Holding

If the prosecution proves that a public servant possessed assets disproportionate to his known sources of income, the burden shifts to the accused to satisfactorily account for them, and the period of reckoning may be limited to a reasonable span; consequently, the conviction was unsustainable and the appeal dismissed.

Summary

Pollonji Darabshaw Daruwalla, a customs appraiser, was searched and found to possess assets allegedly disproportionate to his known income for the period 1‑April‑1958 to 31‑Dec‑1968. He was convicted under the Prevention of Corruption Act, 1947 (s.5(1)(e) read with s.5(2)) for criminal misconduct, but the High Court acquitted him on the ground that the prosecution had not proved the disproportion beyond reasonable doubt. The State appealed. The Supreme Court held that the prosecution may select any period that fairly reflects the accused’s income and assets, that once it establishes possession of disproportionate assets the burden shifts to the accused to explain them, and that the order of names in joint bank accounts does not determine beneficial ownership. The Court further ruled that the prosecution need not disprove every possible source of income and that a liberal approach to what constitutes ‘disproportion’ is permissible. Applying these principles, the Court found the benefit of doubt applied and dismissed the appeal, upholding the acquittal.

Issues considered

The appropriate period for assessing disproportionate assets under s.5(1)(e) of the Prevention of Corruption Act, 1947.
Whether the burden of proof shifts to the accused after the prosecution establishes possession of assets disproportionate to known income.
Whether the order of names in joint bank deposits determines beneficial ownership.
Whether the prosecution must disprove all possible sources of income to secure a conviction.
The extent of disproportion required to sustain a conviction for criminal misconduct.

Legislation cited

Code of Criminal Procedure, 1973s. 342
Prevention of Corruption Act, 1947s. 5(1)(e), s. 5(2)

Subjects

Prevention of Corruption Actdisproportionate assetsburden of proofjoint bank accountbeneficial ownershipperiod of reckoningcriminal misconductpublic servantbenefit of doubt

Judgment

STATE OF MAHARASHTRA
A v.
POLLONJI DARABSHAW DARUWALLA

NOVEMBER 10, 1987.

B [A.P. SEN AND M.N. VENKATACHALIAH, JJ.)

Prevention of Corruption Act, 1947-Respondent's acquittal of
offence under section 5(J)(e), read with section 5(2), thereof challen-
ged.

The respondent, Pollonji Darabshaw Daruwalla, was an appra- I •
C iser in the Customs Department. The police searched his residential
premises on a suspicion of his complicity in certain offences concerning
the export of the Stainless Steel-Ware, in the course of the investigation
of that case. Though nothing incriminatory for the purpose of that
investigation was discovered, the search revealed that the respondent
D was in possession of property and pecuniary resources, disproportion-
ate to his known sources of income between 1.4.1958 and 31.12.1968,
for which he could not satisfactorily account for. This led to the suspicion
of the commission by the respondent of an offence under the Prevention
of Corruption Act, 1947, and the respondent was charge-sheeted for an
offence under section 5(1)(e), read with section 5(2) of the Act. In sup- Y
E port of the charge, a number of documents pertaining to the respon-
dent's investments in the banks, in the company deposits and on shares,
both in his own name and jointly with his wife, as also the documents
pertaining to the salary and emoluments of the respondent between
1.4.1958 and 31.12.1968 were brought on record in evidence. The
defence was that the respondent was in possession of substantial assets
F even anterior to 1.4.1958. ,
·",
The Special Judge ~eld the respondent guilty and sentenced him
to rigorous imprisonment and fine. The respondent filed an appeal
before the High Court against the Judgment and Order of the Special
Judge. The High Court allowed the appeal and acquitted the respon·
G dent. The State appealed to this Court by special leave against the
decision of the High Court.

Dismissing the appeal, the Court,

HELD: In order to establish that a public-servant is in possession
H of pecuniary resources and property disproportionate to his known
906
STATE OF MAHARASHTRA v. P.D. DARUWALLA 907

sources of income, it is not imperative that the period of reckoning be
A
spread out for the entire stretch of anterior service of the public-
servant. There can be no general rule or criterion, valid for all cases, in
regard to the choice of the period for which accounts are taken to
establish criminal misconduct under section S(I)(e) of the Act. The
choice of the period must necessarily be determined by the allegations of
fact on which the prosecution is founded and rests. However, the period B
must be such as to enable a true and comprehensive picture of the
known sources of the income and the pecuniary resources and property
in possession of the public servant either by himself or through any
other person on his behalf which are alleged to be so disproportionate.
A ten year period cannot be said to be incapable of yielding such a true
and comprehensive picture. The assets spilling-over from the anterior
period, if their existence is probablised, would, of course, have to be C
given credit to on the income side and would go to reduce the extent and
quantum of the disproportion. It is for the prosecution to choose what is
the period, having regard to the acquisitive activities of the public
servant, and characterise and isolate that period for special scrutiny. In
this case, the selection of a ten year period between 1.4.1958 and D
31.12.1968, cannot, by reason alone of the choice of the period, be said
to detract from the maintainability of the prosecution, and the view of
the High Court on these points is erroneous. [913C-F; 914E; 9ISC-D]

Once the prosecution establishes the essential ingredients of-the
offence of criminal misconduct by proving, that the public servant is, or E
was, at any time during the period of his offence, in possession of
pecuniary resources or property disproportionate to his sources of
income known to the prosecution, the prosecution has discharged its
burden of proof and the burden of proof is lifted from the shoulders of
the prosecution and.descends upon the shoulders of the defence. It then
becomes necessary for the public servant to satisfactorily account for F
the possessicm of such properties and pecuniary resources. It is errone-
ous to predicate that the prosecution should also disprove the existence
of the possible source of the public servant. [914G-H; 915A-B]

Equally erroneous and unsustainable is the view of the High
Court on the proposition that the respondent was not the beneficial G
owner in the joint bank investments where the respondent's name was
not the first name but his wife's name occurred first. The assumption
that in all the joint-deposits, the depositor first-named alone is the
beneficial owner and the depositor named second has no such beneficial
interest, is erroneous. The matter is principally guided by the terms of
the agreement, inter se between the joint-depositors. If, however, the H
908 SUPREME COURT REPORTS [1988] 1 S.C.R.

A terms of the acceptance of the deposit by the depositee stipulate that the
name of the beneficial owner shall alone be entered first, then the
presumptive beneficial interest in favour of the first depositor might be
assumed. There was no such material before the Court in the case. The
respondent virtually acknowledged his beneficial interest in the deposits
in the course of his examination under section 342, Cr. P.C. [9ISD-G]

However, though there are errors of approach and of assumption
and inference in the judgment under appeal, they did not by themselves
detract from the conclusion reached by the High Court that in the
ultimate analysis, the prosecution had not established the case against
the respondent beyond reasonable doubt. The conclusion reached by
the High Court tends to show that the disproportion of the assets in
C relation to the known sour~es rf income was such as to entitle the
respondent to be given the benefit of doubt, though, however, on a
consideration of the matter, it could not be said that there was no
disproportion or even a sizeable disproportion; for instance, the accep-
tance by the High Court of the case of receipt by the respondent of the
j) alleged gift from bis mother, was wholly unsupported by the evidence.
There were also other possible errors in the calculations in regard to the
carried-forward assets, etc. The finding became inescapable that the
assets were in excess of the known sources of income. But on the ques-
tion whether the extent of the disproportion was such as to justify a
conviction for criminal misconduct under section S(l)(e) read with sec-
E tion 5(2), the Court thought it should not, in the circumstances of the
case, interfere with the verdict of the High Court, as, in the Court's
view, the difference would be considerably reduced in the light of the
factors pointed out by the High Court. A somewhat liberal view was
required to be taken of what proportion of assets in excess of the known
sources of income constitutes "disproportion" for the purposes of see-
p tion S(l)(e) of the Act. [9ISG-H; 916A-D]

The respondent should have the benefit of doubt. State of
Maharashtra v. Wasudeo Ramachandra, A.I.R. 1989 S.C 1189, refer-
red to. [916E]

G CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No. 318 of 1978.

From the Judgment and Order dated 29th and 30th April, 1976
of the High Court of Bombay in Criminal Appeal No. 1044 of 1973.

H A.S. Bhasme for the Appellant.
STATE OF MAHARASHTRA v. DARUWALLA [VENKATACHALIAH,J.) 909

Prem Malhotra for the Respondent.
A
The Judgment of the Court was delivered by

VENKATACHALIAH, J. This appeal, by special leave by the
State of Maharashtra, arises out of and is directed against the judg-
ment, dated, April 29-30, 1976 of the High Court of judicature at B
Bombay in Criminal Appeal No. 1044/73 on its file setting-aside
respondent's conviction and sentence dated, 21. 7. 73, under Section
5(1)(e) read with Section 5(2) of the Prevention of Corruption Act of
1947 ('Act' for short) in Special Case No. 24170 on the file of the
Special Judge, Greater Bombay.

The special judge held respondent guilty of the charge of Crimi- C
nal Misconduct in that respondent was in possession of property and
pecuniary resources, disproportionate to his known sources of income
for which he could not satisfactorily account; and sentenced respon-
dent to undergo rigorous imprisoument for 3 years and to pay a fine of
~.W,~. D
The High Court allowing respondent's appeal before it acquitted
him of the charge. The State has come-up in appeal.

2. At the relevant time, respondent-Pollonji Darabshaw
Daruwalla-was an Appraiser in the customs department at Bombay. E
He and several other customs officers were suspected of their compli-
city in certain offences, concerning export of stainless steel-ware to
Hongkong. On 9.12.1968, Police-inspector (PW 34), armed with a
warrant in this behalf searched the residential-premises of the respon-
dent in the course of the investigation of that case. Though nothing
-- incriminatory for purpose of that investigation was discovered·, F
however, the search revealed respondent's possession of furniture,
refrigerator, tape-recorder and cash of Rs.7593 which were susceptible
of the suspicion of the commission of an offence under Section 5( 1)( e)
read with Section 5(2) of the 'Act'. PW 34, accordingly, obtained the
requisite authorisation to investigate into this offence and after in-
vestigation, sought and obtained on 26.10.1970 sanction to prosecute G
respondent. On 2.11.1970, the charge-sheet was placed against the
respondent for an offence under Section 5(1)(a) read with 5(2) of the
Act.

3. The substance of the charge was that respondent, as a public-
servant, between the period of 1.4.1958 and 31.12.1968 was in H
910 SUPREME COURT REPORTS I 1988] l S.C.R.

A possession of pecuniary resources and property of the value of
Rs.2,62, !22.15; that his known sources of income during the said
period was Rs.85, 114.12; that, therefore, the property possessed by
the respondent was disproportionate to his known sources of income
to the extent of Rs.l,71,647 for which respondent could not satisfac-
B torily account and that, thereby respondent was guilty of Criminal
Misconduct within the meaning of and punishable under Sectiol) 5(2)
of the Act. Respondent having pleaded not guilty, the matter went for
trial.

4. In support of the charge, the prosecution examined 34 witnes-
ses. A number of documents pertaining to the respondent's invest-
C ments in Banks; in company deposits; and on shares both in his own
name and jointly with his wife, as also documents pertaining to the
salary and emoluments of the respondent between 1.4.1958 and
3 l.12.1968 were brought on record and marked in evidence.

0 In the course of the trial, for the most part, respondent was not
defended by a counsel. Many of the prosecution witnesses were not
cross-examined. It was only at a late stage of the proceedings that an
advocate appeared for him. From what is disclosed by the trend of the
answers, in the course of the examination under Section 342 Cr. P.C.,
the possession of the assets in the form of investments in Fixed
E Deposits with Banks and with companies and on shares in the joint
name of the respondent and his wife was not disputed. The defence
was that respondent was in possession of substantial assets even
anterior to 1.4.1958 and that respondent had also derived substantial
assets from his wife's side. His wife was stated to be the only daughter
of a practising doctor. Respondent also claimed that he and his daugh-

-
F ter were in receipt of gifts from his mother.

5. The trial court went through the somewhat complex exercise
of computing and collating the particulars of the investments, made by
the respondent in his own name and in the name of his wife from time
to time over the years. In Chart No. I, appended to and forming part
G of its judgment the trial court formulated what, according to it, were
the results of the collation of these particulars as to the receipts and
investments for the various years. In Chart No. II, the pay and emolu-
ments which respondent was in receipt of, for and during the relevant
period were set-out. In Chart No. III, the trial court has set-out the
amounts of interest and dividends received by the respondent during
H the relevant-years.
STATEOFMAHARASHTRAv. DARUWALLA [VENKATACHALJAH,J.] 911

6. The substance of the outcome of the exercise by the trial, in A
relation to the total-income of the respondent for the relevant-period
was referred to and summarized by the High Court thus:

"The total of all these items aggregate of Rs.169736.69. It
is urged on behalf of the State that out of this, estimated
expense of Rs.31, 114.47 should be deducted because they B
were not available to the respondent to be accumulated as
his assets. So the total sources available to him were
Rs.1,38,621.83."

Referring to the total assets acquired by the respondent during
the relevant-period and the extent of the disproportion, the High C
Court noticed the results of the findings of the trial court thus:

"It was urged that the total assets being Rs.2,21,606.45, the
assets of worth Rs.82,984.23 were in excess".

7. We have heard Shri Bhasme, learned counsel in support of D
the appeal and Shri U.R. Lalit, who was requested to assist the court

, as Amicus Curiae in view of the circumstance that respondent re-
mained unrepresented. Learned Counsel have taken us through the
judgment under appeal and the evidence on record on the material
points.

8. From what we can gather from the somewhat spread-out
E

reasoning of the High Court, the considerations that principally
weighed with the High Court in reaching such conclusions as it did on
the material points in controversy before it, admit qf being formulated
thus:
F

(a) That the selection of the particular period (from 1.4.1958 to
31. 12. 1968) for the ascertainment and determination of
disproportionate-assets is itself arbitrary and caused pre-
judice to the respondent;
G
The period cif reckoning should have been from 1946 to
1968 as that would have given a fuller and a more complete
picture;

(b) That it was erroneous to proceed-as was done by the trial H
912 SUPREME COURT REPORTS [ 1988] 1 S.C.R.

court-on the premise that respondent was the beneficial
A
owner of the joint bank investments where his name was not
the first name;

That prosecution had failed to establish-and it was
erroneous on the part of the trial court to have assumed-
B that in respect of the deposits in which the wife's name
occurred first and respondent's name second, the respon-
dent alone was the beneficial-owner.

(c) That the deduction of Rs.41,839.17 as the carried-forward
assets from the period prior to 1.4 .1958 was inadequate and
it should have been Rs.56,822.
c
The effect of this would be that the whole of the invest-
ments made-in the first-year of the accounting-period viz,
1954, would be absorbed by the higher assets so carried-
forward;
D
(d) That a sum of Rs.6,000 which was the value of the probable
gift from the mother and Rs.1,275 representing the broker-
age on the fixed deposits had to be given credit to the re-
spondent on the resources side;

E (e) That from the bank account of Veera Bai, the wife of the
respondent, a sum of Rs.82,827.99 had been with-drawn dur-
ing the period between 1.4.1958 and 31.12.1968 and that
only Rs.31,010.12 had been given credit to on the plus side in
the accounting and that the balance of Rs.51,815.87 should
be treated as belonging to Veera Bai in joint investments and
F should, therefore be excluded from the value of respondent's
assets.

9. The High Court, on the basis of these re-calculations, held
that in all a sum of Rs.77,215,03 could not be treated as the assets of
the respondent and had to be deducted from a sum of Rs.2,21,66.45.
G In other words, the High Court held that the value of the assets of
Rs.82,984.23 said to be in excess of and disproportionate to the known
sources of income should be reduced by Rs. 77 ,215.03. Concluding, the ~
High Court observed:

"32. Now comes the question, whether a man after serving
H for 22 years from 1946 to 1968, on the prosecution own
.STATE OF MAHARASHTRA v. DARUWALLA [VENKATACHALIAH,J.] 913

showing, is able to save Rs.1,38,822 can it be. said that the
A
assets of Rs.1,41,495 as observed by us, are disproportion-
ate assets as required under Section 5(1)(e) of the Act. In
this connection, in our opinion, the difference is so negligi- ·
ble that it cannot be said to be disproportionate".

10. Shri Bhasme for the appellant seriously assailed the reason- B
ing of and the conclusion reached by the High Court on these points
and more particularly on the points noticed at (a) and (b). Learned
counsel submitted that the view of the High Court on points (a) & (b)
was manifestly erroneous and the High Court misdirected itself in law
' on these propositions:-
(~ c
We are inclined to agree with the learned counsel on the submis-
sion on points (a) and (b). In order to establish that a public-servant is
in possession of pecuniary resources and property, disproportionate to
his known sources of income, it is not imperative that the period of
reckoning be spread-out for the entire stretch of anterior service of the
public-servant. There can be no general rule or criterion, valid for all D
cases, in regard to the choice of the period for which accounts are
taken to establish criminal misconduct under Section S(J)(e) of the
'Act'.

The choice of the period must necessarily be determined by the
allegations of fact on which the prosecution is founded and rests. How- E
ever, the period must be such as to enable a true and comprehensive
picture of the known sources of income and the pecuniary resources
and property in possession of by the public-servant either by himself or
through any other person on his behalf, which are alleged to be so
disproportionate. In the facts and circumstances of a case, a ten year
period cannot be said to be incapable of yielding such a true and F
comprehensive picture. The assets spilling-over from the anterior
period, if their existence is probablised, would, of course, have to be
given credit-to on the income side and would go to reduce the extent
and the quantum of the disproportion.

On this aspect, the High Court observed: G

y " ..... 20. But at the same time, it has also to be remem-
bered that the prosecution, without showing any reason has
selected to begin the calculation of the assets from 1958. I
do not see any substantial reason in the selection of the
year 1958. It is on record that from 1954, the accused had H
9!4 SUPREME COURT REPORTS [ 1988] I S.C.R.

become the Appraiser. It is also on record that from the
A
year 1958 the accused had separated from his brother and
mother after the child was born to his wife. When I asked
the Public Prosecutor for the reason for selecting the years
1958 to 1968, he said that it was done because the prosecu-
tion could lead evidence so as to show that the investment
B during these 10 years would be disproportionate of the
assets compared to the moneys received. Looking to the
logic of the prosecution, if amounts invested upto 1958 are
excluded by themselves, I see considerable force in Mr.
Vashi's arguments that the first year of 1958 should also be
considered along with the previous years. There is no
charm in selecting the year. I think that the prosecution
c would have been in a better position instead of selecting
the period of 1958 to 1968, it had taken the entire period of
service from 1946 to 1968 and given credit of the amounts
that he has earned against all the assets that he had col-
lected. It is therefore difficult to understand why the pro-
D secution has chosen the period from 1958 to 1968 ...... "

" ..... 20. We have carefully considered this evi-
dence of the Police Inspector but still we are not convinced
about the selected of the period. We feel that the prosecu-
tion by selecting the check period of 10 years, when the
E accused had put in service from 1946 to 1968, i.e. for 22
years has done something whereby the chances of prejudic-
ing the case of the accused are there ........ "

11. The assumptions implicit in the above observation of the
High Court suffer from a basic fallacy. It is for the prosecution to
F choose what according to it, is the period which having regard to the
acquisitive activities of the public-servant in amassing wealth,
characterise and is late that period for special scrutiny. It is always
open to the public-servant to satisfactorily account for the apparently
disproportionate nature of his possession. Once the prosecution
establishes the essential ingredients of the offence of Criminal Miscon-
G duct by proving, by the standard of criminal evidence, that the public-
servant is, or was at any time during the period of his offence, in
possession of pecuniary resources or property disproportionate to his
sources of income known to the prosecution, the prosecution dis-
charges its burden of proof and the burden of proof is lifted from the
shoulders of the prosecution and descends upon the shoulders of the
H defence. It then becomes necessary for the public-servant to satis-
STATE OF MAHARASHTRA v. DARUWALLA IVENKATACHALIAH. J.] 915

~ factorily account for the possession of such properties and pecuniary
A
resources. It is erroneous to predicate that the prosecution should also
disprove the existence of the possible sources of income of the public
servant. Indeed in State of Maharashtra v. Wasudeo Ramchandra,
A.LR. 1981 SC 1189 this Court characterised the approach of that
kind made by the High Court as erroneous. It was observed:

...... \
" ........ The High Court, therefore, was in error in hold-
ing that a public servant charged for having disproportion-
B

ate assets in his possession for which he cannot satisfac-
.....:
torily account, cannot be convicted of an offence under
I Section 5(2) read with Sections 5(1)(e) of the Act unless
?! the prosecution disproves all possible sources of income
........ " c
In the present case, the selection of a ten year period between 1.4.1958
and 31. 12. 1968 cannot, by reason alone of the choice of the period, be
said to detract from the maintainability of the prosecution.

12. Equally erroneous, in the view of the High Court on the D
proposition noticed at point (b ). The assumption that in all joint-
deposits, the depositor first-named alone is the beneficial owner and
the depositor named second has no such beneficial interest is errone-
....... ous. The matter is principally guided by the terms of the agreement,
inter-se, between the joint depositors. If, however, the terms of the
acceptance of the deposit by the depositee stipulate that the name of E
the beneficial owner shall alone be entered first, then the presumptive
beneficial interest in favour of the first depositor might be assumed.
There is no such material before the court in this case.

Indeed, the answers of the respondent to the specific questions
r-
'
under Section 342 Cr. P.C. pertaining to the nature of the deposits and
the suggestion-implicit in the questions-as to the beneficial owner-
F

ship in the respondent in the deposits do not support the view of the
· High Court and lend credence to any doubts in the matter. Respon-
dent virtually acknowledged his beneficial interest in the deposits in
the course of his examination under Section 342. The view of the High
Court on point (b) is clearly unsustainable. G

> )' 13. However, these errors of approach and of assumption and
inference in the judgment under appeal do not, by themselves, detract
from the conclusion reached by the High Court that, in the ultimate
analysis, the prosecution has not established the case against respon-
dent beyond reasonable doubt. H
916 SUPREME COURT REPORTS I !988] I S.C.R.
A The discussion of and the conclusion reached on the contents and
parts (c) to (e) by the High Court tends to show that the dispropor\ion
of the assets in relation to the known source of income is such that
respondent should be given the benefit of doubt though however, on a
consideration of the matter, if cannot be said that there is no dispro-
B portion or even a sizeable disproportion. For instance, Shri Bhasme is
right in his contention that the acceptance by the High Court of the
case of the alleged gift from the mother is wholly unsupported by the
evidence. There are also other possible errors in the calculations in
regard to point(c). The finding becomes inescapable that the assets
were in excess on the known sources of income.

c But on the question whether the extent of the disproportion is ~
!'
such as to justify a conviction for criminal misconduct under Section
5( 1)(e) read with Section 5(2), we think, we should not, in the circum-
stances of the case, interfere with the verdict of the High Court as, in
our view, the difference would be considerably reduced in the light of
D the factors pointed out by the High Court. A somewhat liberal view
requires to be taken of what proportion of assets in excess of the
known sources of income constitutes "disproportion" for purpose of
Section 5(l)(e) of the Act.

We think that the respondent should have the benefit of doubt . .......
The appeal is accordingly dismissed.
E
S.L. Appeal dismissed.

-" I