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State of Punjab v. Kuldeep Singh & Ors - CRM-28348-M-2004 [2006] RD-P&H 11686 (1 December 2006)


Criminal Misc.No.28348-M of 2004

Date of Decision: December 1, 2006

State of Punjab



Kuldeep Singh & others


Present: Mr.M.C.Berry, Sr.DAG, Punjab,

for the petitioner.

Mr.M.K.Dogra, Advocate,

for the respondents.


This order will dispose of Criminal Misc.Nos.28348-M of 2004 (State of Punjab v. Kuldeep Singh and others) and 36881-M of 2004 (Food Corporation of India v. Kuldeep Singh and others).

Yet another case where the Rice Millers have been relieved of the consequences of their action in committing embezzlement of paddy entrusted to them for the purposes of shelling. The prosecution in this case has seen a sudden end and the respondent-millers stand discharged from the offence and criminal liability incurred by them under Section 406 IPC. The petitioner-State and the Food Corporation of India filed revisions against the order discharging Criminal Misc.No.28348-M of 2004 { 2 }

the respondents and the mills, which was also dismissed and hence they are now before this court by way of present Criminal Misc.Petitions invoking the jurisdiction under Section 482 Cr.P.C.

Guru Nanak Rice Mills Dhariwal were supplied 38920 bags of common paddy weighing 25276 qtls. 85 kgs. for storage and return of rice after shelling the paddy. 18641 bags of super fine paddy weighing 12079 qntls. 87 kgs. were also supplied. The Mill did not return 14037 bags of common paddy weighing 9124 qntls.

approximately and 1331 bags of super fine paddy weighing 864 qntls.

Thus, the Mill did not account for the paddy worth Rs.79,94,348.47P.

Offence under Section 406 IPC was accordingly alleged against the mill and the other persons responsible. Challan in this case was filed in the Court of Judicial Magistrate Ist Class, Gurdaspur, who vide his order dated 11.1.1999, discharged the accused-respondents of their criminal liability under Section 406 IPC on the ground that it was a case of civil liability. As already noticed, the revision against the same was also dismissed.

Mr.M.C.Berry, learned Senior Deputy Advocate General, Punjab appearing for the State and Mr.Hari Pal Verma, learned counsel appearing for the petitioner-Food Corporation of India have submitted that apart from civil liability, the respondents would also be liable for criminal misconduct committed by them in embezzling the paddy entrusted to the mill for the purpose of shelling. On the other hand, Mr.M.K.Godra, learned counsel for the respondents, while relying upon Kailash Verma Vs. Punjab State Civil Supplies Corporation and another, 2005(1) RCR (Criminal) 727, would contend that no offence under Section 406 IPC is made out in this Criminal Misc.No.28348-M of 2004 { 3 }

case in view of the ratio laid down by the Supreme Court in the said case. He has further submitted that criminal prosecution as well as arbitration cannot be continued together. The submissions made by the learned counsel for the respondents cannot be accepted. It is required to be seen if the ratio of the decision in Kailash Verma's case (supra) would be attracted in the facts and circumstances of this case or not. For that, it would be essential to understand the system of entrusting paddy for milling purposes. There are two types of rice which are milled by the millers and these are known as levy rice and custom milled rice. A difference between these two types of milling is required to be understood. Custom milling rice is the rice delivered by the millers to the Govt. of the paddy purchased by Govt. or its agencies and given to the millers for milling. Levy rice is a rice delivered by the millers to the Govt. out of the paddy purchased by them directly from the market in which they are required to give 75 % of the rice to the Government out of the paddy milled and purchased by them. It is thus clear that the paddy, which is supplied to the mills for custom milling of rice is a property of the agency, which had supplied paddy and it is only entrusted to the mill for the purpose of milling. The mill is required to account for the rice and in case it is unable to do so, certainly it would expose itself to criminal liability, besides the civil liability that it may incur. In the State of Punjab, a scam known as "Rice Scam" received very wide publicity. The millers had apparently benefited to a huge extent by short supplying rice in return for the paddy that was entrusted to the Mills. This, of course, could not have been without the connivance of employees of agency. The rice scam was of multi facet in nature. It Criminal Misc.No.28348-M of 2004 { 4 }

was found that in some cases, the price of the rice was more in the market than the rate at which this was required to be supplied to the government. The same was sold by the mills in the market. In these circumstances, it was very easy for the millers to urge that they were prepared to compensate the agency. In civil liability, they would still be gainers by paying dues of the agency. In some other cases, where it was found that the price of the rice was more if it was returned to the agency than the open market, then the millers resorted to mixing the custom milled rice with the levy rice and thus gained tremendously. All these issues are required to be adjudicated properly in a proceeding, which may be of a civil or criminal nature.

The facts in the present case clearly revealed that a particular quality of paddy was entrusted to the petitioners and the firm was bound to return the rice after shelling the same. Once it has been found that the rice, which was entrusted for shelling has not been returned it would reveal an offence of criminal breach of trust and be enough indication that the said quantity of rice has been mis-appropriated.

The civil liability would go into the aspect of loss, which the FCI would suffer whereas the petitioners cannot be allowed to escape the criminal liability and responsibility for having breached the trust reposed in it by Government and the FCI. These are distinguishable facts from Kailash Verma's case (Supra) and thus, it can be said that the ratio of this decision would not apply to the facts and circumstances of this case. Rather, this case seems to be covered by the ratio of decision in the case of Trisuns Chemical Industry v.

Rajesh Agarwal and others, JT 1999 (6) S.C.618. In this case, the allegation of the complainant was that the Director-respondent had Criminal Misc.No.28348-M of 2004 { 5 }

approached the appellant -Company for supply 5450 metric tones of "Toasted Soyabean Extractions" for a price of nearly four and a half crores of rupees. The appellant Company paid the amount through cheques. The commodity, which was supplied, was found to be most inferior and sub-standard quality. The complainant had suffered a loss of Rs.17 lacs from this consignment. After obtaining report in regard to the inferior quality of the consignment, the complaint was filed for initiating the criminal prosecution against the accused. The High Court had quashed this complaint on the ground that the dispute is purely of a civil nature and hence no prosecution should have been permitted. The same was taken in appeal before the Hon'ble Supreme Court. Noticing the judgment in the cases of State of Haryana v. Bhajan Lal, JT 1990 (4) SC 650 and Rajesh Bajaj v.

State NCT of Delhi JT 1999 (2) SC 112, the Hon'ble Supreme Court observed that "time and again this Court has been pointing out that quashment of FIR or a complaint in exercise of inherent powers of the High Court should be limited to very extreme exceptions." In the case of Rajesh Bajaj (supra), the Hon'ble Supreme Court had observed that "merely because an act has a civil profile is not sufficient to denude it of its criminal outfit." It would be a benefit to quote observations of Hon'ble Supreme Court in this regard:- "It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions." Criminal Misc.No.28348-M of 2004 { 6 }

In Trisuns Chemical Industry'case (supra), the Hon'ble Supreme Court specifically dealt with the filing of a criminal complaint in cases where there is an arbitration clause. In this regard, the Hon'ble Supreme Court observed as under:- "We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in Bhajan Lal v. State of Haryana (Supra)." It can thus be said that criminal prosecution and remedy by way of arbitration are two separate and distinct courses available to an aggrieved party. As noticed by the Hon'ble Supreme Court, arbitration is a remedy affording relief for breach of agreement and this cannot be a substitute for a criminal trial where the facts reveal commission of an offence, which may be arising out of the same sets of facts. As already noticed above, the arbitration clause in itself Criminal Misc.No.28348-M of 2004 { 7 }

cannot lead to quashing all the proceedings and it would depend on facts and circumstances of the case. It has to be resorted to in an exceptional case as may have been done in the case of Kailash Verma (supra). The present cases, in my considered opinion, would not fall under such extreme or exceptional case, whereby the offence under Section 406 IPC would not be revealed. Accordingly, the order discharging the respondents and the order dismissing the revision are set-aside. The present petitioners are allowed with the direction that the trial Court would proceed with the case from the stage of quashing of charge. Since the case has been inordinarily delayed because of the pendency of these proceedings, the trial Court would make endeavour to conclude this trial within some short period.

December 01, 2006 ( RANJIT SINGH )

ramesh JUDGE


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