Hypothecation creates a security interest rather than an entrustment of property, precluding charges of criminal breach of trust. Failure to repay a loan is a civil matter and does not constitute cheating unless dishonest intent is proven at the inception of the transaction.

ORDER :

1. This Revision case has been preferred as against the Judgment passed in C.A. No. 96 of 2022 on the file of III Additional District and Sessions Court, Erode at Gobichettipalayam on 27.04.2023 thereby confirming the order of conviction and sentence imposed by the Trial Court in C.C. No. 86 of 2012 on 24.06.2022 made on the file of the learned Judicial Magistrate No.1, Gobichettipalayam.

2. The case of the prosecution is that the petitioners are the partners of Anbu Thanga Maligai shop and they obtained a loan for a sum of Rs.11,85,95,0000/- by pledging the movable and immovable properties of Anbu Thangamalaigai shop including gold jewellery and silver articles. While taking possession of the said properties under the SARFEASI Act, the Gold and Silver articles were not available in the premises which were hypothecated with the Respondent/Bank thereby the petitioners have committed criminal breach of trust and cheating. Hence, the Respondent/Bank has given a private complaint before the concerned Judicial Magistrate and the same was taken cognizance by the Trial Court for the offence punishable under Sections 34, 406 and 420 of IPC.

3. In order to prove the charges, the respondent had examined P.Ws. 1 to 7 and marked Exs.1 to 20 and no witness was examined on the side of the accused and six documents were marked as Exs.D.1 to 6 by the accused.

4. On a perusal of the oral and documentary evidence, the Trial Court found the petitioner guilty for the offence punishable under sections 420 r/w 34 of IPC and section u/s 406 r/w 35 of the IPC. The Trial Court passed a Judgment on 24.06.2022, wherein the petitioner was sentenced to undergo rigorous imprisonment for 3 years each and to pay a fine of Rs.5,000/- each and in default of fine, one month simple imprisonment for the offence under section 420 r/w 34 of IPC and sentenced them to undergo Rigorous imprisonment of 3 years each for the offence under section u/s 406 r/w 35 of the IPC. Aggrieved by the same the petitioner preferred an appeal in C.A.No.96 of 2022 on the file of III Additional District and Sessions Court, Erode at Gobichettipalayam and the same was also dismissed and the order passed by the Trial Court was confirmed . Hence, the present revision case.

5. The learned counsel for the petitioner submits that they have availed loan by pledging their immovable properties and gold and silver articles of the Anbu Thanga Maligai shop and there was a default in payment of the loan amount. Therefore, the respondent filed a suit for recovery of money in O.S.No.299 of 2008 on the file of the District Court, Erode and the same was decreed in favour of the respondent. In pursuance of the decree, the respondent had sold the property and obtained a part of the loan amount. He further submitted that the said loan was in existence prior to 31.08.2008 as a loan from Indian Bank and subsequently taken over by Respondent/Bank of Baroda. After committing default in payment of loan, the respondent invoked SARFAESI proceedings and attached the property. Now the substantive amount of the default loan amount has been realised by the respondent and the outstanding due was Rs.22,68,23,913.33/-. Though the respondent initiated SARFAESI proceedings to sell the properties, out of 11 properties given as collateral, the bank has sold only 5 properties for a sum of Rs.7.69 crores and realized the sale proceeds and no steps were taken to sell the remaining 6 properties. Therefore the charges under Sections 406 and 420 of IPC cannot go together. To attract the of