The availability of a civil remedy does not preclude the existence of a criminal offence in commercial transactions or breach of contract.

Prashant Kumar, J.-This is an application for quashing the First Information Report bearing Jasidih P.S. Case No. 126 of 1995 dated 01.07.1995 under Sections 406, 420 and 403 of the IPC.

2. The case of prosecution in brief is that petitioners being Managing Director and Directors of Sharda Hosiery Pvt. Ltd (hereinafter referred as 'Company') applied for loan from Bihar State Financial Corporation (hereinafter referred as ‘B.S.F.C.’). It is further stated that B.S.F.C. sanctioned Rs. 7.80 Lakhs as loan in favour of company. However, company availed only Rs. 6.09 Lakhs. It is further stated that as on 31.3.1994 a sum of Rs. 27,48,420.45/was outstanding against company, which includes principal amount as well as interest accruing on it. It is further alleged that at the time of obtaining loan, petitioner No. 1 (the Managing Director of the Company) on being authorized by the Board of the Company had issued letters of hypothecation dated 16.6.1982 and 16.12.1982. It is further stated that indenture of agreement execute on 16.8.1982 and 16.12.1982. It is stated that in the letter of hypothecation it is stipulated that borrowers agreed to held hypothecated assets as BSFC's exclusive property and said assets specifically appropriated to the security and the borrowers will not, except with the consent in writing of BSFC, do anything which would prejudice the security. It is stated that in the indenture of agreements petitioners, being guarantors in their personal capacity, undertook that they would not, without the consent of BSFC, remove the plant and machinery and any part there of from the land and the building mortgaged in favour of BSFC. It is alleged that the Deputy Manager and Area in-Charge of BSFC inspected the company and found that hypothecated tools and machineries (details of which given on the foot of FIR) had been removed and in all probabilities, sold by the petitioners in breach of terms and condition laid down in the letter of hypothecation and agreements. It is further alleged that petitioners mis-appropriated sale proceed and prevented BSFC from realizing the outstanding loan by sale of aforesaid hypothecated articles.

3. On the basis of aforesaid information, Jasidih P.S. Case No. 126/1995 dated 01. 07 .1995 instituted under Sections 406, 403 and 420 of the IPC against the petitioners.

4. Mrs. Badani Verma, learned counsel for the petitioners submits that no offence under Sections 403,406 and 420 of the IPC are made out. She submits that in case of hypothecation ownership of movable property and possession thereof remain with debtor. Under the said Circumstance, offence of criminal breach of trust as defined under Section 405 of IPC is not made out. She further submits that since ownership of the hypothecated articles vest in the company, thus, question of misappropriation of said articles by the petitioners does not arise. Thus, offence under Section 403 of the IPC is not made out. She further submits that there is no averment in the FIR to show that at the time of issuance of hypothecation letter and/or execution of agreement petitioners and/ or the company had any intention to cheat BSFC. Thus, the offence of cheating also not made out. It is further submitted that even if allegations made in the FIR are taken to be true then also no criminal liability made out and at best civil dispute arose for breach of contract, which can be resolved by a competent civil Court. Accordingly, it is submitted that the FIR may be quashed.

5. On the other hand, Sri Ashok Kumar Yadav learned counsel for BSFC and Sri Moti Gope, learned Additional P.P. submit that there is stipulation in the hypothecation letter that borrowers (petitioners and the company) will held hypothecated assets as exclusive property of BSFC. Thus from the aforesaid stipulation, it is clear that petitioners held hypothecated articles as a trust. Thus it is not open for the petitioners to say that they are owner of hypothecated assets. Learned counsels s