IMPORTANT POINT
Merely because an act has a civil profile it is not sufficient to denude it of its criminal outfit.

JUDGMENT

Dr. Arijit Pasayat, J. —

1. Challenge in this appeal is to the judgment of a learned Single Judge of the Punjab and Haryana High Court dismissing the appeal filed by the State of Punjab against the judgment of acquittal recorded by learned Judicial Magistrate, Ist Class, Samana. The respondents were charged for alleged commission of offence punishable under Section 406 of the Indian Penal Code, 1860 (in short the ‘IPC’). They were partners of one Jagdamba Rice Mills to whom the paddy was entrusted for milling by the Punjab State Civil Supplies Corporation Ltd. (in short the ‘Corporation’) during the year 1983-84. It was alleged that the accused failed to account for the paddy and thus misappropriated the same. Pursuant to arbitration clause between the parties an arbitrator was appointed and an award of Rs.1,81,315.43 was rendered in favour of the Corporation. The trial Court acquitted the accused on the ground that the matter arose out of breach of contract, the same was of civil nature and a criminal case against the accused was not made out.

2. High Court endorsed the view and dismissed the appeal.

3. In support of the appeal, learned counsel for the State submitted that the High Court’s judgment is totally unreasoned as no reason has been indicated. Merely because there was allegedly a breach of contract, that cannot in all cases rule out the criminal prosecution. It is pointed out that even the arbitration award on which reliance has been placed by the trial Court to direct acquittal, was a factor in favour of the Corporation and without examining the ingredients of Section 406 IPC the trial Court and the High Court directed acquittal.

4. Section 406 IPC deals with punishment for criminal breach of trust. In a case under Section 406 the prosecution is required to prove that the accused was entrusted with property or he had dominion over the property and that the accused misappropriated or converted the property to his own use or used or disposed of the property or willfully suffered any person to dispose of the property dishonestly or in violation of any direction of law prescribing the mode in which the entrusted property should be dealt with or any legal contract express or implied which he had entered into relating to carrying out of the trust.

5. Criminal breach of trust is defined in Section 405 IPC. The ingredients of offence under Section 405 are (i) entrusting any person with property or with dominion over the property, (ii) the person entrusted (a) dishonestly misappropriated or converted to his own use the property or (b) dishonestly used or disposed of the property or willfully suffered any other person so to do in violation (i) of any direction of law prescribing mode in which such mode is to be discharged or (ii) of any legal contract made touching the discharge of trust.

6. In Rajesh Bajaj v. State NCT of Delhi1 (1999 (3) SCC 259) it was held as follows:

“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. One of the illustrations set out under Section 415 of the Indian Penal Code [Illustration f] is worthy of notice now:

“(f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats.”

7. While dealing with a case under Section 482 of the Code of Criminal Procedure, 1973 (in short the ‘Code’) this Court referred to the aforesaid judgment and held that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit.

8. In Trisuns Chemical Industry v. Rajesh Agarwal and Ors.2 (1999 (8) SCC 686) it was noted as follows:

“9. We are unable to appreciate the reasoning t