IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :11.03.2011 CORAM THE HONOURABLE MR.JUSTICE P.R.SHIVAKUMAR Crl.R.C.No. 337 of 2010 & M.P.No.1 of 2010 1.T.T.G.Industries Ltd., rep. by V.Ravi Srinivasan Old No.36, New No.34, College Road Chennai – 6 2.V.Ravi Srinivasan S/o.T.S.Venkatraman Managing Director T.T.G.Industries Ltd., Old No.36, New No.34, College Road Chennai – 6 3.T.K.Sasidharan S/o.Krishnamoorthy Director, T.T.G.Industries Ltd., Old No.36, New No.34, College Road Chennai – 6 4.C.Krishnan S/o.Chokalingam Site Engineer T.T.G.Industries Ltd., Varapatti Village, Palladam Taluk, Coimbatore District. 5.M.Vijayakumar S/o.A.Mathi Engineer Electrical T.T.G.Industries Ltd., Varapatti Village, Palladam Taluk, Coimbatore District. .. Petitioners/A1 to 5 petitioners Vs. https://hcservices.ecourts.gov.in/hcservices/ State By CBI, E.O.W, Chennai .. Respondent/ Complainant/ R.C.No.6(E) 2005 Respondent PRAYER: Criminal Revision Case filed under section 397 & 401 of Criminal Procedure Code praying to set aside the order in Crl.M.P.No.1519 of 2009 in C.C.No.559 of 2007 dated 12.03.2010 passed by the Additional Chief Metropolitan Magistrate, Egmore, Chennai and allow the revision. For Petitioners : Mr.R.Rajarathinam For Respondent : Mr.N.Chandrasekaran Spl.Public Prosecutor for CBI Cases ----- ORDER The petitioners 1 to 5 herein have been arraigned as Accused Nos. 1 to 5 in C.C.No.559 of 2007 on the file of the learned Additional Chief Metropolitan Magistrate, Egmore, Chennai. Consequent to the dismissal of their petition filed under Section 239 Cr.P.C, namely Crl.M.P.No.1519 of 2009 seeking an order of discharge from the said criminal case, the petitioners have approached this Court challenging the correctness and legality of the said order by invoking the revisional powers of this Court under Section 397 r/w. 401 Cr.P.C. 2. Without there being any specific complaint made by a de facto complainant, the SPE/CBI/EOW/Chennai, registered a case on "source information" in R.C.6/E/2005-CBI/Chennai and submitted a final report on the file of the learned Additional Chief Metropolitan Magistrate, Egmore, Chennai alleging that the petitioners herein committed offences punishable under Sections 120-B r/w. Sec. 409, 420, 467, 467 r/w. 471 I.P.C and substantive offences thereof, probably meaning the offences punishable under Sections 409, 420, 467, 467 r/w. 471 I.P.C. The said charge sheet was dated 31.01.2007. The learned Additional Chief Metropolitan Magistrate, Egmore, Chennai took it on file as C.C.No.559 of 2007 for the above said offences alleged in the final report. On appearance of the petitioners herein/accused, they not only denied the allegations against them found in the final report, but also filed a petition under Section 239 Cr.P.C which was taken on file by the learned Additional Metropolitan Magistrate, Egmore, Chennai as Crl.M.P.No.1519 of 2009 in C.C.No.559 of 2007. After enquiry, the learned Additional Metropolitan Magistrate passed the impugned order dated 12.03.2010, partly allowing the petition https://hcservices.ecourts.gov.in/hcservices/ and discharging the petitioners herein for the offence under Section 409 I.P.C alone and dismissing the said petition in respect of the offences under Section 120-B r/w. Sec. 420, 467, 467 r/w. 471 I.P.C. The said order is impugned so far as the dismissal of the petition seeking discharge regarding the offence under Section 120-B r/w. Sec.420, 467, 467 r/w. 471 I.P.C and the substantive offences thereof. 3. The arguments advanced by Mr.R.Rajarathinam, learned counsel for the petitioners and by Mr.N.Chandrasekaran, learned Special Public Prosecutor of CBI Cases, representing the respondent were heard. The grounds of revision and other documents filed in this case and also the records summoned from the trial Court were perused by this Court. 4. The gist of the allegation made against the petitioners leading to the institution of the criminal case by the CBI is as follows: (i) The first petitioner herein was initially promoted in the name of M/s.T.T.G Machinery Manufacturing Company in the year 1987 and it underwent a change of name in 1992 as M/s.T.T.G.Industries Limited. It was engaged in manufacturing of Wind Electric Generators in collaboration with a German company. During the year 1994 – 1995, the first petitioner approached the Chennai office of the Industrial Finance Corporation of India, shortly called as IFCI, for the sanction of a term loan of Rs.11.65 crores for setting up of a "Wind Farm" with 2.5 MW capacity near Kethanoor, Palladam Taluk and for expanding its capacity of manufacturing Wind Electric Generators at its plant at Ayanambakkam, Chennai. IFCI agreed to lend financial assistance on condition that the loan amount should be secured by way of first charge on all the movable and immovable assets of M/s.T.T.G Industries Ltd., both present and future. It was also agreed that the possession of such movable and immovable assets of the first petitioner would be treated as properties entrusted to it by IFCI. Out of the agreed amount of loan, at various points of time, a total amount of Rs.11 crores was released to the first petitioner herein by way of cheques. However, the loan in respect of the balance amount of Rs.65 lakhs was cancelled. The first petitioner executed a deed of hypothecation dated 06.06.1995 hypothecating Wind Electric Generators with their parts and accessories. Pursuant to the execution of the deed of hypothecation and with the help of the financial assistance rendered by IFCI, the first petitioner company installed 10 wind electric generators at Kethanur, Palladam Taluk on condition that the possession of the said wind mills and enjoyment of the same by the first petitioner was for doing business of electricity generation and out of the profit earned, the principal and interest should be repaid to IFCI. https://hcservices.ecourts.gov.in/hcservices/ (ii) Apart from the hypothecation, the first petitioner company also mortgaged its immovable properties with all structures and fixtures situated at Varapatti and Poorandampalayam villages, Kethanoor, Palladam Taluk. Though the installation of 10 electric generators at the above said villages was completed in March 1996, after purchasing the generators for the Wind Mill from M/s. Siemen Ltd., and they were used for generating electricity to be sold to Tamil Nadu Electricity Board, and the first petitioner company sold about Rs.170 lakhs worth of electricity to Tamil Nadu Electricity Board and received payments, it failed to repay the loan advanced by IFCI between 1999 and 2002. The first petitioner company fraudulently and dishonestly removed 8 of the wind electric generators hypothecated to IFCI from the Wind Farm site at Varapatti and Poorandampalayam villages, Kethanoor, Palladam Taluk, Coimbatore District and sold 7 wind electric generators to Sriram Investments Limited and 1 to Sriram City Union Finance Limited, pursuant to which they were erected at their Wind Farm site at Levenjipuram, Tirunelveli District. The value of the said wind electric generators thus sold and removed from the Wind Farm site of the first petitioner was about Rs.8 Crores. (iii) When the officials of IFCI visited the Wind Farm of the first petitioner in December 2002 for verification of the hypothecated properties, the first petitioner company handed over false and fabricated documents as if those wind electric generators were sent for repair works and thus the sale of the 8 wind electric generators and removal of the same were concealed. The first petitioner company's representatives also falsely submitted before the Board for Industrial and Financial Reconstruction (shortly called BIFR) on 21.03.2002 that the subject wind electric generators had been sent for repairs. During the course of investigation, the second and the third petitioners (A2 and A3), who were the representatives of the first petitioner company also furnished false information to the Registrar of companies by producing false balance sheets for the year 2003 and 2004, as if the wind electric generators had been sent for repairs. The 4th and 5th petitioners, who are also the officials of the first petitioner company, during investigation gave confessional statements before the Chief Metropolitan Magistrate, Chennai bringing the malpractice to light that they also entered into a criminal conspiracy with other petitioners to commit the said malpractice. Pursuant to the conspiracy, petitioners 1 to 3 herein, who were entrusted with and were given dominion over the wind electric generators by the IFCI, fraudulently and dishonestly misappropriated the same with the help of the 4th and 5th petitioners and thus all the petitioners had committed the alleged offences. 5. The petitioners had prayed for an order discharging them https://hcservices.ecourts.gov.in/hcservices/ from the criminal case concerned in this revision on the following submissions made by them:- (i) In the petition filed under Section 329 Cr.P.C, there was no allegation in the final report that the term loan was obtained by submitting any forged document. Admittedly, 10 wind electric generators for the Wind Farm were purchased from M/s. Siemens Limited, through proper invoices containing the serial numbers of the generators. It is also not in dispute that all the ten generators, thus purchased from M/s.Siemens Ltd., were installed at the wind mill farm of the first petitioner in Palladam Taluk. Though it is true that the wind electric generators were hypothecated to IFCI by a deed of hypothecation dated 06.06.1995, the first petitioner never parted with the possession of the same and the possession and enjoyment of the same was with the first petitioner company, whereas IFCI had been given only a lien/charge over those generators. Neither the ownership nor possession of the movable property passed on to the creditor, namely IFCI. Hence, the contention that the said wind electric generators were entrusted to IFCI and dominion over them was given to IFCI by the first petitioner, is without any legal basis. Therefore, there is no prima facie material to show that there was any criminal breach of trust, as there must be an entrustment of the property or entrustment of dominion over the property. Since the first petitioner company was the owner of the 10 generators allegedly removed from its Wind Farm, the preparation of the invoices and delivery challans for the removal of the same from the Wind Farm, even if not true, will not come under the definition of forgery as defined in Section 463 I.P.C. Creating some false delivery challans and invoices, if any, with regard to one's own movable property hypothecated to another will not attract the definition of forgery, even though it may amount to breach of conditions of the hypothecation deed. Therefore, the petitioners should not be asked to face trial for the alleged offences under Section 409, 467 and 471. (ii) In addition to that, the entire amount due to IFCI was paid to it and IFCI accepted it in full satisfaction of the claim against the first petitioner. On such acceptance, IFCI also released the immovable properties mortgaged to them. It also agreed to withdraw all cases instituted against the first petitioner. As such, cases instituted by IFCI against the first petitioner in other forum were withdrawn, after recording full satisfaction. When IFCI officials were asked to withdraw the criminal case also, the officials of IFCI revealed the fact that they were not the defacto complainants and the case was registered by CBI on "source information". In view of the fact that the aggrieved party has already withdrawn the cases and has not chosen to lodge any complaint and in view of the fact that the amount due to the aggrieved party was settled and full https://hcservices.ecourts.gov.in/hcservices/ satisfaction was obtained, the petitioners cannot be prosecuted for the alleged offences and hence, the petitioners should be discharged in respect of all the offences alleged in the charge sheet. 6. Let us now consider the sustainability of the contentions raised by the petitioners. The petitioners, as per the final report, are alleged to have committed the offences of: criminal conspiracy punishable under Section 120-B of I.P.C; criminal breach of trust punishable under Section 409 of I.P.C; forgery for the purpose of cheating punishable under Section 468 of I.P.C and using a forged document as original punishable under Section 468 r/w. 471 I.P.C. The offence of criminal conspiracy is said to have been committed for committing the other offences, namely offences punishable under Section 409, 468 and 468 r/w. 471 I.P.C. Therefore, before dealing with the alleged offence of criminal conspiracy, let us deal with the other offences. Under Section 409 I.P.C, criminal breach of trust by a public servant or by a banker, merchant or agent is made a punishable offence. It says, whoever, being in any manner entrusted with property, or with any dominion over property in any one of the above said capacities, commits criminal breach of trust in respect of such property, shall be punished. Therefore, besides proving that the accused is a public servant or a banker, merchant or agent and was entrusted with the property or dominion over property in his capacity as public servant or in the course of business as a banker, merchant, factor, broker, attorney or agent, it shall also be proved that he has committed criminal breach of trust. What is criminal breach of trust is defined in Section 405 I.P.C, which reads as follows:- "Dishonest misappropriation or conversion of the property which was entrusted or dominion over which was entrusted to one to his own use or dishonest use of or disposal of such 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 the act of willfully suffering any other person so to do. Therefore, to constitute a criminal breach of trust, there must be an entrustment of property or entrustment of dominion over the property to the person who is said to have committed breach of trust." Neither any one of the two explanations provided to Section 405 nor any one of the six illustrations provided thereunder makes the owner of the property who enters into a deed of hypothecation with a financier, as a person entrusted with the property (hypotheca) or entrusted with the dominion over the property. In a case of hypothecation, the hypothecator being https://hcservices.ecourts.gov.in/hcservices/ the owner, his possession, enjoyment and dominion over the property is traceable to his title and not to any concession that may be purported to be extended by the hypothecatee. It is quite clear that in case of hypothecation, there is no entrustment of either the property or dominion over the property to the hypothecator, who is the owner of the property. The person, in whose favour the hypothecation is created, does not get possession or dominion over the property. He has got only a lien or charge over the property, which can be enforced by having recourse to the procedure prescribed by law. 7. In this regard, a comparison of hypothecation and hire purchase shall be of much use in understanding the problem. In case of hire purchase, the financier who finances the amount for the purchase of the property shall be the owner and the hirer shall be the pledgee with a condition that in case of completion of payment of the installments, he shall be entitled to the transfer of ownership without any further payment. Unless and until the payment of final installment is made, the financier shall be the owner and the possession of the hirer under the hire purchase of agreement will be an entrustment of the property and any misappropriation or conversion of the same may amount to criminal breach of trust. On the other hand, a hypothecation of a movable is equvalent to mortgage of an immovable property without possession. The hypothecator does not part with either the title or possession under the deed of hypothecation. On the other hand, a lien/charge is cretaed in favour of hypothecatee for the repayment of the loan secured by the hypothecation. 8. This position shall be clear in the light of the observations by the Hon'ble Supreme Court in Indian Oil Corporation Vs. NEPC India Ltd. and others reported in (2006) 3 SCC (Crl) 188. In the said case, NEPC India Ltd. had hypothecated its two aircrafts to the Indian Oil Corporation for securing payment for the fuel supplied under a contract. In the said contract itself a clause was incorporated to the effect that NEPC India would not assign, sell, pledge, charge, underlet or otherwise encumber or part with the possession, custody or beneficial interest in respect of the two aircrafts without the previous consent of IOC in writing. NEPC also undertook not to do any act which might diminish the value of the hypothecated property without clearing the outstanding due to IOC. Thus NEPC had been bound by the contractual clause. NEPC India Limited was alleged to have clandestinely removed the engines and certain parts of the aircrafts hypothecated to IOC and also committed default in payments to be made to IOC. A private complaint was filed against the directors of NEPC for offences punishable under Section 378 (theft), 403 (dishonest misappropriation), 405 (criminal breach of trust) 415 (cheating) https://hcservices.ecourts.gov.in/hcservices/ and 425 (mischief) of Indian Penal Code. The Hon'ble Supreme Court in that case held that the complaint itself could be quashed. Dealing with the allegation of commission of criminal breach of trust, the Hon'ble Supreme Court made the following observations:- "A criminal breach of trust involves the following ingredients:- a) a person should have been entrusted with property or entrusted with any 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 willfully 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." It has also referred to observation made in an earlier judgment Chelloor Mankkal Narayan Ittiravi Nambudiri V. State of Travancore Cochin reported in AIR 1953 SC; 478, wherein it was observed as follows: "the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit." The Hon'ble Supreme Court has also answered the question whether there is any entrustment in a Hypothecation in the following observation: "Hypothecation is a mode of creating a security without delivery of title or possession. Both, ownership of the movable property and possession thereof, remain with the debtor. The creditor has an equitable charge over the property and is given a right to take possession and sell the hypothecated movables to recover his dues. The creditor may also have the right to claim payment from the sale proceeds (if such proceeds are identifiable and available). " 9. In Central Bureau of Investigation V. Duncans Agro Industries Ltd., reported in (1996) 5 SCC 591, the following observations were also made:- "When some goods are hypothecated by a person to https://hcservices.ecourts.gov.in/hcservices/ another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in the other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee. In the instant case, a floating charge was made on the goods by way of security to cover up credit facility. In our view, in such case for disposing of the good covering the security against credit facility the offence of criminal breach of trust is not committed." 10. Applying the ratio decided in the said cases, the learned Additional Chief Metropolitan Magistrate has rightly held that criminal breach of trust as defined in Section 405 I.P.C has not been made out and the petitioners cannot be prosecuted for the offence of aggravated form of criminal breach of trust made punishable under Section 409 I.P.C. The said finding of the Court below is not challenged by the prosecution. Therefore, this court hereby holds that no prima facie case has been made out for prosecuting any one of the petitioners for the offence under Section 409 I.P.C and the finding of the Court below in this regard is on sound reasoning, which deserves confirmation by this Court. 11.So far as forgery is concerned, it is defined under Section 463 I.P.C. As per the definition found in Section 463 I.P.C, making a false document or part of a document shall be forgery if it is done with intent to cause damage or injury to the public or to any person , or to support any claim or title, or to cause any person to part with property or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed. Making a false document is defined under Section 464 I.P.C. Dishonest or fraudulent making, signing, sealing or executing a document or part of a document or making any mark denoting the execution of a document with the intention of causing it to be believed that such document or part of the document was made, signed, sealed, executed by or by the authority of a person by whom or by whose authority the person doing it knows that it was not made, signed, sealed or executed, is defined as making a false document. Dishonest or fraudulent cancellation, alteration of a document or material part without lawful authority is also construed to be making a false document. Dishonestly or fraudulently inducing any person to sign, seal, execute or alter https://hcservices.ecourts.gov.in/hcservices/ a document with the knowledge that such person, by reason of unsoundness of mind or intoxication, cannot or that by reason of deception practised upon him, he does not know the contents of the document or nature of alteration, will also amount to making a false document. Making a false document shall be with dishonest or fraudulent intention of causing any damage or injury to the public or to any other person or to support any claim or title or to make any person to enter into a contract, which he otherwise would not chose to do so. 12. In this case, the petitioners are said to have committed forgery for the purpose of cheating as defined under Section 468 I.P.C. Forgery per se is made punishable under Section 465 I.P.C. The petitioners 1 to 3 are said to have committed the offence of forgery by preparing invoices showing repair charges and transport delivery challans to project as if 8 out of 10 wind electric generators were removed from the Wind Farm of the first petitioner to the factory for repairs. According to the prosecution, 7 out of 8 wind electric generators removed from the Wind Farm of the first petitioner were sold to Sriram Investments Limited and the remaining one was sold to Sriram City Union Finance Ltd., and all the 8 wind electric generators were erected by them at Levenjipuram, Tirunelveli District. According to the prosecution, suppressing the fact of the sale of those 8 wind electric generators to Sriram Investments Limited and Sriram City Union Finance and the transportation of the same to Levenjipuram, petitioners 1 to 3 had created false transport delivery challans and false invoices for repair charges and thereby committed the offence of forgery for the purpose of cheating IFCI, in whose favour those wind electric generators had been hypothecated. 13. On the other hand, it is the contention of the petitioners/accused that those wind electric generators, due to some technical fault, were to be removed to the factory for effecting repairs and the transport delivery challans and the invoices for repair charges were prepared for the said purpose; that during the said period there was a recession in the market, which was a cause for the inability on the part of the first petitioner to make repayment of the loan advanced by IFCI; that pursuant to