Calcutta High Court
Anz Grindlays Bank P.I.C. And Anr. vs Shipping And Clearing (Agents) Private ... on 15 July, 1991
Equivalent citations: 1992CRILJ77
ORDER J.N. Hore, J.
1. This is an application under Article 227 of the Constitution of India and Sections 401 and 482 of the Criminal Procedure Code for quashing the criminal proceeding being Case No. C11 of 1991 in the 9th Court of the learned Judicial Magistrate, Alipore Under Sections 120B, 409, 420, 465 and 500 of the Indian Penal Code.
2. Petitioner No. 1 ANZ Grindlays Bank PIC having a branch office at 10, Sansad Marg, New Delhi represented by petitioner No. 2 S. C. Bhargava, formerly Assistant Manager and now Manager, Area Administration, Northern India are accused Nos. 4 and 5 respectively. On 3-1-91 the complainant-opposite party Shipping and Clearing (Agents) Pvt. Limited (hereinafter referred to as S.C.A.L.) filed a petition of complaint in the Court of the Sub-Divisional Judicial Magistrate, Alipore, South 24-Parganas against the petitioners and some other persons alleging commission of offences u/Sections 120B, 409, 410, 465 and 500 of the Indian Penal Code.
3. The allegations in the petition of complaint may briefly be stated thus : Complainant S.C.A.L. has a Branch Office at New Delhi situated at B-27 Sagar Apartments, 6 Tilak Marg. Accused Nos. 1 and 2 are Directors of accused No. 3 which is an existing company carrying on business in transportation, shifting, clearing and air-Cargo operations. By virtue of an agreement accused Nos. 1 and 2 as Directors of accused No. 3 took over the charge of business of the S.C.A.L.'s Office at New Delhi with effect from 1st April, 1986 for a term of 3 years. S. C. A. L. maintained current account No. O/C BM-8174900 with the accused No. 4 A.N.Z. Grindlays Bank at its Branch at 10, Sansad Marg, New Delhi and accused No. 5 was the Assistant Manager of the Bank at the relevant time. By virtue of the agreement between the accused No. 3 and the complainant accused Nos. 1 and 2 being Directors of accused No. 3 had been operating the said account of the complainant. The proposal for renewal of the agreement was rejected by the complainant but a grace period of 8 months was allowed to settle the outstanding matters ending on 30th June, 1989. Accused No. 3 also maintained an account with the accused No. 4 Bank operating through accused Nos. 1 and 2. Accused Nos. 1 and 2 were asked to draw upto-date accounts and to close all bank accounts as on 30-6-89. But accused Nos. 1 and 2 and 6 with mala fide intention failed to close the said account with the accused No. 4 Bank. The Managing Director of the complainant company came to learn on 11th November, 1989, that accused No. 1 collected a cheque from a customer of the complainant and arranged to syphon the proceeds to the credit of accused No. 3 using the service of accused No. 4 Bank. Thereafter the complainant sent a letter and mandate to the accused No. 4 to close the complainant's account which was received by accused No. 4 on 15,-11-89. But the accused No. 4 Bank transferred a sum of Rs. 52,572.30 on 15-11-89 from the complainant's account to the account of accused No. 3 without having any authority to do so and failing to abide by the instructions of the complainant. The unauthorised transaction by accused No. 4 was further aggravated by transferring a sum of Rs. 2,000/- on 17-11-89 from the complainant's account to the account of accused No. 3. These transactions were made with the mala fide intention to cheat the complainant by committing breach of trust by the accused persons including the accused No. 4 Bank. The complainant sent lawyer's notice to the accused No. 4 calling upon it to make payment of the cumulative sum of Rs. 55,277.65 which was illegally transferred to the accused No. 3's account making a wrongful gain for the said accused and causing a wrongful loss to the complainant on 15-11-89 and 17-11-89 ignoring the instructions of the complainant. Accused No. 4 sent a reply on 18-12-89 denying negligence and liability on the part of the Bank. The accused persons have thus committed offences punishable u/Sections 120B, 409, 420, 465 and 500, Indian Penal Code.
4. On perusal of the complaint the learned Sub-Divisional Judicial Magistrate, Alipore, South 24-Parganas took cognizance by an order dated 3-1-91 and transferred the case to the 9th Court of the learned Judicial Magistrate, Alipore and the learned Magistrate by order dated 14-1-91 issued process against the petitioners and others Under Section 120B, 409, 420, 465 and 500 of the Indian Penal Code.
5. Mr. Chowdhury, learned Advocate for the petitioners has first contended that the learned Sub-Divisional Judicial Magistrate, Alipore, 24-Parganas (South) had no jurisdiction to take cognizance and the learned Judicial Magistrate, 9th Court, Alipore, South 24-Parganas had no jurisdiction to issue process against the petitioners inasmuch as the petition of complaint does not disclose the commission of any offence within the territorial jurisdiction of the aforesaid courts. The second contention of Mr. Chowdhury is that the petition of complaint filed by the complainant-opposite party does not disclose commission of any offence by the petitioners and that the dispute between the parties, if any, is purely of civil nature. The last contention of Mr. Chowdhury is that the continuation of the impugned proceeding would be an abuse of the process of the court and for ends of justice it should be quashed. Mr. Dey, learned Advocate for the complainant-opposite party has contended, on the other hand, that the courts below had jurisdiction to entertain the complaint and issue process against the petitioners. It has further been contended that the petition of complaint discloses the commission of the offences alleged and the impugned proceeding should not be quashed at this stage.
6. The first contention of Mr. Chowdhury with regard to jurisdiction appears to be correct. Section 177 of the Criminal Procedure Code, 1973 provides that ordinarily every offence would be tried by a court within the local limits of whose jurisdiction it was committed. The word 'ordinarily' must be taken to mean 'except in cases provided hereinafter'. Therefore, the rule Under Section 177 shall have to be read subject to any special provisions of law which may modify it such as Sections 178, 179, 180, 181, 182, 183, 184, 185, 186 and 188. The provisions of Sections 219, 220, 221 and 223 also provide exception to Sections 177.
7. The offence of criminal misappropriation or breach of trust may be enquired into or tried by the Court within whose jurisdiction any of the following five facts took place, namely, (i) Any part of the property forming the subject matter of the offence was received by the accused, or
(ii) was retained by him; or
(iii) was required to be returned by him; or
(iv) was required to be accounted for by him; or
(v) the offence was committed. The offence of cheating may be tried either at the place where the cheating was committed or at the place where the loss ensued to the complainant. In Purusholtamdas Dalmia. v. State of West Bengal . The Supreme Court has held that the court having jurisdiction to try the offence of conspiracy has also jurisdiction to try an offence constituted by the overt acts which are committed in pursuance of the conspiracy beyond its jurisdiction overruling the Full Bench Decision of this Court in Jiban Banerjee's case, (FB). In the instant case, the complainant-company's Branch office which had an account with the petitioner Bank is situated in Delhi. The petitioner Bank is also situated at Delhi and the alleged breach of trust etc. also took place at Delhi. Accused No. 3 company which was authorised to carry on the business of the complainant-company is also at New Delhi. Accused Nos. 1 and 2 who are Directors of accused No. 3 also operated the account and withdrew the amount by encashment of cheque and credited to the account of accused No. 3 at New Delhi. The amount was received and retained at New Delhi. The Bank was also accountable to the complainant company at 143 First Floor Janpat Hotel, New Delhi (vide Annexure 'D'). There is no whisper in the petition of complaint that any part of the conspiracy took place within 24-Parganas South. Three addresses of accused Nos. 1 and 2 each have been given in the petition of complaint one of which is within 23 Parganas South. But there is no allegation whatsoever that at the material time accused Nos. 1 and 2 were residing within the territorial limits of 24-Parganas South or any act of conspiracy or any other act constituting any of the other alleged offences was committed anywhere within the jurisdiction of 24-Parganas South. The petition of complaint does not prima facie show that the lower courts had jurisdiction to take cognizance and issue process.
8. The next point for consideration is whether the complaint and the initial deposition prima facie disclose commission of any of the offence alleged. There is nothing in the petition of complaint and the initial deposition which may even remotely suggest commission of the offences Under Sections 500, IPC and 465, IPC. There is also no question of criminal breach of trust by the Bank punishable Under Section 409, IPC. It is well-settled that the relationship between a banker and the customer qua money deposited in bank is that of debtor and creditor. "The relation of banker and customer", as Sir John Paget aptly remarks, "is primarily that of debtor and creditor, the respective positions being determined by the existing state of the account. Instead of the money being set apart in a safe room, it is replaced by a debt due from the banker. The money deposited with him becomes his property and is absolutely at his disposal and, save as regards the following of trust funds into his hands, the receipt of money by a banker from or on account of his customer constitutes him merely the debtor of the customer with the "superadded" obligation to honour his customer's cheques drawn upon his balance, in so far as the same is sufficient and available."
9. In the case of Attorney-General of Canada, AIR 1947 Privy Council 44, the Privy Council has similarly held that the receipt of deposits and the repayment of the sums deposited to the depositor or their successors-in-title is an essential part of the business of banking. The relation between banker and the customer who pays money into the bank is the ordinary relation of a debtor and creditor with a superadded obligation arising out of the custom of the bankers to honour the customer's drafts. No question of possession of or property in the deposit arises. The obligation is mutuum not commodatum. Once the deposit is made there remains only a debt due from the banker to the customer.
10. Money deposited with a bank is also not trust money which the trustee must preserve and not use; on the contrary it is lent for use and the bank is not a trustee but a debtor to the depositor. The difference between property and possession of deposits does not come in question; the only obligation under which a bank lies is to repay a like sum in the like currency. The same principle was enunciated by the Supreme Court in the case of Shanti Prasad Jain, in the following words:
Now the law is well-settled that when moneys are deposited in a Bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not trustee and beneficiary. The banker is entitled to use the moneys without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed upon between him and the customer". The Supreme Court, however, qualified that general statement with the remark that "there might be special arrangement under which a banker might be constituted a trustee, but apart from such an arrangement, his position qua banker is that of a debtor and not a trustee". The same principle of law was reiterated by the Supreme Court in the case of Ram Ratan Gupta, . It has, however, been held that though ordinarily a deposit of an amount in the current account of a Bank creates a debt it does not necessarily involve a contract of loan. The question whether a deposit amounts to a loan depends upon the terms of the contract under which the deposit is made. In Velji Lakhansey and Company v. Dr. Banaji, (1955) 25 Comp Cas 395, the Bombay High Court has thrown further light on the relation between banker and customer by holding that the relation between a banker and its customer is that of a debtor and creditor and any amount due by the banker to the customer in that relationship cannot be claimed by the customer from the bank as a preferential creditor if the bank is wound up. But a customer may give certain specific direction to the bank and constitute the bank his agent. If the bank acts as an agent and not as a debtor, then the agency brings about a fiduciary relationship which lasts until the agency is terminated. Therefore, if the customer were to give directions to the bank that a certain amount must be paid to a certain person, then till that amount is paid pursuant to the directions of the customer, the agency would continue and the bank would hold the amount not as a debtor of the customer but in the capacity of a trustee and the amount would be impressed with a trust.
11. From the above it is clear, therefore, that normally the relation between a bank and the customer regarding the money deposited is that of a debtor and a creditor but under special arrangement relationship of trust may be created.
12. Mr. Dey has, however, relied upon two recent decisions in Selangor United Rubber Estates Limited v. Gradock (1968) 2 All ER 1073 and Karak Rubber Co. Limited v. Burden (1971) 3 All ER 1118 which indicate that a banker could be a constructive trustee of a company customer's moneys in account and be liable if he breaches that trust in paying from the account even against a valid mandate. In both the cases, the decisions turned upon the bank's knowledge that a dishonest and fraudulent design was being committed with the use of moneys in the accounts of the companies concerned. In the Selangor Case the company's moneys were used to acquire stock of the company contrary to Section 54 of the Companies Act, 1948; in the second, Harclays paid a cheque drawn by Directors of the Company misusing their authority. Sir John Paget has expressed wonder if the standard of care expected in both cases was unreasonably high (Paget's Law of Banking, 9th Edition, page 85). The correctness of the principle laid down in the two decisions has been doubted in the later decisions. In Carl Zeiss Stifturg v. Herbert Smith & Co. (1969) 2 Ch 276, Sachs and Edmund Davies, LJJ have somewhat adversely commented upon the said view. The former had said that negligent, if innocent, failure to make inquiry would not be sufficient to attract constructive trusteeship; Edmund Davies, LJ said that the concept of 'want of probity' appears to provide a useful touch-stone in considering circumstances said to give rise to constructive trust. He said further : "It is true that not every situation where probity is lacking gives rise to a constructive trust. Nevertheless, the authorities appear to show that nothing short of it will do. Not even gross negligence will suffice". Goff, LJ in Belmont Finance Ltd. v. Will Furniture Ltd., (1979) 1 All ER 118 at 135 disapproved the dictum of Ungoed Thomas, J in the Selangor case. He pointed out that Sachs and Edmond Davis, LJJ threw great doubt on the view of Ungoed Thomas, J. in the Selangor case and of Brightman, J. in Karak Rubber Company Ltd. case that constructive notice in what has conveniently been described as Section 199 of Law of Property Act, 1925 sense was sufficient to carry liability as a constructive trustee. (Paget's Law of Banking, 9th Edn. p. 227). In view of these expressions of the law, it is doubtful if the Selangor and Karak decisions were right. Mr. Dey could not cite any subsequent decision of the Supreme Court revising its earlier view in the light of the decision in Selangor case and Karak Rubber Company Ltd. case. Moreover, in India there is statutory obligation of Bank to honour cheques. This duty is imposed upon banks in India by Section 31 of the Negotiable Instruments Act, 1881 which runs as follows:
The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque, must pay the cheque when duly required so to do and in default of such payment, must compensate the drawer for any loss or damage caused by such default". It may be mentioned here that there is no specific averment to show prima facie that there were circumstances calling for vigilance and enquiry on the part of the petitioner--Bank. It is essentially a dispute between the complainant --company and the accused No. 3 company and the accused Nos. 1 and 2 who are Directors of the accused No. 3 company and there is no question of knowledge of fraud on the part of the Bank--petitioner. There was neither withdrawal of authority nor any specific instruction. The petition of complaint does not prima facie make out a case Under Section 409, Indian Penal Code.
13. Regarding the alleged offences punishable Under Section 120B and Section 420, Indian Penal Code, there are also no prima facie materials in support of the same. In the initial deposition there is no whisper about any criminal conspiracy and cheating. The only allegations in the petition of complaint are that in spite of the mandate of the complainant--company to close the account, the petitioner--Bank honoured the cheque. The mandate to close the account with the resolution of the Board of Directors was sent by letter dated 13-11-89 (Annexure 'D') which was admittedly received by the Bank on 15-11-89. The unused cheques were not returned till November 21, 1989. Annexure 'E' to the petition shows that the petitioner--Bank sent a letter to the complainant to send unused cheques for effecting closure of the account. The cheque for Rs. 52,572.30 was paid on 15-11-89 in the normal course as the Bank did not receive any instruction for countermanding its payment. According to the custom of the petitioner's Bank before closure of accounts unused cheques must be forwarded to the bank for destruction. But the unused cheques were returned with the forwarding letter dated November 20, 1989 (Annexure 'F') long after the disputed payment of the cheque. Even if it be assumed that the Bank after receipt of the mandate for closure of the account could not honour the cheque though there was no specific instructions for countermanding of the cheque and that return of the unused cheques is not essential for closure of accounts, the Bank may at best be fastened with the civil liability of payment of the said amount by way of damages. The allegations in the petition of complaint do not constitute the ingredients of the offence of cheating. The payment of money by honouring the cheque even after receipt of the instructions for closing the account does not by itself point to any conspiracy between the Bank and the accused Nos. 1 to 3 and accused No. 6. Further continuation of the impugned proceeding against the petitioners would, therefore, be an abuse of the process of the court and for ends of justice it is liable to be quashed.
14. For the reasons aforesaid, this revisional application succeeds. The impugned proceeding against the petitioners is quashed.