A) ABSTRACT / HEADNOTE

The appeal examines whether conviction under Sections 120B and 411 IPC can stand where the prosecution fails to prove that the seized gold bars are the same articles procured through the fraudulent Telegraphic Transfers (TTs) and forged demand drafts. The case arises from a largescale banking fraud in which bogus TTs credited Rs. 6,70,00,000/ to an account opened in the fictitious name M/s. Globe International; subsequent withdrawals via forged DDs were allegedly used to buy gold bars delivered to or through the appellant (accused No. 3).

After delayed seizure (about four years) of 205 gold bars from the appellant’s shop, trial court convicted him under conspiracy and receipt of stolen property while paradoxically holding the seized bars were not proved to be the same as those sold against the tainted DDs.

The Trial Court nonetheless convicted; the High Court sustained conviction and ordered confiscation; on appeal the Supreme Court analyzed

(i) essentials of s.411 IPC (possession, prior possession by others, and accused’s knowledge or belief of theft),

(ii) role of ss.106 and 114 Evidence Act as shifting evidential burdens, and

(iii) impact of delayed recovery and absence of linking stock records/unique identification.

The Court held prosecution failed to complete the essential chain of proof and could not invoke presumptions; conviction under ss.120B & 411 IPC set aside and 205 gold bars returned to accused No. 3.

Keywords: dishonestly receiving stolen property; criminal conspiracy; telegraphic transfer; Section 411 IPC; Section 106 Evidence Act; identification of property; delay in seizure; burden of proof.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This litigation stems from a sophisticated imposture upon Vijaya Bank by means of fake Telegraphic Transfers (TTs) and forged documents to open an account in the fictitious name M/s. Globe International, followed by credits totalling Rs. 6.7 crores which were subsequently withdrawn through demand drafts and cash. The CBI investigation traced certain DD proceeds to purchases of gold bars from jewellers M/s. Chenaji Narsinghji (M/s. CN) and M/s. V.P. Jewellers; the delivery route implicated an absconding intermediary (Mukesh Shah / Mayur Desai) and the appellant Nandkumar Babulal Soni (accused No. 3).

After delayed search and seizure in 2001, 205 gold bars of mixed makes were recovered from the appellant’s premises. Trial courts framed multiple charges including conspiracy and receipt of stolen property (s.411 IPC). The prosecution’s case hung on documentary links (Exh.119 letter identifying markings), witness testimony from jewellery houses, and circumstantial inferences of business relations and transfer of DDs. Conversely the defence emphasised long delay in recovery, absence of direct proof that seized bars were those procured by tainted DDs, and lawful acquisition claims.

The Trial Court reached an internally inconsistent finding accepting that seized bars were not proved to be the same but still convicting for receiving stolen property a tension the High Court largely upheld until the Supreme Court re-examined evidentiary prerequisites and the permissible scope of presumptions under ss.106 and 114 Evidence Act. The core questions framed materially concerned identity of property, mens rea (knowledge/belief), and whether circumstantial proof furnished the “chain” required by precedents such as Kamal v. State and Nagendra Sah v. State of Bihar.

D) FACTS OF THE CASE

On 06.02.1997, an account was opened in M/s. Globe International at Vijaya Bank, Nasik branch on the basis of documents later found forged. Between 25.04.1997 and 06.08.1997 multiple TTs (12) totalling Rs. 6,70,00,000/ were credited; withdrawals were effected by DDs and cash. The bank discovered the TTs were bogus on 12.08.1997; payments against 19 DDs (Rs.1,61,44,000/-) were stopped. CBI registered a case on 09.09.1997.

Investigations revealed that many DDs were issued in favour of M/s. CN allegedly for purchase of gold bars; deliveries were said to be to Mukesh Shah who in turn routed goods to or through Nandkumar (accused No.3). On 01.06.2001 a search of accused No.3’s shop resulted in seizure of 205 gold bars (various makes: ARY, HARMONY, Johnson Mathew, Credit Suisse, PAMP Suisse). Trial court convicted accused Nos.1,2 and 3 on multiple counts but paradoxically held the seized bars were not proved to be the ones sold to Globe International.

The Trial Court nonetheless returned the gold bars to accused No.3; CBI appealed that direction. The High Court acquitted bank officers (Nos.1 & 2) but convicted accused No.3 and quashed the order returning bars — placing them at State disposal. Accused No.3 and others appealed to this Court, challenging conviction and custody order.

E) LEGAL ISSUES RAISED

i. Whether conviction under s.411 IPC can be sustained when the prosecution fails to prove identity of seized property as the stolen property?
ii. Whether mere possession of property recovered from accused and some circumstantial links suffice to infer knowledge or belief that the property was stolen?
iii. When and how can ss.106 and 114 Evidence Act be invoked when the initial chain of prosecution evidence is incomplete?
iv. Whether delay (approx. 4 years) in recovery undermines identification and breaks the required chain of circumstances?
v. Whether the bank (Vijaya Bank) acquires entitlement to possession of seized goods absent proof that seized items were its stolen property?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for Petitioner / Appellant submitted that:
i. The conviction under s.411 IPC rests on incomplete circumstantial proof and inadmissible inference; prosecution has not proved that 205 seized gold bars were the same gold sold against tainted DDs.
ii. Delay of approximately four years between fraudulent transactions and seizure vitiates reliable identification; possibility of mistaken identification is real.
iii. Invocation of s.106 Evidence Act and s.114 presumptions is impermissible because the prosecution failed to discharge its initial burden; burden cannot be shifted when the chain is not complete.
iv. The Trial Court’s reasoning was internally inconsistent (finding bars not proved yet convicting); setting aside conviction and restoring possession is necessary.

G) RESPONDENT’S ARGUMENTS

The counsels for Respondent (CBI) submitted that:
i. Independent evidence links accused No.3 to Mukesh Shah and to delivery of goods; letters (Exh.119) and witness testimony establish connection.
ii. Seized bars were found in accused’s shop and there exists circumstantial matrix (business relations, endorsement, handing over of DDs) from which guilt and knowledge may be inferred.
iii. Delay is explainable by investigative exigencies; cautious invocation of presumptions under s.114 Evidence Act is warranted where defence fails to satisfactorily explain possession.

H) RELATED LEGAL PROVISIONS

i. Indian Penal Code, 1860 — s.411 (dishonestly receiving stolen property), s.120B (criminal conspiracy).
ii. Indian Evidence Act, 1872 — s.106 (burden of proving facts especially within special knowledge), s.114 (presumptions).
iii. Prevention of Corruption Act, 1988 — s.13 (criminal misconduct by public servants) (context to bank officers’ charges).

I) JUDGEMENT 

The Supreme Court confined its analysis to accused No.3 (no appeal by CBI against acquittal of bank officers). The Court reviewed trial evidence: jewellers’ testimony, Exh.119 (letter by M/s. CN listing markings), hostile witnesses, expert identification of brands, and the CBI’s seizure chronology. Two pivotal findings by Trial Court emerged:

(a) prosecution did not prove seized bars to be identical to those sold to Globe International, and

(b) despite (a) it convicted on the basis of conversion and circumstantial inference.

The Court stressed settled principles suspicion cannot replace proof beyond reasonable doubt (citing Kamal v. State (NCT of Delhi)). Applying the essential ingredients of s.411 IPC (possession by accused; prior possession by others; accused’s knowledge/belief) as reiterated in Trimbak and Mohan Lal, the Court held the prosecution failed to establish the crucial identity link and the accused’s culpable knowledge. On s.106 Evidence Act, the Court accepted that it applies only after prosecution has proved the foundational facts from which reasonable inferences flow; failure to prove identity meant s.106 could not help.

The Trial Court’s own observation that identification was weak particularly given a four-year delay and absence of evidence showing stock of identical branded bars at M/s. CN fatally weakened prosecution’s case. Invocation of s.114 presumptions was also impermissible where initial burden remained unmet. For these reasons the Supreme Court allowed appeals of accused No.3, set aside convictions under ss.120B & 411 IPC, and directed return of 205 gold bars to him; concurrently it dismissed bank’s appeal for possession since identity as stolen property remained unproved. The Court clarified that its findings are confined to criminal appeal and do not foreclose other remedies available in law.

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a. RATIO DECIDENDI

The controlling ratio is that conviction for receiving stolen property (s.411 IPC) requires the prosecution to prove

(i) accused’s possession of the property,

(ii) prior possession by others, and

(iii) accused’s knowledge or reason to believe property was stolen.

Where the prosecution cannot prove that the seized property is the same property obtained through the tainted fraudulent transactions particularly when there is significant delay in recovery and lack of documentary/stock linkage the chain of circumstantial evidence remains incomplete and s.106 / s.114 of the Evidence Act cannot be invoked to fill that foundational gap. Suspicion and negative inference from failure to explain do not substitute the positive proof required to exclude hypotheses consistent with innocence. Thus, conviction under ss.120B & 411 IPC is unsustainable without a completed chain of proof.

b. OBITER DICTA

The Court observed that conversion of tainted monetary proceeds into gold bars and sale through jewellers may constitute cogent circumstances; but such circumstances still require precise linking evidence (stock records, unique markings traceable to the transactions) to attribute criminal liability. The judgment further commented on the limits of hostile witness evidence: hostility does not automatically confer guilt and may reflect coercion or fear rather than truth.

The Court emphasized that acts like resisting search are relevant but cannot supplant the need for positive proof connecting seized items to the fraud. The Bench also signalled that while criminal findings were set aside, civil or restitution claims by the bank remain open criminal failure does not preclude other remedies.

c. GUIDELINES

i. Prosecution in property-fraud cases must produce contemporaneous stock records/ledger entries or uniquely identifiable markings to link seized goods with tainted funds.
ii. Delays in seizure (years) substantially weaken identification; explainable forensic or documentary continuity must be shown.
iii. Invocation of s.106 Evidence Act is permissible only after prosecution proves foundational facts from which reasonable inferences can be drawn.
iv. s.114 presumptions cannot be used to cure an incomplete chain; courts should not convert suspicion into proof.
v. Where criminal identification fails, courts must reserve civil or restitution avenues to aggrieved banks without criminalizing unproven possession.

J) CONCLUSION & COMMENTS

This judgment reinforces classical evidentiary discipline: the identity of the stolen thing is central in offences under s.411 IPC and cannot be supplied by emphasis on peripheral circumstances alone. The Court’s insistence that proof must close the gap between “may” and “must” is faithful to long-standing precedent and protects against convictions driven by suspicion in complex white-collar matrices where goods are fungible (gold bars) and commercial practices create legitimate possibilities of lawful acquisition.

Practitioners should note the practical guidance: maintain contemporaneous inventory, invoice particulars, delivery acknowledgements, and preferably unique identifiers; investigators should prioritize timely seizures and forensic traceability. The decision balances public interest in punishing financial deception with individual liberty protections by upholding the rule that criminal guilt requires proof beyond reasonable doubt. Finally, the judgment sensibly preserves other legal remedies (civil recovery) for victims, acknowledging that criminal process is not the sole mechanism for restitution.

K) REFERENCES

a. Important Cases Referred

1. Hiralal Babulal Soni v. The State of Maharashtra & Ors., [2025] 2 S.C.R. 708 : 2025 INSC 266.

2. Trimbak v. State of M.P., AIR 1954 S.C. 39.

3. Nagendra Sah v. State of Bihar, (2021) 10 SCC 725.

4. Kamal v. State (NCT of Delhi), 2023 INSC 678 : [2023] 11 SCR 49.

5. Mohan Lal v. State of Maharashtra, (1979) 4 SCC 751.

6. Shiv Kumar v. State of M.P., (2022) 9 SCC 676 : [2022] 7 SCR 493.

b. Important Statutes Referred

1. Indian Penal Code, 1860 (ss.120B, 411, 403, 409, 420, 467, 471, 477A, 109).

2. Indian Evidence Act, 1872 (ss.106, 114).

3. Prevention of Corruption Act, 1988 (s.13).