S. MOHANversusCENTRAL BUREAU OF INVESTIGATION

                           [2008) 9 S.C.R. 46


A                             S. MOHAN
                                   v
              CENTRAL BUREAU OF INVESTIGATION
                (Criminal Appeal No. 906 of 1998)

                            MAY 16, 2008
B
     [K.G. BALAKRISHNAN, CJI, R.V. RAVEENDRAN Af)ID
                   J.M. PANCHAL, JJ.]                                  ·"-

          Penal Code, 1860- ss.409, 411, 409 rlw 120B and 411
c   rlw 120B - Criminal conspiracy, criminal breach of trust by
    public servant, banker, merchant or agent and dishonest re-
    ceipt of stolen property - Allegations of - Canara Bank Mu-
    tua/ Fund (CBMF), a Trust created by Canara Bank- Canbank
    Financial Services Limited (CANFINA), a subsidiary company
    of Canara Bank - CBMF issued units known as "CANC/GO" ~
D
    Accused nos, 1 to 3 were top officials in CANFINA -Accused         --\
    No. 4 was share broker - Accused nos. 1 to 3 allegedly en~
    tered into a transaction with accused no. 4, to purchase
    GANG/GO Units of the face value of Rs. 33 crores standing in
    the name of Andhra Bank and Andhra Bank Financial Ser-
E   vices Ltd. though there was no letter of authority for such sale
    from either Andhra Bank or Andhra Bank Financial Services
    Ltd. - Allegation that the transactions were entered into· by
    accused nos.1 to 3 on behalf of CANFINA knowing fully well
    that CANCIGO Units were not transferable and accused no. 4
F   was not competent to deal with them - Special Court acquit-        }-

    ted the first two accused, but convicted accused nos.3 and 4-
    On appeal by accused nos.3 and 4, held: In facts and circum-
    stances of case, ingredient of criminal breach of trust not made
    out against accused no. 3 or 4 - Prosecution also could not
G   prove any conspiracy- GANG/GO Units worth Rs.33 crores
    were purchased by making use of money owned by accused
    no.4, they were not stolen property in his hands - Accused
    no.3 was Asstt. Vice-President in CANFINA - It is hard to be-
                                                                       r
    lieve that he on his own decided to accept GANG/GO Units
H                                   46
                     S. MOHAN v. CENTRAL BUREAU OF                 47
                             INVESTIGATION

         worth Rs.33 crores without any instructions from higher au- A
         thorities - Accused nos.3 and 4 accordingly acquitted of the
         offences charged - Prevention of Corruption Act, 1988 - ss.
·1       13(1)(c) and 13(1)(d) rlw 13(2) - Special Court (Trial of Of-
         fences relating to Transactions in Securities) Act, 1992- s. 10.
              Canara Bank Mutual Fund (CBMF) is a Trust created B
         by the Canara Bank while Canbank Financial Services
         Limited (CANFINA) is a subsidiary company of Canara
         Bank. CBMF under a sch~me prepared by it, issued units
         known by the name "CANCIGO" in the shape of credit
         sheets which provided a fixed rate of interest. The scheme c
         was operated under the Rules framed by CBMF.
              Accused No. 1 was the Executive Vice President and
         Chief Dealer, accused No. 2 was the Asst. Vice President
         and accused No. 3 was the Asstt. Vice President and
                                                                   D
         Dealer, of CANFINA at the relevant point of time. Accused
         No. 4 was a Share and Securities Broker.
              According to the prosecution, accused Nos.1 to 3
         entered into a transaction with accused no.4, to purchase
         the CANCIGO Units of the face value of Rs. 33 crores E
         standing in the name of Andhra Bank and Andhra Bank
         Financial Services Limited though there was no letter of
         authority or consent for such sale from either Andhra Bank
         or Andhra Bank Financial Services Limited. The prosecu~
     1   tion alleged that these transactions were entered into by F
         accused 1 to 3 on behalf of CANFINA knowing fully well
         that the CANCIGO Units were not transferable and ac-
         cused no.4 was not competent to deal with them. The
         prosecution alleged that by this method accused no.4 got
         his debt to the tune of Rs.25 crores due to CAN FINA wiped
                                                                    G
         out and got a sum of about Rs.8 crores from CANFINA,
         even though CANCIGO Units were not transferable and
         could not be transferred to the name of CANFINA.
              The Special Court (Trial of Offences Relating to Trans-
         actions in Securities) ·acquitted the first two accused, but H
    48       SUPREME COURT REPORTS               [2008] 9 S. C.R.


A   held accused no.3 guilty under s.409 IPC and si;.13(1)(c)
    and 13(1) (d) r/w s.13(2) of the Prevention of Corruption
    Act. He was also found guilty of the offence punishable
    under s.411 r/w s.120B IPC. Accused no.4 was convicted
    under s.409 r/w s.120B IPC and also under s.411 IPC.
s   Hence the present appeals by accused No. 3 and 4 under
    s.10 of the Special Court (Trial of Offences R!elating to
    Transactions in Securities) Act, 1992.
         Allowing the appeals, the Court

c         HELD:1.1. CANCIGO Units worth Rs.33 crores were
    purchased by Andhra Bank or Andhra Bank Financial
    Services Limited by making use of the mone~r owned by
    accused no.4. These two financial institutions impliedly
    agreed to lend their name and allowed accw;ed no.4 to
    purchase CANCIGO Units in their name. Also interest due
0
    on the CANCIGO Units worth Rs. 33 crores received from
    CBMF by Andhra Bank and Andhra Bank Financial Ser-
    vices Ltd. were credited to the account of accused no.4.
    Therefore, it is clear for all practical purposes that the
    CANCIGO Units worth Rs. 33 crores were pmchased by
E accused no.4 and he transferred these units to CANFINA
    and CBMF did not raise any objection in respect of trans-
    fer of the CANCIGO Units by accused no.4. If at all, it was
    for the CBMF to raise any objection but they did not raise
    any objection for the transfer of the CANCIGO Units. It IJas
F been held by this Court in Canbank Financial Services Ltd. 's
    case that the custodian was not entitled to get the value
    of the CANCIGO Units and that the CANFINA had a just
    right to possess the CANCIGO Units to the' exclusion of
    accused no.4. Also CANFINA had succeeded in getting
G . the proceeds of these CANCIGO Units. The~refore, no of-
    fence of Criminal Breach of Trust is committed by accused
    no.4. He has not acted contrary to the direction of any
    person who has entrusted these units to him and it is
    proved that it was accused no.4 himself who was the ap-
H parent owner of these units. [Para 11] [60-18-G]
                S. MOHAN v. CENTRAL BUREAU OF                 49
                        INVESTIGATION

i         1.2. As regards accused no.3, who was one of the          A
    Asst. Vice- Presidents of CANFINA, the prosecution case
    is that he had telephonically informed PW 6 to accept the
    CANCIGO Units. PW 6 is an Officer of the Canara Bank
    who had been authorized by the Board Resolution to deal
    in Securities/Bonds and execute securities transactions         s
    on behalf of CANFINA. PW-6 deposed that the Entry per-
    taining to purchase of CANCIGO Units of the face value
    of Rs. 33 crores from accused No. 4 was made on the
    basis of the instructions received from accused no. 3. He
    also deposed that the accused no.3 sent an Inter Branch         c
    Advice by which the funds were transferred from Banga-
    lore to Bombay in order to facilitate the payment. He also
    deposed thataccused no.3 had told him that a sum of Rs.
    25,01,67, 129/~ was recoverable from accused no.4 against
    some transactions and that this amount was to be ad-
                                                                    0
    justed against the transaction of purchase of CANCIGO
    Units of face value of Rs. 33 crores. All these evidence
    would only show that accused no.3 was involved in the
    transaction. The prosecution could not prove that there
    was any illegality in these transactions. The only illegality
    pointed out by the CBI is that these CANCIGO Units were         E
    not liable to be transferred and the Andhra Bank and
    Andhra Bank Financial Services Limited could not have
    transferred it to accused no.3. So long as the CANFINA
     has no grievance or complaint against accused no.3 that
     he acted contrary to their directions and accepted the         F
    CANCIGO Units and paid the money to accused no.3, no
    offence is made out against accused no.3 either of Crimi-
     nal Breach of Trust or conspiracy. In fact, PW 1 has ad-
     mitted that CANFINA used to regularly deal in CANCIGO
     Units, that neither the Audit nor RBI made any remarks         G
     regarding transactions relating to CANCIGO Units and all
     the transactions relating to CANCIGO Units were in the
     ordinary course of business. Neither Canara Bank nor
     CANFINA had initiated any disciplinary proceedings
                                                                    H
   50      SUPREME COURT REPORTS             [2008] 9 S.C.R.


A against him. They have also not disputed the ~1enuine­
  ness of the CANCIGO Units which were got enca.shed by
  accused no.3. [Para 12) [60-G,H, 61-A-H, 62-A]
       1.3. The Managing Director of CANFINA wa.s exam-
  ined as PW 16. He admitted that CANFINA did not file any
8 complaint with CBI regarding purchase of CANCIGO Units
  of Rs. 33 crores; that according to CANFINA, the
  CANCIGO Units were purchased for valuable consider-
  ation in the normal course of business; that CANFINA
  stood by the transactions of purchase of CANCIGO Units
C of Rs. 33 crores; that CANFINA was not induced to pur-
  chase the CANCIGO Units of Rs. 33 crores by any false
  representation. [Para 13) [62-B,C]
       1.4. In the circumstances, no ingredient of criminal
  breach of trust is made out against either of the appel-
0
  lants. The prosecution also could not prove any con-
  spiracy by these accused persons to commit any crimi-
  nal acts. So long as there was no such evidence, the of-
  fence of conspiracy is not proved against these appel-
E lants. [Paras 14, 15] [62-D,E]
       1.5. Accused no.4 has been found guilty for the of-
  fence punishable under s.411 alleging that he dishonestly
  received the stolen property or retained the same. No in-
  gredients of this offence have been proved against him.
F So long as the prosecution admits that the CANCIGO
  Units worth Rs. 33 crores were purchased by making use
  of the money owned by him, they were not stolen prop-
  erty in the hands of accused no.4. Neither, the Andhra
  Bank nor the Andhra Bank Financial Services Limited has
G any case that these CANCIGO Units were stolen by ac-
  cused no.4. As the offence of Criminal Breach of Trust is
  also not made, the conviction of accu~ed no.4 under s.411
  is not sustainable and is liable to be quashed. So also,
  accused no.3 is not liable for the conspiracy to commit
H offence under s.411 IPC. [Para 16] [62-E-H]
                       S. MOHAN v. CENTRAL BUREAU OF                    51
                               INVESTIGATION

1              1.6. Accused no.3 has been found guilty of offence A
         punishable under ss.13(1) (c) and 13 (1) (d) r/w s.13(2) of
         the Prevention of Corruption Act. He was one of the Asstt.
         Vice-Presidents of CAN FINA dealing with CANCIGO Units.
         There is no allegation that he committed any illegality. The
         allegation against him is to the extent that he accepted B
         the CANCIGO Units though they stood in the name of
.,       Andhra Bank and Andhra Bank Financial Services Lim-
         ited. These CANCIGO Units were worth Rs. 33 crores and
         they were accepted with the proper authorization by the
         higher authorities in the CANFINA. It is highly improbable           c
         to believe that accused no.3 on his own decided to ac-
         cept CANCIGO Units worth Rs. 33 crores without any in-
         structions. CANFINA did not file any complaint alleging
         any unauthorized transaction carried out by him. Now it
     (j has been held by this Court that the entire transaction D
~        was legal and CANFINA was entitled to the proceeds of
     .j-these CANCIGO Units and not the "Custodian" under the
     Q:- Act. Therefore, accused no.3 is not guilty of the offence
         punishable under ss.13(1 )(c ) and 13(1) (d) r/w s.13(2) of
     Ctthe Prevention of Corruption Act. Both accused nos. 3
         and 4 are acquitted of all the offences charged against E
         them. [Paras 17, 18] [63-A-E]
                Canbank Financial Services Ltd. v. Custodian (2004) 8
           sec 355 - referred to.
1               CRIMINALAPPELLATE JURISDICTION: Criminal Appeal               F
           No. 906 of 1998
                From the final Judgment and Order dated 6.8.1998,
           7.8.1998, 13.8.1998 & 14.8.1998 of the Special Court (Trial of
           Offences Relating to Transactions in Securities) at Bombay in G
           Special Case No. 7of1994 In Case No. RS.5/BSC/93/Bombciy
                                          WITH
                Crl. A. No. 910 of 1998
                U.U. Lalit, Jatin Zaveri, Harish J. Jhaveri, Sunil S. Kale,   H
    52        SUPREME COURT REPORTS                  [2008] 9 S.C.R.


A Satyajit Saha, Prasenijt Keswani, Nitin Sangra and V.D. Khanna
    for the Appellant.
         A. Subba Rao (for P. Parmeswaran) for the Respondents.
         The Judgment of the Court was delivered by
B         K.G. BALAKRISHNAN, CJI 1. These two statutory ap-
    peals under Section 10 of the Special Court (Trial of Offences      >.
    relating to Transactions in Securities) Act, 1992 (for short 'the
    said Act') are filed by Accused No. 3 and 4 in Special Case No.
    7/1994, being aggrieved by the Judgment and Order dated 61h/
c   7lh/131h/141h August, 1998 convicting and sentencing them.
          2. These two appellants were tried alongwith two other
    accused persons by.the Special Court (Trial of Offences Relat-
                                                                             µ
    ing to Transactions in Securities) at Bombay and by Judgment             f-
    dated 141h August, 1998, these appellants were found guilty of
D                                                                       -+
    various offences. The appellant in Criminal Appeal No. 906 of
    1998 (third accused - S. Mohan) was found guilty of offence
    punishable under Section 409 IPC and was sentenced to un-
    dergo rigorous imprisonment for seven years and a fine of Rs.
    1 lakh, and with default, sentence for a period of one and a half
E   year. He was also found guilty of the offences punishable under
    Sections 13( 1)(c ) and 13( 1) (d) read with Section 13(2) of the
    Prevention of Corruption Act and for this offence he was sen-
    tenced to undergo rigorous imprisonment for a period of five
    years and a fine of Rs. 50,000, in default of payment of fine,
F   sentence for a period of one year. He was also found guilty of
    the offence punishable under Section 411 read with Section
    1208 IPC and sentenced to undergo two years RI and a fine of
    Rs. 50,000/- and in default sentence for six months. The appel-
    lant in Criminal Appeal No. 910of1998 (fourth accused- Hiten
G   P. Dalal) was found guilty of offences punishable under Section
    409 read with Section 1208 IPC and sentenced to undergo
    seven years rigorous imprisonment and a fine of Rupees 1 lakh
    and with default, sentence for a period of one and half years.
    He was also found guilty of an offence punishable under Sec-
H   tion 411 IPC and Was sentenced to undergo imprisonment for a
            S. MOHAN v. CENTRAL BUREAU OF                    53
         INVESTIGATION [K.G. BALAKRISHNAN, CJI]

period of two years and a fine of Rs, 50,000/-, and in default,   A
sentence for a period of six months. The sentences were to run
concurrently. The special court acquitted accused 1 and 2.
       3. In the year 1992, certain irregularities were detected in
various security transactions that had taken place between cer-
tain financial institutions. The Reserve Bank of India constituted B
a Committee known as "Janakiraman Committee" to look into
the real nature of these transactions and to find out if any fraud
or financial irregularities had taken place in these transactions.
It appears that in the course of the enquiry by the "Janakiraman
Committee", it was found that large scale irregularities and C
malpractices were noticed in transactions both in the Govern-
ment and other securities, indulged in by some brokers in collu-
sion with the employees of various banks and financial institu-
tions. It was noticed that these irregularities and malpractices
had led to the diversion of funds from banks and financial insti- D
tutions to the individual
                   /
                            accounts of certain brokers. The Cen-
tral Bureau oflr\vestigation(CBI) made enquiries generally re-
garding all security transactions and it seems that the CBI after
investigation of the case filed a report against four accused
before the Special Court alleging that these accused were re- E
sponsible for causing loss of Rs. 33 crores to Canara Bank
and various other allegations were also made against these
accused. Accused No. 1 was the Executive Vice President and
Chief Dealer, Accused No. 2 was the Asst. Vice President and
Accused No. 3 was the Asstt. Vice President and Dealer, of F
Canbank Financial Services Ltd. at the relevant point of time.
Accused No. 4 was a Share and Securities Broker.
      4. Andhra Bank is a nationalized Bank and Andhra Bank
Financial Services Limited is a company wholly owned by the
Andhra Bank. Canara Bank is also a nationalized bank and          G
Canara Bank Mutual Fund (CBMF) is a Trust created by the
Canara Bank. The Canara Bank was the chief trustee of the
trust-CBMF. Canbank Financial Services Limited('CANFINA'
for short) is a subsidiary company of Canara Bank. The Chair-
man and the Managing Director of Canara Bank was also the         H
    54        SUPREME COURT REPORTS                    [2008] 9 S.C.R.


A   Chairman of Canbank Financial Services Limited. The Manag-
    ing Director of CAN FINA was a person deputed by Canara Bank
    and the Executive Director also was appointed by Canara Bank.
    The trust, namely, Canbank Mutual Fund under a scheme pre-
    pared by it issued units known by the name "CANCIGO" in the
B   shape of credit sheets which provided a fixed rate of interest
    with a stipulation that these credit sheets may not be transferred    ...
    for a period of one year. The CANCIGO Units could be encashed
    only after the completion of this lock-in period of one year from
    the date of issue. The scheme was operated under the Rules
c   framed by Canbank Mutual Fund. One of the rules so framed
    imposed a restriction on the transfer of these units but it permit-
    ted transfer of units to the heirs in case of death of the holder
    and also in special circumstances.

        5. On August 28, 1991, Accused No. 4 wrote to Andhra
D Bank enclosing an application form for CANCIGO Units worth              -+
  Rs. 11 crores requesting the Bank to sign the application on his
  behalf. On August 29, 1991, Andhra Bank Ltd. applied to the
  Canbank Mutual Fund, at the request of the appellant Hiten P.
  Dalal, for the purchase of CANCIGO Units of the face value of
E Rs. 11 crores. A cheque drawn by the appellant Hiten P. Dalal
  for the sum of Rs. 11 crores was sent alongwith the application.
  The application was signed by one Dhankumar on behalf of
  Andhra Bank Ltd. Similarly, on Sepetember 14, 1991, the same
  appellant Hiten P. Dalal through Andhra Bank Financial Ser-
F vices Limited requested for purchase of CANCIGO Units of the
  face value of Rs. 22 crores alongwith the application and a
  cheque drawn by appellant Hiten P. Dalal for Rs. 22 crores on
  his account with Andhra Bank. On the basis of these two appli-
  cations, Canbank Mutual Fund issued two credit sheets of the
  units of CANCIGO one in the name of Andhra Bank for Rs. 11
G
  crores and the other in the name of Andhra Bank Financial Ser-
  vices Limited for Rs. 22 crores. Though these two credit sheets
  were issued on the basis of the cheques drawn by the appellant
  Hiten P. Dalal, the credit sheets were issued in the name of
  Andhra Bank and Andhra Bank Financial Services Limited, re-
H
                                                                          5;;
-"                     S. MOHAN v. CENTRAL BUREAU OF
                    INVESTIGATION [K.G. BALAKRISHNAN, CJI]
                                                                           "

     1
          spectively as they had signed the application forms.                  A
                 6. According to the prosecution, the appellant Hiten P.
           Dalal who was a stocks and securities broker was indebted to
           CANFINA in a sum of Rs. 25,01,67,129/-. It appears that the
           appellant Hiten P. Dalal offered to sell the CANCIGO Units of
          the face value of Rs. 33 crores to CANFINA to square up his B
           dues in the sum of Rs. 25,01,67,129/-. According to the
           presecution, accused 1 to 3 entered into a transaction with the
           appellant Hiten P. Dalal who was the fourth accused, to pur-
           chase the CANCIGO Units of the face value of Rs. 33 crores
           standing in the name of Andhra Bank and Andhra Bank Finan- c
           cial Services Limited though there was no letter of authority or
           consent for such sale from either Andhra Bank or Andhra Bank
           Financial Services Limited. The prosecution alleged that these
           transactions were entered into by accused 1 to 3 on behalf of
           CANFINA knowing fully well that these CANCIGO Units were D
           not transferable and the appellant Hiten P. Dalal was not com-
           petent to deal with them. The prosecution alleged that after ad-
           justing the amount due from the appellant Hiten P. Dalal, a
           cheque was issued for the balance amount of Rs. 7,98,32,871/
          .- drawn in the name of Andhra Bank with a letter to the Andhra E
           Bank to credit the proceeds of the cheque to the account of
           Hiten P. Dalal. The prosecution alleged that by this method the
           appellant Hiten P. Dalal thus got his debt to the tune of Rs,
           25,01,67,129/- due to CANFINA wiped out and got a sum of
           Rs. 7,98,32,871/- from CANFINA, even though CANCIGO Units F
           were not transferable and could not be transferred to the name
           of CANFINA.
                7. It is in this background all the four accused were charged
          with having entered into a criminal conspiracy for committing
          the offence of cheating and criminal breach of trust and falsifi-     G
     ..   cation of accounts and the offences under Section 13(1 )(c) and
          13(1 )(d) read with 13(2) of the Prevention of the Corruption Act.
               8. Under the Special Courts (Trial of Offences Relating to
          Transactions in Securities) Act, 1992, Special Court was es-
                                                                                H
     56        SUPREME COURT REPORTS                    [2008] 9 S.C.R.


A    tablished for the speedy trial of cases relating to transactions in
     securities and disposal of properties attached. The Special
     Court declared accused Hiten P. Dalal as a "notified person"
     under this Act. Before the Special Court, the Custodian made
     an application that CAN FINA be ordered to handover to him,
B    the CANCIGO Units worth Rs. 33 crores with accrued interest
     thereon. The Custodian contended that Accused No. 4 could
     not have transferred the CANCIGO Units which were not stand-
                                                                           ..
     ing in his name and the entire transaction was tainted with ille-
     gality. He contended that therefore, no title was transferred to
C    CANFINA; and that as title remained with Accused No. 4, he
     was entitled to the said CANCIGO Units. Before the Special
     Court, the appellant Hiten P. Dalal and theAndhra Bankand the
     Andhra Bank Financial Services Limited did not make any claim
     in regard to the CANCIGO Units. The Canbank Financial Ser--
D    vices Limited claimed before the Special Court that the.
     CANCIGO Units covered under the two certificates issued by
     CBMF were properties belonging to them. The Special Court
     by order dated 22.9.1993, allowed an application filed by the
     custodian and that Order was challenged before this Court. By
     the judgment of this Court reported as Canbank Financial Ser-
E    vices Ltd. Vs. Custodian (2004) 8 SCC 355, it was finally held
     that the CANFINA was entitled to succeed on the transfer of
     CANCIGO Units of the value of Rs. 33 crores in favour of
     CANFINA was legal and valid: It was also held that CBMF must
     be presumed to have issued the CANCIGO Units in the names
F    of Andhra Bank and Andhra Bank Financial Services with full
     knowledge that they would enure to the benefit of Hiten P. Dalal;
     and therefore, the transfer of CANCIGO Units in favour of
     CANFINA was valid and legal as by reason of the transfer of
     possession ofCANCIGO Units in favour of CANFINA, a valid
.G   right has been created therein and the same could not be at-
     tached in terms of Section 3(3) of the said Act. The entire find-
     ing of the Special Court in this case is to be appreciated in the
     light of the decision rendered by this Court in Canbank Finan-
     cial Services Ltd. case(supra).
H
                S. MOHAN v. CENTRAL BUREAU OF                     57
             INVESTIGATION [K.G. BALAKRISHNAN, CJI]

          9. These two appellants were found guilty by the Special A
    Court mainly on the ground that the CANCIGO Units issued by
    CBMF of the face value of Rs. 33 crores stood in the name of
    the Andhra Bank and Andhra Bank Financial Services Limited
    and the appellant Hiten P. Dalal was not entitled to get transfer
    of these CANCIGO Units and that the appellant S. Mohan (in B
    Criminal Appeal No. 906of1998) was instrumental in such trans-
    action and thus entered into a conspiracy with the accused no.
    4. Both the appellants have been found guilty of offences pun-
    ishable under Section 406 namely, Criminal Breach of Trust. It
    is important to note that, in the instant case, there was no com- c
    plaint either by the Andhra Bank or the Andhra Bank Financial
    Services Limited that these appellants committed any criminal
    breach of trust. "Criminal Breach of Trust" has been defined
     under Section 405 Indian Penal Code as under:
t        "Whoever, being in any manner entrusted with property, or D
         with any dominion over property, dishonestly
         misappropriates or converts to his own use that property,
         or dishonestly uses or disposes of that property in violation
         of any direction of law prescribing the mode in which such
         trust is to be discharged. or of any legal contract, express E
         or implied, which he has made touching the discharge of
         such trust, or willfully suffers any other person so to do,
         commits "criminal breach of trust.

                                    xx xx
                                                                        F
          Section 409 IPC deals with criminal breach of trust by pub-
    lic servant, or by banker, merchant or agent.
           10. Here, the CANCIGO Units stood in the name of the
    Andhra Bank and Andhra Bank Financial Services Limited.
    They apparently entrusted this property to accused no. 4 and G
    allowed him to encash the same. In fact, Accused No. 4 had
    paid the consideration for purchasing the CANCIGO Units in
    the names of Andhra Bank and Andhra Bank Financial Services
    Ltd. It is true that if a person entrusted with property dishonestly
    misappropriates that property, such misappropriation in viola- H
    58        SUPREME COURT REPORTS                    [2008) 9 S.C.R.          )

                                                                          ~-
A lion of any direction of law prescribing the mode in which such
   trust is to be discharged, or of any legal contract which the per-
   son has made in regard to discharge of such trust, will be guilty
   of criminal breach of trust. According to the prosecution, both
  these appellants acted contrary to the express condition that
B these CANCIGO Units were not liable to be transferred within a
  period of one year and in spite of this, the Andhra Bank as well        ').

  as Andhra Bank Financial Services Limited transferred the units
  in favour of the appellant Hi!en P. Dalal and enabled him to
  encash the CANCIGO Units with the connivance of appellant S.
c Mohan and that constituted the offence of Criminal Breach of
  Trust. It was alleged that Accused No. 3 while employed by
  CAN FINA, obtained for Accused No. 4, a pecuniary advantage
  of Rs. 33 crores by illegally purchasing CANCIGO Units and
  committed criminal breach of trust in regard to the employer's
  funds of Rs. 33 crores. It is important to note that these Units        -+
D
  were issued by CBMF. They had imposed restrictions regard-
  ing transfer of CANCIGO Units. They have not filed any com-
  plaint alleging that transfer of these Units by appellant Hi ten P.
  Dalal was contrary to rules. There is no express law or statuto1y
  rules prohibiting the transfer of CANCIGO Units except the terms
E of the scheme framed. by CBMF They are not statutory rules
  and purely contractual. It is also pertinent to note that neither the
  Andhra Bank nor the Andhra Bank Financial Services Limited
  filed any complaint alleging that the appellant Hiten P. Dalal acted
  contrary to their directions. Nor did CANFINA complain that             ,..
F appellant S. Mohan had committed criminal breach of trust in
  regard to these transactions of CANCIGO Units. This Court in
  Canbank Financial Services Ltd. case( supra) held (at para 38,
  39, 40 and 41) as follows:
         The Rules and Regulations framed by Canbank Mutual
G
         Fund in relation to the issuance of CANCIGO certificates
         do not have any statutory backing. The CANCIGOs had a            :..
         lock-in period of one year which means that the holder
         thereof must not encash the securities within the
         aforementioned period. The question as regards the non-
H
       S. MOHAN v. CENTRAL BUREAU OF                      59
    INVESTIGATION [K.G. BALAKRISHNAN, CJ!]

transferability of the units will have to be construed upon     A
reading the Scheme in its entirety and in particular
Condition 22 thereof, inn terms whereof the trustees were
not required to maintain any register of CANCIGO-holders.
In terms of Condition 24, the person whose name is shown
in a CANCIGO certificate would be the only person to be         B
recognized by the trustees as the holder of such CANCIGO
and as having any right, title or interest in or to such
securities. No trust created was also to be recognized.

Condition 19 creating a bar on transfer has to be construed
in the aforementioned context. The bar on transfer created C
was to have the effect that the same would not be binding
on Canbank Mutual Fund as it was not bound to take any
notice thereof and only the holder shall be recognized as
having the right, title or interest on the CANCIGO ........... .
CANCIGOs indisputably are valuable securities. They are D
otherwise capable of being transferred in terms of the
established business practice, the Sale of Goods Act or
the Transfer of Property Act. No legal bar has been created
in transfer of the said securities. The scheme, thus, does
not and could not have created an absolute legal bar on E
transfer of the CANCIGOs so as to invalidate the same.
The rules and regulations framed by Canbank Mutual Fund
and tlze notes appended to the CANCIGO credit sheet
differ in material particulars. Rules and regulations explain
as to why an embargo on transfer has been placed i.e. not       F
to recognize Respondent 2 for the dividends or for other
liabilities arising out of transfer. A transfer violating the
rules and regulations would only have the effect of the
same being not binding on Canbank Mutual Fund. No
other legal consequence flows therefrom. We have also           G
noticed that the brochure merely states that the transfer is
not permitted but provisions exist for grant of such
permission. The appellant Bank as well as Canbank Mutual
Fund are the subsidiaries of Canara Bank. The appellant
cannot be estopped from raising either a limited or absolute    H
    60        SUPREME COURT REPORTS                   [2008] 9 S.C.R.


A        title in them keeping in view the fact that they had paid a    t
         sum of 33 crores of rupees by way of consideration for
         transfer of interest of Respondent 2 herein in the said
         CANCIGOs." (The respondent 2 referred to as the present
         appellant Hiten P Dalal)
B          11. It is not disputed that CANCIGO Units worth Rs. 33
    crores were purchased byAndhrCl!Bank or Andhra Bank Finan- f.
    cial Services Limited by making use of the money owned by
    the appellant Hiten P. Dalal. These two financial institutions im-
    pliedly agreed to lend their name and allowed the appellant Hiten
C   P. Dalal to purchase CANCIGO Units in their name. It is also
    important to note that interest due on the CANCIGO Units worth
    Rs. 33 crores received from CBMF by Andhra Bank and Andhra
    Bank Financial Services Ltd. were credited to the account of
    the appellant Hiten P. Dalal. Therefore, it is clear for all practical
D   purposes that the CANCIGO Units worth Rs. 33 crores were -+
    purchased by the appellant Hiten P. Dalal and he transferred
    these units to CAN FINA and CBMF did not raise any objection
    in respect of transfer of the CANCIGO Units by the appellant
    Hiten P. Dalal. If at all, it was for the CBMF to raise any objec-
E   tion but they did not raise any objection for the transfer of the
    CANCIGO Units. It has been held by this Court in Canbank Fi-
    nancial Services Ltd. (supra) that the custodian was not en-
    titled to get the value of the CANCIGO Units and that the
    CAN FINA had a just right to possess the CANCIGO Units to the
F   exclusion of Hiten P. Dalal. It is also not in dispute that CAN FINA r
    had succeeded in getting the proceeds of these CANCIGO
    Units. Therefore, no offence of Criminal Breach of Trust is com-
    mitted by the appellant Hiten P. Dalal. He has not acted con-
    trary to the direction of any person who has entrusted these units
G   to him and it is proved that it was the appellant Hiten P. Dalal
    himself who was the apparent owner of these units.
        12. As regards appellant S. Mohan who was one of the ).,.
  Asst. Vice- Presidents of CANFINA, the prosecution case is
  that he had telephonically informed PW 6 Mr. Vernekar to ac-
H cept the CANCIGO Units. PW 6 Vernekar is an Officer of the
                     S. MOHAN v. CENTRAL BUREAU OF                   61
                  INVESTIGATION [K.G. BALAKRISHNAN, CJI]
     i
         Canara Bank who had been authorized by the Board Resolu- A
         tion to deal in Securities/Bonds and execute securities trans-
         actions on behalf of CANFINA. He deposed that he used to
         receive telephonic instructions from Bangalore and recorded
         these instructions in rough transaction sheets. He has proved
         the rough transaction sheets including the rough transaction B
         sheet on which Ex-51A has been noted. PW-6 deposed that
 ..I;
         the Entry pertaining to purchase of CANCIGO Units of the face
         value of Rs. 33 crores from accused No. 4 was made on the
         basis of the instructions received from accused no. 3, namely,
         appellant S. Mohan. He also deposed that the appellant S. c
         Mohan sent an Inter Branch Advice No. 32894 by which the funds
         were transferred from Bangalore to Bombay in order to facili-
         tate the payment. He deposed that the date 6th February 1992
         was written because CANFINA Bangalore had purchased
         CANCIGO Units of face value of Rs. 33 crores on 6th February
 ~                                                                         D
         1992. He also deposed that appellant S. Mohan had told him
         that a sum of Rs. 25,01,67, 129/- was recoverable from accused
         no. 4 against some transactions and that this amount was to be
         adjusted against the transaction of purchase of CAN Cl GO Units
         of face value of Rs. 33 crores. All these evidence would only
         show that the appellant S. Mohan was involved in the transac- E
         tion. The prosecution could not prove that there was any illegal-
         ity in these transactions. The only illegality pointed out by the
         learned Counsel for the CBI is that these CANCIGO Units were
'i       not liable to be transferred and the Andhra Bank and Andhra
         Bank Financial Services Limited could not have transferred it F
         to the appellant Hiten P. Dalal. So long as the CANFINA has no
         grievance or complaint against the appellant S. Mohan that he
         acted contrary to their directions and accepted the CANCIGO
         Units and paid the money to the appellant Hiten P. Dalal, no
         offence is made out against the appellant S. Mohan either of G
         Criminal Breach of Trust or conspiracy. In fact, PW 1 (Mr. Kini,
"'       Executive Vice President) has admitted that CANFINA used to
         regularly deal in CANCIGO Units, that neither the Audit nor RBI
         made any remarks regarding transactions relating to CANCIGO
         Units and all the transactions relating to CANCIGO Units were H
    62       SUPREME COURT REPORTS                  [2008] 9 S.C.R.


A   in the ordinary course of business. Neither Canara Bank nor ~
    CANFINA had initiated any disciplinary proceedings against
    him. They have also not disputed the genuineness of the
    CANCIGO Units which were got encashed by the appellant Hiten
    P. Dalal.
B       13. The Managing Director of CANFINA (K.N. Karnath)
  was examined as PW 16. He admitted that CANFINA did not 1
  file any complaint with CBI regarding purchase of CANCIGO
  Units of Rs. 33 crores; that according to CANFINA, the
  CANCIGO Units were purchased for valuable consideration in
C the normal course of business; that CAN FINA stood by the trans-
  actions of purchase of CANCIGO Units of Rs. 33 crores; that
  CAN FINA was not induced to purchase the CANCIGO Units of
  Rs. 33 crores by any false representation.

D         14. In the circumstances, no ingredient of criminal breach
    of trust is made out against either of the appellants.             --4

          15. The prosecution also could not prove any conspiracy
    by these accused persons to commit any criminal acts. So long
    as there was no such evidence, the offence of conspiracy is not
E   proved against these appellants.

        16. The appellant Hiten P. Dalal has been found guilty for
  the offence punishable under Section 411 alleging that he dis-
  honestly received the stolen property or retained the same. No
  ingredients of this offence have been proved against him. So
F long as the prosecution admits that the CANCIGO Units worth          "
  Rs. 33 crores were purchased by making use of the money
  owned by him, they were not stolen property in the hands of the
  appellant Hiten P. Dalal. Neither, the Andhra Bank nor the Andhra
  Bank Financial Services Limited has any case that these
G CANCIGO Units were stolen by the appellant Hiten P. Dalal. As
  the offence of Criminal Breach of Trust is also not made, the
  conviction of the appellant under Section 411 is not sustainable      ).c

  and is liable to be quashed. So also, the appellant S. Mohan is
  not liable for the conspiracy to commit offence under Section
H 411 IPC.
                   S. MOHAN v. CENTRAL BUREAU OF                    63
                INVESTIGATION [K.G. BALAKRISHNAN, CJI]

i            17. The appellant S. Mohan has been found guilty of of- A
       fence punishable under Section 13(1) ( c) and 13 (1) (d) read
       with Sedion 13(2) of the Prevention of Corruption Act. This ap-
       pellant was one of the Asstt. Vice-Presidents of the CAN FINA
       dealing with CANCIGO Units. There is no allegation that he
       committed any illegality. The allegation against him is to the B
       extent that he accepted the CANCIGO Units though they stood
A-     in the name of the Andhra Bank and Andhra Bank Financial
       Services Limited. These CANCIGO Units were worth Rs. 33
       crores and they were accepted with the proper authorization by
       the higher authorities in the CAN FINA. It is highly improbable toc
       believe that appellant S. Mohan on his own decided to accept
       CANCIGO Units worth Rs. 33 crores without any instructions.
       CAN FINA did not file any complaint alleging any unauthorized
       transaction carried out by him. Now it has been held by this
       Court that the entire transaction was legal and the CANFINA
                                                                          D
 t
       was entitled to the proceeds of these CANCIGO Units and not
       the "Custodian" under the Act. Therefore, the appellant S. Mohan
       is not guilty of the offence punishable under Section 13(1) (c)
       and 13(1) (d) read with Section 13(2) of the Prevention of Cor-
       ruption Act.
                                                                          E
             18. The appeals filed by both the appellants are allowed.
       The accused are not liable for any other offences and they are
       acquitted of all the offences charged against them. Their bail
       bonds stand cancelled.
....   B.B.B.                                       Appeals allowed .




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