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IN THE HIGH COURT OF ORISSA
B.C. Das, J.
S.F. JAQUE - APPELLANT
Versus
STATE OF ORISSA - RESPONDENT
Criminal Revision No. 535 of 1969
Decided On : 11-05-1971
{'KEYWORD': 'CRIMINAL LAW - MISAPPROPRIATION - TRUST - PARTNERSHIP - COMPANY - EVIDENCE - ADMISSIBILITY - BURDEN OF PROOF', 'SUBJECT': 'Misappropriation of funds by a Managing Director of a Private Limited Company - Entrustment of funds - Liability of a partner - Admissibility of documents - Burden of proof', 'ACT SECTION LIST': ['INDIAN PENAL CODE, 1860 - SECTION 403', 'INDIAN PENAL CODE, 1860 - SECTION 405', 'INDIAN EVIDENCE ACT, 1872 - SECTION 63', 'INDIAN EVIDENCE ACT, 1872 - SECTION 65']}
Fact of the Case:
The Petitioner, the Managing Director of a Private Limited Company, was convicted of misappropriation of funds under Section 409 of the Indian Penal Code. He challenged the conviction on the grounds that he was a partner in the company and not an employee, that the documents relied upon by the prosecution were inadmissible, and that the prosecution had failed to establish the exact amount of loss sustained by the company.
Finding of the Court:
The Court held that the Petitioner, as the Managing Director of the company, was entrusted with the funds and properties of the company and was liable for the goods sold by him and the moneys obtained. The Court also held that the documents relied upon by the prosecution were admissible and that the prosecution had established beyond reasonable doubt that the Petitioner had misappropriated certain items of property belonging to the company.
Issues: 1. Whether the Petitioner, as a partner in a Private Limited Company, could be held liable for misappropriation of funds under Section 409 of the Indian Penal Code. 2. Whether the documents relied upon by the prosecution were admissible in evidence. 3. Whether the prosecution had established beyond reasonable doubt that the Petitioner had misappropriated certain items of property belonging to the company.
Ratio Decidendi: 1. The Court held that a partner in a Private Limited Company could be held liable for misappropriation of funds under Section 409 of the Indian Penal Code if there was a special agreement between the parties entrusting the partner with the funds or assets of the company. 2. The Court held that the documents relied upon by the prosecution were admissible in evidence as they were copies of the proceedings of meetings of the Board of Directors and were obtained from the Government Secretariat. 3. The Court held that the prosecution had failed to establish beyond reasonable doubt that the Petitioner had misappropriated certain items of property belonging to the company as the prosecution had not been able to present an independent picture of the true and correct state of affairs of the company.
Final Decision: The Court set aside the conviction and sentence passed by the Courts below and acquitted the Petitioner.
JUDGMENT :
B.C. Das, J. - The Petitioner stands convicted u/s 409, Indian Penal Code and sentenced to undergo R.I. for two years and to pay a fine of Rs. 5, 000/-. He stood his trial in the Court of the Assistant Sessions Judge, Cuttack. Hill appeal before The Additional Sessions Judge, Cuttack stands dismissed.
2. The Petitioner was the Mg. Director from 25-1-1963 till 14-7 -1964 of the Orissa Trunk and Enamel Works Ltd., Dargah bazar, Cuttack which is a Pilot Project Company of the State Government incorporated under the Companies Act and manufacturers steel trunks, suit cases and enamel works. The authorised capital is Rs. 3,00,000/- out of which Rs. 1,33,500/- has been subscribed by the Government of Orissa and Rs. 32,000/- by the private enterpriser, the father of the Petitioner. A sum of Rs. 1,45,500/- has been paid up comprising Rs. 1,33,500/- by the Government and Rs. 12,000/- by the Petitioner?s father. The Petitioner had first taken over charge as General Manager from his father with effect from 20-7-1961 and thereafter was appointed the Mg. Director with effect from 22-1-1963.
3. The Board of Directors consist of five members. The director of Industries, Dy. Director of Industries (Pilot Project), Industrial Engineer and the District Industries Officer, Cuttack were the Government nominees on the Board. The fifth member was the partner himself.
4. At the quarterly meeting of the Board on 26-10-1964 the partner as the Mg. Director furnished to the Board two copies of a list consisting of two parts namely of persons to whom advances had been made as on 27-9-1964 and of sundry debtors, showing a sum of Rs. 61,727.18 paise outstanding against these debtors. The Dy. Director of Industries had presided over the meeting. He asked the Petitioner to furnish addresses of these debtors for which another meeting was held on 30-10-1964. The Petitioner furnished the same list against without any further particulars. Meanwhile, on inquiry some of the items in the list were found to be fictitious. Since the Petitioner did not file detailed addresses of the sundry debtors and persons to whom moneys had been advanced, he was again caned upon to do so and it was resolved not to release any money in favour of the Petitioner till the outstanding dues were collected and a true picture of the financial position of the company placed before the Board of Directors.
5. The next meeting was held on 4-12-1964. The Petitioner attended this meeting but did not bring with him the proceedings book as a result of which the proceeding of the last meeting could not be read and confirmed. At this meeting he was confronted with the result of the inquiries that had been made so far and he admitted that some of the transactions shown in the list were in fact factitious and identified these items and further pointed out that one of the persons shown in the list against whom a sum of Rs. 10,522.10 paise had been shown was his brother-in-law.
6. As a result of the resolution at this meeting on 4-12-964 the Petitioner was ordered to be removed from office of the Mg. Director which was subsequently confirmed at a general body meeting. A first information report with the police at the Lalbag P.S. was lodged against the Petitioner in respect of misappropriation of a sum of Rs. 58,649/- as revealed by then.
7. In his defence the Petitioner had stated that he was the Mg. Director from 25-1-1963 till 4-12-1964 when he was removed from the office. He denied having furnished any list and also the allegation that inspite of demand he had not supplied the detailed addresses of the persons from whom money was due and further that he ever made any admission about any such misappropriation.
8. His allegation on the other hand was that the company was formerly running at a loss at Kendrapara and at Cuttack, the Official Directors wanted him to wind up the company; he did not agree to the proposal and the Official Directors forcibly removed him from office and in order to protect
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