B. K. Birla v. P. N. Agarwal — 1989 DIGILAW 377 (BOM)

JUDGMENT G.D. Guttal, J.- This application by the accused in Criminal Case No. 47/S/89 of 1989 (33/Misc.189), pending in the Court of the learned Metropolitan Magistrate, 7th Court, at Dadar, Bombay is for quashing the proceedings in which the learned Metropolitan Magistrate ordered issue of summons under Section 409 read with Section 120-B of the Indian Penal Code. The Petitioners Nos. 1 to 4 are the Directors of Century Textiles and Industries Ltd. who is the petitioner No.5. The petitioner No.5 is hereinafter referred to as "the Company". The respondent No.1 is the complainant who holds one share in the company. 2. The proceedings initiated by the respondent No.1 on his complaint are not only frivolous but are vexatious and oppressive and designed to harass the petitioners. As the conduct of the respondent to which I will make a reference a little later will reveal the respondent is a cantanketous, quarrel some, unreasonable person given to making irresponsible accusations. His complaints should not be accepted at the face value, but should be scrutinised carefully. 3. The material facts set out by the respondent No.1 in his complaint on the basis of which he urges that the petitioners have committed the offence of conspiracy to commit criminal breach of trust and the offence of criminal breach of trust, are these: (a) On 28-6-1079 or thereabout, the petitioners invested the Company's funds in Mangalore Cement Limited by purchasing six lacs shares valued of Rs. 60,00000/- rupees. This caused a loss to the Company. (b) Similarly the investment of the Company's funds in the shares or KESORAM Industries and Cotton Mills Limited caused to the Company a loss of a crore rupees by way of interest. (c) Every year the petitioners cause loss of Rupees 200 crores by investing funds. 4. In his statement of verification of the complaint, the Complainant asserted that the investments in different companies were made with the object of controlling those companies. On 11-9-1989, the learned Magistrate issued summons under Section 120-B with section 409 of the Indian Penal Code. 5. (c) Every year the petitioners cause loss of Rupees 200 crores by investing funds. 4. In his statement of verification of the complaint, the Complainant asserted that the investments in different companies were made with the object of controlling those companies. On 11-9-1989, the learned Magistrate issued summons under Section 120-B with section 409 of the Indian Penal Code. 5. The principles governing the exercise the power of quashing the proceedings have been laid down in a number of cases of Smt. Nagawwa v. VeeranM Shivlingappa Konjalgi ors.1 If the allegations made in the complaint or the statement of verification taken at their face value do not make out any case or where the allegations made in the complaint are patently absurd and inherently improbable or the discretion exercised by the Magistrate is issuing process is capricious and arbitrary, the proceedings may be quashed. Even where the allegations made against the accused do constitute the offences alleged but there is either no legal evidence adduced in support of the case or evidence adduced clearly or manifestly fails to prove the charges, the proceedings may be quashed. In R. P. Kapur v. State of Punjab.2 6. The petitioners Nos. 1, 2, 3 and 4, as the members of the Board of Directors, are "entitled to exercise all such powers and to do all such acts and things as the Company is authorized to exercised and do" Section 291 of the Companies Act, unless such power is required to be exercise by the company in general meeting. The Board of Directors of a company "shall exercise" inter alia "the power to invest the funds of the Company". Section 292(1)(d) of the Companies Act. Therefore, the Board of Directors are specifically empowered to exercise the power to invest the funds of the company. It is not the case of the respondent that the investment in the shares of the two companies named by him has not been made with the sanction of the Board of Directors. I am tol4 at the bar that these investments were made with the sanction of the Board of Directors. Since the investments have been made by the Board of Directors in exercise of its statutory power, the intention to commit any offence is excluded. These investments were made in 1979. The Annual General meetings of the Company were held every year. Since the investments have been made by the Board of Directors in exercise of its statutory power, the intention to commit any offence is excluded. These investments were made in 1979. The Annual General meetings of the Company were held every year. None except the respondent No.1 has ever questioned the validity of these investments. Against this background and the authority of the Board of Directors, consider the essentials of the offence. The offence of Criminal Breach of trust has three chief elements : i. Entrustment to any person with property or with dominion over property. ii. The person so entrusted dishonestly misappropriates or converts to his own use that property or. dishonestly uses or disposes of the property. iii. The acts mentions at (ii) above are done in violation of any direction of law prescribing the mode in which such trust is to be discharged. The respondent No.1 and other share-holders purchased the shares of the petitioner No.5 by payment of money. The amounts which the petitioners invested in the shares of Mangalore Cements Ltd. and Kesoram Industries and Cotton Mills Ltd. belong to the petitioner No.5 the company. In a sense the amounts belong to the share-holders also. The Company invested its funds in the shares of Mangalore Cements Ltd. and Kesoram Industries and Cotton Mills Ltd. It disposed off its own funds to purchase the shares. The concept of entrustment is that a person who transfers the possession of the property to another party remains the legal owner of the property. The funds which are invested do not belong to the respondent No.1, but they belong to the Company which is a legal person. The legal ownership in the funds does not vest in the respondent No.1 but in the company, who, acting through its Board of Directors invested the amount. There was no question of entrustment of money to the petitioners. It is necessary to draw a distinction between entrustment of the property and giving control or general charge over the property. In the case of the Board of Directors, what they have is the general charge over the property of the Company under the Companies Act. This fact is clear from the provisions of the Companies Act which gave to the Directors the power of disposition subject, of course, to the laws and article of association. In the case of the Board of Directors, what they have is the general charge over the property of the Company under the Companies Act. This fact is clear from the provisions of the Companies Act which gave to the Directors the power of disposition subject, of course, to the laws and article of association. The authority which the Board of Directors exercised over the disposition of the Company's funds is not something as entrustment. 7. The next question is whether there is any dishonesty in the transactions. The word "dishonestly" as defined in the Indian Penal Code Section 24 of the Indian Penal Code implies that the act of investment of money in the two Companies must have been done "with the intention of causing wrongful gain" to the Company OR "wrongful loss to another person". If the petitioners invested the money by exercising the authority given to them by law, there is no question of dishonestly in such transactions. They have done what the law permits them to do. The definition of Criminal breach of trust also implies that the act of disposing off the property by investment cannot be an offence unless it is in violation of any direction of law prescribing the mode in which such "trust' is to be discharged. In other words, since disposition of the property by investment is in accordance with the provisions of Sections 291 and 292 of the Companies Act, the petitioners' Act is outside the definition of the criminal breach of trust. 8. The complaint or the statement of verification does not disclose any meeting of minds for the purpose of committing the crime. The offence of criminal conspiracy is not discernible from the complaint even if it is accepted in its totality. 9. If I were to catalogue how reprehensible and oppressive the conduct of the respondent No.1 is, I do not know where to begin. This is not the first complaint or first legal proceeding initiated by the respondent No.1 to oppress people whom he does not like. On 6-4-1988, the learned Magistrate, 7th Court, Dadar, Bombay, rejected the complaint containing the same accusation of investment of funds in Mangalore Cements Ltd. and Kesoram Industries and Cotton Mills Ltd. He filed a criminal writ petition in this Court against the former Prime Minister and some other persons. On 6-4-1988, the learned Magistrate, 7th Court, Dadar, Bombay, rejected the complaint containing the same accusation of investment of funds in Mangalore Cements Ltd. and Kesoram Industries and Cotton Mills Ltd. He filed a criminal writ petition in this Court against the former Prime Minister and some other persons. A Division Bench of this Court found the statements in his petition to be irresponsible, reckless and mischievous. The respondent No.1 is used to making wild irresponsible, reckless and scurrilous accusations against persons whom he does not like. He has imaginary grievances divorced from reality. He takes pleasure in vilifying people who enjoy good reputation. He knows reasonably good English. He misuses his capacity to stand up and talk by making irresponsible speeches vilifying others. He calls them arguments. Every "argument" of his is irrelevant, irresponsible and accusatory. The Division Bench eventually found it necessary to issue notice under the Contempt of Courts Act. It is not clear whether it has been issued. The petitioners have annexed to the petition a list of cases filed by the respondent No.1 in different Courts. The respondent No.1 has, to his credit, a score of 26 cases against different persons. Out of them, 22 were filed in the Courts of the Metropolitan Magistrates, Esplanade, Bombay. It appears that the learned Magistrates in that Courts are by now well acquainted with the nature of the cases which the respondent No.1 files. He filed three cases in 37th Court, Bombay. The respondent No, 1 likes to harass victims of his irresponsible litigation by requiring them to attend different Courts. I have heard him for nearly four hours. But nothing in his argument reveals even a remote possibilities of the petitioners having committed the offences complained of. 10. No amount of words can adequately describe the reprehensible conduct of the respondent No.1 in filing complaints, in prosecuting them, in using foul language, in making non-existent fanciful accusations and generally vilifying others. It is distressing to record that in this application too the respondent No.1 has made an affidavit containing scurrilous accusations and false imputations. I do not wish to reproduce what he has said about the learned Chief Justice of this Court" but the Contempt of this Court is writ-large in his affidavit. The respondent No.1 has, in my opinion, by the statements in paragraphs Nos. I do not wish to reproduce what he has said about the learned Chief Justice of this Court" but the Contempt of this Court is writ-large in his affidavit. The respondent No.1 has, in my opinion, by the statements in paragraphs Nos. 7, 8, 9 and 10 of his affidavit dated 5th December 1989, scandalised this Court, attempted to lower its authority and interfered with the due course of justice. I, therefore. consider it necessary that the notice as to why action under the Contempt of Courts Act should not be taken, be issued to the respondent No.1 and action taken in accordance with the Act. The Registrar shall forthwith issue such notice and initiate the proceedings. 11. It is necessary to caution the subordinate courts that the complaints of this nature should be scrutinised closely with a view to finding out whether they disclose offences complained of. An examination of accusations contained in the complaints should be made in the light of judicial authorities especially those of the Supreme Courts, which provide the guidelines. It is only after such scrutiny that process should be issued. Issuing process is not a mechanical job. It should be done cautiously and after application of the law on the subject. 12. For all these reasons, the Criminal Application No. 2621 of 1989 is allowed. The Complaint No. 47/S of 1989 (35/Misc./89) pending in the Court of the learned Metropolitan Magistrate, 7th Court at Dadar, Bombay, is hereby quashed. Rule is made absolute in terms of prayer(a). The Registrar shall issue notice to the respondent No.1 accordingly. 1. A.I.R. 1976 S.C. 1947. 2. A.I.R. 1960 S.C. 866.