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TMI Blog1956 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... f property to wit 3% Government Promissory Loan Notes 1966-68 of the face value of Rs. 50,000 and 2½% Government Promissory Notes 1961 of the face value of Rs. 25,000 in or about February to May, 1949, entrusted to him in his capacity as managing director of the Exchange Bank of India and Africa Ltd. and belonging to the Cambay Hindu Merchants Cooperative Bank. (Detailed charge is separately framed)." The appellant at all material times was the managing director of the Exchange Bank of India and Africa Ltd., with its head office at Bombay, which hereinafter will be referred to as the Exchange Bank. He held a power of attorney to act as the managing director on behalf of the directors of the company. By that power the accused was invested with the authority to borrow money on behalf of the bank. In 1944 the Cambay Hindu Merchants Co-operative Bank at Cambay, which hereinafter will be referred to as the Co-operative Bank, had opened a current account with the Exchange Bank. On instructions from the Co-operative Bank, the Exchange Bank purchased in August, 1946, securities worth Rs. 25,000 in its own name with money belonging to the Co-operative Bask and the securities were ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he face value of Rs. 50,000 to the Central Bank. The Central Bank also on behalf of the Co-operative Bank made a similar demand and as the Exchange Bank did not comply with that requisition, the Central Bank informed the Co-operative Bank by a letter dated the 3rd May, 1949, that the securities had not been handed over to the Central Bank as directed by the Co-operative Bank. The Co-operative Bank then wrote to the Reserve Bank for stoppage of the securities of the value of Rs. 25,000. It became clear by then that the Exchange Bank was not in a position to return the securities to the owners, that is to say, the Co-operative Bank. In spite of the best efforts of the appellant as the managing director of the Exchange Bank, to stave off the crisis by borrowing money from different sources, the run on the bank became so great that the directors applied for and obtained from the Company Judge of the Bombay High Court a moratorium of 15 days. On the 18th May, 1949, a provisional liquidator was appointed in respect of the Exchange Bank on a creditor's application and on the 24th June, 1949, the official liquidator was appointed to wind up the bank. On the 25th June, 1949, one M.N. Raije ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that during the material time the Co-operative Bank had a credit balance in its favour and that there was no overdraft by that bank from the Exchange Bank. He proved exhibits E, F and G which are the documents evidencing the contract between the two banks in respect of the pledge of the security. He corroborated the previous witness that it was the appellant who negotiated and finalised the loan of one lakh of rupees from the Canara Bank and that the securities in question along with others had been pledged to the Canara Bank. It was he who had endorsed the securities to the Canara Bank. He stated that the Exchange Bank had submitted to the Canara Bank a declaration to the effect that the said securities belonged absolutely to the Exchange Bank. As there was a heavy rush of depositors on the bank, the loan from the Canara Bank was taken to satisfy the demand of the depositors. The most important witness examined on behalf of the prosecution is P.W. 4, Ganpati Venkatrao Kini. He was an accountant in the Exchange Bank during the relevant period. He was also working with the official liquidator of the bank after its liquidation was ordered by court. Like the previous witness, he also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Advertising Agents, which had been given overdraft facilities by the Exchange Bank. The appellant was also getting Rs. 2,000 per month as salary from the aforesaid Advertising Agents. The appellant and his wife were the principal shareholders in Akhaney & Sons Ltd., who were the secretaries and treasurers of the Indian Overseas Airlines. The Exchange Bank had advanced to the aforesaid Indian Overseas Airlines a loan of one crore and ten lakhs of rupees and Messrs. Akhaney & Sons Ltd. aforesaid were getting a remuneration of Rs. 2,500 per month from the Indian Overseas Airlines Ltd. It would thus appear that the appellant along with his wife in one way or another was getting about Rs. 8,000 per mensem as remuneration from the different companies referred to above which were closely associated with one another from the financial point of view and that the appellant was the chief person concerned with them and the connecting link between them. It was naturally his interest to see that the Exchange Bank continued its existence as long as could be arranged even by borrowing large sums of money when there was already a run on the bank. It is in the background of all these facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence in the case and the points raised by the appellant in his defence came to the conclusion that the appellant was guilty of the offence of criminal breach of trust under section 409, Indian Penal Code, and passed a lenient sentence, as stated above, in view of the consideration that "not a pie went to the pocket of the accused", and that "the accused had not taken up any dishonest defence". The learned Magistrate held that the charge as framed was not vague in view of the provisions of section 222, Criminal Procedure Code, with special reference to the terms of sub-section (2) of that section. On the question of the non-examination of the first informant, M.N. Raiji, and of the investigating police officer, the learned Magistrate observed that they were formal witnesses inasmuch as the facts of the case were not in dispute. Furthermore, the court observed that if the accused or his lawyer, who defended him at the later stage of the prosecution, had applied to the court for their being examined, they could have been called as witnesses and subjected to cross-examination by the accused. But no such application had been made. As regards want of sanction of the Company Judge, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce passed by the trial magistrate. The appellant then moved the High Court for a certificate that the case was a fit one for appeal to this court. The certificate was refused by that court. Thereafter the appellant moved this court and obtained special leave to appeal. In support of the appeal the learned counsel for the appellant has raised a number of questions of law and at the forefront of his argument contended that both in law and on a proper construction of the contract between the two banks the appellant was fully entitled to pledge the securities as long as the overdraft agreement subsisted, irrespective of whether or not there was an actual overdraft by the Co-operative Bank on the date of the pledge, that is to say, on the 28th February, 1949. Examining the position with reference to the contract between the two banks, we find that exhibits E, F and G, all dated the 14th May, 1948, are parts of the same transaction and evidence the terms of the contract between them. Exhibit E is a promissory note executed by the Co-operative Bank in favour of the Exchange Bank for the sum of Rs. 66,150 with interest at three per cent. per annum with half-yearly rests. Exhibit F is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest it may be realised by the Exchange Bank by sale of those securities and after satisfying the pledgee's dues against the pledgor, if there was any outstanding amount, the surplus of the sale proceeds shall be paid back to the pledgor. Thus it is clear that according to the terms of the contract the Exchange Bank was not entitled, as contended on behalf of the appellant, to sell the securities even though there may not have been any outstanding dues from the Co-operative Bank. The securities were to be kept by the Exchange Bank charged with the payment of such amount as may from time to time have been advanced or be advanced under the overdraft arrangement. But that charge was not an absolute one without reference to the state of accounts between the two banks; in other words, there would be a charge only when there was an adverse balance against the Co-operative Bank. We know that at all material times the Co-operative Bank had not drawn any sum from the Exchange Bank in pursuance of the agreement referred to above. The right of the Exchange Bank to deal with the securities under the agreement would arise only on the happening of certain events, namely, that the pledgor eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract. On the facts stated above the Exchange Bank had become the bailee in respect of the securities. The securities had been delivered by the Co-operative Bank to the Exchange Bank for the express purpose, as disclosed in the contract set out above, that they shall be disposed of in accordance with the terms contained in Exhibit G set out above. By the very fact of the delivery of the securities to the bailee the latter became a trustee in terms of the contract, not for all purposes, but only for the limited purpose indicated by the agreement between the parties. The pledgor has in the present case only transferred his possession of the property to the pledgee who has a special interest in the property of enforcing his charge for payment of an overdraft, if any, whereas the property continues to be owned by the pledgor. The special interest of the pledgee comes to an end as soon as the debt for which it was pledged is discharged. It is open to the pledgor to redeem the pledge by full payment of the amount for which the pledge had been made at any time if there is no fixed period for redemption, or at any time after the date fixed and such a right of redemption continues unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wner 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 event. The person who transfers possession of the property to the second party still remains the legal owner of the property and the person in whose favour possession is so transferred has only the custody of the property to be kept or disposed of by him for the benefit of the other party, the person so put in possession only obtaining a special interest by way of a claim for money advanced or spent upon the safe keeping of the thing or such other incidental expenses as may have been incurred by him. In the present case the Co-operative Bank entrusted the Exchange Bank with the securities for the purpose of keeping them as a security for the overdrafts if and when taken by the former. In law those securities continued to be the property of the Co-operative Bank and as it never borrowed any money from the Exchange Bank, the latter had no interest in those securities which it could tranfer in any way to a third party so far as the two banks are concerned. The entrustment was to the Exchange Bank itself. But it being a non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement has not tried to take shelter behind any such mistake. He was in full control of the bank accounts and, as pointed out by the courts below, it is impossible to believe that in the circumstances in which the bank had found itself and when the appellant was hard put to it to collect all the bank's resources to stave off the severe crisis through which it was passing, the appellant would not have known the fact that the Co-operative Bank did not owe his bank any money by way of overdraft. Hence, in our opinion, there is no room for the supposition that the appellant was not aware of the true state of accounts between the two banks. But then it was argued that the appellant may have made a mistake of law in thinking that he was justified by law in dealing with those securities. The attempt is to bring the case within one of the general exceptions contained in Chapter IV of the Indian Penal Code and set out in section 79 in these terms: "Nothing is an offence which is done by any person who is justified by law, or who by reason of a mistake of fact and not by reason of a mistake of law in good faith, believes himself to be justified by law, in doing it." In considering a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Criminal Procedure. Where a prosecution has to be launched in the name of, or on behalf of, the company, it naturally becomes the concern of the Judge to see whether or not it was worthwhile to incur expenses on behalf of the company and, therefore, the section requires the sanction of the Judge before the liquidator can undertake the prosecution or defence in the name of and on behalf of the company. The present case is not a prosecution in the name or on behalf of the company; nor is the official liquidator interested in prosecuting the case. The prosecution was started on a charge-sheet submitted by the police, though the first information report had been lodged by an official under the official liquidator. This was not a prosecution initiated or instituted by the official liquidator. This is not a case which can come even by analogy within the rule laid down by the Federal Court in the case of Basdeo Agarwalla v. King-Emperor [1945] FCR 93, that a prosecution launched without the previous sanction of the Government within the meaning of clause 16 of the Drugs Control Order, 1943, was completely null and void. In that case their Lordships of the Federal Court had to consider t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trust, and specified section 409, Indian Penal Code, which impliedly gives notice to the accused of every legal condition required by law to be fulfilled in order to constitute the offence of criminal breach of trust. It has also fulfilled the requirements of section 222(1) of the Code in so far as it has specified the securities in respect of which and the Co-operative Bank against which a criminal breach of trust had been committed. Those particulars, in our opinion, were sufficient to give the accused notice of the matter with which he was charged. The trial court has made reference to the provisions of sub-section (2) of section 222. But it was in error in relying upon those provisions which relate to the offence of criminal breach of trust or dishonest misappropriation of money, which was not the present case. It is true that the manner of the commission of the offence as required by section 223 of the Code has not been set out. But that has to be set out only when the nature of the case is such that the particulars required by sections 221 and 222 had not given the accused sufficient notice of the matter with which he is charged. In our opinion, though the charge could ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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