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Punjab National Bank And Ors vs Surendra Prasad Sinha on 20 April, 1992

Supreme Court of India

Punjab National Bank And Ors vs Surendra Prasad Sinha on 20 April, 1992

Equivalent citations: 1992 AIR 1815, 1992 SCR (2) 528

Author: K Ramaswamy

Bench: Ramaswamy, K.

           PETITIONER:
PUNJAB NATIONAL BANK AND ORS.

	Vs.

RESPONDENT:
SURENDRA PRASAD SINHA

DATE OF JUDGMENT20/04/1992

BENCH:
RAMASWAMY, K.
BENCH:
RAMASWAMY, K.
JEEVAN REDDY, B.P. (J)

CITATION:
 1992 AIR 1815		  1992 SCR  (2) 528
 1993 SCC  Supl.  (1) 499 JT 1992 (3)	 46
 1992 SCALE  (1)926


ACT:
     Limitation	 Act, 1963-Section 3-Whether bars the  right
to which a remedy related-Right to enforce debt by  judicial
process-Scope  of-Time barred debt-Realisation of-Filing  of
suit to recover debt-Creditor's obligation.
     Penal  Code,  1860-Section	 405-Action in	terms  of  a
contract-Whether  amounts  to criminal breach  of  trust  or
misappropriation-Creditor   in	 possession   of   security-
Adjustment of debt due from security-Justification of.
     Penal   Code,   1860-Section   409,   109/114-Complaint
petition-Maintainability-Duty	of  Magistrate,	  indicated-
Accused to be legally responsible for the offences  charged-
Magistrate's  satisfaction  of	prima  facie   case-Criminal
justice-Objects of.



HEADNOTE:
     On	 5.5.1984, the Bank-Appellant No.1, gave a  loan  of
RS.15,000  to one S.N. Dubey.  The respondent and  his	wife
executed  a Security Bond, as guarantors and handed  over  a
fixed  Deposit	Receipt for a sum of Rs.  24,000  which	 was
valued at Rs. 41,292 on its maturity on 1.11.1988.
     The  principal debtor defaulted marking payment of	 the
debt.	When the respondent's F.D. matured, the	 Manager  of
the  Bank (appellant No.5) adjusting a sum  of	Rs.27,037.60
due and payable by the principal debtor as on December	1988
and the balance sum of Rs.14,254.40 was credited to the S.B.
Account of the respondent.
     The  respondent filed a private complaint	against	 the
appellants  in the Court of Addl. Chief Judicial  Magistrate
u/ss.409,109/114, IPC, alleging that the debt became  barred
by  limitation	as on 5.5.1987; that the  liability  of	 the
respondent  being  co-extensive with that of  the  principal
debtor,	  his  liability  also	stood  extinguished  as	  on
5.5.1987;  that	 without taking any action  to	recover	 the
amount from the principal debtor within the period
						       529
of limitation, on 14.1.1989, the Branch Manager credited  to
his  S.B. Account only Rs.14,254.00 on the maturity  of	 his
F.D.R.	and thereby the appellants criminally embezzled	 the
amount.
    The	 appellants  filed this Criminal Appeal	 by  special
leave challenging the High Court's order declining to  quash
the  complaint	filed by the respondent	 u/ss.409,  109/114,
IPC.
     Allowing the appeal of the Bank, this Court,
     HELD  : 1.01. The rules of limitation are not meant  to
destroy	 the  rights  of  the parties.	 Section  3  of	 the
Limitation  Act only bars the remedy, but does	not  destroy
the  right  which the remedy relates to.  The right  to	 the
debt continues to exist notwithstanding the remedy is barred
by the limitation.  Only exception in which the remedy	also
becomes	 barred	 by limitation is the  right  is  destroyed.
[532E-F]
     1.02. Though the right to enforce the debt by  judicial
process	 is  barred, the right to debt	remains.   The	time
barred debt does not cease to exist by reason of s.3.	That
right can be exercised in any other manner than by means  of
a  suit.   The debt is not extinguished, but the  remedy  to
enforce the liability is destroyed. [532G]
     1.03. What s.3. refers is only to the remedy but not to
the right of the creditors.  Such debt continues to subsists
so  long as it is not paid.  It is not obligatory to file  a
suit to recover the debt. [532G-H]
     2.01.  Action  in terms of the  contract  expressly  or
implied is a negation of criminal breach of trust defined in
s.405  and  punishable	under s.409 I.P.C.   It	 is  neither
dishonest, nor misappropriation. [533C]
     2.02.  The	 creditor  when he is in  possession  of  an
adequate  security, the debt due could be adjusted from	 the
security, in his possession and custody.  [533A]
     2.03.  The	 bank had in its possession  the  F.D.R.  as
guarantee for due payment of the debt and bank	appropriated
the amount towards the debt due and payable by the principal
debtor. [533D]
     2.04.  The respondent and his wife stood guarantors  to
the principal debtor, jointly executed the security bond and
entrusted the F.D.R. as
						       530
security to adjust the outstanding debt from it at maturity.
Therefore,  though the remedy to recover the debt  from	 the
principal  debtor  is barred by	 limitation,  the  liability
still  subsists.   In  terms of the  contract  the  bank  is
entitled to appropriate the debt due and credit the  balance
amount to the saving bank account of the respondent. Thereby
the  appellant	did  not act in violation of  any  law,	 nor
converted  the amount entrusted to them dishonestly for	 any
purpose. [533B-C]
     3.01.  The	 Magistrate without  adverting	whether	 the
allegation in the complaint prima facie makes out an offence
charged	 for, obviously, in a mechanical manner, issued	 the
process	  against  all	the  appellants.   The	High   Court
committed grave error in declining to quash the complaint on
the  finding that the Bank acted prima facie high  handedly.
[533E]
     3.02.  Judicial process should not be an instrument  of
oppression or needless harassment.   The complaint was	laid
impleading  the Chairman, the Managing Director of the	Bank
by  name and a host of officers.  There lies  responsibility
and  duty  on the Magistracy to find whether  the  concerned
accused	 should	 be  legally  responsible  for	the  offence
charged	 for.	Only  on  satisfying  that  the	 law   casts
liability or creates offence, against the juristic person or
the persons impleaded, then only process would be issued. At
that  stage the court would be circumspect and judicious  in
exercising discretion and should take all the relevant facts
and circumstances into consideration before issuing process,
least it would be an instrument in the hands of the  private
complainant  as vendetta to harass the	persons	 needlessly.
Vindication of majesty of justice and maintenance of law and
order  in  the	society are the prime  objects	of  criminal
justice	 but  it would not be the means	 to  wreak  personal
vengeance. [533F-534A]



JUDGMENT:

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 254 of 1992.

From the Judgment and Order dated 25.6.1991 of the Madhya Pradesh High Court in Misc. Criminal Case No. 1701 of 1991.

G.L. Sanghi, Dhruv Mehta, Aman Vachher and S.K. Mehta for the Appellants.

The Judgment of the Court was delivered by K. RAMASWAMY, J. Special leave granted.

Through the respondent was served on July 29, 1991, neither appeared in person, nor through counsel. The facts set out in the complaint eloquently manifests on its face a clear abuse of the process of the court to harass the appellants. The respondent, an Advocate and Standing Counsel for the first appellant filed a private complaint in the court of Addl. Chief Judicial Magistrate, Katni in C.C. No.933/91 offences under s.409 and ss.109/114 I.P.C.

The facts stated in the complaint run thus : The first appellant’s branch at Katni gave a loan of Rs. 15,000 to one Sriman Narain Dubey on May 5, 1984 and the respondent and his wife Annapoorna stood as guarantors, executed Annexure ‘P’ “security bond” and handed over Fixed Deposit Receipt for a sum of Rs. 24,000 which would mature on November 1, 1988. At maturity its value would be at Rs. 41,292. The principal debtor committed default in payment of the debt. On maturity, the Branch Manager, 5th appellant, Sri V.K. Dubey, adjusted a sum of Rs. 27,037.60 due and payable by the principal debtor as on December, 1988 and the balance sum of Rs. 14,254.40 was credited to the Saving Banks Account of the respondent. The respondent alleged that the debt became barred by limitation as on May 5, 1987. The liability of the respondent being co-extensive with that of the principal debtor, his liability also stood extinguished as on May 5, 1987. Without taking any action to recover the amount from the principal debtor within the period of limitation, on January 14, 1989, Sri D.K. Dubey, the Branch Manager, intimated that only Rs.14,250.40 was credited to his Saving Bank Account No. 3763. The entire amount at maturity, namely Rs. 41,292 ought to have been credited to his account and despite repeated demands made by the respondent it was not credited. Thereby the appellants criminally embezzled the said amount. The first appellant with a dishonest interest to save themselves from the financial obligation neglected to recover the amount from the principal debtor and allowed the claim to be barred limitation and embezzled the amount entrusted by the respondent. The appellant 2 to 6 abated the commission of the crime in converting the amount of Rs. 27,037.40 to its own use in violation of the specific direction of the respondent. Thus they committed the offences punishable under s.409 and ss.109 and 114 I.P.C.

The security bond, admittedly, executed by the respondent reads the material parts thus : “We Confirm having handed over to you by way to security against your branch office Katni F.D. Account No. 77/83 dated November 1, 1983 for Rs. 24,000 in the event of renewal of the said Fixed Deposit Receipt as security for the above loan.” “We Confirm…the F.D.R. will continue to remain with the bank as security here”. “The amount due and other charges, if any, be adjusted and appropriated by you from the proceeds of the said F.D.R. at any time before, on or its maturity at your discretion, unless the loan is otherwise fully adjusted from the dues on demand in writing made by you….” “We give the bank right to credit the balance to our saving banks account or any other amount and adjust the amount due from the borrowers out of the same”. “We authorise you and confirm that the F.D.R. pledged a security for the said loan shall also be security including the surplus proceeds thereof for any other liability and the obligation of person and further in favour of the bank and the bank shall be entitled to retain/realise/utilise/appropriate the same without reference to us.”

Admittedly, as the principal debtor did not repay the debt, the bank as creditor adjusted at maturity of the F.D.R., the outstanding debt due to the bank in terms of the contract and the balance sum was credited to the Saving Banks account of the respondent. The rules of limitation are not meant to destroy the rights of the parties. Section 3 of the Limitation Act 36 of 1963, for short “the Act” only bars the remedy, but does not destroy the right which the remedy relates to. The right to the debt continues to exist notwithstanding the remedy is barred by the limitation. Only exception in which the remedy also becomes barred by limitation is that right itself is destroyed. For example under s.27 of the Act a suit for possession of any property becoming barred by limitation, the right to property itself is destroyed. Except in such cases which are specially provided under the right to which remedy relates in other case the right subsists. Though the right to enforce the debt by judicial process is barred under s.3 read with the relevant Article in the schedule, the right to debt remains. The time barred debt does not cease to exist by reasons of s.3. That right can be exercised in any other manner than by means of a suit. The debt is not extinguished, but the remedy to enforce the liability is destroyed. What s.3 refers is only to the remedy but not to the right of the creditors. Such debt continues to subsists so long as it is not paid. It is not obligatory to file a suit to recover the debt. It is settled law that the creditor would be entitled to adjust, from the payment of a sum by a debtor, towards the time barred debt. It is also equally settled law that the creditor when he is in possession of an adequate security, the debt due could be adjusted from the security in his possession and custody. Undoubtedly the respondent and his wife stood guarantors to the principal debtor, jointly executed the security bond and entrusted the F.D.R. as security to adjust the outstanding debt from it at maturity. Therefore, though the remedy to recover the debt from the principal debtor is barred by limitation, the liability still subsists. In terms of the contract the bank is entitled to appropriate the debt due and credit the balance amount to the saving bank account of the respondent. Thereby the appellant did not act in violation of any law, nor converted the amount entrusted to them dishonestly for any purpose. Action in terms of the contract expressly or implied is a negation of criminal breach of trust defined in s.405 and punishable under s.409 I.P.C. It is neither dishonest, nor misappropriation. The bank had in its possession the fixed deposit receipt as guarantee for due payment of the debt and the bank appropriated the amount towards the debt due and payable by the principal debtor. Further, the F.D.R. was not entrusted during the course of the business of the first appellant as a Banker of the respondent but in the capacity as guarantor. The complaint does not make out any case much less prima facie case, a condition precedent to set criminal law in motion. The Magistrate without adverting whether the allegation in the complaint prima facie makes out an offence charged for, obviously, in a mechanical manner, issued the process against all the appellants. The High Court committed grave error in declining to quash the complaint on the finding that the Bank acted prima facie high handedly.

It is also salutary to note that judicial process should not be an instrument of oppression or needles harassment. The complaint was laid impleading the Chairman, the Managing Director of the Bank by name and a host of officers. There lies responsibility and duty on the Migistracy to find whether the concerned accused should be legally responsible for the offence against the juristic person or the persons impleaded then only process would be issued. At that stage the court would be circumspect and judicious in exercising discretion and should take all the relevant facts and circumstances into consideration before issuing process lest it would be an instrument in the hands of the private complaint as vendetta to harass the persons needlessly. Vindication of majesty of justice and maintenance of law and order in the society are the prime objects of criminal justice but it would not be the means to wreak personal vengeance. Considered from any angle we find that the respondent had abused the process and laid complaint against all the appellants without any prima facie case of harass them for vendetta.

The appeal is accordingly allowed and the complaint is quashed.

V.P.R.     Appeal allowed.

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