JOSEPH ALAPPAT Vs. CBI COCHIN

JUDGEMENT

(1.) IN this appeal filed under Sec.374 (2) Cr.P.C. the appellant who was the first accused in Crime No. RC 2(A)/91 of the Special Police Establishment , CBI, Cochin and the sole accused in C.C. 14 of 1996 on the file of the Court of the Special Judge (SPE/CBI) - 1, Ernakulam, challenges the conviction entered and the sentence passed against him for offences punishable under Sec. 120 B read with Secs. 420, 468 and 471 I.P.C. and Sec. 13 (2) read with Section 13 (1)(d) of the Prevention of Corruption Act, 1988 ("the P.C. Act" for short).

(2.) THE case of the prosecution can be summarised as follows:- During the period 1988-1990 he first accused (Joseph Alappatt) was working as the Manager of the Quilon Branch of the Punjab National Bank (PNB for short). Some time in October, 1989 A1 & A2 (H.M. Shahabhuddin-Managing Partner, M/s. Barrels and Metals, Quilon), Shine Cottage, Pallithottam and now residing in Flat No. 5, Ponnamma Amma Bhavan, Kochupilamood, Quilon - 6 entered into a criminal conspiracy to cheat PNB, Quilon In pursuance of the said conspiracy, on 21-10-1989 A2 submitted a false loan application before A1 for a term loan of ` 75,000/- and cash credit limit of ` 3,00,000/- in the name of his unit Barrels and Metals. THE term loan was for purchasing machinery for reconditioning empty barrels. Along with the loan application A2 had enclosed a forged quotation from a fictitious and non- existing firm by name M/s. Mohamamed Ismayil, Chinnakkada, Madurai for ` 97,225/- for the supply of drums, hydraulic testing unit with hydraulic water pressure pump, gas welding unit etc. Knowing fully well that the loan application was false and the quotation submitted along with the loan application was forged, A1 sanctioned the term loan and cash credit limit on the same day by abusing his official position as public servant in order to obtain pecuniary advantage to A2 . A2 utilised the help of one Nawas, S/o. Fakkir Muhammed through M/s. Bakyia Finance, Madurai. A1 who was a public servant employed as the Manager of PNB by corrupt or illegal means or by otherwise abusing his position as such public servant had obtained for A2, pecuniary advantage to the extent of ` 75,000/- by sanctioning the loan amount knowing fully well that the loan application was false and the forged quotation was from a non-existing and fictitious firm by name M/s. Mohammed Ismayil, Madurai. A1 had allowed A2 to transfer ` 31,947/- from the cash credit loan amount to facilitate A2 to raise the margin money purportedly for the purchase of the said machinery and had also handed over to A2 directly a demand draft for ` 106947.50 issued in favour of M/s. Mohammed Ismayil without crossing the Demand Draft so as to facilitate A2 to encash it. A2 thereafter encashed the D.D. without utilising the amount for purchasing machinery as stated in the loan application. A1 A2 have thereby committed offences punishable under Section 120 B read with Sections 420 , 468 and 471 I.P.,C. and Sec. 13 (2) read with Sec. 13 (1) (d) of the P.C. Act.

(3.) AFTER the close of the prosecution evidence, the appellant was questioned under Sec. 313 (1)(b) Cr.P.C. with regard to the incriminating circumstance appearing against him in the evidence for the prosecution. He denied those circumstances and maintained his innocence. He had the following to submit before the trial court:- Duties such as inspecting the units of the borrower and supplier, preparing the confidential report of the borrower and the guarantor, preparation of the agreement of guarantee for term loans and cash credit, preparation of the limit proposal for the term loan and cash credit etc. were all the delegated pre-sanction duties of the loans officer who at the relevant time was P.W. 6 (Ayyappan) . He never had any occasion to doubt the integrity or honesty of P.W.6 while he was working under him. P.W.6 had 2 = years of experience in the loan Section of the Trivandrum Branch of PNB before he joined the Quilon Branch. The post sanction inspection also was the duty of the loans officer as per the office orders issued by the Bank. When he joined the Quilon Branch it was only a Scale - II Manager's Branch. As a result of his work , the Quilon Branch which was only a Scale - II Manager's Bank was first upgraded as a Scale -III Manager's Branch and soon a Scale - IV Manager's Branch. During his tenure in that branch a loan of Rs. 28 crores which was sanctioned by the head office to the Kerala Cashew Development Corporation was to be released through the Quilon Branch and as per the orders of the head office he was to personally inspect all the 36 factories of the KSCDC every fifteen days . KSIDC used to submit foreign bills for ` 40 lakhs and if anything went wrong in the verification of the bills , he would be held responsible by the Bank as he had signed all the bills for the Bank. The Bank was given a target of more than three crores of rupees in the priority sector loans to be achieved by him before the end of March 1990. When he had such a heavy workload in the Quilon Branch, it was not possible for him to achieve the heavy target of priority sector loans without the help of the loans officer in whom he reposed complete confidence. But he personally ensured that all the loans were covered by collateral security worth more than the loan amounts . When P.W.6 the loans officer conducted the pre-sanction inspection, studied the audited balance sheet of the borrower and found out that the party had sufficient means and had recommended the loan for his sanction, he had done so in good faith. The application for the cash credit and term loan was submitted to the loans officer one month before the sanction of the loan. Thereafter the bank had taken the valuation report and legal opinion from the concerned authorities. The loans officer had filled up the date in the blank loan application on behalf of the borrower at the time of preparing the loan documents. He had put the same date for the sanction of the loan also. This does not mean that the loan was sanctioned on the same day on which the loan application was submitted. The project report was submitted along with the loan application by the party to the loans officer. It was the duty of the loans officer to verify whether the project report was signed by the borrower. The Manager cannot verify each and every document in such a big branch. The value of the land and building offered as collateral security belonging to Muhammed Kunju and Fathima Kunju exceeded more than Rs. 8 lakhs . The same property was offered as security for Shangrilla Paints Products which was a sister concern of barrels and metals. The term loan amount given to Shangrilla Paints Products was only Rs. 1.50,000/-. The Bank usually allows offering the same collateral security for two loans in the value of the security covers both the loans. It was the loans officer who had filled up the loans papers by verifying the documents including the quotation and project report submitted by the borrower. He had never asked P.W.6 (Ayyappan) to fill up the documents and recommend the loan . If he had forced P.W.6 to prepare the documents and recommend the loan, P.W.6 could have recorded the same in the Deviation Register and informed the Regional Office. P.W.6 did not do so . He had not mentioned about it in the statement given by him to P.W.2 Prasad who conducted the inspection. P.W. 10 (Navas) who is the endorsee of Ext.P34 Demand Draft has stated that he does not know who the payee Muhammed Ismail was . So P.W.10 was taking a draft from a person without knowing who that person was. He would further say that there was a signature on the draft when it came to his possession and that he does not know whose signature it was or the person who had signed on the reverse of the Demand Draft. He was presenting the Demand Draft for payment through the Lakshmivilas Bank which had a duty under the negotiable Instruments Act to verify and find out the genuineness of the payee as well as endorsee thereunder. The CBI never questioned Shahabhuddin (A2) about the genuineness of the certificate and they were completely relying on P.W.10 who had encashed the D.D. without knowing the payee or the endorsee . If according to P.W.10, there was no person as Muhammed Ismayil known to him, then how could he take a D.D. payable to Muhammed Ismayil and get it encashed through a bank with the help of Bakya Finance. He had taken collateral security of landed property covering more than the loan amount and had issued the draft. Thereafter it was the duty of the loans officer to get the draft crossed and to send it along with a covering letter by registered post to the supplier. If such a thing had not happened , then it was P.W.6 Ayyappan and not the Manager who was responsible for the lapse. In fact, sending the Demand Draft by Registered Post is a clerical duty which had to be supervised and checked by the loans officer. The Manger had only over all responsibility and he in his capacity as the Manager had protected the Bank's interest by taking collateral security . He has been prosecuted without any just ground.