Companies Act Case Law V P Shrivastava Appellant (S) Vs Indian Explosives Ltd & Ors Respondent (S)

Companies Act Case Law

V.P. Shrivastava — Appellant (S) Vs Indian Explosives Ltd & Ors — Respondent (S)

 

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

 

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