THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY Crl.P.No.7842 of 2007 ORDER: 1. This Criminal Petition is filed under Section 482 Cr.P.C. seeking to quash proceedings in C.C.No.78 of 2005 on the file of the Judicial Magistrate of First Class, Andole, Jogipet, Medak district. 2. The petitioner is A1 and the second respondent is the defacto complainant, who lodged report dated 16.2.2004 with the Station House Officer, Jogipet, Medak district, which was registered as Cr.No.26/04 of Jogipet P.S. under Sections 409 and 420 IPC and Sections 79(A)(1) (a) and (c) and 116(c) of A.P. Cooperative Societies Act, 1964 against the petitioner-A1. 3. Before going into the merits of the case, it is necessary to note briefly the prosecution version. 4. A1 who was the Ex-Managing Director of Sanjay Rural Electrical Society Ltd., (for short ‘SCORE’) had implemented the revised pay scales of 2002 of A.P. TRANSCO to the employees of SCORE, Jogipet without verifying the process involved therein as contemplated under the provisions of the A.P. Cooperative Societies Act and without obtaining prior approval from competent authority which benefited 87 regular employees and consequently disbursed an amount of Rs.30.00 lakhs towards arrears as on 3.2.2004 and an amount of Rs.2,33,391/- towards revised salaries for the month of January 2004 totalling to Rs.32,33,391/- to the employees of SCORE after placing note for necessary approval before A2 in the case, who was then Person Incharge for the revision of pay scales of SCORE with effect from 1.4.2002 and obtaining approval from A2 who got no authority to do so on 30.1.2004. Thus, A1 and A2 misappropriated the said amount and thereby they have committed the said offence. 5. The learned counsel for the A1 has submitted that SCORE issued a Memo No.2/1/2004 dated 28.2.2004 cancelling the order and sought to recover the payments made to the employees which was challenged in Writ Petition Nos.3737 & 3902 of 2004 by several employees of SCORE and obtained interim directions not to recover the amounts and further the employees of Rural Electrical Society Limited (for short ‘RESCO’) have been drawing their pay scales on par with the scales of A.P. TRANSCO implementing the revision of pay scales of A.P. TRANSCO and further the Government issued G.O.Rt.No.458 dated 6.5.2004 for the implementation of the revised pay scales in respect of the employees of CESS, Sircilla and Karimnagar pending for review of similar cases in pursuance of the recommendations of the Registrar of Cooperative Society, Hyderabad duly exempting them from the operation of Section 116(c) of the Act and further the Government of A.P. issued G.O.Rt.No.1257 dated 28.11.2005 for the implementation of the revised pay scales of 2002 on par with the employees of A.P. TRANSCO and thereby permitted the employees of SCORE to draw the salaries as per the same scales exempting them also from the operation of Section 116(c) of the Act subject to the outcome of the orders of this Court in W.P.Nos.3737 and 3902 of 2004 as was done in the case of employees of RESCO. Further, on 12.3.2004 the Registrar of A.P. Cooperative Societies, Government of A.P. directed the liquidator of SCORE to fix up the pay scales of RESCO, Jogipet as per the revised pay scales of 2002 in terms of the orders issued in G.O.Rt.No.1257 dated 28.11.2005 and to pay arrears of pay scales and in furtherance thereof, the liquidator of SCORE by proceedings dated 29.12.2005 revised the pay scales with effect from 1.4.2002. Further, as A1 submitted his note to A2 on 30.1.2004 specifically saying that the society was adopting the pay scales of A.P. TRANSCO to its employees and also adopted them in 1994 and 1998 as a practice from the inception of SCORE, which was approved by A2 and further necessary orders were passed by the competent authority for the implementation of revised pay scales with effect from 1.4.2002 itself, which upholds or endorses the act of implementing the revised pay scales of 2002 by A1 as per law, it cannot be said that A1 involved in cheating any body or misappropriating the funds of the establishment. In support of his contention, the learned counsel has relied upon the decision in GOVT. OF A.P. AND OTHERS v. D.JANARDHANA RAO AND ANOTHER[1]. 6. There is no dispute that the liquidator of SCORE by proceedings dated 29.12.2005 revised the pay scales with effect from 1.4.2002 in terms of G.O.Rt.No.1257 dated 28.11.2005 and there is also no dispute about the implementation of pay scales to the employees of SCORE as applied to the employees of A.P.TRANSCO, RESCO & CESS. 7. Therefore, it is to be mainly considered as to whether the implementation of revised pay scales of 2002 by A1 after obtaining necessary approval from A2 (the then Person Incharge of the Society) in the manner stated amounts to the commission of offences punishable under Sections 409 and 420 IPC and Sections 79(A)(1) (a) and (c) and 116(c) of the Act. “Section 405 IPC reads as under: Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, 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 wilfully suffers any other person so to do, commits “Criminal breach of trust”. Explanation (1) …………………….. Explanation (2) …………………….. Section 409 IPC reads as under: Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Section 415 IPC reads as under: 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, and 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’. Section 420 IPC reads as under: 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”. 8. Therefore, the main element to constitute the offence of criminal breach of trust punishable under Section 409 IPC is dishonest intention of doing any act or acts covered thereunder. The main elements to constitute the offence of cheating at the outset is deception of a person to induce him to part with his property. The record available only provides that A1 and A2 involved in implementing the revised pay scales of 2002 only for the benefit of the employees of SCORE without any element of dishonest intention or element of cheating and hence the application of Sections 409 and 420 IPC has to be ruled out here. 9. Further, Section 79-A(1) of A.P. Cooperative Societies Act, 1964 provides; “Punishment for corrupt practices: (1) Where any officer of a society or an employee or a paid servant or any member of such society; (a) commits any irregularity in receipt or sanction of loans or in purchases or causes, deficit in stocks; or (b) ………………………………………………………….. (c) uses to allow the use of funds of the society otherwise than in accordance with the provisions of this Act, rules or the bye-laws of the society; or (d) ………………………………………………………… (e) ……………………………………………………….. he shall be deemed to be guilty of a corrupt practice in relation to the society. Explanation: …………………………………… (i) ………………………………………………… (ii) …………………………………………………. (2) Every person guilty of a corrupt practice shall be punishable with imprisonment for a term which may extend upto one year or with fine which may extend to rupees five thousand or with both. Section 116(c) of the Act adumbrates that; “Staffing pattern of societies: (1) A society shall have power to fix the staffing pattern, qualifications, pay scales and other allowances for its employees with the prior approval of the Registrar of Cooperative Societies subject to the condition that expenditure towards pay and allowances of the employees shall not exceed two percent of the working capital or thirty percent of the Gross profit, in terms of actuals in a year whichever is less. (2) ……………………………………… 10. This clearly manifests or mandates that the implementation of pay scales should be subject to the approval of Registrar of Cooperative Societies concerned and when it was not done, there was a violation of the provisions punishable under Section 79A(1)(c) of the Act. Further, the question of application of the pay scales of employees of A.P. TRANSCO and RESCO etc., as of practice does not relax the provision enumerated in Section 116(c) of the Act and does not give A1 any authority to implement the revised pay scales without the approval of the concerned authority as prescribed thereunder. The only test that is to be applied here is whether he got any authority to do so and all other considerations raised are not suffice to take away that mandate. In other words, the subsequent order of implementation of revised pay scales with retrospective effect does not relieve him of the criminal liability fastened to him by the operation of law. 11. Relevant facts in GOVERNMENT OF A.P. v. D.JANARDHANA RAO (1 supra) are as follows: Erstwhile employees of the Government of Hyderabad did not have the opportunity to acquire the qualifications prescribed by Rule 4 (a) of the Special Rules on their promotion as Deputy Tahsildars. The Government felt that they should not be left out of consideration for appointment as Tahsildars and asked the Public Service Commission to consider the names of such Deputy Tahsildars for inclusion in the lists of eligible candidates assuring the Public Service Commission that the Government would relax the requirement as to qualification in favour of such Deputy Tahsildars provided they were otherwise found suitable by the Commission. The Public Service Commission accordingly included the names of those 63 employees in batches in the lists prepared for the years 1965, 1966, 1968 and 1969. By an order dated June 30, 1971 the Governor of Andhra Pradesh relaxed the provisions of Rule 4(a) of the Special Rules relating to the qualifications required of Deputy Tahsildars for being appointed as Tahsildars in favour of those 63 employees and requested the Board of Revenue to make appointments to the post of Tahsildar in the Telengana area according to the order in which the names had been indicated in the panels for the aforesaid years against the vacancies. The order traces the background of facts and states the reasons for relaxation of Rule 4 (a) of the Special Rules in the case of these employees. Rule 47 of the Andhra Pradesh State and Subordinate Service Rules gives power to the Governor to relax the rigour of the general rules in such manner as may appear to him to be just and equitable. Under those circumstances, the Supreme Court considered as to whether Rule 47 permits relaxation of any general rule with retrospective effect and observed; “The order made on June, 1961 relaxed Rule 4(a) of the Special Rules in the case of these employees to validate the panels for the years 1965, 1966, 1968 and 1969. The impugned order thus regularised the inclusion of the names in the panels which was done long before the order was made. The order is therefore clearly retroactive and not prospective in operation”. 12. In the circumstances of the case, the meaning of word “retroactive” is to be taken as retrospective in nature as the subsequent orders were made applicable to the promotions made earlier, but the question involved here is altogether different i.e. as to whether any criminal liability has been fastened to A1 apart from A2 by implementing the revised pay scales of 2002 without any authority and whether the subsequent implementation of revised pay scales with retrospective effect would discharge such criminal liability, if any. 13. Therefore, for the foregoing reasons, the criminal petition is allowed insofar as the offences punishable under Sections 409 and 420 IPC are concerned and dismissed insofar as the offence punishable under Section 79(A)(1) (a) of A.P. Cooperative Societies Act, 1964 is concerned. Further, as the matter has become very old, the lower Court is directed to dispose of the matter within a period of four months from today. ________________________ G.KRISHNA MOHAN REDDY, J Date: 21.10.2011 Note: L.R. copy to be marked. B/o DA THE HON’BLE SRI JUSTICE V.ESWARAIAH AND THE HON’BLE SRI JUSTICE G.KRISHNA MOHAN REDDY Crl.A.No.1547 of 2007 .10.2011 [1] AIR 1977 SC 451