Patna High Court
Tilokchand Bajla And Ors. vs Motilal Jhunjhunwala on 7 December, 1954
Equivalent citations: AIR 1955 PATNA 338
ORDER Choudhary, J.
1. By these two applications the petitioners seek to quash a criminal proceeding started against them.
They are being prosecuted under Section 120-B, Penal Code for conspiracy, to commit criminal breach of trust and tinder Section 406, Penal Code for having committed criminal breach of trust.
The petitioners in Criminal Revision No. 898 of 1953 are proprietors of the firm Lakshmi Narayan Gouri Shanker at Gaya. The petitioner of Criminal, Revision No. 855 of 1953 is related to the petitioners of the other case. It is said that his sister is married to the petitioner Bishwanath of Criminal Revision No. 898 of 1953, This petitioner has his business at Deoghar. The complainant in this case is Motilal Jhunjhunwala, who is the proprietor of the firm Baijnath Motilal at Deoghar.
2. The facts giving rise to these applications are as follows :
The Textile Commissioner to the Government of India at Bombay used to distribute yarn produced by different mills in India to the different States. The Cloth and Yarn Controller of Bihar used to distribute the quota allotted to that State to different importers through the Clearing Agents. The petitioners of Criminal Revision No. 898 of 1953 were the Clearing Agents, and the complainant was one of the importers in respect of Dumka.
On 30-1-1948, the State Government allotted, through allotment No. 976, 50 bales of yarn to the complainant from Nagpur Empress Mills. The total price of these bales amounted to Rs. 23,645. On information being given to tbe complainant, he sent to the Clearing Agents a hundi of Rs. 13,000. This amount was received by the Clearing Agents.
On 17-3-1948, another allotment, being allotment No. 1018, was made to the complainant for 78 bales of yam from Nagpur Model Mills, and the complainant again, on getting information, sent a sum of Rs. 9,500 through insured post to the Clearing Agents which was duly received by them.
It is alleged that, although the aforesaid Clearing Agents took delivery of the bales in question from the two mills, they did not supply the same to the complainant. On these allegations the complainant filed a petition of complaint, on 1-2-1950, in the Court of the Sub-Divisional Magistrate, Deoghar, who passed an order for summoning the petitioners. "The petitioners, thereafter, moved this Court in Criminal Revision No. 867 of 1950 for quashing the proceeding which was finally heard on 18-9-1950, and was dismissed as being premature. It was, however, made perfectly clear in the order of this Court that after the evidence is led on behalf of the complainant in support of his case the petitioners will be at liberty to come at any time before this Court for the quashing of the proceeding against them if that evidence does not disclose a prima facie case against them.
The complainant, thereafter, produced evidence and charges under Sections 120B and 406, Penal Code were framed against the petitioners. They, thereafter, have again come up to this Court for the quashing of the proceeding on the ground that the evidence adduced in the case did not disclose any prima facie case against them for an offence of criminal breach of trust. The proprietors of the firm Lakshmi Narayan Gouri Shanker, the Clearing Agents, have filed Criminal Revision No. 898 of 1953, and their relation Tilokchand Bajla has filed Criminal Revision No. 855 of 1953.
3. On behalf of the petitioners an argument has been put forward that on the allegations made in the petition of complaint as well as on the evi-depce adduced on behalf of the complainant in this case there could not be a charge of criminal breach of trust against them and in that view of the matter, the proceeding should be quashed. The argument seems to be well founded.
Criminal breach of trust has been defined in Section 405, Penal Code in the following terms :
"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'."
According to the above definition, in order that an offence of criminal breach of trust could be committed, the person accused must have been entrusted with the property in question or any dominion over it, and he must have dishonestly misappropriated or converted to his own use that property or dishonestly used or disposed of the same in violation of any direction of law prescribing the mode in which such trust was to be discharged or in violation of any legal contract, express or implied, which he had made touching the discharge of such trust.
Therefore, one of the ingredients of this offence is that the person accused must have been entrusted with the property in question, and in order that he could be said to have been entrusted with that property, that property must be the property of some person other than the accused and not of the accused. I£ the ownership in the property which is the subject-matter of criminal breach of trust is in the person accused, he cannot be said to have been entrusted with it. The ingredient of entrustment, on the face of it, signifies that the ownership in the property in question, which is said to have been entrusted, is in a person other than one who is said to have been entrusted with it. It is therefore, clear that if the property with respect to which the offence of criminal breach of trust is said to have been committed belongs to and is owned by the accused person in his own right, who has got the full right of ownership at the time when the offence of criminal breach of trust is said to have been committed it cannot be said that he was a trustee of that property for somebody else, and that by converting it to his own use he committed the offence of criminal breach of trust.
Another ingredient of this offence is that even if the accused is a trustee with respect to the property for which the offence o£ criminal breach of trust is said to have been committed, its conversion, use or disposal by the accused person must have been in violation of any legal contract, express or implied, which he had made touching the discharge of such trust.
It has been argued in this case that both these ingredients are wanting in the present case inasmuch as it is said that on the own evidence of prosecution the bales in question were owned by the petitioners of Criminal Revision No. 898 of 1953 in their own right, and that, at any rate, their disposal by them was in consonance with the contract made by them with respect to those bales. In order to test the correctness of this argument, it has to be found out as to on what terms the Clearing Agents took delivery of the bales from the mills and what were their rights with respect to them.
Exhibits 1 and l(c) are two of the agreements made between Messrs. Lakshmi Narayan Gouri Shanker, namely, "the petitioners of Criminal Revision No. 898 of 1953, and the Governor of Bihar, under which these petitioners were made Clearing Agents. Exhibit 1 is dated 21-7-1949, and Ex. 1(c) is dated 13-4-1947. Each of these two agreements was for a period of one year from the dates of their execution, and therefore, the term of Clear ing Agency under Ex. 1(c) expired on 13-4-1948 and that under Ex. 1 expired on 21-7-1950. The allotments in question with which I am concerned in this case were made on 30-1-1948, and on 17-3-1948. The allotment made on 30-1-1948 was within the period of Clearing Agency under Ex. 1
(c).
The agreement under which these petitioners were to act as Clearing Agents so as to cover the allotment dated 17-3-1948, within their term of agency is not on the record. But it is an admitted fact in this case that even prior to 13-4-1947, when Ex. 1(c) was executed and subsequent to its 'expiry,' these petitioners were Clearing Agents on the same terms as embodied in Exs. 1 and l(c). It may also be noted that the terms of Exs. 1 and l(c) are exactly similar. The- terms of the agreement which are relevant for the purpose of the present case are these:
"1. On receipt Of a mills registered notice that yarn is ready for delivery, the Cloth Controller, Bihar, will give the second party (these petitioners) an intimation of the names of the mills concerned, the quantity of yarn ready for delivery and the date by which the yarn has to be cleared from the mills premises. The Cloth Controller, will also give the second party instructions regarding the distribution of yarn among the yarn importers appointed by the first party (the Governor of Bihar).
2. On receipt of intimation from Cloth Controller, Bihar, the second party will arrange to take delivery of the yarn at the mills premises on payment of its price by the specified date, will promptly despatch it by rail F.O.R. station of despatch to importers specified by the Cloth Controller, Bihar, on receipt of its price from them and will take all necessary steps for securing transport, if necessary by correspondence with the Textile Commissioner to the Government of India, the Cloth Controller, Bihar, and the railway authorities. They will also secure export permits from the Provincial Textile authorities concerned wherever necessary.
3. The second party will make efficient arrangement for the storage of the yarn during the period intervening the receipt of delivery by them from mills and its despatch to importers. If any of the importers do not undertake to take yarn or if the Cloth Controller, Bihar, informs the second party that no allotment to any importers is being made, then the second party will take the yarn themselves and transport it to Bihar and will sell it at their own risk.
4. The second party will charge the actual cost of the yarn plus one and a half per cent. on it from the importers to whom the yarn is supplied F.O.R. station of despatch.
5. The first party will not be held responsible for any financial risk that the second party may have to incur in carrying out the terms of the contract."
From the above terms it appears that (1) the Cloth Controller could give instructions to the petitioners only with regard to the distribution of yam amongst the yarn importers appointed by the State of Bihar, (2) the petitioners were to take delivery of the yarn at mills premises on payment of its price, which means the full price, (3) they were to despatch the yarn to the importers specified by the Cloth Controller on receipt of its price, which means the full price, from them, (4) if any of the importers did not undertake to take the yarn, these petitioners were entitled "to take it themselves and to transport it to Bihar and to sell it at their own risk and (5) the State of Bihar was not to be responsible for any financial risk that these petitioners may have had to incur in carry ing out the terms of the contract. It is not disputed that the term that these petitioners were to des patch the yarn to the importers on receipt of its price meant that they were to despatch it on receipt of full price.
On a pure construction of the agreement also, it is clear that before the complainant could claim to get the yarn, he was liable to pay its full price to the petitioners. This interpretation of the agreement gains full support from a letter of the Government of Bihar issued from the Supply and Price Control Department to all yarn importers (Ex. 6). It runs as follows:
"To All Yarn Importers, Dear Sir (s), It has been brought to the notice of Government that you are not paying even 25 per cent, of the cost of yarn in advance to the yarn clearing agent Messrs. Lakshmi Narayan Gouri Shanker, Gaya, in respect of your quota of yarn allotted to you from time to time. According to the terms of the agreement, the clearing agent is required to despatch goods on payment of its price by you, but as it may entail hardships to some of the importers, Government in consultation with the clearing agent have decided that if you are unable to remit the entire price of the yam in advance, you should make an advance payment of at least 25 per cent. of the value of the goods allotted to you. If you fail to remit 25 per cent. advance, you may be removed from the list of importership."
The trend of this letter seems to make it perfectly clear that under the terms of the agreement, the Clearing Agents were entitled to receive the entire price, but the Government of Bihar was trying to make some concession to all yarn importers by way of directing them to pay, at least 25 per cent. of the cost of yarn in advance. How far this letter is binding on the petitioners will be considered later on, but there is no doubt that this letter itself shows that, as of right, the Clearing Agents were entitled to demand the full price of the yarn before despatching it to the importers under the terms of the agreement.
As a matter of fact, the petitioners by their letter, Ex. X/C, dated 12-1-1948, asked the complainant in clear terms that full value of the goods allotted to him should be made to them within a week from the date of their demand note and that in case the payment was not made to them, as stated above, they would not be in a position to purchase goods allotted to him, and they shall presume that he was not agreeable to accept the allotment.
4. It appears that, after the letter, Ex. X/C was sent to the importers, there were some communications between them and the Government, and the Government suggested to them, as is evident from the aforesaid letter, Ex. 6, dated 17-2-1948, that they should pay at least 25 per cent. of the cost of yarn in advance to the petitioners.
There is nothing to show on the record of the present case that these petitioners accepted the suggestion of the Government to despatch the yarn on receiving only 25 per cent. of its cost. Under the agreements, Exs. 1 and l(c), the Government of Bihar had no right to modify the terms of those agreements without the consent of the petitioners, and, as already stated, there is nothing on the record to show that the petitioners agreed to the suggestion made by the Government of Bihar in Ex. 6; rather, there are indications on the record of the case to show that the petitioners did not agree to this suggestion of the Government. The first allotment, namely, allotment No. 976, Was communicated by letter Ex. 5, dated 1-3-1948, and on 3-3-1948, the petitioners by their letter Ex. 13, wrote to the complainant demanding the full price of the bales as intimated to him by their letter, Ex. X/C, dated 12-1-1948.
The second allotment No. 1018, dated 17-3-1948 was communicated by letter, Ex. 5(a), dated 17-3-1948, and the petitioners, on 23-3-1948, again asked the complainant to send the full price of the yarn as indicated per letter dated 12-1-1948, Ex. X/C. It appears that as the petitioners insisted upon payment of full price by the importers before the despatch of the yarn, they again made some representation to the Government of Bihar, and on 9-4-1948, a letter from the Government of Bihar, Supply and Price Control Department, Ex. 21, was sent to the petitioners asking them to accept only 25 per cent. of the cost in advance and there was a further instruction in the letter that if the petitioners had any objection to it, they should let the Government know as to why the Santal Parganas Yarn Dealers' Association should not be allowed to purchase direct from the mills.
What happened thereafter is not known and there is nothing on the record of this case to show as to whether the petitioners agreed to accept only 25 per cent. in advance or whether the Government took any further action on their refusal to do so. One thing, however, is significant that under the terms of the agreement the petitioners had to deposit with "the District Magistrate of Gaya to the credit of and endorsed in favour of the Government of Bihar, Government securities of the face value of Rs. 50,000 in cash by way of security which could be forfeited to the Government of Bihar at their discretion. There is nothing on the record to show that there was any breach of the terms of the agreement by the petitioners and that their security was forfeited. No action seems to have been taken by the Government of Bihar against the petitioners for not having despatched the bales to the complainant.
It may, therefore, be safely presumed that the agreement between the Government of Bihar and the petitioners that they would be liable to despatch the yam to the importers on receipt of its full price was not in any way modified and the petitioners had full right to insist on payment of the full price before the despatch of the yarn.
5. The question, therefore, that arises for consideration is whether the conduct of the petitioners in not despatching the yarn to the complainant amounted to criminal breach of trust. As already observed, under the terms of the agreement between the Government on the one hand and the petitioners on the other, the petitioners were en titled to take delivery of the yarn from the mills only on payment of its full price and they were liable to send the same to the importers on receiving the full cost from them. The agreement was not, in any way, binding on the complainant, and the complainant could refuse to take the yarn.
At any rate, he was never entitled to get it with out paying the full price for the same. Therefore, the ownership in the yam was never thought to be vested in the complainant till he actually paid its full price.
Under the terms of the agreement, the petitioners had to take the risk of any financial loss, and in ease of the importers' refusal to take the yarn in accordance with the terms of the agreement, the petitioners were entitled to sell it at their risk as if the yarn belonged to them. I fail to understand how in face of this agreement and the evidence discussed above it could ever be said that the ownership in the yarn vested in the complainant and the petitioners were holding the same in trust for him.
In my opinion, according to the terms of the agreements referred to above, the ownership in the yarn could vest in the complainant only when he paid its full price as stipulated in the agreements. The mills having delivered the goods on payment of full price could not claim to be the owner of the yam. The Government having clearly contracted not to bear any risk of financial loss could not be said to be the owner of the yarn. The complainant not having paid the price in full could not, on the above interpretation, be said to have the right of ownership in the yarn. The question then is as to who could be the owner of that yarn, and the only possible answer is that the petitioners were the owners of the yarn. That being the position, the yarn could never be said to have been entrusted with them and there could not be an offence of criminal breach of trust with respect to it.
6. The view that I have taken about the offence of criminal breach of trust gains full support from decision of this Court in -- 'Sheonarayan Jaiswal v. State of Bihar', AIR 1953 Pat 225 (A), where Das J. made the following observations:
"The offence of criminal breach of trust is defined in Section 405, Penal Code. One of the essential conditions is that the property which is the subject-matter of the offence must have been entrusted to a person: a trust of some kind is necessary, and the property in respect of which criminal breach of trust can be committed must be either the property of some person other than the person accused, or the beneficial interest in or ownership of it must be in some other person and the offender must hold such property on trust for such other person or in some way for his benefit."
6A. In -- 'Kanai Lal v. The State', AIR 1951 Cal 206 (B) the complainant instructed the accused to make a gold chain and handed him Rs. 500 towards the cost of gold and the cost of making it. The accused did not deliver the chain to the complainant, nor did he return the money. It was held in that case that the accused could not be convicted of an offence of criminal breach of trust inasmuch as he did not hold the money in trust for the complainant the money being given to him as the price of the gold and the cost of making the chain.
In -- 'Ramaswami Reddy v. Emperor', AIR 1931 Mad 235 (C) a similar view was taken, where it was held that the property in respect of which criminal breach of trust can be committed must be of the property of some person other than the accused or the beneficial interest in or ownership of it must be in some other person and the offender must hold such property on trust for such other person or in some way for his benefit.
7. No doubt, in the present case, the petitioners were holding the yam to be supplied to the importers if they paid its full price. They could, therefore, be said to have held it in trust for the complainant or for his benefit only after payment of its full price. Before that the ownership undoubtedly vested in the petitioners with the possibility of their being divested of that ownership subsequently if within the period prescribed the full price of the yarn was paid by the importers. The ownership in the yarn continued to exist in the petitioners till the period within which the full price had to be paid by the importers expired, and after the expiry of that date, under the terms of the agreement, as already observed, they were entitled to sell the yarn as their own property. The charge of criminal breach of trust, therefore, could not lie in this case.
8. It has been contended on behalf of the complainant that the petitioners had received a hundi of Rs. 13,000 as an advance for the despatch of the first allotment and a sum of Rs. 9,500 for the despatch of the second allotment, and it has also been argued that when the complainant demanded the despatch of the yarn, the petitioners falsely wrote to him that under the transport difficulties delivery could not be taken at Baidyanath Dham though prior to the writing of this letter they had already despatched the yarn to Baidyanath Dham addressed to self.
It is not disputed that the petitioners received the two sums of money referred to above. As regards the letter intimating to the complainant about the transport difficulties, it is submitted that, though the yarn had been despatched from Nagpur on 14-5-1948, the petitioners had no knowledge of it, and the letter referred to above was written to the complainant from Gaya on 20-5-1948, in ignorance of the despatch made at Nagpur, It is not necessary for me to decide the truth or otherwise of the contentions raised by the parties on this point. The petitioners may have committed breach of contract and may be civilly liable, but it cannot be held on these facts that there was any criminal breach of trust.
9. For the reasons given above, I perfectly agree with the contentions raised on behalf of the petitioners that on the own case of the prosecution there is no room for any prosecution for criminal breach of trust, and the proceedings must, therefore, be quashed. In the result the applications are allowed, and the proceeding is quashed.