Crl.Rev No.1972 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Crl.Rev No.1972 of 2009 Date of Decision: 17.08.2011 Punjab State Civil Supplies Corporation Ltd. ...Petitioner Vs. Rajesh Garg ...Respondent BEFORE: HON'BLE MR.JUSTICE A.N.Jindal 1. Whether Reporters of local papers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest. --- Present: Mr.G.S.Sandhawalia, Advocate, for the petitioner. Mr.G.S.Dhaliwal, Advocate, for Mr.H.S.Saggu, Advocate, for the respondent. --- A.N.Jindal, J. This revision has arisen out of the judgment of acquittal dated 17.01.2009 passed by learned Chief Judicial Magistrate, Sangrur, acquitting the accused (hereinafter referred to as the respondent), under section 406 of the Indian Penal Code. M/s Ganpati Rice Mills, Sangrur has been dealing with Crl.Rev No.1972 of 2009 2 custom milling and during the period 1999-2000 aforesaid firm through accused/respondent Rajesh Garg entered into an agreement for delivery of rice to Food Corporation of India (for short the FCI) in the Punjab State Civil Supplies Corporation Ltd. (for short PUNSUP) account. As per the terms of the policy, the party had to deliver 23523.27 quintals of rice till date leaving a balance of 26455.01 quintals of paddy. On 30.5.2000 District Manager PUNSUP along with field staff checked the premises and detected that the whole paddy was missing and there was no stock available with the miller. Thereafter, physical verification was carried out on 9.6.2000. It was found that the accused had embezzled whole of the stock as supplied to him. On the aforesaid application of District Magistrate a case under sections 406/420 IPC was registered against the accused. Case was investigated and ultimately challan against the accused was presented in the court. On finding prima facie case against the accused he was charge-sheeted under section 406 IPC, whereas other co-accused Parmod Kumar was discharged vide order dated 3.10.2001. The prosecution, in order to substantiate the charge examined Ram Kishan, Field Officer (PW1), Baldev Singh Inspector (PW 2), Upinder Nath Sharma (PW 3), Bimal Kumar, Accountant PW 4); Anjana Kumari (PW 5), Megh Raj Bansal (PW 6), Anant Kumar Sharma (PW 7), Harpal Singh (PW 8), Ashwani Kumar (PW 9), SI Hargopal (PW 10) and SI Anokh Singh (Retired) (PW 10). Crl.Rev No.1972 of 2009 3 When examined under section 313 Cr.PC, the accused denied all the incriminating circumstances appearing against him and pleaded his false implication in the case. Though the State has not filed any appeal yet the State through Punjab State Civil Supplies Corporation Ltd., has filed this revision. Trial resulted into acquittal. Arguments heard. Records perused. As regards the entrustment of paddy there is definite statement of Baldev Singh PW 2 that 54560 bags i.e. 35464 quintals of paddy were entrusted to the accused for delivery of rice to FCI in PUNSUP account. It is admitted case of the parties that M/s Ganapati Rice Mills was on lease with the accused, therefore, as per Clause 6 (e) of the policy (Ex.D.1), the paddy stored was handed over to the accused for milling. PW 4 Bimal Kumar, Accountant, has admitted that as per Ex.D.8 to Ex.D.11 as also Ex.D.15, the accused was handed over 3900 quintals, 3883.50 Quintals, 2580.50 quintals and 2145 quintals of paddy vide Ex.D.8 to Ex.D.11, respectively. There is no evidence with regard to the delivery of rice by milling 26455 quintals of paddy by the accused. The trial court has dealt with the matter while observing that since paddy was delivered according to Ex.D.2, therefore, the dispute being of short delivery of rice,relates to the jurisdiction of the arbitrator being of civil nature and the miller is not liable for criminal proceeding, as only civil remedy is Crl.Rev No.1972 of 2009 4 available to the PUNSUP. As a matter of fact, the order acquitting the accused is on the basis of same judgment i.e. Kailash Verma Vs. Punjab State Civil Supplies Corporation & Anr. 2005 (1) RCR (Criminal) 727, which was earlier relied upon by the accused by challenging the order of framing the charge, but Hon'ble Justice Ranjit Singh while distinguishing the said judgment in Criminal Revision No.1547 of 2002 (PUNSUP, Chandigarh Vs. Rajesh Garg), preferred by the accused, which was decided on 29.11.2006 along with connected CRR No.1037 of 2002 titled PUNSUP, Chandigarh Vs. Rajesh Garg, observed as under:- “...........This aspect of the law laid down in Kailash Verma's case (supra) has been considered by this Court. It is required to be seen if the ratio of the decision in Kailash verma's case (supra) would be attracted in the facts and circumstances of this case or not. For that, it would be essential to understand that the system of entrusting paddy for custom milling. There are two types of rice which are milled by the millers and they are known as levy rice and custom milled rice. A difference between the two types is required to be understood. Custom milling rice is the rice delivered by the millers to the Govt. of the paddy purchased by Government or its agencies and given to the millers for milling. Levy rice is a rice delivered by the millers to the Government out of the paddy Crl.Rev No.1972 of 2009 5 purchased by them directly from the market and they are required to give 75% of the rice out of the paddy milled and purchased by them. It is thus clear that the paddy which is supplied to the mill for custom milling of rice is a property of the agency, which had supplied paddy and it is only entrusted to the mill for the purpose of milling. The mills is required to account for the rice and in case it is unable to do so, certainly it would expose itself to criminal liability, besides the civil liability that it may incur In the State of Punjab, a scam known as “Rice Scam” received very wide publicity. The millers had apparently benefited to a huge extent by short supplying rice in return for the paddy that was entrusted to the Mills. This, of course, could not have been without the connivance of employees of agency. The rice scam was of multi facet in nature. It was found that in some cases, the price of the rice was more in the market than the rate at which this was required to be supplied to the Government. The same was sold by the mills in the market. In these circumstances, it was very easy for the millers to urge that they were prepared to compensate the agency. In civil liability, they would still be gainers by paying dues of the agency. In some other cases, where it was found that the price of the rice was more if it was returned to the agency than the open market, then the millers resorted to mixing the Crl.Rev No.1972 of 2009 6 custom milled rice with the levy rice and thus gained tremendously. All these issues are required to be adjudicated properly in a proceeding, which may be of a civil or criminal nature. It is not clear if the rice given for shelling in Kailash Verma's case (supra) was custom mill rice................” In the instant case it is very much clear that it was case of custom milling as the paddy was supplied by the agency to the miller for milling the same. The trial court has overlooked the earlier judgment passed in the case for the reasons best known to it and has again placed reliance on the same judgment while acquitting the accused. The respondent has taken shelter of the judgments in the case of Bala Kishan Dass Vs. P.C.Nayyar 1991 Supp. (2) SCC 412 and Punjab State Civil Supplies Corporation (PUNSUP) Vs. Deepak Kumar and Anr. 2007 (2) RCR (Criminal) 550. The learned trial court appears to have taken wrong view of the matter. Transactions with regard to the receipt of paddy by the PUNSUP for supply of rice to the FCI is based on mutual trust of the PUNSUP and the miller. Since the paddy is entrusted to the miller from time to time under the agreement, a trust is created in him and he is obliged to supply the rice as per Government policy and the breach of such trust resulting into the misappropriation of such paddy entrusted to the miller denudes it of its criminal outfit. The provisions incorporated in the agreement for referring the dispute to Crl.Rev No.1972 of 2009 7 the Arbitrator are not an effective substitute for a criminal prosecution when the disputed act is an offence as many a cheatings are committed in the course of commercial and also money transactions. Similar view was taken by the Hon'ble Apex Court in case of Trisuns Chemical Industry Vs. Rajesh Agarwal & Ors. (1999) 8 Supreme Court Cases 686, wherein it was observed as under:- “7. Time and again this Court has been pointing out that quashing of FIR or a complaint in exercise of the inherent powers of the High Court should be limited to very extreme exceptions (vide State of Haryana V. Bhajan Lal 1992 (Supplement) (1) SCC 337 and Rajesh Bajaj Vs. State NCT of Delhi 1994 (3) SCC 259). 8. In the last referred case this Court also pointed out that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. We quote the following observations: (SCC page 263 para 10) “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.” 9. We are unable to appreciate the reasoning that the Crl.Rev No.1972 of 2009 8 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 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.” In the instant case, it would be seen that particular quantity of paddy was supplied to the accused but he galloped whole of the paddy and not supplied the rice. The mens rea is the back bone of the Section 406 IPC. Had there been any minor shortage in the supply of paddy or a dispute over some accounts and misunderstanding regarding of concessions or benefits to be given to the miller, then the element of mens rea could be said to be missing. Such shortage could be said to be on account of certain misunderstandings and miscalculations, terming it to be the dispute Crl.Rev No.1972 of 2009 9 of a civil nature, but when the paddy in huge quantity is misappropriated, and is not accounted for, then the element of mens rea in misappropriation becomes apparent. While interpretting Section 406 IPC, the Apex Court in case State of Punjab Vs. Pritam Chand & Ors. 2009 (3) RCR (Criminal) 376, besides the Bala Kishan Dass's case (supra), the Apex Court also discussed State of Haryana Vs. Bhajan Lal 1991 (1) RCR (Criminal) 383 as well as Rajesh Bajaj Vs. State NCT of Delhi 1992 (2) RCR (Criminal) 160 and approved the view taken by the Apex Court in the aforesaid cases and observed as under:- “9. These 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.” In case of criminal breach of trust, the gist of the offence Crl.Rev No.1972 of 2009 10 is dishonest, misappropriation or conversion to the person's own use of property. This is a case of breach of trust committed by a person in the position of a trustee to whom the paddy of crores was entrusted for a specific purpose and he had lifted the paddy with a promise that he would supply the quantity of rice to the FCI in particular proportion in PUNSUP's account but he failed to fulfill the promise. The faith reposed by the PUNSUP stood betrayed . The essential thing to be proved in case of breach of trust is whether the accused was actuated by dishonest intention or not. The failure to account for paddy shows that the accused had misappropriated the same. It is not necessary or possible in every case to prove in what precise manner the accused has misappropriated the articles supplied to him but element of offence of criminal breach of trust is established if the prosecution proves that the article given to the accused was for a specific purpose but he did not account for the same for which it was meant. This court also in the case of Pawan Kumar Vs. State of Haryana, 2006 (2) RCR (Criminal) 162, while distinguishing the judgment delivered in Kailash Verma's case (supra) and relying upon Bala Kishan Dass's case (supra) observed as under:- “22. In the aforementioned judgments the Hon'ble Supreme Court has not laid down any absolute proposition of law that the existence of an arbitration clause or the pendency of arbitration proceedings would entail an automatic quashing of an FIR. In Bal Kishan Crl.Rev No.1972 of 2009 11 Das (supra) after examining the facts of the case and specifically taking note of the fact that after registration of a case under Section 409 of the IPC, the Vigilance Department dropped the case and that arbitration proceedings were pending for more than 17 years, the Hon'ble Supreme Court quashed criminal proceedings. This judgment, in my considered opinion, cannot be construed to be a precedent for the proposition that the existence of an arbitration clause bars the filing of a complaint or an FIR for an offence under Sections 406/409 of the IPC etc. The next judgment namely; Kailash Verma's case (supra) also does not set down any absolute proposition that the existence of an arbitration clause would necessarily oust the right of an aggrieved party to lodge an FIR nor does the aforementioned judgment lay down any absolute rule of law that the existence of an arbitration clause would bar criminal proceedings. In Kailash Verma's case (supra), the appellant was discharged by the trial court. The said order was reversed and the mater remitted to the trial Court. The Supreme Court held that as there was no prima facie evidence of entrustment of paddy or shortage of rice supplied to the Corporation, and the dispute disclosed being civil in nature, the petitioner could not be prosecuted.” Crl.Rev No.1972 of 2009 12 As regards the judgment delivered in case Deepak Kumar's case (supra), the same is on different set of facts as the element of misappropriation had not been proved. In that case, the accused had supplied whole of rice and there was dispute with regard to calculations, therefore, the same is not applicable to the facts of the present case. The trial court appears to have not dealt with the issue of mens rea and also not discussed and appreciated the evidence on the record. The court has not dealt with the factum with regard to embezzlement of the rice and non-compliance of the promise as committed by him at the time paddy was supplied to him. The case relates to embezzlement of paddy amounting to Rs.1,17,00,000/- which itself is an indication of the criminal intention of the accused. In my view, the impugned judgment is based on misappreciation of evidence and misapplication of law and is rendered perverse warranting interference by this court. As a result of the aforesaid discussion, this revision petition is accepted. Impugned judgment is set aside and the case is remitted back to the trial court to decide afresh after appreciating the entire evidence on record. (A.N.Jindal) 17.08.2011 Judge rp