M. Gopalakrishnan vs State By Addl. S.P. Cbi, Bs&Fc Bangalore

State by Addl. S.P. CBI, B.S. & F.C., Bangalore ....Respondent

WITH

Criminal Appeal No.274/2009 @ SLP(Crl.) No. 2687 of 2007 Criminal Appeal No. 277/2009 @ SLP(Crl.) No. 2848 of 2007 Criminal Appeal No.278/2009 @ SLP(Crl.) No. 2912 of 2007 Criminal Appeal No.279/2009 @ SLP(Crl.) No. 2913 of 2007 Criminal Appeal No.280/2009 @ SLP(Crl.) No. 2923 of 2007

JUDGMENT

Dr. ARIJIT PASAYAT, J.

1. Leave granted in Special Leave Petitions.

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2. Challenge in all these appeals is to the order passed by a learned

Single Judge of the Madras High Court in each case dismissing the

application under Section 482 of the Code of Criminal Procedure, 1973 (in

short the `Code'). Stand of the appellant is that there was no sanction for

prosecution as contemplated under law.

3. Background facts in a nutshell are as follows:

The respondent/complainant on credible information registered a case

against the appellant and others for the alleged commission of offences

punishable under Section 120B of the Indian Penal Code, 1860 (in short the

`IPC') read with Section 420 IPC and Sections 11, 12, and 13(2) read with

section 13(1)((d) of the Prevention of Corruption Act, 1988 (in short the

`PC Act'). On the basis of the First Information Report when investigation

proceeded it disclosed the commission of the offences, as aforementioned,

resulting in filing of a final report followed by taking cognizance of the case

by the court concerned.

The respective stands of the parties before the High Court were as

follows:

2 The appellant filed a petition under Section 482 of the Code to quash

the proceedings since in the absence of any sanction under Section 197(1)

(a) of the Code, the cognizance taken by the Court is illegal and invalid

since he is a public servant. It is the further case of the appellant that though

he was the Chairman and Managing Director of the Company with over all

control, the sanction of credit facility was not directly connected with him

and in this view he should be absolved from all the charges. It was further

submitted that there is no allegation that the appellant as public servant

obtained pecuniary advantage while holding office as public servant and in

this view the charges against him are untenable. On the above basis, it was

claimed that proceedings against him should be quashed.

The respondent-State opposed the application contending that

sanction to prosecute the appellant is not necessary under the facts and

circumstances of the case and the same also could be decided even at the

time of the trial.

The final report reads:

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"That accused M. Gopalakrishnan (A1) while functioning as the

Executive Director and Chairman and Managing Director, Indian Bank

connived to commit criminal misconduct by public servants by corrupt or

illegal means or by abuse of their official position as public servants or they

while holding office as public servants without any public interest obtained

for themselves or for any other person any valuable thing or pecuniary

advantage by recommending/sanctioning credit limits without proper

appraisal, ignoring banking norms, RBI guidelines, exceeding delegated

powers, violating board directions despite glaring adverse features in the

conduct of the account, without ensuring proper end use of funds and

safeguarding the interest of the Bank by A1 to A4 the public servants, viz.

M. Gopalakrishnan (A1) and N. Kumaraswamy (A2) named above to accept

or obtain for themselves or for their close relatives viz. A18 to A20 named

above valuable thing without consideration from persons whom they knew

to have been concerned in business transacted by them or having any

connection with the official functions of themselves or from any person

whom they knew to be interested in or related to the person so concerned

and the accused R. Ramesh (A18), T.S. Jayakumar (A19) and Kala

Kumaraswamy (A20) to abet the aforesaid offences of public servants

obtaining valuable thing without consideration from persons concerned in

4 business transaction by them by accepting Rs.15 lacs and Rs.5 lacs in

demand drafts and an Ambassador Nova Car, respectively. Thus the accused

A1 to A20 committed offence punishable under Sections 120B read with

Section 420 IPC and Sections 11, 12, 13(2) read with Section 13(1)(d) of

PC Act.

4. Thus it is seen the capacity or the position of the appellant as that of

public servant is an admitted position. In the ordinary course in order to take

cognizance of a case against a public servant subject to certain other

conditions as said in Section 197 of Code a sanction is a must as held by

this Court in Mohd. Hadi Raja v. State of Bihar (AIR 1998 SC 1945). In the

above decision it is observed as follows:

"For the purpose of requirement of sanction under Section 197 of the Code the accused will be such public servant who cannot be removed from his office except by or with the sanction of the Government. Further, the accused will not only be a public servant of above description but the offence alleged to have been committed by such officer must have been committed while such public servant had been acting or purporting to act in the discharge of his official duties."

5. As far as the second part is concerned in this petition we are not very

much concerned since on that ground discharge or quashing of the

5 proceedings was not urged. In this view, High Court held that though the

appellant is described as a public servant it has to be seen whether he comes

within the meaning of "such public servant who cannot be removed from his

office except by or with the sanction of the Government".

6. As revealed by the records the appellant was appointed as per the

Notification dated 8.12.1988 as Managing Director of the Indian Bank from

the date of his taking the charge to be the Chairman of the Board of

Directors of the Indian Bank with effect from the same date. This

notification says that the Central Government after consultation with the

Reserve Bank of India had appointed the appellant. On this basis learned

counsel for the appellant submitted that the appointment of the appellant as

Managing Director-cum-the Chairman of the Board of Directors was only

by the Central Government and the Central Government alone should have

power to remove him from the service thereby taking the accused within the

ambit of Section 197 of Code.

7. Nationalised Banks (Management and Miscellaneous Provisions)

Scheme 1970 defines "Chairman" under Rule 5(1) as follows:

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"Chairman (1) the Central Government shall, after consultation with the Reserve Bank appoint one of the Directors to be the Chairman of the Board."

8. According to Rule 7 of the Scheme:-

"The Central Government may, after consultation with the Reserve Bank appoint the same person to hold, at the same time both the office of the Chairman and the Managing Director".

9. When it comes to terms of office and remuneration etc. Rule 8(1)(a)

reads:

"Notwithstanding anything contained in sub-clause (1), the Central Government shall have the right to terminate the term of office of a whole time Director, including the Managing Director, at any time before the expiry of the term specified under that sub-clause by giving to him a notice of not less than three months' in writing or three months' salary and allowances in lieu of notice and the whole time Director, including the Managing Director shall also have the right to relinquish his office at any time before the expiry of the term specified under that sub-clause by giving to the Central Government notice of not less than three months in writing."

10. In the same manner, Section 8(4) reads:-

"The Central Government may, if it is satisfied that it is expedient in the interests of the nationalized bank so to

7 do, remove a whole time Director including the Managing Director from office."

11. The above provisions are relied on to say that appellant is a public

servant removable only by the Central Government.

12. The above provisions as well as the notification relied on by the

appellant would indicate as if he was appointed by the Central Government,

thereby impliedly saying that he could be removed only by the Central

Government. If this position is correct then the sanction contemplated under

Section 197 of Code should come to the aid of the appellant and if there is

no sanction, taking cognizance of the case may be against the provisions of

the law.

13. The learned counsel for the respondent submitted that under the

Banking Regulation Act, 1949 the Chairman of a Banking Company is

appointed only by the Reserve Bank of India and the Reserve Bank of India

alone is the competent authority to remove the Chairman and in this view

though the appellant is described as a public servant he will not come within

the phrasing contemplated under Section 197 of Code requiring sanction

since the Central Government is not concerned for his removal.

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14. Section 10(bb) of the Banking Regulation Act says:

"Where the office of the Chairman of the Board of Directors appointed on a whole time basis or a Managing Director of a Banking Company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the Banking Company, appoint a person eligible under sub- section (4) of Section 10-B to be so appointed to be the Chairman of the Board of Directors appointed on a whole time basis or a Managing Director of the Banking Company, he shall so long as the person so appointed is not a Director of such Banking Company, he shall so long as he holds the office of the Chairman of the Board of Directors appointed on a whole time basis or a Managing Director, be deemed to be a Director of the Banking Company."

15. Section 36(AA) empowers the Reserve Bank to remove Managerial

and other persons from office including any Chairman and Director which

reads as follows:

"Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a Banking Company being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of any Banking Company, it is necessary so to do, the Reserve Bank may for reasons to be recorded in writing by order remove from office within effect from such date as may be specified in the order any Chairman, Director, Chief Executive Officer by whatever name called or other officer or employee of the Banking Company."

9 16. Banking Regulation Act, 1949 shall prevail over the Scheme which

was formulated under Section 9 of the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1970. This Scheme cannot have the over

riding effect against the Banking Regulation Act. In this view the appellant

cannot claim that he is a public servant coming within the meaning of a

`public servant' not removable from his office, save by or with the sanction

of the Government. In view of the specific provisions available for the

removable of the Chairman under the Banking Regulation Act it is prima

facie clear that the appellant will not come within the scope of Section 197

of Code. It was submitted by learned counsel for the respondent before the

High Court the question of requirement of sanction for prosecution can be

left open to be examined during the trial by giving an opportunity to the

defence to prove the same.

17. Learned counsel for the respondent relied on a decision of this Court

in P.K. Pradhan v. State of Sikkim (2001 SCC (Crl.) 1234) wherein it is

observed as follows:

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"Question of requirement of sanction for prosecution could be raised at any time after cognizance of the offence is taken, may be even at the time of conclusion of trial or after conviction."

It is also observed that:

"The claim of the accused that the act alleged was done reasonably and not in pretended course of his official duty can be examined during the trial by giving an opportunity to the defence to prove it. In such cases, the question of sanction can be left open to be decided in the main judgment after conclusion of trial."

18. On the basis of the above conclusions the claim of the accused that he

should be discharged for want of sanction is not acceptable at present and

the matter should be left open to be decided later on.

19. The High Court held that the question whether the appellant is

removable from service by the Reserve Bank or the Central Government is

really an academic interest because it is yet to be established that the

impugned acts were done by the appellant in position of his official duty.

20. In Parkash Singh Badal v. State of Punjab (2007 (1) SCC 1) it was

noted as follows:

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"The offence of cheating under Section 420 or for that matter offences relatable to Sections 467, 468, 471 and 120B can by no stretch of imagination by their very nature be regarded as having been committed by any public servant while acting or purporting to act in discharge of official duty. In such cases, official status only provides an opportunity for commission of the offence."

21. Above being the position, the High Court's view does not suffer from

infirmity to warrant interference. The appeals fail and are dismissed.

..........................................J. (Dr. ARIJIT PASAYAT)

..........................................J. (Dr. MUKUNDAKAM SHARMA) New Delhi, February 11, 2009

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