VINAYAK NARAYAN DEOSTHALI versus C.B.I.

Citation: [2014] 12 S.C.R. 308 · Decided: 02-12-2014 · Supreme Court of India · Bench: S. J. MUKHOPADHAYA · Disposal: Disposed off

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Judgment (excerpt)

A 
B 
[2014] 12 S.C.R. 3os 
VINAYAK NARAYAN DEOSTHALI 
v: 
C.B.I. 
(Criminal Appeal No. 346 of 2004) 
DECEMBER 02, 2014 
[SUDHANSU JYOTI MUKHOPADHAYA AND 
ADARSH KUMAR GOEL, JJ.] 
Special Court (Trial of offences relating to Transactions 
C in Securities) Act, 1992: s.10 - Allegation of diversion of 
public funds belonging to certain public sector banks and 
financial institutions by employees of such banks and financial 
institutions in collusion with some brokers - Conviction of 
appellant-bank manager ulss. 120-8, 409, 467, 471 /PC and 
D ss. 13(1)(c) and (d) of Prevention of Corruption Act, 1988 by 
special court -
Held: Action of appellant involved 
unauthorised conversion of public funds to private funds of 
an individual - Mens rea was established from the f?ct that 
false bank receipts were issued for non-existent securities -
·E Diversion of public funds by appellant by committing forgery/ 
use of forged documents amounted to criminal breach of trust 
as well as offence under POC Act - Conviction upheld. 
Disposing of the appeal, the Court 
F. 
HELD: 1. The facts are undisputed and clearly stand 
established on the record : (i) The EEPC is functioning 
under the control of Ministry of Commerce to help export 
of engineering goods and services. It was operating 
International Price Reimbursement Scheme with a view 
G to neutralize the price of Steel for domestic exporters. It 
had funds for disbursement. Further it had funds on 
account of sale o.f office. IPRS was being operated by PW 
3. He made a deposit of a sum of Rs.7.75 crores with the 
UCO Bank by way of three cheques in favour·of the UCO 
H· 
308 
VINAYAK NARAYAN DEOSTHALI v. C.B.I. 
. 309 
Bank~ (iij The appellant acting as Assistant Manager of A 
the UCO Bank transferred the amount to the account of 
Mehta which was apparently in collusion with Mehta 
without any authority by EEPC. He issued Bank Receipts 
in lieu of. physical delivery of securities without such 
securities being in existence. (iii) The EEPC never B 
instructed purchase of securities through Mehta nor 
allowed'the transfer .of the amount in question to Mehta 
but the EEPC was made to sign documents under a 
mistal(en belief at the instance of the appellant. PW-3, who 
represented the EEPC fully supported the prosecution c 
version of having made deposit with the Bank and 
having not authorized the diversion of the said amount 
in favour of any private party. The said evidence has been 
duly accepted by the Special Court. The appellant 
unauthorisedly credited the amount to Mehta's account o 
by abusing his position in conspiracy with Mehta. The 
accused also issued bank receipts for security 
transactions without physical existence of securities 
which amounted to forgery. It is thus, safe to infer the 
abuse of position by the accused-appellant in conspiracy E 
with and to the benefit of Mehta. Diversion of public funds 
by the accused amounted to criminal breach of trust by 
committing forgery/use of forged documents as well as 
offence under the provisions of the Corruption Act. PW-
10 and PW-12, who were maintaining· register for sale and 
· purchase of securities could not show that the securities F 
in question were physically available with the Bank when 
the bank receipts were issued by the accused which 
could be done only if securities were available. The 
Special Court thus rightly held the charge to be proved. 
It was not necessary to prove that the accused had G · 
derived any benefit or caused any loss to the Bank. The 
fact remains that action of the appellant involved 
unauthorized conversion of public funds to private funds 
of an individual. Issuing of Bank receipts for securities 
H 
310 
SUPREME COURT REPORTS 
[2014] 12 S.C.R. 
A without existence of securities could not be justified 
except for illegal benefit to a private individual. Patent 
illegality cannot be defended in the name of practice or 
direction of higher authorities. Mens rea is established 
from the fact that false Bank Receipts were issued for non-
B existent securities. Thus, the offences of conspiracy, 
forgery, misappropriation and corruption stand 
established. [Paras 14, 15 and 16] [332-A-H; 333-A, E] 
Ram Narayan Popli vs. Central Bureau of Investigation 
c 
(2003) 3 sec 641: 2003 (1) SCR 119 - relied on. 
Case Law Reference: 
2003 (1) SCR 119 
relied on 
Para 4 
CRIMINAL APP ELLA TE JURISDICTION : Criminal f\ppeal 
D No. 346 of 2004. 
E 
From the Judgment & Order dated 20.01.2004 Special

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