R. K. DALM.IA versus DELHI ADMINISTRATION

1 s.c.R.

R. K. DALM.IA

DELHI ADMINISTRATION (S .K. D..\s, K. SuBBA RAo and RA<iHUBAR DAYAL. JJ.)

Criminal Trial-Transactions to divert money of Insurance Company to losses incurred by Chairman in share speculation-Chairman and Agent, if guilty of criminal breach of trust-Oharge, if legal-Confession before Investigator, if voluntary--'Agent'-''In the way of his busittess"--Meaning-Falsification of account-Conspiracy-Accomplice-Corroboration-Indian Penal Oode 1860 (XIV of 1860), ss. 120B, 409, 405, 477.A-Oode of Criminal Procedure, 1898 (Act 5 of 1898), s. 233-'-lnaurance Act, 1938 ( 4 of 1938), s. 33.

Appellant Dalmia was the Chairman of the Board of Directors and Principal Officer of the Bharat Insurance com-pany and appellant Chokhani its agent in Bombay. Appdlant Vishnu Prasad, nephew of Chokhani, was the ne;minal owner of Bhagwati Trading Company but its business was entirely conducted by Chokhani. Gurha, the other appellant, was Director of Bharat Union Agencies, company dealing in for-ward transactions of speculation in sh~res, and owned for all practical purposes by Dalmia. This Company suffered heavy losses in its business during the period August, 1954, to Sep-tember, 1955. The prosecution case against the appellants in substance was that in order to provide funds for the payment of those losses in due time, they entered into conspiracy, along with five others, to divert the funds of the Insurance company to the Union Agencies through the Bhagwati Trading Company and to cover up such unauthorised transfer of funds, the various steps for such transfer and the falsification of accounts of the Insurance Company and the Union Agencies and its allied concern and committed offences under s. 120B read with s. 409 of the Indian Penal Code. Dalmia made confession before Mr. Annadhanam, Chartered Accountant, who was appointed Investigator under s.33( I) of the Insurance Act, 1938, which was as follows:-·

"I have misappropriated securities of the order of Rs. 2,20,00,000 of the Bharat Insur ince Company Ltd. I have lost this money in speculation."

.f;ril I.

R. K. Da/mia v.

Delhi Administration

"At any cost, I want to pay full amount by requesting by relatives or myself in the interest of the policy holders".

The prosecution primarily depended upon the evidence of Raghunath Rai, the Secretary-cum-Accountant of the Insu-ranc: Company, and it was contended on behalf of the appel-lants that he was an accomplice.

The Sessions Judge convicted all the appellants under s. 120B read with s. 409 of the Indian Penal Code, and fur-ther convicted Dalmia and Chokhani for substantive offences under s. 409, Chokhani under s. 477A read withs. I IO and Gurha under s. 477 of the Indian Penal Code. He however acquitted the others.

The High Court in sub,tance agreed with the findings of the Sessions Judge, except that it did not rely on the confes-sion of Dalmia.

Held, that the Delhi Court had jurisdiction to try Chok-hani for the offence under s. 409 of the Indian Penal Code, committed beyond its jurisdiction in pursuance of the alleged conspiracy with which he and the other co-accused were char• ged.

Purusho[1]tam Das Dalmia v. State of West Bengal, [1962] 2 S. C.R. IOI, followed.

The charge against Dalmia under s. 409 of the Indian Penal Code was not hit by s. 233 of the Code of Criminal Procedure. The charge framed was not for four distinct offen-ces. It was really with respect to one offence though the mode of committing it was not precisely stated. Any objec-tion as to the vagueness of the charge on the score could not invalidate the trial since no prejudice haq been caused to the accused nor any contention raised to that effect.

The word 'property' used in s. 405 of the Indian Penal Code could not be confined to movable property since the sec-tion itself did not so qualify it. The word 'property' 'Was much wider than the expression 'movable property' defined in s. 22 of the Code. The question whether particular offence could be committed in respect of any property depended not on the meaning of the word 'property' but on whether that pro· perty could be subjected to that offence. 'Property' in par-ticular section could, therefore, mean only such kind of pro· perty with respect to which that offence could be committed. The fonds of the Bharat Insurance Company referred to in the charge amounted to property within the meaning of s. 405 of the Indian Penal Code.

1 S.C.R. SUPREME COURT REPOR'TS

Reg. Girdhar Dharamdas (1869) 6 Born. High Ut. Rep. (Crown Cases) 33, and Jugdown Sinha v. Queen Empress (1895) I. L. R. 23 Cal. 372, disapproved.

Emperor v. Bishan Prasad, (1914) I L.R. 37 All. 128, Ram Ohand Gurvala v. King Emperor A. I. R. l 926 Lah. 385, Manchersha Ardeshir. v. Ismail Ibrahim, (1935) I.L.R. 60 Bom. 70.P, Daud Khan v. Emperor A. I. R. 1925 All. 672 and The D~lhi O'loth and General Mills Oo. Ltd. v. Harnam Singh 0955] 2 S. C.R. 402, referred to. '

The relevant articles and bye-laws of the Insurance Company and the resolutions passed by its Board of Directors established that both Dalmia and Chokhani were entrusted with dQminion over the funds of the company in the Banks within the meaning of s. 409 of the Indian Penal Code.

· Peoples Bank v. Harkishan Lal, A. I. R. 1936 Lah. 408, G. E, Ry. Oo. v. Turner, L. R. (1872) 8 Ch. App. 149 and Re. Forest of Dean Etc. Oo., L. R. (1878) IO Ch. D. 450 refer-red to,

The offence of Criminal breach of trust could be commit-ted by Chokhani eyen though he alone could not opf'rate the Bank account and could do so jointly with another. Bindeshwari v. King Emperor (1947) I.L.R. 26 Pat. 703, held inapplicable.

Nrigendro Lall Chatterjee v. Okhoy Ooomar Shaw, (1874) (Cr. Rulings) 59 and Emperor v. Jagannath Ragunathdas, (1931) 33 Bom. L. R. 1518, referred to.

The expression 'in the way of business as agent' occur-ring ins. 409 of the Indian Penal Code meant that the pro-pety must have been entrusted to such agent 'in the ordinary course of his duty or habitual occupation or profession or trade.' He should get the entrustment or dominion in his capacity as agent and the requirements of the section would be satisfied if the person was an agent of another and that person entrusted him with the property or with dominion over the property in the course of his duties as an agent, person might be an agent of another for some pu~pose and if he was entrusted with property not in connection with that purpose but for another purpose, that would not be entrustment within the meaning of s. 409 of the Code.

Mahumarakalage Edward Andrew Oooray v. Queen. [1953] ~· C. 407 and Reg. v. Portugal, [1885] 16 Q. B. D, 487, con-sidered.

R. K. ualml11 v. Dtll,i Atlminislr11tion

1968 B. K. DaJmia y, D1lhi Administration

Both Dalmia and Chokhani were agents of the Bharat Insurance Company within the meaning of s. 409 of the Code.

Guiab Singh v. Punjab Zamindara Bank, A. I. R. 1942 Lah. 47, referred to.

Raghunath Rai was not an accomplice as he did not participate in the commission of the actual crime charged against the accused. An accomplice must be particeps criminis, except where he was receiver of stolen property or an accomplice in previous shuilar offence committed by the ac.cused when evidence of the accused having committed crimes of identical type on other occasions was admissible to prove the system and intent of the accused committing the offence charged.

Davies v. Director of Public Prosecutions, [1954] A.C. 378 referred to.

Chokhani was servant of the Insurance Company with-in the meaning of s. 477 of the Indian Penal Code. He was paid Agent of the company and as such was its servant even though he was full-time servant of the Bharat Union Agen-cies.

Each transaction to meet the losses of the United Agen-cies, was not an independent conspiracy by itself. There was identity of method in all the transactions and they must be held to originate from the one and same conspiracy.

Since the confessio:-t made by n, lmia had not been shown to have been made under any threat or inducement or promise from person in autho1·ity, it could not be anything but voluntary even though it might have been made for the purpose of screening the 5cheme of the conspiracy and the High Court was in error in holding that it was otherwise.

person appointed an Investigator under s. 33( I) of the Insurance Act did not ipso facto become public servant with-in the meaning ofs. 21, Ninth, of the Indian Penal Code and s. 176 of the Indian Penal Code could have no application to an examination held under s. 33(3) of the Act.

The confession of Dalmia was not hit by Art. 20(3) of the Constitution since it was not made by him at time when he was accused of an offence.

State of Bombay v. Katpi Kalu Oghad, R. [19ti2) 3 S.C.R. 10, referred to.

The expression 'with intent to defraud' in s. 4 77 of the Indian Penal Code did not mean intention to defraud someone in the future and could relate to an attempt to cover up what had ahcady happtned.

1 S.C.R. SUPREME COURT REPORTS

Emperor v. Ragho Ram, I. L. R. ( 1933} 55 All. 783, approved.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos. 7 to 9 of Hl61.

Appeals by special leave from the judgment and order dated January 2, 1961, of the .i'unjab High Court (Circuit Bench) at Delhi in Criminal Appeals Nos. 464-C, 465-C and 463-D of 1959.

Dingle Foot, D. R. Prem, 8. JJJ. Sikri, G. . .J a1t-har·i and A. N. Goyal, for the appellant (in Cr. A. No. 7 of 61).

R. L. Kohli and A. N. Goyal, for the appel-

lant (in Cr. A. No. 8 of 1961).

Prem Nath Ohadha, Madan Gopal Gupta and K. R. Ohoudhri, for appellant No. 2 (in Cr. A. No. 9 of 1961).

0. K. Daphtary, Solicitor General of India,

R. L. Mehta and R. H. Dhebar, for the respondents.

1962. April 5. The Judgment of the Court was delivered by

RAGHUBAR DaYAL, J.---These tltte-e. appeals

are by special leave. .Appeal No. 7 of 1961 is by R. K. Dalmia. Appeal No. 8 of .l.96 l is by R.P.Gurha. Appeal No. 9 of 1961 is by G.L.Chokhani and Vishnu Prasad. All the appellants were con-victed of the offence under s. LO-B read with s.409 I.l>.C., and all of them, except Vishnu Prasad, were also convicte.d of certain offences arising out of the overt acts committed by them. Dalmia-and Chok-hani were convicted under s. 409 I.P.C. Chokhani was also convietetd under s. 477A read withs. llO, I. P. C. Gurha 'was convicted under s. 47iA

I. P. C.

To appreciate the case against the appellants, we •may first state generally the facts leading to the ~se? ·,Pharat ~nsurance 9omrany was incorporateq

1961 R. E. Dalmia y, f> el hi A.dministratio n

Roghnbar Dayal J.

1968 R. K. D•lmia •• Dtl/ai Admini1tr11J'on Jt,avAui" D•y•I J.

in 1896. In 1936 Dalmia purchased certain shares of the com ·1any and became Director and Chairman of the company:·· He reeigned from these offices in 1942 and was succeeded by his brother J. Dalmia. The head office of the Bharat Insura.nce Company was shifted from Lahore to IO, Daryaganj, Delhi. in 11147. Dalmia was co-opted Director on March IO, 1949 and was again elected Chairman of the com-pany on March 19, 1949 when his brother

J. Dalmia resigned.

R. L. Chordia, relation of Dalmia and

principal Officer of the Insurance Company, was appointed Managing Director on February 27, 1950. Dalmia. was appointed Principal Officer of the company with effect from August 20, 11154. He remained the Chairman and Principal Officer of tha Company till September 22, 1955. The period of criminal conspiracy charged against the appellant is from Augni;t 1954 to Sept11mber 1955. Dalmia was therefore, during the relevant period, both Chairman and Printipa.1 Officer of the Insurance Company.

Dut ing this relevant period, this company had

its curre11 t account in the Chartered Bank of India, Australia and China Ltd. (hereinafter called the Chartered Bank) at Bombay. The COillpany also had an account with this bank for the safe custody of its securities the company also had separate current account with the Punjab National Bank, Bombay.

At Ddhi, where the head office was, the

company had an account for the safe custody of securities with the Imperial Bank of India, New Delhi.

Exhibit P-785 consists of the Memorandum of

Association and the Articles of Association of the Bharat Insurance Company. Articles 116 and 117 deal with the powers of the Directors.

Exhibit P-786 is said to be tht> original Bye-

laws passed by the Directors on September 8, 19/H.

I S.C.R. SUPREME COURT REPORTS

The pages a.re signed by K.L. Gupta, who was the G[eneral Mana!!er ]~ of [the company during ]the [rele-]vant period, and not by Da.lmia t.he Chairman, as should have been the case in view of the resolution dated 'May 8, 1951. The genuineness of this docu-ment is not, however, admitted.

Exhibits P-15 and P-897 are said to be copies of these Bye-laws which were sent to 8hri K. Annadhanam (Chartered Accountant, appointed by the Government of India on September 19, 1955, to investigate into the aff nirs of the Bharat Insu-rance Company under s. 33(1) of the Insurance Act) and to the. Imperial Bank of India, New Delhi, respectively, and the ev.idence about their genuine· ness is questioned.

Bye-law 12 deals with the powers of the

Chairman. Clause (b) thereof empowers .the Chair-man to grant loans to persons with or without security, but from August 30, 1954, the power was restricted to grant of loans on mortgages. Clause (e) empowers the Chairman to negotiate transfer buy and sell Government Securitfos and to pledge, indorse, withdraw or otherwise deal with them.

On January 31, 1951, the Board of Directors

of the Insurance Company passed resolutions to the following effect : ( l) To open an account in the Chartered Bank at Bombay. (2) To authorise Chokhani to operate on the account of the Insurance Company. (3) To arrange for the keeping of the Government securities hcl<J by the company, in safe custody, with the Chartered Bank. (4) To instruct the Bank to accept instructions with regard to withdrawal from Chokhani and Chordia.

On the samo day, Dalmia and Chordia made

an application for the opening of the account at Bombay with the result that Current Account No. I !20 was opened. On the same day Chokhani w~s n.ppoint~d Agent of the company at Bombay.

19'! Dalmi• -

R. IC'. Dalmi• -•· Delhi Mministr•ti;n R11g1tu6ar Da,al J.

''" 11.. /f. D•lmia v. Bilhi Afknimistralion /tlf"--~""' J.

He was its agent during the relevant period. From 1951 to 1953, Chokhani alone operated on that account. On October l, 1953, the Board of Direc-tors directed that the current account of the company with the Chartered Bank, Bombay, be operated jointly by Chokhani and Raghunath Rai, P.W. 4.

Raghunath Rai, joined the company in 1921 as Clerk, became Chief Accountant in 1940 and Secretary-cum-Chief Accountant of the company from August 17, 1954.

The modus operandi of the joint operation of

the bank account by Chokhani and Raghunath Rai amounted, in practice to Chokhani's operating that account alone. Chokhani used to get number of blank cheques signed by Raghunath Rai, who worked at Delhi. Chokhani signed those cheques when actually issued. In order to have signed cheques in possession whenever needed, two cheque books were used. When the signed cheques were nearing.depletion in one cheque book, Chokhani would send the other cheque book to Raghunath Rai for signing again number of cheques. Thus Raghunath Rai did not actually know when and to whom and for what amount the cheques would be actually issued and therefore, so far as the company was concerned, the real operation of its banking account was done by Chokhani alone. This system led to the use of the company's funds for unauthorized purposes.

Chokhani used to purchase and sell securities

on behalf of the company at Bombay. Most of the securities were sent to Delhi and kept with the Imperial Bank of India there. The other securities remained at Bombay and were kept with the Chartered Bank. Sometimes securities were kept with the Reserve Bank of India and inscribed stock was obtained instead. The presence of the inscri· bed stock was guarantee that the securities were in the Ba.nk.

1 S.C.R. SUPREME COURT REPORrs

Chokhani was not empowered by any resolu-tion of the Board of Directors to purchase and sell securities. According to the prosecution, h~ pur-chased and sold securities under the instructions of Dalmia. Dalmia and Chokhani state that Dalmia' had authorised Chokhani in general to purchase and sell securities and that it was in pursuance of sueh authorisation that Chokhani on his own purchased and sold securities without any further reference to Dalinia or further instructions from Dalmia.

R. K. Dalmia v. Delhi Administrati o 1 R~ghubar Dayal J.

The transactions which have given rise to the present proceedings against the appellants consisted of purchase of securities for this company and sale of the securities which the company held. The transactions were conducted through recognised brokers and ostensibly were normal transactions. The misappropriation of funds of the company arose in this way. Chokhani entered into transaction 1_,f purchase of securities with broker. The broker entered into transaction of purchase of the same securities from company named Bhagwati Trading Company which was owned by Vishnu Prasad, appellant, nephew of Chokhani and aged about 19 yea.rs in 1954. The e.ntire business for Bhagwati-Trading Company was really conducted by Chokhani. The securities purchased were not delivered by the brokers to Chokhani. It is said that Chokhani instructed the brokers that he would have the securities from Bhagwati rrrading Company. The fact, however, Chokhani however was that Bhag-wati Trading Company did not deliver the securities. Chokhani however issued cheques in payment of the purchase price of the securities to Bhagwati Trading Company. Thus, the amount of the cheques was paid out of the company's funds with. out any gain to it.The sale transactions consisted in the sale of the securities held or supposed to be held by the company to broker and the price obtained from

1962 R. K Dalmia .. D1I•• Administration B.,Aubar D.,.1 I.

the sale was unutilised in purchasing formally further securities which were not received. The purchase transaction followed the same pattern, viz., Chokhani purchased for the company from broker, thti broker purchased the same securities from Bhagwati Trading Company and the delivery of the Recurities was agreed to be given by Bhag-wati Trading Company to Chokhani. Bhagwati Trading Company did not deliver the securities but received the price from the Insurance Company. In few cases, securities so purchased and not received were received later when fresh genuine purchase of similar securities took place from the funds of the Bharat Union Agencies or Bhagwati Trading Company. These securities were got endorsed in favour of t,ho Insurance Company.

The funds of the company, ostensibly spent on the purchase of securities, ultimately roached another company the Bharat Union Agencies.

Bharat Union Agencies ( hereinafter referred to as the l:;nion Agencies) was company which dealt in speculation in shareH and, according to the prosecution was practically owned by Dalmia who held its shares either in his own names or in the names of persons or firms connected with him. The Union Agencies suffered lo~ses in the relevant period from August 1954 to Sep-tember, 1955. The prosecution case is that to provide funds for the payment of these losses at the due time, the accused persons entered into the conspiracy for the diversion of the funds of the Insurance Company to the Union Agencies. To cover up this unauthorised transfer of funds, tho various steps for the transfer of funds from one company to thA other and the falsification of accounts of the Insuntn<Je Company and tho lJnion AgenuieB took place and this conduct of the accused ga vu 1 ise to the various offences the;r were charged with and convicted of. ·

i s.c.R.

The real nature of the sale and purchase

transactions of the securities -did not come to the notice of the head office of the Insurance Company at Delhi as Chokhani communicated to the head office the contracts of sale and purchase with the brokers' statements of accounts, with covering letter stating the purchase of securities from the brokers, without mentioning that the securities had not been actually received or that the cheques in payment of the purchase price were issued to Bhagwati Trading Company and not to the brokers.

Raghunath Rai, the Secretary-cum-Accoun-tant of the Insurance Company, on getting the ad-vice about the purchase of securities used to inquire from Da.lmia. about the transaction and used to get the reply that Chokhani had purchased them under Dalmia's instructions. Thereafter, the usual procedure in making the entries with respect to the purchase of securities was followed in the office and ultimately the purchase of securities used to be confirmed at the meeting of the Board of Directors. It is said that the matter was put up in the meeting with an office note which recorded that the purchase was under the instructions of the Chairman. Dalmia however, denies that Raghunath Rai ever approached him for the confirmation or approval of the purchase transaction and that he told him that the purchase transaction was entered into under his instructions.

The firm of Khanna and Annadhanam, Char-

tered Accountants, was appointed by the Bharat Insurance Company, its auditors for the year 1954. Shri Khanna oarri~d out the audit and was not satisfied with respect to certain matters and that made him ask for the counterfoils of the cheques and for the production of securities and for satisfactory explanation of the securities not with the company at Delhi.

IHI

R. T\. Dalmiu v. D1lhi Administratio1 --

1962 R. tr. Dalmia ~ •• Dell•i A•lminialratian Raghub'J Dayal J.

The matter, however, came to head not on account of the auditors' report, but on account of Shri. Kaul, Deputy Secretary, Ministry of Finance, Government of India, hearing at Bombay in September 1955 rnmour about the unsatisfactory position of the securities of the Insurance Company. He contacted Dalmia and learnt on September 16, 1!);35 from Dalmia's relatives ihat there was short-fall secmities. He pursued the matter Depart-mentally and, eventually, the Government of India appointed Shri Annadhanam under s. 33 (l) of the Insurance Act, to investigate into the affairs of the company. This was done on September I!), 1955. Vcdmia is said to h3Ne made confes-sional statemtJnt to Annadhanam on September 20. Att0mpt was made to reimburse the Insurance Company with respect to the short-foll in securities. The matter was, however, made over to the Police and the appellants and few other persons, acquitted by the Sessions Judge, were proceeded against as result of the investigation.

Dalmia's defence, in brief, is that he hnd nothing to do with the details of the working of the company, that he had authorised Chokhani, in 1953, to purchase and sell securities and that there-after Chokhani on his own purchased and sold securities. H•i had no knowledge of the actual modus operand·i of Chokhani which~led to the dil,er-sion of the fund~ of the company to the Union Agencies. He rcdmits knowledge <•f tho losses incurred by the Union Agencies and being told -'Y Chokha.ni that he would arrange funds to merot them. He denies that he was party to what Chokhani did.

Chokhani admits that ho carried out the trans-actions in the form alleged in order to meet the losses of the Union Agencies of which he was an employee. He states that he did so as ho expect-!ld that the Union Agencies would, in due course,

1 S.C.R.

SUPREME OOURT REPORTS

make np the losses and the money would be returned

to the Insurance Company. According to him, ho was under the impression that what he did amounted to giving of loan bv the Insurance Company to the Union Agencies and that there was nothing wron~ in it. He asserts emphatically that if he had known that he was doi9g was wrongful, he would have never done it and would have utilised other means to raise the money to meet the losses of the Union Agencies as he had large credit in the business circle at Bombay and as the Union Agencies possessed shares which would be sold to meet the losses.

Vishnu Prasad expresses his absolute ignora-

n·ce about the transactions which were entered into on behalf of Bhagwati Trading Company and states that what he did himself was under the instructions of Chokhani, but in ignorance of the real nature of the transactions.

Gurha denies that he was party to the

fabrication of false accounts and vouchers in the furtherance of the interests of the conspiratJy.

The learned Sessions Judge found the offences

charged against the appellants proved on the basis of the circumstances established in the case and, accord-ingly, convicted them as stated. above. The High Court substantially agreed with the findings of the Sessions Judge exc~pt that it did not rely. on the confession of Dalmia.

Mr. Dingle Foot, counsel for Dalmia, has

raised number of contentions,, both of law and of facts. We propose to deal with the pc;>ints of law first.

In order to appreciate the points of law raised by Mr. Dingle Foot, we may now sta.te the charges which were framed against the various appellaats.

R. K. Dalmia v.

Delhi Administration RaghubM Da1al J.

1162 ..

R. K. Dalmi• .. 1lh1 .4dminfstralion

The charge under s. 120.B read with s. 409,

I.P.C., was against the appellants and five other persons and read :

"I, Din Daya.I Sharma, Magistrate I

Class, Delhi, do hereby charge you,

R. Dalmia (Ram Krishna Dalmia) s/o etc.

2. G. L. Chokhani s/o etc.

3. Ba.jranglal Chokhani s/o etc.

4. Vishnu Pershad Bajranglal s/o

etc.

5. R. P. Gurha (Ragbubir Pershad

Gurha) s/o etc.

6. J. S. Mittal (Jyoti

Swarup

Mitta.l} s/o etc.

7. S. N. Duda.ni (Shri Niwa.s Dud.

ani} s/o etc.

8. G. S. Lakhotia. ( Gauri Shanker La.khotia) s/o etc.

9. V. G. Kannan Vellore Govindaraj Kannan s /o etc. accused as under:-

That you, R. Dalmia, G. L. Chokha.ni,

Bajrang La.I Chokhani, Vishnu Pershad Ba.j-ranglal, R. P. Gurha, J. S. Mittal, S. N. Dud-ani, G. S. Lakhotia and V. G. Kannan,

during the period between August 1954 and September 1955 at Delhi, Bombay and other places in India.

were parties to criminal conspiracy to

do and cause to he done illegal acts ; viz., criminal breach of trust of the funds of the Bharat Insurance Compa.ny Ltd.,

by agreeing amongst yourselves and with otht>rs that criminal breach of trust be com· mitted by you R. Dalmia and G. L. Chokhani

1 S.C.R.

in respflct of the funds of the said Insurance Company in current account No. 1120 of the said Insurance Company with the Chartered Bank of India., Australia and China, Ltd., Bombay,

the dominion over which funds

was

entrusted to you R. Dalmia in your capacity as Chairman and the Principal Officer of the said Insurance Company, and

to you G. L. Chokhani, in your capacity

as Agent of the said Insurance Company,

for the purpose of meeting losses suffered by you R. Da.lmia in forward t~ansaction (of speculation) in shares; which transactions were carried on in the name of the Bharat Union Agencies Ltd., under the directions and over all control of R. Dalmia, by you, G. L . Chokhani, at Bomboy, and by you, R. P. Gurha, J. S. Mittal·&nd S. N. Dudani at Cal· cut ta; and for other purposes not conneoted with the affairs of the said Insurance Com~, pany,

by further agreeing that current account

No. Rl763 be opened with the Bank of India, Ltd., Bombay and current account No. 1646 with the United Bank of India Ltd.. Bombay, in the name of M/s. Bhagwati Trading Com-pany, by you Vishnu PerE'had accused with the assistance of you G. L. Chokhani, and Ba.j-rangla.l Chokhani accused for the illegal pur-pose of diverting the funds of the said lnsur-ance Company to the said Bharat Union Agencies, Ltd.,

by further agreeing that false entries show-ing that the defalcated funds were invested in Government Securities by the said Insurance Company be got made in the books of

B. K. Dolmia v.

11 Iii Atlniinislrali#tt Raghubar Dqol J.

1962 R.iK. Dalmia •• Dt!hi Admfr,islra1ion

Roghuhar D4.J1al J.

accounts of the said Insurance Company at Delhi, and

by further agreeing to the making of

false and fraudulent entries by you R. P. Gurha, J. S. Mittal, G. S. Lakhotia, V. G. Kannan, and others, relating to the diversion of funds of the Bharat Insurance Company to the Bharat Union Agenoies Ltd., through M/s. Bhagwati Trading Company, in the books of account of the said Bharat Union AgenC'ies, Ltd., and its allied concern known as Asia Udyog Ltd., and

that the same aots were committed in

pursuance of the said agreement and

thereby you committed an offence punish-able under seotion 120-B read with section 409 I.P.C., and within the cognizance of the Court of Sessions."

Da!mia was further chargC'd on two counts for au

offence under s. 409 I. P. C. These charges were as follows :

·•I, Din Dayal Sharma, Magistrate I

Class, Delhi charge you, R. Dalmia accused as under:-

FIRSTLY, that yon R. Dalmia, in pur-

suance of the said conspiracy between tho 9th day of August 1954 and the 8th day of August 1955, at Delhi.

Being the Agent, in your capacity as

Chairman of the Board of Directors and the Principal Officer of the Bharat Insurance Com-pany Ltd., ·and as suoh being entrusted with dominion over the funds of the said Bharat Insurance Company,

committed oriminal breach of trust of the

funds of the Bharat Insurance Company Ltd.,

amounting to Rs. 2,37 ,483-9-0,

by wilfully suffering your co-accused

G. L. Qhokhani to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing bet-ween you and the said Bharat Insurance Company, prescribing the mode in which such trust was to be discharged,

by withdrawing the said funds from cur-

rent account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd.,. Bombay, by means of cheque Nos. B-540329 etc., issued in favour of M/s. Bhagwati Trading Company,, Bombay, and cheque No. B-540360 in favour of F. C. Podder, and

by dishonestly utilising the said funds

for meeting losees suffered by you ·in forward transactions in shares carried on in the name of Bharat Union Agencies, Ltd., and for other purposes not connected with the affairs of the said Bharat Insurance Company ; a.nd

thereby committed an offence punishable under section 409, I. P. C., and within the cognizance of the Court of Sessions;

SECONDLY, that you R. Dalmia, in pur-

suance of the said conspiracy between the 9th day of August 1955 and the 30th day of Sep-tember 1955, at Delhi,

Being the Agent in your capacity as

Chairman of the Board of Directors and the Principal O:flicer of the Bharat Insurance Company, Ltd., and as such being entrusted with dominion over the funds of the said Bharat lasur$D08 Company,

R.K.Dalmia ••

D;lhi .4tlministrati111 .

Raghntai iia,aJ J.

11111 B. Jr, Da/mia .. Dtllli Adminislration B111Aohor Da.1al J

committed criminal breach of trust of the funds of the Bharat Insurance Company Ltd., amounting to Rs. 55,43,220-12-0,

by wilfully suffering your co-accused G.L.

Chokhani to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing between you and the said Bharat Insurance Company prescribing the mode in which such trust was to be discharged,

by withdrawing the said funds from cur-

rent account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd., Bombay by means of Cheque Nos. B-564835 ...... issued in favour of M/s. Bhagwati Trading Company Bombay, and,

by dishonestly utilising the said funds for

meeting losses suffered by you in forward transactions in shares carried on in the name of the Bharat Union Agencies Ltd., and for other purposes not connected with the affairs of the said Bharat Insurance Company, and

thereby committed an offence punishable

under section 409 I. P. C., and within the cognizance of the Court of Sessions."

Hr. Dingle Foot has raised the following

contentions:

(I) The

Delhi

Court had no territorial

jurisdiction to try offences of criminal breach of trust committed by Chokhani at Bombay.

(2) Therefore, there had been misjoinder of

charges..

(3) The defect of miajoinder of charges was

1 s.c.R.

fatal to the validity of the tria.1 and was not cura-ble under s. 531 s. 537 of the Code.

B. K. Dalmia v.

(4) The substantive charge of the offence

D1lAi A'minuiraltm

under s. 409, I. P. C., against Dalmia offended a.ga· inst the provisions of s. 233 of the Code; therefore the whole trial was bad.

Ba11aubar Dayal J.

(5) The funds of the Bharat Insurance Com-

pany in the Chartered Bank, Bombay, which were . alleged to have been misappropriated were not 'property' within the meaning of ss. 405 and 409, I. P. C.

(6) If they were, Dalmia did not have domin-

ion over them.

(7) Dalmia was not an 'agent' within the

meaning of s. 409 I. P. C., as only that person could be such agent who professionally carried on the business of agency.

(8) If Dalmia.'s conviction for an offence under

s. 409 I. P. C., fails, the conviction for conspiracy must also fail a.a conspiracy must be proved as laid.

(9) The confeBSional statement Exhibit P-10

made by Da.lmia on September 20, 1955, was not admissible in evidence.

(10) If the confeasional statement was not in-

admissible in evidence in view of s. 24 of the Indian Evidence Act, it was inadmissible in view of the provisions of cl. (3) of Art. 20 of the Constitution.

(11) The prosecution bas failed to establish

that Dalmia was synonymous with Bharat Union Agenciea Ltd.

(12) Both the Sessions Judge and the High

Court failed to consider the question of onus of proof i.e., failed to consider whether the evidence on record really proved or established the conclusion arrived at by the Courts.

1961 R, E. Da!mia v. Delhi Administratfott Raghu6ar Dayal J.

(13) Both the Courts below erred in their

approach to the evidence of Raghunath Rai.

(14) Both the C,mrts below were wrong in

holding that there was adequate corroboration of the evirlence of Regunath Rai who was a.n accomplice or at least such witness whose testimony required corroboration.

(15) It is not eetablished with the certainty

required by law that Dalmia had knowledge of the impugned transactions at the time they were enter. ed into.

We have heared the learnea counsel for the

parties on facts, even though there are concurrent findings of fact, as Mr. Dingle Foot has referred us to large number of inaccuracies, most of them not of much importance, in the narration of facts in the judgment of the High Court and has also complai-ned of the omission from discussion of certain matters which were admittedly urged before the High Court and also of misapprehension of certain arguments presented by him.

We need not, however, specifically consider

points No. 12 to 15 as questions urged in that form. In discussing the evidence of Raghnnath Rai, we would discuss the relevant contentions of Mr. Dingle Foot, having bearing on Raghunath Rai's relia-bility. Our view of the facts will naturally dispose of the last point raised by him.

Mr. Dingle Foot's first four contentions relat-

ing to the illegalities in procedure may now be deal with. The two charges under s. 409, I.P.C., against Chokbani mentioned .that he committed criminal breach of trust in pursuance of the ea.id conspiracy. One of the charges related to the period from August 9, 1954 to Angust 8, 1955 and the other related t? the period from August 9, 1955 to September 30, 195/ii.

1 S.C.R. SUPREltE COURT REPORTS

This Court held in P.urush'>itam Das Dalmia v.

State of West Bengal ([1]) that the Court having juris-diction to try the offence of conspiracy has also jurisdiction to try an offence constituted by the overt acts which are committed, in pursuance of the conspiracy, beyond its jurisdiction. M. Dingle Foot submitted that this decision required reconsidera-tion and we heard him and the learned Solicitor General on the point and, having considered their submissions, came to the conclusion that no case for reconsideration was made out and accordingly expressed our view during the hearing of these appeals. We need not, therefore, discuss the first contention of Mr. Dingle Foot and following the decision in Purushott,am Das Dalmia's case([1]) hold that the Delhi Court had jurisdiction to try Chokhani of the offence under s. 409 I.P.C. as the offence was alleged to have been committed in pursuance of the criminal conspiracy with which he and the other co-accused were charged.

In view of this opinion, the second and third contentioni:: do not arise for consideration.

The fourth contention is developed hy Mr. Dingle Foot thus. The relevant portion of the charge under s. 409 I. P. C., against Dalmia reads:

''Firstly, that you Da.lmia, in pursuance

of the said conspiracy between .•. being the Agent, ip your capacity as Chairman of the Board of Directors and as Principal Officer of the Bharat Insurance Company Ltd., and as such being.entrusted with dominion over the funds of the said Bharat Insurance Company, committed criminal breach of trust of the , fundE' ••• by wilfully suffering your co-accused G. L. Chokhani to dishonestly misappropriate the said funds and dishonestly use or dispose . of the said funds in violation:1 of the directions of law. and the implied contract existing bet. · ween you and the said Bharat Insura.noe (1) ~1SG2J 2 s. c. R lQl.

1962 R. K. Dalmia v. Delhi Administrnt irri Raghuhar Dayal J.

Company prescribing the mode in which such trust was to be discharged ... "

lift R. x. Dalmia y,

Dtlhi .A.dminilt1ation This charge can be split up into four charges, each

of the charges being restricted to one particular mode of committing the offence of criminal breach of trm1t. These four offences of criminal breach of trust were charged in one count, e~.oh of these four amounting to the offence of criminal breach of trust 'by wilfully suffering Chokhani (i) to dishones-tly misappropriate the said funds; (ii) to dishonestly use the said funds in violation of the directions of law; (iii) to dishonestly dispose of the said funds-in violation of the directions of law; (iv) to dishon-estly use the said funds in violation of the implied contract existing between Dalmia and the Bharat Insurance Company'.

Section 233 of the Code or Criminal Procedure

permits one charge for every distinct offence and directs that every charge shall be tried separately except in the oases mentioned in ss. 234, 235, 236 ~nd 239. Section 234 allows the trial, together, of offences up to three in numbu, when they be of the same kind and be committed within the space of twelve months. The contention, in this case is that the four offences into which the charge under s. 409 I.P.C. against Dalmia can be split up were distinct offences and therefore could not be tried together. We do not agree with this conten-tion. The charge is with respect to one offence, though the mode of committing it is not stated precisely. If it be complained that the charge framed under s.409 I. P. C. is vague because it does not specifically state one particular mode in whioh the offence was committed, the vagueness of the charge will not make the trial illegal, especially when no prejudice is caused to the accused and no contention has been raised that Dalmia was pre-judiced by the form of the charge.

We may now pass on to the other points raised

by Mr. Dingle Foot.

R. K.Dalmi. v.·

v.· Section 405 I.P.C. defines what amounts to D1lhi A.thnillistf'aUon

criminal breach of trust. It reads :

Raglmbar Da]GI J•,

"Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that propertly, or dis-honestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharg-ed, or of any legal contract, express or impli-ed, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust'."

Section 406 provides for punishment for criminal

breach of trust. Section 407 provides for punish-ment for criminal breach of trust committed by carrier, wharfinger or warehous0'·keeper, with respeot to property entrusted to them as such and makes their offence more severe than the offence under s. 406. Similarly~ s. 408 makes tb.e criminal breach of trust comm~tted by clerk or ·servant entrusted in any manner, in such . <)apacity, with property or with any dominion over property, more severely punishable than the offence of .criminal breach of trust under s. 406. Offences under ss.407 and 4.08 are similarly punishaLle. The last section in the series is s. 409 whirh provides for still heavier punishment when criminal breach of trust is committed by pel'rnns mentioned in that section. The section reads :

"Whoever, being in any manner entrusted

with property, or with any dominion over property in hfo capacity of public servant or in t.he way of his business as banker, merchant, factor, broker~ ·attorney or agent,

lllfl R. K. Dalmia v. D1lhi A.dministration lfazhu~ar DaJal J.

commits criminal breach of trust in respect of

that property, shall be punished with im-prisonment for life, or wit,h imprisonment of either description for term which may ex-tended to teu vears, and shall also be liable to fine." •

Both Dalmia and Chokhani have been convict-ed of the offence under s. 409 I.P.C.

Mr. Dingle Foot contends that no offence of

criminal breach of trust has been committed as the funds of the Bharat Insurance Company in the Bank do not come with tho expression 'property' in s. 405 I.P.C. It is urged that the word 'property' is used in the Indian Penal Code in di£ferent senses, accord-ing to the context, and that in s. 405 it refers to IllOVable property and not to immovable property or to chose in action.

It is then contended that the funds which

customer has in bank represent choses in action, as the relationship between the customer and the banker is that of creditor and debtor, as held in Attorney Ge:neral for Canada v. Attorney General for Prouince of Que.bee & Attorneys General for Saskatch-ewan, Alberta & Manitoba ([1]) and in Foley v. Hill(').

Reliance is also placed for the suggested

restricted meaning of 'property' in s. 405 I.P.C. on the cases Reg. v. Girdhar Dharamdas ('); Jugdown Sinha v. Queen Empress (') and Ram Chand Gurvnl,a v. King Emperor(•) and also on the scheme of the Indian Penal Code with respect to the use of the expressions 'property' and 'movable property' in its various provisions.

Tbe learned Solicitor General has, on the

other hand, urged that the word 'property' should

(I) [1947] A.C. 33. (2) [1848] 2 H.L.C.28 9 E. R. 1002. lg) [1869] 6 Dom. High Ct. Rep, (Crown Cases) g3. (4) (1895) I.L.R. 23 Cal. 372. (5) A.l.R. 1926 Lah 385.

be given its widest meaning and that the provisions of the various sections can apply to property other than movable property. It is not to be restricted to movable property only but includes chose in action and the funds of company in Bank.

We are of opinion that there is no good reason

to restrict the meaning of the word 'property' to movable property only when it is used without any qualification in a. 405 or in other sections of the Indian Penal Code. Whether the offence defined in pa.rtioula.r section of the Indian Penal Code can be committed in respect of any particular kind of property will dep€nd not on the interpretation of the word 'property' but on the fact whether that particular kind of property can be subject to the acts covered by that section. It is in this sense that it may be said that the word 'pwperty' in parti-cular section covers only tbat type of property with respect to which the offence contemplated in that section can be committed.

Section 22 I.P.C. defines 'movable property'.

The definition is not exhaustive. According to the section the words 'movable property' are intended to include corporeal property of every description, except land and things at.tached to the earth or permanently fastened to anything which is attached to the earth. The definition is of the expression •movable property' and not of 'property' and can apply to all corpc[1]real property except property excluded from the definition. It is thus clear that the word 'property' is used in the Code in much wider sense than the expression •movable property'. It is not therefore necessary to consider in detail what type of property will be included in the various .sections of the Indian Penal Code.

In Reg. v. Girdhar Dkaramdas (1) it was held

that reading as. 403 and 404: I.P.C. together, a. 404 (I) (1869) 6 Bom. High Ct. Rep. (Crow.q Cases) 33,

lfJ62

R I(: Dalmia v. De/Iii Administratio n

19~1 R. E.Da;mia •• DtlAI ArZ-irlralion Ra1Wa• Da,al I.

applied only to movable property. No reasons are given in the judgment.

It is to be noticed that though s. 403 I.P.C. speaks of dishonestly mis·appropriating or convert· ing to one's own use any movable property, s. 404 speaks of only dishonestly misappropriating or converting to one's own use property. If the Legis-lature had intended to restrict the operation of s. 404 to movable property only, there was no reas·m why the general word was used without the qualifying word 'movable'. We therefore do not see any reason to restrict the word 'property' to 'movable property' only. We need not exprel!B any opinion whether immovable property could be the subject of the offence under s. 404 I.P.C.

Similarly, we do not see any roason to restrict

the word 'property' in s. 405 to •movable property' as held in Jugdown Si,nha v. Queen Empress ([1]). In that case also the learned Judges gave no reason for their view and just referred to the B»mbay Case ('). Further, the learned Judges observed at page 374:

"In this case the appellant was not at

most entrusted with the aupervision or management of the factory lands, and the fact that he mismanaged the land does not in our opinion amount to criminal olfence under section 408.''

different view has been expressed with res-

pect to the conten~ of the word 'pr?perty: in certain sections of the Indian Penal Code, mcluding s. 405.

In Emperor v. Bishan Prasad (') the right to

sell drugs was held to come within the definition of the word 'property ' in s. 185, I.P.C. which makes certain conduct at any sale of property an offence.

(1) (1R9S) I.L.R. 23 Ce!. 372.

(2) (1869) 6 Dom. Hi•h Ct. Rep. (Crown Cases) 33,

(3) [1914] f.L.R. 37 AJI. 128.

1 s.c.R.

SUPREME OOURT REPORTS

In /lam Chand Gurwala v. King Emperor ([1]) the contention that mere transfer of amount from the bank account to his own account by the accused did not amount to misappropriation was repelled, it being held that in order to establish charge of dishonest misappropriation or criminal breach of trust, it was not necessary that the accused should have actually taken tangible property such as cash from the possession of the bank and transferred it to his own possession, as on the transfer of the amount from the account of the Bank to his own account, the accused removed it from the control of the bank and placed it at his own disposal. The <'onviotion of the ac~cusecl for crimi-nal breach of trust was confirmed. ·

In Manchersha Ardeshir v. Ismail Ibrahim (2)

it was held that the word 'property' ins. 421 is wide enough to include chose in action.

In Daud Khan v. Empero?' ([3]) it was said at page 674:

"Like s. 3; 8, s. 403 refers to movable

property. Section 404 and some of the other sections following it refer to pr~c;irty without any such qualifying description; and in each case the context must determine whether the property there referred to is intended to be property movable or immoveable."

The case law, therefore, is more in favour of

the wider meaning being given to the word 'pro-perty' in sections whP.re the word is not qualified by any other expression like 'movable•.,

In Tke DeJ,hi O/,oth and Genera/, Mills Co. Ltd.

v. Harnam Singh ([4 ]) this court said

11That debt is property is, we think,

clear. It is chose in action ~nd is heritable (1) A.I.R. 1926 Lah. 385. (2) (1935) LL.R. 60 Dom. 706. (!I) A.J.R. 1925 All. 67!1. (4) [1955] 2. S.C.R.102, 417.

R. K Dalmia v •.

De/Al Administmlion

1911 R.K. Dalmia v. D"hi .Administration

and assignable and it is treated as property in India under the Trat1sfer of Property Act which calls it an •actionable claim'."

In· Allchin v. Coulthard(') the meaning of the expression 'fund' has been discussed it is said:

"Much of the obscurity which surrounds this matter is due to failure to distinguish the two senses in which the phrase 'payment out of fund' may be used. The word 'fund' may mean actual cash resources of parti-cular kind (e. g., money in drawer or bank), or it may be mere accountancy expression used to describe particular cate-gory which person uses in making up bis accounts. The words 'payment out of' when used in connection with the word 'fund' in its first meaning connote actual payment, e. g., by taking the money out of the drl!.wer or dmwing cheque on the bank. When used in connection with the word 'fund' in its second meaning they connote that, for the purposes of tho account in which the fund finds place, the payment is debited to that fund, an operation which, of course, has no relation to the actual method of payment or the particular cash resomces out of which the payment is made. Thus, if company makes paymrnt out of its reserved fund-an example of the second meaning of the word 'fund'-the actual payment is made by cheque drawn on the company's banking acc-ount, the money in which may have been derived from number of sources".

The expression •funds' in the charge is used in the

first sense meaning thereby that Dalmia and Chokhani had dominion over the amount credited to the Bharat Insurance Company in the accounts (I) fl942J 2 K,B. 228, 234,

i s.c.tt. SUPREME COURT REPORTS

of the Bank, inasmuch as they could draw cheques on that account.

We are therefore of opinion that the funds referred to in the charge did amount to 'property' within the meaning of that term in s. 405 I.P.C.

It is further c0ntended for DaJmia that he had not been entrusted with dominion over the funds in the Banks at Bombay and had no c0ntrol over them as the Banks had not been informed that Dal-mia was empowered to operate on the company's accounts in the Banks and no specimen signatures of his had been supplied to the Bank. The omis-sion to inform the Banks that Dalmia was entitled to operate on the account may disable Dalmia to actually issue the· cheques on the company's acc-ounts, but that position does not mean that he did not have any dominion over those accounts. As Chairman and Principal Officer of the Bharat Insu-rance Company, ho had the power, on behalf of the company, to operate on those accounts. If no further steps are taken on the execution of the plan, that does not mean tha.t the power which the company had entrusted to him is nullified. One may have dominion over property but may not exercise any power which he could exercise with respect to it. Non-exercise of the power will not make the dominion entrusted to him, nugatory.

Article 116 of the Articles of Association of the Bharat Insurance Company provides that the business of the company shall be managed by the Directors, who may exercise all such powers of the company as are not, under any particular law or regulation, not to be exercised by them. Article 117 declares certain powers of the Directors. Clause (7) of this Article authorises them to draw, make, give, accept, endorse, transfer, discount and negotiate such bill of exchange, pro· missory notes and other similar obligations as may · be desirable for carrying on she business of the

R. K. Dalmia v. Dellii Atlmini1trali 11 Raghubar Dayal J

R.K Dalmia •• Dellti Administration Bagltubar Dayal J.

282 8UPREME COURT REPORTS [1963]

company. Clause ( 10) authorizes them to let, mort~age, sell, or otherwise dispose of any property of the oompany either absolutely. Clause ( 12) authorises them to invest such parts of tho fund of the company as shall not be required to satisfy or provide for immediate demands, upon such securi-ties or investments as they may think advisable. It also pr.ovides that the funds of the company shall not be applied in making any loan or guaran-teeing any loan made to Director of the company or to firm of which such Director is partner or to & private company of which such Director is Director. Clause (23) empowers the Director to deal with and invest any moneys of the company not immediately required for the purposes thereof, in Government Promissory Notes, Treasury Bills, Bank Deposits, etc.

The bye-laws of the company entrusting the

Chairman with dominion over it1 property, were revised in 1951. The Board of Directors, at their meeting held on September 8, 1951, resolved:

"The bye-laws as per draft signed by the Chairman for identification be and are hereby approved, in substitution and to the exclusion of the existing bye-laws of the company."

No such draft as signed by the Chairman has been produced in this case. Instead, K. L. Gupta, P. W. ll2, who was the Manager of the Bharat Insurance Company in 19.51 and its General Manager from 1952 to August, 1956, has proved the bye-laws, Exhibit P. 786, to b€1 t.he draft revised bye-laws approved by the Board of Direct.ors at that meeting. He states that he was present at that meeting and had put up these draft bye-laws before the Board of Directorn and that the Directors, while paSBing these byc-lawR, issuerl direetivc that they should comu into force on .January l, l!l52, and that, &cc-ordingly, be added in iuk in th" opening words of

1 s.C.R. SUPREME OOOOT REPORTS 2sa

the bye-laws that they would he eft'ective from

January l, 1952. When cross-examined by Da.1-mia himself, he stated that he did not attend any other meeting of the Board of Directors and his presence was not noted in the minutes of the meet-ing. He further stated emphatically:

11! am definite that I put up the bye-laws

P-786 in the meeting of the Board of Direc-tors. I did not see any bye-laws signed by the Chairman."

There is no reason why Gupta should depose fal-

sely. His statement finds corroboration from other facts. It may be that, as noted in the resolution. it was contemplated that the revised bye· laws be signed by the Chairman for the purposes of their identity in future, but by over-sight such signatures were not obtained. There is no evidence that the bye-laws approved by the Board of Directors were actually signed by the Chairman Dalmia. Dalmia. has stated so. It is not necessary for the proof of the bye-laws of the company that the original copy of the bye·laws bearing any mark of approval of the Committee be produced. The bye-laws of the company can be proved from other evidence. K. L. Gupta was present at the meeting when the bye-laws were passed. It seems that it was not his duty to attend meetings of the Board of Directors. He probably attended that meeting because he had prepared the draft of the revised bye-laws. His presence was necessary or at least desirable for explaining the necessary changes in the pre ·existing bye-laws. He must have got his own copy of the revised bye-la.we put up before the meeting a.nd it is expected tha.t he would makt> necessary corrections in his copy in accordance with the form of the bye-la.we as finally approved a.t the meeting. The absence of the copy signed by the Chairman~ if ever one existed, does not therefore ma.ke the other evidence about the bye-laws of the

R. K. Dalmia v. Delhi Administraliln Raghuhar Da.J<Sl J.

11~2 R. K. Dalmia v. Delhi Administration Raglrubar Da)·al J.

company in admissible. The fact that Gupta signed each page of Exhibit P. 786 supports his statement. There was no reason to sign every page of the oopy if it was merely draft office·copy that was with him. He must have signed each page on account of the importance attached to that copy and that could only be if that copy was to be the basis of the future bye-laws of the company.

Copies of the bye.Jaws were supplied to the Imperial Ba.nk, New Delhi, and to the auditor. They are Exhibits P. 897 and P. 15. Raghunath Rai deposed about sending the bye-laws Exhibits P. 897 to the Imperial Bank, New Delhi, with covering letter signed by Dalmia on September 4, 1954. Mehra, P. W. l 5, Sub-Accountant of the State Bank of India (which took over the under taking of the Imperial Bank of India on July l, 1955) at the time of his deposition, stated that the State Bank of India was the successor of tho Imp• erial Bank of India. Notice was issued by the Court to the State Bank of India. to produce latter dated September 4, 1954, addressed by Dalmia to the Agent, Imperial Bank of India, and other dooµ-ments. Mehra deposed that in spite of the best search made by the Bank officials that letter could not be found and that Exhibit P. 897 was the copy of the bye· laws of the Bharat Insurance Company which he was producing in pursuance of the notice iBBued by the Court. It appears from his statement in oross·examination that the words 'received 15th September 1954' meant that that copy of the bye-laws was received by the Bank on that date. Mehra could not personally speak about it. Only such bye-laws would have been supplied to the Bank as would have been the corrected bye-laws. These bye-law Exhibit P. 897 tally with the bye-laws Exhibit P. 786. Raghunath Ra.i proves the letter Exhibit P. 896 to be copy of the letter sent along with these bye-laws to the Bank and states that

l S.C.R. SUPREME COURT REPORTS

both the original and P. 896 were signed by Dalmia. He deposed :

''Ex. p. 786 are the bye-laws of the Bharat Insurance Company which came into operation on 1-1-52 .... -..... I supplied copy of Ex. p. 786 as the copy of the bye-laws of the Bharat Insurance Company to the State Bank of India, New Delhi. ........ Shri Dalmia there-upon certified as true copies of the resolutions whi_9h were sent a1ong with the copy of the bye-laws. He also signed the covering letter which was sent to the State Bank of India a.long with the copy of the bye-laws Ex. p.786 and the copies of the resolutions.

•···•·••·•••··•······•·····••••·•••••••·······•···•··········•

I produce the carbon copy of the letter dated 4-9-54 which was sent as covering letter with the bye-laws of the Bharat Insu-rance Company to the Imperial Bank of India, New Delhi. It is Ex. p. 896. The carbon copy bears the signatures of R. Dalmia ac-cused, whioh signatures I identify ......... The aforesaid Bank (Imperial Bank) put stamp over Ex. p. 896 with regard to the receipt of its original. The certified copy of the bye-laws of the Bharat Insurance Company which was sent for registration to the Imperial Bank along with the original letter of which Ex. p. 896 is carbon copy is Ex.p. 897 (heretofore marked C). The copy of the bye-laws has been certified to be true by me under my signatures."

Dabnia states in answer to question No. 15 (put to him under s. 342, Cr. P. C.) that the signatureti on Ex. p. 896 appear to be his.

1911 R. K.D11lmi11 .,. Delhi Atlmini1fr11li1n Raghubn D11Jtl ii.

1962 R. K. Dolmia •• D1111i A.dmi'nislration

Letter Exhibit P. 896 ma.y be usefully quoted here:

"SEC

The Agent, Imperial Bank of India, New Delhi!

Dea.r Sir,

Re : Safe Custody of Govt. Seourit-

ies.

We are sending herewith true copies of

Resolution No. 4 da.ted 10th Ma.rob, 1949, Resolution No. 3 dated lllth March, 1949, and Resolution No. 8 dated 8th September, 1951, a.long with a. certified copy of the Bye-laws of the Company for registration a.t your end.

BJ virtue of Art. 12 clause ( e) of the Bye-

lawe of the Company I am empowered to deal in Government Securities etc. The specimen signatures Card of the undersigned is also sent herewith,

Yours faithfully,

Sd/- R. Dalmia.

Enols. 5

Chairman."

By Resolution No. 4 dated March 10, 1949, Dalmia

wa.s co-opted Director of the Company. By Re-solution No. 3 dated March 19, 1949, Dalmia wa.s elected Chairman of the Board of Directors. Re-solution No. 8 dated September 8, 1951 wa.s :

"Considered the dra.ft bye-la.we of the

Company and Resolved that the Bye-la.we as per draft signed by the Chairman for identi-fica.tion be and a.re hereby appro:ved in sub-stitution and to the exclusion of the existing bye-laws of the Company."

t s.c.:R. SUPREME COURT REPORTS

The letter Exhibit P. 896 not only supports the statement of Raghunath Rai about the copy of the bye-laws supplied to the Bank to be certified copy but also the admission of Dalmia that he was empowered to deal in Government Securities etc., by virtue of article 12, clause ( e), of the bye-laws of the company. There therefore remains no room for doubt that bye-laws Exhibit P. 897 are the certified copies of the bye-laws of the company passed on September 8, 1951 and in force on September 4, 1954.

We are therefore of opinion that either due to oversight the draft bye laws sajd to be signed by the Chairman Da.lmia were not signed by him or-that such signed copy is no more available and that bye-laws Exhibits P. 786 and P. 897 are the correct bye-laws of the company.

Article 12 of the company's bye-laws provides that the ·Chairman shall exercise the powers enumerated in that article in addition to all the powers delegated to the Managing Director. Clause (e) of this article authorises him to negotiate, tranfser, buy and sell Government Securities etc., and to pledge, endorse, withdraw or otherwise deal with them. Article 13 of the bye-laws mentions the powers of the Manag-ing Director. Clause (12) of this article empowers the Managing Director to make, draw, sign or en-dorse, purchase, sell, discount or accept cheques, drafts, hundies, bills of exchange and othe;;:o negoti-able instruments in the name and on behalf of the company.

Article 14 of the bye-laws originally mention-ed the powers of the Manager. The Board of Directors, by resolution No. 4 dated October 6, 1952 resolved that these powers be exercised by. K. L. Gupta. as General Manager and the necessary corrections be made.

1111 R. K. D•lmi• D1lm A'1niai.sif.•li.ta "· R•1huw D-.,.Z J.

I96B R. K. Dalmia •• Delhi Administration Ragliubar Dayal J.

By resolution No. 4 dated August 30, 1954, of the Board of Directors, the General Mana.ger was empowered to make, draw, sign or endorse, pur-chase, sell, discount or accept. cheques, drnfts, hund· ies, bills of exchange and other negotiable instru-ments in the name and on behalf of the company and to exercise all such powers from time to time incidental to the post of the General Manager of the Company and not otherwise excepted. By the same resolution, the words •Managing Director' in Article 12 of the Bye-laws stating the powers of the Chairman, were substituted by the words •General .l\Ianager.' Thereafter, the Chairman could exercise the powers of the General Manager conferred under the bye-la ws or other resolutions of the Board.It is clear therefore from these provisions of the articles and bye-laws of the company and the resolutions of the Board of Directors, that the Chairman and the General Manager had the power to draw on the funds of the company.

Chokhani had authority to operate on the account of the Bl).arat Insurance Company at Bombay under the resolution of tbe Board of Direct-ors dated January 31, 1951.

Both Dalmia and Chokhani therefore had dominion over the funds of the Insurance Com-pany.

In Pwples Bank v. Harkishen Lal (') it was stated

"Lala Harkishen Lal as Chairman is trustee of all the moneys of the Batik."

In Palmer's Company Law, 20th Edition, is stated at page 517 :

'•Directors are not only agents but they are in some sense and to some extent trustees or in the position of trustees.'' (I) A.f.R. 1936 Lah. 408, 409.

I S.C.R. SUPREME COURT REPORTS

In G. E. Ry. Oo. v. Turner C) Lord Selborne eaid:

"The directors· are the mere trustees or agents of the company-trustees of the com· pany's money and property-agents in the tramiactions which they enter into on behalf of the company . ,

In Re. Forest of Dertn etc., Oo. (2) Sir George Jessel said :

"Directors are ca1led trustees. They are

no doubt trustees of assets which have come into their hands, or which are under their control."

We are therefore of opinion that Dalmia and Chokhani were entrusted with the dominion over the funds of the Bharat Insurance Company in the Banks.

It has been urged for Chokhani that he could

not have committed the offence of criminal breach of trust when he alone had not the dominion over the funds of the Insurance Company, the ac<'ounts of which he could nut operate alone. lfoth Raghu-nath Rai i1nd he could operate on the accounts jointly. In support of this contention, reliance is placed on the case reported as Binde8hwari v. [{ ing Emperor ('[1 ]). \Vo do not agree with the contention. ·

Bindeshu·ari's Case C) does not support the contention. In th;1t C<1Se, joint family firm was appointed Government stockist of food grain. The partners of the firm were Bindesh wari and his younger brot.hcr. On check, shortage in food grain was found. Bindeshwnri was prosecuted and convicted by the trial Court of an offence under s. 409 I. P. C. On appeal, the High Court set aside the conviction of Bindeshwari of the offence under ( l} J .. R. (1872)8 Ch. App. 14-9, 152 (2) L. R. (1878) 10 Ch. D. 450, 453 (3) (l9•7) T.L.R. 26 P~t. 703, 715.

J1't.2 B.K.Dalmia v. Delhi &/ministration Raghubar Dayal J.

JHI

B. /\. Dlllllia

s. 409 I. P. C. and held him not guilty of the offence

under that section as the entrustment of the grain was made to the firm and not to him personally. The High Court convicted him, instead, of the offence 1mder s. 403 I. P. C. This is clear from the observation :

"In my opinion, the Government rice

was entrusted to the firm of which the petitioner and his younger brother were the proprietors. Technically speaking, there was no entrustment to the petitioner personally."

This case clearly did not deal directly with the

question whether person who, jointly with another, has dominion over certain property, can commit criminal breach of trust with respect to that property or not.

On the other hand, Full Bench of the

Calcutta High Court took different view in Nrige:ndro Lall Ohatterje.e v. Oklwy Ooomar Shaw ([1]). The Court said :

"We think the worde of Section 405 of

the Penal Code are large enough to include · the case of partner, if it be proved that he was in fact entrusted with the partnership property, or with dominion over it, and has dishonestly misappropriated it, or conver· ted it to his own use."

Similar view was expressed in Emperor v.

Jagannatk Ragkunathdas. ('\ Beaumont C. J., eaid at.

But, in my opinion, the words of the

section (s. 405) are quite wide enough to cover the case of partner. Where one partner is given authority by the other partners to collect moneys or property of the firm I think that he is entrusted with dominion over

(I) (1874) 21 W. R, !Criminal Rulings) 59 t;I.

1i> (1931) ~3 Born. L. It. 1518, 1~21·

I S.C.R. SUPREME COURT REPORTS

that property, and if he dishonestly misappro-priates it, then I think he comes within the section."

Barlee J., agreed with this opinion.

The effect of Raghunath Rai's deJivering the blank cheques signed by him to Chokhani may amount to putting Chokhani in sole control over the fnnds of the Insurance Company in the Bank •nd there would not remain any question of Cho-khani's having joint dominion over those funds and this contention, therefore, will not be available to him.

It was also urged for Chokhani that he had

obtained control over the funds of the Insurance Company by cheating Raghunath Rai inasmuch as he got blank oheques signed by the latter on the representation that they would be used for the legitimate purpose of the company but latter used them for purposes not connected with the company and that, therefore, he could not commit the offence of criminal breach of trust. This may be so, but Chokhani did not get dominion over the funds on account of Raghunath Rai's signing blank cheques. The signing of the blank cheques merely facilitated Chokhani's committing breach of trust. He got control and dominion over the funds under the powers conferred on him by the Board of Directors, by its resolution authorising him and Raghunath Rai to operate on the accounts of the Insurance Company with the Chartered Bank, Bombay.

The next contention is that Dalmia and Cho-

khani were not agents as contemplated by s. 409 I. P. C. 1'he contention is that .the word 'agent' in this ,gection refers to 'professional agent' i, e., person who carried on the profession of agency and that '&S Dalmia and Chokhani did not carry on such pr,6fession, they could not be covered bT the ex:preitsioq 'ageqt' iq his s"otion

19tll R.E.Dttl.__ v. Delhi Atbni11lilrali• Ragllt1bar Do,ol J.

1962 ••

R. K. DPmio •• D1lhi A.imiaistraCiau

Reliance is placed on the case reported as Mahumg,rakaJa,ge Edward Andrew Oooray v. The Queen Cl· This case approved of what was said in Reg. v. Portugal (2) and it would better to discuss that c&se first.

That case related to an offenoe being com·

mitted by the accused under s. 75 of the Larceny Ao't, 1861 (24 & 25 Viet. c. 96). The relevant portion of the section reads

"Whosoever, having been intrusted, either solely or jointly with any other person, as banker, merchant, broker, attorney or other agent, with any chattel or valuable security, or any power of attorney for the sale or transfer of any share or interest in any public stock or f•md ............ or in any stock or fund of any body corporate, &c., for safe custody or for any special purpose, without any authority to sell, negotiate, transfer, or pledge, shall, in violation of good faith and contrary to the object or purpose for which such chattel &c., was intrusted to him sell, negotiate, pledge, &c., or in any manner convert to his own use or benefit, or the use or benefit of any person other .than the person by whom he shall have been so intrusted ............ shall be guilty of misdemeanor.The accused in that case was employed by firm of Railway contractors for commission, to use his influence to obtain for them contract for the cons-truction of railway and docks in France. In the course of his employment, he was entrusted with cheque for £500/- for the purpose of opening credit in their name in one of the two specified banks in Paris. He was alleged to have misappro· priated the oheque to his own use fraudulently. He was also alleged to have fraudulently dealt with another bill for £250/ · and other securities which had Pl (1953) 1t..c. 407, 419. (2) (188SJ 16 Q.n.o. 4117.

SUPREME COURT RF.PORTS

1 S.C.R.

been entrusted to him for special purpose. He was committed for trial for the offence under s. 75. He, on arrest under an extradition warrant, wa, committed to prison with view to his extradition in respect of an offence committed in France. It was contended on his behalf:

"To justify tho committal under the Extradition Act, it was incumbent on the prosecutors to offer prim.a facie evidence that the money and securities which t.he prisoner was charged with having misappropriated were intrusted to him in the capacity of 'agent', that is, person who carries on the business or occupation of an agent, and intrusted with them in tha.t capacity, and without any authority to sell, pledge, or negotiate, and not one who upon one solitary occasion acts in fiduciary character."

It was held, in view of the section referring to 'hanker, merchant, broker, attorney or other agent', thats. 75 was limited to class, and did not appJy to everyone who might happen to be intrusted as prescribed by the section, but only to the . class of persons therein mentioned. !t was further said :

''In our judgment, the 'other agent' mentioned in this section mea:r;is one whose business or profession it is to receive money, secunties or chattels for safe custody or other special purpose ; and that the term does not include person who carries on no such busi-ness or profession, or the like. The section is aimed at those classes who carry on the occupations or similar occupations to those mentioned in the section, and not at those who carry on no such occupation, but who may happen from time to time to undertake some fiduciary position, whet~er for mone1 or otherwisA".

R. 1(. Dalmia v. Del/ii Administration Raghubar Dayal J.

1962 R. K. Dalmia •• Dtl hi Administr~tlon Roghr.bar Dayal J.

294 Sl'.JPREME OOURT REPORTS [1963]

This case therefore is authority to this effect only that the term 'agent' in that section does not include person who just n.cts as an agent for another for particular purpose with respect to some property that is entrusted to him, i. e., does not include person who becomes an agent as consequence of what he has been charged to do, and who has been asked to do certain thing with respect the property entrusted to him, but includes such person who, b~fore such entrustment and before being asked to do Romething, already carried on such business or profession or the like as neces-sitates, in the course of suoh business etc., his receiving money, securities or chattles for safe cus-tody or other special purpoEe. That is to say, Ile is already an agent for the purpose of doing such acts and is subsequently entrusted with property with direction to deal with it in certain manner. It is not held that person to be an agent within that section must carry on the profession of an agent or must have an agency. The accused, in that caee, was therefore not held to be an agent.It may also be noticed that he was so employ-ed for specific purpose which was to use his influence to obtain for his employers contract for the oonstruction of rail wav and docks in france. This assignment did not arn.ount to making him an agent of the employers for receiving money etc. In Mahumarakalage Edward And1·ew Cooray's Case ([1]) the Privy Council was dealing with the appeal of person who had been convicted under s. 392 of the Penal Code of Ceylon. Secti0ns ass to 391 of the Ceylon Penal Code correspond to es. 405 to 40S of the Indian Penal Code. Section 392 corresponds to s. 409 I. P. C. It was contended before the Privy Council that the offence under s. 3~2 was limited to the case of one who carried on an agency business and did not comprehend person who was casually entrusted with money either on one individual (I) (1953) A.C. 407 419,

I S.C.R.

occasion or number of occasions, provided that the evidence did not establish that he carried on an agency business. Their Lordships were of opinion that the reasoning in Reg. v. Portu.gal ([1]) for the view that s. 75 of the Larceny Act was limited to the class of persons mentioned in it, was directly applicable to the case they were considering, subject to some imma.terial variations, and finally said :

R. K.Da/mia v. Del hi dministrotion Raghubar Dayal J,

"In enunciating the co11struction whieh they have placed on section 392 they would point out that they are in no way impugniug the decisions is certain cases that one act of en- · trustment may constitute man faetor for another provided he is entrusted in his busi-ness as mercantile agent, nor are they deciding what activity is required to establish that an individual is carrying on the business of an agent".

These observations mean that the view thats. 75 was limited to the class of persons mentioned there-in did not affect the correctness of the view that certain act of entrustment may constitute person factor for another provided he was entrusted in his business as mercantile agent. It follows that certain entrustment, provided it be in the course of businef.ls as mercantile agent, would make the person entrusted with factor, i. e., would make him belong to the class of factors. The criterion to hold person factor, therefore, is that his business be that of mercantile agent and not necessarily that ~e be professional mercantile agent.

Further, their Lordships left it open as to what kind of activity on the patt of person alleged to be an agent would establish that he was carrying on the business of an agent. This again makes it clear that the emphasis is not on the person's carrying on the profession of an agent, but on his carrying on the business ·of an agent. (1) (1885) 16 Q.B.D,487.

J9U R. K. Dolmia •• D1lli .Admi,,islral 1111 a.,iubot Dayal J.

'fhese cases, therefore, do not support the contention for Dalmia and Chokhani that the term 'agent' in s. 409 I. P. C., which corresponds to s. 392 of the Ceylon Penal Code.. is restricted only to those persons who carry on the profession of agents. These cases are authority for the view that the word 'agent' would include person who belongs to the class of agents, i.e., who carries on the business of an a.gent

Further, the accused in the Privy Council

Case (1) was not held to be an agent. In so holding, their Lordships said :

"In the present case the appellant clearly

was not doing so, and was in no sense entitled te receive the money entrusted to him in any capacity, nor ind~ed, h1d Mr. Ranatunga authority to make him agent to hand it over to the bank."

To appreciate these reasons, we may mention

here the facts of that case. The accused was the President of the Salpiti Koral Union. The Union supplied goods to its member societies through three depots. The accused was also President of the Committee which controlled one of these devots. He was also Vice·President of the Co-operative Central Bank which advanced moneys to business societies to enftble them to buy their stocks. Tho societies repaid the advance weekly through cheques and/or money orders, except when the advance be of small sums. The Central Bank, in its turn, paid in the money orders, cheques and cash to its account with the Bank of l.oylon. The accused appointed one Ranatunga to bo the Manager of the depot which was managed by the Committee of whi~h he was thll President. The payments to the Central Bank used to be made through him. The accused instru-cted this Manager to follow course other than the prescribed routine. It was t)lat 1:\e w~s to collect

(1) [1953] A.C. 407, 419.

1 S.C.R.

the amounts from the stores in cash and hand them over to him for transmission to the Bank. The accused thus got the cash from the Managn and sent his own cheques in substitution for the amounts to the Central Hank. He also arranged as the Vice-President of that Bank that in certain ca.sea thos~ cheques be not sent forward for collection and the result was that he could thus misappropriate large sum of money. The Privy Council said that the accused was not entitled to receive the money entrust.ed to him in any capacity, that is to say as the Vice·Pl"esident of the Cooperative Central Bank or the President of the Union controlling the depots or as the President of the Committee.

It follows from this that he could not have

received the money in t.he course of his duties as, any of these office-bearers. Further, -the Manager of the depot had no authority to make the accused an agent for purposes of transmitting the money to the Bank. The reason why the accused was not held to be au agent was not that he was not professional agent. Tbf3 reason mainly was that the amount was not entrusted to him in the course of the duties he had to discharge as the office-bearers of the various institutions.

Learned counsel also made reference to the case reported as Rangamannar OltaUi v. Emperor (1) • .lt is not of much help. The accused there is said to have denied all knowledge of the jewels which had been given to him by the complainant for pledging and had been pledged a.nd redeemed. It was said that it was not case under s. 409 I. P. C. The reason given was:

"There is no allegation that the jewels were entrusted to the accused 'in the way of his business as an agent'. No doubt he is said to

(I) (1935) M.W.M, 649.

R. Ti. Dalmia v. De/Iii A.dministration Raghuba1 Dayal J,

R. K. Dalmi-J v. D1lhi Administration Raghu/Ja D:1yal J.

have acted as the complainant's agent., but he is not professionally the complainants agent nor was this affair business transaction."

The reasons emphasize both those aspects we have

referred to in considering the judgment of the Privy Council in Mahuinarakal,ag Edward Andrew Cooray's Case (1), and we need not say anything more about it.

Whats. 409 I.P.C. requires is that the person

alleged to have committed criminal breach of trust with respect. to any property be entrusted with that property or with dominion over that property in the way of his business as an agent. The expres-sion 'in the way of his business' means that the property is entrusted to him 'in the m·dinary course of his duty or habitual occupation or profession or trade'. He should get the entrustment or dominion in his capacity as agent. In other words, the require-ments of this section would be satisfied if the per-son be an agent of another and that other person entrusts him with property or with any dominion over that property in the course of his duties as an agent. person may be an agent of another for some purpose and if he is entrusted with property not in connection with that purpose but for another purpose, that entrustment will not be entrustment for the purposes of s. 409 !.P.O. if any breach of trust is committed by that person. This interpreta-tion in no way goes against what has been held in Re,g. v. Portugal (') or in Mahumarakal.age Edward Andrew Caoray's Case ([1]), and .finds support from the fa.ct that the section also deals with entrustment of property or with any dominion over property to person in his capacity of a. public servant. dif-ferent expression 'in the way of his business' is used in place of the expression 'in his capacity,' to make it clear that entrustmout of property in the capacity of agent will not, by itself, be sufficient to make (1) (1953) A.C. 407, fl9. (2) (1885) 16Q.B.D. 487.

I s.c.R.

the criminal breach of trust by the agent graver offence than any of the offences mentioned is ss. 406 to 408 I.P.C. The criminal breach of trust by an agent would be graver. offence only when he is entrusted with property not only in his capacity as an agent but also in connection with his duties as an agent. We need not speculate about the reasons which induced the Legislature to make the breach of trust by an agent more severely punishable than the breach of trust committed by any servant. The agent acts mostly as representative of the princi-pal and has more powers in dealing with the pro-perty of the principal and, consequently, thne are greater chances of his misappropriating the proper-ty if he be so minded and less chances of his detec-tion. However, the interpretati~n we have put on the expression 'in the way of his business' is also borne out from the Dictionary meanings of that expression and the meanings of the words 'busines8' and 'way', and we give these below for convenience.

'In the way of -of the nature of, belong-

ing to the class of, in the course of or routine of (Shorter Oxford Eng-lish Dictionary)

-in the matter of, as re-gards, by way of (Webster's New Inter-national Dictionary, II Edition, Unabrid-ged)

-occupation, work · (Shorter Oxford Eng-lish Dictionary)

1Busine88'

-mercantile transactions, buying and selling, dut:}, apeoial imposed or under-

191JB R. tr. Dalmia "·

D1lhi Adminisiratio11

1962 R. K Dalmia •• D1lhi A.Jminitlfr ali on B•ghuhar Dayal J

taken servi0e, regulnr occupation (Webster's New Inter-national Dictionary, II Editional, Unabrid-ged)

-duty, province, habitual occupation, profe~sion, trade

(Oxford Concise Dic-tionary)

•Way'

--scope, sphere, range, line of occupation Oxford Concise Dic· tionary)

Chokbani was appointed agent of the Bharat

Insurance Company on January 31, 1951. He admits this in bis ~tatement under s. 342, Cr. 1'.C. He signed various cheques as agent of this company and he had been referred to in certain documents as the agent of the company.

Dalmia, as Director and Chairman of the

company, is an agent of the company.

In Palmer's Company Law, 20th Edition, is

stated, at page 513:

"A company can only act by agents, and

usually the persons by whom it acts and by whom the business of the company is carried on or superin-tended are termed directors ...... " Again, at page 515 is noted:

"Directors are, in the eye of the law,

agents of the company for which they act anc.1 tho gl,neral principles of the law or prin: oipal and agent regulate in most respects the relationship of the company and its directors."

It was held in Gul,ab Singh v. Punjah Zamin-dara Bank (1) and in Jaswant Singh v. V.V. Puri (2) that director is an agent of the company.

Both Dalmia and Chokhani being agents of

the company the control, if any, they had over the securities and the funds of the company, would be in their capacity as agents of the company and would be in the course of Dalmia's duty as the Chairman and Director or in the course of Chokhani's duty as duly appointed agent of the company. If they committed any criminal breach of trust with respect to the securities and funds of the company, they would be committing an offence under ss.409 I.P.C.

In view of our opinion with respect to Dalmia

and Chokhani being agents within the meaning of s. 409 I.P.C. and being entrusted with dominion over the funds of the Bharat Insurance Company in the Banks which comes within the meaning of the words 'property' in s. 409, these appellant would commit the offence of criminal breach of trust under s. 409 in case they nave dealt with this 'property' in any manner mentioned in s. 405 I.P.C.

We may now proceed to discuss the detailed

nature of the transactions said to have taken place in pursuance of the alleged conspiracy. It is, how-ever, not necessary to give details of all the impug-ned transaction. The details of the first few transactions will illustrate how the whole scheme of diverting the funds of the Insurance Company to the Union Agencies was worked.

The Union Agencies suffered losses in its shares-speculation business in the beginning of August, 1954. The share brokers sent statements of accounts dated August 6, 1954, to Chokhani and (l) A.I.R. 1942 Lab. 47. (2) A.I.R. 1951 Pun. 99.

R. K.Delmi• '·

Delhi A.dministratiu

1962 II. E. DalmU. •• D1lhi Administrotfon Bag hub"' Do1ol J.

SUPREME COURT .REPORTS (1963)

made demand of Rs. 22,25,687. 13.0 in respect of the losses. The total oash assets of the Union Agencies in all it~ banks and offices at Bombay, Calcutta and Delhi amounted to Rs. 2,67,857-11-7 only. The Union Agencies therefore needed large sum of money to meet this demand and to meet expected future demands in connection with the losses.

At this crucial time, telephonic communioa·

tions did take place between presumably Dalmia and Chokha.ni. The oalls were made from Telephone No. 45031, which is l>almia.'s number at 3, Sikandara Road, New Delhi, to Bombay No. 33726, of Cho-khani. Two calls were made on August 7, 1954, three on August 8, two on August 11 and one each on August 13 and August 14, respectively. Of course, there is no evidence about the conversation which took place at these talks. The significance of these oalls lies in their taking place during the period when the scheme a.bout the diversion of funds was coming into operation for the first time, but in the absence of evidence as to what conversa-tion took place; they furnish merely circumstance which is not conclusive by itself.

On August 7 and 9, 1954, the Punjab Nat.ional Bank, Bombay, received Rs. 2,00,000 and Rs. 3,00,000 respectively in the account of the Union Agencies, telegraphically from Delhi.

On the same day, Vishnu Prasad, appellant,

opened an account with the Bank of India, Bombay, in the name of Bhagwati Trading Company. He gave himself out as th"' sole proprietor and mentio-ned the buaineBB of the company in the form for opening account as 'merchants and commiasion a.gents'. He made a. deposit of Rs. 1,100 said to have been supplied to him by Chokhani.

On August 11, 1954, Vishnu Prasad made another deposit of Rs. 1,100, again 11a.id to have

1 S.C.R. SUPREME OOURT REPORTS

been Hupptied by Chokhani, as the first deposit in the account he opened with the United Bank of India, Bombay, in the name of Bhagwati Trading Company. The business of the company was des-cribed in the form for opening account as 'mer-chants, piece-goods dealers.'

. There is no dispute now that Bhagwati Trading Company did not carry on any business either as merchants and commission agents or as merchants and piece-goods dealers. Vishnu Prasad states that he acted just at Chokha.ni told him and did not know the nature of the transactions which were carried on in the name of this company. It is · however clear from the accounts and dealings of this company that its main purpose was simply to act in such way as to let the funds of the Insurance Company pass on to the Union Agencies, to avoid easy detection of such transfer of funds.

Chokhani states that he did this business as the Union Agenoies needed money at that time. He thought that the Union Agencies would make profit after some time and thereafter pay it back to Bhagwati Trading Company for purchasing securi-ties and therefore he postponed the dates of deli-very of the securities to the Insurance Company. He added that in case of necessity he could raise money by selling or mortgaging the shares of the Union Agencies in the exercise of his power of att-orney on its behalf.

We may now revert to the actual transaotion gone through to meet the demands in connection with the losses of the Union Agencies.

On August 9, 1954, Chok.hani purchased 3%

1963-65 securities of the face value of Rs. 22,00,000 on behalf of the Insurance Company from Narain· das and Sons, Security Brokers. Chokhani entered into e. orol58°oontra.ct with the same firm of brokers

19ff R. K. Dalmi• ,,, De/Ai Atlmlni11ra1in

Roghul>a1 D47al J.'

1961 R. K. Dalmio •• Delhi ..fdm.inistraitan ' Ba1hubaT Do.Jal J, '

for the sale of similar securities of the ea.me fa.Oil value on behalf of Bhagwati Trading Company. He informed the brokers that the payment of purchase price would be made by the Insurance Company to Bhagwati Trading Company from whom it would get tp.e securities. Thus the actual brokers practically got out of the transaction ex-cept for their claim of brokerage.

On August 11, 1954, similar transaction of

purchase on behalf of the lnsuran<Je Company from the brokers and sale by Bhagwati Trading Company to those brokers, of 3% 1963·65 securities of the face value of Rs. 5,00,000, was entered into by Chokhani.

It may be mentioned, to avoid repetition, that

Chokhani always acted in such transaction-which may be referred to as usual purchase traneactions-both on behalf of the Insurance Company and on behalf of Bhagwati Trading Company, and that the same arrangement was made with respect to the payment of the purchase pric9 and the delivery of securities.

The securities were not delivered to the Insu-

rance Company by Bhagwati Trading Company and yet Chokhani made payment of the purchase price from out of the funds of the Insurance Company.

On August 11, 1954, Chokhani got the state-

ment of accounts from the brokers relating to the purchase of securities Worth Re. 22,00,000. The total cost of those securities worked out at Re. 20,64,058-6-9. Chokhani made the payment by iseuing two cheques in favour of Bhagwati Trading Company, one for Rs. 10,00,000 and the other fm the balance, i.e., Rs. 10,64,058-6-9. Needless to say that he utilised the cheques which had already been signed by Raghunath Rai, in pursuance of the arrangement to facilitate transactions on behalf of the Insurance Company.

1 S.C.R.

On August 12, 1954:, the statement of account with respect to the purchase of securities worth Ra. 5,00,000 WltS received. The cost worked out to Rs. 4,69,134-15-9. Chokha.ni made the paym~nt by issuing a. cheque for the amount in favour of Bhag-wati Trading Company. All these ckeques were drawn on the Chartered Bank, Bombay.

On August 12, 1954, Vishnu Prasad drew

cheques for Rs. 9,00,000 in the account of Bhag-wati Trading Company in the United Bank of India. The amount was collected by his father B::i.jranglal. He drew another cheque for Rs. 9,60,000 in the account of the Bhagwati Trading Company with the Bank of India, Bombay, and collected the a.mount personally. The total amount withdrawn by these two cheques viz., Rs. 18,60,000 was passed on to the· Union Agencies through Ohokhani that day. Thel'.e-after Chokhani deposited Rs. 7,00,000 in the account of the Union Agencies with the Bank of India, Rs. 7,00,000, in the account of the Union Agencies with the United Bank of India and Rs. 4,40,000 in the account of the Union Agencies with the Punjab National Bank Ltd. The Punjab National Bank Ltd., Bombay~ as already mentioned, had received deposits of Rs. 2,00,000 and R~. 3,'00,000 on August 7 and August 9, 1954~ respectively, in the account of the Union Agencies from Delhi.Between August 9 and August 19, 105!, Cho-khani made payment to 'the brokers on account of the losses suff'3red by the Uqion AgenciE:s. He issued cheqnes for Rs. 9,37,4rl-5-9 between August 9 and August 13, 1954, on the account with the Punjab National Bank. On August 13, he issued cheques on the account of the Union Agency with the United Bank of India in favour of the Bombay brokers on account of the losses of .the Union Agencies, for Rs. 7,40,088-5-9. He also issued, between August 13 and August l 9, 1954, cheque for Rs. 6,84,833·14·0 on the B~nk of fqdia, in fa,vou.r

R. K. Dalmia v.

D1lhi A.dmini1ttalian Rag/iuba Dayal J.

R.K. Dal111ia v. D1Jlai Aclmimislr•tion

of the share brokers at Bombay on account of the

losses suffered by the Union Agencies.

Chokhani informed the head office at Delhi about these purchase transaction of securities worth Rs. 27,00,000, through letter dated August 16, 1954, and along with that letter sent the contract note and statements of accounts received from the bro· kers. No mentioned was made in the letter about the payment being made to Bhagwati Trading Company through cheques or about the arrange· ment about getting the securities from Bhagwati Trading Company or about the postponement of the delivery of the securities by that company. Un receipt of the letter, Haghunath Rai contacted Dal· mia and, on being told that the securities were pur-chased under the latter's instructions, made over the letter to the office whne the usual entries where made and records were prepared, as had to be done in pursuance of the office routine. Ultimately, the form~! confirmation of the purchases was obtained on August 30, 1954, from the Board of Directors at its meeting for which the office note st~ting that the securities were purchase under the instruction of the Chairman (Dalmia) was prepared. The office note, ]j:xhihit P. 793, with respect to the pur-chase of these securities worth Rs. 27,00,000 was signed by Chordia, who was then the Managing Director of the Bharat Insurance Company.

On August 16, 1954, Vishnu Prasad withdrew

Rs. 2,200 from the account of the Bhagwati Trading Company with the Bank of India, according to his statement, gave this money to Chokhani in return for the amount Chokhani had advanced earlier for opening accounts for Bhagwati Trading Company with the Bank of India and the United Bank of India. Thereafter, whatever money was in the account of Bhagwati Trading Company with these Banks was the money obtained throngh the dealings entered into on hAhalf of Bhagwati Trading Company, the funds

for most of whioh , came from the Bharat Insu-rance Company.

On August 18,1954, Vishnu Prasad drew sum of Rs. 50,000 from Bhagwati Trading Com-pany's. account with the Bank of India. and passed on the amount to the Union Agencies through Chokhani. On August 23. 1954, he withdrew Rs. 90,000 from Bhagwati Trading Company's acc-ount with the United Bank of India and Rs. 5,10,000 from its account with the Bank of India. and passed on these amounts alRo to the Union Agen-cies through Chokhani. Chokhani then issued che-ques totalling Rs. 5,88,380-13·0 from August 23 to August 26,1954, on the account of the Union Agen· cies with the Cha.rtered Bank, Bombay. in favour of the brokers on account of the losses sufferred by· that company. Thus, out of the total amount of Rs. 25,33,193-6-6 withdrawn by Cqokhani from the account of the Bharat Insurance Company and paid over to Bhagwati Trading Company, Rs. 25,10,00U went to the Union Agencies, which mostly utilised the amount in payment of the losses suffered by it.

The Union Agencies suffered further losses amounting to about Rs. 23,00,000. Demands for payment by the brokers were received on Septcm· ber 3, 195f, and subsequent days.

The Bharat Insurance Campany had no suffi.

cient liquid funds in the Banks at Bombay. There was therefore necessity to deposit funds in the Bank before they could be dr~wn ostensibly to pay the price of securities to be purchased. This time the transactions of sale of securities held by the Insurance Company and the usual purchase transac-tions relating to certain other securities were gone through. The details of these tr~nsaotious are 'iveJ1. below,

lHI R. Ir. Dalmia v.

D1lAi .tftlmini.stroliolt RoghulNlr Dqyal J.

1911 B. K. Da/mia •• D1lhi AJmini.1trati on

On September 4, 1954, securities of the face value of Rs. 17,50,000 held by the Insurance Com-pany were withdrawn from its safe-custody account with the Imperial Bank of India, New Delhi, by letter Exhibit P. 1351 under the signature of Dalmia. Securities worth Rs. 10,00,000 were 2-1/4% 1954 securities and the balance were 2-1/2% 1955 securities. These securities were then sent to Bombay and sold there. On September 9, 1954, Rs. 6,25,000 were transferred from Delhi to the account of the Insurance Company with the Chartered Bank, Bom-bay, by telegraphic transfer. Thus the balance of the funds of the Insurance Company with the Char-tered Bank rose to an amount out of which the losrns of about Rs. 23,00,000 suffered by the Union Agencies could be met. The 195,l securities sold were to mature on November 15, 1954. The 1955 securities would have matured much later. No ostensible reason for their premature sale has been given. · On September 6, 1954, Chokhani purchased 3% 1959·6 l securities of the face value of Rs. 25,00,000 on behalf of the Insurance Company from M/s. Naraindas & Sons, Brokers. cross-contract of sale of similar securities bJ Bhagwati Trading Company to the brokers was also entered into. Steps which were ta.ken in connection with the purchase of securities worth Rs. 27,00,000 in August 1954 were repeated. On September 9, 1954, Chokhani iBBued two cheques, one for Rs. 15,()0,000 and the other for Rs. 9,20,875 on the account of the Insurance Company with the Chartered Bank, in favour of Bhagwati Trading Company which deposi-ted the amount of the cheques into its account with the Bank of India, Bombay. Vishnu Prasad passed on Rs. 24,00,000 to the Union Agencies through Chokhani. This amount was utilised in meeting the losses suffered by the Union Agencies to tho extent nf Rs. 22,81,738-2-0. . sun1 -of Its. w,oon wn~ paid . ~

I S.C.R. SUPREME COURT REPORTS

to Bennett Coleman Co. Ltd., of which Dalmia was director and sum of Rs. 15,000 was deposited in the Punjab National Bank.

It is a.gain significant to note that telephonic

communication took place between Dalmia's resi-dence at New Delhi at, Chokhani's at Bomha.y, between September 4 and Septemher J 0, I 954. Th~re was two communications on September 4, one on'September 5, three on Sept~mb~r u and one on Septembt:r 10, 1954.

The Union Agencies suffered further losses amounting to about Rs. 10,00,000 in the month of September. .Again, the accounts of the Union Agencies or of the Insurance Company, at Bombay, did not have sufficient balance to meet the losses and, consequently, sale of certain se0urities held by the Insurance Company and purchase of other securities :l.gain took place. 11his time. :i% l fl;)7 securities of the face value of Rs. 10,00,000 held by the Insurance Company in its safe-custody d1>posit with the Chartered Bank, Bomb~1y, were f!Old on September 21, 1954, and Rs. 9,84,854-5-6, the net proceeds, were deposited in the Bank. On the same day, Chokhani purchased 3% 1959-61 securities of the face value of Rs. 10,00,000 on behalf of the Insurance Company following the procedure adopted in the earlier usual purchase transactions.No telephonic communication appears to have taken place between Delhi and Bombay, on receipt of the demand from the brokers on September 17, 1954, for the payment of the losses, prosumably because necessary steps to be taken both in connection with the fictitious purchase of securities, in order to pay money to' Bhagwati. Trad-ing Company for being made over to the Union Agencies when funds were needed and also or providing funds in thr~ Insurance Company's account wit4 the Charterorl Bank, Bombay, in case the

R. K. Dalmiu-v. Delhi Admini~·trutil'ri Raghu6ar Dayal J,

1962 R. K. J)q.lmia v. D1lli Administration RagktJJar DaJal J.

balance was not suffioient to meet the losses, had already been adopted in the previous transactions, presumably, after consultations between Dalmia and Chokhani. This lends weight to the significance of the telephonic communications between Delhi and Bombay in the critical period of August and early September, 1954.

To complete the entire picture, we may now mention the steps taken to cover up the non-receipt of securities purchased, at the proper time.

By November, 19, 1954, securities of the face· value of about Rs. 80,00,000 had been purchased by Chokhani on behalf of the Insurance Company and such securities had not been sent to the head office at Delhi. Raghunath Rai referred the matter to Dalmia and, on his approval, sent letter on November 19, 1954, to Chokhani, asking him to send the distinctive numbers of those securities. The copy of the letter is Exhihit P. 805. The securities referred to were 3% Loan of l!l59-6l of the face value of Rs. 35,00,000, 3% .Loan ef 1963-65 of the face value of Rs. 27,00,000 and 2-3/4% Loan of 1960 of face value of Rs. 18,00,000.

It was subsequent to this that stock certificate1 with respect to 3% 1963-65 securities of the face value of Rs. 27,00,000 and with respect to 2-3/4% 1960. Loan securities of the faoe value of Rs. 18,00,000 were received in Delhi.

We may now refer to the transactions which

led to the obtaining of these stock certificates. The due dates of interest of 3% 1963·65 securitiee pur-chased in August 1954 were June l andDeoember I. It was therefore nec618ary to procure these securi-ties or to enter into paper transaction of their sale prior to December l, as, otherwise, the non-obtaining of the income-tax deduction certificate from the Reserve Bank would have clearly indicat-ed that the Insurance Company did not hold thelO

I S.C.R.

~UPREME COURT REPORTS

securities, Chokhani, therefore, entered into genuine contract of purchase of 3% 1963-65 securi-ties of the face value of Rs. 27,00,000 on behalf of Bhagwati Trading Company with Devkaran Nanjee, Brokers, Bombay, on November 3, 1954. He instructed the brokers to endorse the securities in favour of the Insurance Company, even though the securities were being sold to Bhagwati Trading Company. These securities so endorsed were receiv-ed on November 24, 1954, and were converted into inscribed sto.ck (Stock Certificat.e Exhibit P. 920) from the Reserve Bank of India on December 7,1954.. The stock certificate does not mention the date on which the securities were purchn.sed and therefore it existence could prevent the detection of the fact that t.hese securities were not purchased in August 1954 when, according to the books of the Insurance Company, they were shown to have been purchased.

The Insurance Company did not ostensibl.v

pay for the purchase of these shares but partially paid for it through another share-purchase transac-tion. In order to enable Bhagwati Trading Com-pany to pay the purchase price, Chokhani paid Rs. 16,00,000 to it front the account of the Bharat Union Agencies with the Banks at Bombay, and Rs. 10,08,515-15-0 from the account of the Insurance Company with the Chartered Bank oy .fictitious purchase of 2-1/2% l96ll~ecurities of the faoe value of Rs. 11,00,000 on behalf of the Insurance Company. These 2-l/2% 1961 securities of the face value of Rs. 11,00,000 were purchased by Chokhani on November 16, 1954. by taking· step similar to those taken for the purchase of securities in August and September, 1954, already referred to.

Interest on the 2-3/4% Loan of 1960 of the face

.value, of Rs. 18,00,0JO was to fall due on January 15, 1955. Both on account of the necessity for obtaining the interest certificate and also on

R. K. Dafmia v.

Delhi .Administration Ragliubar Dayal •

R. K. Dalmia v. Delhi Administration

account of the expected check of securities by the . auditors appointed for auditing the accounts of the Insure.nee Company for the year 1954, it became necessary to procure these securities or to sell them off. Chokhani purchased, on December 9, 1954, 2-3/4% I 960 securities of the face value of Rs. 18,00,000 on behalf of Bhagwati Trading Com-pany. The purchase price was paid out of the funds of the Union Agencies and Bhagwati Trading Com-pany. The securities were, however, got endorsed in the name of the Insurance Company. Chokhani got the securities sometimes about December 21, 1954, and, therefore, got them converted into st.ock certi-ficates which were then sent to the head office at Delhi.

There still remained 3% 195!l-Gl Aecuritks of face value of Rs. 35,00,00IJ f,,, be accounted for. They were purchased in Sept.ember, Hi34, as already mentioned, but had not been re<•<·ived up to the end of Decem her. On Decem!Jer :27. 1954, Chokhani purchased 2-3/4°/., l 91i2 securities of the face value of Rs. 46,00,000, in two lots of Rs. l l,O,l,000 and Rs. a:3,00,000 respectively, on bflhalf of the Insu-rance Company. He also entered int.o the usual cross-contract with the brokers for the sale of those securities on behalf of the Union Agencies. This was fictitious transaction, as usual, and these securities were not received from the Union Agencies. On the same day, Chokhani entered into contract for the sale of :i% 1959-61 securities of the face value of Rs. 35,00,000 on beba.lf of the Insurance Company and also entered into cross·contract on behalf of the Union Agencies for the purchase of these securities from the same broker~. As these securi-ties did not exist with the Jnsuranc~ Company, these transactions were also paper transactions.

We need not give details of the passing of money from one concern to the other in oonnection' with these transactions. For purposes of audit the 3'Yq 1959-Gl seourities of t4e fa,ce value of

i s.c.R. SUPREME COUltT REPORTS

Hs.35,00,000 had been sold. New securities viz., 2-3/4% 1962 securities of the face value of Rs. 46,00,000 had been ostensibly purchased. The auditors co'.lld de;ntnd impection of these newly purchased securitiel. Cnokhani therefore entered into another purchase transaction. 'rhis time genuine transaction for the purchase of 2-3/4% 1962 securi-ties of the face value of Rs 46,00,000 was entered into on J:tnuary 11, 1955. The purchase price was pa.id by the sale of 3% 1 J57 securities of the face value of Rs. 46,00.000 which the· Insurance Company possessed. For this purpose, Chokhani withdrew these securities of the face value of Rs. 8,25,000 from the Chartered Bank, Bombay, and Rs. 37,75,000 worth of securities were sent to Bombay from Delhi. These securities were then converted into inscribed stock.The Insurance Comµany was now supposed to have purcha.ied 2-3/4% 1962 securities of the face value of Rs. 92,00,000 having purchased Rs. ·16,00,00iJ worth of securities in December 1954 and B.s. 46,00,000 worth of securities in January 1955. IL possessed securities worth Hs. 46,00,000 only and inscribed stock certificate with respect to that could serve tho purpose of verifying the existence of the other set of Rs. 46,00,000 worth of securities. These transactions are sufficient to indicate the scheme followed by Chokhani in the purchase and sale of securities on behalf of the Insurance Com-pany. It is clear that the transactions were not in the interests of the Insurance Company but were in the interests of the Union Agencies inasmuch as the funds were provided to it for meeting its losses. It is also clear that the system adopted of withdrawing the funds of the Insurance Company ostensibly for paying the purchase price of securities after the due date of payment of interest. and selling the socnrities off', if not actually recouped from tho funds of the Union Agencies or

R. K. Dalmia v. Ddhi Administr•tion Bagliubar D•Jal J.

19011 R. K. Dalmia •• Di/Iii Adminisl1'otioa RaghubM n.,.1 J.

314 SUPREME OOURT REPORTS [1963]

Bhagwati Trading Company prior to the next <late of payment of interest, was not in the interests of the Insurance Company. When, however, the sale price could not be paid out of the funds of' the Union Agencies or Bhagwat.i Trading Company, Chokhani, on behalf of the Insurance Company, entered into fresh transaction of purchase of securities which were not actually received and thus showed repayment of the earlier funds, though out of the funds withdrawn from the same company (viz., the Insurance Company) ostensibly for paying the purchase price of newly purchased securities.

Turning to the evidence on record, the main statement on the basis of which, together with other circumstances, the Co•irts below have found that Dalmia had the necessary criminal intent as what Chokhani did was known to him and was under hie instructions, is that of Raghuna.th Rai, Secretary-cum-Account of the Bharat Insurance Company. Mr. Dingle Foot has contended firstly that Raghunath Rai was an accomplice of the alleged conspirators and, if not, he was witness whose testimony should not, in the circumstances be believed without sufficient corroboration which does not exist. He has also contended that the Courts below fell into error in accepting the statec ments made by him which favoured the prosecution case without critically examining them, that they ignorecl his statements in favour of the accused for the reason that he was under obligation to Dalmia and ignored his statements inconsistent with his previous statement as he was not confronted with them in cross-examination.

An accomplice is person who participates

in the commission of the actual crime charged against an accused. He is to be particeps criminis. There a.re two oases, however, in which person has been held to be an accomplice even if he is not

particep~ criminis. Receivers of stolen property

1 s.c.R.

SUPREME OOUltT REPORTS

are taken to be accomplices of the thieves from whom they receive goods, on trial for theft. Accomplicds in previous similar offences committed by the accused on trial a.re deemed to be accompli-ces in the offence for which the ac1,used is on trial, when evidence of the accused ·having committed crimes of identical type on other occasions be admi-ssible to prove the system and intent of the accused in committing the offence charged : Davies v. Director of Public Proseoutions ([1]).

The contention that Raghunath Rai was an accomplice is mainly based on the facts that ( i) Raµ-hupath Rai did not produce the counterfoils of the cheques for the inspection of the auditors, though asked for by them, in spite of the fact that the counterfoils must have come to Delhi during the period of audit; (ii) the aIJeged scheme of the cons-pirators could not have been carried out without his help in signing blank cheques which were issued by Chokhaui subsequently. The mere signing of the blank cheques is hardly an index of complicity when the bank account had to be operated both by Chokhani and R1tghunath Rai, jointly. Raghunath R~i had to sign blan'k. cheques in order to void delay in payments and possible occasional falling through of the transactions. No sinistf'lr intention can be imputed to Ragbunath Rai on account of his signing blank cheques in the expectation that those cheques would be properly used by Chokhani. The counterfoils have not been produced and there is no· evidence that they showed the real state of affairs, i.e., that the cheques were issued to Bhagwati Tra-ding Company and not to the brokers from whom the securities were purchased.

It is not expected that the name of Bhagwati Trading Company would have been written on the counterfoils of the cheques when its exist.ence and

(I) L, R. 1954 .\, C, 378,

· R. lf, D1Jlmi• ... D1lhi .tfdminislrotion ---Baghubar Da,J!Jl J.

1961 R. Jr. Dolmia v. 1lhi Ac/ministration Rog!u/Jor DaJ•I J,

SUPREME COUH'.I.' REPORTS [1963]

the part it took in the transactions were to be k~pt secret from the head office. When counterfoils were sent for in August, 1955, they were not received from Bombay. Chokhani states that he did not get that letter.

Moreover, counterfoils reach the head office after long time and there is no particular reason why Raghunath Rai should notice the counterfoils then. He does not state in his evidence that he used to look over the counterfoils when the cheque books came to him for further signatures.

We do not therefore agree that Raghunath Rai was an accomplice.

Even if it be considered that Raghunath Ra.i's evidence required corroboration as to the part play-ed by Da!mia, the circumstances to which we would refer later in this judgment, afforded enough corro-boration in that respect.

Raghunath l:ai made statement. Exhibit

P. 9, bt1fore Annadhanam on September 20, 1955. He made certain statements in Court which were at variance with the statement made on that occasion. This variation was not taken into consideration in assessing the veracity of Raghunath Rai as he had not been cross-examined about it. The argument of Mr. Dingle Foot is that such variation, if taken into consideration, considerably weakens the eviden-ce of Raghunath Hai. He has urged that no cross examination of Raghunath Rai was directed to the inconsistencies on any particular point in view of the general attack on his veracity through cross-examination with respect to certain matters. He has contended that in view of s. 155 of the Indian Evidencu Act, any previous statement of witness inconsistent with his statement in Court, if other-wise proved, could be used to impeach his credit and that therefore the Courts below were not right

1 s.c.R.

in ignoring the inconsistencies in the statement of Raghuna.th Rai merely on the ground that they were not put to him in cross-examination. On the other hand, the learned Solicitor General contends thats. 155 of the Indian Evidence Act i':l controlled bys. 145 and that previous inconsistent statements not put to the witness could not be used for impea-ching his credit. We do not consider it necessary to decide this point as we are of opinion that the inconsistent statements referred to are not of any significance in impeaching the cr~dit of Raghunath Rai.

The specific inconsistent statements are : (i) 'I never of my own accord send securities to Bombay nor am I authorised to do so': In Court Raghunath Rai said that certain securities were sent by him to Bombay on his own accord because those securities were redeemable at Bombay and the matu-rity date was approaching. (ii) Before the Adminis-trator, Raghunath Rai had stated: 'I cannot interfere in the matter as, under Board Resolution, Chokhani ia authorised to deal with the securities. Chokhani always works under instructions from the Chairman.' In Court, however, he stated that there was no resolution of the Board of Directors authorising Chokhani to sell and purchase securities. The mis-statement by Raghunath Rai, in his statement P. 9 to the Investigator made on September 20, 1955, a.bout Chokhani's being authorised by Board resolution to deal with the securities, is not considered by Dalmia to be false statement as he himself stated, in answer to question No. 21, t.ha.t such st.atement could possibly be made by Raghunath Rai in view of the Board of Directors considering at the meeting the question whether Chokhani be authorised to purchase and sell securi-ties on behalf of the company in order to make profits. (iii) 'Roughly 1-3/4 crores of securities wer<> sent to Bombay from here during the period from

R. K. Dalmia v. Delhi AtlminislratilJ11 Raghu6ar Da_,al J,

J96B R. K. Doltnia v. D•fhi 4.dmini•trotion Raghu~ar Da:Jol J.

318 SUPREME COURT REPoR~ (1963]

April 1955 to June 1955'. The period was wrong

and was really from July to August 1955. Ra.ghunath Rai admitted the error and said that he had stated to Annadhanam without reference to books. (iv) 'Securities are sent to Chokhani at Bombay through representative of Dalmia'. The statement is not quite correct as securities were sent to Bombay by post also.

Raghunath Rai stated that on the receipt of

the advice from Chokhani about the purchase or sale of securities, he used to go to Dalmia on the day following the receipt of the advice for confirmation of the contract of purchase or sale of securities and that after Dalmia's approval the vouchers about the purchase of those securities and the crediting of the amount o.f the sale price of those securities to the account of the Insurance Company with the Chartered Bank, as the case may be, used to be prepared.

Kashmiri Lal and Ram Das, who prepared the vouchers, describe the procedure followed by them on receipt of the advice but do not state anything about Raghunath Rai's seeking confirmation of the purchase transactions from Dalmia and therefore do not, as suggested for the appellants, in any way, contradict Raghunath Rai.

It is urged by Mr. Dingle Foot that it was

somewhat unusual to put off the entries with respect to advices received by day, that the entries must have been made on the day the advices were received and that in this manner the entries made by these clerks contradict Raghunath Rai. witness cannot be contradicted by first supposing that certain thing must have taken place in manner not deposed to by any witness and then to find that that was n<;>t consistent with the statement made by that. witness. Fart.her, we are of opinion that there could be no object in making consequential entrie8

I S.C.R.

SUPREME ~OURT REPORTS

on receipt of the advice about the purchase of securities if the purchase transaction itself is not approved of and is consequently cancelled. The consequent entries were to . be with respect to the investments of the Insurance Company and not with respect to infructuous transactions entered into by its agents.

It has also been urged that if Dalmia's con-firmation was necessary, it was extraordinary that no written record of his confirming the purchase of securities was kept in the office. We see no point in this objection. If confirmation was necessary, the fact that various entries were made consequent on the receipt of advice is· sufficient evidence of the transaction' being confirmed by Dalmia, as, in the absence of confirmation, the transaction could not have been taken to be complete. Further, office notes stating that securities had been purchased or sold 'under instructions of the Chairman' used to be prepared for the meeting of the Board of Directors when the matter of conntming sale and purchase of securities went before it. The fact that office notes mentioned that the securities had been· purchased under the instru.ctions of the Chairman is the record of the alleged confirm~tion.

The proceedings of the meeting of the Board

of Directors with respect to the confirmation of the purchase and sale of securities do not mention that that action was ta.ken on the bltBis of the office notes. Minutes wi Lh respect to other matters do ref er to the office notes. This does not, however, mean that office notes were not prepared. Confirmation of the . purchase and sale of the shares was formal n;iatter • for the Board.

All the office notes, except one, were signed by

Raghunath Ra.i. The one not signed by him is Exhibit P. 793. It is signed by Chordia and is dated August 18,1954. This also mentions 'under instruc-tions of the Chairman Qerta.in. shares have been

19~1 R. K. Dalmia v. D1lhi AdministratiM RaghubM DtJJ.Z J.

1962 · R K. ,Dalmia v. Delhi Administralion Razliuhar Dayal J.

purchased'. Chordia was relation of Dalmia and had no reason to write the expression 'Under instructions of the Chairman' falsely. Such note cannot be taken to be routine note when the power to purchase and sell securities vested in CLordia as Managing Director of the company. Clause (4) of article 13 of the Bye-laws empowered the Managing Director to transfer, buy and sell Government securities. When Chordia, the Managing Director, wrote in this office note that securities were purchased under the instructions of the Chairman, it can be taken to be true statement of fact. It is true that he has not been examined as witness to depose directly about his getting it from Dalmia that the purchase of securities referred to in that note was under his instructions. This does not matter as we have referred to this office note in connection with Raghunath Rai's statement that office notes used to be prepared after Dalmia's state-ment that the particular purchase of shares was under his instructions.

The statements made by Raghunath Rai which

are said to go in favour of the accused may now be dealt with. Raghunath Rai was cross-examined with respect to certain letters he had sent to Chokhani. He stated, in his deposition on July 29, 1958, that Dalmia accepted his suggestion for writing to Chokhani to send him the distinctive numbers of tho securities which had been purchased, but not received at the head office, and that when he reported non-compliance ofChokhani in communica-ting the distinctive numbers and suggested to Dalmia to ring up Chokhani to send the securities to the head office, Dalmia agreed. This took place in November and December 1954. Dalmia's approval of the suggestion does not go in his favour. He could not have refused the suggestion.

Raghunath Rai also stated that in Septembm

or October 1954 there was talk between hier,

1 S.C.R.

K. L. Gupta. and Dalmia about the low yif,Jd of interest on the investments of the Insurance Company and it was suggested that the money be invested in securities, shares and debentures. Dalmia then said that he had no faith in private shares and debentures but had faith in Government securities and added that he would ask Chokhani to invest the funds of the Insurance Company in the purchase and sale of Government securities. · He, however, del)ied that Dalmia·had said that the investment of funds would be in the discretion of Chokhani, and added that Chokhani was not authorised to purchase or sell securities on behalf of the Insurance Company unless he was authorised by the Chairman. The statement does not support Dalmia's authorising Chokhani to purchase and sell securities in his discretion.

Another statement of Raghunath Rai favour-able to Dalmia is said to be that according to him he told the audit.ors on September 9, 1955, that the securities not then available were with Chokhani at Bombay from whom advices about their purchase had been received. Annadhanam stated that Raghunath Rai had told him that Db.lmia would give the explanation of the securities not produced before the auditors. There is no reason to prefer Raghunath Rai's statement to that of Annadhanam. Annadhanam's statement in the letter Exhibit P. 2 about their beiug informed that in March, .1954, after the purchase, the securities were kept in Bombay in the custody of Chokhani refer to what they were told in the first week of January, 1955, and not to what Raghunath Rai told nim on September 9, 1954.

Ra.ahunath Rai stated that on one or two

occasion: he, instead of going to Dalmia, talked with him on telephone regarding the purchase and sale of securities by Chokhani and that Dalmia told him on tolephone th~t he bad illStructed for the pur9ha~c,

1961 R. Ir. Dalmia v. Delhi .A.dminislrali111 Raghubar Dayal J.

R. IC. Dalmia •• Delhi Atlministratio n Roglw6ar D•JOI J,

and sale of securities and that he was confirming

the purchases or sales. This does not really favour Dalmia ns Ragbunath Rai maintains that Dalmia did confirm the purchase or sale reported to him. It is immaterial whether that was done on telephone or on Raghunath Rai actually meeting him.

Questions put to tlie Administrator, Mr. Rao, in cross-examination, implied that Raghunath Rai was reliable person and efforts to win him over failed. It was suggested to the Administrator that the reasons for the appointment of Sundara Rajan as the Administrator's Secretary was that he wanted to conceal certain matters from Raghunath Rai. His reply indicated different reasons for the appoint-ment. Another suggestion put to him was that Raghunath Rai offered to retire, but he kept his offer pending because of this case. This suggestion too was denied.

It was brou~ht out in the cross-examination

of Raghunath Rai that he was in position in which he could be influenced by the Administrator. Raghunath Rai was using the office car. Its use was stopped by the Administrator in January, 1956. He was not paid any conveyance allowance. In April, 1958, he made representation to the Administrator for the payment of that allowance to him. The Administrator passed the necessary order in May, 1958, with retrospective effect from January 1956. The amount of conveyance allow-ance was Rs. 75 per mensem. Raghunath Rai could not give any satisfactory explanation as to why he remained silent with regard to his claim for conveyance allowance for period of over two years, but denied that he was given the allowance with retrospective effect in order to win him over to the prosecution.

Raghunath Rai applied for extension of

11ervice ip the eiid of J 956 or i11 the beginning of

1 S.C.R.

1957 and, in accordance with the resolution passed

on August 17, 1954, by the Board of Directors, bis service was extended up to 1961. The Adminis-trator forwarded the application to the higher authorities. This matter had not been decided by July 29, 1958.

The amount of his gratuity and provident

fund in the custody of the Insurance Company amounted to Rs. 35,000.

We do not think that·the Administrator had

any reason to influence Raghunath Ra.i's statement and acted improperly in sanctioning oar allowance to him retrospectively and would have so acted with reRp3cli to Raghunath Rai's gratuity if Raghunath Rai had not made statement's support-ing the prosecution case.

Raghunath Rai stated on July 29, 1958, that in

July, 1955, when he informed Dalmia that the bulk of the securities were at Born bay and the rest were at Delhi, Dalmia asked him to write to Chokhani to deposit all the Eiecurities in Bombay in the Chart-ered Bank. At this he told Dalmia that if the sale and purchase of securities was to be carried on as hithertofore, there was no use depositing them in the Bank and thus pay frequent heavy withdrawal charges, and suggested that the securities could be deposited in the Bank if the sale and purchase of them had to be stopped altogether and that Dalmia then said that the securities should be sent for to Delhi in the middle of December, 1955 for inspec-tion by the auditors.

Raghunat.h R ai was re-examined on July 30 and stated that the aforesaid conversation took place on July 14, 1955, and added that he had, in the same context, further talk wit.h Dalmia in August, 1955. The Public Prosecutor, with the permission of tb.e Court, then questioned him

1962 R. K. Dalmia Delhi AdmlnistralioiJ "· Raghubar Da.Jal J,

19'1 R. Ir. Da/mi• •• D1lli ~iministrnlion B•ilaub•r D•y•I J.

324 SUPREME LOURT REPORTS (1963]

about the circumstances in which he had to go second time to Da.lmia and talk about the matter. His reply was that he had the second talk as the securities purchased in May, 1955, and those pur-chased in July and Augu~t, 1955, had not been received at the head office. He asked Dalmia to direct Chokhani to deposit a.II the securities in the Chartered Bank or to send them to Head Office. Dalmia then said that the sale and purchase of securities had to be carried on for some time and .therefore the question of depositing those securities in the Bank or sending them to the head office did not arise for the time being and that the securities should be sent for to the head office in December, 1955.

Raghanath Rai thus made significant change in his statement. On July, 29, 1958, he oppos-ed the direction.of Dalmia for writing to Chokhani to deposit the securities in the Bank as that would entail heavy withdrawal charges in case the sale and purchase of securities were not to be stopped while, according to his statement the next day, he himself suggested to Da.lmia in August, 1955, that Chokhani be asked to deposit all the securities in the Bank or to send them to the head office. He denied the suggestion that he made this change in his statement under pressure of the Police.

The cross-examination was really directed to show that he had been approached by the police between the close of his examination on July 29 and his further examination on July <10, 1958. Raghunath Rai admitted in court that after giving evidence he went to the room allotted in the Court building to the Special Police Establishment and that the Investigating Officer and the Secretary to the Administrator of the Insurance Company were there. He went there in order to take certain papers which he had kept there. He, however, 4a.q qot brought any papers on July 30 M, aoQord·ing to him, his main cross-examination had been over. He however denied that he had been dictated notes by the police in order to answer questions in cross-examination or that he remained with the police till 9 p. m. or that the Secretary to the Administrator held out threat about the for-feiture of his gratuity in case he did not make statement favourable to the prosecution.

We see no :t'eason for the police to bring pressure on Raghunath Ra.i to introduce falsely the conversation in August. Betwe'3n July 14, 1955, and middle of August, 1955, the head office learnt of the purchase of securities of the face value of Rs. 74,00,000 and a.gain, on or about August 26, of the purchase of securities of the fare value of Rs. 40,00,000 .. further conversation in August is therefore most likely as deposed to. The main fact remains that Dalmia said that the securities be sent for in December, 1955, which implies his knowledge of the transactions in question.

We are of opinion that the discrepancies or contradictions pointed out in Raghunath Rai's statement are not such as to discredit him and make him an unreliable witness and that he is not shown to be under the influence of the prosecution. Further, his various statements connecting Dalmia with the crime, find corroboration from other evidence.

Letter Exhibit P. 1351 dated September 4, 1954, was sent to the Imperial Bank of India, Delhi Branch, under the signature of Dalmia as Chairman. The letter directed the bank to deJiver certain securities to the bearer. Dalmia admits his signatures on this document and also on the letter Exhib!t. P. 1352 acknowledging the receipt of the secur1t1es sent for, thus corroborating Raghunath Rai's statement that the securities were withdrawn under his instructioni:z

R.K •. Dalmia ... Dllki Mini •u•raliotl

1962 R. K. Dalmia •• Dtlhi Ad1r.inistration

Leiters Exhibit D. 3, dated l\farch 16, 1955, and P. 892 dated August 5, 1955, from Raghunath Rai to Chokhani, mentioned that the stock certi-ficates were being sent under the instructions of the Chairman. They corroborate Raghunath Rai's statements in Court of the despatch of these stock certific(ttc~ under Dalmia's instructions. He had no reason to use this expression if he was sending them on his own.

It is true that the date on which the Chairman gave the instruction is not proved, but it stands to reason that the stock certificates must have been despatched soon after the receipt of the instruction from the Chairman. It cannot be presumed that in such transactions the~e could be such delay as would make statement in these letters not corroborative evidence under s. 157, of the Evidence Act '\\ hieh provides that previous statements made at or about the time fact took place can be used for corroborating the statement in Court .

. Chokhani's statement that he did not mention

the name of Bhagwati Trading Company in his letters to the head office as he did not want Dalmia to' know about the dealings with Bhagwati Trading Company, implies that in the ordinary course of business the information conveyed in those letters would be communicated to Dalmia and thus tends to support Raghunath Rai's statement that he used to visit Dalmia on receipt of the statement of account and inform him about the purchase or sale of the securities.

Chokhani had been inconsistent about Raghunath Rai's later knowledge of the existence of Bhagwati Trading Company. In answer to question :-.To. 66, on November Ia, 1958, he stated:

1'I did not contradict the statement made

!n E2'. p, 813 tl!at cheque No. B564801}

I S.C.R. SUPREME COURT REPORTS

dated 17-11-54 had been issued in favour of Narain Das and Sons although that cheque had in fact been issued in favour of Bhagwati Trading Company and not in favour of Narain Das and Sons because those at the Head Office did not know anything about Bhagwati Trading Company''.

In answer to question No. 149, on November 14, 1958, he stated:

''I did not mention the na.me of Bhagwati Trading Company in my letters addressed to the Head Office of the Bharat Insurance Com-pany as the party with whom there wero cross contracts because Raghunath Rai would not have known as to what was Bhagwati Trading Company. I also did not mention the name of Bhagwati Trading Company in my letters to the Head Office of the Bharat Insu-rance Company because I did not want Shri Dalmia to know that I was having dealings with Bhagwati Trading Company. I also want to add that Raghunath Rai must have known that the cross-contracts were with Bhagwati Trading Company because the name of Bhagwati Trading Company was mentioned as the payee on the counterfoils of the cheques issueq in favour of Bhagwati Trading Company.''

Chokhani seems to have attempted to undo the effect of his statement on November 13, but being of divided mind, made inconsistent statements even on November 14, 1958. He was in diffieult posi-tion. He attempted to show that Dalmia did not know about Bha.gwati Trading Company and also to show that Raghunath Rai had reasons to know about it and was therefore in the position of an accomplice, stand which is also taken by Dalmia·

1962 R. K.Dalmia v. Delhi Administration

Raghubar Dayal J.

J96Z R. K Da/mitt v. Delhi AdmintsJral/on

We may now deal first with the case of Chokhani, appellant. Chokhani has admitted hill entering into the various transactions of purchase and sale and to have set up Bhagwati Trading Com-pany for convenience to carry out the scheme of diverting the funds of the Insurance Compa.ny to the Union Agencies by way of temporary loan. His main plea is t.hat he had no attention to cause loss to the Insurance Company and did not know that the way he arranged funds for tho Union Agencies from the Insurance Company was against law. He contends that he had no dishonest intentions and therefore did not commit any of the offences he had been charged with, and convicted of.

Learned counsel for Chokhani has urged two points in addition to some of the points of law urged by learned counsel for Dalmia. He urged that the transactions entered into by Chokhani were ordinary genuine commercial transactions and that there was no evidence of Chokhani's acting dishones· tly in entering into those transactions. It is further said that the High Court recorded no finding on the latter point though it was necessary to record such finding, even though this point was not seriously urged.

In support of the contention that the purchase

and sale transactions were genuine commercial transactions, it is urged that to meet the losses of the Union Agencies Chokhani was in position to sell the shares held by it or could have raised the money on its credit. He did not sell the shares as they were valuable and as their sale would have affected the credit of the Union Agencies. Chokhani had been instructed in September, 1954, that the yield from the investmrnt of the Insurance Company was not good and that the funds of the Insurance Company be invested in securities. Such instruc-tions are said to have been given when he was tinthorised b! Dalmia to purc}\ase aqd ~ell S!lcuriti\l'

1 s.c.R.

SU:PR~ME COURT REPORTS

on behalf of the Insurance Company. It is sugges-

ted that these instructions were given in 1953; and not in 1954 when Dalmia was going abroad. In view of this authority, Chokhani decided on course of action by which he could invest the insurance money in securities and also help the Union A!len-cies. It is submitted that it was not necessary to ,me~tion Bhagwati Trading Company to the head oftice as the Insurance Company was g0ing to suffer nq loss and was simply concerned in knowing of the sale and purchase transactions. Chokhani's pay-ment of the purchase price in anticipation of the delivery of the securities, was bona fide.

We have already expressed the opinion that.

the transaction in connection with the investment of the funds of the Insurance Company were not bonafide purchase and sale transactions. They were transactions with purpose. They were motivated in the interests of the Union Agencies and not in

the interests of the Insurance Comp~.

The mere fact that on account of the non-

delivery of securities within reasonable time of the payment of the purchase money made the brokers or Bhagwati Trading Company or both of them liable to an action, does not change the nature of the transactions. That liability can co-exist with the criminal liability of Chokhani if the transac-tions were such which could amount to his commit-ting breach of trust. In fact, the offence of breach of truat is not with respect to his entering into the sale and purchase transactions. It is really on the basis of his paying the money out of the Insurance Company's funds to the Union Agencies through Bhagwati Trading Company, in contravention of the manner in which he was to deal with that money. /These purchase and sale transactions were just device for drawing on those funds. '

We do not believe that Chokhani really intend-

ed to purchase the securities though be did purchase

R. K. Dalmia v. Delhi Adminislration Raghubar DaJal J.

some, in certain circumstances, and that the non-delivery of the securities was not n case of just his slightly postponing the delivery of the securities. No reason is given why such concession should have been made to the seller of the securities and the period during which such purchased securities remained undelivered is much longer than what can be said to be reasonable period during which purchased securities for ready delivery should be delivered. The fact, if true, that the Insurance Company suffered no monetary loss on account of the purchase and sale transactions and tho passing of its money to the Union Agencies, does not suffice to make the transaction an honest one. The gain which the Union Agencies made out of the money it got from the Insurance Company was wrongful gain. It was not entitled to profit by that money. One is said to act dishonestly when he does any thing with the intention of causing wrongful gain to one person,.Qr wrongful loss to another. Wrong-ful gain means gain by unlawful means of property to which the person gaining is not legally entitled · and wrongful loss is loss by unlawful means of property to which the person using it is legally entitled.

R. K. Dab11ia v.

D1lhi Adminillralion

It is urged that Chokhani's keeping Bhagwati

Trading Company secret from Delhi was not the result of guilty conscience, but could be due to his nervousness or fear. We do not agree with this suggestion. He had nothing to fear when he was acting honestly and, according to him, when he waH doing nothing wrong.

It is further submitted that what Chokhani

did amounted simply 'to the mixing of the funds of the Insurance Company and the Union Agencies. Wti do not think that this would be the correct interpretation of what Chokhani did. It was not case of mixing of funds but was case of making

IS. C.R. SUPREME COURT REl'ORTS

over the funds of the Insurance Company to the Union Agencies.

The fact that the Administrator did not cancel

any contract entered into on behalf of the Insurance Compnny under the powers given to him bys. 52(c) of the Insurance Act, does not mean that every such contract was in the interest of the Insurance Company. The Administrator has stated that he did not know the legal position as to whether those contracts stood or not.

Of the points of law urged for Chokhani, we

have already dealt with those relating to the juris-diction oft.he Delhi Court to try the various offences, to the content of the woras'property', 'dominion' and 'agency' in s. 409, I. P. C. The only other points raised are that the offence under s. 4 77 could not be said to be committed in pursuance of the conspiracy and that it was not case of one conspiracy but of several conspiracies.

The charge under s. 477 A, .I. P. C. is based

on the letters written by Chokhani from Bombay to Delhi intimating his entering into the contracts of purchase of securities and indicating that cheques had been issued in payment to the brokers. It is true that these letters did not specifically state that the cheques had been issued to the brokers, but that is the implication when the latters refer to the · contracts and the AtatemEmts sent along with them and which relate simply to ~he transactions between the Insurance Company and the brokers and in no way indicate the· cross-contracts between the brokers and Bhagwati Trading Company. It is further said that the payment to Bhagwati Trading Company was as an agent of the brokers. There is no evidence that the brokers appointed Bhagwati Trading Company as their agent for the purpose. The evidence is t.hat on Chokhani's representation that the Insurance Company would

1961 R. K. Dalmia v. Dtlhi Administration Raghuba1 Doyal J,

R. K. Dalmio •• D1lhi Adminisfr•lirn Bog/iubor DaJal J.

pay to Bhagwati Trading Company andget thfl securities from Bhagwati Trading Company that the brokers neither got the price nor delivered the securities.

It is also contended that Chokhani was not 'servant' of the Insurance Company and therefore does not come withins. 477 A. I. P. C. which makes certain conduct of clerk, officer or servent an offence <Jhokhani was servant of the Insurance Company as he was its Agent and received payment for doing work as an agent. His being full-time servant of the Union Agencies does not mean that he could not be S\lrvant of any other company, or other employer.

We do not agree with the contention that it

was case of several conspiracies, each transaction to meet the loBBes, as they occurred, giving rise to an independent conspiracy. The conspiracy was entered into in the beginning of August, 1954, when such circumstance arose that funds had to provided to the Union Agencies to meet its losses. The cons· piracy must have been to continue up to such time when it be possible to anticipate that such situation would no more arise. Similar steps to meet the losses were taken whenever the occasion arose. The identity of purpose and method is to be found in all the transactions and they must be held to have taken place in pursuance of the original conspiracy.

We next come to the case of Vishnu Prasad,

appellant. He was the sole proprietor of Bhagwati Trading Company. His main defence is that he was ignorant of the various transactions entered into by Chokhani on behalf of Bbagwati Trading Company and that it was Chokhani who kept the books of accounts and entered into those transac-tions. The courts below have found that he knew of transactions and the nature of the conspiracy.

I S. C. R. SUPREME COURT REPOI-t'fS

'We agree with this opinion. There is sufficient material on record to establish his know ledge and part in the conspiracy.

Bhagwati Trading Company ca.me into exi~­

tence just when the Union Agencies suffered losses and was not in position to pay them .and, conse-quently, there arose the necessity for Dalmia a.nd Chokhani to devise means to raise funds for meeting those losses. Vishnu Prasad opened the banking accounts in two banks at Bombay on August 9 and August 11, 1954, depositing the two sums of Rs. 1, 100 each in each of the two banks. He states that he got this money from Chokhani. The money was, however withdrawn after short time and paid back to Chokbani and no further contribution to the funds of the Bhagwati Trading Company was made on his behalf. The Company functioned mainly on the amounts received from the Insurance Company. Vishnu Prasad, therefore, cannot be said to be quite innocent of the starting of the company and the nature of its business.

He started, in answer to question No. 24:

"I started business in the name of Bhag-

wati Trading Company in 1953, or beginning of 1954. I however did no business in the name of that company. G. L. Chokhani stated that I should do business for the purchase or sale of securities."

and in.answer to question No. 26 he stated that he had no knowledge about Chokhani's entering into contracts on behalf of the Bharat Insurance Com-pa,ny for the purchase of securities and his entering into crose-contracts with the same firm of brokers for the sale of those securities on behalf of Bhag-wati Trading Company but admitted that he knew that Chokhani was doing-business for the purchase ~nd Aalo of securities on behalf of Bhagwa.ti Trading Company. He expressed ignorance

R. K. DalmitJ v. Delhi Aimini11r0[1]-4 Ragliubar Da11• I·

1961 R. Ii. Dalmia •• Delhi .Administration Raglm&ar Dayal J,

abo.ut similar future contracts for purchaae of secu-rities on behalf of the Insurance Company and cross-contracts for the sale of those securities on behalf of Bhagwati Trading Company.

Vishnu Prasad, however, made statement at the close of the day when he had made the above statement, and said:

''In answer to question No. 24 I want to

state that I did not start business of Bhagwati Trading Company in 1953 or the beginning of 1954 but only intended to start that business."

The latter statement deserves no acceptance and is

clear indication that the implications of his earlier statement worked on his mind and he attempted to indicate that he was not even respon-sible in any way for the starting of the business of Bhagwati Trading Company. Bhagwati Trading Company did come into existence and ostensibly did business. The latter statement therefore can-not be true.

Vishnu Prasad further knew, as his answer to

question No. 157 indicates, that Chokhani did shares speculation business at Bombay. He, howeTer, stated that he did not know on behalf of which com· pany he did that business.

What Vishnu Prasad actually did in connection

with the various transactions which helped in the diversion of the funds of the Insurance Company to the Union Agencies has to be looked at in this back-ground. He cashed number of cheques issued on behalf of the Insurance Company and made over that money to Chokhani, who passed it on the Union Agencies. He issued cheques on behalf of Bhagwati Trading Company in favour of Bharat Union Agencies after the. amounts of the cheques of the Insurance Company in favour of Bhagwati Trading Company had been deposited in the Bank. Some of

I S. C. R.

these ch~ques issued in favour of Union Agencies were filled in by Vishnu Prasad himself and there-fore he must have known that he was passing on the money to the Union Agencies. In fact, some of the cheques isaued on behalf of Bhagwati Trading Com-pany in favour of the Union Agencies were deposited in the bank by Vishnu Prasad himself.

It is therefore not possible to. believe that Vishnu Prasad did not know that the amounts which his company viz., Bhagwati Trading Company, received from the Insurance Company must have purported to be on account of SE\curities sold to the Insurance Company, as that was the business which Bhagwa.ti Trading Company professed to do and, according to him, he knew to be its business, He knew that most of this amount Wtl.s passed on to the Union Agencies. Both these facts must have put him on enquiry even if he did not initially know of the nature of the business which brought in the money to, and took out the money from, Bhagwati Trad-ing Company. He is expected to knew that the Insurance Company was not likely to purchase securities so frequently. If he had made enquiries, he would have learnt about the nature of receipts and payments and in fact we are inclined to the view that he must have known of their nature and that it is not reasonable that he would be com-pletely in the dark.

The business of Bhagwati Trading Company is said to have been started as Vishnu Prasad was not taking ~nterest in the other business. This should indioa.te that he must have evinced interest in th:e activities of Bhagwati_ Trading Company which contmued for over year and which made him receive and dispose of lakhs of Rupees. Surf'ly, it is not expected that he would have made no effort to know what is required to be know by one earr-ing on business for the purchase and sale of securi-ties, and any attempt to have known this would have

R. tr. Delmi• v.

Delhi Atlminislrlllin

I96B R. tr. Dolmia ••

D1lhi Adminislralio,1

neeessarily led him to know that securities were

being puroha.sed on behalf of the Insurance Com· pany and were not delivered to it and that Bhag-wati Trading Company purchased no securities from the Union Agencies and that any payment by it to the latter was for something which Bhagwati Trad-ing Company was not liable to pay. It follows that he must have known that money was being received from ·the Insurance Company for nothing which was due to Bhagwati Trading Company from that company and that most of that money was being paid to the Union Agencies for payment of which Bhagwati Trading Company had no liability and that the net result of the transa-ctions of receipt of money from the Insuranc>e Com· pany and payment of it to the union Agencies was that Bhagwati Trading Company was acting to help the diversion of funds from the Insurance Company to the Union Agencies.

We therefore hold that Vishnu Prasad has been rightly found to be in the conspiracy.

We may now deal with the ca.se of Dalmia, appellant. The fact that the funds of the Bharat Insurance Company were diver-ted to Union Agencies by the transactions proved by the prosecution, is not challenged by Dalmia. His main contention is that he did not know what Chokhani had been doing in connection with the raising of funds for meeting the losses of the Union Agenci!'s. There is, however, ample evidenoe to indicate that Dalmia knew of the scheme of the transactions and was party to the scheme inas-much as the transactions were carried through under his instructions and approval:

The facts which have bearing on this matter

are:

(l) D&lmia had the clearest motive to devise

means for meeting the losses of the Union Agencies.

1 S. C. R.

(2) Dalmia actually looked after the share business of the Union Agencies at. Calcutta and Delhi. He had knowledge of the losses of the Union Agencies.

( 3) The frequency of telephonic calls between

him and Chokhani during the period when the losses took place · and steps were taken to meet them, especially during the early stages in August and September, 1954, when the scheme was being put into operation, and in July and August, 1955, when there had been heavy and recurring losses.

( 4) Dalmia's informing the Imperial Bank,

Delhi, on September 4, J 954, about his powers to deal with securities and actually withdrawing secu-rities that day, which were shortly after sold at Bombay and whose proceeds were utilised for mee-ting the losses.

( 5) The gradually increasing retention of

securities in the office of the Insurance Company and consequently the gradually reduced deposit of securities in the Banks.

Ttle transfer of securities held by the

Insurance Company frorn Delhi to Bombay when funds were low there ·to meet the losses.

(7) The purchase and sale of securities in the

relevant period in order to meet the losses were under his instructions.

larger use of converting securities ·into

inscribed stock certificates which was used for con-cealing the disclosure of the interval between the date of p11rchaee of the securities which were then not received, and the date when those securities were recouped later.

(9) Dalmia's annoyance and resentment on

September 9, 1955, when the auditors made sur-prise inspection of the office of the insurance OOllJ• pa.n1 and wanted to see the ~ecuritieth

R. K. Doltnia v.

D1/hi Mminislr111W Rag/au/Jar D9.Z J.

111!2 R. Jr. Dolmia •• BeW A.tlmlnidraU1n lt•tldl6"' D•J•I J.

(IO) His conduct on September I5, 1955.

(ll) His not going to meet Mr. Kaul on Sep· tember I6, 1955, and instead, sending his relatives to state what was not the full and correct statement of facts which, according to his own statAments, were known to him by then.

(I2) His confession P. IO together with the

1tatement Exhibit p. 11 and the statement made to Annadhanam that he carried on his speculative business in shares in the name of the Union Agencies.

One of the main factors urged in support of

the contention that Dalmia waa in the conspiracy is that the entire scheme of conspiracy was entered into for the sole benefit of Dalmia. It is not rea. 11onably probable that such conspiracy would come into existence without the knowledge or consent of Dalmia. The conspiracy charge framed against Dalmia mentioned the object of the conspiracy as 'meeting lolll!es, suffered by you, R. Dalmia, in for-ward transactions, of speculation in shares, which transactions were carried on in the name of the Bharat Union Agencies Limited .. .' and the charge under s. 409 I. P. C. referred to the dishonest · utili-sation of the funds of the Insurance Company.

This matter has been considered from several

aspects. The first ie that Dalmia is said to have owned the entire shares issued by the Union Agen· cies, or at least to have owned substantial part of them and was in position to control the other shareholders. To appreciate this aspect, it is neces-sary to give an account of the share-holding in this company. The Union Agencies was incorporated at Bombay on April I, I948, as private limited com-pany, with its registered office at Bombay. It also had an office at IO, Daryaganj, Delhi, where the head office of the Bharat Insurance Company was. Its authorised capital was Rs. 5,00,000. The total num-ber of shares issued in l9t9 was 2,000, Out of these

I S.C.R. SUPREME COURT REPORTS

Dalmia held 1,200 shares, Dalmia Cement & Paper

Marketing Company Ltd. (hereinafter called tht1 Marketing Company) 600 shares, 8hriyans Prasad Jain, brother of S. l:'. Jain, 100 aha.res and Jagat Prasad J a.in, the balance of 100 shares. The same position of sha.r~-holding continued in 1950. In 1951, DJ.lmia continued to hQld 1,200 shares, but the other 800 shares were held by Govan Brothers. The position continued in 1952 as well and, in the first half of 1953, D<1.lmia increased the number of his shares tp 1,800 and Govan Brothers increased theirs to 1,200 and the total shares issued thus stood at 3,000. This position continued up to September 21, 1954.

On September 22, 1954, 2,000 shares were fur-ther issued to S. N. Dudani, nominee of Asia Udyog. The total shares on that date stood at 5,000 of which Dalmia held 1,800, Govan Brothers 1,200, and Dudani 2,000. On Octobe.r 4, 1954, R.P. Gurha and J. S. Mittal each got 100 shares from Govan Brothers with the result that thereafter the position of share-holding was: Dalmia l,80J; Govan Brothers 1000; Dudani 2,000; Gurha lOJ; and Mittal 100, out of the total number of issued shares of 5000.

It is said that Dalmia transferred his 1,800 shares to one L. R. Sharma on October 30, 1954. Sharma's holding 1,800 shares was mentioned in the return, Exhibit P. 3122 filed by the Union Agen-cies as regards share capital and shares as on December 31, 1955, in the office of the Register of Companies in January 1956 with respect to the year 1955. The return showed that the transfer had taken place on January 31, 1955. It would appear that the alleged sale of shares to Sharma in October 1954 was not mentioned in similar return which must have been submitted to the Registrar of Com· panies in January, 1955, and that therefore its ~flQ)Bfer was s}JoWJl o» Janua.17 31, 1955, rroba.bl1

R. K. dmio v. Delhi Admi11ittrolia Raghubor D.iyal J.

I96e R.X.Dallftia v. Dr/Id Admi,.islruUon

date subsequent to the submission of the relevant return for the year 1954.

brief account of the various share-holders

may be given. Dalmia was Director of Govan Brothers Ltd., and was succeeded, on his resiena-tion, by 0. P. Dhawan, who was an Accountant in the Delhi Office of the Union Agencies. He was also an employee of another company named Asia. Udyog Ltd. Another Director of Govan Brothers Ltd. was D. A. Patil, Income-tax Adviser in the concerns of Da.Imia.. The share scrips in the Marke-ting Company standing in the name of Govan Bro-thers Ltd. and three blank share transfer forms signed by S. N. Dudani a.s Secretary of Govan Bro-ther Ltd., in the column entitled 'seller' were reco-vered from Da.lmia's house on search on November 25; 1955. Duda.ni was the personal accountant of Da.Imia and Manager of the Delhi Office of Bharat Union Agencies. The inference drawn by the Courts below from these circumstances is that Govan Bro-thers Ltd. was the concern of Dalmia., and this is reasonable. No Satisfactory explanation is given why the shares standing in the name of Govan Bro-thers Ltd. and the blank transfer forms should be found in Da.lmia's residence.Duda.ni was the personal accountant of Dal mi& and Manager of the Delhi Office of the Union Agen-cies, and was also Secretary of Asia Udyog Ltd. Asia Udyog appears to be sister concern of the Union Agencies. It was previously known a.s Dal-mia. Jain Aviation Ltd. It installed a. telephone at one of Da.lmia's reaidences in January, 1!153. Its offices were in the same room in which the offices of the Union Agencies were. Dhawan, who succeeded Da.lmia. as Director of Govan Brothers Ltd., was an employee of Asia. Udyog. Gurha. was the Accoun-tant of Asia Udyog, in addition to being Director of the Union Agencies. He had powers over the eta.IF (lf bot~ the pompanies. J. S. Mitt&l wlloll Dirootor of

1 s.c.R.

IM R.K.Dalmia •• D1l/ai .dtbnbtldratilltr

Union Agencies and held 100 shares in the Union

Agencies as nominee of Govan Brothers Ltd., from October 4, 1954, ancl 1,000 shares ·as nominee of Crosswords Ltd., from some time about January 31, 1955. L. N.· Pathak, R. B. Jain and G. L. D.almia, were authorised to operate on the account of both the Union Agencies, Calcutta, and Asia Udyog Ltd., with the United Bank of India, Calcutta.

The issue and transfer of shart>s of the Union

Agencies in September and October, 1954, seem to be in pursuance of an attempt to meet contention, as at present urged for the State, that Dalmia was the largest shareholder in it. The same idea seemed to have led to the transfer of shares to Sharma by D!l.lmia. The verbal assertion of the sale having taken place iQ October, 1954, is not supported by the entry in Exhibit P. 3122 and what may be taken to be the entries in similar return for the year 1954. This can go to support the allegation that DaJmia knew ~bout the shady transactions which were in progress from early August, 1954. The learned Sessions Judge relied on the following circumstances for his conclusion that Dalmia was synonymous with Bharat Union Agencies.

''l. The speculation business of Dalmia.

Cement and Paper Marketing CCI. Ltd., the paid up capital of which nearly all belonged , to Dalmia was on the liquidation . of that company taken over by Bharat Union Agencies and more or less the same persons conducted the business of Bharat Union Agencies who were previously looking after Dalmia Cement & Paper Marketing Company.

2. Bharat Union Agencies was known

and taken to be the concern of Dalmia by its then Accountant Dhawan and by the broker' with wJ>.om it b.ad dealings,

1962 R.K. Dalmia .. D1lhi '4dministratio n

3. Chokhani, who held power of attorney on behalf of Dalmia and Bharat Union Agen-cies, told the brokers at the time he gave business of Bharat Union Agencies to them that it was the business of Dalmia.

4. The salaries of personal and domestic employees of Dalmia were paid by Bharat Union Agencies and thLse payments were debited to the Salaries Account of the com-pany. The personal employees of Dalmia were thus treated as the employees of Bharat Union Agencies.

5. The business done in the name of

Dalmia with Jagdish Jagmohan Kapadia was treated as the business of Bharat Union Agencies.

6. The funds of Bharat Union Agencies were used to discharge an obligation perso-nally undertaken by Dalmia. The price of the shares purchased in the process in the name of Dalmin. was paid out of the funds of Bharat Union Agencies and the purchase of those shares was treated in the books of Bharat Union Agencies as part of its invest-ment.

7. When sister-in-law of Dalmia wanted

money it was lent to her out of the funds of Bharat Union Agencies and in the books of that company no interest was c.harged from her".

It has been strenuously urged by Mr. Dingle

Foot that what certain persons considered to be the nature of the Union Agencies or what Chokhani told them could n9t be evidence against Dalmia with respect to the question whether he could be said to be identical with the Union Agencies. We need not consider this legal objection as it is not verr necessary to rely on th cse considerations for

1 S.C.R.

the purpose of the finding on this point. It may be said, however, that prima ac-ie there seems to be no legal bar to the admissibility of statements that Chokhani told certain persons that Union Agencies was the business of Dalmia. He had authority to represent Dalmia and Union Agencies on the basis of the power of attorney held by him from both. His statement would thus appear to be the state-ment of their 'agent' in the course of the business. We have considered the reasons given for the other findings by the learned Sessions Judge and accepted by the High Court and are of opinion that the findings are correct and that they can lead to no other conclusion than that no distinctic.n existed 1Jetween Dalmia and the Union A~encies and that whenever it suited Dalmia or the interests of the Union Agencies such transactions of one could be changed to those on behalf of the other. We may, however, refer to one matter.

Dalmia admits ha vine: purchased shares of Dalmia

Jain Airways of the face value of RR.6,00,000/-from Anis Haji Ali Mohammad, on behalf of the Union Agencies, in his own name, though the real purchaser was .the Union Agencies and that he did so as the seller and his solicitor did not agree to sell the shares in the name of the latter. The explanation does not ·appear to be satisfactory. The seller had no interest in whose name the sale took plac~ so long as he gets the money for the shares he was selling.

Mr. Dingle Foot has urged that these various

considerations may indicate strong association of Dalmia. with the Union Agencies but are not suffici-ent to establish his compJete identity with it, a.a is necessary to establish in view of the charges framed. Dalmia's identity with Union Agencies or having great 'interest in it is really matter providing motive for Dalmia's going to the length of entering into conspiracy to raise funds for meeting tile

19~1 R. K. tJ.tmia ,,. Dlllii Atbnlni.drlllion &ghuiar D41•l J.

R. K. O•lmia . . Y. D•lhi .dtbltinittr•litn

SUPREME OOURT REPORTS (1963)

loeees of the Union Agencies by diverting the funds of the Insurance Company and which would a.mount to committing criminal breach of trust .

Dalmia admits having given instructions about the business of the Union Agencies in 1954 when he wa.s not Director of that company, and in 1955 when he was not even shareholder.

Dalmia.'s own statement to Annadhanam on

September 20, 1951l, goes to support the conclusion in this respect. He stated to him then that he had lost the moneys in speculation which he did through his private companies and that most of those tra.n-sa.ctions were through the Union Agencies.

Further, the charge sdid that he committed

criminal breach of trust of the funds of the Insuran-ce Company by wilfully suffering Chokhani to dishonestly misappropriate them a.nd dishonestly use them or dispose of them in violation of the directions of la.w and the implied contra.ct existing between Dalmia and the Insurance Company prescribing the mode in which such trust was to be discharged. It wa.s in describing the manner of the alleged dishonest misappropriation or the use or disposal- of the said funds in violation of the legal a.nd contractual directions that the charge under s. 409 I.P.C. described the manner to consist of withdrawing the funds from the banks by cheques in favour of Bhagwati Trading Company a.nd by the utilisation of those funds for meeting losses suffered by Da.lmia in forward transactions in shares carried on in the name of Bharat Union Agencies, and for other purposes not connected with the a.ffa.irs of the Insurance Company. Even in this description of the manner, the emphasis ought to be placed on the expression •for meeting losses suffered by Dalmia in forward transactions in shares carried on in the name of the Bha.ra.t Union Agencies and for other purposes not connected with

SUPRlmE COURT REi>ORTS

1$.d.R.

the affairs of the said Bharat Insurance Company' and not on the alJeged losses suffered by Dalmia personally. We are therefore of opinion that :firstl} the evidence is adequate to establish that Dalmia and the Union Agencies can· be said to be inter-changeable and, secondly, that even if that is not possible to say, Dalmia had sufficient motive, on account of his intimate relations with the Union Agencies, for committing breach of trust, and thirdly, tha.t the second finding does not in any way adversely affect the establishment of the offence under s. 40!J I. P. C. against Dalmia even though the charge described the utilisation of the money in i somewhat different manner.

R.K. Dalmia v. ----Delhi iftlminislraliM Raghu6ar Dayal J,

The entire scheme of the transactions must

start at the instance of the person or persons who were likely to suffer in case the losses of the Union Agencies were not paid at the proper time. There is no doubt tha.t in the first instance it would be the Union Agencies as company which would suffer in its credit and its activities. We have found that Dalmia was so intimately connected with this com· pany as could make him sort of sole proprietor of the company. He was to lose immensely in case the credit of the Union Agencies suffered, as it was commonly believed to be his concern and he had oonneotions and control over number of business concerns and had high stake in the business world. His prestige and credit were bound to suffer severely as a. result of the Union Agencies losing credit in the market. There is evidence on record that if the losses are not promptly paid, the defau]ter would suffer in credit and may not be able to persuade the brokers to enter into contracts with him.

It is suggested for Dalmia that Chokbani had a. greater interest in seeing that Union Agencies does not suffer in credit. We do not agree. If the Union Agencies failed on account of its losing credit in the market on its failure to meet the losses# Chokhani

R. tr. D.Zmia •• Delhi Ad•inf11ration RagAubar D•yal J.

SUPREME OOURT REPORTS fl963]

may stand to lose his service with the Union

Agencies. That would have meant the loss of few hundred rupees month. In fact, he need not have euffered any loss. He could have been employed by Dalmia who had great confidence in him and whom he had been serving faithfully for long time. Chokha.ni, as a.gent of Dalmia, · had certainly credit in the market. There is evidence of his good reputation, but much of it must have been tl;ie result of his association with Dalmia and his concerns. He really enjoyed reflected glory. He had no persona.I interest in the matter a.s Da.lmia had. We therefore do not consider this suggestion to be sound and are of opinion that Dalmia. was the only person who bad to devise means to meet the losses of the Union Agencies.

Further, Dalmia admits that he used to give

instructions with regard to the speculation-in-shares business of the Union Agencies at Calcutta. and Delhi during 1954 and 1955, and stated, in answ<'r to question No. 210 with respect to the evidence that Delhi Office of the Union Agencies used to supply funds for meeting the losses suffered by it in the speculation business at Calcutta and Delhi:

"It is correct that a.s the result of shareb speoulation business at Calcutta. and Delhi Bharat Union Agencies suffered losses in the final analysis. I was once told by R. P. Mittal on telephone from Calcutta. that G.L. Chokha.ni had informed him that the Bombay Office would arrange for funds for the losses suffered by the Calcutta. Office of the Bharat Union .Agencies. It was within my knowledge that if the Bombay Office of the Bharat Union Agencies was not in a. position to supply full funds for meeting the losses a.t Calcutta. the Delhi Office of the Company would supply those fundR."

And, in a.newer to question No. 211 which referred

to the evidence about the Delhi Office of the Union Agencies being short of liquid funds from August, 1954, onwards and in 1955, to meet the losses, he said:

•'It was within my knowledge that Bharat Union Agencies was holding very large number of shares. But I did not know t.he name of the Companies of which the shares were held by the Bharat Union Agencies and the quantum of those shares."

Dalmia also admitted his knowledge that Chokhani had entered into contract for the forward sale of Tata Shares at Bombay on behalf of the Union Agencies during 1954 and 1955 and that the Union Agencies suffered losses on this business, but stated that he did not know the extent or details of the losses. Dalmia must be expected not only to know the losses which the Union Ag~ncies suffered, but also their extent. He is also expected to devise or at lea.st know the ways in which those losses woqld be met. mere vague knowledge, as stated, a.bout the Union Agencies possessing number of shares could not h:J.ve been sufficient satisfaction about the losses being successfully met. It is to be noted that he did not deny that the Delhi Office was short of funds and that it used to supply funds to meet the losses.

Further, if Dalmia's statement about Mittal's

communication to him be correct, it would appear that when the Bombay Office of the Union Agencies was not in position to meet the losses, Chokhani would not think of.arranging, on his own, funds to meet the losses, hut would first approach the Delhi Office of the Union Agencies. The Delhi Office, then, if unable to meet the losses, would necessarily obtain instructions from Dalmia. It can therefore be legitimately concluded that Dalmia a.lone, or in consultation with Chokha.ni, devised the scheme of

R. K. Dalrnla v. De/Iii Adminiltralion Ragliubar Dayal J.

IHI R.t:. Demla •• Di/Iii Admiaist.-.tion Rath•'- Dl!)lal J.

~48 SUPREME COURT REPORTS (1963]

the transactions which led to the diversion of the funds of the Insurance Company to the Union Agencies and carried it rmt with the ht•lp of the other appellants.

It has been contended both for Chokhani and

for Dalmia that funds could have been found to meet the losses of tho Union Agencies by means other than the diversion of the Insurance Company's funds. We need not discuss whether the shares held by the Union Agencies at the time could be sold to raise the funds or whether on the mere credit of Dalmia funds could be raised in no time. These courses were not adopted. The selling of the shares which the Union Agencies possessed, might itself affect its credit, and that no business concern desires, especially concern dealing in share-speculation business .

• Dalmia had been in telephonic communication with Chokhani. It is significant, even though there is no evidence about the content of the conversa-tions, that there had been frequent calls, during the period of the losses in August and September, 1954, between Da.lmia's telephone and that of Chokhani at Bombay. That was the period when Dalmia was confronted with the position of arranging sufficient funds at Bombay for the purpose of diverting them to the Union Agencies. Very heavy losses were suffered in July and August, 1955. Securities of the face value of Rs. 79,00,000 and Rs. 60,00,000 were purchased in ·July and August, 1955, respectively. very large number of telephone calls took place during that period between Dalmia at Delhi and Chokhani at Bombay. It is true that during certain periods of losses, the record of telephonic commu-nications does not indicate that any telephonic communication took pie.co. We have already stated, in considering the transactions, that the pattern of action to be ta.ken harl been fully determined by the course adopted in the first few transactions.

1 S.C.R.

Ghokha.ni acted according to that pattern. The only thing that he had to do in connection with further contingencies of demands for losses, was to send for securities from Delhi when the funds at Bombay were low. Such requests for the transfer of securities could be made in good time or by telephonic communication or even bv letters addressed to Dalmia personally. The fact remains that number of securities were sent from Delhi to Bombay under the directions of Dalmia when there was no apparent reason to send them other than the need to meet losses incurred or expecte'il.

Dallnia informed the Imperial Bank at Delhi about his power to deal with securities on September 4, 1954, though he had that power from September, 1951, itself. This was at the early stage of the commencement of the losses of the Union Agencies suffered for period of over year nnd the planned diversion of the funds of the Insurance Company to meet the losses of the Union Agencies.

Raghunath Rai states that on the resignation of Chordia. it was deemed necessary that the powers of thp Chairman be registered with the Bank so that he be in position to operate on the securities' safe-custody account of the company with the Bank, and that he sent the copy of the bye-la.ws etc., without the instructions of Dallnia, tl:iough with his know-ledge, as he was told that it was necessary for the purpose of the withdrawal of the securities for which he had given instructions. This was, however, ~ot necessary, as Raghunath Rai bad the authority to endorse, transfer, negotiate and or deal with Government securities, eto., standing in the name of the company. We are of opinion that Dalmia took this step to enable him to withdraw the securities from the Bank when urgently required and another person authorised to withdraw be not available or be not prepared to withdraw them on hi8 own. ·

1141 R, K. Dolmi• MnlUtist111i1.11 ··-

D1Uri MnlUtist111i1.11 ··-

RagM11 D.,91 J.

B. K. Dafmia v, Del hi Admini.stratian Raghubar Dayal J,

35'0 SUPREME COlrR'.i' REPORTS [1963j

The position of the securities may be brifely described on tile basis of Appendix I of the Investigator's report Exhibit D. 74. The amount of securities at Bombay with the Chartered Bank, on June 30, 1953, was Rs. 53,25,000 out of total worth Rs. 2,69,57,200. The amount of securities in the Bank continued to be the same till March 31, 1954, even though the total amount of securities rose to Rs. 3,04,88,600. Thereafter, there had been depletion of securities with the Chartered Bank at Bombay with the result that on December 31, 1954, it. had no securities in deposit. The amount of securities in the Imperial Bank of India, New Delhi, also fell subsequent to June 30, 1954. It came down to Rs. 2,60,000 on March 31, 1955, from Rs. 59,11,100 on June 30, 1954.

Securities worth Rs. 52,00,000 were in the two offices on June 30, 1953. The amount of such securities kept on steadily increasing. It was Rs. 1,88,47,500 from September, 1953, to March 31, 1954. Thereafter, it rapidly increased every quarter, with the result that on March 31, 195n, the securities worth Rs. 3,76,50,804 out of the total worth Rs. 3,86,97,204 were in the offices. The overall position of the securities must have been known to Dalmia. The saving of Bank charges is no good explanation for keeping the securities of such large amount, which formed large percentage of the Company's holdings, in the offices and not in deposit with recognized bank. The explanation seems to be that most of the securities were not really in existence.

Raghunath Rai states that he spoke to Dalmia number of times, presumably, in July and August, 1955, about the non-receipt of the securities of the value of Rs. 81,25,000, Rs. 75,00,000 and Rs. 69,00,000 which were pur-chased in the months of April-May, July and August Hl55 reB1pectively, and Dalmia used

of the Rs. pur-July y

aot

1 S.d.R.

to tell him that as the purchase and sale of securities had to be effected at Bombay, Chokhani could send them to the head office only after it had been decided about which securities would be finally retained by the Insurance Company. This state-ment implies that Dalmia knew and anticipated the sale of those securities and such sale of those securities, as already mentioned, could not be in the usual course of business of the company. The securities were to be sold only if by the next due date for payment of interest tbey could not be recouped and did not exist with the company. Such an inference i1:1 sufficient to impute Dalmia with the knowledge of the, working of the scheme.

Securities were sent to Bombay from Delhi seven times during the, relevant period and they were of the face value of Rs. ·2,14,82,500. Securities of the face value of Rs. 17,50,000 were withdrawn from the Imperial Bank, Delhi, on Septemb~r 4, 1954-vide Exhibit P. 1351. They were sold at Bombay on September 9, 1954. Thereafter, 3% 1957 securities of the face value of Rs. 37,75,000 were sent on Janua.ry 6, 1955. Raghunath Rai deposes that he withdrew these from the Imperial Bank, Delhi, under the directions of Dalmia, and that he handed them over to Dalmia. These securites did reach Bombay. There is no clear evidence as to how they went from Delhi to Bombay. They were sold on January 11, 1955.

Eleven stock certificates of the face value of Rs. 57, 72,000 were sent to Bombay on March 16, 1955, vide letter Ex. D. 3. Thereafter, stock certificates were sent thrice in July 1955. Stock certificate in respect of 3% Bombay Loan of 1955, of the face value of Rs. 29,75,000 was sent to Bombay on July 15, 1955-vide Exhibit P. 9.23. On the next day, i.e., on July 16, 1955, stock certificates of 3% Bombay Loan of 1955 of the face value of Rs. 15,50,000 and stock

1962 R. K. Dolmia v. Delhi Adminiatratian Raghubar Daya' J.

1961 R. IC. Dalmia .. Del.hi Administrt.tion Raghubar Dayol J.

~52 SUPREME OOURT RE.PORTS [1963]

certificates of 3 % Loan of Government of Madhya

Pradesh of the face value of Rs. 60,500 were sent to Bombay-vide Exe. D. I and D. 2 res-pectively.

Lastly, stock certificates of 2 3/4% Loan of

1962 of the face value of Rs. 56,00,000 were sent to Bombay on August 5, 1955.

Letters Exhibits D. 3 and P. 892 state that

the stock certificates mentioned therein were being sent 'under instructions of the Chairman'.

Raghunath Rai has deposed that the other

stock certificates send with letters Exhibits D. I, D. 2 and P. 923, were sent by him as the securities with respect to which those certificates were granted were maturing in September and were redeemable at Bombay. It has been urged that they could have been redeemed at Delhi and that they need not have been sent by Raghunath Rai on his own couple of months earlier. We do not consider the sending of the securities month and half or two months earlier than the date of m11.turity to be unjustified in the course of business. It is to be noticed that what was sent were the stock certificates 'and it might have been necessary to get the securities covered by those certificates for the purpose of redemption and that might have taken time. No pointed question was put to Raghunath Rai as to why he sent the securities two months ahead of the date of maturity.

Dalmia denies that he gave any instructions

for the sending of the securities. There seems to us to be no go'.ld reason why the expression 'under the instructions of the Chairman' would be noted in letters Exhibits D. 3 and P. 892, unless that represented the true statement of fact.

We have already discussed and expressed

the opinion, in 'considering the evidence of Raghu-nath Rai, that Raghunath Rai was told by

] s.c.R. SUPREME COURT REPORTS

Dalmia, when informed of the purchase or sale of securities, that had been done under instructions and that he had confirmed them. We may further state that there is no resolution of the Board of Directors empowering Chokbani to deal with the securities. He was, however, empowered by reso-lutions at the meeting of the Board dated June 29, 1953, to lodge and receive G. P. Notes from the Reserve Bank of India for verification and endorsement on the same and to endorse or with-draw the G. P. Notes on behalf of the company in the capacity of an agent. Chokbani[1 ]was also empowered by resolution dated October 1, 1953, to deposit and withdraw Govermpent securities held jn safe custody account by the company. The aforesaid powers conferred on Chokhani are different from the powers of sale or purchase of securities.

Dalmia has stated that he authorised Chokbani to purchase securities in about October, 1953, when he was to leave for abroad and that thereafter Chokhani had been purchasing anrl Rr ll-ing securities in the exercise of that autl1ority with-out consulting him. It is i.Irgf'd for him that Raghunath Rai's statement that be used to obtain confirmation of th~ purehase and sale of the secu-rities from him cannot be true, as there was no necessity for such confirmation. Chokhani dots not appear to hav1~ exercised any such authority during the pniod Dalmia was abrc.ad or till August, 19541 and therefore Dalmia's statement does not appear to be correct.

Chokhani and Raghunath Rai were authoris-ed to opnate upon the Bank account at Bombay on October 1, 1953. Dalmfa states, in paragraph 17 of the written statement <lated March 30, 1959, that this was donfl as Ohokh1mi had been givep

R.K. Dalmia v. Delhi Administration Raghubar Dayal J.

19~1 R.K.Dalmia v. Delhi Administration Raghubar DaJal J.

the authority for the sale and purchase of securi-ties at the same time. The Board did not give any sucih authority to l hokhani and if the system of joint signatur<'s was introduced for the reason all-eged, there seems to be no good re!j.son why the Board itself did not resolve that Chokhani be empowered to sell and purchase secmities. The explanation for the introduction of joint-signature scheme does not stand to reason.

Even if it be not correct that Raghunath Rai had to obtain confirmation, it stands to reason that he shoul<l report such transactions on the part of Chokhani to the Chairman, if not necessari-ly for his approval, at least for his information, as Chokhani had. no' authority to purchase and sell securities. These transactions have to be con-firmed by the Board of Directors and therefore confirmation of the Chairman who was the only person authorised to purchase and sell securities was natural.

Raghunath Rai states that when he received no reply to his letter dated November 19, 1954, asking for distinctive num hers of securities not received at headquarters. Dalmia said that he would arrange for the despatch of those secu-rities from Bomba.y to the head officr. No action was apparently taken in that connection. Raghunath Rai further states that on March 23, 1955, when he spoke to Dalmia about the non-receipt of certain securities Dalmia told him that he had already instrueted Chokhani for the conversion of those securities into stock certificates and that· it was in view of this statement of Dalmia that he had written letter Exhibit P. 916 to Chokhani stating therein.

"You were requested for conversion of t.he above Sa.id G. P. Notes into StoC>k Certifi~ate.

Thll ~11iri certificato has pot, beep r"odvcd by 'llR

1 S.C.R. SUPREME COURT REPORTS

as yet. It may be sent now immediately as it is required for the inspection of the company's auditors."

This indicates that DaJmia was in the know of

the position of securities and, on his own, gave in-structions to Chokhani to couvert certain securities into inscribed stock.

Dalmia admits Raghunath R.ai's speaking to

him about the non-receipt of the securities and his telling him that he would ask Chokhani to send them when he would happen to talk to him on the telephone.

Mention has already been made of securities

of the face value of Its. 17 ,50,000 being sent to Bombay from Delhi in the first week of September 1954:. At the time securities of the face value of Rs.53,25,000 were in deposit in the Chartered Bank at Bombay. There was thus no need for sending these securities from Delhi. Chokhani could have withdrawn the necessary securities from the Bank at Bombay. This indicates that on learning that there were 'no liquid funds for meeting the losses at Bombay, Dalmla himself deoided to send these securities to Bombay for sale and for thus providing for the liquid funds there for meeting the cost of the intended fictitious purchase of securities to meet the losses of the Union Agencies.; It is not suggested that these securities were sent to Bombay at the request ofChokhani.

Securities withdrawn in January, 1955, a.nd

stock certificates sent in March and August, 1955, coincided with the period when the Union Agencies suffered losses and the funds of the Insurance Company-at Bombay were low and were insufficient to meet the losses of the Union Agencies.

3% 1957 ~ecurities of the

face value of

Rs. 46,00.000 ( B.s. 37 .75~000 aent from Delhi a.nd

R.K.Dalmia v. Delhi Administration Raghubar Dayq.tJ

It. K. D•l.iia •• DtlA-; Ad111inistr•ti1n

356 SUPR.KME COURT REPORTS [1963J

Rs. 8,25,000 withdrawn from the Chartered Bank at Bombay) were sold 011 January II, 1955, and the proceeds were utilised in purchasing 2·3/4% 1962 securities of the face value of Rs. 46,00,000 in two lots, one of Hs. 35,00,00J and the other of Rs. 11,00,000.

On January 11, 1955, Rs. 3,34,039-15-3, the balance of the Bale proceeds was deposited in the accounts of the Insurance Company. Inscribed stock for these securities worth Rs. 46,00,000 wae duly obtained. Dalmia him1elf handed oTer inscribed stock certificate to Raghuniith Rai aomo time in the end of January 1955.

This purchase, though genuine, wa1

purchase in the ordinary course of bu1ine1a, but was for the purpose of procuring the inscribed ~tock certificate to satisfy t,he auditors, as already dis· cussed earlier, that similar securities purchased in December, 1954 existed. Tho auditors were than to audit accounts of 11154 and not of 1955. In this connection reference may be made to Dalmia'e attitude to the auditors' surprise inspection on September 9, 1954, on the ground that they could not ask for inspection of securities purchased in 1955.

It may also be mentioned that purchasing and

selling securities was not really the business of the Insurance Company. The Insurance Company had to invest its money and, under the statutory requirements, had to invest certain portion at least in Government Securities. The value of Government securities does not fluctuate much. Dalmia states, in answer to question No. 25 (under s. 342 Cr. P. C.): •Government securities are gift edged securities and there is very small fluctation in these.' The question of purchasing and selling of securities with a. view-to profit cnuld not there-forr. be the ordinary bqsine~ of the Insurance

1 s.c.R.

SUPREME OOURT REPORTS

Company. It has to purchase securities when the statutory requirements make it necessary, or when it has got funds which could be invested.

R. ](. Dalmi11 ,O,i A.dministratiOR "· --Raghubar Dayal J.

The Insurance Company had Government of

India 3% Loan of 1957 in deposit with the Charter-ed Bank, Bombay, the face val9e of the securit.ies being Rs. 53,25,000, from April 6, 1951, onward. The fact that these securities remained intact for period of over three years, bears out our view that the purchasing and selling of securities was not the normal business of the Insurance Company, Securities are purchased for investment and are redeemed on the date of maturity.

In this connection, reference may be made

to Khanna's statement in answer to question in eross-exa.mination-The frequency of transactions rele.ting to purchase and sale of securities depends upon the share market and its trends ? His answer wa.s that that was so, but that it also depended on the character of the company making the investment in securities. It may be said that the trend of the share market will only guide the purchase or sale transactions of securities of company speculating in shares, like the Union Agencies, but will not affect the purchase and sale by company whose business is not speculation of shares like the Insurance Company.

Raghunath Rai states that when 9n September

9, 1955, the auditors wanted the production of the securities, said to be at Bombay, in the next two days, he informed Dalmia about it an<l Dalmia B&id that he would arrange for their production after two days. DaJmia, however, took no steps to contact Chokhani at Bombay, but rang up Khanna instead and asked him to certify the accounts as they had to be la.id before the Company by September 30, and told him that everything was in order, that he would give all satisfaction l&oter,

1962 R. K. Dalmia v. Delhi AdminislratlH R rgltub•r Da,Jal J.

358 SUPREME OOURT REPORTS (1963]

soon after Chokbani was available and that he did not ask for an extension of time for the filing of tho accounts as that would affect the prestige of the company. On September 10, 1955, when Raghunath Rai handod over the letter Exhibit P. 2 of even date from' the auditors asking him to produce statement of investments as on Sep-tember 9, 1955, along with the securities or evidence if they were with other persons, by Tuesday, September 13, Dalmia had stated that Chokhani's mother had died and that he would himself arrange for the inspection of securities direct with the auditors. Chokhani's mother died on September 4, 1955. Dalmia had no rea8on to tell Raghunath Rai on September 9 that the securities would be produced for inspc·ction in tho n<>xt two days, un Jess he believed that he could get them in that time on contacting Cbokhani, or did not wish to tell him the real position. Dalmia states that he contacted Chokhani for the first time on September 11>, the last day of the mourning and then learnt from Chokhani that the securities were not in existence, the money withdrawn for their purchase having been lent to the Union Agencies. The various st,atements made by Dalmia in these circumstances and his conduct go to show that he had guilty mind and when he made the statement to Raghunath R!li that the securities would be produced within two days, ho tru;;ted that he would be persuasive enough for the auditors to pass the accounts without further insistence on the product-ion of those securities.

Dalmia's not going to Mr. Kaul's Office on

September 16, and sending his relations to inform the latter of the short.fall in securities can have no other explanation than that he was guilty anti there-fore did not desire to have any direct talk about the matter with Mr. Kaul. There was no need to avoid meeting him and miss the opport.unit,r

I S.C.R. SUPREME COURT REPORTS

of explaining fully what Chokhani had done without his own knowledge.

R. K. Dalmia v.

Dalmia has admitted that he sent his relations to Mr. Kaul and has also admitted that what they sta.ted to "Mr. Kaul was under his instructions. He states in answer to question No. 450, that after the telephonic t.alk with Chokhani on the evening of September 15, he consulted his brother Jai Dayal Dalmia and his son-in-law S. P. Jain. about the position and about the action to be taken and that it was decided between thr>m before they left for the officp, of Mr. Kaul that they would tell him that either the Becurities would be restored or their price would .be paid off as \vould be desired' by the Government and in answer to question No. 451, said that it "NBS correct that these persons told Mr. Kaul that considerable amount of the securities were missing and that they were to make good the loss. It is clear that these persons decided not to disclose· ·to Mr. Kaul that the securities were not in stock because they were not actually purchased and the amount shown to be spent on them was lent to the Union Agencies.. It was not case of·the securities missing but case of the Inslirance Company not getting those securities at all. It is reasonable inference from this conduct of Dalmia that he did not go himself to Mr. Kaul as he was guilty and would have found it inconvenient to explain to him how the shortfall had taken place.

Delhi Administration

RGghubar Dayal J.

We may now discuss the evidence relating to

Dalmia's making confession to Annadhanam. Annadhanam was Chartered Accountant and partner of the Firm of Chartered Accountants M/s. Khanna and Annadhanam, New Delhi, and he was appointed by the Central Government, in exercise of its powers under s. 33( I) of the Insu-rance Act, 1938, on September 19, 1955, to investi~ate into the affairs of t4e Bharat Insura.nc~

If. K. Dalmiri v. D~lhi Administ1atir1J Raghubar DaJ·al J.

SUPREME GOURT REPORTS (1963]

Company and to report to the Government on such investigation. He started this work on September 20. Annadhanam, having learnt from Raghunath Ra.i about the missing of number of Government securities and the amount of their value from the statement prepared by him, called Dalmia to his office that evening in order to make statement. Dalmia made the statements Exhibits P. IO and P. 11. P. 10 reads:

''I have misappropriated securities of the order of Rs. 2,:W,00,000 of the Bharat Insurance Company Ltd. I have lost this money in speculation."

Exhibit P. 11 reads:

''Further stated on solemn affirmation.

At any cost, I want to pay full amount

by requesting my relatives or myRelf in the interest of the policy holders. "

Dalmia admits having made the statement

Exhibit P. 11. but m11de some inconsistt'lnt statements about his making the statement Exhibit P. 10. It is said that he never made that statement, but in cer-tain circumstances he asked the Investigator to write what he considered proper and t.ha.t he signed what Anna.dhanam recorded. He did not directly state, but it was suggested in cross·examination of Anna.-dha.nam and in his written statement that he ma.de that statement as result of inducement and pro. mise held out by either Annadha.nam of Khanna (the other partner of M/s. Khanna and Annadha.nam, Chartered Accountants, New Delhi) or both.

Dalmia's contention that Exhibit P. IO was

inadmisRible in evidence, it being not voluntary, was repelled by the learned Sessions Juclge, but was, in way, accepted by the High Court which did not consider it safe to rely on it. The learned Solicitor General urged that the confession Exhibit r. IO W&lj

SUl?Rlnl\f~ OOU:R'l' R~PORTS

1 S.C.R.

voluntary and was wrongly not taken into conside-ration by the High Court. Mr. Dingle Foct conten-ded that the High Court took the prop0r view and the confession was not voluntary. He further urged that the confession was hit by the provisions of cl. (3) of Art. 20 of the Constitution.

The only witnesses with respect to the recording of the statement Exhibit P. 10. are Annadhanam and Khanna. The third person who knew about it and has stated about it is Dalmia himself. He has given his version both in his statement recorded under s. 342 Cr. P. .. and in his written statement filed on October 24-, 1958.

We may first note the relevant statement in this connection before discussing the question whe-ther the alleged confession is voluntary and there-fore admissible in eviden'.le. Annadhanam made the following relevant statements:

Dalmia came to the office at 6.30 p. m., though the appointment was for 5.30 p. m. His companion stayed outside the office room. Annadhanam asked Dalmia the explanation with regard to the missing securities. Dalmia wanted two hours' time to give the explanation. This was refused. He then asked for half-an-hour's time at least. This was allowed. Dalmia went out of the office, but returned within ten minutes and said that he would make the statement and it be recorded. Annadhanam, in the exercise of the powers under s. 33(3) of the Insurance Act, adminis-tered oath to Da.lmia and recorded the statement Exhibit P. IO. It was read over to Dalmia. Dal-mia admitted it to be correct and signed it. Shortly after, DaJmia stated that he wanted to add one more sentence to his statement. He was again ad-ministered oa.th and his further statement, Exhibit P. 11 was recorded. This was also read over and Dalmia signed it, admitting its accuracy.

R. K. Dalmia v.

Delhi Adminislralion Righuba• Doyal J,

R. K. Dalmia v. Delhi Administr~tion Roghubor D!.lya. J,

Annadhanam states that no threat or induce· ment or promise was offered to Dalmia before he made these statements.

third statement is also attributed to Dalmia

and it is that when Dalmia was going away and was ne:tt'ing the stair-case, Annadhanam asked him whe-ther the speculation in which he bad lost the money was carried on by him in the company's account or in his private account. Dalmia replied that he had lost that money in his personal speculation business which was carried on chiefly through one of his pri-vate companies, viz., the Union Agencies. This statement was not recorded in writing. Annadha· nam did not consider it necessary, but this was mentioned by Annadhanam in his supplementary interim report, Exhibit P. 13, which he submitted to the Deputy Secretary, Ministry of Finance, on September 21, 1955. Annadhanan also mentioned about the statement recorded in Exhibit P. 10 in his interim report, Exhibit P. 12, dated September 21, 1955, to the Deputy Secretary, Ministry of Finance.

Annadhanam

stated

In-cross-examination, Annadhanam stated that he did not send for Dalmia to the office of the Bharat Insurance Company where he had examined Raghunath Rai, as he had not made up his mind with respect to the further action to be taken. He denied tha.t he had any telephonic talk with Mr. Kaul, the Deputy Secretary, Ministry of Finance, prior to the recording of the statements, Exhibits P. 10 and P. 11. His explanation for keeping Khanna with him dtlfing the examination of Dal-mia was that Khanna had done the detailed audit. ing of the accounts of the company in pursuance of the firm Khanna and Annarlhanam being appoin· ted auditors for 1954 by the Insurance Company. He denied that Dalmia,told him that he had no perso-nal knowledge of the securities and that the only information he had from Chokhani was that the

latter bad given money on loan to the Union Agen-

cies. He stated that the statements Exhibits l>. l 0 and 11 were recorded in the very words of Dalmia. The statements were not actually read over to Dalmia but Dalmia himself read them over.

R. K. Dalmia v.

Delhi Administration Rohgubar Dayd J.

Annadhanam denied that he told Dalmia that

he would not be prosecuted if he mada the state-~nts Exhibit P. 10 and P. J l and deposited the money alleged to have been embezzled a.nd further stated that Khanna did not tell this to Dalmia. He denied that Exhibit P. 10 was never made by Dalmia and was false and reiterated that that state-ment was made by Dalmia. He did not consider it proper to reduce to writing every word of what transpired between him and Dalmia from the moment of the latter's arrival in his office till the time of his departure, and considered it proper to reduce in writing the statement which was made with regard to the missing s9curities. He further stated that his statement above Dalmia's making statements Exhl.bits P. 10 and P. 11 voluntarily was on account of the facts that Dalmia himself volun-teered to make those statements and that he himself had offered no inducements or promises.

In cross-examination by Mr. T. C. Mathur, he

denied that he told Dalmia that as Chairman of the Insurance Company he should own responsibility for the missing securities and th!l.t that would make him greater Dalmia because he was prepared to pay for the short-fall and further denied that it was on account of the suggested statement that Dalmia ha.d asked for two hours' time before making his statement.

In cross-examination by Dalmia personally,

Annadbanam explained the discrepancy in the am;mnt of the securities admitted to be misappro-priated. Exhibit P. 10, mentions the securities to be of the order of l{.s. 2,20,oa,OOO/- In his report

R. K. Dolmia ••

D! llii Administration Ragh ubar Dayal .I.

Exhibit P. 12, he stated the admission to be with respect to securities of the face valu11 of Rs. 2,22,22,000/-. The explanation is that in he inte-rim report he worked out the face value of the mis-sing securities to be Rs. 2,22,22,000/·, and he men-tioned this figure in his report as Dalmia had admit-ted the misappropriation of the securities. Nothing sinister can be inferred from this variation.

Khanna practically supports the statement of Annadhanam, not only with respect to Exhibit P. IO and P. II, but a.lso with respect to the third statement said to have been made nea.r the stair· case. His statements in cross-examina.tion that it was possible that Annadhanam might ha.ve asked the companion of Dalmia to stay outside the office as the proceedings were of confidential nature, does not in any way belie Annadhanam's statement as this statement itself is not definite. In answer to the question whether it struck him rather improper that Dalmia made the sta.tement Exhibit P. IO in view of his previous statement to Khanna that satisfaction would be afforded to the auditors on the points raised by them after Chokhani was available, he replied that his own feeling was tha.t the statements Exhibits P. IO and P. II were the natural culmination of what he learnt in the office of Mr. Kaul on September I!}, 1955. He also denied that he told Dalmia that whoever was at fault, the ultimate responsibility would fall on the Chairman and other Directors as well as the officers of tb,e Insurance Company hy way of misfeasance, an that Dalmia should sign the statement which would be prepared by himself and Annadhanam so that the other Directors and the officers of the Insurance Company be not harassed and that if this sugges-tion was accepted by Dalmia, he would save every one and become greater Dalmia. He denied the suggestion that when Dalmia talked of his charita· ble disposition in his office on Septem her 20, 1955, it should have been in answer to his {Khanna's)

provoci:ttive remarks wherein he had made insinua-tions regarding Dalmia's integrity and stated that he was merely silent spectator of what actually had ha:t ~ened in the office that day. He further stated that no question arose of Annadhanam's at-tacking the integrity of Dalmia on September 20, 1955. He denied that Mr. Kaul had told him or Annadbanam on September 19, when the order ap-?Ointing Annadhanam Investigator was delivered, that Dalmia had to be implicated in criminal case.

Khanna denied that his tone and remarks du-ring the discussion were very persuasive and that told Dalmia that it was very great of him that he was goi~g to pay the a.mount represented by the short-fall of the securities. He also denied the sug-gestion that Dalmia told him and Annadhanam on September 20, at their office, that he had no know-ledge of the missing securities, that it, appeared that the securities had either been sold or pledged and that the money had been paid to the Union Agencies, which Dalmia did not; like, and that in the interest of the policy holders and the Insurance Company Dalmia was prepared to pay the amount of the short-fall of securities, and also that when Dalmia spoke about the securities being sold or pledged, Khanna and 4nnadhanam remarked that the securities had been misappropriated. He denied that he told Dalmia that if he took personal respon-sibility in the matter, it would be only then that no action would be taken and stated that he and Anna-tlhanam were nobody to give any assurance to Dalmia. ·

Dalmia stated, in this st.atement under s. 342 Cr. P.. C. on November 7, 1958, that his companion Ra~hunath Das Dalmia stayed out because he was not allowed to stay with him inside the office. He denied that he first spoke about his charitable dis-position and piety when asked by Annadhanam to explain about the missing securities and stated that

R; K.Dalmia v.

Delhi Administration Raghubar Dayal J.

1962 R. K. Datmia y, D1lhi Administr[0]1ion /Ughuhar D1,o.l J.

there could be no occasion for him to talk at that time of his piety and charitable disposition when he had been speoifically ca.lied to explain with regard to the miHsing securities. His version of what took place may now be quoted (answer to question No. 471) in his own w.:irds:

"What actually happened was that I told Shri Annadhanam that I had learn,; from G. L. Chokhani that the amount of the missing securities had been lent temporarily on behalf of the Bharat Insurance Company by Shri G. L. Chokhani to Bharat Union Agencies and that the amount had been lost in speculation. Shri Annadhanam then asked me about the missing securities. I then told him that I did not know as to whether the securities had been sold or mortgaged. My replies here being noted by Shri Annadhanam on piece of paper. Shri Annadhanam then asked me as to wh"n the securities had been sold or mort-gaged I replied that I did not know with re-gard to the time when the securities had been sold or mortgaged. Shri Annadhanam then asked me as to what were the places where there were offices of Bharat Union Agencies. I then told him that the offices were at Bombay and Delhi. I than remarked that whatever had happened, I wanted to pay the amount of the missing securities as the interest of the policy holders of the Bharat Insurance Com-pany were close to my heart. During the course of that talk sometimes Shri Annadha-nam questioned and sometimes the questions were asked by Shri Khanna. Shri Khanna then stated thl\t I should forget the events of 9-9-1955. Shri Khanna further stated. 'We too are men of hearts. And not bereft of all feelings. We too have children. I am very much impressed by your offer of such huge

1 s.c.tt. SUPREME COURT REPORTS

amount'. Shri Khanna also remarked that Shri Annadhanam had been appointed under section 33 of the Insurance Act to investigate into the affairs of the Bharat Insurance Com-pany and as such the words of Shri Khanna and Shri Annadhanam would carry weight with the Government. Shri Khanna also stated other things but I do not remember them. I however distinctly remember that Shri Khanna stated to me that I should go to Shri C. D. Deshmukh and that Shri Khanna would also help me. I then repli~d that I would not like to go to Shri Deshmukh. Shri Khanna then remarked that the Gove1 nment attached great importance to the interests of the policy holders and that if the matter got undue publicity it would cause great loss to the policy holders. Shri Khanna accordingly stated that if I agreed to his suggestion the matter would be settled satisfactorily and without any publicity. It was in those cir-cumstances that I asked for two hours' time to consult my brother and son-in-law."

He further stated that when Annadhanam told him that he could have half-an-hour's time and that more time could not be given as the report had to be given to the Government immediately, he objec-ted to the shortness of time as he could not during that inter~al go to meet his brother and son-in-law and return to the office after consulting them and further told Annadhanam and Khanna to write whatever they considered proper as he had trust in them.

His reply to question No. 476 is significant and reads:

" The statement was read over to me.

I then pointed out that what I had Atated had not been incorporated in Ex. P. 10. I made

1962 R. K. Dalmia v. Delhi Administration fRaghub•r Dayal J,

198J R. K. •. Dalmia Delhi A.dminUtration Ro,mJ>ar Do.Joi J.

no mention that the statement Ex. P. 10 was correct or not. Shri Annadhanam then redu-ced to w:r~tin~, whatever was stated by me . That wr1tmg 1f Ex. P. 11 and is in the very words used by me."

He does not directly answer question No. 479:

"It is in evidence that the statement Ex.

P. ~ J. was read over to you, you admitted it to be correct and signed it. Do you want to say anything with regard to that?"

and simply stated, 'l did sign that statement'. He

denied the third statement alleged to have been made near the staircase.

Dalmia also stated that he had mentioned

some facts about the statements Exhibits P. 10 and 11 in his written statement.

Paragraphs 53 to 59 of the written statement

dated October, 24, 1958, refer to the circumstances about the making of the statements Exhibits P. IO. and .P. 11. In paragraph 53 Dalmia states that the recording of his statement in Annadhanam's office took place as it was only there that Annadhanam and Khanna could get the necessary privacy. The insinuation is that they did not want any indepen· dent person to know of what transpired between them.

Paragraph 54 refers to very minor discre·

pancy. Paragraph 55 really giv~s- the version of what took place in, Annadhanam s office.

We refer only to such portions of this version

as do not find place either in the suggestions ma.de to Annadhanam and Khanna in their cross·exami· nation or in the statement of Dalmia under s. 342 or which be inconsistent with either of them. Dalmia stated that he told Annadhanam that the

1 S.C.R.

mouey that had been received by Bharat Union Agencies as loan belonged to Bharat Insurance Company and it appeared that the Union Agencies had lost that money in speculatiou. He further made statements which tend to impute an induce-ment on the part of Khanna to him. These state-ments may be quoted in Dalmia's own words:

"On this Shri Khanna said that I was gentleman, that I was prepared to pay such heavy amount which has never been paid so far by anybody, that I should accept his advice and that I should act according to his suggestion and not involve myself in this dis-pute. the Government was not such fool that they would not arrive at quiet settle-ment with man who thought that his first duty was to protect the policy holders and thus by spoiling the credit of the Bharat fusu-rance Co. would harm its policy holders. If the Government did so it would be an act of cruelty to the policy holders, and when I was prepared to pay the money it (Government) would not t11ke any such course by which I may have to face troubles, that my name would go very high, that he advised me as being my well-wisher that I should confess that I had taken the securities, that they would help ~e. They added that Shri Anna-dhanam has been appointed as Investigator by the Government and therefore their words carry weight with the Government, that it was my responsibility, being the Chairman and Principal Officer of the Bharat Insurance to pay the money. At that time I was restless to pay the money. I was influenced by their talk and anybody in my place would ha.ve trusted their words. I was impressed by their saying to me that HO wise Government or officers would ta.k.~

R. f', Dalmia y, Dalhi .A.dministrat"1n Raghubar Dayal J.

370 SUPREME <X>URT REPORTS [1963]

196B such action which would harm the policy-holders through publicity. Therefore I took "': R. A~. Dnlntila v. that whatever Shri Khanna and Annadhanam Dt/ki Adminia1t•tion were saying was for my good".

liaghubttr Dayal J. He stated that he asked Annadhanam and Khanna for two hours' time to consult his brother 11.nd son-in-law and that one of them said that they could not give more than half-an-hour. This is inconsis-tent with what he stated under s. 342. He further sta.ted :

"I told them to write in whatever wa.y

they thought best and whatever they wrote I simply signed. After signing when I read it, I pointed out to them that they had not written that I wanted to pay every pie of the policy holders &nd then they wrote as I t.old them and I signed".

The statement referred to is short one, and it is

not possible to believe that he signed it without reading it.

Paragraph 56 makes no reference to the events

of that evening, but paragraph 57 refers to the improbability of his writing things which brought trouble to him when just before it be had been talking irrel'olvantly. The question in cross-exa.mi-nation did suggest that he was forced to make irrelevant talk due to certain provocation. That does not fit in with the explanation in paragraph 57 that his talk about a. temple was invented to support the statement Annadhanam had made to the police about Dalmia's talking irrelevantly. His statement •How could I have acted in such a. way without any poRitive assurances, implies th&t he did make the statements though on getting assurances. In para-graph 58 he states :

"On 20th September Shri Khanna and

Annadhanam had put all sorts of questions

to Raghunath Rai but let me off after record-ing my statement in just one or two Jines. Their design had succeeded and therefore they did not care to record any further question".

This again implies his making the statement P. 10. Of course, after he had made the statement P. 10 there was no necessity of asking anything further. His statement explained the missing of the securities.

Reference may now be

made to what

Raghunath Rai, who was the Secretary of the Bharat Insurance Company, states in reference to .the statement made by DaJmia to Annadhanam. Raghunath Rai states that when he went to Dalmia. a.bout 7 p. m. on September 20, 1955, and told him a.bout the recording of his own statement by Anna-dhanam and the preparation of the statement about Exhibit P. 8 and about his talk refarding the securities at Bombay, Dalmia said : ·I have been myself in the office of the Investigator. He has recorded my statement wherein I have admitted the short-fall of the securities'. This also points to Dalmia's making the statement Exhibit P. 10.

Raghunath Rai did not admit, but simply said

that Da.lmia. did tell him something when he was questioned as to whether Dalmia told him that he had been told by Annadhanam and Khanna that if he had made the statement in accordance with their desire, there would be no trouble.

Dalmia evaded direct answer to the question put to him under s. 342, Cr. P. C. When question No. 482 was put to him with reference to this state-. ment of Raghunath Rai he simply stated that he had briefly told R.aghunath Rai with regard to what had transpired between him and Khanna and Annadhanam and that he had told H.aghunath R~j ibat he need not worry.

R. K.Dalmia v.

Delhi Adminishalion Raghubar Dayal J.

1962 R. K. natmia •• Delhi .Ar/ministration Raghubar Day•l J.

. The various statements of Dalmia suggesting that inducement was held out to him by Khanna have not been believed by the Courts below, and we see no good reason to differ from their view. There was no reason for Annadhanarn to record an incriminating statement like P. 10 and get it signed by Dalmia.

The High Court does not also hold that the

confession was the result of some threat extended by Annadhanam. It did not consider it safe to rely upon it as it considered the confession to be not voluntary in certain sense. It said :

"In that sense, therefore, it was not voluntary statement, because although no words of threat or inducement were uttered by Mr. Annadhanam or anyone else, the circumstances had shaped themselves in such manner that there was an implied offer of amnesty being granted to him if he did not persist in his negative behaviour. He there-fore made statement that he had misapprop-riated the secmities and immediately offered to make good the loss through his relatives".

What are those circumstances which implied an offer of amnesty being granted to him if he did not persist in his negative behaviour, presumably in not giving out full information about the missing securities ? Such circumstances, as can be gathered from the judgment of the High Court seem to be these : ( l) Dalmia, person of considerable courage in commecial affairs was not expected to make voluntary confession. (2) He had evaded meeting the issue full-face whenever b.e could do so and did not appear before Mr. Kaul on September 16, 19!)5, to communicate to him the position about the securities. (3) He not only appeared before Annadhanam an hour late, but further asked for two hours' time before answering simple question a.bout the 1ni8sing secaritie&. (4) He m,1de the

1 S.C.R.

statement when he felt cornered on account of the knowledge that Annadhanam had the authority of law to question and thought that the only manner of postponing the evil consequence of his act was by making the statement which would soften the attitude of the authorities towards him.

We are of opinion that none of these circums-tances would make the confession invalid. Dalmia's knowledge that Annadhanam could record his state-ment under law and his desire to soften the attitude of the authorities by making the statement do not establish that he was coerced or compelled to make the statement. person of the position, grit and intelligence of Dalmia. could not be so coerced. person making confession may be guided by any considerations which, a.ccording to him, would benefit him. Dalmia must have made the statement after weighing the consequences which he thought would be beneficial to him. His making the confes-sion with view to benefit himself would not make tihe confession not voluntary. confession will not be voluntary only when it is made under some threat or inducement or promise, from person in authority. Nothing of the kind happened in this case and the considerations mentioned in the High Court's judgment do not justify holding the confos-sion to be not voluntary. We are therefore of opinion that Dalmia made the confession Exhibit P. 10, voluntarily.

It was argued in the High Court, for the State, that Dalmia thought it best to make the statement because, by doing so, he hoped to avoid the discov-ery of his entire scheme of conspiracy which had made it possible for him to misappropriate such large amount of the assets of the Insurance Com-pany. The High Court held that even if the confession was made for that purpose, it would not be voluntary confession. We consider this ground to hold the confession involuntary unsouQd,

R. /( •. IJalmia y,,

Dellzi Adm'ei.rWCJlion

1962 R. K. Dalmia v, I'elhi Adminis1raiion Raghubar Dayal. J.

Mr. Dingle Foot has contended that the state-

ment, Exhibit P. 10, is not correct, that Annadha-nam and Mr. Kaul colluded and wanted to get confession from Dalmia and that is why Annadha-nam extracted the confession and that various circumstances would show that the confession was not voluntary in the sense that it was induced or obtained by threat. He has also urged that Annadhanam was 'a person in authority' for the purpose of s. 24 of the Indian Evidence Act. These circumstances, according to him, are that Dalmia's companion was not allowed to stay in the office, that only half-an-hour was allowed for Dalmia to make consultations, that there had been dis~'US· sion before the recording of Exhibit P. 10, that no record on the discussion was maintained, that Annadhanam, as Investigator, was public servant, thats. 176, I. l'. C. was applicable to Dalmia if be bad not made the statement and that the stattment on oath really amounted to an inquisition. It was further contended that if the confession was not inadmissible under s, 24 of the Evidence Act; it was inadmissible in view of cl. ( 3) of Art. 20 of the Oonstitut ion.

Mr. Dingle Foot has further contended ibat

the st11.tement, Ex. P. 10, is not correct inaamucb as it records: 'I have misappropriated securities of the order of rupees two crores, twenty lakbs of the Bharat Insurance Company Ltd.', that it could not be the language of Dalmia and that these facts supported Dalmia's contention that be simply signed what Annadhanam bad written.

The public prosecutor bed also questioned the correctness of this statement inaHmucb as the actual misappropriation was done by Cbokbani and Dalmia had merely suffered it and as the accurate statement would have been that there was mis-appropriation of the money equivalent of t}le securi· ties,

I S.C.R. SUPREME COURT REPORTS

We are of opinion that any vagueness in the

expression could have been deliberate. The expre-ssion used was not such that Dalmia, even if he had poo.r knowledge of. English, could not have used. The statement was undoubtedly very brief. It cannot be expected that every word was used in that statement in the strict legal sense~ The expression 'I misappropriated the securities' can only mean that he misappropriated the amount which had been either spent on the purchase of the securities which were not in existence, or realised by the sa.le of securities, and which was shown to be utilised in the fictitous purchase of securities. The main fact is that Dalmia did a.dmit his personal part in the loss of the amount due to the 1hortfall in the securitiea.

There is nothin& OB record to justify any

conclusion that A.nnadhan&m and Mr. Kaul had colluded and wanted to get confession from Dalmia. It is suggested that Annadhanam was annoyed with I>almia. on account of the latter's resentment at the conduct of Annadhanam and Khanna in conducting surprise inspection of the accounts and securities on September 9, 1955. Raghuna.th Ra.i protested saying that they had already verified the securities and that they, as auditors for the year 1954, had no right to ask for the inspection of securities in the year 1955. At their insistence, Raghunath Rai showed the securi-ties.

After their return to the office, Da.lmia. rang

them up &nd complained that they were unnecessa.-rily harassing the ofticer1 of the Bh&r&t Insur11.nce Company and ha.d no right to inspect the securities. Dalmia was not satisfied with their assertion of their right to make surprise . inspection. There was nothing in this conduct of Dalmia which should b.~ve annoyed Anna.dhanain or Khanna. They did

R. K. Dalmitl v.

Delhi .Adminislralet Ra1kubar Daya I,

1962 R. K.Da.lmia •• Delhi Adminislralitin Baghubor Dayal J •

what they considered to be their duty and success-fully met the opposition of Raghunath Rai. If there could be any grievance on account of their inspec-tion, it would be to Dalmia wh'b, as result, would not be easily induced by them to make the con-fession.

Mr. Kaul, as Deputy Secretary, Ministry of Finance, did take part in the bringing of the matter to head, not on account of any personal animus against Dalmia-such animus is not even alleged-but on account of his official duties, when he heard rumour in Bombay that Dalmia had incurred heavy losses amounting to over two crores of rupees through his speculative activities and had been drawing upon the funds of the Insurance Com-pany of which he was the Chairman to cover his losses. He asked Dalmia on September 14, 1955, to see him on the 15th in connection with the securi-ties of the Insurance Company. When Dalmia met him on the 15th in the presence of Mr. Barve, Joint Secretary, he asked whether he had brought with him an account of the securities of the Bharat Insu-rance Company. Dalmia expressed his inability to do so for want of sufficient time and promised to bring the account on September 16. On the 16th, Dalmia did not go to ]\fr. Kaul's office; instead, his relations S. P. Jain and others met Mr. Kaul and made tJertain statements. Mr. Kaul submitted note, Ex. D. 67, to the Finance Minister «m September 18, 1955, and in his note suggested that of all the courses of action open to the Government, the one to be taken should be to proceed in the matter in the legal mannrr and launch prosecu-tion as the acceptance of S. P. Jain's offer would amount to compounding with criminal offender. Mr. Kaul stated that he did not consider it nece@sary to make any enquiry because the merits of the case against Dalmia remained unaffected whether the loss was rupees two crores or few lakhs, more or less. On the basis of the aforesaid suggestion of

1 S.C.R. SUPREME COURT REPOR1'S

Mr. Kaul and his using the expression 'courses against Shri Dalmia' it is urged that criminal action was contemplated against Dalmia and that th~re must have been some understanding between Mr. Kaul and Annadhanam about securing some sort of confession from Dalmia for the purpose of the case which was contemplated. We consider this sugges· tion farfetched and not worthy of acceptance. As pa.rt of his duty, Mr. Kaul ha.cl to consider the various courses of action open to the Government in connection with the alleged drawing upon the funds of the Insurance Company to cover his losses in the speculative activities. Mr. Kaul did not know what had actually transpired with respect to the securities. He had heard something in Bombay and then he was told about the short-fall in the securities of the Bharat Insurance Company and. naturally, he could contemplate that the alleged conduct could amount to criminal offence. In fact, according to Mr. Kaul, suggestion had been made to him by S. P. Jain that on the making up of the short-fall in securities no further action be taken which might affect the position of Dalmia and his other associates in. business and of variou·s busi-nesses run by them. The fact that ,Annadhanam knew that there had been a. short-fall of over rupees two crores prior to Dalmia's making the statement Exhibit P. 10 cannot justify the conclusion that Annadhanam and Mr. Kaul were in collusion.Annadhanam does not admit he had ordered Da.lmia's companion to stay out of the office. Even if he did, as stated by Dalmia, that would not mean that Annadhana.m did it on purpose, the purpose being that h~ would act unfairly towards Dalmia and that there be not any witness of such anlattempt. Simila.rly, the non-mainten&11ce of the record of wha.t conversation took place between Dal 'Jlia and the Investigator, does not point out to any sinister pur.pose on the pa.rt of Annadha.nam. It was

R. K. Dalmia v. Delhi Administrali1 n Raghubaf' Dayal J,

R. K. Dn/mia v. Delhi Administf'afion Roghubar Dayal J.

Annadhanam's discretion to examine person in eonnection with the affairs of the Insurance Com-pany. He put simple question to Dalmia and that required him to explain about the missing securities. So long as Dalmia did not make statement in that connection, it was not neceBBary to make any record of the talk which might t&ke place between the two. In fact, Annadhanam had stated that the word 'discussion' used by him in his supplementary interim report Exhibit P. 13, really be read as 'recording of the statement of Shri Dalmia and the talk he had with when he came to Annadbanam's office and which he had with him while going to the staircase'_ This explanation seems tb fit in with the context in which the word 'discussion' is used in Exhibit P. 13.

The interval of time allowed to Dalmia for con-sulting his relations might have been considered to be insufficient considering for confeBBion voluntary in case that was the time allowed to confessing accused produced before Magistrate for recordiug con· fession. But that was not tlie position in the present case. Annadhanam was not going to record the con-fession of Dalmia. He was just to examine him in connection with the affairs of the Insurance Com-pany and had simply to tell him that he had called him to explain about the miBBing securities. There was therefore no question of Annadhanam allowing any time to Dalmia for pondering over the pros and cons of his making statement about whose nature and effect he would have had no idea. We do not therefore consider that this fact that Dalmia was allowed half-an-hour to consult his relations can point to compelling Dalmia to ma.ke the statement.

We do not see that examination of Dalmia on oath be considered to be an inquisition. Sub-section (3) of s. 33 of the Insurance Act empowers the Investigator to examine on oath any manager, managing director or other offioer of the insures in relation to his business. Section 176 of the Indian

I s.c .R.

SUPR:ti:ME COURT REPOR'rs

Penal Code has no application to the examination of Dalmia under s. 33 of the Insurance Act. Section 176 reads:

''Whoever, being legally bound to give any notice or to furnish information on any subject to any public servant, as such, inten-tionaHy omits to give such notice or to furnish such information in the manner and at the time required by law, shall be punished with simple imprisonment for term which may extend to one month, or with fine which may extend to five hundred rupee!, or with both.

or, if the notice or information required to

be given r:eFpects the commission of an offence, or is required for the purpose of preventing the commission of an offence, or in order to the apprehension of an offender, with simple imprisonment for term which mav extend to six months, or with fine which may ·extend to one thousand rupees, or with both;

or, if the notice or information required

to be given is required by an order passed under sub-section ( l) of section 565 of the Code of Criminal Procedure, 1898, with imprisonment of either description for term which may extend to six , months, or with fine which may extend to one thousand rupees, or with both."

For the application of this section, it is necessary that Annadhanam, as Investigator, be public servant. Annadhanam cannot be said to be servant. He was not an employee of Government. He was Chartered Accountant and •had been di-rected by the order of the Central Government to investigate into the affairs of the Insurance Com-pany and to report to the Government on the in-yestigation made by him. or course, he was to get

1961 R. K. Dalmia v. Delhi Administratilln Raghubar Dayal J.

R. K. Da/mia v.

D1lhi Admini5lratlon Raghubar DaJal J ·

aso SUPREME COUlt'l' ltEPORTS (1963]

some remuneration for the work he was entrusted with.

•Public servant' is defined in s. 2 l of Indian

Penal Code. Mr. Dingle Foot has argued that Annadhanam was public servant in view of the ninth clause of s. 21. According to this clause, every officer in tbe service or pay of the Govern-ment or remunerated by fees or commission for the purpose of any public duty would be public ser-vant. person who is directed to investigate into the affairs of an Insurance Company under s. 33(1) of the Insurance Act, does not ipso facto become an officer. There iii no office which he holds. He

is not employed in service and thArefore this defini.

tion would not apply to Annadhanam.

The making of statement to the Investiga·

tor under s. 33(3) of the Insurance Act rloes not amount to furnishing information on any subject to any public servant as contemplated by s. 176 I. P. C., an omission to furnish which would be an offence under that section. This section refers to information to be given in statements required to be furnished under some provision of law. We are therefore of opinion that s. 176. I. P. C. did in no way compel Dalmia to make the statement Exhibit P. 10.

We believe the statements of Annadhanam

and Khanna about Dalmia's making the statement Exhibit P. 10 without his being induced or threa-tened by them. 'fheir statements find implied support from the statement of Raghunath Rai with respeot to what Dalmia told him iu connection with the making of the statement to Annadhanam and from certain statements of Da.lmia himself in his written statement and' in answers to questions put to him under s. 342, Cr. P. C.

We therefore hold the statement Exhibit P.

10 is voluntary statement and is admissible in evidence.

t s.c.R. SUPREME COURT REPORTS

We also hold that it is not inadmissible in view of cl. (3) of Art. 20 of the Constitution. It was not made by Dalmia at time when he was accused of an offence, as is necessary for the ap-plication of that clause, in view of the decision of this Court in The State of Bombay v. Kath'i Kalu Oghad ([1]) where the contention that the statement need not be made by the accused person at time when he fulfilled that character was not accepted. Dalmia was not in duress at the time he made that statement and therefore was not oompelled to make it. It was said in the afore-said case :

1' 'Compulsion', in the context,

must

mean what in law is called 'duress' ......... The compulsion in this sense is physical ob· jective act and not the state of mind of the person making the statement, except where the mind has been so conditioned by some extraneous process as to render the making of the statement involuntary and, therefore, extorted."

The Tarious circumstances preceding the making of the statement Exhibit P. 10 by Dalmia have all been considered and they fall far short of prov-ing that Dalmia's mind had been so· conditioned by some extraneous process as to render the mak-ing of this statement involuntary and therefore extorted.

We believe the statement of Annadhanam

that Dalmia had told him near the staircase that he had lost the money in bis personal speculation busini:lss which was carried on chiefly through one of his private companies, viz .. the Union Agencies. The later part of his confession Ex-hibit P. 10, is an admission of Dalmia's losi~g the (1) [19621 SS. C. R. 10, 35.

R. K. Dalmia v.

Delhi .Administration Raghuba• Dayal J.

R.K.Dalmia v. D1llii Adminislrwtion

money in speculation. His further statement was only an amplification of it as to the name under which specu la ti on was carried on. The statement finds support from the facts established by other evidence that the speculation business carried on by the Union Agencies was really the business of Dalmia himself, though, ostensibly, it was the busi-ness of the company of which there were few shareholders other than Dalmia.

Mr. Dingle Foot has urged that adverse in-

ference be drawn against the prosecution case on account of the prosecution not producing certain documents and certain witnesses. We have con-sidered the objection and are of opinion that there is no case for raising such an inference against the prosecution.

The prosecution did not lead evidence about

the persons holding shares in Asia Udyog Ltd., and in Govan Brothers Ltd. Such evidence would have, at best, indicated how many shares Dalmia held in these co'Tlpanies. That was not necessary for the prosecution case. The extent of shares Dalmia held in these companies had no direct bear-ing on the matter under inquiry in the ease.

The prosecution led evidence about the tele·

phonic calls up to August 31, 1955, and did not lead evidence about the calls between September 1 and September 20. 1955, It is urged that pre-sumption be raised that Dalmia and Chokhani had no telephonic communication in this period Ad-mittedly, Dalmia had telephonic communication with Chokhani on September 15. The prosecution has not impugned any transaction entered into by Chokhani during this period. It is not therefore es2ential for the prosecution to have led evidence of telephonic calls between Dalmia and Chokhani during this period.

Another document which the proaecution ia

SUPREME COUR;r REPORTS

1 S.C.R.

said not to have produced is the Dak Receipt Register. The Register could have at best shown on which dates the various advices received from Bombay about the transactions were received. On that point there had been sufficient evidence led by the prosecut.io_n. The production of the l{egister was therefore not necessary. The accused could have summoned it if he had particular reason to

rely on its· entries to prove his case.

Lastly, complaint is ma.de of the non-produc-

tion of certain documents in connection with the despatch of certain securities from Delhi to Bombay. Again, there is oral evidence with res-pect to such despatch of securities and it was not essential for the prosecution to produce the docu-ments in that connection.

Of the witnesses who were not produced,

complaint is made about the prosecution not ex-amining Mr. Ba.rve, Joint-Secretary, Ministry of Finance, who was present at the interview which Dalmia had with Mr. Kaul on September 15, 1954, and of the non-production of the Direotors of the Insurance Company. It was quite unnecessary to examine Mr. Ba.rve when Mr. Kaul has been exa-mined. It was also not necessary to examine the Directors of the company who a.re not alleged to have had any first-hand knowledge about the transactions. They could have spoken a.bout the confirmation of the sale and purchase transactions and about the passing of the bye-laws and other relevant resolutions at the meeting of the Board of Directors. The minutes of the proceedings of the Board's meet-ings served this purpose, It is admitted by Dalmia that there was no resolution of the Boa.rd of Dire~tors conferring authority on Chokha.ni to purchase and sell secu-rities.

Certain matters have been referred to at

R. K. Dalmia v. Delhi '4dminislratior. Raghubar Dayal J,

R.K. Dalmia v. Delhi .A.tiministralion

384 SUPREMl!: OOURT REPORTS [1963j

pages 206-210 ofDalmia's statement of ca11e, which, according to Dalmia, could have been proved by the Directors. All these matters are 8uch which were not necessary for the unfolding of the prose-cution case and could be proved by the &ccused examining them if considered necessary. We there-fore see no force in this contention.

It is urged for Dalmia that he could not ha.ve been party to scheme which would came loSll to the Insure.nee Company, because he was mainly responsible for the prosperity of the company. The Union Agencies has assets. The Government was displeased with Dalmia.. The company readily agreed to the appointment of M/s. Khanna and Annadhanam a.a auditors. There was the risk of detection of the frauti to be committed a.nd so Dalmia would have acted differently with respect to such affairs of the Union Agencies as have been used as evidence of Dalmia being synonymous with it. We a.re of opin.ion that these considerations are not such which would off-set the inferences arrived at f'rom the proved facts.

It cannot be matter of mere coincidence that frequent telephonic conversations took place between Dalmia aud Chokhani when the Union Agencies suffered losses, that the usual purchase transa,ctions by which the funds of the Insure.nee Company were diverted to the Union Agencies took place then, that such purchases sh0uld recur several times during the relevant peric.d, that such securities which could not be recouped ha.<il to be shown as sold and when the Union Agencies or Bhagwati Trading Company c.ould not pay for the sale price which had to be credited to the account of the Insurance Company, further usual pll.l'chase transaction took place.

We arc therefore satisfied from the varieus facts considered above tha.t the tram1actioa1 whicll

1 S.C.R.

led to the diversion of funds of the Insurance Com· pany to the Union Agencies were carried through under the instructions and approval of Dalmia. It is clear that he had dishonest intention "to ca.use at least temporary loss of its fun<ls to the Insurance Company and gain to the Union Agencies. This could be achieved only as result of the con-spiracy between him and Chokhani. Vishnu Prasad. was taken in the conspiracy to facilitate diversion of funds and Gurha to facilitate the making up of fa.Jae accounts etc. in the offices of the Union Agen· cies and Asia. Udyog Ltd., as would be discussed hereafter.We may now turn to the charges against Gurha., appellant. He was charged under s. 120-B read with s. 409 I. P. C. and a]so on three counts under s. 4 77 for making or abetting the making of false entries in three journal vouchers Nos. 98, 106 and 107 dated January. 12, 1955, of the Union Agencies. It is necessary to give brief account of how these vouchers happened to be made.

Gurha was~ Director of the Union Agencies and looked after the w:ork of its office at Delhi. ne was also the Accountant of Asia Udyog Ltd.

At Delhi there was ledger with respect to the account of the transactions by the Bombay Office of the Union Agencies. Under the direct-ions of Ghokhani who was an agent of the Union Agencies at Bombay and also held power of attor-ney on its behalf. Kannan used to send n cash statement and journal to the Born bay Office. and the Union Agencies at Delhi. These . documents used 'o be gent to Gnrha personally. Now, the ce.sh statement from Born bay showed correctly entries of the amounts received from Bhagwati Trading Company. Such amounts were noted to the credit of Bhagwati Trading Company. When Ii Union Agencies made payment to l3hagw.,aii

R. K • .Ja/mia v. Delhi Administration Raghubilr Dajtd J.

R. K. D•lmia •• Delhi A.dminidration Raghubar Doyal J.

38 6 SUPREME COURT REPORTS [1963]

Trading Company, an entry to that effect was noted in the cash statement to the debit of Bhagwati Trading Company. On receipt of these cash statements in 1955, it is alleged, Gurha used to get the genuine cash stll.tement substituted by another fictitious cash statement in which no men· tion was made of Bhagwati Trading Company. Entries to the credit of Bhagwati Trading Company used to be shown to be entries showing the receipt of those moneys from the Delhi Office of the Union Agencies through Chokhani. The debit entry in the name of Bhagwati Trading Company used to be shown as debit to the Velhi Office of the Union Agencies. This substituted cash statement was then made over to one Lakhotia, who worked in the Delhi Office of the Union Agencies on be· half of the Bombay Office of the company. He was also prosecuted, but was acquitted. Lakhotia issued credit advices on behalf of the Bombay Office of the Union Agencies to the Delhi Office of the Union Agencies in reference to the entry in the cash shtement which, in the original statement, was in respect of the amount received from Bhagwati Trading Company, intimating that that amount had been credited by the Bombay Office to the account of the Delhi Office. de bit advice on behalf of the Bombay Office to the Delhi Office was issued intimating that the amount had been debited to the account of the Delhi Office when in fact, the original entry debited that amount to the account of Bhagwati Trading Company. Lakhotia also made entries in the ledger of the Bombay Office which was maintained in the Delhi Office of the company. In its column entitled 'folios' reference to the folio of the cash statement was given by writing the Jetter 'C' and the number of the folio of the cash statement from which the entry was posted.

On receipt of such advices from Lakhotia on beqalf of the Bombay Office, Dhawan, P. W, 19,

3 S.C.R. SUPREME COURT REPORTS

Accountant of the Delhi Office of the Union Agen-cies used to prepare the journal voucher. In the case of the credit advices, the amount was debited to the Bombay Office of the Union Agfl!ncies and credited to Asia U dyog Ltd. In the case of the debit advices, the amount wa~ debited to Asia Ud-yog Ltd., and credited to the Bombay Office of the Union Agencies. According to the statement of DhawanJ he did so under the instructiens of Gurha. Gurha used to sign these vouchers and when he fell ill, they were signed by another Dir-ector, J. S. Mittal. Corresponding entries used to be made in the account of the Bombay Office and the Asia Udyog Ltd., in the ledger of the Delhi Office of the Union Ag<'ncies.After Dhawan had prepared these vouchers he also used to issue l).dvices to Asi~ Udyog Ltd. intimating that the amount mentioned therein had been credited or debited to its account. Thus the name of Bha..;wati Trading Company did not app· ear in the various advices, vouchers and the ledgers prepared at Delhi.

In the office of Asia Udyog Ltd., on receipt of the credit advice, journal voucher crediting -the amount to the Bombay Office and debiting it to the Delhi Office of the Union Agencies was prepared. journal voucher showing the entries in tht'I reverse order was prepared on the receipt of the debit advices. Asia. Udyog Ltd., issued advice to the Bombay Office intimating that the amount had been creuited or debited to the Bombay Office of the Union Agencies in the case of vouchers rel-ating to the cr<:<lit or debit advice from that Office. All such vouchers in Asia Udyog Ltd. were signed by Gurha even during the period when he was ill and was not attending the office of the Union Agencies.

The result of all such entries in the vouchers was that· on pa per it appeared 1n the case of credit

R. K. Dal1nia v. D1llai Adminisir111i1n Raghubar Daµl J.

1962 R. K. Dalmia •• Delhi Adm/njs/ralion R Jghubar Dayal J. •

388 SUPREME COURT'8EPORTS (1963]

advices that the Delhi Office of the Union Agencies advanced money to the Bombay Office which paid the money to Asia Udyog Ltd., which in its turn p'lid the money to the Delhi Office of the Union Agencies, and in the case of de.bit advices, the Bombay Office debited the amount to Delhi Office . of the Union Agencies and that debited it to Asia Udyog Ltd., which in its turn debited it to the Bombay Office. All these entries were against facts and they must have been done with motive and apparently it was to keep off the records any mention of Bhagwati Trading Company. No explanation has been given as to why this course of making entries was adopted.

The genuine cash statements are on reoord. The alleged fictitious statements are not on the record. It is not admitted by Gurha that any fictitious cash statement was prepared. It is not necessary for our purposes to hold whether ficti-tious cash statement in lieu of the genuine cash statement received from Bombay was prepared under the directions of Gurha or not. The fact rem-ains that the entries in the various advices prepared by Lakhotia on the basis of the cash statements received, did not represent the true entries in the ge.nuine cash statements and that journal vouchers prepared by Dhawan also showed wrong entries and did not represent facts correctly.

Of the journal vouchers with respect to which

the three charges under 8. 477 A, l. P. C. had been framed, two are the vouchers prepared by Dhawan crediting the amounts mentioned the rein to Asia Udyog Ltd., and debiting them to the Bombay Office of the Union Agencies. '!'hey are Exhibits P. 2055 and P. 2060. Each of them is addressed to Asia Udyog Ltd. and states that the a.mount mentioned therein was the amount received by the former, i. e. the Bombay Office from Chokhani on account of the latter, i. e., Asia. Udyog Ltd., on

1 S.C.R. SUPREME COURT1REPORTS 389

January 7 and January 10, 1955~ respectively and adjusted. One Exhibit P. 2042 deb-its the amount to Asia Udyog · Ltd, and credits it to the Bombay Office of Union Agencies and states the amount mentioned therein to have been paid by the latter, i.e., Bom-bay Office to Chokhani on acoount of the former, i.e Asia Udyog Ltd., and adjusted.

Other facts which throw light on the deliber-ate preparation of these fal~e vouchers are that there had been tampering of the ledger of the Bombay Office in the Delhi Off ice of the Union Agencies and a.lso in the journal statement of that office. The letter •C' in the folio column of the ledger had been altered to •J' indicating that that entry referred to an entry in the journal statement received from Bombay. Sheets of the journal statei;nent on which corresponding entri~s are noted have also been changed. These two documents remained in the possession of the Union Agencies till November It, 1955, though the advices and vouchers in the Delhi Office w~re seized by the Police on September 22, 1955, and therefore interested persons could make alterations in them. It haa been suggested for Gurha that the alterations were made by the Police. The suggestion has not been accepted by the learned Sessions Judge for good reasons. The changed entries did not jn any way support the prosecution cMe and therefore the police had no reason to get those entries concocted. The entries did show the receipt of the amounts. from Bha.gwa.ti Trading Company, but the prosecu-tion case was that the amount was received in cash and not through transfer& which transactions had to be adjusted. The learned Sessions Judge, did ncit, however, believe the statement of Sri Kishen Lal who investigated the case that he had noticed these alterations earlier than his statement in Court wbioh was some time in 1958, for the reason that

1911 R. K.Dalmia \, D:/hi Adminisl"lion Raghubor Dayal J.

1962 R. K. Dalmia v. Delhi Administratio 11 Raghuhar Dayal J.

Dhawan was not questioned by the prosecution in th_is regard . and no ref~rence was made by Sri Krshen Lal m the case diary about his questioning Dhawan about the alterations. The learned Sessions Judge appears to have overlooked the statement of Sri Kishen Lal to the effect:

"I made note in the case diary about myself having put the overwriting to Lakhotia and about having asked his explanation about that."

The Court could have verified the fact from the case diary. It is too much to suppose that Sri Kishen Lal would make wrung statement whose inaccuracy could be very easily detected. However, the learned Session Judge himself has giv<in good reasons for not accepting the suggestion that the over-writing of the letter 'C' by the letter 'J' and the changing of the journal papers were made by the police,

The part that Gurha played in getting these false entries prepared is depoPed to by Dhawan, P.W. 19, who used, occasionally, to approach Gurha for instructions.

Further, Gurha, as the accountant of Asia

Udyog Ltd., must have known that Asia Udyog Ltd., had neither advanced any amounts to the Bombay Office of the Fnion Agencies nor received any amounts from the Bombay Office of the Union Agencies. He however signed all the vouchers prepared in the office of Asia Udyog Ltd., in con-nection with these transactions. He did so even during his illness (May, 1955, to July, 1955, which, according to the statement of Gurha, in answer to question No. 134 was from March 15 to August l~, 1955, during which period he did not attend the office of the Union Agencies). He signed thlllll pe!iberatel1 to stat!J false facts, ·

1 S.C.R. SUPREME COURT REPORTS

Dhawan particularly stated that on receipt of the advice, Exhibit P. 2041, on the basis of which journal 1-~ntry No. 98 was prepared by him, he went to Gurba to consult as it was not clear from that advice to whom the amount mentioned in it had been pa.id. Gurha, on looking up the Journal state-ment received from the Bombay Office told him to debit that amount to Asia Udyog Ltd. Dhawan prepared journal voucher P. 204:2, accordingly, and Gurha initialled it. It may be mentioned that this debit ad vice was addressed to M/s. Delhi Office and therefore could be taken to refer either to the Delhi Office of the Union Agencies or the Delhi Office of Asia Udyog i~td., both these offices being in the same building a.nd being looked after by Gurha. Gurha admits in his statement under s.342, Cr P. C., that Dhawan referred this mat.tor to him and that he asked him to debit the amount to Asia Udyog Ltd., The journal statement of the Bombay Office at the relevant time could have no reference to this item which was really entered in the cash statement and Gurha's conduct in looking up the journal was mere ruse to show to Dhawan that was giving ins-tructions on the basis of the entries and not on his own.

Gurha stated, in answer to question No. 45, that he remembered to have seen an entry relating to this amount of Rs. 4,61,000 which is the amount mentioned in Ex:. P. 2042 in the cash statement of the Bombay Office of the Union Agencies when O.P. Dhawan referred an advice relating to t.hat amount to him.. In answer to questions Nos. 217 and 218, in connection with his advising Dhawan about the debiting of this amount to Asia Udyog Ltd., he stated that he gave that advice after tracing the relevant entry in the journal statement of the Bom-bay Office. This answer is not consistent with his earlier answer to question No. 45 as entry with res-pect to the same amount could not havt' existed

R. K. Dolmia

Delhi Administratian Raghubar Dnyal J.

R. Ii. Dalmia v. Delhi Administration Raghubar Dayal J,

simultaneously both in the cash statement and the journal statement of the Bombay Office. If hi• later answer is correct, his referring to the journal would have been just ruse as already stated. If his earlier answer fa correct that would indicate that either Gurha had supplied the office with the ficti-tious cash statement of the Bombay Office as alleged by the prosecution or that seeing in the journal cash statement that the entry related to Bhagwati Tra-ding Company, deliberately told Dhawan, in accor-dencc with the scheme, to debit that amount to Asia. Udyog Ltd. In either view of the matter, this con-duct of Gurha in advising Dhawan to debit the amount to Asia Udyog Ltd., is sufficient to indicate his complicity in the whole scheme, as otherwise, he had no reason to behave in that manner.

Gurha, among the accused, must have been

<'hosen for the purpose of the conspiracy because he had connection both with the Union Agencies and with Asia Udyog Ltd. He had been in the employ of Dalmia concern from long before. He was the Accountant of the Dalmia Cemen1. and Paper Mar-keting Company from 1948 till its liquidation in 1953. Gurha, as Director of the Union Agencies, knew that it had suffered losses as result of share-speculation business in 1954-55 and that the Delhi Office was short of liquid funds to meet these losses. He must have known how the funds to meet the losses were being secured from the funds Gf the Insurance Company through Bhagwati Trading Company. He must have also known that this was wrong. It is only with such knowledge that he could have been party to the making of false ad-vices and vouchers. There could be no other reason. It could not have been possible for the prosecntion to lead direct evidence about Gurha's knowledge with respect to the full working of the scheme to provide for the losses of the Union Agencies from the funds of the IneuraQce Company. It is furtherSUPRgM:E COURT R,gPQRTS

I S.C.R.

not necessary that ea.oh member of 'JOnspiracy ·

must know all the details of the conspiracy.

Mr, Kohli, for Gurha, has urged that Gurha could have had nothing to do with the diversion of the funds of the Insurance Company to the Union Agencies, even though he was Director of the latter as he never issued instructions regarding the activities vf the. Union Agencies, bad no knowledge of the passing of money from the funds of the Insu-rance Company to th~ Union Agencies as he had nothing to do with the movement of the securities held by the Insurance Company or the receipt of cash or the other transactions, his role having begun, according to the prosecution, after the offen-ce under s. 409 I. P. C. had been actually commit-ted, i.e., after Chokhani had issued cheques on the bank accounts of the Insurance Company with the Chartered Bank in favour of Bhagwati Trading Company, and therefore could know nothing regar-ding the diversion of funds and the desirability of falsifying the accounts &nd papers of the Offices he had to deal with. Great reliance is placed on the letter, Exhibit B. 956 in submitting that Gurha did not know about the whole affair and simply knew, as stated by him, that Chok-hani had borrowed money, for the Union Agencies to pay its losses, from Bhagwa.ti Trading Company. This letter is of significance and we quote it in full : "Girdharilal Chokhani Times of India India

Times of India India Building, Hornby Roarl, Bombay-I.

CONFIDENTIAL

17th September 55.

Bharat Union Agencies Ltd., Delhi.

Attn. Mr. R. P. G1.trka

Dear Sir,

I have to inform you that the Yt1or1011s a. mounts

R. K. Dalmia v. Delhi Administration

Raghuba 'Dayal J.

I96t -:---R. K. Dalmia v. D,Jhi Admini.drotion ~--Raghubar Da;·al J.

arr?'nged by .me as temporary Joana to Bharat l!1J1on. Agenmea Ltd., Bombay Office from timo to time m the name of Bhagwati Trading Company, actually represented the monies relating to the undernoted securities belonging to Bharat Insurance Company Limited.

I have now to request you to please arrange

at your earliest to pay about Ra. 1,80,00,000 in cash or purchase the aforesaid securities (or their equi-valent) and deliver the same to Bharat Insurance Company Ltd., 10, Daryaganj, Delhi on my behalf~ debit.ing the amount to the credit standing in the books of the Company's Bombay Office in the name of M/a Bhagwati Trading Company. Any debit or· credit balance left thereafter in the said account would be settled later. on.

I am getting this Jetter also signed by Vishnu·

pra.sad on behalf of Bhagwati Trading Company although he had neither any knowledge of these traDSactions nor had any connection with these affairs.

Yours faithfully, ·

.l!'or : Bhagwati Trading Company

Sd/ G. L. Chokhani

Sd. Illegible Vishnuprasad Bajranglal Proprietor."

We are of opinion that this is letter written

tor the purpose of the case and was, as urged for

1 S.C.R.

the State, ante-dated. There is inherent evidence in this letter to support this view. The letter makes reference to Vishnu Prasad's having no know ledgf' of the transactions and having no connection with the affairs. Mention of these facts was quite out of place in letter which Chokhani was addressing to Gurha in the course of business for his immedi-ately arranging for the payment of Rs. 1,80,00,000 in cash or securities to Bharat Insurance Company. Further, the opening expression in the letter does not necessarily mean that Gurha was being inform-ed for the first time that the temporary loans arranged by him for the Union Agencies Ltd., in the name of Bhagwati Trading Company actually represented the moneys belonging to the Bharat Insurance Company. If it meant so, that must have been done so by design, just as the concluding portion of the letter was, as already mentioned, put in by design to protect Vishnu Prasad's interest.The letter is dated September 17, 1955, and thus purports to have been written few days before the formal complaint was made to the police. Even if it was written on September 17, it was written at time when the matter of securities had come to the notice of the aut.horities and Dalmia was being pressed to satisfactorily explain the position of the securities. Chokha.ni could have written letter of this kind in that setting.

Another fact relied upon by the learned Sessions Judge in considering this letter to be ante-dated is that it does not refer to one kind.of securi-ties which were not in the possession of the Insu-rance Company even though they had been ostensi-bly purchased. It <iloes not mention of the securities worth Rs. 26,25,000 which were really supplied to th~ Insurance Company on September 23, 1955. This letter should have included securities of that amount and should have asked Gurha to make up

R. K. Dalmi11 1Delhi .u:~in stration Rag/,ubar Dayal J.

R. K. Dalmia v. Delhi AJministralion Raghuba, J)aJal J.

for that amount to the Insurance Company. This is clear indication that this letter was written after September 23, 1955.

l\Ir. Kohli has, however, urged that the con-

tract for the purchaFe of these securities had taken place on September 16, 1955, and that therefore Chokhani did not include those securities in this letter. Reference is made to the statement of Jayantilal, P.W. 6, partner of the Firm Devkaran Nanjee, Brokers in Shares and securities. He states that Bhagwati Trading Company wanted to pur-chase for immediate .delivery 3% 1966-68 securities of the face value of Rs. 21,25,000 and that con-tract about it was entered into. Securities of this amount were not available in the market. Securities worth B,s. 1,75,000 were available and were de-livered to Chokhani that day. They had to purchaso securities of the face value of Rs. 20,00,000, from the Reserve Bank of India in order to effect delivery and had to sell some other securities of that value. The result was that the required securities were received by them on September 22, 1955. Even this statement does not account for not including securities of the value of Rs. 4,50,000 in this lt'tter Ex. P. 956.

It was further urged in the alternative that

Chokhani had very extensive powers in all the alleged concerns of Dalmia and so could get any-thing done due to his influence without divulging secrets. That was not the position taken by Gurha in his statement. Ho did not say that he deliberately got false documents prepared due to directions from Chokhani and which he could not disregard. Even if it be ao, that means that Gurha got false documents made deliberately.

Another submission for Gurha is that the case

held proved for convicting him is different from the case as sought to be made out in the police charge-sheet submitted to the Court under s. 173 of the

t s.c.R.

Code of, Criminal Procedure. The charge-sheet is hardly complete or accurate thesis of the pro-secution case. Clause (a.) of sub-a. (I) of a. 173, Cr. P.C., requires the officer-in~charge of the police station to forward to the Magistrate empowered to take cognizance of the offence' on police report, the report in the prescribed form setting forth the names of the parties,. the natu:re of the information, a.nd the names of the persons , who appear to be acquainted with the circun:1sta~ces of the case. Nothing further need be said. on this point.

R. K. DaZmia ••

Delhi A.dminisfratio n

Further, it is submitted that the prosecution cas.e has changed from stag.e to stage. This can only mean that facts came on the record which were not known before and therefore the comple-xion of the allegations against Gurha's conduct varied. Even if this is so, he can have no grievance against it unless he had been unable to meet it in defence. No such inability bas been expressed. It is however stated that the prosecution based its ultimate case against him on ·t;he . allegation that· the cash statement received from Bombay was suppres-sed and another. false oash statement was prepared at Delhi under the directions of Gurha. We have already dealt with this mattor. There was no such aUegation on the basis of the statement of any pro-secution witness. This way re!:!illy . suggestion to explain how despite certain' entries in the cash statements received from Bombay different entries were made in the advices iss11ted by Lakhotia which advices ought to have been in accordance with the1 entries in the cash statement. The suggestion may · be correct or may not be correct. It cannot, how-ever, be said on its basis that there has been such change in the prosecution case. a.s would make the proseoution case reasonably doubtful.

In the same connection, grievance has been made that Gurh& was not questioned about the

1061 R. K. D•lmia •• Delhi ~Jministration

allegation that the cash statement had been suppres-sed and substit.uted by another fictitious one. No such question could have been put to him when there was no evidence about it. An accused is questioned under s. 342 Cr. P. C., to explain any circumstances appearing in the evidence against him. It is not necessary to ask him to explain any inference that & Court may be asked to draw and be prepared to draw from the evidence on record.

Another point stressed for Gurha is that the cash statements would not have mentioned Bhagwati Trading Company when the prosecution case is that Chokhani took deliberate steps to keep the Delhi Office of the InRurance Company in the dark about it. The fact is that the cash statement sent from Bombay did mention Bhagwati Trading Company. They were eent to Gurha personally. In the circumstances the reasonable conclusion can be that they mentioned Bhagwati Trading Company as that represented the true state of affairs and Chokhani had to inform the Delhi Office of the Bharat Union Agencies abcut the source of the money he was receiving for the Union Agencies to meet its losses. Ch{lkhani did not disclose the true source, but disclosed source fictitiously created to canceal the real source. There was no harm in disclosing Bhagwati Trading Company to the office of the Union Agencies at Delhi. With the same frankness it could not have been disclosed to the Insurance Company Office at Delhi both because that would required the complicity of the entire staff of the Insurance Company in the conspiracy and because otherwise, it would at once disclose to the Insurance Company and those who had to check its working that its funds were being misused. Di& closure of Bhagwati Trading Company to the Union Agencies was neceBBary IWd there was no harm in any way in informing Gurha confidentially about it. After Gurha had got possession of the cash

1 S.C.R.

SUPltEME COURT REPORTS

statement it was for him how to direct the neces-

sary entries to be ma.de in the advices prepared by Lakhotia on behalf of the Bombay Office at Delhi and on the basis of which journal vouchers were to be prepared by Dhawan and entries wero to be made in the accounts of the Union Agencies at Delhi. We therefore do not consider that this co:u.tention in any way favours the appellent.

The fact that the account of the Asia Udyog

Ltd., in the ledger Exhibit P. 2226 is not alleged to be fictitious and records in the column 'folio' the letter 'J' is of no help as the entries in that ledger must have been ma.de on the basis of the journal vouchers issued by Dha.wan. In fact once it is alleged that the advices issued by Lakbotia were fictitious any entry which can be traced to it must also be ;fictitious.

It is argued that the alleged scheme of

making the circuitious entries could not have worked in keeping the source of money concealed as the Incometa.x Authorities could have detected by following the entries in the Bank records with respect to the source- of payment of money (by cheques issued by Bhagwati Trading Company) to the Union Agencies at Bombay. They could have thus known only about Bhagwati Trading Company and, as already stated, it was not necessary to keep Bhagwati Trading Company secret from the Union Agencies. What was really to be kept secret was that the money ca.me from the Insurance Company. The various cirouitous entries were not really made to keep Bhagwati Trading Company unknown, but were made to make it difficult to trace that the money really was received from the Insurance Company.

suggestion has been made by Mr. Kohli that

Chokhani might have showed the same amount both in ~he cash statement and in the journal state-ment. No such case~ however, seems to have been

i962 R. K. Dalmia v. Delhi Adminislrati.11

Raghuhar Do.Jal J,

IHI R. lr. D.Z..;. •• /J,lM Mmlnislr•lion lra1/tuw Dlgfll .T.

raised in the Courts below and has been made in the appellant's statement of case.

It has been contended that an offence under

s. 4 77 I. P. C. has not been establi11hed against the accused as it is not proved that he falsified any book, papers, etc., in the possession of his employer with intent to defraud and that the intention to defraud should be to defraud someone in future and should not relate to an attempt to cover up what had already happened. It is sub-mitted that an intent to defraud connotes an intention to deceive and make the person deceived suffer some loss, that the entries made in the journal vouchers did not make anyone suffer and therefore the entries could not be said to have been made with intent to defraud.

The expression •intent to defraud' is defined in the Penal Code but s. 25 defines 'fraud-ulently' thus :

not

"A person is said to do thing fraud-

ulently, if he does that thing with intent to defraud and not otherwise."

The vouchers were falsified with one intention only

and that was to let it go unnoticed that the Union Agencies had got funds from the Insurance Com-pany. If they had shown the money received and paid to Bhagwati Trading Company, it was possible to trace the money back to the Insurance Company through Bhagwati Trading Company which received the money from the Insurance Company through cross cheques as well. Whoever would have tried to find out the source of the money would have been deceived by the entrfes. The Union Agencies made wrongful gain from the diversion of the 'Insurance Company's funds to it through Bhagwa.ti Trading Company and the Insurance Company suffered lo118 of funds. The false entries were made to cover

1 S.O.R. SUPREME OOURT REPORTS

up the diverdion of fonds and were thus to conceal and therefore to further the dishonest act already committed.

We agree with respect with the following

observation in Emperor v. page 788:

Ragho Ram (1) at

•'If the intention wit.h which false do-

cument is made is to conceal fraudulent or dishonest act which had been previously com-mitted, we fail to appreciate how that inten-tion could be other than an intention to commit fraud. The concealment of an already oom-mitted fraud is fraud."

And, again, at page 789:

"Where, therefore, there is an intention to obtain an advantage by deceit there is fraud and if document is fabricated with such intent, it is forgery. man who deli-b~rately makes false document in order to conceal fraud already committed by him i11J undoubtedly acting with intent to commit fraud, as by making the false document he intends the party concerned to believe that no fraud had been commilted. It requires no argument to demonstrate that steps taken and devices adopted with view to prevent persons already defrauded from ascertaining taat fraud had been prepetrated on them, and thus to enable the person who practised the fraud to retain the illicit gain which he secured by the fraud, amount to the commis-sion of a, fraud. An act that is calculated to conceal fraud already committed and to make the party defrauded believe that no fraud had been committed is fraudulent act and the person reRponsible for the act acts fraudulent-ly within the meaning of section 25 of the Oode."

(1) [1933J I l,. R. 55 AU. 789, 788, 789,

Jld8 B.K. Dalmia y, .

D1lhi .ddmiiiislralion Ra1Aubar Dayal J.

R. K. Dalmia y, Delhi Adminisbalil'f1. Raghuhar Dayal J,

We agree, with this observation, and repel the con-tention for the appellant.

It has then been submitte'.l that the falsifica-tion should have bePn necessarily connected with the commission of the breach of trust. There is no question of immediate or remote connection with the commission of breach of trust which is sought to be covered up by the falsification, so long as the falsification is to cover that up. In the present case, introduction of Bhagwati Trading Company in the transactions was t.he first step to carry out deception about the actual payment of money out of the funds of the Insurance Company to the Union Agencies.

The second step of suppressing the name of

Bhagwati Trading Company in the papers of the Union Agencies Delhi, made it more difficult to trace the passing of the money of the Insurance Company to the Union Agencies and therefore the falsification of the journal vouchers related back to the original diversion of the Insurance Companys moneys to the Union Agencies and was with vew to deceive any such person in future who be tracing the source of the money received by the Union Agencies.

grievance is made of the fact that certain

witnesses were not examined by the prosecution. Of the persons working for the Union Agencies, five were accused at the trial, Kannan, Lakhotia, Gurha, Mittal and Dudani. Only Gurha among them was convicted. The others were acquitted. 'J he remaining persons were Krishnan, Pancbawagh and the clerks 0. D. Mathur and Attarshi. Of the persons connected with Asia Udyog, one R. S. Jain of the Accounts Branch was not examined. Pancha-wagh who waa an Accountant of the Union Agencies and had custody of the cash statements and journal WBll given up by the prosecution on the ground that

he was won over. We do not consider th~t it was

necessary to examine him for the unfolding of the prosecution case against Garha. Similarly it was not necessary to examine the others for that purpo-se. mere consideration that they might have given further description of how things happened in those offices would not justify the conclusion that the omission to examine them was an oblique motive and could go to benefit the accused.

grievance was made that the High Court

did not deal with the question whether the police tampered with the cash statement and the journal. It is not clear whether such point was raised in the High Court. It was however not mentioned in the grounds of appeal. The trial Court did deal with the point and held against the appelJant Gurha. In fact, paragraph 22 of the grounds of appeal by Gurba simply said that no value should have bten attached to the said cuttings when it was not proved on tho record as to who made the said cuttings and when they were not calculated to conceal the true facts or the further interest of the conspiracy.

We are therefore of opinion that Gurha has been rightly held t) have been in the conspiracy and to have abetted the making of the false journal vouchers.

In view of the above, we are of opinion that the appellants have been rightly convicted of the offences charged.

It has been urged for Chokhani that his sent· ence· be reduced to the period already undergone as he ma.de no profit for himself out of the impugned transactions, that he is 59 years old and had al-ready b0en ten days in jail. We do not consider th~ee to justify the redQ.ction of the sentence when

B. K. D"almU. v.

Dllhi .A.dminislralion

Baghu/Jar Do.JO. I.

1962 R. K. Dalmia •• Delhi Administration Ra:liubar Dayal J.

J96B A;ril 6.

he ·was the chief person to oa.rry out the ma.in work of the conspiracy.

We also do not consider Dalmia.'s sentence, in the circumstances of the case, to be severe. We therefore dismiss these appeals.

Appeals Dismissed.

EAST INDIA TOBACCO CO.

STATE OF ANDHRA PRADESH

(B. P. SINHA, c. J., P. B.

GAJENDRAGADKAR,

K. N. WANCHOO, N. RAJAGOPALA AYYANGAR and T. L. VENKATARAVA ArYAR, JJ.)

Sales 'I'ax-Tobacca-Imposition of Tax on sale of Virginia Tobacco and exemption of country tobacco-Provision if discrimi· natory-Purchase which procedes sale for export if could be oxem• pted from tax-Madras General Salts Tax Act. 1939 (Mad. 9 of J939), as amended by the Madras General Sales Tax and the Madras Tobacco (Taxation of Sales and Registration) (Andhra Amendment) Act(Andhra XIV of 1956), ss. 5, 6-0onstitution of India, Arl.9. 14, 286 (I) (b).

The appellants firms were doing business in the export of Virginia tobacco. The usual course of that business was stated to be that appellants first entered into contracts with their customers abroad for the sale of tobacco and there· after they purchased the requisite quantities of goods locally and then exported them to foreign purchasers in performance of their contracts. Section 5 of the Madras General Sales Tax Act 1939, was amended by the Andhra State Legislature wh:n the Andhra State came into existence by the Amending Act XIV of 1955. As result of this enactment to sales of countr)' tobacco were exempted ; while sale of Virginia tobacco were liable to be taxed. The appellants were called upon to produce their account books relating to their business in tobacco for the purpose of assessing salos tax. The appellants ftled petitions undrr Art. 226 of the Constitution challenging the constitutionality of the Amending- Act. XIV of 1955, on