CENTRAL BUREAU OF

INVESTIGATION
ACADEMY

READING MATERIAL
ON
DISPROPORTIONATE ASSETS

KAMLA NEHRU NAGAR, HAPUR ROAD,

GHAZIABAD
 INVESTIGATION OF CASES OF DISPROPORTIONATE ASSETS

CHAPTER I
I N T R O D U C T ION

1.1 Think of a water tank containing a few visible inflow pipes and some
outflow pipes. If the total Inflow and outflow of water during a particular period of
time are correctly calculated and the water already available In the tank at the
commencement or the period is known, the quantity of water that should be In
the tank at the end or the period can be computed and this should normally tally
with or be near-about the quantity actually available in the tank. If, however ,
considerably more water than thus calculated is found in the tank, it is clear
indication that there is an invisible inflow pipe. The same is the case with
finances. In human economic activity, the inflow of water could be compared to
income; the outflow of water to expenditure and the quantity of water actually
available in the tank to assets. If the assets are far in excess of the difference
between income and expenditure, it is clear indication or secret invisible inflow of
income, which in the case of a public servant, would be bribes taken by him. This
is what a case or possession of disproportionate assets is all about. As detecting
various individual acts of corruption committed by a public servant is virtually
impossible, the corrupt public servant is caught in due course when his corrupt
earnings burst at the seams and take the form of disproportionate assets.

1.2 In India, the offence of possession of disproportionate assets is now

quarter century old. Many a corrupt public servant has been caught by the long
and wide arm of this offence and has dearly paid the penalty. For the
investigating officer, however, a case of disproportionate assets is the most
difficult vigilance case to investigate unless the I.O. has struck gold at the time of
the search itself. Generally, even when a public servant has vast disproportionate
assets, they are round invested, sometimes very cleverly, either in his own name
or in benami names. A good quantum of such tainted funds are also invested in
house constructions. In such cases, the IO has to do plodding work in a
sustained manner
before he can shout "Eureka" .

1.3 An attempt has been made in this note to explain the old and the new law,
certain peripheral aspects of such investigations like fixing of period of check, the
various steps to be taken during the investigation, the computations to be made
and the guiding principles to be observed while taking a final decision in the
case. Rulings or the Supreme Court, High Courts and CAT on the subject are
cited in the book. A study of this note would, it is hoped, apprise the reader of
most of the nuances of the subject. Human ingenuity is, however limitless. In
course of time, corrupt public servants would definitely adopt newer and newer
methods or guile and concealment and the investigator will also then have to
adapt and alter his technique of investigation so as to keep pace with the corrupt
and prove their criminality.

1.4 If catching the unholy public servant is important, not harassing an

innocent one is much more so. A case of disproportionate assets causes quite
some humiliation and inconvenience to the S.O. and the members of his family
and also results in one or two Investigating Officers virtually spending their whole
time in the case for months on end. If on the conclusion of the investigation, it
transpires that the public servant who is involved in the case is innocent or the
extent or disproportion is minimal, it would be thoroughly inappropriate. It could
even be deemed to be callousness to have registered such a case, particularly if
verification prior to the registration of FIR could have disclosed even at that stage
that the public servant is not corrupt and is not having disproportionate assets.
Thorough and sincere verification prior to the registration of an FIR is the sine
qua non of a case of disproportionate assets. Officers of the CBI and State Anti-
corruption Agencies should bear in mind that they are discharging a responsible
and noble duty.
 CHAPTER II
THE LAW

Evolution of the Law

2.1 In India, acts or corruption committed by public servants and in relation to

public servants were initially punishable only under Sections 161 to 165 of Indian
Penal Code. 165-A IPC was added by Act 46 or 1952. The Prevention or
Corruption Act. 1947 (Act II or 1947), however. Created a new offence of
criminal misconduct which. was defined in Section 5(1) of the said Act. This
Section had four parts, namely (a) to (d), by which the habitual commission of
offences under Section 161 and 165 of the I.P.C. Criminal breach of trust
committed by a public servant and the causing of pecuniary advantage to anyone
by a public servant by corrupt or illegal means or by otherwise abusing his
position as a public servant were defined as criminal misconduct.

2.2 When this Act came into force in 1947 and till 1964 when an amendment
was made therein, the Act contained another sub-section 5(3) which set out that
in any trial of an offence U/S 5(1)(a) to (d) of the Act etc., the fact that the
accused person or any other person on his behalf is in possession for which the
accused person cannot satisfactorily account, of pecuniary sources or property
disproportionate to his known sources or income may be proved by the
prosecution. The Sub-section also laid down that on such proof, the Court shall
presume unless the contrary is proved, that the accused person is guilty of
criminal misconduct in the discharge of his official duty and his conviction
therefor shall not be invalid by reason only that it is based on such presumption.
Thus at that time, the possession of disproportionate assets by a public servant
was not a substantive offence by itself and an accused public servant could not
be convicted for the possession or disproportionate assets per se. The
possession of disproportionate assets was therefore, only a rule of evidence
which could lead to a presumption and not an offence by itself.

2.3 The Santhanam Committee on Prevention or Corruption, which was set up

by the Government of India, submitted its report on 31st March, 1964 in which it
was recommended, inter alia, that the possession of disproportionate assets by a
public servant should be' made a substantive offence by itself. The Committee, in
its report, recommended the creation of this substantive offence by the
amendment of the P.C. Act, 1947 and adding it as Section 5(1)(e) in the said Act.
In pursuance of this recommendation, Anti-corruption Laws (Amendment) Act,
1964 was passed which deleted section 5(3) of the P.C. Act, 1947 and instead
added a new sub-section (e) to Section 5(1) of the Act. This amendment came
into force with effect from 18th December, 1964. Consequently with effect from
that date, the possession of disproportionate assets by a public servant became
a substantive offence.
2.4 Prevention or Corruption Act, 1988 which came into force with effect from
9.9.1988 has repealed P.C. Act. 1947. In the new Act also, the possession of
disproportionate assets is a substantive offence under Section 13(1){e). A new
Explanation has now been added. Let us now consider the offence, old and new,
and the effect of the Explanation.

The (old) offence under P.C. Act, 1947

2.5 With effect from 18.12.1964, Section 5(1)(e) of P.C. Act, 1947 defined the
offence as under:-

"5. Criminal misconduct in discharge of official duty.

(1) A public servant is said to commit the offence of criminal misconduct -

(e) if he or any person on his behalf is in possession or has, at any time

during the period or his office, been in possession, for which the public servant
cannot satisfactorily account, of pecuniary resources or property disproportionate
to his known sources of income".

2.6 In State of Maharashtra Versus Wasudeo Ramchandra, Kaidalwar (AIR 1981

SC 1186) the Supreme Court observed as under regarding the burden of proof
on the prosecution and the accused in a case of disproportionate assets:

"The provision contained in Section 5(1)(e) of the Act is a self-contained

provision. The first part of the section casts a burden on the prosecution
and the second on the accused. When Section 5(1)(e) uses the words "for
which the public servant cannot satisfactorily account", it is implied that the
burden is on such public servant to account for the sources for the
acquisition of disproportionate assets. The High Court, therefore, was in
error in holding that a public servant charged for having disproportionate
assets in his possession for which he cannot satisfactorily account, cannot
be convicted of an offence under Section 5(2) read with Section 5(1)(e) of
the Act unless the prosecution disproves all possible sources of income.

That takes us to the difficult question as to the nature and extent of the
burden of proof under Section 5(1) (e) of the Act. The expression 'burden
of proof' has two distinct meanings (1) the legal burden, i.e. the burden of
establishing the guilt, and (2) the evidential burden, i.e. the burden of
leading evidence. In a criminal trial, the burden of proving everything
essential to establish the charge against the accused lies upon the
prosecution, and that burden never shifts. Notwithstanding the general
rule that the burden of proof lies exclusively upon the prosecution, in the
case of certain offences, the burden of proving a particular fact in issue
may be laid by law upon the accused. The burden resting on the accused
in such cases is, however, not so onerous as that which lies on the
 prosecution and is discharged by proof of a balance of probabilities. The
ingredients of the offence of criminal misconduct under Section 5(2) read
with Section 5(1)(e) are the possession of pecuniary resources or property
disproportionate to the known sources of income for which the public
servant cannot satisfactorily account. To substantiate the charge, the
prosecution must prove the following facts before it can bring a case under
Section 5(1)(e), namely, (1) it must establish that the accused is a' public
servant, (2) the nature and extent of the pecuniary resources or property
which were found in his possession, (3) it must be proved as to what were
his known sources of income, i.e. known to the prosecution, and (4) it
must prove, quite objectively, that such resources or property found in
possession of the accused were disproportionate to his known sources of
income. Once these four ingredients are established, the offence of
criminal misconduct under Section 5(1)(e) is complete, unless the accused
is able to account for such resources or property. The burden then shirts
to the accused to satisfactorily account for his possession of
disproportionate assets.

The (new) offence under P.C. Act, 1988

2.7 Prevention of Corruption Act, 1988 (Act 49 of 1988) has come into force
with effect from 9.9.1988 and has repealed, inter alia, Prevention of Corruption
Act, 1947. Consequently, Section 5(2) r/w 5(1)(e) has ceased to exist w.e.f.
9.9.1988. In the new Act, the same offence is described as under:-

"Sec.13(1) A public servant is said to commit the offence of criminal

misconduct -

(e) if he or any person on his behalf, is in possession or has, at any

time during the period of his office, been in possession for which
the public servant cannot satisfactorily account; of pecuniary
resources or property disproportionate to his known sources of
income.

EXPLANATION

For the purposes of this section, "known sources of income" means

income received from any lawful source and such receipt has been
intimated in accordance with the provisions of any law, rules or orders for
the time being applicable to a public servant".

The explanation of known sources of income has been discussed in

the State of Punjab Vs. Sajjan Singh, AIR 1964, SC 464 vide judgement
dated 28th August, 1963 by a Bench consisting of Hon‟ble Justices S.K.
Das, acting CJ, M. Hidayatullah and K.C. Das Gupta, JJ. The Hon‟ble
Court made the following observation regarding known sources of income
 “the expression „known source of income‟ must have reference to sources
known to the prosecution on a thorough investigation of the case and it
does not mean sources known to the accused.

Explanation inserted to Section 13(1)(e) assumes lot of importance

and significance as it is clearly held by Supreme Court in Nallammal's
Case -1999 Cri.L.J. 1591, the explanation "known sources of income" of
the Public Servants for the purpose of satisfying the court should be by
any lawful sources. Besides being lawful source, the explanation further
enjoins that the receipt of such income should have been intimated by the
Public Servant in accordance with the provisions of any law applicable to
such income and should have been intimated by the Public Servant in
accordance with the provisions of any law applicable to such public
servant at the relevant time. So a Public Servant cannot now escape from
the tentacles of Section 13(1)(e) of the PC Act by showing other legally
forbidden sources, albeit such sources are outside the purview of clauses
(a) to (d) of the sub-section. The para Nos.18 to 20 of the Judgement
contain the various contentions of the defence and the observations of the
court rejecting the contentions and settling the legal issues. The
explanation under this section is prospective i.e. from 09.09.1988 and not
retrospective.

2.8 It would be seen from the above that the sub-section(e) still reads exactly
as it did in the earlier Act. However, the explanation is new. On account of this
explanation, a public servant who is facing an investigation or trial for this offence
can claim the benefit of only the following types of income:

(i) The income must have been received from any lawful source.

(ii) The public servant should have intimated the same to the
concerned Authorities as required under the provisions of any law
(such as Income Tax), rules (such as AIS or CCS etc. Conduct
Rules) or order (such as orders issued by the Government etc.).

2.9 By this explanation a public servant is now prevented, almost estopped,

from pleading the following types of income to account for his assets:

(i) Income derived illegally, such as by under-declaration of the value

of an immovable or movable property which he might have sold.

(ii) Income, whether taxable or not, which ought to have been shown in
Income Tax Return, and not thus shown.

(iii) Income in respect of which the public servant ought to have

obtained prior permission or given a subsequent intimation, as the
 case may be, under the Conduct Rules and he had not complied
with those provisions.

(iv) Gifts which could have been accepted by the public servant only
after taking prior permission under the Conduct Rules and such
prior permission was not taken.

(v) Any other such income to which the explanation would apply.

2.10 Consequent upon this explanation, wild and patently false claims of, inter
alia, the following categories which public servants have been taking in the past
in cases of disproportionate assets are debarred:

(i) Agricultural -income, unless it has been shown in the Annual

Property Return or Income Tax Return. It may be mentioned that
though agricultural income is not taxable, it has to be shown in a
prescribed column in the Income Tax Return.

(ii) Loans, gifts etc. in respect of which the public servant ought to
have taken prior permission or sent subsequent intimation under
the Conduct Rules and he had not done so.

(iii) Income of wife and dependents above taxable limits in respect of

which Income Tax Return had not been tiled.

(iv) Income by speculation in shares, by receipt of dowry etc. which are

prohibited under Conduct Rules.

(v) Income by private trade which is prohibited under Conduct

Rules as well as under Section 168 IPC.

2.11 The Explanation that has been added has, therefore, far reaching
consequences and is of great advantage to investigating agencies who can now
deny to the public servant the benefit of such claims, which, as past experience
shows, are generally false.

2.12 However, there is one contingency that may arise. Suppose, it is clearly
proved by documentary evidence that a public servant did in fact have a lawful
income (such as rent payment to' him) which he did not disclose in the Income
Tax Returns or Annual Property Returns etc. Is he or is he not to be given the
benefit of such income? If one goes by the principles of correct calculations, it is
obvious that the public servant has to be given such benefit and such concealed
income could be reported to the Income Tax Department for tax proceedings and
to his own Department for initiation of departmental action for violation of
Conduct Rules. This is what the Investigating Agencies have been doing till now.
It appears that the legally correct course to be followed henceforth is to deny the
benefit of such income in the calculations of disproportionate assets and leave it
to the Court or Enquiry officer to come to a finding on such income. This is a
legal issue which would be decided in due course by the High Courts and the
Supreme Court.

2.13 There is yet another plea which a public servant may and would take. Cases
registered and prosecuted in future would be under Section 13(2) r/w
Sec.13(1)(e) of P.C. Act, 1988. In the charge sheets filed in such cases, the
Investigating Agencies would include assets acquired and expenses incurred
prior to 9.9.1988 also, when this Section did not exist. An accused public servant
may plead that under Article 20(1) of the Constitution of India, "no person shall
be convicted of any offence except for violation of law in force at the time of the
commission of the act charged as an offence" and, therefore, such assets and
expenses prior to 9.9.1988 should not be included in the charge framed under
the new Act which came into force only on 9.9.1988.

2.14 The effective answer to this plea is available in a string of rulings of the
Supreme Court and High Courts given after Section 5(1)(e) was added in the
P.C. Act, 1947, w.e.f. 18.12.1964 by the Anti-Corruption Laws Amendment Act,
1964. In these cases, the accused had taken similar plea with reference to the
date 18.12.1964. It was held that the income derived, assets acquired and
expenses incurred prior to 18.12.1964 could also be included in the computation.
In this context, we have to bear in mind that prior to 18.12.1964, the possession
of disproportionate assets was not even an offence. Despite this, the Supreme
Court permitted the inclusion in calculations of assets and expenses anterior to
18.12.1964. As against this, the present situation is that even prior to 9.9.1988,
the possession of disproportionate assets was a substantive offence. A fortiori,
the said rulings would come to the help of the I.O./Prosecution, if an accused
public servant takes such a Constitutional plea. The check periods in future
cases involving public servants, who were public servants prior to 9.9.1988 also,
can, therefore, include periods prior to 9.9.1988.

2.15 Section 2(c) of the P.C. Act, 1988 defines a public servant for purposes of
the new Act. Certain new categories of persons (such as office bearers of certain
Cooperative Societies, per eons working in Universities, etc) have been added in
the definition. Prior to 9.9.1988, such persons were not public servants at all.
Consequently, it appears that in their case, the check period can commence only
on or after 9.9.1988. In other words, it appears that their income, assets and
expenditure prior to 9.9.1988 cannot be computed in the calculations.
 CHAPTER III
PRELIMINARY ASPECTS, REGISTRATION OF CASE AND SEARCHES

Purpose and scope of investigation

3.1 In a case of disproportionate assets, a period of check as explained later

in this note (Para 4.1 to 4.4) is selected. If the assets acquired and the expenses
incurred during such period of check are grossly disproportionate to the income
derived during the same period, a good case of disproportionate assets is made
out.

3.2 It has to be noted that the crux of the charge under Section 13(2) read
with Section 13(1)(e) of the Prevention of Corruption Act is that the public servant
is in possession of assets which are disproportionate to his "known sources of
income" for which he cannot satisfactorily account. The word disproportionate
means relatively too large or small. The public servant cannot, therefore, be held
to be in possession of disproportionate assets if the assets are not relatively too
large or, in other words, a slight excess will not be sufficient to warrant a
conviction in a court of law or punishment in a departmental enquiry. It is,
therefore, apparent that the question as to whether the assets are so
disproportionate as to attract the provisions of the Prevention of Corruption Act or
to warrant disciplinary proceedings has to be examined in each case, by
reference to the duration of the check period and the extent of disproportionate
assets. For example, while disproportionate assets of Rs.60,000/- against a total
income of Rs.1,00,000/- over a period of 5 years will be strikingly actionable, the
same disproportion if related to a longer period of 15 or 20 years against a total
income of say Rs.7 lakhs will not readily lead to the conclusion that it amounts to
criminal misconduct or warrants disciplinary proceedings. Each case has,
therefore, to be considered on its own merits. Stated mathematically, the
prosecution has to prove:

SHOULD BE FAR

ASSETS + EXPENSES INCOME

Preliminary verification and registration of case

3.3 Among all the vigilance cases, the most difficult case to investigate is a
case of disproportionate assets. It may take an I.O. a period of 9 to 18 months to
investigate such a case depending upon how complicated the case is. In the
meantime, considerable hardship is caused to the accused public servant. A
case of disproportionate assets should, therefore, be registered only after careful
preliminary verification and ensuring that there is reasonable scope of
prosecuting the case. This verification, inter alia, would be constituted ,by the
following steps, which should be taken in a discreet manner without
compromising secrecy:

(i) Checking up the reputation of the public servant. A bad reputation for
integrity is an essential prerequisite.

(ii} Standard of living including the residential accommodation, transport used

by the -public servant and the members of the family, Club memberships,
education of children, etc. This would also depend on the cost of living at
the places of posting of the public servant.

(iii) Discreet and secret verification of the ownership of immovable properties.

(iv) Visual inspection of immovable properties.

(v) Checking up, if possible, the possessions in the residence by

masquerading as telephone mechanic, electrician etc.

(vi) Scrutiny of the income tax records of the public servant and his family
members. If the wife is also earning, care has to be exercised.

(vii) Verifying the financial background of the parents of the public servant and
his wife.

(viii) Scrutiny of the personal file (including property returns) of the public
servant.

(ix) Making discreet enquiries at the native place/home town and such
previous places of posting as deemed necessary to locate assets.

(x) Such other secret and discreet verification as is possible.

3.4 The case should be registered only if after such verification, prima facie
material is available for registering a case. In other words, no case of
disproportionate assets should be registered without such verification.
3.5 In the FIR, it is advisable not to mention check period as it may clash with
the check period that would be fixed later. Besides, the wording of the allegation
in the FIR should be restricted to Section 13(1)(e) of the P.C. Act without using
the language of Section 13(1)(d) of the P.C. Act. It should not, therefore, be
mentioned that the accused public servant acquired the assets/pecuniary
advantages by abuse of his official position. This is because such investigation of
abuse is almost never conducted during the investigation of a case of
disproportionate assets.

3.6 At the time of the registration of the case, the S.P. Incharge of the case
should issue a specific order to the I.0. (Dy.SP or Inspector) for investigating the
case. This is a legal requirement under the second proviso to Section 17 of the
P.C. Act, 1988.

3.7 It should also be borne in mind that any offence, including possession of
disproportionate assets, under P.C. Acts, 1947 and 1988 can be investigated
only by (a) Inspector of Police and above in CBI and (b) by a Dy.SP and above of
State Police as well as an Inspector of State Police, “who is authorised by the
State Government in this behalf by general or special order”. If it is proposed to
entrust the investigation of a case of disproportionate-assets to an officer who is
not empowered as above, or depute such officer to assist another officer who is
empowered, the permission of the competent Magistrate should be taken under
Sections of the P.C. Acts mentioned above. It is settled law that the granting of
such permission is not to be treated by a Magistrate as a mere matter of routine
but it is an exercise of his judicial discretion having regard to the policy
underlying it" (Rishbud V State AIR 1955 SC 196, 1955 Cr.LJ 526). The
application filed for obtaining such permission should be in some detail as to why
the permission is requested for. In particular, it should be mentioned (and also
ensured later) that the officer for whom permission is sought would work under
the close supervision of the Dy.SP or SP or that such officer would only assist an
empowered officer and would conduct only such investigation as he is directed to
do by the empowered officer. Non-availability of any other empowered officer, if it
is so, could also be mentioned as a ground along with such. other grounds as
may be present in each case. The Magistrate should also be requested to set out
the grounds on which he is according the permission requested for instead of
just ordering "Permitted" which may be later challenged by the S.O. showing
mechanical issue of permission without application of mind.

Action immediately after registration

3.8 Immediately after the registration of the case, the residence and office
room of the public servant and such other places as may be found necessary,
including the house of the public servant in his home town or elsewhere, should
invariably be searched on warrants obtained from the court under Section
93(1)(c) of the Cr.P.C. When there is urgency which can be justified, resort may
be had to 165 Cr.PC also. Guidelines to be observed by the CBI Officers while
conducting searches (all types of searches) are mentioned in Policy Division
Circular No. 21/21/97-PD (SO No. 6) dated 24.10.1997. The salient features of
this circular are reproduced in the following columns :

(1) House searches maybe conducted only when

essential in the interest of the case. Conducting searches as
a routine in cases which may ultimately end in minor actions
must be avoided. The number of places to be searched
should be kept at the bare minimum.

(2) Searches must always be carried out in strict

conformity with law. Provisions of Sections 96, 165, 166. 101
, 102 and 103 Cr. P. C. must be fully complied with.

(3) Searches should preferably be conducted after

obtaining Search Warrants. In the case of accused persons.
Search Warrants should be obtained u/s 93(1 )(c) of Cr.P.C.,
1973. In all cases where searches are decided to be carried
out, prior approval of the CBI Officer authorised to permit
registration of the case in question should be obtained. For
this purpose, a self -contained note personally prepared in
hand by the IO with the comments of the SP, also written in
hand should be sent to the competent CBI authority. This
note should be treated as "Secret" and sent to the competent
authority by name in a sealed cover with due precautions
against leakage of information. Wherever possible. the note
should be hand-delivered or sent by registered post (in name
cover). The SsP should exercise due caution against all
possible leakages. A watch of the place to be searched may
be kept, wherever necessary, during the period of verification
of information. It will not be possible to follow this rule in
certain emergent cases where there is evident risk of loss of
evidence due to inherent delays. In such cases, the
"provisions of Sec. 165 Cr.P.C. may be invoked after
completing all necessary legal formalities, including
preparation despatch of grounds of search. Searches after
dark should be avoided as far as possible. In such cases, it is
for the Branch SP to personally satisfy himself about the
need for taking emergent action. However, approval of the
competent authority should be taken as soon as possible.

(4) Soon after the registration of the case, the need for
conducting searches should be evaluated and the proposal
for search should be sent to the competent authority without
causing undue delay.
(5) The SP shall take into confidence the Head of Deptt.
or Office concerned before taking up any searches or as
soon after the searches as may be possible according to the
circumstances of each case.

(6) In regard to a decision-making level officers (Joint

Secretary or equivalent or above in the Central Govt. or such
officers who are on deputation to a Public Sector
Undertakings: Board level officers in Public Sector
Undertakings; Officers of the Reserve Bank of India of the
level equivalent to Joint Secretary or above in the Central
Government and Chairman and Managing Director and
Executive Directors of Nationalised Banks), there should be
prior consultation with the Secretary of the
Ministry/Department concerned before a search is conducted
in respect of them. Without this concurrence, no search shall
be initiated, except in urgent cases.

(7) In cases, however, where inquiries have been

ordered against senior officers and during the course of such
inquiries there is reason to believe that there is need to
search the premises of another officer of decision-making
level, then the requirements of the procedure mentioned
above of consulting the Secretary of the Ministry/Department
should be followed. In case there is no time for such
consultation, the Secretary of the Ministry/Departments
should be immediately informed of the proposal to search the
premises of the senior officers.

(8) In case during the course of the search or from the

deposition in the inquiry against other officer, there are
reasons to suspect malafides or corrupt practices against an
officer of decision-making level then the inquiry against him
would be initiated only after the formalities as mentioned in
the Single Directive 4.7 (2) are completed.

(9) Once a search party reaches the place of search

during the proceedings, nobody from the house should be
allowed to go or come in. If the person, whose house is being
searched, happens to be out at that time and returns during
the course of the search, he would, of course, be allowed to
come in. The search party should have a control over all the
access points and outlets to the house, including all the
doors and windows. The telephones are also to be taken
over under control
(10) The Officer incharge of the searches should also
ensure that no member of the search party unauthorisedly
tampers with the incriminating evidence or unauthorisedly
takes away anything which is available in the premises of the
search.

(11) The confirmation of the addresses and places to be

searched should be made not only at the time of verifications
and decision for searches, but also before searches are
actually launched.

(12) Whenever searches are being organised, monitoring

of the progress by senior officers involved should be there at
the Branch. A stand-by reserve team along with a vehicle
should also be kept at the Branch/Unit. This party should be
able to immediately move to assist a search party, whenever
required. It could also be utilized whenever, daring a search,
necessity of searching other premises arises.

(13) In cases, such as disproportionate assets, searches

could also be held not only at the residence and office of the
suspect officer, but also at the places of close relations,
friends and Chartered Accountants etc., who, very often, are
entrusted with damaging evidence. Such an assessment will
have to be made prior to the registration of the case. In
searches conducted in cases of disproportionate assets, a
separate inventory list should be prepared of items which are
not seized. Values, preferably agreed by all concerned,
should be indicated against each item. Milometer readings of
cars not scooters should also be shown in the inventory list.
A conscious effort should be made to locate and seize locker
key; which have a typical appearance. The locker concerned
should be located quickly and sealed for search later (within
a day or two).

(14) Searches should not, unless absolutely unavoidable,

be carried out on occasion of festivals/celebrations or
mourning etc. going on in the house to be searched.

(15) The searches must always be conducted quickly and

quietly and in a manner so as to avoid unnecessary
embarrassment, humiliation or inconvenience to the public
servants and their family members. Due courtesy should be
shown to the public servants and to their family members to
take the sting out of the searches.
(16) In searches conducted in cases of disproportionate
assets, articles of trifling value and/ or daily use need not be
mentioned individually in the search list nor seized. It would,
however, be useful to note down the lump sum value of such
articles in the house. Colour photographs of various parts of
the house should be taken and got signed at the back by the
photographer. His statement should also be recorded u/s 161
Cr.P.C.

(17) Disproportionately large cash or jewellery, foreign

exchange (under an amendment in FEMA in the year 2000,
an individual is authorised to keep US$2000 in cash), costly
electronic gadgets without customs papers, arms and
ammunition without licence etc. should be seized. lt should
be borne in mind that even if such an item is not covered by
the search warrant, Section 102 Cr.P.C. could be invoked.

(18) The size of the raiding party must be restricted to the

minimum possible requirements. Show of force should be
avoided. If for any special reasons some force is required, it
may be kept in reserve at some distance.

(19) Search parties invariably should be headed by

officers not below the rank of Inspectors. In case of searches
of house of senior officers or big firms, the searches should
be supervised personally by the SP on the spot. In case of
very big firms or of very senior officers searches could even
be supervised by DIG. However, the DIG/SP shall not be a
formal witness of the search as he would not remain
continuously present during the searches. Witnesses
selected for searches of GOs and other senior officers
should also be of senior rank themselves.

(20) Informants/colleagues/subordinates of the public servant

whose house is searched should not as a rule be selected
as search witnesses and should not accompany the search
party, so that the accused does not get the benefit of
departmental jealousies or enmity at the time of prosecution.

(21) A witness should not be selected for more than once.

(22) Duties of the search witnesses are :

(i) Witness the search carefully from the commencement

till it is closed for the day and the search list is drawn up;
(ii) Read and understand the warrant or authorisation
and search list;

(iii) Ensure that the search and seizure operation is

carried out in an orderly manner without any interference;

(iv) Ensure that there is no tampering or destruction of

valuable documents;

(v) Not leave the premises without permission of the

authorised officer;

(vi) Initial all the documents etc. for proper identification. If

the documents run into thousands of pages, a round rubber-
stamp seal of the company/firm could be affixed at the top of
each document and specimen of the stamp affixed in all
copies of the search list.

(vii) Ensure that a female is searched only by female

members of the search party;

(viii) Ensure that correct facts relating to search and

seizure are recorded in the search list; and

(ix) If he is witnessing the continuation of a search on a

subsequent date see that the seals are intact and they are
broken in his presence, Darbandi (sealing and unsealing)
memos should be prepared for this purpose.

(23) Proper facilities should be given to the witnesses and

undue inconvenience to them avoided.

(24) Members of the search party should be fully briefed

about their allotted tasks and about the do's and don'ts on
searches contained in the CBI Manual and other instructions
issued from time to time before they set out for actual search.

(25) In the inventory list that is prepared, the suspected

incriminating documents should be listed with relevant
details. Rest could be inventorised in bulk. However, page
numbering and identity should be given and the contents
should be individually initialed by the witnesses etc. so that
allegation of introduction of documents later by CBI can be
fully avoided.
(26) No Press publicity should be given about the
searches. Strict instructions should be given to members of
the raiding party not to divulge any information about
searches to unauthorised persons.

(27) A report about results of the search should be sent to

Head Office within a week after the search along with
analysis of the same. Apart from the evidence collected the
report should also mention the time at which the search
began and ended, the constitution of each search party and
any other fact which may be relevant. In case the preparation
of search lists etc. has taken an unduly long time. the fact
also should be clearly brought out in the report.

(28) When the I.O. of one Branch goes to conduct a

search in a place within the jurisdiction of another Branch,
the SP of the latter Branch should be contacted to depute an
officer of his Branch also to be present at the time of the
search. The necessary endorsement in the search warrant
should be obtained before conducting a search if a house
which is located outside the jurisdiction of the Searching
Officer.

(29) In the course of search, it should be ensured that the

legal rights of the person searched are respected because
any violation thereof may affect the search adversely. The
occupant of the premises reserves the following rights :-

(i) to see the warrant of authorisation duly signed &

sealed by the issuing authority;

(ii) to verify the identity of each member of the search

party;

(iii) to have at least two respectable and independent

residents of the locality as witnesses;

(iv) to have personal search of all members of the search

party before the start of the search and after conclusion of
the search;

(v) to insist on a personal search of females by another

female only with strict regard to decency;

(vi) to have a copy of the Panchnama together with all

annexures, for which acknowledgement should be given;
 (vii) to call a Medical Practitioner, if unwell;

(viii) to have the children permitted to go to school, after

discreet examination of their bags; and

(ix) to have the facility of having meals etc. at the normal

time.

(30) Copy of the search list/seizure memo may also be

made available to the Department concerned whenever the
Departments make a specific request to the concerned CBI
Branches.

3.9 It is difficult to lay down hard and fast rules as to what should be seized
during the search and in respect of which items inventory list should be prepared.
This is a discretion to be exercised by the I.O. in a reasonable manner with the
guidance of the S.P. Good colour photographs should be taken of all
costly/luxury good and various parts of the house (to show standard of living) and
the negatives preserved with the identity of the photographer noted. The
photographer should sign (with date) on the back of all photographs. Camcorder
can also be used to picturise the entire search procedure as well as taking
picture of the house with all the items intact. In case of digital photographs taken
by the digital still cameras/movie cameras, a CD should be prepared and it
should be digitally be authenticated by obtaining a hash value. All batteries
should be removed from the seized electronic articles. Seized articles which are
likely to decay should be auctioned with the permission of the court under
Section 451 Cr.P.C. 1973 and the proceeds deposited in the Court.

3.10 If large cash is seized, sometimes manual counting can be time

consuming, hence it would be good idea to take help of currency counting
machines which are available with most of banks located in big cities. A
requisition to this effect can be placed by the I.O. to the Manager to the
concerned bank and the machine brought to the search premises. This would
save a lot of time. Unless it is necessary to preserve the identity of the notes for
some specific purpose, the seized cash, after obtaining the permission of the
court under Section 451 Cr.P.C. 1973, should be deposited immediately in a
current account to be opened by the S.P. (by designation and not by name) in a
nationalised bank. It should be specifically mentioned in the Account Opening
Form that the account can be operated by the SP holding that particular office at
any point of time. This should not be done where the identity of the notes
themselves are relevant or where there are Bank slips of counting in the bundles
which may enable the I.0. to prove the date and circumstances of the drawal of
the bundle of notes from the Bank and how it reached the public servant.
3.11 Some points to be borne in mind during the searches are set out below:

(i) Assets should be seized only if they are patently high, considering
the status of the public servant. Otherwise, it should only be
mentioned in the inventory.

(ii) Valuation of article, wherever indicated in the search list or

inventory, should be as at the time of acquisition. In the case of
jewellery, only the weight and type of ornaments should be
mentioned with the remarks that the value will be assessed after
ascertaining the date of acquisition. In the case of jewellery, it is
advisable to procure the services of a Customs appraiser or
authorised valuer so that they are properly included in the seizure
or inventory list as the case may be. Good colour photos should
also be taken for being exhibited in evidence.

(iii) All relevant documents, including documents relating to bank

accounts etc., relating to the financial transactions of the public
servant and the members of his family should be seized. It is of
utmost importance to seize such documents of investments in the
names of others also as this is an indication of benami
ownership/investment by the public servant.

(iv) A conscious effort should be made during the search to find out the
bank lockers and lockers in private agencies maintained by the
public servant and his family members. This would be by (a) tactful
interrogation of the public servant and the members of his family (b)
by locating locker fee receipts (c) by locating the annual locker rent
debit entries in Bank pass books (d) identifying locker keys which
have a typical appearance of about 6 cm length and (e) making
very quick enquiries on the date of the search itself in the banks in
which the public servant and his family members have accounts,
FDs etc. and Banks near about his residence and office. If a key
appearing to be a locker key is found and it does not fit the lock in
any almirah, drawer etc. in the house, it should be seized even if
the public servant says it is not of a locker. Thereafter steps (b), (c)
and (e) supra should be undertaken. If any locker is located or such
a key found, the key should be seized and the locker sealed
immediately. The Bank Manager should be requested in writing
under Section 102 Cr.P.C. not to permit the operation of the locker
till it is searched. The search of the locker could be conducted by
making the public servant himself open the locker or by obtaining a
search warrant u/s 93 Cr.P.C. if the public servant refuses to open
the locker. If the public servant refuses to be present for opening
the locker, a notice under Section 160 Cr.P.C. could be served on
 him requiring his presence in the Bank on the appointed day and
time. Two witnesses are essential during a locker search.

(v) The odometer (known as speedometer) readings of cars owned by

the public servant and his family members should be noted in the
Inventory.

(vi) Valuable data especially investments are at times entered by the

suspect in his computer which could be a desktop/laptop or a
palmtop. Sometimes, valuable data is also stored in the mobile
phone-cum-Digital diary or tiny removable data storage devices.
Care should be taken to seize computers as there is danger of data
loss. A separate chapter has been devoted to seizure in computer
environment.

(vii) Food articles etc. in the kitchen, though not of much value, should
be mentioned in the inventory as this would help to prove the
standard of living of the public servant. Taking of colour
photographs in this regard should also be done Imported tinned
food or other exotic food items like truffles, cavier, imported cheese
should be mentioned in the inventory. Similarly high value
cosmetics such as imported perfumes by renowned brands,
creams, face packs, different kinds of gells etc. should not be
ovorlooked as they give incite into the life style of the suspected
officer,

(viii) High value imported articles, works of art and antiquities besides
heavy foreign exchange beyond the permissible limit of US$2000
as prescribed by the Foreign Exchange Maintenance Act, 1999 (as
amended in 2000) should be seized. Excessive amount of gold,
jewellery and other articles should also be seized.

(ix) In the afternoon of the day of search itself and in any event right at
the commencement of banking hours on the next day, orders
should be served on all Bank Managers seizing/freezing all credit
balances in bank accounts, FDRs, lockers etc. of the public
servant, members of his family and other benamidars u/s 102
Cr.P.C. A separate article in this manual has been devoted to the
legality of seizure under Section 102 Cr.P.C. These orders should
be in the proforma (Annexure I) There should be absolutely no
delay in doing this as a few minutes are sufficient for withdrawing
amounts from banks, opening lockers etc. and valuable case
property would be lost.
Arrest
3.12 Arrest should not generally be effected in a case of disproportionate
assets unless there is some compelling reason like extremely good chance of
recovery and not a mere possibility under Section 27 of the Evidence Act. If
arrest is proposed to be effected, generally the permission of the authority
competent to order registration of the case against the public servant should be
obtained except in emergencies. Even if there is urgency, effort should be made
to contact the competent authority over phone including by STD. The Supreme
Court guidelines in D.K. Basu Vs. State of West Bengal should be strictly
adhered to and the rights of the person in custody should be protected.

It may be necessary to launch simultaneous searches at several places

not only within the city but also in several States. Whenever simultaneous
searches are launched, proper timing and synchronization would be necessary to
prevent destruction of evidence. The leader of the search parties should be in
touch with the command post set up at the office of SP and the SP should be
informed of all the developments.

Action immediately after the searches

3.13 As soon as the searches are over, the following actions should be
completed. This should be ensured by the SP supervising the investigation:

(i) In appropriate cases, file an application in the Court of the District

Judge for attachment of properties under the Criminal Law
Amendment Ordinance, 1944 after getting authorisation in favour of
the 10 from the Central or State Government as the case may be.

(ii) Requesting the Vigilance Department of the Ministry/Organisation

for getting from the public servant particulars in the prescribed
Statements I to VI (Annexure-II).

(iii) Issuing requisitions for obtaining various documents and particulars

such as pay & allowances, personal files and property return file,
details of postings, bank statements of account, cheques, pay-in-
slips, Account Opening Forms, certified copies of sale/purchase
deeds of immovable properties, information from LIC etc. Income
Tax & Wealth Tax files of the public servant and members of his
family are important and should be requisitioned at the earliest and
collected. In addition, specific requisitions indicated by the
documents seized in each case should also be issued.

(iv) Issuing requests to the Chief Technical Examiner or CPWD or the

PWD (as the case may be) for valuation of the immovable
properties concerned in the case. Valuation should be done as
early as possible lest the public servant pleads that part of the
construction was done after the date of search but before the
 valuation. It would be absolutely necessary that the plan of the
house as well as structural drawings are available which should be
provided to the CPWD Engineer. In case such plans are not
available, it would be better to collect a copy of the plan from the
Development Authority of the City which maintains a record of all
plans passed by it. In this context, the guidelines provided by the
Study Group constituted by the CVC may be kept in mind. The said
guidelines are available in the CBI Policy Division Circular No.
21/40/99-PD(Pt.) dated 26.11.2001. In case of a ready-built
property purchased by the public servant, the registered sale deed
value of the purchased property should only be considered. In
case of power of attorney route of acquisition, value is to be
determined in accordance of standard principles for determination
of market value. Valuation of construction declared by public
servant should be accepted if the variation with the
CPWD/Government Department valuation is not more than 15%,
otherwise the valuation done by CPWD/Govt. Department should
be utilized. While computing the value, all alterations, fittings and
fixture need to be included. The valuation cell of the Income Tax
Deptt. could also be associated for getting property evaluated
According to Circular No. 21/40/99-PD dated 24.6.2002 of the
Policy Division, it was decided to take the cooperation of the
Valuation Cell of the Income Tax Department in the evaluation of
immovable properties. Suitable instructions were issued by the DG
of Income Tax (Vigilance) to the Chief Engineer (Valuation Cell),
Northern Region, New Delhi to comply with the requirement
whenever a reference is received from CBI.

(v) Value of movable property should be taken at build value failing

which an estimated value may be taken adjusted the year of
acquisition. (As mentioned in the aforesaid circular).

(vi) Scrutinizing the seized bank account pass books/statements of

account at the earliest opportunity with expert help where required
and sending requisitions to the concerned banks immediately for
obtaining the required further details/documents.

(vii) Whenever huge assets are seized in such cases, the Income Tax
Deptt. Should also be associated to make out a case of tax evasion
by the accused public servant. Writing to the I.T.O./C.I.T. when very
large assets are seized/detected so as to avoid someone filing a
Voluntary Disclosure Return under Section 273-A of the Income
Tax Act, 1961 and the I.T. Department accepting it. This should be
done within a couple of days after the search. This has been further
elaborated in paragraphs 8.16 -8.18 of ChapterVIII.
3.14 Even if the I.O. has to take up some other case after the search, the
requisitions mentioned above should be issued immediately after the searches. It
is also the duty of the SP to ensure that this is. done promptly.

3.15 Immediately after the searches, the public servant should be interrogated
thoroughly with reference to the seizure of large assets, including cash, and for
getting clarifications, explanations regarding documents the purport of which is
not clear to the I.0. This interrogation should be done at the earliest so that the
version given by the public servant before he has time to cook up defence
theories could be ascertained. Again after obtaining Statements I to VI and as
often as it becomes essential during the investigation, the public servant should
be interrogated for getting further particulars and clarifications. This does not,
however, preclude the recording of a comprehensive statement of the public
servant at the close of the investigation.

3.16 It would be a good idea to segregate the documents immediately after the
search into income, expenditure and assets. Similarly, documents pertaining to
movable and immovable assets should also be segregated. At times, it could be
necessary to obtain computer print-outs from the hard-disk of the seized
computer. Care should be exercised while handling computers and only qualified
personnel should be allowed to retrieve data. Thorough and repeated scrutiny of
seized documents, particularly of bank accounts, pay-in-slips and cheques
issued to other is of great importance and it is on this that the success of the
case depends. Prompt follow up action to collect further documents and to trace
income, expenditure and assets should be taken. The SP, who supervises the
case, should also scrutinize the important documents and guide the I.O. Even at
the intermediate stages, the technical expert in accounts could be consulted for
determining specific lines of investigation.

3.17 With rapid globalization, the modes of investments by corrupt public

servants have also become global. It could therefore, be necessary to obtain the
details of investments held by the accused public servants in foreign banks or
properties existing in benami ownership in foreign countries. Foreign
investigations would require issuance of LRs by the competent courts. A
separate chapter has been devoted to address this aspect of foreign
investigation.
 CHAPTER IV
PERIOD OF CHECK

Legal position

4.1 The controversy as to what could be the period of check in a case of

disproportionate assets has now been set at rest by the ruling of the Supreme
Court in State of Maharashtra Vs. Pollonji Darabshaw Daruwalla (AIR 1988 SC
88 = 1988 Cri LJ.183) in pursuance of which Policy Division has issued Circular
No.27/8/85-PD dated 9.8.88. The sum and substance of this ruling is that the full
service period of the public servant need not be taken as the check period and it
could be a shorter period also keeping in view the acquisitive activities of the
public servant. Care should, however, be taken to ensure that. due credit is given
to the public servant for the assets/savings he had on the date of
commencement of the check period. This is important.

Choice of period of check

4.2 In almost all the cases, the last date of the period of check would be the
date on which the search was conducted. For compelling reasons, some other
date could also be chosen. The date of commencement of the period of check
should be chosen in such a manner that the period of check would include the
phase during which the public servant acquired large assets and/or incurred
heavy expenditure. Study of the chronological statement of acquisition of assets
and incurring of heavy expenses would facilitate fixing the commencement date
of the period of check. Keeping the desired commencement date in mind, it
would be better to fix a slightly earlier commencement date, namely a date on
which the public servant got a particular posting or promotion whereafter his
acquisitive activities commenced. This would enable the Prosecution to explain
properly the rationale behind the choice of the commencement date, namely a
date with reference to the service of the public servant and not a date arbitrarily
fixed by the prosecution.

4.3 It may be stated that whatever be the period of check, no prejudice would
ever be caused to the public servant provided due credit is given for his
assets/savings on the date of commencement of the period of check. Giving such
credit is very important.

4.4 It should be possible to determine the period of check within 3-4 months
from the time of the search. The period of check should be reported latest by the
5th Progress Report. This is the responsibility of the S.P.
 CHAPTER V
COMPUTATION OF INCOME

General principles

5.1 It is important that the investigating. Officer must not leave out any "known
sources of income in the course of his assessment of total income of the public
servant. The expression "known- sources of income , however, means sources
known to the prosecution on a thorough investigation of the case. The
prosecution, in the very nature of things, cannot be expected to know all sources
which may be within the special knowledge of the public servant alone. This,
however, implies that where a public servant discloses the sources of his income,
it is the duty of the Investigating Officer to verify each such claim. The sources of"
income generally consist of the following. -

Pay & Allowance

5.2 This should present no difficulty as particulars salary income and allowances
can be ascertained from the Pay & Accounts Officer concerned. The net income
(take home -pay) after payment on account of deduction of the income tax, G.P.
Fund etc. only should be taken into consideration. These details may be obtained
monthwise, with particulars of gross pay and allowances along with the
corresponding details of deductions on account of income-tax, GPF contribution,
refund of GPF advance, house rent, other deduction etc. along with the mode of
payment. If by cheque, the bank and branch on which drawn, cheque number
and date should also be obtained. Where the Department itself had sent the pay
cheques direct to the Bank account of the public servant account or remitted the
pay directly to such Bank account, particulars other bank, branch and account
number- should be obtained. GPF withdrawals should also be added to-the-
income.

T.A. & D.A.

5.3 T.A. & D.A. are meant to reimburse the public servant in respect of out-of-
pocket expenses and should not ordinarily be a source of income. There can,
however, be exceptions where the TA/DA rules are very liberal and the public
servant has to undertake considerable amount of touring in circumstances where
a certain percentage of the allowances can reasonably be expected to be saved.
Any claim of such savings of TA/DA by the public servant should, therefore, be
considered carefully by the Investigating Officer. Allowing savings under this
head should be done only in exceptional circumstances.

Income from Immovable Property.

5.4 This will arise from profits accruing from sales, compensation on
acquisition or by way of rental income. Such income can be precisely determined
from relevant records, such as sale deeds in the office Of the Sub-Registrar, the
documents pertaining to compensation for acquisition or
Property and in the case of rental income, by rent receipts and by the
examination of the tenants concerned. Further investigation can be made by-
reference to the Income tax returns, property returns and by the examination of
the bank accounts of the public servant. Municipal records should also be
checked up.

Income from Agricultural property

5.5 It is not uncommon for a public servant, who owns agricultural property to
inflate the income from such property. This requires a very detailed investigation
by reference to the size of the holding of the agricultural property, the nature of
land, -the -kinds of crops produced , relevant revenue records including crop-
cutting records, commodity price indices etc., assessment of the yield and of
inputs such as expenditure on irrigation, purchase of seeds and fertilizers, wages
of labour etc. for arriving at the net income from agricultural property. Where
agricultural income tax is payable, it should be ascertained whether the public
servant has been assessed for agricultural income tax.

5.6 Declaration of agricultural income in the property returns of the accused

public servant is also of great relevance. Besides, even though agricultural
income is not taxable, there is a column in the I.T. Return Form where
agricultural income should be just shown. The I.T. Returns filed by the public
servant should, therefore, also be kept in view.

Income from Movable Assets

5.7 This will arise from dividends on shares and other securities, interest on
deposits and profits made on sale of any movable assets. Particulars of income
through dividends and interest should be ascertained by enquiring from
companies, share brokers, sub-brokers, depositories and banks etc. This can be
further verified by referring to the Income-Tax Returns and bank accounts of the
public servant where such income should normally be reflected.

Gifts

5.8 Frequently, public servants make claims of sizable income through gifts
from relations and friends on occasions like marriages, birth of a child etc. It is
the duty of the investigating officer to verify all such claims. Where substantial
gifts are claimed, it should be seen whether there was gift tax liability and if so,
whether the same was discharged. Receipt of gifts beyond certain monetary
limits has also to be reported under the Conduct Rules and it provides a further
mode of verification of the public servant's claims. The capacity of the donor to
give the gift should also be gone into carefully. In addition, it should also be
investigated as to whether there was any discrimination by the donor in favour of
the donee public servant and/or his family members vis-a-vis other similarly
placed relatives. In this context, the new "Explanation" that has been added in
P.C. Act, 1988 should also be applied.

5.9 There should be no difficulty where loans or advances have been taken
from the Government or from such bodies as the LIC, HDFC, Banks etc.
Difficulty, however, arises where substantial loans are claimed to have been
taken from relatives or friends. This requires careful investigation with reference
to the financial capacity of the persons to give such loans, income-tax records,
scrutiny of bank accounts and by finding out whether intimation was sent to the
competent authority where this was required under the Conduct Rules. Where a
person claims to have advanced a substantial loan to the public servant, it should
be ascertained whether there is any corresponding withdrawal from his bank
account. Besides, the exact mode in which the loan was given to the public
servant and what the public servant did with the loan as soon as he received it
should also be checked up. If the creditor is an IT/WT assessee, his returns
should also be checked to see if he has shown the interest received as income
and the loan as part of his wealth. If the creditor maintains account books, the
vouchers and account entries should be thoroughly checked with a keen eye
kept for forgeries. If the loan has been partly or fully repaid by the public servant
under the check period, the amount of repayment should be added to the
expenditure.

Profits on disposal of assets

5.10 The rule to be followed in such cases is that if an asset has been acquired
and sold during the period of check, the profit or loss thereon should be included
in income or expenses, as the case may be. The purchase price and sale
proceeds as such need not come into the final computation. However, if an asset
was possessed by the public servant before the period of check and the same is
disposed of during the period of check, the full sale proceeds may be included in
the income without giving credit to the asset on the commencement date of the
period of check. Alternatively, the value of the asset may be included in the asset
at the beginning of the period and only the profit or loss thereon may be included
in the income or expenditure as the case may be. Mistake should not be made by
including such assets in beginning of the check period and at the same time
including the entire sale proceeds in income. The same principle will be
applicable whether the officer acquired the asset himself before the period of
check or he inherited the asset. Sometimes, ingenious methods are adopted by
public servant such as producing an old will or claiming that heavy amount of
gold jewellery and other precious items were inherited by him from his ancestors.
He may even make a declaration to this effect as per the Conduct Rules or as
per applicable tax laws. An in-depth investigation is required to be made on these
aspects. Old documents containing stamps can be got verified from the
Government Security Press, Nasik. Besides, there are forensic tools to determine
age of ink used in writing or printing the documents as well as the age of paper.
Such evidences would prove handy to counteract the defence of the accused.

Income from miscellaneous sources:

5.11 Any claim made by the public servant regarding income from such
sources as overdraft account, matured insurance policies, withdrawals from
provident fund, income- tax refunds, dairy income, income of wife by giving
tuition etc. must be thoroughly verified by the Investigating Officer, before such
claims are allowed or disallowed.

Total income

5.12 The income from all the sources should be totaled up to find out the total
income during the period of check.
 CHAPTER VI
COMPUTATION OF EXPENDITURE

General principles

6.1 The items of expenditure of the public servant would include household
expenses as well as other expenses. A useful arrangement is to divide
household expenses into two categories, viz. (a) Kitchen expenses to include
expenditure on rations, groceries, milk, sugar, bread, oil, vegetables, meat, cost
of gas etc., and (b) other household expenses such as wages of servants,
expenditure on barber, washerman, newspaper and magazines, smoking, drinks,
toilet articles, cosmetics, hobbies etc. and any other items which can reasonably
come under this heading and which are not dealt with separately, under the
major head 'expenditure'. It is to be emphasised that in estimating these
expenses, the number of dependents, adults and children, as well as that of
servants provided with free "boarding and/or lodging is of essence. The standard
of living as disclosed during the search and the photographs taken during the
search should also be kept in view. Discreet on the spot enquiries from
neighbours and others who have watched the delinquent officer at close
quarters, would prove particularly helpful. A probe into the delinquent officer's
Bank accounts might also reveal whether he has been regularly withdrawing
money for meeting his household expenses. Investigation should also be
conducted with the Department of Statistics with reference to cost of living
indices and other data maintained by them and the statement of an officer of that
Department should be recorded. These expenses should be calculated in a
reasonable manner and there should be no attempt to inflate these expenses.

6.2 An important aspect to be noted is that any amount calculated for the
acquisition of assets should not be included under expenditure and vice versa.
This is very important as otherwise the public servant would be unjustly saddled
with double accountability.

Verifiable and non-verifiable items of expenditure

6.3 The expenses of a public servant would fall into two categories, viz
verifiable and non-verifiable items. The verifiable items would be (i) house rent (ii)
electricity and water charges (iii) education expenses of children (iv)
maintenance of conveyance (v) payments made to petrol pumps, video libraries
etc. (vi) expenses on club (vii) payment of insurance premia (viii) losses on
disposal of assets (ix) income tax payments other than deductions at source (x)
house tax and other municipal taxes paid in respect of property (xi) bank charges
and interest paid on overdrafts and loans (xii) medical expenses which are not
reimbursed (xiii) expenses on gas (xiv) repayments of loans and advances etc.
No effort should be spared by the Investigating Officer in collection of evidence in
respect of verifiable items. Expenses incurred on marriages of issues may also
sometimes be verifiable and full details about them, wherever possible ; should
be collected. GPF withdraws, withdrawals from bank accounts and loans taken
just prior to and soon after the date of the marriage would also be useful
evidence in computing expenses incurred on a marriage.

6.4 Among non-verifiable items are other household expenses i.e. kitchen
expenses, expenses on clothing and linen etc. The kitchen and living expenses
would include expenditure on rations and groceries, sugar, tea, milk, biscuits,
bread, butter, eggs, poultry, fish, vegetables, fruits, cooking oil, newspapers and
magazines, expenses on hobbies etc. All these expenses are mostly non-
verifiable, unless the public servant has kept a record of these expenses. The
determination of these expenses is the most difficult task of the I.O. Usually, the
estimate given by the public servant is too low whereas the estimate by the
Investigating Officer tends to be high. No hard and fast rule can be laid down for
estimating kitchen expenses of the public servant. It is in respect of these
expenses that evidence collected from the Department of Statistics would be
useful. It may be mentioned that the CVC had constituted a study group
consisting of officers of CVC, Income Tax, CPWD and CBI all of whom are
procedurally involved in investigation into disproportionate assets or whose
expertise is in this area for standardizing the procedure for assessment of wealth
of suspect public servant under scrutiny of the CBI for being in possession of
assets disproportionate to known sources of income. The said Study Group had
made the following recommendations, which was circulated by the Policy
Division of CBI vide Circular No. 21/40/99-PD(Pt.) Dated 28.11.2001 :-

A) Unverifiable expenditure such as on kitchen, household, clothing etc,

should be taken at 1/3rd of the gross salary as a last resort after
quantifying the expenses broadly under each of these heads by
verification.

B) If husband and wife have independent sources of income the income of

the spouse with higher salary shall be the base for computing the
unverifiable expenditure in accordance with the above prescription. If the
spouse with the higher income is investing or depositing the salary entirely
, then the lower salary shall become the base for computing unverifiable
expenses.

C) The salary used as a base for computing unverifiable expenditure as

above should be taken as net of income tax paid.

D) Electricity and water charges are not to be computed separately when

unverifiable expenditure is computed as detailed above.

E) Other expenses such as education, telephone/ mobile phone/ internet,

pleasure trips etc. Should be calculated as per information or actual bills
produced.
 The practice of computing 1/3rd of income as non-verifiable expenses,
owes its origin from the judgement of the Hon‟ble Supreme Court in the State of
Punjab Vs. Sajjan Singh, AIR 1964, SC 465 vide judgement dated 28th August,
1963 by a Bench consisting of Hon‟ble Justices S.K. Das, acting CJ, M.
Hidayatullah and K.C. Das Gupta, JJ. The Hon‟ble Court made the following
observation “the legislature had not chosen to indicate what proportion would be
considered disproportionate and the court should take a liberal view of the
excess of the assets over the receipts from the known sources of income”. "That
taking the most liberal view it was not possible for any reasonable man to say
that assets to be extent of Rs. 1,20,000/- was anything but disproportionate to a
net income of Rs. 1,03,000/- out of which at least Rs. 36,000/- must have been
spent in living expenses”. It may be mentioned here that the amount of Rs.
36,000/- roughly worked out to 1/3rd of net income of Rs. 103000/- in respect of
Shri Sajjan Singh. This judgement of the Hon‟ble Supreme Court was, therefore,
taken as a bench mark in computing non-verifiable expenses as 1/3rd of the net
total income.

6.5 The broad indicators for estimation of household expenses where there is
no better method of calculation are (i) the size of the family; (ii) the living
standard of the family as may be disclosed by the household effects recorded in
the inventory prepared and colour photographs including footage taken through
still digital cameras and camcoders taken at the time of search such as that of TV
Sets, Home Theatre Systems, hi-fi systems, LCD TV, DVD players, MP3 players
such a I-POD, designer watches, high value mobile phones, microwave ovens,
cooking ranges, costly bathrooms fittings and jacuzzi, Sauna bath chambers,
refrigerators and other electrical gadgets. The living standard can be shown by
clothing items and items of jewellery, food and alcoholic beverages. It may be
mentioned that designer clothes and jewellery designed by reputed national as
well as international fashion designers such as Lomani, Kelvin Klein, Dior as well
as Indian designers such as Rohit Ball, Satyapaul, Reena Dhaka etc. fetch a
fortune, care should be taken while arriving at the value of such costly items. The
same holds good for evaluating antiques, paintings and artifacts. Painting by
renowned artists such as M.F. Hussain, Anjolie Ila Menon, Bikas Bhattacharjee,
cost a fortune. Sometimes, items banned under the Wild Life Act may be found
such as tiger skins, ivory articles, shatoos shawls and pets such as exotic birds
and protected animals. Impoted liquors of famous brands should also be
mentioned and if the quatity found exceeds the permissible limit as per the excise
act then the excise department should be intimated. The I.O. should remain alert
at these aspects and take action accordingly.

(iv) The style of living as may be shown by club and other entertainment
expenses, the mode of traveling, expenses incurred on holidays and other trips
including foreign trips, expenses incurred on religious and other ceremonies; (v)
the style of living as may be shown by maintenance of cars and other vehicles
and also by the mileage done; (vi) expenses on domestic servants; (vii)
expenses on hobbies; and (viii) maintenance of pets, etc. While estimating the
'household expenses', all these factors should be discussed in detail in the I.O.'s
Report (and SP's Report in CB1 cases) to justify the estimates. If the public
servant has given a low estimate of expenses, the reasons for its non-
acceptance should be discussed in the report. The golden principle which has to
be kept in mind is that wherever it is possible to collect evidence about expenses
the same must be collected. To reiterate, the Investigating Officer should not be
permitted, as far as possible, to base his calculations on bare presumptions.

6.6 The period of check should be sub-divided into smaller portions for
determination of the expenses of the public servant during such periods. The
division into these smaller block periods should conform to the size of the family,
promotions earned by the officer, the places of his
posting etc.

6.7 An essential feature to be borne in mind while computing the expenses,

particularly the non-verifiable expenses, is that even during the investigation
stage, the benefit of doubt should be given to the accused public servant so that
during the trial, the court would appreciate the reasonable attitude of the
prosecution. This will also avoid an embarrassing acquittal of the case due to the
court giving such benefit of doubt to the accused.

6.8 If the fate of a case is too much dependent on non-verifiable expenses, it

would be a weak case.

Expenses deductable from rental income

6.9 In computing rental income, care should be taken to verify the expenses
borne by the public servant in respect of the property ,which yields rental income.
1/6th allowance claimed in IT Return cannot be automatically computed as
expenses on maintenance. The expenses normally borne by the owner of the
immovable property are municipal tax, amount actually spent on repairs, ground
rent, interest payable on borrowings if the property was acquired, constructed,
repaired with such loans, land revenue and other State Government taxes,
collection of charges actually incurred for collecting rents from tenants,
insurance premia paid for insuring the property etc. It may be mentioned that if
the rental income has not been declared by the public servant under any law, Act
or rule, the benefit of such income shall not be given to him as per the
explanation of „known sources of income‟ given in Section 13(1) (e) of the P.C.
Act, 1988. These should be shown under the head 'Expenses' in Statement D. If
this is done, the entire rental income should be included in the Income
Statement C.

Expenses incurred on Credit Cards

6.10 Of late, quite a number of Credit/Debit Cards are issued by Banks and
other organisations. These could be nationally or internationally valid. If such
Credit/Debit Cards or documents relating to them are detected during the
search/investigation, the bank which issued the Credit Card should be
approached for documentary and oral evidence regarding all the bills issued to
the public servant and the payments made by him. Such out-flow of amounts
from the public servant should be included either in the assets column or in the
expenditure column depending upon the purpose for which the amount was
spent.
 CHAPTER VII
COMPUTATION OF ASSETS

General principles

7.1 Assets( property ) means the total value (at the time of acquisition) of the
property, both movable and immovable, possessed by the public servant on the
last date of the period of check. Determination of the assets held by the public
servant including the discovery of any undisclosed assets acquired during the
check period, is one of the most important points of investigation in the case. It is
in this that the competence of the 10 lies. In CBI Cases, the prescribed
proformae Statements 1 to VI obtained from the accused officer through his
Vigilance Department should be studied thoroughly and necessary follow-up
investigation conducted.

Immovable Assets

7.2 The immovable assets will include house property, plots and agricultural
land. The purchase price of an immovable property can be usually determined by
reference to the registration records, the stamp duty paid and by examination of
the vendors of such property. Where there is gross under valuation, evidence of
other sales in the area for a couple of years prior to and after the purchase by the
public servant should be probed and proved. In such cases, withdrawals from the
bank accounts of the public servant and his family members, GPF withdrawals
made and loans taken just prior to or immediately after the date of purchase
should be investigated to get clues. The bank accounts etc. of the seller around
the time of the sale should also be probed. It should, however, be borne in mind
that proving in Court that a much higher price than what was shown in the
registered document is a difficult, though not impossible, task and strong
evidence should be available to prove such under-valuation. It may be mentioned
that the Study Group constituted by the CVC reference to which has been made
in preceding chapter had made the following recommendations with regard to
the immovable property and these recommendations were circulated by the
Policy Division of the CBI vide Circular No. 21/40/99-PD(Pt.) dated 28.11.2001.
The recommendations are as follows :-

i) Value of movable property should be taken at billed value failing which an

estimated value may be taken adjusted for the year of acquisition.

ii) Immovable property is to be valued at registered deed value; in the case

of power of attorney route for acquisition, value is to be determined in
accordance with standard principles for determination of market value.

iii) Valuation of construction declared by the public servant should be

accepted if the variation with the CPWD/Govt. Deptt. valuation is not more
than 15% otherwise, the valuation done by the CPWD/Govt. Deptt. should
 be utilized. While computing the value, all alterations, fittings and fixtures
needs to be included.
7.3 In regard to evaluation or house property and commercial buildings
constructed by the public servant, a request has to be made for valuation by a
qualified engineer of the PWD. In CBI cases, the request should be made to the
Chief Technical Examiner of the CVC or the CPWD. Assistance can also be
taken from the Income Tax Valuation Cell. In order to enable these authorities to
make a proper evaluation, certain data such as the year of construction, the
sanctioned plans, the specifications of construction et.. have to be furnished
apart from arranging physical inspection of the property by the engineer. Where
the construction has been made out of loans taken from the Government, HDFC
, Banks or the LIC, such information where available, should also be taken into
consideration. Withdrawals from Bank accounts and GPF at the relevant time
should also be investigated as indicated in the previous paragraph. The technical
expert who undertakes the evaluation of such property must furnish the data on
the basis of which the valuation has been made by him as this is often
challenged by the public servant who in some cases may also have got the
property evaluated through some private agency such as an approved valuer. It
should, therefore, be ensured that the technical expert correctly follows the
prescribed norms of valuation. Wherever required, an electrical engineer may be
associated in the valuation. As mentioned at para 7.2, in case the valuation got
conducted by the accused public servant is not more than 15%, then his
valuation should be accepted otherwise CPWD/Govt. Deptt. valuation would be
necessary. Self constructed houses need very careful valuation especially with
regard to fittings and fixtures in the living rooms, kitchen, bathroom and lounge.
Sometimes the prices of fittings & fixtures could cost a fortune. Overlooking this
aspect, during valuation would not be resulting in accurate valuation of the
property. A market survey of light fittings would show that imported cut-glass
chandeliers made in Austria cost anything from Rs. 25,000/- onwards. Gold
plated bathroom fittings and Italian tiles, marbles and sanitary-ware have
astronomical price tags. Such articles and fittings should never be overlooked
during valuation.

7.4 It is very essential to get such valuation done very soon after the search
lest the public servant takes the plea that part of the construction was made after
the date of search and before the valuation date and thereby attempt to attribute
part of the investment as having been made after the check period.

7.5 If the public servant refuses to allow inspection of a building, then the
following steps should be taken:

i) Obtain a warrant from court under Section 93(1)(c) for inspection of the
building for purposes of valuation of the building and fixtures.

ii) Issue a notice under Section 160 Cr.P.C. to the public servant requiring
his presence on the appointed day and time at the building. This should be
 done after getting the date and time fixed by the expert (Engineer) who is
to do the valuation.

iii) If necessary, resort may also be made to Section 100(2) read .with
Section 47(2) of Cr.P.C., 1973 to obtain ingress into the building.
iv) Two witnesses should be associated.

v) Proceedings/list should be prepared and a copy delivered to the public

servant/occupant of the building under acknowledgement.

Movable assets and their valuation

7.6 It is neither possible nor necessary to enumerate various kinds of movable

assets which a person can acquire. The Investigating Officer should, however,
ensure that all movable assets are taken into account in the computation. Apart
from movable properties included in the seizure/inventory lists (including
jewellery and cash etc.). Some of the items that could be found in the modern
day household are enumerated below :-

 TV Sets, Home Theatre Systems, hi-fi systems, LCD TV, DVD players,
VCDs, MP3 players such a I-POD, designer watches, high value
mobile phones, microwave ovens, cooking ranges.

 Costly bathrooms fittings and jacuzzi besides Sauna bath chambers,
refrigerators, electric shavers/ toothbrushes, door surveillance
equipment and other electrical/ electronic gadgets.

 Designer clothes and jewellery designed by reputed national as well as
international fashion designers such as Lomani, Kelvin Klein, Dior as
well as Indian designers such as Rohit Ball, Satyapaul, Reena Dhaka
etc. fetch a fortune

 Paintings, artifacts and antiques . Painting by renowned artists such as
M.F. Hussain, Anjolie Ila Menon, Bikas Bhattacharjee, cost a fortune.

 Banned items under the Wild Life Act may be found such as tiger
skins, ivory articles, shatoos shawls and pets such as exotic birds and
protected animals.

 The I.O. should remain alert at these aspects and take action
accordingly. care should be taken while arriving at the value of such
costly items.

Other movable assets include:-
(i) Credit balances in Savings and Current accounts, PPF Accounts, fixed
deposits, cumulative deposits and recurring deposits in Banks and Post
 Offices. Fixed Deposits and debentures in companies, firms, finance
companies etc. should also be computed.

(ii) National Savings Certificates, Indira Vikas Patras, Kisan Vikas Patras,
National Savings Schemes, Savings Accounts etc. in Post Offices.

(iii) Bearer Bonds. Though these are not actionable by Income Tax
Department, for Prevention of Corruption Act offences, they should be
taken into consideration as assets as the scheme itself specifically
excludes immunity in respect of offences under P.C. Act.

(iv) Investments in various schemes of Unit Trust of India. Prices at which

purchased and not face value should be computed.

(v) Shares and debentures in companies and investments in mutual funds.

Prices at which purchased and not face value should be computed. Bonus
shares should be taken as of nil value.

(vi) Loans given to private persons.

(vii) Policies of L.I.C. and other Insurance Companies (Payment of life

insurance premia to LIC/other insurance companies etc. could be better
included in expenditure and not in assets).

(viii) All other miscellaneous investments.

7.7 While valuing assets, only the cost paid at the time of acquisition and not
their present value, should be computed. This principle applies to immovable as
well as movable assets. This is very important.

Benami Assets

7.8 In many cases of disproportionate assets, the I.O.would face benami

investments made by the public servants in the names of his relatives. Under
Section 13(1)(e) of P.C. Act, 1988 (5(1)(e) of P.C. Act, 1947), such benami
investments are also to be treated as assets acquired by the public servant as
the section contemplates computation of such benami assets also. The burden of
proving this would no doubt be squarely on the prosecution.

7.9 The proof that has to be collected in this regard would be the following:

(i) Custody of the title deeds, municipal tax payment receipts, ground rent
payment receipts, receipts of payments made to housing societies etc.
These should be positively seized during the search.

(ii) The source from which the purchase money (whole or in part) came.
(iii) The person who actually derives the income from the property.

(iv) The possession of and control over the property after the purchase.

(v) The motive for giving the transaction a benami colour. In the case of a
public servant, this would be for secreting the money earned by
corruption.

(vi) Position of the parties and the relationship between the public servant and
the ostensible owner.

(vii) The conduct of the parties concerned in dealing with the property after the
purchase.

(viii) Correspondence between the public servant and the benami owner.

(ix) The financial capacity of the benami owner to buy the property.

(x) Examining the tenant of the property and neighbours. In the case of
investments, the concerned officials of the Bank or the Organisation
concerned should be examined.

7.10 The Benami Transactions (Prohibition) Act, 1988 (No.45 of 1988) has
come into effect from 5.9.1988. Section 2(a) of the Act defines benami
transaction as "any transaction in which property is transferred to any person for
a consideration paid or provided by another person". Section 2(c) defines
property itself as "property of any kind, whether movable or immovable, tangible
or intangible and includes any right or interest in such property". Section 3(1) lays
down that no person shall enter into any benami transaction. Section 3(3)
prescribes the punishment for benami transaction as imprisonment for a term
which may extend to 3 years or with fine or both. Section 3(4) states that the
offence shall be non-cognizable. However, Section 3(2) states that this restriction
on benami transaction shall not apply to the purchase of property by any person
in the name of his wife or unmarried daughter and it shall be presumed, unless
contrary is proved, that the said property had been purchased for the benefit of
the wife or unmarried daughter". Section 4 of the Act dis-entitles the real owner
from making any legal claim in respect of the benami property against the
benami owner. This Act, therefore, creates this disability against challenging the
ownership of the benami holder only for the real owner and not for the
prosecution in a case of disproportionate assets or for an Income-tax Officer etc.

7 .11 From the provisions of the Act set out above , it would be seen that if a
public servant purchases property benami in the name of anyone other than his
wife or unmarried daughter, the very act of such a benami purchase, if proved, is
an offence and, therefore, a separate case could be registered and investigated
after obtaining the order of the Magistrate under Section 155(2) of the Code of
Criminal Procedure, 1973. On account of the Explanation under Section 13(1)
(e) of the P.C. Act, 1988. It appears that the benefit of the income derived from
such benami property need not be computed in favour of the public servant as
the very act of purchase of the property benami was illegal. This would be so
even if the benami property is included, as it should
be while computing the assets acquired by the public servant.

7.12 However, if a public servant gifts any amount to anyone, including his
male issues and married daughters, and investments are made by or in the
names of such donees, they would not be benami investments. Distinction has,
therefore, to be made between a benami investment and investment after gift.
This would depend on the facts surrounding each investment.
 CHAPTER VIII

SOME SPECIFIC ASPECTS OF INVESTIGATION

Expeditious collection of evidence and scrutiny of documents

8.1 During the investigation of a case of disproportionate assets, certain steps

have to be taken for the collection of evidence by sending requisitions to various
authorities and it is essential that these steps should be taken promptly and
immediately after the searches and as and when necessary during further
investigation. These are:

i) Writing to the Vigilance Department concerned for obtaining Statements I

to VI from the public servant.

ii) Obtaining of property returns and personal files of the public servant for
scrutiny and taking of follow up action.

iii) Collection of pay and allowances particulars.

iv) Ascertaining the place of posting with dates, of the public servant during
his service.

v) Obtaining of statements of Bank accounts and-Postal-accounts for

scrutiny. All Account Opening Forms, pay-in-slips and cheques should
also be taken over. Banks take 3 to 4 months to segregate such
documents and, therefore, these requisitions should be sent promptly and
also followed up regularly.

vi) Ascertaining the education expenses by reference to the institutions

concerned. Similar action has to be taken with reference to clubs etc.

vii) Evaluation of house property by an Engineer.

viii) Referring the documents to the handwriting expert or other expert such as
the Currency Note Press for opinion on date of issue of any revenue
stamp.

ix) Obtaining records from the Income Tax Department.

x) Obtaining particulars from LIG, PLI, GIC, Credit Cards etc.

xi) Obtaining particulars of shares and debentures from Companies and

Share brokers.
xii) Obtaining particulars of all other income, expenses and assets as may be
required in the case under investigation.

8.2 It is worth reiterating that it is of utmost importance that the seized

documents should be scrutinsed thoroughly and repeatedly. All follow up
investigation, including on clues obtained during scrutiny, should be pursued in a
systematic and sustained manner. This is a long and tortuous route which cannot
be avoided.

8.3 Successful results can be achieved only if the enquiries are conducted
speedily and methodically. Otherwise, there is risk of valuable evidence being
destroyed or tampered with. As many of the various steps -indicated in the
foregoing paragraph should be taken simultaneously as practicable. Frequent
reminders should be sent to the authorities concerned.

8.4 It is in this regard that the SP should take initiative and closely monitor the
quick collection of information and documents by the I.O. Whenever required, the
SP should also contact, personally or demi-officially, the concerned authorities
for expeditious collection of documents. Where necessary, the intervention of the
DIG/JD should also be requested for.

8.5 If any document is to be sent to the handwriting expert, it should be sent

within 6 months of the commencement of the investigation.

Attachment of property

8.6 In all cases of disproportionate assets, one aspect to be considered at an

early stage of the investigation is as to whether the immovable and movable
properties (including benami) of the public servant and of the members of his
family should be got attached by a District Judge pending the investigation and
trial of the case to prevent the public servant and the others from transferring the
properties. In so far as the properties of the family members are concerned, only
those properties which were acquired by funds emanating from the public servant
or in respect of which the source of the funds used for the acquisition are not
properly explained should be got attached. Properties which clearly belong to the
family members on account of being acquired out of their own income/funds
should not be got attached. The attachment could be got done under the
provisions of the Criminal Law Amendment Ordinance, 1944 (Ordinance XXXVII
of 1944) .The salient features. of this ordinance as amended by P.C. Act, 1988,
are as under:

(i) As per the Schedule to the Ordinance, properties acquired, inter alia, by
the commission of any offence under the Prevention of Corruption Act,
1988 are covered by the Ordinance.
(ii ) Pending investigation, the State Government or Central Government can
authorise u/s 3 of the Ordinance, any person to file an application in the
court of the District Judge within the local limits of whose jurisdiction the
accused ordinarily resides or carries on business for attachment of money
or other property procured by the commission of the offence. If such
money or property cannot be attached for any reason, other property of
the accused as nearly as may be equivalent to the money or property
procured by the commission of the offence may be attached.

(iii) On the filing of the application, the District Judge shall, subject to the
conditions laid down in Section 4 of the Ordinance, order ad interim
attachment and issue notice to the affected persons.

(iv) After hearing objections, the District Judge shall, under Section 5 or the
Ordinance, pass an order making the ad interim attachment absolute or
vary it or withdraw it.

(v) Under Section 10 or the Ordinance, the attachment order would be valid
for one year from the date or the ad interim attachment. This can,
however, be extended by the District Judge on the application or the
authorised persons. If I in the meantime, cognizance or the offence is
taken (namely charge sheet is filed), the attachment shall continue until
further orders are passed by the Special Judge, who has now been vested
with the power to order, during trial, continuation or the attachment.

8.7 Such attachment is or importance as under Section 16 or the P.c. Act,

1988, the court, while convicting an accused under Section 13(2) read with
13(1)(e) of the P.C.Act, 1988 and imposing fine, shall take into consideration the
extent of disproportionate assets that has been proved. Attachment would ensure
that this fine can be realised by the court.

8.8 Chapter II or the Prevention or Corruption Act, 1988 empowers the Central
or State Governments to appoint Special Judges. Section 5(6) of Chapter II
reads as under:

"Sec.5(6) A Special Judge, while trying an offence punishable under this

Act, shall exercise all the powers of and functions exercisable by a
District Judge under the Criminal Law Amendment Ordinance, 1944.

8.9 It would be observed that the Special Judge acquires this power only after
the charge sheet is filed and he takes cognizance or the offence. During
investigation stage, applications for attachment will continue to be filed before the
District Judge. This appears to have come about due to oversight while drafting
the Bill as the intention apparently was to bestow this power on the Special
Judge during the investigation stage also. Section 5(6), therefore, needs an
amendment to bring this about.
Suspension

8.10 In every case of disproportionate assets, a decision should be taken at an

early stage if suspension of the public servant should be recommended. This
would depend upon the extent of disproportionate assets that have been
detected and the instructions issued by the Government from time to time
regarding the policy in this regard. Suspension should be recommended only
when considerable disproportionate assets clearly and unambiguously come to -
light during-the search or during later investigation and not otherwise. In so far as
the Central Government is concerned, the instructions that have been issued
regarding suspension in cases of corruption are in the office Memorandum dated
20.6.1986 of DoPT, Govt. of India Circulated vide Policy Division Circular No.
21/2/86-PD dated 23.10.86.

Examination of Bank Accounts

8.11 It is of utmost importance to collect statements of accounts from the

concerned banks as scrutiny of the statements reveal several clandestine
transactions entered into by a public servant. With almost all branches of banks
located in big cities converting their accounts into computerized electronic
ledgers, accounts are no longer maintained in physical form. It, therefore,
becomes necessary to obtain printed copies of the ledgers existing in
computerized form. Besides, a copy of the ledger should also be electronically
derived in the form of a CD and by using a cyber forensic tool a hash value of the
derived CD should be obtained which would serve as evidence in the court as it
is immune to any type of tampering or interference. It has been found from
experience that an intelligent scrutiny of bank accounts invariably helps in a
number of days and brings out a mine of information and clues regarding the
sources of income, expenditure and assets of the public servant and the
members of his family. The credits into the bank accounts compared with the
known sources of income would indicate whether there are doubtful deposits
calling for detailed investigation. The debits would give information about
investments and assets of the accused and also the amount spent on household
and other expenses. If large unexplained deposits are found during a particular
period, especially corresponding to the period during which the public servant
was holding a post where there were opportunities of corruption, such large
deposits should be specially brought out and emphasized during the trial or in the
disciplinary proceedings, as the case ma be.

8.12 The undermentioned instances indicate how scrutiny of bank accounts

and full-fledged investigation with reference to Account Opening Forms, pay-in-
slips and cheques could yield useful results.

(i) In savings or current accounts, some small odd amounts may be found
credited. On enquiries with reference to the pay-in-slip, it may be found
 that these amounts actually represent interest on Fixed Deposits or other
investments which could thus be traced. Sometimes, if the relevant
accounts from which the interests in question are credited are in turn
scrutinised, larger amounts may be found credited in those accounts
which deposits would be assets. With the ATMs installed in almost every
big/small city, cheques are used less frequently by account holders to
obtain cash for their own use. In this context, the statement of account
becomes highly significant since cheques showing withdrawal cannot be
found. Opening an account with a bank requires a photograph of the
account holder as well as disclosure of PAN No. , if allotted. The PAN No.
could be quite useful in tracing the Income Tax Returns of the public
servant or his family members. The photograph comes handy in
identifying the account holder, especially, when benami accounts are
opened.

(ii) It may also be found that a cheque from another undisclosed bank
account of the public servant is credited in a known account. Getting
details of such other bank accounts would -bring to light further assets of
the public servant.,

(iii) Sometimes, the public servant might have opened a bank account in the
name of one of his dependents. Detailed scrutiny of the transactions in
that account would also prove useful in discovering undisclosed assets.
Sometimes, the account may be even in the name of a domestic servant
or a close relative. To prove that the account actually belonged to the
public servant and was also operated by him, it will be necessary to get
from the bank the Account Opening Form and- Specimen Signature Card
and check up the hand writing and signature therein. The person who
introduced the ostensible owner of the account to the Bank should also be
examined. The specific instructions to the bank for the operation of the
account may also prove useful. In many cases, it would be found that it
was the accused person, who had got that account opened in the name of
the servant or the relative. In such cases, it is most likely that during the
search, the Pass Book and Cheque Book of the said account would be
recovered during the search from the public servant. If so, this is indication
of the concerned bank account being of the accused public servant
himself. This inference should be consolidated further during investigation
by collecting all possible evidence.

(iv) The dates of cash deposits in the Bank, if scrutinised minutely, would
prove "very useful in cases where it is alleged by the public servant that
the deposits were out of loans taken from friends or relatives. If there is
evidence in the personal accounts of those persons that the money for
giving the loans had never been withdrawn by them, it would be clear
proof that the impugned deposits were not made out of loans taken but
 were out of unexplained money which was available with the public
servant.

(v) The public servant might have taken a loan from the Bank for the
purposes of constructing a building or meeting some other big expenses.
In such a case, though the source of that particular expenditure is
satisfactorily proved as having come from the Bank, still the security on
the basis of which the loin was taken will disclose further assets. Scrutiny
of the documents executed for obtaining the loan would bring to light fixed
deposits, shares, NSCs, units etc. on the security of which the loan had
been taken. These assets which might not have till then come to the
notice of the Investigating Officer could thus be traced.
(vi) Banks also purchase and sell shares or securities for their constituents.
These transactions are normally recorded in the constituent's savings or
current account. Close scrutiny of such account would indicate as to what
shares or securities had been purchased by the public servant and if they
had not been sold, whether they find place in the assets disclosed by him
or discovered by the I.O. Similarly, the information regarding the sale of
shares or securities would have to find out if the initial source of
investment in the said shares or securities is explainable or not.

(vii) The scrutiny of the deposits .in the bank accounts would indicate whether
all the salary cheques and income from other known sources have been
deposited in those accounts or not. If it is found that all the incomes are
faithfully deposited in the Bank account, but the withdrawals for personal
and household expenses from these accounts are not sufficient for
maintaining the standard of living to which the accused public servant is
actually used to, this is clear indication that the accused public servant
had met most of his expenses out of bribes received by him.

(viii) The credits in a Bank account in respect of dividends on shares or interest

on securities would help the Investigating Officer to find out what shares
and securities were possessed by the accused. This would help him to
discover further disproportionate assets.

(ix) Investigation into the major items of credits or debits would help in a
number of ways; e.g. they would throw light on the sales or acquisitions of
assets, which might not have been disclosed, receipts of money from
insurance companies on maturity of policies, the payment of premia on
policies which might not have been disclosed, amounts received on
maturity of certain fixed deposits which might not have been disclosed
earlier etc.

(x) A careful perusal of the bank accounts would often disclose a pattern of
regular monthly withdrawals by the public servant which would be an
indication of his household expenses. This would lend powerful support to
 the other evidence collected, such as from a statistical organization, in this
regard. Withdrawals from the bank account around the time of marriages,
house constructions etc. would also be an indication of the expenses
incurred thereon.

(xi) Absence of contemporaneous deposits in Bank accounts when false

claims of agricultural income, income from tuitions given by wife etc. is
powerful evidence to negate such claims. This should- no doubt be
supplemented by other circumstantial evidence,.

(xii) Proof of regular banking habits would also help in disproving false claims
of large cash holdings by the public servant and the members of his
family.

Action to be taken on fixed deposit receipts

8.13 Very often in cases of disproportionate assets, fixed deposit receipts are
seized. It should be ensured that at the time of their maturity, they are got
renewed with the permission of the court. This is with a view to ensure that the
public servant gets the benefit of further interest in the event of his being cleared
on the conclusion of the investigation or discharged/acquitted in a trial.
In the event of a conviction, a similar benefit would accrue to the State on
account of the confiscation of the FDRs by the Court or for realising the fine that
may be imposed by the Court.

Income Tax Returns

8.14 It is mandatory to have a permanent account No. for all income tax
payees. The PAN No. is issued by an issuing authority and it bares the Code of
the issuing office. The data base of the Income Tax Payee is maintained by the
issuing office. It is, therefore, necessary to trace the PAN Card of the suspected
public servant or his family members during searches and the PAN No. should
be noted down. PAN No. are also to be declared while opening Bank Accounts
and Client Registration Form maintained by share brokers. Besides, PAN No.
has to be compulsorily declared in respect of several other financial transactions.
Collection and scrutiny of Income Tax, Wealth Tax and Gift Tax returns filed by
the public servant and his family members as well as by other persons with
whom the public servant and his family members had or claim to have had large
financial transactions such as loans and gifts are of great importance in a case of
disproportionate assets. Very good evidence regarding the various incomes
claimed by the public servant and other persons would become available from
these returns.

8.15 Investigation with the I.T. Department would become necessary in another
circumstance also. This is when any of the family members of the public servant
or some other person who wants to help the public servant files voluntary
disclosure I.T. and W.T. returns after the searches are conducted in a case of
disproportionate assets and large assets are seized/discovered. It is, therefore
necessary for an IO to know the provisions in the I.T. and W.T. Acts
in this regard.

8.16 With the Income Tax Department also becoming fully computerized, it
becomes necessary for the Investigating Officer to find out the data base of the
concerned Income Tax Office where the suspected Public Servant files his
Returns. The search may yield filing of returns by other members of the family
as well.

8.17 In the Income Tax Act and Wealth Tax Act themselves, search & seizure
by the Income Tax Department is mentioned as a circumstance after which the
assessee cannot file such a return. However, detection by I.T.O. is independent
of this. Consequently, even if the I.T.O. detects the concealment on information
Given by a Police officer, it would disable any person from filing any such
voluntary disclosure I.T. and W.T. Returns and claiming assessment.

8.18 It is, therefore, of utmost importance that when large cash or other assets
are seized/discovered, the concerned CIT and ITOs should be informed about it
immediately (within a couple of days) after the searches along with the
names and full-office and residential addresses of the persons who are likely to
file voluntary disclosure I.T. and W.T. returns with the request that such returns
may not be acted upon without consulting the CBI or ACB as the case may be.

8.19 There are several investments options available today, these are listed
below :-

Equity Shares - Primary Market

Primary market refers to new issues of shares by new companies

as well as existing companies. Apart from shares, other instruments
commonly issued in the primary market are debentures, convertible
debentures, shares with attached options like warrants, etc.

Equity Shares- Secondary Market

Secondary market refers to the stock exchanges where an investor

can buy (or sell) shares which are listed on them. As a result of
significant changes in the recent past, particularly computerisation,
online trading, demeterialisation and depository participation,
investors are now dealing with a much more transparent and
efficient secondary market.

Equity shares yield returns in two ways : one, dividends declared

by companies usually at the end of a year (and sometimes during
 the course of the year) and, two, capital gains on sale of equity
shares. Equity shares are primarily volatile instruments. Equity
shares is an appropriate investment avenue and more and more
public servants find it convenient to invest in shares.

Debt Instruments

Debt instruments represent contracts where one party is the lender

(investor) and the other party is the borrower (issuer). The debt
contract specifies the rate of interest, time of interest payment,
repayment of principal, etc. In India, the term 'bond' is used to
represent the debt instrument issued by the central and state
governments and PSUs. The term 'debenture' is used to mean debt
issues from the private corporate sector. The principal features of a
debt instrument are :-

 Maturity.
 Coupon
 Principal

Maturity refers to the date on which the principal would be

repaid. coupon is the rate at which interest is calculated with
reference to the face value. For example, a 100% 2010 bond refers
to face value of Rs. 100, coupon rate of 10% p.a. and repayment of
the face value in the year 2010.

The coupon rate may be fixed for the entire period or may
be related to a benchmark rate. In the latter case, the coupon rate
changes as the bench rate changes. This instrument is called a
floating rate debt instrument.

There are many different types of debt instruments in India.

These are :-

 PSU bonds.
 Government Securities
 Treasury bills
 State Loans
 Corporate debentures.
 Bonds from financial institutions.
 Commercial papers.
 Certificates of deposits.

 Bonds and debentures
 A Bond is a loan given by the buyer to the issuer of the
instrument. bonds may be used by companies, financial institutions,
or the government.. Bonds can be broadly classified into (a) Tax
Bonds and (b) Regular Income Bonds.

Company Debentures

Debentures are debt instruments. Companies borrow from

debenture-holders and generally offer a fixed rate of interest to
such investors. Most debentures are redeemed after a specified
period.

Public Sector and financial Institutions Bonds

Various bonds are floated from time to time by public sector

undertakings as well as Development Financial Institutions. Most
bonds offer attractive schemes like monthly interest, quarterly
interest, various redemption options, deep discount bond option,
etc.
A deep discount bond is a long term bond where the initial
amount invested keeps growing based on the interest accumulated
on the principal amount.

RBI Tax Free Bonds

RBI Tax Free Bonds are special bonds issued by the RBI
offering tax-free facility.

Mutual Fund Schemes

Mutual Funds are entities which collect funds from small investors,
pool these funds together and invest into various equity and debt
instruments (or even money market instruments and government
securities). Mutual funds schemes can be open-ended or close-
ended. Open-ended schemes do not have a fixed maturity.
Investors can buy/sell units of such schemes from/to the fund itself
at price determined by Net Asset Value (NAV) plus or minus a load,
applied either at the point of purchase or sales by the fund. In case
of close ended mutual funds, liquidity depends on the availability of
buyers and sellers in the stock exchange where these units are
listed.

Investment Process

An investor has to contact a broker or a sub broker registered with

SEBI for carrying out his transactions pertaining to the capital
 market. A broker is a member of a recognized stock exchange, who
is permitted to do trades on the floor of the exchange. He is
enrolled as a member with the concerned exchange and is
registered with SEBI. A broker's registration number begins with the
letters "INB". A sub-broker is a person who is registered with SEBI
as such and is affiliated to a member of a recognized stock
exchange. A sub-broker registration begins with the letters "INS'.
An investor has to sign 'Member - Client agreement' for the
purpose of engaging a broker to execute trades on his behalf from
time to time and furnish details relating to himself for enabling the
members to maintain client registration form. The member client
agreement form is entered between client and broker in presence
of witness where the client agrees to trade/invest in the securities
listed on the concerned Exchange through the broker. The client
registration form contains all the details of the investors including
his name, address, qualification, bank account, PAN No., proof of
address, proof of identity etc. In order to facilitate maintaining
database of their clients, it is mandatory for all brokers to use
unique client code which will act as an exclusive identification for
the client.

Demat account

Though the company is under obligation to offer the securities in

both physical and demat mode, the investor has the choice to
receive the securities in either mode. if he wishes to have securities
in demat mode, he needs to indicate the name of the depository
and also of the depository participant with whom he must have
depository account in his application. Now a days, majority of
investors are having demat account.

For conducting investigation in investment of shares, it is necessary to

obtain member-client agreement form and the unique client code from the broker.
The computer of the broker could yield very valuable information about his clients
and their investment patterns. Every transaction entered into by a client is given
a unique order code No. which the broker always has. It is, therefore, necessary
to obtain all the information from the concerned broker about investments by the
public servants in the primary as well as in the secondary market.

8.20 While writing to Companies in respect of shares, it is necessary to mention

the Ledger folio, Share Certificate No., Distinctive numbers, Names of the
shareholders, the face value of the shares and dates of initial allotment and later
transfer, if any, of the shares. All these particulars would be available in the
Share Scrip (Share Certificate) itself as well as its reverse. Such letters to
Companies should issue immediately after the searches.
8.21 Companies generally issue the-following types of shares:

(i) Equity shares at par.

(ii) Equity shares at premium.
(iii) Rights shares at par.
(iv) Rights shares at premium.
(v) Bonus shares.

8.22 One equity share is usually of face value Rs.10/- each and occasionally
Rs.100/- each. Equity shares at par are initially allotted by companies on
applications submitted by the applicants for purchase of shares in such
companies at the time when the companies are initially formed and occasionally
even later. The share certificate itself would show the date of allotment thereof
and the face value. If the date of allotment clearly relates to the period when the
company was incorporated and commenced business, such shares would be
equity shares allotted. at par. For buying such shares from the company, the
public servant would have paid the face value of the shares, generally in two
instalments, one while applying and another on allotment. Examining the
concerned official of the company is generally sufficient to prove this investment
by the public servant. If further proof is desired, the application given by the
public servant and the original cheques issued by him in favour of the company
could also be collected.

8.23 Equity shares at premium are allotted by the companies by selling shares
to the allot tees at prices which are higher than the face value. This could be
done only by the companies which are prosperous as otherwise there would be
no buyer. The premium charged by the Company should be ascertained from the
company. The cost of such shares, even including the premium, would be
generally less than the then prevailing market price. However, only the amount
paid by the public servant to the Company should be computed as the value of
such shares. In such cases also, the investigation
to be done is the same as indicated above.

8.24 Rights shares at par and rights shares at premium are allotted by
companies only to existing shareholders of the company in a ratio that is decided
by the company. For example the company may decide that for every 100 equity
shares held by a holder, they may issue a further 25 rights shares. This may be
at the face value of the 25 shares or at such premium as the company may
decide. Rights shares are also generally sold by the Companies at less than the
market price. In the case of rights shares also, the investigation to be done is the
same as indicated above.

8.25 Bonus shares are issued by companies free of cost to existing

shareholders in such ratio as decided by the companies. If for example, the ratio
is 1:3, this means that for every 3 shares held by the holder, the company would
issue one share free. In the case of bonus shares, the share-holder does not
spend any money and gets the shares free. In a case of disproportionate assets
against a public servant, therefore, the bonus shares should. be treated for
accounting purposes as nil assets, though for the public servant himself they are
of value and he gets income from them, which has
to be taken into account.

8.26 Shares can be bought and sold either physically or in demat form. A
shareholder can sell his shares in the market to other persons through a share
broker. If shares are purchased physically and not in demat form by a public
servant in the market, the name on the face of the share certificate would be of
someone else (the original shareholder) and the name of the public servant as
holder would appear on the reverse side of the share certificate under
"Memorandum of Transfers" made by the company. If, however, the name
appearing in a seized share certificate is of someone else and the name of the
public servant or any of his family members is not appearing in the
"Memorandum of Transfers" on the reverse, this means that either (a) the public
servant has bought the shares but is yet to send them to the Company for getting
the transfer recorded or (b) the public servant himself owns the shares in benami
name. It should be borne in mind that in the case of such purchases in the
market, the price paid by the public servant would not generally be the face value
of the shares. It would be more than or less than the face value. In such cases,
the share transfer application submitted by the public servant should be collected
from the Company. The documents of the broker who put the deal through
should be collected and his statement recorded to prove the amount paid by the
public servant for purchasing the shares. The documents and evidence of the
person who sold the shares to the public servant are also relevant. A cross
checking should also be done of the price of that particular share in the market
as on the date of the transaction. This is necessary to determine if the public
servant paid the correct price for purchasing the shares or paid much less which
could give rise also to an offence under Section 11 of P.C. Act, 1988 (165 IPC
prior to 9.9.1988). In that event, it should also be verified if the seller had any
official dealings with the public servant. The client broker agreement form is a
valuable document which is helpful in tracing the investments by a suspected
public servant. It contains the broker details as well as the unique client code.
With the help of the details obtained from this agreement information can be
obtained from the depositories about investment made by a person through
demat form.

8.27 Where a public servant has sold shares during the check period, similar
investigation as indicated in the previous paragraph should be done to determine
the income derived by the public 'servant by such sale .

8.28 Companies also issue the following two types of debentures:

(i) Convertible debentures.

(ii) Non-convertible debentures.
8.29 In convertible debentures, interest at the prescribed rate is paid by the
company to the holder. On a particular future date or dates, the whole or part of
the debenture amount (principal) would be converted into equity shares either at
par or at premium as mentioned in the debenture. On such date or dates, the
agreed part of the debenture amount is converted to equity shares which are
issued to the debenture holder and the company would pay interest only on the
balance amount of the debenture till the date of redemption (repayment) of the
balance principal amount of the debenture to the
holder.

8.30 In non-convertible debentures, the company pays to the holder interest at

the agreed rate till the date of redemption (repayment) of the debenture. No part
of the debenture is converted into equity shares.

8.31 In the case of debentures also they could be acquired from the Company
at the time of issue or in the share market at the prevailing market rate.

8.32 In the case of debentures also, the investigation to be done is mutatis

mutandis as indicated in respect of shares.

8.33 When some extremely prosperous and even some prospectively

prosperous Companies issue equity shares, the applications that are received by
the Companies may be many times the value of the total shares issued by the
Companies. In such cases, the Companies allot shares in some decided
proportion to the applicants. This proportion is determined by a Company in
consultation with the Stock Exchange where the Registered Office of the
Company is situated. The: successful applicants are called upon by the
Company to pay the balance of balance share price. The Company would refund
the application money to the unsuccessful applicants.

8.34 In such cases, Companies reserve a percentage of the shares for issue
under the discretionary quota of Directors. These are generally allotted to
relatives, friends, employees and:' business associates. If in any case it is found
that a public servant has been allotted shares out of discretionary quota, it should
be investigated if the public servant has had official dealings with the Company
and if he has abused his official position and caused pecuniary advantage to the
Company. The financial advantage accruing to the public servant lies in the fact
that he has purchased the shares, even if at a premium, at much less than the
prevailing market price in the Stock Exchange. For example, if the face value of a
share is Rs.10 and the Company issued it at a premium of say Rs.15, the cost of
each share to the public servant would be Rs.25. At that time, if the quoted
market value of the share was Rs.85, the financial advantage derived by the
public servant was Rs.60 per share. If he had purchased 1000 shares out of the
discretionary quota, the financial advantage derived by the public servant would
be Rs.60,000/-. Hypothetically speaking, if the public servant sold the shares on
the day he got them, he could have made a profit of Rs.60,000/-. If even the
payment for the shares to the Company was made purportedly by the public
servant in cash (instead of by cheque), it should be verified if the public servant
himself paid the cash or someone else paid it on his behalf.

8.35 In a case of disproportionate assets, computations should be made as

under in respect of shares and debentures:

(i) In the case of equity shares-purchased direct from, the

Company (including rights share) or in the market from another
holder, the actual price paid by the public servant would be the
value of the shares. This may sometimes differ from the face value
of the shares.

(ii) In the case of bonus shares, the value should be taken as nil
for purposes of calculation as these are received free.

(iii) Dividend received from the Company on the shares would

be income.

(iv) In the case of non-convertible debentures, the actual price

paid to the Company or in the market to the earlier holder would be
the value of the assets. This may sometimes differ from the face
value of the debentures.

(v) In the case of convertible debentures, till the conversion

takes place, valuation as assets should be done as in (iv) above.
Thereafter, the shares that are received by the public servant
should be valued as assets at a cost which is equal to the
converted part of the debenture. The balance non-converted part
should be valued as assets of a cost equal to the price paid for the
purchase of the debentures minus the value of the shares
computed as above.

(vi) Dividend received on such (converted) shares and interest

received on debentures should be computed as income.

(vii) Commission paid to a share broker, if any, for the purchase

or sale of shares and debentures should be treated as expenditure.

Use of Computer

8.36 Valuable information is stored in the hard-disk or removable storage

devices of desktop/laptop/palm top computers owned by the public servant or his
family members. Data could also be stored in digital diaries or mobile phones or
similar electronic devices. Care should be taken to extract data from these
devices as a small error could erase all the data. A separate chapter has been
devoted relating to seizure in computer environment. It should be borne in mind
that computers should need careful handling and only qualified personnel should
be allowed to seize the computer or extract data from it.

Technical assistance

8.37 In almost all cases, it is necessary for the I.O. to obtain the technical
assistance of a qualified Chartered Accountant to make the calculations. This is
necessary to make correct calculations and to avoid mistakes. In fact, such help
should be taken during the investigation stage itself to get guidance regarding the
lines of investigation to be pursued to unearth further assets and expenses of the
accused public servant. In CBI, there is a Technical Division to render such
assistance. In State Vigilance Organisations where such facility is not available,
the services of a Chartered Accountant should be secured through the senior
officers of the Vigilance Organisation.

8.38 The report of such Chartered Accountant is admissible in evidence under

Section.65(g) of the Indian Evidence Act.

Examination of the public servant

8.39 The public servant should be first interrogated immediately after the
searches-and his explanation obtained regarding the seizure/discovery of large
cash, jewellery and other assets. Documents, the purport of which is not clear,
should be got explained by him at that stage itself. Such prompt interrogation
would enable the IO to get the version of the public servant before he can cook
up an elaborate defence. Any documents he may produce in defence must be
taken over under a Memo and investigation conducted on them.

8.40 Later during the investigation also, the public servant could be
interrogated as often as necessary, ensuring that he is not harassed
unnecessarily by being called too frequently or made to wait for long periods.

8.41 Despite these preliminary and interim examinations, the statement of the
public servant that is recorded on the conclusion of the investigation should be
comprehensive and cover all aspects. If there are contradictions between the
earlier versions and the later versions, copies of all such statements should be
enclosed with the S.P.'s Report.

False defences that are put up

8.42 Following are some of the false defences put up by accused public
servants in cases of disproportionate assets:
(i) Use of forged or antedated wills, stamped receipts, agreements in stamp
paper etc. All the steps of investigation usually conducted in cases of
forgeries, including references to Currency Note Press, Nasik (in respect
of revenue stamps) and G.E.Q.D. or C.F.S.L. should be done. These
references should be sent at an early stage of the case (within 4 to 6
months) without waiting till the conclusion of the investigation. It should be
borne in mind that in certain circumstances a person could be guilty of
forgery by putting his own signature (Explanation 1 to Section 464 IPC). In
appropriate cases, a separate case could be registered under the relevant
Sections of the IPC, including Section 193 IPC.

(ii) False agricultural income. This has already been dealt with in paras 5.5
and 5.6 of Chapter V and para 8.12(xi) of Chapter VIII.

(iii) False loans/gifts received plea. This has already been dealt with in paras
5.8 to 5.10 of Chapter V.

(iv) False plea of highly deflated domestic expenses. This has already been
dealt with in paras 6.1 to 6.8 of Chapter VI and para 8.12(vii) and (x) of
Chapter VIII.

(v) False plea of income of wife by giving tuitions, stitching, sale of milk etc.
The claimed customers should be examined. Bank accounts should be
correlated to prove that there were no corresponding contemporaneous
deposits. The circumstance that the loans taken on certain occasions
need not and would not have been normally taken if such surplus
income/funds of wife were really available should also be brought in
evidence. If such claimed income was taxable and above the taxable limit
in each year, the non-filing of I.T. Returns by the wife should be proved by
taking a letter to that effect from the I.T.O. concerned and recording his
statement. Apart from these standard lines of investigation, other specific
evidence indicated by the facts of each case should also be collected. The
ultimate purpose is to improbabilise the false claim from all possible
angles. Needless to say, if such investigation proves the claimed income,
the benefit thereof should be given to the public servant.

(vi) Wind falls from lotteries and contests. Frequent winning of lotteries by
public servant or his family members are highly suspicious. However,
there are very few ways to challenge that the accused purchase the same
by investing his black money. Custodial interrogation could lead to certain
clues and the actual person who receive black money from the accused in
lieu of the winning lottery tickets could be traced and examined.
Companies offering prizes are another method of recycling black money.
In this context, the association of public servant with the said company
could be proved and the nexus prove during investigation.
(vii) Plea of large cash holding on the commencement date of the period of
check. This has been dealt with in para 8.12(xii) of Chapter VIII.

(ix) The Explanation under Section 13(1)(e) of P.C. Act, 1988 should be kept
in view while deciding whether an income that is claimed should be
allowed or not.

8.43 In some cases, the public servant may induce certain persons to give false
statements u/s 160 Cr.P.C. to the I.O. in support of some pleas of the public
servant. In respect of such witnesses, if the IO has evidence to prove the falsity
of their statements, such evidence should be specifically put to such witnesses in
the manner of cross examination and their replies recorded. If, however, the I.O.
has no such evidence but the witness is not able to produce any acceptable
evidence either, a last question should be put to such a witness that he being a
relative/friend of the public servant, he is speaking falsely with a view to support
the public servant and is not producing evidence also or is producing
unsatisfactory evidence. The witness is bound to reply in the negative. All the
same, this answer should be recorded for use when such witnesses are
produced in defence. Such witnesses need not be cited as PWs.
 CHAPTER - IX

PROGRESS REPORTS, FINAL COMPUTATION AND FINAL DECISION

Reports in cases of disproportionate assets

9.1 Vide Policy Division Circulars No.21/33/69-PD dated 3.11.1976 and

23.12.1986, No.27/2/78-PD dated 28.2.1978 and No.21/17/89-PD dated
5.4.1989, it is prescribed that in the Progress Reports of cases of
disproportionate assets, SPs should furnish in the prescribed Statements A to D,
progressive calculation of income, expenditure and assets computed will then,
based on the investigation conducted. This should invariably be done from the
4th P.R. onwards. It is often found that these Statements are not furnished with
the P.Rs. These Statements are of great importance, as they enable the I.O. and
S.P themselves to take stock of the evidence collected, plan the further evidence
to be gathered and discern the direction the case is taking. This also enables
senior officers to assess the trend of the investigation and also whether the
investigation is progressing along proper lines. Based on these Statements, they
can also issue appropriate instructions to the Branch. Non-furnishing of these
statements with the PRs would be deemed to be a lapse by the S.P,

Assets at the beginning of the period of check

9.2 If the Investigating Officer has taken a shorter period of check than the
entire-period of service of the public servant and even in a case in which the full
service period is the period of check but -the public servant concerned had
certain assets even while joining service, it is necessary to determine, as
precisely as possible, the total value of the assets, including savings possessed
by the suspect on the date of commencement of the period of check. This total
value should be deducted from-the total value or the assets which the public
servant is found in possession of on the last date of the period of check in order
to determine the total acquisition or assets during the period or check. If the
same asset is available on the commencement date as well as the concluding
date of the period of check, the same value should be ascribed to such asset on
both dates. It should not be assessed at enhanced market value as on the
concluding date. It is sometimes noticed that this important aspect of the total
assets held at the beginning of the period of check is riot subjected to a thorough
investigation. During his examination, the public servant concerned may also
claim to have been in possession of substantial assets at the commencement of
the check period and it is the duty of the Investigating Officer to verify each and
very such claim very thoroughly.

9..3 In this context, reference may be made to a mistake that has often been
detected in the calculation of assets at the beginning of the check period or likely
savings at the beginning of the check period made by some I.Os. The likely
savings of a public servant as on the date of commencement of the period of
check would be what was visibly and clearly available with him in bank accounts,
fixed deposits, shares and debentures and other forms of investment including
immovable properties. The total of all such documented savings and assets only
should be. taken as existing on the commencement date. If the public servant
pleads that he had cash savings on the commencement date, it could be
accepted, provided the amount involved reasonable keeping in view the status
of the public servant. This would only be a few thousands which a public servant
of any status would normally keep ~n his house for expenses. If, however, the
cash amount claimed is unusually large and is only a bland plea or based on a
palpably concocted theory, it should not be accepted. It should be borne in mind
that as held by the Supreme Court, the public servant has also got a duty to
satisfactorily account for his assets and has to prove his pleas by the theory of
preponderance of probabilities. A mere plea or patently concocted evidence
should not, therefore, be accepted.

9.4 Some I.Os are in the habit of calculating the income, expenditure and
acquisition of assets by a public servant prior to the period of check and then
making calculations of likely savings he would or could have held as on the date
of commencement of the period of check and then giving credit to such amount
as the likely savings which were available to the public servant on the
commencement date of the period of check. This is a totally wrong method of
calculation as the 1.0. is then having two check periods, out of which, for the
former, he makes a cursory investigation and for the latter, an investigation in
depth. No such investigation need be done in respect of any such former period
which is anterior to the selected check period. Therefore, the likely savings
available to the public servant on the date of commencement of the selected
period of check should be taken as what was available in bank accounts, other
documented investments and some reasonable cash balance.
In fact, for any human being, this is the mode of calculating the savings/assets as
on any date.

Preparation of statements

9.5 After an investigation has been finalised, the Investigating Officer should
prepare the following four statements in the prescribed proformae, full particulars
of which are furnished in Annexure III. These statements, which were earlier
numbered I to IV are now described as Statements A to D to avoid confusion with
Statements I to VI (Annxure II) which are obtained from the accused public
servant.

Statement A

Assets at beginning of the period of check, furnishing also dates of

acquisition. These would include reasonable cash balance, bank balances,
jewellery, household effects and other movable and immovable properties.
Unduly large cash balance pleaded by the public servant without satisfactory
evidence should not be given credit.

Statement B

Assets at the end of the period of check. Dates of acquisition must be

furnished. Valuation should be as at the time of acquisition. Any asset which is
figuring in Statement B as well as Statement A should be given the same value in
both statements.

Statement C

Total income during the check period. While the statement should give
figures in respect of income under different heads, e.g. pay and allowances,
rental income, interest income, loans and advances, dividends etc., schedules
should be prepared and attached to the Statement giving split up details of each
head of income.
Statement D

Total expenditure, sub-periodwise, during the period of check.

9.6 While preparing these statements, the following should be kept in mind:

(a) All the statements should show against individual items, the
amounts/values based on the investigation made and ,also those put
forward by the suspect public servant.

(b) In Statements A and B, description of each item should be adequate

enough to judge its cost and the date of acquisition should also be
indicated.

(c) An item included as expenditure should not again be included in assets. In

other words, no item which appears in Statement A or B should figured in
Statement D.

(d) Statement C should clearly indicate how items of net income appearing
therein have been arrived at. For example, deductions made from gross
salary on account of Income-tax, provident fund, house rent, recovery of
loans and advances etc. should be indicated. In case certain recoveries
made from the accused officer are not by way of deduction from salary,
they should be specifically reflected in Statement D.

(e) Statement D should take care of all items on which a family generally
spends e.g. house rent, water, electricity, food, fuel, clothing, shoes, linen,
 education of children, books, magazines, newspapers, clubs,
entertainment, insurance premia, religious and social ceremonies,
travelling, maintenance of conveyance, etc.

(f) Expenditure on kitchen and living expenses should be estimated for each
sub-period, having due regard to the standard of living, number and ages
of dependents, places of posting, prevailing prices etc.

(g) There is often correlation between income, expenditure and assets. For
example, possession of a house as an asset would also result in a source
of income by way of rent. There would also be corresponding expenditure
thereon by way of house-tax, ground rent, repairs, insurance etc. Every
related item appearing in the statements should, therefore, be cross-
checked to ensure correctness.

(h) There should be cross reference given of the various items appearing in
these statements, to the relevant page and para numbers of the
investigation report. This will help in assessing the evidence available in
support of each item.

9.7 In CBI, it has been prescribed that these 4 statements should be furnished
by the I.O. as enclosure to Final Report-I. They should also be enclosed with the
S.P.'s Report sent to the CVC and the department concerned.

COMPUTATION OF DISPROPORTIONATE ASSETS

9.8 When Statements A to D are prepared finally in a comprehensive manner,

the extent to which the properties and pecuniary resources are disproportionate
to the known sources of income during the period of check can be computed. As
Section 13(1)(e) of P.C. Act, 1988 speaks of property and pecuniary resources
being disproportionate to known sources of income, it is advisable to adopt the
following method of computation.

Assets- (Properties) at the end of the check period Rs. _____

(Statement B)

Assets (Properties) at the beginning of the check Rs. _____ (-)

period (Statement A)

Assets (properties) acquired during the check period) Rs. _____

(B - A)
Expenses during the check period (Statement D)
Total assets (properties) acquired and expenses Rs. _____(+)
Incurred during the check period.
Income during the check period (Statement C) Rs.
 Extent to which assets (properties) and expenses
(pecuniary resources) are disproportionate to income.
(B-A+D)- (C) Rs. ______
Percentage of disproportionate assets with =
reference to income
Rs. _______
============

Some I.Os, however, make this calculation in a different manner. First

they arrive at the likely savings by deducting expenditure from income during
check period. The assets acquired during the check period are then compared
with the likely savings and the extent to which assets are disproportionate is
arrived at. Mathematically speaking, there is nothing wrong in this mode of
calculation. However, the mode adopted in para 9.8 above is more strictly
accordance with the language of Section 13(1)(e) of Act, 1988 (Section 5(1)(e) of
P.C. Act, 1947).

9.10 A good case is made out only if the extent of disproportionate assets is
considerable in comparison with the total income during the check period. There
is no hard and fast rule to determine this. A reasonable and common sense view
should be taken of the matter. Another aspect to be borne in mind is that if the
non-verifiable expenses, including expenses computed on the basis of cost of
living indices, would have considerable impact in the calculations and can turn
the complexion of the case, it is not a good case. In Krishnanand Agnihotri Vs.
State of "M.P. (AIR 1977 SC 796 = 1977 Cr.L.J.566), the Supreme Court allowed
the appeal of the accused ITO when the extent of disproportionate assets was
not even 10% of the total income. This does not necessarily mean that if the
extent of disproportionate asset is more than 10% of the total income, a good
base for prosecution is made out. Each case should be assessed on its own
facts and merits and a decision taken whether it is fit for prosecution, RDA,
suitable action or closure. lt is, however, been repeatedly held by the Supreme
Court and High Courts that Courts should take a "liberal view" in cases of
disproportionate assets. This is, therefore, the view that should guide the IO,
Prosecutor etc. while making their recommendations and the competent authority
while taking the final decision. The following are some important factor which
should be, kept in view while assessing the extent of disproportionate assets :

(a) The status of the public servant.

(b) The total income of the public servant and his family
members which are included in the computation.

(c) The extent of controversy between the investigator and the

public servant in items of income, expenditure and assets;
 particularly in respect of non-verified expenditure and its proportion
to the extent of disproportionate assets.

(d) The length of the period of check.

9.11 In Annexure IV, three illustrative examples of calculations of

disproportionate assets in three separate cases are given. In the first two cases,
comparative extent of disproportionate assets are analyzed while in the third
illustration, an example has been given of an accused public servant whose
family members are also earning members.

9.12 The mathematical formula or inequality which we had seen earlier in this
note (para 3.2) SHOULD BE FAR
can now be
elucidated GREATER THAN
further and
given as under INCOME DURING CHECK PERIOD
for deciding if
a good case of
disproportionat
e assets is
made out:

FORMULA

(ASSETS AT THE CLOSE OF THE CHECK

PERIOD - ASSETS AT THE BEGINNING OF
THE CHECK PERIOD) + EXPENDITURE
DURING THE CHECK PERIOD

DEPARTMENTAL ACTION WHERE PROSECUTION IS NOT WARRANTED

9.13 Where, after a detailed investigation, it appears that the evidence is not
sufficiently strong or clinching to justify prosecution of the public servant u/s 13(2)
of P.C. Act, 1988 (5(2) of P.C. Act, 1947), but the extent of disproportionate
assets is considered sizeable, the piblic servant can be dealt with departmentally
on a charge of violation of Conduct Rules on the ground that the possession of
such sizeable disproportionate assets is sufficient basis to allege that the public
servant concerned had failed to maintain absolute
integrity.

9.14 For recommending RDA for major penalty for possession of

disproportionate assets, 10% and above of disproportion in comparison with total
income may suffice. Provided the unverified expenditure is not large and assets
have been valued in a reasonable manner. It should, however, be borne in mind
that if even in the Articles of Charge, the extent of disproportion is only 10 % or
slightly more, this may be further reduced by the Enquiry Officer in his -report,
thus taking .it below 10%. Care has, therefore, to be exercised even while
recommending RDA.

9.15 It is doubtful if in a court case, a conviction can be obtained and sustained

in appeal also, on the basis of this ruling of CAT when the extent of disproportion
is only slightly more than 10%. Contravention of Conduct Rules. It is also
observed that after finalisation of the case, if it is found that a prosecution case is
not made out, then while submitting a report u/s 173 Cr.P.C. in the court, the I.Os
sometimes mention that 'the case of disproportionate assets is not made out'.
Whenever a report u/s 173 Cr.P.C. is to be filed in the court and departmental
action for major penalty is contemplated against the suspected officer, it should
be mentioned that evidence available is not sufficient to prove it in the court of
law, needless to say that utmost care should be taken while drafting reports u/s
173 Cr.P.C. in all cases before filing the same in Court.

Contravention of Conduct Rules

9.16 While investigating a case of disproportionate assets, the I.O. would also
doubtless find out whether Conduct Rules which were in force during the relevant
periods were contravened by the public servant. For example, whether the
delinquent officer has been deriving income from sources suggestive of the
inference that he has been indulging in business or whether he had
acquired/disposed' of assets without obtaining prior permission or giving
intimation to the competent authority etc. Specific .instances, if any, of such
misconduct should be brought out during the investigation. In the case of his
doing private business, it should also be seen if an offence u/s 168 IPC is made
out.

Violation of other laws

9.17 In many cases of disproportionate assets, it is found that the facts brought
out prove the violation of other Laws. Such Laws are 165,168,193,467,468 and
471 IPC, Income Tax Act, Wealth Tax Act, Stamps Act, Foreign Exchange
Maintenance Act, Customs Act, Arms Act, Wild-Life Act, Prevention of Money
Laundering Act, etc. besides violations of the Benami Transactions (Prohibition)
Act, 1988. Evasion of Municipal Tax, violations of Municipal Bye-laws, purchase
of a plot or flat from Government established Development Authorities or
Housing Boards by the filing of false affidavit that the S.O. or his wife did not own
any other plot/flat in a particular area and some other such infractions may come
to light. According to the extent instructions in the CBI, separate cases should be
registered in the CBI itself in respect of such offences. If the offence in the FIR of
such an off-shoot case is non-cognizable, the permission of the court should be
taken u/s 155(2) of Cr.P.C., 1973 for the investigation of the case. On the
conclusion of investigation of such a case, if the offence is made out, then charge
sheet could be filed, if legally possible. In other cases, SP's Report should be
sent to the authority concerned for initiation of appropriate action under the law.
In respect of some such offences, the Statutes concerned (such as FERA) may
contain a provision that the court can take cognizance of the offence only on a
complaint filed by a specified Authority. In such a case, a draft complaint should
be enclosed with the SP's Report. If the offence committed is a minor one, such
as the possession of US$ 100 being the balance amount available with the public
servant after a foreign visit undertaken by the Public servant, a few months back,
then prosecution may not be necessary and the recommendation could be for
adjudication proceedings only.

9.18 Sometimes, investigation of the separate offence may be continued in the

main case of disproportionate assets itself. In that event, brief report setting out
all the facts relevant to each particular violation should be sent to the authorities
concerned, making appropriate recommendations for action to be taken by them.
It is neither necessary nor advisable to send the entire SP's Report copy to such
Authorities as most of the other facts in the SP's Report would be irrelevant to
them and unnecessary publicity would be given to the case which would be a
violation of 'the need to know' theory.
 CHAPTER. X

SEARCH AND SEIZURE IN COMPUTER ENVIRONMENT

Before conducting search at a place which contains computer systems, we have

to decide that whether the computer systems at that place are:-

 Contraband or fruit of crime

 Instrument or
 Repository of data incidental to the offence

This will help the search team in deciding whether or not :
 to seize the hardware
 to seize the software
 to seize the data
Preparing for Search
For conducting search in computer environment it is required to carry
 Still and video cameras
 Hand gloves:
 Permanent Markers
 Labeling material
 Sealing material
 Packing material.
 Stationery
 Finger print development kit
Conducting Search
After completing the pre-search formalities and on reaching the search spot:-
 Secure the spot
 preserve area for finger prints
 Restrict access to computer(s)
 Isolate computer(s) from telephone lines
 if the computer(s) is/are "OFF"; don't turn "ON"
 Computer, if "ON", shut down gently with the help of expert-
 If no body knows how to shut down that particular, system
  Photograph the scene, then disconnect all power sources; unplug
from wall and also from the back of system.
 Place unformatted blank floppies in each drive for preventing
accidental booting of the computer.
 Label all the equipments and connectors and cable ends to allow
reassemble as needed.
 Photograph the scene of search and also prepare sketch of the spot.
 Dismantle the equipment.
 Pack the equipment carefully.

Additional Points for Seizing Network computers:-

 Identify the types of computers.
 Must bring a computer specialist with search team, this is required
because
 The network may include computers in other locations.
 Pulling the plug may damage the system.
 The computer may be important for running the business/operation
of the organisation. Its seizure may effect the functioning of the
organisation.
 The expert will help in deciding the mode of copying the data,
floppy, CD, DATA Cartridge, Optical Disk, Zip Disk etc.

Precautions during search and seizure:-

All the proceedings at the spot must be recorded in writing with the details
of operations/ functions carried out on the spot. Do not check any floppy or other
storage device on the suspect computers; it may be containing virus etc. Do not
accept the help of the suspect on the spot for operating the computer.

Additional Points to be covered during search:-

 Examine the persons, including suspect for the passwords, user
names etc.
  Search the premises, trash boxes, under the Key Board, tables,
drawers etc. For the passwords, user names.
 Search the premises for the printouts, handwritten notes etc. Which
may be of vital importance to the investigation.
 Search the premises for the softwares/programmes available with the
suspect.
 Search the premises for the financial transactions of the suspect, as
per the requirement of the case.
 Search the premises for the books which may be of relevancy to the
case.

Packaging, Transportation and storing the seized computers:-

 Due to the sensitive nature of the computers and for preserving the
evidence.
 As far as possible cover the mouse and key boards with polythene
covers to preserve finger prints.
 Place the computer in a box properly cushioned with non-static
material.
 While transporting, place it in the back seat of car to avoid jerks.

 1Store the computers in secure dust free place.

 The storage place should be away from magnetic field.
 Send the computer for expert examination without loss of time

 CHAPTER. XI

Guidelines issued by Govt.of India,

Ministry of Home Affairs for issuance of a Letter of Request for
Investigation abroad as per Section 166 Cr.P.C., 1973
___

Vide Code of Criminal Procedure (Amendment) Act, 1990 (Act X of 1990)

procedure for carrying out investigation in a country or place outside India and
also to provide assistance to Court or authority outside India for carrying out
investigation in India has prescribed in Section 166-A and Section 166-B
(Chapter xii) of the Code of Criminal Procedure, 1973.
2. Ministry of Home Affairs have notified the procedure for sending such
requests from India, which reads as :

S.O. 444(E) :- In pursuance of sub-section(2) of Section 166-A of

the Code of Criminal Procedure, 1973 (2 of 1974), the Central
Government hereby specify that a letter of request from any Criminal
Court in India referred to in sub-section(1) of that Section shall be sent to
the Interpol Wing, Central Bureau of Investigation, Govt. of India, New
Delhi - 110003, for transmission to the concerned country or place outside
India through the diplomatic channel.
[Notification : F. No. 2/8/90-Judl.Cell]

3. Similarly, the Ministry of Home Affairs have notified the procedure for
dealing with the requests for assistance received from abroad which reads as :

S.O. 445(E) : In pursuance of sub-section(2) of Section 166-B of

the Code of Criminal Procedure, 1973 (2 of 1974), the Central
Government hereby directs that all evidence taken or collected under sub-
section(1) of that Section, or authenticated copies thereof or the thing so
collected, shall be forwarded by the Magistrate or Police Officer, as the
case may be, to the Ministry of Home Affairs, Government of India, New
 Delhi - 110001, for transmission to a Court or authority in a country or
place outside India through the diplomatic channel.
[Notification : F. No. 2/8/90-Judl.Cell]

4. Ministry of Home Affairs vide O.M. No. VI-25013/53/90-GPA.I dated 6/8th

November, 1990 has laid down that the following work is required to be handled
by the Ministry of Home Affairs, GPA.II Desc. in consultation with the Director,
CBI and Joint Director, Interpol Wing, CBI :-

(a) Receipt of evidence from a court or authority in a foreign

country in response to the letter of request sent by a Court or
authority in a foreign country under Section 166-A, and its
despatch to the concerned Court in India;

(b) Receipts of request from a Court or authority in a foreign

country under sub-section 1 of Section 166-B, and after scrutiny
thereof by the Interpol Wing of the CBI forwarding the same for
taking appropriate action to the Magistrate or Police Officer, as the
case may be; and

(c) Receipt of all evidence taken or collected by the Magistrate

or the Police Officer, as the case may be, under sub-section(2) of
Section 166-B and its dispatch to court or authority in the foreign
country from whom the request was received, through the
diplomatic channel.

All correspondence in this regard may be addressed to the Joint Secretary

(GS), in the Ministry of Home Affairs/GFA.II Desk, Ministry of Home Affairs.
5. DP&T have issued instructions that no request for issuance of a letter of
request to any court will be made without prior clearance of the Central
Government as certain difficulties were experienced in connection with execution
of letter of request for investigation abroad and since the process involved
matters relating to foreign policy, bilateral diplomatic relations, the procedure laid
down in the requested foreign country to handle such requests, assurance for
reciprocity, crime scenario at the international level and certain other relevant
factors which may be expensive and time consuming exercise. It is, therefore,
imperative that a reference to the Central Government be made to obtain this
clearance whenever it is found that such an assistance is needed under Section
166-A of the Cr.P.C.

6. A reference to Interpol Wing may be made to ascertain the name of the

competent authority in the requested country and also the requirement of the law
of the aforesaid foreign country to take up such requests, the language in which
such requests are to be translated along with the documents accompanying the
request and whether we have any legal mutual assistance treaty, agreement,
MOU, or arrangement with the requested foreign country and the requirements
thereof. Some countries have the requirement of obtaining an undertaking by the
Government of India to assure reciprocity. The principal of duel criminality is
relevant in most of the foreign countries and it has to be ensured that this
requirement is duly attended to.

7. A request to the Court of Competent jurisdiction may be made in the light

of above information to issue a Letter of Request to the concerned Competent
Judicial Authority in the requested country. This request should provide brief
facts of the case, particulars of the witnesses to be examined, details of the
documents to be collected, the evidence to be collected and the relevance of the
same to the investigation of the case, the justification for investigation abroad to
collect the said evidence and should indicate whether the requirements of the
requested state have been complied with.

8. In case the Court of India decides to issue the Letter of Request as

prayed, the same will be issued by the Court and will be addressed to the
Competent Judicial Authority of the requested country and shall contain material
showing the competence and jurisdiction of the issuing Indian Court, identity
particulars and brief facts of the case, name of the accused against whom
investigation is directed, relevant legal provisions and their description,
punishment prescribed. The relevant extracts of the legal provisions may be
enclosed for perusal and reference of the requested competent Judicial Authority
in the requested country. The request should clearly spell out the assistance
sought. When requesting for statement of the witnesses, a detailed questionnaire
should be enclosed for each witness separately to enable the requested Judicial
Authority to record the evidence. Identity, particulars of each of the witnesses to
be examined should be mentioned clearly with full address. When the assistance
is sought to collect or prove any document, our requirement should be clearly
spelt out and a copy of the relevant enactment may also be enclosed.

9. It may be mentioned in the L.R. that as per Indian Law, it is not necessary
to give any notice to the accused before executing the Letter of Request .

Note : In certain countries viz, USA, their law requires that a notice has to be
given to the accused while collecting evidence during investigation and the
evidence collected without observing their procedure may not be allowed to be
entered against the accused to that country. However, there is no requirement
under the criminal procedure law of our country and, therefore, it is not necessary
to give such a notice while executing a request for such assistance from this
country which would delay the process without any ensuing benefit.

10. It would be desirable to keep the following points also in mind while
preparing a Letter of Request :

i) The law of the foreign country concerned regarding mutual

legal assistance in criminal investigation and its compliance may be
mentioned in the LRs to be issued.
ii) Whether the request of the documents with letter of request
are required to be translated in the language of the requested
country and whether this requirement has been fulfilled.

iii) Certain foreign countries require an undertaking by the Govt.

of India for which the form is prescribed by that country. In such a
case, the required undertaking has also to be enclosed with Letter
of Request.

(iv) The principal of dual criminality is relevant in most of the

foreign countries and it has to consured that this requirement is
attended to while preparing the L.R.

(v) In case we have a treaty/agreement/MOU/arrangement with

the requested country relating to the mutual legal assistance the
L.R. has to be prepared in accordance with such
treaty/agreement/MOU/arrangements.

(vi) It should specifically be mentioned that the evidence, oral or

documentary collected in pursuance to the Letter of Request will be
issued only in the case mentioned in the request.

(vii) An assurance of reciprocity of the arrangement as per

bilateral arrangement, treaty and our law may also be given in the
request.
(viii) The various documents, photographs and objects, if
enclosed with the letter of request, should be clearly marked and
referred to in the request to enable the requesting Judicial Authority
abroad to know clearly what is requested to be done with them.

(ix) A copy of the First Information Report and also a copy of the
relevant legal provisions should be enclosed.
 CHAPTER. XII

POWERS OF INVESTIGATING OFFICER TO INSPECT BANKER’S BOOKS

AND FREEZE BANK ACCOUNTS IN CORRUPTION CASES
___

The Bankers‟ Books Evidence Act, 1891 has laid down certain guidelines
to the Banks in regard to production of Banker‟s books in legal proceedings and
also inspection of the entries in the books by a party to a legal proceeding.

Bankers‟ Book include ledgers, day books, cash books, account books
and all other books used in the ordinary business of a Bank, (Clause 3 of Section
2 of the Act).

The term legal proceeding is defined in Clause 4 of Section 2 as follows:

i) Any proceeding or inquiry in which evidence is or may be given;

ii) An arbitration; and

iii) Any investigation of inquiry under the code of Criminal Procedure,

1973, or under any other law for the time being in force for the
collection of evidence, conducted by Police Officer or by any other
person (not being a Magistrate) authorized in this behalf by a
Magistrate or any law for the time being in force.

It will be seen from sub-clause (iii) that an investigation or inquiry under

Criminal Procedure Code by a Police Officer for collection of evidence is also a
legal proceeding under this definition.

Sec.4 of the Act provides that a certified copy of any entry in a Banker‟s
Book shall be received as prima facie evidence of the existence of such entry.

An officer of the bank cannot be compelled to produce any banker‟s book

in any legal proceeding to which the banker is not a party or to appear as a
witness in such proceeding to prove the matters, transactions and accounts
recorded therein unless there is an order of the court or judge made for special
cause (Sec.5).

As regards inspection of banker‟s book, it is provided in Sec.6 of the Act

that such an inspection can be made only by a party to a legal proceeding after
obtaining an order from the court or the Judge to inspect and take copies of any
entries in a banker‟s book for the purpose of such proceeding. The court is also
empowered to order the bank to prepare and produce certified copies of all such
entries.

There is a clarification in Sec.8 - that in the application of the provisions of

Secs. 5 & 6 to an investigation or inquiry referred to in Sub-clause (iii) of Clause
4 of Sec.2, the order of the court of Judge shall be construed as referring to an
order made by a Police Officer not below the rank of a Superintendent of Police
as may be specified by the Government.

Notwithstanding the above provisions in the Bankers‟ Books Evidence Act,

the Prevention of Corruption Act, 1988 has conferred wide powers on the Police
Officer investigating an offence under that Act, in regard to inspection of Bank
records etc.

Under Sec.13 of the Prevention of Corruption Act, a Public Servant who

commits criminal misconduct, is liable to be punished with imprisonment for a
term which shall be not less than one year but which may extend to seven years
and shall also be liable to fine. Without fixing the amount of fine which could be
imposed under sub-section (2) of Sec.13, the legislature has indicated the
matters to be taken into consideration for fixing the fine under Sec.16 of the Act
and it categorically provides that for fixing the amount of fine under sub-sec.(2) of
Sec.13 or Sec.14, the Court shall take into consideration the amount or the value
of the property which the accused person has obtained by committing the
offence.
Sec.18 of the Prevention of Corruption Act, 1988 which empowers the
police officer to inspect banker‟s books, reads as follows -

“Power to inspect banker‟s Books - If from information received or

otherwise, a Police Officer has reason to suspect the commission of an
offence which he is empowered to investigate under Sec.17 and considers
that for the purpose of investigation or inquiry into such offence, it is
necessary to inspect any bankers‟ books, then, notwithstanding anything
contained in any law for the time being in force, he may inspect any
bankers‟ books in so far as they relate to the accounts of the persons
suspect to have committed that offence or of any other person suspected
to be holding money on behalf of such person, and take or cause to be
taken certified copies of the relevant entries there from, and the bank
concerned shall be bound to assist the police officer in the exercise of his
powers under this section:

Provided that no power under this section in relation to the

accounts of any person shall be exercised by a police officer below the
rank of a Superintendent of Police, unless he is specially authorized in this
behalf by a police officer of or above the rank of Superintendent of Police.

Explanation : In this section expressions “bank” and

“bankers‟ books” shall have the meanings respectively assigned to them in
the Bankers‟ Books Evidence Act, 1891 (18 of 1891).

It will be seen that this section enables a Police Officer who is empowered
to investigate an offence under the Act, to inspect any bankers‟ books which
relate to the accounts of a person suspected to have committed the offence or of
any other person suspected to be holding money on behalf of such person. He is
also empowered to take certified copies of the relevant entries in those books.
This power is vested in a Police Officer of and above the rank of Superintendent
of Police or by a subordinate Police Officer who is specially authorized by such
superior officer.

Another important aspect which is not covered by the Banker‟s Books

Evidence Act is regarding the power of the Police Officer to freeze the bank
accounts and issue a prohibitory order not to operate the accounts of a person
suspected to have committed an offence or of another person suspected to be
holding money on behalf of such person.

In this connection it is pertinent to notice the relevant provisions of the

Criminal Law Amendment Ordinance, 1944, and Sec.12 Crl. Procedure Code.

The Criminal Law Amendment Ordinance, 1944, provides for preventing

the disposal or concealment of money or other property procured by means of
certain offences punishable under the Indian Penal Code and the Prevention of
Corruption Act, 1988. For this purpose the money or other property may be
attached during the investigation and the attachment will continue till the disposal
of the criminal case and if the criminal proceeding ends in conviction of the
accused, the amount of fine imposed by the Criminal Court shall be recovered
from the values of the attached property.

The provisions of Sec.102 Cr.P.C. indicate that the Police Officer has the
power to seize any property which may be found under circumstances creating
suspicion of the commission of any offence. The legislature having used the
expression “any property” and “any offence” has made the applicability of the
provisions wide enough to cover offences created under any Act. But the two
pre-conditions for applicability of Sec.102 (1) are that it must be „property‟ and
secondly, in respect of the said property there must have suspicion of
commission of an offence.

In this view of the matter the questions that arise for consideration are
whether the Bank account of an accused or of his relation or other person
holding money on behalf of accused can be said to be „property‟ within the
meaning of sub-sec. (1) of Sec.102 of the Cr.P.C. and secondly, whether
circumstances exist, creating suspicion of commission of any offence in relation
to the same. Different High Courts in the country have taken divergent views in
this regard.
 In Textile Traders Syndicate Vs. The State of U.P. (1960 Cri.L.J. 871
AIR 1960 All 405) the Allahabad High Court held that the order passed by a
Police Officer prohibiting the bank not to pay any amount to the accused out of
his account with the Bank is without jurisdiction.

A Division Bench of the Delhi High Court in Swaran Sabharwal vs.

Commissioner of Police (1988 Cr.L.J.241) also took the same view and held
that the prohibitory order passed by the Police Officer u/s 102 of the Cr.PC
prohibiting the operation of the account in the Bank is liable to be quashed.

Again in M/s. Purbanchal Road Service, Guhati vs. State (1991

Cr.L.J.2798) the Gauhati High Court also held that the order passed by the
Police Officer directing the bank not to allow the accused to withdraw money or
property from the accounts and lockers held by him is not permissible u/s 102 of
the Cr.P.C.

In M/s. Malnad Construction Co. vs. State of Karnataka (1994 Cr.L.J.645)

the Karnataka High Court held that „seizure‟ contemplated in Sec.102 of the
Cr.P.C. does not include issuance of order to the banker prohibiting operation of
the account by the accused and the prohibitory order issued by the Police
Officer to the bankers of the accused to freeze or suspend the operation of his
account is unsustainable.

As against the above decisions, the Madras High Court in Bharath

Overseas Bank vs. Minu Publication, [988 Mad L.J. (Cri) 309] held that
money in bank account is property within the meaning of Sec.102 of the Cr.P.C.
and the Police Officer is competent to issue order prohibiting operation of the
accounts of the accused in the bank and such order is valid. In this decision the
High Court observed as follows :-

“In modern days, where commission of white collar crimes and bank
frauds are very much on the increase and banking facilities have been extended
to the remotest rural areas, interpreting the term „property‟ in Sec.102 Cr.P.C. in
a way, as to exclude money in a bank, would have the effect of placing legal
hurdles, in the process of investigation into these crimes, which could never have
been the intent of the framers of the Criminal Procedure Code. In view of the
wide meaning given to the term property in Sec.452(5), Cr.P.C. as including, in
the case of property regarding which an offence appears to have been
committed, not only such property as was originally in the possession, but also
any property into which it might have been converted or exchanged and also
anything acquired by such conversion or exchange, whether immediately or
otherwise, to put too narrow a construction on the term „property‟ occuring in
Sec.102 Cr.P.C. would be against the very spirit of the Criminal Procedure
Code.”

On the next question for consideration, whether such a bank balance is

capable of being seized by the Investigating Officer, High Court observed that
“the only act of ownership, which the customer of the bank exercises over the
bank balance, is operating the account, either by making deposits or by
withdrawing the same, in any mode made available to him by the bank. When
corporeal tangible property is seized, by taking physical possession and
producing it in court, the seizure is intended to have the effect, of preventing the
person from whom it is seized, from exercising any acts of ownership or
possession over the property. The property, therefore, is physically removed
from his possession and is produced before the Court. The Court take
possession of the property and has thus prevented the person, from exercising
acts of ownership or possession over them. The only way, in which such an
effect can be brought about, regarding bank balance, is to issue a prohibitory
order, restraining the customer from operating his account in the bank, either by
remittance or by withdrawal. This act of preventing the customer from exercising
any right over the bank balance constitutes seizure of the bank balance, which
the bank balance constitutes seizure of the bank balance, which in ordinary
parlance is described as “freezing”. The consequences that flow from freezing a
bank balance, following a prohibitory order, are the same, as those that flow from
the physical removal of any movable property, following a seizure”.

The Delhi High Court in P.K. Parmar vs. Union of India [(1992)
Cr.L.J.2499] after elaborate consideration of the power of the Police Officer to
direct the various bankers and financial institutions to freeze the accounts of the
accused held that such orders passed by the Police Officer under Sec.102 of the
Cr.PC are legal and valid.

In Babu Varghese vs. Deputy Superintendent of Police, Kottayam and

another (1991 Crl.L.J.1111), Kerala High Court held that where during
investigation of offence of cheating the investigating officer found that the
accused had collected large amounts from various depositors promising to invest
said accounts very lucratively and cheated them and he also found that accused
had deposited said amounts in various banks, the notices by investigating officer
directing the banks to freeze the operation of accounts of accused, were legal.

Ultimately this conflict of judicial opinion has been resolved by the

Supreme Court, in State of Maharashtra vs. Tapas D.Neogy [1999(8)
Supreme 149]. The Supreme Court agreed with the views of the Madras and
Delhi High Courts in 1988 MLJ Crl.309 and 1992 Cr.L.J.2499 respectively and
held as follows:

“Having considered the divergent views taken by different High Courts

with regard to the power of seizure under Sec.102 of the Code of Criminal
Procedure and whether the bank account can be held to be property within the
meaning of said Sec.102(1), we see no justification to give any narrow
interpretation to the provisions of the Criminal Procedure Code. It is well known
that corruption in public offices has become rampant that it has become difficult
to cope up with the same. Then again the time consumed by the Courts in
concluding the trials is another factor which should be borne in mind in
interpreting the provisions of Sec 102 of the Criminal Procedure Code and the
underlying object engrafted therein, in as much as, if there can be no order of
seizure of the bank account of the accused then the entire money deposited in a
bank which is ultimately held in the trial to be the outcome of the illegal
gratification, could be withdrawn by the accused and the courts would be
powerless to get the said money which has any direct link with the commission of
the offence committed by the accused as a public officer. We are therefore
persuaded to take the view that the bank account of the accused or any of his
relation is „property‟ within the meaning of Sec.102 of the Criminal Procedure
code and a Police Officer in course of investigation can seize or prohibit the
operation of the said account if such assets have direct links with the commission
of the offence for which the Police Officer is investigating into.

Thus, the law in this regard is well settled that money in a bank account is
„property‟ within the meaning of Sec.102 Cr.P.C. and a Police Officer can seize
or prohibit the operations of the said account during the course of investigation if
it appears that an offence has been committed and the money deposited in the
bank is the outcome of the commission of the offence by the accused.
 CHAPTER XIII

CONCLUSION
Annexures

10.1 The following Annexures are appended to this note:

Annexure I Proforma of Order u/s 102 Cr. P.C. for seizure/freezing of

Annexure II Proformae of Statements I to VI to be obtained from the

public servant (through his Department).

Annexure III Statements A to D which are to be prepared and updated

from time to time for being enclosed with Progress
Reports, Final Report (Part I) and finally with the SP's
Report.

Annexure IV CBI Policy Division Circulars on the subject of

disproportionate assets.

Annexure V Brief Digest of some important Court and CAT rulings on

the subject.
Annexure VI Three illustrative examples of calculation of
disproportionate assets.

Need for sustained investigation

10.2 A case of disproportionate assets requires patient, persistent, painstaking

and sustained investigation, which should be carefully planned and diligently
pursued in order to succeed in determining the true state of affairs of the public
servant in regard to his income, expenses and assets and for arriving at a correct
conclusion which can, on the basis of the evidence collected, stand tile test of
judicial scrutiny in the court or be acceptable in a departmental enquiry.

10.3 Collection of evidence in a case of disproportionate assets has to be done

with the dedication, thoroughness, perseverance and patience of an ant locating
grains and carrying them, one by one, to its abode. There are no short cuts and
instant solutions which are readily available.

Confidentiality

10.4 This note is meant only for the guidance of the Investigating and
Supervisory Officers of CBI and State Anti-Corruption Agencies and should not
be cited in a court or during departmental proceedings. It should not also be
passed on to unauthorised persons.
 ANNEXURE - I

ORDER FOR SEIZURE OF PROPERTY

(Under Section 102 of Code of Criminal Procedure, 1973)

To

The Manager
________________________
(Name of the Bank)
________________________

1. Whereas a Criminal Case _________________ CBI, DSPE _________

registered on ____________ under Section/s _______________________
against Shri (Name, designation & address) is being
investigated by the undersigned; and

2. Whereas the amounts deposited, credit balances held and lockers held by
Shri _____________________________, the members of his family and others
as indicated in the tabular statement below are properties which have been found
under circumstances which create suspicion of the commission of the offence/s
cited above which are under investigation :

S. No. Account/Locker/FDR etc. No. Name of the Holder

(1) (2) (3)

3. The above properties are hereby seized under Section 102 of the Code of
Criminal Procedure, 1973 during the investigation of the case cited above and
you are hereby directed not to allow any operation of or withdrawal from the
properties cited above.

( )
Inspector/Dy. Supdt. of Police
CBI : SPE

Copy to : Special Judge __________________ under Section 102(3) of the Code

of Criminal Procedure, 1973.
( )
Inspector/Dy. Supdt. of Police
CBI : SPE
 ANNEXURE - II

STATEMENT NO. 1

Statement of immovable property possessed by the undersigned and his

dependents either in their own names or in the names of other as on ________.
(Here IO has to give the last date of the period of check).

Details of property Held in whose Date of Method of acquisition

(full address to be name acquisition (whether acquired by
furnished purchase or inheritance
or gift, lease or any
other means)
(1) (2) (3) (4)
1 House or shop or other
building

2 Land or plot of land

3 Other type of
immovable property

Name & address of Price paid for the Source from which Particulars of
person from whom property or if payment was made sanction obtained
acquired acquired otherwise for the property & or intimation given
than by purchase, mode of payment to competent
mortgage or lease, (Give cheque/DD authority in respect
value at the time of No., date name of of acquisition.
acquisition bank & branch)
(5) (6) (7) (8)

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________

Note : Details of property held by a joint Hindu family or HUF or any other
property which is jointly owned in which the official or his dependents have
a share should also be furnish.
 STATEMENT NO. II

Statement of immovable property possessed by the undersigned and his

dependents either in their own names or in the names of other as on and
disposed of between _______ and _______ (Here IO has to give
commencement date and last date of the period of check).

Details of Held in whose Date of Sale price or How was sale Name &
property name disposal or value at the price utilised address of the
disposed of sale time of or invested person to
(full address disposal if whom the
to be otherwise property was
furnished disposed of sold or
and mode of otherwise
receipt of disposed of.
payment
(1) (2) (3) (4) (5) (6)
1. House or
shop or other
building

2. Land or plot
of land

3. Other type of
immovable
property

Particulars of Date of Mode of Price, if Name & Particulars of

sanction acquisition acquisition acquired by address of the sanction
obtained or purchase; if person from obtained or
intimation acquired whom intimation
given to otherwise, acquired given to
competent value at the competent
authority in time of authority in
respect of acquisition respect of
disposal acquisition
(7) (8) (9) (10) (11) (12)

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________

Note : Details of property held by a joint Hindu family or HUF or any other
property which is jointly owned in which the official or his dependents have
a share should also be furnish.
 STATEMENT NO. III

Statement of movable property possessed by the undersigned and his

dependents either in their own names or in the names of other as on _______
(Here IO has to give last date of the period of check).

Details of property Held in whose name Date of acquisition Mode of acquisition

disposed of (full (Whether aacquired by
address to be purchase or inheritance
furnished or gift or any other
means)
(1) (2) (3) (4)
1. Ornaments &
jewellery (full list
including loose pieces
of gold silver and
precious stones and
any other articles
made
2. All means of
conveyance (Car,
scooter, motorcycle,
moped, etc.

Price paid or if acquired Source from which payment was Particulars of sanction obtained
otherwise than by purchase its made for the property & mode of or intimation given to competent
value at the time of acquisition payment authority in respect of
acquisition.
(6) (7) (8)

3. Furniture

4. Carpet

5. TV, LCD TV, Home Theatre Systems,

Tape Decks, DVD or DVD recorders,
VCD, Digital Cameras, Film Cameras,
Camcorder, MP3 Players, Laptops,
Palmtops, Mobile Phones, Desktop
Computers, Car Accessories including
Audio-Video equipment installed in the
car.

6. Airconditioner.
7. Electrical gadgets such as geyser,
washing machine, dish washers, oven,
microwave-oven, food processors, and
other kitchen gadgets etc.

8. Paintings by renowned painters, artifacts,

sculptors etc.

9. Watches, pens, and other valuable

articles.

10. Crockery, cutlery and other utensils.

11. Clothing and other personal articles.

12. Gym equipment/fitness equipment.

13. Fire arm.

14. Animal articles.

15. Other articles.

--------------------------------------------------------------

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________
 STATEMENT NO. IV

Statement of movable property possessed by the undersigned and his

dependents either in their own names or in the names of other and disposed of
between __________ and _______ (Here IO has to give commencement date &
last date of the period of check).

Details of Held in Date of Mode of Sale price How was Name & address
assets whose disposal disposal (or value at the sale price of the person to
disposed name time of disposal utilised whom the
of if otherwise property was
disposed of) and sold or otherwise
mode of receipt disposed of.
or price.
(1) (2) (3) (4) (5) (6) (7)
1. Ornaments & jewellery (full list
including loose pieces of gold
silver and precious stones and
any other articles made

2. All means of conveyance (Car,

scooter, motorcycle, moped,
etc.

Particulars of Date of acquisition Mode of acquisition Price, if acquired if Name and address
sanction obtained or acquired otherwise the person from
intimation given to value value at the whom acquired.
competent authority time of acquisition
in respect of disposal

(8) (9) (10) (11) (12)

3. Furniture

4. Carpet

5. TV, LCD TV, Home Theatre Systems,

Tape Decks, DVD or DVD recorders,
VCD, Digital Cameras, Film Cameras,
Camcorder, MP3 Players, Laptops,
Palmtops, Mobile Phones, Desktop
Computers, Car Accessories including
 Audio-Video equipment installed in the
car.

6. Airconditioner.

7. Electrical gadgets such as geyser,

washing machine, dish washers, oven,
microwave-oven, food processors, and
other kitchen gadgets etc.

8. Paintings by renowned painters, artifacts,

sculptors etc.

9. Watches, pens, and other valuable

articles.

10. Crockery, cutlery and other utensils.

11. Clothing and other personal articles.

12. Gym equipment/fitness equipment.

13. Fire arm.

14. Animal articles.

15. Other articles.

-----------------------------------------------------------------------------------

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________
 STATEMENT NO. V

Statement of financial investment and cash possessed by the undersigned and

his dependents either in their own names or in the names of other as on _______
(Here IO has to give last date of the period of check).

Held in whose Date of Amount Present value

Details of investment name investment invested or
or purchase for which
purchased
(1) (2) (3) (4) (5)
1. Saving A/C No.

2 Current A/c No.

3 Fixed Deposit No..
4 Cumulative/Recurring Deposit No.
5 Other bank deposit No.
6 PO Savings A/c No.
7 P.O. Fixed Deposit No.
8 P.O. Cumulative Deposit No.

Name & address of Banker or Source from which Particulars of

other Organisation or person payment was made sanction
with whom invested or from and made of payment obtained or
whom purchased (give cheque/DD No., intimation
date, name of bank given to
and branch) competent
authority in
respect of
acquisition
(6) (7) (8)

9. PO Recurring Deposit No.

10. NSCs

11. Kisan Vikas Patras.

12. Indira Vikas Patras

13. Government Securities

14. Bearer Bonds

15. Loans advanced

16. Deposits with companies & firms.

17. Shares

18. Debentures.

19. Life Insurances, Jeevan Dhara, Jeevan

Akshay etc. police of LIC.

20. Units, Master Shares, Mutual funds,

Magnums, etc.

21. P.P.F.

22. Deposits/payments for plots and flats

which are not yet allotted.
Note : If alloted, they should be included
in Statement I and not in this Statement.

23. Cash in hand

24. Credit Card Accounts.

25. Any other investment, deposits, credit

balance etc.

--------------------------------------------------------------------------------

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________
 STATEMENT NO. VI

Statement of financial investment and cash possessed by the undersigned and

his dependents either in their own names or in the names of other and disposed
of or which matured or payment was received between ______ and
___________ (Here IO has to give the commencement date and last date of the
period of check).

Details of Held in whose Date of Face Amount Name of

investment name which Value received Bank or
payment other
received organisati
on or
person
from
whom
payment
received
(1) (2) (3) (4) (5) (6)
1. Saving A/C No.

2 Current A/c No.

3 Fixed Deposit No..
4 Cumulative/Recurring Deposit No.
5 Other bank deposit No.
6 PO Savings A/c No.
7 P.O. Fixed Deposit No.
8 P.O. Cumulative Deposit No.

Particulars of Particulars of Date of Value at the time of acquisition Name & address of the b
the cheque/DD sanction obtained acquisition organi- sation or person w
etc. by which or intimation given of the invested or from whom pu
payment to competent investment
received authority in or other
respect disposal property
and/or receipt of
payment

(7) (8) (9) (10) (11)

9. PO Recurring Deposit No.

10. NSCs
11. Kisan Vikas Patras.

12. Indira Vikas Patras

13. Government Securities

14. Bearer Bonds

15. Loans advanced

16. Deposits with companies & firms.

17. Shares

18. Debentures.

19. Life Insurances, Jeevan Dhara, Jeevan

Akshay etc. police of LIC.

20. Units, Master Shares, Mutual funds,

Magnums, etc.

21. P.P.F.

22. Credit Cards.

23. Repayment or refund of any other

investment or deposit.

--------------------------------------------------------------------------------

Signature ______________
Date __________________
Full Name ______________
Designation _____________
Address ________________
 ANNEXURE - III

STATEMENT - A
ASSETS AT THE BEGINNING OF THE PERIOD OF CHECK

Immovable Assets

a. Plots, flats and building

b. Agricultural land.

Movable Assets.

a. Bank balances in Savings and Current accounts, Fixed Deposits

etc.

b. Balances in Post Office Accounts.

c. National Saving Certificates, Kisan Vikas Patras, Indira vikas

Patras etc.

d. Government securities.

e. Bearer Bonds.

f. Loans advanced.

g. Deposits with Companies, firms etc.

h. Shares and debentures in Joint Stock Companies.

i. Jeevan Akshay, Jeewan Dhara and such investment policies of

LIC, Units, Mastershares, Mutual Fund, PPF etc.
j. Cash, bullion, jewelry and ornaments.
k. Furniture and carpets.
l. Car, scooter, motor cycle, moped etc.

m. Radio, TV, VCR, tape recorder, airconditioner, typewriter etc.

n. Electrical gadgets, such as washing machine, room cooler,
refrigerator, freezer, oven, micro oven, mixie, other kitchen gadgets
etc.
o. Watches, pens, paintings and other valuable articles.

p. Animals.
 q. Other assets.

Note :

(i) Date of acquisition and cost to be indicated in each case. Cost to be

computed as at the time of acquisition.

(ii) If any of these assets were disposed of or matured or repaid to the public
servant during the period of check and the amount thus received by the
public servant is included in the Income Statement C, then such assets
should not be included in this Assets Statement-A.
 STATEMENT - B

ASSETS AT THE CLOSE OF THE PERIOD OF CHECK

Immovable Assets

a. Plots, flats and building

b. Agricultural land.

Movable Assets.

a. Bank balances in Savings and Current accounts, Fixed Deposits

etc.

b. Balances in Post Office Accounts.

c. National Saving Certificates, Kisan Vikas Patras, Indira vikas

Patras etc.

d. Government securities.

e. Bearer Bonds.

f. Loans advanced.

g. Depopsits with Comapnies, firms etc.

h. Shares and debentures in Joint Stock Companies.

i. Jeevan Akshay, Jeewan Dhara and such investment policies of

LIC, Units, Mastershares, Mutual Fund, PPF etc.
Note : Premia paid on life insurance policies of LIC, PLI should not
be included in this statement. They should be incorporated in the
Expenditure Statement - D.

j. Cash, bullion, jewellery and ornaments.

k. Furniture and carpets.

l. Car, scooter, motor cycle, moped etc.

m. Radio, TV, VCR, tape recorder, airconditioner, typewriter etc.

n. Electrical gadgets, such as washing machine, room cooler,

refrigerator, freezer, oven, micro oven, mixie, other kitchen gadgets
etc.
 o. Watches, pens, paintings and other valuable articles.

p. Animals.

q. Other assets.

Note :

(i) Date of acquisition and cost to be indicated in each case. Cost to be

computed as at the time of acquisition.

(ii) If any of these assets were disposed of or matured or repaid to the public
servant during the period of check and the amount thus received by the
public servant is included in the Income Statement C, then such assets
should not be included in this Assets Statement-A.
 STATEMENT - C

INCOME AND OTHER RECEIPTS DURING THE PERIOD OF CHECK

(1) Pay and allowances.

(2) Rents.

(3) Dividends

(4) Interests

(5) Loans and advances

(6) Gifts

(7) Agriculture income.

(8) TA & DA (only in very exceptional cases; otherwise not

permissible as income)

(9) Income Tax refunds.

(10) Maturity values received of Insurance policies, fixed deposits etc.

(11) GPF advance and withdrawal.

(12) Profit on sale of assets.

(13) Sale proceeds of assets (such assets should not then figure in
Statement - A)

(14) Income and receipts of family members (in appropriate case)

(15) Other income.

Note : Explanation to Sec. 13(1)(e) of P.C. Act, 19887 should be kept in view
while preparing this statement.
 STATEMENT - D

ITEMS OF EXPENDITURE DURING THE PERIOD OF CHECK

Verifiable expenditure

(1) House rent.

(2) Electricity, water, gas charges etc.

(3) Education of children

(4) Maintenance and running of vehicles.

(5) Income tax payments other than those deduced from salary or
other TDS.

(6) House tax and other taxes paid for property and insurance
amounts paid for property.

(7) Expenses on repairs of building

(8) House hold goods insurance, accident insurance etc.

(9) Life Insurance premia paid to LIC, PLI etc.

(10) Club expenses.

(11) Medical expenses which are not reimbursed.

(12) Locker fees.

(13) Expenses incurred on holidays, including for visits abroad.

(14) Losses on disposal of assets.

Non-Verifiable Expenditure

a. Rations
b. Milk

c. Tea, coffee and other beverages.

d Sugar
e. Eggs & poultry.
 f. Bread, butter & biscuits
g. Vegetables and fruits.
h. Shaving creams, soaps, tooth brush and tooth paste.
i Fuel other than gas and electricity.
j. Cloth and linen
k. Washing & Washerman‟s charges.
l. Shoes, chappals, socks, etc.
m. Movies and other entertainment including VCR library
expenses.
n. Pocket and transport expenses of children
o. Domestic servants.
p. Pets & kennel.
q. Expenses on marriages, other than those included in
Statement B.
r. Expenses on religious ceremonies
s. Transport expenses.
t. Other expenses.

Note :(i) Basis of calculation should be indicated in each case.

(ii) No item appearing in Assets Statement B should appear in

Expenditure Statement D.
 ANNEXURE - IV

SOME IMPORTANT CIRCULARS

RELATING TO DISPROPORTIONATE ASSETS

Sl. No. Particulars and Date Subject

1 Policy Division Circular No. 21/1/60- Statements I to VI to be obtained from
PD dt. 7.11.1964 the accused person through his
department prescribed.
2 Policy Division Circular No. 21/21/59- Note on investigation of cases of
PD dt. 11.8.1970 disproportionate assets.
3 Four Policy Division Circular No. In Progress Report of cases of
21/33/69-PD dated 3.11.76 and dated disproportionate assets, progressive
23.12.86, No. 27/2/78-PD dated 28.2.78 expenses and assets should be furnished
and No. 21/17/89-PD dated 5.4.89 in the prescribed Statement I to IV. Not
furnishing these in PRs indicates lack of
effective supervision and ignorance of
instructions.

Note : In this paper, these Statements I

to IV have been termed as Statements A
to D to avoid confusion with statements
I to VI prescribed by the Circular at Sl.
No. 1 supra.
4 Policy Division Circular No. 21/2/789- Procedure to be followed in
PD dt. 28.2.78 investigation of cases of
disproportionate assets and measures
for its improvement.
5 Director's Circular No. 120 dt. 14.7.78 Investigation of cases of
disproportionate assets - Revision of
chapter thereon in the CBI Hand Book
No. III - Part.I
6 Legal Division Circular No. 12/2/79- Digest of certain cases of the Supreme
LD dt. 18.6.81 Court and High Courts.
7 DCBI Circular No. 124 dated 16.8.84 Need for careful verification before
registering a case of disproportionate
assets.
8 Policy Division Circular No. 27/8/85- Guidelines for registration of cases of
PD dated 16.7.85 disproportionate assets. - need for
caution while registering a case of case
disproportionate assets
9 Two Policy Division Circulars Nos. Need for prompt attachment of
21/3/86-PD dated 18.2.86 and 14.3.88 property of those who are found in
possession of assets disproportionate to
their known sources of income.
10 OM No. 142/5/84-AVD.I dated 20.6.86 Guidelines for suspension of suspected
 of Deptt. of Personnel & Trg., Govt. of officials in corruption cases (including
India (Circulated vide Policy Division in cases of disproportionate assets).
No. 21/3/86-PD dated 23.10.86)
11 Policy Division Circular No. 21/10/87- Valuation of gold ornaments in case of
PD dated 18.3.87 disproportionate assets
12 Policy Division Circular No. 21/5/86- Submission of Reports u/s 173 Cr.P.C.
PD dated 7.5.87
13 Policy Division Circular No. 21/17/86- Guidelines for seizure of valuables and
PD dated 24.7.87 cash properties in disproportionate
assets cases, need to take photographs
of valuable assets, deposit of seized
cash in a bank account etc.
14 Legal Division Circular No. 13/2/86- SP should issue an order to the IO for
LD dt. 20.8.87 the investigation of a case of
disproportionate assets as required in
the second proviso of Sec. 5 of the P.C.
Act, 1947 (now Sec. 17 of P.C. Act,
1988).
15 Policy Division Circular No. 27/8/85- Determination of check pereiod in cases
PD dated 9.8.88 of disproportionate assets
16 Policy Division Circular No. 46/2/89- Guideoines for grant of rewards to
PD dated 25.1.89 informants and Govt. servants in cases
of disproportionate assets
17 Policy Division Dircular No. 21/17/86- Seizure (freezing) u/s 102 Cr.P.C. of
PD dated 21.3.89 credit balances in bank accounts etc. in
CBI cases in general and
disproportionate assets cases in
particular. Performa of seizure
prescribed.
18 Policy Division Circular No. 21/36/88- Accused public servants in cases of
PD dated 5.4.89 disproportionate assets should be
interrogated quickly so as to avoid
tampering with evidence or to prove his
innocence as the case may be.
19 Policy Division Circular No. 21/19/89- In spite of Benami Transaction
PD dated 20.4.89 (Prohibition) Act, 1988 coming into
force, assets acquired by a public
servant benami in the names of others
can be attached under the Criminal Law
Amendment Ordinance, 1944.
20 Policy Division Circular No. 27/8/85- Regarding investigation of
PD dt. 24.7.91 disproportionate assets when other
family members of the suspected
officers are also earning.
21 Policy Division Circular No. 21/21/97 Upgrading of guidelines to be observed
(SO No. 6) dt. 24.10.97 by the CBI Officers while conducting
 searches.
22 Policy Division Circular No. 21/40/99- Standardizing the procedure for
PD(Pt) dt. 28.11.2001 investigation into the Assessment of
wealth possessed by public servants -
instructions issued.
23 Policy Division Circular No. 21/40/99- Regarding taking assitance of the
PD(Pt) dated 24.6.2002 Valuation Cell of Income Tax.
 INVESTIGATION OF DISPROPORTIONATE ASSETS CASES IN THE LIGHT
OF JUDICIAL VERDICTS

by P.V. K. Ramana Prasad, Addl. Chief

Legal Adviser, ACB, Hyderabad
(Source courtesy : Vigilance Professional,
April-June, 2002)

Section 13(1) of PC Act 1988 pertains to the offence of Criminal

misconduct as a Public Servant. Section 13(1)(e) reads,

" if he or any person on his behalf is in possession of at any time during

the period of his office, been in possession, for which the Public servant
cannot satisfactorily account or pecuniary resources of property
disproportionate to his known sources of income" .

The necessary conditions which must be satisfied before the offence of

criminal misconduct can be said to have been committed by a person under
Section 13{1)(e) are:-

(i) The accused must be a public servant;

(ii) He or some other person on his behalf must be found

in possession of pecuniary resources or property, which is
disproportionate to his known sources of Income.

(iii) The accused is not able to satisfactorily account for

the possession of such disproportionate assets.

Since the possession of disproportionate assets being a substantive

offence, the responsibilities of the Investigating Officers while investigating such
cases have considerably increased. They should collect sufficient material so as
to be in a position to satisfy the court beyond any reasonable doubt that the
offence under section 13(1)(e) has been committed.

The subject of disproportionate assets can be discussed only when the

frequently used words are explained and understood.

I. Period of Check:- The period during which a delinquent officer is

suspected to have indulged in corrupt practices is taken into consideration to
ascertain the known sources of income and pecuniary resources and property in
his possession during that period to arrive at his disproportionate assets. It is the
"Period of Check" during which the entire income and expenses have to be
worked out and the excess of income over expenditure calculated. This
difference will give the quantum of "likely Savings" or 'Over Spending" which is
used for measuring whether the assets in possession of the delinquent officer at
the end of this period were disproportionate to his known sources of income. The
period of check has to be fixed after due consideration, taking care to see that it
is not unduly long. Otherwise, it will be difficult for thorough investigation. It
should not be too short so that information pertaining to crucial years may not be
missed. It must be the optimum period during which the accumulation of assets
by the delinquent officer is the maximum and during which he is suspected to
have indulged in malpractices. There are a few advantages in having a
reasonably short period of check. It is easy to make a through investigation for a
shorter period than for a longer one. It will be difficult to make investigation for
earlier years of service and get useful evidence. Moreover, even a moderate
disproportion discovered for a shorter period will be more effective than over a
longer period. If disproportion is spread over for the entire period of service the
net effect may turn out to be negligible.

II. Assets:- The term "assets" means the total valuee of the property,
both movable and immovable, possessed by a Government Servant at the time
of check. They refer only to what is actually in possession of a person at a
particular time.

Ill. Total Income:- "Total Income" during the period of check may include
not only the income from salary but also other receipts.

IV. Total Expenditure:- Under the head "Total Expenditure "are included
all items which are clear and outright expenses of the delinquent officer during
the period of Check. Expenses which constitute the acquisitions of assets should
not at all be considered under this head. They will come in the category of
"Assets"

V. Likely Savings:- If the "Total Expenditure during the period of check is

deducted from the Total Income during the same period the result would be the
"Likely Savings".

VI. Over Spending:- If the "Total expenditure exceeds "Total Income"

during the period of check" the excess shows the "Over spending".

VII. Disproportionate Assets:- The value of 'Assets" at the end of the

"Period of Check maybe less than or at the most equal to the "Likely Savings". In
any other case where the " Assets" exceed the likely savings " or where there is
"Over Spending" the public Servant concerned would be considered to possess
assets disproportionate to his known sources of income or simply
"Disproportionate Assets".
 It is not out of place to mention here that the possibility of a good case
arises only if the " Assets" are considerably more than the "Likely Savings" or
sufficiently disproportionate to the known sources of income. Once the
disproportion is discovered the public servant should be asked to explain as to
how he got the disproportionate or excessive assets i.e. those which can not be
explained by the "likely savings". If he cannot account for the same satisfactorily,
he would be liable for the charge of possession of assets disproportionate to his
known sources of income. The accused cannot be said to have discharged the
onus lying on him for rebutting the charge of possession of disproportionate
assets by merely offering a plausible explanation as to how he came into
possession of the unaccounted wealth. He has to satisfy the court by leading
sufficient evidence that his explanation is worth consideration.

The success of a case of disproportionate assets depends upon the

information and evidence collected by Investigating Officer from various sources.
Bank accounts of a Public Servant normally afford a very useful source of
information. It is therefore, necessary that in addition to other particulars, all the
Bank Accounts, which an officer is suspected to have operated at any time must
be collected and subjected to a thorough scrutiny. It has been found from
experience that an intelligent scrutiny of the bank accounts helps in a number of
ways and the chances of making a good case are sufficiently brightened.

Implication of concept Of "Known Sources of Income"

In the prevention of corruption Act 1988, an explanation has been added

to section 13 (l)(e) defining the term "known sources of Income", which reads:

"for the purpose of this section" known sources of income" means income
received from any lawful source and such receipt has been intimated in
accordance with the provisions of any Law, Rules or orders for the time
being applicable to a public Servant".

Therefore, in order is make out an offence Under Sec.13(I)(e), known

sources of income must be 1) from a Lawful source and 2) the-same should
have been intimated in accordance with the provision of any law, rules or orders
applicable to the public servant.

A Public Servant may commit an offence under Prevention of Corruption

Act or certain other offences under the Indian Penal Code falling within the
purview of criminal Law Amendment Ordinance, 1944 where the properties or
amounts are liable for confiscation on proof.

Very often the following instances of income, are boosted by accused

officers, I) Agricultural income 2) Gift 3) Loans 4) income of wife 5) income of
dependents 6) dowry, 7) shares and speculations 8) income from private trade
or business.
 Whatever may be the additional income shown by the accused Officer it
should be immediately seen whether it is lawful and intimated to the competent
authority in accordance with provisions of Law, rules or order .

It follows that if it is not lawful it need not be considered. Similarly, even if

it is a lawful source but has not been intimated in accordance with provision of
law it cannot be considered as known sources of income.

The word "Lawful" has a wider meaning than the word 'legal'. Lawful
means sanctioned and justified by law and that which is in conformity with the
principles or spirit of the law and not prohibited by Law. ' Legal' looks to the letter
and lawful' to the spirit of the Law.

The above essential conditions must be satisfied by the public servant and
whatever may be the amount of hardship, inconvenience or injustice caused to
the public servant.

In C. D.Swamy vs State, AIR 1960 SC 7, it was held by Supreme Court

that the prosecution cannot in the very nature of things be expected to know the
affairs of the accused. There will be matters especially within the knowledge of
the accused. It was further held that the expression known sources of income
must have reference to sources known to the prosecution: It is always open to
the accused to prove other sources of income which have not been taken into
consideration or brought into evidence by the prosecution.

Explanation inserted to Section 13(1)(e) assumes lot of importance and

significance as it is clearly held by Supreme Court in Nallammal's Case -1999
Cri.L.J. 1591 that the explanation "known sources of income" of the Public
Servants for the purpose of satisfying the court should be by any lawful sources.
Besides being lawful source, the explanation further enjoins that the receipt of
such income should have been intimated by the Public Servant in accordance
with the provisions of any law applicable to such income and should have been
intimated by the Public Servant in accordance with the provisions of any law
applicable to such public servant at the relevant time. So a Public Servant cannot
now escape from the tentacles of Section 13(1)(e) of the PC Act by showing
other legally forbidden sources, albeit such sources are outside the purview of
clauses (a) to (d) of the sub-section. The para Nos.18 to 20 of the Judgement
contain the various contentions of the defence and the observations of the court
rejecting the contentions and settling the legal issues.

The explanation under this section is prospective i.e. from 09.09.1988 and
not retrospective.

For the purpose of investigation to be more practical it has to be

considered and examined as to what is the illegal income or income from
unlawful source. If the income is found to be illegal or from any unlawful source it
has to be automatically deleted and it can not be taken into account for the
purpose of calculation. It has to be altogether ignored.

Even if such illegal income or income from unlawful source is intimated in

accordance with the provisions of Law Rules, or orders for the time being
applicable to a Public Servant it will not become lawful. As such, if the first
requisite is satisfied the other two requisites are not relevant.

Whether Accused Officer should satisfactorily account to the Investigating

Officer

In respect of disproportionate assets cases there is some delay particularly due

to serving a notice on AO after completion of investigation. In view of the above
said provision, and explanation to Sec.13, a doubt is being expressed by I.Os
whether a notice should be given to the AO to satisfactorily account for the
known sources of income.

A question may also arise whether the A.O. should satisfactorily account
for the known source of income to the Investigating Officer .

In an unreported Division Bench case of the Andhra Pradesh High Court,

it has been held that it is incumbent on the Investigating agency after completion
of investigation to furnish to the accused the statement of assets, income and
expenditure and ask him to explain the excess assets found in his possession
before obtaining sanction for his prosecution, as the gist of offence U/s 5(i) (e) of
the Prevention of Corruption Act is failure to satisfactorily account for possession
of excess assets
(Indrasena Reddy Vs. The State Anti Corruption Bureau, Crimina! Petition
No.457/1998).

The Madras High Court held that filing a charge sheet without giving an
opportunity to the accused Public Servant to account for possession of pecuniary
resources or property is illegal in view of the words " for which the Public Servant
cannot satisfactorily account" occurring; in Sec 5(1)(e) of the prevention of
Corruption Act, 1947 (Vedagiri in re. 1985 MLJ (Crl) 15J).

In 1993 Bombay High Court also held. that if opportunity to satisfactorily,

account has not been given to the accused either by the Investigating Officer or
by the sanctioning authority, sanction order stands vitiated (N.P.Lotlikar vs. CBI
& Another 1993 Cr.LJ.2051 Bombay).

However, the Supreme Court did not agree with the view of High Courts
and held that the Investigating Officer is only required to collect material to find
out whether the offence alleged appears to have been committed. In the course
of the investigation, he may examine the accused. He may seek his clarification
and if necessary he may cross check with him about his known sources of
income and assets possessed by him. Indeed fair investigation requires that the
accused should not be kept in darkness. He should be taken into confidence if he
is willing to cooperate. But to state that after collection of all material, the
Investigating Officer must give an opportunity to the accused and call upon him
to account for the excess of the assets over the known sources of income and
then decide whether the accounting is satisfactory or not, would be elevating the
Investigating Officer to the position of an inquiry officer or a judge. The
investigating Officer is not holding an inquiry against the conduct of the Public
Servant or determining the disputed issue regarding the disporportionality
between the assets and the income of the accused. He just collects material from
all sides and prepares a report which he files in the Court as charge sheet (K.
Veera Swamy, Former Chief Justice Vs. Union India and Others 1991 SCC
(Crl.) Crl.) 734734).

Even though the Supreme Court held so, it will be advantageous to the
Investigating Agency, if AO is given an opportunity to explain his version. It will
help investigating officer to further probe into the matter basing on his
explanation. It. will also enable the Investigating Agency to know the probable
defence of the AO. Therefore, reasonable time may be given to the A. O
.depending on the circumstances of the case. If the explanation given by the AO
is found to be satisfactory, the Investigating Officer may not pursue the matter
further for prosecution which will be a futile exercise.

Whether private persons can be charged along with Public Servant

In P.Nallammal vs. State 1999 JT(SC) 41 it was held that non-public

servants can be tried with Public Servants for abetting the offence U/s 13(1)(e). lt
can now be taken that the law is settled on the application of Section 109 IPC for
charging all the persons along with the public servant for abetment of offence U/s
13(1)(e) of PC Act, 1988. Whenever there is sufficient evidence of abetting the
public servant in commission of the offence U/s 13(1)(e) of the Act the abetment
can be either of the methods or modes mentioned as enumerated in section 107
IPC. Sections 107 and 108
IPC are reproduced below for ready reference.

Sec. 107 - Abetment of a thing:- A person abets in doing of a thing,

who,

Firstly -Instigates any person to do that thing; or

Secondly - Engages with one or more persons in any conspiracy for doing
of that thing; if an act or illegal omission takes place in pursuance of that
conspiracy, that in order to doing of that thing; or
 Thirdly - Intentionally aids, by any act or illegal omission, in doing of that
think.

Explanation : - A person who, by willful misrepresentation, or by wilful

concealment of a material for which he is bound to .disclose, voluntarily causes
or procures, or attempts to cause or procures, a thing to be done, is said to
instigate the doing of that thing

Sec. 108 - Abetor:- a person abets an offence, who abets either the
commission of an offence, or the commission of all act which would be an
offence if committed by a person capable by law of committing of an offence with
the same intention or knowledge as that of the abettor.

Explanation-l . The abetment of the illegal omission of an act may amount to an

offence although the abettor may not himself be bound to do that act.

Explanation-2. To constitute the offence of abetment it is not necessary

that the act abetted should be committed or that the effect requisite to constitute
the offence should be caused.

It is therefore, necessary for investigating agencies to keep in view the

ingredients of section 107 IPC and collect evidence particularly against the
persons who aid, assist conspire by any means either by omission or
commission and in this process a; thorough probe and interrogation of such
person can be taken up and such persons can be treated as accused for taking
cognizance of the offence along with the public and such persons can be
impleaded at any stage treating them as co-accused.

As per the guidelines given by the Supreme Court in Krishnanand

Agnihotri vs. State of Madhya Pradesh, 1977 Cr.L.J 566 and reiterated in B.
C Chaturvedi vs. Union of India, AIR 1996 S. C 484 the Special Courts are
generally inclined to allow reasonable margin of 10% on the total income of the
Government Servant while computing the disproportionate assets. The rationale
behind the above guidelines is that it is not possible for the Government Servant
to prove his defence with mathematical exactitude and intended to be applied by
the Investigating Agency for further action for prosecution or initiating
departmental action.

*****
 ANNEXURE - V

SOME IMPORTANT COURT AND CAT RULINGS IN

CASES Of DISPROPORTIONATE ASSETS

KNOWN SOURCES OF INCOME - IS KNOWN TO THE PROSECUTION

Prevention of Corruption Act (1947), S.5(3) - “ Known Sources”,

mean known to prosecution on investigation.

- The expression „known sources of income‟ must have reference to

sources known to the prosecution on a thorough investigation of the case and it
does not mean sources known to the accused.

Sajjan Singh Vs. State of Punjab AIR 1964 SC 464.

Prevention of Corruption Act (2 of 1947), S.5(2) r/w S.5(1)(e) -

Accused found having disproportionate assets in his possession - His duty
to account satisfactorily for such possession - Extent of proof - Accused
need not prove his innocence beyond all reasonable doubt.

The ingredients of the offence of criminal misconduct under S.5(2) read

with S.5(1)(e) are the possession of pecuniary resources or property
disproportionate to the known sources of income for which the public servant
cannot satisfactorily account. To substantiate the charge, the prosecution must
prove the following facts before it can bring a case under S.5(1)(e), namely, (1) it
must establish that the accused is a public servant, (2) the nature and extent of
the pecuniary resources or property which were found in his possession, (3) it
must be proved as to what were his known sources of income i.e., known to the
prosecution, and (4) it must prove, quite objectively, that such resources or
property found in possession of the accused were disproportionate to his known
sources of income. Once these four ingredients are established, the offence of
criminal misconduct under S.5(1)(e) is complete, unless the accused is able to
account for such resources or property. The burden then shifts to the accused to
satisfactorily account for his possession of disproportionate assets. The nature
and extent of the burden cast on the accused is well settled. The accused is not
bound to prove his innocence beyond all reasonable doubt. All that he need do
is to bring out a preponderance of probability. Case law is discussed.

State of Maharashtra Vs. Wasudeo 1981 (SC) Cr.L.J. 884

 BURDEN IS ON ACCUSED TO SATISFACTORILY ACCOUNT

Prevention of Corruption Act (1947), S.5(3) - “Satisfactorily account".

The Legislature has advisedly used the expression "satisfactorily

account". The emphasis must be on the word "satisfactorily", and the Legislature
has, thus, deliberately cast a burden on the accused not only to offer a plausible
explanation as to how he came by his large wealth, but also to satisfy the court
that his explanation was worthy of acceptance.

C.S.D. Swami Vs. The State, AIR 1960 SC 7

Prevention of Corruption Act (1947), Section 5(3) - Criminal

Misconduct in discharge of official duties - Presumption under Sub-
section(3) - Rebuttal.

Upon proof of disproportion in Sub-section(3) of Section 5, the onus falls

upon an accused person to account satisfactorily the acquisition of properties
and pecuniary sources held or possessed by him. That onus, it is true, may not
be as strict as the initial onus on the prosecution which has first to establish the
disproportion between the properties held by an accused and the known sources
of his income. But where from the facts the disproportion was not satisfactorily
explained. It could not be said that excessive burden was thrown on accused to
explain the disproportion.

Rameshwar Prasad Upadhya, Vs. State of Bihar AIR 1971 SC 2474.

Prevention of Corruption Act (1947) S.5(1)(e) - Power to launch

prosecution - Employer alone not empowered - Police also has the power -
No obligation on public servant to give accounts to police - Refusal
however is entirely at his own risk.

There can be no doubt that it is only possession of unaccounted pecuniary

resources of property punishable, but the ultimate accountability must be to a
Court set up to try offence. Merely because the employer has not considered it
appropriate or does not call upon the public servant to account for his property
can be no bar to a Court applying itself to consider whether offence under
Section 5(1)(e) of the Act has been committed by an accused or not. A Court
legally constituted cannot be shut out from applying itself to materials collected
during investigation. After the materials have been placed before a Court then
the question will arise whether the asset alleged to have been acquired by the
accused has been accounted for or not. An accused, has, therefore, to account
for his assets before a Court. An accused would be perfectly within his rights to
refuse to co-operate with the investigating agency in order to convince them that
there was no unaccountable asset disproportionate to his known resources of
income, but the risk will be entirely his.

Santosh Kumar Bhattacharjee Vs. State of Bihar, 1979 Cr.L.J. 384

Where the FIR expressly sets out the four essential ingredients of the
offence U/s. 5(1)(e) of Prevention of Corruption Act, 1947 then the fifth
ingredient namely that the accused cannot satisfactorily account for his
assets disproportional to his all known sources of income is implicit in the
FIR.

Prabhu J.U. Vs. Union of India (Karnataka) & Ors. 1983(2) Crime 715.

Possession of assets disproportionate to income - Prima facie

opinion had been formed that provisions of Section 5(1)(e) were attracted
- Notice had been sent to the delinquent as king for his explanation -
Suspension of delinquent officer - Not sufficient to infer malafides on part
of Govt.
Ishwar Piraji Kalpatri & ors. .Vs. State of Maharashtra & ors. 1996
Cr.L.J. 1127 (SC)

MARGIN IN DA CASES

Prevention of Corruption Act (1947), S.5(3) - Presumption under -

Disproportion between pecuniary resources and known sources of income
of accused

Held that since the excess was comparatively small and it was less than
10 per cent of the total income of Rs.1,27,715.43. It would not be right to hold
that the assets found in the possession of the accused were disproportionate to
his known sources of income so as to justify the raising of presumption under
S.5(3).

Krishnanand Agnihotri Vs. State of M.P. AIR 1977 SC 796

Prevention of Corruption Act (2 of 1947), Ss. 5(1)(e) & 5(2) - Govt.

Servant - No specific allegations in the FIR that building was constructed
by accused over plot purchased by his wife or that he spent huge amount
on construction of house - Income of wife (employed) not taken into
consideration while holding that he made or has been spent more money
during relevant period over these items in excess of known sources of his
income or that of his wife - FIR lodged after 8 years of purchase of items
and construction of building constituting allegations under S.5(1)(e) r/w
5(2) - Challan not presented - FIR quashed.
 Adarsh Kumar Batra Vs State of Punjab 1991 Cr.L.J. 118

Pecuniary resources and property relating to the period before the

amendment w.e.f. 18.12.1964 can be taken into consideration

Prevention of Corruption Act (1947) S.5(3) - Pecuniary resources and

property acquired before the Act can be taken into consideration.

Looking at the words of the section and giving them their plain and natural
meaning, it is impossible to say that pecuniary resources and property acquired
before the date on which the Prevention of Corruption Act came into force should
not be taken into account even if in possession of the accused or not other
person on this behalf. To accept the contention that such pecuniary resources or
property should not be taken into consideration one has to read into the section
the additional words if acquired after the date of this Act" after the word
"property". For this there is not justification.

Sajjan Singh Vs. State of Punjab AIR 1964 SC 464

Prevention of Corruption Act (1947) Ss.5(1)(e) and 5(3) (as amended

in 1964) - Constitution of India, Article 20(1) - Criminal misconduct -
Possession of disproportionate pecuniary resources or property - Mere
possession made offence under Clause (e) - No evidence that accused was
in such possession after 18.12.1964 when Cl. (e) came into existence -
Accused is entitled to protection under Art.20(1) of Constitution.

- The accused was found in possession of disproportionate assets by the

search made on 17.5.1964. While the matter was still under investigation, the
Act was amended by Amending Act 40 of 1964 and Cl.(e) was added. The trial
Court convicted the accused under S.5(2) as he held that he had committed
offences under Cls. (a) (b) (d) and (e) of S.5(1) and Ss.161 and 165. Penal
Code. The High Court set aside the conviction under all the counts. Special
leave to appeal was limited to the question, whether the acquittal under
Sec.5(1)(e) was justified. Therefore acquittal under other counts became final.

Held, that the accused was entitled to the protection of Art.20 (1) and the
acquittal was justified. It was not permissible for the trial Court to convict him of
an offence under Cl. (e) of sub-section (1) of Section 5 as no such clause was in
existence at the relevant time. The accused could not therefore be said to have
committed an offence under Cl.(e) of sub-section (1) of Section 5 read with sub-
section (2) of that section.

The result of the insertion of Cl. (e) was that mere possession of
pecuniary resources or property disproportionate to the known sources of income
of a public servant, for which he could not satisfactorily account, became an
offence by itself. Such a possession was not, however, an offence by itself until
December 18, 1964 although there was a third sub section to Section 5 before
that date. As is obvious, sub-section (3) provided an additional mode of proving
the offence punishable under sub-section (2) for which the accused person was
on trial, but the mode of proof was necessarily correlated to Cls. (a), (b), (c) and
(d) of sub-section (1) of Section 5 which stated the circumstances in which a
public servant could be said to commit the offence of criminal misconduct in the
discharge of his duty.

It could not be contended that the protection of Art. 20(1) of the

Constitution should not have been given merely because what was once a rule of
evidence in the form of the earlier sub-section (3) of Section 5 was amended by
the Legislature and a distinct offence was provided by the insertion of Cl. (e).

Kaliar Koil Subramaniam Ramaswamy Vs. State of Maharashtra AIR

1977 SC 2091

Prevention of Corruption Act (2 of 1947), Ss.5(1)(d), (e) and 5(3) -

Repeal of S.5(3) and its subsequent revival - Effect - Central Act 16 of 1967 -
Not a piece of ex post facto legislation - (Constitution of India, Article 20(1)
; Anti - Corruption Laws (Amendment) Act (!6 of 1967), S.2; Anti Corruption
Laws (Amendment) Act (40 of 1964), S.6(2) ; General Clauses Act (!897),
S.6)

A public servant was charged under S.161, Penal Code read with S.5(2)
and S.5(1)(d) of the Prevention of Corruption Act. The Special Judge found that
the assets of the accused during 1955 to 1961 were disproportionate to the
known sources of his income. But as S.5(3) had been repealed by Act No. 40 of
1964 on 18.12.1964 the accused was acquitted on ground that presumption
under S.5(3) was not available. Appeal was preferred by the State to the Court.
During pendency of the appeal Act No. 16 of 1967 introducing S.5(1)(e) came
into force. The High Court remanded the case to be tried from the stage at which
it was pending on 18.12.1964.

Held, that in view of the provisions of the General Clauses Act the
operation of all the provisions of the Prevention of Corruption Act would continue
in so far as the offences that were committed when S.5(3) was in force. The
offences that were committed after the date of the repeal will not come under the
provisions of S.6(b) of the General Clauses Act S.6(c) also preserves all legal
proceedings and consequences of such proceedings as if the repealing Act had
not been passed. In this view it is clear that whether Act 16 of 1967 had been
brought into force on 20th January, 1967 or not the rule of evidence as
incorporated in Section 5(3) would be available regarding offences that were
committed during the period before the repeal of S.5(3).

G.P. Nayyar Vs. State (Delhi Admn.) 1979 Cr.L.J. 589 (SC)
 CHECK PERIOD

Prevention of Corruption Act (2 of 1947), S.5(1)(e) - Criminal

misconduct - Possession of property disproportionate to known sources of
income - Selection of period for ascertainment of disproportionate assets -
Not necessary that period of reckoning be spread out for entire stretch of
anterior service of public servant.

In order to establish that a public servant is in possession of pecuniary

resources and property, disproportionate to his known sources of income, it is not
imperative that the period of reckoning be spread out for the entire stretch of
anterior service of the public servant. There can be no general rule or criterion,
valid for all cases, in regard to the choice of the period for which accounts are
taken to establish criminal misconduct under S.5(1)(e). The choice of the period
must necessarily be determined by the allegations of fact on which the
prosecution is founded and rests. However, the period must be such as to
enable a true and comprehensive picture of the known sources of income and
the pecuniary resources and property in possession of the public servant either
by himself or through any other person on his behalf, which are alleged to be so
disproportionate. In the facts and circumstances of a case, a ten year period
cannot be said to be incapable of yielding such a true and comprehensive
picture. The assets spilling over from the anterior period, if their existence is
probabilised, would, of course, have to be given credit to on the income side and
would go to reduce the extent and the quantum of the disproportion. It is for the
prosecution to choose what according to it is the period which having regard to
the acquisitive activities of the public servant in amassing wealth and
characterise and isolate that period for special scrutiny.

Pollonji Darabshaw Daruwalla Vs. State of Maharashtra AIR 1988 SC 88

Prevention of Corruption Act (2 of 1947) S.5(1)(e) & (2) -

Accumulation of assets by public servant disproportionate to known
sources of his income - Entire period of his service need not be taken into
account - period of 7 years from Promotion date was not unreasonable .

Sri Mahesh Chandra Vs. State of U.P. 1993 Cr.LJ 1151

Benami Transaction, Burden of Proof is on the prosecution.

Evidence Act (1872) , Ss. 101-104 - Benami - Onus and proof - Nature
of Onus of establishing a transaction as benami is on the person who
asserts it - This burden has to be discharged by adducing legal evidence of
a definite character - Suspicion however strong cannot take the place of
proof.
 The burden of showing that a particular transaction is benami and the
owner if not the real owner always rests on the person asserting it to be so and
this burden has to be strictly discharged by adducing legal evidence of a definite
character which would either directly prove the fact of benami or establish
circumstances unerringly and reasonably raising an inference of that fact. The
essence of benami is the intention of the parties and not unoften, such intention
is shrouded in a thick veil which cannot be easily pierced through. But such
difficulties do not relieve the person asserting the transaction to be benami of the
serious onus that rests on him, nor justify the acceptance of mere conjectures or
surmises as a substitute for proof. It is not enough merely to show
circumstances which might create suspicion, because the court cannot decide on
the basis of suspicion. It has to act on legal grounds established by evidence.

Krishnanand Agnihotri Vs. State of M.P. 1977 Cr.LJ 566

Index Note :- (A) Transfer of Property Act (1882), S.54 - Benami sale -
Onus and proof - Nature of - Matters to be considered in determining
benami nature of transaction stated.

Brief Note :- (A) It is well settled that the burden of proving that a
particular sale is benami and the apparent purchaser is not the real owner,
always rests on the person asserting it to be so.

Though the question, whether a particular sale is Benami or not, is largely

one of fact, and for determining this question, no absolute formulae of acid test,
uniformly applicable in all situations, can be laid down, yet in weighing the
probabilities and for gathering the relevant indicia, the Courts are usually guided
by these circumstances :(1) the source from which the purchase money came ;
(2) the nature and possession of the property, after the purchase (3) motive, if
any, for giving the transaction a benami colour ; (4) the position of the parties and
the relationship , if any, between the claimant and the alleged benamidar ; (5) the
custody of the title - deeds after the sale and (6) the conduct of the parties
concerned in dealing with the property after the sale.

The above indicia are not exhaustive and their efficacy varies according to
the facts of each case. Nevertheless no. 1, viz. the source when the purchase
money came, is by far the most important test for determining whether the sale
standing in the name of one person, is in reality for the benefit of another.

Jaydayal Poddar (Deceased) through L.Rs. and another VS. Mst. Bibi Hazra
and others, AIR 1974 SC 171.

Burden of Proof in Disproportionate Assets Cases - Meaning of

- The expression 'burden of proof' has two distinct meanings (1) the legal
burden ie., the burden of establishing the guilt , and 2) the evidential burden ie.,
the burden of leading evidence. In a criminal trial, the burden of proving
everything essential to establish the charge against the accused lies upon the
prosecution and that burden never shifts. Notwithstanding the general rule that
the burden of proof lies exclusively upon the prosecution, in the case certain
offences, the burden of proving a particular fact in issue may be laid by law upon
the accused. The burden resting on the accused in such cases is, however, not
so onerous as that which lies on the prosecution and is discharged by proof of a
balance of probabilities. The ingredients of the offence of criminal misconduct
under S.5(2) read with S.5(1)(e) are the possession of pecuniary resources or
property disproportionate to the known sources of income for which the public
servant cannot satisfactorily account. To substantiate the charge, the prosecution
must prove the following facts before it can bring a case under S.5(1)(e), namely,
(1) it must establish that the accused is a public servant, (2) the nature and
extent of the pecuniary resources or property which were found in his
possession, (3) it must be proved as to what were his known sources of income
i.e., known to the prosecution, and (4) it must prove, quite objectively, that such
resources or property found in possession of the accused were disproportionate
to his known sources of income. Once these four ingredients are established, the
offence of criminal misconduct under S.5(1)(e) is complete, unless the accused is
able to account for such resources or property. The burden then shifts to the
accused to satisfactorily account for his possession of disproportionate assets.
The extent and nature of burden of proof resting upon the public servant to be
found in possession of disproportionate assets under Section 5(1)(e) cannot be
higher than the test laid by the Court in Jhingan's case (AIR 1966 SC 1762)
(supra), i.e, to establish his case by a preponderance of probability. That test
was laid down by the Court following the dictum of Viscount Sankey, L.C. In
Woolmington Vs. Director of Public Prosecution (!935) AC 462. The High Court
has placed an impossible burden on the prosecution to disprove all possible
sources of income which were within the special knowledge of the accused. As
laid down in Swamy's case (AIR 1960 SC 7) (supra.), the prosecution cannot, in
the very nature of things, be expected to know the affairs of a public servant
found in possession of resources or property disproportionate to his known
sources of income i.e, his salary. Those will be matters especially within the
knowledge of the public servant within the meaning of S.106 of the Evidence Act,
1872. Section 106 reads.

Wasudeo Ramchandra Kaidalwar Vs. State of Maharashtra 1981 Cr.LJ. 888

TRAVELLING ALLOWANCE IS NOT A SOURCE OF INCOME

Prevention of Corruption Act (!947), S.5(3) - “Known sources of

income” - Expression explained - Affairs of accused are matters “specially
within the knowledge” of accused within S.106, Evidence Act - (Evidence
Act (1872), S.106.
 The prosecution would not be justified in concluding that travelling
allowance was also a source of income when such allowance is ordinarily meant
to compensate an officer concerned for his out-of-pocket expenses incidental to
journeys performed by him for his official tours. That could not possibly be
alleged to be a very substantial source of income.

C.S.D. Swami Vs. The State, AIR 1960 SC 7

Prevention of Corruption Act, 1988-Section 13(1)(e) read with Section
4 - Public Servant possessing property disproportionate to his known
sources of income - Prosecution for offence of - offence can be abetted by
another including one who is not a public servant - if a non-public servant
has abetted any of offences which a public servant commits such non-
public servant is also liable to be prosecuted along with public servant in
same trial - Public servant cannot escape from tentacles of Section 13(1)(e)
by showing other legally forbidden sources, albeit such sources are
outside purview of clause (a) to (d) of sub-section (1) of Section 13.

There is no force in the contention that the offences under Section

13(1)(e) cannot be abetted by another person. "Abetment" is defined in Sec.107
of the Penal Code, as under :-

"107 - Abetment of a thing - A person abets the doing of a thing, who -

First - Instigates any person to do that thing ; or

Secondly - Engages with one or more other person or persons in any

conspiracy for the doing of that thing, if an act or illegal omission takes place in
pursuance of that conspiracy, and in order to the doing of that thing ; or

Thirdly - Internationally aids, by any act or illegal omission, the doing of

that thing".

For the 'First' clause (i.e, instigation), the following Explanation is added to
the Section :-

"Explanation 1 - A person who , by willful misrepresentation, or by willful

concealment of a material fact which he is bound to disclose, voluntarily causes
or procures, or attempts to cause or procure, a thing to be done, is said to
instigate the doing of that thing".

For the "thirdly" clause (i.e., intentionally aids) the following Explanation is
added :-

"Explanation 2 - Whoever, either prior to or at the time of the commission

of an act, does anything in order to facilitate the commission of that act, and
thereby facilitates the commission thereof, is said to aid the doing of that act ".
 Certain illustrations would amplify the cases of abatements fitting with
each of the three clauses in Section 107 of the Penal Code vis-a-vis Section
13(1)(e) of the P.C. Act.

The first illustration cited is this :

If A, a close relative of the public servant tells him of how other public
servants have become more wealthy by receiving bribes and A persuades the
public servant to do the same in order to become rich and the public servant acts
accordingly. If it is a proved position there cannot be any doubt that A has
abetted the offence by instigation. Next illustration is this :

Four persons including the public servant decide to raise a bulk amount
through bribery and the remaining persons prompt the public servant to keep
such money in their names. If this is a proved position then all the said persons
are guilty of abetment through conspiracy.

The last illustration is this :

If a public servant tells A, a close friend of him, that he has acquired

considerable wealth through bribery but he cannot keep them as he has no
known source of income to account, he requests A to keep the said wealth in A's
name, and A obliges the public servant in doing so. If it is a proved position A is
guilty of abetment falling under the "Thirdly" clause of Section 107 of the Penal
Code.

Such illustrations are apt examples of how the offence under Section
13(1)(e) of the P.C. Act can be abetted by non-public servants. The only mode
of prosecuting such offender is through the trial envisaged in the P.C. Act.

AIR 1999 SC 2556, SCC (Cr) 1133 : (1999(4) Crimes 20 (SC) : P. Nallammal
Vs. State

Article 21 - Speedy trial - Directions in Raj Deo Sharma's case (JT

1998(7) SC1) - Clarification - Following directions given held (Per majority -
Shah J. Dissenting)

The directions of the Supreme Court given in Raj Deo Sharma Vs. State of
Bihar JT 1998 (7) SC 1) are as under :-

(i) In cases where the trial is for an offence punishable with

imprisonment for a period not exceeding seven years whether the accused is in
jail or not, the court shall close the prosecution evidence on completion of a
period of two years from the date of recording the plea of the accused on the
charges framed whether the prosecution has examined all the witnesses or not
within the said period and the Court can proceed to the next step provided by law
for the trial of the case.

(ii) In such cases as mentioned above, if accused has been in jail for a
period of not less than one half of the maximum period of punishment prescribed
for the offence, the trial court shall release the accused on bail forthwith on such
conditions as it deems fit.

(iii) If the offence under trial is punishable with imprisonment for a

period exceeding seven years whether the accused is in jail or not, the Court
shall close the prosecution evidence on completion of three years from the date
of recording the plea of the accused on the charges framed whether the
prosecution has examined all the witnesses or not within the said period and the
Court can proceed to the next step provided by law for the trial of the case unless
for very exceptional reasons to be recorded and in the interest of justice the
Court considers it necessary to grant further time to the prosecution to adduce
evidence beyond the aforesaid time limit.

(iv) But if the inability for completing the prosecution within the
aforesaid period is attributable to the conduct of the accused in protracting the
trial, no Court is obliged to close the prosecution evidence within the aforesaid
period in any of the cases covered by clauses (i) to (iii).

(v) Where the trial has been stayed by the orders of the Court or by
operation of law such time during which the stay was in force shall be excluded
from the aforesaid period for closing prosecution evidence.
Raj Deo Sharma Vs. State of Bihar Jt. 1999 (7) S.C. 317

Investigation taking 4 years - Sanction taking 2 years - 2 years lapsing in

filing charge - Approached to High Court in writ for quashing on ground inordinate
delay in contravention of speedy trial enshrined in Art.21 of Constitution -
Dismissed on the ground that in a similar case High Court refused the relief -
Appeal to Supreme Court - whether there was gross delay in investigation and
sanction and in filing the charge - sheet and that such delay violates Art. 21 of
the Constitution.

Delay in Criminal proceedings is antithesis to the constitutional protection

enshrined in Article 21 of Constitution but Court must consider each case.

In the case cited below which is of CAT. Shri Harbhajan . Singh, ITO was
dismissed from service on 1.8.1974 after an RDA (in consequence of a CBI
case) in which the Inquiry Officer held that the extent of disproportionate assets
was Rs. 74,973.88. On appeal, the appellate authority rejected the appeal but
held the disproportionate assets to be only Rs. 38,031/-. Shri Harbhajan Singh
thereafter moved the CAT by a petition which was rejected by the CAT which
held: .

" In the present case even by the most liberal and relaxed norms and even
after allowing for 10% cushion, the petitioner can be presumed to be in
possession of assets valued to the extent of more than Rs. 18,000/-
beyond his highest possible savings. Accordingly the petition has to be
rejected".

Harbhajan Singh Union of India and others , ATR 1986 (2) CA T 570
(Delhi Bench).
 ANNEXURE-VI

THREE ILLUSTRATIVE EXAMPLES OF CALCULATION OF

DISPROPORTIONATE ASSETS

Enclosed are Cases I, II & III relating thereto setting out calculations
made in three different cases of possession of disproportionate assets. The first
case relates to Shri A who, on the date of search on 21.6.1988 was Traffic
Manager in the Madras Port Trust. The second case relates to Shri B who, on the
date of search on 10.6.1988 was a Superintendent in the Customs Department at
Delhi. The third case relates to an IAS Officer whose other family members were
having their own sources of income. In the first two cases, the check period was
of about 9 years from 1979 to 1988. In the first two cases, the extent of
disproportionate assets that were worked out on the conclusion of the
investigation were Rs. 1,20,000/ -.

2. In so far as Shri A is concerned, a good case for prosecution or even RDA

is not made out as the extent of disproportionate assets of Rs. 1,20,000/ is not
much (only 8.3%) when compared to the total income of Rs. 14,40,000/- of Shri
A during the check period. Besides, Shri A could raise various defences during
the trial and RDA particularly in respect of (a) valuation of household articles, (b)
date and mode of acquisition and valuation of jewellery, (c) cost of construction
of Ist floor in the house gifted to him by his father-in-Iaw, (d) plea of additional
agriculture income, (e) amount spent in repairing and maintaining ancestral
house, (f) amount spent in marriage of daughter, (g) household expenses and
possibly some more items depending upon the ingenuity of Shri A and his
counselor defence assistant. The Court or Enquiry Officer may choose to accept
some of these pleas, particularly because the burden on Shri A for providing his
defence is only by the theory of preponderance of probabilities and not beyond
reasonable doubt as on the prosecution. If prosecuted, the case would, in all
probability, end in acquittal. Even Regular
Departmental Action may not succeed.

3. As against this, the case against Shri B is a very good case for
prosecution and possible conviction as the extent of disproportionate assets of
Rs. I,20,0001 is about 49% of his total income of Rs. 2,45,7751-. Even if Shri B
disputes the correctness of some items of income, expenditure and assets
computed by the prosecution and even if the Court is inclined to give him benefit
of doubt for certain amounts, the final figure of disproportionate assets that would
be arrived at by the Court would be sizeable in comparison with the total income
of Shri B.

4. The first two illustrative examples would show that there is no hard and
fast rule regarding the extent of disproportionate assets that are required for
making out a good case. Broadly speaking, this would depend to a great extent
on:
a) The status of the public servant.

b) The total income of the public servant and his family members which are
included in the computation.

c) The extent of controversy between the prosecution and the defence in

items of income, expenditure and assets; particularly in respect of non-
verified expenditure and its proportion to the extent of disproportionate
assets.

d) The length of the period of check.

In the third case, an illustration has been given on calculation of

disproportionate assets when all the three family members of the accused
persons have their own sources of income.
 CASE - I

Shri A is an official working in Madras Port Trust. He joined the Port Trust
on 1.5.1965 as Assistant Traffic Manager. He was promoted as Traffic Manager
w.e.f. 1.7.1979 in the scale of pay Rs. 2250-100-3250. He was holding this rank
on 21.6.1988, when searches were conducted :-

Basic Pay at the time of search on 21.6.1988 Rs. 3,150.00

Family composition Self

Wife
Daughter
Son

Place of Stay Madras

CHECK PERIOD 1.7.1979 TO 21.6.1988

The computations below are based on enclosed Statements A to D.

1.Assets held on 21.6.1988 (St. B) Rs. 11,18,000.00

2.Assets held on 1.7.1979 (St. A) Rs. 3,98,000.00

3.Assets acquired during the check period Rs. 7,20,000.00

4.Expenses during check period (St. D) Rs. 8,40,000.00

5.Total assets and expenses of check period. Rs. 15,60,000.00

6.Income during eheck period (St. C) Rs. 14,40,000.00

7.Extent of disproportionate Assets Rs. 1,20,000.00

===============

Contd..
 STATEMENT - A

ASSETS AT THE BEGINNING OF THE PERIOD OF CHECK

I. IMMOVABLE PROPERTIES SHRI 'A' SHRI 'B'

(a) Ancestral house at Madras and Rs. 95,80,000 Rs. 40,000.00

Mahrauli respectively

(b) Ancestral agricultural land Rs. 1,00,000.00

(c) One house acquired by way of Rs. 85,000.00

gift from father-in-law at Madras
at the time of marriage in 1966

(d) Plot purchased prior to the Rs. 13,200.00 Rs. 12,500.00

check period

II. BANK BALANCES

Total of SB account balances, Rs. 23,000.00 Rs. 2,300.00

FDs etc.

III. MOTOR CAR ETC.

Ambassador Car Rs. 30,800.00

Bajaj Scooter Rs. 3,100.00

IV. JEWELLERY Rs. 40,400.00 Rs. 6000.00

V. HOUSE HOLD EFFECTS

Furniture, TV etc. Rs. 9,300.00 Rs. 7.500.00

_____________ _____________
Rs. 3,98,000.00 Rs. 71,400.00
=========== ===========
 STATEMENT - B

ASSETS AT THE CLOSE OF THE PERIOD OF CHECK

I. IMMOVABLE PROPERTIES SHRI 'A' SHRI 'B'

(a) Ancestral house at Madras and Rs. 95,80,000 Rs. 40,000.00

Mahrauli respectively

(b) Ancestral agricultural land Rs. 1,00,000.00

(c) One house acquired by way of Rs. 85,000.00

gift from father-in-law at Madras
at the time of marriage in 1966

(d) Construction of first floor in (c) Rs. 1,09,100.00

above
(e) Plot purchased prior to the Rs. 13,200.00 Rs. 12,500.00
check period

(f) Construction of a house at Delhi Rs. 1,52,000.00

(g) Plot purchased at Madras Rs. 81,100.00

during May, 1988

II. MOTOR CAR ETC.

(a) Fiat Car acquired in Sept., 1987 Rs. 1,05,000.00

and additional fittings

(b) Bajaj Scooter Rs. 3,100.00

(c) Enfield Silver plus moped

acquired in December, 1985

(d) Maruti Deluxe Car purchased in Rs. 99,000.00

December, 1986

III. BANK BALANCES, FDS, AND Rs. 40,400.00 Rs. 6000.00

OTHER INVESTMENT

(a) FD in his name in bank (cash Rs. 20,000.00 Rs. 9,000.00

deposited)

(b) FD in the name of wife (cash Rs. 12,000.00 Rs. 5,000.00

deposited)
(c) Another FD in the name of wife Rs. 30,000.00
(cash deposited)

(d) Cash certificate in the name of Rs. 21,500.00

daughter (cash deposited)

(e) Cash certificate in the name of Rs. 15,000.00

son

(f) SB A/c held in his name Rs. 9,400.00 Rs. 1,500.00

(balance on closing date of
check period)

(g) SB A/c held in the name of his Rs. 1,800.00

wife (balance on closing date of
check period)

(h) Indira Vikas Patras Rs. 35,000.00

(i) NSCs Rs. 30,000.00

(j) Shares and debentures (at Rs. 37,000.00

purchase price) & company
deposits

IV JEWELLERY FOUND IN THE Rs. 1,35,000.00 Rs. 33,000.00

LOCKER HELD BY WIFE AND
VALUED

V. HOUSE HOLD EFFECTS

(a) Furniture Rs. 12,500.00 Rs. 9,000.00

(b) Colour TV, VCR etc. Rs. 29,300.00 Rs. 36,500.00
(c) Refrigerator Rs. 4,500.00 Rs. 4,500.00
(d) Air Conditioner Rs. 8,500.00
(e) Utensils & other house hold Rs. 6,500.00 Rs. 8,900.00
items of daily use
(f) Carpets, costly clothing such as Rs. 14,400.00 Rs. 12,000.00
silk sarees suits, etc.
______________ ____________
Rs. 11,18,000.00 Rs. 3,27,000.00
============= ===========
 STATEMENT - C

INCOME AND OTHER RECEIPTS DURING THE PERIOD OF CHECK

SHRI 'A' SHRI 'B'

1. Net salary income Rs. 2,21,600.00 Rs. 2,43,775.00

2. Rental income from ancestral Rs. 3,05,000.00

house

3. Agricultural income Rs. 1,85,000.00

4. House Building Advance Rs. 75,000.00

5. HDFC loan obtained for Rs. 30,000.00

house building

6. GPF withdrawal for the Rs. 30,000.00

marriage of daughter

7. Loan from father-in-law Rs. 1,25,000.00

8 Salary income of wife Rs. 2,40,000.00

9 Interest income from FDs, SB Rs. 5,200.00 Rs. 2,000.00

account and other
investments

10. Earning of son in share Rs. 76,000.00

transactions during 1985-87

11. Income of wife by lottery Rs. 1,47,200

(cheque received from State
Government)
______________ _____________
TOTAL Rs. 14,40,000.00 Rs. 2,45,775.00
============= ============
 STATEMENT - D

EXPENDITURE DURING THE PERIOD OF CHECKS

SHRI 'A' SHRI 'B'

1. Expenditure incurred for Rs. 11,700.00 Rs. 9,300.00

obtaining building plan
approved, licence fee,
improvement charges paid
etc.

2. Amount paid for repairing and Rs. 27,500.00 Rs. 11,200.00

maintaining old ancestral
house

3. Municipal taxes paid Rs. 16,500.00 Rs. 6,500.00

4. Income Tax paid (other than Rs. 26,700.00

deduction at source)

5. Electricity and water charges Rs. 19,500.00 Rs. 4,500.00

paid

6. Insurance paid for insuring the Rs. 1,200.00 Rs. 875.00

house and household articles

7. Repayment of HDFC loan Rs. 10,000.00

8 Locker rend paid Rs. 800.00

9 Educational expenditure of Rs. 20,000 Rs. 4,600.00

two children

10. Foreign tour with family Rs. 1,21,000.00

members to USA and back.

11. Marriage of daughter Rs. 1,55,000.00

12. Household expenditure Rs. 1,75,000.00 Rs. 60,000.00

13 Return of loan to father-in-law Rs. 1,25,000.00

(taken prior to check period)
14. Expenditure on maintenance Rs. 48,500.00 Rs. 2,800.00
of conveyance

15. Customs duty paid on return Rs. 8,000.00

from foreign tour

16. Personal trunk-call charges Rs. 4,600.00

paid

17. Club expenses Rs. 3,000.00

18 Extra expenditure on LTC trip Rs. 4,800.00

to Andaman - Air travel

19. Medical expenditure on Rs. 41,200.00

account of open heart surgery
of self (not reimbursed by
Government)

20. LIC Premia paid Rs. 20,000.00 Rs. 10,400.00

---------------------- _____________
TOTAL Rs. 8,40,000.00 Rs. 1,10,175.00
============
 CASE - 3

ILLUSTRATIVE EXAMPLE OF CALCULATION OF DISPROPORTIONATE

ASSETS WHEN FAMILY MEMBERS OF THE
SUSPECT OFFICERS ARE ALSO EARNING MEMBERS

(As circulated by the Policy Division Circular No. 27/8/85-PD, dt.24-7-91)

During the course of the investigation in the cases of disproportionate

assets, it is sometimes found that apart from the Suspect Officer, his wife or
other members of his family are also earning members. The transactions relating
to the acquisition of property either in the name of the Suspect Officer or in the
name of his wife or other members of the family are so inter-connected that it
becomes difficult to come to a definite conclusion as to the extent of the assets
held by the Suspect Officer. It has been noticed that normally the Investigating
Officers club the income, expenditure and assets of the Suspect Officer, his wife
and other members of his family in order to arrive at the extent of the assets held
by the Suspect Officer disproportionate to the known sources of his income.
Such an approach may not be legally acceptable in all cases to Courts of Law
and in certain cases, a court may invite that the assets disproportionate to the
known sources of his income of the Suspect Officer should be independently and
distinctly proved. The following is illustrative of such a case.

Mr. 'A' was an IAS Officer and his wife, Dr. '8' was also a Govt. Doctor.
Later on, 'A's wife became a private Medical Practitioner. The mother-in-law of
the Suspect Officer, Mrs. 'C' was residing with her daughter and son-in-Iaw and
was also having income through the property owned by her. The Suspect Officer
and his mother-in-law also received various remittances from abroad from
another daughter of Mrs. 'C'. This case was analysed and the income,
expenditure and assets of each of the aforesaid earning members were
segregated in order to come to a conclusion as to whether Mr. ' A' had assets
disproportionate to the known sources of his income or not.

No household expenditure was attributed either to Dr. '8' or her mother,

Mrs. 'C' for coming to such conclusion. While computing the assets of the
aforesaid persons, care was taken that the value of the assets should be
attributed to that person in whose name the said assets stood if it was not proved
to be benami transaction. The contribution, if any, made by the Suspect Officer
for the procurement of that asset was taken as his expenditure. Illustration of the
above type are
given below :-
 (1 ) IN RESPECT OF MRS. 'C'. MOTHER-IN-LAW OF THE SUSPECT
OFFICER

eld prior to the period of check 43,780/-

either as rent or from agricultural land 2,43,701/-

of check

e assets in her name at different places 10,21,697/-

of check

x paid on the property 27,091/-

The value of the assets in her name during the period of check thus works
out to Rs. 10,21,697-Rs. 43,780=Rs. 9,77,917/- and her likely savings works out
to Rs. 2,43,701- Rs. 27,091 = Rs. 2,16,610. Hence, the excess amount of the
assets held by her works out to Rs. 9,77,917-Rs. 2,16,610= Rs. 7,61,307/-.

(2) IN RESPECT OF OR. 'B'. WIFE OF THE SUSPECT OFFICER

Rs
e prior to the period of check 1,55,367/

e during the period of check 7,95,330/-

period of check in respect of her posting 6,32,158/-

pect of house-tax paid 4,649/-

.
The total value of the assets held by her prior to the period of check to the tune of
Rs. 1,55,367/- and of her likely savings of Rs. 6,27,509/- works out to Rs.
7,82,876/-. The excess amount of the assets held by her works out to Rs.
7,95,330 - Rs. 7,82,876= Rs. 12,454/-. A Hospital was established in one of the
properties held in the name of Mrs. 'C', mother of Dr.'B'. This Hospital was being
run by Dr. 'B' and the books of accounts showed that at the end of the check-
period of the Hospital had incurred a loss of Rs. 84,219/-. Thus, Dr. 'B' was
already under debt of Rs. 84,219+ Rs. 12,454= Rs. 96,673/- in comparison to her
total income. It is pertinent to note that no household expenditure whatsoever
was attributed to Dr. 'B'.
 (3) IN RESPECT OF SUSPECT OFFICER MR.'A'

Rs.

o the period of check. 8,270/-

name during the period of check 3,70,753/-

e Suspect Officer
4,26,895/-

5,43,069
he Suspect Officer during the check
3,70,753/-
- 8,270/-
=3,62,483/-

5,43,069/-
4,26,895/-
1,16,174/-
ate to the known sources of income
3,62,483/-
+ 1,16,174/-
= 4.78,657/-

The amount invested by the Suspect Officer in the procurement of the

property in the name of his mother-in-law or in the name of his wife was taken as
expenditure as the same did not constitute the entire cost of those properties as
they were partly financed by the holder. Since the income and assets of the wife
and mother-in-law of the Suspect Officer were segregated, his probable plea that
the amount for the procurement of the assets in his name had been given to him
by his wife or mother-in-law would not be tenable. The aforesaid independent
calculation would clearly indicate that neither the mother-in-law nor the wife of
the suspect was in a position to contribute any amount for the acquisition of the
assets by the Suspect Officer in his own name as both of them had property in
excess of their total income. Since neither of the two ladies had other sources of
income it could be safely presumed that it was the Suspect Officer who had
diverted his ill-gotten money at least to the extent to which the assets in the
name of the two ladies were found in excess of their total income. The Suspect
Officer, Mr. 'A' can thus be said to be in possession of assets disproportionate to
the known sources of his income to the extent of Rs. 4,78,657 (of himself) + Rs.
7,61,307 (of his mother-in-law)+Rs. 96,673 (of his wife) = Rs. 13,36,637/-.

*****