M. Chainraj And Others v. Sulochana C. Daniel — 1991 DIGILAW 108 (MAD)

Judgment :- Petitioners are accused 1 to 5 in C.C. No. 4450 of 1988 on the file of the VII Metropolitan Magistrate, Madras. 2. All accused are related to each other. Accused 1 is the paternal uncle of accused 2 to 4 who are all brothers. Accused 5 is the sister's son of accused 1's wife. A partnership firm under the name and style of Ananda Trading Co. was formed at Madras on 14-5-1982 and registered with the Registrar of firms, Madras on 24-7-1982. The respondent-complainant along with her mother in law Mrs. Rose Daniel became partners of the firm. Accused 1 to 3 also became the partners of the firm. The firm consisted of 19 partners. 3. On 17-5-1982 the firm acquired an old shop M. V. St. Demetrius in the name of D. Narasingamurthy, one of the partners of the firm for its metal scrap. For dismantling of the ship and selling the scraps accused 1 and D. Narasingamurthy were appointed by all the other partners as Managing Partners and given a Power of Attorney to act for the firm. A current account No. 577 was opened in the Bank of Rajasthan Ltd., Sunkurama Street, Madras. Both of them were authorised to operate the account jointly. 4. In the process of dismantling and selling of the scraps more than rupees two crores appeared to have been realised. The accounting year of the firm is Deepavali year. No statement of accounts appeared to have been furnished by accused 1 and the said D. Narasingamurthy, giving rise to exchange of notices. 5. The said Narasingamurthy was said to be suffering from cancer on and from February 1983, and not participating in the business of the firm. On 14-9-1983, it is alleged that with the consent of all the partners, he assigned his rights in favour of his son Gururaj Doraisingam, a partner who became the Managing Partner along with accused 1 with effect from that date. On 30-10-1983 Narasingamurthy died. 6. The illness and physical incapacity of Narasingamurthy from February 1983 is stated to have enabled accused 1 to secure his signatures in blank cheques and utilise the same for his gain. In such a process, he is stated to have drawn 13 cheques for a total sum of Rs. 11,85,000/-. Out of 13 cheques 11 cheques were drawn prior to 14-9-1983 totalling to Rs. In such a process, he is stated to have drawn 13 cheques for a total sum of Rs. 11,85,000/-. Out of 13 cheques 11 cheques were drawn prior to 14-9-1983 totalling to Rs. 9,75,000/- and the other two cheques were drawn subsequent to that crucial date i.e. one on 21-9-1983 for a sum of Rs. 80,000/- and the other on 3-10-1983 for a sum of Rs. 1,30,000/- accused 2 to 5 were said to have assisted accused 1 in such a nefarious design of withdrawal of the funds of the firm. Thus all accused are stated to have committed criminal breach of trust of the funds of the firm and the commission of the offence of forgery. The respondent on these allegations is stated to have given a complaint to the police on which no action was taken as the dispute between them is purely of civil nature. Consequently a private complaint had been given by the respondent, which was taken on file in the aforesaid Calendar Case. 7. On receipt of process, the petitioners have come forward with the present action invoking the inherent jurisdiction of this Court to quash the Criminal proceedings initiated against them. 8. Learned Senior Counsel Mr. K. T. Pal Pandian appearing for the petitioners would submit that the allegations as made in the complaint, if scanned, would point out that the transaction between the parties is purely of civil nature, giving rise to a cause of action for institution of a civil proceeding before a competent Civil Court and by no stretch of imagination can it be stated to amount to any offence whatever, giving rise to the initiation of criminal prosecution and therefore it is the prosecution so launched is not sustainable in law and consequently liable to be quashed. 9. In amplifications of the argument, learned Senior Counsel for the petitioners would say that a partner does not in the ordinary course, hold a partnership property in fiduciary capacity because partnership property belongs to the partners and one partner has as much right to the property as any other partner. In other words he would say, the partner who holds the partnership property holds it in his own right and it cannot be said that he holds it in fiduciary capacity. In other words he would say, the partner who holds the partnership property holds it in his own right and it cannot be said that he holds it in fiduciary capacity. On such a premise, he would further contend that before a person can be said to have committed criminal breach of trust within the meaning of Section 405, I.P.C., it must be established that he has either entrusted with or entrusted with dominion over the property, which he is said to have converted to his own use. In order to establish "entrustment of dominion" over the property to an accused person, mere existence of that person's dominion over the property is not enough. It must be further shown that his dominion was the result of entrustment. In the case of a partnership every partner has dominion over the partnership property by reason of the fact that he is a partner. This is a kind of dominion, which every owner of property has over his property. But it is not dominion of this kind, which satisfied Section 405, I.P.C. In this view of the matter, he would say that accused 1 to 3, the partners cannot at all be stated to have the kind of dominion over the funds of the partnership firm as required for invoking the refraction of the provisions of Section 405, I.P.C. and consequently if they are not liable for such an offence, he would say that it goes without saying that the other accused 4 and 5 cannot at all be made liable. 10. As regards the alleged commission of the offence of forgery and abetment, his contentions are two-fold. Firstly in view of the fact that the signatures on all those 13 cheques are not denied to be the signature of D. Narasingamurthy, who is authorised to sign, it cannot be stated that the alleged offence of forgery had been committed by anyone, whosoever in relation to these cheques. Firstly in view of the fact that the signatures on all those 13 cheques are not denied to be the signature of D. Narasingamurthy, who is authorised to sign, it cannot be stated that the alleged offence of forgery had been committed by anyone, whosoever in relation to these cheques. Secondly there can be no dispute whatever that in respect of 11 cheques out of 13 cheques drawn and presented for encashment before 14-9-1983, the date on which Narasingamurthy was stated to have assigned all his rights in favour of his son, by no stretch of imagination can it be stated that the alleged offence of forgery had been committed and, if at all in respect of the two cheques drawn and presented subsequent to 14-9-1983 one on 21-9-1983 and the other on 3-10-1983, it may appear as if such withdrawal of the funds from the Bank was beyond the powers of accused 1 and that by itself, even assuming to reflect the correct position, is not sufficient to constitute an offence of forgery. He would further state that the assignment of his rights in favour of his son was not by itself sufficient for his ceasing to be a partner of the firm, as the power to operate the accounts in the bank along with accused 1 remained in tact and in this view of the matter, it cannot be stated that withdrawal of the funds by accused one utilising his signature on the cheques cannot be stated to be beyond the scope of the authority vested in him. 10A. Learned Senior Counsel Mr. U. N. R. Rao appearing for the respondent would frankly concede the proposition that in a case of partnership, every partner has a dominion over the partnership property by reason of the fact that he is a partner and this kind of dominion is not a sufficient requirement of S. 405, I.P.C. But what he would contend is that a partner cannot at all be stated to have committed criminal breach of trust as defined under S. 405, I.P.C. in respect of a partnership property in all situations and a partner is prosecutable for such an offence in case there are materials to establish that the dominion over a particular asset of the partnership was, by reason of a special agreement between the parties, entrusted to a particular partner. He would further say that the case on hand is one falling within the existence of the special agreement between the partners entrusting the funds of the partnership firm, to accused 1 and the said D. Narasingamurthy and therefore it is that the prosecution as launched against accused 1 and others viz., accused 2 to 5 for the alleged commission if the offence of criminal breach of trust and abetment is sustainable in law. 11. Regarding the offence of forgery and abetment, what he would contend is that the thrust by the prosecution, as disclosed by the allegations in the complaint, relates to only two cheques dated 21-9-1983 and 3-10-1983 and not in relation to the other cheques drawn and presented before the crucial date, 14-9-1983. In relation to the aforesaid two cheques, he would say, the allegations in the complaint are crystal clear to the effect that from 14-9-1983 Narasingamurthy ceased to be the Managing Partner on his assigning his rights to his own son Gururaj Duraisingam, who in turn took position as Managing Partner to operate the Bank account. He would further state that specific allegations are incorporated in the complaint as to accused 1 securing the signatures of Narasingamurthy on blank cheques and utilising the same for his gain, taking advantage of the illness and physical incapacity and on the face of such allegations, the filling up of blank cheques subsequent to 14-9-1983 does prima facie amount to the commission of an offence of forgery in respect of these two cheques, and in such state of affairs, he would include by saying that there are prima facie material for all accused to undergo the ordeal of trial and therefore it is that the criminal proceedings initiated against them cannot at all be quashed. 12. The tenability or otherwise of the rival submissions of both Senior Counsel may now fail for consideration. Admittedly the partnership was in existence much earlier to the acquisition of the ship for its scrap value in the name of one D. Narasingamurthy, a partner of the firm. Of course, no material is available to point out as to for what purpose the partnership had been constituted. Admittedly the partnership was in existence much earlier to the acquisition of the ship for its scrap value in the name of one D. Narasingamurthy, a partner of the firm. Of course, no material is available to point out as to for what purpose the partnership had been constituted. The partners of the existing partnership entrusted the dismantling operation and selling of the scrap of the ship so purchased specifically to accused 1 and the said D. Narasingamurthy and for factually carrying out that purpose, they were authorised to open a Bank Current Account bearing No. 577 in Bank of Rajasthan Ltd., Madras, and operate the same. As such, both of them were entrusted with the dominion over the funds realised by the sale of scrap materials of the ship and such entrustment of dominion over such funds prima facie appear to fall within the entrustment of dominion falling within the provisions of Section 405, I.P.C. and such entrustment of funds, it is alleged as per the allegations in the complaint, had been misappropriated or converted to the use of accused 1, ably assisted and abetted by the other accused 2 to 5. 13. A useful reference at this juncture may be made to certain precedents emerging from various High Courts and the apex of the Judicial Administration of the Country. In the decision in Bhuban Mohan Das v. Surendra Mohan Das, AIR 1951 Cal 69 : (1951 (52) Cri LJ 723), a Full Bench of that High Court had the occasion to consider whether a partner can be charged under S. 406, I.P.C. in respect of partnership property by another partner and learned Judges comprising of the Full Bench expressed their view on this question in para 62 (at page 78) (of AIR) : (at pp. 731-732 of Cri LJ) which is as follows :- "It is quite clear, therefore, that unless there is an agreement between the partners that a particular property would be the separate property of a partner, there cannot be an entrustment of it to the other partner or partners. In the absence of such an agreement, each partner is interested in the whole of the partnership assets and there cannot be an entrustment of "a partner's property' as such by one Partner to another, because there is no "property" which can be entrusted". 14. In the absence of such an agreement, each partner is interested in the whole of the partnership assets and there cannot be an entrustment of "a partner's property' as such by one Partner to another, because there is no "property" which can be entrusted". 14. In K. V. Subbiah v. T. Chalapathi Rao, (1971) 2 Mad LJ 246, a Learned Judge of this Court happened to consider such a question and aimed his views in paragraph 3 (at pages 247 and 248) which are as follows :- "Ordinarily a partner does not in the ordinary course hold partnership property in a fiduciary capacity, because the partnership property belongs to the partners, and one partner has as much right to the property as any other partner. In other words, the partner who holds the partnership property holds it in his own right and it cannot be said that he holds it in a fiduciary capacity. This is on the basis that the partnership assets cannot be predicated until an account has been taken and all the debts have been discharged and till this is done, it cannot be said that a particular asset belongs to a particular partner. But in a case where there is some special agreement it would be different. Where it could be made out that one partner was entrusted with the property or with the dominion over it, no difficulty would arise. But, where a partner receives partnership property without any special agreement there can be no breach of trust. It may be that by a special agreement between the parties, the partner could be regarded as being entrusted with the property but apart from such special agreement, it cannot be said that the partner who receives partnership property on behalf of his partner, has been given dominion over that property by his co-partners. Thus, in some circumstances, a partner can be charged under S. 406 of the Indian Penal Code." 15. In the decision in Velji Raghavnji Patel v. State of Maharashtra, AIR 1965 SC 1433 : (1965 (2) Cri LJ 431), approving the view as expressed by the Full Bench of the Calcutta High Court as referred to above, the Supreme Court has laid down in paragraph 6 (at pp. 1435 and 1436 (of AIR) : (at pp. 433 and 434 of Cri. 1435 and 1436 (of AIR) : (at pp. 433 and 434 of Cri. L.J.) as follows :- "Upon the plain reading of S. 405, I.P.C. it is obvious that before a person can be said to have committed criminal breach of trust, it must be established that he was either entrusted with or entrusted with dominion over the property which he is said to have converted to his own use or disposed of in violation of any direction of law, etc. Every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property. But it is not dominion of this kind which satisfies the requirements of S. 405. In order to establish "entrustment of dominion", over property to an accused person the mere existence of that person's dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. Therefore, as rightly pointed out by Harris C.J. the prosecution must establish that dominion over the assets or a particular asset of the partnership was, by a special agreement between the parties entrusted to the accused person. If in the absence of such a special agreement a partner receives money belonging to the partnership he cannot be said to have received it in a fiduciary capacity or in other words cannot be held to have been "entrusted" with dominion over partnership properties". 16. The views expressed in the aforesaid decisions are clearly applicable to the facts of the present case. As adverted to earlier, the said Narasingamurthy ceased to be the Managing Partner on and from 14-9-1983 and in his place, his son Gururaj Duraisingam, another partner of the firm had been installed as a Managing Partner along with accused I for the operation of the bank account, after the blank cheques having been signed by the said Narasingamurthy which were subsequently stated to have been utilised by accused 1 in filling them and drawing funds from the Bank for his own purpose, of course, in connivance with the able assistance rendered by accused 2 to 5. Such filling up the blank signed cheques does prima facie fall within the mischief of the commission of the offence of forgery as defined under S. 463, I.P.C. punishable under S. 467, I.P.C. 17. Such filling up the blank signed cheques does prima facie fall within the mischief of the commission of the offence of forgery as defined under S. 463, I.P.C. punishable under S. 467, I.P.C. 17. In view of what has been stated above, this is eminently a fit case containing the requisite prima facie materials for the petitioners - accused for undergoing the ordeal for trial for the various offence alleged against them. 18. As such, the petition deserves to be dismissed and is accordingly dismissed. Petition dismissed.