http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: JETHSUR SURANGBHAI

       Vs.

RESPONDENT: STATE OF GUJARAT

DATE OF JUDGMENT09/11/1983

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA MISRA, R.B. (J) THAKKAR, M.P. (J)

CITATION:  1984 AIR  151            1984 SCR  (1) 797  1983 SCALE  (2)709

ACT:      Indian Penal  Code 1860,  Ss. 120  B, 109, 408, 467 and 471.      Chairman of  Co-operative  Society  along  with  others charged with  conspiracy to commit criminal breach of trust- Charge of conspiracy having failed-Sessions Court acquitting all but  one accused-Appeal  by State-High  Court convicting Chairman-Conviction whether valid and legal.      Defalcation of  properties-Several accused charged with conspiracy-Prosecution to prove collusion and cohesion among all  accused-Mens  rea  not  to  be  excluded-If  charge  of conspiracy fails-Prosecution  to  prove  affirmatively  that accused directly  and  personally  connected  with  acts  or omissions.

HEADNOTE:      The  appellant   was  the  Chairman  of  an  autonomous cooperative society under the control and supervision of the State  Government.   On  receipt  of  complaints  about  the financial  management  of  the  Society,  the  Registrar  of Cooperative Societies  appointed a  special auditor to audit the Society’s  accounts. On  the basis of the audit report a charge-sheet was  filed against all the accused for entering into a  conspiracy to  commit criminal  breach of trust. The conspiracy charge  having failed, all the accused except one were acquitted by the Sessions Judge.      On appeal  by the  State, the  High Court convicted the appellant in  respect of  three items,  namely, purchase  of fertilisers  involving   two  transactions  and  missing  of certain oil  engines, on  the ground that as Chairman of the Managing Committee  he must be held to be vicariously liable for any  order given  or misappropriation  committed by  the other accused.      In appeal  to this  Court it was contended on behalf of the appellant  that no case of defalcation had been made out against the appellant.      Allowing the appeal, ^      HELD: 1.  There was no justification for the High Court to  interfere  with  the  appellant’s  acquittal.  The  case against the  appellant had not been proved beyond reasonable

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

doubt and  he was  wrongly convicted by the High Court. [802 D-E] 798      2. In a case where there was serious defalcation of the properties, unless  the prosecution  proved that there was a close cohesion  and collusion  between all the accused which formed the  subject matter  of a  conspiracy,  it  would  be difficult to  prove the  charges against  the appellant. The charge of  conspiracy having  failed, the  most material and integral part of the prosecution story against the appellant disappeared. [801 B-C]      3. In  a criminal  case of such serious nature mens rea cannot be excluded. Once the charge of conspiracy has failed the onus  lay on the prosecution to prove affirmatively that the appellant  was directly  and personally  connected  with acts or omissions pertaining to the items purchased. [801 E]      4. In  the absence  of a  charge of conspiracy the mere fact that  the appellant  happened to be the Chairman of the Committee would  not make  him liable  in a vicarious sense. There is no evidence either direct or circumstantial to show that apart  from approving  the purchase  of fertilisers  he knew  that   the  firms  from  which  the  fertilisers  were purchased did  not exist.  If the  Chairman was  to be  made liable then  all members of the Committee, viz Tehsildar and other nominated  members would be equally liable because all of them  participated in the deliberation of the meetings of the Committee.  The appellant  as Chairman of the Sangh, had to deal  with a large variety of matters and it would not be humanly possible  for him to analyse and go into the details or every small matter in order to find out whether there has been any criminal breach of trust. [801 G-H; 802 A-B]

JUDGMENT:      CRIMINAL APPELLATE  JURISDICTION: Criminal  Appeal  No. 260 of 1972.      Appeal by  Special leave  from the  Judgment and  Order dated the  22.3.1972 of  the Gujarat  High Court in Criminal Appeal No. 171 of 1971.      R.L. Kohli,  Ramesh Kohli,  Naresh K. Sharma and Vineet Kumar for the Appellant.      M. N.  Phadke, H.  R. Khanna  and R.  N. Poddar for the Respondent.      The Judgment of the Court was delivered by      FAZAL ALI, J. After hearing counsel for the parties, by virtue of  our Order  dated October  4, 1983, we had allowed the appeal  and  acquitted  the  accused-appellant.  We  now proceed to give the reasons for the said Order.      The appellant  was convicted by the High Court under s. 408 read  with s.  109, Indian  Penal  Code  in  respect  of criminal breach of 799 trust with  regard to several items which have been detailed in the  judgment of  the High  Court. The appellant was also convicted under  ss. 471  and 467  read with  s. 109  of the I.P.C. Under  the first  count (s.  408) the  appellant  was sentenced to  two years  R.I. and  a fine  of Rs.  1000,  in default of  payment of  fine, further  six months R.I. Under the second  count (s.  471) he was sentenced to imprisonment for one year. The High Court further convicted the appellant under s.409  I.P.C. for  having committed breach of trust in respect of  certain oil engines and sentenced him to 3 years R.I. and  a fine of Rs. 1000, in default of payment of fine, imprisonment for  six months.  Thus, the  sum total  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

sentences under  various sections  mentioned above  comes to five years  but as  the sentences  have  been  made  to  run concurrently, the total sentences would be three years apart from the fine.      The learned  Sessions Judge had acquitted the appellant holding that  the charges framed against him were not proved but the  High Court  in an  appeal by  the State  of Gujarat reversed the  decision of  the Sessions  Judge and set aside the   appellant’s    acquittal   and    convicted   him   as aforementioned.      The facts  of  the  case  have  been  detailed  in  the judgments of  the High  Court and  the Sessions  Judge  with clarity and lucidity and need not be repeated all over again except so  far as  they are  relevant  for  the  purpose  of deciding the  appeal. There  was an  organisation  known  as ’Jasdan Taluka Sahkari Kharid Vechan Sangh Ltd. (hereinafter referred to  as the  ’Sangh’) which  was like  an autonomous cooperative  society   directly  within   the  control   and supervision  of   the  Government.  The  appellant  was  the chairman of  the Sangh  and the  other members  of the Sangh consisted of  two categories, viz., members nominated by the Registrar of  Cooperative Societies and those elected by the Sangh itself.  The managing Committee of the Sangh consisted of 8  members out of whom the appellant was the Chairman and A-2 was  the Manager  while the Tehsildar was the ex-officio Member of  the Sangh. Having received a number of complaints against the  Sangh, the  Registrar of  Cooperative Societies ordered one V. B. Shah to act as special auditor and examine and audit the accounts of the Sangh for the year 1965-66. On the basis  of the  audit report,  the Managing Committee was superseded and an administrator was appointed. Meanwhile the Sangh moved  the High  Court to  obtain a stay order against the appointment of the 800 administrator as  a result  of which  the appointment of the administrator was  stayed for  some time  and the  stay  was vacated in  July 1966.  Subsequently, one  M. K.  Parikh was appointed an administrator.      The  police   after   usual   investigation   submitted chargesheet under  s. 120B,  IPC against all the accused for entering into  a conspiracy  to commit  criminal  breach  of trust. So  far as  the appellant  is concerned  he was never charged under  the sections mentioned earlier. The charge of conspiracy failed  and the  Sessions Judge acquitted all the accused except A-3 who was convicted under s.408 to R.I. for two years and a fine of Rs.1000. In the instant case, we are only concerned  with the  appellant who  was Chairman of the Managing Committee.      Mr. Phadke,  learned counsel  for the  respondent,  has very fairly  conceded that  excepting 3  items he  would not press the  case of  the prosecution  against the  appellant. These items  are mentioned at page 154 of the paper-book and may be extracted as follows:      (1)  Item about purchase of the truck;      (2)  Item about purchase of fertilisers;      (3)  Items of  the amounts of Rs. 600 and 1100 received           by accused No. 3 after the audit was done;      (4)  non-finding   of   five   oil   engines   by   the           administrator when he took over charge.      So far  as item  No.(1) is  concerned, the  High  Court itself found  that there was absolutely no legal evidence to connect the  appellant with the purchase of the truck and so far as  misappropriation by  the appellant in regard to this item is concerned that stands disproved.      Coming to  the other  three items,  viz.,  purchase  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

fertilisers, the  amounts of  Rs. 600  and Rs.  1100 and the missing of  five oil  engines, these formed the basis of the conviction of  the appellant  by the  High Court. Mr. Phadke conceded that  he would  not press  the case with respect to item No.  (1) but would try to show that so far as items (2) to (4)  are concerned the case has been fully proved against the appellant. 801      Having gone  through the  judgment of the High Court we find ourselves  unable to accept the argument of Mr. Phadke. The counsel  for the  appellant rightly  argued  with  great force and  vehemence that  taking the  findings of  the High Court ex  facie no  case of  defalcation of Items (2) to (4) has been  made out. In our opinion, the contention raised by the counsel  for the  appellant  is  well-founded  and  must prevail. With  due respect what the High Court seems to have missed is  that in  a case like this where there was serious defalcation of  the properties  of  the  Sangh,  unless  the prosecution proved  that there  was  a  close  cohesion  and collusion between  all the  accused which formed the subject matter of  a conspiracy,  it would be difficult to prove the dual charges  particularly against  the  appellant  (A-1)The charge of  conspiracy having  failed, the  most material and integral part of the prosecution story against the appellant disappears. The  only ground  on the basis of which the High Court. has  convicted him  is that as he was the chairman of the Managing  Committee, he  must be  held to be vicariously liable for  any order given or misappropriation committed by the other accused. The High Court, however, has not referred to the  concept of  vicarious liability  but the findings of the High  Court seem  to indicate  that this was the central idea in  the mind  of the  High  Court  for  convicting  the appellant. in  a criminal case of such a serious nature mens rea cannot  be excluded  and once  the charge  of conspiracy failed  the   onus  lay   on  the   prosecution   to   prove affirmatively that the appellant was directly and personally connected with  acts or  omissions pertaining  to items 2, 3 and 4.  It is  conceded by  Mr Phadke  that no  such  direct evidence is  forthcoming and  he tried  to argue that as the appellant was  chairman of the Sangh and used to sign papers and approve  various tenders, even as a matter of routine he should have  acted with  care and caution and his negligence would be  a positive  proof of  his intention  to commit the offence. We  are however  unable to agree with this somewhat broad statement  of the  law. In  the absence of a charge of conspiracy the  mere fact  that the appellant happened to be the Chairman  of the Committee would not make him criminally liable in  a vicarious  sense for  items 2 to 4. There is no evidence either  direct or circumstantial to show that apart from approving  the purchase of fertilisers he knew that the firms from  which the  fertilisers were  purchased  did  not exist. Similar is the case with the other two items. Indeed, if the  chairman was  to be  made liable then all members of the Committee,  viz, Tehsildar  and other nominated members, would be  equally liable because all of them participated in the deliberations  of  the  meetings  of  the  Committee,  a conclusion 802 which has  not even  been suggested  by the  prosecution. As chairman of the Sangh the appellant had to deal with a large variety of  matters and it would not be humanly possible for him to analyse and go into the details of every small matter in order  to find  out whether  there has  been any criminal breach of  trust. in fact, the hero of the entire show seems to be  A-3 who  had so  stage-managed the drama as to shield

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

his guilt and bring the appellant in the forefront. But they by itself  would not  be  conclusive  evidence  against  the appellant. There  is nothing  to show  that A-3  had  either directly or  indirectly informed the appellant regarding the illegal purchase  of fertilisers  or the missing of the five oil engines which came to light much later during the course of the audit. Far from proving the intention the prosecution has failed  to prove that the appellant had any knowledge of defalcation of  items 2  to 4,  In fact, so far as item 3 is concerned, even  Mr. Phadke conceded that there is no direct evidence to connect the appellant.      In  these   circumstances,   we   do   not   find   any justification for the High Court to have interfered with the order of acquittal passed by the Sessions Judge in favour of the  appellant   and  having   considered   the   fact   and circumstances of  the case,  we are  clearly of  the opinion that the  case against  the appellant  has not  been  proved beyond reasonable  doubt and he was wrongly convicted by the High Court. Even putting the prosecution case at the highest it  cannot  be  said  that  two  views  are  not  reasonably possible,      For the  reasons given  above, we allow the appeal, set aside the conviction and sentences imposed by the High Court and acquit  the appellant of the charges framed against him. The appellant will now be discharged from his bail bonds and need not surrender. N.V.K.                                       Appeal allowed. 803