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Calcutta High Court · body

2007 DIGILAW 132 (CAL)

DHARAMPAL AJITSARIA v. SYNDICATE BANK

2007-02-28

ASHIM KUMAR ROY

body2007
( 1 ) THE Judgment of the Court was as follows : in this application under Section 482 of the Code of Criminal Procedure, the petitioner sought for quashing of the complaint case No. C-5250 of 2001, under Section 406/34 of the Indian Penal Code, now pending before the learned metropolitan Magistrate, 16th Court, Calcutta, as also the order of taking cognizance. ( 2 ) MR. Subrata Bose, the learned Advocate appearing on behalf of the petitioners sought for quashing of this case on the following grounds, a) Accepting the allegations as made in the petition of complaint along with those made in the initial depositions in their entirely and the same to be true, no case of criminal breach of trust can be said to have been made out against the petitioners. b) When by hypothecation of goods any credit facilities by way of overdraft is obtained from bank in such case disposal of hypothecated goods by the debtor does not amount to an offence of criminal breach of trust and at best bank will be entitled to take civil action for damages against the debtor for a breach of contract. c) Besides the allegations, the goods were hypothecated by way of security to cover up credit facilities there is no allegation of entrustment,. e. the transfer of ownership or possession as such there cannot be any question of criminal breach of trust in respect of those properties. In support of his contention Mr. Bose, relied on a decision of the Hon'ble apex Court in the case of Central Bureau of Investigation, SPE, SIU (X), New delhi v. Duncans Agro industries Limited, Calcutta reported in AIR 1996, supreme Court 2452 : 1996 C Cr LR (SC) 320. ( 3 ) MR. Bose further submitted before this Court that in any event his client is regularly making payment towards the liquidation of the cash credit he obtained from the bank and produced the relevant documents showing acknowledgment of receipt of payment by the complainant banker on different dates during the period from January 2002 to November 2006 and at the initial stage there was no default in payment of regular instalments. The Learned advocate of the complainant banker has not disputed the same. Those documents be kept with the records. The Learned advocate of the complainant banker has not disputed the same. Those documents be kept with the records. He also submitted that bank has also filed necessary application for recovery of the loan granted to the accused persons before the Bank Debt Recovery Tribunal and the same is pending. ( 4 ) MR. Manwendra Singh Yadav, the learned Advocate appearing on behalf of the complainant/opposite party strongly opposed the prayer for quashing. Mr. Yadav submitted that when upon perusal of the complaint and examination of the witnesses the Learned Magistrate was satisfied that a case of criminal breach of trust has been made out the question of quashing of this case before the trial does not at all arise. Mr. Yadav further submitted, that although the complaint was made for cheating the Learned Court took cognizance for criminal breach of trust and admitted that the complainant never moved any higher forum against the same. ( 5 ) HEARD, the Learned Advocate for the parties and considered their respective submissions as well as the case laws relied upon. Perused the petition of complaint, initial depositions of the witnesses and other materials on records. ( 6 ) ON careful consideration of the averment made in the petition of complaint, I found as follows ; i) The petitioner No. 1 obtained an overdraft facilities from the complainant bank to the tune of Rs. 20 lakhs against hypothecation of raw jute in bells and the accused No. 2, his father stood as guarantor. ii) While taking the aforesaid overdraft facilities the accused persons executed the requisite loan documents and the agreement of hypothecation. iii) In terms of the said agreement the accused person was required to liquidate the outstanding amount obtained by way of overdraft facilities. iv) When the accused person did not act in terms of the agreement the complainant bank sent its Officers for spot check and verification of the hypothecated stocks, but they found no stock nor even a scrap of jute. v) On enquiry they came to learn that all stocks of raw jute were sold out by the accused without depositing the sale proceeds thereof to liquidate the overdraft dues. v) On enquiry they came to learn that all stocks of raw jute were sold out by the accused without depositing the sale proceeds thereof to liquidate the overdraft dues. Whereas, from the initial deposition of the complainant the following facts became evident, a) In terms of the loan agreement the accused has to operate the loan account within its limit and to pay the interest from time to time and also to submit the monthly stock statements to the bank. b) Initially the accused operated the said loan account as usual but subsequently they stopped operating the account by not paying the interest. c) Inspite of several demands the accused persons had not liquidated the amount which they borrowed from the bank under the overdraft facilities. d) The accused person represented that he is engaged in sell and purchase of jute and for that purpose they had shown their godowns and the bank officers inspected the godowns before sanctioning loan. e) After the failure of the accused to make payment, the Bank Officers had been to his godown for inspection but they were not allowed to take any inspection. ( 7 ) I have also taken into consideration the decision relied upon by the Learned Advocate of the petitioner. The Apex Court, in the said case of cbi v. Duncans Agro Industries Limited Calcutta reported in AIR 1996 Supreme court 2452, in paragraph 27, held as follows ; "in the instant case, a serious dispute has been raised by the Learned counsel appearing for the respective party as to whether on the face of the allegations, an offence of criminal breach of trust is constituted or not. In our view, the expression 'entrusted with property' or 'with any dominion over property' has been used in a wide sense in Section 405,. P. C. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract. The expression 'entrusted' appearing in Section 405,. P. C. is not necessarily a term of law. It has wide and different implications in different contexts. P. C. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract. The expression 'entrusted' appearing in Section 405,. P. C. is not necessarily a term of law. It has wide and different implications in different contexts. It is, however necessary that the ownership or beneficial interest in the ownership of the property entrusted in respect of 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. The expression 'trust' in Section 405,. P. C. is a comprehensive expression and has been used to denote various kinds of relationship like the relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee. When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee. In the instant case, a floating charge was made on the goods by way of security to cover up credit facility. In our view, in such case for disposing of the goods covering the security against credit facility the offence of criminal breach of trust is not committed. In the facts and circumstances of the case, it, however, appears to us that the respondents moved the High Court only in 1991 although the first FIR was filed in 1987 and the second was filed in 1989. The CBI, therefore, got sufficient time to complete the investigation for the purpose of framing the charge. In the facts and circumstances of the case, it, however, appears to us that the respondents moved the High Court only in 1991 although the first FIR was filed in 1987 and the second was filed in 1989. The CBI, therefore, got sufficient time to complete the investigation for the purpose of framing the charge. " ( 8 ) IN view of the legal position as noticed from the above decision of the Apex Court, no offence of criminal breach of trust is committed in a case where a person after obtaining the credit facilities by hypothecation of goods, by way of making a floating charge on the goods as security to cover up the credit facility, disposed of those goods. Hence, in my opinion, in the instant case, on the allegations that the petitioner was in default in liquidating the overdraft dues and disposed of the hypothecated raw jute bells, against which such overdraft was obtained, no offence of criminal breach of trust punishable under Section 406 of the Indian penal Code has been made out for which the Learned Court has taken cognizance and proceeded for prosecution of the petitioner thereunder. ( 9 ) IN any event, mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown existing right at the beginning of the transaction. In order to make a person liable for prosecution for an offence of cheating it is essential to show that he had fraudulent or dishonest intention at the time of making promise and existence of such culpable intention right at the beginning cannot be presumed merely from his failure to keep up such promise subsequently. In the instant case, it is an admitted position that initially the accused operated the account as per the loan agreement and they subsequently stopped making payment towards the liquidation of the loan amount and before sanctioning loan the bank Officers took inspection of the godown of the accused persons. Moreover, it is not disputed that at the present moment the accused persons are making payment regularly to liquidate the outstanding dues. Moreover, it is not disputed that at the present moment the accused persons are making payment regularly to liquidate the outstanding dues. Except the allegations the accused had dishonest intention from the very beginning to cheat the complainant bank nothing factually either has been stated expressly nor suggested indirectly in the averments made in the petition of complaint or in the initial depositions to show that such intention was existed right at the beginning and at the top of all, admittedly, initially for some time there was regular payment by the accused. ( 10 ) IN the result this application stands allowed and all proceedings relating to the complaint case No. C-5250 of 2001, under Section 406/34 of the Indian Penal Code, now pending before the Learned Metropolitan magistrate, 16th Court, Calcutta stands quashed.