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V.P. SHRIVASTAVA vs. INDIAN EXPLOSIVES LTD. & ORS dated 2010-09-24

                                                                 REPORTABLE

                  IN THE SUPREME COURT OF INDIA

 

                 CRIMINAL APPELLATE JURISDICTION

 

           CRIMINAL APPEAL NO.             1843       OF 2010

             (Arising out of S.L.P. (Crl.) No.5167 of 2007)

 
V.P. SHRIVASTAVA                                 --   APPELLANT (S)
 
                                 VERSUS
 
INDIAN EXPLOSIVES LTD. & ORS.                   --    RESPONDENT (S)
 
                                  WITH
 

            CRIMINAL APPEAL NO. 1844                 OF 2010

             (Arising out of S.L.P. (Crl.) No.1198 of 2008)

 
 
 

                            JUDGMENT

 
 
D.K. JAIN, J.:
 
 
      Leave granted.
 
 

2.These appeals, by special leave, arise out of the judgment and order dated

 

28th February 2007, delivered by the High Court of Calcutta in CRR

 

No.2898 of 2004 in a common petition filed by the two appellants herein

 

and one Mr. A.K. Mukherjee, who is now deceased, under Section 482 of

 

the Code of Criminal Procedure, 1973 (in short "the Code").         By the

 

impugned judgment, the High Court has declined to quash a private

 

complaint filed by respondent No.1 company against the appellants and Mr.

                                                                    1


A.K. Mukherjee for offences under Sections 420, 406 and 120B of the

 
Indian Penal Code, 1860 (for short "the IPC').
 
 

3.Shorn of unnecessary details, the facts, material for the purpose of disposal

 
of these appeals may be stated thus:
 
 

      Both the appellants in these appeals were senior employees of the

 

Fertilizer Corporation of India Limited (hereinafter referred to as "FCIL"), a

 

government company within the meaning of Section 617 of the Companies

 
Act, 1956.
 
 

4.On 20th April 1992, the FCIL's Board of Directors passed a resolution to

 

the effect that the company had become a sick company within the meaning

 

of the Sick Industrial (Special Provision) Companies Act, 1985 (hereinafter

 

referred to as "SICA") and hence a reference should be filed with the Board

 

of Industrial and Financial Reconstruction (hereinafter referred to as

 

"BIFR"). On 6th November 1992, FCIL was declared a "sick company"

 
under Section 3(1)(o) of the SICA by the BIFR.
 
 

5.The complainant -- Indian Explosives Limited (hereinafter referred to as

 

"IEL"), respondent No.1 in these appeals, is engaged in the manufacture and

 

sale of industrial explosives. Ammonium nitrate is a major raw material for

 

the manufacture of explosives, and the same was procured by IEL from

 

FCIL. Some time in the year 2001, FCIL entered into a tripartite agreement

                                                                       2


with M/s Bharat Coking Coal Limited (hereinafter referred to as "BCCL")

 

and IEL. As per the arrangement under the agreement, it was agreed that

 

FCIL would supply ammonium nitrate to IEL and against this supply, IEL

 

would supply explosives of an equivalent value to BCCL, which in turn

 

would supply coal of equivalent value to FCIL. It is an undisputed fact that

 

pursuant to the said arrangement ammonium nitrate was supplied by FCIL to

 

IEL for some time. However, due to the breakdown of a synchronized gas

 

compressor and other financial difficulties, FCIL stopped supplies of

 
ammonium nitrate to IEL.
 
 

6. On 2nd November 2001, BIFR formed its final opinion recommending

 

winding up of FCIL and forwarded the same to the High Court of Delhi.

 

Some time in December 2001, FCIL aggrieved by the opinion of the BIFR,

 

preferred a statutory appeal under Section 25 of SICA before the Appellate

 

Authority for Industrial and Financial Reconstruction (hereinafter referred to

 
as "AAIFR"). However, on 16th April 2002, the AAIFR dismissed the said
 

appeal and confirmed the order of the BIFR for the winding up of FCIL. In

 

June 2002, FCIL and its employees preferred a Writ Petition (CWP No.3298

 

of 2002) before the High Court of Delhi challenging the said order of the

 

AAIFR. The writ petition was disposed of by the High Court by its order

 

dated 26th November 2002, whereby it remitted the matter back to BIFR for

 

fresh consideration on the revival of the closed units of FCIL. BIFR, upon

 

                                                                      3


receiving the reference, directed the winding up of FCIL, except the JMO

 

unit and on 2nd April 2004 sent its opinion to the High Court for

 
confirmation.
 
 

7. During the pendency of the writ petition before the High Court, the

 

Government of India, on 30th July 2002, issued a memorandum for closing

 

of all the units of FCIL except the Sindhri and JMO units. On 10th

 

September 2002, the Government of India issued yet another memorandum

 

directing closure of the Sindhri unit as well. It was further directed that FCIL

 

shall implement Voluntary Suppression Scheme in all its units, and all the

 

employees shall be discharged of their employment. The appellants herein

 

availed of the Voluntary Suppression Scheme and were discharged from the

 
service of FCIL.
 
 

8.On 22nd May 2003, IEL instituted a criminal complaint (Case No.

 

2560/2003) in the court of Chief Metropolitan Magistrate, Kolkata under

 

Sections 406, 420 and 120B of the IPC read with Sections 540 and 542 of

 

the Companies Act, 1956 against both the appellants and Mr. A.K.

 
Mukherjee.
 
 

9.Simultaneously, on 25th May 2003, IEL also filed a Title Suit No. 34 of

 

2003 before the 4th Civil Judge, Alipore for recovery of the outstanding

 

amount of Rs.4,20,41,622/- along with future and pendelite interest against

 

                                                                        4


FCIL. IEL, on 23rd January 2004, obtained and was granted permission by

 

the BIFR to continue with the said civil suit subject to the condition that they

 

will not execute the decree in the suit without the permission of the BIFR.

 
 

10.On 30th October 2003, the Chief Metropolitan Magistrate referred the

 

complaint to Metropolitan Magistrate, 8th Court, Kolkata, who issued

 

summons against the appellants and Mr. A.K. Mukherjee. Aggrieved by the

 

order of the Magistrate taking cognizance of the complaint, appellants

 

together with Mr. A.K. Mukherjee preferred the afore-stated petition under

 

Section 482 of the Code for quashing of the order summoning them to stand

 
trial, before the Calcutta High Court.
 
 

11.As stated above, the High Court, vide its impugned judgment has

 

dismissed the said petition. The High Court has inter alia, observed that if

 

the fact that FCIL, of which the accused were senior functionaries, had

 

become sick and the question of its winding up was under consideration by

 

the BIFR was made known to the complainant company, it would not have

 

agreed to the proposal of the accused persons. According to the High Court,

 

in order to arrive at a conclusion whether or not on the available materials

 

the accusation against the appellants would be sustained or not, a detailed

 

enquiry by appreciation of the evidence would be required and such an

 
 
 
 

                                                                        5


exercise, being entirely a matter of trial, cannot be undertaken in

 
proceedings under Section 482 of the Code.
 
 
Hence the present appeals.
 
 

12.Mr. Jaideep Gupta, learned senior counsel appearing for the appellants

 

strenuously urged that the complaint deserves to be quashed as it ex-facie

 
lacks the basic ingredients of               Sections 420 or 406 IPC. It was
 

argued that in the complaint it is not even averred that the accused had a

 

fraudulent or dishonest intention to induce the complainant to enter into the

 

tripartite agreement. Similarly, there is no allegation that the appellants

 

herein had dishonestly misappropriated or converted to their use any

 

property of IEL, which had been entrusted to them. Further, from a bare

 

perusal of the complaint, it is evident that the complainant was aware of the

 

financial health of FCIL and, therefore, it cannot be said that the appellants

 

had suppressed the fact that FCIL was likely to be declared as a sick

 

company. To buttress the plea, learned senior counsel referred to the plaint

 

in the suit. Relying on the decision in All Cargo Movers (India) Private

 

Limited & Ors. Vs. Dhanesh Badarmal Jain & Anr.1, it was submitted that

 

the averments and the documents in the civil suit could be taken into

 

consideration to find out as to whether the allegations in the complaint were

 

correct.       Additionally, learned senior counsel argued that the disputes

 
1
    (2007) 14 SCC 776

                                                                      6


between FCIL and IEL were essentially civil in nature, and the complaint

 

only against the erstwhile employees of FCIL was mala fide and an abuse of

 
the process of court and, therefore, deserves to be quashed.
 
 

13.Per contra, Mr. Sanjoy Ghosh, learned counsel appearing on behalf of the

 

IEL, supported the impugned judgment and argued that the appellants had

 

only disclosed to the IEL that FCIL was going through a financial crunch

 

and, therefore, withholding of material information regarding its moving the

 

BIFR for being declared a sick company was clearly suppression of material

 

facts from IEL with a mala fide intention to induce them to enter into the

 

said agreement with them, knowing fully well that FCIL will not be able to

 

honour its commitment under the arrangement. According to the learned

 

counsel, this tantamounts to cheating as also criminal breach of trust within

 

the meaning of Sections 415 and 405 IPC respectively. Learned counsel

 

thus, contended that the High Court was justified in not analyzing and

 

returning a finding on the truthfulness or otherwise of the allegations in the

 

complaint at such a preliminary stage of the proceedings, when only

 

summons have been issued to the appellants to appear in the court and it is

 

always open to the appellants to apply for discharge before the trial court.

 
 

14.The question for consideration, therefore, is whether or not in the light of

 

the allegations in the complaint against the appellants, the High Court was

 
 

                                                                        7


correct in law in declining to exercise its jurisdiction under Section 482 of

 
the Code?
 
 

15.Before evaluating the contentions advanced on behalf of the parties, it

 

will be useful to briefly notice the scope and ambit of the inherent powers of

 

the High Court under Section 482 of the Code. The section itself envisages

 

three circumstances under which the inherent jurisdiction may be exercised,

 

namely; (i) to give effect to an order under the Code; (ii) to prevent an abuse

 

of the process of court; and (iii) to otherwise secure the ends of justice.

 

Nevertheless, it is neither possible nor desirable to lay down any inflexible

 

rule which would govern the exercise of inherent jurisdiction of the Court.

 

Undoubtedly, the power possessed by the High Court under the said

 

provision is very wide but is not unlimited. It has to be exercised sparingly,

 

carefully and cautiously, ex debito justitiae to do real and substantial justice

 

for which alone the court exists. It needs little emphasis that the inherent

 

jurisdiction does not confer an arbitrary power on the High Court to act

 

according to whim or caprice. The power exists to prevent abuse of authority

 
and not to produce injustice.
 
 

16.In one of the earlier cases, in R.P. Kapur Vs. State of Punjab2 this Court

 

had summarised some of the categories of cases where the inherent power

 
 
 
2
    AIR 1960 SC 866

                                                                        8


under Section 482 of the Code could be exercised by the High Court to

 
quash criminal proceedings against the accused. These are:
 

          (i) where it manifestly appears that there is a legal bar against

          the institution or continuance of the proceedings e.g. want of

          sanction;
 

          (ii) where the allegations in the first information report or the

          complaint taken at its face value and accepted in their entirety

          do not constitute the offence alleged;

 

          (iii) where the allegations constitute an offence, but there is no

          legal evidence adduced or the evidence adduced clearly or

          manifestly fails to prove the charge.

 
 

17. In Dinesh Dutt Joshi Vs. State of Rajasthan & Anr.3, while dealing with

 

the inherent powers of the High Court, this Court has observed thus: (SCC

 
p. 573, para 6)
 

                "6. ... The principle embodied in the section is based upon

            the maxim: quando lex aliquid alicui concedit, concedere

            videtur et id sine quo res ipsae esse non potest i.e. when the

            law gives anything to anyone, it gives also all those things

            without which the thing itself would be unavailable. The

            section does not confer any new power, but only declares that

            the High Court possesses inherent powers for the purposes

            specified in the section. As lacunae are sometimes found in

            procedural law, the section has been embodied to cover such

            lacunae wherever they are discovered. The use of

            extraordinary powers conferred upon the High Court under

           this section are however required to be reserved, as far as

            possible, for extraordinary cases."

 
 
3
    (2001) 8 SCC 570

                                                                           9


18.In G. Sagar Suri & Anr. Vs State of U.P. & Ors.4, this Court had opined

 
as follows:
 
 

          "Jurisdiction under Section 482 of the Code has to be exercised

          with great care. In exercise of its jurisdiction the High Court is

          not to examine the matter superficially. It is to be seen if a

          matter, which is essentially of a civil nature, has been given a

          cloak of criminal offence. Criminal proceedings are not a short

          cut of other remedies available in law. Before issuing process a

          criminal court has to exercise a great deal of caution. For the

          accused it is a serious matter. This Court has laid certain

          principles on the basis of which the High Court is to exercise its

          jurisdiction under Section 482 of the Code. Jurisdiction under

          this section has to be exercised to prevent abuse of the process

          of any court or otherwise to secure the ends of justice."

 

19.Bearing in mind the aforestated legal position in regard to the scope and

 

width of power of the High Court under Section 482 of the Code, we shall

 
now advert to the facts at hand.
 
 

20.As noted above, the complaint against the appellant alleges commission

 

of offences by them of cheating and dishonestly inducing delivery of

 

property; criminal breach of trust and of criminal conspiracy punishable

 
respectively under Sections 420, 406 and 120B of the IPC.
 
 

21.Section 415 IPC deals with "cheating" and reads as follows:

 
 
 

              "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

4
    (2000) 2 SCC 636
                                                                           10

              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".

 

              Explanation.--A dishonest concealment of facts is a

              deception within the meaning of this section."

 
 

It is plain from a bare reading of the Section that to hold a person guilty of

 

cheating, as defined in Section 415 of the IPC, it is necessary to show that at

 

the time of making the promise he had fraudulent or dishonest intention to

 

retain the property or to induce the person so deceived to do some thing

 
which he would not otherwise do.
 
 
 

22.The ingredients required to constitute an offence of cheating have been

 

succinctly laid down in Ram Jas Vs. State of U.P.5, as follows:

 

          "(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

          were not so deceived; and

 

          (iii) in cases covered by (ii)(b), the act or omission should be

          one which causes or is likely to cause damage or harm to the

          person induced in body, mind, reputation or property."

          (Hridaya Ranjan Prasad Verma & Ors. Vs. State of Bihar &

 
5
    (1970) 2 SCC 740
                                                                         11

        Anr.6, S.W. Palanitkar & Ors. Vs. State of Bihar & Anr.7,

        Kuriachan Chacko & Ors. Vs. State of Kerala8)

 
 

23.Similar views were echoed in Medchl Chemicals & Pharma (P) Ltd. Vs.

 

Biological E. Ltd. & Ors.9, wherein it was observed that:

 

        "In order to attract the provisions of Sections 418 and 420 the

        guilty intent, at the time of making the promise is a requirement

        and an essential ingredient thereto and subsequent failure to

        fulfil the promise by itself would not attract the provisions of

        Section 418 or Section 420. Mens rea is one of the essential

        ingredients of the offence of cheating under Section 420. As a

        matter of fact Illustration (g) to Section 415 makes the position

        clear enough to indicate that mere failure to deliver in breach of

        an agreement would not amount to cheating but is liable only to

        a civil action for breach of contract."

 
 

24.It is well settled that in order to constitute an offence of cheating, it must

 

be shown that the accused had fraudulent or dishonest intention at the time

 

of making the representation or promise and such a culpable intention right

 

at the time of entering into an agreement cannot be presumed merely from

 

his failure to keep the promise subsequently. (Also see: Hira Lal Hari Lal

 
Bhagwati Vs. CBI, New Delhi10).
 
 

25.In the instant case, it has been alleged by IEL that at the time of entering

 

into the tripartite agreement, the appellants, by having suppressed the fact

 

that FCIL was likely to be declared a sick company and was, in fact,

 
6
 (2000) 4 SCC 168
7
 (2002) 1 SCC 241
8
 (2008) 8 SCC 708
9
 (2000) 3 SCC 269
10
   (2003) 5 SCC 257
                                                                         12

declared to be so by the BIFR, had dishonest intention to induce IEL to enter

 

into the said agreement, which amounted to cheating. A bare reading of the

 

complaint would show that there is not even a whisper let alone a specific

 

averment that the appellants had dishonestly "induced" IEL to enter into the

 

said agreement/arrangement. On the contrary, the complaint clearly reveals

 

that IEL was fully conscious of the precarious financial health of FCIL at the

 

time they had decided to enter into contract with FCIL and BCCL to ensure

 

a regular supply of their basic raw material from FCIL so that their

 

production of explosives did not suffer. At this juncture it would be apposite

 
to extract relevant portions of the complaint:
 
 

      "6.    That the complainant Company approached the accused

      persons at their office at 41, Chowringhee Road, Kolkatta-700

      071 to supply a large quantity of Ammonium Nitrate and at last

      the accused persons had agreed to such proposal. The complaint

      had been to the office of the accused persons on several

      occasions and had several discussions with this regard with

      some terms and conditions.

 

      7.     That the accused persons supplied Ammonium Nitrate to

      the complaint Company for some time. The accused persons

      who were officers-in-charge of (sic) and were responsible for

      the supply of ammonium nitrate to the complainant's company

      made the following representations to the complainant and

      other officers of the complainant's Company:-

 

             a) That it would not be possible for the accused persons

             to maintain regular supply of Ammonium Nitrate to the

             complainant's company due to acute shortage of funds

             the Company of the accused persons was not in position

             to lift coal from M/S Bharat Coking Coal Ltd. hereinafter

             referred as "BCCL" which is one of the subsidiaries of

 
                                                                      13

      Coal India Ltd. and unless regular supply of coal is

      received by the company of the accused persons from

      BCCL, the manufacture of Ammonium Nitrate would be

      hampered and consequently the company of the accused

      person would not be able to supply the same to the

      company of the complainant.

 

      b) That it was represented by the accused persons that as

      BCCL purchases huge industrial explosives from the

      complainants company, for using explosives in their coal

      mines for mining/procuring coal, and as BCCL supplies

      coal to the company of the accused person, for the

      purpose of its manufacturing Ammonium Nitrate, which

      would be supplied to the Company of the complainant,

      the accused persons would make arrangements with

      BCCL so that instead of making payment to the company

      of the accused persons for supply of ammonium nitrate,

      the Complainant's Company would make an advance

      payment of Rs. 4,20,41,622/- by supply of explosives to

      BCCL and the same would be adjusted for its supply of

      coal to the company of the accused person against supply

      of Ammonium nitrate of equivalent value by the

      company of the accused persons to the complainant's

      company.

      .... .... .... .... .... .... .... .... ...

      .... .... .... .... .... .... .... .... ...

      .... .... .... .... .... .... .... .... ...

 

8.    That on such representations the accused persons induced

      the complainant and the officers of the company to pay a

      sum of Rs.4,20,41,622/- and equivalent to BCCL

      between September 2001 to November 2001 on the

      specific representations that the accused persons would

      supply ammonium nitrate to IEL and the said sum would

      be adjusted towards the supply of ammonium nitrate.

 

...   ...   ....   ....   ....   ....   ....   ....   ....   ....

 
 
 

10. That enquiry revealed that the accused persons deliberately

    and with fraudulent intentions while making the aforesaid

                                                                    14


   representations to the complainant and other officers of IEL

   for dishonestly inducing them to pay Rs.4,20,41,622/- and

   or equivalent to and the said amount an or equivalent was

   entrusted to BCCL in the false representation of the accused

   persons and the said entrustment was made to BCCL on the

   behalf of the accused persons. The accused persons

   deliberately suppressed that FCIL was already declared to

   be a "Sick Company" and was referred to BIFR after

   eroding its net worth and became a `sick company". The

   accused persons also suppressed the fact that BIFR was

   considering winding up of FCIL by recommending to the

   Hon'ble High Court at Delhi.

 

11. That it was further learned that the accused persons with

    deceptive and fraudulent intentions deliberately suppressed

    that a huge amount was already due to various other

    suppliers of raw materials and other creditors, that the

    complainant would have not parted with such a huge

    amount of Rs.4,20,41,622/- and or equivalent to BCCL if

    they were not deceived by the false and fraudulent

    representation of the accused persons and induced to part

    with the said sum.
 

12. That the accused persons had therefore acted in collusion

    and connivance with each other in order to defraud and

    cheat the company of the complainant to make entrustment

    of the said sum of Rs.4,20,41,622/- and or equivalent to

    BCCL for and on the behalf of the company of the accused

    persons.
 
13. That the accused persons were party to a criminal

    conspiracy and criminal design they were in collusion to

    each other intentionally deceived the complainant and

    officers of IEL and by their false and fraudulent

    representation made the company of the complainant to

    believe that they would supply ammonium nitrate to IEL of

    Rs.4,20,41,622/- and or equivalent is paid by IEL to BCCL

    and by such representation induced the complainant and

    other officers of IEL to pay a sum of Rs.4,20,41,622/- and

    or equivalent to BCCL knowing it fully well that the

    representations made by them were false and they would not

    supply ammonium nitrate to IEL in respect of the said sum

                                                              15


               advanced by IEL to BCCL on their behalf and thus they

               have committed offences rendering themselves liable to be

               prosecuted under the provisions of the Section

               120B/420/406 of the Indian Penal Code and also under

               Section 540/542 of the Companies Act, 1956."

                                               (Emphasis supplied by us)

 
 

26.It is manifest from the afore-extracted paragraphs of the complaint that

 

the basis of the complaint is that by deliberately suppressing the fact that

 

FCIL had already been referred to the BIFR after the erosion of its net worth

 

and was likely to be declared a "sick company", the appellants induced IEL

 

to pay Rs.4,20,41,622/- to BCCL and in return did not supply ammonium

 

nitrate to them. In our view, a mere mention of the words "defraud" and

 

"cheat" in para 12 of the complaint, in the setting that these have been used,

 

is not sufficient to infer that the appellants had dishonest intention right at

 

the beginning when, demonstrably, after due deliberations a tripartite

 

agreement was signed, which, under the given circumstances at that

 

juncture, was considered to be in the interest of all the three parties to the

 

agreement. In this regard, it would be useful to advert to the following

 

observations made by this Court in Anil Mahajan Vs. Bhor Industries Ltd.

 
& Anr.11:
 

           "The substance of the complaint is to be seen. Mere use of the

           expression `cheating' in the complaint is of no consequence.

           Except mention of the words `deceive' and `cheat' in the

           complaint filed before the Magistrate and `cheating' in the

           complaint filed before the police, there is no averment about the

11
     (2005) 10 SCC 228

                                                                           16


      deceit, cheating or fraudulent intention of the accused at the

      time of entering into MoU wherefrom it can be inferred that the

      accused had the intention to deceive the complainant to pay."

 
 
 

27.In our opinion, in the present case, at best, it was a case of breach of

 

contract on the part of FCIL, for which the said company is already

 

defending a civil suit filed by IEL. In this behalf, it is also pertinent to note

 

that in para 5 of the plaint filed by IEL it is averred that:

 
 

      "While the aforesaid arrangement was continuing and the

      defendant no.1 supplied various quantities of Ammonium

      Nitrate malt to the plaintiff in the years 2000-2001, the

      defendant no. 1 ran into serious difficulties in continuing its

      production due to breakdown of synchronized gas compressor

      and the other financial problems...."

 
 

28.In our view, the averment strikes at the root of the allegation that at the

 

time of entering into the agreement some time in the year 2001, the

 

appellants had fraudulent intention to somehow induce IEL to enter into the

 

said agreement and part with a huge sum of money. It bears repetition that

 

on their own showing IEL was fully aware of the financial health of FCIL at

 

the time the said contract was entered into, as also the reason why FCIL was

 
unable to continue the production of ammonium nitrate.           It needs little
 

emphasis that in order to constitute an offence of "cheating",                the

 

intention to deceive should be in existence at the time when the alleged

 

inducement was made. In the instant case, such an intention cannot be

 

                                                                         17


inferred from the aforenoted allegations in the complaint and averments in

 

the plaint. In our opinion, therefore, even if the allegations made in the

 

complaint are taken to be correct on their face value, may amount to breach

 

of terms of contract by FCIL but do not constitute an offence of "cheating",

 
punishable under Section 420 of the IPC.
 
 

29.We may now consider whether the allegations in the complaint make out

 

a case of criminal breach of trust, as defined in Section 405 of the IPC, the

 
Section reads as follows:
 
 

           "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 wilfully

           suffers any other person so to do, commits "criminal

           breach of trust".

 

           Explanation 1.--A person, being an employer of an

           establishment whether exempted under section 17 of

           the Employees' Provident Funds and Miscellaneous

           Provisions Act, 1952 (19 of 1952), or not who deducts

           the employee's contribution from the wages payable

           to the employee for credit to a Provident Fund or

           Family Pension Fund established by any law for the

           time being in force, shall be deemed to have been

           entrusted with the amount of the contribution so

           deducted by him and if he makes default in the

           payment of such contribution to the said Fund in

           violation of the said law, shall be deemed to have

 
                                                                      18

                dishonestly used the amount of the said contribution

                in violation of a direction of law as aforesaid.

 

                Explanation 2.--A person, being an employer, who

                deducts the employees' contribution from the wages

                payable to the employee for credit to the Employees'

                State Insurance Fund held and administered by the

                Employees' State Insurance Corporation established

                under the Employees' State Insurance Act, 1948 (34

                of 1948), shall be deemed to have been entrusted with

                the amount of the contribution so deducted by him

                and if he makes default in the payment of such

                contribution to the said Fund in violation of the said

                Act, shall be deemed to have dishonestly used the

                amount of the said contribution in violation of a

                direction of law as aforesaid."

 
 

30.According to the Section, 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; and

 

                (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."

 
 

31.In Onkar Nath Mishra & Ors. Vs. State (NCT of Delhi) & Anr.12, a

 

bench of two Judges of this Court, in which one of us (D.K. Jain, J.) was a

 

member, had observed that two distinct parts were involved in the

12
     (2008) 2 SCC 561

                                                                          19


commission of the offence of criminal breach of trust. The first part consists

 

of the creation of an obligation in relation to the property over which

 

dominion or control is acquired by the accused. The second is the

 

misappropriation or dealing with the property dishonestly and contrary to the

 
terms of the obligation created.
 
 

32. Therefore, in relation to the offence under Section 405, IPC, the first

 

ingredient that needs to be established is "entrustment." In Common Cause,

 

A Registered Society Vs. Union of India & Ors.13, this Court held that:

 

                        "A trust contemplated by Section 405 would arise

                        only when there is an entrustment of property or

                        dominion over property. There has, therefore, to be

                        a property belonging to someone which is

                        entrusted to the person accused of the offence

                        under Section 405. The entrustment of property

                        creates a trust which is only an obligation annexed

                        to the ownership of the property and arises out of a

                        confidence reposed and accepted by the owner."

 
 

33.However, it must be borne in mind that Section 405, IPC 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

 

contingency arises or to be disposed of by him on the happening of a certain

 
 
 
 
13
     (1999) 6 SCC 667

                                                                               20


event. (See: Jaswantrai Manilal Akhaney Vs. State of Bombay14              and
 
Indian Oil Corpn. Vs. NEPC India Ltd. & Ors.15.)
 
 

34.In the instant case, there is nothing in the complaint which may even

 

suggest remotely that the IEL had entrusted any property to the appellants or

 

that the appellants had dominion over any of the properties of the IEL,

 

which they dishonestly converted to their own use so as to satisfy the

 

ingredients of Section 405 of the IPC, punishable under Section 406 IPC.

 
 

35.Having come to the conclusion that no prima facie case had been made

 

out against the appellants in respect of the alleged offences under Sections

 

420 and 406 IPC, the question of alleged conspiracy between the appellants

 

does not arise.         Nevertheless, in order to bring home the charge of

 

conspiracy within the ambit of Section 120B of the IPC, it is necessary to

 

establish that there was an agreement between the appellants for doing an

 
unlawful act. The complaint lacks any such substance.
 
 

36.The upshot of the foregoing discussion is that no prima facie case is made

 

out against the appellants in respect of alleged offences under Sections 420,

 

406 and 120B of the IPC and, in our opinion, it was a fit case where the

 

High Court should have exercised its jurisdiction under Section 482 of the

 
Code quashing the complaint against the appellants.
 
14
     AIR 1956 SC 575
15
     (2006) 6 SCC 736

                                                                     21


37.For the aforegoing reasons, the appeals are allowed; the impugned order

 

is set aside and the order of the Magistrate taking cognizance in Complaint

 
Case No.2560 of 2003 is quashed.
 
 
 
 

                                     ...........................................J.

                                     (D.K. JAIN)

 
 
 

                                    ............................................J.

                                    (H.L. DATTU)

NEW DELHI;
SEPTEMBER 24, 2010
 
 
 
 
                                                                          22

 

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