Appeals by special leave from the judgment v. Stau of M~Mra~h,ra

Appeals by special leave from the judgment and f'rder dated August 21i, 1959, of the Bombay High Court, in Cr. A. No. 1638 of 1!158. A. S. R. Chari, J. B. Dadachanji, 0. C. Mathur and Ravinder Na.rain, for the appellant (in Cr. A. No. 176 of5!1). Frenny Parekh and K. R. Clwudhri, for t'1 ap!>eliant (in Cr. A. No. 40 of 60). Jai Oopal Sethi, R. f,. Mehta and R. H. Dh.ehar, for the respondents. I 962. April 24. The Judgment of the Court was delivered by GAJDDl!AGADKAR, J.-A c1iminal conspiracy to 'Which, ocoordiDg w tbe 'PfOBecDtion, M. G. Agarwal 198* •. M. G. Agan«•I State of Maharashtra Gajendragadkar J. ,\ s.c.R. SUPREME COURT REPORTS 407 ' M. K; Kulkarni and }'IT. Laxminarayan, hereafter cal led acoused Nos. 1, 2 and 3 respectively, were parties between December, 1954, and June 1955, at Bombay, has given rise to the . criminal prooeedings from whioh the two present appeals arise. At the rele vant time, the three accused persons were attached to the office of the Income-tax Officer, Ward No. A-III in Greater· Bombay. Accused No. 1 was designated as the First Inoome-tax Officer, and _accused Nos. 2 and 3 worked under him as second and third Assessment Clerks respectively. The main charge against these persons was that during the relevant period, they had entered into a oriminal conspiracy by agreeing to do or cause to be done illegal acts by corrupt and illegal means and by abusing their position as public servants to obtain for themselves pecuniary advantage in the form of income-tax refund orders and this criminal object was achieved by issuing the said refund orders in the names .of persons who either did not exist or were not assessPes entitled to such refunds. The prosecution case was that after the said refund orders were thus fraudulently issued, they were fraudulently cashed and illegally misappropriate<l, The ten persons in whose names these refund orders were fraudulently issued were G.M. Thomas, P.N. Swamy,· K. S. Patel, S. R. Bhandarkar, S. P. Jani, D. M. Joshi, C. B. Kharkar, Ramnath Gupta, V. M. Desai and K. V. Rao. It appears that 0_ twenty-five bogus vouchers were issued in respect of these ten fictitious cases ; eleven accounts were fraudulently opened in different Banks in Bombay and mis.appropriation to the extent of Rs. 54,000/ has therebj been committed .. That, in substance, is the main charge which was levelled against tho three accused persons. Nine other subsidiary charges were also framed agaiust them .. Charges 2, 3 and 4 wore in respect of the inct1me-tax refund order issued on 1962 . '1 . G. Agarwal v. Stau of M~Mra~h,ra Cajtndra.(udkar J • 408 SUPREME COURT REPORTS [1963] the 7th January, 1955, in favour of Mr. G. M. Thomas. The prosecution alleged that by their several act!! in respect of the iBBuance of this re fund ordff, the three accused persons had commit ted offonc1·s under sections 467 and 471 road with B. 34 I.P.C., as well as section 5 ( 2) of the Preven tion of Corruption Act read with s. 5(l)(d) of the the Indian Penal Code. Raid Act and s. 34 of Similaily, charges 5, 6, and 7 were framed under tho same sections respectively in regard to the income-tax refund order iesued in favour of Mr. In regard G. M. Thomas on the 2nd April, 1955. to the income.tax refund order iBSued in favour of Mr. S. R. Bhandarkar on 2nd April, 1955, charges 8, !l and 10 were framed under the said respective is how the case against the three sections. That accused persons under ten charges w~s tried by the ~pccial Judge, Greater Bombay. It would thus be seen that, in suhstancr., the pros~cution case is that in order to carry out the criminBI objent of the conspiracy, the three acomed persons adopted a very clever and ingenious modus OJltrandi in defrauding the public treasury. They decided to take adequat.e steps to issue income-tax refund orders in tho names of non-existing perRons and to misappropriato the amounts by encashing the said refund certificates is•ued in pursuance of In furtherance of the tho said refund orders. conspir,.cy and in furtherance of the common inten tion of all the conspiratoTR, steps were ta.ken to forge the signatureil of the said fictitious persons as claimants wheruver necessary, to prepare som" of tho supporting documents and to deal with the cases as though th1•y weru cases of genuine 8.88etl8eo8 submitting a return and making a claim for refund. It is by adopting thi• clnver dovice that all tho accused persons have succeeded in misappropriating such a large amount as }{s. 54,000/-. • i

28.C.R. SUPREME COURT REPORTS 409 I96B M. G. Agarwal v. Stat1 of Maharashtra It appears that when a return or refund application is received in the Income-tax Office, it first goes to the assessment refund clerk who, in due course, puts it up for orders before the Income tax Officer. In ordinary course, the Income· tax Officer sends a notice to the assessee, examines him Gai•nd••t•dkar J. and the a.ccounts produced by him to see if the return is correct. That done, an assessment order is passed by the Income-tax Officer. Thereafter, a form known as I. T. 30 form is prepared. This form contains several columns which, when filled in, give details about the income-tax payable by the assessee, the t.ax paid - by him, the refund ordered by the Income-tax Officer or the co!Iection demanded by him. After this form is duly filled, it is sen.t to another clerk for preparing the refund order. At ~ that stage, the refund order ie prepared and the said order together with the demand and collection register and I.T. form 30 are sent back to the Income-tax Officer who examines the record and signs the refund order and the I.T. form 30 and himself makes or causes to be made an entry in the demand and collection register. At this time, he also cancels the refund certificates, such as dividend warrants. The Income-tax Officer also receives the advice memo prepared by the refund clerk and signs it. The said memo is sent to the Reserve Bank and the refund order is sent to the assessee. After the refund voucher is cashed by the Reserve > Bank, the advice memo is received back in the Income-tax Office. . It is thereafter that an entry is made in the Daily Refund Register. The prosecu tion case is that the conspirators puqiorted to adopt all steps which they deemed necessary to carry out their criminal obj~ct in order form'1,Jly to comply with the procedure prescribed by the department in making refund orders. At this stage, it is relevant to state briefly how, according to the prosecution, the fraud of the 1962 J./. G. A1arwal v. Stal• of M alvJrashJra Gajnodtagod}car J. 410 SUPREME COURT REPORTS [1963] conspirators was discovered. In April, 1955, Mr. Sundara.ra.ja.n who wa.e then the Commissioner of Income-ta.I, Bombay City received a. report that many irregularities were being committed in respect of refund orders issued by A-III Ward. On receiving this report, he told Mr. Gharpure who was the Inspecting Assistant Commissioner of Income-tax, A-Range, to carry out a.n inspection of the work of accused No. l. He, however, cautioued Mr. Gharpure to carry out his assiiµiment as if he was making a.n inspection in the normal course in order that no suspicion should arise in the mind of accused No. 1. Mr. Gharpure accordingly made inspection and submitted his report on the 6th June, is common ground that Mr. Gharpure was not able to discover a.nv fraud.

19515. It On the 10th June, 1955, Mr. Sundara.rajan asker! Mr. Gharpure to produee before him o.11 refund books kept in A-III Ward. They were accordingly produced before him. On examining those books, Mr. Sundara.ra.jan found certain sue· picious features. He came across one counter-foil of the refund order in the name of G. M. Thomas and he noticed that the relevant posts.I acknowledg ment did not bear any postal st&mp and presented a. clean and fresh appearance. That appeared to Mr. Sundararajan to be suspicious. He also found that a number of refunds were made in round figures which was very unusual. The files showed that on the back of the counter-foils the postal acknowledgments were not stuokup nor were advice notes stuck up. Hi• su•piciems having been raised by these unusual features of the files, Mr. Sunda.ra rajan conducted a further scrutiny of the six counter-foil books particularly to find out whether the refund orders were in respect of round figures and he found that such refund orders had been passed in the names of .Messrs G; M. Thomas, K. S. Patel, P. N. Swamy, D. N. Joshi and S. R. Bha.nda.rka.r. • • • ' .. 2 S.C.R. SUPREME COURT REPORTS 411 refund orders were encashed, After were sent to the Accountant-General's Office by the Reserve Bank and so, Mr. Sundararajan' thought that he could get them from the said office. All this happened in the evening of the 10th June, 1955. 1962 M. G. Agarwal •• State rif MaharaJht'a Gajendragadkar J. On the 11th June, 1955, which was a Satur day, Mr. Sundararajan called for the income-tax files of some of the persons named above including G. M. Thomas and K. S. Patel along with the files of twenty other regular assessees. The files of the twenty regular assessees were submitted to him but not of the ten fictitious persons. On enquiry, he was told that those files were not available. The non-production of the said files confirmed his sus picion that something irregular must have happened in respect of them. That is why he sent for accused No. 1 at 2 p. m. but he was not in his office. He came at 3 p. m. Mr. Sundararajan showed him the relevant counter-foils and e-.;amined him. The statement made by accused No. 1 was duly recorded by Mr. Sundararajan. · As a result of the enquiry made by him, Mr. Snndararajan was satisfied that the three accused persons had fraudulently brought into existence several docu ments as a result of which a large amount had been misappropriated, and so, he requested the Central Board .of Revenue to suspend accused No. 1. At that stage, Mr. Sundararajan naturally wanted to search the office of A-III Ward, but he could not carry out the search since he was t6ld that the· key of the A-III Ward Office had been taken away by accueed No. 3. instructions with the police guard of his office that nobody should be allowed to enter the room of A-III Ward without his permission. Next day, he attended his office but he found that no person in A-III Ward had gone to work. Before he left the office, he got the office of A· III Ward sealed and He then 1961 U, G. Ararwal v. Statt of MrzlinraJhtrr; 412 SUPREME COURT REPORTS (1963) )~ft word with the Inspector on duty that if any person came to work in that office thereafter, it should be reported to him. After Mr. Sundara· ra.ja.n rea.chod home, hn received a telephone message that accused No. 3 ha.d come to A·lII Ward Office with the keys. Mr. Sundarara.ja.n directed the Inspector to take charge of the keys from a.ccusod No. 3 and ask him to attend office the ' next day. Next day was a Monday (13·6-1955). On accompanied by that day, Mr. Sundararajan certain other officers went to the office of A.JI! Ward, op0ned the seal and the look and after going inside, attached six registers. He also ma.de a search for the aese88meut records of the ten persons in question but he did not find them. He then transferred accused No. 1 to an unimportant charge and instruct,(,'(f the Banks that no withdrawals should be allowed from any of the eleven acoounts, since the said accounts appeared to him to be ~uspicious. He then sent for aocused No. 3 and examined him. He also sent for accused N" o. 2 but he was not available since he had gone ou leave. He directed one of his inspectors to enquire whether the said ten persons were real persona or were merely ffotitious names. All this happened on the 13th June, 1955. On the 14th June, 1955, Mr. Sundararajan went to A-III Ward Office a.long with accused No. 3. He wanted to search for the missing papers, viz., the a.SBessment record of tho ten persons in question. Accused No. 3 waited for some time and then opened accused No. 2's table and took out some papers. A list of these papers was made and they were taken in charge. This list has been signed by l\Ir. Sundararaja.n snd the officers who accompani ed him as we 11 as by accused No. 3. Then after, a.caused Nos. 2 & 3 were ~usponded and as a result ! > .• ' ·.• 2 S.C.R. SUPREME COURT REPORTS 413 of the investigation which followed, all the three accused persons were put ·up for their trial before the learned Special Judge for Greater Bombay on the charges already indicated. ~ . ' . . . Before the learned trial Judge, accused No. 3 pleaded guilt to all the charges framed against him, whereas accused Nos. 1 and 2 denied that they had anything to do with the alleged commission of the offences charged. 1962 Ill. G. Agarwal v. StateCJj JyJ aharalh>ra Gaj~ndragadkar J. The prosecution sought to prove its case against all the three persons by producing before the learned trial Judge the relevant documents including the files kept in A-III Ward office, and it examined four witnesses from the department for the purpose of showing the procedure thatis follow- . ed in passing assessment orders and granting re funds and with the object of showing thnt the conspiracy could not have succeeded without the active assistance and co-operation of accused No. 1. These witnesses are Sundararajan, P. W. 1, Nag wekar, P. W. 2, Subramanian, P.W. 5 and Downak, P. W. 21. It also examined Das Gupta, P. W. 26, to prove the handwrjting of the accused persons. Eleven other witnesses were examined to prove the identity of accused Nos. 2 and 3 in respect of the steps taken. by them to open accounts in different banks in order to encash the refund vouchers issued in pursuance of the refund orders passed by accused No. 1. The learned trial Judge held that the evidence the prosecution did not establish adduced by beyond a reasonable doubt the existence of the criminal conspiracy between the three accused. He waA not inclined to hold that the ten alleged ·Even so, he proceeded persons were non-existent. to deal with the case on the basis that the ten persons were non-assesses and yet t.he refund orders bad been passed in their favour. According to the ' .. .. N., 0. A1arzcal Stal• of .Mahnra41Mru Gai•r.dt'ttgad~a, J. / 414 SUPREME COURT REPORTS [1963] learned trial .Judgo, accused :N"o. 1 may have inno cently signed relevant documents without looking to them in a hurry to dispose of cases, placing confidence in his staff, anrl so, it would be difficult to hold that bo was a member of tho con spiracy. The utmost, Mid the lea.mod ,Judge, that can be argued against him is that he was negligent. That is how he acquitted accused No. 1 of the principal charge of conspiraoy unckr section 120-B In s. .. d as a result, tho other charges as well. regard to accused No. 2, the learn~d Judge was likewise not satisfied that the evidence adduced by the prosecution to prove his signatures on the relevant documents established the fact that ho had signed thoso dooumente and ho was not impres· sed hy tho other ovidence led before him to show that he assisted acoused No. ;{ in the matter of el!.caahing the r"f1nd vouchers. On theRe findings, accused :N"o. 2 was acquitted of all the charges Since accused No. 3 had framed a.gainst him. pleaded guilty to the chargeR, the learned Judge convicted him under sections 4 71, of the I. P. C. and s. 5 ( 2) of the Prevention of Corruption Act and sentenced him to different terms of imprison· mont which were ordered to run concurrently. He, howtJvor, acquitted accused No. 3 so far as the charge of conspiraoy was concerned and he acquit· ted accused Nos. 1 and 2 of all the offences. Against the order of acquittal paRsed by the learned Judge in favour of acoused Nos. i and 2, tho State of ~faharasl>.tra preferred an appeal in tho Bombay High Co·1rt and this appeal succeeded. The High Court has found that the learned trial Judge mis'1irectod himself by assuming that accused No. l had pleaded that he had negligently signed the relevant documents and passed the relevant orders in a hurry, pll\cing confidenco in his staff. The High Coul't has pointed out that far from plead ing negligence, accused No. 1 had definitely ste.ted ' -- 1962 M. a. Agarwal v. State fJf Ma araihtra J ' ) .... ,....~ 2 s.c.R. SUPREME COURT REPORTS 415 in his written statement filed in the trial Conrt that before he directed the idsue of refund in the ten cases, he had examined' the files containing the supporting documents and had satisfied himself that it was proper to allow the refund in each one of those cases. This position was conceded by the learned Advocate who appeared for accused No. l in the High Court. The High Court then exam· ined the question as to wbethPr the ten assessees were existing persons or were fictitious names and it came to the OO!JOlusion that the ten names given for the ele'V'en accounts in which refund- orders were passed were fictitious names. The High Court then examined the oiroumstantial evidence on which t.he prosecution relied in support and proof of its main charge of conspiracy between the three accused persons and it came to the conclusion that the s'lid charge had been proved against all the three ac cused persons beyond a reas::mable doubt. That is how the High Court partially allowed the appeal preferred by the State and convicted all the three accused persons under section 1;!0-B of the Indian Penal Code. It also convicted accused No. 2 of the offences under ss. 467, 471, I. P. C., ands. 5(2) of the Prevention of Corruption Act. In regard to the other offences charged, the order of acquittal was confirmed. Having convicted accused Nos. I & 2 under section 120-B, the High Court has sentenced each one of them to suffer rigorous imprisonment for 18 months for the said orfence. Accused No. 2 i. has also been directed to suffer R.I. for 18 months in respect of ea.oh of the offences under ss. 467, 471, I. P. C. _ands. 5 (2) of the Prevention of Corruption Act. These sentences are ordered to run concur· rently with the sentence ordered under s. 120-B. It is against this order of conviction and sentence passed by the High Court in appeal that accused Nos. l & 2 have come to this Court by special leave by their appeals Nos. 1711 of 1959 and 40 of 1960. IHI M. G. At°"""I v. S1at1 "/ MaAarwAlra I ' 416 SlJPREME COURT REPORTS (1963) Since th 0 impugned ordtir of conviction and sentl noe was pass~d againbt the appellants by the High Court in exercis1· of its powers under s. 423 of the Criminal Procedure Code while hearing an appeal against their acquittal, the first question which calls for our decision relates to the extent of the High Court's powers in interfering with orders of acquittal in appeal. '1 his question has been discussed and considered in several judicial deci sions both by the .1-rivy Council and this Court. In dt1aling with the different aspects of the problem raised by the construotion of s. 423, emphasis has sometimes shifted from one aepeot to the other and tha.t is likely to crea.te a doubt about the true scope and effect of the relevant provisions contained in s. 423. Therefore, we propose to deal with point and state the position very brit fly. Section 423 ( l) presoribee the powers of the appellate Court in disposing of appeals preferred before it and clauses ta) and (b) deal with appea.la age.inst acquittals and appeals against oonviotione respectively. There is no doubt that the power oonferred by clause (a) which deals with a.n appeal against an order of acquittal is as wide as the power conferred by clause (b) which deals with an appeal age.inst an order of conviction, and so, it is obvious that the High Court's powers in dealing with crimi nal appeals a.re equally wide whether the appeal in question is one against acquittal or · against conviction. That is one aspect of the question. The other aepeot of the question centres round the approach which the High Court adopts in dealing with appeals against orders of acquittal. In dee.ling with suoh appeals, the High Court naturally bears in mind the presumption of innooonce in favour of an aocused person and cannot lose eight of the fact that the said presumption is strengthened by the order of aoquittal paeeed in hie favour by the trial Court and so, the fact that the aooused person is .,,_ ... 1901 II!. fJ. Agarwal v. State of M ahara•hlra OajendragadAar, J. 2 s.c.R. SUPREME COURT REPORTS 417 entitled to the benefit of a ri.•asonable doubt will always be present in the mind of the High Court when it deals witb the merits of t.he case. As an appellate Court the High Court is generally slow in disturbing the finding of fact recmded by the trial Uourt, partioularly when the said finding is based on an appreciation of oral evidence because the trial Court has the advantage of watching the demeanour of the witnesses who havt; given evi dence. · Thus, though the powers of the High Court in dealing with an appeal against acquittal are as wide as those which it has in dealing with an appeal against·conviction, in dealing with the former class of appeals, its approach is governed by the over· riding consideration flowing from the presumption of innocence. t)ometimes, the width of the power is emphasized, while on other occasions, the nec€s sity to adopt a ca:utious approach in dealing with appeals against acquittals is emphasised, and the emphasis is expressed in different words or phrases .wied from time to time. But the· true legal position is that however circumspect and cautions the app roach of the High Court may be in dealing with appeals against aoquittals, it is undoubtedly enti tled to reach its own oonclgsions upon the evidence adduced by the prosecution in respeot of the guilt or innocence of the acoused. J his position has been clarified by the Privy Council in Shoo Swarup v. The King Emperor (') and Nur Mohammad v. Emperor ('). · In some of the earlier decisions of this Court, however, in emphasising the importance. of adopt ing a cautious approach in dealing with appeals against acquittals, it was observed that the presump the order of tion of innocence is reinfor~d by ""·'( acquittal and so, "the findings of the trial Court which had the advantage of seeing the witnesses and h,earing their evidence can be reversed only for· (ll (1934) L.R. 61 I. A. 398. (2) A.I.R. 1945 P.C. 151. 1g61 M. G. Agarwal •• Stu~ oJ Maharar.\ha 418 SUPREME OOURT ~EPOR.TS [1963) very substantial and compelling rfasons": vide Surajpal Singh v. The Sllltc (1). Similary in Ajmer Singh v. SI.ate of Punjab('), it was obse1ved that the interference of the High Court in an appeal &!'&inat the or:ler of a.oquitta.1 would be justified only if there a.re "very snbetantia.1 and compelling rea9on1 to do so." In som(\ other decisions, it has been stated that an order of acquittal can be revenied only for "good and sufl'ioiently cogent reasons" or for "strong reasons". In appreciating the effect of these observations, it must be remembered that these observations were not intended to lay down a rigid or inflexible rule which should govern the decision of the High Court in appeals against a.oquit· ta.ls. They were not intended, and should not be read to have intended to introduce an additional condithn in clause (a) of section 423 ( 1) of the Code. All that the ea.id obeervationa a.re intended to em· pha.sise ia that the approa.oh of the High Court in dealing wi lb an appeal against acquittal ought to be oa.utious beoa.uee as Lord .RuBBell observed in the ca'l6 of Sheo Swa.rup, the preeumption of innooenoe in favour of the acoused "is not certainly weakened by the fa.ct that. he has been a.oquitted at his tri&I." Therefore, the test sug~ested by the expreBBion "substantial and compelling rea.sons" should not be construed as a formula which ha.a to be rigidly applied in every case. That is the effect of the recent decisions of this Court, for instance, in Sanwat Singh v. State of Rajaathan ('), and Harbana Singh v. The State of Punjab ('); and eo, it iR no' neceeea.ry that before reversing a judgment of a.o quittal, the High Court must neceeea.rily character ise the findings recorded thef!\io a.e perverse. There fore, the question which we have to ask ourselves in the present appeals is whether on the material produced by the prosecution, the High Court wae justified the conclusion reaching (2} (11153) S. C. R 4 IR. (4) (1'62) Supp. I S.C.R.. IOI. II I (IQ•') S.C.ll. 191!.. 201. \1961) SS C.R. Jiu. (3) • ,,,_ ... 1981 M. G.Agorw•I •• Stat, of Mah·:irashtra Gaj1nclra1adkar J. 2 S.C.R. SUPREME COURT REPORTS 419 prosecution case against the appellant.a ·had been proved beyond a reasonable doubt, and that the contrary view taken by the trial Court was errone· ous. In answering this question, we would, no doubt, consider the salient and broad features of the evidence in order to appreciate the grievance made by the appellants against the conclusions of the High (lourt. But under Art. 136 we would ordinarily be relucta.nt to interfere with the finding of fact recorded by the High Court particularly where the said findings are based on appreciation of oral evidence. There is ano~her point of law which must be considered before dealing with the evidence in this case. The prosecution case against accused No. 1 tests on circumstantial evidence. The main charge of conspiracy under section 120· B is sought to be established by the alleged conduct of the conspira· tors and so far as accused No. I is CClncerned, that rests on circumstantial <'vidcnce alone. It is a well established rule in criminal jurisprudence that cir cumstantial evidence can be reasonably made' the basis of an accused person's conviction if it is of such a, character that it is wholly inconsistent with the innocence of the accu•ed and is consistent only with his guilt. If the circumstances proved in the case are consisLent eithl'r with the innocence of the accused or with his guilt, then the accused is enti- tied to the benefit of doubt. There is no don bt or dispute about this, position. But in applying this principle, it is necessary to-OistinguiRh between facts which may be called primary or basic o~ the one band and inference of facts to be drawn from them on the other. In regard to the proof of basic or primary facts the Court has to judge the evidence in the ordinary way, and in the appreciation of evidence in respect of the proof of these basic or primary facts there is no scope for the application f- 1951 M. 0. A111rwal •• Stelt of M 111wJro1h'1 • 420 SUPREME COURT REPORTS [1963) of the doctrine of benefit of doubt. The Court con siders the l'vidence a.nd decides whether that evi dences proves a particular fa.ct or not. When it is he Id that a cqrta.in fact is proved, the question arises whether that fa.ct lea.de to the inference of guilt of tho accused person or not, a.nd in dealing with this the doctrine of benefit of aspect of tho problem, doubt would a.pply a.nd a.n inference of guilt ca.n be drawn only if the proved fact is wholly inconsistent with th" innocence of the accused a.nd is consistent only with his guilt. It is _in the light of this legs.I position that the evidence in the present oaae ha.a to be a.ppreciated. Tho Court then considered the evidence and the findings of the High Court a.nd dismissed the appeals. Appe.al8 dismissed. f •