http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: STATE BANK OF INDIA

       Vs.

RESPONDENT: RAJENDRA KUMAR SINGH & ORS.

DATE OF JUDGMENT: 25/09/1968

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. GROVER, A.N.

CITATION:  1969 AIR  401            1969 SCR  (2) 216

ACT:     Code of Criminal Procedure, 1898, Ss. 517 and 520--Order of  the  Court  directing  return  of  seized   property--If necessary   to  give  party  adversely  affected  notice  of hearing  and  opportunity  to be heard--who  has  ’right  to possess’ within the meaning of s. 517.

HEADNOTE:     21  currency notes of Rs. 1,00.0 each were  seized  from the  Appellant  Bank  by  the police in  the  course  of  an investigation  of  a case against the  third  respondent  of cheating   the   first and second respondents.   The  seized currency notes were said to be part of the property obtained by the third respondent from the other two respondents.  The third  respondent  was acquitted by the trial court  of  the offence  charged.  In  the course of the trial the appellant made  an  application  under  section 517(1) of the Code  of Criminal  Procedure asking for the delivery of the  currency notes to it on the ground that the appellant was an innocent third  party  who had received the said  notes  without  any knowledge or suspicion of their having been involved in  the commission  of an offence. By its order of 24th April  1962, the  trial court allowed the application and  directed  that the  currency  notes ’should be returned to  the  appellant. Subseqently an appeal filed by the State was allowed by  the High  Court  which  set aside the  trial  court’s  order  of acquittal  of the third respondent and convicted him of  the offence  charged.   On  an application  made  by  the  first respondent asking for delivery of the currency notes to  him as they belonged to. him and the second respondent, the High Court, by an order of April 5, 1963 directed that the  notes be handed over to the first and second respondents.     In  the  appeal to this Court, it was  contended,  inter alia,  on  behalf of the appellant that the High  Court  had reversed the order of the  trial court directing the  return of  the  currency notes to the appellant  without  giving  a notice  to the appellant. and without giving an  opportunity of  being  heard; and that the order of April  5,  1963  was therefore violative of the principles of natural justice and was  illegal.  The contention on behalf of  the  respondents was  that there was no provision in section 520 of the  Code

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

of  Criminal  Procedure for giving notice to  the   affected parties  and  the  order  of the High  Court  could  not  be challenged  on the ground that no hearing was given  to  the appellant.  It was also contended that the High Court had  a discretion under the statute as to whom. the property was to be  returned and there was no reason why this  Court  should interfere with the exercise of discretion by the High Court.     HELD:  The appeal must be allowed and the order  of  the High  Court  dated April 5, 1963 set  ’aside.   The   seized currency  notes  must  be directed to be  returned  to,  the appellant.     (1)  It  is mainfest that the High Court was  bound  to. give notice to the ’appellant before reversing the order  of the trial court directing the disposal of the property under s. 517 of the Code of Criminal Procedure. As no such  notice was  given  to the appellant, the order of  the  High  Court dated  5th  April  1963 is vitiated in  law.   Although  the statute does not expressly require a notice to be issued, or a hearing to be given to the 217 parties  adversely  affected. there is in the eye of  law  a necessary  implication that the parties  adversely  affected should  be heard before the Court makes an order for  return of the seized property. [220 C-D, 221 E]      Cooper  v.  Wandsworth  Board  of  Works.   (1863)   14 C.B.N.S. 180, Ridge v. Baldwin,  (1963)  2  W.L.R.  935  and Board  of  High  School  and  Intermediate  Education,  U.P. Allahabad  v. Ghanshyam Das Gupta and Ors, A.I.R. 1962  S.C. 1110, referred to.     (2)  The  appellant asserted that it had  obtained   the currency  notes  in the normal course of  its  business  and without  any  knowledge or suspecion of  their  having  been involved  in  the  commission of any offence  and  that  the respondents  had not alleged fraud or lack of good faith  on the  part of the appellant.  In the circumstances  the  High Court should have directed the return of the currency  notes to the appellant which had the "right to possess" the  notes within  the  language  of s. 517 of  the  Code  of  Criminal Procedure.  Property in coins and currency  notes passes  by mere  delivery and it is the clearest exception-to the  rule Nemo dat quod non habet. [222 B. C]      Whistler  v.  Forster,  (1863)  14  C.B.N.S.   257-258, referred to.

JUDGMENT:      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal NO. 32 of 1965.      Appeal  by special leave from the ,judgment  and  order dated April 5, 1963 of the Madhya Pradesh High Court, Indore Bench in Criminal Misc., Case No. 135 of 1962.      Niren De, Solicitor-General, H.L. Anand, 1. M. Bhardwaj and K.B. Mehta, for the appellant.      B.C. Mishra and C.P. Lal, for respondents Nos. 1 and 2. The Judgment of the Court was delivered by      Ramaswami, J. This appeal is brought from the order  of the  High Court of Madhya Pradesh dated 5th April,  1963  in Criminal  Miscellaneous Case No. 135 of 1962  under  section 520  of the Code of Criminal Procedure directing the  return of  21 currency notes of the denomination of Rs. 1,000  each to respondents Rajendra Kumar Singh and Virendra Singh.      The  currency  notes of the total value of  Rs,  21,000 were  seized  by the Madhya Pradesh Police from  the  Beawar Branch  of  the  State Bank of India in  the  course  of  an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

investigation of a case under sections 420, 406 and 120B  of the Indian Penal Code registered in P.S. Thuko Ganj,  Indore City  as  Crime No. 113 of 1961 against  Kishan  Gopal,  the third respondent.  It appears that the third respondent  had come  into  possession  of   a   sum   of  Rs.  1,50,000  in Government  currency notes by cheating the first and  second respondents.   The currency notes seized from the  appellant were  said  to be part of the property  obtained  by  Kishan Gopal  by the commission of the said offence.  The  case  of the  appellant was that it had come into possession  of  the said  currency  notes in the usual course  of  its  business partly  through  the Bank of Rajasthan  Limited  and  partly through the Mahalaxmi L2SuP CI 69--15 218 Mills  Company Limited without any knowledge that  the  said currency  notes had been the subject matter of  an  offence. In the proceedings that followed on the investigation of the said   case,  the  accused  persons  including   the   third respondent  were  acquitted  by  the  Court  of  the  Fourth Additional  Sessions Judge,  Indore  in Sessions Case No.  3 of 1962 by an order made on 24th April, 1962.  In the course of  the  trial,  the appellant  made  an  application  under section  517 (1 ) of the Code of Criminal  Procedure  asking for delivery of the aforesaid 21 currency notes to it on the ground  that the said currency notes had been seized by  the police  from  the appellant and that the  appellant  was  an innocent third party who had received the said notes without any knowledge or suspicion of their having been involved  in the  commission  of  an offence.  By his  order  dated  24th April,  1962  the  4th  Additional  Sessions  Judge,  Indore allowed the application and directed that the currency notes should  be  returned  to the  appellant.   Subsequently,  an appeal  was filed to the High Court by the State  of  Madhya Pradesh  being Criminal Appeal No. 205 of 1962.  The  appeal was  allowed  and  the High Court set  aside  the  order  of acquittal  of the third respondent and’ convicted him  under sections  420,  406 and 120B of the Indian  Penal  Code  and sentenced  to undergo imprisonment.  The  first  respondent, Rajendra Kumar Singh, made an application to the High  Court asking  for delivery of the currency notes as they  belonged to  him  and  the second respondent and  as  they  had  been deprived of the said property by the third respondent by the commission  of  the aforesaid offence. The  application  was allowed by the High Court by its order dated 5th April, 1963 and the currency notes were ordered to be handed over to the first and the second respondents.  The relevant portion  the order of the High Court reads as follows :--     "Now  the  bulk of the recovered property   consists  of Government  currency  notes either of  the  denomination  of rupees one thousand each or money obtained after the  tender of  one thousand rupee notes by Kishan Gopal.  The  position of the recovered money in short is this :-- 1.37, one thousand rupee notes were recovered from the pillow of accused Kishan  Gopal  after  his arrest amounting to:                        37,000 2. Money directly traceable to one- thousand rupee notes recovered from Dayabhai P.W.52, with  whom  it was deposited by accused Kishan Gopal and Mst. Tulsabai.                          59,500 3. Money recovered from Mst. Tulsa- bai the sister of accused’s cuncubine       10,000 219

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

4. Money in Beawar Bank consisting of two drafts of ten-thousand each; on in the name of accused Kishan Gopal and the other in the name of Rukmanibai, his witness for which the  accused ten- dered twenty one thousand rupee notes and one thousand rupee notes. with which he opened an account with his Bank.          21,000                                            ---------                                 Total :--  1,27,500       This  amount (Rs. 1,27,500) is directly  traceable  to the conversion of one thousand rupee  notes.  We, therefore, direct  it be given to Virendra Singh P.W. 1,  and  Rajendra Kumar  P.W. 73, who shall proportionately divide it  between themselves.   No  other order is made in  respect  of  other property and., the parties are left to establish their claim in Civil Court". Section 517 o.f the Code’ of Criminal Procedure states: "517. (1) When an inquiry  or a trial in any  Criminal Court is concluded, the Court may make such order as it thinks fit for  the disposal by destruction, confiscation, or  delivery to any  person claiming to be entitled to possession thereof or otherwise of any property or document produced before ’it or in its custody or regarding which any offence appears  to have  been  committed,  or  which  has  been  used  for  the commission of any offence.     (2)  When a High Court or a Court of Session makes  such order  and  cannot  through its  own  officers  conveniently deliver  the property to the person entitled  thereto,  such Court  may direct that the order be carried into effect   by the  District Magistrate.          .     .     .     .      .     .          .     .    .      .      .     . Section 520 provides as follows : "Any  Court of appeal,confirmation, reference   or  revision may  direct  any  order under section 518,  section  518  or section  519 passed by a  Court  subordinate thereto, to  be stayed  pending consideration by the former Court,  and  may modify,  alter  or  annul such order and  made  any  further orders that may be just". 220     In Support of this appeal, it was contended in the first place  that  the High Court had’ reversed the order  of  the Sessions  Judge directing the return of the  currency  notes without giving a notice to the appellant and without  giving an  opportunity  to it for being heard.   The  argument  was stressed  that  there was a violation of  the  principle  of natural  justice and the order of the High Court  dated  5th April,  1963  was illegal.  It was,  however,  contended  on behalf  of  the respondents that there was no  provision  in section  520  of the Code of Criminal Procedure  for  giving notice  to  the affected parties and the order of  the  High Court cannot be challenged on the ground that no hearing was given to the appellant. In our opinion, there is no  warrant or justification for the argument advanced on behalf of  the respondents.  It is true that the statute does not expressly require  a notice to be issued, or a hearing to be given  to the  parties adversely affected.  But though the statute  is silent  and does not expressly require issue of  any  notice there is in the eye ’of law a necessary implication that the party  adversely affected should be heard before  the  Court makes  an  order  for return of the  seized  property.   The principle is clearly stated in the leading case of Cooper v. Wandsworth Board of Works(x). In that ease section 76 of the Metropolis Local Amendment Act, 1855 authorised the District

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

Board to demolish the building if it had been constructed by the  owner  without  giving  notice  to  the  Board  of  his intention to build.  The statute laid down no procedure  for the exercise of the power of demolition, and, therefore, the Board  demolished the house in exercise of the  above  power without issuing a notice to the owner of the house.  It  was held by the Court of Common Pleas that’ the Board was liable in  damages  for  not having given notice  o,f  their  order before  they proceeded to execute it. Erie, C,J.  held  that the   power  was  subject  to  a  qualification   repeatedly recognised  that  no man is to be deprived of  his  property without  his having an opportunity of being heard  and  that this  had been applied to "many exercises of power which  in common  understanding  would not be at all a  more  judicial proceeding  than would be the act of the district  board  in ordering  a house to be pulled down". Willes, J.  said  that the rule was "of universal application and rounded upon  the plainest  principles  of justice" and Byles,  J.  said  that "although  there  are  no   positive  words  in  a   statute requiring that the party shall be heard, yet the justice  of the common law will supply the omission of the legislature." The  same  principle has been reaffirmed in  a  recent  case Ridge  v.  Baldwin(2).   In that case, section  191  of  the Municipal  Corporations  Act,  1881 provided  that  a  watch committee  may  at any time suspend or dismiss  any  borough constable whom they think negligent in the discharge of  his duty,  or otherwise unfit for the same.  The appellant,  who was the  chief constable of a (1) (1863) 14 C.B.N.S. 180.   (2) (1963) 2 W.L.R. 935. 221 borough  police force, was dismissed by the watch  committee on the ground that he was negligent in the discharge of  his duties  as  thief constable.  He brought an  action  against the  members of the watch committee by stipulating that  his dismissal  was illegal and ultra vires the powers.   It  was held  by the House of Lords that the decision of  the  watch committee  was  ultra  vires  because  they  dismissed   the appellant on the ground of neglect of duty and as such  they were  bound to observe the principles of natural justice  by informing him of the charges made against him and giVing him an  opportunity  of being heard.  The same   principle   was applied  by  this  Court  in  Board  of  High    School  and Intermediate  Education.  U.P.. Allahabad v.  Ghanshvam  Day Gupta  and  Ors.  (1).  It was held in  that  case  that  an examination committee of the Board of Secondary Education in Uttar  Pradesh was acting quasi-judicially  when  exercising its  Dower  under  rule   1  (1)   of  Chapter  VI  of   the Regulations  dealing  with cases of examinees  using  unfair means  in  examination  hall and the  principle  of  natural justice which require that the examinee must be heard.  will apply to the proceedings before the Committee.  Though there was  nothing express one way or the other in the Act or  the Regulations   casting  a  duty  on  the  committee  to   act judicially,  where no opportunity whatever was given to  the examinee  to  give  an explanation and  present  their  case before  the  Committee.  the  Resolution  of  the  committee cancelling  their results and depriving them from  appearing at  the  next  examination  was  defective.   Applying   the Principle to the present case it is manifest  that the  High Court  was  bound  to give notice to  the  appellant  before reversing  the  order of the Sessions  judge  directing  the disposal1  of  the  property under s. 517  of  the  Code  of Criminal  Procedure.   As no such notice was  given  to  the appellant. the order of the High Court dated 5th April, 1963 is vitiated in law.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

   The next question which arises in this appeal is whether the  High  Court  was justified on merits  in  ordering  the currency  notes to be returned to respondents 1 and  2.   It was  argued  by  Mr.  Mishra  that  the  High  Court  hat  a discretion under the statute as to whom the property was  to be  returned and there was no reason why  this Court  should interfere  with  such  exercise of discretion  by  the  High Court.   We are unable to accent the argument.  It  iS  true that sections 517 and 520 of the Code of Criminal  Procedure confer  a  discretion  on  the High  Court  as  regards  the disposal  of  the property seized or produced before  it  or regarding which any offence was said to have been committed. But  as  we  shall presently show the  High  Court  has  not exercised its discretion according to proper legal principle and  its  order  is hence liable to be set  aside.   It  was stated by Mr. Mishra that the question involved in (1) A.I.R. 1962 S.C. 1110 222 this case is whether as to which out of two innocent parties should suffer, viz.; the person who lost the property due to the  criminal,  act  of another or the person  to  whom  the property  (currency notes) had been delivered in the  normal course  of its business. It is not, however, correct to  say that  respondents  1  and 2  are  equally  innocent  because respondents 1 and 2 had admittedly handed over the  currency notes  to  respondent  No. 3 "for the  criminal  purpose  of duplication".   It  was  indeed  urged  on  behalf  of   the appellant  that  respondents  1  and2  had  entered  into  a criminal conspiracy with respondent No. 3 for  ’duplicating’ the currency notes.  In any event, we are satisfied that the High  Court  was  in error in directing the  return  of  the currency  notes to respondents 1 and 2. The reason  is  that the  property  in coins and currency notes  passes  by  mere delivery  and it is the clearest exception to the rule  Nemo dat  quod  non habat.  This exception was engrafted  in  the interest  of commercial necessity.  But the  exception  only applies  if  the transferee of the coin. or  currency  notes takes in good faith for value and without notice of a defect in  the title of the transferor.The rule is stated by  Wills J. in  Whistler  v.  Forster(1) as follows :-               "The general rule of law is undoubted, that no               one  can  transfer  a  better  title  than  he               himself possesses: Nemo dat quod non habat. To               this there ,are some  exceptions; one of which               arises out of the rule of the law merchant  as               to negotiable instruments.  These, being  part               of the currency, are subject to. the same rule               as  money:   and  if  such  an  instrument  be               transferred  in good faith, for value,  before               it  is  overdue, it becomes available  in  the               hands  of the holder,   notwithstanding  fraud               which would render it unavailable in the hands               of a previous holder."    In  the present case the appellant asserted that  it  had obtained’the  currency  notes in the normal  course  of  its business  and  without any knowledge or suspicion  of  their having been involved in the commission of any offence.   The respondents have not alleged fraud or lack of good faith  on the  part  of the appellant. The appellant  hence  contended that  the  property  in the currency notes,  passed  in  its favour  by mere delivery and the appellant "had a  right  to possess’ the currency notes within the meaning of s. 517  of the  Code of Criminal Procedure.  We do not wish to  express any concluded opinion in this case on the ultimate  question of  liability  for  payment  of the  money  as  between  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

appellant  on  the one hand and respondents 1 and 2  on  the other.   But we are of opinion that in the circumstances  of this case the High  Court should have directed the return of the said currency notes to the (1) (1863) 14 C.B.N.S. 257-258. 223 appellant   which  had the "right to possess"  the  currency notes within the language of s. 517 of the Code of  Criminal Procedure.     we accordingly allow this appeal, set aside the order of the  High Court dated April 5, 1963 and direct that  the  21 currency  notes of the denomination of Rs. 1000 each  seized by  the  Madhya  Pradesh Police should be  returned  to  the appellant. R.K.P.S.                                   Appeal allowed. 224