Allahabad High Court
Milan Anandan Son Of Sri A.K. Anandan, ... vs States Of U.P., Through The Secretary, ... on 29 September, 2005
Author: K.N. Ojha
Bench: K.N. Ojha
JUDGMENT S.S. Kulshrestha, J.
1. Both the petitions are taken together as they enjoin the identical questions of law and facts and in both the cases common FIR registered at case crime No. 606/05 under Sections 409/420 IPC at P.S. Behjoi, Moradabad has been challenged However, there is little difference that in the later writ petition all the four petitioners were arrested by the police and they were subsequently released on bail pursuant to the orders passed by this Court dated 30.5.2005. In the first petition the prayer is also for the protection of the liberty of the petitioner by way of staying his arrest.
2. These petitions under Article 226 of the Constitution of India have been brought for quashing the written report registered at case crime No. 606/05 under Sections 409/420 IPC at P.S. Behjoi, Moradabad. It is said that the entire case has been fabricated against the petitioners so as to harass them. Even if the allegations made in the written report are accepted to be true on its face value no offence can be said to have been made by the petitioners. The petitioners are the employees of I.T.C. Ltd., a company having its registered office at 37, J.L. Nehru Road. Kolkata - 16. The company is, engaged in the procurement of wheat and other food grains and also manufacturing of food articles etc. State of U.P. formulated a 'bulk purchase scheme' in terms of which a bulk purchaser of the food grains was granted liberty to apply for and be granted a centralized licence for the purchase of food grains at various Mandis in the State with the control of operations; including filing of returns payment of Mandi fees etc., being vested in one particular Mandi Samiti In the State of U.P. The petitioners were also granted licence as a bulk purchaser in the year 2002 under Section 9 of the U.P. Krishi Utpadan Mandi Adhiniyam, 1963 (hereinafter called as U.P. Act 1963). Such licence was extended time to time and it is still subsisting and the petitioners are carrying on its activities in the State of U.P. in the areas allotted to them. On 7.5.2005 a notice was given by the respondent No 3 calling upon the explanation of the company with regard to the purchase of wheat at price below the minimum supporting price. This notice was replied by the company on 12.5.2005 but without taking any decision, the impugned report was lodged. It is next contended that the company or its employees have not violated the conditions of the licence or the government order. There was no inhibition under the law for making or affecting the quality deduction from the minimum-supporting price. Further it was also permissible under Rule 76(6) of the Niyamawali framed by State Government under the U.P. Act 1963, There are also no such allegations that the petitioners induced the farmers/ producers or any one to part with the food grains at a price lower than the minimum-supporting price. The petitioners have also not changed the purchase center and the same has been mis-described in the impugned report.
3. These petitions were resisted by the Krishi Utpadan Mandi Samiti, which is herein the respondent No. 3. In the counter affidavit it has categorically been asserted that under the bulk purchase scheme' for food grains and other commodities, purchase centers were allotted to the licence holders by the local Mandi Samiti, Two firms namely M/s Kargil India Ltd. and M/s. I.T.C. Ltd. were allotted purchase centers in Mandi Samiti Behjoi, Moradabad with the clear terms and conditions that (i) the purchase would not be below the minimum procurement price in any case, (ii) the purchase has to be directly from the farmers and (iii) they were required to set up their godowns at a particular place from where they can make purchases. For the petitioners company the godown belonging to one Sri Madan Lal Gupta, Manager of "the Committee of Management, Varshney Inter College was notified and not the college premises. But they have changed the site of the purchase center. Not only this company has illegally procured wheat under the bulk purchase scheme much below the minimum-supporting price fixed by the State Government despite several oral warnings. A notice was also given to them for illegally making deduction from the minimum procurement price. In the reply given by the company on 12.5.2005 this itself is clear that they have made purchase of wheat at lesser amount than the minimum procurement price though described its reasons. By making the payment of price much below the 'minimum procurement price' the company and its employees have duped the State revenue such as trade tax, Mandi Samiti tax and also growers and have also committed criminal breach of trust as under the bulk purchase scheme they have been allotted specific area for making the purchase of wheat but they started taking undue advantage of such allocation,
4. By way of filing rejoinder affidavit the allegations made in the counter affidavit were controverted by the petitioners and it has specifically been pleaded that the company had not committed any illegality in making deduction from the minimum supporting price upon finding that the commodity offered for said did not meet the requisite standard. Such deduction is also permissible under the rules. Such quality deductions do not militate against the provisions of the Act and consequently it cannot be said that the petitioners have either contravened a provision of the Act or Rules framed there under. The identical problems were also faced by the company in the year 2004 and the explanation for making deduction was accepted by the State Government as would be ascertainable from the letter dated 10.9.2004 (Annexure RA-1). Growers/producers also . forced the company to buy the commodity even though it did not match the quality parameters. But to avoid unpleasant situation they accepted that substandard quality of wheat by making quality deductions and in that way they had accommodated them. However, where the quality of wheat was found much higher to the quality parameters they were given purchase price much higher to the minimum-supporting price. Even the farmers/producers have accepted the price offered to them after making necessary deductions. They have not raised any objection It was, therefore,, a consensual transaction. The purchase was not made by I.T.C. in violation of the terms of the licence. Further the boundaries of the purchase center have also been specified so as to show that it was not changed.
5. Before examining the position as to whether the allegations attributed against the petitioners make out any offence, Sri Shanti Bhushan learned Senior Counsel for the petitioners urged that powers contained on the High Court under Article 226 of the Constitution is to advance justice and not to thwart it. The very purpose of such constitutional power is that no man should be subjected to injustice by violating the law. The look out of the High Court is, therefore, not merely to pick out any error of law through an academic angle but to see whether the allegations do make out any offence so complained Whether injustice-has resulted in the matter of certain officials of I.T.D.C. who were arrested, on account of erroneous interpretation of law. In that regard observations made by the Apex Court in the case of State of Haryana v. Ch. Bhajan Lal, AIR 1992 SC 604 have been referred which read as under:
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 F.I.R. 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 156(2) of the Code.
3) Where the uncontroverted allegations made in the FIR or complaint and the evideno & collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
4) Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
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.
6. Factual matrices, therefore, would be relevant in the matter of assessment of the situation as to whether the petitioners are criminally liable for their act or omission. The report was lodged at case crime No. 606/05 under Sections 409/420 IPC at P.S. Behjoi, Moradabad against the petitioners specifying therein that I.T.C. Ltd. Company was granted licence for making purchase of wheat at the minimum supporting price of Rs. 640/- per Quintal at the godown of Sri Madan Lal Gupta at Behjoi. But they created separate purchase center at Varshney Inter College, Behjoi campus without the permission of the appropriate authority Further the purchase was also made from the farmers much below the minimum-supporting price by deceiving them. They have also duped the State Exchequer by making the payment of trade tax and Mandi tax by lowering the purchase price, In that way they are said to have committed the offences indicated above.
7. From the written report lodged at the police station, the principal allegation against the petitioners is that in violation of the terms of the license and the government order referred therein the purchases were made by reducing the amount. Though the petitioners have offered their explanation and have disputed the correctness of the allegation so made. The question arises for consideration is whether purchase of wheat was made in violation of the terms of the licence and would make out the offence under the Act of 1963 or also under Sections 409 and 420 IPC. It is necessary at this stage to refer the terms of licence The State Government in view of the provisions as contained under Section 9 read with Rule 70(2) and bylaws framed under U.P. Act 1963, granted bulk purchase licence in favour of M/s I.T.C Ltd. having its registered office at Gomti Nagar, Lucknow. As many as 43 purchase centers, including that of Behjoi, were allotted to them. Certain terms and conditions for the licence were also incorporated. They were also required to adhere to the conditions specified in the G.O. No. 576/12-05-2004-600(22)/2002 dated 1.4.2004. If we look to clauses 6 and 13 of the terms and conditions of the licence, it would become clear that the company was prohibited for changing the site; of the purchase center and to do any act or omission so as to deprive the producers/growers for having reasonable price On the basis of the above G.O. the minimum supporting price was fixed by the State Government.
8. Point for consideration is as to what would be the consequences whether penal or administrative if the purchases are made by the company contrary to the terms of the licence and government order dated 1.4.2004, regarding the minim-supporting price of wheat. Before coming to this point it shall be necessary to ascertain the enforceability of the terms of the licence and the G.O. dated 1.4.2004. Broadly, the points would arise' (i) the legal status and binding nature of supporting price so settled by the G.O. dated 1.4.2004, (ii) the power of the State Government to fix minimum wheat purchase price under the provisions (Section 26) of the U.P. Act 1963 and (iii) in case such power exists and is exercised whether the State order fixing the price becomes repugnant to Rule 76 framed under that Act We have gone through the G.O. dated 1.4.2004, which communicates the fixation of minimum-supporting price. In view of the arrangement made under Section 26-M of the Act, the State Government have been entrusted- with various functions under the Act conceived in the interest of growers and purchasers Such power is specifically traced out under Section 26-M of the Act. Fixation of price, is though not specifically laid down, however, Section 26-M of the Act does not exhaust the field of operation of the powers. The price fixation will come under the generality of the powers reserved under Section 26-M. The impact of the word "direction" used in Section 26-M is wide and expensive enough to cover price fixation. It is a sort of regulatory powers. It has got the statutory force as was also held in the case of (i) Raja Ram Maurya v. R.K.U. Mandi Parishad, 1998(1)4 UPLBEC 690, (ii) Vijay Singh and Ors. v. State of U.P. and Ors., (2004) 3 UPLBEC 2778. It was also held in the case of Jiyajirao Cotton Mills v. M.P. Electricity Board, (1989) Supp. 2 SCC 52 that the expression "regulate" has no precise or fixed connotation and that it has different shades of meaning. There is no doubt that it is a word of broad import. Its width and contents may vary according to the contextual setting in which the expression occurs. The scheme and thrust of the provision, is of the statutes, the objective of the legislation, the legislation's intent gathered from the legislative history and the provisions of the Act can be taken into account while appreciating correct meaning of the expression .,, "directions" in the statute. Under such powers the State Government have fixed the minimum-supporting price and that was also one of the conditions of the licence. Further there was specific condition for not. going below to the minimum-supporting price. Here the allegations are that the petitioners have changed the collection site so notified and made the purchases of wheat from certain farmers much below to the minimum support price and this would tantamount to the violation of the conditions of licence issued under Rule 26-M of the Rules and the Government Order dated 1.4.2004. In this regard Section 37 of the Act may be referred as under :
37. Penalty. - (1) Any person who contravenes any of the provisions of Section 9 or Section 10 or the rules or bye laws made thereunder shall, on conviction, be punished-
(a) for the first offence, with fine which may extend to five hundred rupees;
(b) for a second and any subsequent offence of the same nature with. imprisonment which may extend to ninety days or with fine which may extend to one thousand rupees or with both and in case of continuing contravention, with a further fine up to rupees one hundred for every day subsequent to the date of second conviction or any subsequent conviction for which contravention has continued:
Provided that in the absence of special and adequate reasons to the contrary mentioned in the judgment of the court the fine for the first Offence shall not be less than two hundred and fifty rupees and for the second or subsequent offence, shall not be less than five hundred rupees.
(2) Any person who contravenes any of the provisions of this Act or the rules or bye-laws made thereunder, except the provisions of Section 9 and 10 and the rules and bye-laws made, shall be punishable with fine which may extend to two hundred rupees and in the case of continuing contravention with a further fine of twenty rupees for every day subsequent to the date of the first conviction for which the contravention has continued.
(3) Whenever any person is convicted of an offence punishable under this Act, the Magistrate shall in addition to any fine which may be imposed, recover summarily and pay to the Market Committee, the amount of fee or any other amount due from him under this Act or the rules or bye-laws made thereunder and may, in his discretion also recover summarily and pay to the Market Committee costs of the prosecution.
The breach or infringement of the conditions of licence and Government Order would make out prima facie offences under Section 37 of the Act.
9. Now the question is to be determined as to how far by making the purchase of wheat at the price below the minimum-supporting price, the petitioners have committed criminal breach of trust. Petitioners were given the licence for making the bulk purchase from the growers. The fact remains that this scheme for sale and purchase was formulated for the benefit of both the farmers and purchasers at one center with the minimum fixed price. For that purpose licence was given to the company, A short of public trust was evolved on the purchasers so as to prevent unfair dealing with the farmers. But this Doctrine of Public Trust' cannot be invoked in fixing the criminal liability and the whole matter will have to be decided on the principle of criminal jurisprudence, one which is that the criminal liability has to be strictly construed and the offence can be said to have been committed only when the ingredients of that offence as defined in the statute are found to have been satisfied. The matter may be examined in the context of the allegations made in the written report that the licence was given for making bulk purchase from' the center at Behjoi. This allocation of area for the purchase of wheat is done for smooth, proper and convenient business transaction between the farmers and purchasers. In this way, neither of 'trust', as ordinarily understood or defined under the trust Act, was created in favour of the petitioners nor did they become trustees in that sense In the sense no trust enforceable under the law, has been created. In order to ascertain criminal liability, the definition of the offence of "criminal breach of trust as defined under Section 405 IPC, minus explanation, is asunder:
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 willfully suffers any other person so to do, commits 'criminal breach of trust'.
From the plain reading of this section it is clear that the trust contemplated by section 405 IPC would arise only when there is entrustment of property or dominion over property. There has, therefore, to be a property belonging to some one which is entrusted to the person accused of offence under Section 405 IPC The entrustment of property creates a trust which is only an obligation annexed to the ownership of property and arises out of confidence what has been laid down by the Apex Court in the case of State of Gujarat v. Jaswantlal Nathalal . In the cases of Smt. Rashmi Kumar v. Mahesh Kumar Bhada, and Anwar Chand Sab Nanadikar v. State of Karnataka, AIR 2004 SC 986, the essential ingredients for establishing the offence of criminal breach of trust has been spelled as follows:
1) The accused, a public servant, or banker or agent was entrusted with property of which he is duty bound to account for; and
2) The accused has committed criminal breach of trust what amounts to criminal breach of trust is provided in Section 405 IPC. Section 409 IPC is in essence criminal breach of trust by a category of persons. The ingredients of , the offence of criminal breach of trust are (1) entrusting any person with property, or with any Dominion over property, (2) the person entrusted (a) dishonestly misappropriating or converting to his own use that property, or (b) dishonestly using, disposing of that property or willfully suffering any other person so as to do in violation ii) of any direction of law prescribing the mode in which trust is to be discharged, or (ii) of any legal contract made touching the discharge of trust.
10. Emphasis has been given by the learned counsel for the petitioners that even remotely the offence under section 409 IPC, on the facts of the case, cannot be construed. Reliance has been placed on behalf of the petitioners on Common Cause, a Registered Society v. Union of India, , wherein the allotment of all the 15 petrol outlets, allotted by Captain Satish Sharma, who was, at that time, Minister of State for Petroleum and Natural Gas in Central Government to various persons out of his discretionary quota, were cancelled, the question came for consideration as to whether such act would amount to criminal breach of trust, the Apex Court held that:
A trust contemplated by Section 405 would arise only when there is an entrustment of property or dominion over property. There has, therefore, to be a property belonging to someone which is entrusted to the person accused of the offence under Section 405. The entrustment of property creates a trust which is only an obligation annexed to the ownership of the property and arises out of a confidence reposed and accepted by the owner. This is what has been laid in State of Gujarat v. Jaswantlal Nathalal, , In Rashmi Kumar v. Mahesh Kumar Bhada , the essential ingredients for establishing the offence of criminal breach of trust, as defined in Section 405, have been spelt out as follows:
"(i) entrusting any person with property or with any dominion over property;
(ii) the person entrusted dishonestly misappropriating or converting to his own use that property; or dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract made touching the discharge of such trust."
In this case, the earlier decision in Pratibha Rani v. Suraj Kumar was affirmed. The case essentially related to the entrustment of 'Stridhan,' but nevertheless, it is important, in the sense that the ingredients of the offence are set out and discussed. In Chellor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore-Cochin, , it was laid down that every breach of trust in the absence of mens rea or dishonest intention cannot legally justify a criminal prosecution.
The expressions "entrusted with property" and "with any dominion over property" used in Section 405 came to be considered by this Court in C.B.I. v. Duncans Agro Industries Ltd., Calcutta and the view earlier expressed was reiterated. It was held that the expression "entrusted" has wide and, different implication in different contexts and the expression "trust" has been used to denote various kinds of relationships like trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee.
Mr. K. Parasaran contended that "power to allot petrol pumps," and that too under discretionary quota, cannot be treated as "property" within the meaning of Section 405 of the Indian Penal Code. It is pointed out by him that the Minister merely makes an order of allotment. Subsequently, the .Indian Oil Corporation or the Bharat Petroleum Corporation enters into a dealership agreement with that person and the business is regulated by the agreement between the allottee and the Corporation (Indian Oil Corporation or Bharat Petroleum Corporation). It is also pointed out that in pursuance of the agreement, the allottee invests money, constructs the building and sets up the petrol pump. Mere exercise of "power to allot," it is rightly contended, cannot, therefore, be treated as "property," within the meaning of Section 405, capable of being misutilised or misappropriated.
It is argued that there is no entrustment of property and so there could be no dishonest misappropriation or conversion of the property or dishonest use or disposal in violation of the direction of law and contract. Reliance is also placed in the case of Chelloor Mankkkal Narayan, Ittirvi Nambudiri v. State of Travancore-Cochin AIR 1963 S.C. 478. Identical question also came for consideration in the case of State of Gujarat v. Jaswantlal Nathalal, AIR 1968 SC 700. In that case the contractor was allotted 10 tons cement for the construction work, The contractor, out of the released 100 bags of cement sent only 60 bags of cement at the site and remaining 40 bags were sent to godown. The contractor paid for the amount of cement. Point arose whether for such transaction of sale the offence under Sections 405 and 409 could be construed. It was held that:
The term "entrusted" found in Section 405 I.P.C. governs not only the word "with the property" immediately following it but also the words "or with any dominion over the property" occurring thereafter-see Velji Raghavji Patel v. State of Maharashtra . 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 v. State of Bombay 1956 SCR 483 at pp. 498 500 : AIR 1956 SC 575 at pp. 582 583. The expression 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. 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.
11. The basic requirement to bring the accusation of criminal breach of trust is not found even if the allegations made in the written report are accepted to be true on its face value. The right to make the purchase from the center was made. There is no entrustment of the property. It shall not be out of point to mention that the word 'property' used in Section 409 IPC, means the property which can be entrusted or over which dominion may be exercised. The Apex Court in the case of R.K. Dimly v. Delhi Administration, held that "property" used in Section 405 IPC has to be interpreted in wider sense as it is not restricted by any qualification under Section 405 IPC. It was held that where any offence defined in that section could be said to have been committed would depend not on the interpretation of the word "property" but on the fact whether the particular kind of property could be subject of the act covered by 'this section. That is to say, the word "property" would cover that kind of property with respect to which the offence contemplated in that section could be determined. As has already been mentioned that the company was issued licence for purchase of wheat at the center allotted to it. There was no entrustment of property to the company. There only the sale and purchase transactions were to take place. The center so allotted to the petitioners would not be the property for which the offence is said to have been made out. Further the breach of the terms of the licence would also not fall within the expression property.
12. Sri B.D. Madhyan, learned Senior Counsel for the Mandi Samiti placing reliance in the cases of (i) Ram Narayan Poply v. Central Bureau of Investigation, , (ii) Shivanarayan Laxminarayan Joshi and Ors. v. State of Maharashtra and Ors., AIR 1986 SC 439, (iii) R.K. Dalmia v. Delhi Administration, , (iv) Jaswantrai Manilal Akhaney v. State of Bombay, 1956 SC 575, (v) Central Bureau of Investigation v. Duncans Agro Industries Ltd. Calcutta, and (vi) Som Nath Puri v. State of Rajasthan, urged that failure to make the purchase of the wheat on the minimum support price will show the culpable intention of the petitioners right from the beginning and would not only make out the offences under " Section 409 IPC but also under Section 420 IPC. It is also contended that entrustment may relate to tangible and intangible property. As the licence was given to the petitioners' company and the government, allotted centers for bulk purchase on minimum procurement price certain facilities were also given to the company so as to make(sic) wholesale purchase. This would amount to entrustment of the property and to deal with those purchased properties. Petitioners have made violation of the terms and conditions of that licence and such act or omission on the part of the petitioners would fall within the purview of Sections 405 and 409 IPC. It shall not be off the point to mention that in the case of Ram Narayan Poply (supra) the Apex Court has held that there must be entrustment of the property and had there been entrustment of the property by the owner or by others lawful authority and which the offender holds subject to some duty or obligation to apply it according to the trust. The majority view given in case of Ram Narayan Poply (supra) while defining the provisions of Section 405 IPC may be quoted hereinunder:
Section 409 deals with criminal breach of trust by public servant or by banker, merchant or agent. Section 405 defines criminal breach of trust. The offence like the offence of criminal misappropriation is characterized by an actual fraudulent appropriation of property, there is not originally wrongful taking or moving as in the case of theft but the offence consists in wrongful appropriation of property, consequent upon a possession which is lawful. The offence is distinguishable from criminal misappropriation because subject of it is not the property which by some casual act or otherwise, but without criminal means, comes into the offender's possession : but the property which is entrusted to the offender by the owner or by others lawful authority and which the offender holds subject to some duty or obligation to apply it according to the trust.
The Apex Court in the case of Central Bureau of Investigation v. Duncans Agro Industries Ltd., Calcutta (supra) has also held that the expression "entrustment" appearing in Section 405 IPC must necessarily mean 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. Here this case as has already been referred above, the petitioners are the purchasers of the wheat. The moment they purchased the wheat that would not be construed to be the property of the seller/farmer. This position is also clear from the observations made by the Apex Court in the said case as under:
In the instant case, a serious dispute has been raised by the learned counsel appearing for the respective party as to whether on the face of the allegations, an offence of criminal breach of trust is constituted or not. In our view, the expression 'entrusted with property' or 'with any dominion over property' has been used in a wide sense in Section 405, I.P.O. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract. The expression 'entrusted' appearing in Section 405, I.P.C. is not necessarily a term of law. It has wide and different implications in different contexts. It is, -however, necessary that the ownership or beneficial interest in the ownership of the property entrusted in respect of which offence is alleged to have been committed must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. The expression 'trust' in Section 405, I.P.C. is a comprehensive expression and has been used to denote various kinds of relationship like the relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee. When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect 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 but the same is kept in trust by the pledgee. In the instant case, a floating charge was made on the goods by way of security to cover up credit facility. In our view, in such case for disposing of the goods covering the security against credit facility the offence of criminal breach of trust is not committed. In the facts and circumstances of the case, it, however, appears to us that the respondents moved the High Court only in 1991 although the first FIR was filed in 1987 and the second was filed in 1989. The CBI, therefore, got sufficient time to complete the investigation for the purpose of framing the charge.
So is also the position of law laid down in the cases of Shivanarayan Laxminarayan Joshi and Ors. v. State of Maharashtra and Ors., AIR 1986 SC 439, R.K. Dalmia v. Delhi Administration, AIR 1962 SC 1821 Jaswantrai Manilal Akhaney v. State of Bombay, AIR 1956 SC 575 wherein it was also made clear that Section 405 IPC itself defines criminal breach of trust to mean the entrustment of the property in any of the manners. But here in this case there is no entrustment.
13. As has already been mentioned that for criminal liability under Section 409 IPC there must be initial entrustment of goods, but there should be a subsequent dishonest conversion to the use of the accused. Here the right to purchase would not be construed to be entrustment of the wheat even if the area has been allotted. There is nothing on record that under the scheme the farmers were also under obligation to sell the produce to the petitions and to none else. In the given circumstances there was also no dominion of the petitioners over the property Grant of licence to make purchase of the minimum support price there is no control over the property of farmers. Further mere existence of licence to make purchase in favour of petitioners' company is not enough to bring the charge of criminal breach of trust. It must be shown that accused dominion was the result of entrustment.
14. So far as the offence of cheating punishable under Section 420 IPC, it is argued by the learned Senior Counsel for the petitioners that the impugned report is conspicuously silent on what fraud has been committed. There is no whispering as to who was cheated whether the government or the farmer and who had made the deception and in what way. It is further urged that the court cannot find fraud unless it is distinctly pleaded. We have gone through the written report lodged at the police station. It, as regards the cheating, refers that "from six receipts received in the office it is found that some of the farmers were paid Rs. 618 or Rs. 620 in place of minimum support price of Rs. 640 fixed by the State Government. In that way the farmers were cheated." On the basis of such allegations care has been taken to find out as to whether fraud has been played by the petitioners by their conduct either by letters or words, which induced some of the farmers, to take a definite determinative stand as a response of the conduct. It is contended that some of the farmers were paid more than the minimum support price but some such farmers whose reference is given in the written report were given less amount as the wheat was substandard, mixed with foreign elements and also wet. Such reduction is permissible keeping in view the guidelines issued by the Government of India, Ministry of Consumer Affairs, Food and Public Distribution, Krishi Bhawan, New Delhi vide the letter dated 18.4.2005 for wheat and barley for Rabi Marketing Season 2005-2006 and also under Rule 76 framed under the Act. Even in the year such deduction was approved by the Government as the letter dated 10.9.2004 is indicative of the fact. More so there was constant threat from farmers to receive their wheat and in the past they assaulted the the company's officials for which the report was lodged. There is no protection or safety at the purchase center. Company has to make purchase whether standard or substandard. However a consensual formula was devised for making minimum deduction which was also acceptable to the farmers. They happily accepted lesser amount for the sub-standard wheat and signed the receipts. They were in the know of minimum support price but because of the wheat being substandard consented for settling the lower price. To avoid any untoward and ugly situation the petitioners also accepted that wheat. There was no deliberate deception with the design of securing something by taking unfair advantage of another. There was no question of deception in order to gain by another's loss.
15. Suffice is to mention that to hold a person guilty for cheating as defined under Section 415 IPC, it is necessary to show that he has fraudulent or dishonest intention at the time of making the promises with an intention to retain the property or licence. In other words, Section 405 IPC which defines cheating requires deception of any person (a) including that person to : (i) to deliver any property to any person, on(ii) to consent that any person shall retain any property or (b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he was not so deceived and which act or omission causes or is likely to cause damage or harm to that person, anybody's mind, reputation or property. In view of the aforesaid provisions, it is essential that person may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he was not so deceived. In the first class of cases, the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
16. From the impugned report and other materials there is no inkling that the farmers were dishonestly induced to sell their wheat at the lower price. To the contrary farmers agreed to dispose of their wheat on the lower price. From receipts wherein deduction was made from that minimum support price it is clear that deduction was made on the basis of qualitative difference and for that the farmers were also consented.
17. In the case of Shrisht Dhawan v. Shaw Brothers, SC 1555 : 1992 AIR SCW 1649 the Apex Court also observed that:
Fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It is a concept descriptive of human conduct. Michael Lew. likens a fraudster to Milton's sorcerer, Comus, who exulted in his ability to 'wing me into the easy-hearteo man and trap him into snares'. It has been defined as an act of trickery or deceit. In Webster fraud in equity has been defined as an act or omission to act or concealment by which one person obtains an advantage against conscience over another or which equity or public forbids as being prejudicial to another. In Black's Legal Dictionary, fraud is defined as an intentional perversion of truth for the purpose of inducing another in reliance upon it to part some valuable thing belonging to him or surrenders legal right; a false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury. In Oxford, it has been defined as criminal deception, use of false representation to gain unjust advantage; dishonest artifice or trick. According to Halsbury's Laws of England, a representation is deemed to have been false, and therefore a misrepresentation, if it was at . the material date false in substance and in fact. Section 17 of the Contract Act defines fraud as act committed by a party to a contract with intent to deceive another. From dictionary meaning or even otherwise fraud arises out of deliberate active role of representator about a fact which he knows to be untrue yet he succeeds in misleading the representee by making him believe it to be true. The representation to become fraudulent must be of fact with knowledge that it was false. In a leading English case Deny v. Peek (1889) 14 App Cas 337 what constitutes fraud was described thus:
"fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false."
But fraud in public law is not the same as fraud in private law. Nor can the ingredients which establish fraud in commercial transaction can be of assistance in determining fraud in Administrative Law. It has been aptly observed by Lord Bridge in Khawaja v. Secretary of State for Home Deptt. (1983) 1 All ER 765 that it is dangerous to introduce maxims of common law as to effect of fraud while determining fraud in relation to statutory law. Pankaj Bhargava (supra) it was observed that fraud in relation to statute must be a colourable transaction to evade the provisions of a statute. 'If a statute has been passed for some one particular purpose, a Court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope [Cries on Statute Law, 7th Edition, p. 791. Present day concept of fraud on statute has veered round abuse of-power or mala fide exercise of power. It may arise due to overstepping the limits of power or defeating the provision of statute by adopting subterfuge or the power may be exercised for extraneous or irrelevant considerations. The colour of fraud in public law or administrative law, as it is developing, is assuming different shade. It arises from a deception committed by disclosure of incorrect facts knowingly and deliberately to invoke exercise of power and procure an order from an authority or tribunal. It must result in exercise of jurisdiction which otherwise would not have been exercised. That is misrepresentation must be in relation to the conditions provided in a section on existence or non-existence of which power can be exercised. But non-disclosure of a fact not required by a statute to be disclosed may not amount to fraud. Even in commercial transactions nondisclosure of every fact does not vitiate the agreement, 'In a contract every person must look for himself and ensures that he acquires the information necessary to avoid bad bargain [Anson's Law of Contract].
18. As discussed above there is nothing on record to show, even" the FIR does not disclose that the petitioners misrepresented the farmers. They were told of the minimum support price as it is also described in those six receipts referred in FIR and bear signatures of farmers. There appears no omission or silence on the part of the petitioners. To the contrary the farmers have not raised any voice or complaint but by signing those receipts expressed their consent for deduction. Such deduction, even if could not be lawfully done, petitioners cannot be said to have cheated the farmers.
19. It is argued by the learned senior counsel for the Mandi Samiti that for not sticking to the terms of licence the petitioners have also deceived the State Government. It is settled law by catena of decisions that for establishing the offence of cheating complainant is required to show that the accused had fraudulent dishonest intention at the times of making promise or representation to the authority. Failure to keep up promise subsequently such a culpable intention might at the beginning that is at the time when the promise was made cannot be presumed. The licence granted in favour of petitioners contained necessary conditions which were required to be complied at the time of purchase of wheat. Since the petitioners could not comply it in respect of few farmers and they were given price after making marginal deduction, as the wheat was not upto the mark, their conduct clearly indicates that there was no fraudulent or dishonest intention of the petitioners. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 IRC does not arise.
20. There is no allegation indicating expressly or impliedly any intentional deception or fraudulent/dishonest intention on the part of the petitioners right from the time of taking licence. Nothing has been said as to what misrepresentations were made" and how the government or the farmers were duped and what were the roles played by the petitioners in the alleged offence.
21. The petitioners in our view could not be attributed any mens rea of cheating the government or the farmers. Reliance may be placed in the cases of (i) "C.B.I. v. Duncans Agro Industries Ltd., Calcutta- 1996 AIR SCW 3019 (ii) "Sushila Rani v. I.-T. Commr" = 2002 AIR SCW 485 (iii) "Hira Lal Hari Lal Bhagwati v. C.B.I., New Delhi"= 2003 AIR SCW 2735
22. Deception on the part of petitioners and their fraudulently inducing the villagers or the government to deliver a property to them is not ascertainable and so the respondent Mandi Samit cannot take benefit of the principle of law laid down in the cases of (i) Ram Narain Poply v. Central Bureau of Investigation, AIR 2003 SC 2748 and (ii) State of Tamil Nadu v. Them K Kural Perumal, JT. 1995 (3) SC 166.
23. It is contended by the learned counsel for the petitioners that from the written report and also other materials on record, no offence under Sections 409/420 IPC is made out. Investigation of case crime No. 606/05 under these sections would be a step in the process of harassment to the petitioners, . offending his right to liberty enshrined under Article 21. Further investigation in a matter would be against the Constitutional mandate or the scheme as provided under Sections 154-157 of the Code of Criminal Procedure. It was also held in the case of State of Bihar v. P.P. Sharma, :
The word personal liberty is of the widest amplitude covering variety of rights which goes to constitute personal liberty of a citizen. Its deprivation shall be only as per procedure prescribed in the Code and the Evidence Act conformable to the mandate of the Supreme law, the Constitution. The investigator must be alive to the mandate of Article 21 and is not empowered to trample upon the personal liberty arbitrarily, though the Code gives unfettered power to investigate into the suspected cognizable offence imputed to an accused. The gravity of the evil to the community resuiting from anti-social, activities or commission of the grave crime by itself would not give carte blanche right or power to the investigator to invade the personal liberty of a citizen except in accordance with the procedure established by law and the Constitution. The observance of the procedure, therefore, is an assurance against wanton assaults on personal liberty.
24. There is no reason as to why the petitioners must be made to undergo the agony of criminal investigation or trial as has been held by the Apex Court in the case of G. Sagar Suri and Anr. v. State of U.P. and Ors., AIR 2000 SC 756, In that case it was held that:
Likewise the ingredients of Section 420 of the Indian Penal Code are also not made out. There is no reason as to why the appellants must be made to undergo the agony of a criminal trial as has been held by this Court in the case of G. Sagar Suri and Anr. v. State of U.P. and Ors.,, In this case, this Court held that, "Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a Criminal Court has to exercise a great deal of caution. For the accused, it is a serious matter. The Supreme Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any Court or otherwise to secure the ends of justice. Merely because the accused persons had already filed an application in the Court of Additional Judicial Magistrate for their discharge, it cannot be urged that the High Court cannot exercise its jurisdiction under Section 482 of the Code. Though the Magistrate, trying a case has jurisdiction to discharge the accused at any stage of the trial if he considers the charge to be groundless but that does not mean that the accused cannot approach the High Court under Section 482 of the Code or Article 227 of the Constitution to have the proceeding quashed against them when no offence has been out against them and still why must they undergo the agony of a criminal trial."
25. From the allegations and materials on record as was observed above only the offence under Section 37 of the Act is prima facie made out which is non-cognizable offence. The scheme of the Code Of Criminal Procedure makes it clear that an officer incharge of police station has to commence investigation as provided in Section 156 or 157 on the basis of entry of the first information report, on coming to know the commission of a cognizable offence. Here no such cognizable offence is prima facie made out.
26. In view of the guidelines aid down by the Apex Court in the case of State of Haryana v. Ch. Bhajan Lal AIR 1992 SC 604, in our considered view the impugned FIR warrants interference in as much the ingredients of criminal breach of trust punishable under Section 409 and cheating punishable under Section 420 IPC have not been made out. Present case falls within the first category of cases enumerated in the guidelines (State of Haryana v. Ch. Bhajan Lal). It is such a case where non-interference with the FIR would result in the miscarriage of justice. Accordingly the petitions are allowed and the FIR registered at case crime No. 606/05 under Sections 409/420 IPC at P.S. Behjoi, Moradabad is hereby quashed.