2010(1) Crimes 43 (Ker.)
KERALA HIGH COURT
Gopalakrishnan –Petitioner
versus
State of Kerala –Respondent
Criminal R.P. No. 2766 of 2009
Decided on 1.10.2009

IMPORTANT POINT
Granting of loan by a bank to a customer and his spending it for the purpose for which loan was availed would not amount to entrustment with property or dominion over the property or its dishonest misappropriation so as to constitute an offence of breach of trust.

Headnote:Indian Penal Code, 1860—Sections 420 an 406—Framing of charge for offences—Revision—Petitioner obtained a loan of Rs. 10,00,000 from complainant bank after pledging land —Said property had earlier been mortgaged with other bank and a loan was availed from other bank and fact was suppressed while availing loan from complainant bank—No mention in FIR that petitioner made de facto complaint believe that there was no liability charged upon property which was offered for security—No mention in evidence that petitioner fraudulently made witness believe that there was no liability charged upon property—No mention that had he been aware of earlier liability, loan in dispute would not have been granted—No prima facie case for offence under Section 420 IPC could be said made out—No offence under Section 406 IPC could also be said to have been made out—Impugned order was liable to be set aside.

       Held: The law was put in motion upon the basis of a statement given by CW1 the Chief Manager, State Bank of India. According to him, he came to know that on the basis of a duplicate document the revision petitioner had availed a loan of Rs.10,00,000 and thereby the revision petitioner cheated the bank. It is also stated that the revision petitioner suppressed the factum of availing a loan from State Bank of Travancore after pledging the original document. However, there is no mention in the first information statement that the revision petitioner made the de facto complainant believe that there was no liability charged upon the property which was offered as security. In his further statement also there is no such whisper. What is stated is that the duplicate copy of the document and other connected records were produced by the revision petitioner and it was sent for legal scrutiny of the panel lawyer and no defect was noticed and the loan was granted. At the same time he would admit that there was no ban for granting loan on the basis of a duplicate copy of the document.

       The 2nd witness in the charge (CW2) was the officer who sanctioned the loan. In his statement it is mentioned that the loan was granted after perusing all the documents. According to him, the loan was granted on the belief that the documents produced are original. In his statement also there is no mention that the revision petitioner fraudulently made the witness believe that there was no liability charged upon the property offered as security or that there was any fraudulent inducement to part with money. There is no mention that had he been aware of the earlier liability, the loan in dispute would not have been granted. No other witnesses cited by the prosecution mention about the nature of the transaction. The statement of the above witnesses, even if taken at its face value would not constitute offence under Section 406 or 420 I.P.C. No fraudulent or dishonest inducement to part with money is alleged. At the most what can be inferred is lack of vigil in scrutinizing the document. No deception can be inferred. (Paras 5 and 6)

       Granting of loan by a bank to a customer and his spending it for the purpose for which loan was availed would not amount to entrustment with property or dominion over the property or its dishonest misappropriation so as to constitute an offence of breach of trust. Here there is no case that the loan amount was appropriated, used or disposed for any purpose other than for which the loan was availed. On the other hand the allegation is that there is no prompt payment. Failure to promptly pay back a loan would not amount to a breach of trust as defined in Section 405 I.P.C., though it may amount to a breach of contract for which civil action can be initiated.

       There is yet another allegation that after clearing the first loan, the property was sold. Even if the property is mortgaged to the bank, sale of mortgagor’s right is not forbidden by law. Such sale also may not amount to a breach of trust so as to be prosecuted. Such sale in no way affects the mortgagee’s right. It would be subject to the right of the mortgagee. Mortgagee can ignore such sale and enforce his right. As regards the sale of property by the revision petitioners, the principle of the maxim ‘Nemo dat quid non habet’ no man can transfer better title than he himself has applies. For such sale, the revision petitioners are not liable to be prosecuted for breach of trust. So, in fact, there is little material on record so as to send the revision petitioner to face trial for an offence under Section 406 I.P.C. also. (Paras 9 and 10)

       Result: Petition allowed.