C.S. D. Swamy vs The State

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Criminal Appeal No. 177 of 1957

Decision Date: 21 May 1959

Coram: Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.N. Wanchoo

In the matter styled C.S. D. Swamy versus The State, the Supreme Court of India rendered its judgment on 21 May 1959. The opinion was authored by Justice Bhuvneshwar P. Sinha and the decision was delivered by a bench consisting of Justices Bhuvneshwar P. Sinha, P. B. Gajendragadkar, and K. N. Wanchoo. The petitioner in the case was C.S. D. Swamy and the respondent was the State. The official citation for the judgment appears as 1960 AIR 7 and 1960 SCR (1) 461. Subsequent reports that refer to the decision include RF 1961 SC 583 (8), R 1962 SC 605 (19), D 1962 SC 1204 (4), R 1964 SC 464 (13,37), F 1971 SC 786 (13), R 1977 SC 2091 (5), R 1979 SC 602 (6), R 1981 SC 1186 (11,13), and R 1990 SC 1459 (30). The case concerned the Prevention of Corruption Act, 1947 (2 of 1947), specifically sections 5(1)(a), 5(1)(d) and 5(3). The appellant had been tried on charges brought under sections 5(1)(a) and 5(1)(d) of the Act. The prosecution was unable to prove that the appellant had received any specific bribe sums. Nevertheless, the High Court held that the appellant’s uncorroborated statements made from the dock could not satisfactorily explain the large deposits recorded in his bank accounts, and therefore the statutory presumption provided by section 5(3) of the Act was raised. On that basis the High Court found the appellant guilty of criminal misconduct in the discharge of his official duty under section 5(1)(d) and affirmed the conviction and sentence imposed by a special magistrate. The appellant contended that because the specific bribery charge under section 5(1)(a) had failed, the presumption under section 5(3) should not have been deemed established, and in the absence of proof that his statements were false, the charge should not have been proved beyond reasonable doubt. The Supreme Court held that section 5(3) of the Prevention of Corruption Act does not create a new offence but merely sets a rule of evidence that permits a court to presume guilt in certain circumstances, without overturning the fundamental principle that the burden of proof rests on the prosecution. By employing the phrase “satisfactorily account” in section 5(3), the legislature placed upon the accused the duty not only to present a plausible explanation for wealth disproportionate to his known sources of income, but also to convince the court of the credibility of that explanation. Consequently, the general-law position that an accused may be exonerated by offering a plausible explanation does not apply to cases governed by this statutory provision. The expression “known sources of income” in the section was interpreted to refer to sources that have become known to the prosecution through investigation, and not to those known only to the accused; it was not the prosecution’s responsibility to prove such sources.

The Court explained that the term “known sources of income” in section 5(3) refers only to income that the prosecution discovers through its investigation; it does not include any information that the accused may possess privately, and the prosecution is not required to produce evidence concerning the latter. When the prosecution satisfies the conditions laid down in the first part of section 5(3) of the Prevention of Corruption Act, a statutory presumption of guilt arises, and the onus shifts to the accused to rebut that presumption by presenting strong, convincing evidence. The Court held that the authorities cited in Rex v Carrington (1943 1 KB 607), Otto George Gfeller v The King (AIR 30 1943 PC 211), Hate Singh Bhagat Singh v State of Madhya Bharat (AIR 1953 SC 468) and Regina v Dunbar (1958 1 QB 1) were not applicable to the present provision. The Court further observed that a failure to prove a charge under section 5(1)(a) on the basis of evidence does not automatically lead to an acquittal on a charge under section 5(1)(d). If the prosecution establishes the requirements of the first part of section 5(3) with evidence, a conviction for criminal misconduct under section 5(1)(d) based on the statutory presumption is fully permissible under the law. The judgment then set out the procedural posture: this was a criminal appeal (No. 177 of 1957) taken by special leave from the Punjab High Court’s order dated 11 April 1957, which had affirmed the Special Judge, Delhi’s order of 19 January 1955 in Corruption Case No. 2 of 1953. Counsel for the appellant included G S Pathak, R Ganapathy Iyer and G Gopalakrishnan, while the respondents were represented by C K Daphtary, Solicitor-General of India, G C Mathur and R H Dhebar. The judgment was delivered on 21 May 1959 by Justice Sinha. The appeal challenged the conviction of the appellant under section 5(2) of the Prevention of Corruption Act, 1947, for which he had been sentenced to six months’ rigorous imprisonment. The factual background leading to the appeal was then summarized: during and after the Second World War, the Government of India created a “Grow More Food Division” within the Ministry of Agriculture to increase national food supplies. S Y Krishnaswamy, a Joint Secretary of the Ministry, assumed charge of the division on 2 January 1947. The appellant served in the same department as Director of Fertilizers and had previously been employed by Imperial Chemical Industries, a well-known fertilizer manufacturer. Because chemical fertilizers were scarce both in India and abroad, large quantities had to be imported, and an international body called the International Emergency Food Council, established in the United States, coordinated the allocation of such fertilizers among member countries.

In this case, the Court described that the International Emergency Food Council of the United States, of which India was a member, examined the fertilizer needs of various countries and allocated supplies accordingly, while Russia was not part of that organization. Toward the end of 1946, a Bombay firm called Messrs Nanavati and Company, which dealt in fertilizers and maintained commercial contacts with Russia, offered to supply ammonium sulphate from Russia to the Government of India. During the years 1947 and 1948, a substantial quantity of ammonium sulphate was obtained through that firm. Afterwards, a former employee of Messrs Nanavati and Company, identified as D N Patel, entered into a partnership operating under the name Messrs Agri Orient Industries Limited of Bombay. In February 1950, this partnership secured a contract from the Government to supply twenty thousand tons of ammonium sulphate sourced from the United States of America. While pursuing that contract, Patel encountered difficulties in obtaining Government orders for certain consignments. He then approached the appellant for assistance, and it was alleged that Patel paid the appellant a sum of ten thousand rupees in Bombay as a bribe to expedite the matter. Despite the alleged payment, the consignments continued to face delays after reaching India, resulting in considerable losses for Patel’s firm.

Consequently, Patel brought the matter to the attention of Shri K M Munshi, who at that time served as the Minister for Food and Agriculture in Delhi. Patel disclosed both the alleged ten-thousand-rupee bribe and the appellant’s alleged receipt of large sums as bribes for granting favours in the discharge of his official duties. Acting on this information, the Minister ordered a thorough inquiry and referred the case to the Inspector-General of the Special Police Establishment. In parallel, a departmental committee comprising three senior officers of the Department was constituted to conduct a departmental inquiry. Following the departmental inquiry, the Minister issued dismissal orders against the appellant in August 1950. A further quasi-judicial inquiry was later conducted by the late Mr Justice Rajadhyaksha of the Bombay High Court in 1951, focusing on matters concerning the import of fertilizers into India. After receiving Justice Rajadhyaksha’s report in January 1952, the authorities lodged a first-information report on 4 April 1952 and pursued comprehensive investigations of the allegations. As a result, two criminal cases were instituted. The first case involved an alleged conspiracy among the appellant, the Joint Secretary S Y Krishnaswamy, a proprietor of Messrs Nanavati and Company, and several others, relating to bribery and corruption in the supply of ammonium sulphate from Russia; the Court indicated that it was not concerned with that particular case. The second case, from which the present appeal arose, was instituted against two individuals, namely the appellant and Mr Krishnaswamy, on allegations that they had entered into a conspiracy to receive bribes and presents from various firms in connection with the import of fertilizers.

In the matter that gave rise to the present appeal, a criminal case had been instituted against two individuals, namely the appellant and a person named Krishnaswamy, on the allegation that they had entered into a conspiracy to obtain bribes and presents from various firms in connection with the import of fertilizers. The learned Special Judge who heard the prosecution evidence concluded that the evidence did not disclose any conspiracy as alleged, except for certain instances that formed the subject-matter of a separate charge of conspiracy which was being tried in another proceeding. Consequently, the present case proceeded only against the appellant and did so under two distinct heads of charge. The first charge alleged that the appellant habitually accepted or obtained, for himself or for others, illegal gratifications from a number of named firms and others in relation to the import and distribution of fertilizers, invoking section 5(1)(a) of the Prevention of Curruption Act, 1947 (hereinafter referred to as “the Act”). The second charge alleged that the appellant habitually received presents of various kinds by abusing his position as a public servant, invoking section 5(1)(d) of the Act. The High Court, agreeing with the finding of the Special Judge, held that the evidence of prosecution witnesses 9 and 10, who were the principal witnesses regarding the passage of certain sums of money from the named firms to the appellant, was wholly unreliable. In addition, the testimony of Patel, who was in the position of an accomplice, was found to lack sufficient corroboration from other facts and circumstances proved in the case. Because the tainted evidence could not be accepted, the High Court concluded that the prosecution had failed to establish the payment of particular sums of money by way of bribes. However, relying upon the presumption contained in sub-section (3) of section 8 of the Act, the High Court determined that the appellant had not satisfactorily accounted for the receipt of approximately Rs 73,000 in cash and about Rs 18,000 by cheque during the years 1947 and 1948, sums that were wholly disproportionate to his known source of income, namely his salary as a Government servant. On that basis, the High Court found the appellant guilty of criminal misconduct in the discharge of his official duties and affirmed the conviction and sentence of six months’ rigorous imprisonment that had been imposed by the learned Special Judge of Delhi. Counsel for the appellant contended that, on the admitted facts, the ingredients of section 5(3) of the Act had not been established; that where the charge in respect of specific instances of corruption had not been proved, as found by the courts below, the opposite of the presumption contemplated by section 5(3), namely the presumption of guilt of criminal misconduct, should be deemed established; and that the appellant’s statement under section 342 of the Code of Criminal Procedure, as well as the statements contained in his written statement, had not been proved false, and therefore the case against the appellant had not been proved beyond all reasonable doubt.

The Court observed that the evidence did not prove the appellant’s guilt beyond all reasonable doubt. It noted that section 5(3) of the Act does not create a separate offence; rather, it merely establishes a rule of evidence that permits a court to draw an inference of guilt under certain circumstances. The Court emphasised that this evidential rule departs from the traditional principles of criminal law, which hold that the prosecution must prove every element of the charged offence and that the burden of proof never shifts to the accused to disprove the allegation. Referring to the wording of section 5(3), the Court explained that the charge of criminal misconduct in the discharge of official duties was confined to the amounts shown in the appellant’s bank accounts with the Imperial Bank of India (New Delhi Branch) and the Chartered Bank of India, Australia and China (Chandni Chowk Branch). The appellant’s net credit in those accounts was reported to be a little over Rs 91,000. In response, the appellant claimed that he was the sole son of his father, who had enabled him to obtain an advanced education in England for more than seven years. After returning to India, he said, he had held high-paying positions for about twenty years with the Imperial Chemical Industries, the Army and the Government of India. He asserted that he had no children and no dependants other than his wife, and that, because his household expenses were modest, he was able to save a substantial sum from his salary and allowances, which were considerable due to extensive official travel that allowed him to collect travelling allowances, many of which he saved by lodging with friends and relatives during official tours. The appellant further maintained that he had received a gratuity for services rendered to the Army and a significant amount from his provident fund with the Imperial Chemical Industries in late November 1947. He explained that his deposits in the two banks represented cash savings derived from his salary, allowances and gifts from his parents, as well as repayments of loans he had advanced to friends while serving in the Army and thereafter. He added that some cash deposits were merely the reinvestment of earlier withdrawals, and that they also included the sale proceeds of his old car sold in June 1948 for Rs 5,500 together with the proceeds from the sale of his wife’s gold jewellery. To account for the large cash deposits made in 1948, the appellant alleged that he had borrowed Rs 20,000 from a person named Ganpat Ram on a promissory note, a debt he later repaid and for which he obtained a receipt, intending to use the money to construct a house in Delhi; when the house-building plan failed, he deposited the cash in his two bank accounts in August 1948 because the creditor would not accept repayment within two years unless interest for that period was also paid.

The accused stated that he had deposited the cash in his accounts at the two banks in August 1948 because the creditor would not accept repayment of the loan before two years had elapsed unless the interest for that period was also paid at the same time. Counsel for the accused argued that, in view of those facts, it could not be said that the accused had failed to account for the large deposits made in the two banks. The High Court observed that the matters alleged in the accused’s statement could have been proved easily by evidence, but such evidence had not been adduced; that an allegation alone did not amount to proof; and that the accused’s lucrative posts in Imperial Chemical Industries and in the Army related only to a period earlier than the time for which the charge was framed. Accordingly, the High Court found it impossible to accept the appellant’s bare statement from the dock as an explanation of how amounts earned far in the past could have entered the banks during the years 1947 and 1948. The Supreme Court noted that it is not a court of criminal appeal and therefore would not examine the reasons of the High Court for arriving at its factual conclusions. Apparently the High Court had considered all relevant statements made by the accused under section 342 of the Code of Criminal Procedure and in his written statement, and had concluded that those statements were not substantiated. This Court declined to go behind those findings of fact and accepted the High Court’s determination on the matter.

Reference was also made to cases in which courts have held that if an accused offers a plausible explanation for being in possession of property that forms the subject-matter of the charge, the court may exonerate the accused from criminal responsibility for possessing incriminating property. The Court observed that those precedents did not apply to the present charge because the statutory provision requires the accused to “satisfactorily account” for the possession of pecuniary resources or property disproportionate to his known sources of income. Ordinarily an accused is entitled to acquittal if he can honestly account for property that has been proved to have been recently stolen, as illustrated in section 114 of the Indian Evidence Act, 1872. The rule of law states that a prima facie explanation by the accused that he acquired the stolen goods in an honest way displaces the inference of guilty knowledge, and any doubt as to a necessary ingredient of the offence must be resolved in favour of the accused. However, the legislature deliberately used the expression “satisfactorily account”, thereby placing on the accused not only the burden of offering a plausible explanation but also the burden of satisfying the court that the explanation is worthy of acceptance. The emphasis, therefore, must be on the word “satisfactorily”.

The Court explained that the legislature deliberately emphasized the word “satisfactorily”, thereby imposing on the accused not merely the duty to present a plausible explanation for his large wealth but also the obligation to convince the court that such an explanation was acceptable. The Court then addressed another contention that the prosecution had not produced evidence identifying the appellant’s known sources of income. It observed that the record of the investigating officers did not specify what the known sources of the accused’s income were, nor did it state that his salary was his sole source of income. The Court clarified that the phrase “known sources of income” must refer to sources that the prosecution discovered through a thorough investigation, not to sources known only to the accused. It further held that the prosecution could not be expected to have complete knowledge of the accused’s private affairs, which fall within the “specially within the knowledge” category defined in section 106 of the Evidence Act. Consequently, the prosecution could only rely on the evidence it had, which indicated that the accused earned his livelihood by serving in the Government during the relevant period. The Court rejected the proposition that the travelling allowance could be treated as a source of income, explaining that such allowance is intended to reimburse an officer for out-of-pocket expenses incurred during official journeys and therefore cannot be considered a substantial source of income. The Court noted that an individual’s source of income depends on his occupation or avocation; for a government servant, the natural inference is that his known source of income is the salary received while in active service. The Court added that a pension or a provident-fund balance would be relevant only after retirement, unless the servant had a legitimate reason to draw on the provident fund. On this basis, the Court was not persuaded by the argument that the prosecution had failed to lead proper evidence concerning the appellant’s known sources of income. While the accused might have made statements to the investigating officers about alleged sources of income, such statements do not constitute evidence in the trial. Moreover, if the prosecution omitted certain sources of income, the accused remained free to prove those sources independently. In the present case, the Court observed that the prosecution had indeed produced the best evidence available regarding the accused’s pecuniary resources, namely the records of his bank accounts.

In this matter, the court examined the financial holdings of the accused, focusing specifically on the balances that appeared in his bank accounts. The evidence demonstrated that during the calendar years 1947 and 1948 the accused maintained deposits in various banks that, when aggregated, totaled a little more than Rs 91,000. The court then considered the earnings of the accused for the same period, noting that his average monthly salary—referred to in legal terminology as “per mensem”—was a little above Rs 1,100. If one assumes, for the sake of illustration, that the entirety of the salary earned over those two years was placed into the bank accounts, the resulting sum would still represent less than one-third of the total bank balance of Rs 91,000 that had been recorded. From this comparison the court concluded that the accused possessed financial resources that were clearly disproportionate to his known legitimate sources of income. Accordingly, the court rejected any suggestion that the accused could not be said to be in possession of pecuniary resources exceeding what his salary alone could explain.

The discussion then turned to the statutory burden imposed by subsection (3) of section 5 of the Act, with the appellant contending that this burden was not as heavy as the burden traditionally resting on the prosecution to prove every element of an offence beyond reasonable doubt. In support of that contention, reference was made to a series of decisions, most notably the case of Rex v. Carrbriant (1), which is reported in (1943) 1 K.B. 607 and cited in Archbold Criminal Pleading Evidence and Practice, 34th edition, at Art. 3907, p. 1511. That authority observes that the onus of proof shifts to the accused to demonstrate that a payment proven by the prosecution was not a corrupt payment, yet it characterises the burden on the accused as lighter than the ordinary prosecutorial burden of proof. Additional authorities invoked included Otto George Gfeller v. The King (1), Hate Sing Bhagat Singh v. State of Madhya Bharat (2) and Regina v. Dunbar (3). The court, after careful consideration, held that these precedents did not aid the appellant in the present circumstances. The court observed that, apart from the accused’s own bare statements, no admissible evidence had been produced to rebut the facts established by the prosecution. The statutory provision requires that the accused be presumed guilty of criminal misconduct in the discharge of official duties unless the contrary is proved. The language of the statute is categorical, placing the enduring burden on the accused to establish a contrary inference. Once the conditions set out in the earlier part of subsection (3) of section 5 have been satisfied by evidence that meets the court’s satisfaction, the court must raise the presumption of guilt with respect to criminal misconduct in the performance of official duties. This presumption remains in force unless the accused can satisfy the court that the statutory presumption has been overcome by cogent evidence. Moreover, the provision expressly declares that a conviction based solely on this presumption shall not be invalidated merely because it rests on that presumption. Finally, the appellant’s argument that the statutory reference to the burden on the accused merely requires the accused to adduce evidence to disprove the charge was rejected, as the court affirmed that the statutory burden continues to require the accused to prove the contrary to the established presumption.

The requirement that the accused must adduce evidence to disprove the charge means that the accused has to present proof which shows that the allegation is false. The argument advanced by counsel for the accused was that, because in the present case the facts and circumstances set out in the charge had not been proved, the accused should be acquitted on the ground that he had, by reference to the specific instances of bribery that had been held to be unproved, effectively disproved the charge. In the Court’s view this line of reasoning is fallacious and it relies upon three authorities: A.I.R. 1943 P.C. 211, A.I.R. 1953 S.C. 468, and [1958] 1 Q.B. 1. The High Court and the trial court found that the prosecution had failed to adduce sufficient evidence to establish the particular facts and circumstances of criminal misconduct contemplated by section 5(1)(a) of the Act. However, the failure to prove the charge under section 5(1)(a) does not automatically produce the legal consequence that the appellant claims. Once the conditions laid down in subsection (3) of section 5 are satisfied, the law requires the court not merely to be entitled but to be duty-bound to draw the statutory presumption that the accused is guilty of criminal misconduct as defined in section 5(1)(d). To succeed on the charge under section 5(1)(a), the prosecution must demonstrate that the accused accepted, obtained, agreed to accept, or attempted to obtain any gratification in the form of a bribe, which is defined in section 161 of the Indian Penal Code. That particular charge could not be sustained because the testimony of witness 9 was rejected by both the High Court and the trial court. By contrast, the charge under section 5(1)(d) does not require proof of a bribe. If evidence is produced that satisfies the first part of subsection (3) of section 5, a conviction for criminal misconduct may be entered on the basis of the legal presumption drawn from that proven fact. This is precisely the finding of the lower courts against the accused. Consequently, the failure of the case under clause (a) of subsection (1) of section 5 does not necessarily entail the failure of the case under section 5(1)(d). The Court is of the opinion that the judgment of the High Court is correct and accordingly dismisses the appeal. The accused, if released on bail, must surrender as required by his bail bond, and the appeal is dismissed.