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Friday, January 9, 2015

CRIMINAL APPEAL NO. 2327 OF 2014 (Arising out of SLP (Crl.) No. 9751/2011) BINOD KUMAR & ORS. .. Appellant Versus STATE OF BIHAR & ANR. ..Respondents-2014 S.C.OCT.MONTH


                        IN THE SUPREME COURT OF INDIA

                      CRIMINAL APPEAL NO. 2327  OF 2014
                  (Arising out of SLP (Crl.) No. 9751/2011)

BINOD KUMAR & ORS.                                 .. Appellant


STATE OF BIHAR & ANR.                     ..Respondents

                               J U D G M E N T


            Leave granted.
2.          Whether the charges under  Section  406  IPC  and  the  criminal
complaint for criminal breach of trust  for  allegedly  retaining  the  bill
amount payable to respondent No.2 is liable  to  be  quashed  is  the  point
falling for consideration in this appeal.
3.          Payment of bill pertaining  to  the  contract  executed  by  the
second respondent in Tilka  Manjhi  Bhagalpur  University  had  a  chequered
history. Case of  second  respondent  is  that  contract  was  entered  into
between him and K.S.S. College on 4.9.1990 for the construction of  building
of K.S.S. College, Lakhisarai, a constituent unit of Tilka Manjhi  Bhagalpur
University.  According to  second  respondent,  since  money  and  requisite
materials were not given to him in time, the work was not  completed  within
stipulated period.  The university vide  letter  dated  9.5.1995,   informed
the respondent No.2 that  his  contract  is  terminated  and  all  his  dues
including  final bill, earnest money  and  security  deposit  etc.  will  be
released after consultation with the  College  Development   Committee.  The
University Engineer vide letter dated 4.6.1996, addressed to  the  Principal
of the college, informed that a payment of Rs.48,505/-  is  payable  to  the
contractor; but the respondent No.2 was not paid the aforesaid bill  amount.
 Finally, the respondent was paid Rs.14,000/-  vide  cheque  No.  EMGCO-OP.Z
No. 0127627, as per the direction of the College Development  Committee  and
balance amount of Rs.34,505/- was not paid to him.  Aggrieved  by  the  said
non-payment of entire amount, respondent No.2 filed   a  criminal  complaint
case No.196-C/1997 in the Court  of   Sub  Divisional  Judicial  Magistrate,
Lakhisarai for criminal  breach  of  trust,  alleging  that  the  amount  of
Rs.34,505/- was  not paid to  him and that  the amount was utilized  by  the
appellants in some other work.
4.          The appellants filed  an  application  under        Section  227
Cr.P.C. before the Court of Sub Divisional Judicial  Magistrate,  Lakhisarai
seeking their discharge from the criminal case. The Court of Sub  Divisional
Judicial Magistrate, Lakhisarai vide its  order  dated  2.12.2002  dismissed
the said petition and directed the  appellants  to  remain  present  in  the
court on 8.1.2003 for framing of charges under Section  406/120B  IPC.   The
appellants filed petition under Section 482 Cr.P.C. before  the  Patna  High
Court  for  quashing  the  said  order  and  by  the  impugned  order  dated
18.2.2011, the High Court dismissed the petition.  Aggrieved  by  the  same,
the appellants are before us.
5.           Dr.  Manish  Singhvi,  learned  counsel   appearing   for   the
appellants, contended that the act of withholding of payment to  the  second
respondent was as per the direction issued by  the  Vice-Chancellor  and  no
case is made out for misappropriation of funds under  Section  406  IPC.  It
was contended that the act of the appellants was done in  the  discharge  of
their public duties and there was no dishonest intention  to  misappropriate
the amount and the essential ingredients of criminal  breach  of  trust  are
not made out and the High Court has not properly appreciated the matter.
6.          Ms. Prerna Singh, learned counsel for respondent  No.1  -  State
of Bihar, submitted that   the instant  petition  does  not  relate  to  any
police case and the matter was never subjected to police investigation.   It
was, however, submitted that on examination of  four  witnesses,  Magistrate
found that   a prima facie case was made  out  against  the  appellants  and
therefore, High Court rightly dismissed the  petition  filed  under  Section
482 Cr.P.C.
7.          Mr. Rajiv  Kumar,  learned  counsel  appearing  for  the  second
respondent  contended  that  the  application  for  discharge  was   rightly
rejected by the Magistrate as the case filed by the second respondent  is  a
warrant case instituted other than  on police report and since   prima-facie
 case  was  made out, the discharge application was   rightly  dismissed  by
the trial  court.   It  was  also  contended  that  as  per  the  terms  and
conditions of the contract, the second respondent had executed the work  and
the same was also measured and  verified  by  the  University  Engineer  and
while so,  the  appellants  with  malafide  intention  withheld  the  second
respondent’s dues and thus, committed criminal breach of trust and the  High
Court rightly dismissed the petition filed under Section 482 Cr.P.C.
8.          We have carefully considered  the  rival  contentions  and  also
perused the impugned order and the materials on record.
9.          In proceedings instituted on  criminal  complaint,  exercise  of
the inherent powers to quash the proceedings is  called  for  only  in  case
where the complaint does not disclose any offence or is  frivolous.   It  is
well settled that the power under Section 482 Cr.P.C.  should  be  sparingly
invoked with circumspection, it should be exercised to see that the  process
of law is not abused or misused.  The settled principle of law  is  that  at
the stage of quashing the complaint/FIR, the High Court  is  not  to  embark
upon an enquiry as to the probability, reliability  or  the  genuineness  of
the allegations made therein. In Smt.  Nagawwa  vs.  Veeranna  Shivalingappa
Konjalgi,    (1976) 3 SCC 736, this Court  enumerated  the  cases  where  an
order of the Magistrate issuing process against the accused can  be  quashed
or set aside as under:
“(1)  where the allegations made in the complaint or the statements  of  the
witnesses recorded in support of the same taken at their   face  value  make
out absolutely no case  against the accused  or  the  complainant  does  not
disclose the essential ingredients of an offence which  is  alleged  against
the accused;
where the  allegations made  in  the  complaint   are  patently  absurd  and
inherently  improbable   so  that  no  prudent  person  can   ever  reach  a
conclusion that there is a sufficient  ground  for  proceeding  against  the
where the discretion exercised by  the  Magistrate  in  issuing  process  is
capricious and arbitrary having been based  either  on  no  evidence  or  on
materials which are wholly irrelevant or inadmissible; and
where the complaint suffers from fundamental legal defects such as, want  of
sanction, or absence of a complaint by legally competent authority  and  the

The  Supreme  Court  pointed  out  that  the  cases  mentioned  are   purely
illustrative and provide sufficient  guidelines  to  indicate  contingencies
where the High Court can quash the proceedings.
10.         In Indian Oil Corporation vs. NEPC India Ltd. And  Ors.,  (2006)
6 SCC 736, this Court has summarized the principles relating to exercise  of
jurisdiction under Section 482 Cr.P.C.  to  quash  complaints  and  criminal
proceedings as under:-
“The principles relating to exercise of jurisdiction under  Section  482  of
the Code of Criminal Procedure to quash complaints and criminal  proceedings
have been stated and reiterated by  this  Court  in  several  decisions.  To
mention a few—Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao  Angre
(1988) 1 SCC 692, State of Haryana v. Bhajan  Lal,1992  Supp  (1)  SCC  335;
Rupan Deol Bajaj v. Kanwar Pal Singh Gill (1995) 6 SCC 194,  Central  Bureau
of Investigation v. Duncans Agro Industries Ltd (1996) 5 SCC 591;  State  of
Bihar v. Rajendra Agrawalla (1996) 8 SCC 164, Rajesh Bajaj v. State  NCT  of
Delhi,(1999) 3 SCC 259; Medchl Chemicals & Pharma (P) Ltd. v. Biological  E.
Ltd(2000) 3 SCC 269 [pic]Hridaya Ranjan  Prasad  Verma  v.  State  of  Bihar
(2000) 4 SCC 168, M. Krishnan v. Vijay Singh (2001) 8 SCC   645   and  Zandu
Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque(  2005)  1  SCC  122.  The
principles, relevant to our purpose are:
(i)       A complaint can be quashed  where  the  allegations  made  in  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  the  case
alleged against the accused.
    For this purpose, the complaint has to  be  examined  as  a  whole,  but
without examining the merits of the allegations. Neither a detailed  inquiry
nor a  meticulous  analysis  of  the  material  nor  an  assessment  of  the
reliability  or  genuineness  of  the  allegations  in  the  complaint,   is
warranted while examining prayer for quashing of a complaint.
(ii)     A complaint may also be quashed where it is a clear  abuse  of  the
process of the court, as when the criminal proceeding is found to have  been
initiated with mala fides/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  proceeding
are different from a criminal proceeding, the mere fact that  the  complaint
relates to a commercial transaction or  breach  of  contract,  for  which  a
civil remedy is available or has been availed, is not by itself a ground  to
quash the criminal proceedings. The test is whether the allegations  in  the
complaint disclose a criminal offence or not.”

11.         Referring  to  the  growing  tendency  in  business  circles  to
convert purely civil disputes into criminal cases, in  paragraphs  (13)  and
(14) of the Indian Oil Corporation’s case (supra), it was held as under:-
“13. While on this issue, it is  necessary  to  take  notice  of  a  growing
tendency in business circles to convert purely civil disputes into  criminal
cases. This is obviously on account of a  prevalent  impression  that  civil
law remedies are time consuming and do not adequately protect the  interests
of lenders/creditors. Such a tendency is seen  in  several  family  disputes
also, [pic]leading to irretrievable breakdown of  marriages/families.  There
is also an impression that if a person  could  somehow  be  entangled  in  a
criminal prosecution, there is a  likelihood  of  imminent  settlement.  Any
effort to settle civil  disputes  and  claims,  which  do  not  involve  any
criminal offence, by applying pressure through criminal  prosecution  should
be deprecated and discouraged. In G. Sagar Suri v. State of U.P.,  (2000)  2
SCC 636 this Court observed: (SCC p. 643, para 8)
“It is to be seen if a matter, which is essentially of a civil  nature,  has
been given a cloak of criminal  offence.  Criminal  proceedings  are  not  a
short cut of other remedies available  in  law.  Before  issuing  process  a
criminal court has to exercise a great deal of caution. For the  accused  it
is a serious matter. This Court has laid certain principles on the basis  of
which the High Court is to exercise its jurisdiction under  Section  482  of
the Code. Jurisdiction under this section has to  be  exercised  to  prevent
abuse of the process of any  court  or  otherwise  to  secure  the  ends  of

14. While no one with a legitimate cause or grievance  should  be  prevented
from  seeking  remedies  available  in  criminal  law,  a  complainant   who
initiates or persists  with  a  prosecution,  being  fully  aware  that  the
criminal proceedings are unwarranted and his remedy lies only in civil  law,
should himself  be  made  accountable,  at  the  end  of  such  misconceived
criminal proceedings, in accordance with law. One positive step that can  be
taken by the courts, to curb  unnecessary  prosecutions  and  harassment  of
innocent parties, is to exercise their power under  Section  250  CrPC  more
frequently, where they discern malice or frivolousness or  ulterior  motives
on the part of the complainant. Be that as it may.”

12.         Coming to the facts of this case, it is no doubt true  that  the
dispute relates to the non-payment of bill amount of Rs.34,505/-  pertaining
to the contract executed by respondent No.2.  It is also pertinent  to  note
that respondent No.2 preferred CWJC  No.5803/1999  wherein  an  order  dated
5.4.2000 was passed by Patna High Court  directing  the  Vice-Chancellor  of
Bhagalpur University to release  the  balance  amount  of  Rs.34,505/-  with
interest at the rate of 18% w.e.f. 1.10.1994 till the date of   payment  and
pay the interest at  the  rate  of  11%  on  the  sum  of  Rs.14,000/-  from
1.10.1994  till  9.12.1996.   Aggrieved  by  the   said   order,   Bhagalpur
University preferred LPA No.716/2000 wherein it was directed that  since  it
was not a statutory contract, no direction for payment  of  money  could  be
issued and the respondent No.2 can pursue other remedies  available  in  law
for the recovery of money.  Aggrieved by the said order,  respondent  No.  2
filed SLP(C) No. CC 4832/2001 which  was  dismissed  as  withdrawn  by  this
Court by  Order  dated  30.7.2001  granting  him  liberty  to  approach  the
appropriate forum.  Respondent No.2 thereafter filed Money  Suit No.  2/2002
before the Court of  Sub  Judge  1st  Court,  Lakhisarai  on  20.4.2002  for
recovery of Rs. 69,010/- i.e. double the amount of Rs.34,505/- and the  said
suit is pending.  Second appellant  representing  the  university  had  also
filed Money Suit No.2/2006 before the same Court on 4.2.2006 claiming a  sum
of Rs.1,44,437/- with interest against  the   second  respondent-contractor.
These acts of the parties show that the parties have  already  had  recourse
to the civil remedies that are available to them in law.
13.         Appellant Nos.1 and  2  were  then  employed  as  Principal  and
Professor respectively in KSS College,  Lakhisarai  and  appellant  No.3  as
Bursar of the said college. The appellants have  stated  that  they  had  no
intention to cheat or dishonestly misappropriate the amount of Rs.  34,505/-
.  The appellants  have  stated  that  there  were  disputes  regarding  the
quality of work done and also non-return of some cement bags by  the  second
respondent.   It  is  stated  that  in  view  of  the  dispute  between  the
university and the contractor and stoppage of further  construction  by  the
second  respondent  and  with  the  direction  and  approval  of  the  Vice-
Chancellor, contract of the  appellant  was  terminated  and  his  bill  was
placed before the  College  Development  Committee.  In  its  meeting  dated
8.12.1995, the Committee considered the claim of the second  respondent  and
rejected his  certain  claims  and  the  same  was  informed  to  the  Vice-
Chancellor.  The university vide letter No. E/243 dated  25.3.1998  directed
to stop final payment to the second respondent and the university  requested
the  Executive  Engineer  for  verification  of  quality   of   work   done.
Appellants  have  stated  that  the   amount   of         Rs.  34,505/-  has
been lying in the account of the university and  only  on  instruction  from
the Vice-Chancellor, the amount was not paid to the  second  respondent  and
no dishonest intention could be attributed to the appellants.
14.         At this stage, we are only concerned with the question   whether
the averments in the complaint  taken at their face  value   make  out   the
ingredients of criminal offence or not.  Let  us  now  examine  whether  the
allegations made in the complaint when taken on their face value,  are  true
and constitute the offence as defined under Section 406.
15.         Section 405 IPC deals with criminal breach of trust.  A  careful
reading of the Section 405  IPC  shows  that  a  criminal  breach  of  trust
involves the following ingredients:
(a)   a person should have been entrusted with property, or  entrusted  with
dominion over property;
(b)   that person should dishonestly misappropriate or convert  to  his  own
use that property, or  dishonestly  use  or  dispose  of  that  property  or
wilfully suffer any other person to do so;
(c)   that such misappropriation, conversion, use or disposal should  be  in
violation of any direction of law prescribing the mode in which  such  trust
is to be discharged, or of any legal contract which  the  person  has  made,
touching the discharge of such trust.

16.         Section 406 IPC prescribes punishment  for  criminal  breach  of
trust as defined in Section 405  IPC.   For  the  offence  punishable  under
Section 406 IPC, prosecution must prove:
(i)   that the  accused  was entrusted with property  or with dominion  over
it and

 (ii)       that he  (a) misappropriated it, or (b)  converted  it  to   his
own use, or (c) used it,  or (d) disposed of it.

The gist of the offence is misappropriation  done  in  a  dishonest  manner.
There are two distinct parts of the said offence.  The  first  involves  the
fact of entrustment,  wherein  an  obligation  arises  in  relation  to  the
property over which dominion or control is acquired. The second  part  deals
with  misappropriation  which  should  be  contrary  to  the  terms  of  the
obligation which is created.
17.         Section 420 IPC deals with cheating.  Essential  ingredients  of
Section 420 IPC are:- (i) cheating; (ii)  dishonest  inducement  to  deliver
property or to make, alter or destroy  any  valuable  security  or  anything
which is sealed or signed or        is capable of  being  converted  into  a
valuable security, and    (iii) mens rea of the  accused  at  the  time   of
making the inducement.
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  the
property.  To make out a case  of  criminal  breach  of  trust,  it  is  not
sufficient to show that money has been retained by the appellants.  It  must
also be shown that the appellants dishonestly disposed of the same  in  some
way or dishonestly retained the same.  The mere  fact  that  the  appellants
did not pay the money to the complainant does not amount to criminal  breach
of trust.
19.         Even if all the allegations in  the  complaint    taken  at  the
face value are true,  in  our  view,  the  basic  essential  ingredients  of
dishonest misappropriation and cheating are  missing.  Criminal  proceedings
are not a short cut for other remedies.  Since no case  of  criminal  breach
of trust or dishonest intention of inducement is made out and the  essential
ingredients of Sections 405/420 IPC are  missing,  the  prosecution  of  the
appellants under Sections 406/120B IPC, is liable to be quashed.
20.         The impugned order of the High  Court  is  set  aside  and  this
appeal is allowed. Parties are at liberty to work out their  remedy  in  the
civil suits which they have already had recourse to.

                                                               (T.S. Thakur)

                                                              (R. Banumathi)

New Delhi;
October  30, 2014

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