N.S. SUHAS v. THE STATE OF KARNATAKA

Being aggrieved by the same, appellants are before this Court on the following grounds:  That the findings given, conclusion arrived at, decision taken and the very judgment/order of conviction and sentence passed by the Learned Sessions Judge, to the extent challenge herein are totally arbitrary, erroneous and opposed to law 12 equity and justice and the same are liable to be set aside and limine  That the Learned Sessions Judge has totally erred in not appreciating the oral and documentary evidence on record. The misinterpretation and misreading of evidence and record has resulted in erroneous conviction and sentence, by the Sessions Judge. Therefore the judgment of conviction and sentence are liable to be set aside on this ground alone.  The Learned Sessions Judge has totally erred in not understanding and appreciating that the complaint has failed to establish the essential ingredients of Sec.420 and 120 B of the Indian Penal Code and as such the Judgment / Order of conviction and sentence passed by the Sessions Judge are liable to be set aside.  That learned Sessions has not properly appreciated the material evidence on record and has totally gone wrong in holding that the offences are proved against the appellants.  That in as much as it has been admitted by the complainant that sufficient financial security and surety were supplied by the appellants in time and that it could not have been the case of a fraud or cheating, the appellants ought to have been acquitted by the learned Sessions Judge, 13  The essential element of criminal conspiracy contemplated under Sec.120B and dishonest intention to cheat or dishonest intention of inducing some other person to deliver the property contemplated under Section 420 of IPC have not been brought home by the complainant and therefore it is a case of clear acquittal which the Sessions Judge has failed to appreciate.  In as much as all the financial status and property details, details of the loan accounts, the balance sheets of tax payments and also loss and profit accounts were placed before the Bank before the sanction of loan and because the said financial status was accepted for the purpose of grant of loan, the appellants cannot be held to have committed the said offences since it does not bring about the essential ingredients of dishonest intention right from inception. Therefore in view of the law laid down by the Hon'ble Supreme Court of India in the absence of dishonest intention at the inception, the order of conviction and sentence passed by the learned Sessions Judge are not sustainable in law and the same are liable to be set aside  The learned Sessions judge has blindly held that the appellants have gone against, banking norms, circulars and also guidelines without actually referring to any particular guideline or a circular and 14 therefore the conviction based on this is contrary to  The learned Sessions Judge has ignored number of vital admissions made by PW.3, 4 and 5 and even other witnesses which have given a clear go bye to the original case of the complainant.  That the learned Sessions Judge has totally erred in holding that the discounting of the cheque by the second appellant under Ex.P7(c) to P7(t) of the same amounts to conspiracy between the accused persons.  The Court below has totally erred in holding that a cheque for Rs.1,16,979/- was discounted and it was dishonored whereas no such cheque was either discounted or returned unpaid The Court also failed to note that a cheque for Rs,2,60,000/- was discounted on 6.2.2001 under LCDB 1752, that the said cheque was dishonored as per Ex.P7(k) on 9,2.2001 But it was represented for collection under LCDB 1769 on the very same day i.e., 9,2.2001 and it got encashed.  That the learned Sessions Judge has totally ignored very important fact that large amounts are being credited by the appellants in the bank account, the appellants have been honest and loyal in their payments and above all no loss has occurred to the bank in the said transaction. 15  That the evidence produced by the complainant Manager is totally opposed to the mandatory provisions of Banker's Book Evidence Act which the learned Sessions Judge has failed to appreciate.  The Court below has failed to appreciate that out of 86 cheques/instruments discounted only 6 have been dishonored and later 2 of the said dishonored cheques have been honored later. Therefore the finding of the Sessions Judge that permitting discounting of cheques frequently in spite of dishonor shows complicity and meeting of minds is wholly illegal and perverse  The Trial Court has failed to understand the difference between "discounting of a cheque" and "cheque given for collection in clearing" and has misdirected itself leading to the conviction of the accused.  That vital contradictions in the depositions and statements of the prosecution have been brushed aside and ignored by the learned Sessions Judge and therefore the conviction and sentence are liable to be set aside even on this ground also.  The Officer concerned/Senior Manager who has taken spot inspection of the loan application forms of the appellants has completely examined the state of affairs of the appellants with respect to the loans, drawings and repayments. The said officer has 16 certified that the accounts are proper and he has also recommended for the grant of the loan. Therefore the appellants cannot be blamed for the same especially when their involvement in the same is not proved as per law  That the learned Session Judge has totally erred in not noticing that the Manager who sanctioned and permitted the availing of the loan had the power limit upto Rs.25 Lakhs and that he has sanctioned only Rs.13,47,042/ -. This itself shows that the appellants have enriched themselves with exorbitant loan.  The clear and vital admissions of the witnesses on the part of the Canara Bank that they are not able to say whether bank has suffered loss in the said transaction of grant of loan to the appellants, has been totally ignored by the learned Sessions Judge. It is submitted that even otherwise the allegation of loss even if proved cannot entitle the judge to run with idea that it is a case of cheating and criminal conspiracy. Therefore the finding of the judge requires to the set aside on this ground also.  In as much as the security given by the appellants are intact and because they have deposited huge amounts on several occasions and because the transactions were homely and co-extensive, cannot be a case of intention to cheat, which the 17 learned Sessions judge has failed to appreciate. It has to be a case for noting that illegal diversion tunes to Rs.4 Lakhs whereas the deposit by the appellants is above Rs.19laks. Therefore cheating by the appellants is beyond imagination.  That the judgments and the decrees of the competent Civil Courts made in O.S.Nos.2832/2004, O.S.No.7018/2004 and O.S.No.495/2008 amply prove that the appellants are good customers and the bank itself owes certain amounts to the second appellant and that the entire transaction at best would go to make out a civil liability and that the complainant cannot knock the doors of the Criminal Courts in the said regard.  That the learned Sessions Judge has gone into serious error in passing the order of conviction and sentence against the appellants, when commission of the said offences by the appellants has not been proved beyond all the reasonable doubt by the prosecution.  That the law laid down by this Hon'ble Court and also the Hon'ble Supreme Court of India on various important aspects touching the said offences, has been ignored and not followed by the learned Sessions Judge and therefore the judgment and order of conviction and sentence passed by the Spl. 18 & Sessions Judge require to be set aside by this Hon'ble Court in the above appeal.”

#19. Sri S.P.Kulkarni, learned Senior Advocate representing the appellants contended that the material evidence on record is wrongly interpreted by the learned Special Judge in the impugned judgment while convicting the appellants, resulting in miscarriage of justice and sought for allowing the appeal.

#20. He further pointed out that valuable admissions elicited in the cross-examination of prosecution witnesses is totally ignored by the learned Special Judge while recording an order of conviction resulting in miscarriage of justice.

#21. He further argued that dishonest intention to commit the fraud must be available at the inception and from the material evidence on record prosecution has to establish the same. Unless such intention is established, there cannot be conviction either for the offences under the 19 provisions of the Prevention of Corruption Act or for the offence punishable under Sections 120B and 420 of the Indian Penal Code. Therefore, the impugned judgment is based on surmises and conjectures and sought for allowing the appeal.

#22. He further pointed out that the suit filed by the appellants in O.S. No.495/2008 against the Bank got decreed which would establish that there was no cheating or misrepresentation committed by the appellants and thus sought for allowing the appeal.

#23. He further pointed out that prosecution witnesses categorically admitted that all the loans were secured and there was no loss caused to the Bank and, accused No.1 had the power to sanction the loan and as such, there is no material on record which would warrant recording an order of conviction and therefore, impugned judgment is bad in law. 20

#24. He also points out that even though there are allegations that sanctioned loan amounts were diverted, no such material evidence is placed on record and there is no document to show that there was a loss caused to the Bank to the tune of Rs.65,00,000/- and thus, the ingredients required to establish the offence punishable under Sections 120B and 420 of the Indian Penal Code are not proved by the prosecution and sought for allowing the appeal.

#25. Much emphasis was laid by the learned Senior Advocate on the material on record to establish that value of collateral security was more than the loan amount and the rules and regulations of the Bank having not been produced and marked, case of the prosecution ought to have been dismissed by the learned Special Judge and acquitted the appellants . 21

#26. In support of his arguments, learned Senior Advocate placed on record the following judgments, wherein, it has been held as under: Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8 SCC 293

#12. From the decisions cited by the appellant, the settled proposition of law is that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In other words for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code, 1860 can be said to have been made out. Sujit Biswas v. State of Assam, (2013) 12 SCC 406

#13. Suspicion, however grave it may be, cannot take the place of proof, and there is a large difference between something that “may be” proved, and something that “will be proved”. In a criminal trial, suspicion no matter how strong, cannot and must not be permitted to take place of proof. This is for the reason that the mental 22 evidence produced distance between “may be” and “must be” is quite large, and divides vague conjectures from sure conclusions. In a criminal case, the court has a duty to ensure that mere conjectures or suspicion do not take the place of legal proof. The large distance between “may be” true and “must be” true, must be covered by way of clear, cogent and unimpeachable prosecution, before an accused is condemned as a convict, and the basic and golden rule must be applied. In such cases, while keeping in mind the distance between “may be” true and “must be” true, the court must maintain the vital distance between mere conjectures and sure conclusions to be arrived at, on the touchstone of dispassionate judicial scrutiny, based upon a complete and comprehensive appreciation of all features of the case, as well as the quality and credibility of the evidence brought on record. The court must ensure, that miscarriage of justice is avoided, and if the facts and circumstances of a case so demand, then the benefit of doubt must be given to the accused, keeping in mind that a reasonable doubt is not an imaginary, trivial or a merely probable doubt, but a fair doubt that is based upon reason (Vide Hanumant Govind and common sense. Nargundkar v. State of M.P. [(1952) 2 SCC 71 : AIR 1952 SC 343 : 1953 Cri LJ 129] , State v. Mahender Singh Dahiya [(2011) 3 SCC 109 : (2011) 1 SCC (Cri) 821 : AIR 2011 SC 1017] and Ramesh Harijan v. State of U.P. [(2012) 5 SCC 777 : (2012) 2 SCC (Cri) 905] ) ORDER (i) Criminal Appeal is allowed in part. (ii) While maintaining the conviction of the appellants the offences punishable under Sections 120B and 420 of the Indian Penal Code, sentence ordered by the learned Special Judge is modified as under: (a) Simple imprisonment of 3 years and 2 years ordered the offences punishable under Sections 120B and 420 of IPC respectively is hereby set- aside by enhancing the fine amount in 99 a sum of Rs.4,50,000/- (plus Rs.25,000/- each for the offences punishable under Sections 120B and 420 IPC, in all Rs.5,00,000/-) payable by each of the appellants. (b) Enhanced fine amount is to be paid on or before 15th March 2025 failing which appellants shall undergo simple imprisonment as ordered by learned Special Judge impugned judgment. (iii) Office is directed to return the Trial Court Records with copy of this Order forthwith, for issuing modified conviction warrant. (V. SRISHANANDA) JUDGE Sd/-