TMI Blog2006 (7) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... the matters in accordance with law in regard to the complaints filed by IOC in so far as offences under sections 415 and 425 of IPC. - CRL.A. 834 of 2002 and Appeal No. 833 of 2002 - - - Dated:- 20-7-2006 - SEMA, HOTOI KHETOHO AND R.V. RAVEENDRAN, JJ. JUDGMENT RAVEENDRAN, J. These appeals are filed against the common order dated 29.3.2001 passed by the Madras High Court allowing Crl. O.P. Nos.2418 of 1999 and 1563 of 2000. The said two petitions were filed by the respondents herein under section 482 of Criminal Procedure Code ('Code' for short) for quashing the complaints filed by the appellant against them in C.C. No.299 of 1999 on the file of Judicial Magistrate No.6, Coimbatore and C.C. No. 286 of 1998 on the file of Judicial Magistrate, Alandur (Chennai). 2. The appellant (Indian Oil Corporation, for short 'IOC') entered into two contracts, one with the first respondent (NEPC India Ltd.) and the other with its sister company Skyline NEPC Limited ('Skyline' for short) agreeing to supply to them aviation turbine fuel and aviation lubricants (together referred to as "aircraft fuel"). According to the appellant, in respect of the aircraft fuel supplied under the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat NEPC India may remove the hypothecated aircraft (VT-NEJ) from Coimbatore Airport to a place outside its reach, IOC filed C.S. No.425 of 1997 in the Madras High Court seeking a mandatory injunction to the Airport Authority of India and Director General of Civil Aviation to detain the said aircraft stationed at Coimbatore Airport, under section 8 of the Aircraft Act, 1934, so as to enable it to take possession thereof. The High Court granted an interim injunction on 16.9.1997 restraining NEPC India from removing the aircraft (VT-NEJ) from Coimbatore Airport. In regard to the other hypothecated aircraft (VT-NEK) kept at Meenambakkam (Chennai) Airport, IOC filed a suit (OS No.3327/1998) in the City Civil Court, Chennai for a similar mandatory injunction. 6. IOC filed the two complaints against NEPC India and its two Directors (respondents 2 3 herein) in July, 1998 under section 200 of Code of Criminal Procedure alleging unauthorized removal of the engines and certain other parts from the two hypothecated aircraft. They are : (i) C.C. No. 299 of 1999 before the Judicial Magistrate No.6, Coimbatore, regarding Aircraft bearing No. VT-NEJ. (ii) C.C. No. 286 of 1998 before the J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the accused had failed to clear the said outstanding amounts and had breached the terms of the hypothecation agreements. Subsequently on 20.9.2007, an agreement was entered into between IOC and M/s NEPC India Limited. As per the terms of the above agreement M/s NEPC India Limited had agreed to clear the outstanding amount of Rs.18 crores approximately due to IOC from M/s NEPC India Limited and M/s Skyline NEPC Limited within a time frame. However, M/s NEPC India Limited had failed to keep up the schedule of payments mentioned in the said agreements. The facts narrated above will clearly show that IOC has got every right to take possession of the Aircraft VT-NEK as well as VT-NEJ. Only with a view to defeat the said right of IOC, M/s NEPC India has removed the engines of the aircraft ." 7. The respondents herein filed Crl. O.P. No.1563 of 2000 and Crl. O.P. No.2418 of 1999 respectively under section 482 of Cr. P.C. for quashing the said two complaints on the following two grounds : (i) The complaints related to purely contractual disputes of a civil nature in respect of which IOC had already sought injunctive reliefs and money decrees. (ii) Even if all the allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with malafides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable. (iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution. (iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence. (v) A given set of facts may make out : (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sness or ulterior motives on the part of the complainant. Be that as it may. 11. Coming to the facts of this case, it is no doubt true that IOC has initiated several civil proceedings to safeguard its interests and recover the amounts due. It has filed C.S. No.425/1997 in the Madras High Court and O.S. No.3327/1998 in the City Civil Court, Chennai seeking injunctive reliefs to restrain the NEPC India from removing its aircrafts so that it can exercise its right to possess the Aircrafts. It has also filed two more suits for recovery of the amounts due to it for the supplies made, that is CS No.998/1999 against NEPC India (for recovery of Rs.5,28,23,501/90) and CS No.11/2000 against Skyline (for recovery of Rs.13,12,76,421/25), in the Madras High Court. IOC has also initiated proceedings for winding up NEPC India and filed a petition seeking initiation of proceedings for contempt for alleged disobedience of the orders of temporary injunction. These acts show that civil remedies were and are available in law and IOC has taken recourse to such remedies. But it does not follow therefrom that criminal law remedy is barred or IOC is estopped from seeking such remedy. 12. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, is said to commit theft." The averments in the complaint clearly show that neither the aircrafts nor their engines were ever in the possession of IOC. It is admitted that they were in the possession of NEPC India at all relevant times. The question of NEPC committing theft of something in its own possession does not arise. The appellant has therefore rightly not pressed the matter with reference to section 378. Section 403 16. Section 403 deals with the offence of dishonest misappropriation of property. It provides that "whoever dishonestly misappropriates or converts to his own use any movable property", shall be punished with imprisonment of either description for a term which may extend to 2 years or with fine or both. The basic requirement for attracting the section are : (i) the movable property in question should belong to a person other than the accused; (ii) the accused should wrongly appropriate or convert such property to his own use; and (iii) there should be dishonest intention on the part of the accused. Here again the basic requirement is that the subject matter of dishonest misappropriation or conversion should be someone else's movable property. When NEPC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m-trust. (Under such a deed, the owner pledges his movable property, generally vehicle/machinery to the creditor, thereby delivering possession of the movable property to the creditor and the creditor in turn delivers back the pledged movable property to the debtor, to be held in trust and operated by the debtor). 18. In Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore, Cochin [AIR 1953 SC 478], this Court held : " to constitute an offence of criminal breach of trust, it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted, there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by someone else which he willingly suffered to do. It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(n) of Securitisation and Reconstruction of Financial Assets Enforcement of Security Interest Act, 2002)" But there is no 'entrustment of the property' or 'entrustment of dominion over the property' by the hypothecatee (creditor) to the hypothecator (debtor) in an hypothecation. When possession has remained with the debtor/owner and when the creditor has neither ownership nor beneficial interest, obviously there cannot be any entrustment by the creditor. 20. The question directly arose for consideration in Central Bureau of Investigation v. Duncans Agro Industries Ltd., Calcutta [1996 (5) SCC 591]. It related to a complaint against the accused for offences of criminal breach of trust. It was alleged that a floating charge was created by the accused debtor on the goods by way of security under a deed of hypothecation, in favour of a bank to cover credit facility and that the said goods were disposed of by the debtor. It was contended that the disposal of the goods amounted to criminal breach of trust. Negativing the said contention, this Court after stating the principle as to when a complaint can be quashed at the threshold, held thus : " .a serious disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd possession of the aircrafts continued with NEPC India. Possession of the aircraft, neither actual nor symbolic, was delivered to IOC. NEPC India was entitled to use the aircraft and maintain it in good state of repairs. IOC was given the right to take possession of the hypothecated aircrafts only in the event of any default as mentioned in the Hypothecation Deed. It is not the case of the IOC that it took possession of the aircraft in exercise of the right vested in it under the Deed of Hypothecation. Thus, as the possession of the aircraft remained all along with NEPC India in its capacity as the owner and the Deed of Hypothecation merely created a charge over the aircrafts with a right to take possession in the event of default, it cannot be said that there was either entrustment of the aircrafts or entrustment of the dominion over the aircrafts by IOC to NEPC India. The very first requirement of section 405, that is the person accused of criminal breach of trust must have been "entrusted with the property" or "entrusted with any dominion over property" is, therefore, absent. 22. Learned counsel for the appellant, however, sought to distinguish the decision in Duncan Agro on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cused. The facts were somewhat similar to example (viii) in Para 17 above. Further the Judicial Commissioner finally observed that there was so much room for an honest difference of opinion as to the rights and liabilities of the parties to the trust receipt that no useful purpose could be served in interfering with the order of discharge by the Magistrate. The said decision is therefore of no assistance to the appellant. If the observations relied on by the appellant are to be interpreted as holding that the debtor holds the hypothecated goods, in trust for the creditor, then they are contrary to the decision of this Court in Duncan Agro (supra) which specifically holds that when goods are hypothecated, the owner does not hold the goods in trust for the creditor. A charge over the hypothecated goods in favour of the creditor, cannot be said to create a beneficial interest in the creditor, until and unless the creditor in exercise of his rights under the deed, takes possession. The term 'beneficial interest' has a specific meaning and connotation. When a trust is created vesting a property in the trustee, the right of the beneficiary against the trustee (who is the owner of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock-in-trade held by the debtor at that point of time. The principle in Duncan Agro is based on the requirement of 'entrustment' and not with reference to the 'floating' nature of the charge. The second contention also has no merit. 24. We accordingly hold that the basic and very first ingredient of criminal breach of trust, that is entrustment, is missing and therefore, even if all the allegations in the complaint are taken at their face value as true, no case of 'criminal breach of trust' as defined under section 405 IPC can be made out against NEPC India. Section 415 25. The essential ingredients of the offence of 'cheating' are : (i) deception of a person either by making a false or misleading representation or by other action or omission (ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person 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. 26. The High Court has held that mere breach of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof; and (iii) the change so made destroying or diminishing the value or utility or affecting it injuriously. For the purpose of section 425, ownership or possession of the property are not relevant. Even if the property belongs to the accused himself, if the ingredients are made out, mischief is committed, as is evident from illustrations (d) and (e) to section 425. The complaints clearly allege that NEPC India removed the engines thereby making a change in the aircrafts and that such removal has diminished the value and utility of the aircrafts and affected them injuriously, thereby causing loss and damage to IOC, which has the right to possess the entire aircraft. The allegations clearly constitute the offence of 'mischief'. Here again, we are not concerned with the proof or ultimate decision. Conclusion : 31. In view of the above discussion, we find that the High Court was not justified in quashing the complaints/criminal proceedings in entirety. The allegations in the complaint are sufficient to constitute offences under sections 415 and 425 of IPC. We accordingly allow these appeals in part and set aside the order of the High Court insofar it quashes the complaint un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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