If the prosecution failed to prove the identity of seized gold the accused is not liable to prove lawful acquisition of gold

Appeal

Appeal against the confirmation of conviction

1. This common order disposes of these criminal appeals as they are directed against the common judgment and order dated 16.07.2009 of the High Court of Judicature at Bombay whereunder the High Court dismissed the appeal of the appellant/Hiralal Babulal Soni (Criminal Appeal Nos. 579-580/2012) and the appeal of the appellant/accused No. 3 namely, Nandkumar Babulal Soni, (Criminal Appeal No. 581-583/2012) whereas the appeals of Mr. S.K. Sheenappa Rai (accused no.1), Devdas Shetty (accused no.2) and Vijaya Bank were allowed. We shall later notice the conviction and sentence awarded by the courts below.

2. The offence pertains to commission of fraud by remittance through fake Telegraphic Transfers and subsequent withdrawals to the tune of Rs. 6,70,00,000/- at Vijaya Bank, Nasik Branch, Maharashtra.

2.1 On 30.01.1997, one person disclosing as a representative of M/s. Globe International, a proprietary concern, approached the bank for opening an account which was not immediately accepted by the accused no. 1 (S.K. Sheenappa Rai), Branch Manager as he wanted to verify the documents as there was difference in signatures. However, since one Surendera Bhandary, Assistant General Manager, Vijaya Bank, Fort Branch, Bombay confirmed the letter of introduction issued by him, the personal presence of the proposed account holder was dispensed with, and the account was opened.

2.2 It is the case of the prosecution that the documents submitted at the time of account opening were forged and the person representing the firm namely, Surendra Jain or the firm Globe International were fictitious. The account was eventually opened on 06.02.1997. On 25.04.1997, Nasik Branch received TT of Rs. 10,00,000/- in the account of Globe International and thereafter till 28.07.1997, 11 TTs were sent from Delhi issued by Vijaya Bank, Ansari Road Branch, New Delhi. On 06.08.1997, Vijaya Bank, Nasik Branch received TT of Rs. 4,00,000/- which was credited to the account of Globe International. Thus, total amount of Rs. 6,70,00,000/- was credited in this account. Simultaneously, with the credit of TT amount, the same was withdrawn and subsequently, the TTs were found to be bogus and forged and the entire fraud was committed not only by accused nos. 1 and 2 but was done with the help of absconding and unknown persons like Mukesh Shah @ Mayur Desai or Ashok Agarwal @ Surender Jain and so on. On 12.08.1997, it was found that no payment of the said TTs was ever made at Vijaya Bank, Ansari Road Branch, Delhi. On this date, accused no. 1 informed Vijaya Bank, Fort Branch, Bombay about the fraud and the payments against 19 demand drafts for a total amount of Rs.1,61,44,000/- were stopped.

Investigation

3. During the investigation, the Investigating Officer recorded the statements of the owner of Jewellary firms i.e. M/s. Chenaji Narsinghji and M/s. V.P. Jewellers and thereafter filed the chargesheet against accused nos. 1 and 2 by mentioning that further investigation is going on. Later, Central Bureau of Investigation found that most of the DDs were issued in favour of M/s. CN against the purchase of gold bars and the delivery of those gold bars were given to accused no. 3 or through him to Mayur Desai @ Mukesh Shah. CBI found link between absconding accused Mukesh Shah and accused no. 3 to whom gold bars were delivered from M/s. CN. On 01.06.2001, a search was carried out at the shop of accused no. 3 effecting seizure of 205 gold bars and other documents. Thus, chargesheet was filed against accused no. 1 (S.K.Sheenappa Rai), accused no. 2 (M. Devdas Shetty), accused no. 3 (Nandkumar Babulal Soni) whereas accused no. 4 (Mayur Desai @ Mukesh Shah @ M.P. Jain @ Mukesh Jain) could not be traced and declared proclaimed offender by the Trial Court on 12.02.2002.

4. The Trial Court framed charges against the accused persons for offences under Section 120B read with Sections 403, 409, 411, 420, 471, 477A and 109 of the Indian Penal Code, 1860 read with Section 13 (2) read with Section 13 (1) (d) of the Prevention of Corruption Act, 1988. While the accused nos. 1 and 2 submitted that they are innocent; the account was opened as per the banking procedure; they have been given a clean chit in the departmental inquiry conducted by the Vijaya Bank. The accused no. 3 set up a defence that he has no connection with either M/s.CN or with Mukesh Shah @ Mayur Desai and, thus, he is falsely implicated without there being any evidence against him. He claimed that the seized gold bars are his property, legally acquired by him. At the end of trial, accused nos. 1 and 2 were convicted for the offences under Sections 120B, 467, 409, 471, 477A, 403 of the IPC as also under Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. Accused No. 1 was also held guilty of the offence punishable under Sections 403 and 465 read with Section 120B of the IPC and accused no. 2 was held guilty under Section 403 of the IPC. The accused no. 3 was held guilty of the offence punishable under Section 120B of the IPC as well as under Section 411 read with Section 120B of the IPC. The Trial Court directed that the muddemal articles consisting of 205 gold bars be returned to the accused no. 3.

Direction to return 205 gold bars to accused no.3 by Trial court was quashed by High Court

6. The High Court under the impugned judgment has allowed the Criminal Appeal preferred by accused nos. 1 and 2 and their conviction and sentence has been set aside. The Criminal Appeal No. 428 of 2006 preferred by accused no. 3 (Nandkumar Babulal Soni) was dismissed. The Criminal Appeal No. 363 of 2009 (converted from Criminal Application No. 463 of 2007) preferred by Hiralal Babulal Soni was also dismissed. The Criminal Appeal No. 638 of 2006 preferred by CBI challenging the Trial Court’s direction to return 205 gold bars to the accused no. 3 (Nandkumar Babulal Soni) has been allowed and the direction is quashed and set aside by the High Court. The property stood confiscated and placed at the disposal of the State Government.

Conviction and return of 205 gold bars is challenged in this appeal

7. Aggrieved by the High Court’s judgment, accused no. 3 (Nandkumar Babulal Soni) has preferred Criminal Appeal Nos. 581-583 of 2012 challenging his conviction as also seeking return of 205 gold bars whereas Criminal Appeal No. 579-580 of 2012 has been preferred by Hiralal Babulal Soni and Criminal Appeal No. 584 of 2012 has been preferred by Vijaya Bank, both seeking return of gold bars.

Analysis

The nature of fraud – “Telegraphic Transfer”

11. At the relevant time, Vijaya Bank offered a service facility to all its customers whereby money could be remitted through the means of “Telegraphic Transfer” (TT). If a customer desired to remit funds urgently from one place to another, he could deposit cash and request the remitting branch to send the amount to the credit of a particular account. Upon receipt of money, the remitter branch would generate a code which was then sent via telegram to the concerned branch in which account of the beneficiary was operational. Upon decoding, the receiving branch would then credit the amount to the account of the beneficiary and send “Bank adjustment Requisition Form” (BARF) to the remitting branch which upon receiving the BARF would send a credit advice to the receiving branch.

20. The prosecution sought to prove the charges against the appellant/Accused No. 3 on the basis of evidence of PW-19- Praveen Champalal Jain (who was working with the firm Babulal Soni Bhutajilal Soni), PW-21- Bhavarlalji Jawaratrai Jain (owner and partner of M/s. CN), PW-22- Dhiraj Ganeshmal Jain (Manager of M/s. CN), PW-26- Prakash Kumar Devraj Jain (Manager of M/s. CN), PW-32-Ashok Kumar Bhavarlal Jain (owner of M/s. V.B. Jewellers) and PW-33-Chandramohan A. Shetty (Investigating Officer). To establish the identity of the gold bars, the prosecution examined PW-24 (Manish Srivastav), PW-25 (Sudhakar Tamhane), PW-27 (Dr. Piyush Bhansali), PW29 (Bien Nanavati) and PW-31 (Vinod Kumar Niranjanlal Jain).

Receipt of stolen property by appellant/accused no. 3

23. For proving the charge under Section 411 IPC against the appellant/accused no. 3, the prosecution relied on Section 106 of the Evidence Act to say that the appellant/accused no.3 having been found in possession of 205 gold bars, it was for him to explain the source of acquisition. The Trial Court examined the witnesses i.e. PW-24 (Manish Srivastav), PW-25 (Sudhakar Tamhane), PW-27 (Dr. Piyush Bhansali), PW-28 (Anichandra Mahadeorao Bhujade), PW-29 (Biren Vinodchandra Nanavati) and PW-31 (Vinodkumar Niranjanlal Jain). The prosecution tried to establish the negative fact that the gold claimed was not  purchased from the brother of appellant/accused no. 3 i.e. Ambalal Soni who was also examined as defence witness. On the contrary, appellant/accused no. 3 set up a defence firstly, that there is a delay of four years in finding out the property though the name of appellant/accused no. 3 was already disclosed to the police much earlier, secondly, appellant/accused no. 3 himself is a jeweller and, thirdly, the gold bars are not proved to be the same stolen property due to the difference of markings.

25. Having said so, as extracted above, the Trial Court proceeded to hold in para 120 that the property Article 2 (seized gold bars) before the Court is not proved as the same property which was sold by M/s. CN to M/s. Globe International. However, surprisingly, the trial court concluded that, the fact that the gold was sold through fraudulent demand drafts from M/s. CN to M/s. Globe International, it can be held that appellant/accused no. 3 has received stolen property with knowledge. It was held that gold bars found with him may be a stolen property or he might have handed over to the absconding accused Mukesh Shah or any other accused. It was also held that after receiving the stolen property, it may change the hands, so accused may not have entertained the property but the fact that he has received the property is proved beyond reasonable doubt. Therefore, the evidence brought forth by the prosecution is sufficient to hold that accused is guilty under Section 120B and 411 of the IPC. Significantly, the Trial Court observes in the same breath in the following words in Para 120:

“120. However, the gold bars i.e. Article 2 may be or may not be the same gold bars which were sold by Chenajee Narsinghjee to Mr. Mukesh of Globe International. The distance between may and not is very vast and prosecution has to cover that distance to reach the destination of must, however, the prosecution in this case could not achieve that level of proof.”

Circumstances for conviction

28. The circumstances considered by the courts below to sustain the appellant’s conviction under Section 411 and 120B of the IPC can be summarised as follows:

(i) CBI officials were resisted at the time of search and seizure in the appellant’s jewellery shop;

(ii) Letter issued by M/s. Chenaji Narsinghji to CBI (Exhibit-119) containing an endorsement in favour of the appellant;

(iii) Gold purchased by utilizing demand drafts drawn on the account of M/s. Globe International was stolen property;

(iv) The appellant have business relations with M/s. Chenaji Narsinghji and M/s. V.B. Jewellers;

(v) The appellant failed to substantiate his defence set up in his accused statement while answering question no. 133.

(vi) The appellant having failed to substantiate his defence, clause (a) of Section 114 of the Evidence Act will have to be invoked;

(vii) The evidence of handing over of demand drafts by the appellant to M/s. Chenaji Narsinghji and M/s. V.B. Jewellers and taking delivery of gold bars (finding by the Trial Court).

Judgment on proof beyond reasonable doubt

29. It is settled law that however, strong a suspicion may be, it cannot take place of proof beyond reasonable doubt. This Court in “Kamal vs. State (NCT of Delhi)” (supra) has held thus:-

“18. It can thus be seen that this Court has held that the circumstances from which the 24 conclusion of guilt is to be drawn should be fully established. It has been held that the circumstances concerned “must or should” and not “may be” established. It has been held that there is not only a grammatical but a legal distinction between “may be proved” and “must be or should be proved”. It has been held that the facts so established should be consistent only with the hypothesis of the guilt of the accused, that is to say, they should not be explainable on any other hypothesis of the guilt of the accused, that is to say, they should not be explainable on any other hypothesis except that the accused is guilty. It has been held that the circumstances should be of a conclusive nature and tendency and they should exclude every possible hypothesis except the one sought to be proved, and that there must be a chain of evidence so complete so as not to leave any reasonable ground for the conclusion consistent with the innocence of the accused and must show that in all human probability the act must have been done by the accused.

19. It is a settled principle of law that however strong a suspicion may be, it cannot take place of a proof beyond reasonablele doubt. In the light of these guiding principles, we will have to consider the present case.”

Prosecution failed to prove whether the seized gold bars are the alleged gold bars

30. In the case at hand, the Trial Court has held in para 120 that whether the gold bars which were sold by M/s. CN to Mr. Mukesh Shah of M/s. Globe International are the same or not has not been proved beyond reasonable doubt. It is held by the Trial Court that the distance between may and must is very vast and prosecution has to cover that distance to reach the destination of must, however, the prosecution in this case could not achieve that level of proof. With this finding of the Trial Court, it is surprising as to how the appellant can be convicted for committing offence under Sections 120B and 411 of the IPC. Once the courts below have found that the seized gold bars, (Article 2) are not the same gold bars, conviction under Sections 120B and 411 of the IPC cannot be sustained.

If the prosecution failed to prove the identity of seized gold the accused is not liable to prove lawful acquisition of gold

31. Similarly, the High Court impliedly held that witnesses connected with M/s CN have failed to identify the seized gold. However, in the opinion of the High Court, the same is not relevant because the appellant has failed to prove lawful acquisition of gold. We fail to understand, when the prosecution has failed to prove the identity of seized gold as being the same gold which were sold by M/s. CN to M/s. Globe International, how the appellant is liable to prove lawful acquisition of gold visà-vis the stolen gold.

Section 411 IPC: Ingredients

32. In order to bring home the charge under Section 411 of the IPC, it is the duty of the prosecution to prove (i) that the stolen property was in the possession of the accused; (ii) that 26 some persons other than the accused had possession of the property before the accused got possession of it and (iii) that the accused had knowledge that the property was stolen property (See: ‘Trimbak vs. State of M.P’- AIR 1954 SC 39).

33. In “Mohan Lal vs. State of Maharashtra”, this Court held that the prosecution has to prove that the accused was in possession of property which he had reason to believe that it was stolen property.

34. In “Shiv Kumar vs. State of M.P. this Court reiterated the essentials of the offence under Section 411 of the IPC:

“9. Assailing the legality of the guilty verdict against the appellant, Mr Lav Kumar Agrawal, the learned counsel would submit that the essential ingredients of Section 411 IPC offence are not at all made out as the prosecution has failed to adduce any evidence to show that the accused had knowledge that the seized articles were stolen from the looted truck. It is, therefore, argued that unless the knowledge of the accused on the nature of the articles sold by them is established, his conviction under Section 411 IPC cannot be sustained in law.

13. In this case, although recovery of items was made, the prosecution must further establish the essential ingredient of knowledge of the appellant that such goods are stolen property. Reliance solely upon the disclosure statement of accused Raju alias Rajendra and Sadhu alias Vijaybhan Singh will not otherwise be clinching, for the conviction under Section 411 IPC.

16. To establish that a person is dealing with stolen property, the “believe” factor of the person is of stellar import. For successful prosecution, it is not enough to prove that the accused was either negligent or that he had a cause to think that the property was stolen, or that he failed to make enough inquiries to comprehend the nature of the goods procured by him. The initial possession of the goods in question may not be illegal but retaining those with the knowledge that it was stolen property, makes it culpable.

17. …………Moreover, the appellant in usual course, sold utensils in his shop and nothing is unnatural about him possessing such household articles, as seized from him.”

35. When the pre-requisite evidence to bring home the charge under Section 411 of the IPC is considered in the present case, even if it is proved that the appellant was handed over the demand drafts by Mr. Mukesh Shah and gold bars were purchased by the appellant from M/s. CN and M/s. V.B. Jewellers, still it was necessary for the prosecution to prove that the appellant either had knowledge or reason to believe that the demand drafts had been obtained through fraudulent process to make the gold bars as stolen property in the hands of the appellant or that the appellant was part of the conspiracy. Moreover, the appellant has not been charged and tried for the first part of the offence relating to criminal conspiracy vis-à-vis fraudulent TTs.

Section 106 IEA: Burden of Proof

36. Yet another aspect of the case which needs consideration is invocation of Section 106 of the Evidence Act by the courts below. Under Section 106 of the Evidence Act if certain facts are established, a reasonable inference can be drawn regarding existence of certain other facts which are within the special knowledge of the accused. On this, we may profitably refer to this Court’s judgment in “Nagendra Sah vs. State of Bihar”

“22. Thus, Section 106 of the Evidence Act will apply to those cases where the prosecution has succeeded in establishing the facts from which a reasonable inference can be drawn regarding the existence of certain other facts which are within the special knowledge of the accused. When the accused fails to offer proper explanation about the existence of said other facts, the court can always draw an appropriate inference.

23. When a case is resting on circumstantial evidence, if the accused fails to offer a reasonable explanation in discharge of burden placed on him by virtue of Section 106 of the Evidence Act, such a failure may provide an additional link to the chain of circumstances. In a case governed by circumstantial evidence, if the chain of circumstances which is required to be established by the prosecution is not established, the failure of the accused to discharge the burden under Section 106 of the Evidence Act is not relevant at all. When the chain is not complete, falsity of the defence is no ground to convict the accused.”

Presumption under section 114 IEA

37. Significantly, the Trial Court has held that in para 115 that the prosecution ought to have produced evidence to show that there was a stock of the same brand with M/s. CN and out of that stock some gold bars with markings of Harmony Suisse, Johnson Mathew, Arya were sold to M/s. Globe International. In the absence of this evidence and especially due to delay of four years in the recovery of the property the very basis of its identification is found shattered, and the possibility of mistaken identification cannot be ruled out. With this finding of the Trial Court, invocation of Section 114 of the Evidence Act is not at all permissible since the prosecution has failed to discharge its initial burden. The weakness in the defence or the appellant’s failure to substantiate the fact while answering question (no. 133) in his accused statement cannot become the strength of the prosecution. The prosecution has to prove its case beyond all reasonable doubts by positively completing the chain of circumstances against the appellant, which the prosecution has utterly failed in the present case.

39. In view of the fact that the identity of the seized property being the stolen property has not been established, Vijaya Bank is not entitled to the possession of the seized gold. Accordingly, Criminal Appeal No. 584 of 2012 preferred by Vijaya Bank stands dismissed. We, however, make it clear that the findings are for the purpose of the criminal appeal and will not come in the way of other remedies, if any, as may be available in law to the parties.

Similarly, the Criminal Appeal Nos. 579-580 of 2012 preferred by Hiralal Babulal Soni seeking return of gold bars is also dismissed.

Judgments Cited in the Judgment

1. Kamal vs. State (NCT of Delhi) – This case was referenced regarding the standards of proof required in criminal cases, particularly concerning circumstantial evidence.

2. Trimbak vs. State of M.P. – Cited for establishing the essential elements required to prove possession of stolen property under Section 411 of the IPC.

3. Mohan Lal vs. State of Maharashtra – This case reiterated the necessity for the prosecution to prove that the accused had knowledge that the property was stolen.

4. Shiv Kumar vs. State of M.P – Cited to emphasize the importance of proving the accused’s knowledge regarding the nature of the goods in possession.

5. Nagendra Sah vs. State of Bihar – Referenced concerning the application of Section 106 of the Evidence Act, particularly in cases relying on circumstantial evidence.

Party 

Hiralal Babulal Soni – The State of Maharashtra & Ors – Criminal Appeal Nos. 579-580 of 2012 – 2025 INSC 266 – February 25, 2025