SUPREME COURT REFERS MATTER TO LARGER BENCH TO DECIDE THE ISSUE WHETHER POLICE OUGHT TO HAVE TAKEN PRIOR GOVERNMENT APPROVAL TO ARREST MR. CHANDRABABU NAIDU UNDER PREVENTION OF CORRUPTION ACT 1988 IN THE AP SKILL DEVELOPMENT SCAM

In a recent case of Nara Chandrababu Naidu vs The State of Andhra Pradesh and K. Ajay Reddy, Chairman of A.P. State Skill Development Corporation, Criminal Appeal No. 279 of 2024, a two Judge Bench of the Supreme Court comprising of Justice Aniruddha Bose and Justice Bela M. Trivedi passed a Judgment dated 16-01-2024 with different views on the interpretation of Section 17A of the Prevention of Corruption Act, 1988 (PC Act) (Enquiry or Inquiry or investigation of offences relatable to recommendations made or decision taken by public servant in discharge of official functions or duties) and its applicability to the Appellant in the present case. Hence, the matter was referred to the Hon’ble Chief Justice of India for taking appropriate decision on placing the matter before a larger Bench for adjudication on the said point.

Facts

i) In the present case, a First Information Report (FIR) dated 09-12-2021 was registered at the CID Police Station, Mangalagiri, Andhra Pradesh against 26 Accused persons in Crime No. 29 of 2021. The allegations were pertaining to siphoning off of public funds that were to be used for setting up six clusters of skill development centres in Andhra Pradesh.

ii) Initially, the Appellant-Mr. Nara Chandrababu Naidu, former Chief Minister of the State of Andhra Pradesh and currently, acting as Leader of the Opposition of the State of Andhra Pradesh, was not included in the array of the Accused persons in the said FIR.

iii) However, subsequently, the list of Accused persons was expanded and the Appellant was also added as Accused No. 37, vide Accused Adding Memo dated 08-09-2023, which was lodged before Ld. Special Judge, Special Police Establishment (SPE) and Anti-Corruption Bureau (ACB) Cases (Trial Court).

iv) The allegations were pertaining to the offences committed under the following provisions of law, between 2015-2019, when the Appellant was acting as the Chief Minister of the State of Andhra Pradesh:

a) Section 109 of the Indian Penal Code 1860 (IPC) (Punishment of abetment if the act abetted is committed in consequence and where no express provision is made for its punishment),

b) Section 166 IPC (Public servant disobeying law, with intent to cause injury to any person),

c) Section 167 IPC (Public servant framing an incorrect document with intent to cause injury),

d) Section 209 IPC (Dishonestly making false claim in Court),

e) Section 409 IPC (Criminal breach of trust by public, servant. or by banker, merchant or agent),

f) Section 418 IPC (Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect),

g) Section 420 IPC (Cheating and dishonestly inducing delivery of property),

h) Section 465 IPC (Punishment for forgery),

i) Section 468 IPC (Forgery for purpose of cheating),

j) Section 471 IPC (Using as genuine a forged document or electronic record)

k) Section 120B of IPC (Punishment of criminal conspiracy),

l) Section 34 IPC (Acts done by several persons in furtherance of common intention),

m) Section 37 IPC (Co-operation by doing one of several acts constituting an offence)

n) Section 12 of the Prevention of Corruption Act, 1988 (PC Act) (Punishment for abetment of offences)

o) Sections 13(1)(c)(d), 13(2) of PC Act (Criminal misconduct by a public servant).

v) As a result, the Appellant was arrested on 09-09-2023 and was produced before the Trial Court on the next day. The Trial Court remanded him to judicial custody, vide Order dated 10-09-2023.

vi) The Appellant filed a Criminal Petition in CRLP-6942-2023 before the High Court of Andhra Pradesh and sought for the following reliefs:

a) Quashing of the FIR in Crime No. 29 of 2021 on 12-09-2023 by invoking the jurisdiction of the High Court under Section 482 of the Code of Criminal Procedure 1973 (CrPC) (Saving of inherent power of High Court).

b) The Appellant also challenged the legality of the Remand Order dated 10-09-2023 passed by the Trial Court.

vii) The High Court, vide Order dated 22-09-2023, dismissed the Criminal Petition.

viii) Aggrieved by the High Court Order dated 22-09-2023, the Appellant filed Special Leave Petition (SLP) (Criminal) No. 12289 / 2023 on 23-09-2023 before the Supreme Court.

Contentions of the State

I) That for the purpose of setting up of clusters of skill development centres in Andhra Pradesh (AP), the Government established AP State Skill Development Corporation (Respondent No. 2-Corporation) through a Memorandum bearing G.O.Ms. No.47 dated 10-09-2014. The Respondent No. 2-Corporation entered into an Agreement with two entities, namely, Siemens Industry Software India Pvt. Ltd. (Siemens) and Design Tech India Pvt. Ltd. (Design Tech) for setting up of one Centre of Excellence and five Technical Skill Development Institutions and Skill Development Centres in AP.

II)As per the said Agreement, the Government had to infuse 10% of the project cost and balance had to be contributed by Siemens and Design Tech.

III) As per the State, during an investigation by the GST Intelligence Department, Pune, a financial scam was unearthed involving both Siemens and Design Tech, wherein, it was found that both these entities had sub-contracted a part of the work of setting up of skill development centres to other entities, despite there being no such provision for sub-contract in the Agreement executed with the Respondent No. 2-Corporation.

IV) The State further alleged that these sub-contractor entities were shell / defunct companies that were being used as vehicles for diverting funds.

V) The Respondent No. 2-Corporation conducted a forensic audit in 2020, wherein flaws and irregularities were found in utilisation of funds between 2014-15 and 2018-19.

VI) Further, as per the Investigating Authorities, a sum of Rs. 370 Crores (approx.) from the Government funds of the Respondent No. 2-Corporation were siphoned off.

VII) As per the State, the Appellant was the mastermind behind this scam and he was roped in as the Accused in Memo dated 08-09-2023 based on the following allegations:

VIII) He had unilaterally appointed the Directors of the Respondent No. 2-Corporation, without obtaining approval from the AP Cabinet.

IX) He had approved the Memorandum and Articles of Association of the Respondent No. 2-Corporation.

X) He had allotted the Project to Siemens and Design Tech on nomination basis, without following any tender process.

XI) He had fast-tracked the Project and approved the cost estimation and ensured release of Rs. 370 Crores (approx.) towards the 10% of the Project cost that the Government had to infuse as per the terms of the aforementioned Agreement.

XII) The Appellant, thereby, misappropriated the Government funds through corrupt and unlawful methods by abusing his official position.

Contentions of the Appellant

The Appellant’s main argument was that if at all fault was found for implicating the Appellant-Accused under the provisions of PC Act, prior approval from the Government has to be obtained before conducting an inquiry or investigation against a public servant under Section 17A of PC Act[1]. However, in this case, the Police did not take any such prior sanction before arresting the Appellant and hence, the Trial Court could not have remanded the Appellant to judicial custody.

Supreme Court Observations

The Apex Court allowed the SLP and registered the case as Criminal Appeal No. 279 of 2024 on 17-01-2024:

A) Justice Aniruddha Bose passed a Judgment dated 16-01-2024 and made the following observations in this case:

1) That Section 17A of PC Act came into force on 26-07-2018 and as per various earlier judgments of the Supreme Court, Section 17A of PC Act is substantive in nature and hence, applicable prospectively.

2) However, as per Justice Aniruddha Bose, Section 17A of PC Act does not distinguish between alleged commission of offences prior to the cut-off date of 26-07-2018 or post thereof. In fact, as per Justice Aniruddha Bose, Section 17A is applicable from the starting point of inquiry / investigation and not the time of commission of alleged offence.

3) In the present case, the time of alleged commission of offences pertained to 2014-15, i.e. prior to Section 17A of PC Act became operational.

4) But as per Justice Aniruddha Bose’s aforesaid observations, Section 17A of PC Act becomes applicable from the point of start of inquiry, which in this case, is 09-12-2021, when the FIR was registered and 08-09-2023, when the Appellant was implicated, both of which are post cut-off date of 26-07-2018.

5) Thus, Justice Aniruddha Bose held that the Appellant was entitled to the protective shield granted by Section 17A of PC Act, i.e. prior permission ought to have been taken before commencing inquiry / investigation against the Appellant, who was a Public Servant. But as such prior approval was not taken, the steps taken by the Authorities against the Appellant under the PC Act would be invalidated.

6) However, in respect of allegations of commission of offences under IPC, if the same are proved, it can form the basis of conviction under IPC, independent of the offences under PC Act. Therefore, the Trial Court can proceed against the Appellant for allegations of commission of offences under IPC, for which he has been implicated.

7) Thus, based on the aforesaid observations, Justice Aniruddha Bose held that lack of prior approval in terms of Section 17A of PC Act would not render the entire Remand Order dated 10-09-2023 passed by the Trial Court non-est.

B) Justice Bela M. Trivedi passed a Judgment dated 16-01-2024 and made the following observations in this case:

(1) That the objectives of PC Act are to combat corruption, promote transparency and accountability in public administration and deter people from engaging in corrupt activities by imposing strict penalties, etc.

(2) Similarly, the object behind introducing Section 17A of PC Act was to protect honest public servants from harassment by way of inquiry, investigation, etc in respect of the decisions taken or acts done in bonafide performance of their official duties. Hence, Section 17A bars police officers from conducting inquiry, investigation, etc against a public servant, without obtaining prior permission of the concerned Authorities. But on the other hand, it cannot be the object of Section 17A to give benefit to the dishonest and corrupt public servants.

(3) Further, Section 17A of PC Act that came into force by way of Amendment in 2018, is substantive in nature and hence, prospective applicability to offences under PC Act that were amended or brought into force after such Amendment was introduced and not to the offences existing prior to the said Amendment.

(4) Even otherwise, in the absence of prior approval before conducting inquiry, investigation against a public servant i.e. the Appellant herein, it cannot be a ground for quashing of the entire FIR registered against such Public Servant or the proceedings conducted against him, more particularly when he is also charged for offences under IPC in respect of the same set of allegations.

(5) Thus, Justice Bela M. Trivedi held that the Trial Court had the jurisdiction to pass the Remand Order dated 10-09-2023.

Conclusion

Based on the aforesaid observations, Justice Aniruddha Bose held that the Appellant cannot be proceeded against for the offences under PC Act, as no prior approval was obtained by the Authorities. However, the State is at liberty to apply for such approval in terms of Section 17A of PC Act. Further, the Appellant can be proceeded against under the provisions of IPC by the Trial Court.

Whereas, Justice Bela M. Trivedi held that Section 17A of PC Act is not applicable to offences existing prior to the said Amendment and even otherwise, lack of prior permission under PC Act would not be a ground for quashing the entire FIR, hence, the Trial Court had the jurisdiction to pass the Remand Order dated 10-09-2023.

Thus, as the 2 Judge Bench of the Apex Court passed a Judgment with different views on the interpretation of Section 17A of PC Act and its applicability to the Appellant in the present case, hence, the matter has been referred to the Hon’ble Chief Justice of India for taking appropriate decision on placing the matter before a larger Bench for adjudication on the said point.

Harini Daliparthy

Senior Associate

The Indian Lawyer

 

[1] Section 17A of PC Act 1988: Enquiry or Inquiry or investigation of offences relatable to recommendations made or decision taken by public servant in discharge of official functions or duties

No police officer shall conduct any enquiry or inquiry or investigation into any offence alleged to have been committed by a public servant under this Act, where the alleged offence is relatable to any recommendation made or decision taken by such public servant in discharge of his official functions or duties, without the previous approval—

(a) in the case of a person who is or was employed, at the time when the offence was alleged to have been committed, in connection with the affairs of the Union, of that Government;

(b) in the case of a person who is or was employed, at the time when the offence was alleged to have been committed, in connection with the affairs of a State, of that Government;

(c) in the case of any other person, of the authority competent to remove him from his office, at the time when the offence was alleged to have been committed: Provided that no such approval shall be necessary for cases involving arrest of a person on the spot on the charge of accepting or attempting to accept any undue advantage for himself or for any other person:

Provided further that the concerned authority shall convey its decision under this section within a period of three months, which may, for reasons to be recorded in writing by such authority, be extended by a further period of one month