Case: Ashim K. Roy Vs. Bipin Bhai Vadilal Mehta

2. The appellant who was a General Secretary of Hind Mazdoor Kisan Panchayat to which Gujarat Mazdoor Panchayat, a recognised trade union of a limited company, originally known as M/s. Sayaji Mills Ltd, now known as Sayaji Industries Ltd, is affiliated. According to the appellant/complainant, respondents 1 and 2 (hereinafter called the "contesting respondents") have committed offences under Sections 120-B and 409 IPC read with Section 77 of the Companies Act. The contesting respondents are father and son. One Vadilal Lalbhai Mehta was the father of the first respondent Bipinbhai Vadilal Mehta. One Suhasbhai Vadilal Mehta was the brother of the first respondent. They entered into a memorandum of understanding on 30.1.1982 for dividing their properties. As per the said memorandum of understanding, the first respondents family will be given management and control of M/s. Sayaji Industries Ltd. and M/s. C.V. Mehta Pvt. Ltd. On the other hand, the management and control of other companies, namely, M/s. Industrial Machinery Manufacturers Pvt. Ltd., M/s. C. Doctor and Co. Pvt. Ltd. shall remain with Suhash Bhai Mehta, brother of the first respondent. As per the terms of the memorandum, the liabilities of M/s. C.V. Mehta Pvt. Ltd. towards other concerns amounting to Rs. 39 lacs and odd was to be discharged by the first respondent and his family and only after the clearance of the said liability, the first respondent and his family could take over the management and control of the companies allotted to them. It was alleged by the appellant in the complaint that the contesting respondents had no funds with them to discharge the liability allotted to them and they could not also raise funds to be deposited with M/s. C.V. Mehta Pvt. Ltd. within the stipulated period, namely, February to November, 1982. Therefore, a modification to the memorandum of understanding was entered into between the same parties on 13.11.1982. As per the modified memorandum of understanding, it was agreed that the contesting respondents will deposit Rs. 20 lacs immediately with M/s. C.V. Mehta Pvt. Ltd. in order to acquire the shares of M/s. Sayaji Industries Ltd. and thereby gain management and control of M/s. Sayaji Industries Ltd. (hereinafter referred to as the `Company). In order to discharge the liability as per the modified memorandum of understanding, it is the specific case of the appellant that the contesting respondents entered into a conspiracy to commit criminal breach in relation to the funds of the company and thereby dishonestly siphoned the public funds to the detriment of the shareholders and the employees of the company. The appellant explaining the act of alleged conspiracy has stated in the complaint that the contesting respondents diverted the funds of the company in a clandestine manner by manipulating and tampering the records and accounts and caused the wrongful gain in so transferring the funds of the company by making advance to a supplier M/s. Santosh Starch Products Ltd. by three different cheques drawn on Punjab National Bank. It was further alleged that the accused persons in furtherance of the conspiracy made it to appear that M/s. Santosh Starch Products advanced a loan of Rs. 20 lacs on 13.11.1982 by three cheques in favour of Bipin Mehta who in turn ploughed the amount in M/s. C.V. Mehta Pvt. Ltd. to discharge the liability undertaken by him as per the modified memo of understanding. In this process, the contesting respondents acquired the control and management of M/s. Sayaji Industries Ltd. Inasmuch as the funds of the company were utilised in the manner aforesaid, according to the appellant, the contesting respondents have violated Section 77 of the Companies Act. In addition, it was the case of the complainant that the contesting respondents have also committed offences punishable under Sections 120-B and 409 of IPC.3. On receipt of such complaint, the Judicial Magistrate, First Class, Ahmedabad (Rural) conducted an inquiry under Section 202 Cr.P.C. The learned Magistrate recorded statements of four witnesses. After considering the deposition of the said four witnesses and also the documents produced before him, the Magistrate was of the opinion that prima facie a case against the contesting respondents was made out for the offences punishable under Sections 120-B and 409 IPC read with Section 77 of the Companies Act. Learned Magistrate was also of the view that the case has to be tried by the Sessions Court and accordingly he committed the case under Section 323 of Cr.P.C. to Sessions Court.4. The contesting respondents previously moved the Sessions Court for anticipatory bail while the proceedings were pending before the Magistrate. The learned Sessions Judge rejected that application for anticipatory bail. The contesting respondents moved the Gujarat High Court against the order of the Sessions Judge declining to grant anticipatory bail and also against the order of the Magistrate registering the case and committing the same for proceeding further by the Sessions Court. These two cases, namely, Criminal Revision Application No. 247 of 1989 and Criminal Miscellaneous Application No. 4216 of 1994 came up for consideration before the High Court.5. Before the learned single Judge, it was conceded by the learned counsel appearing for the complainant that the warrant issued against the contesting respondent for the offence punishable under Section 77 of the Companies Act was uncalled for and that the order of committing criminal case to the Sessions Court was also not proper. In view of these concessions, the High Court confined the dispute as to whether the warrant issued against the contesting respondents for the offences punishable under Sections 120-B and 409 was justified. The learned Judge by his detailed and considered order dated 2.12.94 held that the order passed by the learned Magistrate was without application of mind and that on the day on which the offence was said to have been committed by the contesting respondents, they were not even ordinary directors much less managing directors of the company having control and management of the affairs of the company. On the other hand, the learned Judge held on facts that it was established, it was the father of the respondent No. 1 who was the Chairman and Managing Director of the Company on the relevant date and he was not impleaded as a party. The company also was not impleaded as a party accused. The learned Judge further found that the complaint was at the instance of somebody to settle his score with the contesting respondents and it was a clear case of deliberate attempt on the part of the complainant to use the machinery of the court for an oblique purpose. The learned Judge also found that the chances of ultimate conviction are bleak and, therefore, no useful purpose will be served by allowing the criminal prosecution to continue. In coming to this conclusion, the learned Judge placed reliance on a judgment of this Court in Madhavrao Jiwaji Rao Scindia and another v. Sambhajirao Chandrojirao Angre and others, AIR 1988 SC 709 . In the result, the learned Judge allowed the applications and quashed the complaint and charge against the contesting respondents.6. Aggrieved by the common order of the High Court, the present appeals by special leave are preferred.

Court's reasoning:
17. A cursory reading of the complaint, in particular the extracts especially the underlined portion as given above, will clearly show that the contesting respondents (accused) will come into picture only after the liability contemplated under the modified memorandum of understanding was discharged. In other words, the accused respondents 1 and 2 could have come into picture only after the transactions complained of had taken place and as noticed above it was the father of the first respondent, who was the Managing Director of Sayaji Industries Ltd. when the transactions in question took place. The respondents Nos. 1 and 2 could have played no part in that transaction as they were not even ordinary Directors at that time in M/s. Sayaji Industries Ltd. Therefore, the allegations made in the complaint even if it is taken in its entirety still they do not constitute an offence either under Sections 120-B and 409 IPC. In the circumstances, it would be manifestly unjust to allow the proceedings in the criminal complaint to be proceeded with against respondents 1 and 2.18. In this connection, though it is very well settled that the power under Section 482 Cr.P.C. should be sparingly invoked with circumspection, this Court consistently has taken the view that it should be exercised to see that the process of law is not abused or misused.In fairness to the High Court, we must also set out the reasoning of the High Court on this aspect. The High Court rightly observedthe complaint and other material on record it appears that even according to the complainant the loan was advanced on 13.11.1982 by Sayaji Industries Limited to Santosh Starch Products and the Santosh Starch Products are alleged to have advanced the loan to the accused on the same day i.e. on 13.11.1982 and this, according to him, is an offence constituting both criminal breach of trust and conspiracy. Reading the requirement of Section 409 it is clear that proof of entrustment of money is a condition precedent. The ingredients of offence under Section 409 of IPC are to be found in the definition clause of "criminal breach of trust" in Section 405 of IPC. It is, therefore, necessary for the complainant to prove the entrustment of property or dominion over it and in the second instance "dishonest misappropriation" or "conversion to the accused own use" of the property concerned. It is well settled that the dishonest use or disposition of the property in question in violation of any direction of the law prescribing the mode in which the trust is to be discharged or of any legal contract, express or implied, which is made touching the discharge of such trust, or wilfully suffering of any person to do so also constitute the offence of "Criminal Breach of Trust". Now, upon reading the complaint, it becomes clear that it is the specific case of the complainant that the loan was advanced on 13.11.1982 by Sayaji Industries Limited to Santosh Starch Products alleged to have advanced the loan to the accused on the same day and thus, according to him, is an offence constituting of both criminal breach of trust and conspiracy. This, in my view, does not amount in law into an offence under Section 409 as the ingredients of Section 409 are not attracted. For attracting the provisions of Section 409 one has to allege that the breach of trust is committed by public servant or by banker, merchant or agent, broker or attorney. Reading the complaint, it is nowhere stated that the accused occupy any of these positions. In absence of these particulars in the complaint, in my view, the complainant has prima facie failed to make out the case against the petitioners. Similarly, it is clear from reading the complaint and other material on record that the complainant has failed to make out any case under Section 120-B or 409 of IPC.We are in agreement with the view expressed above by the High Court.