From the appellate court verdict by Judge C.R. Kumaraswamy

From the appellate court verdict by Judge C.R. Kumaraswamy on May 11, 2015.

1. “Positive evidence”: The main point that Justice Kumaraswamy makes in his 919-page verdict is that the four accused persons borrowed Rs.24 crore from nationalised banks to buy immovable properties and so the amount should be considered “lawful income”. He underscores it as “positive evidence”. In page 850, he says, “…there is a positive evidence to the effect that Rs.24,17,31,274 has been borrowed as loans from nationalised banks by A-1 to A-4, firms and companies” to buy immovable properties. “This is a lawful source of income,” the judge says. Again in page 844, he states, “…this is not an unlawful activity”. He brings up the taking of loans again on pages 843 and 848 and stresses on page 901 that “immovable properties were acquired by borrowing huge loans from nationalised banks”. The loan amount comes up again on pages 903, 908 (the accused “borrowed heavy loans”) and 909.

2. Marriage expenses: Justice Kumaraswamy estimates that “the liability” of the money spent by Jayalalithaa, Sasikala and Ilavarasi for Sudhakaran’s wedding “is to the extent of Rs.28,68,000”. He had concluded, he said, after examining the evidence and documents, that the “accused number 1 cannot be saddled with the entire marriage expenses”. It is “a customary practice” that the bride’s family meets the wedding expenses. He argues that “…according to the Hindu customs, it is the bride’s father and their family members who perform the marriage and they bear the marriage expenses. Besides, there will be non-verifiable expenditure.” He refers to the trial court’s estimate of Rs.3 crore as marriage expenses and concludes that “there is no acceptable evidence to point out that A-1 has spent about Rs.3,00,00,000”. Justice Kumaraswamy finds fault with the trial court that “in spite of it, the trial court has arrived at a figure of Rs.3 crore as a modest and conservative estimate. Arriving at Rs.3,00,00,000 towards marriage expenses and fixing the liability of Rs.3,00,00,000 to A-1 alone is not proper.”

The judge refers to the testimony of Ramkumar, the photocopy of the savings bank account passbook, the remittance of Rs.92 lakh into the bank account, and Ramkumar’s deposition that he spent Rs.92 lakh to conduct the marriage. He, however, says that “the account details do not disclose that the amounts were spent on the marriage”. The prosecution did not examine the material witness, the bride’s father, Narayanaswamy, although “he was a proper person to speak about the marriage expenses of his daughter”, the judge states. “No plausible explanation is forthcoming as to why he was not examined.”

While the prosecution’s case was that Jayalalithaa met all the marriage expenses, her version was that she spent Rs.28.67 lakh. Besides, the bride’s family was financially sound. The judge accepts the version of the bride’s family that “they incurred expenditure” for the marriage. There was “positive evidence” that AIADMK members made some arrangements and spent some amount “voluntarily” for the marriage. In the absence of evidence from Narayanaswamy, and with Jayalalithaa providing a statement to the Income Tax Department that she spent Rs.28,67,520 on the marriage and the party workers spending some amount, “I am of the opinion that the liability of the marriage of A-3 by A-1 to A-4 is to the extent of Rs.28,68,000”, the judge says.

3. Namadhu MGR: According to Justice Kumaraswamy, it was in 1990 that Namadhu MGR introduced the subscription deposit scheme to improve the newspaper’s circulation. According to defence witness 88,

K. Soundaravelan, a chartered accountant, the total amount received by Jaya Publications under the scheme from its subscribers was Rs.14.23 crore. The judge says that as far as the income of Namadhu MGR is concerned, “there is a positive evidence to the effect” that Income Tax returns were filed “very belatedly”. Yet, “no plausible explanation is forthcoming from the assessee as to why there is a delay in filing the returns. Under the tax laws, the burden is on the assessee to explain the true nature and source of the income…. The burden of establishing that a disputed amount is not the assessee’s income lies on the assessee and not the [Income Tax] Department.”

In this case, accused numbers 1 and 2 did not enter the witness box although they claimed that the income from the subscription scheme was more than Rs.14 crore, the judge says. He points to a discrepancy in the evidence of defence witness 88: at a point of time, the assessee said the application forms for the scheme went missing and a complaint was given to the police. Subsequently, the application forms were marked and presented to the Income Tax Department. The judge points out that counsel for the respondents—the prosecution and the general secretary [K. Anbazhagan] of the Dravida Munnetra Kazhagam—had argued that “this claim is fictitious” and that “it is an afterthought”. Justice Kumaraswamy concludes, “When Income Tax returns have not been filed for many years, it disentitles the assessee substantially. A doubt arises in the genuineness of the Income Tax returns. Taking into consideration the evidence of the defence witnesses… even if there is a delay in filing the Income Tax returns, this cannot be a factor to reject the whole claim of the assessee. The evidence adduced by the defence will have some force. This aspect has to be taken into consideration while assessing the income spoken by the defence side. Jaya Publications’ activities are printing textbooks, publishing, real estate and Namadhu MGR … in my view, a sum of Rs.4,00,00,000 has to be taken as an income earned by Jaya Publications.”

4 . Cost of construction: Justice Kumaraswamy gives “a finding” that the cost of construction of new and additional buildings by the accused is Rs.5.10 crore. In this, he includes Rs.4.67 crore as the construction cost for 1,668.39 “squares” at Rs.28,000 per square during the check period; Rs.25.66 lakh as the cost of marble and granite slabs and interior decoration; Rs.40,000 for staircase, sump and overhead tank; and Rs.15,000 for the installation of OTIS lift. In contrast, the cost of construction as per the DVAC estimate is Rs.27.79 crore.

5. Value of immovable assets: The judge estimates the value of immovable properties such as agricultural land and “sites” bought by the accused, their firms and companies at Rs.6.24 crore. From pages 884 to 890, he lists the series of parcels of land in various parts of Tamil Nadu, defunct TANSI units in Chennai, and some buildings bought by the accused and their firms and companies. “Insofar as these items are concerned, there is no acceptable evidence adduced by the prosecution to show that unaccounted money was parted by the accused to the sellers. Therefore, I value the cost paid over and above the sale consideration as ‘nil’,” he says. On page 903, the judge says, “The value of immovable properties acquired amounts to Rs.6,24,09,120, i.e., agricultural lands. Kodanadu tea estate was acquired by accused number two to four and it is worth about Rs.3.50 crore.”

6. Criminal conspiracy: The judge rejects the charge of criminal conspiracy and abetment against the accused. He says that even if there was an undervaluation of properties and non-compliance of Income Tax Act by not furnishing the Tax Clearance Certificate, they could not be taken into consideration for bringing home the offence of criminal misconduct. There was “positive evidence” that Rs.24.17 crore had been borrowed by the accused numbers 1 to 4, firms and companies. He calls it “a lawful source of income” and says the amount had been used to acquire immovable properties. “There is no evidence to show that ill-gotten wealth of A-1 has been parted to A-2 to A-4, firms and companies to acquire these immovable properties. The prosecution has not shown the loan borrowed by accused number one to four, firms and companies. Therefore, the prosecution has not established the offence of abetment and criminal conspiracy,” he concludes.

7. Abetment: Evidence reveals that Rs.24 crore borrowed by the accused from nationalised banks had been used to buy agricultural land, sites, firms and companies. The question of Jayalalithaa abetting the other three accused to acquire immovable properties, therefore, “does not arise”.

8. Confiscation: The High Court judge says that the trial court confiscating the properties of the accused is not sustainable in law because they bought the immovable properties “by borrowing huge loans from nationalised banks” and “it is difficult to infer” that they were bought using ill-gotten money.

9. Quantum of disproportionate assets: Justice Kumaraswamy calculates the total assets of the four accused, their firms and companies at Rs.37.59 crore and their income at Rs.34.76 crore. Their disproportionate assets work out to 8.12 per cent above the known sources of income. “It is a well-settled law that according to Krishnanand Agnihotri’s case, when there is a disproportionate asset to the extent of 10 per cent, the accused are entitled for acquittal,” he says and sets free Jayalalithaa, Sasikala, Sudhakaran and Ilavarasi.