Supreme Court: In an appeal arising out of the prosecution and convictions under High Denomination Bank Notes (Demonetisation) Ordinance, 1946, the Division Bench of B. Jagannadhadas* and T.L. Venkatarama Ayyar, JJ., was unable to agree with the contention that the present case was the one in which Accused 2 and 4 (‘appellants’) should get away with a mere fine. The Supreme Court stated that the gravamen of the modus operandi, in the commission of the offence was that persons in the responsible position of a Director or an agent of the Company and having a fiduciary capacity, allowed the Company’s name to be used for the private purposes using their dual position. Whether or not this was done for any ulterior purpose or benefit, such an act on the part of such people called for a sentence more severe than a mere sentence of fine, which people in such situations would find quite easy to pay up.
The Supreme Court stated that there was no sufficient reason for the substantial disproportion in the fines imposed, considering the first count in the false declaration case and the first count in the prohibited transfer case. Therefore, the Supreme Court stated that it was unable to maintain the sentences awarded by the High Court and accordingly, reduced the sentence of six months’ simple imprisonment to one month’s simple imprisonment.
Background
In the present case, there were six accused at the trial, wherein Accused 1 was Sholapur Spinning and Weaving Company Limited (‘the Company’), Accused 6 was its Secretary, and the other four accused related to the management of the Company in some capacity or other. The Company had its head office at Bombay, and the mills were situated at Sholapur. Further, Moraka and Company (‘the Firm’) were the managing agents of the Mills at Sholapur on behalf of the Company.
On 17-1-1946, a declaration signed by Accused 2, on behalf of the Company, was filed with Imperial Bank, Bombay with a tender of 452 bank notes of the denomination of Rs 1000 each. The case for the prosecution was that these high denomination notes belonged to the Firm and not to the Company. Rather, these notes were transferred by the firm to the possession of the Company, partly by substitution of the small notes in the Company’s possession, but mainly by showing in the books of the Company a sum of Rs 3,50,000 as having been received by the Company from the firm.
It was also the prosecution case that the original cash book of the Company at the relevant period was substituted by a new one and rewritten, and that the original cash receipts of the relevant period were destroyed and rewritten, to show the sum of Rs. 3,50,000 was received in the regular course of the Company’s business on 11-1-1946. Further, these manipulations were made by two of the Company’s employees, namely, the cashier and the assistant cashier, at the instance and pressure of these two accused.
The declaration filed into the bank had to comprise the following questions:
(1) the status of the declarant as owner of the bank notes tendered;
(2) when and from what source the declarant came into possession of bank notes now tendered; and
(3) the reasons for keeping high amount in denomination notes rather than in current account, fixed deposit or securities.
In the written declaration as filed, the answer to Question 1, showed the Company as the owner by implication. Further, in answer to the query regarding the source of the bank notes, the declaration stated that it was “in the course of the business”, and in answer to the reasons for keeping the amount in high denomination notes, the declaration was that it was “to make urgent payment in course of business”. Thus, apart from the fact that by permitting these bank notes to be transferred from the firm to the Company, Section 4 of the Ordinance was contravened, the declaration filed under Section 6(2) was also false, and hence offences under Section 7(1) of the Ordinance were committed.
At the trial, Accused 3 and 5 were acquitted, and Accused 1, 2, 4 and 6 were convicted. Thereafter, an appeal was filed by the Company to the High Court against the conviction. The State also filed two applications for enhancement of sentence as against Accused 2 and 4, who were Directors of the Company. The High Court, while dismissing the appeal, enhanced the sentences as against Accused 2 and 4.
Analysis, Law, and Decision
The Supreme Court stated that in the present case, it had to be remembered that the Magistrate imposed on each of the appellants very heavy fines of Rs 67,000 on each, and it was not unlikely that the such heavy fines was imposed, considering the fact that he was not awarding a sentence of imprisonment. The Supreme Court stated that the High Court Judges did not take this into consideration but maintained the aggregate heavy fine of Rs. 67,000 against each and have given also a further sentence of imprisonment for six months against each.
The Supreme Court stated that in awarding such a sentence, the High Court had not kept in view the decision in Adamji Umar Dalal v. State of Bombay, 1951 SCC 1106. There was no sufficient reason for the substantial disproportion in the fines imposed as regards the first count in the false declaration case and the first count in the prohibited transfer case. Therefore, the Supreme Court stated that it was unable to maintain the sentences awarded by the High Court.
However, the Supreme Court was unable to agree with the appellant’s contention that the present case was the one in which the appellants should get away with a mere fine. The Supreme Court stated that the gravamen of the modus operandi in the commission of the offence was that persons in the responsible position of a Director or an agent of the Company and having a fiduciary capacity, allowed the Company’s name to be used for the private purposes using their dual position. Whether or not this was done for any ulterior purpose or benefit, such an act on the part of such people called for a sentence more severe than a mere sentence of fine, which people in such situations would find quite easy to pay up.
Thus, considering all the circumstances of the present case, the Supreme Court reduced the sentence of six months’ simple imprisonment to one month’s simple imprisonment and the fine of Rs 50,000 in respect of the first count in the false declaration case was reduced to Rs 20,000.
[Ram Kumar Shrinivas Morarka v. State of Bombay, (1954) 2 SCC 268, decided on 23-09-1954]
*Judgment authored by: Justice B. Jagannadhadas
Advocates who appeared in this case :
For the Appellants: A.K. Basu, Senior Advocate (Rajinder Narain and M.D. Upadia, Advocates, with him); P.R. Das, Senior Advocate (E.B. Ghasvala and I.N. Shroff, Advocates, with him);
For the Respondent: C.K. Daphtary, Solicitor General of India (P.A. Mehta and P.G. Gokhale, Advocates, with him)
*Note: Principles for sentencing employees in fiduciary capacity
In T.N.C.S. Corpn. Ltd. v. K. Meerabai, (2006) 2 SCC 255, it was held that:
“In the instant case, the charged employee holds a position of trust where honesty and integrity are inbuilt requirements of functioning and, therefore, in our opinion, the matter should be dealt with firm hands and not leniently. In the instant case, the respondent deals with public money and is engaged in financial transactions or acts in a fiduciary capacity and, therefore, the highest degree of integrity and trustworthiness is a must and unexceptionable. Judged in that background, the conclusion of the learned Single Judge as affirmed by the Division Bench of the High Court does not appear to be proper. We have no hesitation to set aside the same and restore the order passed by the disciplinary authorities upholding the order of dismissal.”