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2012 DIGILAW 442 (JHR)

Babul Choudhary v. State of Bihar

2012-03-26

PRASHANT KUMAR

body2012
JUDGMENT Prashant Kumar, J.-This is an application for quashing the First Information Report bearing Jasidih P.S. Case No. 126 of 1995 dated 01.07.1995 under Sections 406, 420 and 403 of the IPC. 2. The case of prosecution in brief is that petitioners being Managing Director and Directors of Sharda Hosiery Pvt. Ltd (hereinafter referred as 'Company') applied for loan from Bihar State Financial Corporation (hereinafter referred as ‘B.S.F.C.’). It is further stated that B.S.F.C. sanctioned Rs. 7.80 Lakhs as loan in favour of company. However, company availed only Rs. 6.09 Lakhs. It is further stated that as on 31.3.1994 a sum of Rs. 27,48,420.45/was outstanding against company, which includes principal amount as well as interest accruing on it. It is further alleged that at the time of obtaining loan, petitioner No. 1 (the Managing Director of the Company) on being authorized by the Board of the Company had issued letters of hypothecation dated 16.6.1982 and 16.12.1982. It is further stated that indenture of agreement execute on 16.8.1982 and 16.12.1982. It is stated that in the letter of hypothecation it is stipulated that borrowers agreed to held hypothecated assets as BSFC's exclusive property and said assets specifically appropriated to the security and the borrowers will not, except with the consent in writing of BSFC, do anything which would prejudice the security. It is stated that in the indenture of agreements petitioners, being guarantors in their personal capacity, undertook that they would not, without the consent of BSFC, remove the plant and machinery and any part there of from the land and the building mortgaged in favour of BSFC. It is alleged that the Deputy Manager and Area in-Charge of BSFC inspected the company and found that hypothecated tools and machineries (details of which given on the foot of FIR) had been removed and in all probabilities, sold by the petitioners in breach of terms and condition laid down in the letter of hypothecation and agreements. It is further alleged that petitioners mis-appropriated sale proceed and prevented BSFC from realizing the outstanding loan by sale of aforesaid hypothecated articles. 3. On the basis of aforesaid information, Jasidih P.S. Case No. 126/1995 dated 01. 07 .1995 instituted under Sections 406, 403 and 420 of the IPC against the petitioners. 4. Mrs. Badani Verma, learned counsel for the petitioners submits that no offence under Sections 403,406 and 420 of the IPC are made out. 3. On the basis of aforesaid information, Jasidih P.S. Case No. 126/1995 dated 01. 07 .1995 instituted under Sections 406, 403 and 420 of the IPC against the petitioners. 4. Mrs. Badani Verma, learned counsel for the petitioners submits that no offence under Sections 403,406 and 420 of the IPC are made out. She submits that in case of hypothecation ownership of movable property and possession thereof remain with debtor. Under the said Circumstance, offence of criminal breach of trust as defined under Section 405 of IPC is not made out. She further submits that since ownership of the hypothecated articles vest in the company, thus, question of misappropriation of said articles by the petitioners does not arise. Thus, offence under Section 403 of the IPC is not made out. She further submits that there is no averment in the FIR to show that at the time of issuance of hypothecation letter and/or execution of agreement petitioners and/ or the company had any intention to cheat BSFC. Thus, the offence of cheating also not made out. It is further submitted that even if allegations made in the FIR are taken to be true then also no criminal liability made out and at best civil dispute arose for breach of contract, which can be resolved by a competent civil Court. Accordingly, it is submitted that the FIR may be quashed. 5. On the other hand, Sri Ashok Kumar Yadav learned counsel for BSFC and Sri Moti Gope, learned Additional P.P. submit that there is stipulation in the hypothecation letter that borrowers (petitioners and the company) will held hypothecated assets as exclusive property of BSFC. Thus from the aforesaid stipulation, it is clear that petitioners held hypothecated articles as a trust. Thus it is not open for the petitioners to say that they are owner of hypothecated assets. Learned counsels submit that the BSFC is the owner of hypothecated property, thus acts of petitioners and the company in removing and selling of these articles without consent of BSFC amounts to criminal breach of trust. Thus, offence under Section 406 of the IPC made out. Learned counsels further submit that there are allegations in the FIR that petitioners mis-appropriated sale proceeds of hypothecated assets, thus offence under Section 403 of the IPC made out. Thus, offence under Section 406 of the IPC made out. Learned counsels further submit that there are allegations in the FIR that petitioners mis-appropriated sale proceeds of hypothecated assets, thus offence under Section 403 of the IPC made out. Learned counsels for the opposite parties further submit that petitioners and their company by making wrong promise had induced BSFC to sanction loan and thereafter without consent of BSFC removed and sold all machineries and caused loss to BSFC, thus offence under Section 420 of the IPC also made out. Learned counsels submit that it is well settled that nature and scope of civil proceeding are different from criminal proceeding, thus, merely because the allegations relates to commercial transactions or breach of tI1Ist for which a civil remedy is available, criminal proceeding cannot be quashed. Accordingly it is submitted that if the given facts makes out both civil and criminal wrong, then in that case both proceeding can proceed simultaneously. 6. Having heard the submissions. I have gone through the record of the case. It is true that Hon'ble Supreme Court in Central Bureau of Investigation v. Dankans Agro Industry Ltd., reported in (1996) 4 SCC 591 as well as in Indian on Corporation v. N.E.P.C. India Ltd and others. reported in (2006) 6 SCC 736 has held that in a case of hypothecation of movable property ownership and possession of property remain with the debtors, the creditors has only a charge over the property and had been given right to take possession and sale hypothecated movable property to recover his due, thus offence of criminal breach of trust as defined under Section 405 of the IPC not made out if hypothecated articles removed and sold by the debtor. But considering the special feature and facts of this case, in my view, the aforesaid decisions of their Lordships of Supreme Court will not apply in this case. As noticed above, there is stipulation in the hypothecation letter that borrowers (petitioners and the company) shall held hypothecated assets as exclusive property of BSFC. Aforesaid stipulation clearly shows that the parties agreed that the ownership of hypothecated asset will remain the property of BSFC till realization of loan. 7. Section 405 of the IPC defines criminal breach of trust which runs as follows :- 405. Aforesaid stipulation clearly shows that the parties agreed that the ownership of hypothecated asset will remain the property of BSFC till realization of loan. 7. Section 405 of the IPC defines criminal breach of trust which runs as follows :- 405. Criminal breach of trust.-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 prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust". A careful reading of definition of criminal breach of trust makes it clear that if a person entrusted with the property or dominion over the said property and he dishonestly mis-appropriate or convert it to his own use or dispose of that property in violation of any direction of law or any contract or trust then he commits offence of criminal breach of trust. As noticed above, in this case, petitioners (the company) held hypothecated articles as exclusive property of BSFC. There is clear stipulation in the hypothecation letter as well as in the agreement that petitioners and the company will not except with the consent in writing of BSFC remove the plant and machineries and any part there of from the land and building and transfer the same to any body. There is allegation in the FIR that petitioners removed the machineries and sold them and misappropriated sale proceed. Under the said circumstance, prima facie it appears that petitioners committed offences under Sections 403 and 406 of the IPC. 8. It is alleged in the FIR that at the time of obtaining loan, petitioners promised that they will retain the possession of plant and machinery at the place where it was installed and shall not dispose of and/or remove them without re-paying the amount of loan or without taking prior consent of BSFC. It appears that on being induced by aforesaid promise, BSFC sanctioned loan in the favour of petitioners. It is alleged that without taking consent of BSFC petitioners removed and sold machinery and misappropriated sale proceed, thereby they put loss to the BSFC. It appears that on being induced by aforesaid promise, BSFC sanctioned loan in the favour of petitioners. It is alleged that without taking consent of BSFC petitioners removed and sold machinery and misappropriated sale proceed, thereby they put loss to the BSFC. Thus, offence of cheating as enumerated under Section 420 of the IPC is made out. 9. In a similar circumstances, their Lordships of Supreme Court in Bihar State Financial Corporation v. B.K. Jha (Cr. Appeal No. 921 of 2005) dated 25.7.2005 while dealing with similar issue relating to removal of hypothecated asset without seeking formal permission of BSFC has held that the allegations do clearly make out a case under Sections 406, 408 and 420 of the IPC. Thus, this case is fully covered by aforesaid decision of their Lordship of Supreme Court. 10. Now coming to the next contention of learned counsel for the petitioner that since the matter relates to commercial transaction and breach of contract for which a civil remedy is available, the criminal proceeding is liable to be quashed. The aforesaid contention have no leg to stand in view of the decision of Hon’ble Supreme Court in Indian Oil Corporation case (supra). Paragraph No. 12 (v) of aforesaid judgment runs as follows :- (v) A given set of facts may make out: (a) purely a civil wrong; (b) purely a criminal offence; (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed. is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. 11. As discussed above, I have already come to the conclusion that the allegations made in the FIR constitutes offence under Sections 403, 406, 420 of the IPC, therefore, aforesaid contention raised on behalf of petitioners is liable to be rejected. 12. In view of discussion made above, I find no merit in this application, accordingly, same is dismissed. Application dismissed.