State of Punjab Vs.
Pritam Chand & Ors.  INSC 282 (11 February 2009)
IN THE SUPREME COURT
OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 1069 OF 2004 State
of Punjab ...Appellant Versus Pritam Chand and Ors. ...Respondents
Dr. ARIJIT PASAYAT,
in this appeal is to the judgment of a learned Single Judge of the Punjab and
Haryana High Court dismissing the appeal filed by the State of Punjab against
the judgment of acquittal recorded by learned Judicial Magistrate, Ist Class,
Samana. The respondents were charged for alleged commission of offence
punishable under Section 406 of the Indian Penal Code, 1860 (in short the
`IPC'). They were partners of one Jagdamba Rice Mills to whom the paddy was
entrusted for milling by the Punjab State Civil Supplies Corporation Ltd. (in
short the `Corporation') during the year 1983-84. It was alleged that the
accused failed to account for the paddy and thus misappropriated the same.
Pursuant to arbitration clause between the parties an arbitrator was appointed
and an award of Rs.1,81,315.43 was rendered in favour of the Corporation. The
trial Court acquitted the accused on the ground that the matter arose out of
breach of contract, the same was of civil nature and a criminal case against
the accused was not made out.
Court endorsed the view and dismissed the appeal.
support of the appeal, learned counsel for the State submitted that the High
Court's judgment is totally unreasoned as no reason has been indicated. Merely
because there was allegedly a breach of contract, that cannot in all cases rule
out the criminal prosecution. It is pointed out that even the arbitration award
on which reliance has been placed by the trial Court to direct acquittal, was a
factor in favour of the Corporation and without examining the ingredients of
Section 406 IPC the trial Court and the High Court directed acquittal.
406 IPC deals with punishment for criminal breach of trust.
In a case under
Section 406 the prosecution is required to prove that the accused was entrusted
with property or he had dominion over the property and that the accused
misappropriated or converted the property to his own use or used or disposed of
the property or willfully suffered any person to dispose of the property
dishonestly or in violation of any direction of law prescribing the mode in
which the entrusted property should be dealt with or any legal contract express
or implied which he had entered into relating to carrying out of the trust.
breach of trust is defined in Section 405 IPC. The ingredients of offence under
Section 405 are (i) entrusting any person with property or with dominion over
the property, (ii) the person entrusted (a) dishonestly misappropriated or
converted to his own use the property or (b) dishonestly used or disposed of
the property or willfully suffered any other person so to do in violation (i)
of any direction of law prescribing mode in which such mode is to be discharged
or (ii) of any legal contract made touching the discharge of trust.
Rajesh Bajaj v. State NCT of Delhi (1999 (3) SCC 259) it was held as follows:
"10. It may be
that the facts narrated in the present complaint would as well reveal a
commercial transaction or money transaction. But that is hardly a reason for
holding that the offence of cheating would elude from such a transaction. In
fact, many a cheatings were committed in the course of commercial and also
money transactions. One of the illustrations set out under Section 415 of the
Indian Penal Code [Illustration f] is worthy of notice now:
intentionally deceives Z into a belief that A means to repay any money that Z
may lend to him and thereby dishonestly induces Z to lend him money, A not
intending to repay it. A cheats."
dealing with a case under Section 482 of the Code of Criminal Procedure, 1973
(in short the `Code') this Court referred to the aforesaid judgment and held
that merely because an act has a civil profile is not sufficient to denude it
of its criminal outfit.
Trisuns Chemical Industry v. Rajesh Agarwal and Ors. (1999 (8) SCC 686) it was
noted as follows:
"9. We are
unable to appreciate the reasoning that the provision incorporated in the
agreement for referring the disputes to arbitration is an effective substitute
for a criminal prosecution when the disputed act is an offence. Arbitration is
a remedy for 4 affording reliefs to the party affected by breach of the
agreement but the arbitrator cannot conduct a trial of any act which amounted
to an offence albeit the same act may be connected with the discharge of any
function under the agreement. Hence, those are not good reasons for the High
Court to axe down the complaint at the threshold itself. The investigating
agency should have had the freedom to go into the whole gamut of the
allegations and to reach a conclusion of its own. Pre-emption of such
investigation would be justified only in very extreme cases as indicated in
State of Haryana v. Bhajan Lal. (1992 Supp (1) SCC 335)"
aspects were not considered by the trial Court and, therefore, the High Court
should not have in a summary manner dismissed the appeal after having recorded
that a criminal case may arise even when breach of contract is also there and
there is no bar for prosecution under the criminal law. Having said so, the
High Court came to an abrupt conclusion because two views are possible as to
whether the allegation made was of a civil dispute or of a criminal nature no
interference was called for. The approach is clearly erroneous. Therefore, we
set aside the impugned judgment of the High Court and remit the matter to it
for fresh consideration in accordance with law.
appeal is allowed to the aforesaid extent.
(Dr. ARIJIT PASAYAT)