Reliance is placed on the case reported as Mahumarakalage Edward Andrew Cooray v. The Queen (1). This case approved of what was said in Reg. v. Portugal (2) and it would better to discuss that case first.
That case related to an offence being committed by the accused under s. 75 of the Larceny Act, 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 a 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 find............ 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 a misdemeanor.
The accused in that case was employed by a firm of Railway contractors for commission' to use his influence to obtain for them a contract for the construction of a railway and docks in France. In the course of his employment, he was entrusted with a cheque for pound 500/- for the purpose of opening a credit in their name in one of the two specified banks in Paris. He was alleged to have misappropriated the cheque to his own use fraudulently. He was also alleged to have fraudulently dealt with another bill for pound 250/- and other securities which had
(1) (1953) A.C. 407, 419. (2) (1885) 16 Q.B.D. 487. 293
been entrusted to him for a special purpose. He was committed for trial for the offence under s. 75. He, on arrest under an extradition warrant, was committed to prison with a view to his extradition in respect of an offence committed in France. It was contended on his behalf: "To justify the committal under the Extradition Act, it was incumbent on the prosecutors to offer prima facie evidence that the money and securities which the prisoner was charged with having misappropriated were intrusted to him in the capacity of "agent', that is, a person who carries on the business or occupation of an agent, and intrusted with them in that capacity, and without any authority to sell, pledge, or negotiate, and not one who upon one solitary occasion acts in a fiduciary character."
It was held, in view of the section referring to ,banker, merchant, broker, attorney or other agent', that a. 75 was limited to a class, and did not apply to everyone who might happen to be intrusted as prescribed by the section, but only to the class of persons therein mentioned. It was further said :
"In our judgment, the 'other agent' mentioned in this section means one whose business or profession it is to receive money, securities or chattels for safe custody or other special purpose; and that the term does not include a person who carries on no such business 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, whether for money or otherwise".
This case therefore is authority to this effect only that the term agent' in that section does not include a person who just acts as ,in agent for another for a particular purpose with respect to some property that is entrusted to him, i. e., does not include a person who becomes an agent as a consequence of what he has been charged to do, and who has been asked to do a certain thing with respect the property entrusted to him, but includes such person who, before such entrustment and before being asked to do something, already carried on snob business or profession or the like as necessitates, in the course of such business etc., his receiving money, securities or chattels for safe custody or other special purpose. That is to say, he is already an agent for the purpose of doing such acts and is subsequently entrusted with property with direction to deal with it in a certain manner. It is not bold that a 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 case, was therefore not held to be an agent. It may also be noticed that he was so employed for a specific purpose which was to use his influence to obtain for his employers a contract for the construction of a railways and docks in France. This assignment did not amount to making him an agent of the employers for receiving money etc. In Mahumarakalage Edward Andrew Cooray's Case (1) the Privy Council was dealing with the appeal of a person who had been convicted under s. 392 of the Penal Code of Ceylon. Sections 388 to 391 of the Ceylon Penal Code correspond to ss. 405 to 408 of the Indian Penal Code. Section 392 corresponds to s. 409 1. P. C. It was contended before the Privy Council that the offence under s. 392 was limited to the case of one who carried on an agency business and did not comprehend a person who was casually entrusted with money either on one individual
(1) (1953) A.C. 407 419.
occasion or a 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. Portugal (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 immaterial variations, arid finally said :
"'In enunciating the construction which they have placed on section 392 they would point out that they are in no way impugning the decisions is certain cases that one act of en- trustment may constitute a man a factor for another provided he is entrusted in his busi- ness as a 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 that s. 75 was limited to the class of persons mentioned therein did not affect the correctness of the view that a certain act of entrustment may Constitute a person a factor for another provided be was entrusted in his business as a mercantile agent. It follows that a certain entrustment, provided it be in the course of business as a mercantile agent, would make the person entrusted with a factor, i. e., would make him belong to the class of factors. The criterion to hold a person a factor, therefore, is that his business be that of a mercantile agent and not necessarily that he be a professional mercantile agent.
Further, their Lordships left it open as to what kind of activity on the part of a 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.
These 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 a person who belongs to the class of agents, i.e., who carries on the business of an agent.
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 indeed, had 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 depots. He was also Vice-President of the Co-operative Central Bank which advanced moneys to business societies to enable them to buy their stocks. The 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 Ceylon. The accused appointed one Ranatunga to be the Manager of the depot which was managed by the Committee of which he was the President. The payments to the Central Bank used to be made through him. The accused instructed this Manager to follow a course other than the prescribed routine. It was that he was to collect (1)  A.C. 407, 419.
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 Manager and sent his own cheques in substitution for the amounts to the Central Bank. He also arranged as the Vice President of that Bank that in certain cases those cheques be not sent forward for collection and the result was that he could thus misappropriate a large sum of money. The Privy Council said that the accused was not entitled to receive the money entrusted to him in any capacity, that is to say as the Vice-President 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 the 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 an agent was not that he was not a professional agent. The 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 Chatti v. Emperor (1). it 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 and redeemed. It was said that it was not a case under a. 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 (1) (1935) M.W.M, 649.
have acted as the complainant's agent, but he is not professionally the complainants agent nor was this affair a business transaction." The reasons emphasize both those aspects we have referred to in considering the judgment of the Privy Council in Mahumarakalag Edward Andrew Cooray's Case (1), and we need not say anything more about it.
What s. 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 expression in the way of his business' means that the property is entrusted to him 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. In other words, the requirements of this section would be satisfied if the person 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. A 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 I.P.C. if any breach of trust is committed by that person. This interpretation in no way goes against what has been held in Reg. v. Portugal (2) or in Mahumarakalage Edward Andrew Cooray's 'Case (1), and finds support from the fact that the section also deals with entrustment of property or with any dominion over property to a person in his capacity of a public servant. A different expression 'in the way of his business' is used in place of the expression 'in his capacity,' to make it clear that entrustment of property in the capacity of agent will not, by itself, be sufficient to make
(1) (1953) A.C. 407. 419.
(2) (188 5) lb Q.B.D. 487.
the criminal breach of trust by the agent a 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 a 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 a representative of the principal and has more powers in dealing with the property of the principal and, consequently, there are greater chances of his misappropriating the property if he be so minded and less chances of his detection. However, the interpretation 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 'business' 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 English Dictionary)
-in the matter of, as regards, by way of
(Webster's New Inter-
II Edition, Unabrid-
Business' -occupation, work
(Shorter Oxford Eng-
buying and selling, duty,
special imposed or under-
taken service, regular occupation
(Webster's New Inter-
II Editional, Unabrid-
-duty, province, habitual
(Oxford Concise Dictionary)
'Way' --scope, sphere, range, line of occupation Oxford Concise Dictionary)
Chokhani was appointed agent of the Bharat Insurance Company on January 31, 1951. He admits this in his statement under s. 342, Cr. P.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 a 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 superintended 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, and the general principles of the law of principal and agent regulate in most respects the relationship of the company and its directors.,,
It was held in Gulab Singh v. Punjab Zamindara Bank (1) and in Jasuwant Singh v. V.V. Puri (2) that a 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 a 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 have 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, however, not necessary to give details of all the impugned 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
(1) A. I.R. 1942 Lah. 47.
(2) A.I.R. 1951 Pu n. 99.
made demand of Rs. 22,25,687-13-0 in respect of the losses, The total cash 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 a large sum of money to meet this demand and to meet expected future demands in connection with the losses. At this crucial time, telephonic communications did take place between presumably Dalmia and Chokhani. The calls were made from Telephone No. 45031, which is Dalmia'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 calls lies in their taking place during the period when the scheme about the diversion of funds was coming into operation for the first time, but in the absence of evidence as to what conversation took place, they furnish merely a circumstance which is not conclusive by itself.
On August 7 and 9, 1954, the Punjab National 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 the sole proprietor and mentioned the business of the company in the form for opening account as merchants and commission agents'. 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 said to have
been supplied 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 described in the form for opening account as merchants, 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 Chokhani 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 a 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 Agencies 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 securities and therefore he postponed the dates of delivery of the securities to the Insurance Company. He added that in case of necessity be could raise money by selling or mortgaging the shares of the Union Agencies in the exercise of his power of attorney on its behalf. We may now revert to the actual transaction gone through to meet the demands in connection with the losses of the Union Agencies.
On August 9, 1954, Chokbani purchased 3% 1963-65 securities of the face value of Rs. 22,00,000 on behalf of the Insurance Company from Naraindas and Sons, Security Brokers. Chokhani entered, into a cross-contract with the same firm of brokers
for the sale of similar securities of the same face 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 the securities. Thus the actual brokers practically got out of the transaction except for their claim of brokerage.
On August 11, 1954, a similar transaction of purchase on behalf of the Insurance 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 transactions 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 price and the delivery of securities. The securities were not delivered to the Insurance 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 statement of accounts from the brokers relating to the purchase of securities Worth Rs. 22,00,000. The total cost of those securities worked out at Rs. 20,64,058-6-9. Chokhani made the payment by issuing two cheques in favour of Bhagwati Trading Company, one for Rs. 10,00,000 and the other for 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. 305
On August 12, 1954, the statement of account with respect to the purchase of securities worth Rs. 5,00,000 was received. The cost worked out to Rs. 4,69,134-15-9. Chokhani made the payment by issuing a cheque for the amount in favour of Bhag wati Trading Company. All these cheques were drawn on the Chartered Bank, Bombay.
On August 12, 1954, Vishnu Prasad drew cheques for Rs. 9,00,000 in the account of Bhagwati Trading Company in the United Bank of India. The amount was collected by his father Bajranglal. 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 amount personally. The total amount withdrawn by these two cheques viz., Rs. 18,60,000 was passed on to the Union Agencies through Chokhani that day. Thereafter 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 Rs. 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, 1954, Chokhani made payment to the brokers on account of the losses suffered by the Union Agencies. He issued cheques for Rs. 9,37,473-5-9 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 19., 1954, cheque for Rs. 6,84,833-14-0 on the Bank of India, in favour 306
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 brokers. No mentioned was made in the letter about the payment being made to Bhagwati Trading Company through cheques or about the arrangement about getting the securities from Bhagwati Trading Company or about the postponement of the delivery of the securities by that company. On receipt of the letter, Raghunath Rai contacted Dalmia and, on being told that the securities were purchased under the latter's instructions, made over the letter to the office where the usual entries where made and records were prepared, as had to be done in pursuance of the office routine. Ultimately, the formal confirmation of the purchases was obtained on August 30, 1954, from the Board of Directors at its meeting for which the office note Stating that the securities were purchase under the instruction of the Chairman (Dalmia) was prepared. The office note, Exhibit P. 793, with respect to the purchase 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 through the dealings entered into on behalf of Bhagwati Trading Company, the funds
for most of which came from the Bharat Insurance Company. On August 18,1954, Vishnu Prasad drew a sum of Rs. 50,000 from Bhagwati Trading Company'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 account with the United Bank of India and Rs. 5,10,000 from its account with the Bank of India and passed on these amounts also to the Union Agencies through Chokhani. Chokhani then issued cheques to telling Rs. 5,88,380-13-0 from August 23 to August 26,1954, on the account of the Union Agencies with the Chartered Bank, Bombay, in favour of the brokers on account of the losses suffered by that company. Thus, out of the total amount of Rs. 25,33,193-6.6 withdrawn by Chokhani from the account of the Bharat. Insurance Company and paid over to Bhagwati Trading Company, Rs. 25,10,000 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 September 3, 1954, and subsequent days. The Bharat Insurance Company had no sufficient liquid funds in the Banks at Bombay. There was therefore necessity to deposit funds in the Bank before they could be drawn 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 transactions relating to certain other securities were gone through. The details of those transactions are given below. 308
On September 4, 1954, securities of the face value of Rs. 17,50,000 held by the Insurance Company 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 2-1/40% 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, Bombay, 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 losses of about Rs. 23,00,000 suffered by the Union Agencies could be met. The 1954 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% 1959-61 securities of the face value of Rs. 25,00,000 on behalf of the Insurance Company from M/s. Naraindas & Sons, Brokers. A cross--contact of sale of similar securities by Bhagwati Trading Company to the brokers was also entered into. Steps which were taken in connection with the purchase of securities worth Rs. 27,00,000 in August 1954 were repeated. On September 9, 1954, Chokhani issued two cheques, one for Rs. 15,00,000 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 deposited 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 the extent of Rs. 22,81,738-2-0, A sum of Rs. 75,000 was paid 309
to Bennett Coleman Co. Ltd., of which Dalmia was a director and a sum of Rs. 15,000 was deposited in the Punjab National Bank.
It is again significant to note that telephonic communication took place between Dalmia's residence at New Delhi at, Chokhani's at Bombay, between September 4 and September 10, 1954. There was two communications on September 4, one on September 5, three on September 6 and one on September 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 securities held by the Insurance Company and purchase of other securities again took place. This time, 3% 1957 securities of the face value of Rs. 10,00,000 hold by the Insurance Company in its safe- custody deposit with the Chartered Bank, Bombay, were sold 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, presumably because necessary steps to be taken both in connection with the fictitious purchase of securities, in order to pay money to Bhagwati Trading Company for being made over to the Union Agencies when funds were needed and also or providing funds in the Insurance Company's account with the Chartered Bank, Bombay, in case the 810
balance was not sufficient 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 facevalue of about Rs. 80,00,000 bad been purchased by Chokhani on behalf of the Insurance Company and such securities bad not been sent to the head office at Delhi. Raghunath Rai referred the matter to Dalmia and, on his approval, sent a letter on November 19, 1954, to Chokhani, asking him to send the distinctive numbers of those securities. The copy of the letter is Exhibit P. 805. The securities referred to were 3% Loan of 1959-61 of the face value of Rs. 35,00,000, 3% Loan of 1963-65 of the face value of Rs. 27,00,000 and 2- 3/40/% Loan of 1960 of face value of Rs. 18,00,000. It was subsequent to this that stock certificates with respect to 3% 1963-65 securities of the face, value of Rs. 27,00,000 arid with respect to 2-3 14% 1960. Loan securities of the face 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 securities purchased in August 1954 were June 1 and December 1. It was therefore necessary to procure these securities or to enter into a paper transaction of their sale prior to December 1, as, otherwise, the non-obtaining of the income-tax deduction certificate from the Reserve Bank would have clearly indicated that the Insurance Company did not hold these 311
securities, Chokhani, therefore, entered into a genuine contract of purchase of 3% 1963-65 securities 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 received on November 24, 1954, and were converted into inscribed stock (Stock Certificate 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 purchased and therefore it existence could prevent the detection of the fact that these 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 ostensibly pay for the purchase of these shares but partially paid for it through another share-purchase transaction. In order to enable Bhagwati Trading Company to pay the purchase price, Chokbani paid Rs. 16,00,000 to it from 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 by a fictitious purchase of 2-1/2% 19611 securities of the face value of Rs. 11,00,000 on behalf of the Insurance Company. These 2-1/2% 1961 securities of the face value of Rs. 11,00,000 were purchased by Chokhani on November 16, 1954. by taking a 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. 18,00,000 was to fall due on January 15, 1955. Both on account of the necessity for obtaining the interest certificate and also on
account of the expected check of securities by the auditors appointed for auditing the accounts of the Insurance 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% 1960 securities of the face value of Rs. 18,00,000 on behalf of Bhagwati Trading Company. The purchase price was paid out of the funds of the Union Agencies and Bhagwati Trading Company. 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 stock certi- ficates which were then sent to the head office at Delhi. There still remained 3% 1959-61 securities of face value of Rs. 35,00,000 to be accounted for. They were purchased in September, 1954, as already mentioned, but had not been received up to the end of December. On December 27, 1954, Chokhani purchased 2-3/4% 1962 securities of the face value of Rs. 46,00,000, in two lots of Rs. 11,00,000 and Rs. 35,00,000 respectively, on behalf of the Insurance Company. He also entered into the usual cross-contract with the brokers for the sale of those securities on behalf of the Union Agencies. This was a fictitious transaction, as usual, and these securities were not received from the Union Agencies. On the same day, Chokhani entered into a contract for the sale of 3% 1959-61 securities of the face value of Rs. 35,00,000 on behalf of the Insurance, Company and also entered into a cross-contract on behalf of the Union Agencies for the purchase of these securities from the same brokers. As these securities did not exist with the Jnsuranco Company, these transactions were also paper transactions.
We need not give details of the passing of money from one concern to the other in connection with these transactions. For purposes of audit the 1959-61 securities of the face value of
Rs.35,00,000 had been sold. Now securities viz., 2-3/4% 1962 securities of the face value of Rs. 46,00,000 had been ostensibly purchased. The auditors could demand inspection of these newly purchased securities. Chokhani therefore entered into another purchase transaction. This time a 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 January It, 1955. The purchase price was paid by the sale of 3% 1957 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 Company was now supposed to have purchased 2- 3/4% 1962 securities of the face value of Rs. 92,00,000 having purchased Rs.416,00,000) worth of securities in December 1954 and Rs. 46,00,000 worth of securities in January 1955. It possessed securities worth Rs. 46,00,000 only and inscribed stock certificate with respect to that could serve the 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 Company. 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 securities off, if not actually recouped from the funds of the Union Agencies or 314
Bhagwati Trading Company prior to the next date 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 Bhagwati Trading Company, Chokhani, on behalf of the Insurance Company entered into a 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 Courts below have found that Dalmia had the necessary criminal intent as what Chokhani did was known to him and was under his instructions, is that of Raghunath 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 a witness whose testimony should not, in the circumstances be believed without sufficient corroboration which does riot exist. He has also contended that the Courts below fell into error in accepting the statements made by him which favoured the prosecution case without critically examining them, that they ignored 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 a person who participates in the commission of the actual crime charged against an accused. He is to be a particleboard. There are two cases, however, in which a person has been held to be an accomplice even if he is not a particeps criminis. Receivers of stolen property 315
are taken to be accomplices of the thieves from whom they receive goods, on a trial for theft. Accomplices in previous similar offences committed by the accused on trial are deemed to be accomplices in the offence for which the accused is on trial, when evidence of the accused having committed crimes of identical type on other occasions be admissible to prove the system and intent of the accused in committing the offence charged Davies Director of Public Prosecution8 (1).
The contention that Raghunath Rai was an accomplice is mainly based on the facts that (i) Raghunath 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 alleged scheme of the cons- pirators could not have been carried out without his help in signing blank cheques which were issued by Chokhani 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 Raghunath Rai, jointly. Raghunath Rai had to sign blank cheques in order to avoid delay in payments and possible occasional falling through of the transactions. No sinister retention can be imputed to Raghunath 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 Trading 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 existence and
(1) L. R. 1954 A. C. 378.
the part it took in the transactions were to be kept 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 a 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 Rai's evidence required corroboration as to the part played by Dalmia, the circumstances to which we would refer later in this judgment, afforded enough corroboration in that respect. Raghunath Rai made a statement. Exhibit P. 9, before 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 evidence of Raghunath Rai. 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 Evidence Act, any previous statement of a witness inconsistent with his statement in Court, if otherwise proved, could be used to impeach his credit and that therefore the Courts below were not right
in ignoring the inconsistencies in the statement of Raghunath Rai merely on the ground that they were not put to him in cross-examination. On the other hand, the learned Solicitor General contends that s. 155 of the Indian Evidence Act is controlled by s. 145 and that previous inconsistent statements not put to the witness could not be used for impeaching 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 credit of Raghunath Rai. The specific inconsistent statements are : (i) 'I never of my own accord send securities to Bombay nor am 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 maturity date was approaching. (ii) Before the Administrator, Raghunath Rai had stated: 'I cannot interfere in the matter as, under Board Resolution, Chokhani is 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 misstatement by Raghunath Rai, in his statement P. 9 to the Investigator made on September 20, 1955. about Chokhani's being authorised by a Board resolution to deal with the securities, is not considered by Dalmia to be a false statement as he himself stated, in answer to question No. 21, that such a statement 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 securities on behalf of the company in order to make profits. (iii) 'Roughly 1-3/4 chores of securities were sent to Bombay from here during the period from
April 1955 to June 1955. The period was wrong and was really from July to August 1955. Raghunath 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 a 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 of 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 advises received by a 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. A witness cannot be contradicted by first supposing that a certain thing must have taken place in a manner not deposed to by any witness and then to find that was not consistent with the statement made by that witness. Further, we are of opinion that there could be no object in making consequential entries
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 confirmation was necessary, it was extraordinary that no written record of his confirming the put-chase 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 Lalmit, 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 confirming sale and purchase of securities went before it. The fact that office notes mentioned that the securities had been purchased under the instructions of the Chairman is the record of the alleged confirmation.
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 action was taken on the basis of the office notes. Minutes with respect to other matters do refer 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 a formal matter for the Board.
All the office notes, except one, were signed by Raghunath Rai. 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 instructions of the Chairman certain shares have been
purchased'. Chordia was a relation of Dalmia and had no reason to write the expression 'Under instructions of the Chairman' falsely. Such a note cannot be taken to be a routine note when the power to purchase and sell securities vested in Chordia 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 a true statement of fact. It is true that he has not been examined as a 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 statement 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 the securities which had been purchased, but not received at the head office, and that when he reported non-compliance of Chokhani in communicating 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 September or October 1954 there was a talk between hier,
K. L. Gupta and Dalmia about the low yield 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, denied 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 favourable to Dalmia is said to be that according to him he told the auditors on September 9, 1955, that the securities not then available were with Cbokhani at Bombay from whom advices about their purchase had been received. Annadhanam stated that Raghunath Rai had told him that Dalmia 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 being 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 him on September 9, 1954. Raghunath Rai stated that on one or two occasions be, 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 telephone that be bad instructed for the purchase