Conviction under the Prevention of Corruption Act requires proof of demand and acceptance; mere recovery is insufficient.

The appellant, then Manager of Kshetriya Gramin Bank, Hurda Branch, had sanctioned a ₹25,000 loan to Patras Kandulna for establishing a flour mill. Deo Prasad Sahu, the complainant, stood guarantor and later took over and operated the flour mill after the principal debtor became unable to run it.

The complainant approached the C.B.I., which registered a case under Section 7 of the Prevention of Corruption Act, 1988, conducted a trap on 4 December 2002, and recovered thirty ₹100 currency notes from the appellant’s office table after the appellant allegedly counted and accepted them.

The appellant’s right- and left-hand washes tested positive for phenolphthalein and sodium carbonate.

After investigation and sanction for prosecution, the appellant was charged under Sections 7 and 13(2) read with Section 13(1)(d) of the Act.

The Special Judge, C.B.I., Ranchi convicted the appellant and sentenced him to two years’ rigorous imprisonment with a ₹10,000 fine under Section 7 and two-and-a-half years’ rigorous imprisonment with a ₹15,000 fine under Section 13(2) read with Section 13(1)(d), with the sentences running concurrently.

Whether the prosecution proved beyond reasonable doubt the demand and acceptance of ₹3,000 as illegal gratification by the appellant, as required for conviction under Section 7 of the Prevention of Corruption Act?

Whether mere recovery of the tainted currency notes and positive hand-wash evidence established the offence under Section 13(2) read with Section 13(1)(d) of the Act in the absence of proof of demand and illegal acceptance?

Whether the trial court’s appreciation of the complainant’s evidence and the surrounding circumstances disclosed a serious error warranting appellate interference?

The Court applied Section 7 of the Prevention of Corruption Act, 1988, which criminalises acceptance or obtainment of gratification other than legal remuneration as a motive or reward for an official act.

It considered Section 13(1)(d) read with Section 13(2), concerning obtaining a valuable thing or pecuniary advantage through corrupt or illegal means or by abuse of official position.

Section 20 creates a mandatory presumption regarding the corrupt purpose of gratification only after foundational facts of acceptance or obtainment are proved; it does not dispense with proof of demand and acceptance.

Section 19 concerns previous sanction for prosecution, subject to the statutory rule that an irregularity causes interference only where failure of justice is shown.

Relying on Neeraj Dutta v. State (NCT of Delhi), (2023) 4 SCC 731, the Court held that proof of demand and acceptance of illegal gratification is the sine qua non for Sections 7 and 13(1)(d)(i)–(ii), and that mere recovery is insufficient.

It also relied on Rafikmiya Ahmedmiya Malek v. State of Gujarat, 2026 INSC 890, for the principle that mere recovery of money does not, by itself, establish the corruption offences.

The Court found that the complainant was not the principal debtor but merely a guarantor who had, without informing the bank, taken over and operated the flour mill sanctioned in the name of Patras Kandulna, an eligible Scheduled Tribe beneficiary under a subsidy-linked scheme.

This circumstance gave the complainant a possible motive to avoid repayment liability and continue operating the mill in breach of the loan conditions.

Although the trap witnesses proved that the appellant handled the currency notes and that his hand-washes tested positive, the Court held that the money was found on the office table rather than in his personal possession, and the loan passbook was not recovered from him.

The Court further noted inconsistencies and omissions in the complainant’s version: the conversation did not clearly establish a demand for illegal gratification, the word “bribe” was absent from the contemporaneous trap materials, and the appellant’s statement—“ठीक है जाओ आटा चक्की चलाओ, कोई दिक्कत नहीं है”—was considered consistent with his regulating the unauthorised operation of the flour mill rather than demanding a bribe.

Since demand and acceptance of illegal gratification were not proved as foundational facts, the statutory presumption under Section 20 could not be invoked, and the positive chemical test and recovery alone could not sustain the conviction.

It held that the prosecution failed to establish the essential ingredients of demand and acceptance of illegal gratification under Section 7 and failed to prove criminal misconduct under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act.

The conviction and sentences dated 24 July 2004 were set aside; the appeal was allowed, and the appellant, who was on bail, was discharged from the liability of his bail bond and sureties.