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2000 DIGILAW 468 (DEL)

NOVA STILS INDIA LIMITED v. PUNJAB NATIONAL BANK

2000-05-26

M.S.A.SIDDIQUI

body2000
M. S. A. SIDDIQUI, J. ( 1 ) BY this petition under Section 482 of the Code of Criminal Procedure, thepetitioner seeks quashing of the criminal proceedings emanating from the complaintfiled by the respondent Punjab National Bank under Sections 206/403/406/421 IPCread with Section 120-B IPC. ( 2 ) BRIEFLY stated, the facts giving rise to this petition are: The respondent bank fileda complaint under Sections 206/403/406/421 Indian Penal Code read with Section 120-B IPCagainst the petitioner and others on the allegations that the petitioner company hadbeen enjoying cash credit facilities against hypothecation of stock from the respondentbank. Pursuant to the decision of the Supreme Court in the case of M. C. Mehta Vs. Union of India and others (1996) 4 SCC 750 , the petitioner had to dose down itsindustrial unit at Shahdara (Delhi ). It is alleged that the officials of the petitionercompany hatched a criminal conspiracy to defraud the respondent bank and nullifythe assurance given to the bank for repayment of loan and in pursuance of the saidconspiracy they dishonestly sold the stock hypothecated with the bank andmisappropriated the sale proceeds thereof. It is alleged that the petitioner companyand its official and dishonestly sold the hypothecated stock without adequateconsideration intending thereby to prevent or knowing it to be likely that they willthereby prevent distribution of the hypothecated stock according to law among thepetitioner s creditors including the respondent bank. On the complaint being filed, thelearned Metropolitan magistrate took cognizance of the offences under Sections206/403/406/421 Indian Penal Code read with Section 120-B Indian Penal Code and issued process against thepetitioner and the remaining accused persons. Aggrieved thereby, the petitioner hascome up before this Court under Section 482 Cr. P. C. ( 3 ) LEARNED counsel for the petitioner has strenuously urged that the allegationsmade in the complaint do not constitute any offence against the petitioner. Accordingto the learned counsel, the case was basically a matter of civil dispute and the bankwas already moved the Debt Recovery Tribunal for recovery of the dues of the bankan account of the credit facility and hence no prosecution should have been permittedin respect of the said dispute. Reliance has been placed on the decision of thesupreme Court in G. Sagar Suri and another Vs. State of U. P. and others (2000)2 SCC 636 in support of the said contention. Reliance has been placed on the decision of thesupreme Court in G. Sagar Suri and another Vs. State of U. P. and others (2000)2 SCC 636 in support of the said contention. ( 4 ) IT is well settled that powers under Section 482 Criminal Procedure Code are meant to beexercised sparingly and with circumspection. In State of Haryana Vs. Bhajan Lal air 1992 SC 604 , the Supreme Court has laid down certain categories of cases ofway of guidelines to indicate contingencies where this court can quash criminalproceeding. At the initial stage of the proceedings, the complaint in its entirely shallhave to be examined on the basis of the allegations made therein and this Courtunder Section 482 Criminal Procedure Code has jurisdiction to examine its correctness Whateverappears on the face of the complaint shall be taken into consideration without anycritical examination of the same. ( 5 ) BY the impugned order dated 29. 8. 1998, the learned Metropolitan Magistratehas taken cognizance of the offences punishable under Section 206/403/406/421lpc read with Section 120-B IPC. It is relevant to mention that the ingredients of theoffence under Section 206 Indian Penal Code are totally absent in the complaint As regards theoffences punishable under Section 403/406 IPC, it is contended by the learnedcounsel for the petitioner that the grant of credit facility or giving of a loan in pursuanceof that credit facility cannot amount to entrustment of property as a loan in quitedifferent from entrustment of money. He further contended that when the debtorhypothecates his goods to the bank by way of security, there is no entrustment ofthose goods to the bank by the debtor. Even if there is any contravention of the termsof the contract under which credit facilities are given, it will be merely a breach ofcontract for which the bank may make debtor liable for damages under the civil law. ,reliance in placed on a decision of the Supreme Court in CBI Vs. Duncans Agroindustries Ltd. (1996) 5 SCC 591 . In that case it was held that disposal of thehypothecated goods covering the security against credit facility does not amount toan offence of criminal breach of trust. In this context, a reference to the followingpassage of the judgment has become indispensable. "27. Duncans Agroindustries Ltd. (1996) 5 SCC 591 . In that case it was held that disposal of thehypothecated goods covering the security against credit facility does not amount toan offence of criminal breach of trust. In this context, a reference to the followingpassage of the judgment has become indispensable. "27. In the instant case, a serious dispute has been raised by the learnedcounsel appearing for the respective parties as to whether on the face of theallegations, an offence of criminal breach of trust is constituted or not. In ourview, the expression "entrusted with property" or "with any dominion overproperty" has been used in a wide sense in Section 405 IPC. Such expressionincludes all cases in which goods are entrusted, that is, voluntarily handedover for a specific purpose and dishonestly disposed of in violation of law orin violation of contract. The expression entrusted appearing in Section 405ipc is not necessarily a term of law. It has wide and different implications indifferent contexts. It is, however, necessary that the ownership or beneficialinterest in the ownership of the property entrusted in respect of which offenceis alleged to have been committed must be in some person other than theaccused and the latter must hold it on account of some person or in someway for his benefit. The expression trust in Section 405 Indian Penal Code is acomprehensive expression and has been used to denote various kinds ofrelationships like the relationship of trustee and beneficiary, bailor andbailee, master and servant, pledger and pledgee. When some goods arehypothecated by a person to another person, the ownership of the goods stiltremains with the person who has hypothecated such goods. The property inrespect of which criminal breach of trust can be committed must necessarilybe the property of some person other than the accused or the beneficialinterest in or ownership of it must be in the other person and the offendermust hold such property in trust for such other person or for his benefit. In acase of pledge, the pledged article belongs to some other person but thesame is kept in trust by the pledgee. In the instant case, a floating charge wasmade on the goods by way of security to cover up credit facility. In our view, insuch case for disposing of the goods covering the security against creditfacility the offence of criminal breach of trust is not committed. In the instant case, a floating charge wasmade on the goods by way of security to cover up credit facility. In our view, insuch case for disposing of the goods covering the security against creditfacility the offence of criminal breach of trust is not committed. " ( 6 ) BEARING in mind, the aforesaid principles of law, I am of the opinion that theaction of the petitioner is disposing of the hypothecated stock does not attract thepenal provisions of Sections 403/406 IPC. As regards the offence punishable under Section 421 IPC, following allegationshave been made in para No. 13 of the complaint: " (13) That the accused persons in the aforesaid manner have dishonestlyand fraudulently removed, concealed, delivered and transferred to and infavour of other persons with inadequate considerations the propertieshypothecated with the Complainant Bank intending the knowing that the saidremoval, transfer and delivery would prevent the distribution of the saidproperty according to law amongst their creditors including the Complainantbank. " ( 7 ) AT this stage, allegations in the complaint will have to be accepted on the face ofit and trust or falsity thereof would not be gone into by this Court under Section 482cr. P. C. At this stage, it is not necessary to scrutinize the allegations for the purposefor deciding whether such allegations are likely to be upheld in the trial. {state ofharyana Vs. Bhajan La/air1992 SC 604, State of Bihar Vs. P. P. Sharma 1992supp. (1) SCC 222, Janta Dal Vs. H. S. Chowdhary (1992) 4 SCC 305 }. On acareful reading of the allegations made in para No. 13 of the complaint, it cannot besaid that the ingredients of the offence under Section 421 Indian Penal Code are totally absent in thecomplaint. It is also well settled that merely because an act has a civil profile is notsufficient to denude it of its criminal outfit. (Rajesh Bajaj Vs. State JT 1999 (2) SC112 ). In M/s Medchi Chemicals and Pharma P. Ltd. Vs. M/s. Biological E. Ltd. JT2000 (2) SC 426, it was held that simply because of the fact that there s a remedyprovided for breach of contract, that does not by itself clothe the Court to foreclosecriminal prosecution at the threshold. Both criminal and civil law remedy can bepursued in divers situations and "they are not mutually exclusive but clearly coextensive and essentially differ in their content and consequences. Both criminal and civil law remedy can bepursued in divers situations and "they are not mutually exclusive but clearly coextensive and essentially differ in their content and consequences. " It is anathema tosuppose that when a civil remedy is available, a criminal prosecution is completelybarred. ( 8 ) CONSIDERING the factual aspect of the matter, I am of the opinion that this is not acase in which the criminal trial is liable to the short-circuited. Consequently, I am notinclined to interfere in the matter in exercise of extraordinary jurisdiction undersection 482 Criminal Procedure Code The petition is accordingly dismissed.