The disposal of mortgaged assets does not necessarily constitute a criminal offense under Sections 406/420 of the Indian Penal Code.

1. Facts, as uncontroverted at the time of arguments before this Court, are as under:

2. The petitioner is sole proprietor of M/s National Wires Products Ltd., village Ghatoli, District Jind. In the year 1983, he applied to the Haryana Financial Corporation (hereinafter referred to as the “Corporation”) for a cash loan of Rs.6.5 lacs. The loan aforesaid came to be sanctioned by the Corporation vide reference No.HFC-PP 244. As per the order of sanction, the amount was utilizable for the purchase of land, building and machinery and also for working capital etc. At the time of sanction of the loan, the petitioner mortgaged 18 Marlas of land comprised in Khasra No.167, Killa No.90/3, situated in Revenue Estate of village Ghatoli, District Jind with the Corporation. Along with the plant, the engine, machinery, electric equipments, tools and accessories installed or located, affixed or attached in the factory were also mortgaged with the factory. However, the petitioner suffered heavy business losses and the manufacturing process in his factory came to a stand still. On account of default in the payment of amount, the Corporation took over the possession of the unit on 20.8.1997. The Corporation had, apart from other property of the petitioner, also taken possession of the 18 Marlas of mortgaged land. As the petitioner suffered heavy business losses, the manufacturing process of the Concern came to a stand still and the petitioner became defaulter. The Corporation entered into the possession of the unit and the mortgaged land on 22.8.1997. Prior to the entering into possession of the unit aforesaid, a notice had been issued by the Corporation to the petitioner. In spite of the fact that the Corporation had entered into possession, the petitioner sold away some of the assets which were under mortgage.

3. It was under these circumstances that the Haryana Financial Corporation lodged FIR No.149 dated 12.8.2002, under Sections 406/420 of the Indian Penal Code against the petitioner.

4. Through the present petition under Section 482 of the Code of Criminal Procedure, the petitioner raised a plea for the quashing of FIR aforesaid. The essential plea raised, in the course of the petition, is that the impugned transaction, at best, gives rise to a civil liability and the criminal law had been unjustly set into motion.

5. I have heard learned counsel for the petitioner and learned Assistant Advocate General, Haryana and have carefully gone through the records.

6. Learned counsel for the petitioner argued that the property mortgaged by the petitioner with the Corporation continued to be otherwise owned by him and even if it is assumed (for the sake of arguments) that a part thereof came to be disposed of, the petitioner cannot be held liable for a criminal offence. For the advocated plea, sustenance was drawn from M/s Deva Disc and Tiller, Hissar and others Versus Haryana Financial Corporation and another, 2003(1) RCR (Crl.) 722.

7. The plea aforementioned deserves acceptance, particularly when it is supported by the judicial pronouncement relied upon by the petitioner. The facts in that case were as under:

8. The indicated Concern had raised certain amount of loan from Haryana Financial Corporation. As per the terms of the agreement, the borrower had undertaken not to replace, remove or mortgage the machinery hypothecated with the Corporation. The Corporation lodged a report with the police that the borrower had ceased to have any title in the hypothecated stocks and he had committed an offence by mis-appropriating a part of the machinery/stock. The borrower raised a plea that the allegations, at best, gave rise to a dispute of civil nature and did not give rise to criminal offence because the ownership of hypothecated goods remained only with him. It was under these circumstances that an Hon’ble Single Bench of this Court held that even if the borrower had removed hypothecated machinery stocks for making payment, no criminal offenc