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PUNJAB & HARYANA HIGH COURT
R.L.Anand, J.
Sunita Bajaj
Versus
Punjab And Sind Bank
Criminal Misc. No. 22388 of 1996,
Decided On : OCTOBER 3, 1997
CRIMINAL LAW - CRIMINAL BREACH OF TRUST - HYPOTHECATION OF GOODS - OWNERSHIP - BENEFICIAL INTEREST - SECTION 406, INDIAN PENAL CODE - INTERPRETATION - COURT'S POWER TO QUASH COMPLAINT AND SUMMONING ORDER UNDER SECTION 482, CR.P.C. - SCOPE AND LIMITATIONS.
Fact of the Case:
The petitioners, who had taken a loan from the Punjab and Sind Bank against the hypothecation of goods, were summoned by the Magistrate for the offence under Sections 408/409, IPC, alleging that they had disposed of the hypothecated goods without the Bank's permission and without depositing the sale proceeds.
Finding of the Court:
The Court held that the ownership of the hypothecated goods remained with the petitioners, and the Bank only had a floating charge on the goods as security for the loan. The Court further held that the petitioners' act of selling the hypothecated goods did not constitute an offence under Section 406, IPC, as there was no dishonest intention or entrustment of property to the Bank.
Issues: 1. Whether the ownership of the hypothecated goods was transferred to the Bank by the creation of a floating charge? 2. Whether the petitioners' act of selling the hypothecated goods without the Bank's permission constituted an offence under Section 406, IPC?
Ratio Decidendi: 1. The Court relied on the Supreme Court's decision in CBI, New Delhi v. Duncans Agro Industries Ltd., Calcutta, which held that the ownership of the hypothecated goods remains with the person who has hypothecated them, and that a floating charge created on the goods does not transfer the beneficial interest in the goods to the Bank. 2. The Court also relied on the decision in Pardeep Kumar v. State of Haryana, which held that an offence under Section 406, IPC, requires dishonest intention on the part of the accused, and that a mere breach of contract does not constitute an offence.
Final Decision: The Court allowed the petitions and quashed the complaint and the summoning order against the petitioners.
R.L.Anand, J.
1. Vide this judgment, I dispose of eight Criminal Misc. Nos. 22388-M of 1996, Smt. Sunita Bajaj and others v. Punjab and Sind Bank and another, 11993-M of 1997, M/s Saraswati Mehra Woollen Mills and others v. Punjab and Sind Bank and another; 11995-M of 1997, M/s Saraswati Mehra Woollen Mills and others v. Punjab and Sind Bank and another; 11999-M of 1997, M/s Saraswati Mehra Woollen Mills and others v. Punjab and Sind Bank and another; 11997-M of 1997, M/s N.K. Woollens and others v. Punjab and Sind Bank and another; 12003-M of 1997, M/s N.K. Woollens and others v. Punjab and Sind Bank and another; 12001-M of 1997, M/s N.K. Woollens and others v. Punjab and Sind Bank and another and 12005-M of 1997, M/s N.K. Woollens and others v. Punjab and Sind Bank and another, as in the opinion of this Court common questions of law and fact are involved in all the criminal miscellaneous petitions. For the sake of facts, I am taking the facts from Criminal Misc. No. 22388-M of 1996 Smt. Sunita Bajaj and others v. Punjab and Sind Bank and another (supra).
2. Smt. Sunita Bajaj and others have filed the present petition under Section 482, Cr.P.C., for the quashment of complaint (Annexure P1) dated 28th October, 1995 and the summoning order (Annexure P3) dated 17th November, 1995 for the offence under sections 403/409, Indian Penal Code, presently pending in the Court of Additional Chief Judicial Magistrate, Amritsar.
3. The case set up by the petitioners is that respondent No. 1, i.e., Punjab and Sind Bank filed a complaint under Section 408/409, IPC alleging that the petitioners took loan from respondent No. 1 to the tune of Rs. 29.6 lacs as cash credit hypothecation limit and term loan against hypothecation of stock of Rice and Bardana and machinery. It was further alleged that the loan was sanctioned and disbursed to the petitioners on the condition that the hypothecated goods shall not be disposed of without the prior permission of the Bank and without depositing the sale proceeds of the same. Since the petitioners disposed of the hypothecated goods without the permission of the Bank, they have committed offence punishable under Sections 408/409 of the Indian Penal Code. The learned Magistrate vide the summoning order dated 17th November, 1995 summoned the petitioners. According to the petitioners, the perusal of the order would show that there was total lack of judicious application of mind by the learned Magistrate. The learned Magistrate has not specified in the summoning order as to what offence has been committed by the petitioners. No preliminary evidence has been recorded on the ground that the Manager of the Punjab and Sind Bank was a Public Servant. The summoning order has been passed in a mechanical manner which does not show judicious application of mind on the part of the learned Magistrate; so much so counsel for the complainant sought adjournment in order to show the law that the Branch Manager of Punjab and Sind Bank was a Public Servant but the learned Magistrate did not give any opportunity. As per the petitioners, no offence under Sections 408/409, Indian Penal Code, is made out because the ownership of the hypothecated goods remained with the petitioners in spite of the hypothecation of the goods with the Bank against the loan secured by the petitioners. The dispute, if any, was predominantly of civil nature. Therefore, the complaint and the summoning order are liable to be quashed. It was also pleaded that the complaint was nothing but an abuse of the process of law.
4. With the above main averments, the petitioners have prayed for the quashment of the complaint (Annexure P-1) and the summoning order (Annexure P-3).
5. Before I proceed further I would like to incorporate the material averments of the complaint (Annexure P-1). The record shows that the Punjab and Sind Bank filed criminal complaint under Sections 408/409, Indian Penal Code, against Sardar Bahadur Rice Mill, Smt. Sunita Bajaj, Shri
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