Research › Search › Judgment

Patna High Court · body

2000 DIGILAW 861 (PAT)

Ajit Kumar Verma v. State Of Bihar

2000-07-11

D.P.S.CHOUDHARY

body2000
Judgment D.P.S.Choudhary, J. 1. The petitioner has preferred this Criminal Revision for setting aside the order dated 10.6.99, passed by Sri J.K. Sinha, Judicial Magistrate, 1st Class, Deoghar, in T.R. No. 426 of 1999, arising out of Jasidih P.S. case no. 129 of 1995, for the alleged offence under sections 420, 406 and 403 IPC, whereby the petitioners application for discharge has been rejected. 2. The factual matrix of the case is as follows : The petitioner, Ajit Kumar Verma and one Pandey Jitendra Mohan were partners of M/s Bihar Die Casting Industries at Deoghar. They had applied for and were sanctioned a term loan of Rs. 3 lacs by opposite party no. 2, Bihar State Financial Corporation (hereinafter referred to as the Corporation), Branch Office at Deoghar, out of which an amount of Rs. 2.67 lacs were availed by them. The petitioner and Pandey Jitendra Mohan had issued a letter of hypothecation dated 14.12.78 and an indenture of agreement of the same date was also executed between the parties. It was agreed in between the parties that hypothecated assets were to be held as the Corporations exclusive property, specifically appropriated to the security and the borrower would not do anything which would prejudice the security except with the consent in writing of the Corporation. The borrower would not remove the plant and machinery or any part thereof from the land and building hypothecated and mortgaged with the Corporation without its consent. 3. The petitioners factory was inspected by Sri S.R. Mandal, Area incharge, Deputy Manager, and tools and machinery hypothecated to the Corporation were alleged to have been removed and probably sold by the petitioner and his partner Pandey Jitendra Mohan in breach of the terms and condition laid down in the letter of hypothecation as well as agreement. 4. It was alleged by the prosecution that the sole object for removal of the machinery was to misappropriate the sale proceeds and prevent the Corporation from realising the loan. The details of the machinery as indicated in the F.I.R. was valued at Rs. 1.10 lacs. 5. On the basis of the F.I.R. filed on behalf of the Corporation before the Deoghar Police, the case was registered and after investigation, chargesheet was submitted under sections 406, 420 and 403 IPC against the petitioner only and final form was submitted against Pandey Jitendra Mohan (another partner). 6. 1.10 lacs. 5. On the basis of the F.I.R. filed on behalf of the Corporation before the Deoghar Police, the case was registered and after investigation, chargesheet was submitted under sections 406, 420 and 403 IPC against the petitioner only and final form was submitted against Pandey Jitendra Mohan (another partner). 6. Subsequently, a protest petition was filed on behalf of the petitioner on 14.4.96 with a prayer to reject the chargesheet and discharge the petitioner. Another petition was also filed on 4.8.97 stating that the Investigating Officer has adopted a partisan attitude in the matter, while noting in the case diary that Pandey Jitendra Mohan could not be traced and final form has been submitted against him, in a malafide manner. The learned Magistrate on the basis of the materials available on the record, took cognizance against the petitioner as well as Pandey Jitendra Mohan (both partners), under sections 406, 420 and 403 IPC vide order dated 1.9.97. 7. The petitioner filed an application for discharge on 5.11.98 on the following grounds : (i) That by the subsequent deed of partnership in between both the partners, he retained only 10% interest in the said partnership concern and he became a sleeping partner. It was alleged that in and around the year 1983, the petitioner met with a serious accident and because of his partial paralysis, he became incapable to run the industry which necessiated to enter into another partnership with Pandey Jitendra Mohan as referred to above (ii) That the entire allegation against the petitioner and the whole case is predominentiy of a civil nature (iii) In the agreement with the Corporation, title of the goods hypothecated with the Corporation including plant and machinery does not pass over to the Corporation by virtue of the said hypothecation and the owner thereof cannot be held to have committed any misappropriation or theft of his own property. Thuseven on the face of the allegations on the basis of which the F.I.R. was lodged, no criminal case whatsoever is made out against the petitioner and (iv) The Corporation had itself executed a supplementary agreement taking note of the changed circumstances and Pandey Jitendra Mohan had taken over the charge of the entire assets because the petitioner had become a sleeping partner. Therefore, he cannot be saddled with any criminal liability. 8. Therefore, he cannot be saddled with any criminal liability. 8. Learned Judicial Magistrate, at Deoghar, after hearing the parties and the contention raised on their behalf, rejected the prayer of the petitioner for discharge and asked him to appear on the date fixed for framing of the charge against him. 9. Learned counsel for the petitioner has submitted that the impugned order of the learned Magistrate is bad in law who has failed to consider the relevant materials produced on his behalf in support of the prayer for discharge. He placed reliance on the case of Satish Mehra V/s. Delhi Administration and another, reported in (1996) 9 SCC 766 . It was further submitted that the petitioner cannot be said to have acted in violation of the terms of the said agreement and no criminal liability can be fastened on him. Property in respect of which criminal breach of trust can be committed must necessarily be the property of some other person than the accused and no criminal offence can be made out for disposing of the hypothecated goods covering the security against the credit facility. In support of this contention, he placed reliance on the case of C.B.I. V/s. Duncans Agro Industries Ltd., reported in (1996) 5 S.C.C. 591 . The trial court has failed to take into consideration that there was any allegation of inducement whatsoever made in the F.I.R. and as such no case under section 420 IPC can be made out against the petitioner. 10. It was further submitted that the trial court omitted to take into consideration the fact that the petitioner exercised his option under the agreement and had retired from the partnership and he has nothing to do with any asset or liability of the Unit. The petitioner was compelled to this situation because of his ill health. 11. The petitioner had informed the Corporation, Opposite party no. 2 for the safe key of the hypothecated/mortgaged assets as he had apprehension against the another partner, namely, Pandey Jitendra Mohan, but both the Corporation and the police had malafide intention against the petitioner. The police while investigating the case took a partisan attitude and filed the chargesheet against the petitioner, though he had nothing to do with the said unit. 12. The Corporation, opposite party no. The police while investigating the case took a partisan attitude and filed the chargesheet against the petitioner, though he had nothing to do with the said unit. 12. The Corporation, opposite party no. 2 filed a counter affidavit and its case, inter-alia, is as follows : It appears that the petitioner has tried to make out a case that at the relevant time of filing FIR, Annexure-1, for removal of the hypothecated assets of the unit in question, he was not an active partner rather a sleeping partner in terms of the partnership agreement as well as supplementary agreement for term loan on 31.3.85 (annexure-5). But on verification from the record of the unit in question it transpires that the petitioner had annexed a document which did not appear to be the photo copy of the document retained by the Corporation. As such it appears to be a forged document, as would be evident from annexure A to the counter affidavit. It is admitted fact that the petitioner in order to secure the loan had executed a registered document of agreement vide annexure-4 of the petition and on the basis of the guarantee and hypothecation in favour of the Corporation, he availed the loan of Rs. 266,337.70. At the request of petitioner propriety constitution of the firm, was allowed to be changed by the Corporation into a partnership firm by inducting Pandey Jitendra Mohan Verma and both the parties jointly guaranteed the loan to the Corporation. On the basis of the aforesaid change, partnership was allowed and a supplementary partnership agreement dated 31.3.85 was executed for securing an additional term loan for Rs. 3 lacs and it was specifically spelled out in the agreement that other terms and condition of the previous loan agreement dated 14.12.78 shall remain intact and in full force. It was also agreed that no change in the partnership shall be permitted unless and until loan taken from the Corporation was paid in full. At the time of disbursement of the loan, the loanee was required to enter into an agreement that assets created at the site shall not be removed without the consent of the Corporation and there was specific agreement mortgaging the site as well as the assets created at the site. 13. It was further contended on behalf of the opposite party no. 13. It was further contended on behalf of the opposite party no. 2, the Corporation, that accused persons had dishonest intention while executing the said agreement to take advance loan from the Corporation on the basis of the agreement and after realising the loan, the articles and assets were dishonestly removed causing wrongful gain to themselves and loss to the Corporation by their act of omission and commission wherein the Corporation could not recover the loan amount and interest and other charges adequately even by the sale of the mortgaged property. Thus the petitioner has committed breach of the instrument of agreement by not accounting for the said property as mentioned in the F.I.R. which amounts to criminal breach of trust, punishable under the relevant sections of the IPC as mentioned in the FIR. It was also contended that by the agreement a statutory right was created in favour of the Corporation and the mortgaged property thus remained in possession of the debtor and because of the statutory and beneficial interest created in favour of the Corporation with specific stipulation in the agreement the properties could not be removed without the consent of the Corporation. Thus in the facts and circumstances of the case, it transpires that the petitioner had dishonest intention and with that intention he entered into an agreement with the Corporation to induce it to disburse the amount with full intention that the agreement would be flouted later on causing wrongful loss to the Corporation diminishing the chances of adequate recovery of loan and interest. 14. Learned counsel further submitted that petitioner had placed reliance on the case of Ranjit Prasad Singh V/s. The State of Bihar and others, reported in PLJR 1998(2) 40, but the Corporation preferred a SLP (Criminal) No. 3650 of 1998, before the Apex Court and in Cr. Appeal No. 379 of 1999, the Supreme Court vide order dated 5.4.99, set aside the judgment of the High Court (Annexure-C). It was further submitted that in similarly situated cases namely, Mostt. Shyam Kuer and others V/s. State of Bihar and others, (Cr. Misc. No. 3432/96), Mahesh Prasad Manjhi V/s. The State of Bihar (Cr. Misc. No. 24215/98) and Bakshi Govind Prasad Sinha V/s. The State of Bihar, and ors. (Cr. Rev. No. 202/99), the High Court has held that in such type of agreement, removal of assets thereof is a criminal offence. Misc. No. 3432/96), Mahesh Prasad Manjhi V/s. The State of Bihar (Cr. Misc. No. 24215/98) and Bakshi Govind Prasad Sinha V/s. The State of Bihar, and ors. (Cr. Rev. No. 202/99), the High Court has held that in such type of agreement, removal of assets thereof is a criminal offence. A true copies of the above orders are annexed as annexures D, E and F. 15. It was lastly submitted on behalf of the Corporation that the total outstanding balance against the petitioner is about Rs. 26,18,076.06 paise, including principal, interest and other charges. 16. The relevant clause of the agreement is being reproduced hereinbelow : "The first party shall not without the written consent of the second party First had and obtained remove the plant or any part thereof from the land and buildings and in case of such removal shall replace the same by plant of equivalent nature or value provided that in the event of the second party agreeing that any such part of the plant so removed as aforesaid is redundant or has become worn out or obsolete and need not be replaced, the same may be sold and proceeds applied towards the satisfaction or payment of the dues of the second party." 17. From this agreement, it is crystal clear that the Corporation, a statutory body created under the State Financial Corporation Act, advanced a loan of Rs. 2.67 lacs out of the sanctioned loan of Rs. 3 lacs to the firm of the petitioner after completing necessary legal formalities. The assets in question were hypothecated in favour of the Corporation and the loan amount of the interest thereon have not been paid back to the Corporation by the petitioner or his partner. These facts are not in dispute. 18. The petitioners factory was inspected by the Area Incharge of the Corporation who found and reported that tools and machinery hypothecated to the Corporation were removed and probably sold by the petitioner and another partner in breach of the terms and condition laid down in the letter of hypothecation as well as the agreement. 19. In India two types of hypothecations have been statutorily recognized; one is pledged as defined under section 172 of the Contract Act and the other is mortgage of immovable property as defined under section 58 of the Transfer of Property Act. 19. In India two types of hypothecations have been statutorily recognized; one is pledged as defined under section 172 of the Contract Act and the other is mortgage of immovable property as defined under section 58 of the Transfer of Property Act. Apart from that, mortgage of movable property, whether accompanied by delivery of possession or not, is also recognized a mode of hypothecation in India. For the purpose of this case, it is not necessary to notice in depth the legal instances of the modes of transfer. Learned counsel for the petitioner has placed reliance on the case of C.B.I. V/s. Duncans Agro Industries Ltd., reported in 1996(5) SCC 591 . In my view the facts of this case are not similar to the facts of the reported case. The expression "entrustment" with the property or with any domain over the property has been used in a wide sense under section 405 IPC. Such expression includes all cases in which goods are entrusted i.e. voluntarily handed over for specific purpose and dishonestly disposed of in violation of law or in violation of the contract. The expression "entrustment" appearing in section 405 IPC is not necessarily a term of law. It has wide and different implication in different context. The expression "trust" in section 405 IPC is a comprehensive expression and has been used to denote various types of relationship, like relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee. It is however, necessary that the ownership on beneficial interest in the ownership of the property entrusted with respect to which offence is alleged to have been committed must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. 20. Section 405 IPC defines criminal breach of trust which lays down that whoever being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law or any legal contract, express or implied, which he has made touching the discharge of such trust, commits criminal breach of trust. 21. From the above decision of the Apex Court, [Duncans Agro Industries Ltd. (supra)], the word entrusted has to be understood in a wider sense. 21. From the above decision of the Apex Court, [Duncans Agro Industries Ltd. (supra)], the word entrusted has to be understood in a wider sense. All that is necessary is that the ownership or beneficial interest in the property, which is the subject matter of the offence should be in some person other than the accused. Though in a case of mortgage or hypothecation, the ownership does not pass to the person in whose favour the mortgage/hypothecation is created, but it does create a beneficial interest in his favour. If the property is removed without his consent and in violation of the terms of the agreement, in that case, primafacie, an offence of criminal breach of trust can be said to have been made out. 22. The contents of the F.I.R. that the petitioner made false representation and by inducement entered into a contract to obtain the loan, comes within the definition of cheating as defined under section 415 IPC. 23. The Apex Court in the case of M/s Medchi Chemicals & Pharma Pvt. Ltd. V/s. M/s Biological E. Ltd. and ors., reported in 2000(2) BBCJ 173 : 2000(3) PLJR (SC) 56, held that in the matter of exercise of High Courts inherent powers, the only requirement is to see whether continuance of the proceeding would be a total abuse of judicial process. Both the criminal law and civil law remedy can be pursued in diverse situations. They are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. Merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. The Apex Court further held that it is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. Quashing under section 482 is an exception rather a rule and the case for quashing at the initial stage must have to be treated as rarest or rare so as not to scuttle the prosecution. Relying on the earlier decisions in the case of State of Haryana V/s. Bhajan Lal, reported in 1992, Suppl. Quashing under section 482 is an exception rather a rule and the case for quashing at the initial stage must have to be treated as rarest or rare so as not to scuttle the prosecution. Relying on the earlier decisions in the case of State of Haryana V/s. Bhajan Lal, reported in 1992, Suppl. (1) SCC 335 and Rajesh Bajaj V/s. State NCT of Delhi, reported in (1999) 3 SCC 259 , the Apex Court held that time and again this Court has pointed out that quashing of F.I.R. or complaint in exercise of inherent powers of the High Court should be limited to very extreme exceptions, and so is the case with regard to discharge of the accused, from the criminal proceeding. 24. The Apex Court in the above referred decision of Medchl Chemical and Pharma Pvt. Ltd. (supra) has further held that it is settled principle of law that while quashing the F.I.R. or discharging the accused, the complaint petition or the F.I.R. in its entirety shall be examined on the basis of the allegations made in it and the High Court at that stage has no authority or jurisdiction to go into the matter or examine its correctness. Whatever appears on the face of the complaint or the F.I.R. shall be taken into consideration without any critical examination of the same. But the offence ought to appear ex-facie on the complaint/FIR. The observations made in Smt. Nagawwa V/s. Veeranna Shivlingappa Kongalgi (1976) 3 S.C.C. 736 , lend support to the above statement of law. The accused can be discharged on the ground where the allegations made in the F.I.R. are patently absurd and inherently improbable so that no prudent person can ever reach the conclusion that there is sufficient ground for proceeding against the accused or it suffers from fundamental legal defects such as want of sanction or where the discretion exercised by the Magistrate is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible. 25. 25. I have already made it clear after scrutinising the F.I.R. and other materials on the record that a clear allegation of entrustment and misappropriation of the properties was made by the respondent Corporation against the petitioner in the F.I.R. The allegations made out against the petitioner, prima-facie, discloses an offence under sections 420, 406 and 403 IPC and it cannot be said that it does not disclose commission of any offence. 26. Considering the factual aspects of the matter, I unhesitatingly state that the issues involved in the matter under consideration are not such in which criminal trial should be short circuited. 27. In the result, without expressing any opinion on the merit of the case, I do not find any merit in this revision petition, which is dismissed accordingly. The court below shall proceed with the matter in accordance with law with utmost expedition. However, it is made clear that the observations made above in this judgment be not taken as an expression or opinion of this Court on the merit of the case.