The Supreme Court has acquitted Sarala Devi T.C., former Secretary of Service Co-operative Society Ltd. No. 4280, Thamarakkulam, in a corruption and criminal breach of trust case, after holding that the prosecution failed to establish entrustment and misappropriation beyond reasonable doubt.
A Bench comprising Justice Aravind Kumar and Justice Prasanna B. Varale allowed the appeals in Sarala Devi T.C. v. State of Kerala, Criminal Appeal No(s). ___ of 2026 arising out of Special Leave Petition (Criminal) Nos. 2910-2911 of 2026, by order dated May 19, 2026.
The Court set aside the common judgment dated December 3, 2025 passed by the Kerala High Court at Ernakulam in Criminal Appeal Nos. 45 and 46 of 2014, which had affirmed the conviction and sentence imposed by the Enquiry Commissioner & Special Judge, Thiruvananthapuram in C.C. Nos. 29 and 30 of 2008 by common judgment dated December 18, 2013.
Allegation Was Misappropriation Of ₹1,500 And ₹14,000
According to the prosecution, the appellant, while working as Secretary of the Service Co-operative Society, allegedly misappropriated amounts of ₹1,500 and ₹14,000 said to have been entrusted to her on June 16, 2001 and February 26, 2003.
The allegation was that she failed to account for the amounts in the records of the Society, leading to registration of FIRs. After investigation, charge sheets were filed on April 2, 2008, which were taken on file as C.C. Nos. 29 and 30 of 2008.
Charges were framed under Section 13(2) read with Sections 13(1)(c) and 13(1)(d) of the Prevention of Corruption Act, 1988, and Sections 409, 465 and 477A of the Indian Penal Code, 1860.
The appellant had earlier filed Criminal Miscellaneous Petition No. 1178 of 2013 in C.C. No. 30 of 2008 seeking a joint trial of both cases on the ground that the alleged offences formed part of the same series of transactions. The request was allowed and both cases were tried jointly.
Also Read: Bhojshala-Kamal Maula Dispute : Muslim Party Approaches Supreme Court Against MP HC Order Declaring Disputed Site Temple
Trial Court Convicted Appellant, High Court Affirmed Findings
The Trial Court, after considering the evidence of PW1 to PW6 and documents marked as Exts. P1 to P13, convicted the appellant for offences punishable under Sections 409 and 477A IPC and Sections 13(1)(c) and 13(1)(d) read with Section 13(2) of the PC Act.
She was sentenced to undergo rigorous imprisonment for one year each, with fines of ₹1,000 each, and in default, to undergo rigorous imprisonment for a further period of one month each in both cases. The sentences were directed to run concurrently.
However, the Trial Court acquitted the appellant of the offence under Section 465 IPC relating to forgery.
The Kerala High Court later dismissed Criminal Appeal Nos. 45 and 46 of 2014, holding that the testimony of PW2 and PW3, along with documentary evidence, sufficiently established entrustment of the amounts and failure by the appellant to account for the same.
Appellant Argued Entrustment Was Not Proved
Before the Supreme Court, the appellant contended that entrustment had not been proved and that the receipts relied upon by the prosecution were not duly established in accordance with law.
It was argued that the prosecution case rested mainly on the oral testimony of PW2 and PW3, whose evidence allegedly suffered from serious infirmities. The appellant further submitted that PW3, who allegedly entrusted the amounts, was himself initially arrayed as an accused in the same crime, and therefore his testimony required strict corroboration in material particulars.
The State opposed the appeals and argued that both the Trial Court and the High Court had correctly appreciated the oral and documentary evidence and rightly returned findings of conviction.
Supreme Court Questions Reliance On Disputed Receipts
The Supreme Court noted that the prosecution case fundamentally rested on Ext.P1(b) and Ext.P3(ab), described as receipts allegedly executed by the appellant acknowledging receipt of ₹1,500 and ₹14,000, respectively.
The Court observed that the genuineness of these receipts formed the foundation for establishing entrustment and consequential misappropriation.
The Bench noted that PW3, the then Agricultural Officer attached to Krishi Bhavan, Thamarakkulam, who allegedly entrusted the amounts to the appellant, was originally arrayed as Accused No. 1 in Ext. 9 FIR, though his case was later split up and he was acquitted.
The defence case throughout was that the receipts were fabricated by PW3 in collusion with PW2, the President of the Society, in order to shield PW3 from vigilance proceedings relating to missing subsidy amounts.
Also Read: Supreme Court Designates Seven Former High Court Judges As Senior Advocates
Court Says Interested Witness Evidence Needed Careful Scrutiny
The Supreme Court held that even though interested witness evidence is not automatically inadmissible, it must be subjected to careful scrutiny.
The Bench noted that PW1 did not have direct knowledge of the transactions relating to Ext. P1 file and Ext. P3(a) file, and therefore his testimony was not relevant to prove entrustment.
It further observed that the disputed Society letterhead was not in the exclusive possession of the appellant and could also have been used by PW2. The Court also recorded that the defence had consistently alleged that PW2 and PW3 were connected through the same political affiliation, and therefore the possibility of collusion could not be ruled out.
Handwriting Evidence Under Section 47 Evidence Act Not Conclusive
The Supreme Court found fault with the reliance placed by the courts below on the testimony of PW2 under Section 47 of the Evidence Act to identify the appellant’s handwriting.
The Court explained that Section 47 makes relevant the opinion of a person acquainted with the handwriting of another, though such a person is not an expert under Section 45 of the Evidence Act.
However, the Court held that such non-expert handwriting opinion is not conclusive by itself. It must be assessed along with other strong circumstances proving execution of the disputed document.
In the present case, the Court noted that the appellant’s primary defence was that the documents were fabricated through collusion between PW2 and PW3. Therefore, PW2’s statement could not be the sole basis to conclude that the receipts were in the appellant’s handwriting.
The Bench observed that the prosecution was expected to prove the genuineness of the disputed receipts through independent evidence, including expert evidence or other reliable corroboration, which was not done.
Date Discrepancy In Receipt Weakened Prosecution Case
The Supreme Court also found a material discrepancy in relation to Ext.P3(ab).
While the prosecution alleged that ₹14,000 was entrusted to the appellant on February 26, 2003, the corresponding receipt relied upon by the prosecution bore the date March 3, 2003, nearly five days later.
The Court held that no satisfactory explanation was offered by the prosecution for this inconsistency. It observed that if the receipt was said to be a contemporaneous acknowledgment of payment, the discrepancy in dates affected the genuineness of the alleged transaction.
Acquittal On Forgery Charge Made Reliance On Same Documents Problematic
The Bench also noted that the Trial Court itself had acquitted the appellant of the offence under Section 465 IPC relating to forgery.
The Supreme Court held that once the prosecution failed to conclusively establish the authenticity of the disputed documents for the purpose of forgery, the same documents could not be treated as unimpeachable evidence of entrustment for sustaining conviction under Section 409 IPC and the provisions of the PC Act by themselves.
The Court observed that the reasoning of the courts below suffered from an inherent inconsistency, as the same evidentiary material was considered insufficient for one charge but conclusive for another.
Entrustment Cannot Be Presumed, Says Supreme Court
The Court held that an offence under Section 409 IPC requires proof of entrustment along with dishonest misappropriation.
It observed that entrustment is not a matter of presumption but a foundational fact which the prosecution must prove affirmatively and beyond reasonable doubt.
The Bench further held that mere absence of corresponding entries in the Society’s cash book or day book could not by itself establish misappropriation unless lawful entrustment was first proved through cogent and reliable evidence.
The Court also noted that the prosecution failed to produce independent material such as contemporaneous disbursement registers, treasury records, acknowledgment registers, vouchers, or testimony of any independent witness to prove actual delivery of cash to the appellant.
PC Act Charge Also Not Established
The Supreme Court also accepted the appellant’s contention regarding the applicability of the Prevention of Corruption Act, 1988.
The Court held that the prosecution was required to establish that the appellant was a “public servant” within the meaning of Section 2(1)(c) of the Act.
It found that the courts below appeared to have proceeded on the assumption that since agricultural subsidies were routed through the Society, the Society itself became an aided institution. However, the Bench held that there was no cogent evidence to show that the Society was receiving or had received financial aid from the Government in the manner contemplated by the statutory provision.
Supreme Court Allows Appeals, Acquits Appellant
The Supreme Court reiterated that suspicion, however grave, cannot take the place of proof and that the burden always rests on the prosecution and never shifts to the accused.
The Bench noted that the appellant had faced criminal prosecution for more than two decades in relation to the alleged misappropriation. It clarified that sympathy could not substitute legal proof, but the prolonged pendency of the case founded on doubtful evidence reinforced the need for strict adherence to settled principles of criminal jurisprudence.
Allowing the appeals, the Court set aside the judgments of the Kerala High Court and the Trial Court and acquitted the appellant of all charges.
However, the Court clarified that the appellant would not be entitled to claim any service benefit, including pension, from the State Government or the Service Co-operative Society Ltd., Thamarakkulam, as undertaken by her in paragraph 5 of her affidavit.
The appellant was directed to be released forthwith if in custody. Bail bonds, if any, were discharged and pending applications were consigned to record.
Appearances:
For the petitioner, Mr. Bijo Mathew Joy, AOR, appeared with Ms. Gifty Marium Joseph, Advocate.
For the respondent-State, Mr. C.K. Sasi, AOR, appeared with Dr. K.K. Geetha, Advocate, and Ms. Meena K. Poulose, Advocate.
