the transactions which led to the diversion of the funds. of the Insurance Company to the Union Agencies and carried it out with the help of the other appellants. It has been contended both for Chokhani and for Dalmia that funds could have been found to meet the losses of the Union Agencies by means other than the diversion of the Insurance Company's funds. We need not discuss whether the shares held by the Union Agencies at the time could be sold to raise the funds or whether on the mere credit of Dalmia funds could be raised in no time. These courses were not adopted. The selling of the shares which the Union Agencies possessed, might itself affect its credit, and that no business concern desires, especially a concern dealing in sharespeculation business.

Dalmia had been in telephonic communication with Chokhani. It is significant, even though there is no evidence about the content of the conversations, that there had been frequent calls, during the period of the losses in August and September, 1954, between Dalmia's telephone and that of Chokhani at Bombay. That was the period when Dalmia was confronted with the position of arranging sufficient funds at Bombay for the purpose of diverting them to the Union Agencies. Very heavy losses were suffered in July and August, 1955. Securities of the face value of Rs. 79,00,000 and Rs. 60,00,000 were purchased in July and August, 1955, respectively. A very large number of telephone calls took place during that period between Dalmia at Delhi and Chokhani at Bombay. It is true that during certain periods of losses, the record of telephonic communications does not indicate that any telephonic communication took place. We have already stated, in considering the transactions, that the pattern of action to be taken had been fully determined by the course adopted in the first few transactions. 349

Chokhani acted according to that pattern. The only thing that he had to do in connection with further contingencies of demands for losses, was to send for securities from Delhi when the funds at Bombay were low. Such requests for the transfer of securities could be made in good time or by telephonic communication or even by letters addressed to Dalmia personally. The fact remains that a number of securities were sent from Delhi to Bombay under the directions of Dalmia when there was no apparent reason to send them other than the need to meet losses incurred or expected.

Dalmia informed the Imperial Bank at Delhi about his power to deal with securities on September 4, 1954, though he had that power from September, 1951, itself. This was at the early stage of the commencement of the losses of the Union Agencies ,suffered for a period of over a year and the planned diversion of the funds of the Insurance Company to meet the losses of the Union Agencies.

Raghunath Rai states that on the resignation of Chordia it was deemed necessary that the powers of the Chairman be registered with the Bank so that he be in a position to operate on the securities' safecustody account of the company with the Bank, and that he sent the copy of the bye- laws etc., without the instructions of Dalmia, though with his knowledge, as he was told that it was necessary for the purpose of the withdrawal of the securities for which he had given instructions. This was, however, not necessary, as Raghunath Rai bad the authority to endorse, transfer, negotiate and or deal with Government securities, etc., standing in the name of the company. We are of opinion that Dalmia took this step to enable him to withdraw the securities from the Bank when urgently required and another person authorised to withdraw be not available or be not prepared to withdraw them on his own.

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The position of the securities may be brifely described on the basis of Appendix 1 of the Investigator's report Exhibit D. 74. The amount of securities at Bombay with the Chartered Bank, on June 30, 1953, was Rs. 53,25,000 out of a total worth Rs. 2,69,57,200. The amount of securities in the Bank continued to be the same till March 31, 1954, even though the total amount of securities rose to Rs. 3,04,88,600. Thereafter, there had been a depletion of securities with the Chartered Bank at Bombay with the result that on December 31, 1954, it had no securities in deposit. The amount of securities in the Imperial Bank of India, New Delhi, also fell subsequent to June 30, 1954. It came down to Rs. 2,60,000 on March 31, 1955, from Rs. 59,11,100 on June 30, 1954.

Securities worth Rs. 52,00,000 were in the two offices on June 30, 1953. The amount of such securities kept on steadily increasing. It was Rs. 1,88,47,500 from September, 1953, to March 31, 1954. Thereafter, it rapidly increased every quarter, with the result that on March 31, 1955, the securities worth Rs. 3,76,50,804 out of the total worth Rs. 3,86,97,204 were in the offices. The overall position of the securities must have been known to Dalmia. The saving of Bank charges is no good explanation for keeping the securities of such a large amount, which formed a large percentage of the Company's holdings, in the offices and not in deposit with a recognized bank. The explanation seems to be that most of the securities were not really in existence. Raghunath Rai states that be spoke to Dalmia a number of times, presumably, in July and August, 1955, about the non- receipt of the securities of the value of Rs. 81,25,000, Rs. 75,00,000 and Rs. 69,00,000 which were purchased in the months of April-May. July and August 1955 respectively, and Dalmia used

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to tell him that as the purchase and sale of securities had to be effected at Bombay, Chokhani could send them to the head office only after it had been decided about which securities would be finally retained by the Insurance Company. This statement implies that Dalmia knew and anticipated the sale of those securities and such a sale of those securities, as already mentioned, could not be in the usual course of business of the company. The securities were to be sold only if by the next due date for payment of interest they could not be recouped and did not exist with the company. Such an inference is sufficient to impute Dalmia with the knowledge of the working of the scheme. Securities were sent to Bombay from Delhi seven times during the relevant period and they were of the face value of Rs. 2,114,82,500. Securities of the face value of Rs. 17,50,000 were withdrawn from the Imperial Bank, Delhi, on September 4, 1954-vide Exhibit P. 1351. They were sold at Bombay on September 9, 1954. Thereafter, 30/ 1957 securities of the face value of Rs. 37,75,000 were sent on January 6, 1955. Raghunath Rai deposes that he withdrew these from the Imperial Bank, Delhi, under the directions of Dalmia, and that he handed them over to Dalmia. These securites did reach Bombay. There is no clear evidence as to how they Went from Delhi to Bombay. They were sold on January 11, 1955.

Eleven stock certificates of the face value of Rs. 57,72,000 were sent to Bombay on March 16, 1955, vide letter Ex. D.

3. Thereafter, stock Certificates were sent thrice in July 1955. Stock certificate in respect of 3% Bombay Loan of 1955, of the face' value of Rs. 29,75,000 was sent to Bombay on July 15, 1955-vide Exhibit P. 923. On the next day, i.e., on July 16, 1955, stock certificates of 3% Bombay Loan of 1955 of the face value of Rs. 15,50,000 and stock 352

certificates of 3 % Loan of Government of Madhya Pradesh of the face value of Rs. 60,500 were sent to Bombay-vide Exs. D. 1 and D. 2 respectively.

J. Lastly, stock certificates of 2 3/4% Loan of 1962 of the face value of Rs. 56,00,000 were sent to Bombay on August 5, 1955.

Letters Exhibits D. 3 and P. 892 state that the stock certificates mentioned therein were being sent under instructions of the Chairman'.

Raghunath Rai has deposed that the other stock certificates send with letters Exhibits D. 1, D. 2 and P. 923, were sent by him as the securities with respect to which those certificates were granted were maturing in September and were redeemable at Bombay. It has been urged that they could have been redeemed at Delhi and that they need not have been sent by Raghunath Rai on his own a couple of months earlier. We do not consider the sending of the securities a month and a half or two months earlier than the date of maturity to be unjustified in the course of business. It is to be noticed that what was sent were the stock certificates and it might have been necessary to get the securities covered by those certificates for the purpose of redemption and that might have taken time. No pointed question was put to Raghunath Rai as to why he sent the securities two months ahead of the date of maturity. Dalmia denies that he gave any instructions for the sending of the securities. There seems to us to be no good reason why the expression under the instructions of the Chairman' would be noted in letters Exhibits D. 3 and P. 892, unless that represented the true statement of fact. We have already discussed and expressed the opinion, in considering the evidence of Raghunath Rai, that Raghunath Rai was told by

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Dalmia, when informed of the purchase or sale of securities, that had been done under instructions and that he had confirmed them. We may further state that there is no resolution of the Board of Directors empowering Chokbani to deal with the Rag securities. He was, however, empowered by resolutions at the meeting of the Board dated June 29, 1953, to lodge and receive G. P. Notes from the Reserve Bank of India for verification and endorsement on the same and to endorse or withdraw the G. P. Notes on behalf of the company in the capacity of an agent. Chokbani was also empowered by a resolution dated October 1, 1953, to deposit and withdraw Government securities held in safe custody account by the company. The aforesaid powers conferred on Chokhani are different from the powers of sale or purchase of securities. Dalmia has stated that he authorised Chokhani to purchase securities in about October, 1953,when he was to leave for abroad and that thereafter Chokhani had been purchasing and selling securities in the exercise of that authority without consulting him. It is urged for him that Raghunath Rai's statement that be used to obtain confirmation of the purchase and sale of the securities from him cannot be true, as there was no necessity for such confirmation. Chokbani does not appear to have exercised any such authority during the period Dalmia was abroad or till August, 1954, and therefore Dalmia's statement does not appear to be correct. Chokhani and Raghunath Rai were authorised to operate upon the Bank account at Bombay on October 1, 1953. Dalmia states, in paragraph 17 of the written statement dated March 30, 1959, that this was done as Chokhani bad been given 354

the authority for the sale and purchase of securities at the same time. The Board did not give any such authority to Chokhani and if the system of joint signatures was introduced for the reason alleged, there seems to be no good reason why the Board itself did not resolve that Chokhani be empowered to sell and purchase securities. The explanation for the introduction of joint-signature scheme does not stand to reason.

Even if it be not correct that Raghunath Rai had to obtain confirmation, it stands to reason that he should report such transactions on the part of Chokhani to the Chairman, if not necessarily for his approval, at least for his information, as Chokhani had no authority to purchase and sell securities. These transactions have to be confirmed by the Board of Directors and therefore confirmation of the Chairman who was the only person authorised to purchase and sell securities was natural.

Raghunath Rai states that when he received no reply to his letter dated November 19, 1954, asking for distinctive numbers of securities not received at headquarters. Dalmia said that he would arrange for the dispatch of those secu- rities from Bombay to the head office. No action was apparently taken in that connection. Raghunath Rai further states that on March 23, 1955, when he spoke to Dalmia about the non-receipt of certain securities Dalmia told him that he had already instructed Chokhani for the conversion of those securities into stock certificates and that it was in view of this statement of Dalmia that he had written letter Exhibit P. 916 to Chokhani stating therein. "You were requested for conversion of the above said G. P. Notes into Stock Certificate. The said certificate As not been received by us

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as yet. It may be sent now immediately as it is required for the inspection of the company's auditors. " This indicates that Dalmia was in the know of the position of securities and, on his own, gave instructions to Chokhani to convert certain securities into inscribed stock. Dalmia admits Raghunath Rai's speaking to him about the non- receipt of the securities and his telling him that he would ask Chokhani to send them when he would happen to talk to him on the telephone.

Mention has already been made of securities of the face value of Rs. 17,50,000 being sent to Bombay from Delhi in the first week of September 1954. At the time securities of the face value of Rs.53,25,000 were in deposit in the Chartered Bank at Bombay. There was thus no need for sending these securities from Delhi. Chokhani could have withdrawn the necessary securities from the Bank at Bombay. This indicates that on learning that there were no liquid funds for meeting the losses at Bombay, Dalmia himself decided to send these securities to Bombay for sale and for thus providing for the liquid funds there for meeting the cost of the intended fictitious purchase of securities to meet the losses of the Union Agencies. It is not suggested that these securities were sent to Bombay at the request of Chokhani.

Securities withdrawn in January, 1955, and stock certificates sent in March and August, 1955, coincided with the period when the Union Agencies suffered losses and the funds of the Insurance Company at Bombay were low and were insufficient to meet the losses of the Union Agencies. 3% 1957 securities of the face value of Rs. 46,00,000 (Rs. 37,75,000 set from Delhi and

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Rs. 8,25,000 withdrawn from the Chartered Bank at Bombay) were sold on January 11, 1955, and the proceeds were utilised in purchasing 2-3/4% 1962 securities of the face value of Rs. 46,00,000 in two lots, one of Rs. 35,00,000 and the other of Rs. 11,00,000.

On January 11, 1955, Rs. 3,34,039-15-3, the balance of the sale proceeds was deposited in the accounts of the Insurance Company. Inscribed stock for these securities worth Rs. '46,00,000 was duly obtained. Dalmia himself handed over inscribed stock certificate to Raghunath Rai some time in the end of January 1955.

This purchase, though genuine, was not a purchase in the ordinary course of business, but was for the purpose of procuring the inscribed stock certificate to satisfy the auditors, as already discussed earlier, that similar securities purchased in December, 1954 existed. The auditors were than to audit accounts of 1954 and not of 1955. In this connection reference may be made to Dalmia's attitude to the auditors' surprise inspection on September 9, 1954, on the ground that they could not ask for inspection of securities purchased in 1955. It may also be mentioned that purchasing and selling securities was not really the business of the Insurance Company. The Insurance Company had to invest its money and, under the statutory requirements, had to invest a certain portion at least in Government Securities. The value of Government securities does not fluctuate much. Dalmia states, in answer to question No. 25 (under a. 342 Cr. P. C.): 'Government securities are gift edged securities and there is very small fluctuation in these.' The question of purchasing and selling of securities with a view-to profit could not therefore be the ordinary business of the Insurance

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Company. It has to purchase securities when the statutory requirements make it necessary, or when it has got funds which could be invested.

The Insurance Company had Government of India 3% Loan of 1957 in deposit with the Chartered Bank, Bombay, the face value of the securities being Rs. 53,25,000, from April 6, 1951, onward. The fact that these securities remained intact for a period of over three years, bears out our view that the purchasing and selling of securities was not the normal business of the Insurance Company, Securities are purchased for investment and are redeemed on the date of maturity.

In this connection, reference may be made to Khanna's statement in answer to question in cross-examination-The frequency of transactions relating to purchase and sale of securities depends upon the share market and its trends ? His answer was that was so, but that it also depended on the character of the company making the investment in securities. It may be said that the trend of the share market will only guide the purchase or sale transactions of securities of a company speculating in shares, like the Union Agencies, but will not affect the purchase and sale by a company whose business is not speculation of shares like the Insurance Company.

Raghunath Rai states that when on September 9, 1955, the auditors wanted the production of the securities, said to be at Bombay, in the next two days, he informed Dalmia about it and Dalmia said that he would arrange for their production after two days. Dalmia, however, took no steps to contact Chokhani at Bombay, but rang up Khanna instead and asked him to certify the accounts as they had to be laid before the Company by September 30, and told him that everything was in order,. that he would give all satisfaction later, 358

soon after Chokhani was available and that he did not ask for an extension of time for the filing of the accounts as that would affect the prestige of the company. On September 10, 1955, when Raghunath Rai handed over the letter Exhibit P. 2 of even date from the auditors asking him to produce a statement of investments as on September 9, 1955, along with the securities or evidence if they were with other persons, by Tuesday, September 13, Dalmia had stated that Chokbani's mother had died and that he would himself arrange for the inspection of securities direct with the auditors. Chokhani's mother died on September 4, 1955. Dalmia had no reason to tell Raghunath Rai on September 9 that the securities would be produced for inspection in the next two days, unless he believed that he could get them in that time on contacting Chokhani, or did not wish to tell him the real position. Dalmia states that he contacted Chokhani for the first time on September 15, the last day of the mourning and then learnt from Chokhani that the securities were not in existence, the money withdrawn for their purchase having been lent to the Union Agencies. The various statements made by Dalmia in these circumstances and his conduct go to show that he had a guilty mind and when he made the statement to Raghunatb Rai that the securities would be produced within two days, he trusted that he would be persuasive enough for the auditors to pass the accounts without further insistence on the production of those securities.

Dalmia's not going to Mr. Kaul's Office on September 16, and sending his relations to inform the latter of the shortfall in securities can have no other explanation than that he was guilty and therefore did not desire to have any direct talk about the matter with Mr. Kaul. There was no need to avoid meeting him and miss the opportunity

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of explaining fully what Chokhani had done without his own knowledge.

Dalmia has admitted that he sent his relations to Mr. Kaul and has also admitted that what they) stated to Mr. Kaul was under his instructions., He states in answer to question No. 450, that after the telephonic talk with Chokhani on the evening, of September 15, he consulted his brother Jai Dayal Dalmia and his son-in-law S. P. Jain about the position and about the action to be taken and that it was decided between them before they left for the office of Mr. Kaul that they would tell him that either the securities would be restored or their price would be paid off as would be desired by the Government and in answer to question No. 451, said that it was correct that these persons told Mr. Kaul that a considerable amount of the securities were missing and that they were to make good the loss. It is clear that these persons decided not to disclose to Mr. Kaul that the securities were not in stock because they were not actually purchased and the amount shown to be spent on them was lent to the Union Agencies. was not a case of the securities missing but a case of the Insurance Company not getting those securities at all. It is a reasonable inference from this conduct of Dalmia that he did not go himself to Mr. Kaul as he was guilty and would have found it inconvenient to explain to him how the shortfall had taken place. We may now discuss the evidence relating to Dalmia's making a confession to Annadhanam. Annadhanam was a Chartered Accountant and partner of the Firm of Chartered Accountants M/s. Khanna and Annadhanam, New Delhi, and he was appointed by the Central Government, in exercise of its powers under s. 33(1) of the Insurance Act, 1938, on September 19, 1955, to investigate into the affairs of the Bharat Insurance 360

company and to report to the Government on such investigation. He started this work on September 20. Annadhanam, having learnt from Raghunath Rai about the missing of a number of Government securities and the amount of their value from the statement prepared by him, called Dalmia to his office that evening in order to make a statement. Dalmia made the statements Exhibits P. 10 and P. 11. 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 admits having made the statement Exhibit P. 11. but made some inconsistent statements about his making the statement Exhibit P. 'LO. It is said that he never made that statement, but in certain circumstances he asked the Investigator to write what he considered proper and that he signed what Annadhanam recorded. He did not directly state, but it was suggested in cross-examination of Annadhanam and in his written statement that he made that statement as a result of inducement and promise held out by either Annadhanam of Khanna (the other partner of M/s. Khanna and Annadhanam, Chartered Accountants, New Delhi) or both. Dalmia's contention that Exhibit P. 10 was inadmissible in evidence, it being not voluntary, was repelled by the learned Sessions Judge, but was, in a way, accepted by the High Court which did not consider it safe to rely on it. The learned Solicitor General urged that the confession Exhibit P. 10 was

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voluntary and was wrongly not taken into consideration by the High Court. Mr. Dingle Foot contended that the High Court took the proper view and the confession was not voluntary. He further urged that the confession was bit by the provisions of el. (3) of Art. 20 of the Constitution. The only witnesses with respect to the recording of the statement Exhibit P. 10. are Annadhanam and Khanna. The third person who knew about it and has stated about it is Dalmia himself. He has given his version both in his statement recorded under s. 342 Cr. P. C.- and in his written statement filed on October 24, 1958. We may first note the relevant statement in this connection before discussing the question whether the alleged confession is voluntary and therefore admissible in evidence. Annadhanam made the following relevant statements:

Dalmia came to the office at 6.30 p.m. though the appointment was for 5.30 p.m. His companion stayed outside the office room. Annadhanam asked Dalmia the explanation with regard to the missing securities. Dalmia wanted two hours' time to give the explanation. This was refused. He then asked for half an-hour's time at least. This was allowed. Dalmia went out of the office, but returned within ten minutes and said that he would make the statement and it be record. Annadhanam, in the exercise of the powers under s. 33(3) of the Insurance Act, administered oath to Dalmia and recorded the statement Exhibit P. 10. It was read over to Dalmia. Dalmia admitted it to be correct and signed it. Shortly' after, Dalmia stated that he wanted to add one more sentence to his statement. He was again administered oath and his further statement, Exhibit P. 11 was recorded. This was also read over and Dalmia signed it, admitting its accuracy.

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Annadhanam states that no threat or inducement or promise was offered to Dalmia before he made these statements. A third statement is also attributed to Dalmia and it is that when Dalmia was going away and was nearing the stair- case, Annadhanam asked him whether the speculation in which he had lost the money was carried on by him in the company's account or in his private account. Dalmia replied that he had lost that money in his personal speculation business which was carried on chiefly through one of his private companies, viz., the Union Agencies. This statement was not recorded in writing. Annadhanam did not consider it necessary, but this was mentioned by Annadhanam in his supplementary interim report, Exhibit P. 13, which he submitted to the Deputy Secretary, Ministry of Finance, on September 21, 1955. Annadhanan also mentioned about the statement recorded in Exhibit P. 10 in his interim report, Exhibit P. 12, dated September 21, 1955, to the Deputy Secretary, Ministry of Finance.

In-cross-examination, Annadhanam stated that he did not send for Dalmia to the office of the Bharat Insurance Company where he had examined Raghunath Rai, as he had not made up his mind with respect to the further action to be taken. He denied that he had any telephonic talk with Mr. Kaul, the Deputy Secretary, Ministry of Finance, prior to the recording of the statements, Exhibits P. 10 and P. II His explanation for keeping Khanna with him during the examination of Dalmia was that Khanna had done the detailed auditing of the accounts of the company in pursuance of the firm Khanna and Annadhanam being appointed auditors for 1954 by the Insurance Company. He denied that Dalmia told him that he had no personal knowledge' of the securities and that the only information he had from Chokhani was that the 363

latter had given money on loan to the Union Agencies. He stated that the statements Exhibits P. 10 and 11 were recorded in the very words of Dalmia. The statements were not actually read over to Dalmia but Dalmia himself read them over.

Annadhanam denied that he told Dalmia that he would not be prosecuted if he made the statements Exhibit P. 10 and P. 11 and deposited. the money alleged to have been embezzled and further stated that Khanna did not tell this to Dalmia. He denied that Exhibit P. 10 was never made by Dalmia and was false and reiterated that statement was made by Dalmia. He did not consider it proper to reduce to writing every word of what transpired between him and Dalmia from the moment of the latter's arrival in his office till the time of his departure, and considered it proper' to reduce in writing the statement which was made with regard to the missing securities. He further stated that his statement above Dalmia's making statements Exhibits P. 10 and P. 11 voluntarily was on account of the facts that Dalmia himself volunteered to make those statements and that he himself had offered no inducements or promises.

In cross-examination by Mr. T. C. Mathur, he denied that he told Dalmia that as Chairman of the Insurance Company he should own responsibility for the missing securities and that would make him a greater Dalmia because he was prepared to pay for the short-fall and further denied that it was on account of the suggested statement that Dalmia had asked for two hours' time before making his statement. In cross-examination by Dalmia personally, Annadhanam explained the discrepancy in the amount of the securities admitted to be misappropriated. Exhibit P. 10, mentions the securities to be of the order of Rs. 2,20,00,000/. In his report

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Exhibit P. 12, he stated the admission to be with respect to securities of the face value of Rs. 2,22,22,000/-. The explanation is that in the interim report he worked out the face value of the missing securities to be Rs, 2,22,22,000/- , and he mentioned this figure in his report as Dalmia had admitted the misappropriation of the securities. Nothing sinister can be inferred from this variation. Khanna practically supports the statement of Annadhanam, not only with respect to Exhibit P. 10 and P. II, but also with respect to the third statement said to have been made near the staircase. His statements in cross-examination that it was possible that Annadhanam might have asked the companion of Dalmia to stay outside the office as the proceedings were of a confidential nature, does not in any way belie Annadhanam's statement as this statement itself is not definite. In answer to the question whether it struck him rather improper that Dalmia made the statement Exhibit P. 10 in view of his previous statement to Khanna that satisfaction would be afforded to the auditors on the points raised by them after Chokhani was available, he replied that his own feeling was that the statements Exhibits P. 10 and P. 11 were the natural culmination of what he learnt in the office of Mr. Kaul on September 16, 1955. He also denied that be told Dalmia that whoever was at fault, the ultimate responsibility would fall on the Chairman and other Directors as well as the officers of the Insurance Company by way of misfeasance, and that Dalmia should sign the statement which would be prepared by himself and Annadbanam so that the other Directors and the officers of the Insurance Company be not harassed and that if this sugges- tion was accepted by Dalmia, he would save every one and become a greater Dalmia. He denied the suggestion that when Dalmia talked of his charitable disposition in his office on September 20, 1955, it should have been in answer to his (Khanna's)

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provocative remarks wherein he had made insinuations regarding Dalmia's integrity and stated that he was merely a silent spectator of what actually Del: had happened in the office that day. He further stated that no question arose of Annadhanam's attacking the integrity of Dalmia on September 20, 1955. He denied that Mr. Kaul had told him or Annadbanam on September 19, when the order appointing Annadhanam Investigator was delivered, that Dalmia had to be implicated in a criminal case.

Khanna denied that his tone and remarks during the discussion were very persuasive and that told Dalmia that it was very great of him that he was going to pay the amount represented by the short-fall of the securities. He also denied the suggestion that Dalmia told him and Annadhanam on September 20, at their office, that be had no knowledge of the missing securities, that it, appeared that the securities had either been sold or pledged and that the money had been paid to the Union Agencies, which Dalmia did not-, like, and that in the interest of the policy holders and the Insurance Company Dalmia was prepared to pay the amount of the short-fall of securities, and also that when Dalmia spoke about the securities being sold or pledged. Khanna and Annadhanam remarked that the securities bad been misappropriated. He denied that he told Dalmia that if he took personal responsibility in the matter, it would be only then that no action would be taken and stated that he and Annadhanam were nobody to give any assurance to Dalmia. Dalmia stated, in this statement under s. 342 Cr. P.C. on November 7, 1958, that his companion Raghunath Das Dalmia stayed out because he was not allowed to stay with him inside the office. He denied that he first spoke about his charitable disposition and piety when asked by Annadhanam to explain about the missing securities and stated that 366

there could be no occasion for him to talk at that time of his piety and charitable disposition when he had been specifically called to explain with regard to the missing securities. His version of what took place may now be quoted (answer to question No. 471) in his own words: "What actually happened was that I told Shri Annadhanam that I had learnt 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 then told him that I did not know as to whether the securities had been sold or mortgaged. My replies here being noted by Shri Annadhanam on a piece of paper. Shri Annadhanam then asked me as to when the securities had been sold or mortgaged I replied that I did not know with regard to the time when the securities had been sold or mortgaged.. Shri Annadhanam then asked me as to what were the places where there were offices of Bharat Union Agencies. I then told him that the offices were at Bombay and Delhi. I than remarked that whatever had happened, I wanted to pay the amount of the missing securities as the interest of the policy holders of the Bharat Insurance Company were close to my heart. During the course of that talk sometimes Shri Annadhanam questioned and sometimes the questions were asked by Shri Khanna. Shri Khanna then stated that I should forget the events of 9-9-1955. Shri Khanna further stated. '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

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amount'. Shri Khanna also remarked that Shri Annadhanam had been appointed under section 33 of the Insurance Act to investigate into the affairs of the Bharat Insurance Company and as such the words of Shri Khanna and Shri Annadhanam would carry weight with the Government. Shri Khanna also stated other things but I do not remember them. I however distinctly remember that Shri Khanna stated to me that I should go to Shri C. D. Deshmukb and that Shri Khanna would also help me. I then replied that I would not like to go to Shri Deshmukh. Shri Khanna then remarked that the Government attached great importance to the interests of the policy holders and that if the matter got undue publicity it would cause a great loss to the policy holders. Shri Khanna accordingly stated that if I agreed to his suggestion the matter would be settled satisfactorily and without any publicity. It was in those circumstances that I asked for two hours' time to consult my brother and son- in-law."

He further stated that when Annadhanam told him that he could have half-an-hour's time and that more time could not be given as the report had to be given to the Government immediately, he objected to the shortness of time as he could not during that interval go to meet his brother and son-in-law and return to the office after consulting them and further told Annadhanam and Khanna to write whatever they considered proper as he had trust in them. His reply to question No. 476 is significant and reads: "The statement was read over tome. I then pointed out that what I had stated had not been incorporated in Ex. P. 10. I made

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no mention that the statement Ex.' P. 10 was correct or not. Shri Annadhanam then reduced to writing, whatever was stated by me. That writing if Ex. P. 11 and is in the very words used by me."

He does not directly answer question No. 479: "It is in evidence that the statement Ex. P. 1 1 was read over to you, you admitted it to be correct and signed it. Do you want to say anything with regard to that?"

and simply stated, 'I did sign that statement'. He denied the third statement alleged to have been made near the staircase.

Dalmia also stated that he had mentioned some facts about the statements Exhibits P. 10 and 11 in his written statement.

Paragraphs 53 to 59 of the written statement dated October, 24, 1958, refer to the circumstances about the making of the statements Exhibits P. 10. and P. II. In paragraph 53 Dalmia states that the recording of his statement in Annadhanam's office took place as it was only there that Annadhanam and Khanna could get the necessary privacy. The insinuation is that they did not want any independent person to know of what transpired between them.

Paragraph 54 refers to a very minor discrepancy. Paragraph 55 really gives the version of what took place in, Annadhanam's office.

We refer only to such portions of this version as do not find a place either in the suggestions made to Annadhanam and Khanna in their cross-examination or in the statement of Dalmia under a. 342 or which be inconsistent with either of them. Dalmia stated that he told Annadbanam that the 369

money that had been received by Bharat Union Agencies as loan belonged to Bharat Insurance Company and it appeared that the Union Agencies had lost that money in speculation. He further which tend to impute an inducement on the part of Khanna to him. These statements may be quoted in Dalmia's own words:

The real nature of the sale and' purchase transactions of the securities did not come to the notice of the head office of the Insurance Company at Delhi as Chokhani communicated to the head office the contracts of sale and purchase with the brokers' statements of accounts, with a covering letter stating the purchase of securities from the brokers, without mentioning that the securities had not been actually received or that the cheques in payment of the purchase price were issued to Bhagwati Trading Company and not to the brokers.

Raghunath Rai, the Secretary-cum-Accountant of the Insurance Company, on getting the advice about the purchase of securities used to inquire from Dalmia about the transaction and used to get the reply that Chokhani had purchased them under Dalmia's instructions. Thereafter, the usual procedure in making the entries with respect to the purchase of securities was followed in the office and ultimately the purchase of securities used to be confirmed at the meeting of the Board of Directors. It is said that the matter was put up in the meeting with an office note which recorded that the purchase was under the instructions of the Chairman. Dalmia however, denies that Raghunath Rai ever approached him for the confirmation or approval of the purchase transaction and that he told him that the purchase transaction was entered into under his instructions. The firm of Khanna and Annadhanam, Chartered Accountants, was appointed by the Bharat Insurance Company, its auditors for the year 1954. Shri Khanna carried out the audit and was not satisfied with respect to certain matters and that made him ask for the counterfoils of the cheques and for the production of securities and for a satisfactory explanation of the securities not with the company at Delhi. 264

The matter, however, came to a head not on account of the auditors' report, but on account of Shri Kaul, Deputy Secretary , Ministry of Finance, Government of India, hearing at Bombay in September 1955 a rumour about the unsatisfactory position of the securities of the Insurance Company. He contacted Dalmia and learnt on September 16, 1955 from Dalmia's relatives that there was a short-fall securities. He pursued the matter Departmentally and, eventually, the Government of India appointed Shri Annadhanam under a. 33 (1) of the Insurance Act to investigate into the affairs of the company. This was done on September 19, 1955. Dalmia is said to have made a confessional statement to Annadhanam on September 20. Attempt was made to reimburse the Insurance Company with respect to the short-fall in securities. The matter was, however, made over to the Police and the appellants and a few other persons, acquitted by the Sessions Judge, were proceeded against as a result of the investigation. Dalmia's defence, in brief, is that be had nothing to do with the details of the working of the company, that he had authorised Chokhani, in 1953, to purchase and sell securities and that thereafter Chokbani on his own purchased and sold securities. He had no knowledge of the actual modus operandi of Chokhani which led to the diversion of the funds of the company to the Union Agencies. He admits knowledge of the losses incurred by the Union Agencies and being told by Chokhani that he would arrange funds to meet them. He denies that he was a party to what Chokhani did. Chokhani admits that he carried out the transactions in the form alleged in order to meet the losses of the Union Agencies of which he was an employee. He states that be did so as he expected that the Union Agencies would, in due course,

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make tip the losses and the money would be returned to the Insurance Company. According to, him, he was under the impression that what he did amounted to giving of a loan by the Insurance Company to the Union Agencies and that there was nothing wrong in it. He asserts emphatically that if he bid known that he was doing, was wrongful, he would have never done it and would have utilised other means to raise the money to meet the losses of the Union Agencies as he had large credit in the business circle at Bombay and as the Union Agencies possessed shares which would be sold to meet the losses.

Vishnu Prasad expresses his absolute ignorance about the transactions which were entered into on behalf of Bbagwati Trading Company and states that what he did himself was under the instructions of Chokhani, but in ignorance of the real nature of the transactions.

Gurha denies that he was a party to the fabrication of false accounts and vouchers in the furtherance of the interests of the conspiracy.

The learned Sessions Judge found the offences charged against the appellants proved on the basis of the circumstances established in the case and, accordingly, convicted them as stated above. The High Court substantially agreed with the findings of the Sessions Judge except that it did not rely on the confession of Dalmia. Mr. Dingle Foot, counsel for Dalmia, has raised a number of contentions, both of law and of facts. We propose to deal with the points of law first.

In order to appreciate the points of law raised by Mr. Dingle Foot, we may now state the charges which were framed against the various appellants.

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The charge under s. 120-B read with s. 409, I.P.C., was against the appellants and five other persons and read: "I, Din Dayal Sharma, Magistrate I Class, Delhi, do hereby charge you,

R. Dalmia (Ram Krishna Dalmia) s/o etc.

2. G. L. Chokhani s/o etc.

3. Bajranglal Chokhani s/o etc.

4. Vishnu Pershad Bajranglal s/oetc.

5. R. P. Gurha (Ragbubir Pershad Gurba) s/o etc.

6. J. S. Mittal (Jyoti Swarup Mittal) s/o etc.

7. S. N. Dudani (Shri Niwas Dudani) s/o etc.

8. G. S. Lakhotia (Gauri Sbadker Lakbotia) s/o etc.

9. V. G. Kannan Vellore Govindaraj

Kannan S/o etc. 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. Karinan,

during the period between August 1954 and September 1955 at Delhi, Bombay and other places in India.

were parties to a criminal conspiracy to do and cause to be done illegal acts ; viz., criminal breach of trust of the funds of the Bharat Insurance Company Ltd.,

by agreeing amongst yourselves and with others that criminal breach of trust be Committed by you R. Dalmia and G. L. Chokhani

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in respect of the funds of the said Insurance Company in current account No. 1120 of the said Insurance Company with the Chartered Bank of India, Australia and China, Ltd., Bombay, the dominion over which funds was entrusted to you R. Dalmia in your capacity as Chairman and the Principal Officer of the said Insurance Company, and

to you G. L. Chokhani, in your capacity as Agent of the said Insurance Company,

for the purpose of meeting losses suffered by you R. Dalmia in forward transaction (of speculation) in shares ; which transactions were carried on in the name of the Bharat Union Agencies Ltd., under the directions and over all control of R. Dalmia, by you, G. L. Chokhani, at Bombay, and by you, R. P. Gurha, J. S. Mittal and S. N. Dudani at Calcutta; and for other purposes not connected with the affairs of the said Insurance Company,

by further agreeing that current account No. R1763 be opened with the Bank of India, Ltd., Bombay and current account No. 1646 with the United Bank of India Ltd., Bombay, in the name of M/s. Bhagwati Trading Company, by you Vishnu Pershed accused with the assistance of you G. L. Chokhani, and Bajranglal Chokhani accused for the illegal purpose of divertin g

the funds of the said Insurance Company to the said Bharat Union Agencies, Ltd.,

by further agreeing that false entries showing that the defalcated funds were invested in Government Securities by the said Insurance Company be got made in the books of

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accounts of the said Insurance Company at Delhi, and

by further agreeing to the making of false and fraudulent entries by you R. P. Gurha, J. S. Mittal, G. S. Lakhotia, V. G. Kannan, and others, relating to the diversion of funds of the Bharat Insurance Company to the Bharat Union Agencies Ltd., through M/s. Bhagwati Trading Company, in the books of account of the said Bharat Union Agencies, Ltd., and its allied concern known as Asia Udyog Ltd., and that the same acts were committed in pursuance of the said agreement and

thereby you committed an offence punishable under section 120-B read with section 409 I.P.C., and within the cognizance of the Court of Sessions."

Dalmia was further charged on two counts for an offence under s. 409 I. P. C. These charges were as follows : "I Din Dayal Sharma, Magistrate I Class, Delhi charge you, R. Dalmia accused as under :-

FIRSTLY, that yon R. Dalmia, in Pursuance of the said conspiracy between the 9th day of August 1954 and the 8th day of August 1955, at Delhi.

Being the Agent, in your capacity as Chairman of the Board of Directors and the 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

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funds of the Bharat Insurance Company Ltd., amounting to Rs. 2,37,483-9-0,

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, by withdrawing the said funds from current account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd., Bombay, by means of cheque Nos. B-540329 etc., issued in favour of M/s. Bhagwati Trading Company, Bombay, and cheque No. B-540360 in favour of F. C. Podder, and

by dishonestly utilising the said funds for meeting losses suffered by you in forward transactions in shares carried on in the name of Bharat Union Agencies, Ltd., and for other purposes not connected with the affairs of the said Bharat Insurance Company ; and

thereby committed an offence punishable under section 409,

1. P. C., and within the cognizance of the Court of Sessions;

,SECONDLY, that you R. Dalmia, in pursuance of the said conspiracy between the 9th day of August 1955 and the 30th day of September 1955, at Delhi,

Being the Agent in your capacity as Chairman of the Board of Directors and the Principal Officer of the Bharat Insurance Company, Ltd., and as such being entrusted with dominion over the funds of the said Bharat Insurance Company, 270

committed criminal breach of trust of the funds of the Bharat Insurance Company Ltd., amounting to Rs. 55,43,220-12-0,

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,

by withdrawing the said funds from current account No. 1120 of the said Bharat Insurance Company with the Chartered Bank of India, Australia & China, Ltd., Bombay by means of Cheque Nos. B-564835...... issued in favour of M/s. Bhagwati Trading Company Bombay, and, by dishonestly utilising the said funds for meeting losses suffered by you in forward transactions in shares carried on in the name of the Bharat Union Agencies Ltd., and for other purposes not connected with the affairs of the said Bharat Insurance Company, and

thereby committed an offence punishable under section 409 1. P. C., and within the

cognizance of the Court of Sessions."

Mr. Dingle Foot has raised the following contentions

(1) The Delhi Court had no territorial jurisdiction to try offences of criminal breach of trust committed by Chokhani at Bombay.

(2) Therefore, there had been misjoinder of charges. (3) The defect of misjoinder of charges was 271

fatal to the validity of the trial and was not curable under a. 531-s. 537 of the Code.

(4) The substantive charge of the offence under s. 409, 1. P. C., against Dalmia offended against the provisions of a. 233 of the Code; therefore the whole trial was bad. (5) The funds of the Bharat Insurance Company in the Chartered Bank, Bombay, which were alleged to have been misappropriated were not "property' within the meaning of ss. 405 and 409, I. P. C.

(6) If they were, Dalmia did not have dominion over them. (7) Dalmia was not an agent' within the meaning of s. 409 I. P. C., as only that person could be such agent who professionally carried on the business of agency. (8) If Dalmia's conviction for an offence under s. 409 I. P. C., fails, the conviction for conspiracy must also fail as conspiracy must be proved as laid. (9) The confessional statement Exhibit P-10 made by Dalmia on September 20, 1955, was not admissible in evidence. (10) If the confessional statement was not inadmissible in evidence in view of s. 24 of the Indian Evidence Act, it was inadmissible in view of the provisions of cl. (3) of Art. 20 of the Constitution.

(11) The prosecution has failed to establish that Dalmia was synonymous with Bharat Union Agencies Ltd. (12) Both the Sessions Judge and the High Court failed to consider the question of onus of proof i.e., failed to consider whether the evidence on record really proved or established the conclusion arrived at by the Courts. 272

(13) Both the Courts below erred in their approach to the evidence of Raghunath Rai.

(14) Both the Courts below were wrong in holding that there was adequate corroboration of the evidence of Reounath Rai who was an accomplice or at least such a witness whose testimony required corroboration.

(15) It is not established with the certainty required by law that Dalmia had knowledge of the impugned transactions at the time they were entered into.

We have heared the learned counsel for the parties on facts, even though there are concurrent findings of fact, as Mr. Dingle Foot has referred us to a large number of inaccuracies, most of them not of much importance, in the narration of facts in the judgment of the High Court and has also complained of the omission from discussion of certain matters which were admittedly urged before the High Court and also of misapprehension of certain arguments presented by him.

We need not, however, specifically consider points No. 12 to 15 as questions urged in that form. In discussing the evidence of Ragbunath Rai, we would discuss the relevant contentions of Mr. Dingle Foot, having a bearing on Raghunath Rai's reliability. Our view of the facts will naturally dispose of the last point raised by him. Mr. Dingle Foot's first four contentions relating to the illegalities in procedure may now be deal ,with. The two charges under s. 409, I.P.C., against Chokbani mentioned that he committed criminal breach of trust in pursuance of the said conspiracy. One of the charges related to the period from August 9, 1954 to August 8, 1955 and the other related to the period from August 9, 1955 to September 30, 1955.

2044. It is also stressed that the second part of Section 3 arms the legislatures with the absolute power of sheltering laws which violate Articles 14, 19 and 31 and have no relation to the principles specified in Article 39(b) and (c).

2045. The second part prohibits any court from inquirying whether the law protected by Article 31C has relevancy to Article 39(b) and (c) if it contains a declaration that it gives effect to the policy specified in that provision. Howsoever shocking it may seem, it is not an innovation. You will find several articles having a close resemblance to it. Article 77(2) provides that the validity of an order or instrument which is authenticated as provided therein 'shall not be called in question on the ground that it is not an order or instrument made or executed by the President'. A similar provision is made in Article 166(2) in relation to the Governor. Article 103(1) provides that if any question arises as to whether a member of either House of Parliament has become subject to any of the qualifications mentioned in Article 102(1), the question shall be decided by the President and 'his decision shall be final.' A similar provision is to be found in Article 192(1) as regards the members of the State Legislature with respect rto the decision of the Governor, Article 311(2) gives a right of licaring to an employee sought to be dismissed or removed or reduced in rank. Clause (b) of the proviso to the article enacts that where the appointing authority'is satisfied that for some reason it is not reasonably practicable to hold such inquiry, the pre-requisite of hearing may be dispensed with. Clause (3) of Article 311 then enacts that if a question arises whether it is reasonably practicable to hold an inquiry, 'the decision thereon of the authority...shall be final'. Article 329(a) enacts that notwithstanding anything in the Constitution the validity of any law relating to the delimitation of constituencies or allotment of seats to such constituencies made or purporting to be made under Article 327 or Article 328 shall not be called in question in any court. Like these articles, the second part of Section 3 excludes judicial review to a limited extent.