Holding

The prosecution failed to prove dishonest intention, conspiracy, or wrongful gain; therefore the convictions under Sections 120‑B, 420 IPC and 13(2) r/w 13(1)(d) PC Act are unsustainable and are set aside.

Summary

The case involved six accused bank officials and businessmen charged with criminal conspiracy, cheating and corruption for allegedly abusing a cheque‑discounting facility of State Bank of India. The Special Judge and the High Court convicted all six under Sections 120‑B and 420 of the IPC and, for three of them, under Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act. On appeal, the Supreme Court held that the prosecution failed to prove a dishonest intention at the time of the promises, any meeting of minds constituting a conspiracy, or any wrongful gain that would attract the anti‑corruption provisions. Consequently, the convictions were unsustainable. The Court set aside the judgments of the Special Judge and the High Court, allowed the appeals and ordered the accused to be released. The decision emphasized the need for concrete evidence of fraudulent intent and conspiracy before invoking Sections 420 IPC or the Prevention of Corruption Act.

Issues considered

The prosecution proved the essential ingredients of cheating under Section 420 IPC, particularly the existence of a fraudulent or dishonest intention at the time of the promise.
The prosecution established a criminal conspiracy under Section 120‑B IPC and Section 13(2) r/w 13(1)(d) of the Prevention of Corruption Act.
The accused obtained any wrongful gain or caused wrongful loss to the bank sufficient to attract the provisions of the Prevention of Corruption Act.
Whether the charges framed (including Section 409 IPC) were appropriate given the evidence.
Whether the High Court’s conviction could be set aside under Article 136 of the Constitution.

Legislation cited

Constitution of Indias. 136
Indian Penal Code, 1860s. 120-B, s. 409, s. 415, s. 420
Negotiable Instruments Act, 1881s. 138
Prevention of Corruption Act, 1988s. 13(1)(d), s. 13(2)

Subjects

cheatingconspiracyPrevention of Corruption ActIndian Penal CodeArticle 136bank discountingcheque discountingwrongful gaincriminal conspiracySupreme Courtappeal

Judgment

[2009] 7 S.C.R. 784

A S.V.L. MURTHY ..
v
STATE REP. BY CBI, HYDERABAD
Criminal Appeal No. 942 of 2009
MAY 6, 2009
B
(S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.)
Penal Code, 1860/Prevention of Corruption Act, 1988: .
Sections 409, 415, 420, 120-B!Section 13(2) r/w 13(1)(d) •
c - Alleged cheating of Bank - All six accused found guilty for
offences under Section 120-B, 420 /PC and three ·accused
found guilty for offence under Section 13(2) rlw 13(1) of
Prevention of Corruption Act - Convicted - High Court
affirming the order, but acquitting one accused - On appeal,
Held: Prosecution failed to prove conspiracy as also wrongful
D
gains - Impugned judgment unsustainable and set aside -
Negotiable Instruments Act, Section 138.
Constitution of India, 1950:
Article 136 - Special Leave jurisdiction - Ordinarily
E concurrent finding of fact not interfered with - However, the
;urisdiction must be exercised whenever it is required to do so
for securing the ends of justice and to avoid injustice.
A charge sheet was filed under Sections 120-B, 420 ~

F IPC r/w Section 13(1)(q) of the Prevention of Corruption
Act alleging inter alia that there was criminal conspiracy
between the accused persons to cheat the State Bank of
India.
Special Judge for CBI cases found A-1 to A-6 guilty
G for the offence under Section 120-B and 420 IPC, A-4 to A-
6 were found guilty for the offence under Section 13(2) r/ -+
4

w 13(1)(d) of the Prevention of Corruption Act, 1988.
Accordingly, he convicted and sentenced the accused.

H 784
S.V.L. MURTHY V STATE REP BY CBI, HYDERABAD 785

-
'
'
~

High Court dismissed the appeals of the accused, but A
acquitted A-6. Hence the appeals.
Allowing the appeals, the Court
HELD: 1.1 For the purpose of constituting an offence
of cheating, the complainant is required to show that the 8
accused had fraudulent or dishonest intention at the time
• of making promise or representation. Even in a case
where allegations are made in regard to failure on the part
·~
of the accused to keep his promise, in absence of a
culpable intention at the time of making initial promise
being absent, no offence under Section 420 of the Indian c
Penal Code can be said to have been made out. [Para 21]
[810-F-G]
1.2 It is reiterated that one o'f the ingredients of
cheating as defined in Section 415 of the Indian Penal
... D
Code is existence of an intention of making initial promise
or existence thereof from the very beginning of formation
of contract. [Para 21] [810-H; 811-A]
Hira Lal Hari Lal Bhagwati v. CBI (2003) 5 SCC 257;
Indian Oil Corporation v. NEPC India Ltd. & Ors. (2006) 6 SCC
E
736; Vir Prakash Sharma v. Anil Kumar Agarwal (2007) 7 SCC
373; All Caroga Movers (/) Pvt. Ltd. v. Dhanesh Badarmal Jain
& Anr. 2007 (12) SCALE 391; R. Kalyani v. Janak C. Mehta &
~ Ors. 2008 (14) SCALE 85 and Sharon Michael & ors. vs. State
of Tamil Nadu & Anr. 2009 (1) SCALE 627 - relied on.
F
2. It may be that there had been certain procedural
irregularities in the transaction. However, sufficient
evidence is available on record to show that the Officers
had done so for the purpose of promoting the business
of the Bank. In relation whereto or in respect whereof,
.~
initiatives had been taken by P.Ws. 19 and 20. It is G
j..
furthermore not denied or disputed that after the cheque
discounting facility was stopped in April, 1989 by Accused
No.4, there has been a meeting at the residence of P.W;
20. In his deposition, the said witness categorically
admitted that the said meeting was arranged at the H
786 SUPREME COURT REPORTS [2009] 7 S. C.R.

~
..
A instance of Accsued No.1. It is incomprehensible that a
meeting has been arranged at his residence on the day
he was on leave at the instance of Accused No.1. He must
have developed grievance against the Accused No.4 as
regards the stoppage of the said facility. If immediately
B thereafter the said facility had been restored by the
Accused No.4, a stand taken by him that it was done under
the oral instructions of the higher authorities appears to ..
be plausible. [Para 22] [813-E-.H; 814-A]
•
/ 3. The prosecution 1apart from the fact that it had
c utterly failed to bring on record any evidenc~ of
conspiracy must also be held to have failed to bring on
record any evidence of wrongful gain so as to attract the
provisions of the Prevention of Corruption Act, 1988 or
otherwise. [Para 23] [814-A-B]
D ~
. 4. The findings arrived at by the Special Judge as
also the High Court pro.ved the ingredients of offence
under Section 409 of the· IPC. The accused persons,
however, have not been charged for commission of the
said offence. Conspiracy by and between the Bank
E officials and the Accused Nos. 1 to 3 has been stated to
be for commission of the offence of cheating for the
purpose of arriving at a finding that there has been a
conspiracy so as to cheat the Bank. It was necessary for
the prosecution to establish that there. had been a meeting
F of mind at the time when the facility had been granted.
Such meeting of mind on the part of the accused persons
has not been proved. Furthermore, the prosecution case
even if given face value and taken to be correct in its
entirety does not lead to a finding that even Accused Nos.
G 1 to 3 had any wrongful intention at the time when the
contract was initiated. [Para 24] [814-C-F] ~ •

5. It is one thing to say that there has been an abuse
of a prevalent banking practice for the purpose of causing
wrongful loss to the Bank and causing wrongful gain to
H
S.VL. MURTHY V. STATE REP. BY CBI, HYDERABAD 787

-< others but it is another thing to say that by reason A
thereof, the ingredients of cheating are attracted.[Para 27]
[814-H; 815-A]
6. It would bear repetition to state that accused
persons have not been charged under Seclion 409 of the
IPC; even the Accused Nos. 1 to 3 have not been charged 8
for entering into a conspiracy with Accused Nos. 4, 5 and'6
in respect of commission of offences under the Prevention
'I
of Corruption Act. It is in the aforementioned situation, this
~ Court is of the opinion that the judgment of conviction
. and sentence cannot be upheld. [Paras 28, 29] [815-8-0) c
Lala Ram & Ors. vs. State of UP (1990) 2 SCC 113 -
relied on.
7. It is one thing to say that ordinarily a concurrent
finding of fact shall not be interfered with by this Court in
D
exercise of its jurisdiction under Article 136 of the Consti-
tution of India but it is another thing to say' that despite
opining that accused are entitled to acguittal, a judgment
of conviction passed against them should be upheld. In
,. fact, the jurisdiction of this Court must be exercised
wherever it is required to do so for securing the ends of E
justice and to avoid injustice.[Para 30] [815-H; 816-A-B)
Case Law Reference
(2003) 5 sec _257 relied on Para 21
~

c2oos) 6 sec 736 relied on Para 21 F

c2001) 1 sec 373 , relied on Para 21
2007 (12) SCALE 391 relied on Para 21
' '
2008 (14) SCALE 85 relied on Para 21 G
' '

... ....
2009 (1) SCALE 627 relied on Para 21
(1990) 2 sec 113 relied on Para 30
~
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 942 of 2009 H
788 SUPREME COURT REPORTS [2009) 7 S.C.R.

A From the Judgement and Order dated 17.07 .2007 of the ...
Hon'ble High Court of Judicature, Andhra Pradesh at Hyderabad
in Criminal Appeal No. 125 of 1998.
WITH

B Criminal Appeal No. 945 of 2009
Criminal Appeal Nos. 943~944 of 2009
K.T.S. Tulsi, M. N. Krishnamani, Ravindra Shrivastava,
.,
Radha Rani, Hari Kumar, Kuna! Verma, Krishna Kumar, Supriya -~

c Jain, Anup Jain, C. Batra, D. Mahesh Babu, Gaurava Bhagava,
Raj Kamal, Rishi Malhotra, K.V. Mohan, with them for the
Appellant.
R. Datta, ASG, Rajni, P. Narasimha, B. Krishna Prasad,
with them for the Respondent.
D
The Judgement of the Court was delivered by
~
S.B. SINHA, J.
1. Leave granted.
E 2. These appeals arising out of a common judgment and
order dated 17.07.2007 passed by the High Court of Andhra
Pradesh at Hyderabad were taken up for hearing together and
are being disposed of by this common judgment.
•
3. Accused No. 4 - S.V.L. Murthy was the Branch Manager ;.
F . of Begum Bazar Branch of State Bank of India (for short, "SBI").
Accused No. 1 - Venugopal Loya was proprietor of some
business concerns, namely, Mis Shobhachand Shivijiram ("SS"),
Mis Sreeji Industries ("SI") and Mis Harikrishan Roopchand
("HR"). Whereas SS and HR used to deal in wholesale trade in
G grains and spices, SI was a plastic manufacturing concern.
Accused No. 2 - Gopaldas Dharak was a partner of Mis Gayatri .._
-1
Traders ("GT"). He used to operate current account in the same
Branch. Accused No. 3 - Radheshyam Dharak, partner of GT,
an Accountant working in the firms of Accused No.1. Accused •
H No. 5 - P. Jayakumar was the Accountant in the Begam Bazar
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 789
[S.B SINHA, J.]
-(
Branch of the State Bank of India. Accused No. 6 - Y. Narahari A
Murthy was the Charge Branch Manager.

4. SS was established in the year 1860. It opened current
account with Begum Bazar Branch of the State Bank of India on
or about 5.12.1979. Accused No. 1 opened Current Account
with SBI on behalf of SI in his capacity as a Managing Partner B
on or about 10.5.1988. He was granted cheque discounting
' facility. For the said purpose, he deposited his title deeds on or
~ about 6.9.1988

5. Srinivasa Rao (P.W. 22), the then Branch Manager of c
the SBI by a letter dated 10.1.1989 addressed to the Regional
Manager sought for his advice as to whether levy of 5 paise per
thousand per day instead of 10 paise as commission should
be relaxed. Indisputably, collateral securities were furnished by
the appellants for availing cheque discounting facility.
D
6. Accused No. 4 - S.V.L. Murthy, however, stopped this
discounting facility with SS. inter alia on the premise that three
bills purchased by the Bank and sent to Salem Branch for
collection had been returned unpaid. So far as the bill limit due
in account of SS was concerned, the same stood at E
Rs.20, 18,240/- out of which Accused No. 1 is said to have made
payment of Rs.5,00,314/- for returned bills with interest within 2
hrs. It is stated that on or about 7.4.1989, a meeting was held at
the residence of the Regional Manager (P.W. 20 - V.
Ramamurthy). Accused No. 1 is alleged to have complained F
that Accused No. 4 had stopped discounting of cheques to him
whereupon Regional Manager (P.W. 20) allegedly instructed
Accused No. 4 to continue the practice of discounting cheques
to Accused No. fon the premise that he was a reputed customer
of the Bank. Pursuant thereto, the discounting facility was made
G
available with Acc'used No.1 upon obtaining sufficient collateral
j.
security, i.e., title deeds of moveable and immoveable properties
of Accused .No.1 worth Rs.1.09 lacs.
7. The Bank allegedly sanctioned discounting facility to
the extent of Rs.30 lacs on the basis of collateral securities H
790 SUPREME COURT REPORTS [2009] 7 S.C.R.

A furnished on or about 15.4.1989. However, ten cheques > T
aggregating to Rs.29,86,219/- were discounted and sent for
clearing by Bank, which were returned unpaid from clearing
house. Appellants contended that they were sent for clearing
without proper stamping/endorsement; they did not reach
B drawer bank at all. Indisputably, however, the Regional Office
issued instructions for stopping cheque discounting facility
without notice. It is stated that the appellants paid a sum of
Rs.29,90,941 /-,which covered the discounting amount together '
with interest on or about 25.4.1989. The Bank seized office-
C cum-godown and stocks of SS at about 11.45 a.m. on the same
day. On or about 26.4.1989, 26 account payee cheques were
presented in various banks across the counter which should
have been presented through clearing. However,
Rs.1,28,63,441/- was said to have remained outstanding.
D 8. Accused No. 1 is stated to have made payment of
Rs.38,84,000/- through pay order on or about 27.4.1989. On
the said date, liability is said to have stood at Rs.89,79,441/-.
Indisputably, Accused No. 4 proceeded on leave from
19.4.1989 and handed over the charge of his office to Mr. Y.
E Narahari Murthy (Accused No. 6). Accused No. 1 furthermore
applied for grant of overdraft facility to the limit of Rs.90 lacs
against collateral security. It was granted. Sufficient securities
were also furnished. The Regional Manager was informed by .
the Branch that Accused No. 1 has promised to pay a sum of ><
F Rs.15 lacs within a week. However, a suit was filed in the court
of 4th Additional Judge, City Civil Court at Hyderabad being
CSOS No. 827 of 1989 for recovery of a sum of Rs. 90, 19, 789.11
with interest on or about 10.5.1989. On or about 10.5.1989,
City Civil Court passed interim direction ordering attachment
G before judgment.
9. On 21.6.1989, a criminal complaint was lodged by the -i ...
Bank before the Ill Metropolitan Magistrate at Hyderabad under
Sections 120B, 420, 467, 471 of Indian Penal Code (IPC) and
H under Section 138 of the Negotiable Instrument Act inter alia
- S.V.L. MURTHY V. STATE. REP. BY CBI, HYDERABAD 791
[S.B. SINHA, J.]
_......
~
alleging that cheques issued to SI were fraudulently discounted A
and amounts were drawn between 14.2.1989 and 1.5.1989.
"'
'
It is not in dispute that in the said complaint no allegation
was made against the officers of the Bank. On or about
17. 7.1989, the Metropolitan Magistrate directed the Central
Bureau of Investigation (CBI) to investigate into the case pursuant B
whereto a First Information Report was lodged under Sections
" .. 120B, 420 of IPC read with Section 13(1)(d) of the Prevention
of Corruption Act on or about 5.9.1989.
~ 10. We may, however, place on. record that P.W 22 - c
Srinivasa Rao took over charge as Branch Manager on the oral
instructions of P.W. 20 - V. Ramamurthy, on or about 28.4.1989.
Indisputably, disciplinary proceedings were initiated against
the Accused No. 4, Accused No. 5 as also P.W. 20.
D
In the said disciplinary proceedings, they were placed
under suspension. They were, however, reinstated in service.
Whereas P.W. 20 was censured, Accused No. 4 was inflicted
with a punishment of stoppage of five increments. Some minor
· punishments was also imposed on the Accused No: 5.
E

Indisputably, a vigilance enquiry was conducted on or about
---... 26.4.1989 at Begum Bazaar Branch of the SBI wherein a report
dated 1_8.1.1990 was submitted indicating that there has been
"' a technical vrolation on the part of the Bank Officer, inter alia, F
arriving atthe following conclusions:
"iv. S.V.L. Murthy, who had succeeded Shri Vijaya Kumar
has apparently also passed on pecuniary advantage to
Shri Loya and his group of concerns,
G
~
a.. By continuing the irregular practice of purchasing
~
· local cheques and that too for large amounts. It was
his period the liability on account of local cheque
purchased touched one crore wark in March 1989.
b. By not collecting the applicable interest as laid down, H
792 SUPREME COURT REPORTS [2009] 7 S.C.R.

A he had caused considerable loss of income to the )-
Bank.
C. He also did not report the LOIT facility being extended
..
to the firms to the Controlling Authority directly. He
· had, however, made a reference to the Controlling
B Authority in January 1989.
d. Although, it came to his knowledge that the firms are
indulging in irregular and objectionable transactions, •
he did not adequately safeguard the Bank's interests _.
c nor initiated location as is necessary to avoid loss to
the Bank.
e. He did not ensure that the local cheques purchased
were promptly presented in clearing and payment
obtained. Similarly, he did not ensure prompt recovery
D on return of cheques in clearing."
Both his predecessor as also successor in office were
found guilty of some negligence on their part. Some laxity on
the part of office of the Controlling Authority was also pointed
out.
E
12. A charge sheet was filed on or about 8.9.1993 under
Sections 120B, 420 IPC read with Section 13(1)(d) of the
Prevention of Corruption Act, 1988 alleging inter alia that there
was criminal conspiracy between the accused persons during
~

F 1988-89 to cheat SBI.
13. On or about 7.2.1994, learned Special Judge for CBI
Cases, Hyderabad framed charges against the accused
persons under Sections 120B, 420 IPC read with Section 138
of the Negotiable Instruments Act. However, Accused Nos. 4 to
G 6 were additionally charged with Section 13(1 )(2) of the
Prevention of Corruption Act.
-+
..
14. Before the learned Special Judge, a large number of
witnesses were examined. They included P.W. 1 - Sh. R. Vijay
Kumar, Branch Manager, State Bank of India, Karimnagar
H
S.VL. MURTHY V. STATE REP. BY CBI, HYDERABAD 793
[S.B. SINHA, J]

Branch, who was holding the post of Manager, in the Begum A
Bazaar of the State Bank of India, Hyderabad from 31.8.1987
<
to 9.8.1988, i.e., prior to Accused No.4. P.W. 19 - S.V.
Panchapakesan, Dy. General Manager, SBI Capital Market
Bombay, who worked as Administrative Officer Advances in the
Regional Office and P.W. 20 - V. Ramamurthy, the Additional B
Manager-cum-Deputy General Manager of the Regional Offices.

• 15. Learned Special Judge for CBI Cases, Hyderabad by
reason of judgment and order 28.8.1998, held:
i
"84. The prosecution has fail~d to establish the Charge
U/s 138 of N.I. Act against A 1 to A3. Hence I found c
tr.em not guilty for the offence U/s 138 of N.I. Act
against A 1 to A3.
85. Admittedly A4 to A6 are the employees working in
Begumbazar branch at Hyderabad and they are
D
i public servants. They abused their positions as public
servants. They purchased local cheques which are
totally irregular and against the establishment norms
of the bank and therefore they have committed an
offence of criminal misconduct. A4 to A6 purchased
local cheques upto Rs.90 lakhs. There cannot be E
any evidence that A4 to A6 had pecuniary advantage
/
i due to their misconduct but due to their misconduct
_, ~ they obtained benefit to A 1 to A3. Hence I found A4
,j to A6 guilty for the offence U/s 13(2) r/w 13(1 )(d) of
P.C. Act, 1988. F
86. In the result, A 1 to A6 are found guilty for the offence
U/s 120-B, A 1 to A6 are found guilty for the offence
U/s 420 l.P.C. A4 to A6 are found guilty for the offence
U/s 13(2) r/w 13(1)(d) of P.C. Act, 1988."
G
He convicted and sentenced the accused persons as
>
!-- under:
"A 1 is convicted and sentenced to suffer R.I. for THREE
YEARS and to pay a fine of Rs.10,000/-. In default S.I. for
ONE YEAR for offence UIS 420 IPC. H
t
794 SUPREME COURT REPORTS [2009] 7 S.C.R

A A1 is sentenced to suffer RI. for THREE YEARS and to
pay a fine of Rs.10,000/-. In default S.I. for ONE YEAR for
-
offence U/s 120-B IPC.
A2 is sentenced to suffer R.I. for THREE YEARS and to
pay a fine of Rs.5000/- for offence- U/S. 120-B IPC. In
B default S.I. for ONE YEAR.
A2 is sentenced to suffer R.I. for THREE YEARS and to
pay a fine of Rs.5000/-. In default S.I. for ONE YEAR for •
offence U/S. 420 IPC. ..
c A3 is convicted and sentenced to suffer RI. for THREE
YEARS and to pay a fine of Rs.5000/- In default S.I. for
ONE YEAR for offence U/s. 120-B l.P.C.
A3 is convicted and sentenced to suffer R.I. for THREE
YEARS and to pay a fine of Rs. 5000/-. In default S.I. for
D
ONE YEAR for offence U/s. 420 l.P.C. _..
A4 to A6 are convicted and sentenced to suffer R.I. for
THREE YEARS each and to pay a fine of Rs.5000/-each.
In default S.I. for ONE YEAR for offence U/s. 120-B l.P.C.
E -
A4 to A6 are convicted and sentenced to suffer R.I. for
THREE YEARS each and to pay a fine of Rs.5000/- each.
In default S.I. for ONE YEAR for offence U/s 420 l.P.C.
A4 to A6 are convicted and sentenced to suffer R.I. for
TWO YEARS for offence U/s. 13(2) r/w 13(1)(d) of P.C.
.. "
F '
Act, 1988 and to pay a fine of Rs.5000/- each. In default,
S.I. for SIX MONTHS each.
A 1 to A3 are not found guilty for offence U/s. 138 of
Negotiable Instruments Act and they are acquitted for the
G same offence.
All the sentences of imprisonment shall run concurrently. -1 '·
Accused are entitled to set off for the remand period if any."
16. Feeling aggrieved and dissatisfied with the aforesaid
H judgment, appellants preferred appeals.
S.V.L. MURTHY V STATE REP. BY CBI, HYDERABAD 795
[S.B. SINHA, J.]

-
The High Court by reason of the impugned judgment in A
dismissing the appeals of the appellant, held:
"57. Learned counsel appearing for the accused
contended in chorus that the practice of discounting
cheques was in existence even prior to A4 taking charge
as the Branch Manager of Begum Bazar Branch, State B
Bank of India, Hyderabad and the said practice was a
" part of accepted norms. I do not find any substance in

_,
.,..
' their contention. A practice even if it was prevailing, if
wrong, is not to be approved. The subsequent clarifications
do not in any way put seal of approval on the practices c
adopted in the past, on the other hand it condemns it.

'' 58. When the factual background highlighted is
considered in the light of the various provisions, it is clear
that the alleged offences under Sections 120-B and 420
D
~ IPC against A 1 toA5 and under Section 13(1 )(c) r/w. i 3(2)
"'.'/ of the Prevention of Corruption Act, 198 against A4 and
A5 are clearly established."
However, accused No. 6 was acquitted.
17. Mr. K.T.S. Tulsi, learned Senior Counsel appearing on
E
behalf of Accused Nos. 1 to 3 would contend:
... ~
i. Accused Nos. 1 to 3 having not been charged for
conspiracy with the Bank officials under the
Prevention of Corruption Act, the impugned judgment F
is wholly unsustainable.
ii. One of the principal ingredients of cheating as
envisaged U[lder Sections 415 of the IPC being
dishonest intention at the inception of contract being
wholly absent, appellants could not have been G
... r convicted under Section 420 of the IPC .
iii. Admittedly, the Bank had not suffered any financial
loss and in fact having received interest to the extent
of Rs.44 lakhs from the appellants, the imp~gned
H
796 SUPREME COURT REPORTS [2009] 7 S.C.R.

A judgment holding t.hat they had entered into a criminal )

· conspiracy for cheating the Bank must be held to be ,_
wholly untenable.
18. Mr. Ravindra Shrivastava, learned Senior Counsel
appearing on behalf of Accused No.4 would urge:
B
i. Bill discounting facility which is accepted as a normal
banking practice wherefor even Reserve Bank of ¥
India had issued guidelines, the High Court
-~
committed a serious error in passing the impugned
c judgment.
ii. Accused No. 4 having merely followed the practice
for the purpose of said banking practice and acted
for the promotion of the business of the Bank by
granting discounting facility to Accused Nos. 1 to 3
D which had been initiated by his predecessor, namely,
P.W. 1, it will be incorrect to contend that the appellant ...
had any wrongful intention or had any mens rea to
commit the offence.
iii. Accused No. 4 having himself stopped discounting
E of cheque facility to Accused No.1 in April 1989, the
courts below acted illegally in opining that he was .a
party to the alleged conspiracy.
iv. No evidence having been brought on record whether
..
•
F oral or documentary to establish that Accused No. 4
had acted for th.e purpose of obtaining any wrongful
gain for himself, the provisions of the Preventi9n of
Corruption Act have no application.
v. Accused No.4 being the Branch Manager of the Bank
G for a short time, i.e., from April 1988 to 18.4.1989
and the similar facility having been granted to the
"l
....
other accused persons even by Accused No. 6 who
have since been acquitted, the prosecution must be
held to have failed in proving his case.
H
- .
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 797
[S.B. SINHA, J.]
~
19. Mr. K.V. Mohan, learned counsel appearing on behalf
,.. A
of the Accused No. 5 would urge:
i. As an Accountant, the job of the accused was merely
to make necessary entries in the books of accounts
and in view of the practice prevailing that the entry
into the customers' account should be made only 8
after return of the cheque, IBIT (Inter Branch Items in
. TransitA/c) and LIT (Local Items in Transit) Registers
J were being maintained, in view of the evidence of
P.W. 2 that whatever was in practice having been
' followed, it is incorrect to contend that the Accused c
' No.5 was a party to the conspiracy..
_....

-· ii. The learned special judge as also the High Court
having relied upon the letter purported to have been
issued by the Accused No. 4 to Accused Nos. 5 and
6 that the practice should not be discontinued, the
D
appellant cannot be treated differently vis-a-vis the
Accused No. 6 as he had been acquitted.
,,
20. Mr. 8. Datta, learned Additional Solicitor General
appearing on behalf of CBI, on the other hand, would submit E
, i. The offences against the appellants having been

-• found to have been proved by two courts, this Court
in exercise of its jurisdiction under Article 136 of the
Constitution of India should not interfere therewith.
F
ii. · -As from a perusal of the judgment and order passed
by the learned Special"Judge as also the High Court,
it would be evident that the appellants had entered
into a conspiracy to cause wrongful loss to the Bank
and to cause wrongful gain for themselves by using
G
the public fund for their own benefit, th'ere is absolutely
:? ;·
no reason why the ·impugned judgment should be
interfered with.
iii. Accused No. 4 and Accused No.5 being the Officers
·of the Bank, they had domain over the public fund H
•I

798 SUPREME COURT REPORTS (2009] 7 S.C.R.

)
-.,
A and in that view of the matter, the courts below have
rightly found them guilty for commission of offences.
21. We have noticed hereinbefore the charges leveled
against the appellants. So far as the principal accused, namely,
Accused Nos. 1 to 3 are concerned, they having not been
B charged for entering into a criminal conspiracy with the Bank
officials for commission of offences under the Prevention of
Corruption Act, it was necessary only to see as to whether a •
case of cheating has been made out. ~
,-
c The fact that Accused No. 1 had a long standing business <'---

relationship with the Bank is not in dispute. The Officers of the ·1-
Bank particularly P.W. 2, P.W.19 and P.W.20 in their deposition ~·

clearly stated that the banking practice allows grant of such
discounting facility. In fact, the Reserve Bank of India Circular .....
whereupon reliance has been placed by the courts below clearly
D
points out existence of such a practice. The Reserve Bank of
India, however, laid down certain guidelines with a view to
safeguarding the interest of the Bank.
It is also not in dispute that for the said purpose, a Circular
E has also been issued.
The proposal of the Branch to grant such discounting facility

F
to Accused Nos. 1 to 3 had not been accepted in its entirety. An
ad hoc limit of Rs.35 lakhs has been fixed.
P.W. 1 - R. Vijaykumar, in his evidence categorically
~
-
admitted that the bill discounting facility had started during his
tenure as Branch Manager. It is, furthermore, accepted that said
facility was extended to Accused Nos. 1 to 3 having regard to
the business potentiality they had. He furthermore accepted that
the weekly statements used to be prepared and placed before
G
the higher authorities who had al~o not objected to grant thereof.
•• ~
The said witness, in fact, in his deposition stated that the
Regional Manager wanted Accused No.1 to carry on all his
business only through this branch. In his cross- examination on
behalf of A 1 to A3, he stated:
H
SVL. MURTHY V. STATE REP. BY CBI, HYDERABAD 799
[S.B. SINHA, J.]

"I know A 1 since 1988. I know Harinarayana Kakani, who A
is the father of A 1. It is to my knowledge that they were
operating firms which are reputed. Before forwarding any ..
proposal for sanctioning limits, the branch will make
appraisal of the creditworthiness of the party. I have sent
the proposals in favour of the firms of A 1. The credit limit B
for the firms of A 1 were duly sanctioned by the Regional
Office. The credit limits were sanctioned by the Regional
• office in favour of M/s Sobhachand Shivaji Ram. A1 was
representing Shobhachand Shivaji Ram.
Hefurthermore stated: c
. "Whatever limits were utilized by the firm Shobhachand
Shivaji Ram have permanent sanction. All the cheques
that were presented during my tenure, were duly honoured.
To my knowledge the firms Shri Jee Industries and
0
,. · Shobhachand Shivaji Ram Industries were having
substantial deposit potentials and were also resources."
He in his cross-examination on behalf of A4 to A6 stated: -
''The practice in .our Begum Bazar Bf.anch SBI was to E
debit LOIT account, the amount of local cheques ·
purchased. Auditing was done during my tenure and no
objection was taken for debiting to LOITaccount by the
auditor. It is true that when a local cheque was returned
unpaid for want of sufficient fund, then <?nly such cheques
will be debited the account of the party. If the cheques is F
returned with an endorsement 'effects not cleared, present
again', it will not be debited to the account of the party.
xxx xxx xxx -
I know that our Regional Manager and A.O. (Advances) G ·
was impressing A 1 to confine all the business dealings of
·all the firms to SBI Begum Bazar.. A 1 agreed with a
stipulation that all his credit requirements must be met by
the branch. I was in receipt of a letter from A1 requesting'
for sanction of ad hoc limits to Shri Jee Industries. Regional H
,,....
800 SUPREME COURT REPORTS [2009] 7 S.C.R..

A office never objected to negotiations of local cheques in ~

favour of Shri Jee Industries. I do not remember whether
I presented cheques with a delay of three or four days in
clearance. From February 1986 to August 1987 there was
no permanent Branch Manager to Begum Bazar Branch."
B P.W. 19 - R.V. Panchapakesan - who worked as an
Administrative Officer (Advances) in the Regional Office, in his
deposition, stated as under: •
~
"It is true the transaction is of civil nature and we can
c approach the civil courts for recovery of the liability from
A1. It is not true to suggest that we intentionally taken up
the criminal forum also in prosecuting A1 in order to harass
him becaus~ the cheques were bounced there is criminal
liability of A1 hence we have complaint. The bank also
filed civil suit against A1.
D
I do not admit the suggestion that A1 VG.Loya had not
committed any fraud in the bank. It is not true to suggest "'
that I gave false statement before CBI in order to save my
skin."
E He, in. his cross-examination by A4 to A6, stated:
"At the instructions of D.G.M. I was looking after deposit
mobilization and market promotion.
No written instruction were given to me. A

F
It is true even before A4 S.V.L. Murthy took charge as
Bank Manager, Begumbazar branch, I am acquainted with
A1 V.G. Loya.
I do not remember whether myself or our R.M. have
G approached Sri V.G. Loya seeking deposits to him.
r
It is ~rue after ascertaining the worthiness of parties Sri ,\

VG Loya (A 1) we have sanctioned the limits.
I do not know A4. S.V.L. Murthy addressing a letter dt.
H 24.3.89 hearing No: F/20-75 to the Regnl. Office
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 801
[S.S. SINHA, J.]

expressing some suspicion about the bills discounted on A
behalf of Sobachand Sivajiram, as I was not working as
' A.O. at that time.
)()()( )()()( )()()(

I learnt that the then Branch Manager i.e. A4 SVL Murthy B
has stopped discounting any bills on the a/c Sobaqhand
. Sivajiram before the receipt of my confidential dt. 10.4.89 .
As A.O. Advances I agree that A4 SVL Murthy has taken
a correct stand of not discounting the bills pertaining to
Sobachand Sivajiram Indus. C
I do agree that the bank has not suffered any loss on bills
returned as the amount has been recovered from the party.
)()()( )()()( )()()(

D
The R.M. has to visit the branch periodically and it is his
duty to scrutinize the ledgers of th_e Bank branch A.O.
advances I do not go for such inspection.
It is not true to suggest that the discounting of local, cheques
is a part of lending activity of the bank. E
Discounting bills falls under lending activity.
, It is true during the customers relations meeting A 1 and
.., other customers have complained to R.M. about delay in
relations of cheques by the Begumbazar branch and our F
R.M. advised replying customers that the delays can be
avoided if the clearing cheques are presented by the
branch to the services branch on the same day.
)()()( )()()( )()()(
G
I remember the original Jimit proposed for Rs.85 lakhs
and the ad hoc limit (in principal limit) was Rs.35 lakhs.
The party requires ad hoc limits in urgency pending
sanction of regular limit.
)()()( )()()( )()()( H
802 SUPREME COURT REPORTS [2009] 7 S. C.R. t
'
A The weekly abstracts of branches cannot be scrutinized -
'
by A.O. branch they go to A.O. General Manager. The
weekly abstracts contain expenses of bills discounted and
balance of bills discounted. -
"
The Electronic Data processing (BOP) of local head office
B .generates weekly outputs from" the weekly abstracts from
the banks giving figures of deposits and advances. These
are received by A.O. advances for enabling scrutiny of ..
branch figures of advances and their variations."
c From the aforementioned statements, it is evident that all
transactions were being carried on in a transparent manner
having regard to the prevalent practice. In fact, as noticed
hereinbefore, Shri Vijay Kumar not only started granting the said
facility to the principal accused, some amount of laxity on his
part was also found.
0
P.W. 20 - V. Ramamurthy in his deposition, stated:
"I took charge as Dvnl. Manager Region 1 during the
August 1987 when I visited Begumbazar branch the then
branch manager PW1 Vijaykumar took.me to A1 Loya's
E house and introduced him as bank customer. We have
sanctioned loan limits to A1 Sri V.G. Loya in the name of
the company Mis Shobachand Shivajirao and A1 was the
Managing Partner of the company, the connection of that
loan A1 visited my office.
F ..
Part of the limits was sanctioned by me for Shobchand
Shivajiram and part of limits was sanctioned by Dy. General
Manager. The D.D. purchased documentary bills is for
Rs.20 lakhs and D.D. purchased for bill discounting facility
is for Rs.5 lakhs. Cash Credit hundi typed limit of Rs.20
G
lakhs was sanctioned by the D.GM., Sri Seshasahj. The
sanctioned was communicated to the branch.
xxx xxx xxx
After processing the proposals we found out quite a few
H -~
804 SUPREME COURT REPORTS [2009] 7 S.C.R.

A branch has discontinued purchase of bills and he wanted
this ban to be lifted. Sri Panchapakesan questioned Loya
about the genuineness of the bills he could not give
,
satisfactory answers. We told Shri Loya, A 1, that unless
the full-scale investigation into this matter is over we cannot
resume purchase of bills in this account. This disturbed
B Shri Loya, A 1. We requested A4 to visit Sailam or Madurai,
if necessary, and enquire into the matter to find out whether
any movement of any goods in regard to these bills and ,,
submit a report to us. I resumed duty on 17.4.1989.
xxx xxx xxx
c
The branch of the bank used to send periodical abstract
to Regional Office Ex. P. 623 to 666 are the weekly abstract
sent by Begumbazar Branch to Regional Office. The
purpose of weekly abstract is to furnish information to
D Regional Office for communicating RBI about time liabilities
of the bank branch as the bank is to maintain certain
· reserves as per RBI Rules. The weekly abstract reflects
total of various transaction such as advances, deposits
etc. They won't reflect the details. The abstract will not
come to Regional Manager the Desk Officer shall sent
E statement in routine course.
He in his cross examination on behalf of A4 to A6, stated:
"It is a fact as a Regional Manager, it is my duty to control
advances, deposits and other miscellaneous transaction
F including house keeping of the branch.
Discounting of cheques fall under advances of portfolio of
the branch.
It is a fact our Bank Manager initiated departmental enquiry
- against me pertaining to the Begumbazar transaction in
G respect of Sriji Industries.
It is a fact in this transaction I was issued a charge sheet,
...
I submitted my explanation and on that basis the bank
management given me punishment of 'Censure'.
H xxx xxx xxx
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 805
[S.B. SINHA, J]

It is a fact that A1 V.G. Loya is a resourceful and potential A
customer in attracting deposits and introducing new cliental
to the branch.
A1 Loya might have given some deposits to Begumbazar
Branch.
B
I might have asked for deposits A 1 Loya and he might
have promised me to secure NRI deposits upto 25 Lakhs.
- I cannot exactly recall at this length of time.
xxx xxx xxx
Before sanctioning limits to A 1 Loya under the Ale. C
Shobchand Shivajiram, I took into consideration of the
Branch Manager's Report about credit worthiness, integrity
of A1.
When the such credit facilities provided for A 1 Loya the D
Branch Manager was Sri R. Vijayakumar (PW1 ).
It is a fact that the precautions taken by A4 as Branch '-,,

Manager'while discounting the bills (purchasing bills) as
narrated under Ex. P.670 are proper and sufficient.
xxx )()()( )()()( E

It is a fact Ex.D.11 letter A4 SVL Murthy mentioned that Sri
V.G. Loya has been, presenting demand /usance bills for
purchase/discounting supported by Lorry Receipts which
are originating from a place called Jaora (M.P.).· The F
consignments are booked from Jaora and sent to different
destinations etc. The relevant portion is marked as Ex.
D.11 (a). It was also mentioned by A4that "I am of the view
that this practice is fraught with risks and not in the interest
of the Bank, this is also against the terms of sanction of
bill limits". The relevant portion is marked as Ex. D. 11(b} G
in (EX. D.11)
xxx xxx )()()(

It is a fact the bank has earned appropriate interest on this
transaction. H
806 SUPREME COURT REPORTS [2009] 7 S.C.R.

A Such income arrived byway of interest by the bank will be
reflected in the banks monthly performance report.
I had no occasion to ask the Branch Manager how it
happened to get such huge income by way of interest.

8 At no point of time I have gone through the weekly
statements of Begumbazar branch sent during the period
of A4 SVL Murthy. The witness adds that "I cannot say I
have not seen the weekly statement, there may be
occasions for me to go through the weekly statements, if
-
c they are placed before me by my staff.
It is a fact the weekly abstract is statutory return and very
important return and it is submitted as per the guidelines
of RBI.
It is true the weekly statement abstract will give the entire
D
picture about performance of the branch.
xxx xxx )()()(

I learnt subsequently that there was purchase of local
cheques Begumbazar branch even prior to assumption of
E office as Branch Manager A4 SVL Murthy. The
predecessor of A4 is one R. Vijaykumar (P.W.1)
-
To my knowledge even the said R. Vijaykumar when he .
discounted cheques for A1 to the tune of Rs.15 to 20
F laktis he has not obtained any sanction or permission
from Regional Office.
)()()( )()()( )()()(

Whenever there were customer relations programmes
G
conducted by the branch, the minutes of the programe will
be sent to Regional Office.
Ex. D. 39 is such Xerox copy of such minutes for the
·quarter ending March 89 dt. 17.3.89.

H. It is true in Ex. D.39 it was reported by A4that LOIC facility
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 807
[S.B. SINHA, J.]

-i was extended to 21.3.89 on local cheques purchases. A
The witness volunteers "The customer relationship will be

- held with a purpose of bringing customer together and
also cultivating, so the minutes will be sent to inform
Regional Office that branches doing in Customer Relations
Meetings. The comment with regard to LOIT facility B
customer etc. is not warranted to incorporate in Minutes.
This is done intentionally by A4 involving Regional Office.
~

~ xxx xxx xxx
I am not aware whether other branches in Twincities situate c
in my region like Osmangunj, Charminar, Gowliguda, Old
MLA Quarters branches were also discounting local
cheques. I am not acquainted with the initials of Mr. Srinivas
(LW.1 ). It is not true to suggest that the circular in Ex.
P.675. were sent to the Begumbazar in May 1989 after o-
. completion of disputed transaction. It is a fact that the
R.B.I. did not prohibit totally the discounting of local
cheques.
xxx xxx xxx.-
I do not --know whether A4 Branch Manager stopped E
,~

purchasing local cheques from A 1 from 31.3.89 onwards
and restored the facility only from 7.4.89. It is not true to
suggest that the above said restoration of facility and its
continuation was done by A4, only after I accorded
permission to him. F
Generally I do not entertain my bank customers at my
house. On 7.4.89, I was on sick leave. By 7.4.89 the
purchase of bills under the Ale of M/s Sobchand Shivji
Ram was already stopped. I entertained A1 at my
G
reside.nee on repeated requests made by him on
... /.. Telephone on condition of his bringing the Branch Manager
along with him. I did not inform the branch manager to
come along with A 1. It is not true to suggest that A 1
complained on 7.4.89 at my residence against Branch
.- H
808 SUPREME COURT REPORTS [2009] 7 S.C.R.

A Manager (A4) that he is rigid in his approach of stopping ~

discounting of local cheques particularly after receiving
telex message from Sailam Branch. It is not true to suggest
that the meeting on 7.4.89 was held at the instance of A1
only for the purpose of seeking my permission to resume
-
B purchase of local cheques and I instructed A4 to restore
the facility to discounting of local cheques at the rate of
Rs.30 lakhs per day and asked A1 to reduce the limits
• I
gradually. It is not true to suggest thatA4 asked me whether
he could report the matter in writing to me before
,.
c restoration of facility and in instructed him not to do so. ,.,____

xxx xxx xxx
But the facility to A1 was continued till myself and D.G.M.
visited Begumbazar b.ranch on 25.7.89. It is not true to
suggest that my office instructing Begumbazar branch on
D
18.4.89 to discontinue the facility is false. It is a fact that
I orally instructed A6 Narahari Murthy on 25.4.89 to stop '
the facility. I did not give those instructions in writing. It
must be a fact that all the cheques that were purchased till
18.4.89 by A4 were cleared."
E
The said witness accepted that he used to receive oral
instructions from the A.O.
P.W.22- S. Srinivas Rao in his cross examination stated
as under: +
F
"The practice of purchase of local cheques was in vogue
at Beg~mbazar branch prior to August 1988 also. I did not
happen to go through the spot audit report Ex. P. 683
submitted by Sri G.L. Joseph Branch Inspector, as it was
directly submitted to Regional Office. No copy was send
G
to our branch. Since April, 1987 the practice of local
~

purchase of cheques was in vogue at the branch, so also ....
debiting of the cheques thus purchased to L.0.1.T. Ale.
xxx xxx xxx
H
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 809
,,, [S.B. SINHA, J.]
-i It might be that interest earned by the bank on the local A
cheques purchase extended to Sree Industries was to the
-- tune of about Rs. 44 lakhs. I didn't come across any letter
written either by Adl'Jlinistrative Officer or Regional
Manager seeking clarification from Branch manager as
to how there is substantial incr~se in the earnings of the B
branch beyond the targets prescribed.

• Thus, he quantified the interest earned. He was the
... successor of Accused No. 4.
Having noticed the evidence adduced on behalf of the
prosecution, we are of the opinion that no evidence was brought c
on record to show that Accused No. 4 or for that matter Accused
No. 5 entered into any con~piracy with others. Accused No. 4,
in fact, had stopped grant of the said facility and only at the
instance of P.W. 20, the said facility was restored. It is true that
said witness had denied a suggestion made by the Accused D
~ No. 4 but the fact that the oral instructions used to be given to
the Officers concerned have not only been accepted by P.W. 19
but also by P.W. 20.
Criminal breach of trust is defined in Section 405 of IPC.
The ingredients of an offence of the criminal breach of trust are: E
;:.
"1. Entrusting any person with property or with any
dominion over property.
. 2. That person entrusted (a) dishonestly misappro-
priating or converting to his own use that property; or (b) F
dishonestly using or disposing of that property or willfully
suffering any other person so to do in violation-
(i) of any direction of law prescribing the mode in which
such trust is to be discharged, or
G
(ii) of any legal contract made touching the discharge of
~
/... such trust."
Ingredients of Section 409 of IPC read as under :
"(i) The accused must be a public ~entant;
~
H
810 SUPREME COURT REPORTS [2009] 7 S. C.R.

.
A (ii) He must have been entrusted, in such capacity, with .
property.
(iii) He must have committed breach of trust in respect
of such property."
---
B Section 415 of the Indian Penal Code defines cheating as
under:
"Section 415.-Cheating-Whoever, by deceiving any ~

person, fraudulently or dishonestly induces the person so
~
deceived to deliver any property to any person, or to
c consent that any person shall retain any property, or ~

intentionally induces the person so deceived to do or omit
to do anything which he would not do or omit if he were not
so deceived, and which act or omission causes or is likely
to cause damage or harm to that person in body, mind,
reputation or property, is said to 'cheat'."·
D
An offence of cheating cannot be said to have been made
out unless the following ingredients are satisfied : '
"i) deception of a person either by making a false or
misleading representation or by other action or omission;
E
(ii) fraudulently or dishonestly inducing any person to
'
~

deliver any property; or
(iii) to consent that any person shall retain any property
and finally intentionally inducing that person to do or
F omit to do anything which he would not do or omit."
For the purpose ofconstituting an offence of cheating, the
complainant is required to show that the accused had fraudulent
or dishonest intention at the time of making promise or
representation. Even in a case where allegations are made in
G regard to failure on the part of the accused to keep his promise,, ,
in absence of a culpable intention at the time of making initiar r
~
promise being absent, no offence under Section 420 of the
Indian Penal Code can be said to have been made out.
We may reiterate that one of the ingredients of cheating
H
/

S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD . 811
[S.B. SINHA, J.)

as defined in Section 415 of the Indian Penal Code is existence A
of an intention to cheat at the time of making initial promise or
existence thereof from the very beginning of formation of contract
In Hira Lal Hari Lal Bhagwati v CBI [(2003) 5 SCC 257],
this Court held :
B
"40. It is settled law, by a catena of decisions, that for
establishing the offence of cheating , the complainant is
~
required to show that the accused had fraudulent or
dishonest intention at the time of making promise or
representation. From his making failure to keep promise c
subsequently, such a culpable intention right at the
beginning that is at the time when the promise was made
cannot be presumed. It is seen from the records that the
exemption certificate contained necessary conditions .
which were required to be complied with after importation
D
of the machine. Since the GCS could not comply with it,
therefore, it rightly paid the necessary duties without taki~g
advantage of the exemption certificate. The conduct of
the GCS clearly indicates that there was no fraudulent or
dishonest intention of either the GCS or the appellants in
their capacities as office-bearers right at the time of E
making application for exemption."
[See also Indian Oil Corporation v NEPC India Ltd. &
Ors. [(2006) 6 sec 736]
. . In Vir Prakash Sharma v. Anil Kumar Agarwal ((2007) 7 F
sec 3I~J. noticing, inter alia, the aforementioned decisions,
this Court held:
"13. The ingredients of Section 420 of the Penal Code
are as follows:
G
"' i (1) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to
deliver any property; or
(iii) To consent that any person shall retain any property H
812 SUPREME COURT REPORTS [2009] 7 S.C.R.'""'

A and finally intentionally inducing that person to do or
omit to do anything which he would not do or omit.
No act of inducement on the part of the appellant has
been alleged by the respondent. No allegation has been
made that he had an intention to cheat the respondent
B from the very inception.
14. What has been alleged in the complaint petition as
also the statement of the complainant and his witnesses
relate to his subsequent conduct. The date when such
c statements were allegedly made by the appellant had not
been disclosed by the wit.nesses of the complairiant. It is
really absurd to opine that any such statement would be
made by the_appellant before all of them at the same time
and that too in his own district. They, thus, appear to be ..
wholly unnatural.
D
15. In law, only because he had issued cheques which
were dishonoured , the same by itself would not mean that
he had cheated the complainant. Assuming that such a
statement had been made, the same, in our opinion, does
E not exhibit that there had been any intention on the part of
the appellant herein to commit an offence under Section
417 of the Penal Code."
The said principle has been reiterated in A// Carogo
Movers (I) Pvt. Ltd. v. Dhanesh Badarmal Jain & Anr. [2007
. .
F (12) SCALE 391], stating:
"For the said purpose, allegations in the complaint petition
must disclose the necessary ingredients therefor. Where
a civil suit is pending and the complaint petition has been
G filed one year after filing of the civil suit, we may for the
purpose of finding out as to whether the said allegations
are prima facie cannot notice the correspondences
. exchanged by the parties and other admitted documents.
It is one thing to say that the Court at this juncture would
not consider the defence of the accused but it is another
H
,.~

,
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 813
[S.B. SINHA, J.]

.. thing to say that for exercising the inherent jurisdiction of A
this Court, it is impermissible also to look to the admitted
documents. Criminal proceedings should not be
I
. encouraged, when it is found to be mala fide or otherwise
an abuse of the process of the Court. Superior Courts
while exercising this power should also strive to serve the B
ends of justice."

In R. Kalyani v. Janak C. Mehta & Ors. [2008 (14) SCALE
• 85], this Court held:
...
"24. As there had never been any interaction between the c
appellant and them; the question of any representation
which is one of the main ingredients for constituting an
offence of cheating, as contained in Section 415 of the
Indian Penal Code, did not and could not arise.

25. Similarly, it has not been alleged that they were entrusted D
y with or otherwise had dominion over the property of the
appellant or they have committed any criminal breach of
trust."

(See also Sharon Michael & ors. vs. State of Tamil Nadu
E
& Anr. [2009 (1) SCALE 627]

22 .. It may be that there had been certain procedural
irregularities in the transaction.

~ However, sufficient evidence is available on record to show
that the Officers had done so for the purpose of promoting the · F
business of the Bank. In relation whereto or in respect whereof,
initiatives had been taken by P.Ws. 19 and 20. It is furthermore
not denied or disputed that after the cheque discounting facility
was stopped in April, 1989 by Accused No. 4, there has been a
meeting at the residence of P.W. 20. In his deposition, the said G
witness categorically admitted that the said meeting was
~
.,i.. arranged at the instance of Accsued No. 1. It is incomprehensible.
that a meeting has been arranged at his residence on the day.
he was on leave at the instance of Accused No.1. He must have
developed grievance against the Accused No. 4 as regards H
..
814 SUPREME COURT REPORTS [2009] 7 S.C.R

A the stoppage of the said facility. If immediately thereafter the '
said facility had been restored by the Accused No. 4, a stand
taken by him that it was done under the oral instructions of the
higher authorities appears to be plausible.
...
23. The prosecution apart from the fact that it had utterly
B failed to bring on record any evidence of conspiracy must also
be held to have failed to bring on record any evidence of
wrongful gain so as to attract the provisions of the Prevention of
Corruption Act, 1988 or otherwise.
"'
~

24. The entire argument of Mr. B. Datta, learned Additional
c Solicitor General as also the findings arrived at by the learned
Special Judge as also the High Court proved the ingredients of
offence under Section 409 of the IPC. The accused persons,
however, have not been charged for commission of the said
offence. Conspiracy by and between the Bank officials and the
D Accused Nos. 1 to 3 has been stated to be for commission of
1r
the offence of cheating for the purpose of arriving at a finding
that there has been a conspiracy so as to cheat the Bank. It was
necessary for the prosecution to establish that there had been
a meeting ofmind at the time when the facility had been granted.
E Such meeting of mind on the part of the accused persons has
not been proved. Furthermore, the prosecution case even if given ;-
face value and taken to be correct in its entirety does not lead
to a finding that even Accused Nos. 1 to 3 had any wrongful
intention at the time when the contract was initiated.
F
•
25. We do not mean to suggest that in the matter of
operating the account, no offence might have been committed
by them. The offence, if any, it will be bear repetition to state,
was committed under Section 409 of the IPC.
26. The learned Special Judge as also the High court
G unfortunately proceeded on the basis that the cheque discounting
facility could under no circumstances be made available to them. ",

-
--\

27. We do not think that, that was a correct approach. The
RBI guidelines categorically show that it was not a wrong
H practice. It is one thing to say that there has been an abuse of a
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 815
[S.B. SINHA, J.]
..j
prevalent banking practice for the purpose of causing wrongful A

-
--4 loss to the Bank and causing wrongful gain to others but it is
another thing to say that by reason thereof, the ingredients of
cheating are attracted.
28. We have noticed hereinbefore that learned Additional
Solicitor General merely took us through the judgment of the B
learned Special Judge as also the High court. His entire
• contention revolved around the commission of criminal breach
... of trust. Unfortunately, they have not been charged therewith. It
would bear repetition to state that accused persons have not
. been charged under Section 409 of the IPC; even the Accused c
,, Nos. 1 to 3 have not been charged for entering into a conspiracy
with Accused Nos. 4, 5 and 6 in respect of commission of
offences under the Prevention of Corruption Act.
29. It is in the aforementioned situation, we are of the
opinion that the judgment of conviction and sentence cannot be D
upheld. So far as the submission of learned Additional Solicitor
General that this Court, having regard to the concurrent findings
of fact as regards the commission of offence arrived at by the
learned Special Judge as also the High Court, should not
exercise its discretionary jurisdiction under Article 136 of the E
Constitution of India is concerned, we do not find any substance
therein. Appellants have been charged under wrong provisions.
Proper charges have not been framed against them .
.. 30. In Lala Ram & Ors. vs. State of UP (1990) 2 SCC
113, whereupon strong reliance has been placed by the learned F
Additional Solicitor General, this Court noticing various
decisions opined that when there are various infirmities, the
Supreme Court can interfere.
It is, therefore, a case which comes within the purview of
G
.,,, the dicta laid down therein. It is significant to notice that in that
>. case itself this Court keeping in view the findings arrived at
therein allowed the appeal preferred by the accused persons
and set aside the judgment of conviction.
It is one thing to say that ordinarily a concurrent finding of H
816 SUPREME COURT REPORTS [2009] 7 S.C.R.

A fact shall not be interfered with by this Court in exercise of its

-
~

jurisdiction under Article 136 of the Constitution of India but it is
another thing to say that despite opining that accused are entitled
to acquittal, a judgment of conviction passed against them should
.
be upheld. In fact, the jurisdiction of this Court must be exercised
B wherever it is required to do so for securing the ends of justice
and to avoid injustice.
31. The upshot of our discussions is:- •
(a) The prosecution did not lay down any foundational 4

c facts to arrive at a finding of dishonest intention on
the part of the appellants, nor any such finding has
.
been arrived at by the trial court or the High Court. ...
(b) The circumstances which were considered sufficient
to bring home the charges against the appellant were:
the cheques of accused Nos. 1, 2 and 3 were
D
discounted after purchasing cheques; cheques were
deposited after a gap of 1 to 4 days; only later the
amounts were deposited in the account which
circumstances, in our opinion, are not sufficient to
hold the appellants guilty for commission of offence
E under Section 420 of the IPC as all the actions on
the part of the bank officers were in consonance with
the long standing banking practice.
(c) Accused No. 4 had taken care of having adequate
~
security to ensure that the bank does not suffer any
F loss, the gain if any was caused to the Bank.
(d) Appellants acted on instructions by the higher authority.
(e) The prosecution evidence does not establish any
conspiracy on their part vis-a-vis Accused Nos.1, 2 and 3.
G
32. For the aforementioned reasons, the impugned
_.. r
judgment and order of the High Court, being unsustainable, is
set aside. The appeals are allowed. Appellants are directed to ,._
be set at liberty unless wanted in connection with any other case:
G.N. Appeals allowed.