Supreme Court: Just Because Money Changed Hands, It Cannot Be Ipso Facto Presumed That It’s Pursuant To Demand For Illegal Gratification

The Court dismissed an Appeal filed by the State of Lokayuktha Police, Davanagere, thereby upholding the Order of the Karnataka High Court that had set aside the conviction of an Extension Officer (Respondent) in the office of the Taluka Panchayath, who had been found guilty by the Special Court under Sections 7, 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988 (PC Act).

The Bench of Justice Pankaj Mithal and Justice Ahsanuddin Amanullah held, “The observation of the High Court to this extent is correct that just because money changed hands, in cases like the present, it cannot be ipso facto presumed that the same was pursuant to a demand, for the law requires that for conviction under the Act, an entire chain – beginning from demand, acceptance, and recovery has to be completed. In the case at hand, when the initial demand itself is suspicious, even if the two other components – of payment and recovery can be held to have been proved, the chain would not be complete.”

AOR DL Chidananda appeared for the Appellant, while Advocate Satyajit A Desai represented the Respondent.

Brief Facts

A complaint was filed by a Primary School Teacher, who alleged that the Respondent demanded an illegal gratification of Rs. 1,500 to submit a spot inspection report for his Validity Certificate under Category-II A. The Respondent's file was put up to inquire and report. A complaint was registered, and it was further alleged that the Respondent received the said illegal gratification on the same day.

A trap was conducted by the Lokayuktha Police team, during which phenolphthalein-smeared currency notes amounting to Rs. 1,500 were seized from the Respondent. The Respondent's fingers, when dipped in sodium carbonate solution, turned pink due to the presence of phenolphthalein.

Court’s Reasoning

The Supreme Court remarked that the testimony regarding the demand was "not very coherent and slightly self-contradictory", and the benefit of this incoherence had to flow to the Respondent. The Court stated that "basically, it is only the version of the Complainant himself which can be said to have some basis with regard to the demand".

The Bench highlighted that there was "not even a whisper of there being any demand of bribe", when the physical inspection occurred. The Bench pointed out that the prosecution's own case, through witness depositions, indicated that when the Complainant returned with the money, the Respondent had already informed him that "he had already forwarded the concerned file".

The Court stated that if the work was already done, "there was no occasion for the Complainant to go ahead with paying the amount".

“Though it can be commented that the High Court was required to give detailed factual reasoning, which has not been done, as to why it was overturning an order of conviction by that of acquittal, yet since the factum of demand itself has not been proved beyond reasonable doubt, the acquittal of the Respondent by the Impugned Judgment cannot be termed perverse or unwarranted, in the factual matrix of the present lis,” the Bench remarked.

The Court held that “we have applied our mind independently to all material aspects and find ourselves ad idem with the conclusion of the High Court.”

Consequently, the Court ordered, “Thus, on an overall conspectus of the facts and circumstances of the case and the discussions made hereinabove, we do not find any ground made out by the Appellant requiring interference by this Court. The Impugned Judgment is, hence, upheld.”

Accordingly, the Supreme Court dismissed the Appeal.

Cause Title: State Of Lokayuktha Police, Davanagere v. C B Nagaraj (Neutral Citation: 2025 INSC 736)

Appearance:

Appellant: AOR D. L. Chidananda

Respondent: Advocates Satyajit A. Desai, Abhinav K. Mutyalwar, Siddharth Gautam, Sachin Singh, Ananya Thapliyal and Pratik Singh; AOR Anagha S. Desai

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