TMI Blog1956 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... to incur expenses out of the funds of the company. Section 179 is an enabling provision to enable the liquidator to do certain things with the sanction of the court. It does not control the general law of the land. Appeal dismissed. - 152 OF 1954 - - - Dated:- 4-5-1956 - VIVIAN BOSE, JAGANNADHADAS AND SINHA, JJ. H.J. Umrigar and R.A. Govind for the Appellant. Porus A. Mehta, R.H. Dhebar and P.G. Gokhale for the Respondent. JUDGMENT Sinha, J. This is an appeal by special leave directed against the concurrent orders and judgments of the courts below convicting the appellant under section 409, Indian Penal Code, and sentencing him to rigorous imprisonment for three months and a fine of Rs. 201 or in default, further six weeks rigorous imprisonment. As the appellant had been convicted and sentenced for a similar offence in another case tried by the same Presidency Magistrate, 19th Court, Esplanade, Bombay, he directed the sentence in this case to run concurrently with the sentence in the other case. The charge against the accused in the trial court is in these terms: "The accused is charged under section 409 of the Indian Penal Code for com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Exchange Bank paid off the dues of the Canara Bank by taking a fresh loan of the same amount of one lakh from Messrs. Merwanji Dalai Co. and pledging the same securities as had been pledged to the Canara Bank. On the 28th April, 1949, Messrs. Merwanji Dalai Co. demanded back their money by the forenoon of the day following. As the Exchange Bank could not pay the amount as demanded, the pledgees aforesaid sold those securities including the securities belonging to the Co-operative Bank, for realising their dues, on the 3rd May, 1949. In the meantime, in answer to a letter from the Co-operative Bank to the Exchange Bank asking for a certificate for the securities held by the latter on behalf of the former in the overdraft account, the Exchange Bank issued the certificate dated the 1st April, 1949, to the effect that at the close of business on the 31st March, 1949, it held Government of India securities of the total value of Rs. 75,000 as security against the overdraft facilities granted to the Co-operative Bank and that there was no overdraft against the said securities on that date. Subsequently, on the 29th April, 1949, the Co-operative Bank wrote to the Exchange Bank aski ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities belonging to the Co-operative Bank, as also other securities. He deposed to the fact that it was the appellant who finalised the transaction on behalf of the Exchange Bank. He also proved that in default of payment by the Exchange Bank on demand by his firm, it sold the securities including the securities in question and realised the dues from the bank from the sale proceeds of securities of the value of one lakh of rupees. The third witness for the prosecution was the chief accountant of the Exchange Bank who functioned as such till the 2nd May, 1949, when the bank closed down. He also had a power of attorney from the bank to act jointly with another person with a similar power of attorney. According to this witness, the appellant as the managing director exercised the powers of borrowing, raising money, purchasing, selling and pledging of bonds, scrips and other forms of securities on behalf of the bank and its constituents during the relevant period and that no one else exercised those powers. He also testified to the fact that there was a crisis in the affairs of the bank from about the middle of February, 1949, and that there was a rush on the bank which continued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded over to the Canara Bank against the loan. The accused actually asked me for these securities and I handed them to the accused". To a court question as to why he did not bring it to the notice of the appellant that the securities in question belonged to the Co-operative Bank and not to the Exchange Bank, his answer is in these words: "In fact, the accused himself told me to bring securities pledged by the Cambay Co-operative Bank with the Exchange Bank." He also proves exhibit L, which is a very important document in this case and proves that it was signed by the accused. He further states that the declaration in that document that the securities represented the Exchange Bank's investments was not correct. He also makes detailed statements as to the different kinds of interest which the appellant had in the Exchange Bank. He was drawing Rs. 2,500 as monthly salary as the managing director. He was also drawing a salary of Rs. 1,000 from the Union Life Assurance Co. Ltd., as its managing director. The insurance company and its branches had a current account with the Exchange Bank and had advanced to the latter six to seven lakhs of rupees as "call deposits". The appellant wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sanction of the Company Judge who was in seisin of the liquidation proceedings in respect of the Exchange Bank and that therefore the provisions of sections 179 and 237 of the Indian Companies Act had not been complied with; that the securities in question had not been entrusted to the appellant but to the Exchange Bank, if at all there was any entrustment, and that as a matter of fact and law, the Exchange Bank had not been entrusted with the securities, that the Exchange Bank "could legally deal with the securities in any manner it liked", as provided in the documents, exhibits E, F and G, between the two banks; that the sub-pledging of the securities with the Canara Bank or with Messrs. Merwanji Bomanji Dalai was "perfectly within the four corners of the law", and that the essential ingredients of an offence under section 409, Indian Penal Code, had not been made out. Grievance was also sought to be made of the fact that Inspector Milburn who had investigated the case had not been called as a prosecution witness, with the result that the appellant had been deprived of the right of challenging the prosecution evidence with reference to the police diary. The learned Magistra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Exchange Bank which he represented during the transactions in question. On appeal to the Bombay High Court, a Division Bench of that court dismissed the appeal substantially agreeing with the findings of the trial court. Dealing with a new point raised before the appeal court, namely, that the appellant was under a mistake of fact or law as to the indebtedness of the Co-operative Bank to the Exchange Bank or as to its powers to deal with the security, the High Court held that there was no possibility of the appellant having made any mistake of fact in good faith. The court also pointed out that the appellant himself had not raised this plea of mistake either about the facts of the case or about any doubtful question of law. The court also pointed out the declarations made by the appellant on behalf of the Exchange Bank that the securities belonged absolutely to the bank and represented its investments statements which he knew were false. While dealing with the appeal on the question of sentence, the High Court pointed out that there was good evidence to support the inference that the appellant had been actuated by motives of personal benefit also. In that view of the matter the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in payment of all costs charges and expenses of and incident to such sale or disposal and the enforcement of the pledge and charge in your favour hereby created, secondly in repaying the amount of such advance or credit with interest as aforesaid and all costs charges and expenses incurred by you in relation thereto not otherwise met including loss in exchange (if any) and all other debts and monies however due to you by us and lastly in payment to us of the surplus if any thereafter remaining, declaring as it is hereby expressly provided agreed and declared that this shall be continuing security to cover the amount of any advance or credit which you have allowed to us or may from time to time allow us with interest costs charges and expenses and all other debts and monies due as aforesaid ." Reading exhibits E, F and G together, it is clear that the securities of the face value of Rs. 75,000 were pledged to the Exchange Bank as security for overdraft up to the limit of Rs. 66,150 for which the Co-operative Bank had given the promissory note to the Exchange Bank. It was further stipulated that in the event of the pledgor making a default in payment on demand of the amount advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated upon the overdraft account and had drawn any sum within the limit aforesaid, the Exchange Bank would have an interest pro tanto in those securities and might then have been entitled to pledge or sub-pledge the securities with a third party. But so long as there was no overdraft by the pledgor, the pledgee had no such interest as it could in its turn pledge or sub-pledge to a third party. Furthermore, it is clear from the narrative of events given above that the appellant dealt with the securities with third parties on the footing, after an express declaration had been made by him, that those securities were the absolute property of the Exchange Bank. We are not here concerned with the question of the extent of interest acquired by such third party. We are only concerned with determining the legal position as between the two banks, the Exchange Bank being represented by its managing director, the appellant. Hence there is no difficulty in holding that on the terms of the contract between the two banks the appellant was not entitled to transfer any interest in those securities and if he did so, he did it in contravention of the terms of the contract. We will now deal with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stain a criminal prosecution, though a civil action may lie. We have therefore to examine whether or not there was mens rea in this case or whether the necessary element of a criminal offence have been made out. It has been contended that no offence under section 409, Indian Penal Code, has been brought home to the appellant for the reasons, (1) that there was no entrustment, (2) that there was no mens rea, and (3) that there was no dishonesty on the part of the appellant. For an offence under section 409, Indian Penal Code, the first essential ingredient to be proved is that the property was entrusted. It has been argued that in this case there was no such entrustment as is contemplated by that section; and that the securities were pledged with the Exchange Bank by the Co-operative Bank which was in the position of a debtor to the former. The contention is that the parties never contemplated the creation of a trust in the strict sense of the term. But 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 conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intended both and, as a matter of fact, he caused wrongful loss to the pledgor bank and wrongful gain to the pledgee bank. The Exchange Bank raised money on those securities which it was not entitled to do and the Co-operative Bank was deprived of those securities, even though not for all times. It is settled law that a deprivation even for a short period is within the meaning of the expression. If he disposed of those securities with the intention of causing wrongful loss to the one and wrongful gain to the other, there can be no question but that the appellant had the necessary mens rea. It was next argued that assuming that the essential ingredients of an offence under section 409, Indian Penal Code, had been made out, the appellant may have made a mistake of fact in assuming that the Co-operative Bank was indebted to the Exchange Bank or may have made a mistake of law in mistakenly believing that the Exchange Bank had the right as the pledgee to sub-pledge those securities for raising money for its own purposes. We know as a fact that the Co-operative Bank had not taken any overdraft from the Exchange Bank. But it was argued that it had not been proved that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no mistake about the basic fact, the provisions of section 79, Indian Penal Code, are not attracted to this case. It now remains to deal with certain objections relating to the illegality or irregularity in the procedure followed in the trial of this case. It was argued that this prosecution was incompetent for the reason that no sanction of the Company Judge had been obtained under section 179 of the Indian Companies Act. The relevant portion of section 179 is as follows: "The official liquidator shall have power, with the sanction of the Court, to do the following things: ( a )to institute or defend any suit or prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; " In terms the section lays down the powers of the official liquidator. Such a liquidator has to function under the directions of the court which is in charge of the liquidation proceedings. One of his powers is to institute prosecutions in the name and on behalf of the company under liquidation with the sanction of the court. This section does not purport to impose any limitations on the powers of a criminal court to entertain a criminal prosecution launch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a prosecution in the name and on behalf of the company by the official liquidator who has to incur expenses out of the funds of the company. Section 179 is an enabling provision to enable the liquidator to do certain things with the sanction of the court. It does not control the general law of the land. It was next contended that the charge as framed by the trial court was illegal and vague and had caused material prejudice to the appellant. The charge as framed has already been set out. The learned trial magistrate had stated at the end that a detailed charge was to be separately framed. But no such charge is before us and the appeal has proceeded on the assumption that no such detailed charge was as a matter of fact framed by the trial court. The question therefore is whether the charge, such as it is, complies with the requirements of the law. It has been argued on behalf of the appellant that the charge, is materially defective in so far as the nature of the breach of trust, the facts Constituting the breach, the exact date and manner of the breach have not been set out. The charge as framed fulfils the requirements of section 221, Criminal Procedure Code, because it has m ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
