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Mohinder Singh v. State of Punjab - CM-11502-M-2003  RD-P&H 3173 (16 May 2006)
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
CRL.MISC.NO.11502-M OF 2003
DATE OF DECISION : DECEMBER 21, 2005.
Mohinder Singh ......Petitioner
State of Punjab .......Respondent
CORAM : HON'BLE MR.JUSTICE RAJIVE BHALLA.
Present : Mr.G.C. Dhuriwala, Advocate for the petitioner.
Mr.B.S. Baath, AAG, Punjab for the respondent.
This order shall dispose of Crl.Misc.Nos.11502-M of 2003, 26216- M of 2002, 5330-M of 2002, 36960-M of 2002, 16104-M of 2002, 21623-M of 2003, 36414-M of 2005 and 22903-M of 2005.
As the aforementioned cases involve identical facts and questions of law, the facts have been extracted from Crl.misc.No.11502-M of 2003 Mohinder Singh V. State of Punjab.
A brief factual narrative of the controversy at hand would be appropriate.
The petitioner is the proprietor of M/s S.M. Rice and General Mills, Theri, Tehsil Gidderbaha, Distt. Muktsar. The complainant in the present case is Punjab State Civil Supplies Corporation Limited, known as "Punsup" (hereinafter referred to as such). Admittedly, the firm, constituted by the petitioner is involved in the business of custom milling of paddy. The complainant on the other hand is the agency that procures paddy, entrusts it to firms like the petitioner namely; firms that have capacity for storage and requisite plant and machinery for milling paddy and its consequent conversion into rice. Apart from Punsup, another agency, involved is the Food Corporation of India. The procurement agencies procure paddy, whereafter it is stored in godowns, belonging to the procurement Crl.Misc.No.11502-M of 2003 2
agencies and thereafter, allocated for milling to rice millers like the petitioner.
The rice miller, after milling and processing paddy, is required to return rice in accordance with the terms and conditions of an agreement executed inter parties. The amount of rice returned, in relation to the paddy supplied/entrusted, for obvious reasons is less than the paddy supplied. The exact parameters of storage of paddy milled, the quantity of rice to be returned as also the exact quantity to be returned,the consequences of the failure to return etc., are all enumerated in government instructions, as also in an agreement that is generally executed between the agency and the rice miller.
In the present case, for the year 2000-2001, the petitioner's firm was entrusted with 61005 Kattas (bags) of A-Class paddy weighing 30502-50-00 quintals for the purpose of milling. The petitioner's firm was required to deposit,64% rice after milling paddy with Food Corporation of India, on behalf of Punsup. The rice was required to be deposited with the Food Corporation of India on or before 28.2.2001, subsequently, extended to 20.9.2001. The petitioner, however, deposited 6270-80-00 quintals of rice, upto the lodging of the FIR. 20760-00 quintals of rice was still due from the petitioner. On the basis of the above allegations, Punsup lodged FIR No.19 dated 25.2.2003 under Sections 406/408/420/34/120-B at Police Station Vigilance Bureau, Ferozepur Range, quashing whereof, has been prayed.
Counsel for the petitioner prays that the aforementioned FIR be quashed. It is contended that the aforementioned FIR does not disclose the commission of any offence. A bare perusal of the FIR, discloses the existence of a dispute, which is purely civil in nature, arising from the violation of a contract. It is further contended that the FIR does not disclose any facts that could lead to a conclusion that paddy was entrusted to the petitioner and, thereafter, misappropriated. It is contended that the paddy was stored in the petitioner's premises, under the joint custody of the complainant and the petitioner and, therefore, there was no question of any misappropriation by the petitioner. A failure to discharge an obligation under the contract (Annexure P-1), would not lead to a conclusion that the petitioner was guilty of misappropriation. Mere Crl.Misc.No.11502-M of 2003 3
breach of a contract is sought to be converted into a criminal offence, so as to pressurise the petitioner into discharging his alleged liabilities towards the complaint.
It is further contended that the agreement inter parties contains an arbitration clause, which sets down, the remedy, for violation of the terms and conditions of the contract. The agreement itself provides for the consequences of breach and provides that the failure of a party to deliver rice, would entail interest @ 21% p.a.
Counsel for the petitioner further contends that the existence of an arbitration clause, clearly and categorically indicates that in case of any dispute, resolution thereof, has to be effected by referring the matter to an Arbitrator. As the matter is already pending adjudication, before an Arbitrator, the FIR is an attempt to pressurise the petitioner into making payment allegedly claimed by the respondent.
Reliance for the above propositions is placed upon judgements of the Hon'ble Supreme Court reported as Bal Kishan Das, V. P.C. Nayar, AIR 1991 SC 1531 and Kailash Verma V. Punjab State Civil Supplies Corporation and another, 2005(2) Crl.Court Cases 39 (S.C.) Counsel for the respondent on the other hand contends that paddy was entrusted to the petitioner for milling. As detailed in the FIR, the petitioner failed to return a huge quantity of paddy or mill the same and deposit rice. As the petitioner was in possession of the paddy, his failure to return the rice, would prima facie indicate the commission of an offence of misappropriation. It is contended that the existence of an agreement, which provides for penalty and interest on the amount due and the resolution of any dispute by resorting to arbitration, would not rule out the commission of a criminal offence. A given set of facts, may give rise to both civil and criminal liability. It is further argued that the question of entrustment and misappropriation, being a question of fact, would be determined during the course of the trial and must not be adjudicated in proceedings under Section 482 of the Cr.P.C. The question of mensrea ,which is a necessary ingredient of an offence of misappropriation being a question of Crl.Misc.No.11502-M of 2003 4
fact, to be determined on the basis of evidence, cannot be adjudicated in proceedings under Section 482 of Cr.P.C. It is further contended that merely because arbitration proceedings are pending and an arbitration clause exists, there can be no absolute proposition that the petitioner cannot be prosecuted for a criminal offence. In so far as the judgements cited by the counsel for the petitioner, it is contended that these judgements were rendered on their own peculiar facts. Counsel for the respondent places reliance upon the following judgements :
Kabal Singh V. State of Punjab (P&H) 1997(1) RCR (Criminal) 540, Trisuns Chemical Industry V. Rajesh Aggarwal (SC) 1999(4) RCR (Criminal) 223, Raj Kumar Singla V. State of Punjab, (P&H) 2000(1) RCR (Criminal) 161, S.W. Palanitkar V. State of Bihar (SC) 2001(4) RCR (Criminal) 572 and Sham Lal V. State of Punjab (SC) 2001(3) RCR (Criminal) 535.
I have heard learned counsel for the parties and perused the record.
Before examining the respective contentions, on merits, it would be appropriate to analyse the legal position vis-a-vis the contentions raised by the counsel for the parties. Criminal breach of trust, which leads to an offence under Section 406 of the IPC, is defined in Section 405 of the IPC as follows :- "Section 405. Criminal breach of trust Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode, in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust."
In order to constitute an offence of criminal breach of trust, the necessary ingredients are (i) entrusting a person with property or with any dominion over the said property (ii) the person entrusted (a) dishonestly Crl.Misc.No.11502-M of 2003 5
misappropriates or converts the property to his own use; or (b) dishonestly uses or disposes of that property or willfully suffers any other person so to do in violation of any direction of law prescribing the mode in which such trust is to be discharged or of any legal contract made touching the discharge of such trust.
In order to maintain a complaint/lodge an FIR, the complainant is required to prima facie disclose the ingredients of the offence of misappropriation, as detailed hereinbefore. A perusal of the facts, narrated in the FIR, in my considered opinion, prima facie establish the ingredients of criminal breach of trust, punishable under Section 406 of the IPC. It is not denied, that the custody of paddy was with the petitioner, though, it is contended that paddy was in the joint custody of the petitioner and the complainant. It is also not denied that for the purpose of custody and custom milling, the paddy was stored in the petitioner's premises. The matter with regard to custody of paddy is enumerated in Clause 7 of the agreement, executed inter parties.
Clause 7 reads as follows :-
"The miller shall be responsible for the safe custody of paddy lifted till the delivery of rice as per out turn ratios fixed by the Govt./PUNSUP. Miller shall also make good losses that may be incurred in paddy and rice during transit/storage at the rate of custom milled rice fixed by Govt. of India/PUNSUP plus interest at the rate of 21% from the date it becomes payable till the date of actual realization of the converted variety of paddy or rice towards the short fall."
It is also not denied that release orders for custom milling of paddy were issued to the petitioner. There is no denial to the fact that there was a shortage of 13494-10-00 quintals of rice. The only question, which requires adjudication is, whether shortfall in the delivery of rice or in the return of paddy, would prima facie lead to the commission of an offence of misappropriation.
While considering a plea under Section 482 of Cr.P.C., this Court does not exercise powers of a trial Court and does not appraise the facts as an appellate Court. The narrative in the FIR has to be accepted as a correct Crl.Misc.No.11502-M of 2003 6
narration of the facts obtaining, upon the controversy. A perusal of the FIR, as has been noticed hereinbefore, reveals that the petitioners failed to deliver 13494.10.00 quintals of rice. The question whether, their failure to deliver the aforementioned paddy/rice would amount to misappropriation, in my considered opinion, is a question of fact, to be considered at the stage of trial.
Misappropriation, with all its ingredients, which ingredients have been enumerated hereinbefore, being questions of fact have to be determined on the basis of evidence, to be adduced during the trial. The questions required to be adjudicated, are the questions of entrustment, the effect of joint custody, the consequences of the failure of the petitioner to deliver the requisite quantity of rice and or paddy, the fate of the paddy/rice not so delivered and most significantly "dishonest intention", if any. In view of the above, enumerated facts, contention of counsel for the petitioner, that no prima facie offence is made out cannot be accepted. The facts disclosed in the FIR are insufficient to arrive at a conclusion that no offence is made out.
Admittedly, paddy was stored in the petitioner's premises and entrusted to him. Release orders were issued permitting him to mill the rice. The petitioner failed to return the contracted quantity of rice. Whether his default would be "misappropriation" punishable under Section 406 of the Indian Penal Code is a question of fact to be adjudicated during the trial. In order to record a finding, that there was no "misappropriation", this Court would have to traverse the field of facts, which in the facts and circumstances of the present case, is not warranted.
Another contention, pressed into service by counsel for the petitioner is that the dispute in the present case arises from a breach of contract and, therefore, the petitioner's default would not attract criminal consequences.
A thin line divides criminal breach of trust and civil liability, arising from the breach of a contract. There is no absolute rule of law nor can any such rule be laid down that on a given set of facts only civil or criminal consequences would ensue and vice versa. Every case must turn on its own peculiar facts. The mere fact that the petitioner alleges that his default is a mere breach of contract, in Crl.Misc.No.11502-M of 2003 7
the facts and circumstances of the present case, cannot be accepted.
Another argument, pressed into service, in support of the plea for quashing the FIR is that the agreement provides for penalties, interest etc. for breach of contract and, therefore, criminal prosecution is not tenable. This contention is fallacious. Penalties etc. are the civil consequences of the breach of a contract and cannot be pressed into service to quash the FIR. If that were so, no breach of contract would ever lead to criminal prosecution, thus negating the very distinction between civil and criminal jurisprudence.
The last contention raised by the counsel for the petitioner that as pursuant to the arbitration clause, in the agreement, arbitration proceedings are pending, the present FIR should be quashed, in my considered opinion, lacks merit. It is no doubt true that an arbitration clause exists and binds parties to seek adjudication of their disputes, before an Arbitrator. The existence of an arbitration clause, in my considered opinion, cannot, in the facts and circumstances of the present case, be construed to be a bar to criminal proceedings. As already held hereinbefore, a given set of facts may give rise to both civil and/or criminal consequences. The existence of one would not necessarily rule out the other. An Arbitration clause enables parties to seek adjudication of the civil consequences of the violation of a contract. An Arbitration clause does not envisages adjudication of criminal consequences of an alleged breach of contract. The Arbitrator, would obviously adjudicate the civil consequences of the violation of the contract and if this violation leads to the commission of a criminal offence, the Arbitrator would have no jurisdiction to investigate or launch prosecution, in respect thereof. The mere existence of an arbitration clause or the pendency of arbitration proceedings would, in my considered opinion, not oust the jurisdiction of criminal Courts, to consider whether on the facts narrated in the FIR, a criminal offence has been committed. The judgements relied upon by learned counsel for the petitioner namely; Bal Kishan Das, V. P.C. Nayar, and Kailash Verma V. Punsup and another, (supra) in my considered opinion, do not aid the petitioner in any Crl.Misc.No.11502-M of 2003 8
In the aforementioned judgements, the Hon'ble Supreme Court has not laid down any absolute proposition of law that the existence of an arbitration clause or the pendency of arbitration proceedings would entail an automatic quashing of an FIR. In Bal Kishan Das (supra), after examining the facts of the case and specifically taking note of the fact that after registration of a case under Section 409 of the IPC, the Vigilance Department dropped the case and that arbitration proceedings were pending for more than 17 years, the Hon'ble Supreme Court quashed criminal proceedings. This judgement in my considered opinion, cannot be construed to be a precedent for the proposition that the existence of an arbitration clause bars the filing of a complaint or an FIR for an offence under Sections 406/409 of the IPC etc. The next judgement namely; Kailash Verma's case (supra) also does not set down any absolute proposition that the existence of an arbitration clause would necessarily oust the right of an aggrieved party to lodge an FIR nor does the aforementioned judgement lay down any absolute rule of law that the existence of an arbitration clause, would bar criminal proceedings. In Kailash Verma's case (supra),the appellant was discharged by the trial Court. The said order was reversed and the matter remitted to the trial Court. The Supreme Court held that as there was no prima facie evidence of entrustment of paddy or shortage of rice supplied to the Corporation, and the dispute disclosed being civil in nature, the petitioner could not be prosecuted.
In the present case, however, there are specific allegations of entrustment of paddy, failure of the petitioner to deliver rice and, therefore, the above mentioned judgment cannot be pressed into service by the petitioner to pray for quashing of the FIR and the proceedings initiated thereon. The conclusion that the existence of an arbitration clause is not a bar to the initiation of criminal proceedings, despite the pendency of arbitration proceedings is fortified by a judgement of the Hon'ble Supreme Court in Trisuns Chemical Industry V. Rajesh Aggarwal (SC) 1999(4) RCR (Criminal) 223.
In order to fortify the conclusion, referred to hereinbefore, a brief Crl.Misc.No.11502-M of 2003 9
reference is necessary to a judgement of the Hon'ble Supreme Court in Trisuns Chemical Industry V.Rajesh Aggarwal (supra).
In the aforementioned judgement, it has been held that where the disputed act constitutes a prima facie criminal offence the existence of an arbitration clause is not an effective substitute for criminal prosecution. The other judgements relevant for the controversy in hand are Kabal Singh V.
State of Punjab (P&H) 1997(1) RCR (Criminal) 540, Raj Kumar Singla V.
State of Punjab, (P&H) 2000(1) RCR (Criminal) 161, S.W. Palanitkar V. State of Bihar (SC) 2001(4) RCR (Criminal) 572 and Sham Lal V. State of Punjab (SC) 2001(3) RCR (Criminal) 535.
Counsel for the petitioners in other cases have raised additional arguments.
Crl.Misc.No.36414-M of 2005
Counsel for the petitioner contends that the FIR was lodged after the dispute was referred to arbitration. The petitioner has already deposited a sum of Rs.54,40,581/- with Markfed as the cost of rice, rejected by the Food Corporation of India, due to its poor quality. It is contended that the aforementioned fact is sufficient to quash the FIR. In my considered view, the fact that the petitioner has paid a part of the money, in discharge of his civil liability cannot enure to his benefit for quashing the FIR. The effect of the pendency of Arbitration proceedings has already been decided in the earlier part of the judgement.
Crl.Misc.Nos.26216-M of 2002 and 36960-M of 2002 Counsel for the petitioners in the aforementioned cases contend that the paddy, misappropriation whereof is alleged, is being sold by the respondents. It is further contended that Kewal Krishan is not a partner and Sanjay Uppal is the sole proprietor. These facts, in my considered opinion, being pure questions of fact, cannot be adjudicated in proceedings under Section 482 of the Cr.P.C. The petitioner would be at liberty to raise the aforementioned pleas before the trial Court.
In view of what has been stated above, I am of the considered view Crl.Misc.No.11502-M of 2003 10
that upon an appraisal of the FIR, this Court is unable to hold that the FIR does not disclose the commission of an offence or that the FIR merely discloses a breach of a contract or that the existence of an arbitration clause or the pendency of arbitration proceedings ousts the jurisdiction of criminal courts.
Consequently, finding no merit in these petitions, these petitions are dismissed.
Nothing stated herein shall be construed to be an expression of opinion on the merits of the controversy. The petitioners would be at liberty to raise all the pleas raised in the present petitions before the trial Court, at an appropriate stage.
21.12.2005. ( RAJIVE BHALLA )
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