Dr. Riji G. Nair and R. Jayakumar v. State of Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE A.HARIPRASAD TUESDAY, THE 26TH DAY OF AUGUST 2014/4TH BHADRA, 1936 Crl.MC.No. 5261 of 2013 () --------------------------V.C.NO.7/2013 OF VIGILANCE AND ANTI-CORRUPTION BUREAU, CENTRAL RANGE, ERNAKULAM ON THE FILE OF COURT OF ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THRISSUR. PETITIONER(S)/ACCUSED NO.1 AND 2:- -------------------------------------------------------- 1. DR. RIJI G.NAIR, AGED 52 YEARS, MANAGING DIRECTOR KERALA STATE CO-OPERATIVE CONSUMER'S FEDERATION, GANDHINAGAR ERNAKULAM, (S/O GANGADHARAN NAIR, SRI SRI HOUSE NELLIMUKKU, THIRUMULAVARAM P.O., KOLLAM.) 2. R.JAYAKUMAR, AGED 40 YEARS CHIEF MANAGER KERALA STATE CO-OPERATIVE CONSUMER'S FEDERATION, GANDHINAGAR ERNAKULAM (S/O RAJAN PILLAI, KANNIMEL PUTHENVEEDU CHATHIYARA, THAMARAKULAM P.O., ALAPPUZHA) BY ADVS.SRI.P.VIJAYA BHANU (SENIOR ADVOCATE) SRI.M.REVIKRISHNAN SRI.VIPIN NARAYAN RESPONDENT(S)/STATE: ----------------------------------- 1. STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR HIGH COURT OF KERALA, ERNAKULAM - 682 031. ## ADDL.RESPONDENTS 2 TO 4 IMPLEADED: ADDL.R2 HRIDESHCHANDRAN, AGED 41 YEARS, S/O.CHANDRAN, PUTHUMANA BUILDING, NEAR KOTTARAKKARA POST OFFICE, KOLLAM. IS IMPLEADED AS PER ORDER DATED 16.06.2014 IN CRL.MA.1945/2014 ADDL.R3 P.R.PRATHAPACHANDRAN, EX-EXECUTIVE DIRECTOR, KERALA STATE CO-OPERATIVE CONSUMER'S FEDERATION, GANDHI NAGAR, ERNAKULAM, (S/O.N.S.RAMAKRISHNA PILLAI, NANDANAM, THEVALLY P.O., KOLLAM-691009) IS IMPLEADED AS PER ORDER DATED 16.06.2014 IN CRL.MA.2097/2014 CRL.MC NO.5261/2013 2 ADDL.R4 A.D.RAMESH, EX-MEMBER - QUILON DISTRICT, WHOLESALE CO-OPERATIVE CONSUMER'S STORES (QDWCCS), (ANNEPPIL, THIRUMULLAVARAM P.O., KOLLAM-691012). IS IMPLEADED AS PER ORDER DATED 16.06.2014 IN CRL.MA.2037/2014 R1 BY SHRI TOM JOSE PADINJAREKKARA,. ADDL.DIRECTOR GENERAL OF PROSECUTION ADDL.R2 BY ADV. SRI.M.V.THAMBAN ADDL.R2 BY ADV. SRI.K.V.ANIL KUMAR ADDL.R2 BY ADV. SRI.R.REJI ADDL.R2 BY ADV. SMT.THARA THAMBAN ADDL.R2 BY ADV. SRI.B.BIPIN ADDL.R3 BY ADV. SRI.K.SUBASH CHANDRA BOSE ADDL.R4 BY ADV. SRI.P.R.PREMACHANDREN ADDL.R4 BY ADV. SMT.T.S.MAYA (THIYADIL) THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 12.08.2014, THE COURT ON 26-08-2014 PASSED THE FOLLOWING: Crl.MC.No. 5261 of 2013 () --------------------------- ## APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- ANNEXURE A : TRUE COPY OF THE FIR IN V.C.NO.07/2013 OF THE VIGILANCE AND ANTICORRUPTION BUREAU, CENTRAL RANGE, ERNAKULAM ANNEUXRE B : TRUE COPY OF THE REPORT ADDING THE NAMES OF THE PETITIONER'S AS ACCUSED BEFORE THE COURT OF ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THRISSUR ANNEXURE C : TRUE COPY OF THE TENDER NOTICE ISSUED BY THE CONSUMERFED DATED 16.06.2012 ANNEXURE D : TRUE COPY OF THE LETTER SENT BY HIGHRANGE HILL PRODUCTS PURCHASE AND MARKETING CO-OPERATIVE SOCIETY LTD. TO THE PURCHASE MANAGER, CONSUMERFED DATED 15.07.2013 ANNEXURE E : TRUE COPY OF THE LIST SHOWING AMOUNTS OUTSTANDING TO THE SUPPLIERS FROM THE CONSUMERFED ANNEUXURE F : TRUE COPY OF THE TENDER SHEET OF COCONUT OIL DATED 03.07.2012 ANNEXURE G : TRUE COPY OF THE PURCHASE BILL DATED 04.08.2012 ANNEXURE G1 : TRUE COPY OF THE PURCHASE BILLS DATED 23.08.2012 ANNEXURE H :TRUE COPY OF THE CIRCULAR NO.AD(2)SP/04-05/3079 DATED 27-02-2006 ANNEXURE I : TRUE COPY GOVERNMENT ORDER G.O.(RT) NO.543/2013/CO-OP DATED 20.08.2013 ISSUED BY THE SECRETARY TO GOVERNMENT DIRECTING GOOD SERVICE ENTRY TO THE 1ST PETITIONER ANNEXURE J : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 26.03.2008 ANNEXURE J1 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 18.11.2010 ANNEXURE J2 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 12.05.2011 ANNEXURE J3 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 12.05.2011 ANNEXURE J4 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 10.09.2012 ANNEXURE J5 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 25.09.2012 ANNEXURE J6 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 14.02.2013 ANNEXURE J7 : TRUE COPY OF THE GOOD SERVICE ENTRY OF THE 1ST PETITIONER DATED 16.08.2013 ANNEXURE K : TRUE COPY OF THE LETTER DATED 28.09.2013 ADDRESSED TO THE CHIEF SECRETARY, GOVERNMENT OF KERALA WRITTEN BY THE 1ST PETITIONER WITH REGARD TO SELECTION TO IAS CADRE FROM NON-CIVIL SERVICE OFFICERS ANNEXURE L : TRUE COPY OF THE NOTE IN FILE NO.521/M1/MC&C/2011 ISSUED BY THEN MINISTER FOR CO-OPERATION AND COIR DATED 12.05.2011 ANNEXURE M : TRUE COPY OF THE LETTER OF APPRECIATION ISSUED BY THE PRESENT MINISTER FOR CO-OPERATION DATED 25-09-2012 ANNEXURE N : TRUE COPY OF THE MINUTES OF THE MEETING HELD ON 03.07.2012 ATTENDED BY SRI.PRATHAPACHANDRAN ANNEXURE O TRUE COPY OF THE PAYMENT DETAILS MADE TO KERAFED Crl.MC.No. 5261 of 2013 () RESPONDENT(S)' EXHIBITS --------------------------------------- ANNEXURE R1(a) TRUE COPY OF THE LETTER NO.CS(1)49913/13 DATED 6.2.2014 OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM ANNEXURE R1(b) TRUE COPY OF THE GO(P) NO.18/97/VIG. DATED 5.4.1997 ANNEXURE R1(c) TRUE COPY OF THE CIRCULAR NO.10/2008 DATED 5.9.2008 ANNEXURE R1(d) TRUE COPY OF THE BYE-LAW OF THE CONSUMER FED ANNEXURE R1(e) TRUE COPY OF THE CIRCULAR DATED 1.2.2012 APPOINTING THE CHIEF MANAGER AS THE CHAIRMAN OF PURCHASE COMMITTEE ANNEXURE R1(f) TRUE COPY OF THE RELEVANT PAGE OF THE STORE PURCHASE MANUAL ANNEXURE R1(g) TRUE COPY OF THE LETTER DATED 23.01.2014 ISSUED BY THE MANAGING DIRECTOR OF KERALA STATE CO-OPERATIVE CONSUMER FEDERATION LTD. ANNEXURE R1(h) TRUE COPY OF THE LETTER DATED 17.03.2014 ANNEXURE R1(i) TRUE COPY OF THE CIRCULAR NO.969/A2/2007/SPD ANNEXURE R1(j) TRUE COPY OF THE CIRCULAR NO.2154/A2/2009/SPD DATED 27.08.2009 ANNEXURE R2(a) (AS PER CRL.MA NO.1945/2014) - TRUE COPY OF INFORMATION OBTAINED FROM THE KERALA STATE CO-OPERATIVE CONSUMER'S FEDERATION (CONSUMDERFED) DATED 4.8.2011 ANNEXURE R2(a) (AS PER CRL.MA NO.2097/2014)- (AS PER CRL.MA NO.2097/2014) - TRUE COPY OF LETTER DATED 12.7.2013 SENT TO THE MANAGING DIRECTOR OF THE CONSUMERFED ANNEXURE R2(b)(AS PER CRL.MA NO.2097/2014)- TRUE COPY OF THE LETTER DATED 5.7.2013 SENT TO THE REGISTRAR ANNEXURE R2(c)-(AS PER CRL.MA NO.2097/2014)- TRUE COPY OF THE EXECUTIVE SUMMARY OF THE SAID PETITION DATED 16.8.2013 ANNEXURE R3(a) (AS PER CRL.MA NO.2037/2014) - COPY OF THE EXECUTIVE SUMMARY OF THE PETITION SUBMITTED BEFORE THE CHIEF MINISTER DATED 16.8.2013 ANNEXURE R3(b) (AS PER CRL.MA NO.2037/2014) - COPY OF PETITION SUBMITTED BEFORE THE REGISTRAR OF CO-OPERATIVE SOCIETIES, DATED 26.09.2013 ANNEXURE R3(c) (AS PER CRL.MA NO.2037/2014) -COPY OF THE RELEVANT PAGES OF THE AUDIT NOTE FOR THE YEAR 2011-12 ALONG WITH RELEVANT PAGES OF THE PREVIOUS YEAR'S AUDIT DEFECTS RECTIFICATION SUMMARY //TRUE COPY// ## **A.HARIPRASAD, J.** **-------------------------------------Crl.M.C. No.5261 of 2013 -------------------------------------Dated this the 26[th] day of August, 2014.** ## **ORDER** Petition filed under Section 482 of the Code of Criminal Procedure (in short, “Cr.P.C.”) for the following relief: _“For these and other grounds which may be urged at the time of hearing, it is most humbly prayed that this Hon'ble Court may be pleased to allow this criminal miscellaneous case, quash Annexure A FIR and all further proceedings pursuant thereto pending on the files of the Court of Enquiry Commissioner and Special Judge, Thrissur as against the petitioners/A1 and 2 so as to secure the ends of justice.”_ 2. Brief facts: Petitioners are the accused 1 and 2 in Cr.V.C.No.7 of 2013 registered by the Vigilance and Anti-Corruption Bureau, Central Range, Ernakulam(in short, “the VACB”). Annexure-A is the copy of the first information report in the case. Copy of a report submitted before the Court of Enquiry Commissioner and Special Judge, Thrissur (in short, “the Court”) for adding names of petitioners as accused is Annexure-B. The offences alleged against the petitioners along with other accused are punishable under Sections 120B of the Indian Penal Code (in short, “IPC”) and Section 13(1)(d) read with Section 13(2) of the Prevention of 2 Crl.MC No.5261/2013 Corruption Act, 1988 (in short, “the PC Act”). 1[st] petitioner during 2011-12 functioned as the Managing Director of Kerala State Co-operative Consumer's Federation (in short, “the Consumer Fed”) and the 2[nd] petitioner was the Chief Manager of the Consumer Fed during that period. It is the allegation that while procuring various essential commodities during the year 2012 and subsequent thereto, the accused persons diluted tender conditions and violated the provisions of the Stores Purchase Manual (in short, “the Manual”) so as to cause huge financial loss to the Government and corresponding unlawful gain to the suppliers of the Consumer Fed. Further, they allowed the suppliers to supply inferior quality of essential commodities. Besides, they manipulated the records relating to stock in order to misappropriate essential commodities at various levels and thereby obtained unlawful pecuniary benefits and caused financial loss to the Government. 3. Heard Shri P.Vijaya Bhanu, learned Senior Counsel for the petitioners and Shri Tom Jose Padinjarekkara, learned Additional Director General of Prosecution (Addl.DGP). Learned counsel Shri K.Subhash Chandra Bose and Shri P.R.Premachandran appeared and argued on behalf of additional 3[rd] and 4[th] respondents respectively. 4. Shri P.Vijaya Bhanu, learned Senior Counsel for the petitioners contended that the preliminary enquiry contemplated in the decision of the Supreme Court in **P.Sirajuddin and others v. State of Madras and** 3 Crl.MC No.5261/2013 **others (AIR 1971 SC 520)** before registering a first information report against a public servant has not been conducted in this case. Therefore, the registration of Annexure-A first information report is illegal. It is also contended that all the decisions with regard to the working of the Consumer Fed are being taken by the Board of Directors and the Purchase Committee. The petitioners cannot be mulcted with any vicarious liability for the alleged irregularities. The allegation that the procedure prescribed by the Manual was not followed by the petitioners is totally incorrect. The Consumer Fed comes under the Department of Co-operation. The accounts are audited by the Directorate of Co-operative Audit, headed by the Director, who is an IAS Officer. The entire records of the Consumer Fed were properly audited during the relevant period. Further, the stock verification happens during the end of March and September every year. Therefore, the allegations in that regard are also baseless. From the inception of the Consumer Fed, it is permitted to account for 0.04% stock as damage. For vegetables, it is upto 5%. But, at times, the damage may exceed this limit. It cannot, therefore, be contended that the petitioners intentionally manipulated the stock to cause loss to the Consumer Fed or to make unlawful gain for themselves. 5. Per contra, Shri Tom Jose Padinjarekkara, learned Addl.DGP, relying on the statement filed by the Investigating Officer, raised the following contentions: Consumer Fed is a registered society formed under 4 Crl.MC No.5261/2013 the provisions of the Kerala Co-operative Societies Act, 1969 (in short, “the Act”). Members of the Federation consist of District Wholesale Consumer Co-operative Societies, the State Government and Primary Co-operative Societies having consumer wing, who may be admitted as associate members with the approval of the Registrar. During the course of investigation, it was revealed that the Consumer Fed was not having its own purchase manual. No guidelines/circulars have been issued either by the Government or by the Registrar of Co-operative Societies with regard to procurement/purchase of essential commodities. Therefore, it is bound to follow the rules laid down by the Government vide Stores Purchase Manual. The first information report in the case was registered on 12.10.2013. Before that on 30.09.2013, a surprise check was conducted at the head office of the Consumer Fed, Ernakulam by a team headed by the officers from Supply Co., Kerala Government, Local Fund Audit and Deputy Superintendent of Police, VACB, Central Range, Ernakulam. During the surprise check, the team perused records and files connected with the audit report of the Consumer Fed for the year 2011-2012 and also the details of procurement of essential commodities during 2012-2013. A joint inventory was prepared in the presence of gazetted Officers of the Local Fund Audit, Consumer Fed and Deputy Superintendent of Police, VACB. The surprise check revealed lot of irregularities in the procurement and handling of essential commodities. The surprise check report was 5 Crl.MC No.5261/2013 submitted to the Director, VACB on 03.10.2013. The Director, after verifying the report, directed the Superintendent of Police vide letter dated 11.10.2013 to register a vigilance case against the officials involved and the report was submitted before the Court. The first information statement clearly mentioned about the preliminary enquiry conducted and facts revealed thereupon. The surprise check on 30.09.2013 was conducted based on a petition received at the Directorate of VACB. On 03.10.2013 itself a detailed surprise check report was prepared by the officer concerned after conducting necessary verification. The surprise check and further verification conducted by the officer concerned are part of the preliminary enquiry. Therefore, the directive of the Apex Court in **P.Sirajuddin** 's case (supra) has been meticulously complied with. During the investigation, files pertaining to procurement of rice, sugar, coconut oil, etc. were perused in detail. It showed clear violations of the provisions in the Manual. On perusal of the tender procedure adopted by the Consumer Fed, it is seen that the Consumer Fed purposely omitted conditions that are essentially required to safeguard its interest against the bidders withdrawing from contracts half way and altering the bid during the validity period. All these aspects indicate the corrupt motives of the administrators of the Consumer Fed. It is also submitted that they have unearthed only a tip of an iceberg. Deeper investigation is essential for finding the actual magnitude of the corrupt practices adopted by the accused persons. 6 Crl.MC No.5261/2013 6. Records in the case reveal that additional respondents 2 to 4 are impleaded on their petitions. Additional respondents 3 and 4 claimed the status of defacto complainants as they contend that their complaints led to the registration of first information report in the case. 7. First and foremost contention raised by Shri P.Vijaya Bhanu on behalf of the petitioners is that the directives in **P.Sirajuddin** 's case (supra) have been violated in this case. Before going into the details, I shall deal with the requirements envisaged by the Apex Court in **P.Sirajuddin** 's case. The observations in paragraph 17 is quoted hereunder with profit: _“In our view the procedure adopted against the appellant before the laying of the first information report though not in terms forbidden by law, was so unprecedented and outrageous as to shock one's sense of justice and fairplay. No doubt when allegations about dishonesty of a person of the appellant's rank were brought to the notice of the Chief Minister it was his duty to direct an enquiry into the matter. The Chief Minister in our view pursued the right course. The High Court was not impressed by the allegation of the appellant that the Chief Minister was moved to take an initiative at the instance of a person who was going to benefit by the retirement of the appellant and who was said to be a relation of the Chief Minister. The High Court rightly held that the relationship between the said person and the Chief Minister, if any, was so distant that it_ 7 Crl.MC No.5261/2013 _could not possibly have influenced him and we are of the same view. Before a public servant, whatever be his status, is publicly charged with acts of dishonesty which amount to serious misdemeanour or misconduct of the type alleged in this case and a first information is lodged against him, there must be some suitable preliminary enquiry into the allegations by a responsible officer. .................... When the enquiry is to be held for the purpose of finding out whether criminal proceedings are to be resorted to the scope thereof must be limited to the examination of persons who have knowledge of the affairs of the delinquent officer and documents bearing on the same to find out whether there is prima facie evidence of guilt of the officer. Thereafter the ordinary law of the land must take its course and further inquiry be proceeded with in terms of the Code of Criminal Procedure by lodging a first information report.”_ A Constitution Bench of the Apex Court in **Lalita Kumari v. Government of U.P.(2013 (4) KLT 632)** affirmed the principles stated in **P.Sirajuddin** 's case. Therefore, the question if a preliminary enquiry is required or not is no more _res integra_ . Learned Senior Counsel contended that in this case, there was no enquiry conducted and, therefore, the proceedings are vitiated. 8. Controverting this argument, learned Addl.DGP contended that 8 Crl.MC No.5261/2013 the facts borne out from the records would reveal that the enquiry visualised by the Supreme Court in **P.Sirajuddin** 's case (supra) has been scrupulously done. There is no room for any complaint of procedural irregularity. According to the prosecution, the complaint, on the basis of which the surprise check was done, was received by the Director of Vigilance on 16.08.2013. The surprise inspection/check was conducted in the business premises of the Consumer Fed on 30.09.2013. It is the case of the prosecution that the surprise inspection/check can very well be treated as the enquiry contemplated because all the persons connected with day- to-day administration of the Consumer Fed were questioned. The relevant data were collected during the surprise check. Chapter VII of the Vigilance Manual deals with registration of vigilance cases. Clause 56 of the said Manual reads as follows: _“56. (i). If at any stage, during the Vigilance Enquiry conducted by the Bureau, there are reasonable grounds to believe that the public servant has committed an offence under the Prevention of Corruption Act, the Vigilance enquiry will be stopped at that stage and a crime case registered in respect of that allegation and investigated after obtaining sanction from the Director._ _(ii) If the Dy SP of the Unit considers, based on the findings of a Vigilance Enquiry/Confidential Verification/Surprise check that, prima facie, there is_ 9 Crl.MC No.5261/2013 _adequate material to register a case in the Vigilance Police Station, he will send a report to the Directorate through the concerned Supdt of Police with all relevant information indicating the suitability of registering a case and await instructions. No crime case will be registered in the Vigilance Police Station without instructions from the Directorate except in Trap cases, for the registration of which no such sanction is necessary.”_ It is clear from Clause 56(ii) above that based on the findings of the vigilance enquiry/confidential verification/surprise check, if the Dy.S.P. of the Unit considers prima facie that there are adequate materials to register a case in the Vigilance Police Station, then he will send a report to the Directorate through proper channel with all the relevant information indicating the suitability of registering a case. Thereafter, he shall await for instructions. It is also clearly mentioned that no crime case will be registered in the Vigilance Police Station without receiving instructions from the Directorate, except in trap cases. It is also indisputable that the Vigilance Manual is having the force of law. Learned Addl. DGP, therefore, contended that the entire proceedings in this case was done in accordance with the prescriptions of law. Annexure-R1(b), submitted along with the statement filed by the Investigating Officer, is the relevant extract of the Vigilance Manual relating to surprise check. It can be seen that the directives in **P.Sirajuddin** 's case (supra) were considered and in 10 Crl.MC No.5261/2013 accordance therewith the relevant provisions in the Vigilance Manual were suitably modified. Strong reliance is placed by the Prosecutor on Annexure-R1(c). It is a circular bearing No.10/2008 issued by the VACB, Thiruvananthapuram on 05.09.2008. It reads as follows: _“_ _**Circular No.10/2008**_ _**Sub** : References Endorsed by Courts and Government - Categorization as QV (Quick Verification) - Guidelines - Issued - Regarding_ _Ref:- GO(P) No.29/2008/Vig dated 16-8-2008 (Last Paragraph)_ _Government is the proper authority to order a Vigilance Enquiry (VE). At the same time, the practice of conducting enquiries prior to registration of cases under the PC Act has been upheld in various judicial pronouncements. Additionally, though the Courts do not, strictly speaking, order Vigilance Enquiries, very often this Bureau is called upon by the Courts and judicial authorities to conduct proper verification of facts while disposing off petitions containing allegations of commission of offences under the PC Act. Courts also take recourse to the provisions of 156(3) Cr.P.C._ _2. Government also forwards references to this Bureau for examination and report without formally ordering a VE. In such references, action is required to ascertain prima facie the genuineness of the contents of the petition by generally verifying the basic facts so that an appropriate disposal can be_ 11 Crl.MC No.5261/2013 _ordered with regard to starting of a formal VE or other appropriate action._ _3. The number of such references received from the Courts and Government has increased considerably in the recent past. At present these references are informally categorized as Vigilance Enquiries. Consequently, time consuming procedures by way of seizing all documents and material objects, examination of all witnesses etc. are required to be fully carried out._ _4. It is necessary to differentiate such endorsements received from Court or from Government from the formal VE ordered by the Government. Sometimes a Government Endorsement can be converted into a Surprise Check or the subject matter of a Confidential Verification, but in most cases this is not possible and some kind of enquiry has to be conducted. The essential objective while conducting such enquiries into these endorsements is to quickly verify the basic facts and report to the Court/Government as to:_ _a. whether the statements made in the petition are prima facie correct and whether any crime or irregularity has occurred prima facie;_ _b. if so, whether a comprehensive Vigilance Enquiry or registration of a Vigilance Case is needed; or_ _c. whether no action is called for, since the allegation is false or frivolous or not_ 12 Crl.MC No.5261/2013 _capable of being proved._ _5. Conducting elaborate VEs on all Court Endorsed References and Government Endorsed References would only delay the replies to Court/Government for a long time. Hence it would be appropriate to categorize such references as Court Endorsements (CEs) and Government Endorsements (GEs) and carry out Quick Verification(QV) when either the Government or the Court has directed any examination or verification. QV Serial numbers may be assigned by Headquarters as is being done for VEs. Record check up and essential witness examination may be done to a limited extent to find out whether any crime or irregularity has actually occurred and to ascertain the general circumstances relating to the matter under verification. In matters where either a CV (Confidential Verification) or SC (Surprise Check) is more appropriate, no QV need be ordered but a CV or SC, as the case may be, can be ordered._ _6. The QV Reports to be submitted after conducting enquiry in the CEs and GEs should be a brief running report roughly in the following format:-_ _i. Introduction ii. Substance of Allegations (Briefly) iii. Facts revealed in the enquiry iv. The likelihood of the allegations being true and persons, if any, who have prima facie committed the crime/irregularities_ 13 Crl.MC No.5261/2013 _v. Recommendation for further_ _action._ _7. The QV should definitely be completed within 45 days or within such time limits as may be prescribed by Court or Government. The Unit DySPs shall forward the QV Reports to the Directorate through the Range SPs who shall furnish their comments thereon in the Forwarding Endorsement._ _8. QV Reports based on CEs should be filed before the concerned court by the Unit DySP after obtaining approval from the Directorate. QV reports based on GEs will be forwarded to Government from the Directorate after appropriate scrutiny._ _9. This procedure shall come into effect from 1[st] October 2008 onwards._ _Sd/_ _Director”_ It is, therefore, contended that the Investigating Officer has conducted a surprise check in the Consumer Fed, after complying with the relevant provisions in the Vigilance Manual and Circulars, by questioning the officers concerned and by collecting relevant data to prima facie satisfy about the illegalities and irregularities. So, he reported the matter to the Director of VACB and after obtaining his permission, the case was registered. It is therefore, contended that there is no irregularity or illegality in registration of the crime. 14 Crl.MC No.5261/2013 9. In **Babu A.J. v. State of Kerala and another (2012 (3) KHC 137)** , a learned Single Judge of this Court had occasion to consider whether conduct of a preliminary enquiry is a mandatory requirement in all cases. It was answered as follows: _“It is not an invariable rule that in all cases a preliminary enquiry is to be conducted. If there are sufficient materials to satisfy the conscience of the Court, that those materials are sufficient to find prima facie the truthfulness of the allegations contained in the complaint for the purpose of registration of the crime, then the fact that no preliminary enquiry was conducted prior to the registration of the FIR cannot be a reason to hold that the FIR registered pursuant to the order passed by the Court under S.156(3) CrPC is liable to be quashed. Therefore, it is a matter for the Special Judge before whom the complaint is filed to find whether the materials have been furnished by the complainant in order to satisfy the Court as to the necessity of registration of the crime without obtaining a report of the preliminary enquiry for the purpose of satisfying itself as to the truthfulness of the allegations contained in the complaint. ..........”_ 10. But, in this case, for the reasons mentioned above, it can be safely concluded that a preliminary enquiry has been conducted as required in **P.Sirajuddin** 's case (supra). Hence the prosecution is not 15 Crl.MC No.5261/2013 vitiated on that score. 11. Next contentious issue is regarding non-adherence of the rules in the Manual published by the Stores Purchase (A) Department of the Government of Kerala. Learned Addl.DGP contended that the Consumer Fed blatantly violated the provisions of the Manual; whereas the learned Senior Counsel for the petitioners contended that the Consumer Fed is not bound by the provisions of the Manual. Instead, they have a transparent procedure for purchase of articles. In order to examine these contentions, following aspects will have to be considered. Learned Senior Counsel submitted on the basis of Annexure-C tender notice that the steps taken by the Consumer Fed for procurement of rice, sugar, coconut oil and other grocery items were truly transparent. There is absolutely nothing dubious, malicious or illegal in the procedure adopted by the Consumer Fed. All the actions were done bonafide with an intention to do away with re-tendering as it may take at least a month's time, thereby causing shortage of essential commodities during the festival seasons. It is also contended that since quantity required by the Consumer Fed in each item is large and also from earlier bad experience, the Consumer Fed always called the persons quoting second and third lowest rates also for negotiation in order to fill up the deficiency in supply. Therefore, the allegation in Annexure-A first information report that purchases of rice, wheat, etc. during Onam and Ramzan, 2012 were surreptitiously done is without any basis. 16 Crl.MC No.5261/2013 12. Per contra, learned Addl.DGP and the learned counsel counsel for the additional 3[rd] respondent submitted that the Consumer Fed wantonly violated the provisions of the Manual in spite of knowing fully well that they do not have any guideline for stores purchase. It is also submitted that during the investigation, files relating to procurement of sugar, matta rice, coconut oil and coriander were seized and perused in detail. It was revealed that the Consumer Fed is neither following its own purchase manual nor the Government Stores Purchase Manual in the procurement process. It was also revealed that the tender conditions were not specific and the conditions incorporated were later diluted to facilitate the market advantage to the suppliers. Annexure-R1(d) is the registered bye-law of the Consumer Fed. As mentioned earlier, this is a venture in the Cooperative Sector governed by the Act. The object of the Consumer Fed is stated in Clause (5) of Annexure-R1(d) bye-law. Primary object is to make bulk procurement of consumer goods and supply to affiliated and or other co-operative societies and arrange for proper storage, packing, grading and transport of such goods. It can also be seen that the Consumer Fed is mainly intended to co-ordinate and facilitate the working of affiliated societies and to assist in the promotion, organisation and development of consumer co-operation. Annexure-R1(e) shows about formation of a purchase committee of neethi/nanma scheme reconstituted by the Consumer Fed. The circular is dated 01.02.2012. On a careful scrutiny of 17 Crl.MC No.5261/2013 Annexure-R1(e), it can be seen that the members of the committee is bound to finalise the day-to-day purchase activities of the scheme by convening meetings. The minutes of the committee should be submitted to the Managing Director of Consumer Fed for necessary approval/ratification. It is evident from Annexure-R1(e) that the purchase committee functions under the direct supervision of the Managing Director, Consumer Fed. It is, therefore, contended that the accused persons are primarily liable for the malpractices in the stores purchase. Besides, the Manual issued by the Government contains general rules applicable to all departments regarding purchase of stores required for the use in public service. It insists on deposit of earnest money as well as performance security in order to safe guard the bidders withdrawing/altering the terms during the validity period. On account of not adhering to the provisions of the Manual, the Consumer Fed suffered huge loss and consequently the accused were unjustifiably enriched, contended the Addl.DGP. 13. In order to buttress the above contentions, learned Addl.DGP relied on Annexure-R1(f) Stores Purchase Manual. It can be seen that the originally existed Manual was revised as per G.O.(P) No.3/2013/SPD, dated 21.06.2013. It is a complete code regarding the formalities to be complied with while purchasing stores falling within its purview. It is relevant to note that the petitioners have no case that the Consumer Fed ever adhered to the provisions in Annexure-R1(f), the Manual issued by the 18 Crl.MC No.5261/2013 Government. On the contrary, they contended that the entire action was done with utmost transparency and by checking and cross-checking at various levels to see that every transaction was economically viable and profitable for the Consumer Fed. In the counter statement filed by the Government as well as in the first information report, there are instances pointed out where the Consumer Fed and the Government sustained loss on account of the alleged malpractice in the stores purchase. Learned counsel for the additional 3[rd] respondent, relying on Annexure-R3(c), contended that the audit note for the year 2011-2012 submitted by the auditors of the Co-operative Department would show the defects and irregularities noted in the functioning of the Consumer Fed. In spite of pointing out such defects and irregularities during the previous years, there was no attempt on the part of the Consumer Fed to rectify them or to avoid such things in future. 14. Learned Addl.DGP strongly relied on Annexures-R1(h) and R1 (j) to contend that the petitioners cannot be heard to say that the Manual issued by the Government does not apply to them. Annexure-R1(j) is a circular issued by the Government of Kerala, Stores Purchase (A) Department dated 27.08.2009. It reads as follows: _“_ _**CIRCULAR**_ _Sub:- Stores Purchase Department - All institutions under Government including Local Bodies, Autonomous Bodies and Public Sector Undertakings_ 19 Crl.MC No.5261/2013 _brought under the purview of Stores Purchase Manual - Further instructions- reg._ _Ref:-1. G.O.(P)No.2/95/SPD Dated, 4.2.1995 2. G.O.(P) No.14/2004/SPD Dated, 22.11.2004_ _As per the Government Orders read above Government have issued orders bringing all Local Bodies, Public Sector Undertakings, all Commissions, all Autonomous Bodies including cooperative institutions and Universities under the purview of Stores Purchase Manual for purchases._ _2. It has come to the notice of the Government that many Public Sector Institutions, Autonomous Bodies, etc. are not following the provisions of Stores Purchase Manual in the case of purchases, on the ground that they have their own purchase procedures. This practice will contribute to misuse and malpractices._ _3. In the above circumstances, all Local Bodies including Panchayats, Municipalities and Corporations, all Commissions, all Autonomous Bodies including co-operative institutions, Universities and Public Sector Undertakings are ordered to follow Stores Purchase Manual scrupulously._ _4. In case of practical difficulties in procurement, the Public Sector Undertakings/Institutions/Organizations should forward concrete proposals with the approval of the Board of Directors, to Government in Stores_ 20 Crl.MC No.5261/2013 _Purchase Department through the Administrative Departments for exemption._ ## _L.C.GOYAL_ ## _ADDITIONAL CHIEF SECRETARY”_ Learned Addl.DGP and the learned counsel for the additional 3[rd] respondent contended that a mere glance at Annexure-R1(j) would show that the Consumer Fed is bound to follow the Manual, since it is an institution coming under the operation of the Act. Therefore, no one can take a stand that the Consumer Fed is not governed by the Manual issued by the Government. Annexure-R1(i) circular dated 25.07.2013 issued by the said department also re-states the requirement of adhering to the Manual. Annexure-R1(h) is a letter issued by the Additional Chief Secretary to the Government of Kerala to the Deputy Police Superintendent informing him that the revised Manual was posted in the Government Website. A list of departments/institutions appended thereto is only an illustrative one and not an exhaustive list of the institutions governed by the Manual. It is also mentioned in Annexure-R1(h) that the Consumer Fed was omitted to be included in the list. Learned Addl.DGP contended that a mere omission to add the Consumer Fed in the list cannot be taken advantage of, since right from 2009 onwards, all the cooperative institutions have been brought under the operation of the Manual. It is true that the Consumer Fed cannot claim exemption from the operation 21 Crl.MC No.5261/2013 of the Manual, especially in the absence of any recognized procedure for purchasing the commodities to be dealt with by the Consumer Fed. It is also to be noted here that even according to the petitioners, the Consumer Fed purchases huge quantities of each item to cater their requirement. Therefore, without any established/consistent procedure approved by the authorities, it cannot be said that the purchases made by the Consumer Fed were prima facie transparent. However, it is a matter to be probed further to bring out the details. I am of the view that it may not be legally proper to hold at this juncture that the Consumer Fed is not bound to follow the Manual issued by the Government. Petitioners having taken a stand that they did not go by the procedure prescribed by the Manual and having failed to establish any approved procedure consistently followed, I am of the definite view that the matter requires a deeper probe. There are accusations against the petitioners that in certain cases they consciously avoided insisting on the deposit of EMD from tenderers as required by the tender notice. Further they manipulated the Profit and Loss account for 2011-12 by showing false figures of damaged and deficit stock. Although the petitioners are in a denial mode regarding these contentions, I hold a view that a threadbare probe is required in these matters as well. The allegation that the administrators of the Consumer Fed intentionally avoided insisting on deposit of EMD by some traders is directly connected to the allegation that they failed to adhere to the Manual while making huge Crl.MC No.5261/2013 22 purchase of stores. Likewise, contention regarding the deficit in stock is also a serious issue to be probed. Therefore, I am of the considered view that such matters require a serious investigation. 15. Learned Addl.DGP contended that the jurisdiction vested in this Court under Section 482 Cr.P.C. shall not be exercised in favour of the petitioners. Decision in **Umesh Kumar v. State of A.P. (2013 (4) KLT SN 4 (Case No.2)** is relied on by the learned Addl.DGP to argue that the Supreme Court has categorically held that the inherent power of the court should not be exercised to stifle a legitimate prosecution. The Supreme Court in **Jeffrey J.Diermeier and another v. State of West Bengal and another ((2010) 6 SCC 243)** held as follows: _“.......... The Section itself envisages three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code; (ii) to prevent abuse of process of Court; and (iii) to otherwise secure the ends of justice. Nevertheless, it is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction of the Court. Undoubtedly, the power possessed by the High Court under the said provision is very wide but is not unlimited. It has to be exercised sparingly, carefully and cautiously, ex debito justitiae to do real and substantial justice for which alone the court exists. It needs little emphasis that the inherent jurisdiction does not confer_ 23 Crl.MC No.5261/2013 _an arbitrary power on the High Court to act according to whim or caprice. The power exists to prevent abuse of authority and not to produce injustice.”_ On an over all assessment of the materials before me, I am of the definite view that the petitioners are not entitled to get the first information report registered in this case quashed. 16. Learned Addl.DGP relying on **Satya Narayan Sharma v. State of Rajasthan ((2001) 8 SCC 607)** contended that on account of a stay order passed by this Court on 12.11.2013 the investigative machinery has come to a grinding halt. Valuable evidence might have been caused to disappear at the hands of the accused still working in the establishment. It is contended that the jurisdiction under Section 482 Cr.P.C. cannot be exercised, if the enactment concerned contains a specific bar. Section 19 (3)(c) of the PC Act is pressed into service to contend that this Court should not have granted a stay of investigation. In **Satya Narayan Sharma** 's case (supra), in unequivocal terms, the Apex Court ruled as follows: _“We have heard the parties. Section 19(3)(c) of the said Act reads as follows :_ _"(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974)."_ _xxxxxx xxx xxx_ _(c) no Court shall stay the proceedings under this Act on any other ground and no Court shall exercise the powers of revision in relation to any interlocutory order_ 24 Crl.MC No.5261/2013 _passed in any inquiry, trial, appeal or other proceedings."_ _It is thus to be seen that this Section provides.-_ _(a) that no Courts should stay the proceedings under the Act on any ground and_ _(b) that no Court shall exercise the powers of revision in relation to any interlocutory order passed in any inquiry, trial, appeal or other proceedings._ _To be noted that (b) above is identical to S. 397(2) of the Criminal Procedure Code which deals with revisional power of the Court. If Section 19 was only to deal with revisional powers then the portion set out in (b) above, would have been sufficient. The legislature has, therefore, by adding the words "no Court shall stay the proceedings under this Act on any other ground" clearly indicated that no stay could be granted by use of any power on any ground. This therefore would apply even where a Court is exercising inherent jurisdiction under S. 482 of the Criminal Procedure Code.”_ Considering the scope, amplitude and scheme of the provision, I am of clear view that the terms “proceedings under the Act” includes the investigation too. Hence, to re-capitulate the issues, the plea raised by the petitioners that the prosecution was launched without a proper preliminary enquiry is unsustainable and therefore it is only to be rejected. Another contention that they are not bound to follow the Manual is also not acceptable and, hence, that contention is also rejected. I am of the definite 25 Crl.MC No.5261/2013 view that a thorough probe into the matter is highly essential. I do not find any cogent reason to invoke the power vested in this Court under Section 482 Cr.P.C. to quash the first information report in this case. Hence, the petition is liable to be dismissed. In the result, the petition is dismissed. The interim order passed by this Court staying further investigation in the matter is hereby vacated. All pending interlocutory applications will stand dismissed. ## **A. HARIPRASAD, JUDGE.** **cks**