23 February 1970
Supreme Court







DATE OF JUDGMENT: 23/02/1970


ACT:     Indian   Penal  Code  Section  406-Criminal  breach   of trus--Ingredients necessary-Proof of entrustment.

HEADNOTE: Certain  disputes  arose  between  the  appellant  and   the respondent   who  were  partners  in  a  firm.   After   the respondent   had  sent  to  the  appellant  a   notice   for dissolution  of  the  partnership,  the  appellant  withdrew certain  funds  from  the  firm  account.   The   respondent thereafter lodged a complaint against the appellant alleging criminal  breach of trust within the meaning of Section  406 I.P.C. He also instituted a suit for the, dissolution of the partnership and for accounts.  The.  Additional Chief Presi- dency  Magistrate  issued  summons to  the  appellant  under Section  406.  The appellant instituted proceedings  in  the High  Court  for quashing the criminal proceedings  but  the High Court rejected his prayer.     On appeal to this Court,     HELD: Dismissing the appeal:     The  offence of criminal breach of ’trust under  section 406  of the Indian Penal Code is not in respect of  property belonging to the partnership but is an offence committed  by the  person in respect of property which has been  specially entrusted  to  such  ’a  person and which  be  holds  in  -a fiduciary capacity. [768 F]     In the present case. the appellant denied that there was any  special  entrustment  of any property or  that  he  was holding  any.  property in ’a fiduciary  capacity.   It  was neither possible nor desirable to express any opinion on the merits of such a plea.  It was not possible to do so because the   facts  were  not  in  possession  of  the  court   and furthermore the facts could not be before the court  without proper  investigation and enquiry.  It was not desirable  to do  so  because if any such opinion be  expressed  it  might prejudice or embarrass either party. [768 G]      R.  P. Kapur v. State of Punjab, [1960] 3  S.C.R.  388; Velji  Raghavji  Patel  v. State of  Maharashtra,  [1965]  2 S.C.R.  429, Bhuban Mohan Ran(,v.Surendra Mohan Das,  I.L.R. [1952] 2 Cal. 23, referred to.

JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 134 of 1967.     Appeal  by  special leave from the  judgment  and  order dated  June 7, 1967 of the Calcutta High Court  in  Criminal Revision No. 1100 of 1965.



   Debabrata  Mukherjee and Sukumar Ghose, for  the  appel- lant.     Sadhu Singh, for the respondent. 766 The Judgment of the Court was delivered by      Ray, J. This is an appeal by special leave against  the judgment  of  the  Calcutta High Court dated  7  June,  1967 refusing  to  quash the process issued and  the  proceedings pending  before the Additional Chief Presidency  Magistrate, Calcutta under section 406 of the Indian Penal Code.      The  appellant  and  the  respondent  entered  into   a registered deed of partnership on 27 March, 1963.  The  name of  the  partnership business was "Allied  Engineers".   The nature  of the business was that if the tender submitted  by the  respondent  to the Eastern Railways  for  extension  of bridge  No., 2 at the west and of Howrah yard,  West  Bengal was accepted by the Eastern Railways the said work would  be deemed  to  be included within the partnership.   Under  the terms of partnership agreement the capital was Rs. 20,000 to be  contributed  equally by the partners within  six  months from  the  date of the agreement.  The main  office  of  the partnership  was  at 12/1/5 Manohar  Pukur  Road,  Kalighat, Calcutta.   Another term of the partnership was that if  the tender was accepted the appellant would advance or lend from time  to  time a total sum of Rs. 20,000  towards  the  work represented by the tender as and when necessary.  The amount so  advanced  would  be  repayable  to  the  appellant  with interest at six per cent per annum and 50% of the profit  to be   earned.   The  respondent  was,  under  the  terms   of partnership  agreement, to execute an irrevocable  power  of attorney  in the manner and with powers as provided  in  the draft  approved  by the partners.  The bankers of  the  firm would be United Bank of India Limited and all cheques on the said  bank  would  be  signed by  both  the  partners.   The agreement  further provided that all cheques in  respect  of the  work  in the name of the respondent, S.  K.  Ghosh,  in Eastern  Railways  would  be drawn on  the  banking  account operated by the partner Debabrata Gupta, namely, the  appel- lant  for which the respondent would execute an  irrevocable power of attorney.      The  case of the appellant is that he advanced  to  the partnership  from  time  to time an, aggregate  sum  of  Rs. 50,000 for completion of the work.  The respondent  executed the  power  of  attorney in favour of the  appellant  on  27 March,  1963  and  authorised the appellant  to  submit  all bills,  interim as well as final, to receive cheques and  to do   necessary  things  on  behalf  of  the  respondent   in connection with the said work for extension of bridge  under the partnership agreement.      On 18 April, 1964 a second deed of partnership was made between the appellant and the respondent in modification  of the earlier deed dated 27 March, 1963.  It was recited there that the appellant had invested to the extent of Rs.  50,000 for the 767 aforesaid  work of construction of the bridge.  It was  also recited  in the agreement that the respondent was not  in  a position  to  contribute to his share of the  capital.   The second deed further provided that the amount contributed  by the  appellant  "shall  be  repaid  immediately  after   the collection  of  the bills from the Eastern  Railways".   The banking account was to be operated by the appellant and  all bills  collected  and  security  refunded  by  the   Eastern Railways  in of the first agreement was to be  deposited  by the parties with the bank forthwith.



    It  appears that disputes arose between  the  appellant and  the  respondent whereupon the respondent wrote  to  the bank to stop. all payments to the appellant.  The respondent sent  to  the  appellant a notice  for  dissolution  of  the partnership.    The   appellant  in  accordance   with   the partnership  agreement  instituted proceedings in  the  High Court  at Calcutta on or about 8 September, 1965 for  filing an arbitration agreement under section 20 of the Arbitration Act.   The  High Court appointed an arbitrator  for  adjudi- cation of disputes between the parties.      Meanwhile,  summons was issued by the Chief  Presidency Magistrate,  Calcutta under sections 406 and 424/34  of  the Indian Penal Code against the appellant.  The respondent  on 19  June, 1965 had lodged a complaint against the  appellant for  process  under sections 406 and 424/34  of  the  Indian Penal  Code  against  the appellant and  against  two  other persons   alleging  that  the  appellant   had   dishonestly withdrawn sums totaling about Rs. 92,000 from the account of the  partnership  firm and further that  in  collusion  with other persons had removed the books of accounts.     The respondent also filed a suit being Title Suit No. 15 of  1966  in  the  Third Court  of  the  Subordinate  Judge, Alipore,  West Bengal against the appellant for  dissolution of   partnership  and  for  accounts.   In  that  suit   the respondent  obtained  a  temporary  injunction  against  the appellant  restraining him from receiving payment  from  the Eastern Railways and from operating the bank account of  the partnership.     The   appellant  and  the  accused  No.   2   instituted proceedings  in the High Court at Calcutta for quashing  the criminal  proceedings.  The High Court at  Calcutta  quashed the process issued under sections 424/34 of the Indian Penal Code  against  accused  No.  2 on  the  ground  of  want  of territorial  jurisdiction, but refused to quash the  process under  section  406 of the Indian Penal  Code,  against  the appellant.     Counsel on behalf of the appellant contended first  that there  could be no issue of process in disputes between  the partners and 768 secondly  the Additional Chief Presidency Magistrate had  no jurisdiction  to issue process because the  alleged  offence had  taken  place outside the jurisdiction  of  that  court. Counsel  for the appellant relying on the decision  of  this Court  in  R. P. Kapur v. The State of  Punjab(’)  contended that the High Court could ,exercise inherent jurisdiction to quash proceedings where the allegations in the complaint did not make out a case.  It is true that the Court can in  some cases  do so.  The question is whether the present  case  is one of that type.     Counsel for the appellant relied on the decision of this Court  in Velji Raghavji Patel v. State of  Maharashtra  (2) where  one  of the partners was convicted of an  offence  of criminal  breach  of trust under section 409 of  the  Indian Penal Code and this Court held that where a partner realised the sum in his capacity as partner and utilised them for the business  of the partnership, he was only liable  to  render accounts to his partners and his failure to do so would  not amount  to  criminal  breach  of  trust.   Counsel  for  the appellant  invoked the application of the same  doctrine  to the present case.      In  order  to  accede to the contention it  has  to  be established  first  that  the dispute is  only  between  the partners  and  secondly it does not relate  to  any  special entrustment  of property which constitutes one of the  basic



ingredients  of an offence under section 406 of  the  Indian Penal  Code.   This Court in Patel’s  case(’)  approved  the decision of the Calcutta High Court in Bhuban Mohan Rana  v. Surendra  Mohan Das(3) and said that before criminal  breach of  trust  is established it must be shown that  the  person charged  has been entrusted with property or  with  dominion over the property.  In other words, the offence of  criminal breach  of trust under section 406 of the Indian Penal  Code is not in respect of property belonging to, the  partnership but  is  an offence committed by the person  in  respect  of property which has been specially entrusted to such a person and which be holds in a fiduciary capacity.      In  the present case, the appellant denies  that  there was  any special entrustment of any property or that he  was holding any property in a fiduciary capacity.  It is neither possible nor desirable to express any opinion on the  merits of  such  a plea.  If is not possible to do so  because  the facts are not in possession of the court and furthermore the facts   cannot   be   before  the   court   without   proper investigation  -and enquiry.  It is not desirable to  do  so because if any such opinion be expressed it may prejudice ox embarrass either party. (1) [1960] 3 S.C.R. 388. (2) [1965] 2 S.C.R. 429. (3) I.L.R. [1952] 2 Cal. 23. 769     The  plea as to lack of territorial jurisdiction  cannot also  be  decided  on the materials nor can  an  opinion  be expressed on that question.     It  is made clear that all pleas and defenses  are  left open  to the appellant including the question whether  there was any special entrustment of any property to the appellant and the territorial jurisdiction of the Court.     For these reasons, the appeal fails and is dismissed. R.K.P.S.                Appeal dismissed. 770