Delhi High Court

J.R.D. Tata vs Payal Kumar And Anr. on 5 March, 1986

Equivalent citations: 1987 CriLJ 447, 1986 (2) Crimes 449, 1986 (11) DRJ 49 Author: J Jain Bench: J Jain JUDGMENT J.D. Jain, J. (1) All the above mentioned Criminal Revision Petitions. are directed against order dated 23rd April, 1982 of a Metropolitan Magistrate, summoning the above mentioned petitioners in a complaint case under Sections 406 & 477A read with Section 120B, Indian Penal Code. (2) The facts giving rise to the above mentioned revision petitions in brief are that Shri J.R.D Tata. petitioner in Cr. R.No. 170/82, is the Chairman of M/s. Tata Iron & Steel Company Limited (hereinafter referred to as "the Company"). Rusi Mody, petitioner in Cr. R. No. 179/82 is the Managing Director of the Company while P.S. Prasad and Sujit Gupta, petitioner in Cr. R. No. 178/82, are the Sales Manager and Regional Director respectively of the Company. At the relevant time P.S. Prasad was Manager Sales and Sujit Gupta was Regional Director of the Company. M/s. Amin Chand Bhola Nath, which was a partnership firm (respondent No. 2 in all the above mentioned revision petitions) comprising Suresh Kumar, Mukesh Kumar and Yogesh Kumar, sons of Rajender Kumar, was carrying on business of re-rolling as conversion agents for the Company. The precise nature of the business was that the company used to send tested steel billets from time to time to respondent No. 2 for conversion into Tiscon Bars. During the course of stock checking of respondent No. 2 by the officials of the Company in February 1979, certain shortages of the stock of Tiscon ban were dctected. The same were estimated

to be worth Rs. 10,22,458.00 Suresh Kumar, husband of respondent No.1 was the managing partner of respondent No. 2 at that time. The Company sought to fasten criminal liability on respondent No. 2 for alleged misappropriation of the Tiscon bars found short at the time of checking. Eventually a settlement was arrived at between the parties which culminated in agreement of pledge of movables, viz. diamond jewellery etc., dated 23rd February, 1979. The said agreement was executed between respondent No. 2 on the one hand and the Company on the other, the latter being represented through P.S. Prasad. Under the said agreement respondent No. 2 accepted its liability to pay a sum of Rs. 8,52,414.00 after adjusting Rs. l,70,044.00 due to respd. No. 2 for conversion charges to the Company on account of shortage in the stock of Tiscen bars. They paid a sum ofRs.2,00,000.00 by means of cheques drawn on the New Bank of India then and there and undertook to pay the balance amount of Rs 6,52,458.00 within six months of the agreement. Respondent No. 2 acting through Shri Suresh Kumar also pledged jewellery belonging to his wife Mrs. Payal Kumar, respondent No. 1 herein, by way of security for the payment of the said amount. The estimated value of the pledged jewellery was stated to be Rs. 3,72,000.00 . It was further stipulated that in the event of default on the part of respondent No. 2 in discharging their liability by making payment of the balance amount stated above Along with interest within six months of the agreement the Company would have the right to sell the pledged ornaments without the intervention of a court of law and appropriate the sale proceeds thereof after deducting the expenses etc. incurred on sale towards the amount outstanding against respondent No. 2 and interest falling due thereon. The agreement, however, provided that the Company would give notice of 15 clear days of the sale of the pledged ornaments to respondent No. 2. The company also agreed not to institute criminal proceedings against respondent No. 2 in case they furnished further security in the amount of Rs. 2,80,458.00 within six months of the agreement. In other words, the Company agreed not to institute criminal proceedings of any kind against respondent No. 2 in the event of the latter paying off the full amount due from them within six months of the agreement.

(3) On 3rd March, 1982, the respondents instituted a complaint against S/Shri P.S. Prasad, Sujit Gupta, Rusi Mody, JR.D.Tataand Surinder Gupta of M/s. Shri Ram Hari Ram, Jewellers, for committing offences under Section 406, 418, 419. 420, 477A, 120-B and 109 of the Indian Penal Code. They averred that under threat of prosecution, Suresh Kumar, husband of respondent No. I, who was then working as managing partner of respondent No. 2, was coerced to enter into agreement of pledge of movables with the Company, Ex. Public Witness 2/B being copy thereof. For that very reason respondent No. I was obliged to pledge her very valuable diamond jewellery (as detailed in annexure 'A' to the complaint) with the- Company although it was her Istridhan and its value was estimated at a very low figure of Rs. 3.72 lakhs. The main reason for the shortage found in the stock of Tiscon bars was said to be supply of raw material of different specifications due to mis-management at the end of the Company which resulted in higher wastage. It was further averred that the parties had agreed that the final amounts due to the Company would be ascertained after going into the accounts of both the partial because the Company had yet to make payment on account of bundling, bending and conversion charges etc. to respondent No. 2 on the basis of the bills submitted to the Company. Further, an assurance was given by P.S.Prasad, accused No. I, to the husband of respondent No. I that the pledged jewellery would not be old and it was being delivered to the Company only by way of collateral security. Hawevar, the respondents were shocked to learn on receipt of letter dated 8th December, 1979 of the Company, accused No. 2, that the pledged jewellery had since been disposed of by auction on 29th November, 1979. The precise grievance of the complainants respondents was that they did not receive any notice of sale of the pledged jewellery as stipulated in the foresaid agreement. On the other band, Mukesh Kumar, who was then working as managing partner of the firm-respondent No. 2, vide his letter dated 23rd November, 1979 sent 13 bills claiming a total amount of Rs. 5,56,543/29P. and claimed adjustment of same against the amounts due from them to the Company. Further, he enclosed cheques for payment of Rs. 219,515/14P. in full and final settlement of the whole amount due to the Company. Hi

.ilnoloughtrcIcaseofthejeweHcrypIcdgcdby respondent f4o.l through her bwbandSuresbKumarwithtbe Company. The said letter was duly received by the Company on 26th November, 1979 but even than the petitioners P.S. Prasad and Sujit Gupta in conspiracy with petitioners J.R.D. Tata and Rusi Mody disposed of the jewellery pledged with the Company with mala fide and dishonest intention of causing wrongful loss to the complainants and wrongful gain to themselves. They denied having received any notice or letter dated 28th August, 1979 or 13th November, 1979 which were allegedly sent by the Company to them as stated in their letter dated 8th December, 1979 (annexure 'E' to the complaint). (4) The allegation made against accused I to 4 in nutshell was that they were entrusted with the dominion over the jewellery as pledgees but they hatched a conspiracy and mis-appropriated the same dishonestly in violation of the entrustment and its express and implied terms. Surinder Gupta, accused No. 5, was alleged to have been a party to the said conspiracy as he ostensibly purchased the pledged jewellery for a meagre sum of Rs. 4.40 lakhs although the actual value thereof was much more. The alleged auction by accused l& 2 i.e. P.S Prasad and Sujit Gupta was, according to the complainantsrespondents, only a stage managed affair. (5) The learned counsel for the petitioners has assailed the impugned' order primarily on the ground that breach of the contract of pledge, if any, gives rise to a civil liability but the respondents have indulged in distortion of facts so as to impart criminal tinge to the whole case and harass and pressurise the petitioners into some kind of settlement. It is urged that respondent No. 2 was bound to make good the balance amount within six months of the agreement failing which it was permislible to the petitioners to dispose of the pledged jewellery by sale/auction. Therefore, on failure of respondent No. 2 to pay the balance amount despite service of notice of demand dated 28th August, 1979 as stipulated in the agreement the jewellery pledged with them was liable to be sold on 12th September, 1979, annexure 'D' of Cr R. No. 178/82 being copy of

the said notice. Even then the petitioner did not dispose of the pledged jewellery by auction but waited uptil 29th November, 1979 when the same was sold by auction to M/s. Shri Ram Hari Ram, Jewellers, for a sum of Rs. 4.40 lakhi which was much more than its estimated value which was got done by Suresh Kumar through M/s. Nathu Mal & Sons, approved valuers and jewellers. It is also pointed out that respondent No. 1 was neither a privy to the agreement of pledge nor was she a party to the handing over of the jewellery which was admittedly done by her husband, Suresh Kumar as Managing Partner of respondent No. 2. Unfortunately, however, the learned Magistrate without taking notice of all these salient features of the caie hastened to issue process against the petitioners under both Sections 406 & 477A, Indian Penal Code. (6) Section 172 of the Contract Act defines pledge as the bailment of goods as security for payment of a debt or performance of a promise. The exprssion "bailment" has been defined in Section 148 of the Contract Act as delivery of goods by one person to another for some purpose upon a contract that they shall when the purpose is accomplished be returned or otherwise disposed of according to the directions of the person delivering them. Section 176 of the said Act confers a right on the pledgee to bring a suit against the pledger upon the debt or promise and retain the goods pledged as a collateral security. In the alternative he may sell the thing pledged on giving the pledger a reasonable notice of the sale. However, this power can be exercised by the pledgee if the pledger makes default in payment of the debt or performance at the stipulated time of the promise in respect of which the goods arc pledged. The scope of Section 176 in the words of Shclat, J., in Lallan Prasadv. Rahmat Ah and another, , is as under : "THEtwo ingredients of a pawn or a pledge are : (1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee, and (2) a pawnee has only a special property in the pledge but the general property therein remains in the pawner

&nd wholly reverts to him on discharge of the debt......................A contract of pawn thus carries with it an implication that the security is available to satisfy the debt and under this implication the pawnee has the power of sale on default in payment where time is fixed for payment and where there is no such stipulated on demand or payment and on notice of his intention to sell after default. The pawner however has a right to redeem the property pledged until the sale........................ But if the pawner tenders payment of the debt the pawnee has to return the property pledged" (7) Evidently a breach of contract of pledge by the pledger or pawnee will in the normal course give rise to a civil liability alone but as shall be 53 presently seen, there may be circumstances where the alleged breach is so grave and want on that it may warrant an interfere of dishonest or fraudulent intention on the part of the pledgee in disposing of the pledged goods. In other words, every offence of criminal breach of trust involves a civil wrong in respect of which the complainant may seek redress in a civil court but every breach of trust in the absence of requisite means read is not criminal. As observed by the Supreme Court in Jaswantrai Manilal Akhaney v. The State of Bombay. : "THEsame set of facts may give rise both to a civil liability and a criminal prosecution. But if there is no means rea, or if the other essential ingredients of an offence are lacking, the same facts may not sustain a criminal prosecution, though a civil action may lie". (8) So, dealing with cases of criminal breach of trust the difference between civil and criminal liability must be borne in mind. (9) On a plain reading of Section 405 which defines criminal breach of trust, it is manifest that the following ingredients must be satisfied before the offence can amount to "criminal breach of trust" :

(I)the accused must have been entrusted with property or with dominion over property; (ii) the accused must have misappropriated or converted to his own use that property or used or disposed of that property in violation of any direction or law describing the mode in which such trust is to be discharged or used or disposed of the property in violation of any legal contract (express or implied) which be has made touching the discharge of such trust. (10) It is now well settled that the word "trust" is a comprehensive expression and has been used in Section 405 as covering not only the relationship of trustee and beneficiary but also that of bailor and bailee, master and servant, pledger and pledgee and all other relations which postulate the existence of a fiduciary relationship between the complainant and the accused. In Som Nath Puriv.State of RaJasthan, , the Supreme Court observed: "THEexpression 'entrusted' in Section 409 is used in a wide sense and includes all cases in which property is voluntarily handed over for a specific purpose and is dishonestly disposed of contrary to the terms on which possession has been handed over............ As long as the accused is given possession of property for a specific purpose or to deal with it in a particular manner, the ownership being in some person other than the accused, he can be said to be entrusted with that property to be applied in accordance with the terms of entrustment and for the benefit of the owner." (11) Thus, the fundamental core of the offence of criminal breach of trust is that a property must be entrusted and the dominion of the property hould be given to the trustee which carries with it the implication that the perion handing over any property continues to be its owner. Further, the person handing over the property must have confidence in the person taking theproperty so as to create a fiduciary relationship between them. In the light of the foregoing observations of the Supreme Court, therefore, it cannot be gain said that the goods pledged by the respondents with the petitioners constituted entrustment within the definition of Section 405, Indian Penal Code and the petitioners were to hold the property for the benefit of both the

respondents in whom the ownership thereof still vested as also for their qwn benefit as security for payment of the debt in accordance with the terms and conditions of the agreement of plegde. (12) In Jaswantrai Manilal Akhaney (Supra) the facts were that under the contract entered into by the pledger Bank with the pledgee Bank, the securities owned by the pledger were to be kept by the pledgee Bank charged with the payment of an amount up to a certain limit as may from time to time have been advanced or be advanced to the pledger Bank under the overdraft arrangement. However, the pledgee Bank bad no right to deal with the securities by way of pledge, sub-pledge or assignment until certain contingencies contemplated in the contract bad arisen. The Supreme Court held that the. contract did create a trust in favor of the pledger Bank in respect of pledged securities. Their Lordships observed that : "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 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 congency arises or to be disposed of by him on the happening of a certain event. The person who transfers possession of the property to the second party still remains the legal owner of the property and the person in whose favor possession is so transferred has only the custody of the property to be kept or disposed of by him for the benefit of the other party, the person so put in possession only obtaining: a special interest by way of a claim for money advanced or spent upon the safe keeping of the thing or such other incidental expenses as may have been incurred by him." (13) Their Lordships further observed that : "WHEREsecurities have been delivered with a view to cover the repayment of any overdraft by the pledger Bank to the pledgee Bank and it is agreed that they are to be disposed of on the arising of a stipulated contingency only, then

by the very fact of the delivery of the securities to the bailee the latter becomes a trustee in terms of the contract, not for all purposes, but only for the limited purpose indicated by the agreement between the parties." (14) The observationi of their Lordships, in my.view, would squarely apply to the facts of the instant case. Hence, I entertain no shadow of doubt that there was entrustment of the pledged good resulting in dominion. of the petitioner over the same within the meaning of Section 405, Indian Penal Code. (15) The next question which will then arise is whether the conduct of the petitioners in disposing of the pledged jewellery by auction sale to Surinder Gupta, accused No. 5, constitutes dishonest misappropriation or disposal of that property so as to amount to criminal breach of trust. (16) The learned counsel for the petitioners has canvassed with considerable vehmence that the jewellery in question was auctioned by the petitioners after due compliance with the terms and conditions of the agreement of pledge, viz. after due service of notices dated 28th August, 1979 and 13th November, 1979 upon Suresh Kumar about the intended sale of the pledged jewellery. Substance for this agreement is sought from letter dated 8th December, 79 of the Company to respondent NO. 2 in which a reference has been made to both the said letters. However, the respondents have categorically denied the receipt of said letters in the complaint. Not only that, both Mukesh Kumar and Suresh Kumar entered the witness box as Public Witness 2 and Public Witness 3 respectively and denied having received any of the aforesaid letters. The learned counsel for the petitioners has contended that this amounts to suppression of true facts on their part. Be that as it may, it is a matter to be gone into at the stage of enquiry/trial and not by this Court while hearing this petitioner under Section 482 of the Code of Criminal Procedure (hereinafter referred to as 'the Code'). It may be, however, pertinent to notice here that the alleged notices were issued to Suresh Kumar and not to respondent No. 2 who was the pawner, while Suresh Kumar was only acting as managing partner on its behalf. The learned counsel for the respondents has also drawn my

attention to the facts that both the notices did not conform to the specific stipulation in the agreement of pledge that pawnee would give a notice of 15 clear days of the sale to the pawner. Thus, according to the respondents, there was no compliance with the terms and conditions of the contract. (17) Still worse, it would appear that letter dated 23rd November, 1979 of respondent No. 2 (Ex. Public Witness 2/C) was only received by the petitioners. The said letter has been acknowledged by the petitioners in their letter dated 8th December, 1979, annexure 'E' to the complaint. If that be so, it is not intelligible as to what was the hurry in disposing of a valuable security like diamond jewellery. The submission of the learned counsel for the petitioner is that under the contract the respondents bad no right to claim adjustment of the charges included in the bills of a subsequent period. So, the petitioners were under no obligation to stay the auction of the pledged jewellery. The answer of the respondents is that they had ceased to be the conversion agent of the Company subsequent to the agreement of pledge. However, nothing has come on record with regard to the same. It is, therefore, for the trial court to ascertain whether letter dated 13th November, 1979 of respondent No. 2 was received by the Company well in time and, if so, whether the petitioners acted in unholy haste out of any malafide or ulterior motive. All that I may say for the present is that these circumstances are weighty enough to give rise to grave suspicion and cause doubt on the bonafides of the petitioners in disposing of the pledged jewellery ; at least ex-facie. It may also be noticed that there is an evidence of one Khanna Jeweller to the effect that the items of jewellery pledged with the Company were sold in one lot despite his suggestion that they could fetch more price if sold separately item-wise. (18) The law is well settled that at the stage of issuing process the Magistrate is mainly concerned with the allegations made in the complaint or the evidence led in support of the same and is only to be prima facie satisfied whether there are sufficient grounds for proceeding against the accused. The Magistrate is not required to go into the detailed discussion of the merits or demerits of the

case (see Smt. Nagawwa v. Veeranna Shivalingappa Konjalqi and others, and Kewal Krishna. SuraJ Bhan, ). That being the legal position the Magistrate was not supposed to weight the evidence meticulously as if he were the trial Court. Moreover the standard to be adopted by the Magistrate in scrutinising the evidence at the stage of Sections 203 and 204 is not the same as the one which is to be kept in view at the stage of framing the charges. So, taking into consideration all these facts, it cannot be ex-facie said that there was no guilty intention/knowledge on the part of the petitioners in hurriedly proceeding with the disposal of the pleadged jewellery in somewhat irregular manner. (19) The jurisdiction of the High Court while exercising inherent powers under Section 482 of the Code to quash a First Information Report or a complaint is very limited. It is well settled by long catena of decisions of the Supreme Court that it has no jurisdiction to examine the correctness or otherwise of the allegations. The High Court would be justified in quashing the complaint and the proceedings only if no offence is made out on the allegations made in the complaint or documents accompanying it per se. In Smt. Nagawwa (supra) the Supreme Court considered the scope of Sections 202 and 204 of the Code and while laying down the guidelines and the grounds on which the proceedings could be quashed by the High Court, it observed as follows :"THUSit may be safely held that in the following cases an order of the Magistrate issuing process against the accused can be quashed or set aside: (1) Where the allegations made in the complaint or the statement of the witnesses recorded in support of the same taken at their face value make out absolutely no case-against the accused or the complaint docs not disclose the essential ingredients of an offence which is alleged against the accused ; (2) Where the allegations made in the complaint are patently absured and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused ; (3) Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary

having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and (4) Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent authority and the like. The cases mentioned by us are purely illustrative and provide sufficient guidelines to indicate contingencies where the High Court can quash proceedings. The Supreme Court further said that : "At any rate, at the stage of Section 202 or Section 204 of the Code of Criminal Procedure as the accused had no locus standi the Magistrate had absolutely no jurisdiction to go into any materials or evidence which may be produced by the accused who could be present only to watch the proceedings and not to participate in them. Indeed, if the documents or the evidence produced by the accused is allowed to be taken by the Magistrate then an inquiry under Section 202 would have to be converted into a full-dress. trial defeating the very object for which this section has been engrafted. The High Court in quashing the order of the Magistrate completely failed to consider the limited scope of an inquiry under Section 202. Having gone through the order of the Magistrate we do not find any error of law committed by him. The Magistrate has exercised his discretion and has given cogent reasons for his conclusion. Whether the reasons were good or bad, sufficient or insufficient, is not a matter which could have been examined by the High Court in revision We are constrained to observe that the High went out of its way to write a laboured judgment highlighting certain aspects of the case of the accused as appearing from the documents filed by them which they were not entitled to file and which were not entitled in law to be considered. (20) This authority has been followed and reaffirmed in subsequent decisions of the Supreme Court, viz. Municipal Corporation of Delhi v. Ram Kishan & others, 1983SCC(Crl.)115and.SW. Pritabhav Suraj Kumar, . (21) It is, therefore manifestly clear that proceedings against the accused at the initial stages can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words, the test is

thit taking the allegations and the complaint as they are, without adding or sub-tracting anything, if no offence is made out then the High Court would be justified in quashing the proceedings in the exercise of its powers under Section 482 of the Code. Unfortunately for the petitioners the allegations made in the complaint in the present case and the documents accompanying the same are quite clear and specific. They prima facie constitute an offence under Section 406, Indian Penal Code. at least against the petitioner Rusi Mody, who was the Managing Director of the Company at the relevant time and as such was in overall charge and control of all the affirs of the Company, P.S. Prasad and Sujit Gupta, who were actually handling affirs of the Company and dealing with the case of the respondent No. 2. It is, however, highly doubtful that the petitioner J.R.D Tata, who was the Chairman of the Company, would have the knowledge of this episode although there is an allegation to that effect in the complaint and in the testimony of Public Witness 2 and Public Witness 3. Needless to say that the position of Managing Director of the Company is quite different from that of its Chairman because the former is directly in charge of its affirs. Reference in this context may be made with advantage to Bikram Singh v. The State, 1974 Cr.L.J. (22) To sum up, therefore the above mentioned revision petitions with the solitary exception of Cr. R. No. 170/82, arc devoid of any merit. Hence, Criminal Revision No. 170/82 is allowed and the complaint against Shri J.R.D. Tata, petitioner therein is quashed. However, Criminal Revision Petitions No. 178/82 and 179/82 are dismissed, as being without any substance. The parties (other than Shri J.R.D. Tata) are directed to appear before the concerned Court on 10th April, 1986.