TMI Blog2017 (5) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... utual obligations and it appears that on account of the disputes, the parties have not been able to strictly adhere to their respective obligations. The matter is at large before the Civil Court. The civil liability will be determined by the Civil Court on the basis of the evidence, that may be led by the parties. As noted above, the first informant has not initiated any civil proceeding. He has not even filed a counter claim in the civil suit filed by the accused persons. So far as the applicant of the connected application is concerned, she is the wife of the Chairman and Managing Director of the company. Let me assume for the moment that a, prima facie, case is made out of criminal breach of trust against the company and the other accused. I am of the view that the wife should not be held responsible in any manner by fastening vicarious liability. Even otherwise, no vicarious liability can be fastened on any person for an offence under the Indian Penal Code. In the result, both the writ applications succeed and are hereby allowed. The First Information Report being C.R. No.I2 of 2015 lodged at the Gandhinagar Zone Police Station, District: Gandhinagar is hereby quashed. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the channel partner / franchisee. He also invited the first informant to have a meeting with the writ applicant herein being the chairman and the managing director of the GJRL and GGL. The first informant, accordingly, visited Mumbai and had a meeting with the writ applicant and other office bearers of the GJRL and GGL. The first informant was told that the company had an annual turnover of ₹ 1100 crore. It would be worth becoming a channel partner/franchisee in the State of Gujarat. The first informant was also provided with the figures of sales and profits to create confidence. The first informant gave a thought to the proposal and decided to enter into an agreement with the company of the writ applicant. The understanding arrived at was that whatever amount the first informant would send, the Company would buy the gold bars equivalent to the same in the name of Divyanirman Jewellers, i.e., the business concern of the first informant and the gold bars would remain in the possession of the accused in a fiduciary capacity as a deposit. It was also agreed between the parties that the accused would give 12% interest or margin, whichever is higher, as a minimum guarantee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t purchased the gold bars in accordance with the terms of the agreement out of the amount transferred through the RTGS. The company failed to show the holding of such gold bars in the balancesheet. It is the case of the first informant that the gold bars could be said to have been entrusted to the accused subject to certain terms and conditions, but the property, ultimately, came to be misappropriated. According to the first informant, the company has failed to return the gold bars weighing 105.853 kg worth ₹ 30 crore and also failed to pay the minimum guarantee of ₹ 19.42 crore. In such circumstances, according to the first informant, the accused committed an offence of criminal breach of trust by misappropriating the property worth ₹ 49.42 crore. 4.7 Accordingly, the first information report came to be registered with the Gandhinagar Police Station, Gandhinagar Zone, for the offence punishable under sections 406, 420, 465, 467, 468, 471, 506, 120B read with section 114 of the Indian Penal Code. 4.8 The applicants have come up with the two writ applications praying for quashing of the first information report substantially on the ground that the allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that are being pressed into service by respondent No.2. Similarly, the other offences under Sections 465, 467 and 468 of the Indian Penal Code are not made out, as no element of forgery has been alleged against the petitioner. 3.5 It is further submitted that the entire incident has taken place at Bhavnagar and Bombay but the FIR has been lodged at Gandhinagar, which also raises certain questions. 4. Considering the material on record and the submissions advanced by the learned Senior Advocate for the petitioners, in the view of this Court, a primafacie case has been made out for the grant of interim relief. Hence, issue Notice, returnable on 15.09.2015. Ad-interim relief in terms of Paragraph16( B) is granted, till then. Mr.L.B. Dabhi, learned Additional Public Prosecutor, waives service of notice for respondent No.1State of Gujarat. In addition to the normal mode of service, Direct Service for respondent No.2, through the Concerned Police Station, is also permitted. 6 At this stage, it is necessary for me to take a note of the developments, which took place much before the registration of the first information report. It appears that in the wake of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm of Defendant No.1. The Defendant No.3 is a sole Proprietor of Defendant No 1. The Defendants 1 to 3 have their address at the cause. title as mentioned above. 5. The Defendant No.4 iscoconspirator along with Defendant Nos. 1 to 3 who has also defrauded the Plaintiff. Defendant No. 4 was previously an employee of Plaintiff No 1 and left the organisation on December 9, 2013. The Plaintiffs state and submit that. Defendants have, jointly and severally perpetrated the fraud on the plaintiffs so as to unjustly enrich themselves. 8. In or around August 2010, owing to the impeccable reputation and brand value of the GITANJALI brand in India, Defendant No.1 approached the Plaintiffs for the purposes of becoming it franchisee. Pursuant to discussions, it was decided that Defendant Nos 1 to 3. would be appointed as such franchisee on the basis of the standard terms applicable to all franchisees 9. Several draft agreements were exchanged between the parties from however. Defendant Nos 1 to 3 intentionally did not approve or sign the same due to various inconsequential and fifrivologus reasons including that they wanted to impose their own onerous terms and conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j. if any scheme(s) were launched by the Defendants on behalf of the Plaintiffs, accounts and stocks pertaining to such scheme(s). would have to be maintained separately; k. Standard terms with respect to confidentiality, warranty and termination rights were agreed upon as per standard franchisee agreements 10.On the basis of the above. understanding ( the understanding ) 'the Parties exchanged several draft agreements time to time. As the Defendants were desirous of imposing their own onerous terms, the Defendants with male fide intentions did not sign the same despite several attempts made by the Plaintiffs; and kept delaying the process. As a result the parties continued to act on the basis of this understanding. It is pertinent to note that during this period the entire franchisees business including but not limited to the dealing with the Defendants was handled by the erstwhile Managing Director of GJRL, one Mr. Santosh Srivastava. i.e,, Defendant No. 4. 11. Based on the understanding and the various representations made by the Defendants, GJRL accepted an investment of approximately ₹ 19.82 crores from Defendants Nos. 1 to 3, and in turn pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Defendants and Mr. Srivastava as no results were forthcoming and the Defendants continued to withhold sales proceeds from GJRL, GJRL actively started following up with Mr. Srivastava for a positive outcome. However, Mr. Srivastava was tight lipped on his interactions with the Defendants; and most secretive about providing any information to GJRL. Such conduct of Mr. Srivastava was most suspicious and dubious. In retrospect it is amply clear that the Defendants were in cohorts with each other to jointly and severally illegally usurp the Plaintiffs' Property and / or other assets / goods/jewelry (gold diamonds) of the Plaintiffs with the intention of making windfall gains. 16. Around this time to the shock and surprise of GJRL, on December 9, 2013,. Mr. Srivastava suddenly submitted his resignation letter to GJRL. soon after his exit from GJRL, several discrepancies in the transactions) that Mr. Srivastava oversaw with regards to the understanding with the Defendants arose. Due to his untimely resignation and keeping in mind the then recent events and suspicious turn of events GJRL commenced an internal investigation into its transactions with the Defendants. To the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact been wrongfully retaining the same with the sole aim to unjustly enrich themselves to the detriment and loss of the Plaintiffs its customers. 23.The customers have now started raising claims and/or queries on the Plaintiffs seeking their benefits under these schemes. In this manner, the Plaintiffs are now being forced to deal with the complaints raised on it by individuals arising out of the wrongful acts of the Defendants. It is pertinent to note that the Defendants. had and continue to have in their possession more than enough jewellery stock and consumers' funds to redeem the claims in relation to the schemes as raised by the customers. However, in light of the systematic fraud perpetrated upon the Plaintiffs the Defendants are wrongly and illegally attempting to foist this liability also upon the Plaintiffs. which has resulted in a duplication of loss suffered by the Plaintiffs. 24. It is clarified that the Defendants are (1) retaining the stock provided by the. Plaintiffs and/ or not transferring the installment(s) collected towards the schemes extended by the Plaintiffs; and simultaneously, (2) directing the customers to the Plaintiffs to collect the gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they receive. Their rightful claiml(s) which has been wrongfully usurped by the Defendants who have in a clandestine mariner cheated the public at large and the Plaintiff. The Plaintiffs crave leave to refer to and/or rely upon any such correspondence in this regard, as may be necessary 10 Thereafter, there are averments relating to the parallel business which the first informant started quite detrimental to the interest of the accused company. The following are the averments; 28.The investigations have also revealed that the Defendants have attempted to inter alia: i. copy the designs and marks belonging to the Plaintiffs and/or the Gitanjali Group; and ii. steal and / or misuse the company secrets and/or business models and/ or data and / or software and/ or confidential information of the Plaintiffs which would cause immense loss and /or prejudice to the Plaintiff; 29. This was done With the sole mala fide motive of starting and running a parallel business by emulating the Plaintifts business model, so as to defraud and cheat the Plaintiffs but also to perpetrate a grave and heinous fraud on the public at large. This is evidenced from the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defendants, the system of the Plaintiffs will have only one record whereas in fact the Defendants have made excess sales and are pocketing the proceeds of the sale wrongfully. The above has been set out as and by way of an illustration as to how the Defendants have systematically not only mirrored the business(es) of the Plaintiffs but also duped the Plaintiffs' by usurping the Plaintiffs goods / property and also destroying its goodwill and standing. 32.The Plaintiffs' has also recovered emails addressed by the Defendants from their systems, wherein details of sales proceeds have been detailed under two separate heads of DIVYANIRMAN SALES , and GITANJALI SALES , which confirms the Plaintiffs' allegations that Defendants have mirrored the Plaintiffs' business and were not only carrying out a parallel business but have set out their own business empire which has its foundations on the business(es) of the Plaintiffs. The above clearly entails that the entire modus of the Defendants in entering into the present arrangement with the Plaintiffs was to create a parallel business by selling substandard jewelry manufactured by the Defendants to the public at, lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 2013 as alleged. The defendants reiterate that the transactions were for investment in gold quantity only and rupee value was irrelevant. 58. As a matter of fact, the Defendants herein are not franchisee who can be equated with other franchisee of the Plaintiff Company, as the Defendants have invested gold in huge quantity i.e. over 100 KG pure gold bars owned by and belonging to the Defendants are in possession of the Plaintiff It is clarified at the, outset, that the Plaintiffs have absolutely no right to file suit against the Defendants and the Plaintiffs are dishonest parties who have come to this Hon ble Court by suppressing material information including information that the Plaintiff has deposited over 100 KG 24 karat pure gold bars The Defendants further submit that the quantity of gold bars invested by Defendants with Plaintiff is part of the record of the suit and gold bars are in possession of the Plaintiffs It is submitted that the Agreement dated 25.07.2013 that records acknowledgement given by the Plaintiffs to the effect that the Defendants have invested in terms of gold and such gold bars were purchased by the Plaintiff on behalf of the Defendant No 2 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned here that the entire legal team was involved in preparation of the draft and actual draft agreement was forwarded to the Defendants by Ms. Shikha Palsule, who was Manager Legal by her Mail dated August, 2013, and forwarded all agreements which were drafted by Legal and Operational team of Plaintiff Company. It may be noted that Ms. Shikha Palsule along with one Shivendra Slngh forwarded draft agreement to the Defendants. Similarly, Agreement to confirm 24 karat pure gold bars also came from Plaintiff's side, and Kaushik Hariya, Shivendra Singh, Ms. Shikha Palsule were part of the team working on the Agreement. This Agreement was forwarded by Kaushik Hariya who was part of team as stated above. It is mentioned here that copy of the agreement was also marked to Mr. Sharat Dash who was all India business Head of the Plaintiff Company. It is further submitted that one Vinod Dhavre and Kaushik Hariya forwarded to the Plaintiff a scanned copy of the agreement date 25.07.2013 on 29.07.2013. These facts are mentioned here to place it on record that whole team of the Plaintiff Company was involved with execution of agreement and Plaintiff participated in the process. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plaintiffs have not paid the dues to the Defendants under the Agreement and have not reimbursed the expenses to the defendant in terms of the Agreement. 12 In para63 of the written statement, the first informant, being the defendant No.1, explained the nature of the business transaction, in the following words; 63. To explain to this Hon ble Court the nature of business, that was to be transacted by the parties, following facts are mentioned. A) Four Agreements as mentioned hereinabove relating to confirmation of deposit of gold by defendants and terms of operation of business were entered into by the parties. B) The transactions as agreed under aforesaid agreements stipulated performance of reciprocal obligations to be performed by the plaintiffs after the defendant has deposited the gold bars. As agreed by parties, the plaintiff was required to deposit 24 karat pure gold bars and by way of performance of reciprocal obligations, the Plaintiffs were required to supply 22 karat pore gold jewelry as provided by Page 2 of the Agreement The Plaintiffs were also required to maintain stock of jewelry at all times, equivalent to 95% of the gold deposited by the Defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G) Even, after the defendant no.2 performed in obligations and deposited gold, the plaintiff did not enter into agreement for Inorbit Mall and did not maintain committed stock at stores operating in the state of Gujarat. H) In view of the breach committed by the plaintiffs, the Defendant No.2 was forced to serve notice to the plaintiff on 15.07.2014. Instead of complying with the notice, the plaintiff filed present suit which is absolutely false and frivolous. 64. The defendants reiterate that the plaintiffs were in breach from the beginning and defendants repeatedly requested them to regularize working and operation. The defendant also requested the account, reimbursing the expenses, paying the minimum guaranteed amount and it was brought to the notice of the plaintiff that the stock at various stores was inadequate and customers coming to the stores were finding it extremely difficult to select items for want of proper choice. It is denied that the defendant was carrying on any parallel business as alleged. In any event this was not forbidden and prohibited by agreements. 65. The defendant No.2 reiterated that the plaintiff had distinct agreement with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that only by repeatedly using the word fraud , fraud is not established and the allegations are completely false. In view of this behaviour, the defendant No.2 had no choice but to terminate the agreement B and D, by serving a Terminator Notice dated 21.08.2014. Subsequent thereto, the defendant no.2 also demanded 105.853 KG 24 karat pure gold bars that was entrusted to the plaintiff in fiduciary capacity. It is mentioned here that the entire stock of gold was exclusive property of the defendant No.2 and was transferred by the plaintiffs under invoices and hence, the sale was any way completed within the meaning of the Sale of Goods Act. The defendant has become owner of the stock under the invoices as well as under the terms of the agreement and therefore, the plaintiff has not right in relation to the stock of gold jewelery at the stores. 69. That subsequent to the termination and serving demand notice, the Defendant No.2 has moved stock that was available at five stores. It is mentioned here that out of total stock lying at Bhavnagar, about 35965.17 gms 22 karat gold jewelery, about 180.50 gms 18 karat gold jewelery in addition thereto, there is certain quantity of diamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e civil suit has been filed in the court concerned. Mr. Joshi pointed out that there are serious disputes as regards the terms agreed between the accused company and the first informant, and the genuineness of the documents, on which reliance, is being placed by the first informant, is also highly doubtful. The issues need to be adjudicated by the civil court so as to fix the liability, if any, on either of the parties. 14.5 Mr. Joshi submits that a security deposit is given by a person to the other as a security for the due performance of obligations. It is given in order to secure the interest of the depositee. Like a mortgage created in a loan transaction, a security deposit is a device for the purpose of protecting the depositee and the same, by itself, would not amount to entrustment for the purpose of section 405 of the IPC. Mr. Joshi submitted that if the depositee does not return the security deposit on the ground that the depositor has breached the terms of the contract or has failed to perform his part of the contract, or to put it in other words, has failed to make the payment of the amount due to the depositee, then the depositor should not be permitted to initiate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing decisions; (1) In the case of B. Suresh Yadav vs. Sharifa Bee Anr. , 2008 Cri. L.J., 431 ; (2) In the case of Rex vs. V. Krishnan , AIR 1940 Madras 329 ; (3) In the case of Re Raghava Menon , AIR 1941 Madras 250 ; (4) In the case of Nageshwar Prasad Singh @ Sinha vs. Narayan Singh Anr ., AIR 1999 SC 1480 ; (5) A judgment delivered by this Court in the case of Arvindbhai Maganlal Master Anr. vs. State of Gujarat Anr ., Criminal Misc. Application No.11031 of 2014 ; (6) One another decision delivered by this Court in the case of Ronak Ashokbhai Kedia vs. State of Gujarat , Criminal Misc. Application No.4145 of 2012, decided on 19.11.2014 ; (7) In the case of G. Sagar Suri Anr., vs. State of U.P. Ors ., (2000) 2 SCC 636 ; (8) In the case of Mohammed Sulaiman vs. Md. Ayub Anr ., AIR 1965 SC 1319 ; (9) In the case of Dalip Kaur Ors. vs. Jagnar Singh Anr ., (2009) SCC 696 ; (10) In the case of Jehangir Pestonji Wadia vs. Framji Rustomji Wadia , 1928 (30) BLR 962 ; (11) In the case of Eicher Tractor Limited Ors. vs. Harihar Singh Anr ., (2008) 16 SCC 763 ; 14.9 In such circumstances re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances referred to above, Mr. Nanavati, the learned senior counsel, prays that there being no merit in both the writ applications, the same be rejected. 16.8 Mr. Mitesh Amin, the learned Public Prosecutor appearing for the State submitted that a prima facie case could be said to have been made out for the police to complete the investigation in accordance with law. He submits that although there are disputes between the parties as regards the terms of contract, and a civil suit is also pending, yet that by itself, is not sufficient to terminate the criminal proceedings initiated by the first informant at this stage. In such circumstances, he prays that there being no merit in both the writ applications, they be rejected. ANALYSIS: 17 On 15th July, 2014, one notice was issued to the accusedcompany, stating as under; 1. M/s. Gitanjali Jewellery Retail Limited Having registered office at B6, Laxmi Tower, Bandra, Kurla (E) Mumbai: 400 051. 2. M/s. Gitanjali Germs Limited. Having registered office at B6, Laxmi Tower, Bandra, Kurla (E) Mumbai: 400 051. sub:Notice under the clause 8 of Amendment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirm deposit of 24 Karat pure Gold Bars executed on 25th July 2013. Herein after referred as AgreementA b) Operational and commercial agreement executed on 13th August 2013. Herein after referred as AgreementB c) Amendment of Agreement to confirm deposit of 24 Karat Gold Bars executed on 25th August, 2013. Herein after referred as AgreementC d) Amendment of Qperational and Cornmercial Agreement executed on 26 August 2013. Herein utter referred as Agreement D . 4. it is clearly understood and reduced to writing that Agreement~A and Agreemenht B are independent and separate, though they are to be read together to determine the rights and obligations of parties. 5. My client states that under the terms and conditions stipulated in the agreements as aforesaid. my client has deposited 105.853 Kgs. 24kt. pure Gold Bars with you in your fiduciary capacity and as per the terms of agreement. you were bound to maintain minimum stock of 22kt. gold ornaments and Suggestive Retail Price (SRP) value diamond ornaments to the extent of 95% in various stores run under the agreement. You have not complied with this most vital condition of the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the parties. Such schemes have operated against the interest of my client. One of such scheme is Gift Voucher. You have delivered substantial gold ornaments under such schemes from my client s stores. My client is entitled to receive from you the amount as detailed the tableD annexed here with. Under various schemes such as Shagun, Tamanna, Swarna Mangal Kalash, Swarna Manga lLabh etc. floated by you, you have delivered gold and Diamond ornaments from my client s stores, the cost of which you are liable to reimburse to my client by not reimbursing the cost of gold ornaments delivered under such schemes, you have caused loss and damage to my client as detailed in tableD annexed here with. 11, Your immediate perusal about the breach of contract, the Tables No. E and 'F', [ TableE represent receivable compensation amount for deficit stocks. And TableF for receivable stock for current subscriber of FBSS schemes' future liabilities] 12, As you Wanted to expand your business you had requested my client not to deduct the amount of MG, and other expenses for the operation of the stores from the sale proceeds and to send the full amount of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailing which my client shall be constrained to avail appropriate hard action against you as per Clause 8th of Contract Agreement. D lt Is needless to say that this is a last notice. This notice is without prejudice to all legal actions available to my client in any form whatsoever. Note: 1. the figures shown hereinabove and below in the ensuing Tables are as it appears from the record available With my clients. Note: 2. the aforesaid agreements and other allied documents are not detailed herein for the simple reason as not to burden the paper work and my client has all justification to read and rely upon the aforesaid documents during the course hereinafter including the judicial proceedings, if any. Note: 3. in eventuality of you need to have any clarification or further details qua the aforesaid Tables please immediately contact my client so as to avoid any future dissatisfaction about the lack of details However, not to delay any inquiry so as to frustrate the time limit of this notice. Note 4: Shri Digvijaysinh Jadeja is also entitled for the reimbursement for travel expenses related to company work as per clause 6 of Agreement D (which comes around &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th July, 2013, do hereby demand and call upon you to return our 105.853 kgs 24 kt pure gold bars deposited with you in fiduciary capacity on immediate basis. If you fail to comply with the demand, we shall take such further steps for recovery /protection of our rights as may be deemed expedient. 19 On 23rd August, 2014, one another notice was issued by the first informant regarding stock lying at the Bhavnagar Store. It reads as under; 1. M/s. Gitanjali Jewellery Retail Limited Having registered office at B6, Laxmi Tower, Bandra, Kurla (E) Mumbai: 400 051. 2. M/s. Gitanjali Germs Limited. Having registered office at B6, Laxmi Tower, Bandra, Kurla (E) Mumbai: 400 051. Subject: Stock: Acknowledgement of taking over stocks lying at Bhavnagar store for protecting our interest and ensuring recovery of gold bars deposited/invested with you: Dear sirs, Further to our letter of termination dated 21.08.2014 and Demand Notice dated 21.08.2014, we are entitled to recovery/refund of 105.853 Kg 24 carat pure gold bars from you. We have already issued a demand notice and are awaiting return of gold bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uge financial loss to the accused company. 21 It appears from the materials on record that the first informant has with him in his possession and custody: (i) Approximately invoice gold value of quantity 41.12 kilograms (valued at ₹ 11.92 Crore as on August 12, 2014). (ii) Diamond memo stock approximate value of ₹ 15.09 Crore. (ii) The amount collected through the scheme provided by the accused persons and the first informant which has been illegally retained by the first informant. 22 At this stage, at the cost of repetition, let me take note of the stance of the first informant, as reflected, in his written statement filed in the civil suit. In no uncertain terms, the first informant has admitted that since March 2013, he stopped paying the accused company the sale proceeds, as authorised by the agreement. The agreement, which the first informant is referring to, is of August 2013. That means that for a period of three years, the parties continued with the business. The following are the averments in the written statement of the first informant: D) The Plaintiffs, in performance of their reciprocal obligations were required to maintain stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. Mere incorrect information or a false recital in a document even, if any, does not amount to forgery. Such a document cannot be termed as a false document within the meaning of section 464 of the IPC. 25 The second question, I put to Mr. Nanavati, the learned senior counsel appearing for the first informant and Mr. Mitesh Amin, the learned Public Prosecutor appearing for the State was whether the case is one of cheating or criminal breach of trust. The reply of both the learned counsel was that the allegations constitute, both cheating as well as criminal breach of trust. 26 The offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients. In order to constitute a criminal breach of trust (Section 406 IPC). 1) There must be entrustment with person for property or dominion over the property, and 2) The person entrusted : a) dishonestly misappropriated or converted property to his own use, or b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation i) any direction of law prescribing the method in which the trust is discharged and ii) of legal contract to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually exclusive with each. 28 Further, in both sections, mens rea i.e. intention to defraud or the dishonest intention must be present from the very beginning or inception without which either of these sections cannot be invoked. 29 In my view, the plain reading of the First Information Report fails to spell out any of the aforesaid ingredients noted above. I may only say with a view to clear a serious misconception of law in the mind of the police as well as the courts below that if it is the case of the complainant that an offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of IPC, is committed by the accused, then in the same breath it could not be said that the accused has also committed the offence of cheating as defined and explained in Section 415 of the IPC, punishable under Section 420 of the IPC. 30 Every act of breach of trust may not be resulted in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but any breach o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is his intention, which is the gist of the offence. Whereas, for the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence after the breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership of it must be of some other person. The accused must hold that property on trust of such other person. But the offence, i.e. the offence of breach of trust and cheating involve dishonest intention but they are mutually exclusive and different in basic concept. There is a distinction between the criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of entrustment. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property and he dishonestly misappropriates the same. Whereas, in case of cheating, the offender pract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It depends upon the intention of the accused at the time of 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 necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed. 35 Thus, the law as regards the distinction between the offence of criminal breach of trust punishable under section 406 of the IPC, and cheating punishable under section 420 of the IPC, is well settled. Even, on the first informant s own saying, the case is one of criminal breach of trust as the accused failed to return the property entrusted. 36 A Division Bench of the Bombay High Court, in the case of Jehang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Krishnan [AIR 1940 Madras 329] . His Lordship Pandrang Row, J., while addressing the jury, observed as under: I do not care, I am satisfied if I get a receipt and the document; in these circumstances, is it an entrustment of money? Secondly whether the accused did anything with that money which would show that it was a misappropriation? Misappropriation is the wrongful setting apart or assigning of a sum of money to a purpose or use to which it should not be lawfully assigned or set apart. It is in this connexion that you have heard a fairly long argument addressed to you about the rights of an agent and the rights of an attorney and so on, to which I shall refer shortly. I am reading one or two sentences from Lord Shaw's judgment just to show that it is all important and indeed of the greatest importance that you should always bear in mind the difference between civil and criminal liability especially in dealing with a case of criminal breach of trust because it is not at all uncommon to find cases which are really nothing but cases involving civil liability somehow made to assume the form of criminal cases, and unless one is very careful, the person who gives such colou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere retention was a criminal breach of trust. It was safer and wiser to keep it in a Bank than at home. I am mentioning this; merely keeping the money and not paying it over as required by law, that is to say, even when an agent may have no claim against the principal, even then if he retains it merely and does not pay it, but does not do anything else with it, there is no criminal breach of trust. It is only a civil liability, and of course the principal can at any time, if he chooses, compel him to pay, send him a notice and file a suit. A criminal complaint is not the way to get one's civil rights established. If money due to a particular person is not paid, the law allows only a civil suit and not a criminal proceeding, for in the case of mere retention without any misappropriation, there is only a civil liability. It may be he may have to pay interest; that is a different matter that also is a civil matter. On the criminal side you can take it from me that mere retention of money entrusted to a person without any misappropriation, even though he was directed by the person to pay it to so and so, or to deal with the money in a particular way, is not a criminal breach of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. There would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. 41 I have reached to the conclusion that the case on hand is predominantly a civil wrong and the necessary ingredients to constitute a criminal offence are lacking. 42 In the case of Binod Kumar and others vs. State of Bihar and another [(2014) 10 SCC 663], the Supreme Court, while drawing a fine distinction between the offence of criminal breach of trust and cheating, observed in paras 18 and 19 as under: 18. In the present case, looking at the allegations in the complaint on the face of it, we find no allegations are made attracting the ingredients of Section 405 IPC. Likewise, there are no allegations as to cheating or the dishonest intention of the appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant. Excepting the bald allegations that the appellants did not make payment to the second respondent and that the appellants utilized the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a civil dispute. 13. For the purpose of establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. In a case of this nature, it is permissible in law to consider the stand taken by a party in a pending civil litigation. We do not, however, mean to lay down a law that the liability of a person cannot be both civil and criminal at the same time. But when a stand has been taken in a complaint petition which is contrary to or inconsistent with the stand taken by him in a civil suit, it assumes significance. Had the fact as purported to have been represented before us that the appellant herein got the said two rooms demolished and concealed the said fact at the time of execution of the deed of sale, the matter might have been different. As the deed of sale was executed on 30.9.2005 and the purported demolition took place on 29.9.2005, it was expected that the complainant/first respondent would come out with her real grievance in the written statement filed by her in the aforementioned suit. She, for reasons best known to her, did not choose to do so. 14. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l reason for not going into these aspects is that a civil suit is pending inter se the parties for the amounts in question. 17. In Hira Lal Hari Lal Bhagwati v. CBI, New Delhi [(2003) 5 SCC 257], this Court opined : It is settled law, by a catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his making failure to keep promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed. It is seen from the records that the exemption certificate contained necessary conditions which were required to be complied with after importation of the machine. Since the GCS could not comply with it, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as officebearers right at the time of making application for exemption . As there was absence of dishonest and fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reat must be with intent; (i) to cause alarm to that person; or (ii) to cause that person to do any act which he is not legally bound to do as the means of avoiding the execution of such threat; or (iii) to cause that person to omit to do any act which that person is legally entitled to do as the means of avoiding the execution of such threat. 46 A bare perusal of Section 506 of the Indian Penal Code makes it clear that a part of it relates to criminal intimidation. Before an offence of criminal intimidation is made out, it must be established that an accused had an intention to cause alarm to the complainant. Mere threats given by the accused not with an intention to cause alarm to the complainant, but with a view to deterring him from interfering with the work of construction of the wall, which was undertaken by the accusedapplicant, would not constitute an offence of criminal intimidation. In the entire FIR, there is no whisper of any allegation that the threats which were administered actually caused any alarm to the first informant and he felt actually threatened. 47 In my view, even none of the ingredients to constitute an offence under Section 506(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
