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The appellant's defence is disclosed in a long written statement running into twenty paragraphs and seven closely typed pages submitted on the 3rd October 1952. Shortly stated, it is to the effect that the charge framed against him is bad in law and extremely vague; that the vagueness of the charge had "considerably handicapped" his defence, that the prosecution had not been fair in that it had not exa- mined the first informant, M. N. Raiji, that if he had been examined 'by the prosecution, the appellant would have shown from the records in his possession that the Co-operative Bank had not suffered any loss and that the Bank in the hands of the Liquidator had more than sufficient funds to pay the dues of the former; that the prosecution bad not been launched with the sanction of the Company Judge who was in seisin of the liquidation proceedings in respect of the Exchange Bank and that therefore the provisions of sections 179 and 237 of the Indian Companies Act had not been complied with; that the securities in question had not been entrusted to the appellant but to the Exchange Bank,' if at all there was any entrustment, and that as a matter of fact and law, the Ex- change Bank had not been entrusted with the securities, that the Exchange Bank "Court legally deal with the securities in any manner it liked", as provided in the documents, Exs. E, F and G, between the two banks; that the sub-pledging of the securities with the Canara Bank or with Messrs Merwanji Bomanji Dalal was "perfectly. within the four corners of the law", and that the essential ingredients of an offence under section 409, Indian Penal Code had not been made out. Grievance was also sought to be made of the fact that Inspector Milburn who had investigated the case had not been called as a. prosecution witness, with the result that the appellant had been deprived of the right of challenging the prosecution evidence with reference to the police diary. The learned Magistrate after a very fair and full examination of the evidence in the case and the points raised by the appellant in his defence came to the conclusion that the appellant was guilty of the offence of criminal breach of trust under section 409, Indian Penal Code and passed a lenient sentence, as stated above, *in view of the, consideration that "not a pie went to the pocket of the accused", and that "the accused had not taken up any dishonest defence". The learned Magistrate held that the charge as framed was not vague in view of the provisions of section 222, Criminal Procedure Code, with special reference to the terms of sub-section (2) of that section. On the question of the non-examination of the first informant, M. N. Raiji, and of the investigating police officer, the learned Magistrate observed that they were formal witnesses inasmuch as the facts of the case were not in dispute. Furthermore, the court observed that if the accused or his lawyer who defended him at the later stage of the prosecution, had applied to the' court for their being examined, they could have been called as witnesses and subjected to cross-examination by the accused. But no such, application had been made. As regards want of sanction of the Company Judge, he held that section 179 of the lndian Companies Act had no application to the facts of the present case, as it was not a prosecution under the Companies Act and that therefore no such sanction as is contemplated by that section was necessary. Dealing with the appellant's contention that there was no entrustment within the meaning of section 405, Indian Penal Code the learned Magistrate observed that the accused held delegated powers from the Board of Directors and he held the property in trust on behalf of the Directors of the Exchange Bank. He further held that the contract of pledge dated the 14th May 1948 between the two banks did not vest any right in the Exchange Bank absolutely to deal with the securities and that at any rate, the Exchange Bank could not deal with the securities so long as the Cooperative Bank had not taken an overdraft from the former. In dealing with the question whether the appellant had dealt with the securities dishonestly, he held that in all the circumstances of the case there was no doubt that wrongful loss was caused to the Co-operative Bank and wrongful gain not to the accused personally but to the Exchange Bank which he represented during the transactions in question.

Reading Exhibits E, F and G together, it is clear that the securities of the face value of Rs. 75,000 were pledged to the Exchange Bank as security for overdraft up to the limit of Rs. 66,150 for which the Cooperative Bank had given the promissory note to the Exchange Bank. It was further stipulated that in the event of the pledgor making a default in payment on demand of the amount advanced by way of overdraft with outstanding interest it may be realised by the Exchange Bank by sale of those securities and after -satisfying the pledgee's dues against the pledgor, if there -was any outstanding amount the surplus of the sale proceeds shall be paid back to the pledgor. Thus it is clear that according to the terms of the contract the Exchange Bank was not entitled, as contended on behalf of the appellant, to sell the securities even though there may not have been any outstanding dues from the Co-operative Bank. The securities were to be kept by the Exchange Bank charged with the payment of such amount as may from time to time have been advanced or be advanced under the overdraft arrangement. But that charge was not an absolute one without reference to the state of accounts between the two banks; in other words, there would be a charge only when there was an adverse balance against the Co-operative Bank. We know that at all material times the Co-operative Bank had not drawn any sum from the Exchange Bank in pursuance of the agreement referred to above. The right of the Exchange Bank to deal with the securities under the agreement would arise only on the happening of certain events, namely, that the pledgor either had failed to maintain the proper margin or had made a default in repayment of the outstanding amount on demand by the Exchange Bank. So long as those contingencies did not arise,-and it is nobody's case that any of those contingencies had arisen,--the pledgee bank had no right to deal with the securities by way of pledge, sub-pledge or assignment. In this connection our attention was invited to the provisions of section 179 of the Indian Contract Act in support of the contention that as the securities had been agreed between the two banks to be a cover for overdraft not exceeding Rs. 66,150, up to that amount the pledgee bank bad an interest in those securities which it could have dealt with. It was further argued that as there was nothing to show that the appellant had dealt with the securities for a larger amount than that, he could not be said to have contravened the terms of the contract. In our opinion, there is no substance in-this contention. Section 179 predicates that the pledgor has a limited interest which he can deal with and his transaction to that extent would be valid. If the Co-operative Bank had as a matter of fact operated upon the overdraft account and bad drawn any sum with in the limit aforesaid, the Exchange Bank would have an interest pro tanto in those securities and might then have been entitled to pledge or sub-pledge the securities with a third party. But so long as there was no overdraft by the pledgor, the pledgee bad no such interest as it could in-its turn pledge or sub-pledge to a third party. Furthermore, it is clear from the narrative of events given above that the appellant dealt with the securities with third parties on the footing, after an express declaration had been made by him, that those securities were the absolute property of the Exchange Bank. We are not here concerned with -the question of the extent of interest acquired by such third party. We are only concerned with determining the legal position as between the two banks the Exchange Bank being represented by its Managing Director, the appellant. Hence there is no difficulty in holding that on the terms of the contract between the two banks the appellant was not entitled to transfer any interest in those securities and if be did so he did it in contravention of the terms -of the contract. We will now deal with the legal position, apart from the terms of the contract. On the facts stated above the Exchange Bank had become the bailee in respect of the securities. The securities had been delivered by the Co- operative Bank to the Exchange Bank for the express purpose, as disclosed in the contract set out above, that they shall be disposed of in ,accordance with the terms contained in Exhibit G set out above. By the very fact of the delivery of the securities to the bailee the latter became a trustee in terms of the contract, not for all purposes, but only for the, limited purpose indicated by the agreement between the parties. The pledgor has in the present case only transferred his possession of the property to the pledgee who has a special interest in the property of enforcing his charge for payment of an overdraft, if any, whereas the property continues to be owned by the pledgor. The special interest of the pledgee comes to an end as soon as the debt for which it was pledged is discharged. It is open to the pledgor to redeem the pledge by full payment of the amount for which -the pledge had been made at any time if there is no fixed period for redemption, or at any time after the date fixed and such a right of redemption continues until the thing pledged is lawfully sold. Hence the Co-operative Bank in this case could have asked for a return of the securities at any time, because there never was any overdraft. As the pledge had been terminated neither by redemption,, nor by a lawful sale on the happening of such contingencies as the parties contemplated in their agreement or the law allowed, the securities continued to be the property of the Co-operative Bank and the Exchange Bank, or the appellant as its Managing Director., bad no right to deal with them.

It was next argued that-assuming that the essential ingredients of an offence under section 409, Indian Penal Code had been made out, the appellant may have made a mistake of fact in assuming that the Co-operative Bank was indebted to the Exchange Bank or may have made a mistake of law in mistakenly believing that the Exchange Bank had the right as the pledgee to sub-pledge those securities for raising money for its own purposes. We know as a fact that the Co-operative Bank had not taken any overdraft from the Exchange Bank. But it was argued that it had not been proved that the appellant had that knowledge. The appellant in his long written statement has not tried to take shelter behind any such mistake. He was in full control of the bank accounts and as pointed out by the courts below, it is impossible to believe that in the circumstances in which the bank had found itself and when the appellant was hard put to it to collect all the bank's resources to stave off the severe crisis through which it was passing, the appellant would not have known the fact that the Co-operative Bank did not owe his bank any money by way of overdraft. Hence, in our opinion, there is no room for the supposition that the appellant was not aware of the true state of accounts bet- ween the two banks. But then it was argued that the appellant may have made a mistake of law in thinking that he was justified by law in dealing with those securities. The attempt is to bring the case within one of the general exceptions contained in Chapter IV of the Indian Penal Code and set out in section 79 in these terms--