High Court Acquits Bank Manager and Borrower, Finds No Proof of Dishonest Intention or Pecuniary Gain

A bench of Justice A. Badharudeen of the High Court of Kerala at Ernakulam heard appeals by two accused persons challenging their conviction in a CBI trial for offences under Section 120B read with Section 420 of the IPC and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. The appeals arose from the Special Judge-III (CBI/SPE), Ernakulam judgment dated 31.08.2016 convicting the Senior Manager of a Union Bank branch and a borrower for sanctioning and obtaining housing loans allegedly on the basis of false documents.

The High Court allowed the appeals, set aside the convictions and sentences, and acquitted the appellants. The Court held that the prosecution failed to establish dishonest intention at the inception of the transaction, any unlawful pecuniary gain to the accused or corresponding loss to the Bank beyond reasonable doubt. The Court noted that the nature of the loan was later changed and fully repaid, and that there was no evidence of falsification of records that established corrupt gain. The Court, in its reasoning, observed: “Since the law is settled ... there should be an intention to cheat at the beginning of the transaction, i.e., at the very inception. ... In this case, after changing the category of the loan with high rate of interest, the same was repaid by the 2nd accused. Be it so, there is nothing on record to show that the accused has obtained for himself or for any other person, any valuable thing or pecuniary advantage. ... When the full repayment is made, and there is no falsification of records, the conviction against the appellant is liable to be set aside.” The Court therefore concluded that the ingredients of offences under Section 420 IPC and Section 13(1)(d) PC Act were not proved.

Background

The prosecution case was that while serving as Senior Manager of Union Bank of India, Kattappana Branch, the first accused sanctioned and disbursed five housing loans totaling Rs.50 lakh between July 2004 and February 2005, purportedly on the basis of false and bogus documents and without required inspections, and conspired with other accused to cheat the Bank. In respect of the loan in Ext.P20, the second accused received two instalments totalling Rs.10 lakh; the prosecution alleged those funds were not used for construction and were diverted for other purposes, including purchase of a cardamom estate. The Special Court recorded oral and documentary evidence (PWs 1–14; DWs 1–3; Exts. P1–P65, D1–D10) and convicted accused Nos.1 and 2 after detailed findings in paragraph 90, which included observations such as “There is every reason to believe that the violation of the norms by A1 was malafide” and that “There is meeting of minds between A1 and A2 as regards the sanctioning and disbursal of loan by abusing the official position of A1.”

On appeal, defence counsel relied on documents in the loan file (Ext.P20), the change in the nature of the loan to an ordinary loan carrying a higher rate of interest (Ext.P20(e)), the statement of account (Ext.D6) and evidence that the higher-interest loan was repaid. The Special Public Prosecutor for CBI relied on audit findings and alleged falsified pre‑sanction inspection reports. The High Court examined statutory ingredients and relevant precedents (including authorities cited in the judgment) and applied settled law that to attract Section 420 IPC and Section 13(1)(d) PC Act there must be dishonest intention at the very inception and proof of pecuniary advantage obtained by corrupt or illegal means. Finding those elements lacking on the record, the Court allowed the appeals, set aside convictions and sentences, acquitted the appellants, directed cancellation of bail bonds and ordered that a copy of the judgment be forwarded to the Special Court.

Case Details: Case No.: CRL.A.Nos.924 & 977 of 2016 Case Title: James Mathew & A.P. Varghese v. State of Kerala Appearances: For the Petitioner(s): Sri S. Rajeev; Sri K.K. Dheerendrakrishnan; Sri D. Feroze; Sri V. Vinay; Shri Vargese C. Kuriakose; Sri P.J. Jose; Smt. Seenu Sadique For the Respondent(s): Shri Sreelal N. Warrier, Spl. Public Prosecutor, Central Bureau of Investigation; Standing Counsel, SPE/CBI, High Court of Kerala