Non-Disclosure of Exonerating Preliminary Inquiry Report Vitiates Sanction to Prosecute Under Prevention of Corruption Act.

The Respondent, Assistant Director and Drawing and Disbursing Officer (DDO) at MSME-DI, Goa, was appointed as Coordinating Officer for the National Vendor Development Programme (NVDP) 2012-13. An advance of ₹2,25,000 was deposited into his personal account for expenditures

In 2014, the CBI registered an FIR alleging that the Respondent used 12 forged bills to falsely claim ₹94,090 and misappropriated funds in payments made to "Thomson Enterprises"

Following a trial where 44 witnesses were examined, the District & Sessions Judge, South Goa, acquitted the Respondent on 16.03.2021

The CBI appealed this acquittal, challenging findings on the validity of the sanction and the sufficiency of evidence regarding the forged documents and the Respondent's sole liability

1. Whether the Respondent falsely claimed ₹94,090 using 12 forged bills/vouchers for services not rendered

2. Whether the Respondent misappropriated funds by claiming a higher amount for "Thomson Enterprises" than actually paid

3. Whether the Respondent committed offences under Sections 409, 420, 471 of the IPC and Section 13(2) r/w 13(1)(d) of the PC Act, 1988

4. Whether the sanction to prosecute granted by the Department of Economic Affairs was valid and based on full disclosure of material facts

The court applied Section 19(1)(c) of the Prevention of Corruption Act, 1988, which mandates that sanction must be granted by the authority competent to remove the public servant

It relied on the Supreme Court precedent in CBI v. Ashok Kumar Agarwal (2014), establishing that all relevant materials, including exculpatory evidence like departmental inquiry reports, must be placed before the sanctioning authority

The court further observed the standard of "proof beyond reasonable doubt" for criminal charges under IPC Sections 409 (Criminal breach of trust), 420 (Cheating), and 471 (Using forged documents)

It also adhered to the principles governing appeals against acquittal as set out in State of Goa v. Sanjay Thakran, emphasizing that the appellate court should not interfere if the Trial Court’s view is a "possible view"

The High Court noted that the Respondent was not solely responsible for procurement; an expenditure committee existed, and all bills required the Director’s (PW34) prior approval

The prosecution failed to prove the Respondent forged the bills or had knowledge of any forgery, as his specimen handwriting was never taken for comparison

The testimony of shop owners (e.g., PW31) regarding "fake" bills was deemed unreliable or inconclusive

Regarding the sanction, the court found it fatally flawed because the Investigating Officer (PW44) suppressed a preliminary departmental inquiry report that had already exonerated the Respondent

Additionally, since the Respondent was under the administrative control of the MSME Development Commissioner, the sanction issued by the Department of Economic Affairs lacked proper competence and demonstrated a lack of application of mind

It held that the prosecution failed to prove entrustment or dishonest conversion of funds (Section 409 IPC) and failed to establish the ingredients of cheating (Section 420) or forgery (Section 471)

The court held the prosecution sanction illegal due to the non-disclosure of the exculpatory departmental inquiry report and the lack of jurisdiction of the sanctioning authority

The appeal by the CBI was dismissed