The Madras High Court has acquitted a Customs Preventive Officer and his wife after finding that the prosecution failed to conduct a fair and complete investigation into their lawful income, loans, gifts, and pre-check period earnings.
The bench of Justice G.K. Ilanthiraiyan has observed that the prosecution failed to establish beyond reasonable doubt that the assets acquired by the accused were disproportionate to their known sources of income.
The bench allowed the criminal appeal and set aside the 2014 conviction recorded by the Special Judge for CBI Cases, Chennai, holding that the investigation suffered from serious deficiencies and that the accused had satisfactorily explained the source of their assets.
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The Central Bureau of Investigation (CBI) had alleged that the first accused, a Preventive Officer (Inspector) in Chennai Customs, and his wife, an employee of the Central Warehousing Corporation, amassed movable and immovable assets worth approximately ₹44.79 lakh between 1 March 2000 and 30 January 2008, allegedly disproportionate to their known sources of income.
Following investigation, both were charged under Sections 13(2) read with 13(1)(e) of the Prevention of Corruption Act, 1988. The trial court convicted them in December 2014, sentencing each to two years’ rigorous imprisonment along with a fine of ₹50,000.
One of the principal arguments before the High Court was that the FIR originally adopted a different check period than the one ultimately used in the charge sheet.
While the prosecution maintained that altering the check period caused no prejudice, the High Court observed that although the accused did not challenge the alteration order, they were never afforded an opportunity to explain their assets and income relating to the newly introduced period.
According to the Court, this omission caused serious prejudice because the accused could not explain the source of funds used for properties purchased during the additional period that was later brought within the investigation.
A central reason for acquittal was the prosecution’s failure to account for the income earned prior to the commencement of the check period.
The Court observed that the first accused had already rendered nearly 17 years of government service, while the second accused had several years of employment before the selected period. Their accumulated savings, salary, rental income and earlier lawful earnings were largely ignored during the investigation.
The judgment held that selection of a check period cannot be arbitrary and must present a complete financial picture by considering both assets and legitimate earnings accumulated before the chosen period.
The High Court also noted that statutory financial documents, including Income Tax Returns and Form-16, clearly reflected salary income and rental earnings which supported the defence.
The accused had examined themselves as defence witnesses and produced evidence showing lawful income exceeding ₹25 lakh prior to the check period.
However, neither the investigating agency nor the trial court properly evaluated these documents while computing disproportionate assets.
The Court found multiple instances where legitimate borrowings were omitted from the income calculations.
Evidence demonstrated that several properties had been acquired through Housing loans from IDBI Bank; Loans from Central Bank of India; Loans obtained through co-operative societies.; and Other institutional borrowings.
Although prosecution witnesses themselves acknowledged sanction of these loans, the investigating officer failed to properly include them while computing lawful financial resources available to the accused.
The Court held that ignoring loan amounts significantly distorted the calculation of disproportionate assets.
Another major defect identified by the High Court related to gifted properties.
The defence consistently maintained that certain properties had been gifted by the paternal uncle of the accused; and the father of the second accused.
The investigating officer had recorded statements from these relatives during investigation, but key witnesses were never examined before the trial court, including one who died before trial.
The Court observed that had the investigation been properly completed and these witnesses examined, the prosecution’s theory regarding disproportionate assets would have substantially weakened.
The judgment relied upon earlier precedent laying down the responsibilities of investigating officers in disproportionate assets cases.
The Court reiterated that investigators must properly calculate assets existing before the check period; include lawful income, loans and gifts; avoid inflating expenditure or undervaluing income; and provide reasonable opportunity to the accused to explain alleged disproportion.
Failure to follow these principles, the Court held, can be fatal to the prosecution.
The Court emphasised that in prosecutions under Section 13(1)(e) of the Prevention of Corruption Act, the prosecution first bears the burden of proving that the accused possessed assets disproportionate to known sources of income.
Only after such burden is discharged does any obligation arise for the accused to satisfactorily explain the assets.
In the present case, since the prosecution itself failed to establish disproportionate assets through a proper investigation, the accused could not be held guilty merely because explanations were considered inadequate.
The High Court criticised the investigating agency for mechanically deducting one-third of the gross salary towards household expenditure.
Referring to departmental guidelines, the Court observed that household expenses should be assessed on a realistic basis after verification. In the facts of the case, it held that only 10% of the gross salary could reasonably be considered under kitchen expenses, rather than one-third as adopted by the investigators.
After examining the entire evidence, the High Court concluded that lawful salary income had not been fully considered; rental income was ignored; legitimate loans were excluded; gifted properties were inadequately investigated; explanations submitted by the accused were not fairly evaluated; and the prosecution failed to prove disproportionate assets beyond reasonable doubt.
Consequently, the Court set aside the conviction and sentence imposed by the trial court, acquitted both accused of all charges, directed refund of the fine amount, and ordered cancellation of their bail bonds.
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