Delhi High Court
Smt. Ira Juneja And Anr. vs State And Anr. on 12 November, 2003
Equivalent citations: 2004CRILJ3664, 2004(72)DRJ207, 2004 CRI. L. J. 3664, (2004) 15 ALLINDCAS 179 (DEL), (2004) 4 RECCRIR 840, (2003) 108 DLT 761, (2004) 72 DRJ 207, (2004) 1 CHANDCRIC 55
Author: O.P. Dwivedi
Bench: O.P. Dwivedi
JUDGMENT
O.P. Dwivedi, J.
1. Through this petition under Article 226 of the Constitution of India read with section 482 Cr.P.C petitioners seek quashing of FIR No. 308/2001 under section 406, 420, 120B, IPC, P.S. Ashok Vihar, Delhi.
2. Briefly stated facts leading to this petition are that on 26.2.97 a partnership agreement was entered into between the petitioner Smt. Ira Juneja and respondent No. 2, Ajay Fotedar to carry on the business of manufacturing and sale/ export/ import of leather goods or garments under the name & style of M/s Samsaur Impex. The petitioner already had some export orders worth Rs.6 lac for export of leather goods to USA. Her initial contribution to the partnership was in the form of some machinery valuing about Rs. 48,000/-. Financial contribution mainly came from the side of respondent No. 2, Ajay Fotedar, the other partner of the firm. The two partners were to share profit and losses equally. It appears that partnership business could not run smoothly. In October 1999, respondent No. 2, Ajay Fotedar, one of the partners made a complaint to the Crime Branch but no action was taken thereon. Then in May 2001 he made another complaint to the Commissioner of Police. In the said complaint it was alleged that complainant respondent No. 2, Ajay Fotedar, had invested sum of Rs. 5,50,000/- from his own sources and also took a loan of Rs. 1,67,000/- from the Bank of Maharashtra for investment in the said partnership business. The books of accounts were kept by Sh. R.C. Juneja, husband of petitioner No. 1. It is alleged in the said complaint that petitioner No. 1 has started a sole proprietorship concern under the name and style of M/s Samsaur Impex and opened a account in the Karnataka Bank Limited, Connaught Place and in that account there has been a turn over of more than Rs. 50 lakhs. According to the complainant, this amount reflects the price of the goods sold which were actually manufactured by the partnership concern M/s Samsaur Impex and were exported. The complainant alleged that this amounts to breach of trust and misappropriation of the partnership money. This is further substantiated from the fact that the petitioners have been showing partnership in loss whereas the proprietorship concern of petitioner No. 1 namely M/s Samsaur Impex had huge turn over of Rs.50 lac in the same year even though it had no establishment worth the name. It was further alleged that a Bank account No. 9137 in Punjab National Bank was opened at I.G Airport in the name of partnership M/s Samsaur Impex and the duty draw back permissible under the rules was to be remitted to the said account but the petitioners induced/ misguided the complainant in signing a letter addressed to the Bank intimating that the firm has stopped business and requesting the Bank to close the account. As a matter of fact the firm was not closed. According to the complainant the remittance obtained from the import of goods manufactured by the partnership firm should have been credited in the partnership account. Instead these funds have been diverted to the proprietorship account of the petitioner No. 1. This was done in pursuance of criminal conspiracy between the petitioners with a view to defraud and cheat the complainant and to misappropriate the funds by diverting the sale proceeds of the partnership goods to the sole proprietorship accounts of the petitioner No. 1. On the basis of this complaint, a case under section 420/406/120B IPC was registered vide FIR No. 308/2001 dated 22.5.2001 at P.S. Ashok Vihar.
3. Petitioners have filed this petition for quashing of the said FIR mainly on the ground that the dispute is basically of civil nature which can be resolved by rendition of accounts for which purpose the complainant has already filed a civil suit being No. 2864/98 in the High Court. Clause 9 of the partnership deed which provides for rendering true and correct account of the profit earned by any partner in any transaction of the firm or from the use of the property or the name of firm, reads as under:-
9. That if any of the partners drive profit from any other transaction of the partnership firm or from the use of the property of the partnership firm or any other connection of the partnership firm or by using the firm name he shall have to account for that profit
4. The arguments put forward by learned counsel for the petitioners was that money/ profit earned by the petitioners from any transaction of the partnership firm or by use of property/ name of the firm shall be duly accounted for when the question of rendition of accounts arises. The mere fact that some remittances against export of goods of the partnership were credited to the proprietorship account of petitioner No. 1 will not by itself prove that the petitioners had mensrea to cause any wrongful loss to the complainant with a view to defraud or cheat him or to misappropriate the property of the partnership. As against this the submission of the learned counsel for the complainant, respondent No. 2, is that the fact that the sale proceeds of the goods manufactured by the partnership were not credited to the partnership account and were diverted to the proprietorship account of petitioner No. 1 is sufficient to show prima facie that the petitioners had guilty intention to cause wrongful loss to the complainant and is prima facie indicative of the existence of the conspiracy between petitioners who are husband and wife to cheat the complainant and to misappropriate partnership property.
5. I have learned counsel for the parties and perused the records.
6. In the case of State of Haryana and others Vs. Ch. Bhajan Lal and others-, the apex court after exhaustive analysis of the provisions of chapter XIV of Cr.P.C and various decisions on the question of exercise of extra ordinary jurisdiction under article 226 of the Constitution of India or inherent powers under section 482 Cr.P.C laid down that if the FIR falls in any of the categories mentioned in para 108 of the judgment, the same may be quashed under article 226 of the Constitution of India or section 482 Cr.P.C. Para 108 reads as under:-
108. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extra-ordinary power under Article 226 or the inherent powers under section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.
1. Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
2. Where the allegations, in the First Information Report and other materials, if any, accompanying the F.I.R do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
3. Where the uncontroverter allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
4. Where, the allegations in the F.I.R do not constitute a cognizable offence but constitute only a non-cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.
5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
6. Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
7. Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.
7. Learned counsel for the respondent No. 2, Mr. R.M. Bagai, strenuously urged that the contents of the complaint which form basis of the FIR disclose all the ingredients of cheating defined in section 415 Cr.P.C and Criminal Breach Of Trust under Section 405, therefore, in view of the law laid down by the apex court in the case of Ch. Bhajan Lal (supra) the FIR cannot be quashed. On the other hand learned counsel for the petitioners submitted that on a close scrutiny of the contents of the FIR the basic ingredients of section 406 or section 415 IPC are not made out and therefore FIR is liable to be quashed.
8. Section 415 IPC reads as under:-
415. Cheating:- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, any which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.”
9. Section 420 IPC reads as under:-
420. Cheating and dishonestly inducing delivery of property.- Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
10. A bare reading of these provisions makes it abundantly clear that the existence of guilty intention (mensrea) at the initial stage when the inducement is offered is the crux of the matter. If the inducement referred to in section 415 and 420 is offered honestly without any intention to deceive the other party, the offence of cheating is not made out even though subsequently the person offering inducement may develop/ oblique motives. Reference in this connection may be had to Hridaya Ranjan Pd. Verma and Others Vs. State of Bihar and another-2000 CRI. L.J.2983; The State of Kerala Vs. A. Pareed Pillai & another-; Ajay Mitra Vs. State of M.P. & Ors.-JT 2003 (1) SC 418. In all these cases FIR did not contain any allegation to the effect that the accused had any dishonest intention at the time of making inducement. In the case of Hridaya Ranjan Pd. Verma and Others (supra), Supreme Court observed that in determining the question as to whether the offence of cheating is made out the court has to keep in mind the fine distinction between mere breach of contract and the offence of cheating. 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 at the beginning of the transaction. Thus it is the guilty intention at the initial stage 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. To the same effect are the observations of the Supreme Court in the case of The State of Kerala (supra) and in other decisions cited above. In the present case there is no allegation in the FIR whatsoever to the effect that accused persons viz the petitioners had guilty intention from the very beginning. The main grievance of the complainant is that some goods manufactured by the partnership were exported but instead of putting sale proceeds in the partnership firm account, accused diverted the same to her personal account. The status report filed by the police also indicates that during the subsistence of the partnership agreement the accused opened a separate account in her own name as sole proprietor of M/s Samsaur Impex and diverted some of the sale proceeds to the said account. Besides duty draw back received on the export of goods of the firm were also collected in the said proprietorship account. The Status Report further shows that total amount credited in the proprietorship firm during the period August 1998-December 1998 was to the tune of Rs.46 lakhs whereas amount credited in the partnership account from September 1997 to September 1998 is about Rs.65 lakhs. On the basis of these averments or findings it cannot be said that the accused persons had guilty intention from the very beginning. It may be that subsequently some funds were diverted from the partnership account to sole proprietorship account. From this it cannot be said that accused had the intention to deceive the complainant even at the time when partnership was initially entered into. Therefore, in view of the observation of the apex court in various cases cited above, it must be held that in this case the complaint does not make out the ingredients of the offence of cheating as even the averments to that effect are missing from the complaint.
11. It is next to be considered whether the allegations contained in the FIR are sufficient to make out offence of criminal breach of trust under section 405 of the IPC which reads as under:-
405. Criminal breach of trust.- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust”.
12. The essential ingredients of the offence of criminal breach of trust are (1) entrustment with property or with any dominion over property (2) and dishonest misappropriation thereof. Partners of the firm do not hold property in trust for each other. There is no stipulation in the partnership deed dated 26.2.97 to this effect. Clause 9 of the partnership deed which has been referred to at the time of arguments and has already been re-produced above only makes the partners accountable for the profits earned by them by use of firm’s name or property. In the case of Velji Raghavji Patel Vs. The State of Maharashtra-, the Apex Court considered the question as to whether partners can be convicted u/s 409 IPC on account of failure to account for the money belonging to the firm in which he was partner. The apex court referred to a full bench decision of Calcutta High Court in the case of Bhuban Mohan Rana Vs. Surendra Mohan Das ( 1952) 2 Cal 69 (V 38). In that case the following questions were referred to Full Bench for decision:- ” Can a charge u/s 406 IPC be framed against a person who according to the complainant is a partner with him and is accused of the offence in respect of the property belonging to both of them as partners” ? All the five Hon’ble Judges constituting the Full Bench answered the question in negative. In the leading judgment which was delivered by Harris , C.J., he pointed out that before criminal breach of trust is established it must be shown that the person charged has been entrusted with property or with dominion over property ;and that a partner does not, in the ordinary course, hold property in a fiduciary capacity. It was further observed that there is really no distinct or defined share of a partner in any item belonging to the partnership. Upon the dissolution of the partnership and after an account is taken it may turn out that a partner who retains an asset is entitled to the whole of the asset and may be much more. In para 6, the Supreme Court observed as under:-
“(6) It seems to us that the view taken in Bhuban Mohan Rana’s case, , by the later Full Bench of the Calcutta High Court is the right one. Upon the plain reading of S.405, I.P.C it is obvious that before a person can be said to have committed criminal breach of trust it must be established that he was either entrusted with or entrusted with dominion over property which he is said to have converted to his own use or disposed of in violation of any direction of law, etc. Every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property. But it is not dominion of this kind which satisfies the requirements of S.405. In order to establish ” entrustment of dominion” over property to an accused person the mere existence of that person’s dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. Therefore, as rightly pointed out by Harris , C.J., the prosecution must establish that dominion over the assets or a particular asset of the partnership was, by a special agreement between the parties entrusted to the accused person. If in the absence of such a special agreement a partner receives money belonging to the partnership he cannot be said to have received it in a fiduciary capacity or in other words cannot be held to have been ” entrusted” with dominion over partnership properties.”
13. In the present case there is nothing in the terms and conditions of the partnership deed to indicate that dominion of the partners over the partnership property was the result of any entrustment. Therefore, if in the absence of such a specific agreement a partner receives money belonging to the partnership he cannot be said to have received it in a fiduciary capacity. Therefore, he cannot be said to have been entrusted with the dominion over the partnership property. In the case of Lok Nath Vs. Jagbir Suri-1982 CRL.L.J. 1328, it was held that unless there is a special agreement to the effect that a partner shall hold the partnership property in trust, he does not hold the partnership property as a trustee and consequently cannot be held guilty of an offence under S. 405, even if he is shown to have dishonestly misappropriated that property or converted the same to his owe use. It was further observed that every partner has dominion over partnership property by reason of the fact that he is a partner and that this is a dominion of a kind which a joint owner has over joint property. Since no joint owner can commit misappropriation in respect of the property which he holds jointly with other co-owners, likewise no partner can commit misappropriation of partnership property belonging to him and his other partners. So the offence u/s 403 is also not made out.
14. As already pointed out the main grievance of the complainant is that sale proceeds of the partner goods exported and the duty draw back thereon were credited to proprietorship account instead of partnership account. Since there is no specific agreement between the partners to the effect that they will hold the partnership property in trust, the question of criminal breach of trust does not arise as observed by the Supreme Court in the case of Velji Raghavji Patel ( supra). Moreover the partners hold property as a joint owners so the question of misappropriation u/s 403 also does not arise. It is ultimately a question of rendition of accounts. The Status Report indicates that while a sum of Rs. 46 lakhs was credited to the account of the proprietorship concern from August 1998 to December 1998 , a sum of Rs.65 lakhs was deposited in the partnership account from September 1997 to September 1998. There may be breach of some terms and conditions of the agreement but that by itself does not fasten a criminal liability. It may be that on taking /rendition of accounts, the petitioners are found to be entitled to the amount which was allegedly diverted from partnership account to proprietorship account or even much more. Therefore, as observed by Harrish C.J. in the case of Bhuban Mohan Rana’s case (supra), mere averments of alleged diversion of funds in absence of averment or agreement regarding entrustment, will not be, in my view, sufficient to make out ingredients of section 405 IPC. The complainant in this case has already filed a suit for rendition of accounts. The question as to the shares of the parties and the quantum of the profits or losses will be gone into those proceedings. In such disputes which are essentially of civil nature invoking criminal jurisdiction by lodging FIR has been deprecated by the Supreme Court. Reference in this regard may be had to JR 2000 SC 360; Ajay Mitra Vs. State of MP & Ors.-.
15. In the result, this petition is allowed and FIR No. 308/2001 u/s 406/420 and 120B IPC, P.S. Ashok Vihar, Delhi is hereby quashed.