Punjab-Haryana High Court
Deva Disc And Tiller, Through Its ... vs Haryana Financial Corporation And Anr. on 20 December, 2002
Equivalent citations: II(2003)BC278, (2003)133PLR776
Author: R.C. Kathuria
Bench: R.C. Kathuria
JUDGMENT R.C. Kathuria, J.
1. The petitioners seek quashing of FIR No.913 dated 22nd November, 2000 registered under Section 406 and 420 of the Indian Penal Code with Police Station Sadar Hisar.
2. In order to focus the controversy involved in the petition, a few facts need to be noticed. Present case came to register on the report lodged by Nand Kishore Aggarwal, Branch Manager, Haryana Financial Corporation, Hisar. It is stated therein that Haryana Financial Corporation, Hisar (hereinafter referred to as 'the Corporation') had advanced loan of Rs. 7.94 lacs as term loan, Rs. 7.40 lacs as W.C.T. loan and Rs. 22.50 lacs as Additional Term Loan to M/s Deva Disc and Tiller, Hisar, petitioner No. 1 through its partners Anil Kumar son of Dev Raj and Des Raj son of Lekh Ram, who are petitioner Nos. 2 and 3 in the present petition. In all total amount of Rs. 37.84 lacs were given to the aforesaid partnership concern, accused No. 1 on 13 March, 1995, 22nd July, 1995 and 11th November, 1997. As per terms of loan agreement, the borrowers had undertaken not to replace, remove, mortgage the hypothecated machinery/stock or raw material/finished goods, affixed/stored in the factory premises mortgaged and hypothecated to the Corporation. At the time of taking over of possession of the unit in the month of September, 2000 by the Corporation, it was found that above mentioned borrowers had removed the following items;-
S.No Name of the machinery Nos.
1. Cutting Press hydraulic with Motor 3 HP Ujala Make 1
2. Turning Machine 10' size heavy duty with 2 HP Motor 1
3. Turning Machine 12' size heavy duty with 2 HP Motor 1
4. Drill Machine 2
5. Drill Machine (Parts missing) 1
6. Welding set 1
7. Welding Set (Parts missing) 1
8. Tools 1
9. Main Hammer 250 capacity 15 HP Motor 1 10 Rolling Mill with 100 HP Motor & reduction dear box 1
11. Oil Tank make Disc. Hard & Temp. Machine 1
12. Farma of Press 3
13. Fumance with motor, heated sheets & oil tank 1
14. MS Angle of different size 20 tons value
15. MS Channel of different size 15 tons at
16. MS Plate sheets of different size 26 tons Rs. 9.88 lacs."
3. On inquiry being made no satisfactory explanation was given by the above named accused for removal of the machinery and stocks from the premises of the unit. Therefore, it was concluded that machinery/stock had been misappropriated by the petitioner-accused and the proceeds of the security had been diminished. It was alleged in the report lodged that meahinery and stock was held by the accused as the proceeds of the Corporation as they have no title in the said machinery and stock till the entire due amount to the Corporation was paid by the them. Accordingly, it was prayed that case be registered and action be taken against them. On these allegations, the present case came to be registered under aforesaid sections.
4. While seeking quashing of the FIR in question the stand taken on behalf of the petitioners is that the dispute involved is purely of a civil nature and from the circumstances of the case no criminal offence is made out against the petitioner-accused. In support of the stand taken, it was pleaded that ownership of the hypothecated goods remained with the petitioner-firm and there being no entrustment of the property by the Corporation, the lodging of the report at the behest of the Corporation was abuse of the process of the Court.
5. In pursuance of the notice given by the respondent, reply had been filed by respondent No. 1, wherein it had been stated that the Corporation had advanced at the first instance loan of Rs. 16.10 lacs including working capital loan of Rs. 7.40 lacs on 29th December, 1994 to the petitioner-concern for setting up a unit for manufacture of Disc with installed capacity of 90,000 Discs per year. Initially, it was sole proprietorship concern of Anil Kumar, petitioner No. 2. On 11th April, 1997, additional loan of Rs. 22.50 lacs was advanced to the petitioners-concern for setting up a rolling mill and it is at this stage Des Raj son of Loku Ram, petitioner No. 3 joined the said concern. Thereafter, the concern committed default in repayment of the amount due. Consequently, the Corporation look over the possession of the unit on 26th August, 1999. The possession of the unit was thereafter restored to the petitioner on 7th December, 1999 after re-scheduling the loan by the Corporation. Thereafter, again default was committed by the concern in payment of the amount due to the Corporation with the result the premises of the unit was taken into possession by the Corporation. At the time of taking over the possession OR 18th September, 2000, machinery items were found missing from the site. Thereafter, the Corporation sent a registered letter dated 22nd September, 2000 advising the partners of the concern to restore the missing machinery items/stock within a week's time but no response was received from either of the partners and the Corporation was left with no option but to send registered letter No. 2496 dated 4th October, 2000, copy of which is Annexure R.1/1 to the Police authorities for lodging of report against the accused, wherein the above mentioned detailed facts had been stated. Under these circumstances lodging of the report against the petitioner-accused for misappropriation of the machinery and stock and cheating the Corporation was justified.
6. I heard counsel for the petitioners, the counsel representing the complainant and the State counsel at length.
7. During the course of arguments, it was not disputed by the counsel representing the parties that mortgage deed dated 13th March, 1995 (Annexure R.1/2) came to executed between the parties. It is essential to notice the relevant sub-clause of Clause 5 of the agreement with read as under;-
(i) All the mortgaged properties and the said plant comprised in Schedules A and B hereto and other assets mortgaged to the Corporation by those present are the absolute and exclusive property of the mortgagor at his discretion free from any prior change or encumbrances and all future assets mortgaged hereunder shall likewise be kept unencumbered and be the exclusive, absolute and disposable property of the mortgagor. The mortgagor now has power to assign, transfer and assure all and singular the said mortgaged properties the said plant and other assets and to the use of the Corporation in the manner aforesaid.
(ii) If default shall be made in payment of all or any part of the said principal sum or interest or in the performance or observance of any of the covenants, conditions or provision herein contained and on the part of the mortgagor be performed or observed and then in any such case, it shall be lawful for the Corporation to enter into and upon and take possession of the mortgaged properties and the said plan and thenceforth to possess use and enjoy the same and receive the rents, income, profits and benefits thereof without interruption or hindrance by the mortgagor or by any person or persons who so ever on his behalf, and that freed and discharged by the mortgagor and other person or person on his behalf and other wise well and sufficiently saved and kept harmless, and indemnified of from and against all and all manner and former and other estates, title claims, demands, charges and encumbrances whatsoever *** *** *** *** ***
(iv) all the other assets aforesaid are the absolute property of the mortgagor and at his disposal, free from any prior charge or encumbrances and all future, additions to the said other assets, charges hereunder shall likewise be the unencumbered, absolute and disposable property of the mortgagor.
*** *** *** *** ***
(viii) The mortgagor shall not without the written consent of the Corporation previously had and obtained, remove the said plant or any part thereof, from the industrial concern's factory premises, except for the purpose of overhauling or repairs and in case of such removal, shall replace the same by plant of equivalent nature or value, provided that in the event of the Corporation agreeing that such part of the plant so removed, is superfluous or has become wornout/useless or obsolete and need not be replaced the same may be sold and sale proceeds thereof shall be applied towards the partial satisfaction of the mortgage debt."
8. It is manifest from the aforesaid terms of the agreement that Corporation had been given the right through any of its officers or employees to inspect the premises of the petitioners and the mortgaged property, working of the plants and books of the industrial concern. At the same time, it had been covenanted between the parties that mortgagor shall continue to be the owner of the mortgaged property. Bonds of guarantee also came to be executed between the parties on the same day. The stand taken on behalf of the petitioners is that in terms of the agreement executed between the parties the mortgage and hypothecation of the machinery with the respondent would not in any manner, divest the petitioners of their ownership and as such transfer of the mortgaged machinery mentioned in the report lodged by the Corporation was against the terms of the above mentioned deeds and for that reason report lodged deserves to be quashed.
9. In support of the stand taken reference was made to Sunita Bajaj v. Punjab and Sind Bank, (1998)25 Cr.L.T. 43 wherein after noticing the judgment rendered in C.B.I., New Delhi v. duncans Agro Industries Limited, Calcutta? (1996)3 R.C.R. (Criminal) 61 it was observed in para 11 and 12 of the judgment as under;-
"It has been laid down by the Hon'ble Supreme Court that the property in respect of which criminal breach of the trust can be committed must necessarily be the property of some person other than the accused. With the execution of the documents of loan creating hypothecation in favour of the Bank, a floating charge is created on the goods which are supposed to be purchased ultimately by the loanee. The ownership of these goods always remains with the loanee. For the sake of argument if some undertaking is given by the loanee in the loan documents itself that the hypothecated goods shall not be disposed of without the consent of the Bank, still it cannot be said that the property in respect of which the criminal breach of trust is alleged to have been committed was the property of the Bank. Only the right of recovery of the amount has been conferred upon the Bank, but by no stretch of imagination it can be stated that any beneficial interest has been transferred in favour of the Bank by creating loan documents vide which the loanee was supposed to purchase the goods from the loan amount. Pardeep Kumar v. State of Haryana, 1996(2) Recent Criminal Reports 791, is another judgment which can be useful for me in order to adjudicate the controversy in hand. In this case the accused got the loan after hypothecation of the stock; so much so, the accused paid some instalments and thereafter, sold the stock hypothecated with the Bank and the question arose whether in these circumstances and offence under Section 406 or Section 420, Indian Penal Code, is made out or not. His Lordships held as follows in para No. 12 of the judgment;-
"12. It cannot be disputed that an offence under Section 406, IPC is antithesis to an offence under Section 420, IPC. Even otherwise dishonest intention is an essential ingredient of both these offences. To constitute an offence under Section 406 or Section 420 IPC it is for the prosecution to allege and prove that there was dishonest intention to do the particular act on the part of the accused person. If there is no such averment or any evidence in support thereof, no offence thereunder would be constituted. In the case in hand there is no such averment even regarding any dishonest intention on the part of the petitioner in transacting his business and selling the stock of acid and chemicals in his shop. Moreover, as already stated above, the petitioner had raised this loan only for the purpose of carrying on the business in acide and chemicals. From a bare perusal of the agreement of loan (Annexure C1) and the hypothecation deed (Annexure C2), it is evident that no particular item of acid or chemical was hypothecated to the complainant-Bank. In Schedule III to the agreement, C-1, it is specifically mentioned that the nature of the surety is hypothecation of stock in shop. No specific and identified item of acid or chemical was hypothecated to the respondent-Bank. Still further, the petitioner has been paying the instalments right upto December, 1993 and is alleged to have defaulted since January, 1994. In these circumstances, the allegations contained in the complaint (Annexure P.1) reveal only breach of contract, and does not constitute an offence either under Section 406 or Section 420 IPC."
10. In Alpic Finance Limited v. P. Sadasivan and Anr., 2001 SCC (Cri.) 565 the appellant was a registered non-banking company, carrying on business of leasing and hire-purchase. The first respondent was the Chairman and founder-trustee and the second respondent, the wife of the first respondent, was also a trustee of the trust. The respondents entered into lease agreement with the appellant whereby the appellant agreed to finance the respondent for purchase of 100 hydraulically-operated dental chairs. As per the agreement, the respondents were liable to pay rentals quarterly and the appellant company; the lessors would have sole and exclusive right, title and interest in the dental chairs supplied till the entire hire-purchase amount was paid. Accordingly, the appellant made the payment and the respondents got delivery of the dental chairs. However, the appellant alleged that the respondents were not regular in making the payments and committed default in payment of the instalments and that the bank had dishonoured certain cheques issued by the respondents. It also alleged that on physical verification, certain chairs were found missing from the premises of the respondents and thus they had committed cheating and caused misappropriation of the property belonging to the appellant. It filed a private complaint under Section 200 Cr.P.C. before the Chief Metropolitan Magistrate alleging that the respondents had committed offences under Section 420, 406 and 423 read with Section 120B IPC. The proceedings in that case was challenged by the respondents under Section 482 Cr.P.C. before the High Court and were quashed and the orders of the Magistrate taking cognizance and issuing process to the respondents as well as the order of search and the direction for restoration of the property to the appellant Company were set aside. In appeal before the Supreme Court it was contended on behalf of the appellant that the allegations in the complaint clearly made out offences punishable under Section 420, 406, 423, 424 read with Section 120B IPC and therefore, the Single Judge had erred in quashing the proceedings. On the other hand, it was argued on behalf of the respondents that the entire transaction was of civil nature and that the respondents had made a substantial payment as per the hire-purchase agreement and the default, if any, was not wilful and there was no element of misappropriation or cheating. The respondents also denied having removed any of the items of the disputed property clandestinely to defeat the interest of the appellant. Dealing with the submissions made it was observed by the Apex Court as under;-
"When somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form the basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have a right to sue for damages or compensation and at the same time, law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. Here the main offence alleged by the appellant is that the respondents committed the offence under Section 420 IPC and the case of the appellant is that the respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practising the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. There is no allegation that the respondents made any willful misrepresentation. Even according to the appellant, the parties entered into a valid lease agreement and the grievance of the appellant is that the respondents failed to discharge their contractual obligations. In the complaint, there is no allegation that there was a fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transactions,he fails to pay his debt, he does not necessarily evade the debt by deception. Moreover, the appellant has no case that the respondents obtained the article by any fraudulent inducement or by wilful misrepresentation, It has been informed that the respondents though committed default in paying some instalments, have paid substantial amount towards the consideration. Having regard to the facts and circumstances, it is difficult to discern an element of deception in the whole transaction, whereas it is palpably evident that the appellant had an oblique motive of causing harassment to the respondents by seizing the entire articles through magisterial proceedings. Therefore, the single Judge of the High Court was perfectly justified in quashing the proceedings."
11. The ratio of the above mentioned case is fully applicable to the facts of the present case.
12. It is not the case of the respondents in the report lodged that any fraud had been committed by the petitioners. Rather, the substance of the allegation is that the machinery or stock had been removed by the petitioners-accused in violation of the terms of the agreement entered into between the parties without permission of the Corporation and the allegations made do not constitute an offence stated in the report lodged. The action of the respondents in lodging the report is nothing but abuse of the process of the Court and in view of the principle laid down in State of Haryana and Ors. v. Ch. Bhajan Lal and Ors. 1991(1) R.C.R. (Cri.) 383 the petition has to be allowed.
13. Consequently, the FIR in question qua the petitioners is quashed.