State Bank of India Vs. Rajendra Kumar
Singh & Ors  INSC 227 (25 September 1968)
25/09/1968 RAMASWAMI, V.
CITATION: 1969 AIR 401 1969 SCR (2) 216
Code of Criminal Procedure, 1898, Ss. 517 and
520--Order of the Court directing return of seized property--If necessary to
give party adversely affected notice of hearing and opportunity to be
heard--who has 'right to possess' within the meaning of s. 517.
21 currency notes of Rs. 1,00.0 each were seized
from the Appellant Bank by the police in the course of an investigation of a
case against the third respondent of cheating the first and second respondents.
The seized currency notes were said to be part of the property obtained by the
third respondent from the other two respondents. The third respondent was
acquitted by the trial court of the offence charged. In the course of the trial
the appellant made an application under section 517(1) of the Code of Criminal
Procedure asking for the delivery of the currency notes to it on the ground
that the appellant was an innocent third party who had received the said notes
without any knowledge or suspicion of their having been involved in the
commission of an offence. By its order of 24th April 1962, the trial court
allowed the application and directed that the currency notes 'should be
returned to the appellant.
Subsequently an appeal filed by the State was
allowed by the High Court which set aside the trial court's order of acquittal
of the third respondent and convicted him of the offence charged. On an
application made by the first respondent asking for delivery of the currency
notes to him as they belonged to. him and the second respondent, the High
Court, by an order of April 5, 1963 directed that the notes be handed over to
the first and second respondents.
In the appeal to this Court, it was
contended, inter alia, on behalf of the appellant that the High Court had
reversed the order of the trial court directing the return of the currency
notes to the appellant without giving a notice to the appellant and without
giving an opportunity of being heard; and that the order of April 5, 1963 was
therefore violative of the principles of natural justice and was illegal. The
contention on behalf of the respondents was that there was no provision in
section 520 of the Code of Criminal Procedure for giving notice to the affected
parties and the order of the High Court could not be challenged on the ground
that no hearing was given to the appellant. It was also contended that the High
Court had a discretion under the statute as to whom. the property was to be
returned and there was no reason why this Court should interfere with the
exercise of discretion by the High Court.
HELD: The appeal must be allowed and the order
of the High Court dated April 5, 1963 set 'aside. The seized currency notes
must be directed to be returned to, the appellant.
(1) It is main fest that the High Court was
give notice to the 'appellant before
reversing the order of the trial court directing the disposal of the property
under s. 517 of the Code of Criminal Procedure. As no such notice was given to
the appellant, the order of the High Court dated 5th April 1963 is vitiated in
law. Although the statute does not expressly require a notice to be issued, or
a hearing to be given to the 217 parties adversely affected. there is in the
eye of law a necessary implication that the parties adversely affected should
be heard before the Court makes an order for return of the seized property.
[220 C-D, 221 E] Cooper v. Wandsworth Board of Works. (1863) 14 C.B.N.S. 180,
Ridge v. Baldwin, (1963) 2 W.L.R. 935 and Board of High School and Intermediate
Allahabad v. Ghanshyam Das Gupta and Ors,
A.I.R. 1962 S.C.
1110, referred to.
(2) The appellant asserted that it had
obtained the currency notes in the normal course of its business and without
any knowledge or suspecion of their having been involved in the commission of
any offence and that the respondents had not alleged fraud or lack of good
faith on the part of the appellant. In the circumstances the High Court should
have directed the return of the currency notes to the appellant which had the
"right to possess" the notes within the language of s. 517 of the
Code of Criminal Procedure. Property in coins and currency notes passes by mere
delivery and it is the clearest exception-to the rule Nemo dat quod non habet.
[222 B. C] Whistler v. Forster, (1863) 14 C.B.N.S. 257-258, referred to.
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
NO. 32 of 1965.
Appeal by special leave from the ,judgment
and order dated April 5, 1963 of the Madhya Pradesh High Court, Indore Bench in
Criminal Misc., Case No. 135 of 1962.
Niren De, Solicitor-General, H.L. Anand, 1.
M. Bhardwaj and K.B. Mehta, for the appellant.
B.C. Mishra and C.P. Lal, for respondents
Nos. 1 and 2.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought from the order of the High Court of Madhya
Pradesh dated 5th April, 1963 in Criminal Miscellaneous Case No. 135 of 1962
under section 520 of the Code of Criminal Procedure directing the return of 21
currency notes of the denomination of Rs. 1,000 each to respondents Rajendra
Kumar Singh and Virendra Singh.
The currency notes of the total value of Rs,
21,000 were seized by the Madhya Pradesh Police from the Beawar Branch of the
State Bank of India in the course of an investigation of a case under sections
420, 406 and 120B of the Indian Penal Code registered in P.S. Thuko Ganj,
Indore City as Crime No. 113 of 1961 against Kishan Gopal, the third
respondent. It appears that the third respondent had come into possession of a
sum of Rs. 1,50,000 in Government currency notes by cheating the first and
second respondents. The currency notes seized from the appellant were said to
be part of the property obtained by Kishan Gopal by the commission of the said
offence. The case of the appellant was that it had come into possession of the
said currency notes in the usual course of its business partly through the Bank
of Rajasthan Limited and partly through the Mahalaxmi L2SuP CI 69--15 218 Mills
Company Limited without any knowledge that the said currency notes had been the
subject matter of an offence.
In the proceedings that followed on the
investigation of the said case, the accused persons including the third
respondent were acquitted by the Court of the Fourth Additional Sessions Judge,
Indore in Sessions Case No. 3 of 1962 by an order made on 24th April, 1962. In
the course of the trial, the appellant made an application under section 517 (1
) of the Code of Criminal Procedure asking for delivery of the aforesaid 21
currency notes to it on the ground that the said currency notes had been seized
by the police from the appellant and that the appellant was an innocent third
party who had received the said notes without any knowledge or suspicion of
their having been involved in the commission of an offence. By his order dated
24th April, 1962 the 4th Additional Sessions Judge, Indore allowed the
application and directed that the currency notes should be returned to the
appellant. Subsequently, an appeal was filed to the High Court by the State of
Madhya Pradesh being Criminal Appeal No. 205 of 1962. The appeal was allowed
and the High Court set aside the order of acquittal of the third respondent
and' convicted him under sections 420, 406 and 120B of the Indian Penal Code
and sentenced to undergo imprisonment. The first respondent, Rajendra Kumar
Singh, made an application to the High Court asking for delivery of the
currency notes as they belonged to him and the second respondent and as they
had been deprived of the said property by the third respondent by the
commission of the aforesaid offence. The application was allowed by the High
Court by its order dated 5th April, 1963 and the currency notes were ordered to
be handed over to the first and the second respondents. The relevant portion
the order of the High Court reads as follows :-- "Now the bulk of the
recovered property consists of Government currency notes either of the
denomination of rupees one thousand each or money obtained after the tender of
one thousand rupee notes by Kishan Gopal. The position of the recovered money
in short is this :-- 1.37, one thousand rupee notes were recovered from the
pillow of accused Kishan Gopal after his arrest amounting to: 37,000
2. Money directly traceable to one- thousand
rupee notes recovered from Dayabhai P.W.52, with whom it was deposited by
accused Kishan Gopal and Mst. Tulsabai. 59,500
3. Money recovered from Mst. Tulsa- bai the
sister of accused's cuncubine 10,000 219
4. Money in Beawar Bank consisting of two
drafts of ten-thousand each; on in the name of accused Kishan Gopal and the
other in the name of Rukmanibai, his witness for which the accused ten- dered
twenty one thousand rupee notes and one thousand rupee notes. with which he
opened an account with his Bank. 21,000 --------- Total :-- 1,27,500 This
amount (Rs. 1,27,500) is directly traceable to the conversion of one thousand
rupee notes. We, therefore, direct it be given to Virendra Singh P.W. 1, and
Rajendra Kumar P.W. 73, who shall proportionately divide it between themselves.
No other order is made in respect of other property and., the parties are left
to establish their claim in Civil Court".
Section 517 o.f the Code' of Criminal
"517. (1) When an inquiry or a trial in
any Criminal Court is concluded, the Court may make such order as it thinks fit
for the disposal by destruction, confiscation, or delivery to any person
claiming to be entitled to possession thereof or otherwise of any property or
document produced before 'it or in its custody or regarding which any offence
appears to have been committed, or which has been used for the commission of
(2) When a High Court or a Court of Session
makes such order and cannot through its own officers conveniently deliver the
property to the person entitled thereto, such Court may direct that the order
be carried into effect by the District Magistrate.
. . . . . .
. . . . . .
Section 520 provides as follows :
"Any Court of appeal confirmation,
reference or revision may direct any order under section 518, section 518 or
section 519 passed by a Court subordinate thereto, to be stayed pending
consideration by the former Court, and may modify, alter or annul such order
and made any further orders that may be just".
220 In Support of this appeal, it was
contended in the first place that the High Court had' reversed the order of the
Sessions Judge directing the return of the currency notes without giving a
notice to the appellant and without giving an opportunity to it for being
heard. The argument was stressed that there was a violation of the principle of
natural justice and the order of the High Court dated 5th April, 1963 was illegal.
It was, however, contended on behalf of the respondents that there was no
provision in section 520 of the Code of Criminal Procedure for giving notice to
the affected parties and the order of the High Court cannot be challenged on
the ground that no hearing was given to the appellant. In our opinion, there is
no warrant or justification for the argument advanced on behalf of the
respondents. It is true that the statute does not expressly require a notice to
be issued, or a hearing to be given to the parties adversely affected. But
though the statute is silent and does not expressly require issue of any notice
there is in the eye 'of law a necessary implication that the party adversely
affected should be heard before the Court makes an order for return of the
seized property. The principle is clearly stated in the leading case of Cooper
v. Wandsworth Board of Works(x). In that ease section 76 of the Metropolis
Local Amendment Act, 1855 authorised the District Board to demolish the
building if it had been constructed by the owner without giving notice to the
Board of his intention to build. The statute laid down no procedure for the
exercise of the power of demolition, and, therefore, the Board demolished the
house in exercise of the above power without issuing a notice to the owner of
the house. It was held by the Court of Common Pleas that' the Board was liable
in damages for not having given notice of their order before they proceeded to
execute it. Erie, C,J. held that the power was subject to a qualification
repeatedly recognised that no man is to be deprived of his property without his
having an opportunity of being heard and that this had been applied to
"many exercises of power which in common understanding would not be at all
a more judicial proceeding than would be the act of the district board in
ordering a house to be pulled down". Willes, J. said that the rule was
"of universal application and rounded upon the plainest principles of
justice" and Byles, J. said that "although there are no positive words
in a statute requiring that the party shall be heard, yet the justice of the
common law will supply the omission of the legislature." The same
principle has been reaffirmed in a recent case Ridge v. Baldwin(2). In that
case, section 191 of the Municipal Corporations Act, 1881 provided that a watch
committee may at any time suspend or dismiss any borough constable whom they
think negligent in the discharge of his duty, or otherwise unfit for the same.
The appellant, who was the chief constable of a (1) (1863) 14 C.B.N.S. 180. (2)
(1963) 2 W.L.R. 935.
221 borough police force, was dismissed by
the watch committee on the ground that he was negligent in the discharge of his
duties as thief constable. He brought an action against the members of the
watch committee by stipulating that his dismissal was illegal and ultra vires
the powers. It was held by the House of Lords that the decision of the watch
committee was ultra vires because they dismissed the appellant on the ground of
neglect of duty and as such they were bound to observe the principles of
natural justice by informing him of the charges made against him and giving him
an opportunity of being heard. The same principle was applied by this Court in
Board of High School and Intermediate Education. U.P.. Allahabad v. Ghanshvam
Day Gupta and Ors. (1). It was held in that case that an examination committee
of the Board of Secondary Education in Uttar Pradesh was acting
quasi-judicially when exercising its Dower under rule 1 (1) of Chapter VI of
the Regulations dealing with cases of examinees using unfair means in
examination hall and the principle of natural justice which require that the
examinee must be heard. will apply to the proceedings before the Committee.
Though there was nothing express one way or the other in the Act or the
Regulations casting a duty on the committee to act judicially, where no
opportunity whatever was given to the examinee to give an explanation and
present their case before the Committee. the Resolution of the committee cancelling
their results and depriving them from appearing at the next examination was
defective. Applying the Principle to the present case it is manifest that the
High Court was bound to give notice to the appellant before reversing the order
of the Sessions judge directing the disposal1 of the property under s. 517 of
the Code of Criminal Procedure. As no such notice was given to the appellant.
the order of the High Court dated 5th April, 1963 is vitiated in law.
The next question which arises in this appeal
is whether the High Court was justified on merits in ordering the currency
notes to be returned to respondents 1 and 2. It was argued by Mr. Mishra that
the High Court hat a discretion under the statute as to whom the property was
to be returned and there was no reason why this Court should interfere with
such exercise of discretion by the High Court. We are unable to accent the
argument. It is true that sections 517 and 520 of the Code of Criminal
Procedure confer a discretion on the High Court as regards the disposal of the
property seized or produced before it or regarding which any offence was said
to have been committed.
But as we shall presently show the High Court
has not exercised its discretion according to proper legal principle and its
order is hence liable to be set aside. It was stated by Mr. Mishra that the
question involved in (1) A.I.R. 1962 S.C. 1110 222 this case is whether as to
which out of two innocent parties should suffer, viz.; the person who lost the
property due to the criminal, act of another or the person to whom the property
(currency notes) had been delivered in the normal course of its business. It is
not, however, correct to say that respondents 1 and 2 are equally innocent
because respondents 1 and 2 had admittedly handed over the currency notes to
respondent No. 3 "for the criminal purpose of duplication". It was
indeed urged on behalf of the appellant that respondents 1 and2 had entered
into a criminal conspiracy with respondent No. 3 for 'duplicating' the currency
notes. In any event, we are satisfied that the High Court was in error in
directing the return of the currency notes to respondents 1 and 2. The reason
is that the property in coins and currency notes passes by mere delivery and it
is the clearest exception to the rule Nemo dat quod non habat. This exception
was engrafted in the interest of commercial necessity. But the exception only
applies if the transferee of the coin. or currency notes takes in good faith
for value and without notice of a defect in the title of the transferor. The
rule is stated by Wills J. in Whistler v. Forster(1) as follows :- "The
general rule of law is undoubted, that no one can transfer a better title than
he himself possesses: Nemo dat quod non habat. To this there ,are some
exceptions; one of which arises out of the rule of the law merchant as to
negotiable instruments. These, being part of the currency, are subject to. the
same rule as money: and if such an instrument be transferred in good faith, for
value, before it is overdue, it becomes available in the hands of the holder,
notwithstanding fraud which would render it unavailable in the hands of a
previous holder." In the present case the appellant asserted that it had
obtained' the currency notes in the normal course of its business and without
any knowledge or suspicion of their having been involved in the commission of
any offence. The respondents have not alleged fraud or lack of good faith on
the part of the appellant. The appellant hence contended that the property in
the currency notes, passed in its favour by mere delivery and the appellant
"had a right to possess' the currency notes within the meaning of s. 517
of the Code of Criminal Procedure. We do not wish to express any concluded
opinion in this case on the ultimate question of liability for payment of the
money as between the appellant on the one hand and respondents 1 and 2 on the
other. But we are of opinion that in the circumstances of this case the High
Court should have directed the return of the said currency notes to the (1)
(1863) 14 C.B.N.S. 257-258.
223 appellant which had the "right to
possess" the currency notes within the language of s. 517 of the Code of
we accordingly allow this appeal, set aside
the order of the High Court dated April 5, 1963 and direct that the 21 currency
notes of the denomination of Rs. 1000 each seized by the Madhya Pradesh Police
should be returned to the appellant.
R.K.P.S. Appeal allowed.