R. K. Dalmia vs Delhi Administration

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

Court: Supreme Court of India

Case Number: Criminal Delhi Appeal Nos. 7 to 9 of 1961

Decision Date: 05/04/1962

Coram: Raghubar Dayal, S. K. Das

In the matter titled R. K. Dalmia versus Delhi Administration, the judgment was delivered on 5 April 1962 by a bench consisting of Justice Raghubar Dayal and Justice S. K. Das of the Supreme Court of India. The petitioner was R. K. Dalmia and the respondent was the Delhi Administration; the bench was identified as Dayal, Raghubar and Das, S. K., with the citation recorded as 1962 AIR 1821 and 1963 SCR (1) 253, and further cited in later reports as R 1973 SC 330 and R 1980 SC 439. The case involved provisions of the Indian Penal Code of 1860, specifically sections 120B, 409, 405, and 477A, as well as section 233 of the Code of Criminal Procedure of 1898 and section 33 of the Insurance Act of 1938.

The factual background, as outlined in the headnote, described that the appellant Dalmia held the position of Chairman of the Board of Directors and principal officer of Bharat Insurance Company, while another appellant, Chokhani, acted as the company’s agent in Bombay. A further appellant, Vishnu Prasad, who was Chokhani’s nephew, was the nominal proprietor of Bhagwati Trading Company, although its operations were completely managed by Chokhani. The appellant Gurha served as a Director of Bharat Union Agencies, a firm engaged in forward transactions involving share speculation and effectively owned by Dalmia. During the period from August 1954 to September 1955, Bharat Union Agencies incurred substantial losses.

The prosecution’s case asserted that, in order to raise the necessary funds to meet these losses, the appellants entered into a conspiracy with five additional individuals to divert the insurance company’s funds to Bharat Union Agencies through Bhagwati Trading Company. The prosecution further alleged that the appellants concealed the unauthorized transfers by undertaking a series of steps, falsifying the accounts of both the insurance company and the Union Agencies, and thereby committed offences punishable under section 120B in conjunction with section 409 of the Indian Penal Code. Dalmia made a confession to Mr. Annadhanam, a Chartered Accountant appointed as investigator under section 33(1) of the Insurance Act, stating that he had misappropriated securities amounting to Rs. 2,20,00,000 of Bharat Insurance Company Ltd., that he had lost the money in speculation, and that he intended to repay the full amount either through relatives or personally for the benefit of the policyholders.

The prosecution’s case primarily relied on the testimony of Raghunath Rai, who served as Secretary‑cum‑Accountant of the insurance company. The defence argued that Rai was an accomplice to the alleged conspiracy. The Sessions Judge convicted all the appellants under section 120B read with section 409 of the Indian Penal Code. In addition, Dalmia and Chokhani were each convicted of substantive offences under section 409, Chokhani was convicted under section 477A read with section 110, and Gurha was convicted under section 477A. The Sessions Judge, however, acquitted the remaining accused, the details of which were not completed in the present excerpt.

The High Court essentially affirmed the findings of the Sessions Judge, but it expressly declined to base its decision on the confession made by Dalmia. The Court held that the Delhi Court possessed jurisdiction to try Chokhani for the offence punishable under section 409 of the Indian Penal Code, even though the alleged act was said to have been committed beyond the territorial limits of that Court, because the charge arose out of the alleged conspiracy that linked him with the other co‑accused. In reaching this conclusion, the Court followed the precedent set in Purushottam Das Dalmia v. State of West Bengal, [1962] 2 S.C.R. 101. The Court further observed that the charge framed against Dalmia under section 409 was not defeated by the operation of section 233 of the Code of Criminal Procedure. It clarified that the charge was not directed at four separate offences; rather, it pertained to a single offence, although the precise mode of commission was not explicitly detailed in the charge‑sheet. The Court ruled that any objection to the alleged vagueness of the charge could not invalidate the trial because no prejudice had been shown to the accused and no specific contestation of that point had been raised during the proceedings. Regarding the interpretation of “property” in section 405 of the Indian Penal Code, the Court stated that the term could not be limited to movable property, since the statute itself does not impose such a qualification. It explained that “property” has a broader scope than the expression “immovable property” defined in section 22 of the Code, and that the applicability of a particular offence depends not merely on the dictionary meaning of “property” but on whether that particular kind of property can be the subject of the offence contemplated by the provision. Consequently, “property” in any specific section means only that kind of property with respect to which the offence can be committed. The Court then held that the funds of the Bharat Insurance Company mentioned in the charge fell within the meaning of “property” under section 405. Earlier authorities such as Reg. Girdhar Dharamdas (1869) 6 Bom. High Ct. Rep. (Crown Cases) 33 and Jugdown Sinha v. Queen Empress (1895) 1 L.R. 23 Cal. 372 were disapproved, while cases like Emperor v. Bishan Prasad (1914) I.L.R. 37 All. 128, Ram Chand Gurvala v. King Emperor [1926] Lah. 385, Manchersha Ardeshir v. Ismail Ibrahim (1935) I.L.R. 60 Bom. 706, Daud Khan v. Emperor [1925] All. 672 and The Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh, [1955] 2 S.C.R. 402 were cited for guidance. The Court noted that the articles, bye‑laws and board resolutions of the Insurance Company demonstrated that both Dalmia and Chokhani were entrusted with dominion over the company’s bank funds, a situation that falls squarely within the meaning of section 409. Authorities such as Peoples Bank v. Harkishan Lal [1936] A.I.R. Lah. 408, G.E. Ry Co. v. Turner [1872] 8 Ch. App. 149 and Re Forest of Dean Etc. Co. [1878] 10 Ch. D. 450 were referred to for similar principles. Finally, the Court affirmed that a criminal breach of trust could be committed by Chokhani even though he could not operate the bank account alone, because the offence could be perpetrated jointly with another person.

The Court noted that the decision in King Emperor (1947) I.L.R. 26 Pat. 703 was held to be inapplicable to the present facts. It also referred to earlier authorities Nrigendro Lall Chatterjee v. Okhoy Coomar Shaw (1874) Cr. Rulings 59 and Emperor v. Jagannath Ragunathdas (1931) 33 Bom. L. R. 1518. The Court explained that the expression “in the way of business as agent” in section 409 of the Indian Penal Code requires the property to be entrusted to the agent in the ordinary course of his duty. It further required that the entrustment occur as part of the agent’s habitual occupation, profession or trade. Accordingly, the section is satisfied when a person, acting as an agent of another, receives property or dominion over property in the performance of his agency duties. The Court warned that if a person is an agent for one purpose but is entrusted with property for an unrelated purpose, that entrustment does not fall within section 409. The Court considered the authorities Mahumarakalage Edward Andrew Cooray v. Queen [1953] A.C. 407 and Reg. v. Portugal [1885] 16 Q.B.D. 487 in reaching this conclusion. Applying this principle, the Court held that both Dalmia and Chokhani were agents of the Bharat Insurance Company within the meaning of section 409 of the Code. The decision also cited Gulab Singh v. Punjab Zamindara Bank A.I.R. 1942 Lah. 47 for support.

The Court examined whether Raghunath Rai could be treated as an accomplice to the alleged offences. It found that Rai did not participate in the commission of the actual crime charged against the accused and therefore could not be an accomplice. The Court reiterated that an accomplice must be a participant in the criminal act, except where the person receives stolen property or is involved in a prior similar offence that evidences a common scheme or intent. The authority Davies v. Director of Public Prosecutions [1954] A.C. 378 was referenced in support of this principle. Regarding Chokhani, the Court held that he was a servant of the Insurance Company within the meaning of section 477A of the Indian Penal Code. Although Chokhani served full‑time with the Bharat Union Agencies, he was also a paid agent of the Insurance Company and therefore qualified as its servant. The Court observed that each transaction undertaken to cover the losses of the United Agencies was not an independent conspiracy, but part of a single scheme sharing a common method. Consequently, all such transactions were deemed to originate from the same conspiracy. The Court considered the confession made by Dalmia and found that no threat, inducement or promise from a person in authority had been shown to affect it. Because the confession was therefore voluntary, the High Court’s view that it was involuntary was held to be erroneous. Finally, the Court stated that a person appointed as an investigator under section 33(1) of the Insurance Act does not automatically become a public servant within the meaning of section 21 Ninth and section 176 of the Indian Penal Code.

In the present matter the Court observed that the provisions of the Indian Penal Code which deal with offences by public servants could not be invoked in connection with an examination conducted under section 33(3) of the Insurance Act. Accordingly the statutory offence under the Penal Code was held to have no application to the said investigation. The Court further examined whether the confession given by the appellant, R K Dalmia, was affected by the protection guaranteed in Article 20(3) of the Constitution. It concluded that the constitutional safeguard did not arise because the confession was not made at a time when the appellant was formally accused of any offence. The Court cited State of Bombay v. Kathi Kalu Oghad [1962] 3 SCR 10 as authority for this proposition, indicating that a confession is only protected when it is extracted after an accusation has been formally made against the person concerned. The Court also addressed the meaning of the expression “with intent to defraud” contained in section 477A of the Indian Penal Code. It held that this phrase does not require a future intention to deceive another party; rather, it can apply to a situation where the accused seeks to conceal conduct that has already taken place. The Court supported this interpretation by referring to the decision in Emperor v. Ragho Ram, reported in I LR (1933) 55 All 783, and affirmed the earlier judicial view that the phrase may relate to an attempt to mask past wrongdoing.

The judgment was delivered in the Criminal Appellate Jurisdiction of the Supreme Court in the form of three appeals taken by special leave from the orders of the Punjab High Court (Circuit Bench) at Delhi dated 2 January 1961. The appeals were recorded as Criminal Appeal Nos. 7, 8 and 9 of 1961. The first appeal, No. 7, was filed by R K Dalmia; the second, No. 8, by R P Gurha; and the third, No. 9, by G L Chokhani together with Vishnu Prasad. All of the appellants had been convicted under section 120 read with section 409 of the Indian Penal Code, and each, except Vishnu Prasad, had also been found guilty of additional offences arising from the overt acts they were alleged to have committed. Specifically, Dalmia and Chokhani were each convicted under section 409 IPC, while Chokhani also faced conviction under section 477A read with section 110 IPC. Gurha, on the other hand, was convicted under section 477A IPC. The Court listed the counsel appearing for the parties: for the appellant in Appeal No. 7, counsel B D Foot, D R Prem, S M Sikri, G H Jauhari and A N Goyal; for the appellant in Appeal No. 8, counsel R L Kohli and A N Goyal; for the appellant in Appeal No. 9, counsel Prem Nath Chadha, Madan Gopal Gupta and R Choudhri; and for the respondents, the Solicitor General of India, C K Daphtary, together with R L Mehta and R H Dhebar. The judgment was pronounced on 5 April 1962 by Justice Raghubar Dayal, who noted that the appeals were entertained on special leave and set out the factual and legal foundation for the orders that followed.

To understand the convictions, the Court set out the factual background of the case. The Bharat Insurance Company had been incorporated in 1896. In 1936, the appellant purchased a block of shares of the company and subsequently became both a Director and the Chairman. He resigned from those offices in 1942, and his brother, J Dalmia, succeeded him. The corporate head office was transferred from Lahore to 10 Daryaganj, Delhi, in 1947. On 1 March 1949, the appellant was co‑opted as a Director, and on 19 March 1949 he was again elected Chairman following the resignation of his brother. On 27 February 1950, R L Chordia, a relative of the appellant and the principal officer of the insurance company, was appointed Managing Director. The appellant was later appointed Principal Officer of the company with effect from 20 August 1954. He retained the position of Chairman concurrently and continued to serve as Principal Officer until 22 September 1955. The period that formed the basis of the criminal conspiracy charge therefore spanned from August 1954 to September 1955, during which time the appellant held both the chairmanship and the principal officer role. During this interval the company maintained a current account with the Chartered Bank of India, Australia and China Ltd. at Bombay, a separate account for the safe custody of securities with the same bank, an additional current account with the Punjab National Bank at Bombay, and a safe‑custody account for securities with the Imperial Bank of India at New Delhi. The Court also referred to the Memorandum and Articles of Association of the Bharat Insurance Company, noting that Articles 116 and 117 dealt with the powers of the Directors, and that the original by‑laws passed by the Directors on 8 September 1951 were signed by K L Gupta.

In the case, the record shows that Dalmia continued to hold the office of Principal Officer of the Bharat Insurance Company until 22 September 1955. The alleged criminal conspiracy against him is said to have been committed between August 1954 and September 1955. Consequently, during the entire period covered by the charges, Dalmia occupied both the position of Chairman and that of Principal Officer of the company. The evidence indicates that, in that same period, the company maintained a current account with the Chartered Bank of India, Australia and China Ltd—referred to in the judgment as the Chartered Bank—situated in Bombay. In addition, the company kept with the same bank an account for the safe custody of its securities, and it also operated a separate current account with the Punjab National Bank, also in Bombay. At the head office in Delhi, the company held an account for the safe custody of securities with the Imperial Bank of India, New Delhi. Exhibit P‑785 was identified as the Memorandum of Association together with the Articles of Association of Bharat Insurance Company; Articles numbered 116 and 117 set out the powers that may be exercised by the Directors. Exhibit P‑786 was described as the original by‑laws that the Directors adopted on 8 September 1951. The pages of that document bear the signature of K. L. Gupta, who was the General Manager of the company during the relevant period, and they do not bear Dalmia’s signature, although the by‑law should have been signed by the Chairman in accordance with the resolution dated 8 May 1951. The Court noted that the authenticity of this document was not admitted. Exhibits P‑15 and P‑897 were said to be copies of the same by‑laws that had been sent respectively to Shri K. Annadhanam, a Chartered Accountant appointed by the Government of India on 19 September 1955 to investigate the affairs of the Bharat Insurance Company under section 33(1) of the Insurance Act, and to the Imperial Bank of India, New Delhi; the Court recorded that the genuineness of those copies was also put in dispute. By‑law 12, as reproduced, deals with the powers of the Chairman. Clause (b) of that by‑law authorised the Chairman to grant loans to persons either with or without security, but a subsequent amendment dated 30 August 1954 limited that authority to loans granted only on the basis of mortgages. Clause (e) gave the Chairman the authority to negotiate the purchase and sale of Government securities and to pledge, endorse, withdraw or otherwise deal with such securities. On 31 January 1951, the Board of Directors of the Insurance Company passed a set of resolutions which, in summary, directed: (i) the opening of an account in the Chartered Bank at Bombay; (ii) the authorisation for Mr Chokhani to operate that account on behalf of the company; (iii) the keeping of the Government securities owned by the company in safe custody with the Chartered Bank; and (iv) instructions to the bank to accept instructions concerning withdrawals from both Mr Chokhani and Mr Chordia. On the same day, Dalmia and Chordia submitted an application for the opening of the Bombay account, resulting in the creation of Current Account No. 1120. Also on that day, Mr Chokhani was appointed as the company’s agent in Bombay, a role he continued to perform throughout the period in question. From 1951 until 1953, Mr Chokhani alone operated the account. Finally, on 1 October 1953, the Board of Directors issued a further direction concerning the operation of the current account.

In this case, the Board of Directors ordered that the current account held by the company with the Chartered Bank in Bombay should be operated jointly by Chokhani and Raghunath Rai, who appeared as the fourth witness. Raghunath Rai had joined the company in 1921 as a clerk, was promoted to chief accountant in 1940, and later assumed the combined role of secretary and chief accountant from 17 August 1954. Although the board’s instruction required joint control, the actual practice effectively allowed Chokhani to run the account on his own. Chokhani obtained a number of blank cheques that had been signed by Raghunath Rai, who was based in Delhi, and then signed each of those cheques at the time of actual issuance. To ensure a ready supply of signed cheques, the parties maintained two cheque books; when one book was running low on signed cheques, Chokhani would forward the other book to Raghunath Rai for further signing. Consequently, Raghunath Rai was never aware of the specific dates, payees, or amounts of the cheques that were finally presented, and the company’s banking operations were, for all practical purposes, conducted solely by Chokhani. This arrangement resulted in the company’s funds being used for purposes that had not been authorized by the board. During the same period, Chokhani also engaged in the purchase and sale of securities on behalf of the company in Bombay. The majority of the securities acquired were forwarded to Delhi and deposited with the Imperial Bank of India, while the remainder stayed in Bombay under the custody of the Chartered Bank. At times, securities were held with the Reserve Bank of India, and in certain instances inscribed stock was obtained as a guarantee that the securities were properly secured in the bank. Notably, no resolution of the Board of Directors had empowered Chokhani to buy or sell securities. The prosecution alleged that Chokhani acted on specific instructions of Dalmia when purchasing and selling securities. In contrast, Dalmia and Chokhani asserted that Dalmia had given Chokhani a general authority to deal in securities, and that Chokhani exercised that authority independently without seeking further directions from Dalmia. The transactions that formed the basis of the present prosecution involved the purchase of securities for the company and the subsequent sale of securities that the company purportedly held. These dealings were carried out through recognized brokers and appeared on their face to be ordinary market transactions, yet the alleged misappropriation of the company’s funds arose from this pattern. Specifically, Chokhani entered into a purchase agreement with a broker, and that broker, in turn, sourced the same securities from a firm called Bhagwati Trading Company. Bhagwati Trading Company was owned by Vishnu Prasad, who was Chokhani’s nephew and was about nineteen years old in 1954. In reality, the entire business of Bhagwati Trading Company was conducted by Chokhani. The securities that were supposed to be purchased were never delivered by the broker to Chokhani. Although Chokhani told the brokers that he would receive the securities from Bhagwati Trading Company, the latter failed to make any delivery, leaving the company’s funds paid out without any corresponding securities being received.

According to the evidence, Chokhani issued cheques to Bhagwati Trading Company for the purchase price of the securities, and those cheques were drawn on the funds of the insurance company. Consequently, the amount of the cheques was paid out of the insurance company’s money without any benefit accruing to the latter. The sale side of the scheme involved the purported sale of securities that the company either actually held or claimed to hold to a broker; however, the proceeds obtained from that sale were not applied to purchase additional securities in the normal way, and the securities that were supposedly bought were never delivered. In each purchase transaction the same pattern was repeated: Chokhani acted for the insurance company in acquiring securities from a broker; the broker, in turn, bought the same securities from Bhagwati Trading Company, with the understanding that Bhagwati Trading Company would deliver the securities to Chokhani. Bhagwati Trading Company failed to deliver the securities, yet it retained the purchase price paid by the insurance company. In a few instances, securities that had been purchased but not received were later supplied when a fresh, genuine purchase of similar securities was made using funds from either the Bharat Union Agencies or Bhagwati Trading Company, and those securities were subsequently endorsed in favour of the insurance company. The money that the insurance company believed it was spending on buying securities ultimately flowed to another firm, Bharat Union Agencies. This firm, referred to in the proceedings as the Union Agencies, was engaged in speculative trading in shares and, as alleged by the prosecution, was effectively owned by Dalmia, who held its shares either directly in his own name or through persons or firms associated with him. The Union Agencies incurred losses during the period from August 1954 to September 1955. The prosecution contended that, in order to meet its liability for those losses on time, the accused conspired to divert the insurance company’s funds to the Union Agencies. To conceal this unauthorised diversion, a series of steps were taken to move the money from one company to the other and to falsify the accounts of both the insurance company and the Union Agencies. This conduct, the prosecution argued, gave rise to the offences for which the accused were charged and ultimately convicted. The true character of the sale and purchase transactions was not disclosed to the head office of the insurance company in Delhi because Chokhani sent to the head office the contracts of sale and purchase together with the brokers’ statements of account, accompanied by a covering letter that merely indicated the purchase of securities from the brokers. The letter omitted the fact that the securities had never been received and that the cheques for the purchase price had been paid to Bhagwati Trading Company rather than to the brokers. Raghunath Rai, who served as Secretary‑cum‑Accountant of the insurance company, on receiving information about the purchase of securities would seek clarification from Dalmia, and Dalmia would respond that the purchase had been made by Chokhani under Dalmia’s instructions. Following this, the routine accounting entries for the purchase were made in the company’s books.

The customary procedure for recording the purchase of securities was observed in the office, and the transaction was subsequently ratified at a meeting of the Board of Directors. It was asserted that the matter was presented to the Board together with an office note stating that the purchase had been made under the instructions of the Chairman. Dalmia, however, denied that the company’s Secretary‑cum‑Accountant, Raghunath Rai, ever sought his confirmation or approval for the purchase, and he also denied that he had told Rai that the transaction had been entered into on his instructions.

The Chartered Accountants’ firm Khanna and Annadhanam had been appointed as auditors of the Bharat Insurance Company for the financial year 1954. During the audit, Shri Khanna expressed dissatisfaction with certain aspects of the accounts and consequently demanded to see the counterfoils of the cheques, to have the securities produced, and to obtain a satisfactory explanation for the securities that were not physically with the Delhi office of the company. Although the auditors’ concerns were serious, the issue did not reach a climax because of the audit report alone. Instead, in September 1955, Shri Kaul, Deputy Secretary in the Ministry of Finance, Government of India, heard a rumor in Bombay concerning the unsatisfactory position of the company’s securities. He contacted Dalmia and, on 16 September 1955, learned from Dalmia’s relatives that there was a shortfall of securities. Acting on this information, Shri Kaul pursued the matter through departmental channels, and the Government of India subsequently appointed Shri Annadhanam under section 33(1) of the Insurance Act to investigate the affairs of the company. The appointment was made on 19 September 1955, and Dalmia is said to have made a confessional statement to Shri Annadhanam on the following day, 20 September 1955. An attempt was then made to reimburse the insurance company for the shortfall, but the investigation was transferred to the police. As a result, the appellants, together with a few others who had previously been acquitted by the Sessions Judge, were prosecuted.

In his defence, Dalmia maintained that he had no involvement in the day‑to‑day operations of the company. He claimed that he had authorised Chokhani, in 1953, to purchase and sell securities and that thereafter Chokhani acted independently in conducting those transactions. Dalmia asserted that he was unaware of the actual method employed by Chokhani, which allegedly resulted in the diversion of company funds to the Union Agencies. He acknowledged that he knew of the losses suffered by the Union Agencies and that Chokhani had informed him he would arrange funds to meet those losses, but he denied being a party to Chokhani’s actions. Chokhani, for his part, admitted that he had carried out the transactions as alleged in order to meet the losses of the Union Agencies, of which he was an employee. He explained that he acted on the expectation that the Union Agencies would eventually cover the losses and that the money would be returned to the insurance company. According to him, he was under the impression that his conduct amounted to granting a loan by the insurance company to the Union Agencies, and that there was nothing improper about it.

The accused asserted that the loan was from the Company to the Union Agencies and that nothing improper was involved. He emphasized that, had he known his actions were wrongful, he would never have undertaken them and would have sought alternative means to raise funds, relying on his extensive credit in the Bombay business community and on the fact that the Union Agencies possessed shares that could be sold to cover their losses. Vishnu Prasad declared that he was wholly ignorant of the transactions entered into on behalf of Bhagwati Trading Company and maintained that he acted solely under the instructions of Chokhani, without understanding the true nature of those transactions. Gurha denied any participation in the preparation of false accounts and vouchers intended to further the conspiracy. The learned Sessions Judge concluded that the offences charged against the appellants were proven based on the circumstances established in the case and accordingly convicted them as previously noted. The High Court largely affirmed the Sessions Judge’s findings, except that it chose not to rely on Dalmia’s confession. Counsel for Dalmia raised several contentions concerning both law and fact, and the Court indicated that it would first address the points of law raised by that counsel.

To appreciate the legal issues raised, the Court set out the charges framed against the appellants. The charge under section 120‑B read with section 409 of the Indian Penal Code was directed at the appellants and five additional persons and read as follows: “I, Din Dayal Sharma, Magistrate I Class, Delhi, do hereby charge you, R. Dalmia (Ram Krishna Dalmia) son of …, G. L. Chokhani son of …, Bajrang Lal Chokhani son of …, Vishnu Pershad Bajranglal son of …, R. P. Gurha (Ragbubir Pershad Gurba) son of …, J. S. Mittal (Jyoti Swarup Mittal) son of …, S. N. Dudani (Shri Niwas Dudani) son of …, G. S. Lakhotia (Gauri Sbadker Lakbotia) son of …, V. G. Kannan (Vellore Govindaraj Kannan) son of …) accused as under: That you, R. Dalmia, G. L. Chokhani, Bajrang Lal Chokhani, Vishnu Pershad Bajranglal, R. P. Gurha, J. S. Mittal, S. N. Dudani, G. S. Lakhotia and V. G. Kannan, during the period between August 1954 and September 1955 at Delhi, Bombay and other places in India, were parties to a criminal conspiracy to commit illegal acts, namely criminal breach of trust of the funds of the Bharat Insurance Company Ltd. By agreeing among themselves and with others, they purportedly caused a breach of trust by R. Dalmia and G. L. Chokhani with respect to the funds of that Insurance Company held in current account No. 1120 of the Chartered Bank of India, Australia and China, Ltd., Bombay, a sum entrusted to R. Dalmia in his capacity as Chairman and Principal Officer of the Insurance Company.

In this case, the Court recorded that the accused had entered into a criminal conspiracy during the period from August 1954 to September 1955, involving several individuals who held key positions in the Bharat Insurance Company Ltd. The conspiracy was carried out by R. K. Dalmia, who acted as the Principal Officer of the insurance company, and by G. L. Chokhani, who acted as an agent of the same company. The purpose of the agreement between them was to obtain funds from the insurance company in order to meet losses that Dalmia had suffered in forward‑share speculation. Those speculative transactions were conducted in the name of Bharat Union Agencies Ltd. under the direction and overall control of Dalmia and were performed by Chokhani at Bombay and by R. P. Gurha, J. S. Mittal and S. N. Dudani at Calcutta. The conspirators further agreed to open two additional current accounts, namely account R1763 with the Bank of India Ltd., Bombay, and account 1646 with the United Bank of India Ltd., Bombay, in the name of M/s Bhagwati Trading Company. These accounts were opened by Vishnu Pershad, with the assistance of G. L. Chokhani and Bajrang Lal Chokhani, for the illegal purpose of diverting the insurance company’s funds to Bharat Union Agencies Ltd. The scheme also involved making false entries in the books of the insurance company at Delhi to show that the misappropriated funds had been invested in government securities. Additional false and fraudulent entries were to be made by R. P. Gurha, J. S. Mittal, G. S. Lakhotia, V. G. Kannan and others, reflecting the diversion of the insurance company’s funds through M/s Bhagwati Trading Company to Bharat Union Agencies Ltd. and its allied concern, Asia Udyog Ltd. The Court concluded that these acts were performed in pursuance of the agreed conspiracy and therefore amounted to an offence punishable under section 120‑B read with section 409 of the Indian Penal Code, which lies within the jurisdiction of the Court of Sessions.

The magistrate’s charge sheet further detailed two specific counts against Dalmia under section 409 of the Indian Penal Code. The first count alleged that, between 9 August 1954 and 8 August 1955, Dalmia, acting as the Chairman of the Board of Directors, the Principal Officer and the Agent of Bharat Insurance Company Ltd., willfully misappropriated funds entrusted to him in the amount of Rs 2,37,483‑9‑0. The charge stated that Dalmia allowed his co‑accused, G. L. Chokhani, to dishonestly misappropriate and use those funds in violation of the legal directions and the implied contract governing the trust relationship with the insurance company. The second count, which continues beyond the present excerpt, similarly alleged that Dalmia, in the period from 9 August 1955 to 30 September 1955, again acted in his capacity as Chairman and Principal Officer, and again betrayed the trust placed in him by the insurance company, thereby committing an offence punishable under section 409 of the Indian Penal Code. Both counts were framed as offences within the cognizance of the Court of Sessions.

In the first charge, the court alleged that R. Dalmia, while acting as Chairman of the Board of Directors and Principal Officer of Bharat Insurance Company Ltd., withdrew money from current account number 1120 held with the Chartered Bank of India, Australia & China Ltd., Bombay, by issuing cheques numbered B‑540329 and others in favour of M/s Bhagwati Trading Company, Bombay, and cheque B‑540360 in favour of F. C. Podder; he then dishonestly used those funds to cover losses incurred by him in forward share transactions carried out in the name of Bharat Union Agencies Ltd., and for purposes unrelated to the affairs of Bharat Insurance Company, thereby committing an offence punishable under section 409 of the Indian Penal Code, within the jurisdiction of the Court of Sessions. The second charge described a similar breach of trust committed by Dalmia in a later conspiracy that extended from 9 August 1955 to 30 September 1955, during which he again acted as the Agent in his capacity as Chairman and Principal Officer, withdrew funds from the same current account by means of cheques numbered B‑564835 issued in favour of M/s Bhagwati Trading Company, and dishonestly applied those monies to meet losses from forward share transactions conducted under the name of Bharat Union Agencies Ltd., as well as for other purposes not connected with the insurance company’s business, thus constituting an offence under section 409 of the Indian Penal Code and falling within the Sessions Court’s cognizance. Counsel then advanced several contentions: (1) the Delhi Court lacked territorial jurisdiction to try the criminal breach of trust offences allegedly committed by co‑accused G. L. Chokhani in Bombay; (2) consequently, the charges were improperly joined; (3) the defect of misjoinder was fatal to the trial’s validity and could not be remedied under sections 531 to 537 of the Criminal Procedure Code; (4) the substantive charge of an offence under section 409 against Dalmia contravened section 233 of the Code, rendering the entire trial defective; (5) the funds held in the Chartered Bank, Bombay, which were alleged to have been misappropriated, did not constitute “property” within the meaning of sections 405 and 409 of the Penal Code; (6) even if they were property, Dalmia did not exercise dominion over them; (7) Dalmia was not an “agent” as contemplated by section 409, because only a person who professionally carries on the business of agency can be described as such; (8) if Dalmia’s conviction under section 409 fails, the conviction for conspiracy must also fail, since conspiracy must be proved according to the established legal requirements; (9) the confessional statement marked Exhibit P‑10, made by Dalmia on 20 September 1955, was not admissible as evidence; (10) even assuming it were admissible under section 24 of the Indian Evidence Act, it was barred by clause (3) of Article 20 of the Constitution; (11) the prosecution did not establish that Dalmia was synonymous with Bharat Union Agencies Ltd.; (12) both the Sessions Judge and the High Court failed to address the onus of proof, i.e., they did not examine whether the record‑presented evidence truly proved the conclusions they reached; and (13) consequently, both lower courts erred in their overall approach to the case.

The petitioner contended that Dalmia did not qualify as an “agent” within the meaning of section 409 of the Indian Penal Code because only a person who professionally carries on the business of agency can be described as such. He further argued that if Dalmia’s conviction for an offence under section 409 were to fail, the conviction for conspiracy should also fail, since the conspiracy charge must be proved in the manner prescribed by law. The petitioner asserted that the confessional statement identified as Exhibit P‑10, which Dalmia made on 20 September 1955, was not admissible as evidence. Even assuming that the statement were admissible under section 24 of the Indian Evidence Act, the petitioner maintained that it would still be inadmissible because it violated clause (3) of Article 20 of the Constitution. Additional contentions were that the prosecution had not demonstrated that Dalmia was synonymous with Bharat Union Agencies Ltd.; that both the Sessions Judge and the High Court had neglected to address the onus of proof, thereby failing to consider whether the record‑produced evidence truly established the conclusions they drew; that both courts had erred in their handling of the evidence of Raghunath Rai; that the courts were incorrect in holding that Rai’s testimony, as an accomplice or a witness requiring corroboration, was adequately corroborated; and that there was no proof, to the certainty required by law, that Dalmia possessed knowledge of the questioned transactions at the time they were carried out. Counsel for the petitioner pointed out numerous inaccuracies in the High Court’s factual narration, many of which were of little importance, and also complained that certain matters raised before the High Court had been omitted and that some of his arguments had been misunderstood. The Court noted that it need not examine points twelve to fifteen in the precise form in which they were raised, but that a discussion of Rai’s evidence would necessarily address the petitioner’s relevant contentions on Rai’s reliability, and that the Court’s overall view of the facts would resolve the petitioner’s final point. The first four contentions concerning procedural illegality were then addressed.

Regarding the substantive charges, the petitioner explained that two charges under section 409 of the Indian Penal Code were framed against Chokhani, alleging that he committed criminal breach of trust in furtherance of the alleged conspiracy. One charge covered the period from 9 August 1954 to 8 August 1955, and the second covered the period from 9 August 1955 to 30 September 1955. In addressing this issue, the Court recalled its earlier decision in Purushotam Das Dalmia v. State of West Bengal, wherein it held that a court which possesses jurisdiction to try the offence of conspiracy also has jurisdiction to try any offence consisting of overt acts committed in pursuance of that conspiracy, even if those acts occurred outside the court’s ordinary territorial jurisdiction. This principle was applied to the present case to determine the proper jurisdiction of the Delhi Court over the charges against Chokhani.

The learned counsel for Mr Dingle Foot urged that the earlier decision required fresh consideration. The Court heard arguments from Mr Dingle Foot as well as from the learned Solicitor General on this point. After carefully reviewing the submissions of both parties, the Court concluded that the appellant had not demonstrated any viable ground to justify revisiting the earlier judgment. Accordingly, the Court recorded its view on the matter during the hearing of the appeals and indicated that no further analysis of that particular contention would be undertaken.

The Court therefore found it unnecessary to examine the first contention raised by Mr Dingle Foot. Relying on the authority in Purushottam Das Dalmia’s case, the Court affirmed that the Delhi Court possessed jurisdiction to try Mr G L Chokhani for the offence charged under section 409 of the Indian Penal Code. The basis for this jurisdiction was the allegation that the alleged criminal breach of trust was committed in furtherance of the conspiracy that also implicated the other co‑accused. Because the Court accepted this view, the second and third contentions put forward by Mr Dingle Foot ceased to arise for consideration, and no further discussion of them was required.

The fourth contention was advanced by Mr Dingle Foot and required detailed analysis. The relevant portion of the charge framed under section 409 of the Indian Penal Code against Mr R K Dalmia reads: “Firstly, that you Dalmia, in pursuance of the said conspiracy between… being the Agent, in your capacity as Chairman of the Board of Directors and as Principal Officer of the Bharat Insurance Company Ltd., and as such being entrusted with dominion over the funds of the said Bharat Insurance Company, committed criminal breach of trust of the fund,… by wilfully suffering your co‑accused G L Chokhani to dishonestly misappropriate the said funds and dishonestly use or dispose of the said funds in violation of the directions of law and the implied contract existing between you and the said Bharat Insurance Company … prescribing the mode in which such trust was to be discharged…” The charge, as drafted, can be parsed into four separate specifications, each limited to a distinct mode of perpetrating the offence of criminal breach of trust. Those four specifications constitute the allegation that Dalmia, by wilfully suffering Chokhani, (i) dishonestly misappropriated the funds, (ii) dishonestly used the funds in contravention of legal directions, (iii) dishonestly disposed of the funds in contravention of legal directions, and (iv) dishonestly used the funds in violation of the implied contract that existed between Dalmia and the Bharat Insurance Company.

Section 233 of the Code of Criminal Procedure provides that a separate charge may be framed for each distinct offence and that, ordinarily, each charge must be tried separately, except where the provisions of sections 234, 235, 236 or 239 apply. Section 234 permits the joinder of up to three offences of the same kind that were committed within a twelve‑month period. The contention advanced by Mr Dingle Foot was that the four specifications derived from the charge under section 409 IPC each represented a distinct offence, and consequently could not be tried together. The Court does not accept this submission. It holds that the charge, despite identifying multiple modes of conduct, pertains to a single offence of criminal breach of trust. Accordingly, the multiple specifications do not create separate offences for the purpose of trial, and the charge may be tried as a single case.

In this case, the Court observed that the charge under section 409 of the Indian Penal Code was not articulated with exact specificity regarding the particular mode in which the alleged offence was committed. The Court held that even if a complaint were to allege that the charge was vague because it failed to pinpoint a single, detailed mode of commission, such vagueness would not render the trial illegal, provided that the accused suffered no prejudice from the form of the charge and no party had raised any claim of disadvantage caused by that lack of precision.

The Court then turned to the additional submissions made by counsel for the respondent. It recalled the definition of criminal breach of trust contained in section 405 of the Indian Penal Code, which states that anyone who, being entrusted with property or any dominion over property, dishonestly misappropriates, converts, or uses that property in violation of any legal direction prescribing the manner of discharge of the trust, or in breach of any express or implied legal contract relating to that trust, or who willfully permits another person to do so, commits criminal breach of trust. Section 406 prescribes the punishment for a breach of trust committed in the ordinary course. Section 407 escalates the punishment when the offender is a carrier, wharfinger, or warehouse‑keeper entrusted with property in that capacity, making the offence more severe than that covered by section 406. Likewise, section 408 intensifies the punishment for a breach of trust committed by a clerk or servant who, by virtue of his position, is entrusted with property or any dominion over property, thereby imposing a penalty greater than that of section 406. The Court noted that offences under sections 407 and 408 are punished in a similar fashion. Finally, the Court explained that the last provision in the series, section 409, imposes an even heavier punishment when the breach of trust is committed by persons described in that section, namely public servants or individuals acting in the capacity of a banker, merchant, factor, broker, attorney or agent; the provision provides that such an offender shall be punishable with life imprisonment, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to a fine.

Both the appellant and the co‑accused were convicted under section 409. Counsel for the appellant contended that no criminal breach of trust had occurred because the funds of the Bharat Insurance Company held in the bank did not fall within the meaning of “property” as used in section 405. The argument advanced was that the term “property” in the Indian Penal Code is context‑dependent and, in section 405, is intended to refer only to movable property, not to immovable property or to a chose in action. Consequently, it was submitted that the monies deposited by a customer in a bank represent a chose in action rather than “property” within the meaning of the statute.

In this case the Court observed that the relationship between a bank customer and a banker was that of creditor and debtor, and therefore the funds held by a bank should be treated as a chose in action. The Court relied on the decisions in Attorney General for Canada v. Attorney General for Province of Quebec & Attorneys General for Saskatchewan, Alberta & Manitoba (1) and in Foley v. Hill (2) to support this characterization. The Court also cited authorities that advocated a restricted meaning of the word “property” in section 405 of the Indian Penal Code, namely Reg. v. Girdhar Dharamdas (3), Jugdown Sinha v. Queen Empress (4) and Ram Chand Gurvala v. King Emperor (5), and referred to the overall scheme of the Code in which the expressions “property” and “movable property” appear in various provisions. The learned Solicitor General, however, argued that the term “property” should be given its widest possible meaning and that the various sections of the Code could apply to any kind of property, not only movable property. He contended that the definition must include a chose in action and the funds of a company held in a bank. The Court disagreed with that narrow construction. It held that there was no satisfactory reason to limit the meaning of “property” to movable property when the word appeared without any qualification in section 405 or in other sections of the Indian Penal Code. The Court explained that the question of whether a particular offence could be committed in respect of a specific kind of property depended not on the lexical definition of “property” but on whether that kind of property could be the object of the prohibited act described in the relevant section. Accordingly, the term “property” in any given provision covered only that type of property with respect to which the offence contemplated in that provision could be performed. Section 22 of the Indian Penal Code provided a definition of “movable property”. That definition was not exhaustive; it stated that “movable property” included all corporeal property of every description except land and things attached to the earth or permanently fastened to anything attached to the earth. The definition applied only to the expression “movable property” and not to the broader term “property”. Consequently, the Code used the word “property” in a far wider sense than the expression “movable property”. The Court therefore concluded that it was unnecessary to examine in detail which categories of property fell within each provision of the Code. The Court also noted that in Reg. v. Girdhar Dharamdas (1) the court had held that sections 403 and 404 of the Code, when read together, applied only to movable property, but that judgment gave no reasons for that conclusion.

In the present matter the Court examined the language of sections 403, 404 and 405 of the Indian Penal Code to determine whether the term “property” was limited to movable property or could be interpreted more broadly. Section 403 expressly referred to “any movable property,” whereas section 404 used the broader expression “property” without the qualifier “movable.” The Court observed that if the Legislature had intended to confine the operation of section 404 solely to movable property, it would have inserted the qualifying word, and consequently there was no reason to interpret the general term “property” as being restricted to movable property alone. The Court therefore declined to express an opinion on whether immovable property could fall within the ambit of section 404. In a similar vein, the Court found no justification for limiting the word “property” in section 405 to movable property, a position previously advanced in Jugdown Sinha v. Queen Empress, where the judges gave no reasoning and merely referred to the Bombay case. The Court also noted that the judges in that case had observed that mismanagement of factory lands did not constitute a criminal offence under section 408. By contrast, other authorities had taken a broader view of the term “property” in various sections of the Code. In Emperor v. Bishan Prasad the right to sell drugs was held to lie within the meaning of “property” in section 185, which criminalises certain conduct at any sale of property. Likewise, in Ram Chand Gurwala v. King Emperor the Court rejected the contention that merely transferring an amount from a bank account to the accused’s own account did not amount to misappropriation, holding that the transfer removed the money from the bank’s control and placed it at the accused’s disposal, thereby satisfying the element of dishonest misappropriation for criminal breach of trust. Further, in Manchersha Ardeshir v. Ismail Ibrahim the Court held that “property” in section 421 was sufficiently wide to include a chose in action. Finally, in Daud Khan v. Emperor the Court reiterated that while section 403, like section 378, referred specifically to movable property, sections such as 404 and those that followed used the unqualified term “property,” and that the context of each provision must determine whether the reference was to movable or immovable property. The cumulative case law, therefore, supported a broader interpretation of “property” where the statute did not expressly limit it to movable assets.

The Court observed that the term “property” should be given a wide construction in statutory provisions that do not qualify it with expressions such as “movable”. In the decision of The Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh the Court had previously held that a debt qualifies as property because it is a chose in action, is heritable, assignable and is treated as property under the Transfer of Property Act where it is described as an actionable claim. The Court further referred to the decision in Allchin v. Coulthard where the meaning of the word “fund” was examined in detail. That judgment explained that “fund” can be understood in two different senses: first, as the actual cash resources of a particular type, for example money kept in a drawer or in a bank; second, as an accounting term used to designate a category of expenditure in the books of a person. The Court clarified that when the phrase “payment out of a fund” is used in its first sense, it denotes a real payment made by physically removing cash or by drawing a cheque on a bank account. When the same phrase is employed in its second, accounting sense, it merely indicates that the payment is debited to that fund for purposes of the accounting record, without any reference to the actual source of cash used for the transaction. The Court illustrated the second meaning with the example of a company making a payment out of its reserved fund, where the actual settlement is effected by a cheque drawn on the company’s bank account, the monies in that account possibly originating from various sources.

Applying these principles, the Court held that the word “funds” appearing in the charge against the accused was used in the first sense, indicating that Dalmia and Chokhani possessed dominion over the amount that was credited to the Bharat Insurance Company’s bank account, because they could issue cheques drawn on that account. Consequently, the Court was of the opinion that the funds described in the charge constituted “property” within the meaning of section 405 of the Indian Penal Code. The accused, Dalmia, contended that he had not been entrusted with dominion over the funds held in the banks at Bombay and that he exercised no control because the banks had not been informed that he was authorized to operate on the company’s accounts, nor had any specimen signatures of his been supplied to the banks. According to Dalmia, the failure to inform the banks of his authority could prevent him from actually issuing cheques on the account.

The Court observed that the fact the chairman could not draw cheques on the company’s accounts did not extinguish his dominion over those accounts. As Chairman and Principal Officer of Bharat Insurance Company, he possessed the authority, on the company’s behalf, to operate those accounts. The Court explained that the failure to carry out additional steps in the execution of a plan did not nullify the power that the company had entrusted to him. It was held that a person may retain dominion over property even if he does not presently exercise every power that he could exercise with respect to that property. The Court emphasized that the non‑exercise of a power does not render the dominion entrusted to a person ineffective or nugatory. Article 116 of the Articles of Association of Bharat Insurance Company was cited, stating that the business of the company shall be managed by the Directors, who may exercise all such powers of the company that are not, under any particular law or regulation, prohibited to them. Article 117 enumerates specific powers of the Directors. Clause (7) of Article 117 authorises the Directors to draw, make, give, accept, endorse, transfer, discount and negotiate bills of exchange, promissory notes and other similar obligations deemed desirable for carrying on the business of the company. Clause (10) authorises the Directors to let, mortgage, sell or otherwise dispose of any property of the company absolutely. Clause (12) authorises the Directors to invest portions of the company’s funds that are not required to meet immediate demands, in securities or investments they consider advisable, and expressly prohibits the use of company funds to make or guarantee loans to a Director, to a firm of which a Director is a partner, or to a private company of which a Director is a Director. Clause (23) empowers the Directors to deal with and invest any monies of the company not immediately required for its purposes in government promissory notes, treasury bills, bank deposits and similar instruments.

The Court then turned to the bye‑laws that conferred dominion over the company’s property upon the Chairman, noting that those bye‑laws were revised in 1951. It recorded that the Board of Directors, at a meeting held on 8 September 1951, passed a resolution approving the revised bye‑laws, stating that “the bye‑laws as per draft signed by the Chairman for identification be and are hereby approved, in substitution and to the exclusion of the existing bye‑laws of the company.” The Court observed that no draft bearing the Chairman’s signature had been produced before it. Instead, the testimony of K. L. Gupta, identified as page 112 in the record, was considered. Gupta had served as Manager of Bharat Insurance Company in 1951 and as its General Manager from 1952 until August 1956. He proved Exhibit P. 786 to be the draft of the revised bye‑laws that the Board had approved at the September 1951 meeting. Gupta affirmed that he was present at that meeting and that he had laid the draft before the Directors. He further stated that the Directors, upon adopting the bye‑laws, issued a directive that they should become effective on 1 January 1952. The Court noted that Gupta’s statement was corroborated by other evidence and that the omission of the Chairman’s signature could be explained by an oversight, as contemplated by the resolution, which envisioned the revised bye‑laws being signed in the future for identification purposes.

In this case, the Court observed that the Board of Directors had resolved that the revised bye‑laws should become effective on 1 January 1952 and that this date should be entered in ink at the beginning of the bye‑laws. When Mr Dalmia cross‑examined Mr K L Gupta, Mr Gupta affirmed that he had not attended any Board meeting other than the one on 8 September 1951, a fact that was recorded in the minutes. He further declared unequivocally that he had presented the bye‑laws identified as Exhibit P‑786 at that meeting and that he had not seen any version bearing the Chairman’s signature. The Court found no reason to doubt Mr Gupta’s testimony and noted that his statement was supported by other evidence. It was possible, the Court said, that the resolution envisaged a future signature by the Chairman for identification purposes, but that such signatures had not been obtained due to an oversight. No evidence was produced to show that the Chairman had actually signed the bye‑laws, and Mr Dalmia himself confirmed the absence of such a signature. The Court held that the original copy of the bye‑laws with a mark of the Committee’s approval was not essential for proving the bye‑laws; they could be established by alternative evidence. Mr Gupta had been present when the bye‑laws were passed, although attending Board meetings was not his regular duty. He likely attended because he had drafted the revised bye‑laws and his presence was necessary, or at least desirable, to explain the changes to the existing bye‑laws. Consequently, he would have possessed his own copy of the draft and would have corrected it in accordance with the final form approved at the meeting. The Court further observed that the lack of a copy signed by the Chairman, even if it ever existed, did not render the remaining evidence about the company's bye‑laws inadmissible. The fact that Mr Gupta had signed each page of Exhibit P‑786 reinforced his testimony, for there would be no reason to sign every page of a mere draft office copy. His signing indicated the importance attached to that copy, suggesting it was intended to serve as the basis for the company’s future bye‑laws. Copies of the bye‑laws had subsequently been supplied to the Imperial Bank, New Delhi, and to the auditor, identified as Exhibits P‑897 and P‑15. Mr Raghunath Rai testified that he had sent Exhibit P‑897 to the Imperial Bank together with a covering letter signed by Mr Dalmia on 4 September 1954. Mr Mehra, a sub‑accountant of the State Bank of India (which had succeeded the Imperial Bank on 1 July 1955), also gave evidence concerning these documents.

In this matter the State Bank of India was identified as the legal successor to the Imperial Bank of India. The Court issued a notice to the State Bank of India directing it to produce a document dated 4 September 1954, which had been addressed by R. Dalmia to the Agent of the Imperial Bank of India, together with other related papers. The bank’s sub‑accountant, Mehra, testified that despite a thorough search by bank officials the original letter could not be located, and that the document exhibited as P. 897 represented a copy of the bye‑laws of the Bharat Insurance Company, which he was presenting in compliance with the Court’s notice. In cross‑examination Mehra indicated that the phrase “received 15 September 1954” signified that the copy of the bye‑laws had been received by the bank on that date, although he could not personally attest to the receipt. He explained that only the corrected version of the bye‑laws would have been furnished to the bank, and that Exhibit P. 897 corresponded precisely with the bye‑laws shown in Exhibit P. 786. Raghunath Rai then established that Exhibit P. 896 was a copy of the covering letter that had accompanied those bye‑laws when sent to the bank, and he affirmed that both the original letter and the copy labelled P. 896 bore the signature of R. Dalmia. Rai further testified that the bye‑laws contained in Exhibit P. 786 were those of the Bharat Insurance Company, which had become effective on 1 January 1952, and that he had supplied a copy of Exhibit P. 786 to the State Bank of India, New Delhi. He stated that Shri Dalmia had thereafter certified the copies of the resolutions that were transmitted together with the bye‑laws, and that Dalmia had also signed the covering letter dispatched to the State Bank of India together with the copies of the resolutions and the bye‑laws. Rai produced the carbon copy of the covering letter dated 4 September 1954, identified as Exhibit P. 896, and noted that the carbon copy displayed the signatures of R. Dalmia, which he identified as belonging to the accused. Rai further explained that the Imperial Bank had affixed a stamp to Exhibit P. 896 to acknowledge receipt of the original document. He added that the certified copy of the Bharat Insurance Company’s bye‑laws sent for registration to the Imperial Bank, together with the original covering letter of which Exhibit P. 896 is a carbon copy, was exhibited as P. 897 (previously marked C), and that the copy of the bye‑laws had been certified as a true copy by Rai under his own signature. When questioned under Section 342 of the Code of Criminal Procedure, R. Dalmia answered that the signature appearing on Exhibit P. 896 was indeed his. The court then quoted the content of Exhibit P. 896, which read: “The Agent, 4‑9‑54 Imperial Bank of India, New Delhi: Dear Sir, Re: Safe Custody of Government Securities. We are sending herewith true copies of Resolution No. 4 dated 10 March 1949, Resolution No. 3 dated 10 March 1949, and Resolution No. 8 …”.

The letter identified as Exhibit P. 896, dated 8 September 1951, was addressed to the Imperial Bank of India and transmitted true copies of Resolution No. 4 dated 10 March 1949, Resolution No. 3 dated 10 March 1949, and Resolution No. 8 dated 8 September 1951 together with a certified copy of the Bye‑laws of the Company for registration. In that communication the writer, R. Dalmia, stated that by virtue of Article 12, clause (e) of the Bye‑laws he was empowered to deal in Government Securities and related matters, and he also enclosed a specimen signature card of himself. By Resolution No. 4 dated 10 March 1949 Dalmia was co‑opted as a Director of the Company, and by Resolution No. ‘a’ dated 19 March 1949 he was elected Chairman of the Board of Directors. Resolution No. 8 dated 8 September 1951 recorded that the draft Bye‑laws of the Company, as signed by the Chairman for identification, were considered and approved in substitution for and to the exclusion of the existing Bye‑laws. The contents of Exhibit P. 896 therefore corroborate both the assertion of Raghunath Rai that the copy of the Bye‑laws supplied to the Bank was a certified copy and the admission of Dalmia that he was authorised, under Article 12, clause (e), to negotiate, transfer, buy, sell and otherwise deal with Government Securities. Consequently there is no doubt that the Bye‑laws shown as Exhibit P. 897 are the certified copies of the Bye‑laws passed on 8 September 1951 and were in force as of 4 September 1954. It is the Court’s view that, either because of an oversight, the draft Bye‑laws purported to be signed by Chairman Dalmia were not actually signed by him, or that such a signed copy is no longer available; in either event the Bye‑laws exhibited as P. 786 and P. 897 constitute the correct Bye‑laws of the Company. Article 12 of the Company's Bye‑laws provides that the Chairman shall exercise the powers enumerated in that article in addition to all powers delegated to the Managing Director, and clause (e) specifically authorises the Chairman to negotiate, transfer, purchase, sell, pledge, endorse, withdraw or otherwise deal with Government Securities. Article 13 sets out the powers of the Managing Director, and clause 12 of that article empowers the Managing Director to make, draw, sign or endorse, purchase, sell, discount or accept cheques, drafts, hundies, bills of exchange and other negotiable instruments in the name of and on behalf of the Company. Article 14 originally detailed the powers of the Manager; by resolution No. 4 dated 6 October 1952 the Board resolved that these powers be exercised by K. L. Gupta as General Manager and that the necessary corrections be made. Subsequently, by resolution No. 4 dated 30 August 1954, the Board empowered the General Manager to make, draw, sign or endorse, purchase, sell, discount or accept cheques, drafts, hundies, bills of exchange and other negotiable instruments in the name of the Company and to exercise all such powers incidental to the post of General Manager.

In the present case, the Court observed that the resolution of the Board of Directors had replaced the words ‘Managing Director’ in Article 12 of the Bye‑laws with the words ‘General Manager.’ Consequently, the Chairman was authorised to exercise the powers that had been conferred on the General Manager by the Bye‑laws or by any subsequent resolution of the Board. From the provisions contained in the articles of association, the Bye‑laws and the Board resolutions, it followed that both the Chairman and the General Manager possessed the authority to draw upon the company’s funds. The Court further noted that Chokhani had been given authority to operate the account of the Bharat Insurance Company at Bombay under the Board resolution dated 31 January 1951. Accordingly, both Dalmia and Chokhani held dominion over the funds of the Insurance Company. The Court then referred to the decision in Peoples Bank v. Harkishen Lal (1) where it was stated that “Lala Harkishen Lal as Chairman is a trustee of all the moneys of the Bank.” The Court also quoted Palmer’s Company Law, 20th Edition, page 517, which it said observed that “Directors are not only agents but they are in some sense and to some extent trustees or in the position of trustees.” (1) A.I.R. 1936 Lah. 468, 409. In G. E. Ry. Co. v. Turner (1) Lord Selborne was cited as having described directors as “the mere trustees or agents of the company‑trustees of the company's money and property‑agents in the transactions which they enter into on behalf of the company.” In Re. Forest of Dean etc., Co. (2) Sir George Jessel was quoted as saying that “Directors are called trustees. They are no doubt trustees of assets which have come into their hands, or which are under their control.” On the basis of these authorities, the Court expressed the view that Dalmia and Chokhani were entrusted with dominion over the funds of the Bharat Insurance Company held in the banks. The petitioners had argued that Chokhani could not be guilty of criminal breach of trust because he did not possess sole dominion over the Insurance Company’s funds, pointing out that the accounts could be operated only jointly by him and Ragunath Rai. To support this argument, they relied on the decision reported as Bindeshwari v. King Emperor (3). The Court rejected that contention, stating that the Bindeshwari case did not support the argument. The Court summarized the facts of Bindeshwari, noting that a joint‑family firm had been appointed Government stockist of food grain, that the partners Bindeshwari and his younger brother were prosecuted under section 409 of the Indian Penal Code for shortage of grain, and that the High Court, on appeal, set aside the conviction under section 409 because the entrustment of the grain had been made to the firm and not to Bindeshwari personally. The High Court instead convicted him under section 403 of the Penal Code, observing that “In my opinion, the Government rice was entrusted to the firm of which the petitioner and his younger brother were the proprietors. Technically speaking, there was no entrustment to the petitioner personally.” The Court concluded that the Bindeshwari judgment did not directly address whether a person who jointly holds dominion over property can be held liable for criminal breach of trust with respect to that property, and therefore the contention based on that case could not be accepted.

In the earlier precedent, the court observed that the grain had been entrusted to the firm rather than to the individual, and consequently the High Court convicted the petitioner of the offence under section 403 of the Penal Code. The judgment clearly recorded the rationale: “In my opinion, the Government rice was entrusted to the firm of which the petitioner and his younger brother were the proprietors. Technically speaking, there was no entrustment to the petitioner personally.” The decision therefore did not address directly the question of whether a person who shares dominion over property with another can be held liable for criminal breach of trust in respect of that property. By contrast, a Full Bench of the Calcutta High Court reached a different conclusion in Nrigendro Lall Chatterjee v. Okhoy Coomar Shaw (1). That court declared that the expression “of Section 405 of the Penal Code” is sufficiently broad to encompass a partner, provided it is shown that the partner was in fact entrusted with partnership property or exercised dominion over it and subsequently misappropriated it dishonestly or converted it to his own use. A similar view was expressed in Emperor v. Jagannath Raghunathdas (2), where Justice Beaumont held that the language of section 405 is wide enough to cover a partner who, having been given authority by the other partners to collect money or property of the firm, is entrusted with dominion over that property and thereby falls within the section if he dishonestly misappropriates it. Justice Barlee concurred with that opinion, reinforcing the notion that a partner’s authority to deal with firm assets brings the partner within the ambit of section 405 when the partner acts dishonestly.

The court further examined the effect of Raghupath Rai delivering to Chokhani blank cheques that he had signed. This act potentially placed Chokhani in sole control of the Insurance Company’s funds held in the bank, leaving no question that Chokhani possessed exclusive dominion over those funds, and thus the argument that he shared joint dominion could not be sustained. It was also argued on behalf of Chokhani that he obtained control of the company’s funds by deceiving Raghupath Rai, claiming that the blank cheques were to be used for legitimate company purposes while they were actually employed for unrelated purposes, and that this circumstance should preclude liability for criminal breach of trust. While that contention might appear plausible, the court held that Chokhani did not acquire dominion over the funds merely because Raghupath Rai had signed blank cheques. The signing of those cheques merely facilitated Chokhani’s breach of trust. Instead, Chokhani obtained control and dominion over the funds through powers conferred upon him by a resolution of the Board of Directors, which authorized both him and Raghupath Rai to operate the accounts of the Insurance Company with the Chartered Bank in Bombay. The next contention raised by the respondents was that Dalmia and Chokhani were not agents within the meaning of section 409 of the Penal Code, an issue that would be addressed subsequently.

The learned Court observed that the argument advanced by the respondents was that the term “agent” appearing in section 409 of the Indian Penal Code should be understood narrowly to mean a professional agent, that is, a person who carries on the business or occupation of agency. According to that contention, because the accused Dalmia and Chekbani did not engage in such a profession, they could not fall within the expression “agent” used in the provision. The respondents relied upon the decision in Mahumarakalage Edward Andrew Cooray v. The Queen (1953) A.C. 407, 419, a case which, in turn, endorsed the view expressed in Reg. v. Portugal (1885) 16 Q.B.D. 487. The Court noted that it would be appropriate first to examine the facts and holding in Mahumarakalage, as that case dealt with an offence alleged to have been committed under section 75 of the Larceny Act, 1861 (24 & 25 Vict. c. 96). The Court reproduced the relevant portion of that statutory provision, which 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 fund… or in any stock or fund of any body corporate, 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 … was intrusted to him, sell, negotiate, pledge … 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 Court then set out the factual background of Mahumarakalage, where the accused was employed by a firm of railway contractors to use his influence to obtain 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 £500 to open a line of credit in the name of the contractors at a bank in Paris, and he was also alleged to have mishandled another bill for £250 and other securities that had been entrusted to him for a special purpose. He was committed to trial for the offence under section 75, and, after his arrest under an extradition warrant, he was detained pending extradition to France.

The learned Court further recounted that, on behalf of the accused, it was contended that to justify his committal under the Extradition Act, the prosecution was required to produce prima facie evidence that the money and securities with which the accused was charged had been entrusted to him in the capacity of “agent,” meaning a person who carries on the business or occupation of an agent, and that they had been entrusted to him without any authority to sell, pledge, or negotiate them. The argument, therefore, focused on whether the statutory reference to “agent” in section 75 of the Larceny Act was limited to persons whose regular profession is the receipt of money, securities or chattels for safe custody or a similar special purpose, or whether it could extend to a person who, on a single occasion, performed a fiduciary function. The Court highlighted that the earlier judgment had emphasized that the phrase “other agent” in the provision was intended to cover those whose business or profession involved receiving such items for custody, and that it did not extend to individuals who do not carry on such an occupation but who might occasionally assume a fiduciary role. This reasoning was presented as authority relevant to the present question concerning the interpretation of “agent” in section 409 of the Indian Penal Code.

The Court observed that the provision which enumerates “banker, merchant, broker, attorney or other agent” limits the application of section 75 to the specific classes of persons named therein. The provision does not extend to every individual who might incidentally be entrusted with money, securities, or chattels. Rather, it applies only to those who belong to the listed categories.

The Court further explained that, in its judgment, the phrase “other agent” must be understood to refer to a person whose regular business or profession is to receive money, securities or other chattels for safe custody or for a special purpose. The term does not cover a person who does not carry on such a business or profession. The section is aimed at those who engage in occupations similar to the ones expressly listed, and not at persons who, from time to time, take on a fiduciary role without having a regular agency business.

Consequently, the Court held that the term “agent” in the section does not include a person who merely acts “in agent for another” for a single purpose concerning particular property that has been entrusted to him. A person who becomes an agent only because of the specific task assigned to him, and who is asked to deal with the entrusted property, is not covered. However, a person who, before receiving the entrustment and before being asked to act, already carries on a business or profession that involves receiving money, securities or chattels for safe custody or a special purpose, is considered an “agent” within the meaning of the provision. In other words, the individual must already be engaged in such an agency activity before the particular entrustment occurs, and then he is subsequently directed to handle the property in a specified manner.

The Court clarified that it is not essential for a person to be engaged in the profession of an agent or to have a formal agency agreement in order to fall within the scope of the section. In the case before the Court, the accused was not deemed to be an agent because his employment was limited to a specific purpose: using his influence to secure a contract for the construction of railways and docks in France on behalf of his employers. This limited assignment did not amount to making him an agent of the employers for the purpose of receiving money or other valuables.

Finally, the Court noted that in Mahumarakalage Edward Andrew Cooray’s case, the Privy Council considered an appeal involving a conviction under section 392 of the Penal Code of Ceylon. Sections 388 to 391 of the Ceylon Penal Code correspond to sections 405 to 408 of the Indian Penal Code, and section 392 corresponds to section 409 of the Indian Penal Code. Before the Privy Council, it was contended that the offence charged under section 392 was …

The judgment explained that the restriction in the earlier case applied only to a person who actually carried on an agency business and did not extend to a person who was merely and casually entrusted with money on a single occasion or on several occasions, where the evidence failed to show that he conducted an agency business. The judges expressed the view that the reasoning in Reg. v. Portugal (1) – which held that section 75 of the Larceny Act was limited to the class of persons named in that provision – was directly applicable to the present case, subject only to minor variations. They then quoted the authority verbatim: “In enunciating the construction which they have placed on section 392 they would point out that they are in no way impugning the decisions in certain cases that one act of entrustment may constitute a man a factor for another provided he is entrusted in his business 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.” The judges clarified that this observation meant the view that section 75 was confined to the class of persons mentioned therein did not affect the correctness of the view that a particular act of entrustment could make a person a factor for another, provided the entrustment was made in the course of his business as a mercantile agent. Consequently, an entrustment made while the person is acting in the capacity of a mercantile agent would render the entrusted individual a factor, that is, a member of the class of factors. The essential test for holding a person to be a factor, therefore, is that his business be that of a mercantile agent, and it is not necessary that he be a professional mercantile agent.

The judges further noted that they left open the question of what specific activity on the part of a person alleged to be an agent would demonstrate that he was carrying on the business of an agent. This clarification underscored that the emphasis was on the person’s conduct of the business of an agent rather than on his holding the profession of an agent. The cited authority (1) (1885) 16 Q.B.D, 487 supports this approach. Accordingly, the cases cited did not sustain the argument advanced by Dalmia and Chokhani that the term “agent” in section 409 of the Indian Penal Code, which corresponds to section 392 of the Ceylon Penal Code, is limited solely to those who practice the profession of agents. Instead, those authorities are precedent for the view that “agent” includes any person who belongs to the class of agents, that is, anyone who carries on the business of an agent. Moreover, the Privy Council case (1) held that the accused was not an agent. In that decision, the judges observed: “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.”

In the case that the Court referred to, the Privy Council had examined the conduct of an individual who held several prominent positions within cooperative institutions. The individual was President of the Salpiti Koral Union, an organization that supplied goods to its member societies through three depots. He also served as President of the Committee that controlled one of those depots and was Vice‑President of the Co‑operative Central Bank, which advanced money to business societies so that they could purchase their inventories. The societies repaid these advances on a weekly basis by means of cheques or money orders, except for advances of a small amount. The Central Bank deposited the money orders, cheques and cash it received into its account with the Bank of Ceylon. To manage the depot under his Committee, the President appointed a man named Ranatunga as the depot Manager. Normally the payments to the Central Bank were made through this Manager. However, the President instructed the Manager to deviate from the established procedure. Specifically, the Manager was told to collect the cash amounts from the stores and to hand the cash directly to the President for onward transmission to the Bank. The President therefore received cash from the Manager and, in place of that cash, issued his own cheques to the Central Bank. Acting as Vice‑President of the Bank, he further arranged that in certain instances the cheques would not be forwarded for collection, enabling him to misappropriate a substantial sum of money.

The Privy Council observed that the President was not entitled to receive the money in any capacity, whether as Vice‑President of the Co‑operative Central Bank, as President of the Union that controlled the depots, or as President of the Committee. Consequently, the Council held that the money was not received by him in the performance of the duties attached to any of those offices. Moreover, the Manager of the depot lacked any authority to appoint the President as an agent for the purpose of transmitting money to the Bank. The Council clarified that the reason the President was not deemed an agent was not that he was not a professional agent, but because the money was not entrusted to him in the ordinary course of his responsibilities as an office‑bearer of the various institutions.

Counsel also cited the decision in Rangamannar Chatti v. Emperor, noting that the case offered little assistance. In that matter, the accused denied knowledge of jewels that the complainant had given him for pledging, and the jewels had subsequently been pledged and redeemed. The court there concluded that the matter did not fall under section 409 of the Indian Penal Code because there was no allegation that the jewels were entrusted to the accused “in the way of his business as an agent.” The citation was therefore not persuasive for the present issue.

The Court observed that the authority cited in the earlier decision (1) (1935) M.W.M, 649, which held that the accused had acted as the complainant’s agent but was not professionally the complainant’s agent and that the transaction was not a business transaction, was not determinative of the issue before it. The Court noted that the reasons advanced in that case underscored the two points already discussed in relation to the judgment of the Privy Council in Mahumarakalag Edward Andrew Cooray’s Case (1), and therefore no further discussion of those reasons was necessary. The Court then explained the requirement of section 409 of the Indian Penal Code. According to that provision, a person alleged to have committed criminal breach of trust must have been entrusted with the property or with dominion over the property “in the way of his business as an agent.” The expression “in the way of his business” was interpreted to mean that the property must be entrusted to the person in the ordinary course of his duty, habitual occupation, profession or trade, and that the entrustment must arise from his capacity as an agent. In other words, the statutory requirement is satisfied when the person is an agent of another and the principal entrusts him with the property or with dominion over the property while the agent is performing his duties as an agent. The Court further clarified that if a person is an agent for a particular purpose but is entrusted with property for a different purpose, such entrustment does not fall within the meaning of section 409 even if a breach of trust later occurs. This interpretation does not conflict with the rulings in Reg. v. Portugal (2) or in Mahumarakalag Edward Andrew Cooray’s Case (1), and it is consistent with the fact that the section also contemplates entrustment of property to a public servant in his official capacity. The Court emphasized that the phrase “in the way of his business” is used instead of “in his capacity” to make clear that mere entrustment of property in the capacity of an agent is not sufficient to elevate the breach of trust to the higher offence contemplated by sections 406 to 408 of the Indian Penal Code. The criminal breach of trust by an agent becomes a more serious offence only when the agent is entrusted with property not merely in his capacity as an agent but also in connection with the performance of his duties as an agent. The Court refrained from speculating on the legislature’s motives for imposing a harsher punishment for breach of trust by an agent compared with breach of trust by a servant. The Court observed that an agent ordinarily acts as the principal’s representative, enjoys greater authority in dealing with the principal’s property, and therefore faces a higher risk of misappropriating the property if he so intends, while the likelihood of his detection is comparatively lower. Nevertheless, the Court affirmed that its interpretation of the expression “in the way of his business” is supported by the ordinary meanings of the words “business” and “way,” as reflected in standard dictionaries.

The Court observed that the meaning of the phrase “in the way of” and the individual words “business” and “way” could be derived from standard dictionary definitions, which it reproduced for convenience. It noted that “in the way of” is defined as “of the nature of, belonging to the class of, in the course of or routine of” according to the Shorter Oxford English Dictionary, and also as “in the matter of, as regards, by way of” in Webster’s New International Dictionary, second edition, unabridged. The term “business” was explained as “occupation, work” by the Shorter Oxford English Dictionary, and further described as “mercantile transactions, buying and selling, duty, special imposed or undertaken service, regular occupation” in Webster’s New International Dictionary, second edition, unabridged, as well as “duty, province, habitual occupation, profession, trade” in the Oxford Concise Dictionary. The word “way” was rendered as “scope, sphere, range, line of occupation” in the Oxford Concise Dictionary. The Court then turned to the facts concerning the parties. It recorded that Chokhani had been appointed as an agent of the Bharat Insurance Company on 31 January 1951, a fact he himself admitted in a statement made under section 342 of the Criminal Procedure Code. The Court stated that Chokhani had signed several cheques in his capacity as the company’s agent and was referred to in certain documents as the agent of the company. Likewise, Dalmia, who served as a Director and Chairman of the company, was also an agent of the company. The Court quoted the twentieth edition of Palmer’s Company Law, page 513, which explains that a company can act only through agents, and that the persons who carry out or supervise the company’s business are usually termed directors. The same source, on page 515, was cited to affirm that directors are, in the eyes of the law, agents of the company and that the general principles of principal‑agent law govern the relationship between a company and its directors. The Court further cited the decisions in Gulab Singh v. Punjab Zamindara Bank and Jasuwant Singh v. V.V. Puri, which held that a director is an agent of the company. Consequently, the Court concluded that both Dalmia and Chokhani, being agents of Bharat Insurance Company, exercised control over the company’s securities and funds in the capacity of agents. If either of them committed a criminal breach of trust with respect to those securities and funds, they would be liable under section 409 of the Indian Penal Code. Considering the Court’s view that both individuals were agents within the meaning of section 409, and that they were entrusted with dominion over the company’s funds held in banks, which falls within the definition of “property” under that section, the Court held that they would commit the offence of criminal breach of trust if they dealt with that property in any manner described in section 405. The Court then indicated that it would proceed to discuss the detailed nature of the transactions alleged to be part of the conspiracy, while noting that it was not necessary to set out the details of every impugned transaction.

In order to illustrate how the alleged scheme of diverting the funds of the Insurance Company to the Union Agencies was implemented, the Court described the initial transactions. In early August 1954 the Union Agencies incurred losses in their share‑speculation business. Share brokers sent statements of accounts dated 6 August 1954 to Chokhani, demanding a sum of Rs 22,25,687‑13‑0 in respect of those losses. The total cash assets of the Union Agencies in all its banks and offices at Bombay, Calcutta and Delhi were only Rs 2,67,857‑11‑7, which meant that the Agencies required a large amount of money both to meet the immediate demand and to cover anticipated future liabilities arising from the losses. At this critical juncture, telephone communications were recorded between the individuals identified as Dalmia and Chokhani. The calls originated from telephone number 45031, Dalmia’s line at 3 Sikandara Road, New Delhi, and were placed to Bombay number 33726, Chokhani’s line. Two calls were made on 7 August 1954, three on 8 August, two on 11 August, and one each on 13 and 14 August. No record existed of the content of those conversations. The Court noted that the timing of the calls coincided with the period when the alleged diversion of funds was first being set in motion, but declared that, in the absence of any evidence concerning the substance of the discussions, the calls represented only a circumstance that could not be regarded as conclusive proof of wrongdoing.

Subsequently, on 7 and 9 August 1954 the Punjab National Bank in Bombay received telegraphic transfers from Delhi of Rs 2,00,000 and Rs 3,00,000 respectively, deposited into the account of the Union Agencies. On the same day, Vishnu Prasad, the appellant, opened an account with the Bank of India in Bombay in the name of Bhagwati Trading Company. In the account opening form he represented himself as the sole proprietor and described the company’s business as “merchants and commission agents”. He made an initial deposit of Rs 1,100, which he claimed had been supplied to him by Chokhani. On 11 August 1954 Vishnu Prasad made another deposit of Rs 1,100, again stating that the amount had been provided by Chokhani, this time as the first deposit in a separate account he opened with the United Bank of India in Bombay, also in the name of Bhagwati Trading Company. In that account opening form the business of the company was described as “merchants, piece‑goods dealers”. The Court observed that there was no dispute that Bhagwati Trading Company did not actually carry on any business as either merchants and commission agents or as merchants and piece‑goods dealers. Vishnu Prasad asserted that he acted solely on instructions from Chokhani and was unaware of the nature of the transactions conducted in the company’s name. Nevertheless, the Court found from the pattern of the accounts and the dealings of the company that its principal purpose was to facilitate the movement of the Insurance Company’s funds to the Union Agencies in a manner that would be difficult to detect.

It was recorded that the principal purpose of the scheme was to channel the funds of the Insurance Company to the Union Agencies in a manner that would prevent easy detection of such transfers. Chokhani explained that he undertook the business because the Union Agencies required money at that time. He believed that the Union Agencies would eventually earn a profit and would thereafter reimburse Bhagwati Trading Company for the purchase of securities. Accordingly, he delayed the dates of delivery of the securities to the Insurance Company. He further stated that, if necessary, he could raise money by selling or mortgaging the shares of the Union Agencies under a power of attorney that he held on their behalf. The Court then examined the actual transactions that were carried out to meet the demands arising from the losses of the Union Agencies. On 9 August 1954, Chokhani purchased three‑percent securities for the years 1963‑65 having a face value of Rs 22,00,000 on behalf of the Insurance Company from the brokers Naraindas and Sons. Simultaneously, he entered into a reciprocal agreement with the same brokers for the sale of securities of identical value on behalf of Bhagwati Trading Company. He informed the brokers that the purchase price would be paid by the Insurance Company to Bhagwati Trading Company, which would then receive the securities. In effect, the brokers were left with only their commission fee, as the securities themselves were not transferred to them.

A similar arrangement was repeated on 11 August 1954, when Chokhani again purchased three‑percent securities for the years 1963‑65, this time with a face value of Rs 5,00,000, on behalf of the Insurance Company, and arranged for the sale of the same securities by Bhagwati Trading Company to the brokers. It was noted that Chokhani habitually conducted such “usual purchase” transactions, both for the Insurance Company and for Bhagwati Trading Company, using the same pattern for payment of the purchase price and delivery of the securities. Although the securities were never delivered to the Insurance Company by Bhagwati Trading Company, Chokhani nevertheless made payment of the purchase price out of the Insurance Company’s funds. On 11 August 1954, Chokhani received from the brokers a statement of account for the purchase of securities worth Rs 22,00,000. The total cost calculated on that statement was Rs 20,64,058‑6‑9. Chokhani settled this amount by issuing two cheques in favour of Bhagwati Trading Company—one for Rs 10,00,000 and a second for the balance of Rs 10,64,058‑6‑9. These cheques were drawn using signatures that had already been provided by Raghunath Rai, in accordance with the arrangement for facilitating transactions on behalf of the Insurance Company. On 12 August 1954, a separate statement of account relating to the purchase of securities worth Rs 5,00,000 was received, showing a cost of Rs 4,69,134‑15‑9. Chokhani paid this amount by issuing a cheque in favour of Bhagwati Trading Company. All of the cheques mentioned were drawn on the Chartered Bank, Bombay.

Vishnu Prasad drew two cheques on August 12 1954. The first cheque was for nine lakh rupees drawn on the United Bank of India against the account of Bhagwati Trading Company, and his father Bajranglal collected the proceeds. The second cheque was for nine lakh sixty thousand rupees drawn on the Bank of India, Bombay, also against the Bhagwati Trading Company account, and Vishnu Prasad himself collected that amount. The combined total of eighteen lakh sixty thousand rupees was handed over to the Union Agencies through Chokhani on the same day. Subsequently Chokhani distributed the received funds by depositing seven lakh rupees each in the Union Agencies’ accounts with the Bank of India and the United Bank of India, and four lakh forty thousand rupees in the Union Agencies’ account with the Punjab National Bank Ltd., Bombay. The Punjab National Bank had already received two earlier deposits for the Union Agencies – two lakh rupees on August 7 and three lakh rupees on August 9, 1954, both transferred from Delhi.

Between August 9 and August 19, 1954, Chokhani used the Union Agencies’ funds to pay brokers for losses incurred by the agencies. He issued cheques totalling nine lakh thirty‑seven thousand four hundred seventy‑three rupees and five paisa and nine annas from the Punjab National Bank account between August 9 and August 13. On August 13, he issued further cheques from the United Bank of India account of the Union Agencies in favour of Bombay brokers amounting to seven lakh forty thousand eighty‑eight rupees, five paisa and nine annas. In addition, between August 13 and August 19, he drew a cheque for six lakh eighty‑four thousand eight hundred thirty‑three rupees, fourteen annas, zero paisa from the Bank of India in favour of the Bombay share brokers to cover the same losses. Chokhani communicated these securities purchases, valued at twenty‑seven lakh rupees, to the Delhi head office by a letter dated August 16, 1954, enclosing the contract note and broker statements. The letter did not disclose that the payments had been made to Bhagwati Trading Company, nor did it mention the arrangement for obtaining the securities from that company or any postponement in delivery. Upon receiving the letter, Raghunath Rai contacted Dalmia, who confirmed that the securities had been bought under his instructions; Rai then forwarded the letter to the office where routine entries and records were made. Formal confirmation of the purchases was recorded on August 30, 1954, when the Board of Directors approved the transactions and an office note stating that the securities were purchased on the Chairman’s (Dalmia’s) instruction was prepared. This office note, identified as Exhibit P. 793, concerning the twenty‑seven lakh rupee purchase, bore the signature of Chordia, then Managing Director of the Bharat Insurance Company. On August 16, 1954, Vishnu Prasad withdrew further funds, as noted in the continuing record.

Vishnu Prasad stated that he withdrew Rs 2,200 from the Bhagwati Trading Company’s account with the Bank of India. He then gave this amount to Chokhani in return for the sum Chokhani had earlier advanced to open accounts for Bhagwati Trading Company with the Bank of India and United Bank of India. Thereafter, any money remaining in Bhagwati Trading Company’s accounts with those banks represented funds obtained through transactions carried out on its behalf. The majority of those funds originated from the Bharat Insurance Company. On 18 August 1954, Vishnu Prasad withdrew Rs 50,000 from Bhagwati Trading Company’s account with the Bank of India and transferred the amount to the Union Agencies through Chokhani. Five days later, on 23 August 1954, he withdrew Rs 90,000 from the United Bank of India account and Rs 5,10,000 from the Bank of India account of Bhagwati Trading Company. He again passed both sums to the Union Agencies through Chokhani. Chokhani issued cheques totaling Rs 5,88,380‑13‑0 between 23 and 26 August 1954. These cheques were drawn on the Union Agencies’ account with the Chartered Bank, Bombay, and were payable to the brokers to compensate the losses suffered by the Union Agencies. In total, Chokhani withdrew Rs 25,33,193‑6.6 from the Bharat Insurance Company’s account and transferred it to Bhagwati Trading Company. Out of that amount, Rs 25,10,000 was paid to the Union Agencies, which primarily used the funds to meet its losses. The Union Agencies subsequently incurred additional losses of approximately Rs 23,00,000. Demands for payment from the brokers were received beginning on 3 September 1954 and continued in the following days. At that time, the Bharat Insurance Company did not have sufficient liquid funds in the banks at Bombay. Consequently, it was necessary to deposit money in the bank before any withdrawals could be made, ostensibly to pay for securities to be purchased. During this period, the usual transactions involving the sale of securities held by the insurance company and the purchase of other securities were carried out. The details of these transactions are set out below. On 4 September 1954, securities with a face value of Rs 17,50,000 that were held by the insurance company were removed from its safe‑custody account with the Imperial Bank of India, New Delhi. The removal was effected by a letter marked Exhibit P. 1351 and signed by Dalmia. These securities comprised Rs 10,00,000 of 2‑1/40% 1954 issue and the balance of 2‑1/2% 1955 issue. They were subsequently sent to Bombay where they were sold. On 9 September 1954, Rs 6,25,000 was transferred by telegraphic transfer from Delhi to the insurance company’s account with the Chartered Bank, Bombay. This transfer increased the balance of the insurance company’s funds in the Chartered Bank to an amount sufficient to cover the Union Agencies’ losses of about Rs 23,00,000. The securities issued in 1954 were scheduled to mature on 15 November 1954, whereas the 1955 securities had a much later maturity date. No apparent reason was given for the premature sale of the 1955 securities.

In this case the Court set out a detailed chronology of transactions that were carried out in early September 1954 involving securities held by the Insurance Company. On 6 September 1954 Chokhani purchased government securities bearing a 3 percent interest for the years 1959‑61 with a face value of 2,500,000 rupees from the brokers M/s Naraindas & Sons, acting on behalf of the Insurance Company. A corresponding sale of similar securities by Bhagwati Trading Company to the same brokers was recorded, and the procedures that had been used in August 1954 for acquiring securities worth 2,700,000 rupees were repeated in this September purchase. Subsequently, on 9 September 1954 Chokhani issued two cheques drawn on the Insurance Company’s account with the Chartered Bank—one for 1,500,000 rupees and another for 920,875 rupees—payable to Bhagwati Trading Company. Bhagwati Trading Company deposited the cheque amounts into its account with the Bank of India in Bombay. Through Chokhani, Vishnu Prasad transferred 24,000,000 rupees to the Union Agencies; this sum was employed to meet the Agencies’ losses to the extent of 22,81,738‑2‑0 rupees. In addition, 75,000 rupees were paid to Bennett Coleman Co. Ltd., a company of which Dalmia was a director, and 15,000 rupees were deposited in the Punjab National Bank. The record showed that telephone communications took place between Dalmia’s residence in New Delhi and Chokhani’s office in Bombay during the period from 4 September to 10 September 1954, comprising two calls on 4 September, one on 5 September, three on 6 September and one on 10 September. During the month of September the Union Agencies suffered further losses estimated at about 1,000,000 rupees. Because the accounts of the Union Agencies and those of the Insurance Company in Bombay did not contain sufficient balances to cover these losses, another set of security sales and purchases was effected. On 21 September 1954 securities bearing a 3 percent interest for the year 1957, with a face value of 1,000,000 rupees, held by the Insurance Company in its safe‑custody deposit with the Chartered Bank in Bombay, were sold and the net proceeds of 9,84,854‑5‑6 rupees were credited to the bank.

On the same day Chokhani purchased additional 3 percent securities for the years 1959‑61 with a face value of 1,000,000 rupees on behalf of the Insurance Company, following exactly the same procedure that had been applied in the earlier purchases. The Court observed that after the brokers sent a demand on 17 September 1954 for payment of the losses, no further telephone communication was recorded between Delhi and Bombay. It was inferred that the steps required to effect the fictitious purchase of securities, to transfer the necessary funds to Bhagwati Trading Company, and to ensure that the Insurance Company’s account with the Chartered Bank in Bombay retained a sufficient balance had already been decided in the previous transactions, presumably after consultations between Dalmia and Chokhani. The Court therefore attached significance to the earlier telephone conversations that had occurred between Delhi and Bombay during the critical period of August and early September 1954, viewing those communications as pivotal to the coordination of the series of transactions intended to meet the Union Agencies’ financial shortfall.

To complete the full picture, the Court described the measures taken to conceal the fact that securities bought at the proper time had not actually been received. By 19 November 1954, Chokhani had purchased securities with a total face value of about Rs 80,00,000 on behalf of the Insurance Company, but those securities had not been forwarded to the head office in Delhi. Raghunath Rai brought the matter to Dalmia’s attention, and after receiving Dalmia’s approval, he dispatched a letter on 19 November 1954 to Chokhani requesting the distinctive numbers of the securities in question; the letter is reproduced as Exhibit P.805. The securities concerned were a 3 percent loan of 1959‑61 with a face value of Rs 35,00,000, a 3 percent loan of 1963‑65 with a face value of Rs 27,00,000, and a 2‑3/40 percent loan of 1960 with a face value of Rs 18,00,000. Following this request, stock certificates relating to the 3 percent 1963‑65 securities of Rs 27,00,000 and to the 2‑3/40 percent 1960 loan securities of Rs 18,00,000 were eventually received in Delhi.

The Court then turned to the transactions that produced those stock certificates. The interest dates for the 3 percent 1963‑65 securities bought in August 1954 fell on 1 June and 1 December. Because the Insurance Company needed to either obtain the securities or execute a paper sale before 1 December, failure to do so would have exposed the absence of an income‑tax deduction certificate from the Reserve Bank, thereby revealing that the Insurance Company did not actually hold the securities. Consequently, Chokhani entered into a genuine purchase contract for the 3 percent 1963‑65 securities, valued at Rs 27,00,000, on behalf of Bhagwati Trading Company with Devkaran Nanjee, Brokers, Bombay, on 3 November 1954. He instructed the brokers to endorse the securities in the name of the Insurance Company even though the securities were being sold to Bhagwati Trading Company. The endorsed securities were received on 24 November 1954 and were converted into an inscribed stock certificate—exhibited as P.920—by the Reserve Bank of India on 7 December 1954. The stock certificate omitted the purchase date, a fact that could conceal the reality that the securities had not been bought in August 1954, contrary to the entries in the Insurance Company’s books.

The Court observed that the Insurance Company did not openly pay for these shares; instead, a partial payment was made through another share‑purchase transaction. To enable Bhagwati Trading Company to meet the purchase price, Chokhani transferred Rs 16,00,000 to Bhagwati from the Bharat Union Agencies account held with banks in Bombay, and an additional Rs 10,08,515‑15‑0 from the Insurance Company’s account with the Chartered Bank. This latter sum was supplied by means of a fictitious purchase of 2‑1/2 percent 1961 securities with a face value of Rs 11,00,000 on behalf of the Insurance Company. The Court noted that those 2‑1/2 percent 1961 securities formed part of the scheme used to disguise the actual movement of funds and the true timing of the securities’ acquisition.

Chokhani bought securities worth Rs 11,00,000 on November 16, 1954, following a method that was essentially the same as the one used for the purchases made in August and September of 1954, which had already been discussed. The interest on the 2‑3/4 percent loan of 1960, whose face value was Rs 18,00,000, was scheduled to become payable on January 15, 1955. Because it was necessary to obtain an interest certificate and because the auditors who were to audit the Insurance Company’s accounts for the year 1954 were expected to examine the securities, it became essential to either acquire those securities or to dispose of them. Consequently, on December 9, 1954, Chokhani purchased 2‑3/4 percent securities of 1960 having a face value of Rs 18,00,000 on behalf of Bhagwati Trading Company; the purchase price was paid from the funds of the Union Agencies and Bhagwati Trading Company. Although the purchase was made in the name of the Insurance Company, the securities were endorsed in that name. Chokhani obtained the securities around December 21, 1954, and had them transformed into stock certificates, which were then forwarded to the head office in Delhi.

At that stage, there still remained securities of the 3 percent issue of 1959‑61 with a face value of Rs 35,00,000 that needed to be accounted for. Those securities had been bought in September 1954, as previously mentioned, but had not been received by the end of December. On December 27, 1954, Chokhani bought 2‑3/4 percent securities of 1962 with a total face value of Rs 46,00,000, arranging the purchase 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 brokers for the sale of those securities on behalf of the Union Agencies. This transaction, like the earlier ones, was fictitious; the securities were never actually received from the Union Agencies.

On the same day, Chokhani also executed a contract to sell the 3 percent securities of 1959‑61, worth Rs 35,00,000, on behalf of the Insurance Company, and simultaneously entered into a cross‑contract on behalf of the Union Agencies to purchase those same securities from the brokers. Because the Insurance Company did not possess those securities, these were merely paper transactions. The Court noted that there was no need to detail the flow of money between the parties in connection with these transactions. For audit purposes, the 1959‑61 securities of Rs 35,00,000 had been shown as sold, while the 2‑3/4 percent securities of 1962, worth Rs 46,00,000, appeared to have been purchased. The auditors could therefore request inspection of these newly‑acquired securities. To address this possibility, Chokhani arranged yet another purchase, this time a genuine transaction, for 2‑3/4 percent securities of 1962 having a face value of Rs 46,00,000, which was entered into on January 1, 1955. The purchase price for this transaction was funded by selling 3 percent securities of 1957, also worth Rs 46,00,000, which the Insurance Company actually held. To facilitate the sale, Chokhani withdrew securities with a face value of Rs 8,25,000 from the Chartered Bank in Bombay and the remaining amount was dealt with accordingly.

In the transactions described, securities valued at thirty‑seven lakh seventy‑five thousand rupees were dispatched from Delhi to Bombay. After arrival, those securities were transformed into inscribed stock. Consequently, the Insurance Company was alleged to have acquired 2‑3/4 % 1962 securities with a face value of ninety‑two lakh rupees, reflecting earlier purchases of securities worth four lakh sixteen thousand rupees in December 1954 and forty‑six lakh rupees in January 1955. At the relevant time, the Insurance Company possessed securities amounting to only forty‑six lakh rupees, and the inscribed stock certificate relating to that amount was intended to substantiate the existence of another set of securities of equal value, namely another forty‑six lakh rupees. These series of transactions were regarded as indicative of the scheme employed by Chokhani in effecting the purchase and sale of securities on behalf of the Insurance Company. The Court observed that the transactions did not serve the interests of the Insurance Company; rather, they benefited the Union Agencies, since the funds were supplied to the Insurance Company to cover its losses. Moreover, the method adopted—withdrawal of the Insurance Company’s funds ostensibly to pay for the purchase price of securities after the interest‑payment deadline, followed by the sale of those securities, without actual recovery of the amount from the Union Agencies or Bhagwati Trading Company before the next interest‑payment date—was not advantageous to the Insurance Company. When the sale price could not be met from the Union Agencies’ or Bhagwati Trading Company’s resources, Chokhani, ostensibly on the Insurance Company’s behalf, entered into a new purchase transaction involving securities that were never received, thereby creating the appearance of repayment of the earlier funds, although the repayment was effected from the same funds withdrawn from the Insurance Company for the purpose of paying the purchase price of the newly purported securities.

Turning to the evidentiary record, the principal statement relied upon by the lower courts to infer that Dalmia possessed the requisite criminal intent was that of Raghunath Rai, who served as Secretary‑cum‑Accountant of the Bharat Insurance Company. Counsel for the appellant, Dingle Foot, advanced several objections. First, he argued that Raghunath Rai was an accomplice of the alleged conspirators; if not, he was at best a witness whose testimony should not be accepted without adequate corroboration, which the appellant claimed did not exist. Second, the appellant contended that the lower courts erred in accepting Rai’s statements that favored the prosecution without subjecting them to critical scrutiny. He asserted that the courts overlooked Rai’s statements favorable to the accused, reasoning that Rai was under an obligation to Dalmia, and that the courts ignored statements inconsistent with his earlier testimony because he had not been confronted with them during cross‑examination. The appellant further explained that an accomplice is a person who participates in the commission of the crime charged against an accused and must be a participant in the crime. He noted, however, that jurisprudence recognized two situations in which a person could be deemed an accomplice even without being a direct participant in the criminal act.

In the case being considered, persons who receive stolen goods were treated as accomplices of the thieves from whom they obtained the property during a theft trial. The Court noted that when an accused has previously committed similar offences, evidence of those earlier crimes may be admitted to demonstrate a pattern and the accused’s intent in the offence now charged, as explained by the Director of Public Prosecution in Davies (1). The argument that Raghunath Rai functioned as an accomplice rested primarily on two factual assertions. First, Rai had failed to produce the cheque counterfoils that auditors had requested for inspection, even though those counterfoils should have arrived in Delhi during the audit period. Second, the alleged conspirators could not have executed their scheme without Rai’s assistance in signing blank cheques that Chokhani later issued. The Court observed, however, that merely signing blank cheques did not, by itself, constitute proof of complicity, because the bank account required joint operation by both Chokhani and Rai. Rai needed to sign the blank cheques to avoid delays in payments and to prevent occasional transaction failures. No malicious intent could be inferred from Rai’s signing of the cheques on the basis that he expected Chokhani to use them properly. The counterfoils had not been produced, and there was no evidence that they revealed the true circumstances, namely that the cheques had been issued to Bhagwati Trading Company rather than to the brokers who purchased the securities. It was not anticipated that the name of Bhagwati Trading Company would appear on the counterfoils, given that its involvement was meant to remain hidden from the head office. When a request for the counterfoils was made in August 1955, the documents were not received from Bombay. Chokhani claimed that he never received the letter concerning the request. Moreover, the Court noted that counterfoils typically reached the head office after a considerable delay, and there was no specific reason for Rai to examine them upon receipt. Rai did not state in his testimony that he routinely reviewed the counterfoils when the cheque books came to him for further signatures. Consequently, the Court did not concur with the view that Rai was an accomplice. Even assuming that Rai’s testimony required corroboration regarding Dalmia’s role, the Court indicated that other circumstances discussed later in the judgment provided sufficient corroboration. Rai had made a statement, Exhibit P. 9, before Annadhanam on 20 September 1955, and he later gave court statements that differed from that earlier statement. The variation between the statements was not taken into account when assessing Rai’s credibility, because he had not been cross‑examined on those differences.

In this case, the Court examined the argument presented by counsel for the petitioner, Mr Dingle Foot, who contended that the variations between the statements given by the witness Raghunath Rai significantly weakened his credibility. He observed that the inconsistencies were not brought out during cross‑examination because the defence had focused on a general attack on the witness’s veracity rather than on any particular point. Mr Dingle Foot further urged that, under section 155 of the Indian Evidence Act, any prior inconsistent statement of a witness, if proved, could be used to impeach his credit, and therefore the trial courts were wrong to ignore the inconsistencies merely because they had not been placed before the witness in cross‑examination. In response, the learned Solicitor General argued that section 155 is governed by section 145, which requires that a prior inconsistent statement be put to the witness in order to be admissible for impeachment, and consequently such statements could not be used against the witness if they were not put to him. The Court considered that it was unnecessary to decide the precise theoretical relationship between the two sections, because it concluded that the particular inconsistent statements identified were not material for undermining Raghunath Rai’s credit. The Court listed the specific discrepancies: first, the witness had previously declared, “I never of my own accord send securities to Bombay nor am authorised to do so,” yet in court he testified that he had indeed sent certain securities to Bombay on his own initiative because those securities were redeemable there and their maturity date was approaching. Second, before the Administrator the witness asserted that a board resolution authorized Chokhani to deal with the securities and that Chokhani always acted on the chairman’s instructions; however, in court he later claimed that no such board resolution existed authorising Chokhani to purchase or sell securities. The Court noted that Dalmia did not treat this as a false statement, observing that the board had indeed debated whether to authorize Chokhani to conduct such transactions, so the earlier statement could have been made in that context. Third, the witness claimed that roughly one and three‑quarter “chores” of securities were sent to Bombay between April and June 1955, a period later corrected to July‑August 1955; the witness admitted this error and explained that his original figure was given to Annadhanam without reference to the books. Fourth, he stated that securities were sent to Chokhani in Bombay through a representative of Dalmia, a description that was inaccurate because securities were also dispatched by post. The Court therefore held that, taken together, these inconsistencies did not amount to a significant attack on the witness’s credibility.

When advice concerning securities was received, the officer responsible for the advice would go to Dalmia on the following day in order to obtain Dalmia’s confirmation of the contract for purchase or sale of the securities. After receiving Dalmia’s approval, vouchers were prepared to record the purchase of the securities and to credit the sale proceeds to the account of the Insurance Company held with the Chartered Bank, as the circumstances required. Kashmiri Lal and Ram Das, who were in charge of preparing those vouchers, explained the steps they followed once advice was received, but they made no mention of Raghunath Rai seeking Dalmia’s confirmation of the purchase transactions. Consequently, their testimony does not, as the appellants have suggested, contradict the statement made by Raghunath Rai. Mr Dingle Foot argued that it was unusual to delay the accounting entries for a day after advice had been received, asserting that the entries should have been made on the same day and that the clerks’ delayed entries therefore conflicted with Raghunath Rai’s version. The Court observed that a witness cannot be contradicted by first assuming that a particular procedure must have occurred in a manner not testified to by any witness, and then finding inconsistency with that witness’s statement. Moreover, the Court held that there was no reason to object to making consequential entries upon receipt of advice about a securities purchase if the purchase itself had not been approved and was subsequently cancelled; such entries would pertain to the investments of the Insurance Company and not to abortive transactions carried out by its agents. It was also contended that, if Dalmia’s confirmation was required, it was extraordinary that no written record of his confirmation of the purchase or sale of securities existed in the office. The Court found no merit in that objection. If confirmation was indeed necessary, the fact that entries were made after the advice was received is sufficient evidence that the transaction was confirmed by the officer, because without such confirmation the transaction could not have been considered complete. Further, office notes indicating that securities had been purchased or sold “under instructions of the Chairman” were prepared for the Board of Directors’ meetings where the purchase and sale matters were presented. The mention in those notes that the securities were bought under the Chairman’s instructions serves as the record of the alleged confirmation. Although the Board’s minutes on the confirmation of the purchase and sale do not state that action was taken based on the office notes, the minutes on other matters do refer to those notes, which demonstrates that the notes were indeed prepared. The Court therefore concluded that confirmation of the purchase and sale of the shares was a formal matter dealt with in accordance with the established procedure.

For the Board, all of the office notes were signed by Raghunath Rai except a single note identified as Exhibit P. 793. That particular note bore the signature of Chordia and was dated 18 August 1954. The note states that certain shares had been purchased “under instructions of the Chairman.” Because Chordia was a relative of Dalmia, the Court found that he had no motive to fabricate the phrase “under instructions of the Chairman.” The Court further observed that the note could not be regarded as an ordinary routine entry, since the authority to purchase and sell securities was vested in Chordia in his capacity as Managing Director of the company. Clause (4) of Article 13 of the Bye‑laws expressly empowered the Managing Director to transfer, buy and sell Government securities. Consequently, when the Managing Director, Chordia, recorded in the office note that the securities were purchased under the Chairman’s instructions, the statement could be accepted as a genuine factual assertion. Although Chordia was not examined as a witness to testify directly about receiving such instructions from Dalmia, the Court held that this omission was immaterial. The note had already been linked to Raghunath Rai’s testimony that office notes were prepared after Dalmia declared that a particular purchase of shares was made under his instructions. The Court therefore proceeded to consider the statements of Raghunath Rai, which were alleged to be favorable to the accused.

Raghunath Rai was cross‑examined regarding several letters he had sent to Chokhani. In his deposition dated 29 July 1958, he recounted that Dalmia had accepted his suggestion to write to Chokhani requesting the distinctive numbers of securities that had been purchased but not yet received at the head office. Rai further explained that, after reporting Chokhani’s failure to communicate those numbers, he advised Dalmia to call Chokhani and ask him to send the securities to the head office, an advice to which Dalmia consented. These interactions occurred in November and December 1954. The Court noted that Dalmia’s assent to the suggestion did not aid his defence, because it was unlikely that he could have declined the recommendation. Rai also testified that, in September or October 1954, a discussion took place among him, K.L. Gupta and Dalmia concerning the low interest yield on the Insurance Company’s investments. It was proposed that the funds be placed in securities, shares and debentures. Dalmia is reported to have expressed confidence only in Government securities, stating that he would instruct Chokhani to invest the Insurance Company’s funds in the purchase and sale of such securities. However, Rai denied that Dalmia had indicated that the investment decisions were to be left to Chokhani’s discretion, and he added that Chokhani was not authorized to buy or sell securities for the Insurance Company unless he received explicit authorization from the Chairman. Accordingly, the Court concluded that Rai’s statement did not support the proposition that Dalmia had empowered Chokhani to act independently in purchasing or selling securities. Another statement

In this case, it was asserted that a statement of Raghunath Rai appeared to be favourable to Dalmia because, according to Rai, he told the auditors on 9 September 1955 that the securities which were then unavailable were in the possession of C Bokhani at Bombay, from whom advice concerning their purchase had been received. By contrast, Annadhanam testified that Rai had informed him that Dalmia would provide an explanation of the securities that had not been produced before the auditors. The Court observed that there was no basis for preferring Rai’s version over the statement made by Annadhanam. Annadhanam’s letter, identified as Exhibit P.2, stated that they had been informed that after the purchase in March 1954 the securities were kept in Bombay under the custody of Chokhani. That information, the Court noted, related to what was communicated in the first week of January 1955 and not to what Rai claimed to have said on 9 September 1954.

Rai further claimed that on one or two occasions, instead of approaching Dalmia directly, he spoke with Dalmia over the telephone about the purchase and sale of securities by Chokhani. He alleged that Dalmia told him by telephone that he had been instructed to carry out the purchase and sale of securities and that he was confirming those transactions. The Court held that this assertion did not genuinely aid Dalmia, because Rai nevertheless maintained that Dalmia had confirmed the purchase or sale reported to him. Whether the confirmation occurred by telephone or in person was deemed immaterial to the issue.

During cross‑examination of the Administrator, Mr Rao, questions were posed that suggested Rai was a reliable witness and that attempts to win him over had failed. It was suggested to the Administrator that Sundara Rajan had been appointed as the Administrator’s Secretary in order to conceal certain matters from Rai. The Administrator responded by giving alternative reasons for the appointment. Another suggestion was that Rai had offered to retire but had kept that offer pending because of the ongoing case; this suggestion was also denied.

The cross‑examination further revealed that Rai could have been influenced by the Administrator. Rai had been using the official car, but the Administrator stopped that use in January 1956. Rai did not receive any conveyance allowance for that period. In April 1958, Rai made a representation to the Administrator requesting payment of the allowance. The Administrator issued an order in May 1958 granting the allowance retrospectively from January 1956, setting the amount at Rs 75 per month. Rai could not provide a satisfactory explanation for remaining silent about his claim for more than two years, although he denied that the retrospective allowance was intended to win him over to the prosecution.

Finally, Rai applied for an extension of his service at the end of 1956 or the beginning of 1957. In accordance with the resolution passed by the Board of Directors on 17 August 1954, his service was extended up to the year 1961. The Administrator then forwarded the application for further consideration.

The application was forwarded to the higher authorities, but the issue remained unresolved as of 29 July 1958. At that time, the gratuity and provident‑fund balance held by the Insurance Company for the employee amounted to Rs 35,000. The Court observed that there was no basis to conclude that the Administrator sought to influence the employee’s testimony, nor that the Administrator acted improperly by granting the allowance retrospectively. Moreover, the Court held that the Administrator would not have taken the same step with respect to the employee’s gratuity had the employee not produced statements that were favourable to the prosecution.

On 29 July 1958, the employee testified that in July 1955 he had informed Dalmia that most of the securities were located in Bombay while the remainder were in Delhi. Dalmia then instructed him to write to Chokhani requesting that all the securities be deposited in the Chartered Bank at Bombay. The employee replied that, if the buying and selling of securities were to continue as before, depositing them in the bank would be useless because it would attract frequent heavy withdrawal charges. He suggested that the securities could be placed in the bank only if the trading were to be halted altogether, and Dalmia subsequently directed that the securities be sent to Delhi in mid‑December 1955 for audit inspection.

During re‑examination on 30 July, the employee clarified that the conversation described above actually took place on 14 July 1955. He added that a further discussion with Dalmia occurred in August 1955 concerning the same matter. The Public Prosecutor, with the Court’s permission, asked him why he had to meet Dalmia a second time. The employee explained that the second meeting was necessary because securities purchased in May 1955 and those bought in July and August 1955 had not yet arrived at the head office. He said he had requested Dalmia to order Chokhani either to deposit all the securities in the Chartered Bank or to forward them to the head office. Dalmia responded that the trading of securities would continue for some time, so the issue of depositing them in the bank or sending them to the head office did not arise immediately, and that the securities should be dispatched to the head office in December 1955.

This sequence shows a material alteration in the employee’s testimony. On 29 July 1958, he disputed Dalmia’s instruction to write to Chokhani to place the securities in the bank, arguing that such a step would create heavy withdrawal charges if trading were not stopped. Yet, on the following day, he acknowledged that he himself had suggested in August 1955 that Chokhani be instructed either to deposit all the securities in the bank or to send them to the head office. He denied that this change in his statement resulted from any pressure exerted by the police. The Court noted that the cross‑examination was intended to highlight the inconsistency in his evidence.

The Court examined the allegation that the police had approached Raghunath Rai between the close of his examination on 29 July 1958 and his further examination on 30 July 1958. Rai admitted in court that after giving his evidence he went to a room allotted in the Court building to the Special Police Establishment, where the Investigating Officer and the Secretary to the Administrator of the Insurance Company were present. He said he entered the room in order to retrieve certain papers that he had kept there. He further stated that he did not bring any papers on 30 July because, according to him, his principal cross‑examination had already been concluded. Rai denied that the police had dictated any notes to him for answering questions in the cross‑examination, denied that he remained with the police until 9 p.m., and denied that the Secretary to the Administrator had threatened to forfeit his gratuity if he failed to make a statement favourable to the prosecution. The Court observed that there was no reason for the police to exert pressure on Rai to introduce a false conversation in August. Between 14 July 1955 and the middle of August 1955, the head office became aware of the purchase of securities with a face value of Rs 74,00,000, and again, on or about 26 August, of the purchase of securities with a face value of Rs 40,00,000. Consequently, a further conversation in August was most likely as deposed. The essential fact remained that Dalmia had said that the securities should be sent in December 1955, which implied his knowledge of the transactions in question. The Court opined that the discrepancies or contradictions highlighted in Rai’s statement were not sufficient to discredit him or to render him an unreliable witness, and that he was not shown to be under the influence of the prosecution. Moreover, Rai’s various statements linking Dalmia with the crime found corroboration in other evidence. Letter Exhibit P‑1351 dated 4 September 1954 was sent to the Imperial Bank of India, Delhi Branch, bearing Dalmia’s signature as Chairman and directed the bank to deliver certain securities to the bearer. Dalmia admitted his signature on this document and also on Letter Exhibit P‑1352 acknowledging receipt of the securities sent, thereby corroborating Rai’s statement that the securities were withdrawn under his instructions. Letters Exhibit D‑3 dated 16 March 1955 and Exhibit P‑892 dated 5 August 1955, both from Rai to Chokhani, mentioned that the stock certificates were being sent under the Chairman’s instructions. These letters corroborated Rai’s court statements concerning the dispatch of the stock certificates on Dalmia’s directions. Rai had no reason to use that wording if he were sending them on his own. Although the exact date on which the Chairman gave the instruction was not proved, it was reasonable to infer that the stock certificates would have been dispatched soon after receipt of the Chairman’s instruction.

It could not be presumed that in the type of transactions described there would be a delay so long as to render the letters cited ineffective as corroborative evidence under section 157 of the Evidence Act, which allows previous statements made at or about the time a fact occurred to be used to support the testimony given in Court. The statement made by Chokhani that he deliberately omitted the name of Bhagwati Trading Company in his correspondence with the head office because he did not want Dalmia to become aware of the dealings with Bhagwati Trading Company indicates that, in ordinary business practice, the information contained in those letters would ordinarily have been communicated to Dalmia. Consequently, this admission tends to reinforce Raghunath Rai’s assertion that he visited Dalmia after receiving the statement of account and informed him of the purchase or sale of the securities. Chokhani’s testimony displayed inconsistency regarding Raghunath Rai’s later knowledge of the existence of Bhagwati Trading Company. In response to question number 66 on 13 November 1958, he declared, “I did not contradict the statement made in Exhibit P 813 that cheque number B564809 dated 17‑11‑54 had been issued in favour of Narain Das and Sons, although that cheque had in fact been issued in favour of Bhagwati Trading Company and not in favour of Narain Das and Sons because those at the Head Office did not know anything about Bhagwati Trading Company.” When later questioned under number 149 on 14 November 1958, he said, “I did not mention the name of Bhagwati Trading Company in my letters addressed to the Head Office of the Bharat Insurance Company as the party with whom there were cross contracts because Raghunath Rai would not have known what Bhagwati Trading Company was. I also did not mention the name of Bhagwati Trading Company in my letters to the Head Office of the Bharat Insurance Company because I did not want Shri Dalmia to know that I was having dealings with Bhagwati Trading Company. I also want to add that Raghunath Rai must have known that the cross‑contracts were with Bhagwati Trading Company because the name of Bhagwati Trading Company was mentioned as the payee on the counterfoils of the cheques issued in favour of Bhagwati Trading Company.” These remarks demonstrate that Chokhani attempted, on 13 November, to retract or modify his earlier statement, yet his mind remained divided, leading to further contradictory statements on 14 November 1958. He found himself in a difficult position, trying simultaneously to show that Dalmia was unaware of Bhagwati Trading Company and to establish that Raghunath Rai had sufficient knowledge to be considered an accomplice, a position also advocated by Dalmia. The Court may now address the case of Chokhani, the appellant. Chokhani has admitted that he entered into various purchase and sale transactions and that he established Bhagwati Trading Company for the convenience of executing a scheme intended to divert the funds of the Insurance Company.

In this case, the appellant contended that he had never intended to cause any loss to the Insurance Company and that he was unaware that arranging funds for the Union Agencies from the Insurance Company violated any law. He argued that he acted without dishonest intention and therefore did not commit any of the offenses with which he had been charged and later convicted. Counsel for the appellant raised two principal arguments in addition to several points of law previously urged by counsel for the respondent. First, the counsel asserted that the various purchase and sale transactions entered into by the appellant were ordinary, genuine commercial dealings and that there was no evidence showing that he acted dishonestly in carrying out those transactions. Secondly, the counsel pointed out that the High Court had not recorded any finding on the issue of dishonesty, even though such a finding was necessary, and that this point had not been seriously pressed by the respondent. To support the view that the purchase‑sale dealings were genuine commercial transactions, the counsel submitted that, in order to meet the losses sustained by the Union Agencies, the appellant was in a position to either sell the shares held by the agencies or to raise the necessary money on the agencies’ credit. The appellant chose not to sell the shares because they were valuable and because their sale would have adversely affected the credit standing of the Union Agencies. The appellant further claimed that in September 1954 he had been instructed that the yield from the Insurance Company’s investments was unsatisfactory and that the funds should therefore be invested in securities. According to the appellant, these instructions were given at a time when he was authorized by the respondent’s principal, Dalmia, to purchase and sell securities on behalf of the Insurance Company. The appellant also suggested that the instructions might actually have been issued in 1953 rather than in 1954, when Dalmia was traveling abroad. Relying on this perceived authority, the appellant decided to adopt a course of action that would allow him to invest the insurance money in securities while also assisting the Union Agencies.

Continuing his argument, the appellant submitted that it was not necessary to inform the head office about the involvement of Bhagwati Trading Company because the Insurance Company would suffer no loss and the head office was only required to be aware of the sale and purchase transactions. He further maintained that his payment of the purchase price in anticipation of the delivery of the securities was made in good faith. The Court, however, had already expressed the view that the transactions connected with the investment of the Insurance Company’s funds were not bona‑fide purchase‑and‑sale transactions. The Court observed that the dealings were undertaken with a specific purpose, namely to serve the interests of the Union Agencies rather than those of the Insurance Company. The Court emphasized that the purpose of the transactions was to create a mechanism for drawing on the Insurance Company’s funds, rather than to effect a legitimate purchase of securities. The Court noted that the mere fact that the non‑delivery of securities within a reasonable period after the purchase money had been paid rendered the brokers or Bhagwati Trading Company, or both, potentially liable in a civil action, did not alter the essential character of the transactions. Accordingly, the Court held that such civil liability could coexist with criminal liability for the appellant if the transactions were indeed devised as a device to divert the Insurance Company’s funds. Consequently, the Court found that the appellant’s actions fell within the definition of breach of trust because he diverted the funds in contravention of the prescribed manner of handling such money. The Court concluded that the transactions were motivated by the desire to assist the Union Agencies and were not intended to benefit the Insurance Company, thereby supporting the finding of criminal liability.

The Court observed that the conduct could amount to a breach of trust. The offence of breach of trust, the Court explained, did not arise from the mere fact that Chokhani entered into the sale‑and‑purchase agreements. Rather, the breach was founded on his payment of money out of the insurance company’s funds to the Union Agencies through Bhagwati Trading Company, a payment that contravened the manner in which he was authorised to deal with those funds. The Court held that the purchase‑and‑sale agreements functioned only as a device to draw on the insurance company’s monies. The Court expressed doubt that Chokhani genuinely intended to acquire the securities, even though he did purchase some securities in certain circumstances, and rejected the proposition that the failure to deliver the securities amounted merely to a slight postponement. No justification had been offered for any concession to the seller, and the period during which the purchased securities remained undelivered far exceeded what could be regarded as a reasonable time for the delivery of securities that were supposed to be ready for transfer.

The Court further noted that, even if it were true that the insurance company suffered no monetary loss from the purchase‑and‑sale transactions and the transfer of its money to the Union Agencies, such a fact did not render the transaction honest. The gain realised by the Union Agencies from the insurance company’s money constituted a wrongful gain, for the Union Agencies were not entitled to profit from that money. The Court affirmed the principle that a person acts dishonestly when he intends to cause wrongful gain to another or wrongful loss to a third party. It defined wrongful gain as profit obtained by unlawful means of property to which the person is not legally entitled, and wrongful loss as loss inflicted by unlawful means on property to which the person is legally entitled.

Addressing the argument that Chokhani’s concealment of Bhagwati Trading Company from the Delhi authorities might have stemmed from nervousness or fear rather than a guilty conscience, the Court rejected that suggestion. It stated that Chokhani had nothing to fear if he had been acting honestly and, in his own view, had done nothing wrong. The Court also considered the contention that Chokhani’s acts amounted merely to a mixing of the insurance company’s funds with those of the Union Agencies. The Court disagreed with this characterization, concluding that the situation was not a simple commingling of funds but rather a transfer of the insurance company’s funds to the Union Agencies.

Finally, the Court observed that the administrator’s failure to cancel any contract entered into on behalf of the insurance company, despite having powers under section 52(c) of the Insurance Act, did not imply that every such contract served the insurance company’s interest. The administrator had admitted that he was uncertain about the legal status of those contracts. The Court noted that this point formed part of the legal issues raised for consideration.

In the earlier part of the judgment the Court had already examined the issues concerning the Delhi Court’s authority to try the various offences, and it had also analyzed the meaning of the terms “property”, “dominion” and “agency” appearing in section 409 of the Indian Penal Code. The remaining matters that were raised before the Court concerned two specific points. First, it was argued that the offence alleged under section 477A of the Indian Penal Code could not be said to have been committed in furtherance of the alleged conspiracy. Second, it was contended that the conduct described did not stem from a single conspiracy but rather from several distinct conspiracies. The charge under section 477A was founded on a series of letters that the accused, Chokhani, had sent from Bombay to Delhi. In those letters he indicated that he had entered into contracts for the purchase of securities and that cheques had been issued in payment to the brokers. Although the letters did not expressly state that the cheques had been handed to the brokers, the Court held that this was the necessary implication because the letters referred to the contracts and the accompanying statements, which related only to the transactions between the Insurance Company and the brokers. The letters made no reference to any separate contracts that might have existed between the brokers and Bhagwati Trading Company. It was further submitted that any payment made to Bhagwati Trading Company was made in the capacity of an agent of the brokers. The Court found that there was no evidence to show that the brokers had appointed Bhagwati Trading Company as their agent for that purpose. The record showed that, following Chokhani’s representation that the Insurance Company would pay Bhagwati Trading Company and obtain the securities from that company, the brokers neither received the price nor delivered the securities. Moreover, the argument that Chokhani could not be deemed a “servant” of the Insurance Company for the purposes of section 477A, because that provision makes it an offence for a clerk, officer or servant to engage in certain conduct, was rejected. The Court observed that Chokhani was indeed a servant of the Insurance Company, since he acted as its agent and received remuneration for performing work in that capacity. The fact that he was also a full‑time servant of the Union Agencies did not preclude him from simultaneously being a servant of another company or employer.

The Court further rejected the contention that the case involved several independent conspiracies, each arising to cover separate losses as they occurred. It held that the conspiracy had been formed at the beginning of August 1954, when circumstances arose that required funds to be provided to the Union Agencies in order to meet their losses. The conspiracy was intended to persist until the point at which it could be reasonably anticipated that such a situation would no longer arise. Whenever a similar loss presented itself, the conspirators took comparable steps to meet it, and the identity of purpose and method was evident in all the transactions. Consequently, all of those transactions were to be regarded as having been carried out in furtherance of the original conspiracy. After dealing with the matters relating to Chokhani, the Court turned to the case of Vishnu Prasad, the appellant, who was the sole proprietor of Bhagwati Trading Company. His principal defence was that he was unaware of the various transactions entered into by Chokhani on behalf of Bhagwati Trading Company and that it was Chokhani who maintained the books of accounts and effected those transactions. The lower courts had concluded that Vishnu Prasad possessed knowledge of the transactions and the nature of the conspiracy, and the Court agreed with that view, finding that sufficient material on record demonstrated his awareness and participation in the conspiracy.

In this case, the Court observed that Chokhani acted on behalf of Bhagwati Trading Company and that Chokhani was responsible for maintaining the company’s books of account and for entering into the transactions that formed the subject of the controversy. The lower courts had concluded that Chokhani possessed full knowledge of those transactions and understood the nature of the alleged conspiracy. The Court concurred with that conclusion, finding that the record contained sufficient material to demonstrate both Chokhani’s awareness of the scheme and his active participation in it. The Court further noted that Bhagwati Trading Company was established at the exact time when the Union Agencies were experiencing losses and were unable to meet their financial obligations. Consequently, the Court held that a necessity arose for Dalmia and Chokhani to devise methods for raising funds to meet those losses.

According to the evidence, Vishnu Prasad opened two bank accounts in Bombay on August 9 and August 11, 1954, each account receiving a deposit of Rs 1,100. Vishnu Prasad testified that the money deposited in those accounts originated from Chokhani. The Court found that the deposited sums were withdrawn shortly thereafter and returned to Chokhani, and that no additional contributions were made to the funds of Bhagwati Trading Company on Vishnu Prasad’s part. The Court observed that the company’s operations depended primarily on funds received from the Insurance Company, and therefore Vishnu Prasad could not be characterized as entirely innocent with respect to the formation of the company or the nature of its business. In response to Question 24 of the examination, Vishnu Prasad declared, “I started business in the name of Bhagwati Trading Company in 1953, or beginning of 1954… however did no business in the name of that company. G. L. Chokhani stated that I should do business for the purchase or sale of securities.” In answer to Question 26, he claimed ignorance of Chokhani’s entry into contracts on behalf of the Bharat Insurance Company for the purchase of securities and of the corresponding cross‑contracts with the same brokerage for the sale of those securities on behalf of Bhagwati Trading Company, while simultaneously admitting that he knew Chokhani was conducting purchase and sale of securities for Bhagwati Trading Company. He further expressed lack of knowledge regarding any future purchase contracts for securities on behalf of the Insurance Company and related cross‑contracts for sale on behalf of Bhagwati Trading Company.

Nevertheless, at the close of that same day, Vishnu Prasad made an additional statement concerning Question 24, asserting, “I want to state that I did not start business of Bhagwati Trading Company in 1953 or the beginning of 1951 but only intended to start that business.” The Court held that this later statement could not be accepted, as it clearly indicated an attempt by Vishnu Prasad to distance himself from responsibility for the company’s inception, contrary to his earlier admissions. The Court emphasized that Bhagwati Trading Company did, in fact, come into existence and apparently conducted business, rendering the latter denial untrue. Moreover, Vishnu Prasad’s answer to Question 157 demonstrated that he was aware that Chokhani had engaged in share speculation business at Bombay, although he claimed ignorance of the specific company for which that business was conducted. The Court concluded that the totality of Vishnu Prasad’s statements, combined with the factual record, revealed his participation in the scheme that diverted funds of the Insurance Company to the Union Agencies.

Vishnu Prasad was engaged in a share‑speculation activity in Bombay. He asserted that he was unaware on whose behalf he conducted that activity. The Court examined the actual role he played in the series of transactions that facilitated the diversion of funds belonging to the Insurance Company to the Union Agencies. The record showed that Vishnu Prasad received several cheques that had been issued in the name of the Insurance Company, cashed those cheques, and then handed over the cash proceeds to Chokhani. Chokhani, in turn, transferred the money to the Union Agencies. In addition, after the cheques drawn by the Insurance Company in favour of Bhagwati Trading Company had been lodged in the bank, Vishnu Prasad issued further cheques on behalf of Bhagwati Trading Company payable to Bharat Union Agencies. Some of those cheques addressed to the Union Agencies were completed by Vishnu Prasad himself, indicating that he was conscious that the sums were being forwarded to the Union Agencies. Moreover, Vishnu Prasad personally deposited a number of the cheques drawn on behalf of Bhagwati Trading Company in favour of the Union Agencies. These facts rendered the claim that he was ignorant of the destination of the monies untenable.

The Court therefore could not accept the contention that Vishnu Prasad did not realise that the amounts received by Bhagwati Trading Company from the Insurance Company were represented as payments for securities sold to the Insurance Company, especially since the declared business of Bhagwati Trading Company was precisely the purchase and sale of securities. He was also aware that the majority of those receipts were subsequently passed on to the Union Agencies. Even if he had initially lacked knowledge of the specific nature of the business that generated the inflows and outflows of funds, the circumstances ought to have placed him on inquiry. The Court noted that the Insurance Company was not likely to purchase securities with such regularity; a reasonable enquiry would have revealed the character of the receipts and payments. The Court was inclined to conclude that Vishnu Prasad must have known the true nature of the transactions and that it was implausible for him to have remained completely unaware. The fact that Bhagwati Trading Company was started while Vishnu Prasad was not involved in any other enterprise suggests that he showed an ongoing interest in the company’s operations for over a year, during which he received and disposed of large sums of money. It was therefore unreasonable to expect that he made no effort to understand the requirements of a business engaged in buying and selling securities, an effort that would inevitably have disclosed that securities were being purchased on behalf of the Insurance Company without delivery, that Bhagwati Trading Company bought no securities from the Union Agencies, and that payments made by Bhagwati Trading Company to the Union Agencies were not justified by any contractual liability.

It was held that the sum paid by the Insurance Company was for a liability that Bhagwati Trading Company was not required to discharge. Consequently, Vishnu Prasad must have been aware that the Insurance Company was sending money for a purpose that did not correspond to any genuine debt owed by Bhagwati Trading Company. Moreover, the majority of those funds were subsequently transferred to the Union Agencies, a payment for which Bhagwati Trading Company also bore no responsibility. The overall effect of the transactions, whereby money was received from the Insurance Company and then passed on to the Union Agencies, was to facilitate the diversion of the Insurance Company’s funds to the Union Agencies. On this basis, the Court concluded that Vishnu Prasad was correctly found to be a participant in the conspiracy.

The Court then turned to the matter of the appellants, Dalmia. While Dalmia did not dispute that the Bharat Insurance Company’s funds had been diverted to the Union Agencies, he contended that he was unaware of the actions undertaken by Chokhani in raising money to cover the Union Agencies’ losses. The Court, however, found ample evidence that Dalmia possessed full knowledge of the scheme and was an active party, as the transactions were executed under his direction and assent. The relevant facts establishing Dalmia’s involvement are as follows. First, Dalmia had a clear motive to devise a method for offsetting the Union Agencies’ losses. Second, he personally oversaw the share‑trading operations of the Union Agencies in both Calcutta and Delhi and was therefore informed of their financial deficits. Third, there was a high frequency of telephone communications between Dalmia and Chokhani during the period when the losses occurred and remedial steps were being considered, especially in August and September of 1954 when the scheme was initiated, and again in July and August of 1955 during a phase of heavy, recurring losses. Fourth, Dalmia informed the Imperial Bank in Delhi on September 4 1954 of his authority to handle securities and withdrew securities on that same day; those securities were soon sold in Bombay and the proceeds were used to cover the losses. Fifth, the Insurance Company’s office gradually retained an increasing amount of securities, which correspondingly reduced the deposits of securities held in banks. Sixth, when the funds available in Delhi were insufficient to meet the losses, securities held by the Insurance Company were transferred from Delhi to Bombay. Seventh, the purchase and sale of securities during the relevant period to meet the losses were carried out under Dalmia’s instructions. Eighth, there was a marked increase in the practice of converting securities into inscribed stock certificates, a tactic employed to conceal the interval between the purchase date of the securities—when they had not yet been received—and the later date on which they were reclaimed. Ninth, Dalmia displayed annoyance and resentment on September 9 1955 when auditors conducted an unexpected inspection of the Insurance Company’s office and requested to view the securities. These facts collectively demonstrate Dalmia’s knowledge of, and participation in, the scheme designed to divert funds and cover the Union Agencies’ losses.

Auditors entered the office of the insurance company unexpectedly and demanded to inspect the securities that were held there. On the fifteenth of September 1955, Dalmia’s behaviour was noted by the auditors, and it was observed that he did not attend a scheduled meeting with Mr Kaul on the sixteenth of September 1955. Instead of appearing personally, he dispatched relatives to convey a statement that was neither complete nor accurate, even though, according to his own admissions, he already possessed the full facts at that time. In addition, Dalmia’s written confession on page ten, together with the statement set out on exhibit page eleven, and the declaration he made to Annadhanam indicated that he had been carrying on a speculative business in shares under the name of the Union Agencies.

The prosecution relied on the argument that the entire alleged conspiracy had been devised for the sole advantage of Dalmia. It was submitted that it was not reasonably possible for such a conspiracy to have been formed without Dalmia’s knowledge or consent. The charge of conspiracy framed against him identified the object of the alleged plot as “meeting losses suffered by R Dalmia in forward transactions, of speculation in shares, which transactions were carried on in the name of the Bharat Union Agencies Limited.” The charge under section 409 of the Penal Code further alleged dishonest utilisation of the funds of the insurance company. This aspect of the case was examined from several angles, the first being Dalmia’s ownership of the entire shareholding of the Union Agencies, or at least a substantial portion of it, which placed him in a position to control the remaining shareholders.

To understand the significance of this claim, the Court set out the share‑holding pattern of the Union Agencies. The company had been incorporated in Bombay on 1 April 1948 as a private limited corporation, with its registered office in Bombay and a branch office at 10 Daryaganj, Delhi, which was also the location of the head office of the Bharat Insurance Company. The authorised capital of the Union Agencies was five lakh rupees. In 1949 the company had issued a total of two thousand shares. Of these, Dalmia held twelve hundred shares, the Dalmia Cement & Paper Marketing Company Ltd. held six hundred shares, Shriyans Prasad Jain, the brother of S P Jain, held one hundred shares, and Jagat Prasad Jain held the remaining one hundred shares. The same distribution of shares persisted through 1950. In 1951 Dalmia continued to hold twelve hundred shares while the other eight hundred shares were held by Govan Brothers. This arrangement remained unchanged in 1952. In the first half of 1953 Dalmia increased his holding to eighteen hundred shares, and Govan Brothers raised theirs to one thousand two hundred shares, bringing the total number of issued shares to three thousand. This share structure continued unchanged up to 21 September 1954. On 22 September 1954 an additional two thousand shares were issued to S N Dudani, a nominee of Asia Udyog, raising the total issued capital to five thousand shares, of which Dalmia held eighteen hundred, Govan Brothers one thousand two hundred, and Dudani two thousand. Subsequently, on 4 October 1954, R P Gurha and J S Mittal each received one hundred shares transferred from Govan Brothers, resulting in a share distribution of Dalmia eighteen hundred, Govan Brothers one thousand, Dudani two thousand, Gurha one hundred, and Mittal one hundred out of the total five thousand issued shares.

After the issuance of shares to R. P. Gurha and J. S. Mittal on 4 October 1954, the shareholding pattern became as follows: Dalmia held 1,800 shares, Govan Brothers held 1,000 shares, Dudani held 2,000 shares, Gurha held 100 shares, and Mittal held 100 shares, making a total of 5,000 issued shares. It was alleged that Dalmia transferred his entire holding of 1,800 shares to a person identified as L. R. Sharma on 30 October 1954. The record of Sharma’s holding of 1,800 shares appeared in return Exhibit P. 3122, which was filed by the Union Agencies concerning share capital and shares as of 31 December 1955. This return was lodged with the Registrar of Companies in January 1956 for the financial year 1955. The same return indicated that the transfer to Sharma had taken place on 31 January 1955. Consequently, the alleged sale of shares in October 1954 was not reflected in the return that should have been filed for the year 1954, suggesting that the transfer was recorded only after the deadline for the 1954 filing had passed.

A brief overview of the individuals involved was provided. Dalmia served as a director of Govan Brothers Ltd. Upon his resignation, O. P. Dhawan, an accountant in the Delhi office of the Union Agencies, succeeded him. Dalmia was also employed by another firm called Asia Udyog Ltd. Another director of Govan Brothers Ltd. was D. A. Patil, who acted as an income‑tax adviser for Dalmia’s enterprises. During a search of Dalmia’s residence on 25 November 1955, share certificates belonging to the Marketing Company in the name of Govan Brothers Ltd. and three blank share‑transfer forms signed by S. N. Dudani, then secretary of Govan Brothers Ltd., were seized. Dudani was Dalmia’s personal accountant and the manager of the Delhi office of Bharat Union Agencies. The lower courts inferred from these circumstances that Govan Brothers Ltd. was effectively under Dalmia’s control, a conclusion deemed reasonable. No satisfactory explanation was offered as to why the share certificates and the blank transfer forms, which bore the name of Govan Brothers Ltd., were found in Dalmia’s home.

Dudani also held the position of secretary of Asia Udyog Ltd., a company that appears to be a sister concern of the Union Agencies. Asia Udyog was previously known as Dalmia Jain Aviation Ltd. It installed a telephone line at one of Dalmia’s residences in January 1953, and its offices occupied the same room as those of the Union Agencies. Dhawan, who replaced Dalmia as director of Govan Brothers Ltd., was employed by Asia Udyog. Gurha acted as the accountant of Asia Udyog while simultaneously serving as a director of the Union Agencies, and he exercised authority over the staff of both companies. J. S. Mittal was a director of the Union Agencies and held 100 shares in that company as a nominee of Govan Brothers Ltd. from 4 October 1954.

In the record, it was noted that about thirty‑first January 1955, one thousand shares were held as nominee of Crosswords Ltd. Furthermore, L N Pathak, R B Jain and G L Dalmia were authorized to conduct banking operations on behalf of both the Union Agencies, Calcutta, and Asia Udyog Ltd. with the United Bank of India, Calcutta. The Court observed that the issue and subsequent transfer of Union Agencies shares during September and October 1954 appeared intended to satisfy a claim presently advanced by the State that Dalmia was the principal shareholder of that company. The same reasoning seemed to have prompted Dalmia to transfer shares to an individual named Sharma. The Sessions Judge rejected the oral claim that a sale occurred in October 1954 because the entry recorded in Exhibit P‑3122 and the entries in a comparable return for the year 1954 did not corroborate such a transaction. The lack of documentary support was held capable of reinforcing the allegation that Dalmia possessed knowledge of irregular transactions that had been underway since early August 1954.

The learned Sessions Judge based his conclusion that Dalmia was effectively identical with Bharat Union Agencies on several factual circumstances. First, the speculative business of Dalmia Cement and Paper Marketing Co. Ltd., whose paid‑up capital was almost wholly owned by Dalmia, was taken over by Bharat Union Agencies upon liquidation, and many of the same individuals who managed Dalmia Cement and Paper Marketing subsequently operated Bharat Union Agencies. Second, the then‑accountant of Bharat Union Agencies, Dhawan, together with the brokers dealing with the firm, regarded Bharat Union Agencies as Dalmia’s concern. Third, Chokhani, who held power of attorney for both Dalmia and Bharat Union Agencies, informed brokers that the business he was assigning from Bharat Union Agencies was, in fact, Dalmia’s business. Fourth, the salaries of Dalmia’s personal and domestic staff were paid by Bharat Union Agencies and recorded as debits to the company’s Salaries Account, thereby treating Dalmia’s staff as employees of Bharat Union Agencies. Fifth, transactions carried out in Dalmia’s name with Jagdish Jagmohan Kapadia were recorded as business of Bharat Union Agencies. Sixth, funds belonging to Bharat Union Agencies were utilized to satisfy a personal obligation undertaken by Dalmia; the purchase price of shares bought in Dalmia’s name was paid from those funds and entered in Bharat Union Agencies’ books as an investment. Seventh, when Dalmia’s sister‑in‑law required money, a loan was extended to her from Bharat Union Agencies without any interest being charged in the company’s accounts. It was strongly contended by counsel that the opinions expressed by certain individuals regarding the character of Union Agencies, or the statements made by Chokhani, could not be used as evidence to equate Dalmia with the Union Agencies. The Court noted this objection but held that it was unnecessary to pursue the point for the purpose of the present finding.

In examining the evidence, the Court observed that the statements of certain witnesses could not be used as proof against Dalmia on the specific issue of whether he could be identified as being the same person as the Union Agencies. The Court noted that it was unnecessary to address the legal objection raised on this point because the objection was not essential for reaching a finding on the matter. Nevertheless, the Court remarked that, on the face of it, there was no legal impediment to admitting the remarks made by Chokhani to some individuals in which he said that the Union Agencies was the business of Dalmia. The Court explained that Chokhani possessed authority to act for both Dalmia and the Union Agencies because he held a power of attorney from each of them. Consequently, his comments could be regarded as those of an agent speaking in the normal course of business. The Court further stated that it had examined the reasons for the other findings recorded by the learned Sessions Judge and affirmed by the High Court, and was of the view that those findings were correct. The Court concluded that those findings inevitably led to the inference that there was no distinction between Dalmia and the Union Agencies, and that whenever it suited Dalmia or served the interests of the Union Agencies, a transaction carried out by one could be treated as having been carried out on behalf of the other. The Court did, however, point out one particular matter for consideration. Dalmia admitted that he had purchased shares of Dalmia Jain Airways having a face value of six hundred thousand rupees from Anis Haji Ali Mohammad, and that he had done so in his own name although the true purchaser was the Union Agencies. The purchase was effected in his capacity as the seller, and his solicitor had declined to execute the sale in the name of the Union Agencies. The Court found this explanation unsatisfactory, noting that the seller’s concern was only to receive the purchase money, irrespective of in whose name the sale was recorded. Counsel for the respondent, Mr. Dingle Foot, argued that these various facts only demonstrated a strong association between Dalmia and the Union Agencies and did not establish that Dalmia’s identity was completely merged with that of the Union Agencies, a requirement for the particular charges. The Court observed that Dalmia’s alleged identity with, or substantial interest in, the Union Agencies was presented as a motive for alleged conspiratorial conduct to raise funds to cover the Union Agencies’ losses by diverting the insurance company’s funds, an act that would constitute criminal breach of trust. The Court noted that Dalmia admitted giving instructions concerning the Union Agencies’ business in 1954 at a time when he was not a director of the company, and again in 1955 when he was not even a shareholder. Dalmia’s own statement to Annadhanam on 20 September 1955 was cited as supporting this conclusion; in that statement he told Annadhanam that he had lost money in speculation through his private companies and that most of those speculative transactions had been carried out through the Union Agencies. Finally, the charge alleged that Dalmia had committed criminal breach of trust of the insurance company’s funds by

In the charge it was alleged that Dalmia had willfully caused Chokhani to dishonestly misappropriate the funds of the Insurance Company and to use or dispose of those funds contrary to the legal provisions and the implied contract that existed between Dalmia and the Insurance Company, which prescribed the manner in which the trust was to be discharged. The charge under section 409 of the Indian Penal Code described the alleged dishonest misappropriation as occurring by the withdrawal of the monies from banks through cheques made payable to Bhagwati Trading Company and by the subsequent deployment of those monies for the purpose of meeting losses that Dalmia claimed to have suffered in forward share transactions carried out in the name of Bharat Union Agencies, as well as for other purposes that were unrelated to the affairs of the Insurance Company. In interpreting this description, the Court emphasized that the phrase “for meeting losses suffered by Dalmia in forward transactions in shares carried on in the name of Bharat Union Agencies and for other purposes not connected with the affairs of the said Bharat Insurance Company” must be read as referring to the alleged losses of the Union Agencies and not to personal losses allegedly suffered by Dalmia himself. Accordingly, the Court expressed the view that, first, the evidence was sufficient to conclude that Dalmia and the Union Agencies could be regarded as interchangeable entities; second, even if such interchangeability could not be formally established, Dalmia possessed a strong motive for breaching trust because of his close and intimate relations with the Union Agencies; and third, that this finding of motive did not undermine the ability to establish an offence under section 409 of the Indian Penal Code against Dalmia, despite the charge describing the use of the money in a slightly different way. The Court further observed that the entire scheme of the transactions must be traced to the person or persons who would stand to suffer if the Union Agencies failed to meet its losses in a timely manner. It was undisputed that, at the outset, the Union Agencies as a corporate entity would be the primary party to suffer damage to its credit and its operations. The Court found that Dalmia was so closely connected with the Union Agencies that he could be said to function as a sole proprietor of that company. Consequently, any deterioration in the credit standing of the Union Agencies would cause Dalmia a substantial loss, given that the Union Agencies were commonly regarded as his concern and that he exercised control over a number of business undertakings and held a significant stake in the commercial world. The Court noted that Dalmia’s prestige and creditworthiness would be severely affected by a loss of confidence in the Union Agencies in the market. The record also contained evidence that a defaulter who failed to repay losses promptly would experience a loss of credit and might be unable to persuade brokers to enter into contracts with him. Finally, it was suggested that Chokhani might have a greater interest in ensuring that the Union Agencies did not suffer a loss of credit.

The Court held that Union Agencies had not experienced a loss of credit, and it expressly rejected the opposite allegation. The Court explained that, had Union Agencies lost its market credit because it could not meet its losses, then Mr G L Chokhani would have been at risk of losing his employment with the agency, which would have meant a loss of only a few hundred rupees per month. The Court further observed that such a loss need not have occurred because Mr Chokhani could have remained in the service of Mr R K Dalmia, who had great confidence in him and whom he had faithfully served for a long period. As an agent of Mr Dalmia, Mr Chokhani possessed market credit of his own. The Court noted that evidence of his good reputation existed, but it was largely derived from his association with Mr Dalmia and the various business concerns of Mr Dalmia, and that the credit he enjoyed was essentially reflected glory. The Court stated that Mr Chokhani had no personal interest in the matter, unlike Mr Dalmia. Accordingly, the Court found the suggestion that Mr Chokhani might be responsible to be unsound and concluded that Mr Dalmia alone was required to devise means to meet the losses of Union Agencies.

The Court recorded that Mr Dalmia admitted giving instructions concerning the share‑speculation business of Union Agencies in Calcutta and Delhi during 1954 and 1955. In answer to question No 210, Mr Dalmia affirmed that the Delhi Office of Union Agencies supplied funds to meet losses arising from that speculation business in both cities. He recounted a telephone communication from R P Mittal in Calcutta, in which Mr G L Chokhani reportedly informed Mr Mittal that the Bombay Office would arrange funds for the losses suffered by the Calcutta Office of Bharat Union Agencies. The Court noted Mr Dalmia’s statement that, in his knowledge, if the Bombay Office was unable to provide full funds for the Calcutta losses, the Delhi Office of the company would step in to supply those funds.

Further, in answer to question No 211, which dealt with the evidence that the Delhi Office of Union Agencies had been short of liquid funds from August 1954 onward and throughout 1955, Mr Dalmia said that he was aware that Bharat Union Agencies held a very large number of shares, although he did not know the names of the companies whose shares were held or the exact quantities. Mr Dalmia also admitted that he knew Mr Chokhani had entered into a contract for the forward sale of Tata shares in Bombay on behalf of Union Agencies during 1954 and 1955, and that Union Agencies suffered losses on that transaction, but he claimed not to know the precise extent or details of those losses. The Court emphasized that Mr Dalmia was expected not merely to know that Union Agencies had incurred losses, but also to be aware of the magnitude of those losses.

It was necessary for the person in charge to either devise a plan or at least to be aware of the methods by which the losses suffered by the Union Agencies would be covered. The Court observed that a mere vague awareness, as the witness claimed, that the Union Agencies possessed a large number of shares could not satisfy the requirement that the losses would be successfully met. The witness did not deny that the Delhi Office of the Union Agencies was short of liquid funds and that it regularly supplied money to meet those losses. Moreover, if the witness’s statement that Mittal had communicated with him were correct, the situation would be that whenever the Bombay Office of the Union Agencies found itself unable to meet its losses, the Bombay officer, Chokhani, would not independently arrange funds but would first turn to the Delhi Office for assistance. If the Delhi Office itself could not meet the shortfall, it would necessarily have to obtain instructions from the senior manager, Dalmia. From this chain of events, the Court concluded that Dalmia, either acting alone or in consultation with Chokhani, had devised the scheme of transactions that resulted in the diversion of the Insurance Company’s funds to the Union Agencies, and that the scheme was implemented with the assistance of the other appellants. Both the appellant representing Chokhani and the appellant representing Dalmia argued that the Union Agencies could have obtained the necessary money by means other than diverting the Insurance Company’s funds. The Court held that it was unnecessary to examine whether the shares held by the Union Agencies at that time could have been sold to raise the money or whether Dalmia’s credit could have instantly attracted funds. Those alternatives were not pursued. The Court noted that selling the shares owned by the Union Agencies might have damaged its credit rating, and a business engaged in share‑speculation would generally avoid actions that could impair its market standing.

The record also showed that Dalmia had been in telephonic contact with Chokhani during the period when the losses occurred. Although no evidence was offered concerning the substance of those conversations, the Court found it significant that frequent telephone calls were made between Dalmia’s line in Delhi and Chokhani’s line in Bombay during August and September 1954, the time when Dalmia faced the task of arranging sufficient funds at Bombay for the purpose of diverting them to the Union Agencies. Very heavy losses were also suffered in July and August 1955, when securities with face values of Rs 79,00,000 and Rs 60,00,000 respectively were purchased in those two months. A large number of telephone calls were recorded between Dalmia in Delhi and Chokhani in Bombay during that period as well. The Court accepted that there were intervals during which the telephonic record did not show any communication, but it emphasized that the overall pattern of action had already been set by the initial transactions. Chokhani subsequently acted in accordance with the pattern that had been established. Consequently, the only further step required of him in response to additional demands for loss coverage was to send a request for securities from Delhi, a request that could be made by telephone, by letter, or by any other suitable means.

In this matter, the Court observed that whenever the cash reserves in Bombay fell short, requests were made to move securities from Delhi to Bombay. Such requests could be communicated in advance, by telephone, or even through letters addressed personally to Dalmia. The record showed that a number of securities were indeed dispatched from Delhi to Bombay on Dalmia’s instructions, although no clear justification existed other than the desire to cover losses that had already been incurred or were expected to occur. On September 4 1954, Dalmia notified the Imperial Bank in Delhi of his authority to deal with securities, even though he had possessed that authority since September 1951. This notification occurred at the early stage of the losses suffered by the Union Agencies, losses that continued for more than a year and prompted a plan to divert funds of the Insurance Company to meet those deficits. According to Raghunath Rai, after the resignation of Chordia it became necessary to register the Chairman’s powers with the bank so that the Chairman could operate on the company’s securities safecustody account. Rai further stated that a copy of the bye‑laws and related documents was sent to the bank without Dalmia’s direct instructions, although Dalmia was aware of the action because he had been told that the documents were required to facilitate the withdrawal of securities for which he had already given instructions. The Court noted, however, that such a step was not required, since Raghunath Rai already held the authority to endorse, transfer, negotiate, or otherwise deal with Government securities in the name of the company. The Court opined that Dalmia’s action was intended to enable the Chairman to withdraw securities from the bank in an emergency when no other authorized person was available or willing to do so. The position of the securities can be summarised from Appendix 1 of the Investigator’s report, Exhibit D‑74. On 30 June 1953, the Chartered Bank in Bombay held securities valued at Rs 53,25,000 out of a total of Rs 2,69,57,200. The amount held by that bank remained unchanged until 31 March 1954, even though the total value of securities rose to Rs 3,04,88,600. Subsequently, securities at the Chartered Bank in Bombay were depleted, and by 31 December 1954 the bank held no securities in deposit. The holdings at the Imperial Bank of India in New Delhi also declined after 30 June 1954, falling to Rs 2,60,000 on 31 March 1955 from Rs 59,11,100 on 30 June 1954. Securities worth Rs 52,00,000 were present in the two offices on 30 June 1953, and the amount of securities kept there increased steadily, reaching Rs 1,88,47,500 between September 1953 and 31 March 1954. Thereafter the amount grew rapidly each quarter, so that on 31 March 1955 securities valued at Rs 3,76,50,804 out of a total of Rs 3,86,97,204 were located in the offices.

In this case the Court observed that Dalmia must have been aware of the overall situation regarding the securities held by the Company. The Court rejected the argument that the avoidance of bank charges justified retaining a very large amount of securities, which represented a substantial proportion of the Company’s holdings, in the Company’s offices rather than depositing them with a recognised bank. The Court considered that the real explanation was that most of the securities did not actually exist. According to the testimony of Raghunath Rai, he spoke to Dalmia on several occasions in July and August 1955 about the failure to receive securities valued at Rs 81,25,000, Rs 75,00,000 and Rs 69,00,000, which were said to have been purchased in April‑May, July and August 1955 respectively. Dalmia replied that because the purchase and sale of securities had to be carried out in Bombay, Chokhani could forward the securities to the head office only after a decision was made on which securities would ultimately be retained by the Insurance Company. This statement, the Court held, showed that Dalmia knew and anticipated the sale of those securities, and that such a sale could not be part of the Company’s ordinary business. The securities were to be sold only if, by the next interest‑payment date, they could not be recovered and did not actually exist in the Company’s possession. The Court deemed this inference sufficient to attribute to Dalmia knowledge of the scheme’s operation. The evidence showed that securities with a face value of Rs 2,114,82,500 were transferred from Delhi to Bombay on seven occasions during the relevant period. On 4 September 1954, securities worth Rs 17,50,000 were withdrawn from the Imperial Bank in Delhi (Exhibit P‑1351) and were sold in Bombay on 9 September 1954. Subsequently, securities with a face value of Rs 37,75,000 were dispatched on 6 January 1955. Raghunath Rai testified that he withdrew these securities from the Imperial Bank, Delhi, under Dalmia’s instructions and handed them to Dalmia; they did reach Bombay, although the exact route from Delhi to Bombay was not clearly established, and they were sold on 11 January 1955. Further, eleven stock certificates amounting to Rs 57,72,000 were sent to Bombay on 16 March 1955, as shown by letter Exhibit D‑3. Additional stock certificates were sent in July 1955. A certificate for the 3 percent Bombay Loan of 1955, face value Rs 29,75,000, was sent on 15 July 1955 (Exhibit P‑923). The following day, on 16 July 1955, certificates for the 3 percent Bombay Loan of 1955, face value Rs 15,50,000, and for the 3 percent Loan of the Government of Madhya Pradesh, face value Rs 60,500, were dispatched (Exhibits D‑1 and D‑2). Finally, certificates for the 2 and 3⁄4 percent Loan of 1962, face value Rs 56,00,000, were sent to Bombay on 5 August, completing the series of transfers identified by the Court.

In 1955, letters identified as Exhibits D‑3 and P‑892 indicated that the stock certificates referred to in those letters were being dispatched under the instructions of the Chairman. Raghunath Rai testified that the additional stock certificates accompanying letters marked as Exhibits D‑1, D‑2 and P‑923 were sent by him. He said that the securities underlying those certificates were due to mature in September and to be redeemed in Bombay. It was submitted by the opposite side that the same securities could have been redeemed in Delhi instead. It further argued that there was no necessity for Rai to have sent them himself a few months before the maturity date. The Court held that sending the securities one and a half to two months prior to their maturity was not unreasonable in the normal course of business. The Court observed that what had actually been sent were the stock certificates, and that it might have been required to obtain the underlying securities in order to effect redemption. The Court added that such a process could reasonably have taken a considerable amount of time before the securities could be redeemed. No specific question was put to Rai as to why he chose to dispatch the securities two months before their maturity. Ramlal Dalmia denied that he had issued any instruction to his subordinates to send the securities to Bombay. The Court found no satisfactory explanation for the phrase “under instructions of the Chairman” appearing in Exhibits D‑3 and P‑892 unless that phrase reflected the factual situation. Earlier discussion had concluded that Rai was informed by Dalmia that any purchase or sale of securities was being carried out under the Chairman’s instructions and that Rai had confirmed those transactions. The Court further noted that there was no board resolution that authorised Chokbani to deal with the rag securities. However, a resolution of the Board dated 29 June 1953 had empowered Chokbani to lodge and receive G‑P notes from the Reserve Bank of India for verification and endorsement. The same resolution also authorised him to endorse or withdraw such notes on behalf of the company in his capacity as an agent. A later resolution dated 1 October 1953 authorised Chokbani to deposit and withdraw government securities held in the company’s safe‑custody account. The Court stressed that those powers were distinct from any authority to purchase or sell securities on behalf of the company. Dalmia claimed that he had authorised Chokbani to purchase securities around October 1953, shortly before Dalmia travelled abroad, and that thereafter Chokbani had continued to buy and sell securities without consulting Dalmia. It was contended that Rai’s statement that he sought confirmation of each purchase or sale from Dalmia could not be true because no such confirmation was required. The Court observed that Chokbani does not appear to have exercised any such purchase‑sale authority during the period when Dalmia was abroad or up to August 1954, and therefore

The Court observed that Dalmia’s assertion concerning the authority granted to Chokhani was not supported by the evidence. According to the record, both Chokhani and Raghunath Rai received authorization on 1 October 1953 to operate the company’s bank account located in Bombay. Dalmia, in paragraph 17 of his written statement dated 30 March 1959, claimed that the same authorization also conferred on Chokhani the power to buy and sell securities. The Court noted, however, that the Board of Directors never passed a resolution empowering Chokhani to engage in any purchase or sale of securities. If the joint‑signature system had been introduced to address the alleged need for such authority, the Court found no logical explanation for the Board’s failure to expressly authorize Chokhani. Consequently, the Court regarded the explanation offered for the joint‑signature arrangement as lacking any rational basis and therefore unsatisfactory. Even assuming that Rai was not required to obtain confirmation for each transaction, the Court held that he should have reported Chokhani’s actions to the Chairman for information. The Chairman was the sole officer authorized by the Board to purchase and sell securities, making his confirmation of any such dealings a natural requirement. Rai alleged that he sent a letter on 19 November 1954 requesting the distinctive numbers of securities not received at headquarters, but received no reply. Dalmia responded that he would arrange for the dispatch of the missing securities from Bombay to the head office, yet no subsequent action was taken.

On 23 March 1955, Rai reported that Dalmia told him he had already instructed Chokhani to convert those securities into stock certificates. Relying on Dalmia’s statement, Rai drafted a letter, identified as Exhibit P. 916, to Chokhani requesting immediate conversion of the specified G. P. Notes into stock certificates. The letter to Chokhani read, “You were requested for conversion of the above‑said G. P. Notes into Stock Certificate. The said certificate has not been received by us as yet. It may be sent now immediately as it is required for the inspection of the company’s auditors.” This correspondence demonstrated that Dalmia was aware of the status of the securities and, on his own initiative, directed Chokhani to effect the conversion. Dalmia also acknowledged that Rai had informed him of the non‑receipt of certain securities and that he would ask Chokhani to dispatch them when he spoke to him by telephone. The record further noted that securities worth Rs 17,50,000 were sent from Delhi to Bombay during the first week of September 1954. At that time, securities valued at Rs 53,25,000 were already deposited in the Chartered Bank at Bombay, making the additional transfer from Delhi unnecessary. Consequently, the Court pointed out that Chokhani could have withdrawn the required securities directly from the Bombay bank rather than relying on a shipment from Delhi. This observation led the Court to infer that, upon learning of the existing deposit in Bombay, the decision to send securities from Delhi was questionable. The Court further observed that the Board’s lack of a clear resolution authorizing Chokhani to deal in securities undermined any claim that his actions were ratified by corporate authority. Accordingly, the Court concluded that the transactions cited could not be deemed valid without the requisite approval of the Chairman, who alone possessed such authority under the company’s internal regulations.

When Dalmia learned that there were no liquid funds available in Bombay to meet the losses incurred there, he personally decided to forward the securities to Bombay for sale in order to generate the required cash to cover the cost of a purported purchase of securities intended to offset the losses of the Union Agencies. The Court noted that this action was not undertaken at the request of Chokhani. The securities that were withdrawn in January 1955 and the stock certificates that were issued in March and August 1955 coincided with the period during which the Union Agencies suffered losses and the funds of the Insurance Company at Bombay were low and insufficient to meet those losses. On 11 January 1955, securities bearing a 3 percent interest of the 1957 issue and having a face value of Rs 46,00,000—comprising Rs 37,75,000 transferred from Delhi and Rs 8,25,000 withdrawn from the Chartered Bank at Bombay—were sold. The proceeds from this sale were used to purchase two lots of 2‑3/4 percent securities of the 1962 issue, also having a total face value of Rs 46,00,000, one lot for Rs 35,00,000 and the other for Rs 11,00,000. On the same day, the balance of the sale proceeds, amounting to Rs 3,34,039‑15‑3, was deposited into the accounts of the Insurance Company. The inscribed stock certificate representing the Rs 46,00,000 of securities was duly obtained, and Dalmia himself handed this certificate to Raghunath Rai toward the end of January 1955. Although the purchase was genuine, the Court observed that it was not a transaction carried out in the ordinary course of business; rather, it was undertaken for the purpose of producing an inscribed stock certificate to satisfy the auditors, as had been discussed earlier, by showing that similar securities had been purchased in December 1954. The auditors were to audit the accounts of 1954, not those of 1955. In this connection, the Court referred to Dalmia’s earlier attitude during the auditors’ surprise inspection on 9 September 1954, when he argued that the auditors could not request inspection of securities purchased in 1955. The Court also noted that buying and selling securities was not the core business of the Insurance Company, which was required by statute to invest its funds, with at least a portion invested in Government securities whose values do not fluctuate significantly. Responding to question No 25 under section 342 of the Code of Criminal Procedure, Dalmia stated that “Government securities are gift‑edged securities and there is very small fluctuation in these.” Consequently, the purchase and sale of securities for profit could not be considered an ordinary business activity of the Insurance Company; such transactions could only be undertaken when statutory requirements demanded it or when surplus funds were available for investment. The Insurance Company held a Government of India 3 percent loan of 1957 in deposit with the Chartered Bank, Bombay, with a face value of Rs 53,25,000, from 6 April 1951 onward. The fact that these securities remained untouched for more than three years reinforced the Court’s view that buying and selling securities was not the normal business of the Insurance Company.

In this matter, the court noted that the insurance company purchased securities solely for investment purposes and intended to redeem them on their maturity dates. The court referred to the testimony of Khanna given during cross‑examination, wherein he explained that the frequency of buying and selling securities depends on the conditions of the share market and its prevailing trends. Khanna further clarified that this dependence also varies according to the character of the company making the investment. Accordingly, the court observed that a share‑market trend would guide the transactions of a company engaged in share speculation, such as the Union Agencies, but it would not influence the transactions of a company whose ordinary business is not speculation, such as the insurance company.

Raghunath Rai testified that on September 9, 1955, the auditors requested the production of securities that were said to be kept in Bombay, giving the auditors two days to receive them. He recounted that Dalmia replied that he would arrange for the securities to be produced within that period. However, Dalmia did not contact Chokhani in Bombay; instead, he called Khanna and asked him to certify the accounts, explaining that the accounts had to be presented before the company by September 30 and that everything was in order. Dalmia also indicated that he would provide further satisfaction later, after Chokhani became available, and he chose not to seek an extension of time for filing the accounts, fearing that an extension would damage the company’s prestige. On September 10, 1955, Raghunath Rai handed a letter marked Exhibit P.2, dated the same day as the auditors’ request, demanding a statement of investments as of September 9, 1955, together with the securities or evidence of their whereabouts, to be produced by September 13. Dalmia then asserted that Chokhani’s mother had died on September 4, 1955, and that he would personally arrange for the inspection of the securities directly with the auditors. The court observed that Dalmia had no reason to assure Rai on September 9 that the securities could be produced within two days unless he believed he could obtain them by contacting Chokhani or intended to conceal the true situation. Dalmia later admitted that he first contacted Chokhani on September 15, the last day of the mourning period, and learned from Chokhani that the securities did not exist because the money withdrawn for their purchase had been lent to the Union Agencies. The court concluded that Dalmia’s various statements and conduct demonstrated a guilty mind; when he told Rai that the securities would be produced within two days, he apparently expected that the auditors would accept the accounts without insisting further on the actual securities. Moreover, Dalmia’s decision not to go to Mr Kaul’s office on September 16, and instead to send his relatives to convey information, reinforced the inference that he sought to avoid direct discussion of the missing securities.

In this case, the Court observed that the shortfall in securities could be explained only by the fact that Dalmia was guilty and therefore did not wish to speak directly with Mr. Kaul about the matter. The Court noted that there was no necessity for Dalmia to avoid meeting Mr. Kaul or to miss the chance of fully explaining what Chokhani had done without his own knowledge. Dalmia admitted that he had sent his relatives to Mr. Kaul and that the statements they gave to Mr. Kaul were made under his instructions. In answer to question number 450, Dalmia explained that after a telephone conversation with Chokhani on the evening of 15 September, he consulted his brother Jai Dayal Dalmia and his son‑in‑law S. P. Jain about the situation and the action to be taken. He said that the three of them decided, before proceeding to Mr. Kaul’s office, to tell Mr. Kaul that either the securities would be restored or their price would be paid as the Government desired. In answer to question number 451, Dalmia confirmed that his relatives told Mr. Kaul that a considerable amount of the securities were missing and that they would make good the loss. The Court found it clear that these persons chose not to disclose to Mr. Kaul that the securities were not in stock because they had never been purchased and the money shown as spent on them had been lent to the Union Agencies. The shortfall therefore was not a case of missing securities but a case of the insurance company never receiving the securities at all. From Dalmia’s conduct, the Court inferred that he did not go personally to Mr. Kaul because he was guilty and would have found it inconvenient to explain how the shortfall occurred. The Court then turned to the evidence of Dalmia’s confession to Annadhanam. Annadhanam, a Chartered Accountant and partner of the firm M/s Khanna and Annadhanam, New Delhi, had been appointed by the Central Government under section 33(1) of the Insurance Act, 1938, on 19 September 1955 to investigate the affairs of Bharat Insurance Company and to report to the Government. He began his work on 20 September. After learning from Raghunath Rai about the missing government securities and their value from Rai’s statement, Annadhanam called Dalmia to his office that evening to obtain a statement. Dalmia then made two statements recorded as Exhibits P. 10 and P. 11. Exhibit P. 10 reads: “I have misappropriated securities of the order of Rs. 2,20,00,000 of the Bharat Insurance Company Ltd. I have lost this money in speculation.” Exhibit P. 11 reads: “Further stated on solemn affirmation. At any cost, I want to pay full amount by requesting my relatives or myself in the interest of the policy holders.” Dalmia admitted the contents of these statements.

In this matter, the petitioner Dalmia asserted that the statement recorded as Exhibit P 10 was not voluntarily given and therefore should not have been admitted as evidence. He claimed that he never actually made the statement, alleging that, under certain circumstances, he asked the investigator to draft wording he deemed appropriate and then signed the document prepared by Annadhanam. Dalmia further suggested, through the cross‑examination of Annadhanam and his own written declaration, that the statement was obtained because of inducements or promises made by either Annadhanam, Khanna—the other partner of the chartered accountant firm—or both of them. The learned Sessions Judge rejected Dalmia’s contention and held the statement admissible, while the High Court, although not fully endorsing the admission, expressed doubt about relying on it. The Solicitor General argued that Exhibit P 10 represented a voluntary confession and should have been considered by the High Court. Conversely, counsel identified as Mr Dingle Foot maintained that the High Court correctly found the confession involuntary and that its admission would violate the protection against self‑incrimination under clause (3) of Article 20 of the Constitution. The only persons who testified regarding the recording of Exhibit P 10 were Annadhanam and Khanna; a third perspective came from Dalmia himself, who provided his account both in a statement recorded under section 342 of the Criminal Procedure Code and in a written statement filed on 24 October 1958. Before addressing the issue of voluntariness, the Court first examined the relevant factual statements surrounding the recording of Exhibit P 10.

According to the testimony of Annadhanam, Dalmia arrived at the office at 6:30 p.m., despite an appointment scheduled for 5:30 p.m., and his companion remained outside the interview room. Annadhanam asked Dalmia to explain the disappearance of the securities. Dalmia initially requested two hours to prepare his explanation; this request was refused, after which he asked for at least a half‑hour, which was granted. He briefly left the office, returned within ten minutes, and said he would make a statement that would be recorded. Invoking the authority granted by section 33(3) of the Insurance Act, Annadhanam administered an oath to Dalmia and recorded the statement that became Exhibit P 10. The recorded statement was read back to Dalmia, who acknowledged its correctness and signed it. Shortly thereafter, Dalmia expressed a desire to add one more sentence; he was again placed under oath, and the additional statement, designated as Exhibit P 11, was recorded, read to him, and signed by Dalmia as accurate. Annadhanam asserted that no threat, inducement, or promise had been offered to Dalmia before these statements were made. A further remark attributed to Dalmia occurred as he was departing the building and approaching the staircase, when Annadhanam asked whether the speculative loss had been incurred in the company’s accounts or his private accounts. Dalmia replied that the loss stemmed from his personal speculative activities conducted mainly through his private firm, Union Agencies. This particular remark was not committed to writing, but Annadhanam noted it in his supplementary interim report, Exhibit P 13, submitted to the Deputy Secretary of the Ministry of Finance on 21 September 1955. He also referenced the statement recorded in Exhibit P 10 in his interim report, Exhibit P 12, dated the same day. During cross‑examination, Annadhanam clarified that he had not summoned Dalmia to the Bharat Insurance Company office, where he had examined Raghunath Rai, because he had not yet decided on the further course of action, and he denied any telephone conversation with Mr Kaul, the Deputy Secretary of the Ministry of Finance.

In the hearing, Annadhanam reported that Dalmia was asked whether the speculation in which he had lost money was carried on in the company’s account or in his private account. Dalmia responded that the loss arose from his personal speculation business, which was mainly conducted through one of his private firms, Union Agencies. This reply was not set down in writing, and Annadhanam said he did not deem it necessary to record it. Nevertheless, he referred to this verbal answer in his supplementary interim report, Exhibit P.13, which he filed with the Deputy Secretary of the Ministry of Finance on 21 September 1955. In the same manner, Annadhanam also referred to the statement recorded in Exhibit P.10 in his earlier interim report, Exhibit P.12, dated 21 September 1955, also addressed to the Deputy Secretary of the Ministry of Finance. During cross‑examination, Annadhanam explained that he had not summoned Dalmia to the Bharat Insurance Company office where he had examined Raghunath Rai because he had not yet decided what further action to take. He denied making any telephone conversation with Mr Kaul, the Deputy Secretary of the Ministry of Finance, before the recordings of Exhibits P.10 and P.11 were made. Annadhanam justified the presence of Mr Khanna with him during Dalmia’s examination by stating that Mr Khanna had performed a detailed audit of the company’s accounts for the year 1954, having been appointed auditor by the insurance company together with Annadhanam. He also repudiated the claim that Dalmia had told him he possessed no personal knowledge of the securities and that the only information he had received from Mr Chokhani was that the latter had extended a loan to Union Agencies. Annadhanam asserted that the contents of Exhibits P.10 and P.11 were recorded in Dalmia’s own words. He clarified that the statements were not read out to Dalmia; rather, Dalmia himself read them aloud. He denied ever informing Dalmia that he would escape prosecution if he made the statements in Exhibits P.10 and P.11 and deposited the money alleged to have been embezzled, and further contended that Mr Khanna had not conveyed any such assurance to Dalmia. Annadhanam also rejected the allegation that Exhibit P.10 was fabricated and not made by Dalmia, reiterating that the statement originated from Dalmia. He expressed the view that it was not appropriate to transcribe every word spoken between him and Dalmia from the moment of Dalmia’s arrival in his office until his departure, but that it was appropriate to set down in writing the statement concerning the missing securities. He added that his observation that Dalmia’s statements in Exhibits P.10 and P.11 were voluntary was based on the fact that Dalmia himself had offered to make those statements, and that Annadhanam had offered no inducement or promise. Finally, when cross‑examined by Mr T.C. Mathur, Annadhanam denied that he had told Dalmia that, as Chairman of the Insurance Company, he ought to assume responsibility for the missing securities, a suggestion that would have made Dalmia liable for a greater consequence.

In this case, the Court recorded that the witness indicated Dalmia was prepared to pay for the short‑fall and that the witness denied any implication that Dalmia’s statement was made because he had asked for two hours’ time before giving his statement. During cross‑examination conducted personally by Dalmia, Annadhanam explained the discrepancy in the amount of securities that had been admitted to be misappropriated. Exhibit P. 10 mentioned securities of the order of Rs 2,20,00,000/‑, whereas in his interim report, Exhibit P. 12, the witness stated the admission related to securities of the face value of Rs 2,22,22,000/‑. The witness explained that the figure in the interim report was arrived at by calculating the face value of the missing securities as Rs 2,22,22,000/‑, and that he recorded this figure because Dalmia had admitted the misappropriation of the securities. The Court observed that nothing sinister could be inferred from this variation. The witness also indicated that Khanna effectively supported Annadhanam’s statement, not only with respect to Exhibits P. 10 and P. 11 but also with respect to a third statement said to have been made near the staircase.

Further, the witness recounted that in his cross‑examination he suggested it was possible that Annadhanam might have asked Dalmia’s companion to remain outside the office because the proceedings were of a confidential nature; however, the Court noted that this possibility did not contradict Annadhanam’s statement, as that statement itself was not definite. When asked whether he considered it improper that Dalmia had made the statement in Exhibit P. 10 in view of Dalmia’s earlier comment to Khanna that satisfaction would be afforded to the auditors after Chokhani became available, the witness responded that, in his view, the statements in Exhibits P. 10 and P. 11 were the natural culmination of what he had learned in Mr Kaul’s office on 16 September 1955. The witness also denied that he had told Dalmia that ultimate responsibility for any fault would rest on the Chairman, other Directors, and the officers of the Insurance Company by way of misfeasance, nor that he had suggested Dalmia should sign a statement prepared by himself and Annadhanam so that other Directors and officers would not be harassed, and that acceptance of such a suggestion would save everyone and make Dalmia a greater person.

The witness further denied the suggestion that when Dalmia spoke of his charitable disposition in his office on 20 September 1955, it was in response to Khanna’s provocative remarks that allegedly insinuated about Dalmia’s integrity, and that Khanna claimed to be only a silent spectator of what actually happened in the office that day. He clarified that no question arose of Annadhanam attacking Dalmia’s integrity on that date. Moreover, the witness denied that Mr Kaul had told him or Annadhanam on 19 September, when the order appointing Annadhanam as Investigator was delivered, that Dalmia had to be implicated in a criminal case. Finally, Khanna denied that his tone and remarks during the discussion were...

The testimony recorded that the remarks made were described as very persuasive, and that the speaker told Dalmia that it was commendable of him to intend to pay the amount representing the short‑fall of the securities. The speaker further denied the allegation that Dalmia had told him and Annadhanam, on September 20 at their office, that he had no knowledge of the missing securities, that it appeared the securities had either been sold or pledged, and that the proceeds had been paid to the Union Agencies, which Dalmia supposedly disliked. He also denied that Dalmia had stated that, in the interest of the policy‑holders and the Insurance Company, he was prepared to pay the amount of the short‑fall of the securities, nor that, when Dalmia spoke of the securities being sold or pledged, Khanna and Annadhanam remarked that the securities had been misappropriated. The speaker further denied that he had told Dalmia that only if Dalmia took personal responsibility would no action be taken, and he asserted that he and Annadhanam were not in a position to give any assurance to Dalmia. In a statement made under section 342 of the Criminal Procedure Code on November 7, 1958, Dalmia reported that his companion, Raghunath Das Dalmia, stayed out of the office because he was not permitted to remain with him inside. Dalmia also denied that he first spoke of his charitable disposition and piety when Annadhanam asked him to explain the missing securities, insisting that there was no occasion for him to discuss his piety and charitable disposition at a time when he had been specifically called to explain the missing securities. Dalmia’s own version of the events, given in answer to question No. 471, was quoted as follows: “What actually happened was that I told Shri Annadhanam that I had learned from G. L. Chokhani that the amount of the missing securities had been lent temporarily on behalf of the Bharat Insurance Company by Shri G. L. Chokhani to Bharat Union Agencies and that the amount had been lost in speculation. Shri Annadhanam then asked me about the missing securities. I told him that I did not know whether the securities had been sold or mortgaged. My replies were noted by Shri Annadhanam on a piece of paper. Shri Annadhanam then asked me when the securities had been sold or mortgaged, and I replied that I did not know the time of any such transaction. Shri Annadhanam then asked me where the offices of Bharat Union Agencies were located, and I informed him that they were in Bombay and Delhi. I then remarked that, whatever had happened, I wanted to pay the amount of the missing securities because the interests of the policy‑holders of the Bharat Insurance Company were close to my heart. During that discussion some questions were posed by Shri Annadhanam and some by Shri Khanna. Shri Khanna then stated that I should…”

In this case, the Court recorded that the deponent was told by Shri Khanna to forget the events of 9‑9‑1955. Shri Khanna further said, “We too are men of hearts and not bereft of all feelings. We too have children. I am very much impressed by your offer of such a huge amount.” Shri Khanna also noted that Shri Annadhanam had been appointed under section 33 of the Insurance Act to investigate the affairs of the Bharat Insurance Company and therefore the words of Shri Khanna and Shri Annadhanam would carry weight with the Government. Shri Khanna mentioned other matters, which the deponent could not recall, but the deponent remembered clearly that Shri Khanna directed him to go to Shri C. D. Deshmukh and that Shri Khanna would also help him. The deponent replied that he did not wish to go to Shri Deshmukh. Shri Khanna then observed that the Government attached great importance to the interests of the policy‑holders and that any undue publicity would cause a great loss to them. Accordingly, Shri Khanna stated that if the deponent accepted his suggestion, the matter would be settled satisfactorily and without any publicity. In those circumstances the deponent asked for two hours’ time in order to consult his brother and son‑in‑law. He further recounted that when Shri Annadhanam told him that only a half‑hour could be allotted because the report had to be given to the Government immediately, he objected to the shortness of time, explaining that he could not meet his brother and son‑in‑law, return to the office, and then give an answer within such a brief interval. He then told Shri Annadhanam and Shri Khanna to write whatever they considered proper, because he placed trust in them. In response to question No. 476, the deponent’s answer was significant and read: “The statement was read over to me. I then pointed out that what I had stated had not been incorporated in Exhibit P 10. I made no mention that the statement Exhibit P 10 was correct or not.” Shri Annadhanam reduced to writing whatever the deponent had stated; that writing, identified as Exhibit P 11, contains the exact words used by the deponent. When questioned under question No. 479, the deponent did not give a direct answer; he simply said, “I did sign that statement,” after being asked whether he wished to say anything regarding the fact that the statement Exhibit P 11 had been read to him, he had admitted it to be correct, and he had signed it. He denied the third statement alleged to have been made near the staircase. Dalmia also mentioned that he had referred to some facts concerning the statements Exhibit P 10 and Exhibit P 11 in his written statement. Paragraphs 53 to 59 of the written statement dated 24 October 1958 refer to the circumstances surrounding the making of the statements Exhibit P 10 and Exhibit P 11. In paragraph 53 the deponent states that the recording of his statement took place in Shri Annadhanam’s office because it was the only place where Shri Annadhanam and Shri Khanna could obtain the necessary privacy.

In Dalmia’s narrative the setting of the conversation was chosen so that Annadhanam and Khanna could obtain the necessary privacy; the implication was that they did not wish any independent person to become aware of what was said between them. Paragraph 54 of the written statement mentions only a very minor discrepancy, whereas paragraph 55 provides a detailed account of the events that allegedly occurred in Annadhanam’s office. The Court notes that only those portions of that version are relevant which do not appear in the suggestions made to Annadhanam and Khanna during their cross‑examination, nor in Dalmia’s statement under section 342, and which are not inconsistent with either of those sources. According to Dalmia, he told Annadhanam that the money received by Bharat Union Agencies as a loan actually belonged to Bharat Insurance Company and that the Union Agencies had apparently lost the sum through speculation. He further implied that Khanna had induced him by making certain promises. Dalmia reproduced his own words to illustrate the alleged inducement: “Shri Khanna said that I was a gentleman, that I was prepared to pay such a heavy amount which had never been paid before by anyone, that I should accept his advice and act according to his suggestion and not involve myself in this dispute. He said the Government was not a fool and would arrive at a quiet settlement with a man whose first duty was to protect the policy‑holders, and that damaging the credit of Bharat Insurance Company would hurt those policy‑holders. He said that if the Government acted otherwise it would be cruelty to the policy‑holders, and that when I was ready to pay the money the Government would not take any course that would bring me trouble or tarnish my name. He advised me, as a well‑wisher, to confess that I had taken the securities, assuring me that they would help me. They added that Shri Annadhanam had been appointed as Investigator by the Government, so their words carried weight, and that, as Chairman and Principal Officer of Bharat Insurance, it was my responsibility to pay the money. At that time I was restless to pay, I was influenced by their talk, and anyone in my position would have trusted them. I was impressed by their claim that the Government or its officers would take action that would harm policy‑holders through publicity, and therefore I accepted that whatever Shri Khanna and Annadhanam said was for my good.” Dalmia further stated that he requested two hours of time from Annadhanam and Khanna to consult his brother and son‑in‑law, but one of them replied that they could spare no more than half an hour. This claim conflicted with his earlier statement under section 342. He added that he told them to write the statement in whatever manner they thought appropriate and that he simply signed whatever they wrote. After signing, when he read the document, he pointed out to them that certain passages did not reflect his intention to pay the entire amount owed to the policy‑holders, and that they subsequently amended the wording as he had indicated before signing.

The Court observed that the declaration Dalmia referred to was a brief statement in which he alleged that the document did not initially contain any reference to his intention to pay the entire amount owed to the policyholders, and that the wording was afterwards inserted as he had directed, after which he signed it. The Court noted that such a short declaration made it implausible that Dalmia could have affixed his signature without first reading its contents. The Court further indicated that the earlier paragraph numbered fifty‑six did not discuss the occurrences of that particular evening, whereas the succeeding paragraph fifty‑seven highlighted the improbability of Dalmia authorising any written statements that would cause him difficulty, especially since, moments before, his remarks had been described as irrelevant. During cross‑examination, it was suggested that Dalmia’s irrelevant remarks were provoked by external pressure. The Court found this suggestion inconsistent with the explanation in paragraph fifty‑seven, which portrayed his mention of a temple as a fabrication intended to corroborate the police report made by Annadhanam concerning Dalmia’s alleged irrelevant talk. Moreover, Dalmia’s own remark, “How could I have acted in such a way without any positive assurances?” was interpreted by the Court as an admission that he had indeed made the statements after receiving certain assurances. In paragraph fifty‑eight, Dalmia recounted that on 20 September, Shri Khanna and Annadhanam had interrogated Raghunath Rai with numerous questions but ceased further inquiry after recording Dalmia’s statement in only one or two lines, indicating that their scheme had succeeded and no further questioning was deemed necessary. The Court inferred that this recitation confirmed Dalmia’s authorship of the statement labelled Exhibit P‑10, and that once that statement was made, there was no need for additional questions because the statement itself explained the disappearance of the securities.

The Court then turned to the testimony of Raghunath Rai, who served as Secretary of the Bharat Insurance Company, regarding Dalmia’s interaction with Annadhanam. According to Rai, he approached Dalmia at approximately seven o’clock in the evening on 20 September 1955 and informed him that Annadhanam was preparing to record his statement, which would be documented as Exhibit P‑8, and also mentioned Dalmia’s remarks concerning the securities located in Bombay. In response, Dalmia is reported to have said, “I have been myself in the office of the Investigator. He has recorded my statement wherein I have admitted the short‑fall of the securities.” This admission, the Court held, further demonstrated that Dalmia had indeed made the declaration identified as Exhibit P‑10. Rai, however, did not confirm that Dalmia had explicitly told him that Annadhanam and Khanna had promised him that no trouble would follow if he gave a statement in accordance with their wishes. When Dalmia was questioned under section 342 of the Code of Criminal Procedure, he avoided giving a direct answer. Upon being asked question number 482, which referred to Rai’s account, Dalmia merely asserted that he had briefly informed Rai about the difficulties he had encountered with Khanna and Annadhanam and reassured Rai that there was no cause for concern. The Court noted that Dalmia’s various assertions suggesting that Khanna had offered an inducement were not substantiated by any conclusive evidence.

The Court observed that the lower courts had not accepted the various statements of Dalmia in which he claimed that Khanna had induced him, and it found no reason to depart from that view. The Court saw no justification for Annadhanam to record an incriminating statement such as Exhibit P‑10 and to have Dalmia sign it. The High Court likewise did not hold that the confession resulted from any threat made by Annadhanam. Instead, the High Court considered the confession unsafe to rely upon because it was not voluntary in a particular sense. The High Court explained that, although no explicit words of threat or inducement were uttered by Mr Annadhanam or anyone else, the surrounding circumstances created an implied offer of amnesty if Dalmia ceased his negative conduct. Consequently, Dalmia made a statement that he had misappropriated the securities and immediately offered to restore the loss through his relatives.

The Court then asked what circumstances gave rise to the implication of an amnesty being offered to Dalmia if he did not continue his alleged misconduct, namely the failure to provide full information about the missing securities. From the High Court’s judgment, the Court identified several relevant circumstances: first, Dalmia was a person of considerable courage in commercial affairs and was not expected to make a voluntary confession; second, he repeatedly evaded confronting the issue and failed to appear before Mr Kaul on 16 September 1955 to explain the position regarding the securities; third, he appeared before Annadhanam an hour late and then requested an additional two hours before answering a simple question about the missing securities; fourth, he made the statement when he felt cornered, knowing that Annadhanam possessed legal authority to question him, and he believed that the only way to postpone the adverse consequences of his act was to make a statement that might soften the authorities’ attitude toward him.

The Court concluded that none of these circumstances rendered the confession invalid. Dalmia’s awareness that Annadhanam could legally record his statement and his desire to mitigate the authorities’ view did not demonstrate that he was coerced or compelled. A person of Dalmia’s position, grit and intelligence could not be so easily coerced. The Court noted that a confession may be motivated by any considerations that the maker believes will benefit him. Dalmia apparently weighed the consequences and decided that the statement would be advantageous. Making a confession for personal benefit does not, by itself, make the confession involuntary. A confession is involuntary only when it is produced under threat, inducement or promise from a person in authority. The Court found that no such pressure existed in this case, and therefore the considerations cited by the High Court did not justify holding the confession to be involuntary.

The Court examined the arguments presented regarding the admissibility of Dalmia’s confession recorded as Exhibit P. 10 and concluded that the confession was made voluntarily. The State had argued before the High Court that Dalmia chose to give the statement because he hoped to prevent the full discovery of the conspiracy that enabled him to misappropriate a substantial portion of the assets of the Insurance Company. The High Court had held that even if the confession was given for that motive, it would still be voluntary. The Court found this reasoning unsound and affirmed that the confession was indeed voluntary. Counsel for the State further contended that Exhibit P. 10 was inaccurate, alleging that Annadhanam and Mr. Kaul had colluded to obtain a confession from Dalmia and that the confession was extracted under inducement or threat, thereby rendering it involuntary. Counsel asserted that Annadhanam was a “person in authority” within the meaning of section 24 of the Indian Evidence Act. The alleged circumstances supporting this claim were: Dalmia’s companion was not permitted to remain in the office; Dalmia was allowed only half‑an‑hour for consultations; a discussion took place prior to the recording of Exhibit P. 10 for which no record was kept; Annadhanam, as Investigator, was a public servant; section 176 of the Criminal Procedure Code would have applied to Dalmia had he not made the statement; and the oath‑bound statement amounted to an inquisition. Additionally, counsel argued that, if the confession were not inadmissible under section 24 of the Evidence Act, it would nevertheless be inadmissible under clause (3) of Article 20 of the Constitution. Counsel also pleaded that the statement in Exhibit P. 10 was incorrect because it recorded that Dalmia “misappropriated securities of the order of rupees two crore twenty lakh of the Bharat Insurance Company Ltd.” and that such language could not be Dalmia’s own, suggesting that he merely signed what Annadhanam had drafted. The public prosecutor similarly questioned the accuracy of the statement, maintaining that the actual misappropriation was carried out by Chokhani and that Dalmia had only suffered the loss, so the proper description should have been the misappropriation of money equivalent to the securities. The Court held that any imprecision in the expression might have been deliberate, but the wording was not so obscure as to be beyond Dalmia’s comprehension, even if his command of English was limited. The statement was undeniably brief, and it was unreasonable to expect that every word would conform to a strict legal formulation. The phrase “misappropriated the securities” can be understood only to mean that Dalmia misappropriated the amount that had been either spent on the purchase of the

The Court observed that the securities in question did not actually exist, nor were they realized through any sale, and that the proceeds were shown to have been used for a fictitious purchase of securities. It noted that Dalmia had admitted his personal involvement in the loss that arose because of the shortfall in those securities. The record, however, contained nothing that could support a finding that Annadhanam and Mr Kaul had colluded with the purpose of extracting a confession from Dalmia. The Court rejected the suggestion that Annadhanam was angry with Dalmia because of Dalmia’s resentment over the surprise inspection carried out by Annadhanam and Khanna on 9 September 1955. During that inspection, Raghunath Rai protested that the auditors had already verified the securities for the 1954 year and therefore had no authority to request an inspection for the 1955 year. Nevertheless, at the auditors’ insistence, Rai produced the securities for examination. After returning to his office, Dalmia telephoned the auditors and complained that they were harassing the officers of Bharat Insurance Company and that they had no right to inspect the securities. Dalmia remained dissatisfied with the auditors’ claim to a right of surprise inspection. The Court held that Dalmia’s conduct did not give rise to any legitimate grievance on the part of Annadhanam or Khanna; they had merely performed what they believed to be their duty and had successfully countered Rai’s opposition. Any grievance arising from the inspection would, in fact, have fallen on Dalmia, making him less likely to be induced to confess.

Regarding Mr Kaul, the Court noted that as Deputy Secretary in the Ministry of Finance he participated in bringing the matter before the government, not because of any personal animus toward Dalmia—no such animus was alleged—but in accordance with his official responsibilities. A rumor had reached Bombay that Dalmia, in his capacity as Chairman of the Insurance Company, had suffered speculative losses exceeding two crore rupees and had been drawing on the Company’s funds to cover those losses. Consequently, on 14 September 1955 Mr Kaul invited Dalmia to meet on 15 September to discuss the securities of the Insurance Company. When the meeting took place on the 15th, in the presence of Mr Barve, Joint Secretary, Mr Kaul asked Dalmia whether he had brought the account of Bharat Insurance Company’s securities. Dalmia replied that he could not produce the account due to insufficient time and promised to submit it on 16 September. On that date Dalmia did not appear at Mr Kaul’s office; instead, his associates, including S P Jain, met Mr Kaul and made certain statements. Subsequently, on 18 September 1955 Mr Kaul forwarded a note (Ex D. 67) to the Finance Minister, recommending that, of all the possible courses of action open to the Government, the appropriate step was to proceed with the matter through legal channels and to launch prosecution.

In this matter, the Court observed that initiating a prosecution because S. P. Jain had offered a compromise would amount to compounding with a criminal offender. Mr Kaul, a government official, had expressed that he did not consider it necessary to conduct any inquiry, reasoning that the merits of the case against Dalmia would remain unchanged whether the loss involved two crore rupees or merely a few lakh rupees. On the basis of this suggestion and his use of the phrase “courses against Shri Dalmia,” it was contended that a criminal action was being contemplated and that some understanding must have existed between Mr Kaul and Annadhanam to obtain a confession from Dalmia for the purpose of that contemplated case. The Court found this allegation unconvincing and not worthy of acceptance. As part of his official duties, Mr Kaul was required to evaluate the various courses of action available to the Government in relation to the alleged drawing upon the funds of the Insurance Company to cover losses arising from speculative activities. Mr Kaul admitted that he did not possess direct knowledge of the exact misconduct concerning the securities; he had only heard reports from Bombay and subsequently learned of a shortfall in the securities of the Bharat Insurance Company, which allowed him to contemplate that the alleged conduct might constitute a criminal offence. According to Mr Kaul, S. P. Jain had suggested that once the shortfall in securities was remedied, no further action should be taken that could affect Dalmia, his associates, or the various businesses they operated. The Court held that the fact that Annadhanam was aware of a shortfall exceeding two crore rupees before Dalmia made the statement recorded in Exhibit P. 10 does not justify concluding that Annadhanam and Mr Kaul were colluding. Annadhanam did not admit to having ordered Dalmia’s companion to stay out of the office, and even if such an order had been given, as Dalmia testified, it does not demonstrate that Annadhanam acted with the purpose of treating Dalmia unfairly or of preventing any witness to such an attempt. Likewise, the absence of a written record of the conversation that took place between Dalmia and the investigator does not indicate any sinister motive on Annadhanam’s part. It was within Annadhanam’s discretion to examine a person concerning the affairs of the insurance company; he posed a simple question to Dalmia requiring an explanation of the missing securities. Since Dalmia did not make a formal statement on that point, the Court reasoned that there was no requirement to create a transcript of the discussion that might have occurred between them. Finally, Annadhanam clarified that the term “discussion” employed in his supplementary interim report, Exhibit P. 13, should be interpreted as the recording of Shri Dalmia’s statement and the conversation he had when he came to Annadhanam’s office.

The Court explained that the expression “with him while going to the staircase” clarifies how the term “discussion” was intended in Exhibit P. 13, and that this interpretation is consistent with the surrounding context. The Court then considered the period of time that was permitted to Dalmia to consult his relations. Although the half‑hour allotted might appear inadequate if the purpose were to obtain a voluntary confession – a situation in which a magistrate ordinarily grants a similar interval to a suspect wishing to record a confession – the Court held that this was not the situation here. The investigator, Annadhanam, was not seeking to record a confession from Dalmia. Rather, his role was limited to examining Dalmia in connection with the affairs of the insurance company and informing him that he had been called to explain the disappearance of certain securities. Consequently, there was no requirement for Annadhanam to give Dalmia time to reflect on the advantages and disadvantages of making a statement, nor was there any indication that the nature or effect of any statement made by Dalmia was known to Annadhanam. The Court therefore concluded that the fact Dalmia was allowed only thirty minutes to confer with his relatives could not be read as evidence that he was being compelled to make a statement. Moreover, the Court did not regard the oath‑bound examination of Dalmia as an inquisition. It noted that sub‑section (3) of section 33 of the Insurance Act authorises the investigator to examine, on oath, any manager, managing director or other officer of an insurer in relation to the insurer’s business. The Court further held that section 176 of the Indian Penal Code does not apply to the examination of Dalmia under section 33 of the Insurance Act. For reference, section 176 provides that “Whoever, being legally bound to give any notice or to furnish information on any subject to any public servant, as such, intentionally omits to give such notice or to furnish such information in the manner and at the time required by law, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to five hundred rupees, or with both; or, if the notice or information required to be given respects the commission of an offence or is required for the purpose of preventing the commission of an offence, or in order to the apprehension of an offender, with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both; or, if the notice or information required to be given is required by an order passed under sub‑section (1) of section 56 of the Code of Criminal Procedure, 1898, with imprisonment of either description for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.” The Court emphasized that the operation of this provision requires the person from whom information is sought to be a public servant. It observed that Annadhanam could not be classified as a public servant because he was not a government employee; he was a chartered accountant appointed by an order of the Central Government to investigate the affairs of the insurance company.

The Court observed that the Insurance Company had engaged Mr. Annadhanam, a Chartered Accountant, to investigate its affairs and to report the findings to the Government. It was clear that Mr. Annadhanam would receive remuneration for performing the duties entrusted to him. The Court then examined the definition of “public servant” contained in section 21 of the Indian Penal Code. Counsel for the petitioner argued that Mr. Annadhanam qualified as a public servant pursuant to the ninth clause of that section, which states that every officer who is in the service or pay of the Government, or who is remunerated by fees or commission for the purpose of any public duty, is a public servant. The Court held that merely being directed to investigate the affairs of an insurance company under section 33(1) of the Insurance Act does not automatically make a person an officer, because no office is held and the person is not employed in service. Accordingly, the definition of “public servant” did not apply to Mr. Annadhanam. Moreover, the Court found that a statement made to the Investigator under section 33(3) of the Insurance Act did not constitute furnishing information to a public servant within the meaning of section 176 of the Code of Criminal Procedure, and therefore an omission to furnish such information would not be an offence under that provision.

The Court further concluded that section 176 of the Code of Criminal Procedure did not compel Mr. Dalmia to make the statement set out in Exhibit P. 10. The statements of Mr. Annadhanam and Mr. Khanna regarding Mr. Dalmia’s making of the statement were found to be consistent, and they received implied support from the testimony of Mr. Raghunath Rai concerning what Mr. Dalmia told him, as well as from certain statements made by Mr. Dalmia himself in his written declaration and in his answers to questions posed under section 342 of the Criminal Procedure Code. Consequently, the Court held that Exhibit P. 10 represented a voluntary statement and was admissible as evidence. The Court also held that the statement was not inadmissible under clause (3) of Article 20 of the Constitution, because it was not made by Mr. Dalmia at a time when he was accused of an offence, a condition required for the application of that clause, as established in the decision of this Court in State of Bombay v. Kathi Kalu Oghad. The Court noted that Mr. Dalmia was not under duress when he made the statement and therefore was not compelled to do so. In accordance with the earlier decision, the Court explained that “compulsion” in this context must mean duress in the legal sense—an objective physical act, not merely the mental state of the person, unless the mind has been so conditioned by an extraneous process as to render the statement involuntary. The Court therefore concluded that the statement was voluntarily made and admissible.

In this case, the Court examined the circumstances that preceded Dalmia’s statement recorded as Exhibit P. 10 and concluded that those facts do not establish that Dalmia’s mind was subjected to any external pressure that would make the statement involuntary or extorted. The Court accepted the testimony of Annadhanam that Dalmia had told him, while they were near a staircase, that he had lost money in his personal speculation business, which was mainly conducted through his private company, the Union Agencies. The latter portion of Exhibit P. 10 therefore constitutes an admission by Dalmia that he had lost money in speculation, and his subsequent remarks merely clarified the name under which the speculation was carried on. This admission is corroborated by other evidence showing that the speculation activity of the Union Agencies was in fact Dalmia’s own business, although the company formally had a few shareholders besides Dalmia. Counsel for the petitioner, identified as Mr. Dingle Foot, argued that an adverse inference should be drawn against the prosecution because the prosecution failed to produce certain documents and witnesses. The Court considered this objection and held that no such inference is warranted. The prosecution did not present evidence concerning the shareholders of Asia Udyog Ltd. and Govan Brothers Ltd.; such evidence would at most have revealed the quantity of shares held by Dalmia, which was not relevant to the matters under inquiry. The extent of Dalmia’s shareholdings in those companies bore no direct connection to the issues being tried. Regarding telephone records, the prosecution introduced evidence of calls made up to 31 August 1955 but omitted evidence of calls between 1 September and 20 September 1955. It was suggested that a presumption of no telephone communication between Dalmia and Chokhani should be drawn for that period. The Court noted that Dalmia did have a telephone conversation with Chokhani on 15 September, and the prosecution had not challenged any transaction entered into by Chokhani during that time. Consequently, the Court found it unnecessary for the prosecution to produce evidence of telephone calls for the omitted period. The prosecution was also alleged not to have produced the Dak Receipt Register, which could have shown the dates on which various advices from Bombay regarding the transactions were received. The Court observed that sufficient evidence on that point had already been led, and the Register was therefore not required; the accused could have called for it if he needed its entries. Finally, a complaint was made about the non‑production of documents related to the dispatch of certain securities from Delhi to Bombay. The Court noted that oral evidence concerning that dispatch was available, making the production of those documents unnecessary.

The Court observed that the prosecution had not produced the documents concerning the dispatch of securities from Delhi to Bombay, since oral testimony about that dispatch had already been recorded and the production of those documents was therefore not essential to the case. The Court also addressed the grievance concerning witnesses who had not been called before the trial. It was complained that the prosecution had failed to examine Mr. Barve, Joint Secretary of the Ministry of Finance, who had been present at the interview that Dalmia gave to Mr. Kaul on 15 September 1954, and that the directors of the insurance company had not been produced. The Court found that calling Mr. Barve was unnecessary because Mr. Kaul himself had already been examined on the relevant matters. Likewise, the directors of the insurance company were not required to be examined because they were not alleged to possess any first‑hand knowledge of the transactions under investigation; any information they could have provided about the confirmation of sale and purchase deals, the passage of bye‑laws and other resolutions could be gleaned from the minutes of the board meetings, which had already been admitted into evidence. The Court noted that Dalmia had admitted there was no board resolution appointing Chokhani with authority to purchase and sell securities. The prosecution had referred to pages 206‑210 of Dalmia’s statement of claim, suggesting that the directors could have proved certain matters, but the Court held that these matters were not necessary for the prosecution’s case and could have been proved by the accused if he deemed them essential. Consequently, the Court found no merit in the contention that the prosecution’s failure to produce those witnesses or documents weakened its case.

The Court further examined the argument submitted on behalf of Dalmia that he could not have participated in any scheme intended to cause loss to the insurance company because he was primarily responsible for the prosperity of the company, that the Union Agencies possessed assets, that the Government was displeased with Dalmia, and that the company had readily accepted the appointment of the audit firms M/s. Khanna and Annadhanam. The Court observed that these considerations did not counterbalance the inferences drawn from the proven facts. It was not a mere coincidence that frequent telephone conversations occurred between Dalmia and Chokhani during the period when the Union Agencies suffered losses, that the usual purchase transactions by which the insurance company’s funds were diverted to the Union Agencies took place at that time, that such purchases recurred several times during the relevant period, that securities that could not be recovered were recorded as sold, and that when the Union Agencies or Bhagwati Trading Company failed to pay the sale price that was to be credited to the insurance company’s account, another ordinary purchase transaction was executed. The Court therefore concluded, after considering all the surrounding circumstances, that the transactions resulting in the diversion of the insurance company’s funds to the Union Agencies were carried out under Dalmia’s instructions and with his approval.

It was evident that the accused possessed a dishonest purpose aimed at causing at least a temporary loss of funds to the Insurance Company while securing a benefit for the Union Agencies. Such an outcome could be realized only through a conspiracy between the accused and Chokhani. Vishnu Prasad was implicated in the conspiracy to facilitate the diversion of funds, and Gurha was implicated in the conspiracy to help create false accounts within the offices of the Union Agencies and Asia Udyog Ltd., as will be explained later. The narrative now proceeds to the charges framed against Gurha, who was the appellant. He faced prosecution under section 120‑B read with section 409 of the Indian Penal Code, as well as three separate counts under section 477A for making or abetting the making of false entries in three journal vouchers numbered 98, 106 and 107, all dated 12 January 1955 and pertaining to the Union Agencies. A concise description of the circumstances under which those vouchers were prepared is necessary. Gurha held the position of Director of the Union Agencies and was responsible for the operations of its Delhi office; in addition, he served as the Accountant of Asia Udyog Ltd. In Delhi, a ledger existed that recorded the transactions carried out by the Bombay Office of the Union Agencies. These entries were made under the instructions of Chokhani, who acted as an agent of the Union Agencies in Bombay and also possessed a power of attorney on its behalf. Kanna regularly transmitted a cash statement and a journal to the Bombay Office and to the Union Agencies in Delhi, and these documents were delivered directly to Gurha. The cash statement received from Bombay accurately reflected the amounts received from Bhagwati Trading Company, crediting those amounts to Bhagwati Trading Company. Whenever the Union Agencies made a payment to Bhagwati Trading Company, a corresponding debit entry was recorded against Bhagwati Trading Company in the cash statement. According to the allegations concerning the year 1955, Gurha is said to have replaced the authentic cash statement with a fabricated one that omitted any reference to Bhagwati Trading Company. In the fabricated statement, the amounts that originally appeared as credits to Bhagwati Trading Company were instead shown as receipts of money from the Delhi Office of the Union Agencies, purportedly transferred through Chokhani. Likewise, the debit entry that originally named Bhagwati Trading Company was altered to appear as a debit to the Delhi Office of the Union Agencies. This altered cash statement was subsequently handed over to a person identified as Lakhotia, who was employed in the Delhi Office of the Union Agencies to act on behalf of the Bombay Office. Lakhotia was also prosecuted in a separate proceeding, but he was acquitted. Lakhotia issued credit advices on behalf of the Bombay Office to the Delhi Office, referring to the entry in the cash statement that, in the original document, concerned the amount received from Bhagwati Trading Company, and he intimated that the amount had been credited by the Bombay Office to the account of

In this case, the evidence showed that a debit advice, purportedly issued on behalf of the Bombay Office to the Delhi Office, stated that the amount had been debited to the account of the Delhi Office. In reality, the original entry had debited that amount to the account of Bhagwati Trading Company. Lakhotia also recorded entries in the ledger of the Bombay Office, which was kept at the Delhi Office of the company. In the column labelled ‘folios’, he indicated the reference to the cash‑statement folio by writing the letter ‘C’ followed by the folio number from which the entry originated. Upon receiving such advices from Lakhotia on behalf of the Bombay Office, Dhawan, the accountant of the Delhi Office of the Union Agencies, prepared the corresponding journal vouchers. For credit advices, Dhawan debited the Bombay Office of the Union Agencies and credited Asia Udyog Ltd.; for debit advices, he debited Asia Udyog Ltd. and credited the Bombay Office of the Union Agencies. According to Dhawan’s own statement, he acted under the instructions of Gurha. Gurha ordinarily signed these vouchers; when he fell ill, the signatures were supplied by another director, J. S. Mittal. Parallel entries were then made in the accounts of the Bombay Office and Asia Udyog Ltd. in the ledger maintained at the Delhi Office. After preparing the vouchers, Dhawan also issued advices to Asia Udyog Ltd. indicating that the amount mentioned had been credited or debited to its account. Consequently, the name of Bhagwati Trading Company never appeared in any of the advices, vouchers or ledgers prepared at Delhi.

In the premises of Asia Udyog Ltd., receipt of a credit advice led to the preparation of a journal voucher that credited the amount to the Bombay Office and debited it to the Delhi Office of the Union Agencies. Conversely, a journal voucher showing the reverse entries was prepared when a debit advice was received. Asia Udyog Ltd. then issued its own advice to the Bombay Office stating that the amount had been credited or debited to the Bombay Office of the Union Agencies, depending on whether the original advice was a credit or a debit. All such vouchers at Asia Udyog Ltd. bore Gurha’s signature even during the period when he was ill and not present at the Union Agencies’ office. The net effect of these entries was that, on paper, credit advices created the appearance that the Delhi Office advanced money to the Bombay Office, which then paid the money to Asia Udyog Ltd., which in turn paid the money back to the Delhi Office. In the case of debit advices, the entries suggested that the Bombay Office debited the amount to the Delhi Office, which then debited it to Asia Udyog Ltd., and finally Asia Udyog Ltd. debited it to the Bombay Office. This pattern of entries concealed the involvement of Bhagwati Trading Company from the records.

The Court observed that the entries showed a debit to Asia Udyog Ltd., which then debited the amount to the Bombay Office. These entries contradicted the actual facts and appeared to have been made for a purpose, namely to conceal any reference to Bhagwati Trading Company from the records. No justification was offered for the adoption of this method of bookkeeping. The genuine cash statements had been placed on the record, whereas the purported fictitious statements were absent. Gurha did not admit that any fictitious cash statement had been prepared. The Court held that it was unnecessary to determine whether a fictitious cash statement had been prepared under Gurha’s direction in place of the genuine statement received from Bombay. Nonetheless, the Court stressed that the entries in the various advices prepared by Lakhotia, which were based on the cash statements received, did not reflect the true entries of the genuine cash statements, and that the journal vouchers prepared by Dhawan also contained incorrect entries and failed to represent the facts accurately. Regarding the journal vouchers that formed the basis of the three charges under section 477A of the Penal Code, two of those vouchers were prepared by Dhawan. In those vouchers, the amounts were credited to Asia Udyog Ltd. and debited to the Bombay Office of the Union Agencies. Those vouchers correspond to Exhibits P. 2055 and P. 2060. Each voucher was addressed to Asia Udyog Ltd. and stated that the amount shown was the amount received by the Bombay Office from Chokhani on behalf of Asia Udyog Ltd. on 7 January 1955 and on 10 January 1955 respectively, and that the amount had been adjusted. A further voucher, Exhibit P. 2042, showed a debit to Asia Udyog Ltd. and a credit to the Bombay Office of the Union Agencies, and it claimed that the amount had been paid by the Bombay Office to Chokhani on behalf of Asia Udyog Ltd. and was likewise adjusted. The Court noted additional facts that illuminated the intentional preparation of these false vouchers. It was found that the ledger of the Bombay Office, as kept in the Delhi Office of the Union Agencies, had been tampered with, as had the journal statement of that office. Specifically, the letter “C” in the folio column of the ledger had been altered to “J”, indicating that the entry was meant to refer to an entry in the journal statement received from Bombay. Moreover, sheets of the journal statement on which the corresponding entries were recorded had also been altered. These two documents remained in the possession of the Union Agencies until 12 November 1955, even though the advices and vouchers in the Delhi Office had been seized by the police on 22 September 1955, thereby allowing interested persons the opportunity to make the alterations. It was suggested that the alterations might have been made by the police; however, the learned Sessions Judge rejected that suggestion for sound reasons, observing that the altered entries did not in any manner support the prosecution’s case, and therefore

In this matter, the Court observed that the police had no justification for fabricating the ledger entries in question. Although those entries recorded receipt of sums from Bhagwati Trading Company, the prosecution’s theory was that the monies had been received in cash rather than by bank transfer, and therefore the alleged adjustments were unnecessary. The learned Sessions Judge did not accept the testimony of Sri Kishen Lal, the officer who investigated the case, who claimed to have noticed the alterations before he gave evidence in court in 1958. The Judge’s skepticism was based on the fact that Dhawan had not been examined by the prosecution on the issue of the alterations and that Sri Kishen Lal’s own case diary contained no entry indicating that he had questioned Dhawan about the changes. Moreover, the Judge apparently overlooked a diary entry in which Sri Kishen Lal wrote, “I made a note in the case diary about myself having put the overwriting to Lakhotia and about having asked his explanation about that.” The Court noted that this fact could have been verified directly from the diary and that it was unreasonable to presume that Sri Kishen Lal would deliberately make a false statement that could be so easily disproved. Nevertheless, the learned Sessions Judge gave satisfactory reasons for rejecting the suggestion that the substitution of the letter “C” with “J” and the alteration of the journal pages were the work of the police.

The Court further examined the role played by Gurha in producing the false entries, as recounted by Dhawan, who is identified as witness 19. Dhawan testified that he occasionally approached Gurha for instructions. Gurha, serving as the accountant of Asia Udyog Ltd., would have been aware that the company neither advanced any sums to the Bombay Office of the Union Agencies nor received any sums from that office. Despite this knowledge, Gurha signed every voucher prepared in the Asia Udyog Ltd. office relating to these transactions, even while he was ill. According to Gurha’s statement in response to question 134, his period of illness extended from March 15 to August 12, 1955, during which time he did not attend the Union Agencies office. The Court concluded that Gurha signed the vouchers deliberately to create false records. Dhawan explained that, upon receiving advice document P. 2041, which led him to prepare journal entry 98, he consulted Gurha because the advice did not clearly indicate the recipient of the payment. Gurha, after reviewing the journal statement received from the Bombay Office, instructed Dhawan to debit the amount to Asia Udyog Ltd. Accordingly, Dhawan prepared journal voucher P. 2042, and Gurha initialed it. The Court noted that the debit advice was addressed to “M/s. Delhi Office,” a description that could refer either to the Delhi Office of the Union Agencies or to the Delhi Office of Asia Udyog Ltd., both of which were located in the same building and were administered together.

Gurha acknowledged, in his statement made under section 342 of the Criminal Procedure Code, that Dhawan had brought the matter before him and that he had instructed Dhawan to debit the amount to Asia Udyog Ltd. He further explained that the journal statement of the Bombay Office at the relevant time could not contain any reference to that item, because the amount had actually been entered only in the cash statement. Consequently, Gurha’s claim that he had consulted the journal was merely a pretense intended to give Dhawan the impression that his instructions were based on existing entries rather than on his own direction. In response to question number 45, Gurha recalled seeing an entry for the sum of Rs 4,61,000 – the same amount recorded in Exhibit P. 2042 – in the cash statement of the Bombay Office when Dhawan referred to the advice concerning that amount. However, when asked questions 217 and 218, he asserted that he gave the advice after locating the relevant entry in the journal statement of the Bombay Office. This later answer contradicts his earlier response, because the same amount could not simultaneously appear in both the cash statement and the journal statement. If the later answer were true, Gurha’s reference to the journal would again have been a ruse, as previously noted. If the earlier answer were accurate, it would imply that Gurha either supplied a fabricated cash statement to the office, as alleged by the prosecution, or that he deliberately misidentified an entry concerning Bhagwati Trading Company in the journal and, in accordance with the scheme, instructed Dhwan to debit the amount to Asia Udyog Ltd. In either scenario, Gurha’s conduct in advising Dhawan to make the debit demonstrated his participation in the overall conspiracy, for no other motive for such behaviour was evident.

Gurha’s selection among the accused appeared intentional because he maintained connections with both the Union Agencies and Asia Udyog Ltd. He had long been employed by a Dalmia‑related concern, serving as the accountant of the Dalmia Cement and Paper Marketing Company from 1948 until that company’s liquidation in 1953. As a director of the Union Agencies, he was aware that the firm had suffered losses due to a share‑speculation business during 1954‑55 and that its Delhi office lacked liquid funds to cover those losses. He must also have known that the necessary funds were being obtained from the Insurance Company’s resources through Bhagwati Trading Company, and that such a diversion was unlawful. Possessing this knowledge, Gurha could have become a party to the preparation of false advice notes and vouchers. His intimate knowledge of both the Union Agencies and Asia Udyog Ltd., together with his prior employment history, supported the conclusion that he was complicit in the fraudulent scheme.

The Court observed that the prosecution was unable to produce any direct evidence demonstrating the full extent of Gurha’s knowledge regarding the scheme that used the Insurance Company’s funds to cover the losses of the Union Agencies. It further noted that it was not a legal requirement for every conspirator to be aware of every detail of the conspiracy. Consequently, the absence of proof of Gurha’s complete understanding of the scheme did not, by itself, exonerate him.

Counsel representing Gurha argued that, despite his position as a Director of the Union Agencies, he could not have taken part in the diversion of the Insurance Company’s funds. The counsel contended that Gurha never issued any instructions concerning the activities of the Union Agencies, had no knowledge of the transfer of money from the Insurance Company to the Union Agencies, and was not involved in the handling of the securities held by the Insurance Company or in the receipt of cash or any related transactions. According to the prosecution, Gurha’s involvement began only after the offence punishable under section 409 of the Indian Penal Code had been committed, namely after Chokhani had issued cheques from the Insurance Company’s accounts with the Chartered Bank in favour of Bhagwati Trading Company. On that basis, the counsel maintained that Gurha could not have known anything about the diversion of funds or the falsification of the accounts and papers of the Office.

The Court noted that the defence placed great reliance on a document identified as Exhibit B‑956, a letterpurportedly written by Girdharilal Chokhani. The defence submitted that the letter showed Gurha’s knowledge was limited to the fact that Chokhani had obtained temporary loans for the Union Agencies from Bhagwati Trading Company. The Court reproduced the entire content of the letter for the record: “Girdharilal Chokhani, Times of India Building, Hornby Road, Bombay – 1. CONFIDENTIAL, 17th September 1955. Bharat Union Agencies Ltd., Delhi. Attn. Mr. R. P. Gurha. Dear Sir, I have to inform you that the various amounts arranged by me as temporary loans to Bharat Union Agencies Ltd., Bombay Office from time to time in the name of Bhagwati Trading Company, actually represented the monies relating to the under‑noted securities belonging to Bharat Insurance Company Limited. Face Value 2‑½ % 1961 Rs 56,00,000; 3 % 1963‑65 Rs 79,00,000; 3 % 1966‑68 Rs 60,00,000; total Rs 1,94,00,000. I have now to request you to please arrange at your earliest to pay about Rs 1,80,00,000 in cash or purchase the aforesaid securities (or their equivalent) and deliver the same to Bharat Insurance Company Ltd., 10, Daryaganj, Delhi on my behalf, debiting the amount to the credit standing in the books of the Company’s Bombay Office in the name of M/s Bhagwati Trading Company. Any debit or credit balance left thereafter in the said account would be settled later on. I am getting this letter also signed by Vishnuprasad on behalf of Bhagwati Trading Company although he had neither any knowledge of these transactions nor had any connection with these affairs. Yours faithfully, For:”

Bbagwati Trading Company, signed by G. L. Chokhani, bears an illegible signature of Vishnuprasad Bairanglal, who is identified as the proprietor. The Court expressed the view that this letter had been drafted specifically for the litigation and was, as the State argued, antedated. The Court found inherent evidence within the letter that supported this conclusion. The letter itself contains a reference stating that Vishnu Prasad had no knowledge of the transactions and no connection with the affairs. Such a statement appeared out of place in a communication that Chokhani was sending to Gurha in the ordinary course of business, wherein Gurha was being asked to arrange promptly either cash payment of Rs 1,80,00,000 or delivery of securities to Bharat Insurance Company. Moreover, the introductory words of the letter did not necessarily indicate that Gurha was being told for the first time that the temporary loans arranged by him for Union Agencies Ltd., in the name of Bhagwati Trading Company, actually represented money belonging to Bharat Insurance Company. If that were the intended meaning, it would have been inserted deliberately, just as the concluding part of the letter seemed to be crafted deliberately to safeguard Vishnu Prasad’s interests. The letter is dated 17 September 1955 and therefore appears to have been written a few days before the formal police complaint was lodged. Even assuming the date is correct, the letter was prepared at a time when the securities issue had already attracted the attention of the authorities and Dalmia was being pressed to explain the status of the securities. In that context Chokhani could have produced a letter of the character described.

The learned Sessions Judge also relied on the observation that the letter fails to mention a category of securities that were not in the possession of the Insurance Company although they had ostensibly been purchased. Specifically, the letter omits any reference to securities valued at Rs 26,25,000 that were actually supplied to the Insurance Company on 23 September 1955. A letter of this nature would have been expected to include that amount and to request Gurha to make up that shortfall to the Insurance Company, which suggests that the letter was drafted after 23 September 1955. Mr Kohli, however, argued that a contract for the purchase of those securities had been concluded on 16 September 1955, and therefore Chokhani intentionally omitted those securities from the letter. The Court referred to the statement of Jayantilal, PW‑6, a partner of the firm Devkaran Nanjee, Brokers in Shares and Securities. Jayantilal testified that Bhagwati Trading Company sought to purchase for immediate delivery the 3 percent 1966‑68 securities with a face value of Rs 21,25,000 and that a contract was entered into. Such securities were not available on the market; only securities worth Rs 1,75,000 could be sourced and were delivered to Chokhani on that day. Consequently, they had to acquire securities with a face value of Rs 20,00,000 from the Reserve Bank of India to effect delivery and were forced to sell other securities of equivalent value. As a result, the required securities were received on 22 September 1955. Even this testimony does not explain why securities worth Rs 4,50,000 were omitted from the letter (Ex. P. 956). An alternative contention was that Chokhani possessed extensive powers over all the alleged concerns of Dalmia and could accomplish anything without revealing secrets. Gurha’s statement, however, did not corroborate this view; he did not claim that he deliberately prepared false documents under Chokhani’s direction and could not ignore such instructions. If the alleged circumstance were true, it would mean that Gurha intentionally caused false documents to be prepared. Gurha further submitted that the case established for his conviction differed from the case sought to be portrayed in the police charge‑sheet filed under Section 173 of the Code of Criminal Procedure, and that the charge‑sheet was hardly a

In order to complete the delivery, the parties had to sell other securities of equivalent value, and consequently they obtained the required securities on 22 September 1955. The fact that the securities valued at Rs 4,50,000 were omitted from the letter marked as Exhibit P. 956 was not explained by this statement. An alternative argument was raised that Chokhani possessed extensive authority over all the matters concerning Dalmia and could therefore accomplish any act through his influence without revealing any secrets. Gurha’s testimony did not support this view; he did not affirm that he had deliberately caused false documents to be prepared on Chokhani’s instructions and that he could not refuse such orders. Even assuming that Gurha had indeed caused false documents to be produced, the implication would be that he acted with deliberate intent. Gurha further contended that the case established for his conviction differed from the case that the police sought to present in the charge‑sheet filed under section 173 of the Code of Criminal Procedure. He argued that the charge‑sheet was neither a complete nor an accurate statement of the prosecution’s case. Section 173(1)(a) requires the officer in charge of the police station to forward to the magistrate a report in the prescribed format, containing the names of the parties, the nature of the information, and the names of persons who appear to be acquainted with the circumstances of the case. No additional elaboration on this procedural requirement was necessary.

The prosecution maintained that its case had altered at various stages, suggesting that new facts emerged that were previously unknown, thereby changing the complexion of the allegations against Gurha’s conduct. Even if the allegations had indeed evolved, Gurha could not claim a grievance unless he was unable to meet the new accusations in his defence, a difficulty he did not express. The prosecution’s ultimate allegation was that a cash statement received from Bombay had been suppressed and that a false cash statement had been prepared in Delhi under Gurha’s direction. This matter had already been examined, and no prosecution witness had made such an allegation. The suggestion advanced was essentially an attempt to explain how entries in the cash statements from Bombay differed from the entries in the advices issued by Lakhotia, which ought to have corresponded with the cash‑statement entries. Whether this suggestion was correct or not, it could not be said to constitute a material change in the prosecution’s case that would render it doubtful. Additionally, a grievance was raised that Gurha had not been questioned about the allegation that the cash statement had been suppressed and replaced, a line of inquiry the court found unwarranted in the absence of supporting evidence.

In this case, the Court observed that the prosecution could not put a question before Gurha about a fictitious cash statement because there was no evidence of such a statement. Under section 342 of the Code of Criminal Procedure, an accused may be questioned only to explain circumstances that appear in the evidence against him; it is unnecessary to compel the accused to explain any inference that a court might draw from the record. The Court further noted that the prosecution alleged that Chokhani deliberately kept the Delhi office of the Insurance Company unaware of certain transactions. Contrary to that allegation, the cash statement that was sent from Bombay did in fact mention Bhagwati Trading Company, and these statements were forwarded directly to Gurha. In view of these facts, the Court concluded that the reference to Bhagwati Trading Company reflected the true state of affairs and that Chokhani was obliged to inform the Delhi office of the Bharat Union Agencies about the source of the funds he was receiving for the Union Agencies’ losses. Instead of revealing the actual source, Chokhani fabricated a fictitious source to conceal the real one. The Court held that disclosing the existence of Bhagwati Trading Company to the Union Agencies’ Delhi office did not cause any injury. By contrast, revealing the same information to the Insurance Company’s Delhi office would have required the participation of the entire Insurance Company staff in the conspiracy and would have immediately exposed that the Insurance Company’s funds were being misappropriated. Accordingly, the Court found that informing the Union Agencies of the Bhagwati Trading Company was necessary and that there was no prejudice in communicating this information confidentially to Gurha. After Gurha received the cash statement, it was his responsibility to direct how the necessary entries should be made in the advices prepared by Lakhotia on behalf of the Bombay office in Delhi; those advices formed the basis for the journal vouchers prepared by Dhawan and for the entries recorded in the accounts of the Union Agencies at Delhi. The Court therefore concluded that the contention raised by the appellant did not support his case. The Court also observed that the ledger entry for Asia Udyog Ltd. in Exhibit P‑2226, which is not alleged to be fictitious and bears the letter ‘J’ in the folio column, does not assist the appellant because the entries in that ledger must have arisen from the journal vouchers issued by Dhawan. Moreover, the Court stated that if the advices issued by Lakhotia are deemed fictitious, any entry traceable to those advices must also be fictitious. Finally, the Court rejected the argument that the alleged scheme of making circuitous entries could not have concealed the source of the money, noting that the Income‑Tax Authorities might have detected the true source by following the entries in the financial records.

In this case the Court observed that the bank records could reveal the source of payment only through cheques issued by Bhagwati Trading Company to the Union Agencies in Bombay. The authorities could therefore identify Bhagwati Trading Company, and, as already noted, it was not necessary to conceal the identity of that company from the Union Agencies. The real purpose of the concealment was to hide the fact that the money originated from the Insurance Company. The circuitous entries were therefore not intended to keep Bhagwati Trading Company unknown, but rather to make it difficult to trace that the funds had actually been received from the Insurance Company. A suggestion was put forward by counsel that Chokhani might have shown the same amount in both the cash statement and the journal statement, but no such allegation was raised before the lower courts and it appeared only in the appellant’s statement of case. It was contended that an offence under section 477A of the Penal Code had not been established against the accused because it was not proved that he had falsified any books, papers or documents in his employer’s possession with the intention to defraud. The argument further asserted that the intention to defraud should refer to a future deception causing loss to another, not merely an attempt to conceal past wrongdoing. The submissions noted that “intent to defraud” implies an intention to deceive and cause loss, and argued that the entries made in the journal vouchers did not cause anyone to suffer loss, and therefore could not have been made with such intent. While the term “intent to defraud” is not defined in the Penal Code, section 25 defines the word “fraudulently” as acting with intent to defraud. The Court held that the vouchers were falsified for a single purpose: to conceal that the Union Agencies had obtained funds from the Insurance Company. Had the records shown the money received and paid to Bhagwati Trading Company, investigators could have traced the funds back to the Insurance Company through the cross‑cheques used by Bhagwati Trading Company. Anyone attempting to discover the source of the money would have been misled by the false entries. The Union Agencies obtained an unlawful gain by diverting the Insurance Company’s funds through Bhagwati Trading Company, and the Insurance Company suffered a loss. The false entries were made to cover up this diversion, thereby concealing and furthering the dishonest act already committed. The Court agreed with the observations in Emperor v. Ragho Ram, which state that if a false document is created to conceal a previously committed fraudulent or dishonest act, the intention is clearly that of fraud, and that such concealment amounts to fraud.

In its discussion, the Court quoted the observation that an intention different from the intention to commit fraud could not exist, because concealing a fraud already committed constituted fraud. The Court further reproduced the passage from page 789 which explained that whenever a person intends to obtain an advantage by deceit, that intention amounts to fraud and that a document fabricated with such intention is forgery. The passage clarified that a person who deliberately prepares a false document to hide a fraud he has already committed acts with the intent to commit fraud, because the false document is intended to persuade the other party that no fraud occurred. The Court noted that no argument was required to show that measures taken to prevent a defrauded person from discovering the fraud, and thereby to enable the fraudster to retain the illicit gain, were themselves acts of fraud. It added that any act designed to conceal an already committed fraud and to make the victim believe that no fraud occurred was a fraudulent act within the meaning of section 25 of the Code.

The Court affirmed this observation and rejected the appellant’s contention. It then addressed the submission that any falsification must be directly connected with the commission of a breach of trust. The Court held that a falsification need not be immediately or remotely linked with the breach of trust it seeks to mask, provided the falsification serves the purpose of covering up the breach. In the present case, the Court observed that the introduction of Bhagwati Trading Company into the transactions represented the first step in a scheme to deceive about the actual payment of money from the Insurance Company’s funds to the Union Agencies. The second step involved suppressing the name of Bhagwati Trading Company in the Union Agencies’ records, which made it more difficult to trace the flow of the Insurance Company’s money to the Union Agencies. The Court explained that the subsequent falsification of journal vouchers was directly related to the original diversion of the Insurance Company’s funds to the Union Agencies and was intended to mislead anyone in the future who might try to trace the source of the money received by the Union Agencies.

The Court also noted a grievance raised concerning the failure to examine certain witnesses by the prosecution. It recorded that five individuals—Kannan, Lakhotia, Gurha, Mittal and Dudani—had been accused in the trial. Of these, only Gurha was convicted while the others were acquitted. The Court listed additional persons connected with the Union Agencies: Krishnan, Panohawagh, and the clerks O. D. Mathur and Attarshi. It further mentioned that one individual, R. S. Jain of the Accounts Branch of Asia Udyog, had not been examined. Finally, the Court noted that Panchawagh, who served as an accountant for the Union Agencies and had custody of the cash statements and journal, had been given...

In this case, the prosecution had decided not to call certain individuals as witnesses, arguing that they had been “won over.” The Court held that it was not necessary to examine those persons for the purpose of developing the prosecution case against Gurha, and similarly it was unnecessary to examine the other individuals for that purpose. The Court explained that merely anticipating that they might provide additional description of events in the offices does not make the omission to examine them an ulterior motive, nor does it mean that the omission benefits the accused. A grievance was raised that the High Court had not addressed the issue of whether the police had tampered with the cash statement and the journal. It was unclear from the record whether that issue had been raised before the High Court, and it was not mentioned in the grounds of appeal. The trial Court, however, had considered the allegation and had held against the appellant Gurha. Furthermore, paragraph 22 of Gurha’s grounds of appeal merely stated that no value should be attached to the cuttings because the record did not establish who made the cuttings, when they were made, or that they were intended to conceal the truth or further any conspiracy. Accordingly, the Court concluded that Gurha had been correctly found to be part of the conspiracy and to have abetted the preparation of false journal vouchers. Consequently, the Court was of the view that the appellants had been properly convicted of the offences charged. It was submitted on behalf of Chokhani that his sentence should be reduced to the period already served because he derived no personal profit from the transactions, he was 59 years old, and he had already spent ten days in custody. The Court found that these factors did not warrant a reduction in the sentence, given that he was the principal individual who performed the main work of the conspiracy. Likewise, the Court considered that Dalmia’s sentence was not unduly harsh in the circumstances of the case. Accordingly, the appeals were dismissed.