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PETITIONER: PUNJAB NATIONAL BANK AND ORS.

       Vs.

RESPONDENT: SURENDRA PRASAD SINHA

DATE OF JUDGMENT20/04/1992

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. JEEVAN REDDY, B.P. (J)

CITATION:  1992 AIR 1815            1992 SCR  (2) 528  1993 SCC  Supl.  (1) 499 JT 1992 (3)    46  1992 SCALE  (1)926

ACT:      Limitation  Act, 1963-Section 3-Whether bars the  right to which a remedy related-Right to enforce debt by  judicial process-Scope  of-Time barred debt-Realisation of-Filing  of suit to recover debt-Creditor’s obligation.      Penal  Code,  1860-Section  405-Action in  terms  of  a contract-Whether  amounts  to criminal breach  of  trust  or misappropriation-Creditor   in   possession   of   security- Adjustment of debt due from security-Justification of.      Penal   Code,   1860-Section   409,   109/114-Complaint petition-Maintainability-Duty   of  Magistrate,   indicated- Accused to be legally responsible for the offences  charged- Magistrate’s  satisfaction  of  prima  facie   case-Criminal justice-Objects of.

HEADNOTE:      On  5.5.1984, the Bank-Appellant No.1, gave a  loan  of RS.15,000  to one S.N. Dubey.  The respondent and  his  wife executed  a Security Bond, as guarantors and handed  over  a fixed  Deposit  Receipt for a sum of Rs.  24,000  which  was valued at Rs. 41,292 on its maturity on 1.11.1988.      The  principal debtor defaulted marking payment of  the debt.   When the respondent’s F.D. matured, the  Manager  of the  Bank (appellant No.5) adjusting a sum  of  Rs.27,037.60 due and payable by the principal debtor as on December  1988 and the balance sum of Rs.14,254.40 was credited to the S.B. Account of the respondent.      The  respondent filed a private complaint  against  the appellants  in the Court of Addl. Chief Judicial  Magistrate u/ss.409,109/114, IPC, alleging that the debt became  barred by  limitation  as on 5.5.1987; that the  liability  of  the respondent  being  co-extensive with that of  the  principal debtor,   his  liability  also  stood  extinguished  as   on 5.5.1987;  that  without taking any action  to  recover  the amount from the principal debtor within the period                                                        529 of limitation, on 14.1.1989, the Branch Manager credited  to his  S.B. Account only Rs.14,254.00 on the maturity  of  his F.D.R.  and thereby the appellants criminally embezzled  the amount.     The  appellants  filed this Criminal Appeal  by  special

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leave challenging the High Court’s order declining to  quash the  complaint  filed by the respondent  u/ss.409,  109/114, IPC.      Allowing the appeal of the Bank, this Court,      HELD  : 1.01. The rules of limitation are not meant  to destroy  the  rights  of  the parties.   Section  3  of  the Limitation  Act only bars the remedy, but does  not  destroy the  right  which the remedy relates to.  The right  to  the debt continues to exist notwithstanding the remedy is barred by the limitation.  Only exception in which the remedy  also becomes  barred  by limitation is the  right  is  destroyed. [532E-F]      1.02. Though the right to enforce the debt by  judicial process  is  barred, the right to debt  remains.   The  time barred debt does not cease to exist by reason of s.3.   That right can be exercised in any other manner than by means  of a  suit.   The debt is not extinguished, but the  remedy  to enforce the liability is destroyed. [532G]      1.03. What s.3. refers is only to the remedy but not to the right of the creditors.  Such debt continues to subsists so  long as it is not paid.  It is not obligatory to file  a suit to recover the debt. [532G-H]      2.01.  Action  in terms of the  contract  expressly  or implied is a negation of criminal breach of trust defined in s.405  and  punishable  under s.409 I.P.C.   It  is  neither dishonest, nor misappropriation. [533C]      2.02.  The  creditor  when he is in  possession  of  an adequate  security, the debt due could be adjusted from  the security, in his possession and custody.  [533A]      2.03.  The  bank had in its possession  the  F.D.R.  as guarantee for due payment of the debt and bank  appropriated the amount towards the debt due and payable by the principal debtor. [533D]      2.04.  The respondent and his wife stood guarantors  to the principal debtor, jointly executed the security bond and entrusted the F.D.R. as                                                        530 security to adjust the outstanding debt from it at maturity. Therefore,  though the remedy to recover the debt  from  the principal  debtor  is barred by  limitation,  the  liability still  subsists.   In  terms of the  contract  the  bank  is entitled to appropriate the debt due and credit the  balance amount to the saving bank account of the respondent. Thereby the  appellant  did  not act in violation of  any  law,  nor converted  the amount entrusted to them dishonestly for  any purpose. [533B-C]      3.01.  The  Magistrate without  adverting  whether  the allegation in the complaint prima facie makes out an offence charged  for, obviously, in a mechanical manner, issued  the process   against  all  the  appellants.   The  High   Court committed grave error in declining to quash the complaint on the  finding that the Bank acted prima facie high  handedly. [533E]      3.02.  Judicial process should not be an instrument  of oppression or needless harassment.   The complaint was  laid impleading  the Chairman, the Managing Director of the  Bank by  name and a host of officers.  There lies  responsibility and  duty  on the Magistracy to find whether  the  concerned accused  should  be  legally  responsible  for  the  offence charged  for.   Only  on  satisfying  that  the  law   casts liability or creates offence, against the juristic person or the persons impleaded, then only process would be issued. At that  stage the court would be circumspect and judicious  in exercising discretion and should take all the relevant facts and circumstances into consideration before issuing process,

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least it would be an instrument in the hands of the  private complainant  as vendetta to harass the  persons  needlessly. Vindication of majesty of justice and maintenance of law and order  in  the  society are the prime  objects  of  criminal justice  but  it would not be the means  to  wreak  personal vengeance. [533F-534A]

JUDGMENT:      CRIMINAL  APPELLATE JURISDICTION : Criminal Appeal  No. 254 of 1992.      From  the  Judgment and Order dated  25.6.1991  of  the Madhya  Pradesh High Court in Misc. Criminal Case  No.  1701 of 1991.      G.L.  Sanghi, Dhruv Mehta, Aman Vachher and S.K.  Mehta for the Appellants.      The Judgment of the Court was delivered by                                                        531      K. RAMASWAMY, J. Special leave granted.      Through  the  respondent was served on July  29,  1991, neither appeared in person, nor through counsel.  The  facts set out in the complaint eloquently manifests on its face  a clear  abuse  of  the process of the  court  to  harass  the appellants.   The  respondent,  an  Advocate  and   Standing Counsel for the first appellant filed a private complaint in the court of Addl. Chief Judicial Magistrate, Katni in  C.C. No.933/91 offences under s.409 and ss.109/114 I.P.C.      The facts stated in the complaint run thus :      The  first appellant’s branch at Katni gave a  loan  of Rs. 15,000 to one Sriman Narain Dubey on May 5, 1984 and the respondent  and  his wife Annapoorna  stood  as  guarantors, executed Annexure ’P’ "security bond" and handed over  Fixed Deposit  Receipt for a sum of Rs. 24,000 which would  mature on November 1, 1988.  At maturity its value would be at  Rs. 41,292.   The principal debtor committed default in  payment of   the  debt.   On  maturity,  the  Branch  Manager,   5th appellant,  Sri V.K. Dubey, adjusted a sum of Rs.  27,037.60 due and payable by the principal debtor as on December, 1988 and  the  balance sum of Rs. 14,254.40 was credited  to  the Saving  Banks  Account of the  respondent.   The  respondent alleged that the debt became barred by limitation as on  May 5, 1987.  The liability of the respondent being co-extensive with that of the principal debtor, his liability also  stood extinguished  as on May 5, 1987.  Without taking any  action to  recover the amount from the principal debtor within  the period  of limitation, on January 14, 1989, Sri D.K.  Dubey, the  Branch  Manager, intimated that only  Rs.14,250.40  was credited  to  his Saving Bank Account No. 3763.  The  entire amount  at  maturity, namely Rs. 41,292 ought to  have  been credited to his account and despite repeated demands made by the respondent it was not credited.  Thereby the  appellants criminally  embezzled the said amount.  The first  appellant with  a  dishonest  interest to  save  themselves  from  the financial  obligation neglected to recover the  amount  from the  principal  debtor and allowed the claim  to  be  barred limitation  and  embezzled  the  amount  entrusted  by   the respondent.   The appellant 2 to 6 abated the commission  of the  crime in converting the amount of Rs. 27,037.40 to  its own  use  in  violation of the  specific  direction  of  the respondent.   Thus  they committed the  offences  punishable under s.409 and ss.109 and 114 I.P.C.                                                        532      The   security  bond,  admittedly,  executed   by   the respondent  reads  the  material parts thus  :  "We  Confirm

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having  handed over to you by way to security  against  your branch office Katni F.D. Account No. 77/83 dated November 1, 1983  for  Rs. 24,000 in the event of renewal  of  the  said Fixed  Deposit Receipt as security for the above loan."  "We Confirm...the  F.D.R. will continue to remain with the  bank as  security  here". "The amount due and other  charges,  if any,  be adjusted and appropriated by you from the  proceeds of the said F.D.R. at any time before, on or its maturity at your discretion, unless the loan is otherwise fully adjusted from the dues on demand in writing made by you...." "We give the  bank  right to credit the balance to our  saving  banks account  or any other amount and adjust the amount due  from the  borrowers  out  of the same".  "We  authorise  you  and confirm that the F.D.R. pledged a security for the said loan shall  also  be  security  including  the  surplus  proceeds thereof for any other liability and the obligation of person and  further  in favour of the bank and the  bank  shall  be entitled  to  retain/realise/utilise/appropriate  the   same without reference to us."      Admittedly,  as the principal debtor did not repay  the debt,  the  bank  as creditor adjusted at  maturity  of  the F.D.R., the outstanding debt due to the bank in terms of the contract  and  the balance sum was credited  to  the  Saving Banks  account of the respondent.  The rules  of  limitation are not meant to destroy the rights of the parties.  Section 3 of the Limitation Act 36 of 1963, for short "the Act" only bars  the remedy, but does not destroy the right  which  the remedy relates to.  The right to the debt continues to exist notwithstanding  the  remedy is barred  by  the  limitation. Only  exception in which the remedy also becomes  barred  by limitation  is that right itself is destroyed.  For  example under s.27 of the Act a suit for possession of any  property becoming barred by limitation, the right to property  itself is  destroyed.   Except in such cases  which  are  specially provided  under the right to which remedy relates  in  other case  the right subsists.   Though the right to enforce  the debt  by judicial process is barred under s.3 read with  the relevant Article in the schedule, the right to debt remains. The  time barred debt does not cease to exist by reasons  of s.3.   That right can be exercised in any other manner  than by  means of a suit.  The debt is not extinguished, but  the remedy  to  enforce the liability is  destroyed.   What  s.3 refers  is  only to the remedy but not to the right  of  the creditors.  Such debt continues to subsists so long as it is not  paid.  It is not obligatory to file a suit  to  recover the  debt.   It is settled law that the  creditor  would  be entitled                                                        533 to  adjust, from the payment of a sum by a  debtor,  towards the  time barred debt.  It is also equally settled law  that the  creditor  when  he  is in  possession  of  an  adequate security,  the debt due could be adjusted from the  security in  his possession and custody.  Undoubtedly the  respondent and  his  wife  stood guarantors to  the  principal  debtor, jointly executed the security bond and entrusted the  F.D.R. as  security  to  adjust the outstanding  debt  from  it  at maturity.  Therefore, though the remedy to recover the  debt from  the  principal  debtor is barred  by  limitation,  the liability still subsists.  In terms of the contract the bank is  entitled  to  appropriate the debt due  and  credit  the balance amount to the saving bank account of the respondent. Thereby  the appellant did not act in violation of any  law, nor  converted the amount entrusted to them dishonestly  for any  purpose.  Action in terms of the contract expressly  or implied is a negation of criminal breach of trust defined in

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s.405  and  punishable  under s.409 I.P.C.   It  is  neither dishonest,  nor  misappropriation.   The  bank  had  in  its possession  the fixed deposit receipt as guarantee  for  due payment  of  the debt and the bank appropriated  the  amount towards  the debt due and payable by the  principal  debtor. Further,  the F.D.R. was not entrusted during the course  of the  business  of  the first appellant as a  Banker  of  the respondent but in the capacity as guarantor.  The  complaint does  not  make out any case much less prima facie  case,  a condition  precedent  to set criminal law  in  motion.   The Magistrate  without adverting whether the allegation in  the complaint  prima  facie makes out an  offence  charged  for, obviously,  in  a  mechanical  manner,  issued  the  process against all the appellants.  The High Court committed  grave error  in  declining to quash the complaint on  the  finding that the Bank acted prima facie high handedly.      It  is  also  salutary to note  that  judicial  process should  not  be  an  instrument  of  oppression  or  needles harassment.  The complaint was laid impleading the Chairman, the  Managing  Director of the Bank by name and  a  host  of officers.   There  lies  responsibility  and  duty  on   the Migistracy  to find whether the concerned accused should  be legally  responsible  for the offence against  the  juristic person  or the persons impleaded then only process would  be issued.   At that stage the court would be  circumspect  and judicious  in exercising discretion and should take all  the relevant  facts and circumstances into consideration  before issuing process lest it would be an instrument in the  hands of  the private complaint as vendetta to harass the  persons needlessly.    Vindication   of  majesty  of   justice   and maintenance of                                                        534 law  and  order  in the society are  the  prime  objects  of criminal  justice  but it would not be the  means  to  wreak personal vengeance.  Considered from any angle we find  that the  respondent  had abused the process and  laid  complaint against  all the appellants without any prima facie case  of harass them for vendetta.      The appeal is accordingly allowed and the complaint  is quashed. V.P.R.                                       Appeal allowed.                                                     535