IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 28TH DAY OF JUNE, 2017 :BEFORE:
THE HON’BLE MR.JUSTICE K.N. PHANEENDRA CRIMINAL PETITION NO. 560/2017 BETWEEN:
K. C. VEERENDRA S/O LATE CHANNABASSAPPA, AGED ABOUT 42 YEARS, OCC BUSINESS, R/AT “RATNA”, OLD TOWN, OPP: TO VEERABHADRASWAMY TEMPLE, CHALLAKERE, CHITHRADURGA- DIST - 577 522.
- PETITIONER (BY SRI. H. S. CHANDRAMOULI, ADV.) AND:
THE STATE OF KARNATAKA, BY CENTRAL BUREAU OF INVESTIGATION, ANTI CORRUPTION BRANCH, BENGALURU – 560 032.
- RESPONDENT (BY SRI. P. PRASANNA KUMAR, STANDING COUNSEL) THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 CR.P.C PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO QUASH THE FIR IN RC NO.26(A)/2016 OF CBI/ACB/BANGALORE REGISTERED FOR THE OFFENCE P/U/S 120B R/W 420,406,409 AND 477A OF IPC AND SEC.13(1)(c) & (d) R/W 13(2) OF PREVENTION OF CORRUPTION ACT PENDING ON THE FILE OF XXI ADDL. CITY CIVIL AND S.J. AND PRL. SPL. JUDGE FOR CBI CASES, BENGALURU (CCH-4), IN SO FAR AS PETITIONER IS CONCERNED.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 07.06.2017, COMING ON FOR ‘PRONOUNCEMENT OF ORDER’, THIS DAY AT DHARWAD BENCH, THE COURT MADE THE FOLLOWING:
ORDER This petition is filed for quashing of RC No.26(A)/2016 of CBI, ACB, Bengaluru, registered against the petitioner and others for the offences punishable under section 120B read with Sections 420, 406, 409 and 479A of IPC and also u/s.13(1)(C) and 13(1)(D) read with Section 13(2) of the Prevention of Corruption Act, pending on the file of the XXI Addl. City Civil & Sessions and Principal Special Judge for CBI Cases, Bengaluru (CCH-4).
2. Heard the learned counsel for the petitioner and the learned standing counsel for the respondent – CBI. Perused the records.
3. Before adverting to the specific stand taken by the petitioner and the grounds for quashing of the above said proceedings, it is just and necessary to have the brief factual matrix of the case:
As could be seen from the contents of the FIR, the Deputy Superintendent of Police, CBI, ACB, Bengaluru, received a reliable source information to the effect that, officials of some of the Banks such as SBI, SBM, ICICI, Kotak Mahindra and other public and private sectors situated in and around Challakere, Chitradurga District, are all performing the public duty in the wake of demonetization of specific currency notes of Rs.500/- and Rs.1,000/- as per the Government of India Gazette Notification No.2652 dated 8.11.2016 issued by the Ministry of Finance, Department of Economic Affairs and relevant RBI circulars issued from time to time. They have entered into criminal conspiracy with the petitioner herein by name Sri K.C. Veerendra and others by names Sri Thippeswamy and Sri Venkatesh, who are the residents of Challakere Taluk and unknown middlemen and agents have dishonestly and fraudulently facilitated exchange of Rs.5.76 crores of demonetized currency notes of Rs.500/- and Rs.1,000/- which ceased to be the legal tender with new currency notes of Rs.2,000/- and Rs.500/-, in gross violation of Government of India Circulars and Notifications.
4. On such source information and also on ascertaining truthfulness of the information, he also found that the above said Bank authorities, public sectors and private sector banks have connived with the petitioner Sri K.C.Veerendra and exchanged Rs.5.76 crores of demonitised old currency notes to the new currency notes of Rs.500/- and Rs.2,000/- between November and December, 2016 with the help of other two persons by names Thippeswamy and Venkatesh.
5. The source information further reveal that the officials of Income Tax Department, Hubli, have conducted searches at the residence of the petitioner Accused No.1 and seized new currency notes of Rs.2,000/- denomination amounting to Rs.5.76 crores from his possession. In fact, the said amount of Rs.5.76 crores of money was entrusted to the various Banks for distribution to genuine customers. But the said amount was fraudulently diverted, and misappropriated by the unknown officials of the Banks of SBI, SBM, ICICI, Kotak Mahindra and other public sector and private sector banks. Therefore, all the accused persons in connivance with some bank officials and in furtherance of their criminal conspiracy have mis-utilised the amounts in their respective Banks with that of new currency notes, which have been exchanged with the help of general public through Bank counters. Suspecting the above said acts of all the Bank authorities and as there is no explanation by the accused in this regard, the police have registered a case as noted above.
6. It is an undisputed fact that the currency notes worth Rs.5.76 crores have been seized from accused No.1 i.e., the petitioner herein. Apart from Rs.5.76 crores, the petitioner was also found with two lakhs of new currency notes of denomination of Rs.2,000/- which was also not explained as to how and in what manner, he acquired the said money. On these allegations, the respondent – police are investigating the matter and the investigation is in progress.
7. Now coming to the arguments advanced by the learned counsel Sri Chandramouli, for the petitioner, it is strenuously argued that, there cannot be any offence against the petitioner which can be invoked under the provisions of the Prevention of Corruption Act. Further, there is no semblance of material available against him sofar as Sections 406, 409 and 477A of IPC which are referable to criminal breach of trust by public servant or by a Banker, which is not at all attracted because no specific banker is named and in connivance between any specified bank and the petitioner is also not alleged or established in the FIR. The aforesaid provisions under the Prevention of Corruption Act is only applicable against a public servant and not against a private individual.
8. The learned counsel for the petitioner also contends that, petitioner is an Income Tax assessee. He has declared three crores cash in the year 2015. A raid was conducted and he has given proper explanation for the money seized from him. Even otherwise if such amount is seized by the income tax authorities which has already been returned to the RBI and the same cannot be the subject matter of the investigation in this case. He further contends that even if such money is found with the accused, it only attract the provisions of Section 69A of the Income Tax Act, for which penalty can be imposed and tax can be collected on that money and in no way it attracts the provisions invoked by the respondent police. Except Section 120-B and 420 of IPC, the other offences are not attracted though having huge cash found with the petitioner that itself will not constitute any offence. He further contends that for the purpose of exchanging the old currency notes of Rs.500/- and Rs.1,000/-, there is no restriction, the Government Notification also shows that any person can exchange the said money within the period specified by the Central Government in its Notification. He also relied upon the Notification issued by the Government through Ministry of Finance (Department of Economic Affairs) Notification, New Delhi dated 8.11.2016 in S.0.3407(E) wherein at paragraph 2, he drawn my attention, that the Government has extended the time for exchange of the said money upto 30th December, 2016 subject to certain conditions. He submits that after compliance of all conditions, the said money has been exchanged. Therefore, the accused has not committed any offence as alleged.
9. Per contra, Sri P. Prasanna Kumar, learned standing counsel for the respondent – CBI, has seriously contended that the matter is still at the FIR stage and on the basis of the FIR, the police have investigated the matter and collected sufficient materials, to connect the petitioner to the offences alleged. In spite of the best efforts by the police, the accused has not disclosed the source of the said money of Rs.5.76 crores seized from his custody and how and in what manner, the said amount has been exchanged. Further, added to that, he has personally exchanged an amount of Rs.2 lakhs but without there being any basis. The prosecution has to explain each and every bundle in Rs.5.76 crores after ascertaining from which Bank, those amount emanate. Therefore, at this stage, the court cannot interfere with the investigation by quashing the F.I.R. itself. He also submits that lot of investigation yet to be done. Therefore, within the month of October or November, the CBI would be able to submit the final report. Therefore, he contended that the petition deserves to be dismissed.
10. I have carefully perused the allegations made in the FIR as noted above while narrating the factual matrix of this case. It is specifically alleged that after the demonetization, the income tax authorities have raided the house of the petitioner and they have recovered an amount of Rs.5.76 crores of demonetized currency notes of Rs.500/- and Rs.1,000/- which ceased to be legal tender with new currency notes of Rs.2,000/- and Rs.500/-. Therefore, it becomes the duty of the Investigating Agency either to extract the information from the accused as to how he exchanged those notes by tendering and collected Rs.2,000/- and Rs.500/- new denomination currency notes or to investigate all the circumstances in this regard. Though it is argued before the court that the petitioner is a businessman and he has got lot of employees and those employees have collected those moneys and the said money has to be disbursed to the employees etc., But the specific source of that money and how it has been exchanged appears to has not been disclosed by the accused. In such an eventuality, it becomes the burden on the prosecuting agency to ascertain whether such a huge amount of Rs.5.76 crores can be released in favour of one person or it has been disbursed to different persons, if so by which of the Banks. There is a restriction in the Notification issued by the Government of India as noted supra, though the time for exchange of money was extended upto 30.12.2016, but there are certain conditions which are imposed for the exchange of those money which are:
(i) The specified bank notes of aggregate value of Rs.4,000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity;
(ii) The limit of Rs.4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this Notification and appropriate orders may be issued, where necessary;
(iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where the specified bank notes arte tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be Rs.50,000/-.;
(iv) The equivalent value of specified bank notes tendered may be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of Identity;
(v) the equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorization therefore accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering;
(vi) cash withdrawal from a bank account over the counter shall be restricted to Rs.10,000/- per day subject to an overall limit of Rs.20,000/- a week from the date of commencement of this Notification until the end of business hours on 24th November, 2016, after which these limits shall be reviewed;
(vii) there shall be no restriction on the use of any non-cash method of operating the account of a person including cheques, demand drafts, credit or debit cards, mobile wallets and electronic fund transfer mechanisms or the like;
(viii) withdrawal from Automatic Teller Machines (hereinafter referred to as ATMs) shall be restricted to Rs.2,000/- per day per card upto 18th November, 2016 and the limit shall be raised to Rs.4,000/- per day per card from 19th November, 2016;
(ix) any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it.
(emphasis supplied) - - -
11. Therefore, on perusal of the above said conditions, it is not that, without following any procedure Rs.500/- and Rs.1,000/- demonetized currency notes can be tendered and exchanged in the Banks and automatically a person can get the amount, but there are certain procedures to be followed even by the customer and as well as banking authorities, (underlined portions) who are at the helm of affairs with reference to exchange of the demonetized currency notes.
12. When a huge amount of Rs.5.76 crores have been seized from the custody of the accused and further amount of Rs.2 lakhs which has been exchanged by him personally, it exceeds the limit of Rs.4,000/- as noted in the above said Notification. Therefore, how these amounts have been exchanged, by whom and whether there is any fraud played by the customer for the exchange of money as against the rules or whether he connived with the bank officials for the purpose of exchange of such huge amount and whether Bank Officers are by violating the norms prescribed by the RBI have allowed the exchange of money or whether they have maintained such an account or followed such procedure as contemplated under the guidelines noted above, are all the factors that play a very important role to exactly ascertain the real intention of the customer and the banking authorities and also whether all these money which are meant for disbursing the amount amongst the public has been illegally siphoned out from the petitioner in connivance with the banks, have to be un- earthed during the course of investigation. Then only the Investigating Agency or the court may come to the conclusion as to what exactly the offences committed by the petitioner and as well as if there is any connivance or active participation is there by any of the banking authorities in such an eventuality, what offence the banking authorities have committed. Only after ascertaining all these things, the Investigating Officer may specifically say that what are all the offences which are actually committed by the customer and the banking authorities whether there was any intention of cheating the other public who are also entitled for exchange of their demonetized money. Therefore, all these things can only be done either by proper and correct information by the banking authorities or by the customers themselves. If the banking authorities do not come forward or the customers themselves do not disclose how they exchanged the demonetized currency notes with the regular new currency notes, then it becomes very difficult for the Investigating Agency to un-earth the truth on facts, that can only be done by means of collecting circumstantial evidence.
13. On reading the FIR as noted above, the overall understanding of the FIR shows that the police officers of CBI have suspected the conduct of the accused and as well as the banking authorities and suspected that they might have committed these offences.
14. Of course, there cannot be any allegations directly of offence sofar as the petitioner is concerned for the offence punishable under section 13(1)(c), 13(1)(d) and 13(2) of the Prevention of Corruption Act or u/s.405 and 409 of IPC at present. But whether he has also facilitated or abated those offences to be committed by the banking authorities has to be tested only after un-earthing the entire factual matrix involved in this particular case. Therefore, it is just and necessary to permit the Police to complete the investigation.
15. The learned counsel for the petitioner has relied upon a ruling reported in (2014) 11 SCC 74 between State through CBI, New Delhi Vs. Jitender Kumar Singh, wherein the Hon'ble Apex Court has observed that the provisions of Sections 7, 10, 11 and 13 of the Prevention of Corruption Act, is only applicable to public servants. Those offences can only be committed by a public servant though an offence u/s.7 can also be committed by a “person expecting to be a public servant”.
Relying upon this, the learned counsel wants to submit that the petitioner is not a public servant not expecting to be a public servant. Those provisions are not applicable.
16. As I have already noted that it is not that he alone can commit the offences u/s.13(1)(d) or (c) of the Prevention of Corruption Act. If he facilitates or assists the public servant in committing such an offence, then also he will be caught u/s.12 of the Prevention of Corruption Act. If many number of accused persons are involved, at the stage of FIR itself, it cannot be bifurcated or specifically mentioned who actually committed which offence, that can only be done after thorough investigation and at the time of filing charge sheet and framing of charges. Therefore, it is too premature stage to draw an inference as to whether the petitioner has committed any offence or not that can only be considered after thorough investigation.
17. In this regard, it is worth to mention here some of the decisions of the Hon'ble Apex Court.
In a decision of R. Venkatkrishnan Vs. Central Bureau of Investigation reported in (2009) 11 SCC 737, the Hon'ble Apex Court has observed at paragraph 72 that– “Criminal conspiracy in terms of Section 120-B of the Code is an independent offence. It is punishable separately. Prosecution, therefore, must prove the same by applying the legal principles which are applicable for the purpose of proving a criminal misconduct on the part of an accused. A criminal conspiracy must be put to action and so long a crime is merely generated in the mind of the criminal, it does not become punishable. Thoughts, even criminal in character, often voluntary, are not crimes but when they take concrete shape of an agreement to do or cause to be done an illegal act or an act which is not illegal but by illegal means then even if nothing further is done, the agreement would give rise to a criminal conspiracy.”
18. To this case if the above principle is applied and if there is any contract or understanding between the petitioner and the bank authorities have to be tested by means of thorough investigation and if that crime is illegal and that agreement would give rise to criminal conspiracy or not, it can be ascertained only after the investigation.
19. In another ruling reported in (2005) 13 SCC 540 between State of Orissa and another Vs. Saroj Kumar Sahoo, wherein the Hon'ble Apex Court at paragraph 11 has observed that:
“Inherent powers should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the Court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material.”
20. In connection with the same, it is also worth to note here another ruling of the Hon'ble Apex Court reported in (2007) 12 SCC 93 between T. Vengama Naidu Vs. T. Dora Swamy Naidu and Others, wherein the Hon'ble Apex Court at paragraph 7 has re-iterated that – “It is settled law that an FIR and consequent investigation cannot be quashed unless there is no offence spelt out from the same. The law in this respect is settled that the said FIR has to be taken on its offences complained of. There was no question of considering the merits of the allegations contained in FIR at that stage or testing the veracity of allegations and the court should not normally quash the FIR when the FIR was filed long back and investigation has been in progress.”
In another ruling reported in 2010 SCC 488 between D.Venkatasubramaniam and Others Vs. M.K. Mohankrishnamachari & another, wherein the Hon'ble Apex Court has laid down the principle that – “FIR cannot be quashed in a criminal case, when the investigation is in the midst. Whether the material already in existence or to be collected during the investigation can be sufficient for holding the accused persons concerned guilty has to be considered at the time of framing of charge, it can also be decided whether prima facie case has been made out showing commission of offence and involvement of the charged person. At the stage of FIR, the court cannot go into meticulously with regard to the each and every sentence and word of FIR to ascertain whether it attracts any of the penal provisions or not.”
21. On overall looking to the above said principles laid down by the Hon'ble Apex Court applying to the facts of this particular case as I have already narrated that the investigation is in the half way and the police have collected certain material according to the prosecution and they yet to collect some more materials in this regard. The court cannot quash the entire FIR without ascertaining as to what are all the other materials collected by the police.
22. Further added to that, it is not the stage where the court has to meticulously word by word or sentence by sentence read the FIR isolatedly in order to apply the definition of penal provisions and to find out whether exactly any offence is alleged, but it is the overall reading of the FIR if the courts is of the opinion that some semblance of allegations are there which broadly make out a case for investigation or sufficient to create suspicion of having committed any offences, the same has to be thoroughly investigated, such investigations should not be stifled by quashing the FIR. In this case also, I am of the opinion that on overall reading of the FIR, it gives an indication that there are certain allegations against the petitioner that he colluded with the bank officials in order to siphon out the new currency notes on exchange of demonetized currency notes. In such an eventuality unless and until the investigation is completed, the court may not be in a position to ascertain what exactly the offences committed by the petitioner and other accused persons.
In the above said circumstances, I do not find any strong reasons to entertain the petition and quash the FIR. Hence, the following:
ORDER The petition deserves to be dismissed. Accordingly, dismissed.
PL*/bvv Sd/- JUDGE