Delhi District Court
Unknown vs State on 10 April, 2018
IN THE COURT OF SH. GULSHAN KUMAR,
ADDITIONAL SESSION JUDGE 03
SOUTH EAST DISTRICT, SAKET COURTS
NEW DELHI
IN THE MATTER OF
CNR NO. DLSE010030132017
CR NO. 193/2017
(i) Madhur Mittal
S/o Late H. C. Mittal,
E323, Kamla Nagar, Agra.
(ii) Sumit Mittal
S/o Late H. C. Mittal,
E323, Kamla Nagar, Agra. .......... Revisionists
Versus
State
Through Prosecution Agency
Saket Court, New Delhi. .......... Respondent
DATE OF INSTITUTION : 18.04.2017 DATE OF RESERVING ORDER : 20.02.2018 DATE OF PRONOUNCEMENT : 10.04.2018
1. By this common order I shall dispose of the two revision petitions of applicants/revisionists.
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 1 of 302. The revisionists have challenged the impugned order dated 23/03/2013 whereby Ld. Trial Court has taken cognizance of the offence punishable under Section 406, 420 and 120B IPC and issued summons to the revisionist.
3. The grounds raised in the revision petition for impugning the order dated 23/03/2013 are; Ld. Trial Court has mechanically, without assigning any reason has taken cognizance. Ld. Trial Court has failed to properly examine and consider the documents filed alongwith the Chargesheet. The allegations do not constitute Commission of any offence under IPC and at best constitute breach of contract, the remedy whereof is damages through Civil proceedings. Cognizance of both the offences i.e. under Section 406 IPC and 420 IPC cannot be taken simultaneously being mutually exclusive and held to be antithesis of each other. The disputes between the parties are commercial in nature and no criminal liability can be fastened upon the revisionist besides other grounds.
4. Ld. APP for the State at the outset has raised preliminary objection regarding to the maintainability of the present revision petition on the ground that the impugned order is CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 2 of 30 an "Interlocutory Order" and thus, No revision petition is maintainable. It is further submitted by him that the Impugned Order is in accordance with law and need not be interfered having been passed after considering and examining the material available before Ld. Trial Court.
5. During the pendency of the present revision petition, several applications were filed by allottees of the accused Company seeking their intervention and also praying for refund of the amount; allotment of flat; and dismissal of the revision petition.
6. I have heard Learned Counsels for the parties. The parties were given an opportunity to file their Written Submissions. Except the revisionist none of the parties have filed Written Submissions.
7. Learned Counsel for the revisionist has asserted that the order impugned is not an Interlocutory Order as it sets in motion criminal machinery in action affecting the valuable rights of the revisionist, which is not justified and proper. Ld. Counsel for the revisionist in support of their contention rely upon the judgment reported as Om Kumar Dhankar Vs. State of Haryana CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 3 of 30 2012(3)SCALES63 where the said question was considered and the Hon'ble Supreme Court observed as under:
"9. Insofar as the first question is concerned, it is concluded by a later decision of this Court in the case of Rajendra Kumar Sitaram Pande and Ors. Vs. Uttam and Anr. (1993) 3 SCC 134. In Rajendra Kumar Sitaram Pande and Ors. Case (supra) this court considered earlier decisions of this court in the cases of Madhu Limave Vs. State of Maharasthra (1977) 4 SCC 551, V.C. Shukla Vs. State 1980 Supp. SCC 92, Amar Nath Vs. State of Haryana: (1977) 4 SCC 137 and K.M.Mathew Vs. State of Kerala (1992) 1 SCC 217 and it was held as under:
6... This being the position of law, it would not be appropriate to hold that an order directing issuance of process is purely interlocutory and therefore, the bar under subsection (2) of section 397 would apply. On the other hand, it must be held to be intermediate or quasifinal and, therefore, the revisional jurisdiction under section 397 could be exercised against the same...
10. In view of the above legal position, we hold, as it must be that revisional jurisdiction under section 397 Code of Criminal Procedure was available to the Respondent No. 2 in challenging the order of the Magistrate directing issuance of summons. The first question is CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 4 of 30 answered against the Appellant accordingly"
8. Ld. Counsel for the revisionist also relied upon the judgment reported as Urmila Devi vs. Yudhvir Singh JT2013(14)SC262 wherein it has been observed by the Hon'ble Supreme Court of India as under;
"22... Having regard to the said categorical position stated by this Court in innumerable decisions resting with the decision in Rajendra Kumar Sitaram Pande (supra), as well as the decision in K. K. Patel (supra), it will be in order to state and declare the legal position as under:
(i) The order issued by the Magistrate deciding to summon an accused in exercising of his power Under section 200 to 204 Code of Criminal Procedure would be an order of intermediary or quasifinal in nature and not interlocutory in nature.
(ii) Since the said position viz., such an order is intermediary order or quasifinal order, the revisionary jurisdiction provided under section 397, either with the District Court or with the High Court can be worked out by the aggrieved party.
(iii) Such an order of a Magistrate deciding to issue process or summons to an accused in exercise of his power under section 200 to CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 5 of 30 204 Code of Criminal Procedure, can always be subject matter of challenge under the inherent jurisdiction of the High Court Under Section 482 Code of Criminal Procedure."
9. Having considered the submissions of the revisionist and the law on the subject, it is quite clear that in the instant revision, the revisionist are assailing the correctness, legality and proprietary of the Impugned Order u/s 397 Cr.P.C. Thus, it is clear and evident that the Impugned Order summoning the accused is not an interlocutory order and therefore present revision is maintainable.
10. Ld. Counsel for the revisionist has drawn my attention on various factual aspects as mentioned in the Chargesheet while referring to the grounds taken in the revision petition for challenging the Impugned Order. The company was granted various licenses for development of projects. The construction/development at the project site was supervised through Court appointed Observer. The work of construction at the site was progressing smoothly up to January 2011 and had reached at an advance level of completion. All the payments by the complainants was made to the accused Company through banking channel and is confirmed by the Bank Accounts of the accused company. During investigation an embargo was imposed CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 6 of 30 u/s 102 Cr.P.C. on the project lands of the accused company. The company and the revisionist were restrained from refunding/disbursing any amount to the investors by an order passed by the Hon'ble Delhi High Court dated 30.09.2010. The Hon'ble Delhi High Court vide order dated 11.02.2011 restrained the accused company and the revisionist from dealing with any of their properties both movable and immovable. A committee of two retired High Court Judges was appointed to supervise the affairs of the company through a newly constituted Board of Directors of the company as constituted vide order dated 13.05.2011 passed by Hon'ble Delhi High Court. The revisionist ceased to be the directors of the company by the said order. The Hon'ble Delhi High Court vide order dated 17.10.2012 appointed provisional liquidator to take over the charge of the accused company. The division bench of Hon'ble Delhi High Court in an appeal against the order dated 17.10.2012, with the consent of the complainants/creditors of the Company directed sale of two properties (Sector 78 & 89) belonging to the accused company vide order dated 11.02.2013 & 11.07.2013. The Hon'ble Supreme Court of India vide order dated 29.09.2015 reaffirmed the order dated 11.02.2013 and 11.07.2013. and Lastly it was observed by the Hon'ble Delhi High Court that the complainants are interested in refund of their amount paid to the accused company. In support CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 7 of 30 of his arguments Ld. Counsel for the revisionist have relied upon Pepsi Foods Limited vs. Special Judicial Magistrate, 1998 SCC (Crl.) 1400; M/s Zandu Pharmaticuals Works Ltd. & Ors. vs. Mohd. Sharaful Haque & Anr. (2005(3) JCC 1583); State of Karnataka and Anr. vs. Pastor P. Raju 2006 CriLJ 4045; Devender and Ors vs. State of U.P (2009)7SCC495; C.E. Constructions Ltd. vs. State and Anr 2012(1)JCC74; S.K. Alagh vs. State of U.P. and Ors. (2008) 5 SCC 662; Maksud Saiyed vs. State of Gujarat and Ors (2008)5SCC668; Keki Hormusji Gharda and Ors vs. Mehervan Rustom Irani and Anr (2009)6SCC475; Thermax Ltd and Ors. vs. K.M. Johny and Ors. (2011)11SCC412; Sharon Michael and ors. vs. State (2009)3SCC375; GHCL Employees Stock Option Trust vs. India Infoline Ltd. MANU/SC/0271/ 2013; Nirmal Bhanwarla Jain vs. GHCL Employees Stock Option Trust 2010(1)JCC574; Wolfgang Reim & Ors. vs. State & Anr. 2012(3)JCC2042; Basant Misra and another vs. State of Haryana and others [Cri. Misc No.43667 of 2003 Decided on 03/10/2008]; Shri Jalpa Parahad Aggarwal vs. State of Haryana and another MANU/PH/0382/1987; Nageshwar Prasad Singh alias Sinha vs. Narayan Singh and Anr. (1998)5SCC694; Alpic Finance Ltd vs. P. Sadasivan and Anr (2001)3SCC513; Hridaya Ranjan Pd. Verma and Ors vs. State of Bihar and Anr. AIR 2000 SC 341;
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 8 of 30S.W. Palanitkar and others vs. State of Bihar and another. AIR 2001 SC 960; All Cargo Movers (I) Pvt. Ltd and Ors. vs. Dhanesh Badarmal Jain and Anr AIR2008SC247; Dalip Kaur and Ors. vs. Jagnar Singh and Anr. AIR2009SC3191; S.V.L. Murthy etc. vs. State represented by CBI, Hyderabad (2009)6SCC77; V.G. Sreeram and etc. vs. Smt. Indumati B. Chandachai and ors. 2007CriLj3809); Naini Gopal Lahiri and Ors. vs. State of Uttar Pradesh (1965)35CompCas30(SC); Haridaya Ranjan Prasad Verma & Ors. vs. State of Bihar & Anr. 2000CriLJ2983; G.V. Rao vs. L.H.V. Prasad & Ors. 2000(3)SCC 693; Anil Mahajan vs. Bhor Industries Ltd. and Anr. (2005) 10 SCC 228; Hira Lal Hari Lal Bhagwati vs. CBI, New Delhi 2003CriLJ3041; Ram Biraji Devi & Anr. vs. Umesh Kumar Singh & Anr. 2006(5)SCALE638; Inder Mohan Goswami and Anr. vs. State of Uttaranchal and Ors. AIR2008SC251; Narender Kumar Jain vs. State of NCT of Delhi and Anr. 2010CriLJ3411; Rajendra Narayan Vajpeyi vs. State 64(1996)DLT99; Ram Chander vs. R.K Khattar and Anr. 137(2007)DLT639; I.B. Singh vs. State thr. CBI MANU/DE/1015/2010; Nilesh Lalit Parekh vs. State of Gujarat 2003Cri.L.J.1018; Rajendra Singh Lodha & Anr. vs. Arabindo Dey & Anr. MANU/WB/0415/1997; Om Prakash Gupta vs. State of U.P. AIR1957SC458; Mohd. Sulaimanvs. Mohd. Ayub and Anr. AIR1965SC1319; Chelloor Mankkal Narayan Ittiravi CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 9 of 30 Namhudiri vs. State of Travancore, Cochin AIR1953SC478; Jaswantrai Manilal Akhaney vs. State of Bombay 1956CriLJ1116; Bhaskar Lal Sharma vs. Monica (2009)10SCC604; G.K. Sawhneyvs. State and Anr. 186(2012)DLT784; Vijay Chaudhary vs. Gian Chand Jain (Crl.M.C.No. 1328/2007, Decided on 06052008); Onkar Nath Goenka vs. Gujrat Lease Finance Ltd. (Crl M.C. No. 485 of 2006 decided on 16.5.08); Rozan Mianvs. Tahera Begum and Ors. AIR2007SC2883; Smt. Sharda Mahajan vs. Maple Leaf Trading International (P) Ltd [2007]139CompCas718(Delhi).
11. I have gone through the judgments cited at bar.
12. Ld. APP for the State in support of the Impugned Order has submitted that the accused Company has cheated various allottees by not delivering the flats despite having collected huge amounts. It is further contended that the accused Company induced investors to invest in the projects of the accused company despite the fact that no land was purchased and no license was granted to the accused company. The accused company was granted licenses to construct group housing project but the construction of the flats was carried at snail's pace. No possession of flat or refund of the amount was by the accused company/newly constituted board/OL and the investors were left high and dry.
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 10 of 30When the investors demanded refund of their money the accused company defaulted in refund of the amounts. The efforts made by the accused company/committee/ newly constituted board did not yield any fruitful results. The interveners have adopted the arguments of Ld. APP for the State for not interfering with the Impugned Order.
13. Ld. Counsel for the revisionist has drawn my attention to the relevant portion of the Chargesheet dated 06.02.2013 filed in FIR No. 234/2008, wherein the Investigating Officer has arrived at the following conclusion;
"....From the investigation conducted till date it is evident that accused persons namely Sumit Mittal Madhur Mittal & B. N. Gupta & M/s Triveni Infrastructure Development Co. Ltd through the accused Sumit Mittal in Column No.11 (I) to 11 (IV) have cheated general public to the tune of more than Rs. 600 crores (Appox.) by way of false assurances misrepresentations concealment of material facts and breach of contractual obligations. Thereby accused persons caused wrongful gain to themselves and wrongful loss to others. Fraudulent intention right from the beginning is evident as they collected huge amount from general public by way of inducement/ false assurances without having any license and approvals from the competent authorities. Therefore ingredients of CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 11 of 30 section 420 IPC are made out against the accused persons/ company. The amount collected from general public was diverted to various other group companies/ persons and was misappropriated as stated in SFIO Report. The company was used as tool for doing financial transaction as per their convenience & wish in order to gain wrongfully. Directors of a company are not only the trustee of assets of the company but also act as custodian who has been invested with high degree of trust by its investors. When the same directors betrays that trust and misappropriate the entire invested money and that too by deliberate concealment offences U/s 406 IPC is well made out against these directors. All these facts amounted to diversion of funds and misappropriation by the above named accused persons namely Sumit Mittal Madhur Mittal and B. N. Gupta mentioned in Column No.11 (I) to 11 (III) alongwith the accused company namely Triveni Infrastructure Development Co. Ltd through its erstwhile director/ chairman Sumit Mittal mentioned in Column No. 11 (IV). The accused persons as directors had conspired together to achieve the unlawful common object through the company. Their concerted and coordinated efforts are palpable in the facts and circumstances of the case. Needless to point out that accused Sumit Mittal & Madhur Mittal the promoters/ directors are the real brothers and factum of meeting of mind can easily be deduced. In CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 12 of 30 view of the above facts an offence u/s 120B IPC is also made out..."
14. Perusal of the record reveals that a complaint was filed which culminated into an FIR No.234 of 2008 at PS: EOW (New Delhi) u/s 406, 420, 120B IPC. The complaint was with respect to nondevelopment, nondelivery, nonrefund of money and alleging breach of contractual obligation by the accused Company. Subsequently, all the investors of the accused Company were impleaded/joined in the FIR as per the law laid down by the Hon'ble Supreme Court of India and Hon'ble Delhi High Court.
15. Before examining respective contentions on their relative merits, I think it is appropriate to notice the legal position. Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the persons wronged may seek his redress for damages in a civil court but a breach of trust with mens rea gives rise to a criminal prosecution as well. Before referring to the submissions of the parties it is expedient to refer to the definition of "Cheating" and "Breach of Trust" as defined in Section 405 & 415 of the IPC punishable u/s 406 & 420 IPC respectively: CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 13 of 30
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 to do so, commits criminal breach of trust ‟.
415. Cheating. - Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything, which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat."
16. The allegations against the revisionist and the accused company are in relation to nondevelopment and nondelivery of the flats/immovable property and nonrefund of amounts resulting in breach of contractual obligations.
17. The ingredients for commission of an offence u/s 420 CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 14 of 30 IPC is dishonest inducement to deceive any person to deliver any property, valuable security. The dishonest intention should be at the inception when the transaction is entered into between the parties. It has to be inferred from the facts and circumstances as narrated in the complaint or found during the investigation.
18. The distinction between breach of contract and an offence of cheating is very fine. It depends upon the intention of the accused at the time of inducement which can be judged by a subsequent conduct but, the subsequent conduct itself cannot be the sole test. Fraudulent or dishonest intention has to be shown to exist right at the beginning of the transaction. If a person fails subsequently to keep up his promise, it would not mean that he had culpable intention not to fulfil his part of the contract or to keep his promise subsequently. In this regard the Illustrations (f) and (g) to Section 415 is of much significance and clarifies this position:
(f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats.
(g). A Intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 15 of 30 deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery. A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contact and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract.
19. The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii) (a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property. or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he was not so deceived; and (iii) in cases covered by (ii) (b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.
20. In Thermax Ltd and Ors. Vs. K.M. Johny and Ors. (2011)11SCC412, Hon'ble Supreme Court of India held as under;
"It is settled law that the essential ingredients for an offence under Section 420, which we have already extracted, is that there has to be dishonest intention to deceive another person. We have already quoted the relevant allegations in the complaint and perusal of the same clearly shows that no such dishonest intention can be seen or CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 16 of 30 even inferred inasmuch as the entire dispute pertains to contractual obligations between the parties. Since the very ingredients of Section 420 are not attracted, the prosecution initiated is wholly untenable. Even if we admit that allegations in the complaint do make out a dispute, still it ought to be considered that the same is merely a breach of contract and the same cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction. Inasmuch as there are number of documents to show that AppellantCompany had acted in terms of the agreement and in a bona fide manner, it cannot be said that the act of the AppellantCompany amounts to a breach of contract."
21. In Alpic Finance Ltd vs. P. Sadasivan and Anr (2001)3SCC513, Hon'ble Supreme Court of India held as under: "The facts in the present case have to be appreciated in the light of the various decisions of this Court. 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 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 CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 17 of 30 properties between them, the aggrieved person may have 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 respondents committed the offence under Section 420 I.P.C. and the case of the appellant is that 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 practicing 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, 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 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 transaction, he fails to pay his debt, he does not CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 18 of 30 necessarily evade the debt by deception."
"Moreover, the appellant has no case that the respondents obtained the article by any fraudulent inducement or by willful misrepresentation"
22. In Rajendra Narayan Vajpeyi vs. State 64(1996)DLT99, the Hon'ble Delhi High Court held as under;
".......A mere nonpayment of an amount in a purely business dealing between the parties cannot by any stretch of imagination be said an act of cheating. Complainant in her statement has made a grievance only of the petitioner having committed breach of the contract and having not paid the amount allegedly due to her. In my opinion, no ingredients of Section 415 of the Indian Penal Code were available to enable the Metropolitan Magistrate to summon the petitioner and respondent No.3..."
23. In Ram Chander vs. R.K Khattar and Anr. 137 (2007) DLT 639, Hon'ble High Court of Delhi held as under;
"It is necessary that to constitute the offence of cheating, it is shown that there was fraudulent or dishonest inducement to the person so deceived, to deliver any property to the persons deceiving him. Thus, this fraudulent or dishonest inducement has to be at the time of CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 19 of 30 entering into the deal. Therefore, the necessary ingredient which had to be established by the complainant in the instant case was that from the very beginning, i.e. when the plot in question was booked by the father of the complainant, there was deceitful intention on the part of the accused persons not to give him plot and extract money. However, the complainant has himself stated that the plot could not be given earlier not because of bad intentions but because of the Supreme Court's orders."
24. In S.W. Palanitkar and others vs. State of Bihar and another. AIR 2001 SC 960, Hon'ble Supreme Court of India held as under;
"....In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. it is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating."
25. In All Cargo Movers (I) Pvt. Ltd and Ors. vs. Dhanesh Badarmal Jain and Anr, AIR2008SC247, Hon'ble Supreme Court of India held as under;
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 20 of 30"...No allegation whatsoever was made against the appellants herein in the notice. What was contended was negligence and/or breach of contract on the part of the carriers and their agent. Breach of contract simplicitor does not constitute an offence..."
26. Section 405 Indian Penal Code deals with criminal breach of trust. A careful reading of the Section 405 Indian Penal Code shows that a criminal breach of trust involves the following ingredients: (a) a person should have been entrusted with property, or entrusted with dominion over property; (b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so; (c) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.
27. Section 406 Indian Penal Code prescribes punishment for criminal breach of trust as defined in Section 405 Indian Penal Code. For the offence punishable Under Section 406 Indian Penal Code, prosecution must prove: (i) that the accused was entrusted with property or with dominion over it and (ii) that he (a) misappropriated it, or (b) converted it to his own use, or (c) used CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 21 of 30 it, or (d) disposed of it.
28. Criminal breach of trust is defined in Section 405 IPC and it is made punishable under Section 406 IPC. For invoking these provisions, complainant has to show that he had entrusted the accused persons with property or, had given them any dominion over his property and the accused persons dishonestly misappropriated or converted the said property to their own use or, dishonestly disposed of the said property.
29. The gist of the offence is misappropriation done in a dishonest manner. There are two distinct parts of the said offence. The first involves the fact of entrustment, wherein an obligation arises in relation to the property over which dominion or control is acquired. The second part deals with misappropriation, which should be contrary to the terms of the obligation, which is created.
30. Thus, it is clear that there has to be entrustment of property with dominion over the said property and in the absence of the same, there cannot be any criminal breach of trust.
31. In Chelloor Mankkal Narayan Ittiravi Namhudiri vs. State of Travancore, Cochin AIR1953SC478, Hon'ble Supreme Court of India held as under;
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 22 of 30"... to constitute an offence of criminal breach of trust, it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted, there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by someone else which he willingly suffered to do.
It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust 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."
32. In Jaswantrai Manilal Akhaney v. State of Bombay 1956CriLJ1116, Hon'ble Supreme Court of India has reiterated that the first ingredient to be proved in respect of a criminal breach of trust is "entrustment" and held as under;
"...But when Section 405 which defines "criminal breach of trust"
speaks of a person being in any manner entrusted with property, it does not contemplate the creation of a trust with all the CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 23 of 30 technicalities of the law of trust. It contemplates the creation of a relationship whereby the owner of property makes it over to another person to be retained by him until a certain contingency arises or to be disposed of by him on the happening of a certain event."
33. Turning to the facts of the case, there is nothing the Chargesheet that any property was entrusted to the revisionist at all or the revisionist had domain over any of the properties which they dishonestly converted to their own use so as to satisfy the ingredients of Section 405 & 415 IPC punishable u/s 406 & 420 IPC. Further from the facts of the case it is clear that the development at the project site could not be completed and the flats could not be delivered due to the embargo imposed during investigation. The accused company was restrained from refunding the amounts and delivery of the flats as the complainant has consented for sale of the project lands and disbursement of the monies realized therefrom by the order of the higher Courts. The perusal of the Chargesheet would show that the accused company is possessed with sufficient land bank and licenses have been granted for development of the projects therein. This fact is also mentioned in the order passed by the Hon'ble Supreme Court of India dated 23.08.2013 wherein market valuation of two of the project lands of the company was recorded as Rs.731 Crores plus CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 24 of 30 Rs.287 Crores as against the claims of Rs.650 Crores. This itself establishes that there is no misappropriation or conversion of property for personal benefit of the revisionist. Allegations contained in the chargesheet even if given face value and taken to be correct in their entirety, commission of any offence is not disclosed. Ld. Trial Court, having regard to the facts stated and the legal position explained herein, committed a serious error in issuing the process against the revisionist, when the acts alleged against them did not constitute any offences satisfying their ingredients even prima facie.
34. The ingredients of offences u/s 406 IPC are quite different from the ingredients u/s 420 IPC. A person cannot be charged with the offence of cheating and criminal breach of trust simultaneously for the same transaction. No person can be penalized for commission of both the offences. Inasmuch as an offence u/s 406 IPC, provides for punishment for criminal breach of trust, where a person is either entrusted with a property or acquires dominion over the property and he misappropriates the same dishonestly or converts the same for his own use or dishonestly uses or disposes of that property. In criminal breach of trust, person comes into possession of a property honestly, but he develops dishonest intention subsequent to his acquiring dominion over the property by way of entrustment or otherwise. Whereas CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 25 of 30 section 420 IPC provided punishment for commission of an offence of cheating. Cheating is defined in Section 415 IPC, which provides that, the person, in a case of cheating, acts with dishonest intention right from the commencement of the transaction, the person acted dishonestly, which means that the intention of making either wrongful gain or wrongful loss to a person deceived. In Wolfgang Reim & Ors. vs. State & Anr. 2012(3)JCC2042, Hon'ble High Court of Delhi held as under;
"Further, a person cannot be charged with the offence of cheating and criminal breach of trust simultaneously for the same transaction because for the offence of cheating, it is a prerequisite that dishonest intention must exist at the inception of any transaction whereas in case of criminal breach of trust, there must exist a relationship between the parties whereby one party entrusts another with property as per law, therefore, for commission of criminal breach of trust, the dishonest intention comes later, i.e., after obtaining dominion over the property by the accused person whereas for commission of cheating, dishonest intention of the accused has to be present at the inception of the transaction."
35. It is settled law that in absence of any provision laid down under the statute, revisionists (exdirector of a company) or CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 26 of 30 an employee cannot be held to be vicariously liable for any offence committed by the company for nonrefund of the amounts and nondelivery of the flats, which as per the investigation was subsequently required to be done by the committee/newly constituted board/ Official Liquidator.
36. In Keki Hormusji Gharda and Ors vs. Mehervan Rustom Irani and Anr (2009)6SCC475, Hon'ble Supreme Court of India held as under:
"Indian Penal Code, save and except some matters does not contemplate any vicarious liability on the part a person. Commission of an offence by raising a legal fiction or by creating a vicarious liability in terms of the provisions of a statute must be expressly stated. The Managing Director or the Directors of the Company, thus, cannot be said to have committed an offence only because they are holders of offices."
37. In Thermax Ltd and Ors. Vs. K.M. Johny and Ors. (2011)11SCC412, Hon'ble Supreme Court of India held as under: "Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of 'vicarious liability' is unknown to criminal law."
CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 27 of 3038. During the course of arguments Ld. Counsel for revisionist have referred to and relied upon the affidavit filed by the State before the Hon'ble Supreme Court of India and the reply by the IO in the Session Court to the following effect:
(i) An affidavit was filed by DCP, EOW, New Delhi on 10.07.2013 before the Hon'ble Supreme Court of India after filing of Chargesheet stating that the revisionists are chargesheeted u/s 406 IPC r/w 120B IPC only, sating as under;
"10....When the same directors betrays that trust and misappropriate the entire invested money and that too by deliberate concealment, offences u/s 406 IPC is well made out against the accused persons namely Sumit Mittal, Madhur Mittal & B. N. Gupta. Needless to point out that accused Sumit Mittal & Madhur Mittal, the promoters/ directors are the real brothers and factum of meeting of mind can easily be deduced. In view of the above facts, an offence u/s 120B IPC is also made out against the accused persons..."
(ii) I.O in its reply dated 25.08.2015 to the revision petition has stated that the revisionists are chargesheeted u/s 406 IPC r/w 120B IPC only, sating CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 28 of 30 as under;
"....The Directors, who ought to act as custodian of the assets of the company, had betrayed the trust by misappropriating or converting to his own use the property /assets of the company as mentioned in SFIO report, offence u/s 406 IPC is made out against the accused persons/ revisionists namely Sumit Mittal and Madhur Mittal & other accused persons B N Gupta ;.."
39. Ld. Counsel for the revisionist during arguments conceded to the following effect;
"Cognizance under the Summoning order be modified to the extent as per the chargesheet & as per the statement of the State. Further, revisionist be granted liberty to raise all legal issue for discharge in terms of Section 239 Cr.P.C"
40. In view of the above discussion and in my considered opinion offence under Section 420 IPC is not made out in terms of the chargesheet, affidavit of the State and law laid down by Hon'ble Apex Court. However, the issue of process against revisionist under Section 406/120B IPC is maintained. The order of Ld. Trial Court is modified to this extent. The revisionist is CR No. 193/17 Madhur Mittal & Ors. Vs. State Page 29 of 30 granted liberty as prayed for to file an application under Section 239 Cr.P.C. in accordance with law and Ld. MM is at liberty to frame charge in accordance with law without influence of this order. Accordingly, criminal revision petition stands disposed of.
Criminal Revision Petition Record be consigned to record room.
Trial Court Record, if any, be sent back to court concerned along with copy of order.
Copy of the order be given dasti to revisionist and to State.
ANNOUNCED IN THE OPEN COURT (GULSHAN KUMAR)
ON 10.04.2018 ASJ03, S.E., SAKET COURTS
NEW DELHI
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