Punjab-Haryana High Court
Rajnish Lathar vs State Of Haryana on 2 May, 2007
JUDGMENT
1. Facts, as uncontroverted at the time of arguments before this Court, are as under:
The petitioner is sole proprietor of M/s National Wires Products Ltd., village Ghatoli, District Jind. In the year 1983, he applied to the Haryana Financial Corporation (hereinafter referred to as the "Corporation") for a cash loan of Rs. 6.5 lacs. The loan aforesaid came to be sanctioned by the Corporation vide reference No.HFC-PP 244. As per the order of sanction, the amount was utilizable for the purchase of land, building and machinery and also for working capital etc. At the time of sanction of the loan, the petitioner mortgaged 18 Marlas of land comprised in Khasra No. 167, Killa No. 90/3, situated in Revenue Estate of village Ghatoli, District Jind with the Corporation. Along with the plant, the engine, machinery, electric equipments, tools and accessories installed or located, affixed or attached in the factory were also mortgaged with the factory. However, the petitioner suffered heavy business losses and the manufacturing process in his factory came to a stand still. On account of default in the payment of amount, the Corporation took over the possession of the unit on 20.8.1997. The Corporation had, apart from other property of the petitioner, also taken possession of the 18 Marlas of mortgaged land. As the petitioner suffered heavy business losses, the manufacturing process of the Concern came to a stand still and the petitioner became defaulter. The Corporation entered into the possession of the unit and the mortgaged land on 22.8.1997. Prior to the entering into possession of the unit aforesaid, a notice had been issued by the Corporation to the petitioner. In spite of the fact that the Corporation had entered into possession, the petitioner sold away some of the assets which were under mortgage.
2. It was under these circumstances that the Haryana Financial Corporation lodged FIR No. 149 dated 12.8.2002, under Sections 406/420 of the Indian Penal Code against the petitioner.
3. Through the present petition under Section 482 of the Code of Criminal Procedure, the petitioner raised a plea for the quashing of FIR aforesaid. The essential plea raised, in the course of the petition, is that the impugned transaction, at best, gives rise to a civil liability and the criminal law had been unjustly set into motion.
4. I have heard learned Counsel for the petitioner and learned Assistant Advocate General, Haryana and have carefully gone through the records.
5. Learned Counsel for the petitioner argued that the property mortgaged by the petitioner with the Corporation continued to be otherwise owned by him and even if it is assumed (for the sake of arguments) that a part thereof came to be disposed of, the petitioner cannot be held liable for a criminal offence. For the advocated plea, sustenance was drawn from Deva Disc and Tiller, Hissar and Ors. v. Haryana Financial Corporation and Anr. 2003(1) RCR (Crl.) 722.
6. The plea aforementioned deserves acceptance, particularly when it is supported by the judicial pronouncement relied upon by the petitioner. The facts in that case were as under:
The indicated Concern had raised certain amount of loan from Haryana Financial Corporation. As per the terms of the agreement, the borrower had undertaken not to replace, remove or mortgage the machinery hypothecated with the Corporation. The Corporation lodged a report with the police that the borrower had ceased to have any title in the hypothecated stocks and he had committed an offence by mis-appropriating a part of the machinery/stock. The borrower raised a plea that the allegations, at best, gave rise to a dispute of civil nature and did not give rise to criminal offence because the ownership of hypothecated goods remained only with him. It was under these circumstances that an Hon'ble Single Bench of this Court held that even if the borrower had removed hypothecated machinery stocks for making payment, no criminal offence under Sections 420/406 of the Indian Penal Code was made out. In that case, this Court relied upon the following observations made in Sunita Bajaj v. Punjab and Sind Bank, 1998(1) RCR (Cr.) 129:
It has been laid down by the Hon'ble Supreme Court that 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. With the execution of the documents of loan creating hypothecation in favour of the bank, of floating charge is created on the grounds which were 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 any offence under Section 406 or Section 420, Indian Penal code, is made out or not. His Lordship held as follows in para No. 12 of the judgment:
It cannot be disputed that an offence under Section 406 is antithesis to an offence under Section 420, IPC. Even otherwise, dishonest intention is an essential ingredients 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 his business in acid 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 installments 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 a breach of contract, and does not constitute an offence either under Section 406 or Section 420 IPC.
7. Reliance, in this context, was also placed upon a ruling by the Apex Court reported as Alpic Finance Ltd. v. P.Sadasivam and Anr. 2001(1) RCR (Cri.) 757 (SC). In that case, 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 i.e. the wife of the first respondent, was also a trustee of the trust.
8. The respondents entered into lease agreement with the appellant whereby the appellant agreed to finance the purchase of 100 hydraulically-operated dental chairs by the respondents. 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 dishonored 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 Sections 420, 406 and 423 read with Section 120B IPC. The proceedings in the case were 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 Sections 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 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 from 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 wrong doer 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 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 wilful 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 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 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 mis-representation. It has been informed that the respondents, though committed default in paying some installments, 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.
9. No law taking contrary view of the facts was cited before this Court.
10. In the light of foregoing discussion, the petition shall stand allowed. FIR No. 149 dated 12.8.2002 shall stand quashed.