1. This Writ Petition (Crl.) has been filed challenging Ext,P5 order of sanction issued by the 1st respondent under Section 19(1) of the Prevention of Corruption Act, 1988 as amended in 2018 (for short, ‘the PC Act, 2018’ hereinafter), pursuant to a direction issued by the learned Special Judge, Muvattupuzha and after the verdict in W.P. (C).No.38626/2024, dated 04.11.2024 rendered by this Court and the review petition thereof, filed as R.P.No.1373/2024, dated 23.01.2025.
2. Heard the learned counsel for the writ petitioners, the learned Government Pleader appearing for respondent Nos.1 and 2, as well as the learned counsel appearing for the additional 3rd respondent, who is the complainant before the Special Court.
3. The prime point argued by the learned counsel for the writ petitioners is that the main allegation considered by the 1st respondent while issuing Ext.P5 sanction is the purchase of property by the Society in an area falling within the coastal regulation zone (CRZ). According to the learned counsel for the writ petitioners, mere purchase of property in CRZ itself is not an offence, even though the use of the property may be subject to restrictions and any construction thereon may require permission from the authority concerned. Therefore, according to the learned counsel for the writ petitioners, Ext.P5 sanction order under Section 19(1) of the PC Act, 2018, was issued to prosecute the petitioners alleging purchase of property in CRZ area, though the same by itself is not an independent offence under the PC Act, 2018. It is also pointed out that Ext.P5 sanction order does not speak of the fact that the order was issued on the ground of purchase of property for a higher sum and no materials to hold so also considered by the 1st respondent while issuing Ext.P5 sanction. Therefore, Ext.P5 sanction is illegal and the same would require interference.
4. The learned counsel for the writ petitioners has placed decision of the Apex Court in Dhirendra Krishan v. Bharat Heavy Electricals Ltd. and Others reported in [1999 KHC 2411] with reference to paragraph No.21, which reads as under:
“21. A decision by an administrative authority whether to grant or to withhold sanction to prosecute a public servant is a very serious and important decision. The grant of sanction is not an idle formality but a solemn sacrosanct act which affords protection to public servants against frivolous prosecution. The sanctioning authority has to apply its own independent mind to arrive at a decision with regard to the question whether or not prosecution is to be sanctioned. The mind of the sanctioning authority should be free from bias or pressure of any sort as the discretion to grant or to withhold sanction, vests absolutely in the sanctioning authority. If its discretion is shown to have been affected by any extraneous consideration and is not a result of application of its independent mind, the sanction stands vitiated. (See Mohd. Iqbal Ahmed v. State of Andhra Pradesh, (1979) 4 SCC 172, and Mansukhlal Vithaldas Chauhan v. State of Gujarat, (1997) 7 SCC 622).”
Apart from that, the learned counsel further relies on the decisions in State (Anti Corruption Branch) Govt. of N.C.T. of Delhi and Another v. Dr.R.C.Anand and Another reported in [2004 KHC 982] and CBI v. Ashok Kumar Aggarwal reported in [2013 KHC 4983], reiterating the ratio that a sanction is valid only when the authority applies its mind independently to the relevant materials, and that any sanction granted mechanically or under extraneous influence stood vitiated.
5. Per contra, the learned counsel appearing for the additional 3rd respondent taken attention of this Court to Rule 54 of the Kerala Co-operative Societies Rules 1969 (for short, ‘the Rules, 1969’ hereinafter), which deals with the manner of investment of funds of a Society. According to the learned counsel for the additional 3rd respondent, a Society is permitted to invest the whole or any portion of its funds in the purchase or lease of land subject to previous sanction in writing of the Registrar. According to the learned counsel, in the instant case, an agreement was executed to purchase the property and Rs.15 Lakh was paid as advance sale consideration before obtaining the previous sanction in writing of the Registrar, even though, as seen from Ext.P4, the sanction was subsequently obtained only on 07.09.2015, and the sale deed was thereafter executed on 30.09.2015.
6. The learned Government Pleader appearing for respondent Nos.1 and 2 also pointed out that the purchase of property was with the required sanction dealt under Rule 54 of the Rules, 1969, as noticeable from Ext.P4. However, he justified Ext.P5 sanction, while pressing for dismissal of this writ petition.
7. The specific contention of the learned counsel for the additional 3rd respondent is that, by executing sale agreement and paying Rs.15 Lakh as advance sale consideration, the Society had already invested a portion of its funds for the purchase of land, and this investment was done without obtaining the previous sanction in writing. Therefore, the execution of sale agreement and payment of Rs.15 Lakh as advance sale consideration itself violated the mandate of Rule 54 of the Rules 1969.
8. The learned counsel for the additional 3rd respondent placed decision of this Court in Misbah Salam v. President, Erattupetta Aided School Teachers Co-operative Society Ltd. and Others reported in [2012 (4) KHC 474], wherein this Court considered the impact of Rule 54 of the Rules, 1969 in paragraph Nos.3 and 4, which read as follows:
“3. Before proceeding to consider the facts of the case and the legality and propriety of the order issued by the Joint Registrar declining permission under R.54, we feel the object and scope of the Rule has to be considered first and for easy reference we extract hereunder R.54 of the Kerala Cooperative Societies Rules:
'R.54. Manner of investment of funds.-- (1) A Society may, with the previous sanction in writing of the Registrar, invest the whole or any portion of it's funds in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar.
What is clear from sub-S.(1) is that no society shall make investment of it's funds in land or building without previous written sanction from the Registrar. The Legislature is well aware of chances of societies making unwise investments in land and building adversely affecting their financial position leading to erosion in capital and failure failure to repay public deposits which is the main source of funds for the societies. In the first place, Ext.P3 sale agreement executed between appellant and the first respondent - society on 30/01/2012 is illegal and unenforceable for want of previous sanction in writing from the Registrar. Even though counsel for the appellant submitted that appellant has no role in regard to the approval to be taken by the first respondent from the statutory authorities and, therefore, he is entitled to enforce the agreement against the society, we are not able to accept the contention because when the appellant enters into a transaction with the society which is governed by the provisions of the Co-operative Societies Act and Rules, the appellant should have been prudent enough to ensure that the society executed the agreement in accordance with their powers under the statute and by following the procedure prescribed. If only appellant took little care to find out whether first respondent - society is free to execute the agreement for purchase of land for Rs.1.2 crores without approval from the statutory authorities, he would have realised that the society could enter into agreement with him only after getting prior written approval from the Joint Registrar. Assuming sanction could be granted by the Joint Registrar even after execution of sale agreement, the agreement gets validity only if sanction is granted by the Joint Registrar in writing under R.54 which is declined by him vide Ext.P4 order. At the maximum the agreement for sale executed between appellant and first respondent - society can be treated as a conditional sale agreement, the enforcement of which will depend on approval from the Joint Registrar under R.54. Since the Joint Registrar declined approval, Ext.P3 agreement continues to be invalid and unenforceable against the society. We, therefore, reject the contention raised by the appellant that Ext.P3 sale agreement is enforceable between the parties. 4. We appreciate the approach of the Joint Registrar in the exercise of the discretionary jurisdiction conferred on him under R.54 in this case. In our view, he has correctly understood the scope and object of R.54 because he has analysed the impact of this unwise investment in land by the society and has rightly drawn the conclusion that the same will lead to loss and probably eventual financial ruin of the society. We completely agree with the suggestion that there is no need for the society to construct office building on the road side and on the other hand, it can utilise it's own land located little inside for construction of it's office. Further, the Joint Registrar rightly estimated the interest burden the society will suffer if deposits are diverted for non - productive investment in land and the saving in interest if amounts are applied in business. On the whole, we place on record our appreciation on the quality of order issued by the Joint Registrar.”
9. In response to this contention, it is pointed out by the learned counsel for the writ petitioners that, in the instant case, Ext.P5 sanction was issued solely on the finding that the property was purchased in a coastal zone restriction area, and the same by itself is not an offence. It is further submitted that Ext.P5 does not indicate that any documents were perused or that the authority applied its mind to ascertain whether the value of the property was on the higher side, even though the order contains a reference suggesting that a huge amount was spent for its purchase.
10. Having addressed the rival submissions, the factual basis of this case revolves around the filing of a complaint by the additional 3rd respondent before the Vigilance Special Court, Muvattupuzha, alleging commission of offences under Section 7 of he PC Act, 1988 and under Section 120B of the Indian Penal Code, by the accused persons and the order passed by the learned Special Judge directing the obtaining of sanction under Section 19(1) of the PC Act, 2018, purportedly in terms of the proviso incorporated with effect from 26.07.2018, that too, in obedience to the directions issued by this Court in W.P.(C).No.38626/2024, dated 04.11.2024 and in R.P.No.1373/2024, dated 23.01.2025. Section 19 of the PC Act, 2018 and its proviso read as under:
19. Previous sanction necessary for prosecution.-
(1) No Court shall take cognizance of an offence punishable under [sections 7, 11, 13 and 15] alleged to have been committed by a public servant, except with the previous sanction [save as otherwise provided in the Lokpal and Lokayuktas Act, 2013 (1 of 2014)]-
(a) in the case of a person [who is employed, or as the case may be, was at the time of commission of the alleged offence employed] in connection with the affairs of the Union and is not removable from his office save by or with the sanction of the Central Government, of that Government;
(b) in the case of a person [who is employed, or as the case may be, was at the time of commission of the alleged offence employed] in connection with the affairs of a State and is not removable from his office save by or with sanction of the State Government, of that Government;
(c) in the case of any other person, of the authority competent to remove him from his office:
[Provided that no request can be made, by a person other than a police officer or an officer of an investigation agency or other law enforcement authority, to the appropriate Government or competent authority, as the case may be, for the previous sanction of such Government or authority for taking cognizance by the court of any of the offences specified in this subWP( section, unless-
(i) such person has filed a complaint in a competent court about the alleged offences for which the public servant is sought to be prosecuted; and
(ii) the Court has not dismissed the complaint under section 203 of the Code of Criminal Procedure, 1973 (2 of 1974) and directed the complainant to obtain the sanction for prosecution against the public servant for further proceeding:
Provided further that in the case of request from the person other than a police officer or an officer of an investigation agency or other law enforcement authority, the appropriate Government or competent authority shall not accord sanction to prosecute a public servant without providing an opportunity of being heard to the concerned public servant:
Provided also that the appropriate Government or any competent authority shall, after the receipt of the proposal requiring sanction for prosecution of a public servant under this sub-section, endeavour to convey the decision on such proposal within a period of three months from the date of its receipt:
Provided also that in case where, for the purpose of grant of sanction for prosecution, legal consultation is required, such period may, for the reasons to be recorded in writing, be extended by a further period of one month:
Provided also that the Central Government may, for the purpose of sanction for prosecution of a public servant, prescribe such guidelines as it considers necessary.
Explanation. —For the purposes of sub-section (1), the expression "public servant" includes such person-
(a) who has ceased to hold the office during which the offence is alleged to have been committed; or
(b) who has ceased to hold the office during which the offence is alleged to have been committed and is holding an office other than the office during which the offence is alleged to have been committed.
(2) Where for any reason whatsoever any doubt arises as to whether the previous sanction as required under sub-section (1) should be given by the Central Government or the State Government or any other authority, such sanction shall be given by that Government or authority which would have been competent to remove the public servant from his office at the time when the offence was alleged to have been committed.
(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), —
(a) no finding, sentence or order passed by a special Judge shall be reversed or altered by a Court in appeal, confirmation or revision on the ground of the absence of, or any error, omission or irregularity in, the sanction required under sub-section (1), unless in the opinion of that Court, a failure of justice has in fact been occasioned thereby;
(b) no Court shall stay the proceedings under this Act on the ground of any error, omission or irregularity in the sanction granted by the authority, unless it is satisfied that such error, omission or irregularity has resulted in a failure of justice;
(c) no Court shall stay the proceedings under this Act on any other ground and no Court shall exercise the powers of revision in relation to any interlocutory order passed in any inquiry, trial, appeal or other proceedings.
(4) In determining under sub-section (3) whether the absence of, or any error, omission or irregularity in, such sanction has occasioned or resulted in a failure of justice, the Court shall have regard to the fact whether the objection could and should have been raised at any earlier stage in the proceedings.
Explanation. — For the purposes of this section, —
(a) error includes competency of the authority to grant sanction;
(b) a sanction required for prosecution includes reference to any requirement that the prosecution shall be at the instance of a specified authority or with the sanction of a specified person or any requirement of a similar nature.
11. As far as the legal position pointed out by the learned counsel for the writ petitioners is concerned, it is not in dispute that the grant of sanction should not be an idle formality, and the authority who exercises that power must apply its mind independently on the prosecution materials to determine whether sanction for prosecuting an accused to be issued, so as to avoid false prosecution of public servants on flimsy grounds.
12. In this connection, it is relevant to note that Section 19(1) of the PC Act 1988 and the 2018 Amendment Act which would stipulate previous sanction, before a court can take cognizance of offence/offences under the PC, Act, 1988 and under the amended Act, 2018. That apart, the legal position regarding the procedure to be followed while forwarding a complaint for investigation by the police as per the order of the Special Judge is settled. In view of the decision in Anil Kumar & Ors. v. M.K. Aiyappa & Anr., reported in [(2013) 10 SCC 705], it has been held that, in order to forward a private complaint alleging offences under the PC Act against a public servant under Section 156(3) of the Code of Criminal Procedure (for short, ‘the Cr.P.C.’ hereinafter), the same is permissible only upon prior sanction under Section 19 of the PC Act. In Manju Surana v. Sunil Arora & Ors. reported in [(2018) 5 SCC 557], the correctness of the ratio in Anil Kumar's case (surpa) was referred to larger Bench. Therefore, until a finding otherwise is rendered by the larger Bench of the Apex Court, before which this issue has been pending, the ratio in Anil Kumar's case (supra) will hold the field.
13. In the amended PC Act of 2018, first proviso was inserted which deals with situation when a private complaint is filed before a competent court, and the proviso clause (i) stipulates that such a person has filed a complaint in a competent court about the alleged offences, for which the public servant is sought to be prosecuted and ; (ii) that the court has not dismissed the complaint under Section 203 of the Cr.P.C., and directed the complainant to obtain the sanction for prosecution against the public servant for further proceedings. Ext.P5 is the sanction issued in terms of Section 19(1) r/w first proviso clauses (i) and (ii) of the PC Act, 2018 and the said sanction itself was granted after interference by the Special Court as well as by this Court.
14. Coming to Rule 54 of the Rules, 1969, it is provided as under:
54. Manner of investment of funds.- (1) A society may, with the previous sanction in writing of the Registrar, Invest the whole or any portion of its funds in the purchase or lease of land on the acquisition, construction or renewal of any building that may be necessary to conduct its business. The amount of the funds so invested shall be recouped on such terms as may be determined in each case by the Registrar.
Provided that this sub-rule shall not apply—
(a) to immovable property purchased—
(i) by a society at a sale held in execution of a decree, decision or award obtained by it for the recovery of any sum due to it; or
(ii) by a Financing Bank at a sale held in execution of a decree, decision or award obtained by a society financed by it for the recovery of any sum due to such society or at a sale by or on behalf of the liquidator of such society;
(b) to the purchase or lease of lands or purchase, construction or remodelling of buildings of a Society, whose objects according to its bye-laws include such purchase, lease, construction or remodelling:
Provided further that no recoupment of the amount invested under this sub-rule shall be necessary when the investment is made—
(a) by a society from its building fund raised out of net profit as per the bye-laws; or
(b) by a society other than a credit society in which the share capital raised from the members is intended to build up the special kind of business for which it has been registered.
(2) No society shall dispose of any immovable property acquired by the society without the prior sanction of the general body and of the Registrar.
Provided that Housing Societies, the bye-laws of which specifically provide for the purchase and sale of immovable property, may dispose of those property without the sanction of the Registrar or of the general body.
(3) A society may with previous permission of the Registrar deposit or invest its funds in institutions registered under the Travancore Cochin Literacy, Scientific and Charitable Societies Act, 1955, provided that such institutions are jointly managed by the Government and Co-operative societies for the promotion of health and educational purposes.
15. It is a mandatory provision that a Society shall obtain the previous sanction in writing of the Registrar if it intends to invest the whole or any portion of its funds for two purposes, namely, for the purchase of land or for obtaining a lease of land. In the instant case, the learned counsel appearing for the additional 3rd respondent submits that, as seen from Ext.P4, there is a reference to the execution of a sale agreement prior to the issuance of Ext.P4, for the purchase of 8.74 cents of land in Sy.No.470/16 from Smt.Snila for a period of four months.
16. Anyhow, as per Ext.P4, sanction was accorded by proper authority for purchase of land, though sale agreement was executed and advance sale consideration was paid without any previous sanction.
17. Coming to sanction envisaged under Section 19(1), which is required for a court to take cognizance for the offence under the PC Act, 1988 and Amendment Act, 2018, it is relevant to note that there is a practical difference between the sanction that would accompany the investigation report for the purpose of taking cognizance and the sanction required to be produced for ordering an investigation under Section 175(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short, ‘the BNSS’ hereinafter) or for proceeding with a complaint under Section 223 of the BNSS. That is to say, as submitted by the learned counsel for the writ petitioners, the decision in Dhirendra Krishan’s case (supra), followed by the earlier decision in Mohd. Iqbal Ahmed v. State of Andhra Pradesh reported in [(1979) 4 SCC 172], was rendered in the context of a prosecution sanction under Section 19(1) that was issued on verifying the prosecution materials forming part of the final report prepared upon completion of a comprehensive investigation.
18. However, coming to sanction under Section 19(1) r/w first proviso of the PC Act, 2018, for directing investigation under Section 175(3) of the BNSS to proceed under Section 223 and subsequent sections of the BNSS, the materials which are collected as the outcome of a comprehensive investigation, moulded as a comprehensive final report prepared would not be available, since the stage of Section 175(3) and Section 223 of the BNSS are the stages when allegations in the complaint with available documents alone would be available. Thus, a competent officer while considering issue of sanction for the purpose of directing investigation under Section 175(3) of the BNSS or at the stage of Section 223 of the BNSS would not have opportunity to look into the materials in an exhaustive way. So, a court while addressing the legality or the essentials of a sanction issued at the stage of Section 175(3) and under Section 223 of the BNSS should keep in mind this principle. If so, it becomes necessary to classify the materials for granting sanction under Section 19(1) for taking cognizance against a public servant on the basis of a comprehensive investigation report, and the materials relevant for sanction under Section 19(1) r/w first proviso and clauses (i) and (ii) for the purpose of ordering investigation or proceeding with the enquiry. Thus, a sanction granted under Section 19(1) r/w first proviso and clauses (i) and (ii) thereto for the purpose of ordering an investigation or for conducting an enquiry by the Special Judge should not be as exhaustive one under Section 19(1) for taking cognizance against the accused based on a final report emanated from a full-fledged investigation, since the former is based on the allegations in the complaint and the supporting documents available whereas the latter must be founded on the prosecution materials forming part of the final report prepared after completion of a comprehensive investigation. No doubt, even though while issuing sanction under Section 19 (1) for the purpose of ordering investigation under Section 175(3) of the BNSS or an enquiry by the Special Judge under Section 223 of the BNSS also, prima facie, satisfaction of commission of the alleged offences to be borne out from the materials considered by the Sanctioning Authority, though the same are not so exhaustive when considering sanction under Section 19(1) to prosecute an accused on perusal of the final report and the materials thereof, after completion of investigation.
19. Having held the law thus, it is necessary to analyse any infirmity or illegality in Ext.P5, the sanction order issued and impugned herein at the stage before proceedings under Section 223 of BNSS, where the materials available while issuing Ext.P5 sanction, are only the allegations in the complaint along with the supporting available documents, for which an investigation by the police or an enquiry by the Special Judge is yet to be undertaken. A reading of Ext.P5, which was issued after repeated directions of the Special Court and this Court, shows that the sanction was issued on the finding that the property was situated in CRZ, and construction in the area is permissible only for plots of land, for which roads and buildings existing prior to 18.01.2019, and that any other construction would require the prior sanction of the CRZ authority. At the same time, Ext.P5 indicates the submission of the President of the Society that the purchase was made pursuant to Section 2(XII) of the bye-law. Ext.P5 further states that the property was purchased for a total consideration of Rs.1,22,36,000/- where as per the report of the Tahsildar, the land value prevailing was only Rs.7,97,872/- per Are, as submitted by the President of the Society. Ultimately, the author of Ext.P5 issued the order on the finding that the property was purchased in a CRZ area where full-fledged construction was not possible, and also on the further finding that the property was purchased for higher rates than the prevailing rate, whereby, financial loss sustained to Society.
20. In this connection, it is relevant to note that in the counter affidavit filed by the 3rd respondent, he has produced Exts.R3(d) and (e) valuation certificates prevalent during the period of purchase. Ext.R3(d) is the valuation certificate issued by the Tahsildar, Kanayannur Taluk, dated 11.06.2015, wherein the valuation of the property per Are is stated as Rs.7,97,872/-. This value was reproduced in Ext.P5 order. Ext.R3(e) is the valuation certificate prepared by the Village Officer, Kadamakkudy, dated 29.04.2015, which shows that the valuation of the property per Are during the relevant period in the same survey number was Rs.80,971/-. The property purchased by the Society is 8.74 cents of land. If the valuation of the Tahsildar at the rate of Rs.7,97,872/- per Are is taken, the value of 8.74 Ares would come to Rs.69,73,401.28/-. However, the property was purchased at the rate of Rs.14 Lakh per cent. Thus, the consideration paid for the purchase of this property, which is in a CRZ (restricted area), is prima facie very excessive. That is to say, the excess amount would come to Rs.52,62,599/- and the same prima facie is a loss to the Society at the helm of the writ petitioners. Therefore, the allegation in the complaint, on the basis of which Ext.P5 sanction was issued, need not be set aside, as Ext.P5 discloses sufficient reasons demonstrating application of mind within the sphere of the limited materials available, since Ext.P5 was issued at the pre-investigation and pre-enquiry stage.
Hence, I am of the view that the reasons urged by the learned counsel for the writ petitioners to set aside Ext.P5 sanction are insufficient to do the said exercise and thus, the challenge against Ext.P5 order is liable to fail.
In the result, this writ petition stands dismissed.
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