TMI Blog2010 (9) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 Ltd. (hereinafter referred to as "FCIL"), a Government company within the meaning of section 617 of the Companies Act, 1956. 4. On April 20, 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 Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA") and hence a reference should be filed with the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the BIFR"). On November 6, 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing closure of the Sindhri unit as well. It was further directed that the 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 May 22, 2003, IEL instituted a criminal complaint (Case No. 2560 of 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 May 25, 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 pendente lite interest against FCIL. IEL, on January 23, 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 October 30, 2003, the Chief Metropolitan Magistrate referred the complaint to Metropolitan Magistrate, 8th Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel argued that the disputes 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. 14. 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 learned counsel, this tantamounts to cheating as also criminal breach of trust within the meaning of sections 415 and 405 of the IPC respectively. Learned counsel thus, contended that the High Court was justified in not analysing and returning a finding on the truthfulness or otherwise of the allegations in the complaint at such a preliminary stage of the proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with the inherent powers of the High Court, this court has observed thus (SCC page 573, paragraph 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." 19. In G. Sagar Suri v. State of UP [2000] 100 Comp Cas 613 ; 2 SCC 636, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 v. State of Bihar [2000] 4 SCC 168, S. W. Palanitkar v. State of Bihar [2002] 1 SCC 241 and Kuriachan Chacko v. State of Kerala [2008] 8 SCC 708). 25. Similar views were echoed in Medchl Chemicals and Pharma P. Ltd. v. Biological E. Ltd. [2000] 3 SCC 269, 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 failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plainant'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 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 supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 advanced by IEL to BCCL on their behalf and thus they have committed offences rendering themselves liable to be prosecuted under the provisions of section 120B/420/ 406 of the Indian Penal Code and also under section 540/542 of the Companies Act, 1956." (emphasis supplied by us)" 28. 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 paragraph 12 of the complaint, in the setting that these have been used, is not sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 31. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 405 of the IPC, the first ingredient that needs to be established is "entrustment". In Common Cause, A Registered Society v. Union of India [1999] 6 SCC 667, 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." 35. However, it must be borne in mind that section 405 of the 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 the 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 event (see : Jaswantrai Manilal Akhaney v. State of Bombay AIR 1956 SC 575 and Indian Oil Corpn. v. NEPC India Ltd. [2006] 6 SC 736). 36. In the instant case, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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