LexSUDHIR SHANTILAL MEHTA versus C.B.I.
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[2009] 12 S.C.R. 682 A SUDHIR SHANTILAL MEHTA .-r v. C.8.1. (Criminal Appeal No. 905 of 2005) B AUGUST 7, 2009 [S.8. SINHA AND CYRIAC JOSEPH, JJ.] Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992: .I c s.36(1) - Security scam - Transaction of discounting and rediscounting of bill of exchange - Accused persons, public servants having dominion over public funds - Allegedly entered into conspiracy wiU1 Harshad Mehta, dealer in - D securities market for obtaining liquid cash for short period with a view to make investments in securities market - Bills of .. exchange issued in relation l'o transaction in shares - No I verification as required undertaken - No security taken - Discounting of bill of exchange - Payment not made on the E retiring day - Loss to bank - Conviction under s.409 and s. 120B - Held: Acquisition of shares was neither bona fide nor in the interest of the Bank - Guidelines laid down in the Manual of UCO Bank and directions of Reserve Bank of India .JI dated 5.9.1988, stipulated that credit limit be fixed only after .... F verifying the creditworthiness of customer - Security also required to be taken and it was the duty of the Manager to satisfy himself that the Bills of Exchange were a result of genuine trade transactions - But said procedures were given a complete go by - Branch not dealing with Bill Discounting chosen which demonstratively proved that the transactions G were not ordinary commercial transactions - Accused 1 and 2 were high ranking officers of the Bank and had dominion over the funds thereof - They could not part with the same in favour of any person without complying with the statutory requirements - By reason of such transaction wrongful loss H 682 SUDHIR SHANTILAL MEHTA v. C.8.1. 683 -- --1 was caused to the Bank and wrongful gain was made by the A Harshad Mehta group - Money of a Public Sector Bank was diverted to share/securities market transactions in violation of law - Prosecution proved the charges made against the accused 1, 2, 4, 5- Conviction for conspiracy for commission of the offence of criminal breach of trust upheld - Banking B Regulation Act, 1949 - s.21, 35A - Reserve Bank of India, 1934 - Penal Code, 1860 - ss.405, 409, 120B - Scam. Jurisdiction of Special Court - Held: Is not confined to the scam relating to securities alone but utilization of any c amount relating to transaction of securities and for matters connected therewith or incidental thereto. s.2(c) - Securities - Meaning of. Reserve Bank of India, Act, 1934: Directions/circulars D -'\ issued by RBI are statutory in character - RBI has requisite .. power to issue direction to Banks in relation to discounting and rediscounting of bills of exchange and directions so issued have statutory force - All public sector banks are bound thereby. E Prosecution case was that accused no.1 was the ). Chairman-cum-M.D. of the UCO Bank. On 14.3.1992, he "' visited Harshad Mehta who was a dealer in the securities market. After the meeting he allegedly informed the other officers of the bank that he met Harshad Mehta who F suggested that it was in the interest of the bank to undertake the business of discounting and rediscounting bills of exchange. The officers present were assured by accused no.1 that the business would be transacted without involving the banks funds. He also insisted for G ,_ undertaking the said business through the Nariman Point Branch of the Bank though such transactions were generally not undertaken therefrom. On the same day i.e. 14.3.1992, a resolution was H 684 SUPREME COURT REPORTS [2009] 12 S.C.R. A passed by M/s. Growmore, to open an account in UCO r , Bank, Nariman Point so as to enable it to avail bill discounting facility provided by UCO Bank Ltd. limited to Rs.50 crores. A similar resolution was passed on 18.3.1992 by Mis. Mazda. B On 24.3.1992, Accused no. 7 and 9 came to Nariman Point Branch of UCO Bank. They brought with them two banker's cheques, one cheque was from Syndicate Bank for Rs.24.63 lacs and the other from State Bank of Patiala c for Rs.25 lacs. Two bills of exchange drawn by J.H. Mehta were accepted by accused 4 on behalf of Growmore and accused 7 on behalf of Mazda. Letters were also issued by Mazda and Growmore to the effect that the said amount would be repaid by them on or before 24.4.1992. D The two usance promissory notes were
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