Himachal Pradesh High Court
Vinod Goel vs Bhajan Lal And on 13 June, 2022
Author: Sandeep Sharma
Bench: Sandeep Sharma
1
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
.
ON THE 13TH DAY OF JUNE, 2022
BEFORE
HON'BLE MR. JUSTICE SANDEEP SHARMA
CRIMINAL MISC. PETITION (MAIN) U/S 482 Cr.P.C No.347 of 2020
Between:
SH. AKSHAY KUMAR GOEL, S/O SHRI
VINOD GOEL, R/O ASHOK BHAWAN
OPP. D.C. OFFICE THE MALL SOLAN,
HIMACHAL PRADESH.
....PETITIONER
(BY MR. GEORGE, ADVOCATE)
AND
1. STATE OF HIMACHAL PRADESH
THROUGH PRINCIPAL SECRETARY
(HOME) TO THE GOVERNMENT OF
HIMACHAL PRADESH SECRETARIAT
SHIMLA 171002.
2. SENIOR SUPERINTENDENT OF
POLICE UNA, DISTRICT UNA,
HIMACHAL PRADESH.
3. SH. UMA SHANKAR KUMAR
BRANCH MANAGER VIJAY BANK
UNA, DISTRICT UNA, HIMACHAL
PRADESH.
....RESPONDENTS
(BY MR. MR. SUDHIR BHATNAGAR
ADDITIONAL ADVOCATE GENERAL
FOR R-1 & 2)
(MR. DEEPAK BHASIN, ADVOCATE FOR R -3)
Whether approved for reporting? yes.
This petition coming on for admission after notice this day, the Court
passed the following:
::: Downloaded on - 24/12/2022 09:25:45 :::CIS
2
O R D E R
By way of instant petition filed under Section 482 Cr.P.C., .
read with Section 227 of the Constitution of India, prayer has been made on behalf of the petitioner for quashing of FIR No.129, dated 12.04.2019, registered at police Station, Una Sadar, District Una, H.P., under Sections 406, 410, 420, 120-B and 34 of IPC as well as consequent proceedings pending before the competent court of law.
2. For having bird's eye view, facts leading to the registration of FIR sought to be quashed in the instant proceedings are that the Branch Manager, Vijaya Bank, Una, District Una, H.P., sanctioned the loan amount of `10,00,000/-on dated 12.01.2015 to the petitioner, who in turn, executed an agreement/ deed of hypothecations dated 12.01.2015 and hypothecated the machinery in favour of the bank. Since the petitioner allegedly committed default in repayment of loan and had committed serious irregularities in the operation of the accounts, bank, as detailed hereinabove, firstly called upon the petitioner to make the payment regularly, but subsequently debt of the petitioner was classified as "NPA" on 30.9.2018. On 7.6.2018, notice for the recovery of loan was issued by the bank to the petitioner, but despite that he made the default in payment. Thereafter, demand-cum re-possession seizure notice was issued to the petitioner and to the surety on 01.10.2018. The authorization letter for re-possession/ seizure of machinery was issued to seizure agent on 30.10.2018, but by that time allegedly ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 3 petitioner had absconded with the hypothecated machinery and it was not found at the place of business. The letter by recovery agent .
addressed to the Regional Manager for (Recovery) Vijaya bank dated 29.11.2018, is annexed with as Annexure R-2 with the reply filed by Superintendent of Police Una, wherein he reported that borrower has disposed off the machinery, therefore FIR for fraud may be lodged against the borrower. In the aforesaid backdrop, respondent No.3, Uma Shankar Kumar, Branch Manager, Vijaya Bank, Una lodged complaint in the police station, but it appears that no action was taken by the police on the complaint of the bank and as such, it was compelled to file complaint under Section 156(3) Cr.P.C in the Court of Judicial Magistrate 1st Class, Court No.III, Una, praying therein to order for registration of the case against the petitioner under Sections 406, 410, 420, 120-B and 34 of IPC. In the aforesaid background, FIR sought to be quashed in the instant proceedings came to be lodged against the petitioner, who as per the reply filed by respondent No.1 stands declared proclaimed offender in the case vide order dated 29.01.2021 passed by court below.
3. Precisely, the grounds, as has been raised in the petition and further canvassed by Mr. George, learned counsel representing the petitioner for quashing of FIR, are that once petitioner has already repaid the entire amount of loan alongwith up-to -date interest, he cannot be prosecuted for his being allegedly committed the offence of criminal breach of trust punishable under Section 406 ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 4 of IPC. Learned counsel for the petitioner while inviting attention of this Court to Sections 405 and 406 IPC, argued that if any person .
entrusted with any 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, such person can be said to have committed the offence of criminal breach of trust punishable under section 406 of IPC. Learned counsel for the petitioner further argued that at no point of time machinery alleged to have been sold by the petitioner was entrusted to him by the complainant, rather same as per own case of the complainant was hypothecated by petitioner with the bank.
Learned counsel for the petitioner further argued that though machinery or other property kept as collateral security in lieu of loan was hypothecated with the bank, but always remained in the ownership of the petitioner and as such, there is no question, if any, of entrustment of property by the bank to the petitioner. If it is so, no case much less under Section 405 of IPC, is made out against the petitioner. While referring to Section 420 of IPC, learned counsel for the petitioner argued that there is no material on record to suggest that petitioner committed cheating and dishonestly induced respondent-bank to deliver its property to any person, or any part of a valuable security, which is capable of being converted into a valuable security. He argued that to attract Section 482 Cr.P.C, there has to be dishonest intention from very beginning, which is sine qua ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 5 non to hold the accused guilty for the commission of said offence.
He argued that as per own case of respondent-bank, petitioner was .
regular in making repayment of loan for some time, but subsequently on account of irregular payments, his account was classified as "NPA' on 30.9.2018. He argued that had petitioner had an intention to cheat the bank from very beginning, he would have not paid single installment after availing loan facility from the respondent bank, rather he kept on paying installments regularly, but subsequently on account of some financial crunch became irregular in payment but that does not mean that he had an intention from very beginning to cheat and misappropriate the loan amount. Learned counsel for the petitioner further argued that since no case much less substantial is made out against the petitioner under Sections 405 and 406 of IPC for the reasons stated hereinabove, no fruitful purpose would be served by keeping the FIR sought to be quashed alive. He argued that to the contrary, petitioner, who is innocent and has not committed any offence as is being alleged against him, would be put to great hardship. He argued that moreover entire loan amount now stands repaid and as such, otherwise also, no case is made out against the petitioner and as such, prayer made in the instant petition deserves to be allowed. In support of his aforesaid contention, learned counsel for the petitioner has placed reliance upon the following judgments passed by Hon'ble Apex Court:-
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 6i). State of Haryana and others vs. Bhajan Lal and others, 1992 Supp (1) SCC 335.
ii) Anand Kumar Mohatta and another vs. State .
(Government of NCT of Delhi) Department of Home and Anr, AIR 2019 SC 210 and
iii) Judgment dated 3.1.2019 passed by Hon'ble Apex Court in case titled Satishchandra Ratanlal Shah versus State of Gujarat and another in Criminal Appeal No.9 of 2019 (arising out of SLP(CRL).
No.5223 of 2018).
4. Mr. Sudhir Bhatnagar, learned Additional Advocate General and Mr. Deepak Bhasin, learned counsel representing respondents No.1 to 3, refuted the aforesaid submissions made by learned counsel representing the petitioner, by stating that since machinery alleged to have been sold by petitioner was under
hypothecation, he had no authority to sell the same and as such, no fault, if any, can be said to have been committed by the police while registering criminal case under Section 406 and 420 IPC. Above named counsel representing the respondents further argued that loan account of the petitioner was classified as "NPA" on 30.9.2018 and when he sold machinery hypothecated in favour of the bank, sum of ` 5, 14, 982/- with interest was payable by him and as such, it cannot be said that he has not committed any offence punishable under Sections 406 and 420 of IPC. Learned counsel for the respondents further argued that hypothecation means that till the time entire loan amount is repaid, property hypothecated in favour of the bank would be considered as property of the bank and as such, it ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 7 cannot be contended/submitted that during hypothecation person in whose favour loan is advanced can claim him/herself to be owner of .
the property under hypothecation. They further argued that till the time entire loan amount is not repaid property moveable or immoveable hypothecated in favour of the bank would be deemed to have been entrusted to the loanee by the bank and he cannot dispose of the same till the time property is released from the hypothecation. Lastly above named counsel representing respondents argued that whether petitioner had an intention from very beginning to cheat is a question which need to be determined/answered on the basis of the totality of evidence led on record by the respective parties during trial and as such, it would be too premature at this stage to conclude that petitioner has not committed any offence punishable under Section 420 of IPC.
5. Learned counsel for the respondents further argued that High Court while exercising power under Section 482 Cr.P.C cannot adjudicate upon the veracity of the facts alleged or enter into an appreciation of competing evidence presented, rather limited question for determination in these proceedings can be whether on the face of FIR, the allegations constitute as a cognizable offence, if yes, then power under section 482 cannot be exercised to quash the FIR. They further argued that since prima-facie FIR discloses cognizable offence alleged to have been committed by the petitioner, this Court may not exercise power under Section 482 Cr.P.C.
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 86. I have heard learned counsel representing the parties and perused the record of the case.
.
7. Close scrutiny of the FIR sought to be quashed in the instant proceedings as well as reply to the petition filed by the respondents, reveal that petitioner vide application dated 12.01.2015 applied to Vijaya bank, Una for term loan to the extent of Rs.10 lac, which was sanctioned in his favour on 12.01.2015 itself. Petitioner submitted certain documents required by the bank and thereafter loan amount was released in favour of the petitioner. From January 2015 to middle of the year 2018 petitioner continued to repay the loan amount through installments along with interest, but thereafter became irregular in payment. Since despite repeated notices, petitioner failed to repay the remaining amount, his loan account was classified as "NPA" on 30.09.2018 and recovery notice of loan was issued on 7.6.2018. Since despite notice of recovery, petitioner failed to make the payment, bank issued authorization letter to its agent for re-possession and seizure of machinery, who in turn, reported vide communication dated 29.11.2018 that petitioner has absconded with the machinery and as such, in this backdrop FIR sought to be quashed in the instant proceedings came to be lodged against the petitioner.
8. Though, as per the reply filed by the respondents, sum of `5,14,982/- with up-to- date interest was payable at the time of lodging of the FIR, but during proceedings of the case, it was ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 9 informed that as of now entire loan amount stands recovered, which fact has been duly acknowledged by learned counsel representing .
the respondent-bank.
9. Precisely, the case of the prosecution against the petitioner is that he fraudulently without any authority sold the machinery hypothecated in favour of the bank. As per prosecution, till the time property was hypothecated, it was deemed to have been entrusted to the petitioner by the bank, which advanced loan to the tune of `10,00,000/-. Apart from above, another allegation against the petitioner is that he intentionally with a view to commit fraud upon the bank sold the hypothecated property, which was property of the bank till the time entire loan amount was not repaid.
10. Before considering the prayer made in the instant petition for quashing of FIR, this Court deems it necessary to discuss/elaborate the scope of this Court to quash the FIR as well as criminal proceedings while exercising power under Section 482 Cr.P.C.
11. A three-Judge Bench of the Hon'ble Apex Court in case titled State of Karnataka vs. L. Muniswamy and others, 1977 (2) SCC 699, held that High Court while exercising power under Section 482 Cr.P.C., is entitled to quash the proceedings, if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed.
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 1012. Subsequently, in case titled State of Haryana and others vs. Bhajan Lal and others, 1992 Supp (1) SCC 335, the Hon'ble Apex .
Court while elaborately discussing the scope and competence of High Court to quash criminal proceedings under Section 482 Cr.PC laid down certain principles governing the jurisdiction of High Court to exercise its power. After passing of aforesaid judgment, issue with regard to exercise of power under Section 482 Cr.PC, again came to be considered by the Hon'ble Apex Court in case bearing Criminal Appeal No.577 of 2017 (arising out of SLP (CrL.) No. 287 of 2017) titled Vineet Kumar and Ors. v. State of U.P. and Anr., wherein it has been held that saving of the High Court's inherent powers, both in civil and criminal matters, is designed to achieve a salutary public purpose i.e. court proceedings ought not to be permitted to degenerate into a weapon of harassment or persecution.
13. The Hon'ble Apex Court in Prashant Bharti v. State (NCT of Delhi), (2013) 9 SCC 293, relying upon its earlier judgment titled as Rajiv Thapar and Ors v. Madan Lal Kapoor, (2013) 3 SCC 330, reiterated that High Court has inherent powers under Section 482 Cr.PC., to quash the proceedings against an accused, at the stage of issuing process, or at the stage of committal, or even at the stage of framing of charge, but such power must always be used with caution, care and circumspection. In the aforesaid judgment, the Hon'ble Apex Court concluded that while exercising its inherent jurisdiction under Section 482 of the Cr.PC, Court exercising such power must be fully ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 11 satisfied that the material produced by the accused is such, that would lead to the conclusion, that his/their defence is based on .
sound, reasonable, and indubitable facts and the material adduced on record itself overrule the veracity of the allegations contained in the accusations levelled by the prosecution/complainant. Besides above, the Hon'ble Apex Court further held that material relied upon by the accused should be such, as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 of the Cr.P.C. to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice. In the aforesaid judgment titled as Prashant Bharti v. State (NCT of Delhi), (2013) 9 SCC 293, the Hon'ble Apex Court has held as under:-
"22. The proposition of law, pertaining to quashing of criminal proceedings, initiated against an accused by a High Court under Section 482 of the Code of Criminal Procedure (hereinafter referred to as "the Cr.P.C.") has been dealt with by this Court in Rajiv Thapar & Ors. vs. Madan Lal Kapoor wherein this Court inter alia held as under: (2013) 3 SCC 330, paras 29-30)
29. The issue being examined in the instant case is the jurisdiction of the High Court under Section 482 of the Cr.P.C., if it chooses to quash the initiation of the prosecution against an accused, at the stage of issuing process, or at the stage of committal, or even at the stage of framing of charges. These are all stages before the commencement of the actual trial. The same parameters would naturally be available for later stages as well. The power vested in the High Court under Section 482 of the Cr.P.C., at the stages ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 12 referred to hereinabove, would have far reaching consequences, inasmuch as, it would negate the prosecution's/complainant's case without allowing the prosecution/ complainant to lead evidence. Such a .
determination must always be rendered with caution, care and circumspection. To invoke its inherent jurisdiction under Section 482 of the Cr.P.C. the High Court has to be fully satisfied, that the material produced by the accused is such, that would lead to the conclusion, that his/their defence is based on sound, reasonable, and indubitable facts; the material produced is such, as would rule out and displace the assertions contained in the charges levelled against the accused; and the material produced is such, as would clearly reject and overrule the veracity of the allegations contained in the accusations levelled by the prosecution/complainant. It should be sufficient to rule out, reject and discard the accusations levelled by the prosecution/complainant, without the necessity of recording any evidence. For this the material relied upon by the defence should not have been refuted, or alternatively, cannot be justifiably refuted, being material of sterling and impeccable quality. The material relied upon by the accused should be such, as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 of the Cr.P.C. to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice.
30. Based on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashing, raised by an accused by invoking the power vested in the High Court under Section 482 of the Cr.P.C.:-
30.1 Step one, whether the material relied upon by the accused is sound, reasonable, and indubitable, i.e., the material is of sterling and impeccable quality?::: Downloaded on - 24/12/2022 09:25:45 :::CIS 13
30.2 Step two, whether the material relied upon by the accused, would rule out the assertions contained in the charges levelled against the accused, i.e., the material is .
sufficient to reject and overrule the factual assertions contained in the complaint, i.e., the material is such, as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false.
30.3 Step three, whether the material relied upon by the accused, has not been refuted by the prosecution/complainant; and/or the material is such, that it cannot be justifiably refuted by the prosecution/ complainant?
30.4 Step four, whether proceeding r with the trial would result in an abuse of process of the court, and would not serve the ends of justice?
30.5 If the answer to all the steps is in the affirmative, judicial conscience of the High Court should persuade it to quash such criminal -
proceedings, in exercise of power vested in it under Section 482 of the Cr.P.C. Such exercise of power, besides doing justice to the accused, would save precious court time, which would otherwise be wasted in holding such a trial (as well as, proceedings arising therefrom) specially when, it is clear that the same would not conclude in the conviction of the accused."
14. It is quite apparent from the bare perusal of aforesaid judgments passed by the Hon'ble Apex Court from time to time that where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him/her due to private and personal grudge, High Court while ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 14 exercising power under Section 482 Cr.PC can proceed to quash the proceedings.
.
15. Sh. Sudhir Bhatnagar, learned Additional Advocate General, contended that since investigating agency after having completed investigation has already filed challan under Section 173 Cr.PC., in the competent court of law, prayer made on behalf of the petitioners for quashing FIR cannot be accepted at this stage.
However, this Court is not inclined to accept the aforesaid submission made by the learned Additional Advocate General for the reason that High Court while exercising jurisdiction under Section 482 Cr.PC can even proceed to quash charge, if it is satisfied that evidentiary material adduced on record would not reasonably connect the accused with the crime and if trial in such situations is allowed to continue, person arraigned as an accused would be unnecessarily put to ordeals of protracted trial on the basis of flippant and vague evidence.
16. Recently, the Hon'ble Apex Court in case tilted Anand Kumar Mohatta and Anr. v. State (Government of NCT of Delhi) Department of Home and Anr, AIR 2019 SC 210, has held that abuse of process caused by FIR stands aggravated if the FIR has taken the form of a charge sheet after investigation and as such, the abuse of law or miscarriage of justice can be rectified by the court while exercising power under Section 482 Cr.PC. The relevant paras of the judgment are as under:
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 1516. Even otherwise it must be remembered that the provision invoked by the accused before the High Court is Section 482 Cr. P.C and that this Court is hearing an appeal from an order under Section 482 of Cr.P.C. Section 482 of Cr.P.C reads as follows:
.
-
"482. Saving of inherent power of the High Court.- Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice."
17. There is nothing in the words of this Section which restricts the exercise of the power of the Court to prevent the abuse of process of court or miscarriage of justice only to the stage of the FIR. It is settled principle of law that the High court can exercise jurisdiction under Section 482 of Cr.P.C even when the discharge application is pending with the trial court ( G. Sagar Suri and Anr. V. State of U.P. and Others, (2000) 2 SCC 636 (para 7), Umesh Kumar v. State of Andhra Pradesh and Anr. (2013) 10 SCC 591 (para 20). Indeed, it would be a travesty to hold that proceedings initiated against a person can be interfered with at the stage of FIR but not if it has advanced, and the allegations have materialized into a charge sheet. On the contrary it could be said that the abuse of process caused by FIR stands aggravated if the FIR has taken the form of a charge sheet after investigation. The power is undoubtedly conferred to prevent abuse of process of power of any court."
17. Recently, the Hon'ble Apex Court in case titled Pramod Suryabhan Pawar v. The State of Maharashtra and Anr, (2019) 9 SCC 608, has elaborated the scope of exercise of power under Section 482 Cr.PC, the relevant para whereof reads as under:-
"7. Section 482 is an overriding section which saves the inherent powers of the court to advance the cause of justice. Under Section 482 the inherent jurisdiction of the court can be exercised (i) to give effect to an order under the CrPC; (ii) to prevent the ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 16 abuse of the process of the court; and (iii) to otherwise secure the ends of justice. The powers of the court under Section 482 are wide and the court is vested with a significant amount of discretion to decide whether or not to exercise them. The court .
should be guarded in the use of its extraordinary jurisdiction to quash an FIR or criminal proceeding as it denies the prosecution the opportunity to establish its case through investigation and evidence. These principles have been consistently followed and re-iterated by this Court. In Inder Mohan Goswami v State of Uttaranchal5, this Court observed.
"23. This Court in a number of cases has laid down the scope and ambit of courts' powers under Section 482 CrPC. Every High Court has inherent powers to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to r prevent abuse of the process of the court. Inherent power under Section 482 CrPC can be exercised:
(i) to give effect to an order under the Code;
(ii) to prevent abuse of the process of the court, and
(iii) to otherwise secure the ends of justice.
24. Inherent powers under Section 482 CrPC though wide have to be exercised sparingly, carefully and with great caution and only when exercise is justified by the tests specifically laid down in this section itself. Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the statute."
8. Given the varied nature of cases that come before the High Courts, any strict test as to when the court's extraordinary powers can be exercised is likely to tie the court's hands in the face of future injustices. This Court in State of Haryana v Bhajan Lal6 conducted a detailed study of the situations where the court may exercise its extraordinary jurisdiction and laid down a list of illustrative ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 17 examples of where quashing may be appropriate. It is not necessary to discuss all the examples, but a few bear relevance to the present case. The court in Bhajan Lal noted that quashing may be appropriate where, (2007) 12 SCC 1 1992 Supp (1) SCC 335 .
"102. (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2).
..........
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
In deciding whether to exercise its jurisdiction under Section 482, the Court does not adjudicate upon the veracity of the facts alleged or enter into an appreciation of competing evidence presented. The limited question is whether on the face of the FIR, the allegations constitute a cognizable offence. As this Court noted in Dhruvaram Murlidhar Sonar v State of Maharashtra, 2018 SCCOnLine SC3100 ("Dhruvaram Sonar") :
"13. It is clear that for quashing proceedings, meticulous analysis of factum of taking cognizance of an offence by the Magistrate is not called for. Appreciation of evidence is also not permissible in exercise of inherent powers. If the allegations set out in the complaint do not constitute the offence of which cognizance has been taken, it is open to the High Court to quash the same in exercise of its inherent powers."::: Downloaded on - 24/12/2022 09:25:45 :::CIS 18
18. Now being guided by the aforesaid proposition of law laid down by the Hon'ble Apex Court, this Court would make an endeavor .
to examine and consider the prayer made in the instant petition vis-
à-vis factual matrix of the case. Precisely question, which needs to be decided in the instant case, is whether property/machinery hypothecated in favour of the bank can be presumed/ termed to be entrusted in favour of the petitioner by the bank by advancing him loan to buy that property.
19. Before exploring answer to aforesaid question, it would be apt to take note of Section 405 of IPC, which reads as under:-
"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".
20. Bare reading of aforesaid provisions of law clearly reveals that the person, who in any manner entrusted with property, or with any dominion over property, if dishonestly misappropriate or converts to its own use that property, or dishonestly uses or disposes of that property would deem to have been committed criminal breach of trust as prescribed under Section 405 of IPC. If allegation of criminal breach of trust is proved, person against whom such allegation is ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 19 proved, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both in .
terms of the provisions contained in section 406 of IPC.
21. Though, learned Additional Advocate General argued that entrustment of physical possession of the property is not essential for the offence defined under Section 405 of IPC because the expression "whoever being in any manner entrusted with property or with any dominion over property" clearly negatives the contention that since physical possession was not exclusively transferred to the bank, there cannot be a case of entrustment but after having carefully read section 405 of IPC, this Court finds it difficult to accept the aforesaid contention of learned Additional Advocate General. The term 'entrusted' found in section 405 IPC governs not only the words "with the property" immediately following it but also the words" or with any dominion over the property" occurring thereafter, meaning thereby before there can be any entrustment, the entrustment carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. A mere transaction of sale cannot amount to an entrustment. Reliance in this regard is placed upon the judgment rendered by Hon'ble Apex Court in State of Gujarat vs. Jaswantlal Nathalal, (1968) 2SCR 408,wherein it has been held as under:-
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 20The term "entrusted" found in S. 405 IPC governs not only the words "with the property" immediately following it but also the words "or with any dominion over the property" occurring thereafter-see Velji .
Raghvaji Patel v. State of Maharashtra [1965] 2 S.C.R. 429.Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust (see Jaswantrai Manilal Akhaney v.
State of Bombay(1965 SCR 483). The expression 'entrustment' carries with it the implication that the person handing over any property or on whose behalf that properly is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an entrustment. It is true that the government had sold the cement in question to BSS solely for the purpose of being used in connection with the construction work referred to earlier. But that circumstance does not make the transaction in question anything other than a sale. After delivery of the cement, the government had neither any right nor dominion over it. If the purchaser or his representative had failed to comply with the requirements of any law relating to cement control, he should have been prosecuted for the same. But we are unable to hold that there was any breach of trust.
22. Reliance is also placed upon the judgment rendered by Hon'ble Apex Court in case titled Central Bureau of Investigation, SPE, SIU (X), New Delhi vs. Duncans Agro Industries Ltd, Calcutta (1996) 5 Supreme Court Cases 591, wherein it has been held as under:-
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 21"26. After giving our careful consideration to the facts and circumstances of the case and the submissions made by the respective counsel for the parties, it appears to us that for the purpose of quashing the complaint, it is necessary to consider whether the allegations in the complaint prima facie make out .
an offence or not. It is not necessary to scrutinize the allegations for the purpose of deciding whether such allegations are likely to be upheld in the trial. Any action by way of quashing the complaint is a action to be taken at the threshold before evidences are led in support of the complaint.
For quashing the complaint by way of action at the threshold. It is, therefore, necessary to consider whether no the face of the allegations, a criminal offence is constituted or not. In recent decisions of this Court, the case of Bhajan Lal (supra), since relied on by Mr. Tulsi, the guiding principles in quashing a criminal case have been indicated.
27. 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 wide sense in Section 405 I.P.C. Such expression includes all case 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 I.P.C. is not necessarily a term of law. It has wide and different implication in different context. 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 I.P.C. is a comprehensive expression and has been used to denote various kinds of relationship like the relationship of trustee and beneficiary, bailer and bailee, master and servant, pledger and pledger. 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 of 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 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 ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 22 the goods covering the security to cover up credit facility. In our view, In such case for disposing of the goods covering the 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".
23. It is quite apparent from the reading of aforesaid law laid down by Hon'ble Apex Court that expression "entrusted with property" or "with any dominion over property" has been used in a wide sense in section 405 IPC, which 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. To attract case under section 405 IPC, it is necessary that ownership and beneficial interest in the ownership of the property entrusted in respect of which offence 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.
24. It has been categorically held in the aforesaid judgment that if some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person, who has hypothecated such good, whereas to constitute offence, if any, under section 405 IPC the property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused. In the case at hand, admittedly the ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 23 property in respect of which criminal breach of trust alleged to have been committed by the petitioner was his own property not of the .
bank. As has been observed hereinabove, during hypothecation ownership of the hypothecated goods remains with the person, who has hypothecated the such goods and as such, there appears to be merit in the case of the petitioner that no case much less under sections 405 and 406 of IPC is made out against him. Similarly, this court finds that no case is sustainable against the petitioner under section 410 of IPC, which reads as under:-
"410. Stolen property:- Property, the possession whereof has been transferred by theft, or by extortion, or by robbery, and property which has been criminally misappropriated or in respect of which criminal breach of trust has been committed, is designated as "Stolen property" [whether the transfer has been made, or the misappropriation or breach of trust has been committed, within or without [India]. But, if such property subsequently comes into the possession of a person legally entitled to the possession thereof, it then ceases to be stolen property".
25. In the case at hand, property which was hypothecated and was further sold cannot be said to have acquired/transferred by theft or extortion or by robbery. Since the petitioner despite his having hypothecated property/machinery continued to be owner of the property, as has been discussed hereinabove, he cannot be said to have criminally misappropriated or committed criminal breach of trust as defined under section 405 IPC. No case under section 420 of IPC can be said to be sustainable against petitioner. Section 420 of IPC reads as under:-
::: Downloaded on - 24/12/2022 09:25:45 :::CIS 24"420. Cheating and dishonestly inducing delivery of property.- whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or .
sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."
26. It is none of the case of prosecution that the petitioner dishonestly induced bank to deliver any property/ machinery which he allegedly further sold to other person during hypothecation, rather it is admitted case of the prosecution that property alleged to have been sold by the petitioner during hypothecation was entrusted to him by the bank. Though, hypothecated property does not fall in the meaning of entrustment as defined under section 405 IPC, as has been discussed hereinabove, but even if it is presumed as is being claimed by the prosecution that such property was entrusted to petitioner and he fraudulently sold the same would not make petitioner liable to be tried under section 420 of IPC, which clearly provides that whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security shall be punished with imprisonment of term which may extend to seven years.
27. Leaving everything aside, to constitute offence under section 420 of IPC, prosecution is required to prove that there was dishonest intention from the very beginning, which is sine qua non to ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 25 hold the accused guilty for commission of the said offence. Reliance in this regard is placed upon the judgment rendered by Hon'ble Apex .
Court in Joseph Salvaraj A vs. State of Gujarat and others AIR 2011 SC 2258, wherein it has been held as under:-
"21. Criminal breach of trust is defined under Section 405 of the IPC and 406 thereof deals with punishment to be awarded to the accused, if found guilty for commission of the said offence i.e. with imprisonment for a term which may extend to three years, or with fine, or with both.
22. Section 420 of the IPC deals with cheating and dishonestly inducing delivery of property. Cheating has been defined under Section 415 of the IPC to constitute an offence. Under the aforesaid section, it is inbuilt that there has to be a dishonest intention from the very beginning, which is sine qua non to hold the accused guilty for commission of the said offence. Categorical and microscopic examination of the FIR certainly does not reflect any such dishonest intention ab initio on the part of the appellant".
28. In the case at hand, even if the allegations made in the complaint are accepted to be true and correct, petitioner cannot be said to have committed the offence of cheating. Offence of cheating is established when the accused whereby induced the person to deliver any property or to do or omit to do something, which he would not do if he were not so deceived. (See judgment Mahadeo Prasad vs. State of West Bengal AIR 1954 S.C.724).
29. Recently Hon'ble Apex Court in Satishchandra Rattanlal Shah(supra) held that mere inability of the person to return loan amount cannot give arise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 26 beginning of the transaction. The relevant paras No.12 to 15 of the judgment are as under:-
.
"12.Having observed the background principles applicable herein , we need to consider the individual charges against the appellant. Turning to Section 405 read with 406 of IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that the respondent no.2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognizes a difference between simple payment/ investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
13.In this context, we may note that there is nothing either in th e complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 of IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellants for the said offence. Unfortunately, the High Court also failed to correct this manifest error.
14. Now coming to the charge under Section 415 punishable under Section 420 of IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168). In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached the respondent no. 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or 8 dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred.::: Downloaded on - 24/12/2022 09:25:45 :::CIS 27
15. Moreover, this Court in a number of cases has usually cautioned against criminalizing civil disputes, such as breach of contractual obligations [refer to Gian Singh v. State of Punjab, (2012) 10 SCC 303]. The legislature intended to criminalize only those breaches which are accompanied .
by fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient transfers, under Section 415 of IPC".
30. Leaving everything aside, this Court after having perused the material available on record has no hesitation to conclude that evidentiary material on record, if accepted would not reasonably connect the petitioner with crime. Neither there is sufficient evidence to conclude that petitioner had an intention from very beginning to cheat the bank nor there is any material to suggest that petitioner unauthorizedly/illegally sold the property/machinery entrusted to it by the bank, rather as per own case of the prosecution same was hypothecated. Since ownership of the goods hypothecated in favour of the bank continues to be remained with the person, who has hypothecated such goods, no offence can be said to have been committed by the petitioner under sections 405 IPC. The expression "entrusted" used in section 405 IPC, makes it clear that ownership or beneficial interest in the ownership of property entrusted in respect of which offence alleged to have been committed must be in some person other than the accused. Similarly to constitute the offence under section 420 of IPC, cheating as defined under section 415 of IPC is required to be proved, which consists of fraudulently and dishonestly inducing a person by deceiving him to deliver any property or to do or omit to do anything which he would not do or ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 28 omit if he were not so deceived. Two essential ingredients of offence would be (i) to make a false statement so as to deceive any person .
(ii) fraudulently and dishonestly inducing the person to deliver any property or to do or omit to do something. Both the aforesaid essential ingredients are totally missing in the case at hand and as such, no case otherwise is sustainable against the petitioner under section 420 of IPC. Hence, no fruitful purpose would be served by allowing the proceedings, if any, based upon the FIR sought to be quashed in the instant proceedings, to continue.
31. To the contrary, petitioner would suffer irreparable loss, harassment and mental agony, if criminal proceedings in the present case, which manifestly appear to have been initiated on account of misconstruction and misunderstanding of provisions contained under sections 405 and 420 of IPC. Moreover, chances of conviction of petitioner are very remote and bleak on account of the facts and circumstances, as detailed hereinabove, as such, prayer made on behalf of the petitioner for quashing of FIR as well as consequent proceedings deserves to be accepted and in case proceedings based upon the FIR sought to be quashed are allowed to sustain, petitioner would be unnecessarily put to ordeals of protected trial, which ultimately may lead to his acquittal.
32. Consequently, in view of the detailed discussion made hereinabove as well as law laid down by the Hon'ble Apex Court, present petition is allowed and FIR No. 129, dated 12.04.2019, ::: Downloaded on - 24/12/2022 09:25:45 :::CIS 29 registered at police Station, Una Sadar, District Una, H.P., under Sections 406, 410, 420, 120-B and 34 of IPC as well as consequent .
proceedings, if any, pending before the competent court of law are quashed and set-aside Accordingly, the present petition is disposed of, so also pending applications, if any.
13th June, 2022 (Sandeep Sharma),
(shankar) Judge
r to
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