http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 81  

PETITIONER: R. K. DALMIA

       Vs.

RESPONDENT: DELHI ADMINISTRATION

DATE OF JUDGMENT: 05/04/1962

BENCH: DAYAL, RAGHUBAR BENCH: DAYAL, RAGHUBAR DAS, S.K. SUBBARAO, K.

CITATION:  1962 AIR 1821            1963 SCR  (1) 253  CITATOR INFO :  R          1973 SC 330  (10)  R          1980 SC 439  (5,12)

ACT: Criminal  Trial-Transactions  to divert money  of  Insurance Company to losses incurred by Chairman in share speculation- Chairman  and Agent, if guilty of criminal breach of  trust- Charge,   if   legal-Confession  before   Investigator,   if voluntary-’Agent’     ---    "In    the    way    of     his business"--Meaning-Falsification   of    account-Conspiracy- Accomplice-Corroboration-Indian  Penal  Code  1860  (XLV  of 1860),  ss.  120B,  409,  405,  477  A  --Code  of  Criminal Procedure, 1898 (Act 5 of 1898), s. 233--Insurance Act, 1938 (4 of 1938), 8. 33.

HEADNOTE: Appellant Dalmia was the Chairman of the Board of  Directors and  Principal Officer of the Bharat Insurance  company  and appellant  Chokhani its agent in Bombay.   Appellant  Vishnu Prasad,  nephew  of  Chokhani,  was  the  nominal  owner  of Bhagwati  Trading  Company  but its  business  was  entirely conducted  by Chokhani.  Gurha, the other appellant,  was  a Director of Bharat Union Agencies, a company dealing in for- ward  transactions of speculation in shares, and  owned  for all  practical  purposes by Dalmia.  This  Company  suffered heavy losses in its business during the period August, 1954, to  September,  1955.   The  prosecution  case  against  the appellants  in substance was that in order to provide  funds for  the payment of those losses in due time,  they  entered into  a  conspiracy, along with five others, to  divert  the funds of the Insurance company to the Union Agencies through the   Bhagwati  Trading  Company  and  to  cover   up   such unauthorised  transfer of funds, the various steps for  such transfer and the falsification of accounts of the  Insurance Company  and the Union Agencies and its allied  concern  and committed  offences  under s. 120B read with s. 409  of  the Indian  Penal  Code.  Dalmia made a  confession  before  Mr. Annadhanam,  a  Chartered  Accountant,  who  was   appointed Investigator under s.33(1) of the Insurance Act, 1938, which was as follows:- "I  have  misappropriated  securities of the  order  of  Rs.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 81  

2,20,00,000  of the Bharat Instirance Company Ltd.   I  have lost this money in speculation." 254 "At  any  cost, I want to pay full amount by  requesting  by relatives or myself in the interest of the policy holders". The  prosecution primarily depended upon the  evidence    of Raghunath Rai, the Secretary-cum-Accountant of the Insurance Company,  and it was contended on behalf of  the  appellants that he was an accomplice. The  Sessions  judge convicted all the appellants  under  s. 120B read with s. 409 of the Indian Penal Code, and  further convicted Dalmia and Chokhani for substantive offences under s.  409, Chokhani under s. 477A read with s. 110  and  Gurha under  s.  477A  of  the  Indian  Penal  Code.   He  however acquitted the others. The High Court in substance agreed with the findings of  the Sessions  judge,  except  that  it  did  not  rely  on   the confession of Dalmia. Held, that the Delhi Court had jurisdiction to try  Chokhani for  the  offence  under s. 409 of the  Indian  Penal  Code, committed  beyond  its  jurisdiction  in  pursuance  of  the alleged  conspiracy with which he and the  other  co-accused were charged. Purushottam Das Dalmia v. State of West Bengal, [1962] 2  S. C. R. 101, followed. The  charge against Dalmia under s. 409 of the Indian  Penal Code  was  not  hit  by  s. 233  of  the  Code  of  Criminal Procedure.   The  charge framed was not  for  four  distinct offences.  It was really with respect to one offence  though the  mode  of committing it was not precisely  stated.   Any objection  as  to the vagueness of the charge on  the  score could  not invalidate the trial since no prejudice had  been caused  to  the accused nor any contention  raised  to  that effect. The  word property used in s. 405 of the Indian  Penal  Code could not be confined to movable property since the  section itself did not so qualify it.  The word ’property’ was  much wider than the expression In-lovable property’ defined in s. 22  of the Code.  The question whether a particular  offence could  be committed in respect of any property depended  not on  the meaning of the word ’property’ but on  whether  that property could be subjected to that offence.  ’Property’  in a  particular section could, therefore, mean only such  kind of  property  with respect to which that  offence  could  be committed,  The  funds  of  the  Bharat  Insurance   Company referred  to in the charge amounted to property  within  the meaning of s. 405 of the Indian Penal Code.                             255 Reg.  Girdhar Dharamdas (1869) 6 Bom.  High Ct.  Rep. (Crown Cases)  33, and Jugdown Sinha v. Queen Empress (1895) 1.  L. R. 23 Cal. 372, disapproved. Emperor  v.  Bishan  Prasad,  (1914’  I.L.R.  37  All.  128, Ram  Chand Gurvala v. King Emperor A. 1. R. 1926  Lah.  385, Manchersha Ardeshir v. Ismail Ibrahim, (1935) I.L.R. 60 Bom. 706,  Daud  Khan v. Emperor A. I. R. 1925 All. 672  and  The Delhi  Cloth  and General Mills Co. Ltd.  v.  Harnam  Singh, [1955] 2 S. C. R. 402, referred to. The relevant articles and bye-laws of the Insurance  Company and  the  resolutions  passed  by  its  Board  of  Directors established  that  both Dalmia and Chokhani  were  entrusted with  dominion  over the funds of the company in  the  Banks within the meaning of s. 409 of the Indian Penal Code. Peoples Bank v. Harkishan Lal, A. I. R. 1936 Lah. 408, G. E, Ry.   Co.  v. Turner, L. R. (1872) 8 Ch.  App. 149  and  Re. Forest of Dean Etc.  Co., L. R. (1878) 10 Ch.  D. 450 refer-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 81  

red to. The  offence of Criminal breach of trust could be  committed by Chokhani even though he alone could not operate the  Bank account and could do so jointly with another. Bindeshwari v. King Emperor (1947) I.L.R. 26 Pat. 703, held inapplicable. Nrigendro Lall Chatterjee v. Okhoy Coomar Shaw, (1874)  (Cr. Rulings) 59 and Emperor v. Jagannath Ragunathdas, (1931)  33 Bom.  L. R. 1518, referred to. The  expression ’in the way of business as agent’  occurring in  s. 409 of the Indian Penal Code meant that the  property must  have  been  entrusted to such agent  in  the  ordinary course  of his duty or habitual occupation or profession  or trade.  He  should get the entrustment or  dominion  in  his capacity as agent and the requirements of the section  would be satisfied if the person was an agent of another and  that person entrusted him with the property or with dominion over the  property  in the course of his duties as an  agent.   A person might be an agent of another for some purpose and  if he  was entrusted with property not in connection with  that purpose   but  for  another  purpose,  that  would  not   be entrustment within the meaning of s. 409 of the Code. Mahumarakalage  Edward Andrew Cooray v. Queen. [1953] A.  C. 407 and Reg. v. Portugal, [1885] 16 Q. B. D 487, considered. 256 Both Dalmia and Chokhani were agents of the Bharat Insurance Company within the meaning of s. 409 of the Code. Gulab Singh v. Punjab Zamindara Bank, A. I. R. 1942 Lah. 47, referred to. Raghunath   Rai  was  not  an  accomplice  as  he  did   not participate  in the commission of tile actual crime  charged against  the  accused.  An accomplice must  be  a  particeps criminal, except where he was a receiver of stolen  property or an accomplice in a previous similar offence committed  by the  accused when evidence of the accused  having  committed crimes  of identical type on other occasions was  admissible to prove the system and intent of the accused committing the offence charged. Davies  v. Director of Public Prosecutions, [1954] A.C.  378 referred to. Chokhani  was a servant of the Insurance Company within  the meaning of s. 477A of the Indian Penal Code.  He was a  paid Agent of the company and as such was its servant even though he was a full-time servant of the Bharat Union Agencies. Each transaction to meet the losses of the United  Agencies, was  not  an independent conspiracy by  itself.   There  was identity of method in all the transactions and they must  be held to originate from the one and same conspiracy. Since  the confession made by Dalmia had not been  shown  to have  been  made under any threat or inducement  or  promise from  a  person in authority, it could not be  anything  but voluntary  even  though  it might have  been  made  for  the purpose  of screening the scheme of the conspiracy  and  the High Court was in error in holding that it was otherwise. A  person  appointed an Investigator under s. 33(1)  of  the Insurance  Act  did not ipso facto become a  public  servant within    the  meaning of s. 21, Ninth, of the Indian  Penal Code and s.    176  of the Indian Penal Code could  have  no application to an   examination  held under s. 33(3) of  the Act. The  confession of Dalmia was not hit by Art. 20(3)  of  the Constitution since it was not made by him at a time when  he was accused of an offence. State of Bombay v. Kathi Kalu Oghad, R. [1962] 3 S.C.R.  10, referred to. The  expression ’with intent to defraud’ in s. 477A  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 81  

Indian Penal Code did not mean intention to defraud  someone in  the  future and could relate to an attempt to  cover  up what had already happened.                             257 Emperor v. Ragho Ram, I. L. R. (1933) 55 All. 783, approved,

JUDGMENT: CRIMINAL APPELLATE JURISDICTION: Criminal Delhi Appeal  Nos. 7 to 9 of 1961. Appeals  by special leave from the judgment and order  dated January 2, 1961, of the Punjab High Court (Circuit Bench) at Delhi  in Criminal Appeals Nos. 464-C, 465-C and  463--D  of 1959. Dingle Foot, D. R. Prem, S. M. Sikri, G. H.Jauhari and A. N. Goyal, for the appellant (in Cr.  A. No. 7 of 61). R.   L. Kohli and A. N. Goyal, for the appellant (in Cr.  A. No. 8 of 1961). Prem  Nath  Chadha, Madan Gopal Gupta and R.  Choudhri,  for appellant No. 2 (in Cr.  A. No. 9 of 1961). C.   K. Daphtary, Solicitor General of India, R.  L.   Mehta and R. H. Dhebar, for the respondents. 1962.  April 5. The Judgment of the Court was delivered by RAGHUBAR DAYAL, J.-These three appeals are   by      special leave.  Appeal No. 7 of 1961 is by R.   K.  Dalmia.   Appeal No.  8 of 1961 is by R.P.Gurha. Appeal No. 9 of 1961  is  by G.L.Chokhani  and  Vishnu Prasad.  All the  appellants  were convicted  of  the  offence under s.  120  read  with  s.409 I.P.C.,  and  all of them, except Vishnu Prasad,  were  also convicted of certain offences arising out of the overt  acts committed by them.  Dalmia and Chokhani were convicted under s. 409 I.P.C. Chokhani was also convicted under s. 477A read with s. 110, I. P. C.    Gurha  was convicted under s.  477A I. P. C. To appreciate the case against the appellants, we may  first state  generally  the  facts leading to  the  case.   Bharat Insuirance Company was incorporated 258 in  1896.  In 1936, Dalmia purchased certain shares  of  the company  and became a Director and Chairman of the  company. He resigned from these offices in    1942 and  was succeeded by his brother J. Dalmia.     The head office of the  Bharat Insurance Company was shifted from Lahore to 10,  Daryaganj, Delhi.  in  1947.  Dalmia was co-opted a Director  on  March 1.0,  1949 and was again elected Chairman of the company  on March 19, 1949 when his brother J. Dalmia resigned. R.   L. Chordia, a relation of Dalmia and principal  Officer of the Insurance Company, was appointed Managing Director on February  27, 1950.  Dalmia was appointed Principal  Officer of  the  company  with  effect from  August  20,  1954.   He remained  the Chairman and Principal Officer of the  Company till September 22, 1955.  The period of criminal  conspiracy charged  against  the  appellant  is  from  August  1954  to September  1955.  Dalmia was therefore, during the  relevant period, both Chairman and Principal Officer of the Insurance Company. During  this relevant period, this company had  its  current account in the Chartered Bank of India, Australia and  China Ltd. (hereinafter called the Chartered Bank) at Bombay.  The Company  also  had an account with this bank  for  the  safe custody  of its securities the company also had  a  separate current account with the Punjab National Bank, Bombay. At  Delhi,  where the head office was, the  company  had  an account for the safe custody of securities with the Imperial

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 81  

Bank of India, New Delhi.  Exhibit P-785 consists of the Memorandum of Association and the Articles of Association of the Bharat Insurance Company. Articles 116 and 117 deal with the powers of the Directors. Exhibit  P-786 is said to be the original Byelaws passed  by the Directors on September 8, 1951.                             259 The  pages  are signed by K.L. Gupta, who  was  the  General Manager of the company during, the relevant period, and  not by  Dalmia the Chairman, as De should have been the case  in view  of the resolution dated May 8, 1951.  The  genuineness of this document is not, however, admitted. Exhibits P-15 and P-897 are said to be copies of these  Bye- laws which were sent to Shri K.    Annadhanam     (Chartered Accountant, appointed by the   Government   of   India    on September 19, 1955, to   investigate into the affairs of the Bharat  Insurance  Company under s. 33(1) of  the  Insurance Act)  and  to  the  Imperial  Bank  of  India,  Now   Delhi, respectively,  and the evidence about their  genuineness  is questioned. Bye-law  12 deals with the powers of the  Chairman.   Clause (b)) thereof empowers the Chairman to grant loans to persons with  or  without security, but from August  30,  1954,  the power was restricted to grant of loans on mortgages.  Clause (e) empowers the Chairman to negotiate transfer buy and sell Government  Securities and to pledge, indorse,  withdraw  or otherwise deal with them. On January 31, 1951, the Board of Directors of the Insurance Company passed resolutions to the following effect : (1)  To open  an  account in the Chartered Bank at  Bombay.  (2)  To authorise  Chokhani  to  operate  on  the  account  of   the Insurance Company. (3) To for the keeping of the  Government securities  had  by the company, in safe custody,  with  the Chartered   Bank.  (4)  To  instruct  the  Bank  to   accept institutions  with  regard to withdrawal from  Chokhani  and Chordia. On the same day, Dalmia and Chordia made an application  for the  opening of the account at Bombay with the  result  that Current  Account  No.  1120 was opened.   On  the  same  day Chokhani was appointed Agent of the company at Bombay. 260 He  was its agent during the relevant period.  From 1951  to 1953, Chokhani alone operated’ on that account.  On  October 1,  1953, the Board of Directors directed that  the  current account  of the company with the Chartered Bank, Bombay,  be operated jointly by Chokhani and Raghunath Rai, P.W. 4. Ragbunath Rai, joined the company in 1921 as a Clerk, became Chief Accountant in 1940 and Secretary-cum-Chief  Accountant of the company from August 17, 1954. The  modus  operandi  of the joint  operation  of  the  bank account by Chokhani and Raghunath Rai amounted, in  practice to  Chokbani’s operating that account alone.  Chokbani  used to  get a number of blank cheques signed by  Raghunath  Rai, who  worked  at Delhi.  Chokhani signed those  cheques  when actually  issued.   In  order  to  have  signed  cheques  in possession  whenever  needed, two cheque  books  were  used. When the signed cheques were nearing depletion in one cheque book, Chokhani would send the other cheque book to Raghunath Rai  for signing again a number of cheques.  Thus  Raghunath Rai  did  not actually know when and to whom  and  for  what amount  the cheques would be actually issued and  therefore, so  far as the company was concerned, the real operation  of its banking account was done by Chokhani alone.  This system led  to  the  use of the company’s  funds  for  unauthorized purposes.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 81  

Chokhani  used to purchase and sell securities on behalf  of the company at Bombay.  Most of the securities were sent  to Delhi  and kept with the Imperial Bank of India there.   The other  securities remained at Bombay and were kept with  the Chartered  Bank.   Sometimes securities were kept  with  the Reserve  Bank  of  India and inscribed  stock  was  obtained instead.   The  presence,  of  the  inscribed  stock  was  a guarantee that the securities were, in the Bank. 261 Chokhani was not empowered by any resolution of the Board of Directors to purchase and sell securities.  According to the prosecution,  he  purchased and sold  securities  under  the instructions  of  Dalmia.  Dalmia and  Chokhani  state  that Dalmia  had authorised Chokhani in general to  purchase  and sell  securities  and  that  it was  in  pursuance  of  such authorisation  that Chokhani on his own purchased  and  sold securities  without  any  further  reference  to  Dalmia  or further instructions from Dalmia. The  transactions  which  have given  rise  to  the  present proceedings against the appellants consisted of purchase  of securities  for  this company and sale  of’  the  securities which  the  company held.  The transactions  were  conducted through  recognised  brokers  and  ostensibly  were   normal transactions.  The misappropriation of funds of the  company arose  in this way.  Chokhani entered into a transaction  of purchase  of securities with a broker.  The  broker  entered into a transaction of purchase of the same securities from a company  named Bhagwati Trading Company which was  owned  by Vishnu Prasad, appellant, nephew of Chokhani and aged  about 19 years in 1954.  The entire business for Bhagwati  Trading Company  was really conducted by Chokhani.   The  securities purchased were not delivered by the brokers to Chokhani.  It is  said that Chokhani instructed the brokers that he  would have  the  securities from Bhagwati Trading,  Company.   The fact,  however, Chokhani however was that  Bhagwati  Trading Company  did not deliver the securities.   Chokhani  however issued  cheques  in  payment of the purchase  price  of  the securities to Bhagwati Trading Company.  Thus, the amount of the cheques was paid out of the company’s funds without  any gain to it. The   sale  transactions  consisted  in  the  sale  of   the securities  held or supposed to be held by the company to  a broker and the price obtained from 262 the  sale  was  unutilised in  purchasing  formally  further securities which were not received: The purchase transaction followed the same pattern, viz., Chokhani purchased for  the company  from  a  broker,  the  broker  purchased  the  same securities from Bhagwati Trading Company and the delivery of the  securities was agreed to be given by  Bhagwati  Trading Company  to  Chokhani.   Bhagwati Trading  Company  did  not deliver  the  securities  but received the  price  from  the Insurance Company.  In a few cases, securities so  purchased and  not  received were received later  when  fresh  genuine purchase of similar securities took place from the funds  of the  Bharat  Union  Agencies or  Bhagwati  Trading  Company. These  securities  were  got  endorsed  in  favour  of   the Insurance Company. The  funds of the company, ostensibly spent on the  purchase of securities, ultimately reached another company the Bharat Union Agencies. Bharat Union Agencies ( hereinafter referred to as the Union Agencies) was a company which dealt in speculation in shares and,  according to the prosecution was practically owned  by Dalmia who held its shares either in his own names or in the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 81  

names  of  persons or firms connected with him.   The  Union Agencies suffered Icsses in the relevant period from  August 1954  to September, 1955.  The prosecution case is  that  to provide  funds  for the payment of these losses at  the  due time,  the accused persons entered into the  conspiracy  for the  diversion of the funds of the Insurance Company to  the Union  Agencies.  To cover up this unauthorised transfer  of funds, the various steps for the transfer of funds from  one company  to the other and the falsification of  accounts  of the Insurance Company and the Union Agencies took place  and this  conduct  of  the  accused gave  rise  to  the  various offences they were charged With and convicted of. 263 The  real nature of the sale and’ purchase  transactions  of the securities did not come to the notice of the head office of  the Insurance Company at Delhi as Chokhani  communicated to  the head office the contracts of sale and purchase  with the brokers’ statements of accounts, with a covering  letter stating the purchase of securities from the brokers, without mentioning  that  the  securities  had  not  been   actually received  or  that the cheques in payment  of  the  purchase price were issued to Bhagwati Trading Company and not to the brokers. Raghunath Rai, the Secretary-cum-Accountant of the Insurance Company,  on  getting  the  advice  about  the  purchase  of securities used to inquire from Dalmia about the transaction and  used to get the reply that Chokhani had purchased  them under   Dalmia’s   instructions.   Thereafter,   the   usual procedure in making the entries with respect to the purchase of securities was followed in the office and ultimately  the purchase  of securities used to be confirmed at the  meeting of  the Board of Directors.  It is said that the matter  was put  up  in the meeting with an office note  which  recorded that  the  purchase  was  under  the  instructions  of   the Chairman.   Dalmia however, denies that Raghunath  Rai  ever approached  him  for  the confirmation or  approval  of  the purchase transaction and that he told him that the  purchase transaction was entered into under his instructions. The  firm of Khanna and Annadhanam,  Chartered  Accountants, was appointed by the Bharat Insurance Company, its  auditors for  the year 1954.  Shri Khanna carried out the  audit  and was  not satisfied with respect to certain matters and  that made him ask for the counterfoils of the cheques and for the production of securities and for a satisfactory  explanation of the securities not with the company at Delhi. 264 The  matter, however, came to a head not on account  of  the auditors’  report,  but  on account  of  Shri  Kaul,  Deputy Secretary  ,  Ministry  of  Finance,  Government  of  India, hearing  at  Bombay  in September 1955 a  rumour  about  the unsatisfactory  position of the securities of the  Insurance Company.   He contacted Dalmia and learnt on  September  16, 1955  from  Dalmia’s relatives that there was  a  short-fall securities.   He  pursued  the  matter  Departmentally  and, eventually,   the   Government  of  India   appointed   Shri Annadhanam  under  a.  33  (1)  of  the  Insurance  Act   to investigate into the affairs of the company.  This was  done on  September  19,  1955.  Dalmia is said  to  have  made  a confessional  statement  to  Annadhanam  on  September   20. Attempt  was  made to reimburse the Insurance  Company  with respect  to the short-fall in securities.  The  matter  was, however,  made over to the Police and the appellants  and  a few  other  persons, acquitted by the Sessions  Judge,  were proceeded against as a result of the investigation. Dalmia’s  defence,  in brief, is that be had nothing  to  do

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 81  

with the details of the working of the company, that he  had authorised   Chokhani,  in  1953,  to  purchase   and   sell securities and that thereafter Chokbani on his own purchased and  sold  securities.  He had no knowledge  of  the  actual modus operandi of Chokhani which led to the diversion of the funds  of  the  company to the Union  Agencies.   He  admits knowledge  of the losses incurred by the Union Agencies  and being  told by Chokhani that he would arrange funds to  meet them.  He denies that he was a party to what Chokhani did. Chokhani admits that he carried out the transactions in  the form  alleged  in  order to meet the  losses  of  the  Union Agencies of which he was an employee.  He states that be did so  as  he expected that the Union Agencies  would,  in  due course, 265 make  tip the losses and the money would be returned to  the Insurance  Company.   According to, him, he  was  under  the impression that what he did amounted to giving of a loan  by the  Insurance Company to the Union Agencies and that  there was nothing wrong in it.  He asserts emphatically that if he bid  known  that he was doing, was wrongful, he  would  have never  done it and would have utilised other means to  raise the money to meet the losses of the Union Agencies as he had large  credit  in the business circle at Bombay and  as  the Union Agencies possessed shares which would be sold to  meet the losses. Vishnu  Prasad  expresses his absolute ignorance  about  the transactions  which were entered into on behalf of  Bbagwati Trading  Company  and states that what he  did  himself  was under the instructions of Chokhani, but in ignorance of  the real nature of the transactions. Gurha denies that he was a party to the fabrication of false accounts and vouchers in the furtherance of the interests of the conspiracy. The  learned  Sessions  Judge  found  the  offences  charged against   the  appellants  proved  on  the  basis   of   the circumstances  established  in the  case  and,  accordingly, convicted   them   as   stated  above.    The   High   Court substantially agreed with the findings of the Sessions Judge except that it did not rely on the confession of Dalmia. Mr. Dingle Foot, counsel for Dalmia, has raised a number  of contentions,  both of law and of facts.  We propose to  deal with the points of law first. In  order  to  appreciate the points of law  raised  by  Mr. Dingle Foot, we may now state the charges which were  framed against the various appellants. 266 The  charge  under s. 120-B read with s.  409,  I.P.C.,  was against the appellants and five other persons and read:               "I,  Din  Dayal Sharma,  Magistrate  I  Class,               Delhi, do hereby charge you,               R.    Dalmia (Ram Krishna Dalmia) s/o etc.               2.    G. L. Chokhani s/o etc.               3.    Bajranglal Chokhani s/o etc.               4.    Vishnu Pershad Bajranglal s/oetc.               5.    R. P. Gurha (Ragbubir Pershad Gurba)    s/o               etc.               6.    J.   S.  Mittal   (Jyoti          Swarup                             Mittal)     s/o etc.               7.    S.  N.  Dudani (Shri Niwas  Dudani)  s/o               etc.               8.    G. S. Lakhotia (Gauri Sbadker  Lakbotia)               s/o etc.               9.    V. G. Kannan Vellore Govindaraj               Kannan S/o etc. accused as under :-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 81  

             That  you, R. Dalmia, G. L. Chokhani,  Bajrang               Lal Chokhani, Vishnu Pershad Bajranglal, R. P.               Gurha,  J.  S.  Mittal, S. N.  Dudani,  G.  S.               Lakhotia and V. G. Karinan,               during  the  period between  August  1954  and               September  1955  at Delhi,  Bombay  and  other               places in India.               were  parties to a criminal conspiracy  to  do               and  cause  to be done illegal  acts  ;  viz.,               criminal  breach of trust of the funds of  the               Bharat Insurance Company Ltd.,               by agreeing amongst yourselves and with others               that criminal breach of trust be Committed  by               you R. Dalmia and G. L. Chokhani               267               in respect of the funds of the said  Insurance               Company  in  current account No. 1120  of  the               said Insurance Company with the Chartered Bank               of India, Australia and China, Ltd., Bombay,               the dominion over which funds was entrusted to               you R. Dalmia in your capacity as Chairman and               the  Principal Officer of the  said  Insurance               Company, and               to  you  G. L. Chokhani, in your  capacity  as               Agent of the said Insurance Company,               for the purpose of meeting losses suffered  by               you  R.  Dalmia  in  forward  transaction  (of               speculation)  in shares ;  which  transactions               were  carried  on in the name  of  the  Bharat               Union Agencies Ltd., under the directions  and               over  all control of R. Dalmia, by you, G.  L.               Chokhani, at Bombay, and by you, R. P.  Gurha,               J. S. Mittal and S. N. Dudani at Calcutta; and               for  other  purposes not  connected  with  the               affairs of the said Insurance Company,               by  further agreeing that current account  No.               R1763 be opened with the Bank of India,  Ltd.,               Bombay  and current account No. 1646 with  the               United Bank of India Ltd., Bombay, in the name               of  M/s.   Bhagwati Trading  Company,  by  you               Vishnu Pershed accused with the assistance  of               you  G. L. Chokhani, and  Bajranglal  Chokhani                             accused  for the illegal purpose  of  divertin g               the funds of the said Insurance Company to the               said Bharat Union Agencies, Ltd.,               by further agreeing that false entries showing               that  the  defalcated funds were  invested  in               Government  Securities by the  said  Insurance               Company be got made in the books of               268               accounts  of  the said  Insurance  Company  at               Delhi, and               by further agreeing to the making of false and               fraudulent  entries by you R. P. Gurha, J.  S.               Mittal,  G.  S. Lakhotia, V.  G.  Kannan,  and               others, relating to the diversion of funds  of               the  Bharat  Insurance Company to  the  Bharat               Union  Agencies Ltd., through  M/s.   Bhagwati               Trading  Company, in the books of  account  of               the said Bharat Union Agencies, Ltd., and  its               allied concern known as Asia Udyog Ltd., and               that the same acts were committed in pursuance               of the said agreement and               thereby  you committed an  offence  punishable

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 81  

             under  section  120-B read  with  section  409               I.P.C., and within the cognizance of the Court               of Sessions." Dalmia  was  further charged on two counts  for  an  offence under s. 409 I. P. C. These charges were as follows :               "I Din Dayal Sharma, Magistrate I Class, Delhi               charge you, R. Dalmia accused as under :-               FIRSTLY,  that yon R. Dalmia, in Pursuance  of               the  said  conspiracy between the 9th  day  of               August 1954 and the 8th day of August 1955, at               Delhi.               Being the Agent, in your capacity as  Chairman               of  the Board of Directors and  the  Principal               Officer of the Bharat Insurance Company  Ltd.,               and as such being entrusted with dominion over               the   funds  of  the  said  Bharat   Insurance               Company,               committed criminal breach of trust of the                             269 funds of the Bharat Insurance Company Ltd., amounting to Rs. 2,37,483-9-0, by  wilfully  suffering your co-accused G.  L.  Chokhani  to dishonestly  misappropriate the said funds  and  dishonestly use  or  dispose  of  the said funds  in  violation  of  the directions of law and the implied contract existing  between you  and the said Bharat Insurance Company, prescribing  the mode in which such trust was to be discharged, by withdrawing the said funds from current account No.  1120 of the said Bharat Insurance Company with the Chartered Bank of  India,  Australia  & China, Ltd., Bombay,  by  means  of cheque  Nos.   B-540329  etc.,  issued  in  favour  of  M/s. Bhagwati Trading Company, Bombay, and cheque No. B-540360 in favour of F. C. Podder, and by  dishonestly utilising the said funds for meeting  losses suffered by you in forward transactions in shares carried on in  the name of Bharat Union Agencies, Ltd., and  for  other purposes  not connected with the affairs of the said  Bharat Insurance Company ; and thereby  committed an offence punishable under section  409, 1.  P.  C.,  and  within the  cognizance  of  the  Court  of Sessions; ,SECONDLY,  that  you R. Dalmia, in pursuance  of  the  said conspiracy  between the 9th day of August 1955 and the  30th day of September 1955, at Delhi, Being the Agent in your capacity as Chairman of the Board of Directors and the Principal Officer of the Bharat  Insurance Company,  Ltd.,  and as such being entrusted  with  dominion over the funds of the said Bharat Insurance Company,               270               committed  criminal  breach of  trust  of  the               funds  of the Bharat Insurance  Company  Ltd.,                             amounting to Rs. 55,43,220-12-0,               by  wilfully  suffering your  co-accused  G.L.               Chokhani  to  dishonestly  misappropriate  the               said  funds and dishonestly use or dispose  of               the said funds in violation of the  directions               of  law  and  the  implied  contract  existing               between  you  and the  said  Bharat  Insurance               Company  prescribing  the mode in  which  such               trust was to be discharged,               by  withdrawing  the said funds  from  current               account No. 1120 of the said Bharat  Insurance               Company  with  the Chartered  Bank  of  India,               Australia  & China, Ltd., Bombay by  means  of               Cheque  Nos.  B-564835...... issued in  favour

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 81  

             of M/s.  Bhagwati Trading Company Bombay, and,               by  dishonestly utilising the said  funds  for               meeting  losses  suffered by  you  in  forward               transactions in shares carried on in the  name               of  the  Bharat Union Agencies Ltd.,  and  for               other purposes not connected with the  affairs               of the said Bharat Insurance Company, and               thereby committed an offence punishable  under               section   409  1.  P.  C.,  and   within   the               cognizance of the Court of Sessions."               Mr.  Dingle  Foot  has  raised  the  following               contentions (1)  The Delhi Court had no territorial jurisdiction to  try offences  of criminal breach of trust committed by  Chokhani at Bombay. (2)  Therefore, there had been misjoinder of charges. (3)  The defect of misjoinder of charges was 271 fatal to the validity of the trial and was not curable under a. 531-s. 537 of the Code. (4)  The substantive charge of the offence under s. 409,  1. P. C., against Dalmia offended against the provisions of  a. 233 of the Code; therefore the whole trial was bad. (5)  The  funds  of  the Bharat  Insurance  Company  in  the Chartered  Bank,  Bombay, which were alleged  to  have  been misappropriated  were not "property’ within the  meaning  of ss. 405 and 409, I. P. C. (6)  If they were, Dalmia did not have dominion over them. (7)  Dalmia  was not an agent’ within the meaning of s.  409 I.  P.  C.,  as only that person could  be  such  agent  who professionally carried on the business of agency. (8)  If Dalmia’s conviction for an offence under s.    409 I.  P.  C., fails, the conviction for conspiracy  must  also fail as conspiracy must be proved as laid. (9)  The confessional statement Exhibit P-10 made by  Dalmia on September 20, 1955, was not admissible    in evidence. (10) If the confessional statement was not inadmissible     in evidence in view of s. 24 of the Indian Evidence Act, it was inadmissible in view of the provisions of cl. (3) of Art. 20 of the Constitution. (11) The prosecution has failed to establish that Dalmia was synonymous with Bharat Union Agencies Ltd. (12) Both  the Sessions Judge and the High Court  failed  to consider  the  question  of onus of proof  i.e.,  failed  to consider  whether  the evidence on record really  proved  or established the conclusion arrived at by the Courts. 272 (13) Both  the Courts below erred in their approach  to  the evidence of Raghunath Rai. (14) Both  the  Courts below were wrong  in    holding  that there was adequate corroboration of the evidence of Reounath Rai  who was an accomplice or at least such a witness  whose testimony required corroboration. (15) It  is not established with the certainty  required  by law  that Dalmia had knowledge of the impugned  transactions at the time they were entered into. We have heared the learned counsel for the parties on facts, even  though there are concurrent findings of fact,  as  Mr. Dingle   Foot  has  referred  us  to  a  large   number   of inaccuracies,  most of them not of much importance,  in  the narration of facts in the judgment of the High Court and has also  complained of the omission from discussion of  certain matters  which were admittedly urged before the  High  Court and  also of misapprehension of certain arguments  presented by him.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 81  

We need not, however, specifically consider points No. 12 to 15  as  questions  urged in that form.   In  discussing  the evidence  of  Ragbunath Rai, we would discuss  the  relevant contentions  of  Mr.  Dingle  Foot,  having  a  bearing   on Raghunath  Rai’s  reliability.  Our view of the  facts  will naturally dispose of the last point raised by him. Mr.  Dingle  Foot’s first four contentions relating  to  the illegalities  in procedure may now be deal ,with.   The  two charges  under  s. 409, I.P.C., against  Chokbani  mentioned that  he committed criminal breach of trust in pursuance  of the  said  conspiracy.  One of the charges  related  to  the period  from August 9, 1954 to August 8, 1955 and the  other related  to the period from August 9, 1955 to September  30, 1955.                             273 This  Court held in Purushotam Das Dalmia v. State  of  West Bengal  (1)  that the Court having jurisdiction to  try  the offence  of  conspiracy  has also  jurisdiction  to  try  an offence  constituted by the overt acts which are  committed, in pursuance of the conspiracy, beyond its jurisdiction.  M. Dingle   Foot   submitted  that   this   decision   required reconsideration  and we heard him and the learned  Solicitor General   on   the  point  and,  having   considered   their submissions,  came  to  the  conclusion  that  no  case  for reconsideration  was made out and accordingly expressed  our view  during  the hearing of these appeals.   We  need  not, therefore,  discuss the first contention of Mr. Dingle  Foot and  following  the  decision in  Purushottam  Das  Dalmia’s case(1)  hold that the Delhi Court had jurisdiction  to  try Chokhani  of the offence under s. 409 I.P.C. as the  offence was  alleged  to  have been committed in  pursuance  of  the criminal  conspiracy with which he and the other  co-accused were charged. In view of this opinion, the second and third contentions do not arise for consideration. The  fourth contention is developed by Mr.Dingle Foot  thus. The  relevant portion of the charge under s. 409 I.  P.  C., against Dalmia reads:               "Firstly, that you Dalmia, in pursuance of the               said conspiracy between... being the Agent, in               your   capacity  as  Chairman  of   Board   of               Directors  and  as Principal  Officer  of  the               Bharat  Insurance  Company Ltd., and  as  such               being entrusted with dominion over the.  funds               of   the   said  Bharat   Insurance   Company,               committed  criminal  breach of  trust  of  the               fund,-...by wilfully suffering your co-accused               G.  L. Chokhani to dishonestly  misappropriate               the said funds and dishonestly use or  dispose               of  the  said  funds  in  violations  of   the               directions  of  law and the  implied  contract               existing  between  you  and  the  said  Bharat               Insurance               (1)   [1962]2S.C.R101.               274               Company  prescribing  the mode in  which  such               trust was to be discharged..."    This charge can be split up into four charges, each    of the  charges  being  restricted to one  particular  mode  of committing  the offence of criminal breach of trust.   These four  offences of criminal breach of trust were  charged  in one  count, each of these four amounting to the  offence  of criminal breach of trust by wilfully suffering Chokhani  (i) to  dishonestly  misappropriate  the  said  funds;  (ii)  to dishonestly   use  the  said  funds  in  violation  of   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 81  

directions of law; (iii) to dishonestly dispose of the  said funds in violation of the directions of law; (iv) to dishon- estly  use  the  said  funds in  violation  of  the  implied contract  existing between Dalmia and the  Bharat  Insurance Company’. Section  233 of the Code or Criminal Procedure  permits  one charge  for  every distinct offence and directs  that  every charge  shall  be  tried  separately  except  in  the  cases mentioned in ss. 234, 235, 236 and 239.  Section 234  allows the trial, together, of offences up to three in number, when they  be of the same kind and be committed within the  space of twelve months.  The contention, in this case is that  the four  offences  into which the charge under  s.  409  I.P.C. against  Dalmia can be split up were distinct  offences  and therefore could not be tried together.  We do not agree with this contention.  The charge is with respect to one offence, though  the mode of committing it is not  stated  precisely. If it be complained that the charge framed under s.409 1. P. C.  is  vague  because it does not  specifically  state  one particular  mode  in which the offence  was  committed,  the vagueness  of  the charge will not make the  trial  illegal, especially when no prejudice is caused to the accused and no contention has been raised that Dalmia was prejudiced by the form of the charge.                             275 We may now pass on to the other points raised by Mr.  Dingle Foot. Section  405 I.P.C. defines what amounts to criminal  breach of trust.  It reads               "Whoever,  being in any manner entrusted  with               property, or with, any dominion over property,               dishonestly misappropriates or converts to his               own use that propertly, or dishonestly uses or               disposes of that property in violation of  any               direction of law prescribing the mode in which               such  trust  is to be discharged,  or  of  any               legal  contract, express or implied, which  be               has made touching the discharge of such trust,               or wilfully suffers any other person so to do,               commits ’criminal breach of trust’." Section  406 provides for punishment for criminal breach  of trust.   Section  407 provides for punishment  for  criminal breach  of  trust  committed by  a  carrier,  wharfinger  or warehouse-keeper, with respect to property entrusted to them as such and makes their offence more severe than the offence under  s. 406.  Similarly, s. 408 makes the criminal  breach of  trust committed by a clerk or servant entrusted  in  any manner, in such capacity, with property or with any dominion over property, more severely punishable than the offence  of criminal  breach  of  trust under s.  406.   Offences  under ss.407  and 108 are similarly punishable.  The last  section in  the series is s. 409 which provides for a still  heavier punishment  when  criminal breach of trust is  committed  by persons mentioned in that section.  The section reads :               "Whoever,  being in any manner entrusted  with               property,  or with any dominion over  property               in his capacity of a public servant or in  the               way  of  his business as a  banker,  merchant,                             factor, broker, attorney or agent,               276               commits criminal breach of trust in respect of               that   property,   shall  be   punished   with               imprisonment for life, or with imprisonment of               either  description  for a term which  may  ex               tended to ten years, and shall also be  liable

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 81  

             to fine." Both Dalmia and Chokhani have been convicted of the  offence under s. 409 I.P.C. Mr. Dingle Foot contends that no offence of criminal  breach of  trust  has  been committed as the funds  of  the  Bharat Insurance  Company  in  the  Bank  do  not  come  with   the expression ’property’ in s. 405 I.P.C. It is urged that  the word  ’property’  is  used  in  the  Indian  Penal  Code  in different  senses, according to the context, and that in  s. 405  it  refers  to movable property and  not  to  immovable property or to a chose in action. It is then contended that the funds which a customer has  in a  bank  represent  closes in action,  as  the  relationship between  the customer and the banker is that of  a  creditor and  a  debtor, as held in Attorney General  for  Canada  v. Attorney General for Province of Quebec & Attorneys  General for  Saskatchewan,  Alberta & Manitoba (1) and in  Foley  v. Hill (2). Reliance is also placed for the suggested restricted meaning of  property in s. 405 I.P.C. on the cases Reg.  v.  Girdhar Dharamdas  (3); Jugdown Sinha v. Queen Empress( 4)  and  Ram Chand Gurvala v. King Emperor (5) and also on the scheme  of the  Indian  Penal  Code  with respect to  the  use  of  the expressions ’property’ and ’movable property’ in its various provisions. The learned Solicitor General has, on the other hand,  urged that the word ’property’ should (1) [1947] A.C. 33.  (2) [1848] 2 H.L.C. 28 9 E. R. 100. (3)  [1869] 6 Bom.  High Ct.  Rep. (Crown Cases) 33. (4) (1895)1.L.R.23Cal.372.    (5) A.I.R.1926Lah 385. 277 be  given its widest meaning and that the provisions of  the various  sections can apply to property other  than  movable property.   It is not to be restricted to  movable  property only  but  includes chose in De. action and the funds  of  a company in Bank. R. We  are of opinion that there is no good reason to  restrict the meaning of the word ’property’ to movable property  only when  it is used without any qualification in s. 405  or  in other sections of the Indian Penal Code Whether the  offence defined in a particular section of the Indian Penal Code can be  committed in respect of any particular kind of  property will depend not on the interpretation of the word ’property’ but on the fact whether that particular kind of property can be  subject to the acts covered by that section.  It  is  in this sense that it may be said that the, word property in  a particular  section covers only that type of  property  with respect  to which the offence contemplated in  that  section can be committed. Section   22   I.P.C.  defines  ’movable   property’.    The definition is not exhaustive.  According to the section  the words  ’movable property’ are intended to include  corporeal property  of  every  description,  except  land  and  things attached  to the earth or permanently fastened  to  anything which  is attached to the earth.  The definition is  of  the expression ,movable property’ and not of ’property’ and  can apply  to  all corporeal property except  property  excluded from  the  definition.   It  is thus  clear  that  the  word ’property’  is used in the Code in a much wider  sense  than the  expression  movable  property’.  It  is  not  therefore necessary  to consider in detail what type of property  will be  included  in the various sections of  the  Indian  Penal Code. In  Reg. v. Girdhar Dharamdas (1) it was held  that  reading ss. 403 and 404 I.P.C. together, s. 404

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 81  

(1)  (1869) 6 Bom.  High Ct.  Rep. (Crown Cases) 278 applied  only to movable property.  No reasons are given  in the judgment. It  is  to be noticed that though s. 403 I.P.C.  speaks  of- dishonestly misappropriating or converting to one’s own  use any  movable  property, s. 404 speaks  of  only  dishonestly misappropriating  or converting to one’s own  use  property. If the Legislature had intended to restrict the operation of s.  404 to movable property only, there war, no  reason  why the  general  word  was used  without  the  qualifying  word ,movable’.  We therefore do not see any reason to I restrict the word ’property’ to ,’movable property only.  We need not express any opinion whether immovable property could be  the subject of the offence under s. 404 I.P.C. Similarly,  we  do not see any reason to restrict  the  word ’property’ in s. 405 to movable property’ as held in Jugdown Sinha  v. Queen Empress (1).  In that case also the  learned Judges  gave no reason for their view and just  referred  to the  Bombay Case (2).  Further, the learned Judges  observed at page 374 :               "In  this case the appellant was not  at  most               entrusted  with the supervision or  management               of  the  factory lands, and the fact  that  he               mismanaged  the land does not in  our  opinion               amount  to  a criminal offence  under  section               408." A  different  view has been expressed with  respect  to  the content  of  the word property’ in certain sections  of  the Indian Penal Code, including s. 405. In Emperor v. Bishan Prasad (3) the right to sell drugs  was held to come within the definition of the word ’property’ in s.  185, I.P.C. which makes certain conduct at any  sale  of property an offence. (1)  (1895) I.L.R. 23 Col. 372. (2)  (1869) 6 Boni.  High Ct.  Rep. (Crown Cases) 33, 3)   [1914] I.L.R. 37 All. 128.                             279 In Ram Chand Gurwala v. King Emperor (1) the contention that mere  transfer  of amount from the bank account to  his  own account  by the accused did not amount  to  misappropriation was  repelled,  it being held that in order to  establish  a charge  of dishonest misappropriation or criminal breach  of trust,  it  was not necessary that the accused  should  have actually  taken  tangible  property such as  cash  from  the possession  of  the  bank  and transferred  it  to  his  own possession,  as  on  the transfer of  the  amount  from  the account of the Bank to his own account, the accused  removed it  from  the control of the bank and placed it at  his  own disposal.  The conviction of the accused for criminal breach of trust was confirmed. In  Manchersha Ardeshir v. Ismail Ibrahim it was  held  that the  word ’property’ in s. 421 is wide enough to  include  a chose in action. In Daud Khan v. Emperor (3) it was said at page 674 :               "Like  s.  378,  s.  403  refers  to   movable               property.   Section 404 and some of the  other               sections   following  it  refer  to   property               without  any such qualifying description;  and               in  each  case  the  context  must   determine               whether  the  property there  referred  to  is               intended    to   be   property   movable    or               immoveable." The  case  law, therefore, is more in favour  of  the  wider meaning being given to the word ’property’ in sections where

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 81  

the  word  is  not qualified by any  other  expression  like movable’. In  The  Delhi Cloth and General Mills Co.  Ltd.  V.  Harnam Singh   (4) this court said               "That a debt is property is, we think,  clear.               It is a chose in action and is heritable (1)  A.I.R. 1926 Lah. 385. (3)  A.I.R. 1925 All. 673. (2)  (1935) I.L.R. 60 Bom. 706. (4)  [1955] 2. S.C.R. 402,417. 280               and  assignable and it is treated as  property               in  India under the Transfer of  Property  Act               which calls it an actionable claim’."               In Allchin v. Coulthard (1) the meaning of the               expression  fund’  has been  discussed  it  is               said:               "Much  of the obscurity which  surrounds  this               matter is due to a failure to distinguish  the               two senses in which the phrase ’payment out of               a fund’ may be used.  The word fund’ may  mean               actual cash resources of a particular kind (e.               g., money in a drawer or a bank), or it may be               a mere accountancy expression used to describe               a  particular category which a person uses  in               making  up his accounts.  The  words  ’payment               out  of when used in connection with the  word               fund’  in  its first  meaning  connote  actual               payment, e. g., by taking the money out of the               drawer or drawing a cheque on the bank.   When               used in connection with the word ’fund’ in its               second  meaning  they connote  that,  for  the               purposes  of  the account in  which  the  fund               finds a place, the payment is debited to  that               fund,  an operation which, of course,  has  no               relation  to the actual method of  payment  or               the particular cash resources out of which the               payment  is made.  Thus, if a company makes  a               payment out of its reserved fundan example  of               the  second  meaning  of  the  word  fund’-the               actual payment is made by cheque drawn on  the               company’s banking account, the money in  which               may  have  been  derived  from  a  number   of               sources". The  expression  funds’ in the charge is used in  the  first sense meaning thereby that Dalmia and Chokhani had  dominion over the amount credited to the Bharat Insurance Company  in the account (1)  [1942] 2 K.B. 228, 234, 281 of  the  Bank, inasmuch as they could draw cheques  on  that account. We  are therefore of opinion that the funds referred  to  in the  charge did amount to ’property’ within the  meaning  of that term in s. 405 I.P.C. It  is  further contended for Dalmia that he  had  not  been entrusted  with  dominion  over the funds in  the  Banks  at Bombay  and  had no control over them as the Banks  had  not been  informed that Dalmia was empowered to operate  on  the company’s  accounts in the Banks and no specimen  signatures of  his  had  been supplied to the Bank.   The  omission  to inform the Banks that Dalmia was entitled to operate on  the account may disable Dalmia to actually issue the cheques  on the company’s accounts, but that position does not mean that he  did  not  have any dominion  over  those  accounts.   As

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 81  

Chairman  and  Principal  Officer of  the  Bharat  Insurance Company,  he  had the power, on behalf of  the  company,  to operate on those accounts.  If no further steps are taken on the execution of the plan, that does not mean that the power which  the company had entrusted to him is  nullified.   One may  have  dominion over property but may not  exercise  any power  which  he could exercise with respect  to  it.   Non- exercise  of the power will not make the dominion  entrusted to him, nugatory. Article  116  of the Articles of Association of  the  Bharat Insurance Company provides that the business of the  company shall be managed by the Directors, who may exercise all such powers  of the company as are not, under any particular  law or  regulation,  not to be exercised by them.   Article  117 declares  certain  powers of the Directors.  Clause  (7)  of this  Article authorises them to draw, make,  give,  accept, endorse,  transfer,  discount and negotiate  ’such  bill  of exchange, promissory notes and other similar obligations  as may be desirable for carrying on the business of the 282 company.   Clause  (10) authorizes them  to  let,  mortgage, sell,  or otherwise dispose of any property of  the  company either absolutely.  Clause (12)   authorises them to  invest such  parts  of  the fund of the company  as  shall  not  be required  to satisfy or provide for immediate demands,  upon such securities or investments as they may think  advisable. It also provides that the funds of the company shall not  be applied in making any loan or guaranteeing any loan made  to a  Director  of  the  company or to a  firm  of  which  such Director is a partner or to a private company of which  such Director  is a Director.  Clause (23) empowers the  Director to  deal  with  and invest any Moneys  of  the  company  not immediately required for the purposes thereof, in Government Promissory Notes, Treasury Bills, Bank Deposits, etc. The  bye-laws  of the company entrusting the  Chairman  with dominion over its property, were revised in 1951.  The Board of  Directors, at their meeting held on September  8,  1951, resolved:               "The  bye-laws  as  per draft  signed  by  the               Chairman for identification be and are  hereby               approved, in substitution and to the exclusion               of the existing bye-laws of the company." No such draft as signed by the Chairman has been produced in this  case.   Instead, K. L. Gupta, P. W. 112, who  was  the Manager  of  the Bharat Insurance Company in  1951  and  its General  Manager from 1952 to August, 1956, has  proved  the bye-laws,  Exhibit P. 786, to be the draft revised  bye-laws approved  by  the Board of Directors at  that  meeting.   He states  that he was present at that meeting and had  put  up these draft bye-laws before the Board of Directors and  that the  Directors,  while  passing  these  bye-laws,  issued  a directive  that  they should come into force on  January  1, 1952, and that, accordingly, be added in ink in the  opening words of 283 the  bye-laws that they would be effective from  January  1, 1952.  When cross-examined by Dalmia himself, he stated that he  did  not  attend  any other  meeting  of  the  Board  of Directors  and his presence was Dot noted in the minutes  of the meeting.  He further stated emphatically:               "I  am definite that I put up the bye-laws  P-               786 in the meeting of the Board of  Directors.               I  did  not  see any bye-laws  signed  by  the               Chairman." There  is  no reason why Gupta should depose  falsely.   His

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 81  

statement  finds corroboration from other facts.  It may  be that,  as noted in the resolution, it was contemplated  that the  revised  bye-laws  be signed by the  Chairman  for  the purposes of their identity in future, but by over-sight such signatures were not obtained.  There is no evidence that the bye-laws  approved by the Board of Directors  were  actually signed by the Chairman Dalmia.  Dalmia has stated so.  It is not  necessary for the proof of the bye-laws of the  company that  the original copy of the bye laws bearing any mark  of approval of the Committee be produced.  The bye-laws of  the company can be proved from other evidence.  K. L. Gupta  was present  at  the meeting when the bylaws  were  passed.   It seems  that  it was not his duty to attend meetings  of  the Board  of  Directors.   He probably  attended  that  meeting because  he had prepared the draft of the revised  bye-laws. His  presence  was  necessary  or  at  least  desirable  for explaining  the necessary changes in the  pre-existing  bye- laws.  He must have got his own copy of the revised bye-laws put  up before the meeting and it is expected that he  would make  necessary corrections in his copy in  accordance  with the form of the bye-laws as finally approved at the meeting. The absence of the copy signed by the Chairman. if ever  one existed,  does not therefore make the other  evidence  about the bye-laws of the 284 company in admissible.  The fact that Gupta signed each page of  Exhibit  P. 786 supports his statement.   There  was  no reason  to  sign every page of the copy if it was  merely  a draft  office-copy that was with him.  He must  have  signed each page on account of the importance attached to that copy and  that could only be if that copy was to be the basis  of the future bye-laws of the company. Copies of the bye-laws were supplied to ’.he Imperial  Bank, New Delhi, and to the auditor.  They are Exhibits P. 897 and P.  15.   Raghunath Rai deposed about sending  the  bye-laws Exhibits  P.  897 to the Imperial Bank, New  Delhi,  with  a covering  letter  signed  by Dalmia on  September  4,  1954. Mehra,  P. W. 15, Sub-Accountant of the State Bank of  India (which  took over the under taking of the Imperial  Bank  of India on July 1, 1955) at the time of his deposition, stated that  the State Bank of India was the successor of the  Imp- erial Bank of India.  Notice was issued by the Court to  the State  Bank  of India to produce latter dated  September  4, 1954,  addressed  by Dalmia to the Agent, Imperial  Bank  of India, and other documents.  Mehra deposed that in spite  of the best search made by the Bank officials that letter could not  be  found and that Exhibit P. 897 was the copy  of  the bye-laws  of  the  Bharat Insurance  Company  which  he  was producing  in pursuance of the notice issued by  the  Court. It appears from his statement in cross-examination that  the words  received 15th September 1954 meant that copy  of  the byelaws was received by the Bank on that date.  Mehra  could not  personally  speak about it.  Only such  bye-laws  would have  been  supplied  to the Bank as  would  have  been  the corrected bye-laws.  These bye-law Exhibit P. 897 tally with the  bye-laws  Exhibit  P. 786.  Raghunath  Rai  proves  the letter Exhibit P. 896 to be a copy of the letter sent  along with these bye-laws to the Bank and states that                             285 both  the  original and P. 896 were signed  by  Dalmia.   He deposed:               "Ex.   P. 786 are the bye-laws of  the  Bharat               Insurance Company which came into operation on               1-1-52  I supplied copy of Ex. p. 786  as  the               copy  of the bye-laws of the Bharat  Insurance

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 81  

             Company to the State Bank of India, New  Delhi               Shri Dalmia thereupon certified as true copies               of the resolutions which were sent along  with               the  copy of the bye-laws. He also signed  the               covering  letter which was sent to  the  State               Bank of India along with the copy of the  bye-               laws   Ex.  p.786  and  the  copies   of   the               resolutions.               I produce the carbon copy of the letter  dated               4-9-54  which  was sent as a  covering  letter               with  the  bye-laws of  the  Bharat  Insurance               Company  to  the Imperial Bank of  India,  New               Delhi.   It  is Ex. p. 896.  The  carbon  copy               bears  the  signatures of R.  Dalmia  accused,               which signatures I identify The aforesaid Bank               (Imperial  Bank) put a stamp over Ex.  p.  896               with  regard to the receipt of  its  original.               The certified copy of the byelaws of the Bharat               Insurance Company which was sent for     registration               to  the Imperial Bank along with the  original               letter of which Ex. p. 896 is a carbon copy is               Ex.p. 897 (heretofore marked C).  The copy  of               the bye-laws has been certified to be true  by               me under my signatures." Dalmia states in answer to question No. 15 (put to him under s.  342,  Cr.  P. C.) that the signature,,, on  Ex.  p.  896 appear to be his. 286 Letter Exhibit P. 896 may be usefully quoted here "SEC The Agent,                           4-9-54 Imperial Bank of India, New Delhi: Dear Sir, Re : Safe Custody of Govt.  Securities.               We   are  sending  herewith  true  copies   of               Resolution  No.  4  dated  10th  March,  1949,               Resolution  No. 3 dated 10th March, 1949,  and               Resolution  No. 8 dated 8th  September,  1951,               along with a certified copy of the Bye-laws of               the Company for registration at your end.               By virtue of Art. 12 clause (e) of the Byelaws               of  the  Company  I am empowered  to  deal  in               Government   Securities  etc.   The   specimen               signatures  Card  of the undersigned  is  also               sent herewith.                        Yours faithfully,               Encls. 5          Sd/- R. Dalmia Chairman." By  Resolution  No. 4 dated March 10, 1949, Dalmia  was  co- opted  Director of the Company.  By Resolution No. ’a  dated March 19, 1949, Dalmia was elected Chairman of the Board  of Directors.  Resolution No. 8 dated September 8, 1951 was :               "Considered the draft bye-laws of the  Company               and  Resolved that the Bye-laws as  per  draft               signed  by the Chairman for identification  be               and are hereby approved in substitution and to               the exclusion of the existing bye-laws of  the               Company." 287 The letter Exhibit P. 896 not only supports the statement of Raghunath Rai about the copy of the bye-laws supplied to the Bank to be a certified copy but also the admission of Dalmia that he was empowered to deal in Government Securities etc., by virtue of article 12, clause (e), of the bye-laws of  the company.   There  therefore remains no room for  doubt  that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 81  

bye-laws Exhibit P. 897 are the certified copies of the bye- laws of the company passed on September 8, 1951 and in force on September 4, 1954. We are therefore of opinion that either due to oversight the draft bye-laws said to be signed by the Chairman Dalmia were not  signed  by  him or that such signed  copy  is  no  more available  and that bye-laws Exhibits P. 786 and P. 897  are the correct bye-laws of the company. Article  12  of  the company’s bye-laws  provides  that  the Chairman  shall  exercise  the  powers  enumerated  in  that article  in  addition  to all the powers  delegated  to  the Managing  Director.  Clause (e) of this  article  authorises him   to  negotiate,  transfer,  buy  and  sell   Government Securities  etc.,  and  to  pledge,  endorse,  withdraw   or otherwise  deal  with  them.  Article  13  of  the  bye-laws mentions  the powers of the Managing Director.  Clause  (12) of  this  article empowers the Managing  Director  to  make, draw,  sign or endorse, purchase, sell, discount  or  accept cheques,  drafts,  hundies,  bills  of  exchange  and  other negotiable  instruments  in the name and on  behalf  of  the company. Article  14 of the bye-laws originally mentioned the  powers of the Manager.  The Board of Directors, by resolution No. 4 dated October 6,1952 resolved that these powers be exercised by.   K.  L.  Gupta as General  Manager  and  the  necessary corrections be made. 288 By  resolution No. 4 dated August 30, 1954, of the Board  of Directors, the General Manager was empowered to make,  draw, sign or endorse, purchase, sell, discount or accept cheques, drafts,  hundies,  bills of exchange  and  other  negotiable instruments in the name and on behalf of the company and  to exercise all such powers from time to time incidental to the post of the General Manager of the Company and not otherwise excepted.   By  the  same resolution,  the  words  ’Managing Director’  in Article 12 of the Bye-laws stating the  powers of  the  Chairman, were substituted by  the  words  ’General Manager.’ Thereafter, the Chairman could exercise the powers of the General Manager conferred under the byelaws or  other resolutions of the Board. It is clear therefore from these provisions of the  articles and bye-laws of the company and the resolutions of the Board of Directors, that the Chairman and the General Manager  had the power to draw on the funds of the company. Chokhani  had  authority to operate on the  account  of  the Bharat  Insurance Company at Bombay under the resolution  of the Board of Directors dated January 31, 1951. Both  Dalmia  and Chokhani therefore had dominion  over  the funds of the Insurance Company. In Peoples Bank v. Harkishen Lal (1) it was ,stated               "Lala  Harkishen Lal as Chairman is a  trustee               of all the moneys of the Bank."               In  Palmer’s  Company Law,  20th  Edition,  is               stated at page 517               "Directors are not only agents but they are in               some  sense and to some extent trustees or  in               the position of trustees."               (1)   A.I.R. 1936 Lah. 468, 409.                                    289               In G. E. Ry.  Co. v. Turner (1) Lord  Selborne               said :               "The directors are the mere trustees or agents               of the company-trustees of the company’s money               and property-agents in the transactions  which               they enter into on behalf of the company.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 81  

             In  Re.   Forest  of Dean etc.,  Co.  (2)  Sir               George Jessel said:               "Directors  are called trustees.  They are  no               doubt trustees of assets which have come  into               their   hands,  or  which  are   under   their               control." We  are therefore of opinion that Dalmia and  Chokhani  were entrusted  with  the dominion over the funds of  the  Bharat Insurance Company in the Banks. It  has  been  urged for Chokhani that  he  could  not  have committed  the offence of criminal breach of trust  when  he alone  had not the dominion over the funds of the  Insurance Company,  the accounts of which he could not operate  alone. Both  Ragbunath  Rai and he could operate  on  the  accounts jointly.  In support of this contention, reliance is  placed on the case reported as Bindeshwari v. King Emperor (3).  We do not agree with the contention. Bindeshwari’s Case (3 ) does not support the contention.  In that  case,  a joint family firm  was  appointed  Government stockist  of  food  grain.  The partners of  the  firm  were Bindeshwari and his younger brother.  On check, shortage  in food  grain  was  found.   Bindeshwari  was  prosecuted  and convicted  by the trial Court of an offence under s. 409  1. P. C. On appeal, the High Court set aside the conviction  of Bindeshwari of the offence under (1)L.     R. (1872) 8 Ch.  App. 149,152 (2) L. R. (1878)  10 Ch.  D. 450,453, (3) (1947) I.L.R. 26 Pat. 703, 715. 290 s.   409  I.  P. C. and held him not guilty of  the  offence under that section as the entrustment of the grain was  made to  the  firm  and not to him personally.   The  High  Court convicted him, instead, of the offence under s. 403 1. P. C. This is clear from the observation :               "In  my  opinion,  the  Government  rice   was               entrusted to the firm of which the  petitioner               and his younger brother were the  proprietors.               Technically speaking, there was no entrustment               to the petitioner personally." This  case clearly did not deal directly with  the  question whether  a  person who, jointly with another,  has  dominion over  certain property, can commit criminal breach of  trust with respect to that property or not. On  the other hand, a Full Bench of the Calcutta High  Court took a different view in Nrigendro Lall Chatterjee v.  Okhoy Coomar Shaw (1).  The Court said :               "We  think  the word,- of Section 405  of  the               Penal  Code  are large enough to  include  the               case of a partner, if it be proved that he was               in   fact  entrusted  with   the   partnership               property, or with a dominion over it, and  has               dishonestly  misappropriated it, or  converted               it to his own use."               Similar  view  was  expressed  in  Emperor  v.               Jagannath Raghunathdas. (2) Beaumont C. J.Said               at.               But,  in my opinion, the words of the  section               (s.  405) are quite wide enough to  cover  the               case of a partner.  Where one partner is given               authority  by  the other partners  to  collect               moneys or property of the firm I think that he               is entrusted with dominion over               (1)   (1874)  21 W. R. (criminal Rulings)  59.               61 (1931) 33 Bom.  L R. 1518,1521                                    291

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 81  

             that property, and if he dishonestly misappro-               priates  it, then I think he comes within  the               Section."               Barlee J., agreed with this opinion. The  effect of Raghupath Rai’s delivering the blank  cheques signed by him to Chokbani may amount to putting Chokbani  in sole control over the funds of the Insurance Company in  the Bank  and there would Dot remain any question of  Chokhani’s having joint dominion over those funds and this  contention, therefore, will not be available to him. It was also urged for Chokhani that he bad obtained  control over  the  funds  of  the  Insurance  Company  by   cheating Raghunath Rai inasmuch as he got blank cheques signed by the latter on the representation that they would be used for the legitimate  purpose of the company but latter used them  for purposes not connected with the company and that, therefore, he could not commit the offence of criminal breach of trust. This  may be so, but Chokhani did not got dominion over  the funds  on account of Raghunath Rai’s signing blank  cheques. The   signing  of  the  blank  cheques  merely   facilitated Chokhani’s  committing breach of trust.  He got control  and dominion over the funds under the powers conferred on him by the  Board of Directors, by its resolution  authorising  him and  Raghunath  Rai  to  operate  on  the  accounts  of  the Insurance Company with the Chartered Bank, Bombay. The  next  contention is that Dalmia and Chokhani  were  not agents as contemplated by s. 409 I. P. C. The contention  is that  the  word  "agent’  in  this  Section  refers’  to   a professional  agent’  i.  e., a person who  carried  on  the profession of agency and that as Dalmia and Chekbani did not carry  on such profession, they could not be covered by  the expression ’agent’ in his section. 292 Reliance  is placed on the case reported  as  Mahumarakalage Edward  Andrew Cooray v. The Queen (1).  This case  approved of  what  was said in    Reg. v. Portugal (2) and  it  would better to discuss   that case first. That  case  related  to an offence being  committed  by  the accused under s. 75 of the Larceny Act, 1861 (24 & 25  Viet. c. 96).  The relevant portion of the section reads.               "Whosoever,  having  been  intrusted,   either               solely or jointly with any other person, as  a               banker,  merchant, broker, attorney  or  other               agent, with any chattel or valuable  security,               or  any  power  of attorney for  the  sale  or               transfer  of  any  share or  interest  in  any               public  stock  or find............ or  in  any               stock or fund of any body corporate, & c.. for               safe  custody  or  for  any  special  purpose,               without  any  authority  to  sell,  negotiate,               transfer,  or pledge, shall, in  violation  of               good  faith  and  contrary to  the  object  or               purpose  for  which  such chattel  &  c.,  was               intrusted  to him sell, negotiate,  pledge,  &               c., or in any manner convert to his own use or               benefit,  or the use or benefit of any  person               other  than the person by whom he  shall  have               been so intrusted............ shall be  guilty               of a misdemeanor. The  accused in that case was employed by a firm of  Railway contractors  for commission’ to use his influence to  obtain for  them a contract for the construction of a  railway  and docks  in France.  In the course of his employment,  he  was entrusted  with a cheque for pound 500/- for the purpose  of opening  a credit in their name in one of the two  specified

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 81  

banks in Paris.  He was alleged to have misappropriated  the cheque to his own use fraudulently.  He was also alleged  to have  fraudulently dealt with another bill for  pound  250/- and other securities which had (1) (1953) A.C. 407, 419.  (2) (1885) 16 Q.B.D. 487. 293 been  entrusted  to  him  for a  special  purpose.   He  was committed  for  trial for the offence under s. 75.   He,  on arrest under an extradition warrant, was committed to prison with  a  view to his extradition in respect  of  an  offence committed in France.  It was contended on his behalf:               "To   justify   the   committal   under    the               Extradition  Act,  it  was  incumbent  on  the               prosecutors to offer prima facie evidence that               the  money and securities which  the  prisoner               was  charged with having misappropriated  were               intrusted  to him in the capacity of  "agent’,               that is, a person who carries on the  business               or occupation of an agent, and intrusted  with               them   in  that  capacity,  and  without   any               authority  to sell, pledge, or negotiate,  and               not one who upon one solitary occasion acts in               a fiduciary character." It  was held, in view of the section referring  to  ,banker, merchant,  broker, attorney or other agent’, that a. 75  was limited to a class, and did not apply to everyone who  might happen  to  be intrusted as prescribed by the  section,  but only  to  the class of persons therein  mentioned.   It  was further said :               "In our judgment, the ’other agent’  mentioned               in  this section means one whose  business  or               profession it is to receive money,  securities               or chattels for safe custody or other  special               purpose; and that the term does not include  a               person  who  carries on no  such  business  or               profession, or the like.  The section is aimed               at those classes who carry on the  occupations               or  similar occupations to those mentioned  in               the section, and not at those who carry on  no               such occupation, but who may happen from  time               to time to undertake some fiduciary  position,               whether for money or otherwise". 294 This  case therefore is authority to this effect  only  that the  term agent’ in that section does not include  a  person who  just  acts as ,in agent for another  for  a  particular purpose  with respect to some property that is entrusted  to him,  i. e., does not include a person who becomes an  agent as a consequence of what he has been charged to do, and  who has  been  asked  to do a certain  thing  with  respect  the property  entrusted  to him, but includes such  person  who, before  such  entrustment  and  before  being  asked  to  do something, already carried on snob business or profession or the  like  as necessitates, in the course of  such  business etc.,  his receiving money, securities or chattels for  safe custody  or  other special purpose.  That is to say,  he  is already  an agent for the purpose of doing such acts and  is subsequently entrusted with property with direction to  deal with  it in a certain manner.  It is not bold that a  person to  be  an  agent  within that section  must  carry  on  the profession of an agent or must have an agency.  The accused, in that case, was therefore not held to be an agent. It  may  also  be  noticed that he was  so  employed  for  a specific  purpose which was to use his influence  to  obtain for  his  employers  a contract for the  construction  of  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 81  

railways  and  docks  in France.  This  assignment  did  not amount to making him an agent of the employers for receiving money etc. In Mahumarakalage Edward Andrew Cooray’s Case (1) the  Privy Council was dealing with the appeal of  a  person who  had  been convicted under s. 392 of the Penal  Code  of Ceylon.   Sections  388  to 391 of  the  Ceylon  Penal  Code correspond  to  ss.  405 to 408 of the  Indian  Penal  Code. Section 392 corresponds to s. 409 1. P. C. It was  contended before  the Privy Council that the offence under s. 392  was limited to the case of one who carried on an agency business and  did not comprehend a person who was casually  entrusted with money either on one individual (1)  (1953) A.C. 407 419. 295 occasion  or  a  number  of  occasions,  provided  that  the evidence  did  not establish that he carried  on  an  agency business.    Their  Lordships  were  of  opinion  that   the reasoning in Reg. v. Portugal (1) for the view that s. 75 of the  Larceny  Act  was  limited  to  the  class  of  persons mentioned  in it, was directly applicable to the  case  they were  considering,  subject to some  immaterial  variations, arid finally said :               "’In  enunciating the construction which  they               have  placed on section 392 they  would  point               out  that  they are in no  way  impugning  the               decisions is certain cases that one act of en-               trustment  may constitute a man a  factor  for               another provided he is entrusted in his  busi-               ness  as  a  mercantile agent,  nor  are  they               deciding   what   activity  is   required   to               establish  that an individual is  carrying  on               the business of an agent". These observations mean that the view that s. 75 was limited to the class of persons mentioned therein did not affect the correctness  of the view that a certain act  of  entrustment may Constitute a person a factor for another provided be was entrusted in his business as a mercantile agent.  It follows that a certain entrustment, provided it be in the course  of business  as  a  mercantile agent,  would  make  the  person entrusted with a factor, i. e., would make him belong to the class of factors.  The criterion to hold a person a  factor, therefore,  is  that his business be that  of  a  mercantile agent  and  not  necessarily  that  he  be  a   professional mercantile agent. Further,  their  Lordships left it open as to what  kind  of activity  on  the part of a person alleged to  be  an  agent would  establish that he was carrying on the business of  an agent.   This again makes it clear that the emphasis is  not on the person’s carrying on the profession of an agent,  but on his carrying on the business of an agent. (1)  (1885) 16 Q.B.D, 487. 296 These  cases, therefore, do not support the  contention  for Dalmia  and Chokhani that the term "agent’ in s. 409  I.  P. C.,  which corresponds to s. 392 of the Ceylon Penal  Code., is  restricted  only  to  those persons  who  carry  on  the profession  of  agents.  These cases are authority  for  the view  that  the  word ’agent’ would  include  a  person  who belongs  to  the class of agents, i.e., who carries  on  the business of an agent. Further,  the accused in the Privy Council Case (1) was  not held to be an agent.  In so holding, their Lordships said :               "In the present case the appellant clearly was               not doing so, and was in no sense entitled  te               receive  the  money entrusted to  him  in  any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 81  

             capacity,   nor  indeed,  had  Mr.   Ranatunga               authority to make him agent to hand it over to               the bank." To  appreciate these reasons, we may mention here the  facts of that case.  The accused was the President of the  Salpiti Koral  Union.   The  Union  supplied  goods  to  its  member societies  through  three  depots.   The  accused  was  also President  of  the Committee which controlled one  of  these depots.   He  was also Vice-President  of  the  Co-operative Central Bank which advanced moneys to business societies  to enable  them to buy their stocks.  The societies repaid  the advance  weekly through cheques and/or money orders,  except when the advance be of small sums.  The Central Bank, in its turn,  paid  in the money orders, cheques and  cash  to  its account with the Bank of Ceylon.  The accused appointed  one Ranatunga  to be the Manager of the depot which was  managed by  the  Committee  of  which he  was  the  President.   The payments  to the Central Bank used to be made  through  him. The accused instructed this Manager to follow a course other than the prescribed routine.  It was that he was to collect (1)  [1953] A.C. 407, 419. 297 the  amounts from the stores in cash and hand them  over  to him for transmission to the Bank.  The accused thus got  the cash   from  the  Manager  and  sent  his  own  cheques   in substitution  for the amounts to the Central Bank.  He  also arranged as the Vice President of that Bank that in  certain cases  those cheques be not sent forward for collection  and the result was that he could thus misappropriate a large sum of  money.  The Privy Council said that the accused was  not entitled  to  receive  the money entrusted  to  him  in  any capacity,  that  is  to say as  the  Vice-President  of  the Cooperative  Central  Bank  or the President  of  the  Union controlling the depots or as the President of the Committee. It  follows  from this that he could not have  received  the money  in the course of his duties as, any of these  office- bearers.  Further, the Manager of the depot had no authority to  make the accused an agent for purposes  of  transmitting the  money to the Bank.  The reason why the accused was  not held  to be an agent was not that he was not a  professional agent.   The  reason  mainly was that  the  amount  was  not entrusted  to  him  in the course of the duties  he  had  to discharge as the office-bearers of the various institutions. Learned counsel also made reference to the case reported  as Rangamannar  Chatti v. Emperor (1). it is not of much  help. The  accused there is said to have denied all  knowledge  of the  jewels which had been given to him by  the  complainant for pledging and had been pledged and redeemed.  It was said that  it  was not a case under a. 409 I. P.  C.  The  reason given was:               "There  is no allegation that the jewels  were               entrusted  to the accused ’in the way  of  his               business as an agent’.  No doubt he is said to               (1)   (1935) M.W.M, 649.               298               have acted as the complainant’s agent, but  he               is  not professionally the complainants  agent               nor was this affair a business transaction." The reasons emphasize both those aspects we have referred to in  considering  the  judgment  of  the  Privy  Council   in Mahumarakalag  Edward Andrew Cooray’s Case (1), and we  need not say anything more about it. What  s. 409 I.P.C. requires is that the person  alleged  to have committed criminal breach of trust with respect to  any property  be entrusted with that property or  with  dominion

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 81  

over  that property in the way of his business as an  agent. The  expression in the way of his business’ means  that  the property  is entrusted to him in the ordinary course of  his duty  or  habitual occupation or profession or  trade’.   He should  get the entrustment or dominion in his  capacity  as agent.   In  other words, the requirements of  this  section would be satisfied if the person be an agent of another  and that  other  person entrusts him with property or  with  any dominion  over that property in the course of his duties  as an  agent.   A person may be an agent of  another  for  some purpose  and  if  he  is  entrusted  with  property  not  in connection  with that purpose but for another purpose,  that entrustment  will not be entrustment for the purposes of  S. 409  I.P.C.  if  any breach of trust is  committed  by  that person.  This interpretation in no way goes against what has been  held  in  Reg. v. Portugal (2)  or  in  Mahumarakalage Edward Andrew Cooray’s ’Case (1), and finds support from the fact  that  the  section  also  deals  with  entrustment  of property  or with any dominion over property to a person  in his  capacity of a public servant.  A  different  expression ’in  the  way  of  his business’ is used  in  place  of  the expression  ’in  his  capacity,’  to  make  it  clear   that entrustment  of property in the capacity of agent will  not, by itself, be sufficient to make (1) (1953) A.C. 407. 419. (2) (188 5) lb Q.B.D. 487. 299 the  criminal breach of trust by the agent a graver  offence than any of the offences mentioned is ss. 406 to 408  I.P.C. The  criminal breach of trust by an agent would be a  graver offence only when he is entrusted with property not only  in his  capacity  as an agent but also in connection  with  his duties as an agent.  We need not speculate about the reasons which induced the Legislature to make the breach of trust by an  agent more severely punishable than the breach of  trust committed  by  any  servant.  The agent  acts  mostly  as  a representative  of  the  principal and has  more  powers  in dealing   with   the   property  of   the   principal   and, consequently,    there   are   greater   chances   of    his misappropriating  the property if he be so minded  and  less chances  of his detection.  However, the  interpretation  we have  put on the expression ’in the way of his business’  is also  borne  out  from  the  Dictionary  meanings  of   that expression  and  the meanings of the  words  ’business’  and ’way’, and we give these below for convenience. ’In the way of’    -of the nature of, belong                      ing to the class of, in the                      course of or routine of                    (Shorter Oxford English Dictionary)                     -in the matter of, as regards, by way of                       (Webster’s New Inter-                         national Dictionary,                         II Edition, Unabrid-                             ged) Business’       -occupation, work                (Shorter Oxford Eng-                 lish Dictionary)              -mercantile transactions,               buying and selling, duty,               special imposed or under- 300 taken service, regular occupation (Webster’s New Inter- national Dictionary, II Editional, Unabrid-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 81  

ged) -duty, province, habitual occupation, profession, trade- (Oxford Concise Dictionary) ’Way’     --scope, sphere, range, line of occupation             Oxford Concise Dictionary) Chokhani was appointed agent of the Bharat Insurance Company on January 31, 1951.  He admits this in his statement  under s. 342, Cr.  P.C. He signed various cheques as agent of this company and he had been referred to in certain documents  as the agent of the company. Dalmia,  as  a Director and Chairman of the company,  is  an agent of the company. In  Palmer’s Company Law, 20th Edition, is stated,  at  page 513 : "A  company can only act by agents, and usually the  persons by  whom it acts and by whom the business of the company  is carried  on  or superintended are  termed  directors........ Again, at page 515 is noted :               (Directors are, in the eye of the law,  agents               of  the  company for which they act,  and  the               general principles of the law of principal and               agent   regulate   in   most   respects    the               relationship   of   the   company   and    its               directors.,, 301 It was held in Gulab Singh v. Punjab Zamindara Bank (1)  and in  Jasuwant  Singh v. V.V. Puri (2) that a director  is  an agent of the company. Both  Dalmia  and Chokhani being agents of the  company  the control, if any, they had over the securities and the  funds of the company, would be in their capacity as agents of  the company  and would be in the course of Dalmia’s duty as  the Chairman and Director or in the course of Chokhani’s duty as a  duly appointed agent of the company.  If  they  committed any criminal breach of trust with respect to the  securities and  funds  of  the company, they  would  be  committing  an offence under ss.409 I.P.C. In  view of our opinion with respect to Dalmia and  Chokhani being  agents within the meaning of s. 409 I.P.C. and  being entrusted  with  dominion  over  the  funds  of  the  Bharat Insurance  Company  in  the Banks  which  comes  within  the meaning  of the words ’property’ in s. 409, these  appellant would  commit the offence of criminal breach of trust  under s.  409 in case they have dealt with this ’property’ in  any manner mentioned in s. 405 I.P.C. We  may  now proceed to discuss the detailed nature  of  the transactions  said to have taken place in pursuance  of  the alleged  conspiracy.  It is, however, not necessary to  give details of all the impugned transaction.  The details of the first few transactions will illustrate how the whole  scheme of diverting the funds of the Insurance Company to the Union Agencies was worked. The Union Agencies suffered losses in its shares speculation business  in  the  beginning of  August,  1954.   The  share brokers sent statements of accounts dated August 6, 1954, to Chokhani and (1) A. I.R. 1942 Lah. 47. (2) A.I.R. 1951 Pu n. 99. 302 made demand of Rs. 22,25,687-13-0 in respect of the  losses, The  total  cash assets of the Union Agencies  in  all  it,; banks and offices at Bombay, Calcutta and Delhi amounted  to Rs. 2,67,857-11-7 only.  The Union Agencies therefore needed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 81  

a  large  sum  of  money to meet this  demand  and  to  meet expected future demands in connection with the losses. At  this  crucial time, telephonic communications  did  take place  between  presumably Dalmia and Chokhani.   The  calls were made from Telephone No. 45031, which is Dalmia’s number at 3, Sikandara Road, New Delhi to Bombay No. 33726, of Cho- khani.   Two  calls were made on August 7,  1954,  three  on August  8,  two on August 11 and one each on August  13  and August  14, respectively.  Of course, there is  no  evidence about the conversation which took place at these talks.  The significance  of  these  calls lies in  their  taking  place during  the  period when the scheme about the  diversion  of funds  was coming into operation for the first time, but  in the absence of evidence as to what conversation took  place, they  furnish merely a circumstance which is not  conclusive by itself. On  August 7 and 9, 1954, the Punjab National Bank,  Bombay, received  Rs. 2,00,000 and Rs. 3,00,000 respectively in  the account of the Union Agencies, telegraphically from Delhi. On the same day, Vishnu Prasad, appellant, opened an account with  the  Bank of India, Bombay, in the  name  of  Bhagwati Trading Company.  He gave himself out as the sole proprietor and  mentioned the business of the company in the  form  for opening  account  as merchants and commission  agents’.   He made  a deposit of Rs. 1, 100 said to have been supplied  to him by Chokhani. On  August 11, 1954, Vishnu Prasad made another  deposit  of Rs. 1,100, again said to have                             303 been  supplied  by  Chokhani, as the first  deposit  in  the account he opened with the United Bank of India, Bombay,  in the  name of Bhagwati Trading Company.  The business of  the company  was  described in the form for opening  account  as merchants, piece-goods dealers.’ There  is no dispute now that Bhagwati Trading  Company  did not carry on any business either as merchants and commission agents  or  as merchants and  piece-goods  dealers.   Vishnu Prasad  states that he acted just at Chokhani told  him  and did  not  know  the nature of the  transactions  which  were carried on in the name of this company.  It is however clear from the accounts and dealings of this company that its main purpose was simply to act in such a way as to let the  funds of  the Insurance Company pass on to the Union Agencies,  to avoid easy detection of such transfer of funds. Chokhani  states  that  he did this business  as  the  Union Agencies  needed  money at that time.  He thought  that  the Union  Agencies  would  make  profit  after  some  time  and thereafter  pay  it  back to Bhagwati  Trading  Company  for purchasing  securities and therefore he postponed the  dates of delivery of the securities to the Insurance Company.   He added  that  in case of necessity be could  raise  money  by selling  or mortgaging the shares of the Union  Agencies  in the exercise of his power of attorney on its behalf. We may now revert to the actual transaction gone through  to meet the demands in connection with the losses of the  Union Agencies. On August 9, 1954, Chokbani purchased 3% 1963-65  securities of  the  face  value  of Rs.  22,00,000  on  behalf  of  the Insurance Company from Naraindas and Sons, Security Brokers. Chokhani  entered, into a cross-contract with the same  firm of brokers 304 for the sale of similar securities of the same face value on behalf of Bhagwati Trading Company.  He informed the brokers that  the  payment of purchase price would be  made  by  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 81  

Insurance  Company to Bhagwati Trading Company from whom  it would   get  the  securities.   Thus  the   actual   brokers practically  got  out of the transaction  except  for  their claim of brokerage. On  August  11, 1954, a similar transaction of  purchase  on behalf of the Insurance Company from the brokers and sale by Bhagwati  Trading  Company to those brokers, of  3%  1963-65 securities  of the face value of Rs. 5,00,000,  was  entered into by Chokhani. It  may  be mentioned, to avoid  repetition,  that  Chokhani always acted in such transaction-which may be referred to as usual purchase transactions both on behalf of the  Insurance Company and on behalf of Bhagwati Trading Company, and  that the same arrangement was made with respect to the payment of the purchase price and the delivery of securities. The  securities were not delivered to the Insurance  Company by Bhagwati Trading Company and yet Chokhani made payment of the  purchase price from out of the funds of  the  Insurance Company. On  August 11, 1954, Chokhani got the statement of  accounts from  the  brokers relating to the  purchase  of  securities Worth  Rs.  22,00,000.  The total cost of  those  securities worked out at Rs. 20,64,058-6-9.  Chokhani made the  payment by  issuing  two  cheques  in  favour  of  Bhagwati  Trading Company,  one  for  Rs.  10,00,000 and  the  other  for  the balance,  i.e., Rs. 10,64,058-6-9.  Needless to say that  he utilised  the  cheques  which had  already  been  signed  by Raghunath Rai, in pursuance of the arrangement to facilitate transactions on behalf of the Insurance Company.                             305 On August 12, 1954, the statement of account with respect to the purchase of securities worth Rs. 5,00,000 was  received. The cost worked out to Rs. 4,69,134-15-9.  Chokhani made the payment by issuing a cheque for the amount in favour of Bhag wati  Trading Company.  All these cheques were drawn on  the Chartered Bank, Bombay. On  August  12,  1954, Vishnu Prasad drew  cheques  for  Rs. 9,00,000  in the account of Bhagwati Trading Company in  the United  Bank  of  India.  The amount was  collected  by  his father Bajranglal.  He drew another cheque for Rs.  9,60,000 in the account of the Bhagwati Trading Company with the Bank of India, Bombay, and collected the amount personally.   The total  amount  withdrawn  by these  two  cheques  viz.,  Rs. 18,60,000  was  passed  on to  the  Union  Agencies  through Chokhani  that  day.   Thereafter  Chokhani  deposited   Rs. 7,00,000 in the account of the Union Agencies with the  Bank of India, Rs. 7,00,000, in the account of the Union Agencies with  the  United  Bank of India and  Rs.  4,40,000  in  the account of the Union Agencies with the Punjab National  Bank Ltd.   The  Punjab National Bank Ltd.,  Bombay,  as  already mentioned,  had  received deposits of Rs. 2,00,000  and  Rs. 3,00,000  on August 7 and August 9, 1954,  respectively,  in the account of the Union Agencies from Delhi. Between August 9 and August 19, 1954, Chokhani made  payment to  the  brokers on account of the losses  suffered  by  the Union  Agencies.   He issued cheques  for  Rs.  9,37,473-5-9 between  August 9 and August 13, 1954, on the  account  with the  Punjab National Bank.  On August 13, he issued  cheques on  the account of the Union Agency with the United Bank  of India  in  favour of the Bombay brokers on  account  of  the losses of the Union Agencies, for Rs. 7,40,088-5-9.  He also issued,  between August 13 and August 19., 1954, cheque  for Rs. 6,84,833-14-0 on the Bank of India, in favour 306 of  the  share brokers at Bombay on account  of  the  losses

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 81  

suffered by the Union Agencies. Chokhani  informed  the  head office at  Delhi  about  these purchase  transaction  of securities  worth  Rs.  27,00,000, through  letter dated August 16, 1954, and along  with  that letter  sent  the contract note and statements  of  accounts received  from  the brokers.  No mentioned was made  in  the letter  about  the payment being made  to  Bhagwati  Trading Company  through  cheques  or about  the  arrangement  about getting  the  securities from Bhagwati  Trading  Company  or about the postponement of the delivery of the securities  by that  company.   On  receipt of the  letter,  Raghunath  Rai contacted Dalmia and, on being told that the securities were purchased  under  the latter’s instructions, made  over  the letter to the office where the usual entries where made  and records were prepared, as had to be done in pursuance of the office routine.  Ultimately, the formal confirmation of  the purchases was obtained on August 30, 1954, from the Board of Directors  at its meeting for which the office note  Stating that  the securities were purchase under the instruction  of the  Chairman  (Dalmia)  was  prepared.   The  office  note, Exhibit  P.  793,  with respect to  the  purchase  of  these securities  worth Rs. 27,00,000 was signed by  Chordia,  who was  then  the Managing, Director of  the  Bharat  Insurance Company. On  August 16, 1954, Vishnu Prasad withdrew Rs.  2,200  from the account of the Bhagwati Trading Company with the Bank of India,  according  to  his statement,  gave  this  money  to Chokhani  in  return for the amount  Chokhani  had  advanced earlier  for opening accounts for Bhagwati  Trading  Company with  the  Bank  of  India and the  United  Bank  of  India. Thereafter,  whatever money was in the account  of  Bhagwati Trading  Company  with these Banks was  the  money  obtained through  the  dealings entered into on  behalf  of  Bhagwati Trading Company, the funds 307 for most of which came from the Bharat Insurance Company. On  August 18,1954, Vishnu Prasad drew a sum of  Rs.  50,000 from  Bhagwati  Trading Company’s account with the  Bank  of India and passed on the amount to the Union Agencies through Chokhani.   On August 23. 1954, he withdrew Rs. 90,000  from Bhagwati  Trading Company’s account with the United Bank  of India  and  Rs. 5,10,000 from its account with the  Bank  of India and passed on these amounts also to the Union Agencies through  Chokhani.  Chokhani then issued cheques to  telling Rs.  5,88,380-13-0 from August 23 to August 26,1954, on  the account  of  the  Union Agencies with  the  Chartered  Bank, Bombay,  in favour of the brokers on account of  the  losses suffered by that company.  Thus, out of the total amount  of Rs. 25,33,193-6.6 withdrawn by Chokhani from the account  of the  Bharat.  Insurance Company and paid  over  to  Bhagwati Trading  Company, Rs. 25,10,000 went to the Union  Agencies, which  mostly utilised the amount in payment of  the  losses suffered by it. The  Union  Agencies suffered further  losses  amounting  to about  Rs.  23,00,000.  Demands for payment by  the  brokers were received on September 3, 1954, and subsequent days. The Bharat Insurance Company had no sufficient liquid  funds in  the Banks at Bombay.  There was therefore  necessity  to deposit  funds  in  the  Bank before  they  could  be  drawn ostensibly  to pay the price of securities to be  purchased. This time the transactions of sale of securities held by the Insurance  Company  and  the  usual  purchase   transactions relating to certain other securities were gone through.  The details of those transactions are given below. 308

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 81  

On  September 4, 1954, securities of the face value  of  Rs. 17,50,000 held by the Insurance Company were withdrawn  from its  Safe-custody account with the Imperial Bank  of  India, New Delhi, by letter Exhibit P. 1351 under the signature  of Dalmia.   Securities worth Rs. 10,00,000 were  2-1/40%  1954 securities  and  the balance were  2-1/2%  1955  securities. These  securities were then sent to Bombay and  sold  there. On  September  9, 1954, Rs. 6,25,000 were  transferred  from Delhi  to  the  account of the Insurance  Company  with  the Chartered  Bank, Bombay, by telegraphic transfer.  Thus  the balance of the funds of the Insurance Company with the Char- tered  Bank  rose to an amount out of which  the  losses  of about Rs. 23,00,000 suffered by the Union Agencies could  be met.   The 1954 securities sold were to mature  on  November 15,  1954.   The  1955 securities would  have  matured  much later.   No ostensible reason for their premature  sale  has been given. On   September  6,  1954,  Chokhani  purchased  3%   1959-61 securities  of the face value of Rs. 25,00,000 on behalf  of the Insurance Company from M/s.  Naraindas & Sons,  Brokers. A  cross--contact of sale of similar securities by  Bhagwati Trading Company to the brokers was also entered into.  Steps which  were  taken  in  connection  with  the  purchase   of securities worth Rs. 27,00,000 in August 1954 were repeated. On  September 9, 1954, Chokhani issued two cheques, one  for Rs. 15,00,000 and the other for Rs. 9,20,875 on the  account of the Insurance Company with the Chartered Bank, in  favour of  Bhagwati Trading Company which deposited the  amount  of the cheques into its account with the Bank of India, Bombay. Vishnu Prasad passed on Rs. 24,00,000 to the Union  Agencies through  Chokhani.  This amount was utilised in meeting  the losses  suffered by the Union Agencies to the extent of  Rs. 22,81,738-2-0, A sum of   Rs. 75,000 was paid 309 to Bennett Coleman Co. Ltd., of which Dalmia was a  director and a sum of Rs. 15,000 was deposited in the Punjab National Bank. It   is   again   significant  to   note   that   telephonic communication  took place between Dalmia’s residence at  New Delhi  at,  Chokhani’s at Bombay, between  September  4  and September  10,  1954.   There  was  two  communications   on September  4, one on September 5, three on September  6  and one on September 10, 1954. The  Union  Agencies suffered further  losses  amounting  to about  Rs. 10,00,000 in the month of September.  Again,  the accounts of the Union Agencies or of the Insurance  Company, at  Bombay,  did  not have sufficient balance  to  meet  the losses and, consequently, sale of certain securities held by the Insurance Company and purchase of other securities again took place.  This time, 3% 1957 securities of the face value of Rs. 10,00,000 hold by the Insurance Company in its  safe- custody  deposit with the Chartered Bank, Bombay, were  sold on  September  21,  1954,  and  Rs.  9,84,854-5-6,  the  net proceeds,  were  deposited in the Bank.  On  the  same  day, Chokhani  purchased 3% 1959-61 securities of the face  value of  Rs.  10,00,000  on  behalf  of  the  Insurance   Company following  the  procedure  adopted  in  the  earlier   usual purchase transactions. No  telephonic  communication appears to  have  taken  place between Delhi and  Bombay, on receipt of the demand from the brokers  on  September  17, 1954, for  the  payment  of  the losses, presumably because necessary steps to be taken  both in connection with the fictitious purchase of securities, in order  to  pay money to Bhagwati Trading Company  for  being made  over to the Union Agencies when funds were needed  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 81  

also  or providing funds in the Insurance Company’s  account with the Chartered Bank, Bombay, in case the 810 balance  was not sufficient to meet the losses, had  already been adopted in the previous transactions, presumably, after consultations  between  Dalmia  and  Chokhani.   This  lends weight to the significance of the telephonic  communications between  Delhi and Bombay in the critical period  of  August and early September, 1954. To complete the entire picture, we may now mention the steps taken  to cover up the non-receipt of securities  purchased, at the proper time. By November, 19, 1954, securities of the facevalue of  about Rs.  80,00,000 bad been purchased by Chokhani on  behalf  of the Insurance Company and such securities bad not been  sent to  the  head office at Delhi.  Raghunath Rai  referred  the matter  to  Dalmia and, on his approval, sent  a  letter  on November  19,  1954,  to Chokhani, asking him  to  send  the distinctive  numbers of those securities.  The copy  of  the letter  is Exhibit P. 805.  The securities referred to  were 3%  Loan of 1959-61 of the face value of Rs.  35,00,000,  3% Loan  of 1963-65 of the face value of Rs. 27,00,000  and  2- 3/40/% Loan of 1960 of face value of Rs. 18,00,000. It  was  subsequent  to this that  stock  certificates  with respect  to 3% 1963-65 securities of the face, value of  Rs. 27,00,000   arid  with  respect  to  2-3  14%  1960.    Loan securities of the face value of Rs. 18,00,000 were  received in Delhi. We  may  now  refer to the transactions  which  led  to  the obtaining  of  these stock certificates.  The due  dates  of interest  of 3% 1963-65 securities purchased in August  1954 were  June 1 and December 1. It was therefore  necessary  to procure   these  securities  or  to  enter  into   a   paper transaction   of  their  sale  prior  to  December  1,   as, otherwise,  the  non-obtaining of the  income-tax  deduction certificate  from  the  Reserve  Bank  would  have   clearly indicated that the Insurance Company did not hold these 311 securities,  Chokhani,  therefore, entered  into  a  genuine contract  of purchase of 3% 1963-65 securities of  the  face value of Rs. 27,00,000 on behalf of Bhagwati Trading Company with Devkaran Nanjee, Brokers, Bombay, on November 3,  1954. He  instructed  the  brokers to endorse  the  securities  in favour of the Insurance Company, even though the  securities were   being  sold  to  Bhagwati  Trading  Company.    These securities  so endorsed were received on November 24,  1954, and  were converted into inscribed stock (Stock  Certificate Exhibit  P. 920) from the Reserve Bank of India on  December 7,1954.  The stock certificate does not mention the date  on which  the  securities  were  purchased  and  therefore   it existence could prevent the detection of the fact that these securities were not purchased in August 1954 when, according to  the books of the Insurance Company, they were  shown  to have been purchased. The  Insurance  Company  did  not  ostensibly  pay  for  the purchase  of these shares but partially paid for it  through another  share-purchase  transaction.  In  order  to  enable Bhagwati Trading Company to pay the purchase price, Chokbani paid  Rs.  16,00,000 to it from the account  of  the  Bharat Union Agencies with the Banks at Bombay, and Rs.  10,08,515- 15-0  from  the account of the Insurance  Company  with  the Chartered  Bank  by a fictitious purchase  of  2-1/2%  19611 securities  of the face value of Rs. 11,00,000 on behalf  of the Insurance Company.  These 2-1/2% 1961 securities of  the face  value of Rs. 11,00,000 were purchased by  Chokhani  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 33 of 81  

November  16, 1954. by taking a step similar to those  taken for  the  purchase of securities in  August  and  September, 1954, already referred to. Interest on the 2-3/4% Loan of 1960 of the face value of Rs. 18,00,000  was  to fall due on January 15,  1955.   Both  on account   of  the  necessity  for  obtaining  the   interest certificate and also on 312 account of the expected check of securities by the  auditors appointed for auditing the accounts of the Insurance Company for  the  year 1954, it became necessary  to  procure  these securities  or  to sell them off.   Chokhani  purchased,  on December  9, 1954, 2-3/4% 1960 securities of the face  value of Rs. 18,00,000 on behalf of Bhagwati Trading Company.  The purchase  price  was  paid out of the  funds  of  the  Union Agencies and Bhagwati Trading Company.  The securities were, however, got endorsed in the name of the Insurance  Company. Chokhani  got  the securities sometimes about  December  21, 1954,  and, therefore, got them converted into stock  certi- ficates which were then sent to the head office at Delhi. There still remained 3% 1959-61 securities of face value  of Rs.  35,00,000 to be accounted for.  They were purchased  in September,  1954,  as already mentioned, but  had  not  been received  up to the end of December.  On December 27,  1954, Chokhani purchased 2-3/4% 1962 securities of the face  value of  Rs.  46,00,000,  in two lots of Rs.  11,00,000  and  Rs. 35,00,000 respectively, on behalf of the Insurance  Company. He  also  entered  into the usual  cross-contract  with  the brokers  for the sale of those securities on behalf  of  the Union  Agencies.   This  was a  fictitious  transaction,  as usual, and these securities were not received from the Union Agencies.  On the same day, Chokhani entered into a contract for  the sale of 3% 1959-61 securities of the face value  of Rs.  35,00,000 on behalf of the Insurance, Company and  also entered  into  a  cross-contract  on  behalf  of  the  Union Agencies for the purchase of these securities from the  same brokers.   As  these  securities  did  not  exist  with  the Jnsuranco  Company,  these  transactions  were  also   paper transactions. We  need not give details of the passing of money  from  one concern to the other in connection with these  transactions. For  purposes  of audit the 1959-61 securities of  the  face value of                             313 Rs.35,00,000  had  been sold.  Now securities  viz.,  2-3/4% 1962 securities of the face value of Rs. 46,00,000 had  been ostensibly purchased.  The auditors could demand  inspection of  these  newly purchased securities.   Chokhani  therefore entered  into  another purchase transaction.   This  time  a genuine transaction for the purchase of 2-3/4% 1962  securi- ties  of the face value of Rs 46,00,000 was entered into  on January  It, 1955.  The purchase price was paid by the  sale of  3%  1957 securities of the face value of  Rs.  46,00,000 which  the Insurance Company possessed.  For this purpose  , Chokhani withdrew these securities of the face value of  Rs. 8,25,000 from the Chartered Bank, Bombay, and Rs.  37,75,000 worth  of securities were sent to Bombay from Delhi.   These securities were then converted into inscribed stock. The Insurance Company was now supposed to have purchased  2- 3/4%  1962  securities of the face value  of  Rs.  92,00,000 having  purchased  Rs.416,00,000)  worth  of  securities  in December  1954  and  Rs. 46,00,000 worth  of  securities  in January  1955.  It possessed securities worth Rs.  46,00,000 only  and inscribed stock certificate with respect  to  that could  serve the purpose of verifying the existence  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 34 of 81  

other  set  of  Rs. 46,00,000 worth  of  securities.   These transactions are sufficient to indicate the scheme  followed by Chokhani in the purchase and sale of securities on behalf of the Insurance Company.  It is clear that the transactions were not in the interests of the Insurance Company but  were in the interests of the Union Agencies inasmuch as the funds were  provided  to it for meeting its losses.   It  is  also clear  that the system adopted of withdrawing the  funds  of the  Insurance  Company ostensibly for paying  the  purchase price  of  securities  after  the due  date  of  payment  of interest  and  selling the securities off, if  not  actually recouped from the funds of the Union Agencies or 314 Bhagwati  Trading Company prior to the next date of  payment of  interest,  was  not in the interests  of  the  Insurance Company.   When, however, the sale price could not  be  paid out  of the funds of the Union Agencies or Bhagwati  Trading Company,  Chokhani,  on  behalf  of  the  Insurance  Company entered  into a fresh transaction of purchase of  securities which  were not actually received and thus showed  repayment of the earlier funds though out of the funds withdrawn  from the  same company (viz., the Insurance  Company)  ostensibly for paying the purchase price of newly purchased securities. Turning to the evidence on record, the main statement on the basis  of  which,  together with  other  circumstances,  the Courts  below  have  found that  Dalmia  had  the  necessary criminal  intent as what Chokhani did was known to  him  and was  under  his  instructions, is  that  of  Raghunath  Rai, Secretary-cum-Account  of the Bharat Insurance Company.   Mr Dingle Foot has contended firstly that Raghunath Rai was  an accomplice of the alleged conspirators and, if not, he was a witness whose testimony should not, in the circumstances  be believed  without sufficient corroboration which  does  riot exist.   He  has also contended that the Courts  below  fell into  error  in accepting the statements made by  him  which favoured  the prosecution case without critically  examining them,  that  they ignored his statements in  favour  of  the accused  for  the  reason that he was  under  obligation  to Dalmia  and  ignored his statements  inconsistent  with  his previous  statement  as he was not confronted with  them  in cross-examination. An accomplice is a person who participates in the commission of the actual crime charged against an accused.  He is to be a  particleboard.  There are two cases, however, in which  a person has been held to be an accomplice even if he is not a particeps criminis.  Receivers of stolen property                             315 are  taken to be accomplices of the thieves from  whom  they receive  goods,  on  a  trial  for  theft.   Accomplices  in previous similar offences committed by the accused on  trial are  deemed to be accomplices in the offence for  which  the accused  is  on trial, when evidence of the  accused  having committed  crimes  of identical type on other  occasions  be admissible to prove the system and intent of the accused  in committing  the  offence charged Davies Director  of  Public Prosecution8 (1). The  contention  that  Raghunath Rai was  an  accomplice  is mainly  based  on the facts that (i) Raghunath Rai  did  not produce  the counterfoils of the cheques for the  inspection of  the auditors, though asked for by them, in spite of  the fact  that the counterfoils must have come to  Delhi  during the  period of audit; (ii) the alleged scheme of  the  cons- pirators could not have been carried out without his help in signing   blank  cheques  which  were  issued  by   Chokhani subsequently.   The  mere signing of the  blank  cheques  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 35 of 81  

hardly  an index of complicity when the bank account had  to be  operated  both by Chokhani and Raghunath  Rai,  jointly. Raghunath  Rai had to sign blank cheques in order  to  avoid delay in payments and possible occasional falling through of the  transactions.  No sinister retention can be imputed  to Raghunath Rai on account of his signing blank cheques in the expectation  that  those cheques would be properly  used  by Chokhani.  The counterfoils have not been produced and there is  no evidence that they showed the real state of  affairs, i.  e.,  that the cheques were issued  to  Bhagwati  Trading Company and not to the brokers from whom the securities were purchased. It is not expected that the name of Bhagwati Trading Company would  have been written on the counterfoils of the  cheques when its existence and (1)  L. R. 1954 A. C. 378. 316 the part it took in the transactions were to be kept  secret from  the head office.  When counterfoils were sent  for  in August, 1955, they were not received from Bombay.   Chokhani states that he did not get that letter. Moreover,  counterfoils reach the head office after  a  long time  and  there is no particular reason why  Raghunath  Rai should  notice the counterfoils then.  He does not state  in his evidence that he used to look over the counterfoils when the cheque books came to him for further signatures. We  do  not  therefore  agree  that  Raghunath  Rai  was  an accomplice. Even  if  it  be considered that  Raghunath  Rai’s  evidence required corroboration as to the part played by Dalmia,  the circumstances  to  which  we  would  refer  later  in   this judgment, afforded enough corroboration in that respect. Raghunath Rai made a statement.  Exhibit P.  9,       before Annadhanam on September 20, 1955. He    made         certain statements  in  Court  which  were  at  variance  with   the statement  made  on that occasion.  This variation  was  not taken  into  consideration  in  assessing  the  veracity  of Raghunath  Rai as he had not been cross-examined  about  it. The  argument of Mr. Dingle Foot is that such variation,  if taken into consideration, considerably weakens the  evidence of Raghunath Rai.  He has urged that no cross examination of Raghunath  Rai  was directed to the inconsistencies  on  any particular  point  in  view of the  general  attack  on  his veracity through cross--examination with respect to  certain matters.   He  has contended that in view of s. 155  of  the Indian  Evidence  Act, any previous statement of  a  witness inconsistent  with  his  statement in  Court,  if  otherwise proved,  could  be  used  to impeach  his  credit  and  that therefore the Courts below were not right 317 in   ignoring  the  inconsistencies  in  the  statement   of Raghunath Rai merely on the ground that they were not put to him  in cross-examination.  On the other hand,  the  learned Solicitor  General  contends  that  s.  155  of  the  Indian Evidence  Act  is  controlled by s. 145  and  that  previous inconsistent statements not put to the witness could not  be used  for  impeaching  his credit.  We do  not  consider  it necessary to decide this point as we are of opinion that the inconsistent   statements  referred  to  are  not   of   any significance in impeaching the credit of Raghunath Rai. The  specific inconsistent statements are : (i) ’I never  of my own accord send securities to Bombay nor am authorised to do so’: In Court Raghunath Rai said that certain  securities were  sent by him to Bombay on his own accord because  those securities  were redeemable at Bombay and the maturity  date

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 36 of 81  

was  approaching. (ii) Before the  Administrator,  Raghunath Rai had stated: ’I cannot interfere in the matter as,  under Board  Resolution, Chokhani is authorised to deal  with  the securities.   Chokhani always works under instructions  from the  Chairman.’ In Court, however, he stated that there  was no resolution of the Board of Directors authorising Chokhani to  sell  and  purchase  securities.   The  misstatement  by Raghunath  Rai,  in his statement P. 9 to  the  Investigator made   on  September  20,  1955.  about   Chokhani’s   being authorised   by  a  Board  resolution  to  deal   with   the securities,  is  not  considered by Dalmia  to  be  a  false statement  as he himself stated, in answer to  question  No. 21,  that  such  a  statement  could  possibly  be  made  by Raghunath Rai in view of the Board of Directors  considering at  the meeting the question whether Chokhani be  authorised to purchase and sell securities on behalf of the company  in order  to  make  profits. (iii)  ’Roughly  1-3/4  chores  of securities  were sent to Bombay from here during the  period from 318 April  1955  to  June 1955.  The period was  wrong  and  was really from July to August 1955.  Raghunath Rai admitted the error  and  said that he had stated  to  Annadhanam  without reference to books. (iv) ’Securities are sent to Chokhani at Bombay through a representative of Dalmia.  The statement is not quite correct as securities were sent to Bombay by  post also. Raghunath Rai stated that on the receipt of the advice  from Chokhani  about the purchase or sale of securities, he  used to  go  to Dalmia on the day following the  receipt  of  the advice for confirmation of the contract of purchase or  sale of securities and that after Dalmia’s approval the  vouchers about the purchase of those securities and the crediting  of the  amount  of the sale price of those  securities  to  the account of the Insurance Company with the Chartered Bank, as the case may be, used to be prepared. Kashmiri  Lal  and  Ram  Das,  who  prepared  the  vouchers, describe  the procedure followed by them on receipt  of  the advice  but  do  not state anything  about  Raghunath  Rai’s seeking  confirmation  of  the  purchase  transactions  from Dalmia   and  therefore  do  not,  as  suggested   for   the appellants, in any way, contradict Raghunath Rai. It is urged by Mr. Dingle Foot that it was somewhat  unusual to put off the entries with respect to advises received by a day,  that  the entries must have been made on the  day  the advices  were received and that in this manner  the  entries made  by these clerks contradict Raghunath Rai.   A  witness cannot  be  contradicted by first supposing that  a  certain thing  must have taken place in a manner not deposed  to  by any  witness and then to find that was not  consistent  with the  statement  made by that witness.  Further,  we  are  of opinion   that   there  could  be  no   object   in   making consequential entries                             319 on receipt of the advice about the purchase of securities if the  purchase transaction itself is not approved of  and  is consequently  cancelled.  The consequent entries were to  be with respect to the investments of the Insurance Company and not with respect to infructuous transactions entered into by its agents. It  has  also been urged that if Dalmia’s  confirmation  was necessary,  it was extraordinary that no written  record  of his  confirming the put-chase of securities was kept in  the office.  We see no point in this objection.  If confirmation was  necessary,  the  fact that various  entries  were  made

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 37 of 81  

consequent  on the receipt of advice is sufficient  evidence of  the  transaction being confirmed by Lalmit, as,  in  the absence of confirmation, the transaction could not have been taken  to be complete.  Further, office notes  stating  that securities had been purchased or sold ’under instructions of the  Chairman’  used to be prepared for the meeting  of  the Board  of Directors when the matter of confirming  sale  and purchase of securities went before it.  The fact that office notes mentioned that the securities had been purchased under the  instructions  of  the Chairman is  the  record  of  the alleged confirmation. The  proceedings  of the meeting of the Board  of  Directors with respect to the confirmation of the purchase and sale of securities do not mention that action was taken on the basis of the office notes.  Minutes with respect to other  matters do refer to the office notes.  This does not, however,  mean that  office notes were not prepared.  Confirmation  of  the purchase and sale of the shares was a formal matter for  the Board. All  the office notes, except one, were signed by  Raghunath Rai.   The one not signed by him is Exhibit P. 793.   It  is signed  by Chordia and is dated August 18,1954.   This  also mentions  under instructions of the Chairman certain  shares have been 320 purchased’.   Chordia  was a relation of Dalmia and  had  no reason  to write the expression ’Under instructions  of  the Chairman’  falsely.   Such a note cannot be taken  to  be  a routine note when the power to purchase and sell  securities vested  in  Chordia  as Managing Director  of  the  company. Clause  (4)  of  article 13 of the  Bye-laws  empowered  the Managing  Director  to  transfer, buy  and  sell  Government securities.   When Chordia, the Managing Director, wrote  in this  office note that securities were purchased  under  the instructions  of the Chairman, it can be taken to be a  true statement of fact.  It is true that he has not been examined as  a witness to depose directly about his getting  it  from Dalmia  that the purchase of securities referred to in  that note was Under his instructions.  This does not matter as we have  referred  to  this  office  note  in  connection  with Raghunath  Rai’s  statement  that office notes  used  to  be prepared  after  Dalmia’s  statement  that  the   particular purchase of shares was under his instructions. The statements made by Raghunath Rai which are said to go in favour of the accused may now be dealt with.  Raghunath  Rai was  cross-examined with respect to certain letters  he  had sent to Chokhani.  He stated, in his deposition on July  29, 1958,  that  Dalmia accepted his suggestion for  writing  to Chokhani  to  send  him  the  distinctive  numbers  of   the securities which had been purchased, but not received at the head  office,  and that when he reported  non-compliance  of Chokhani  in  communicating  the  distinctive  numbers   and suggested  to  Dalmia  to  ring  up  Chokhani  to  send  the securities  to  the head office, Dalmia agreed.   This  took place  in November and December 1954.  Dalmia’s approval  of the suggestion does not go in his favour.  He could not have refused the suggestion. Raghunath Rai also stated that in September or October  1954 there was a talk between hier, 321 K.   L. Gupta and Dalmia about the low yield of interest  on the  investments  of  the  Insurance  Company  and  it   was suggested  that the money be invested in securities,  shares and  debentures.  Dalmia then said that he had no  faith  in private  shares and debentures but had faith  in  Government

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 38 of 81  

securities  and added that he would ask Chokhani  to  invest the funds of the Insurance Company in the purchase and  sale of  Government securities.  He, however, denied that  Dalmia had  said  that  the investment of funds  would  be  in  the discretion  of  Chokhani, and added that  Chokhani  was  not authorised  to purchase or sell securities on behalf of  the Insurance Company unless he was authorised by the  Chairman. The statement does not support Dalmia’s authorising Chokhani to purchase and sell securities in his discretion. Another  statement of Raghunath Rai favourable to Dalmia  is said  to  be that according to him he told the  auditors  on September  9, 1955, that the securities not  then  available were  with Cbokhani at Bombay from whom advices about  their purchase   had  been  received.   Annadhanam   stated   that Raghunath  Rai  had  told him that  Dalmia  would  give  the explanation  of  the  securities  not  produced  before  the auditors.   There  is no reason to  prefer  Raghunath  Rai’s statement to that of Annadhanam.  Annadhanam’s statement  in the  letter Exhibit P. 2 about their being informed that  in March, 1954, after the purchase, the securities were kept in Bombay  in the custody of Chokhani refer to what  they  were told  in  the first week of January, 1955, and not  to  what Raghunath Rai told him on September 9, 1954. Raghunath  Rai  stated  that on one  or  two  occasions  be, instead  of  going to Dalmia, talked with him  on  telephone regarding  the purchase and sale of securities  by  Chokhani and that Dalmia told him on telephone that be bad instructed for the purchase 322 and  sale  of  securities and that  he  was  confirming  the purchases  or sales.  This does not really favour Dalmia  as Raghunath Rai maintains that Dalmia did confirm the purchase or sale reported to him.  It is immaterial whether that  was done on telephone or on Raghunath Rai actually meeting him. Questions  put  to  the Administrator, Mr.  Rao,  in  cross- examination,  implied  that  Raghunatb Rai  was  a  reliable person and efforts to win him over failed.  It was suggested to the Administrator that the reasons for the appointment of Sundara  Rajan as the Administrator’s Secretary was that  he wanted  to conceal certain matters from Raghunath Rai.   His reply  indicated  different  reasons  for  the  appointment. Another suggestion put to him was that Raghunath Rai offered to  retire,  but he kept his offer pending because  of  this case.  This suggestion too was denied. It was brought out in the cross-examination of Raghunath Rai that he was in a position in which he could be influenced by the Administrator.  Raghunath Rai was using the office  car. Its  use was stopped by the Administrator in January,  1956. He  was not paid any conveyance allowance.  In April,  1958, he  made  a  representation to  the  Administrator  for  the payment of that allowance to him.  The Administrator  passed the necessary order in May, 1958, with retrospective  effect from  January 1956.  The amount of conveyance allowance  was Rs.  75  per  mensem.   Raghunath Rai  could  not  give  any satisfactory  explanation as to why he remained silent  with regard to his claim for conveyance allowance for a period of over  two years, but denied that he was given the  allowance with  retrospective effect in order to win him over  to  the prosecution. Raghunath Rai applied for extension of service in the end of 1956 or in the beginning of 323 1957 and, in accordance with the resolution passed on August 17,  1954,  by  the  Board of  Directors,  his  service  was extended  up  to  1961.   The  Administrator  forwarded  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 39 of 81  

application to the higher authorities.  This matter had  not been decided by July 29, 1958. The amount of his gratuity and provident fund in the custody of the Insurance Company amounted to Rs. 35,000. We  do  not think that the Administrator had any  reason  to influence Raghunath Rai’s statement and acted improperly  in sanctioning  oar allowance to him retrospectively and  would have  so acted with respect to Raohunath Rai’s  gratuity  if Raghunath  Rai  had  not  made  statements  supporting   the prosecution case. Raghunath  Rai stated on July 29, 1958, that in July,  1955, when he informed Dalmia that the bulk of the securities were at  Bombay and the rest were at Delhi, Dalmia asked  him  to write to Chokhani to deposit all the securities in Bombay in the Chartered Bank.  At this he told Dalmia that if the sale and  purchase  of  securities  was  to  be  carried  on   as hithertofore,  there was no use depositing them in the  Bank and   thus  pay  frequent  heavy  withdrawal  charges,   and suggested that the securities could be deposited in the Bank if  the  sale  and  purchase  of  them  had  to  be  stopped altogether  and  that Dalmia then said that  the  securities should be sent for to Delhi in the middle of December,  1955 for inspection by the auditors. Raghunath Rai was re-examined on July 30 and stated that the aforesaid  conversation  took place on July  14,  1955,  and added that he had, in the same context, a further talk  with Dalmia  in  August, 1955.  The Public Prosecutor,  with  the permission of the Court then questioned him 324 about the circumstances in which he had to go a second  time to Dalmia and talk about the matter.  His reply was that  he had  the  second talk as the securities  purchased  in  May, 1955, and those purchased in July and August, 1955, had  not been received at the head office.  He asked Dalmia to direct Chokhani to deposit all the securities in the Chartered Bank or  to send them to Head Office.  Dalmia then said that  the sale  and  purchase of securities had to be carried  on  for some  time  and therefore the question of  depositing  those securities  in the Bank or sending them to the  head  office did  not  arise for the time being and that  the  securities should be sent for to the head office in December, 1955. Raghunath  Rai  thus  made  a  significant  change  in   his statement.   On July, 29,1958, he opposed the  direction  of Dalmia for writing to Chokhani to deposit the securities  in the  Bank as that would entail heavy withdrawal  charges  in case  the  sale and purchase of securities were  not  to  be stopped  while, according to his statement the next day,  he himself  suggested to Dalmia in August, 1955, that  Chokhani be  asked  to deposit all the securities in the Bank  or  to send them to the head office.  He denied the suggestion that he  made this change in his statement under pressure of  the Police. The  cross-examination was really directed to show  that  he had  been approached by the police between the close of  his examination  on July 29 and his further examination on  July 30, 1958.  Raghunath Rai admitted in court that after giving evidence he went to the room allotted in the Court  building to   the   Special  Police  Establishment   and   that   the Investigating Officer and the Secretary to the Administrator of the Insurance Company were there.  He went there in order to  take  certain  papers  which he  had  kept  there.   He, however, had not brought any papers on July 30 as, accord- 325 ing  to him, his main cross-examination had been  over.   He however denied that he had been dictated notes by the police

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 40 of 81  

in order to answer questions in cross-examination or that be remained with the police till 9 p. m. or that the  Secretary to the Administrator held out a threat about the  forfeiture of  his  gratuity  in  case be  did  not  make  a  statement favourable to the prosecution. We  see  no  Reason  for the police  to  bring  pressure  on Raghunath  Rai  to  introduce falsely  the  conversation  in August.  Between July 14, 1955, and middle of August,  1955, the head office learnt of the purchase of securities of  the face  value of Rs. 74,00,000 and again, on or  about  August 26,  of the purchase of securities of the face value of  Rs. 40,00,000.  A  further conversation in August  is  therefore most  likely  as  deposed to.  The main  fact  remains  that Dalmia  said  that the securities be sent for  in  December, 1955,  which  implies his knowledge of the  transactions  in question. We  are of opinion that the discrepancies or  contradictions pointed out in Raghunath Rai’s statement are not such as  to discredit him and make him an unreliable witness and that he is  not shown to be under the influence of the  prosecution. Further,  his various statements connecting Dalmia with  the crime, find corroboration from other evidence. Letter Exhibit P. 1351 dated September 4, 1954, was sent  to the  Imperial  Bank  of  India,  Delhi  Branch,  under   the signature  of Dalmia as Chairman.  The letter  directed  the bank  to deliver certain securities to the  bearer.   Dalmia admits  his  signatures  on this document and  also  on  the letter  Exhibit  P. 1352 acknowledging the  receipt  of  the securities  sent  for, thus  corroborating  Raghunath  Rai’s statement  that  the  securities were  withdrawn  under  his instructions. 326 Letters Exhibit D. 3, dated March 16, 1955, and P. 892 dated August  5, 1955, from Raghunath Rai to  Chokhani,  mentioned that  the  stock  certificates were  being  sent  under  the instructions  of the Chairman.  They  corroborate  Raghunath Rai’s  statements  in Court of the dispatch of  these  stock certificates under Dalmia’s instructions.  He had no  reason to use this expression if he was sending them on his own. It  is  true that the date on which the  Chairman  gave  the instruction is not proved, but it stands to reason that  the stock certificates must have been despatched soon after  the receipt  of the instruction from the Chairman. it cannot  be presumed that in such transactions there could be such delay as  would make statement in these letters not  corroborative evidence  under s. 157, of the Evidence Act  which  provides that  previous statements made at or about the time  a  fact took  place can be used for corroborating the  statement  in Court. Chokhani’s  statement  that he did not mention the  name  of Bhagwati  Trading Company in his letters to the head  office as  be did not want Dalmia to know about the  dealings  with Bhagwati  Trading  Company,  implies that  in  the  ordinary course of business the information conveyed in those letters would  be communicated to Dalmia and thus tends  to  support Raghunatb  Rai’s statement that he used to visit  Dalmia  on receipt of the statement of account and inform him about the purchase or sale of the securities. Chokhani  had been inconsistent about Raghunath Rai’s  later knowledge of the existence of Bhagwati Trading Company.   In answer to question No. 66, on November 13, 1958, he stated :               "I did not contradict the statement made in Ex               xi :P. 813 that cheque No. B564809               327               dated  17-11-54 had been issued in  favour  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 41 of 81  

             Narain  Das and Sons although that cheque  had               in  fact  been issued in  favour  of  Bhagwati               Trading  Company and not in favour  of  Narain               Das and Sons because those at the Head  Office               did  not know anything about Bhagwati  Trading               Company". In  answer  to question No. 149, on November  14,  1958,  he stated:               "I  did  not  mention  the  name  of  Bhagwati               Trading Company in my letters addressed to the               Head Office of the Bharat Insurance Company as               the party with whom there were cross contracts               because Raghunath Rai would not have known  as               to what was Bhagwati Trading Company.  I  also               did  not mention the name of Bhagwati  Trading               Company  in my letters to the Head  Office  of               the Bharat Insurance Company because I did not               want  Shri  Dalmia to know that I  was  having               dealings  with  Bhagwati Trading  Company.   I               also want to add that Raghunath Rai must  have               known  that  the  cross-contracts  were   with               Bhagwati  Trading Company because the name  of               Bhagwati Trading Company was mentioned as  the               payee  on  the  counterfoils  of  the  cheques               issued in favour of Bhagwati Trading Company." Chokhani  seems to have attempted to undo the effect of  his statement  on November 13, but being of divided  mind,  made inconsistent  statements even on November 14, 1958.  He  was in difficult position.  He attempted to show that Dalmia did not  know  about Bhagwati Trading Company and also  to  show that  Raghunath  Rai had reasons to know about  it  and  was therefore in the position of an Accomplice, a stand which is also taken by Dalmia 328 We may now deal first with the case of Chokhani,  appellant. Chokhani   has  admitted  his  entering  into  the   various transactions  of  purchase  and  sale and  to  have  set  up Bhagwati  Trading Company for convenience to carry  out  the scheme  of diverting the funds of the Insurance  Company  to the Union Agencies by way of temporary loan.  His main  plea is  that he had no attention to cause loss to the  Insurance Company and did not know that the way he arranged funds  for the  Union Agencies from the Insurance Company  was  against law.   He contends that he had no dishonest  intentions  and therefore  did  not commit any of the offences he  had  been charged with, and convicted of. Learned  counsel  for  Chokhani  has  urged  two  points  in addition  to  some  of the points of law  urged  by  learned counsel for Dalmia.  He urged that the transactions  entered into   by   Chokhani  were   ordinary   genuine   commercial transactions  and that there was no evidence  of  Chokhani’s acting dishonestly in entering into those transactions.   It is further said that the High Court recorded no finding,  on the  latter point though it was necessary to record  such  a finding, even though this point was not seriously urged. In  support  of the contention that the  purchase  and  sale transactions  were  genuine commercial transactions,  it  is urged that to meet the losses of the Union Agencies Chokhani was  in  a position to sell the shares held by it  or  could have  raised the money on its credit.  He did not  sell  the shares  as they were valuable and as their sale  would  have affected  the  credit of the Union Agencies.   Chokhani  had been instructed in September, 1954, that the yield from  the investment  of the Insurance Company was not good  and  that the   funds  of  the  Insurance  Company  be   invested   in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 42 of 81  

securities.   Such instructions are said to have been  given when  he  was  authorised by Dalmia  to  purchase  and  sell securities 329 on  behalf of the Insurance Company.  It is  suggested  that these  instructions were given in 1953 and not in 1954  when Dalmia  was  going  abroad.   In  view  of  this  authority, Chokhani  decided  on a course of action by which  he  could invest  the insurance money in securities and also help  the Union  Agencies.  It is submitted that it was not  necessary to  mention Bhagwati Trading Company to the head  office  as the  Insurance Company was going to suffer no loss  and  was simply  concerned  in  knowing  of  the  sale  and  purchase transactions.   Chokhani’s payment of the purchase price  in anticipation  of  the delivery of the securities,  was  bona fide. We have already expressed the opinion- that the  transaction in  connection  with  the investment of  the  funds  of  the Insurance  Company  were  not  bonafide  purchase  and  sale transactions.  They were transactions with a purpose.   They were  motivated in the interests of the Union  Agencies  and not in the interests of the Insurance Company. -  The  mere  fact that on account  of  the  nondelivery  of securities  within a reasonable time of the payment  of  the purchase money made the brokers or Bhagwati Trading  Company or  both  of them liable to an action, does not  change  the nature  of  the transactions.  That liability  can  co-exist with the criminal liability of Chokhani if the  transactions were  such  which could amount to his committing  breach  of trust.  In fact, the offence of breach of trust is not  with respect   to  his  entering  into  the  sale  and   purchase transactions.   It is really on the basis of his paying  the money  out  of the Insurance Company’s funds  to  the  Union Agencies through Bhagwati Trading Company, in  contravention of  the  manner  in which he was to deal  with  that  money. These purchase and sale transactions were just a device  for drawing on those funds. We do not believe that Chokhani really intended to  purchase the securities though he did purchase 330 some, in certain circumstances, and that the nondelivery  of the  securities  was  not  a  case  of  just  his   slightly postponing  the  delivery of the securities.  No  reason  is given  why  such a concession should have been made  to  the seller  of the securities and the period during  which  such purchased  securities  remained undelivered is  much  longer than what can be said to be a reasonable period during which purchased securities for ready delivery should be delivered. The  fact, if true, that the Insurance Company  suffered  no monetary   loss  on  account  of  the  purchase   and   sale transactions  and  the  passing of its money  to  the  Union Agencies, does not suffice to make the transaction an honest one.   The  gain which the Union Agencies made  out  of  the money  it got from the Insurance Company was wrongful  gain. It was not entitled to profit by that money.  One is said to act dishonestly when he does any thing with the intention of causing  wrongful  gain to one person or  wrongful  loss  to another.   Wrongful  gain means gain by  unlawful  means  of property to which the person gaining is not legally entitled and  wrongful loss is loss by unlawful means of property  to which the person using it is legally entitled. It is urged that Chokhani’s keeping Bhagwati Trading Company secret from Delhi was not the result of a guilty conscience, but  could  be due to his nervousness or fear.   We  do  not agree with this suggestion.  He had nothing to fear when  he

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 43 of 81  

was acting honestly and, according to him, when he was doing nothing wrong. It  is  further submitted that what  Chokhani  did  amounted simply  to the mixing of the funds of the Insurance  Company and  the  Union Agencies.  We do not think that  this  would bethe  correct interpretation of what Chokhani did.  It  was not a case of mixing of funds but was a case of making 331 over  the  funds  of  the Insurance  Company  to  the  Union Agencies. The fact that the Administrator did not cancel any  contract entered  into on behalf of the Insurance Company  under  the powers  given to him by s. 52(c) of the Insurance Act,  does not mean that every such contract was in the interest of the Insurance Company.  The Administrator has stated that he did not  know the legal position as to whether  those  contracts stood or not. Of  the  points of law urged for Chokhani, we  have  already dealt  with those relating to the jurisdiction of the  Delhi Court  to  try the various offences, to the content  of  the words ’property’, dominion’ and agency’ in s. 409, I. P.  C. The  only other points raised are that the offence under  s. 477 A could not be said to be committed in pursuance of  the conspiracy and that it was not a case of one conspiracy  but of several conspiracies. The charge under s. 477 A, 1. P. C. is based on the  letters written  by  Chokhani from Bombay to  Delhi  intimating  his entering  into the contracts of purchase of  securities  and indicating  that cheques had been issued in payment  to  the brokers.  It is true that these letters did not specifically state  that the cheques had been issued to the brokers,  but that  is  the  implication when the  letters  refer  to  the contracts and the statements sent along with them and  which relate  simply  to the transactions  between  the  Insurance Company  and the brokers and in no way indicate  the  cross- contracts between the brokers and Bhagwati Trading  Company. It  is  further said that the payment  to  Bhagwati  Trading Company  was  as  an  agent of the  brokers.   There  is  no evidence that the brokers appointed Bhagwati Trading Company as  their  agent for the purpose.  The evidence is  that  on Chokhani’s representation that the Insurance Company would 332 pay to Bhagwati Trading Company and get the securities  from Bhagwati  Trading Company that the brokers neither  got  the price nor delivered the securities. It  is also contended that Chokhani was not a  ,servant’  of the Insurance Company and therefore does not come within  s. 477  A.  1. P. C. which makes certain conduct  of  a  clerk, officer or servant an offence Chokhani was a servant of  the Insurance  Company as he was its Agent and received  payment for  doing work as an agent.  His being a full-time  servant of  the Union Agencies does not mean that he could not be  a servant of any other company, or other employer. We  do not agree with the contention that it was a  case  of several  conspiracies, each transaction to meet the  losses, as they occurred, giving rise to an independent  conspiracy. The conspiracy was entered into in the beginning of  August, 1954,  when  such  circumstance  arose  that  funds  had  to provided  to  the Union Agencies to meet  its  losses.   The conspiracy  must have been to continue up to such time  when it be possible to anticipate that such a situation would  no more  arise.   Similar steps to meet the losses  were  taken whenever  the occasion arose.  The identity of  purpose  and method is to be found in all the transactions and they  must be  held  to have taken place in pursuance of  the  original

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 44 of 81  

conspiracy. We  next come to the case of Vishnu Prasad,  appellant.   He was  the sole proprietor of Bhagwati Trading  Company.   His main  defence  is  that  he  was  ignorant  of  the  various transactions entered into by Chokhani on behalf of  Bbagwati Trading Company and that it was Chokbani who kept the  books of accounts and entered into those transactions.  The courts below have found that he knew of transactions and the nature of the conspiracy.                             333 We agree with this opinion.  There is sufficient material on record   to  establish  his  knowledge  and  part   in   the conspiracy. Bhagwati  Trading Company came into existence just when  the Union Agencies suffered losses and was not in a position  to pay  them and, consequently, there arose the  necessity  for Dalmia  and  Chokhani  to devise means to  raise  funds  for meeting  those  losses.  Vishnu Prasad  opened  the  banking accounts  in two banks at Bombay on August 9 and August  11, 1954,  depositing the two sums of Rs. 1,100 each in each  of the  two  banks.   He states that he  got  this  money  from Chokbani.   The money was, however withdrawn after  a  short time  and paid back to Chokhani and no further  contribution to the funds of the Bhagwati Trading Company was made on his behalf.   The  Company  functioned  mainly  on  the  amounts received   from  the  Insurance  Company.   Vishnu   Prasad, therefore,  cannot  be  said to be  quite  innocent  of  the starting of the company and the nature of its business.               He started, in answer to question No. 24:               "I  started business in the name  of  Bhagwati               Trading Company in 1953, or beginning of 1954.               1 however did no business in the name of  that               company.  G. L. Chokhani stated that I  should               do  business  for  the  purchase  or  sale  of               securities." and  in answer to question No. 26 he stated that he  had  no knowledge about Chokhani’s entering into contracts on behalf of  the  Bharat  Insurance  Company  for  the  purchase   of securities  and his entering into crose-contracts  with  the same  firm  of brokers for the sale of those  securities  on behalf of Bhagwati Trading Company but admitted that he knew that  Chokhani was doing business for the purchase and  sale of  securities  on behalf of Bhagwati Trading  Company.   He expressed ignorance 334 about similar future contracts for purchase of securities on behalf of the Insurance Company and cross-contracts for  the sale  of  those  securities on behalf  of  Bhagwati  Trading Company. Vishnu Prasad, however, made a statement at the close of the day when he had made the above statement, and said:               "In answer to question No. 24 I want to  state               that  I  did not start  business  of  Bhagwati               Trading  Company in 1953 or the  beginning  of               1951   but   only  intended  to   start   that               business." The  latter statement deserves no acceptance and is a  clear indication  that the implications of his  earlier  statement worked on his mind and he attempted to indicate that he  was not  even  responsible in any way for the  starting  of  the business  of  Bhagwati Trading  Company.   Bhagwati  Trading Company did come into existence and ostensibly did business. The latter statement therefore cannot be true. Vishnu  Prasad further knew, as his answer to  question  No. 157 indicates, that Chokhani did shares speculation business

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 45 of 81  

at  Bombay.   He, however, stated that he did  not  know  on behalf of which company he did that business. What  Vishnu  Prasad  actually did in  connection  with  the various  transactions which helped in the diversion  of  the funds of the Insurance Company to the Union Agencies has  to be  looked  at in this background.  He cashed  a  number  of cheques  issued on behalf of the Insurance Company and  made over  that  money to Chokhani, who passed it on  the  Union. Agencies.   He issued cheques on behalf of Bhagwati  Trading Company in favour of Bharat Union Agencies after the amounts of  the  cheques  of  the Insurance  Company  in  favour  of Bhagwati  Trading  Company had been deposited in  the  Bank. Some of 335 these cheques issued in favour of Union Agencies were filled in by Vishnu Prasad himself and therefore he must have known that he was passing on the money to the Union Agencies.   In fact,  some  of  the cheques issued on  behalf  of  Bhagwati Trading  Company  in  favour  of  the  Union  Agencies  were deposited in the bank by Vishnu Prasad himself It  is therefore not possible to believe that Vishnu  Prasad did  not  know  that the amounts  which  his  company  viz., Bhagwati  Trading  Company,  received  from  the   Insurance Company  must have purported to be on account of  securities sold  to  the Insurance Company, as that  was  the  business which   Bhagwati  Trading  Company  professed  to  do   and, according  to him, he knew to be its business, He knew  that most  of  this amount was passed on to the  Union  Agencies. Both these facts must have put him on enquiry even if he did not  initially  know  of the nature of  the  business  which brought  in  the  money to, and took  out  the  money  from, Bhagwati  Trading Company.  He is expected to knew that  the Insurance  Company was not likely to purchase securities  so frequently.  If he had made enquiries, he would have  learnt about the nature of receipts and payments and in fact we are inclined to the view that he must have known of their nature and that it is not reasonable that he would be completely in the dark. The  business  of Bhagwati Trading Company is said  to  have been started as Vishnu Prasad was not taking interest in the other  business.   This should indicate that  he  must  have evinced  interest  in  the activities  of  Bhagwati  Trading Company  which continued for over a year and which made  him receive  and dispose of lakhs of Rupees.  Surely, it is  not expected  that he would have made no effort to know what  is required  to  be  know by one earring on  business  for  the purchase  and  sale of securities, and any attempt  to  have known this would have 336 necessarily  led  him  to know that  securities  were  being purchased  on behalf of the Insurance Company and  were  not delivered to it and that Bhagwati Trading Company  purchased no  securities from the Union Agencies and that any  payment by  it to the latter was for something which B wait  Trading Company was not liable to pay.  It follows that he must have known  that  money  was being received  from  the  Insurance Company  for  nothing  which was  due  to  Bhagwati  Trading company  from that company and that most of that  money  was being  paid  to  the Union Agencies  for  payment  of  which Bhagwati  Trading Company had no liability and that the  net result  of  the transactions of receipt of  money  from  the Insurance  Company and payment of it to the  Union  Agencies was  that  Bhagwati Trading Company was acting to  help  the diversion  of funds from the Insurance Company to the  Union Agencies.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 46 of 81  

We therefore hold that Vishnu Prasad has been rightly  found to be in the conspiracy. We may now deal with the case of Dalmia, appellants The fact that the funds of the Bharat Insurance Company were diverted to  Union  Agencies  by  the  transactions  proved  by   the prosecution,   is  not  challenged  by  Dalmia.   His   main contention  is that he did not know what Chokhani  had  been doing  in connection with the raising of funds  for  meeting the losses of the Union Agencies.  There is, however,  ample evidence  to indicate that Dalmia knew of the scheme of  the transactions  and was a party to the scheme inasmuch as  the transactions were carried through under his instructions and approval: The facts which have a bearing on this matter are: (1)  Dalmia  had  the clearest motive to  devise  means  for meeting the losses of the Union Agencies. 337 (2)  Dalmia actually looked after the share business of  the Union  Agencies at Calcutta and Delhi.  He had knowledge  of the losses of the Union Agencies. (3)  The  frequency  of  telephonic calls  between  him  and Chokhani  during the period when the losses took  place  and steps  were taken to meet them, especially during the  early stages  in August and September, 1954, when the  scheme  was being put into operation, and in July and August, 1955, when there bad been heavy and recurring losses. (4)  Dalmia’s   informing  the  Imperial  Bank,  Delhi,   on September 4, 1954, about his powers to deal with  securities and  actually withdrawing securities that- day,  which  were shortly  after  sold  at  Bombay  and  whose  proceeds  were utilised for meeting the losses. (5)  The gradually increasing retention of securities in the office  of  the  Insurance  Company  and  consequently   the gradually reduced deposit of securities in the Banks. (6)  The  transfer  of  securities  held  by  the  Insurance Company  from Delhi to Bombay when funds were low  there  to meet the losses. (7)  The purchase and sale of securities in the relevant  period in order to meet the losses were under his   instructions. (8)  A  larger use of converting securities  into  inscribed stock  certificates  which  was  used  for  concealing   the disclosure  of the interval between the date of purchase  of the   securities which were then not received, and the  date when those securities were recouped later. (9)  Dalmia’s annoyance and resentment on September 9, 1955, when  the auditors made a surprise inspection of the  office of the insurance company and wanted to see the securities, 338 (10) His conduct on September 15, 1955. (11)  His not going to meet Mr. Kaul on September 16,  1955, and instead, sending his relatives to state what was not the full and correct statement of facts which, according to  his own statements, were known to him by then. (12) His  confession  P.  10  together  with  the  statement Exhibit  p. 11 and the statement made to Annadhanam that  he carried on his speculative business in shares in the name of the Union Agencies. One  of the main factors urged in support of the  contention that Dalmia was in the conspiracy is that the entire  scheme of  conspiracy  was  entered into for the  sole  benefit  of Dalmia.    It  is  not  reasonably  probable  that  such   a conspiracy  would come into existence without the  knowledge or consent of Dalmia.  The conspiracy charge framed  against Dalmia  mentioned the object of the conspiracy  as  ’meeting losses, suffered by you, R. Dalmia, in forward transactions,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 47 of 81  

of speculation in shares, which transactions were carried on in the name of the Bharat Union Agencies Limited...’ and the charge  under  s.  409 1. P. C. referred  to  the  dishonest utilisation of the funds of the Insurance Company. This  matter has been considered from several aspects.   The first in that Dalmia is said to have owned the entire shares issued  by the Union Agencies, or at least to have  owned  a substantial  part of them and was in a position  to  control the  other shareholders.  To appreciate this aspect,  it  is necessary  to give an account of the share-holding  in  this company.   The Union Agencies was incorporated at Bombay  on April  1,  1948,  as a private  limited  company,  with  its registered  office at Bombay.  It also had an office at  10, Daryaganj,  Delhi,  where  the head  office  of  the  Bharat Insurance  Company  was.   Its authorised  capital  was  Rs. 5,00,000.   The  total number of shares issued in  1949  Was 2,000, Out of these 339 Dalmia  held 1,200 shares, Dalmia Cement &  Paper  Marketing Company Ltd. (hereinafter called the Marketing Company)  600 shares,  Shriyans  Prasad Jain, brother of S. P.  Jain,  100 shares  and  Jagat Prasad Jain, the balance of  100  shares. The  same position of share-holding continued in  1950.   In 1951,  Dalmia continued to hold 1,200 shares, but the  other 800  shares  were  hold by  Govan  Brothers.   The  position continued  in 1952 as well and, in the first half  of  1953, Dalmia increased the number of his shares to 1,800 and Govan Brothers  increased  theirs to 1,200 and  the  total  shares issued  thus stood at 3,000.  This position continued up  to September 21, 1954. On  September 22, 1954, 2,000 shares were further issued  to S. N. Dudani, a nominee of Asia Udyog.  The total shares  on that  date stood at 5,000 of which Dalmia held 1,800,  Govan Brothers 1,200, and Dadani 2,000.  On October 4, 1954,  R.P. Gurha  and  J.  S. Mittal each got  100  shares  from  Govan Brothers  with  the result that thereafter the  position  of shareholding was: Dalmia 1,800; Govan Brothers 1000;  Dudani 2,000; Gurba 10); and Mittal 100, out of the total number of issued shares of 5000. It is said that Dalmia transferred his 1,800 ,shares to  one L.  R. Sharma on October 30, 1954.  Sharma’s  holding  1,800 shares was mentioned in the return, Exhibit P. 3122 filed by the Union Agencies as regards share capital and shares as on December  31,  1955,  in  the  office  of  the  Register  of Companies  in  January 1956 with respect to the  year  1955. The  return  showed  that the transfer had  taken  place  on January 31, 1955.  It would appear that the alleged sale  of shares  to  Sharma in October 1954 was not  mentioned  in  a similar  return  which  must  have  been  submitted  to  the Registrar of Companies in January, 1955, and that  therefore its transfer was show on January 31, 1955, Probably 340 a  date subsequent to the submission of the relevant  return for the year 1954. A  brief account of the various share-holders may be  given. Dalmia  was  a  Director of Govan  Brothers  Ltd.,  and  was succeeded,  on his resignation, by O. P. Dhawan, who was  an Accountant  in the Delhi Office of the Union  Agencies.   He was  also  an employee of another company named  Asia  Udyog Ltd.   Another  Director of Govan Brothers Ltd.  was  D.  A. Patil,  lncome-tax Adviser in the concerns of  Dalmia.   The share  scrips in the Marketing Company standing in the  name of Govan Brothers Ltd. and three blank share transfer  forms signed  by S. N. Dudani as Secretary of Govan Brother  Ltd., in the column entitled ’seller’ were recovered from Dalmia’s

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 48 of 81  

house  on  search  on November 25,  1955.   Dudani  was  the personal  accountant  of  Dalmia and Manager  of  the  Delhi Office of Bharat Union Agencies.  The inference drawn by the Courts below from these circumstances is that Govan Brothers Ltd. was the concern of Dalmia, and this is reasonable.   No Satisfactory explanation is given why the shares standing in the name of Govan Brothers Ltd. and the blank transfer forms should be found in Dalmia’s residence. Dudani was the personal accountant of Dalmia and Manager  of the  Delhi  Office  of  the Union  Agencies,  and  was  also Secretary  of  Asia Udyog Ltd.  Asia Udyog appears to  be  a sister  concern  of the Union Agencies.  It  was  previously known as Dalmia Jain Aviation Ltd.  It installed a telephone at one of Dalmia’s residences in January, 1953.  Its offices were  in  the same room in which the offices  of  the  Union Agencies were.  Dhawan, who succeeded Dalmia as Director  of Govan  Brothers Ltd., was an employee of Asia Udyog.   Gurha was  the  Accountant  of Asia Udyog, in  addition  to  being Director  of  the Union Agencies.  He bad  powers  over  the staff of both the companies.  J, S, Mittal was Director of 341 Union Agencies and held 100 shares in the Union Agencies  as nominee  of Govan Brothers Ltd., from October 4,  1954,  and 1,000  shares as nominee of Crosswords Ltd., from some  time about January 31, 1955.  L. N. Pathak, R. B. Jain and G.  L. Dalmia,  were authorised to operate on the account  of  both the Union Agencies, Calcutta, and Asia Udyog Ltd., with  the United Bank of India, Calcutta. The  issue and transfer of shares of the Union  Agencies  in September  and October, 1954, seem to be in pursuance of  an attempt  to meet a contention, as at present urged  for  the State,  that Dalmia was the largest shareholder in it.   The same  idea seemed to have led to the transfer of  shares  to Sharma  by Dalmia.  The verbal assertion of the sale  having taken place in October, 1954, is not supported by the  entry in  Exhibit P. 3122 and what may be taken to be the  entries in a similar return for the year 1954.  This   can   go   to support the allegation that Dalmia knew   about  the   shady transactions which were in progress from early August, 1954. The   learned  Sessions  Judge  relied  on   the   following circumstances for his conclusion that Dalmia was  synonymous with Bharat Union Agencies.                "1. The speculation business of Dalmia Cement               and  Paper Marketing Co,.  Ltd., the  paid  up               capital of which nearly all belonged to Dalmia               was  on the liquidation of that company  taken               over by Bharat Union Agencies and more or less               the  same  persons conducted the  business  of               Bharat  Union  Agencies  who  were  previously               looking after Dalmia Cement & Paper  Marketing               Company.               2.    Bharat  Union  Agencies  was  known  and               taken to be the concern of Dalmia by its  then               Accountant Dhawan and by the brokers with whom               it had dealings               342               3.    Chokhani, who hold power of attorney  on               behalf  of Dalmia and Bharat  Union  Agencies,               told the brokers at the time he gave  business               of Bharat Union Agencies to them J. that    it               was the business of Dalmia.               4.    The  salaries of personal  and  domestic               employees of Dalmia were paid by Bharat  Union               Agencies  and those payments were  debited  to               the  Salaries  Account of  the  company.   The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 49 of 81  

             personal employees of Dalmia were thus treated               as the employees of Bharat Union    Agencies.               5.    The business done in the name of Dalmia with               Jagdish  Jagmohan Kapadia was treated  as  the               business of Bharat Union Agencies.               6.    The funds of Bharat Union Agencies  were               used  to  discharge an  obligation  personally               undertaken by Dalmia.  The price of the shares               purchased in the process in the name of Dalmia                             was  paid  out  of the funds  of  Bharat  Unio n               Agencies and the purchase of those shares  was               treated in the books of Bharat Union  Agencies               as part of its investment.               7.    When  sister-in-law  of  Dalmia   wanted               money  it was lent to her out of the funds  of               Bharat Union Agencies and in the books of that               company no interest was charged from her". It  has been strenuously urged by Mr. Dingle Foot that  what certain  persons  considered to be the nature of  the  Union Agencies  or what Chokhani told them could not  be  evidence against Dalmia with respect to the question whether he could be  said to be identical with the Union Agencies.   We  need not  consider  this  legal  objection  as  it  is  not  very necessary to rely on these considerations for                             343 the  purpose of the finding on this point.  It may be  said, however, that prima facie there seems to be no legal bar  to the  admissibility of statements that Chokhani told  certain persons that Union Agencies was the business of Dalmia.   He had authority to represent Dalmia and Union Agencies on  the basis  of the power of attorney held by him from both.   His statement  would  thus appear to be the statement  of  their ’agent’  in the course of the business.  We have  considered the  reasons  given for the other findings  by  the  learned Sessions  Judge  and accepted by the High Court and  are  of opinion that the findings are correct and that they can lead to  no  other conclusion than that  no  distinction  existed between  Dalmia and the Union Agencies and that whenever  it suited  Dalmia or the interests of the Union  Agencies  such transactions  of one could be changed to those on behalf  of the other.  We may, however, refer to one matter. Dalmia admits having purchased shares of Dalmia Jain Airways of  the  face  value  of  Rs.6,00,000/from  Anis  Haji   Ali Mohammad, on behalf of the Union Agencies, in his own  name, though the real purchaser was the Union Agencies and that he did so as the seller and his solicitor did not agree to sell the shares in the name of the latter.  The explanation  does not  appear to be satisfactory.  The seller had no  interest in  whose  name the sale took place so long as he  gets  the money for the shares he was selling. Mr. Dingle Foot has urged that these various  considerations may  indicate  strong association of Dalmia with  the  Union Agencies  but are not sufficient to establish  his  complete identity  with it, as is necessary to establish in  view  of the  charges framed.  Dalmia’s identity with Union  Agencies or having great interest in it is really a matter  providing motive  for Dalmia’s going to the length of entering into  a conspiracy to raise funds for Meeting the 344 losses  of the Union Agencies by diverting the funds of  the Insurance  Company  and  which would  amount  to  Committing criminal breach of trust. Dalmia  admits having given instructions about the  business of the Union Agencies in 1954 when he was not a Director  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 50 of 81  

that   company,  and  in  1955  when  he  was  not  even   a shareholder. Dalmia’s own statement to Annadhanam on September 20,  1955, goes  to support the conclusion in this respect.  He  stated to him then that he had lost the moneys in speculation which he did through his private companies and that most of  those transactions were through the Union Agencies. Further,  the charge said that he committed criminal  breach of  trust of the funds of the Insurance Company by  wilfully suffering  Chokhani to dishonestly misappropriate  them  and dishonestly use them or dispose of them in violation of  the directions of law and the implied contract existing  between Dalmia  and  the Insurance Company prescribing the  mode  in which such trust was to be discharged.  It was in describing the manner of the alleged dishonest misappropriation or  the use or disposal of the said funds in violation of the  legal and  contractual  directions that the charge  under  s.  409 I.P.C.  described the Manner to consist of  withdrawing  the funds  from  the  banks by cheques  in  favour  of  Bhagwati Trading  Company and by the utilisation of those  funds  for meeting  losses’ suffered by Dalmia in forward  transactions in  shares carried on in the name of Bharat Union  Agencies, and for other purposes not connected with the affairs of the Insurance Company.  Even in this description of the  manner, the  emphasis  ought  to be placed on  the  expression  ’for meeting losses suffered by Dalmia in forward transactions in shares  carried on in the name of the Bharat Union  Agencies and for other purposes not connected with                             345 the affairs of the said Bharat Insurance Company’ and not on the  alleged losses suffered by Dalmia personally.   We  are therefore  of opinion that firstly the evidence is  adequate to establish that Dalmia and the Union Agencies can be  said to  be interchangeable and, secondly, that even if  that  is not  possible  to  say, Dalmia  had  sufficient  motive,  on account  of his intimate relations with the Union  Agencies, for committing breach of trust, and thirdly, that the second finding   does   not  in  any  way  adversely   affect   the establishment  of the offence under s. 409 I. P. C.  against Dalmia  even though the charge described the utilisation  of the money in a somewhat different manner. The  entire  scheme of the transactions must  start  at  the instance of the person or persons who were likely to  suffer in  case the losses of the Union Agencies were not  paid  at the  proper  time.   There is no doubt  that  in  the  first instance  it would be the Union Agencies as a company  which would  suffer  in its credit and its  activities.   We  have found that Dalmia was so intimately connected with this com- pany  as could make him a sort of a sole proprietor  of  the company.  He was to lose immensely in case the credit of the Union  Agencies suffered, as it was commonly believed to  be his concern and he bad connections and control over a number of  business concerns and had a high stake in  the  business world.   His  prestige  and  credit  were  bound  to  suffer severely as a result of the Union Agencies losing credit  in the market.  There is evidence on record that if the  losses are not promptly paid, the defaulter would suffer in  credit and  may not be able to persuade the brokers to  enter  into contracts with him. It  is  suggested  for Dalmia that Chokbani  had  a  greater interest  in seeing that Union Agencies does not  suffer  in credit.   We do not agree.  If the Union Agencies failed  on account of its losing credit in the market on its failure to meet the losses, Chokhani 346

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 51 of 81  

may stand to lose his service with the Union Agencies.  That would  have meant the loss of a few hundred rupees a  month. In fact, he need not have suffered any loss.  He could  have been employed by Dalmia who bad great confidence in him  and whom  he  had  been  serving faithfully  for  a  long  time. Chokhani,  as agent of Dalmia, had certainly credit  in  the market.  There is evidence of his good reputation, but  much of  it  must have been the result of  his  association  with Dalmia and his concerns.  He really enjoyed reflected glory. He bad no personal interest in the matter as Dalmia had.  We therefore  do not consider this suggestion to be  sound  and are  of opinion that Dalmia was the only person who  bad  to devise means to meet the losses of the Union Agencies. Further,  Dalmia  admits that he used to  give  instructions with  regard  to the speculation-in-shares business  of  the Union  Agencies at Calcutta and Delhi during 1954 and  1955, and  stated, in answer to question No. 210 with  respect  to the evidence that Delhi Office of the Union Agencies used to supply  funds for meeting the losses suffered by it  in  the speculation business at Calcutta and Delhi:               "’It  is correct that as the result of  shares               speculation  business  at Calcutta  and  Delhi               Bharat  Union Agencies suffered losses in  the               final  analysis.   I was once told  by  R.  P.               Mittal  on telephone from Calcutta  that  G.L.               Chokhani  had  informed him  that  the  Bombay               Office would arrange for funds for the  losses               suffered by the Calcutta Office of the  Bharat               Union  Agencies.  It was within  my  knowledge               that if the Bombay Office of the Bharat  Union               Agencies was not in a position to supply  full               funds  for meeting the losses at Calcutta  the               Delhi Office of the Company would supply those               funds." And, in answer to question No. 211 which referred 347 to the evidence about the Delhi Office of the Union Agencies being  short of liquid funds from August, 1954, onwards  and in 1955, to meet the losses, he said               "It was within my knowledge that Bharat  Union               Agencies  was  holding very  large  number  of               shares.   But I did not know the name  of  the               Companies of which the shares were held by the               Bharat Union Agencies and the quantum of those               shares." Dalmia also admitted his knowledge that Chokhani had entered into contract for the forward sale of Tata Shares at  Bombay on  behalf of the ’Union Agencies during 1954 and  1955  and that  the Union Agencies suffered losses on  this  business, but stated that he did not know the extent or details of the losses.  Dalmia must be expected not only to know the losses which  the Union Agencies suffered, but also  their  extent. He  is also expected to devise or at least know the ways  in which those losses would be met.  A mere vague knowledge, as stated,  about  the ’Union Agencies possessing a  number  of shares could not have been sufficient satisfaction about the losses  being successfully met.  It is to be noted  that  he did  not deny that the Delhi Office was short of  funds  and that it used to supply funds to meet the losses. Further, if Dalmia’s statement about Mittal’s  communication to  him  be correct, it would appear that  when  the  Bombay Office  of the Union Agencies was not in a position to  meet the  losses, Chokhani would not think of arranging,  on  his own, funds to meet the losses, but would first approach  the Delhi  Office  of the Union Agencies.   The  Delhi  Office.,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 52 of 81  

then, if unable to meet the losses, would necessarily obtain instructions from Dalmia.  It can therefore be  legitimately concluded  that  Dalmia  alone,  or  in  consultation   with Chokhani, devised the scheme of 348 the transactions which led to the diversion of the funds. of the  Insurance Company to the Union Agencies and carried  it out with the help of the other appellants. It has been contended both for Chokhani and for Dalmia  that funds could have been found to meet the losses of the  Union Agencies by means other than the diversion of the  Insurance Company’s  funds.   We need not discuss whether  the  shares held  by  the Union Agencies at the time could  be  sold  to raise  the  funds or whether on the mere  credit  of  Dalmia funds  could be raised in no time.  These courses  were  not adopted.  The selling of the shares which the Union Agencies possessed,  might  itself  affect its credit,  and  that  no business  concern desires, especially a concern  dealing  in sharespeculation business. Dalmia  had been in telephonic communication with  Chokhani. It  is significant, even though there is no  evidence  about the  content  of  the conversations,  that  there  had  been frequent  calls, during the period of the losses  in  August and September, 1954, between Dalmia’s telephone and that  of Chokhani  at  Bombay.  That was the period when  Dalmia  was confronted  with the position of arranging sufficient  funds at  Bombay  for the purpose of diverting them to  the  Union Agencies.   Very  heavy  losses were suffered  in  July  and August, 1955.  Securities of the face value of Rs. 79,00,000 and  Rs. 60,00,000 were purchased in July and August,  1955, respectively.   A very large number of telephone calls  took place  during  that  period  between  Dalmia  at  Delhi  and Chokhani at Bombay.  It is true that during certain  periods of losses, the record of telephonic communications does  not indicate  that any telephonic communication took place.   We have  already stated, in considering the transactions,  that the pattern of action to be taken had been fully  determined by the course adopted in the first few transactions. 349 Chokhani  acted according to that pattern.  The  only  thing that  he had to do in connection with further  contingencies of demands for losses, was to send for securities from Delhi when  the funds at Bombay were low.  Such requests  for  the transfer  of  securities could be made in good  time  or  by telephonic  communication  or even by letters  addressed  to Dalmia  personally.   The  fact remains  that  a  number  of securities  were  sent  from  Delhi  to  Bombay  under   the directions  of Dalmia when there was no apparent  reason  to send  them  other than the need to meet losses  incurred  or expected. Dalmia  informed the Imperial Bank at Delhi about his  power to deal with securities on September 4, 1954, though he  had that  power from September, 1951, itself.  This was  at  the early  stage of the commencement of the losses of the  Union Agencies  ,suffered  for  a period of over a  year  and  the planned  diversion of the funds of the Insurance Company  to meet the losses of the Union Agencies. Raghunath  Rai states that on the resignation of Chordia  it was  deemed  necessary that the powers of  the  Chairman  be registered  with  the Bank so that he be in  a  position  to operate  on  the  securities’  safecustody  account  of  the company with the Bank, and that he sent the copy of the bye- laws  etc., without the instructions of Dalmia, though  with his knowledge, as he was told that it was necessary for  the purpose of the withdrawal of the securities for which he had

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 53 of 81  

given  instructions.  This was, however, not  necessary,  as Raghunath  Rai  bad  the  authority  to  endorse,  transfer, negotiate  and  or deal with  Government  securities,  etc., standing in the name of the company.  We are of opinion that Dalmia  took  this  step  to  enable  him  to  withdraw  the securities from the Bank when urgently required and  another person  authorised  to withdraw be not available or  be  not prepared to withdraw them on his own. 350 The  position of the securities may be brifely described  on the basis of Appendix 1 of the Investigator’s report Exhibit D.  74.   The  amount  of  securities  at  Bombay  with  the Chartered Bank, on June 30, 1953, was Rs. 53,25,000 out of a total  worth Rs. 2,69,57,200.  The amount of  securities  in the Bank continued to be the same till March 31, 1954,  even though   the  total  amount  of  securities  rose   to   Rs. 3,04,88,600.   Thereafter,  there had been  a  depletion  of securities with the Chartered Bank at Bombay with the result that on December 31, 1954, it had no securities in  deposit. The amount of securities in the Imperial Bank of India,  New Delhi, also fell subsequent to June 30, 1954.  It came  down to  Rs.  2,60,000 on March 31, 1955, from Rs.  59,11,100  on June 30, 1954. Securities  worth Rs. 52,00,000 were in the two  offices  on June  30,  1953.   The amount of  such  securities  kept  on steadily increasing.  It was Rs. 1,88,47,500 from September, 1953,  to March 31, 1954.  Thereafter, it rapidly  increased every  quarter, with the result that on March 31, 1955,  the securities worth Rs. 3,76,50,804 out of the total worth  Rs. 3,86,97,204  were in the offices.  The overall  position  of the  securities must have been known to Dalmia.  The  saving of  Bank  charges  is no good explanation  for  keeping  the securities  of  such a large amount, which  formed  a  large percentage of the Company’s holdings, in the offices and not in deposit with a recognized bank.  The explanation seems to be that most of the securities were not really in existence. Raghunath  Rai  states that be spoke to Dalmia a  number  of times, presumably, in July and August, 1955, about the  non- receipt of the securities of the value of Rs. 81,25,000, Rs. 75,00,000  and  Rs. 69,00,000 which were  purchased  in  the months of April-May.  July and August 1955 respectively, and Dalmia used                             351 to tell him that as the purchase and sale of securities  had to  be effected at Bombay, Chokhani could send them  to  the head  office  only  after it had been  decided  about  which securities  would  be  finally  retained  by  the  Insurance Company.   This  statement  implies  that  Dalmia  knew  and anticipated the sale of those securities and such a sale  of those securities, as already mentioned, could not be in  the usual  course  of business of the company.   The  securities were to be sold only if by the next due date for payment  of interest  they could not be recouped and did not exist  with the  company.   Such an inference is  sufficient  to  impute Dalmia with the knowledge of the working of the scheme. Securities were sent to Bombay from Delhi seven times during the  relevant period and they were of the face value of  Rs. 2,114,82,500.  Securities of the face value of Rs. 17,50,000 were  withdrawn from the Imperial Bank, Delhi, on  September 4,  1954-vide Exhibit P. 1351.  They were sold at Bombay  on September  9, 1954.  Thereafter, 30/ 1957 securities of  the face  value of Rs. 37,75,000 were sent on January  6,  1955. Raghunath  Rai  deposes  that he  withdrew  these  from  the Imperial  Bank, Delhi, under the directions of  Dalmia,  and that  he  handed them over to Dalmia.  These  securites  did

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 54 of 81  

reach  Bombay.   There is no clear evidence as to  how  they Went  from Delhi to Bombay.  They were sold on  January  11, 1955. Eleven stock certificates of the face value of Rs. 57,72,000 were  sent to Bombay on March 16, 1955, vide letter Ex.   D. 3.  Thereafter, stock Certificates were sent thrice in  July 1955.   Stock  certificate in respect of 3% Bombay  Loan  of 1955, of the face’ value of Rs. 29,75,000 was sent to Bombay on  July  15, 1955-vide Exhibit P. 923.  On  the  next  day, i.e., on July 16, 1955, stock certificates of 3% Bombay Loan of 1955 of the face value of Rs. 15,50,000 and stock 352 certificates of 3 % Loan of Government of Madhya Pradesh  of the face value of Rs. 60,500 were sent   to Bombay-vide Exs. D. 1 and D. 2 respectively. J.   Lastly,  stock certificates of 2 3/4% Loan of  1962  of the  face  value  of Rs. 56,00,000 were sent  to  Bombay  on August 5, 1955. Letters  Exhibits  D.  3 and P. 892  state  that  the  stock certificates   mentioned  therein  were  being  sent   under instructions of the Chairman’. Raghunath Rai has deposed that the other stock  certificates send with letters Exhibits D. 1, D. 2 and P. 923, were  sent by  him  as  the  securities with  respect  to  which  those certificates  were  granted were maturing in  September  and were  redeemable  at Bombay.  It has been  urged  that  they could  have  been redeemed at Delhi and that they  need  not have  been  sent  by Raghunath Rai on his own  a  couple  of months  earlier.   We  do not consider the  sending  of  the securities a month and a half or two months earlier than the date  of  maturity  to  be  unjustified  in  the  course  of business.   It is to be noticed that what was sent were  the stock  certificates and it might have been necessary to  get the securities covered by those certificates for the purpose of  redemption and that might have taken time.   No  pointed question  was  put to Raghunath Rai as to why  he  sent  the securities two months ahead of the date of maturity. Dalmia denies that he gave any instructions for the  sending of  the securities.  There seems to us to be no good  reason why  the expression under the instructions of the  Chairman’ would  be noted in letters Exhibits D. 3 and P. 892,  unless that represented the true statement of fact. We  have  already discussed and expressed  the  opinion,  in considering  the evidence of Raghunath Rai,  that  Raghunath Rai was told by                             353 Dalmia, when informed of the purchase or sale of securities, that  had  been  done under instructions  and  that  he  had confirmed  them.   We  may further state that  there  is  no resolution of the Board of Directors empowering Chokbani  to deal with the Rag securities.  He was, however, empowered by resolutions at the meeting of the Board dated June 29, 1953, to  lodge and receive G. P. Notes from the Reserve  Bank  of India  for verification and endorsement on the same  and  to endorse or withdraw the G. P. Notes on behalf of the company in the capacity of an agent.  Chokbani was also empowered by a resolution dated October 1, 1953, to deposit and  withdraw Government  securities held in safe custody account  by  the company.   The  aforesaid powers conferred on  Chokhani  are different from the powers of sale or purchase of securities. Dalmia  has stated that he authorised Chokhani  to  purchase securities  in about October, 1953,when he was to leave  for abroad and that thereafter Chokhani had been purchasing  and selling securities in the exercise of that authority without consulting  him.  It is urged for him that  Raghunath  Rai’s

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 55 of 81  

statement  that  be  used  to  obtain  confirmation  of  the purchase and sale of the securities from him cannot be true, as  there was no necessity for such confirmation.   Chokbani does not appear to have exercised any such authority  during the  period  Dalmia  was abroad or till  August,  1954,  and therefore Dalmia’s statement does not appear to be correct. Chokhani  and Raghunath Rai were authorised to operate  upon the  Bank  account  at Bombay on October  1,  1953.   Dalmia states, in paragraph 17 of the written statement dated March 30, 1959, that this was done as Chokhani bad been given 354 the authority for the sale and purchase of securities at the same  time.   The Board did not give any such  authority  to Chokhani  and  if  the  system  of    joint  signatures  was introduced for the reason alleged, there seems to be no good reason why the Board itself did not resolve that Chokhani be empowered to sell and purchase securities.  The  explanation for  the  introduction of joint-signature  scheme  does  not stand to reason. Even  if it be not correct that Raghunath Rai had to  obtain confirmation, it stands to reason that he should report such transactions on the part of Chokhani to the Chairman, if not necessarily for his approval, at least for his  information, as   Chokhani  had  no  authority  to  purchase   and   sell securities.  These transactions have to be confirmed by  the Board  of  Directors  and  therefore  confirmation  of   the Chairman who was the only person authorised to purchase  and sell securities was natural. Raghunath  Rai states that when he received no reply to  his letter  dated  November  19, 1954,  asking  for  distinctive numbers of securities not received at headquarters.   Dalmia said  that he would arrange for the dispatch of those  secu- rities  from  Bombay  to the head  office.   No  action  was apparently taken in that connection.  Raghunath Rai  further states that on March 23, 1955, when he spoke to Dalmia about the  non-receipt of certain securities Dalmia told him  that he  had  already instructed Chokhani for the  conversion  of those securities into stock certificates and that it was  in view of this statement of Dalmia that he had written  letter Exhibit P. 916 to Chokhani stating therein. "You  were requested for conversion of the above said G.  P. Notes  into Stock Certificate.  The said certificate As  not been received by us 355 as  yet.  It may be sent now immediately as it  is  required for the inspection of the company’s auditors.  " This  indicates that Dalmia was in the know of the  position of securities and, on his own, gave instructions to Chokhani to convert certain securities into inscribed stock. Dalmia admits Raghunath Rai’s speaking to him about the non- receipt of the securities and his telling him that he  would ask  Chokhani to send them when he would happen to  talk  to him on the telephone. Mention  has  already been made of securities  of  the  face value  of Rs. 17,50,000 being sent to Bombay from  Delhi  in the first week of September 1954.  At the time securities of the  face  value  of Rs.53,25,000 were  in  deposit  in  the Chartered  Bank  at  Bombay.  There was  thus  no  need  for sending  these securities from Delhi.  Chokhani  could  have withdrawn the necessary securities from the Bank at  Bombay. This  indicates that on learning that there were  no  liquid funds  for  meeting  the losses at  Bombay,  Dalmia  himself decided to send these securities to Bombay for sale and  for thus  providing for the liquid funds there for  meeting  the cost  of the intended fictitious purchase of  securities  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 56 of 81  

meet the losses of the Union Agencies.  It is not  suggested that these securities were sent to Bombay at the request  of Chokhani. Securities   withdrawn   in   January,   1955,   and   stock certificates sent in March and August, 1955, coincided  with the  period when the Union Agencies suffered losses and  the funds  of the Insurance Company at Bombay were low and  were insufficient to meet the losses of the Union Agencies. 3%  1957 securities of the face value of Rs. 46,00,000  (Rs. 37,75,000 set from Delhi and 356 Rs.  8,25,000 withdrawn from the Chartered Bank  at  Bombay) were  sold  on  January  11, 1955,  and  the  proceeds  were utilised  in purchasing 2-3/4% 1962 securities of  the  face value of Rs. 46,00,000 in two lots, one of Rs. 35,00,000 and the other of Rs. 11,00,000. On  January 11, 1955, Rs. 3,34,039-15-3, the balance of  the sale proceeds was deposited in the accounts of the Insurance Company.   Inscribed  stock for these securities  worth  Rs. ’46,00,000  was duly obtained.  Dalmia himself  handed  over inscribed  stock certificate to Raghunath Rai some  time  in the end of January 1955. This  purchase,  though genuine, was not a purchase  in  the ordinary  course  of business, but was for  the  purpose  of procuring  the  inscribed stock certificate to  satisfy  the auditors,   as  already  discussed  earlier,  that   similar securities   purchased  in  December,  1954  existed.    The auditors  were  than to audit accounts of 1954  and  not  of 1955.  In this connection reference may be made to  Dalmia’s attitude  to the auditors’ surprise inspection on  September 9,  1954,  on  the  ground  that  they  could  not  ask  for inspection of securities purchased in 1955. It  may  also  be  mentioned  that  purchasing  and  selling securities  was  not really the business  of  the  Insurance Company.  The Insurance Company had to invest its money and, under  the statutory requirements, had to invest  a  certain portion  at  least in Government Securities.  The  value  of Government  securities  does  not  fluctuate  much.   Dalmia states,  in answer to question No. 25 (under a. 342 Cr.   P. C.):  ’Government securities are gift edged  securities  and there  is very small fluctuation in these.’ The question  of purchasing  and selling of securities with a view-to  profit could  not  therefore  be  the  ordinary  business  of   the Insurance                             357 Company.   It has to purchase securities when the  statutory requirements  make  it necessary, or when it has  got  funds which could be invested. The  Insurance  Company had Government of India 3%  Loan  of 1957  in deposit with the Chartered Bank, Bombay,  the  face value  of the securities being Rs. 53,25,000, from April  6, 1951,  onward.   The  fact that  these  securities  remained intact for a period of over three years, bears out our  view that  the purchasing and selling of securities was  not  the normal  business  of the Insurance Company,  Securities  are purchased  for  investment and are redeemed on the  date  of maturity. In  this  connection,  reference may  be  made  to  Khanna’s statement  in  answer to question  in  cross-examination-The frequency  of transactions relating to purchase and sale  of securities  depends upon the share market and its  trends  ? His answer was that was so, but that it also depended on the character   of   the  company  making  the   investment   in securities.   It  may be said that the trend  of  the  share market will only guide the purchase or sale transactions  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 57 of 81  

securities  of  a company speculating in  shares,  like  the Union Agencies, but will not affect the purchase and sale by a  company whose business is not speculation of shares  like the Insurance Company. Raghunath  Rai  states that when on September 9,  1955,  the auditors wanted the production of the securities, said to be at Bombay, in the next two days, he informed Dalmia about it and  Dalmia said that he would arrange for their  production after  two days.  Dalmia, however, took no steps to  contact Chokhani at Bombay, but rang up Khanna instead and asked him to  certify the accounts as they had to be laid  before  the Company by September 30, and told him that everything was in order,. that he would give all satisfaction later, 358 soon  after Chokhani was available and that he did  not  ask for  an extension of time for the filing of the accounts  as that would affect the prestige of the company.  On September 10, 1955, when Raghunath Rai handed over the letter  Exhibit P. 2 of even date from the auditors asking him to produce  a statement of investments as on September 9, 1955, along with the securities or evidence if they were with other  persons, by Tuesday, September 13, Dalmia had stated that  Chokbani’s mother  had died and that he would himself arrange  for  the inspection   of   securities  direct  with   the   auditors. Chokhani’s mother died on September 4, 1955.  Dalmia had  no reason  to  tell  Raghunath  Rai on  September  9  that  the securities would be produced for inspection in the next  two days, unless he believed that he could get them in that time on contacting Chokhani, or did not wish to tell him the real position.  Dalmia states that he contacted Chokhani for  the first time on September 15, the last day of the mourning and then  learnt from Chokhani that the securities were  not  in existence,  the  money withdrawn for their  purchase  having been  lent  to the Union Agencies.  The  various  statements made by Dalmia in these circumstances and his conduct go  to show  that  he  had  a guilty mind  and  when  he  made  the statement  to  Raghunatb Rai that the  securities  would  be produced  within  two  days, he trusted  that  he  would  be persuasive  enough  for the auditors to  pass  the  accounts without  further  insistence  on  the  production  of  those securities. Dalmia’s not going to Mr. Kaul’s Office on September 16, and sending his relations to inform the latter of the  shortfall in securities can have no other explanation than that he was guilty and therefore did not desire to have any direct  talk about the matter with Mr. Kaul.  There was no need to  avoid meeting him and miss the opportunity 359 of  explaining fully what Chokhani had done without his  own knowledge. Dalmia  has admitted that he sent his relations to Mr.  Kaul and has also admitted that what they) stated to Mr. Kaul was under his instructions., He states in answer to question No. 450,  that  after the telephonic talk with Chokhani  on  the evening, of September 15, he consulted his brother Jai Dayal Dalmia and his son-in-law S. P. Jain about the position  and about the action to be taken and that it was decided between them  before they left for the office of Mr. Kaul that  they would tell him that either the securities would be  restored or their price would be paid off as would be desired by  the Government  and in answer to question No. 451, said that  it was  correct  that  these  persons  told  Mr.  Kaul  that  a considerable amount of the securities were missing and  that they  were  to make good the loss.  It is clear  that  these persons  decided  not  to  disclose to  Mr.  Kaul  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 58 of 81  

securities were not in stock because they were not  actually purchased and the amount shown to be spent on them was  lent to  the  Union Agencies. was not a case  of  the  securities missing  but  a case of the Insurance  Company  not  getting those securities at all.  It is a reasonable inference  from this  conduct  of Dalmia that he did not go himself  to  Mr. Kaul  as he was guilty and would have found it  inconvenient to explain to him how the shortfall had taken place. We may now discuss the evidence relating to Dalmia’s  making a  confession  to Annadhanam.  Annadhanam  was  a  Chartered Accountant and partner of the Firm of Chartered  Accountants M/s.  Khanna and Annadhanam, New Delhi, and he was appointed by  the Central Government, in exercise of its powers  under s. 33(1) of the Insurance Act, 1938, on September 19,  1955, to investigate into the affairs of the Bharat Insurance 360 company   and   to  report  to  the   Government   on   such investigation.   He  started  this  work  on  September  20. Annadhanam,  having  learnt  from Raghunath  Rai  about  the missing of a number of Government securities and the  amount of  their value from the statement prepared by  him,  called Dalmia  to  his  office  that evening in  order  to  make  a statement.  Dalmia made the statements Exhibits P.     10 and P. 11.  P. 10 reads :               "’I  have  misappropriated securities  of  the               order   of  Rs.  2,20,00,000  of  the   Bharat               Insurance Company Ltd.  I have lost this money               in speculation."               Exhibit P. 11 reads:               "Further stated on solemn affirmation.               At  any  cost, I want to pay  full  amount  by               requesting  my  relatives  or  myself  in  the               interest of the policy holders.  " Dalmia  admits having made the statement Exhibit P. 11.  but made  some  inconsistent  statements about  his  making  the statement  Exhibit  P. ’LO.  It is said that he  never  made that  statement, but in certain circumstances he  asked  the Investigator to write what he considered proper and that  he signed what Annadhanam recorded.  He did not directly state, but it was suggested in cross-examination of Annadhanam  and in  his written statement that he made that statement  as  a result  of  inducement  and  promise  held  out  by   either Annadhanam of Khanna (the other partner of M/s.  Khanna  and Annadhanam, Chartered Accountants, New Delhi) or both. Dalmia’s  contention that Exhibit P. 10 was inadmissible  in evidence,  it  being  not voluntary,  was  repelled  by  the learned  Sessions Judge, but was, in a way, accepted by  the High  Court  which did not consider it safe to rely  on  it. The  learned  Solicitor General urged  that  the  confession Exhibit P. 10 was 361 voluntary  and was wrongly not taken into  consideration  by the  High  Court.  Mr. Dingle Foot contended that  the  High Court  took  the  proper view and  the  confession  was  not voluntary.  He further urged that the confession was bit  by the provisions of el. (3) of Art. 20 of the Constitution. The  only  witnesses with respect to the  recording  of  the statement  Exhibit  P. 10. are Annadhanam and  Khanna.   The third  person who knew about it and has stated about  it  is Dalmia  himself.   He  has given his  version  both  in  his statement  recorded  under  s. 342 Cr.  P. C.-  and  in  his written statement filed on October 24, 1958. We may first note the relevant statement in this  connection before   discussing   the  question  whether   the   alleged confession   is  voluntary  and  therefore   admissible   in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 59 of 81  

evidence.    Annadhanam   made   the   following    relevant statements: Dalmia   came  to  the  office  at  6.30  p.m.  though   the appointment  was for 5.30 p.m. His companion stayed  outside the  office room.  Annadhanam asked Dalmia  the  explanation with  regard to the missing securities.  Dalmia  wanted  two hours’ time to give the explanation.  This was refused.   He then  asked  for  half an-hour’s time at  least.   This  was allowed.  Dalmia went out of the office, but returned within ten minutes and said that he would make the statement and it be  record. Annadhanam, in the exercise of the powers  under s.  33(3) of the Insurance Act, administered oath to  Dalmia and recorded the statement Exhibit P. 10.  It was read  over to Dalmia.  Dalmia admitted it to be correct and signed  it. Shortly’ after, Dalmia stated that he wanted to add one more sentence  to his statement.  He was again administered  oath and his further statement, Exhibit P. 11 was recorded.  This was  also  read  over and Dalmia signed  it,  admitting  its accuracy. 362 Annadhanam  states that no threat or inducement  or  promise was offered to Dalmia before he made these statements. A  third  statement is also attributed to Dalmia and  it  is that  when Dalmia was going away and was nearing the  stair- case, Annadhanam asked him whether the speculation in  which he had lost the money was carried on by him in the company’s account  or in his private account.  Dalmia replied that  he had  lost  that money in his personal  speculation  business which  was  carried on chiefly through one  of  his  private companies, viz., the Union Agencies.  This statement was not recorded  in  writing.   Annadhanam  did  not  consider   it necessary,  but  this  was mentioned by  Annadhanam  in  his supplementary  interim  report,  Exhibit  P.  13,  which  he submitted  to the Deputy Secretary, Ministry of Finance,  on September  21,  1955.  Annadhanan also mentioned  about  the statement  recorded in Exhibit P. 10 in his interim  report, Exhibit  P.  12,  dated September 21, 1955,  to  the  Deputy Secretary, Ministry of Finance. In-cross-examination, Annadhanam stated that he did not send for  Dalmia  to the office of the Bharat  Insurance  Company where  he had examined Raghunath Rai, as he had not made  up his mind with respect to the further action to be taken.  He denied  that he had any telephonic talk with Mr.  Kaul,  the Deputy   Secretary,  Ministry  of  Finance,  prior  to   the recording of the statements, Exhibits P.     10  and  P.  II His  explanation  for  keeping Khanna with  him  during  the examination of Dalmia was that Khanna had done the  detailed auditing of the accounts of the company in pursuance of  the firm Khanna and Annadhanam being appointed auditors for 1954 by  the Insurance Company.  He denied that Dalmia  told  him that  he  had no personal knowledge’ of the  securities  and that the only information he had from Chokhani was that the                             363 latter  had given money on loan to the Union  Agencies.   He stated  that  the  statements Exhibits P.  10  and  11  were recorded  in the very words of Dalmia.  The statements  were not  actually  read over to Dalmia but Dalmia  himself  read them over. Annadhanam  denied that he told Dalmia that he would not  be prosecuted if he made the statements Exhibit P. 10 and P. 11 and deposited. the money alleged to have been embezzled  and further stated that Khanna did not tell this to Dalmia.   He denied  that Exhibit P. 10 was never made by Dalmia and  was false and reiterated that statement was made by Dalmia.   He did  not consider it proper to reduce to writing every  word

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 60 of 81  

of what transpired between him and Dalmia from the moment of the  latter’s  arrival in his office till the  time  of  his departure,  and considered it proper’ to reduce  in  writing the  statement  which was made with regard  to  the  missing securities.   He  further stated that  his  statement  above Dalmia’s  making  statements  Exhibits  P.  10  and  P.   11 voluntarily was on account of the facts that Dalmia  himself volunteered to make those statements and that he himself had offered no inducements or promises. In cross-examination by Mr. T. C. Mathur, he denied that  he told  Dalmia  that as Chairman of the Insurance  Company  he should  own  responsibility for the missing  securities  and that would make him a greater Dalmia because he was prepared to pay for the short-fall and further denied that it was  on account of the suggested statement that Dalmia had asked for two hours’ time before making his statement. In   cross-examination  by  Dalmia  personally,   Annadhanam explained  the discrepancy in the amount of  the  securities admitted to be misappropriated.  Exhibit P. 10, mentions the securities  to be of the order of Rs. 2,20,00,000/.  In  his report 364 Exhibit P. 12, he stated the admission to be with respect to securities  of  the face value of  Rs.  2,22,22,000/-.   The explanation is that in the interim report he worked out  the face value of the missing securities to be Rs, 2,22,22,000/- ,  and he mentioned this figure in his report as Dalmia  had admitted  the misappropriation of the  securities.   Nothing sinister can be inferred from this variation. Khanna practically supports the statement of Annadhanam, not only with respect to Exhibit P. 10 and P. II, but also  with respect  to the third statement said to have been made  near the staircase.  His statements in cross-examination that  it was possible that Annadhanam might have asked the  companion of Dalmia to stay outside the office as the proceedings were of  a  confidential  nature,  does  not  in  any  way  belie Annadhanam’s  statement  as  this statement  itself  is  not definite.   In answer to the question whether it struck  him rather improper that Dalmia made the statement Exhibit P. 10 in   view   of  his  previous  statement  to   Khanna   that satisfaction would be afforded to the auditors on the points raised by them after Chokhani was available, he replied that his  own feeling was that the statements Exhibits P. 10  and P. 11 were the natural culmination of what he learnt in  the office  of Mr. Kaul on September 16, 1955.  He  also  denied that be told Dalmia that whoever was at fault, the  ultimate responsibility   would  fall  on  the  Chairman  and   other Directors  as well as the officers of the Insurance  Company by  way  of  misfeasance, and that Dalmia  should  sign  the statement which would be prepared by himself and  Annadbanam so  that  the  other  Directors  and  the  officers  of  the Insurance  Company be not harassed and that if this  sugges- tion  was  accepted by Dalmia, he would save every  one  and become a greater Dalmia.  He denied the suggestion that when Dalmia talked of his charitable disposition in his office on September  20,  1955, it should have been in answer  to  his (Khanna’s)                             365 provocative   remarks  wherein  he  had  made   insinuations regarding Dalmia’s integrity and stated that he was merely a silent  spectator of what actually Del: had happened in  the office  that day.  He further stated that no question  arose of  Annadhanam’s  attacking  the  integrity  of  Dalmia   on September 20, 1955.  He denied that Mr. Kaul had told him or Annadbanam  on  September  19,  when  the  order  appointing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 61 of 81  

Annadhanam Investigator was delivered, that Dalmia had to be implicated in a criminal case. Khanna   denied  that  his  tone  and  remarks  during   the discussion were very persuasive and that told Dalmia that it was  very great of him that he was going to pay  the  amount represented  by the short-fall of the securities.   He  also denied the suggestion that Dalmia told him and Annadhanam on September  20, at their office, that be had no knowledge  of the   missing  securities,  that  it,  appeared   that   the securities  had  either been sold or pledged  and  that  the money had been paid to the Union Agencies, which Dalmia  did not-,  like, and that in the interest of the policy  holders and  the  Insurance Company Dalmia was prepared to  pay  the amount  of the short-fall of securities, and also that  when Dalmia  spoke  about the securities being sold  or  pledged. Khanna and Annadhanam remarked that the securities bad  been misappropriated.   He denied that he told Dalmia that if  he took personal responsibility in the matter, it would be only then  that no action would be taken and stated that  he  and Annadhanam were nobody to give any assurance to Dalmia. Dalmia  stated, in this statement under s. 342 Cr.  P.C.  on November  7, 1958, that his companion Raghunath  Das  Dalmia stayed  out  because  he was not allowed to  stay  with  him inside the office.  He denied that he first spoke about  his charitable disposition and piety when asked by Annadhanam to explain about the missing securities and stated that 366 there  could be no occasion for him to talk at that time  of his  piety  and  charitable disposition  when  he  had  been specifically  called to explain with regard to  the  missing securities.   His  version  of what took place  may  now  be quoted (answer to question No. 471) in his own words:               "What  actually happened was that I told  Shri               Annadhanam  that  I  had  learnt  from  G.  L.               Chokhani  that  the  amount  of  the   missing               securities had been lent temporarily on behalf               of the Bharat Insurance Company by Shri G.  L.               Chokhani to Bharat Union Agencies and that the               amount  had  been lost in  speculation.   Shri               Annadhanam  then  asked me about  the  missing               securities.   I then told him that I  did  not               know  as  to whether the securities  had  been               sold  or  mortgaged.  My  replies  here  being               noted by Shri Annadhanam on a piece of  paper.               Shri  Annadhanam then asked me as to when  the               securities  had  been  sold  or  mortgaged   I               replied that I did not know with regard to the               time  when  the securities had  been  sold  or               mortgaged..  Shri Annadhanam then asked me  as               to  what  were  the places  where  there  were               offices of Bharat Union Agencies.  I then told               him that the offices were at Bombay and Delhi.               I than remarked that whatever had happened,  I               wanted  to  pay  the  amount  of  the  missing               securities  as  the  interest  of  the  policy               holders  of the Bharat Insurance Company  were               close to my heart.  During the course of  that               talk sometimes Shri Annadhanam questioned  and               sometimes  the  questions were asked  by  Shri               Khanna.  Shri Khanna then stated that I should               forget  the events of 9-9-1955.   Shri  Khanna               further  stated.  ’We too are men  of  hearts.               And  not bereft of all feelings.  We too  have               children.   I am very much impressed  by  your               offer of such a huge

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 62 of 81  

                                  367               amount’.  Shri Khanna also remarked that  Shri               Annadhanam had been appointed under section 33               of  the Insurance Act to investigate into  the               affairs of the Bharat Insurance Company and as               such  the  words  of  Shri  Khanna  and   Shri               Annadhanam   would  carry  weight   with   the               Government.   Shri  Khanna also  stated  other               things but I do not remember them.  I  however               distinctly remember that Shri Khanna stated to               me that I should go to Shri C. D. Deshmukb and               that  Shri Khanna would also help me.  I  then               replied  that I would not like to go  to  Shri               Deshmukh.  Shri Khanna then remarked that  the               Government  attached great importance  to  the               interests  of the policy holders and  that  if               the matter got undue publicity it would  cause               a  great  loss to the  policy  holders.   Shri               Khanna accordingly stated that if I agreed  to               his  suggestion  the matter would  be  settled               satisfactorily and without any publicity.   It               was  in those circumstances that I  asked  for               two hours’ time to consult my brother and son-                             in-law." He  further  stated that when Annadhanam told  him  that  he could have half-an-hour’s time and that more time could  not be  given  as the report had to be given to  the  Government immediately,  he  objected to the shortness of  time  as  he could  not during that interval go to meet his  brother  and son-in-law  and return to the office after  consulting  them and  further  told Annadhanam and Khanna to  write  whatever they considered proper as he had trust in them. His reply to question No. 476 is significant and reads:               "The  statement  was read over tome.   I  then               pointed  out  that what I had stated  had  not               been incorporated in Ex.  P. 10.  I made               368               no  mention that the statement Ex.’ P. 10  was               correct or not.  Shri Annadhanam then  reduced               to  writing, whatever was stated by me.   That               writing if Ex.  P. 11 and is in the very words               used by me."               He does not directly answer question No. 479:               "It is in evidence that the statement Ex. P. 1               1 was read over to you, you admitted it to be  correct               and  signed it.  Do you want to  say  anything               with regard to that?" and  simply stated, ’I did sign that statement’.  He  denied the  third  statement  alleged to have been  made  near  the staircase. Dalmia  also stated that he had mentioned some  facts  about the  statements  Exhibits  P.  10  and  11  in  his  written statement. Paragraphs 53 to 59 of the written statement dated  October, 24, 1958, refer to the circumstances about the making of the statements  Exhibits  P.  10. and P. II.   In  paragraph  53 Dalmia  states  that  the  recording  of  his  statement  in Annadhanam’s  office  took place as it was only  there  that Annadhanam and Khanna could get the necessary privacy.   The insinuation is that they did not want any independent person to know of what transpired between them. Paragraph 54 refers to a very minor discrepancy.   Paragraph 55  really  gives  the  version  of  what  took  place   in, Annadhanam’s office. We  refer  only to such portions of this version as  do  not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 63 of 81  

find  a place either in the suggestions made  to  Annadhanam and Khanna in their cross-examination or in the statement of Dalmia under a. 342 or which be inconsistent with either  of them.  Dalmia stated that he told Annadbanam that the 369 money  that had been received by Bharat Union   Agencies  as loan  belonged to Bharat Insurance Company and  it  appeared that the Union Agencies had lost that money in  speculation. He further which tend to impute an inducement on the part of Khanna  to him.  These statements may be quoted in  Dalmia’s own words:               "On  this  Shri  Khanna  said  that  I  was  a               gentleman,  that I was prepared to pay such  a               heavy amount which has never been paid so  far               by  anybody, that I should accept  his  advice               and  that  I  should  act  according  to   his               suggestion and not involve myself in this dis-               pute, the Government was not such a fool  that               they  would not arrive at a  quiet  settlement               with a man who thought that his first duty was               to  protect  the policy holders  and  thus  by               spoiling  the credit of the  Bharat  Insurance               Co.  would  harm its policy holders.   If  the               Government  did  so  it would  be  an  act  of               cruelty to the policy holders, and when I  was               prepared  to  pay the  money  it  (Government)               would not take any such course by which I  may               have  to face troubles, that my name would  go               very  high,  that he advised me  as  being  my               well-wisher  that I should confess that I  had               taken the securities, that they would help me.               They  added  that  Shri  Annadhanam  has  been               appointed  as Investigator by  the  Government               and  therefore their words carry  weight  with               the Government, that it was my responsibility,               being  the Chairman and Principal  Officer  of               the  Bharat  Insurance to pay the  money.   At               that time I was restless to pay the money.   I               was influenced by their talk and anybody in my               place  would have trusted their words.  I  was               impressed  by their saying to me that Po  wise               Government or officers would take               370               such action which would harm the policyholders               through  publicity.   Therefore  I  took  that               whatever  Shri  Khanna  and  Annadhanam   were               saying was for my good". He stated that he asked Annadhanam and Khanna for two hours’ time to consult his brother. and son-in-law and that one  of them  said that they could not give more than  half-an-hour, This  is inconsistent with what he stated under s. 342.   He further stated :               "I  told  them to write in whatever  way  they               thought best and whatever they wrote I  simply               signed.   After  signing  when I  read  it,  I               pointed out to them that they had not  written               that  I wanted to pay every pie of the  policy               holders and then they wrote as I told them and               I signed". The  statement  referred to is a short one, and  it  is  not possible to believe that he signed it without reading it. Paragraph  56  makes  no reference to  the  events  of  that evening, but paragraph 57 refers to the improbability of his writing things which brought trouble to him when just before it he had been talking irrelevantly.  The question in cross-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 64 of 81  

examination   did  suggest  that  he  was  forced  to   make irrelevant  talk due to certain provocation.  That does  not fit  in with the explanation in paragraph 57 that  his  talk about  a  temple  was  invented  to  support  the  statement Annadhanam  had  made to the police about  Dalmia’s  talking irrelevantly.  His statement ’How could I have acted in such a  way without any positive assurances, implies that he  did make the statements though on getting assurances.  In  para- graph 58 he states :               "On 20th September Shri Khanna and  Annadhanam               had put all sorts of questions               371               to   Raghunath  Rai  but  let  me  off   after               recording  my  statement in just  one  or  two               lines.    Their  design  had   succeeded   and               therefore  they,  did not care to  record  any               further question". This  again  implies  his making the statement  P.  10.   Of course,  after he had made the statement P. 10 there was  no necessity   of  asking  anything  further.   His   statement explained the missing of the securities. Reference may now be made to what Raghunath Rai, who was the Secretary  of  the  Bharat  Insurance  Company,  states   in reference  to  the statement made by Dalmia  to  Annadhanam. Raghunath Rai states that when he went to Dalmia about 7  p. m. on September 200, 1955, and told him about the  recording of  his own statement by Annadhanam and the  preparation  of the  statement  about  Exhibit  P.  8  and  about  his  talk regarding  the securities at Bombay, Dalmia said :  ’I  have been  myself  in  the office of the  Investigator.   He  has recorded my statement wherein I have admitted the short-fall of the securities’.  This also points to Dalmia’s making the statement Exhibit P. 10. Raghunatb Rai did not admit, but simply said that Dalmia did tell  him  something when he was questioned  as  to  whether Dalmia  told  him  that he had been told  by  Anadbanam  and Khanna that if he had made the statement in accordance  with their desire, there would be no trouble. Dalmia  evaded  a direct answer to the question put  to  him under  s. 342, Cr.  P. C. When question No. 482 was  put  to him  with  reference to this statement of Raghunath  Rai  he simply  stated that he had briefly told Raghunath  Rai  with regard  to  what bad transpired between him and  Khanna  and Annadhanam and that he had told Raghhunath Rai that he  need not worry. 372 The various statements of Dalmia suggesting that  inducement was; held out to him by Khanna have not been believed by the Courts below, and we see no good reason to differ from their view.    There  was no reason for Annadhanam  to  record  an incriminating  statement  like P. 10 and get  it  signed  by Dalmia. The  High Court does not also hold that the  confession  was the  result of some threat extended by Annadhanam.   It  did not  consider it safe to rely upon it as it  considered  the confession to be not voluntary in a certain sense.  It  said :               "In  that  sense,  therefore,  it  was  not  a               voluntary statement, because although no words               of  threat or inducement were uttered  by  Mr.               Annadhanam  or anyone else, the  circumstances               had  shaped themselves in such a  manner  that               there  was an implied offer of  amnesty  being               granted  to him if he did not persist  in  his               negative   behavior.   He  therefore  made   a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 65 of 81  

             statement  that  he  had  misappropriated  the               securities  and  immediately offered  to  make               good the loss through his relatives". What  are  those  circumstances which implied  an  offer  of amnesty  being granted to him if he did not persist  in  his negative  behaviour,  presumably  in  not  giving  out  full information   about   the   missing   securities   ?    Such circumstances, as can be gathered from the judgment of  tile High  Court  seem  to be these : (1)  Dalmia,  a  person  of considerable courage in commercial affairs was Dot  expected to  make a voluntary confession. (2) He had  evaded  meeting the  issue  lull-face whenever he could do so  and  did  not appear before Mr. Kaul on September 16, 1955, to communicate to  him the position about the securities. (3) He  not  only appeared  before Annadbanam an hour late, but further  asked for two hours’ time before answering a simple question about the missing securities. (4) He made the                             373 statement when he felt cornered on account of the  knowledge that  Annadhanam  had the authority of law to  question  and thought  that,  the  only  manner  of  postponing  the  evil consequence  of  his act was by making the  statement  which would soften the attitude of the authorities towards him. We  are  of opinion that none of these  circumstances  would make  the  confession  invalid.   Dalmia’a  knowledge   that Annadhanam  could  record his statement under  law  and  his desire  to soften the attitude of the authorities by  making the  statement  do  not establish that  he  was  coerced  or compelled to make the statement.  A person of the  position, grit and intelligence of Dalmia could not be so coerced.   A person   making   a  confession  may  be   guided   by   any considerations  which, according to him, would benefit  him. Dalmia  must  have  made the statement  after  weighing  the consequences  which he thought would be beneficial  to  him. His  making  the confession with a view to  benefit  himself would  not make the confession not voluntary.  A  confession will not be voluntary only when it is made under some threat or  inducement  or  promise, from  a  person  in  authority. Nothing   of  the  kind  happened  in  this  case  and   the considerations mentioned in the High Court’s judgment do not justify holding the confession to be not voluntary.  We  are therefore of opinion that Dalmia made the confession Exhibit P.   10, voluntarily. It was argued in the High Court, for the State, that  Dalmia thought it best to make the statement because, by doing  so, he  hoped  to avoid the discovery of his  entire  scheme  of conspiracy   which   had  made  it  possible  for   him   to misappropriate  such  a large amount of the  assets  of  the Insurance  Company.   The High Court held that even  if  the confession  was  made for that purpose, it would  not  be  a voluntary  confession.  We consider this ground to hold  the confession involuntary unsound, 374 Mr. Dingle Foot has contended that the statement, Exhibit P. 10,  is not correct, that Annadhanam and Mr.  Kaul  colluded and  wanted to get a confession from Dalmia and that is  why Annadhanam   extracted  the  confession  and  that   various circumstances  would  show  that  the  confession  was   not voluntary  in the sense that it was induced or  obtained  by threat.  He has also urged that Annadhanam was ’a person  in authority’  for the purpose of s. 24 of the Indian  Evidence Act.   These  circumstances,  according  to  him,  are  that Dalmia’s  companion was not allowed to stay in  the  office, that  only  balf-an-hour  was allowed  for  Dalmia  to  make consultations,  that there had been a discussion before  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 66 of 81  

recording of Exhibit P. 10, that no record on the discussion was  maintained,  that Annadhanam, as  Investigator,  was  a public  servant,  that s. 176, 1. P. C.  was  applicable  to Dalmia  if  he  had  not made the  statement  and  that  the statement on oath really amounted to an inquisition.  It was further   contended   that  if  the   confession   was   not inadmissible  under  s.  24  of the  Evidence  Act;  it  was inadmissible  in  view  of  cl.  (3)  of  Art.  20  of   the Constitution. Mr.  Dingle Foot has further contended That  the  statement, Ex.   P. 10, is not correct inasmuch as it records: 11  have misappropriated  securities  of  the  order  of  rupees  two crones, twenty lakhs of the Bharat Insurance Company  Ltd.’, that  it could not be the language of Dalmia and that  these facts  supported Dalmia’s contention that be  simply  signed what Annadhanam had written. The public prosecutor had also questioned the correctness of this  statement inasmuch as the actual misappropriation  was done  by Chokhani and Dalmia had merely suffered it  and  as the  accurate statement would have been that there was  mis- appropriation of the money equivalent of the Securities. 375 We are of opinion that any vagueness in the expression could have been deliberate.  The expression used was not such that Dalmia,  even if he had a poor knowledge of  English,  could not  have used.  The statement was undoubtedly  very  brief. It  cannot  be  expected that every word was  used  in  that statement  in  the  strict legal sense.   The  expression  1 misappropriated  the  securities’  can  only  mean  that  he misappropriated  the amount which had been either  spent  on the purchase of the securities which were not in  existence, or  realised by the sale of securities, and which was  shown to  be  utilised in the fictitious purchase  of  securities. The main fact is that Dalmia did admit his personal part  in the  loss  of  the  amount  due  to  the  shortfall  in  the securities. There  is nothing on record to justify any  conclusion  that Annadhanam  and  Mr. Kaul bad colluded and wanted to  get  a confession  from  Dalmia.  It is suggested  that  Annadhanam war,  annoyed  with  Dalmia  on  account  of  the   latter’s resentment  at  the  conduct of  Annadhanam  and  Khanna  in conducting  a  surprise  inspection  of  the  accounts   and securities  on September 9, 1955.  Raghunath  Rai  protested saying  that  they had already verified the  securities  and that  they, as auditors for the year 1954, had no  right  to ask  for the inspection of securities in the year 1955.   At their insistence, Raghunath Rai showed the securities. After  their return to the office, Dalmia rang them  up  and complained  that  they  were  unnecessarily  harassing   the officers of the Bharat Insurance Company and had no right to inspect the securities.  Dalmia was not satisfied with their assertion  of  their right to make  a  surprise  inspection. There  was nothing in this conduct of Dalmia,  which  should have annoyed Annadbanam or Khanna.  They did 376 what  they considered to be their duty  and,.,  successfully met the opposition of Raghunath Rai.  If there could be  any grievance  on  account of their inspection, it would  be  to Dalmia who, as a result, would not be easily induced by them to make the confession. Mr. Kaul, as Deputy Secretary, Ministry of Finance, did take part in the bringing of the matter to a bead, not on account of  any  personal animus against Dalmia-such animus  is  not even alleged but on account of his official duties, when  be heard  a  rumour in Bombay that Dalmia  had  incurred  heavy

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 67 of 81  

losses  amounting to over two crores of rupees  through  his speculative  activities and had been drawing upon the  funds of  the  Insurance Company of which he was the  Chairman  to cover his losses.  He asked Dalmia on September 14, 1955, to see him on the 15th in connection with the securities of the Insurance  Company.  When Dalmia met him on the 15th in  the presence of Mr. Barve, Joint Secretary, he asked whether  he had  brought  with him an account of the securities  of  the Bharat Insurance Company.  Dalmia expressed his inability to do so for want of sufficient time and promised to bring  the account on September 16.  On the 16th, Dalmia did not go  to Mr.  Kaul’s  office; instead, his relations S. P.  Jain  and others  met Mr. Kaul and made certain statements.  Mr.  Kaul submitted  a  note, Ex.  D. 67, to the Finance  Minister  or September  18, 1955, and in his note suggested that  of  all the courses of action open to the Government, the one to  be taken should be to proceed in the matter in the legal manner and  launch a prosecution as the acceptance of S. P.  Jain’s offer would amount to compounding with a criminal  offender. Mr.  Kaul  stated that he did not consider it  necessary  to make  any  enquiry because the merits of  the  case  against Dalmia  remained unaffected whether the loss was rupees  two crores  or  a few lakhs, more or less, On the basis  of  the aforesaid suggestion of                             377 Mr. Kaul and his using the expression ’courses against  Shri Dalmia  it  is urged that criminal action  was  contemplated against   Dalmia  and  that  there  must  have   been   some understanding between Mr. Kaul and Annadhanam about securing some  sort of confession from Dalmia for the purpose of  the case  which was contemplated.  We consider  this  suggestion farfetched and not worthily of acceptance.  As a part of his duty, Mr. Kaul had to consider the various courses of action open  to  the  Government in  connection  with  the  alleged drawing upon the funds of the Insurance Company to cover his losses in the speculative activities.  Mr. Kaul did not know what bad actually transpired with respect to the securities. He had heard something in Bombay and then he was told  about the  short-fall  in the securities of the  Bharat  Insurance Company  and.  naturally.,  he could co  template  that  the alleged  conduct  could amount to a  criminal  offence.   In fact, ,according to Mr. Kaul, a suggestion had been made  to him by S. P. Jain that on the making up of the short-fall in securities no further action be taken which might affect the position of Dalmia and his other associates in business  and of various businesses run by them.  The fact that Annadhanam knew  that  there had been a short-fall of over  rupees  two crores prior to Dalmia’s making the statement Exhibit P.  10 cannot  justify the conclusion that Annadhanam and Mr.  Kaul were in collusion. Annadhanam does not admit he had ordered Dalmia’s  companion to  stay  out of the office.  Even if he did, as  stated  by Dalmia,  that  would  not mean that  Annadhanam  did  it  on purpose,  the  purpose  being that  he  would  act  unfairly towards Dalmia and that there be not any witness of such  an attempt.   Similarly, the non-maintenance of the  record  of what   conversation  took  place  between  Dalmia  and   the Investigator, does not point out to any sinister purpose  on the part of Annadhanam.  It was 378 Annadhanam’s  discretion to examine a person  in  connection with  the affairs of the insurance Company.  He  put  simple question  to Dalmia and that required him to  explain  about the  missing securities.  So long as Dalmia did not  make  a statement  in that connection, it was not necessary to  make

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 68 of 81  

any  record of the talk which might take place  between  the two.    In  fact,  Annadhanam  had  stated  that  the   word discussion  used by him in his supplementary interim  report Exhibit P. 13, really be read as "recording of the statement of  Shri  Dalmia and the talk he had with when  he  came  to Annadhanam’s office and which he had with him while going to the  staircase’.  This explanation seems to fit in with  the context in which the word discussion’ is used in Exhibit  P. 13. The  interval of time allowed to Dalmia for  consulting  his relations  might  have been considered  to  be  insufficient considering  for confession voluntary in case that  was  the time  allowed  to  a confessing accused  produced  before  a Magistrate for recording a confession.  But that was not the position  in the present case.  Annadhanam was not going  to record the confession of Dalmia.  He was just to examine him in connection with the affairs of the Insurance Company  and had  simply  to tell him that he had called him  to  explain about  the  missing  securities.   There  was  therefore  no question  of  Annadhanam  allowing any time  to  Dalmia  for pondering  over the pros and cons of his making a  statement about whose nature and effect he would have had no idea.  We do  not  therefore consider that this fact that  Dalmia  was allowed  half-an-hour to consult his relations can point  to compelling Dalmia to make the statement. We do not see that examination of Dalmia on oath  be considered to be an inquisition.  Sub-section (3) of  s.  33 of the Insurance Act empowers the Investigator to examine on oath any manager, managing director or other officer of  the insures  in  relation to his business., Section 176  of  the Indian 379 Penal  Code has no application to the examination of  Dalmia under s. 33 of the Insurance Act.  Section 176 reads:               "Whoever,  being  legally bound  to  give  any               notice  or  to  furnish  information  on   any               subject to any public servant, as such, inten-               tionally  omits  to  give such  notice  or  to               furnish such information in the manner and  at               the  time required by law, shall  be  punished               with simple imprisonment for a term which  may               extend  to one month, or with fine  which  may               extend to five hundred rupees, or with both.               or,  if the notice or information required  to               be given respects the commission of an offence               or  is required for the purpose of  preventing               the  commission of an offence, or in order  to               the  apprehension of an offender, with  simple               imprisonment  for a term which may  extend  to               six  months, or with fine which may extend  to               one thousand rupees, or with both;               or,  if the notice or information required  to               be given is required by an order passed  under               sub-section (1) of section 56.5 of the Code of               Criminal Procedure, 1898, with imprisonment of               either description for a term which may extend               to  six months, or with fine which may  extend               to one thousand rupees. or with both." For  the application of this section, it is  necessary  that Annadhanam,   as   Investigator,  be   a   public   servant. Annadhanam  cannot be said to be a servant.  He was  not  an employee  of Government.  He was a Chartered Accountant  and had been directed by the order of the Central Government  to investigate into the affairs of the Insurance Company and to report  to the Government on the investigation made by  him.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 69 of 81  

of course, he was to get 380 some remuneration for the work he was entrusted with. ’Public  servant’ is defined in s. 21 of Indian Penal  Code. Mr.  Dingle  Foot has argued that Annadhanam  was  a  public servant in view of the ninth clause of s. 21.  According  to this  clause,  every officer in the service or  pay  of  the Government  or  remunerated by fees or  commission  for  the purpose  of  any public duty would be a public  servant.   A person who is directed to investigate into the affairs of an Insurance Company under s. 33(1) of the Insurance Act,  does not ipso facto become an officer.  There is no office  which he holds.  He is not employed in service and therefore  this definition would not apply to Annadhanam. The making of a statement to the Investigator under s. 33(3) of   the  Insurance  Act  does  not  amount  to   furnishing information  on  any  subject  to  any  public  servant   as contemplated  by  a. 176 I. P. C., an  omission  to  furnish which would be an offence under that section.  This  section refers to information to be given in statements required  to be furnished under some provision of law.  We are  therefore of  opinion  that  a. 176.  I. P. C. did in  no  way  compel Dalmia to make the statement Exhibit P. 10. We  believe  the statements of Annadhanam and  Khanna  about Dalmia’s  making  the statement Exhibit P.  10  without  his being induced or threatened by them.  Their statements  find implied  support  from the statement of Raghunath  Rai  with respect  to  what  Dalmia told him in  connection  with  the making  of  the statement to Annadhanam,  and  from  certain statements of Dalmia himself in his written statement and in answers to questions put to him under s. 342, Cr.  P. C. We therefore hold the statement Exhibit P. 10 is a voluntary statement and is admissible in evidence.                             381 We also hold that it is not inadmissible in view of cl.  (3) of  Art. 20 of the Constitution.  It was not made by  Dalmia at a time when he was accused of an offence, as is necessary for the application of that clause, in view of the  decision of this Court in The State of Bombay v. Kathi Kalu Oghad (1) where the contention that the statement need not be made  by the  accused  person  at  a  time  when  he  fulfilled  that character was not accepted.  Dalmia was not in duress at the time he made that statement and therefore was not  compelled to make it.  It was said in the aforesaid case :               " "Compulsion’, in the context, must mean what               in   law   is  called   duress..........   The               compulsion  in  this sense is a  physical  ob-               jective  act and not the state of mind of  the               person making the statement, except where  the               mind   has   been  so  conditioned   by   some               extraneous process as to render the making  of               the  statement  involuntary  and,   therefore,               extorted." The  various  circumstances  preceding  the  making  of  the statement  Exhibit P. 10 by Dalmia have all been  considered and  they fall far short of proving that Dalmia’s  mind  had been so conditioned by some extraneous process as to  render the  making  of  this statement  involuntary  and  therefore extorted. We believe the statement of Annadhanam that Dalmia had  told him  near  the staircase that he had lost the money  in  his personal  speculation business which was carried on  chiefly through  one  of  his private  companies,  viz..  the  Union Agencies.  The later part of his confession, Exhibit P.  10, is an admission of Dalmia’s losing the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 70 of 81  

(1)  [1962] 3 S. C. R. 10, 35. 382 money  in  speculation.  His further statement was  only  an amplification  of it as to the name under which  speculation was carried on. the statement  finds support from the  facts established by other evidence that the speculation  business carried on by the Union Agencies was really the business  of Dalmia  himself though, ostensibly, it was the  business  of the  company  of which there were a few  shareholders  other than Dalmia. Mr.  Dingle Foot has urged that adverse inference  be  drawn against  the prosecution case on account of the  prosecution not  producing certain documents and certain witnesses.   We have considered the objection and are of opinion that  there is  no  case  for  raising such  an  inference  against  the prosecution. The  prosecution  did not lead evidence  about  the  persons holding  shares  in Asia Udyog Ltd., and in  Govan  Brothers Ltd.  Such evidence would have, at best, indicated how  many shares  Dalmia  held  in  these  companies.   That  was  not necessary  for the prosecution case.  The extent  of  shares Dalmia held in these companies had no direct bearing on  the matter under inquiry in the case. The  prosecution led evidence about the telephonic calls  up to  August  31, 1955, and did not lead  evidence  about  the calls  between  September 1 and September 20.  1955,  It  is urged  that presumption be raised that Dalmia  and  Chokhani had no telephonic communication in this period.  Admittedly, Dalmia   had  telephonic  communication  with  Chokhani   on September   15.   The  prosecution  has  not  impugned   any transaction entered into by Chokhani during this period.  It is  not therefore essential for the prosecution to have  led evidence  of  telephonic calls between Dalmia  and  Chokhani during this period. Another document which the prosecution is                             383 said not to have produced is the Dak Receipt. Register.  The Register could have at best shown on which dates the various advices  received  from Bombay about the  transactions  were received.  On that point there had been sufficient  evidence led by the prosecution.  The production of the Register  was there  fore not necessary.  The accused could have  summoned it  if  he had particular reason to rely on its  entries  to prove his case. Lastly,  complaint is made of the non-production of  certain documents  in  connection  with  the  despatch  of   certain securities  from  Delhi  to Bombay.  Again,  there  is  oral evidence with respect to such despatch of securities and  it was  not essential for the prosecution to produce the  docu- ments in that connection. Of  the witnesses who were not produced, complaint  is  made about  the  prosecution  not  examining  Mr.  Barve,  Joint- Secretary,  Ministry  of  Finance, who was  present  at  the interview  which  Dalmia  had with  Mr.  Kaul  on  September 15,1954,  and of the non-production of the Directors of  the Insurance Company.  It was quite unnecessary to examine  Mr. Barve  when  Mr. Kaul has been examined.  It  was  also  not necessary  to examine the Directors of the company  who  are not  alleged to have had any first-hand knowledge about  the transactions.  They could have spoken about the confirmation of the sale and purchase transactions and about the  passing of  the  bye-laws  and other  relevant  resolutions  at  the meeting  of  the  Board of Directors.  The  minutes  of  the proceedings of the Board’s meetings served this purpose. It  is admitted by Dalmia that there was no  ,resolution  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 71 of 81  

the  Board of Directors conferring authority on Chokhani  to purchase and sell securities. Certain matters have been referred to at 384 pages   206-210  of  Dalmia’s  statement  of  came,   which, according   to  Dalmia,  could  have  been  proved  by   the Directors.,  All  these  matters are  such  which  were  not necessary  for  the unfolding of the  prosecution  case  and could be proved by the accused examining them if  considered necessary.  We therefore see no force in this contention. It  is urged for Dalmia that he could not have been a  party to a scheme which would cause loss to the Insurance Company, because he was mainly responsible for the prosperity of  the company.  The Union Agencies has assets.  The Government was displeased  with Dalmia.  The company readily agreed to  the appointment  of  M/s.  Khanna and  Annadhanam  as  auditors. There was the risk of detection of the fraud to be committed and  so Dalmia would have acted differently with respect  to such  affairs  of the Union Agencies as have  been  used  as evidence  of  Dalmia being synonymous with it.   We  are  of opinion  that these considerations are not such which  would off,set the inferences arrived at from the proved facts. It  cannot  be it matter of mere coincidence  that  frequent telephonic  conversations  took  place  between  Dalmia  and Chokhani  when the Union Agencies suffered losses, that  the usual  purchase  transactions  by which  the  funds  of  the Insurance  Company were diverted to the Union Agencies  took place then, that such purchases should, recur several  times during the relevant period, that such securities which could not  be recouped had to be shown as sold and when the  Union Agencies  or Bhagwati Trading Company could not pay for  the sale  price which had to be credited to the account  of  the Insurance Company, a further usual purchase transaction took place. We are therefore satisfied from the various facts considered above that the transactions which                             385 led  to the diversion of funds of the Insurance  Company  to the   Union   Agencies  were  carried  through   under   the instructions  and approval of Dalmia.  It is clear  that  he had  a dishonest intention to cause at least temporary  loss of its funds to the  Insurance Company and gain to the Union This  could be achieved only as a result of  the  conspiracy between  him and Chokhani.  Vishnu Prasad was taken  in  the conspiracy  to  facilitate diversion of funds and  Gurha  to facilitate  the  making  up of false accounts  etc.  in  the offices of the Union Agencies and Asia Udyog Ltd., as  would be discussed hereafter. We may now turn to the charges against Gurha, appellant.  He was  charged  under s. 120-B read with s. 409 I. P.  C.  and also  on three counts under s. 477 A for making or  abetting the  making of false entries in three journal vouchers  Nos. 98,  106  and  107  dated January 12,  1955,  of  the  Union Agencies.   It is necessary to give a brief account  of  how these vouchers happened to be made. Gurha was a Director of the Union Agencies and looked  after the work of its office at Delhi.  He was also the Accountant of Asia Udyog Ltd. At  Delhi there was a ledger with respect to the account  of the transactions by the Bombay Office of the Union Agencies. Under  the  directions of Chokhani who was an agent  of  the Union Agencies at Bombay and also held power of attorney  on its  behalf.   Kanna  used to send a cash  statement  and  a journal  to  the  Bombay Office and the  Union  Agencies  at Delhi.  These documents used to be sent to Gurha personally.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 72 of 81  

Now, the cash statement from Bombay showed correctly entries of the amounts received from Bhagwati Trading Company.  Such amounts  were  noted  to  the  credit  of  Bbagwati  Trading Company.  When the Union Agencies made Payment  to Bhagwati 386 Trading  Company, an entry to that effect was noted  in  the cash statement to the debit of Bhagwati Trading Company.  On receipt  of  these cash statements in 1955, it  is  alleged, Gurha used to get the genuine cash statement substituted  by another  fictitious cash statement in which no  mention  was made of Bhagwati Trading Company.  Entries to the credit  of Bhagwati  Trading  Company used to be shown  to  be  entries showing the receipt of those moneys from the Delhi Office of the Union Agencies through Chokhani.  The debit entry in the name of Bhagwati Trading Company used to be shown as a debit to the Delhi Office of the Union Agencies.  This substituted cash  statement  was  then made over to  one  Lakhotia,  who worked  in the Delhi Office of the Union Agencies on  behalf of   the  Bombay  Office  of  the  company.   He  was   also prosecuted,  but  was  acquitted.   Lakhotia  issued  credit advices on behalf of the Bombay Office of the Union Agencies to  the Delhi Office of the Union Agencies in  reference  to the  entry  in  the cash statement which,  in  the  original statement,  was  in  respect of  the  amount  received  from Bhagwati  Trading Company, intimating that amount  had  been credited  by the Bombay Office to the account of  the  Delhi Office.   A debit advice on behalf of the Bombay  Office  to the  Delhi Office was issued intimating that the amount  had been  debited  to the account of the Delhi  Office  when  in fact, the original entry debited that amount to the  account of Bhagwati Trading Company.  Lakhotia also made entries  in the ledger of the Bombay Office which was maintained in  the Delhi  Office  of  the  company.   In  its  column  entitled ’folios’  reference to the folio of the cash  statement  was given by writing the letter ’C’’ and the number of the folio of the cash statement from which the entry was posted. On  receipt of such advices from Lakhotia on behalf  of  the Bombay Office, Dhawan, P. W,19,                             387 Accountant of the Delhi Office of the Union Agencies used to prepare  the  journal voucher.  In the case  of  the  credit advices, the amount was debited to the Bombay Office of  the Union Agencies and credited to Asia Udyog Ltd.  In the  case of  the debit advices, the amount was debited to Asia  Udyog Ltd.,  and  credited  to  the Bombay  Office  of  the  Union Agencies.   According to the statement of Dhawan, he did  so under  the instructions of Gurha.  Gurha used to sign  these vouchers and when he fell ill,, they were signed by  another Director,  J. S. Mittal.  Corresponding entries used  to  be made in the account of the Bombay Office and the Asia  Udyog Ltd.,  in  the  ledger  of the Delhi  Office  of  the  Union Agencies. After  Dhawan  had prepared these vouchers he also  used  to issue advices to Asia Udyog Ltd. intimating that the  amount mentioned  therein  had  been credited  or  debited  to  its account.  Thus the name of Bhagwati Trading Company did  not appear  in  the various advises, vouchers  and  the  ledgers prepared at Delhi. In the office of Asia UdyogLtd., on receipt    of     the credit advice, a journalvoucher crediting   the  amount  to the Bombay Officeand  debiting it to the Delhi Office  of the Union Agencies was prepared.  A journal voucher  showing the entries in the reverse order was prepared on the receipt of the debit advices.  Asia Udyog Ltd., issued advice to the Bombay  Office intimating that the amount had been  credited

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 73 of 81  

or debited to the Bombay Office of the Union Agencies in the case of vouchers relating to the credit or debit advice from that  Office.   All such vouchers in Asia  Udyog  Ltd.  were signed  by Gurha even during the period when he was ill  and was not attending the office of the Union Agencies. The  result of all such entries in the vouchers Was that  on paper it appeared in the case of credit 388 advices that the Delhi Office of the Union Agencies advanced money  to  the Bombay Office which paid the  money  to  Asia Udyog  Ltd., which in its turn, paid the money to the  Delhi Office  of  the  Union Agencies, and in the  case  of  debit advices,  the  Bombay  Office debited the  amount  to  Delhi Office  of  the Union Agencies and that debited it  to  Asia Udyog  Ltd.,  which  in its turn debited it  to  the  Bombay Office.  All these entries were against facts and they  must have  been done with a motive and apparently it was to  keep off the records any mention of Bhagwati Trading Company.  No explanation  has been given as to why this course of  making entries was adopted. The  genuine  cash statements are on  record.   The  alleged fictitious  statements  are not on the record.   It  is  not admitted  by  Gurha that any fictitious cash  statement  was prepared.   It  is not necessary for our  purposes  to  bold whether  a fictitious cash statement in lieu of the  genuine cash  statement received from Bombay was prepared under  the directions  of  Gurha  or not.  The fact  remains  that  the entries  in the various advices prepared by Lakhotia on  the basis of the cash statements received, did not represent the true entries in the genuine cash statements and that journal vouchers  prepared by Dhawan also showed wrong  entries  and did not represent facts correctly. Of  the  journal vouchers with respect to  which  the  three charges  under s. 477 A, 1. P. C. had been framed,  two  are the  vouchers  prepared  by  Dhawan  crediting  the  amounts mentioned the rein to Asia Udyog Ltd., and debiting them  to the Bombay Office of the Union Agencies.  They are  Exhibits P.  2055  and P. 2060.  Each of them is  addressed  to  Asia Udyog Ltd. and states that the amount mentioned therein  was the  amount received by the former, i. e. the Bombay  Office from  Chokhani on account of the latter, i, e.,  Asia  Udyog Ltd., on      389 January 7 and January 10, 1955,respectively   and adjusted. One Exhibit P.2042 debits the amount to Asia Udyog Ltd,  and credits it to the Bombay Office of Union  Agencies and states the amount mentioned therein to have been paid by the  latter, i.e., Bombay Office to Chokhani on  account  of the former, i.e Asia Udyog Ltd., and adjusted. Other facts which throw light on the deliberate  preparation of these false vouchers are that there had been tampering of the  ledger of the Bombay Office in the Delhi Office of  the Union  Agencies  and also in the journal statement  of  that office.   The letter "C’ in the folio column of  the  ledger had been altered to ’J’ indicating that entry referred to an entry in the journal statement received from Bombay.  Sheets of the journal statement on which corresponding entries  are noted have also been changed.  These two documents  remained in  the possession of the Union Agencies till  November  12, 1955,  though the advices and vouchers in the  Delhi  Office were  seized  by  the  Police on  September  22,  1955,  and therefore interested persons could make alterations in them. It  has been suggested for Gurha that the  alterations  were made by the Police.  The suggestion has not been accepted by the  learned Sessions Judge for good reasons.   The  changed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 74 of 81  

entries did not in any way support the prosecution case  and therefore  the  police had no reason to  get  those  entries concocted.  The entries did show the receipt of the  amounts from Bhagwati Trading Company, but the prosecution case  was that  the  amount  was  received in  cash  and  not  through transfers  which  transactions  had  to  be  adjusted.   The learned  Sessions  Judge,  did  not,  however,  believe  the statement  of Sri Kishen Lal who investigated the case  that he had noticed these alterations earlier than his  statement in Court Which was some time in 1958, for the reason that 390 Dhawan was not questioned by the prosecution in this  regard and  no  reference was made by Sri Kishen Lal  in  the  case diary  about his questioning Dhawan about  the  alterations. The  learned Sessions Judge appears to have  overlooked  the statement of Sri Kishen Lal to the effect:               "I made a note in the case diary about  myself               having  put  the overwriting to  Lakhotia  and               about  having  asked  his  explanation   about               that." The Court could have verified the fact from the case  diary. It  is too much to suppose that Sri Kishen Lal would make  a wrong  statement  whose  inaccuracy  could  be  very  easily detected.   However, the learned Session Judge  himself  has given good reasons for not accepting the suggestion that the over-writing  of  the letter ’C’ by the letter ’J’  and  the changing of the journal papers were made by the police. The  part that Gurha played in getting these  false  entries prepared  is  deposed  to  by Dhawan,  P.W.  19,  who  used, occasionally, to approach Gurha for instructions. Further,  Gurha, as the accountant of Asia Udyog Ltd.,  must have  known that Asia Udyog Ltd., bad neither  advanced  any amounts  to’  the Bombay Office of the  Union  Agencies  nor received  any  amounts from the Bombay Office of  the  Union Agencies.   He however signed all the vouchers  prepared  in the  office  of Asia Udyog Ltd., in  connection  with  these transactions.  He did so even during his illness (May, 1955, to  July, 1955, which, according to the statement of  Gurha, in  answer to question No. 134 was from March 15  to  August 12,  1955, during which period he did not attend the  office of  the  Union Agencies).  He signed  them  deliberately  to state false facts, 391 Dhawan  particularly stated that on receipt of  the  advice, Exhibit P. 2041, on the basis of which journal entry No.  98 was prepared by him, he went’ to Gurha to consult as it  was not  clear from that advice to whom the amount mentioned  in it had’ been paid.  Gurha, on looking up the Journal  state- ment received from the Bombay Office told him to debit  that amount  to Asia Udyog Ltd.  Dhawan prepared journal  voucher P.  2042,  accordingly, and Gurha initialed it.  It  may  be mentioned  that  this  debit advice was  addressed  to  M/s. Delhi Office and therefore could be taken to refer either to the  Delhi Office of the Union Agencies or the Delhi  Office of’  Asia Udyog Ltd., both these offices being in the’  same building  and being looked after by Gurha.  Gurha admits  in his  statement under s.342, Cr P. C., that  Dhawan  referred this matter to him and that he asked him to debit the amount to  Asia  Udyog Ltd., The journal statement  of  the  Bombay Office at the relevant time could have no reference to  this item  which  was really entered in the  cash  statement  and Gurha’s conduct in looking up the journal was a mere ruse to show to Dhawan that was giving instructions on the basis  of the entries and not on his own. Gurha  stated,  in  answer  to  question  No.  45,  that  he

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 75 of 81  

remembered to have seen an entry relating to this amount  of Rs.  4,61,000 which is the amount mentioned in Ex.  P.  2042 in  the  cash statement of the Bombay Office  of  the  Union Agencies  when  O.P. Dhawan referred an advice  relating  to that  amount  to him.  In answer to questions Nos.  217  and 218,  in  connection  with his  advising  Dhawan  about  the debiting  of this amount to Asia Udyog Ltd., he stated  that he gave that advice after tracing the relevant entry in  the journal statement of the Bombay Office.  This answer is  not consistent  with  his earlier answer to question No.  45  as entry with respect to the same amount could not have existed 392 simultaneously  both in the cash statement and  the  journal statement  of  the Bombay Office.  If his  later  answer  is correct, his referring to the journal would have been just a ruse  as already stated.  If his earlier answer  is  correct that  would  indicate  that either Gurha  had  supplied  the office  with  the fictitious cash statement  of  the  Bombay Office  as alleged by the prosecution or that seeing in  the journal  cash statement that the entry related  to  Bhagwati Trading  Company,  deliberately told Dhawan,  in  accordence with the scheme, to debit that amount to Asia Udyog Ltd.  In either view of the matter, this conduct of Gurha in advising Dhawan to debit the amount to Asia Udyog Ltd., is sufficient to   indicate  his  complicity  in  the  whole  scheme,   as otherwise, he had no reason to behave in that manner. Gurba,  among  the accused, must have been  chosen  for  the purpose  of  the conspiracy because he had  connection  both with  the  Union Agencies and with Asia Udyog Ltd.   He  had been in the employ of a Dalmia concern from long before.  He was the Accountant of the Dalmia Cement and Paper  Marketing Company  from 1948 till its liquidation in 1953.  Gurha,  as Director  of the Union Agencies, knew that it  had  suffered losses  as a result of sharespeculation business in  1954-55 and that the Delhi Office was short of liquid funds to  meet these losses.  He must have known how the funds to meet  the losses  were being secured from the funds of  the  Insurance Company through Bhagwati Trading Company.  He must have also known  that this was wrong.  It is only with such  knowledge that  he could have been a party to the making of false  ad- vices  and  vouchers.  There could be DO other  reason.   It could  not  have been possible for the prosecution  to  lead direct evidence about Gurha’s knowledge with respect to  the full working of the scheme to provide for the losses of  the Union Agencies from the funds of the Insurance Company.   It is further 393 not,  necessary that each member of a conspiracy  must  know all the details of the conspiracy. Mr,  Kohli, for Gurha, has urged that Gurha could  have  had nothing  to  do  with  the diversion of  the  funds  of  the Insurance Company to the Union Agencies, even though he  was a  Director  of the latter as he never  issued  instructions regarding  the  activities  of the Union  Agencies,  had  no knowledge  of  the passing of money from the  funds  of  the Insurance Company to the Union Agencies as he had nothing to do with the movement of the securities held by the Insurance Company  or the receipt of cash or the  other  transactions, his  role having begun, according to the prosecution,  after the offence under s. 409 1. P. C. had been actually  commit- ted,  i.e.,  after Chokhani had issued cheques on  the  bank accounts of the Insurance Company with the Chartered Bank in favour of Bhagwati Trading Company, and therefore could know nothing   regarding   the  diversion  of   funds   and   the desirability  of falsifying the accounts and papers  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 76 of 81  

Office;  he had to deal with.  Great reliance is  placed  on the letter, Exhibit B. 956 in submitting that Gurha did  not know  about the whole affair and simply knew, as  stated  by him, that Chokhani had borrowed money for the Union Agencies to  pay  its losses, from Bhagwati  Trading  Company.   This letter is of significance and we quote it in full "Girdharilal Chokhani Times of India Building, Horn by Road, Bombay -1. CONFIDENTIAL 17th September 55. Bharat Union Agencies Ltd., Delhi. Attn.  Mr. R. P. Gurha Dear Sir, I have to inform you that the various a mounts 394 arranged  by me as temporary loans to Bharat Union  Agencies Ltd.,  Bombay  Office  from  time to time  in  the  name  of Bbagwati  Trading Company, actually represented  the  monies relating to the undernoted securitiesbelonging to  Bharat Insurance      Company Limited.                                        Face Value 2-1/2% 1961                        Rs. 56,00,000 3% 1963-65                         Rs. 79,00,000 3% 1966-68                         Rs. 60,00,000                                   Rs. 1,94,00,000 I have now to request you to please arrange at your earliest to pay about Rs. 1,80,00,000 in cash or purchase the a  fore said  securities (or their equivalent) and deliver the  same to Bharat Insurance Company Ltd., 10, Daryaganj, Delhi on my behalf,  debiting the amount to the credit standing  in  the books  of  the Company’s Bombay Office in the  name  of  M/s Bbagwati Trading Company.  Any debit or credit balance  left thereafter in the said account would besettled later on. I  am  getting this letter also signed  by  Vishnuprasad  on behalf  of Bhagwati Trading Company although he had  neither any  knowledge of these transactions nor had any  connection with these affairs. Yours faithfully, For: Bbagwati Trading Company Sd/ G. L. Cho khani Sd. Illegible Vishnuprasad Bairanglal Proprietor." We  are  of opinion that this is a letter  written  for  the purpose of the case and was, as urged for 395 the State,. ante-dated.  There is inherent evidence in  this letter  to support this view.  The letter makes a  reference to  Vishnu Prasad’s having no knowledge of the  transactions and having no connection with the affairs.  Mention of these facts was quite out of place in a letter which Chokhani  was addressing  to  Gurha  in the course  of  business  for  his immediately arranging for the payment of Rs. 1,80,00,000  in cash  or. securities to Bharat Insurance Company.   Further, the  opening expression in the letter does  not  necessarily mean  that Gurha was being informed for the first time  that the  temporary loans arranged by him for the Union  Agencies Ltd.,  in  the name of ’Bhagwati  Trading  Company  actually represented  the  moneys belonging to the  Bharat  Insurance Company.   If  it meant so, that must have been done  so  by design, just as the concluding portion of the letter was, as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 77 of 81  

already  mentioned,  put  in by  design  to  protect  Vishnu Prasad’s interest. The letter is dated September 17, 1955, and thus purports to have been written a few days before the formal complaint was made to the police.  Even if it was written on September 17, it  was written at a time when the matter of securities  had come  to the notice of the authorities and Dalmia was  being pressed  to  satisfactorily  explain  the  position  of  the securities.   Chokhani could have written a letter  of  this kind in that setting. Another  fact relied upon by the learned Sessions  Judge  in considering this letter to be antedated is that it does  not refer  to  one  kind of securities which  were  not  in  the possession  of  the Insurance Company even though  they  had been  ostensibly  purchased.   It does not  mention  of  the securities worth Rs. 26,25,000 which were really supplied to the  Insurance Company on September 23, 1955.   This  letter should  have included securities of that amount  and  should have asked Gurha to make up 396 for  that amount to the Insurance Company.  This is a  clear indication that this letter was written after September  23, 1955. Mr.  Kohli  has, however, urged that the  contract  for  the purchase  of these securities had taken place  on  September 16, 1955, and that therefore Chokhani did not include  those securities  in  this  letter.   Reference  is  made  to  the statement  of  Jayantilal,  P.W. 6, a partner  of  the  Firm Devkaran  Nanjee,  Brokers  in Shares  and  securities.   He states that Bhagwati Trading Company wanted to purchase  for immediate  delivery 3% 1966-68 securities of the face  value of  Rs. 21,25,000 and that a contract about it  was  entered into.   Securities of this amount were not available in  the market.   Securities worth Rs. 1,75,000 were  available  and were  delivered to Chokhani that day.  They had to  purchase securities  of  the face value of Rs.  20,00,000,  from  the Reserve Bank of India in order to effect delivery and had to sell  some other securities of that value.  The  result  was that  the  required  securities were  received  by  them  on September  22, 1955.  Even this statement does  not  account for not including securities of the value of Rs. 4,50,000 in this letter Ex.  P. 956. It  was further urged in the alternative that  Chokhani  had very extensive powers in all the alleged concerns of  Dalmia and so could get anything done due to his influence  without divulging secrets.  That was not the position taken by Gurha in  his statement.  Ho did not say that he deliberately  got false documents prepared due to directions from Chokhani and which he could not disregard.  Even if it be so, that  means that Gurha got false documents made deliberately. Another  submission for Gurha is that the case  held  proved for  convicting him is different from the case as sought  to be made out in the police chargesheet submitted to the Court under s. 173 of the 397 Code  of Criminal Procedure.  The charge-sheet is  hardly  a complete or accurate thesis of the prosecution case.  Clause (a  )  of  sub-s.  (1) of s. 173,  Cr.  P.C.,  requires  the officer-in-charge  of the police station to forward  to  the Magistrate empowered to take cognizance of the offence on  a police  report,  the report in the prescribed  form  setting forth   the  names  of  the  parties,  the  nature  of   the information,  and the names of the persons who appear to  be acquainted  with  the circumstances of  the  case.   Nothing further need be said on this point.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 78 of 81  

Further,  it  is  submitted that the  prosecution  case  has changed from stage to stage.  This can only mean that  facts came on the record which were not known before and therefore the  complexion of the allegations against  Gurha’s  conduct varied.   Even  if  this is so, he  can  have  no  grievance against it unless he bad been unable to meet it in  defence. No such inability has been expressed.  It is however  stated that the prosecution based its ultimate case against him  on the allegation that the cash statement received from  Bombay was suppressed and another false cash statement was prepared at  Delhi  under the directions of Gurha.  We  have  already dealt with this matter.  There was no such allegation on the basis of the statement of any prosecution witness.  This way really  a suggestion to explain how despite certain  entries in  the  cash  statements  received  from  Bombay  different entries  were made in the advices issued by  Lakhotia  which advices ought to have been in accordance with the entries in the  cash statement.  The suggestion may be correct  or  may not  be correct.  It cannot, however, be said on  its  basis that there has been such a change in the prosecution case as would make the prosecution case reasonably doubtful. In the same connection, a grievance has been made that Gurha was not questioned about the                             398 allegation  that the cash statement had been suppressed  and substituted  by  another fictitious one.  No  such  question could have been put to him when there was no evidence  about it.   An accused is questioned under s. 342 Cr.  P.  C.,  to explain any circumstances appearing in the evidence  against him.   It  is  not  necessary to  ask  him  to  explain  any inference that a Court may be asked to draw and be  prepared to draw from the evidence on record. Another point stressed for Gurha is that the cash statements would  not have mentioned Bhagwati Trading Company when  the prosecution  case is that Chokhani took deliberate steps  to keep  the Delhi Office of the Insurance Company in the  dark about  it.   The fact is that the cash statement  sent  from Bombay did mention Bhagwati Trading Company.  They were sent to  Gurha personally.  In the circumstances  the  reasonable conclusion  can  be  that they  mentioned  Bhagwati  Trading Company  as that represented the true state of  affairs  and Chokhani had to inform the Delhi Office of the Bharat  Union Agencies about the source of the money he was receiving  for the  Union  Agencies to meet its losses.  Chokhani  did  not disclose   the   true  source,  but   disclosed   a   source fictitiously created to conceal the real source.  There  was no harm in disclosing Bhagwati Trading Company to the office of the Union Agencies at Delhi.  With the same frankness  it could  not  have  been disclosed to  the  Insurance  Company Office  at  Delhi  both  because  that  would  required  the complicity  of the entire staff of the Insurance Company  in the  conspiracy  and  because otherwise, it  would  at  once disclose to the Insurance Company and those who had to check its  working that its funds were being miscued.   Disclosure of  Bhagwati  Trading  Company to  the  Union  Agencies  was necessary  and  there was no harm in any  way  in  informing Gurha   confidentially  about  it.  After  Gurha   had   got possession of the cash                             399 statement it was for him how to direct the necessary entries to be made in the advices prepared by Lakhotia on behalf  of the Bombay Office at Delhi and on the basis of which journal vouchers  were to be prepared by Dhawan and entries were  to be made in the accounts of the Union Agencies at Delhi.   We therefore  do not consider that this contention in  any  way

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 79 of 81  

favours the appellent. The  fact  that the account of the Asia Udyog Ltd.,  in  the ledger  Exhibit P. 2226 is not alleged to be fictitious  and records in the column folio’ the letter ’J’ is of no help as the entries in that ledger must have been made on the  basis of  the journal vouchers issued by Dhawan.  In fact once  it is   alleged  that  the  advices  issued  by  Lkhotia   were fictitious any entry which can be traced to it must also  be fictitious. It  is  argued  that  the  alleged  scheme  of  making   the circuitious  entries  could not have worked in  keeping  the source  of  money concealed as  the  Income-tax  Authorities could  have  detected by following the entries in  the  Bank records  with respect to the source of payment of money  (by cheques  issued  by Bhagwati Trading Company) to  the  Union Agencies  at Bombay.  They could have thus known only  about Bhagwati Trading Company and, as already stated, it was  not necessary  to keep Bhagwati Trading Company secret from  the Union Agencies.  What was really to be kept secret was  that the  money  came from the Insurance  Company.   The  various circuitous  entries  were not really made to  keep  Bhagwati Trading Company unknown, but were made to make it  difficult to  trace  that  the  money really  was  received  from  the Insurance Company. A suggestion has been made by Mr. Kohli that Chokhani  might have  showed the same amount both in the cash statement  and in  the journal statement.  No such case, however, seems  to have been 400 raised  in  the  Courts  below and  has  been  made  in  the appellant’s statement of case. It has been contended that an offence under s. 477A 1. P. C. has  not been established against the accused as it  is  not proved  that  he falsified any book, papers,  etc.,  in  the possession  of his employer with intent to defraud and  that the  intention  to defraud should be to defraud  someone  in future and should not relate to an attempt to cover up  what had  already  happened.  It is submitted that an  intent  to defraud connotes an intention to deceive and make the person deceived  ,suffer  some loss, that the entries made  in  the journal  vouchers did not make anyone suffer  and  therefore the entries could not be said to have been made with  intent to defraud. The  expression  intent to defraud’ is not  defined  in  the Penal Code but s. 25 defines ’fraudulently’ thus:               "A  person  is  said  to  do  a  thing  fraud.               ulently, if he does that thing with intent  to               defraud and not otherwise." The vouchers were falsified with one intention only and that was  to let it go unnoticed that the Union Agencies bad  got funds  from  the Insurance Company.  If they had  shown  the money received an( paid to Bhagwati Trading Company, it  was possible  to trace the money back to the  Insurance  Company through  Bhagwati Trading Company which received  the  money from  the Insurance Company through cross cheques  as  well. Whoever would have tried to find out the source of the money would have been deceived by the entries.  The Union Agencies mad  wrongful  gain  from the  diversion  of  the  Insurance Company’s  funds to it through Bhagwati Trading Company  and the  Insurance  Company suffered loss of funds.   The  false entries were made to cover                             401 up  the  diversion  of funds and were thus  to  conceal  and therefore to further the dishonest act already committed. We  agree  with respect with the  following  observation  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 80 of 81  

Emperor v. Ragho Ram (1) at page 788:               "If the intention with which a false  document               is   made  is  to  conceal  a  fraudulent   or               dishonest  act which had been previously  com-               mitted, we fail to appreciate how that  inten-               tion  could  be  other than  an  intention  to               commit  fraud.  The concealment of an  already               committed fraud is a fraud."               And, again, at page 789:               "Where,  therefore, there is an  intention  to               obtain  an advantage by deceit there is  fraud               and  if  a document is  fabricated  with  such               intent, it is forgery.  A man who deliberately               makes  a false document in order to conceal  a               fraud already committed by him is  undoubtedly               acting  with  intent to commit  fraud,  as  by               making the false document he intends the party               concerned  to believe that no fraud  had  been               committed.    It  requires  no   argument   to               demonstrate  that  steps  taken  and   devices               adopted with a view to prevent persons already               defrauded  from  ascertaining that  fraud  had               been  perpetrated on them, and thus to  enable               the  person who practiced the fraud to  retain               the  illicit  gain  which he  secured  by  the               fraud,  amount to the commission of  a  fraud.               An  act  that is calculated to  conceal  fraud               already  committed  and  to  make  the   party               defrauded  believe  that  no  fraud  had  been               committed  is a fraudulent act and the  person               responsible  for  the  act  acts  fraudulently               within  the  meaning,  of section  25  of  the               Code." (1)1933J 1 L. R. 55 All. 783, 788, 789, 402 We  agree, with this observation, and repel  the  contention for the appellant. It,  has then been submitted that the  falsification  should have  been necessarily connected with the commission of  the breach  of  trust.   There is no question  of  immediate  or remote  connection  with the commission of breach  of  trust which  is sought to be covered up by the  falsification,  so long  as  the  falsification is to cover that  up.   In  the present  case, introduction of Bhagwati Trading  Company  in the  transactions was the first step to carry out  deception about  the actual payment of money out of the funds  of  the Insurance Company to the Union Agencies. The second step of suppressing the name of Bhagwati  Trading Company  in the papers of the Union Agencies Delhi, made  it more  difficult  to trace the passing of the  money  of  the Insurance  Company to the Union Agencies and  therefore  the falsification  of the journal vouchers related back  to  the original  diversion of the Insurance Companys moneys to  the Union  Agencies  and  was with a view to  deceive  any  such person  in  future who be tracing the source  of  the  money received by the Union Agencies. A grievance is made of the fact that certain witnesses  were not examined by the prosecution.  Of the persons working for the Union Agencies, five were accused at the trial,  Kannan, Lakhotia,  Gurha, Mittal and Dudani.  Only Gurha among  them was  convicted.  The others were acquitted.  ’The  remaining persons  were  Krishnan,  Panohawagh and the  clerks  O.  D. Mathur  and  Attarshi.  Of the persons connected  with  Asia Udyog,  one  R.  S.  Jain of the  Accounts  Branch  was  not examined.   Panchawagh  who was an Accountant of  the  Union

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 81 of 81  

Agencies and had custody of the cash statements and  journal was given up by the prosecution on the ground that                             403 he  was won over.  We do not consider that it was  necessary to  examine  him for the unfolding of the  prosecution  case against  Gurha.  Similarly it was not necessary  to  examine the others for that purpose. A mere consideration that  they might  have  given  a  further  description  of  how  things happened  in those offices would not justify the  conclusion that the omission to examine them was an oblique motive  and could go to benefit the accused. A  grievance was made that the High Court did not deal  with the  question  whether  the police tampered  with  the  cash statement  and the journal.  It is not clear whether such  a point  was  raised in the High Court.  It  was  however  not mentioned  in  the grounds of appeal.  The trial  Court  did deal  with the point and held against the  appellant  Gurha. In  fact,  paragraph 22 of the grounds of  appeal  by  Gurba simply  said that no value should have been attached to  the said cuttings when it was not proved on the record as to who made the said cuttings and when they were not calculated  to conceal  the  true  facts or the  further  interest  of  the conspiracy. We are therefore of opinion that Gurha has been rightly held to  have  been  in the conspiracy and to  have  abetted  the making of the false journal vouchers. In view of the above, we are of opinion that the  appellants have been rightly convicted of the offences charged. It has been urged for Chokhani that his sentence be  reduced to  the  period already undergone as he made no  profit  for himself  out  of the impugned transactions, that  he  is  59 years old and had already been ten days in jail.  We do  not consider these to justify the reduction of the sentence when 404 he  was the chief person to carry out the main work  of  the conspiracy. We   also  do  not  consider  Dalmia’s  sentence,   in   the circumstances of the case, to be severe. We therefore dismiss these appeals. Appeals Dismissed.