IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI
WEDNESDAY, THE 11TH DAY OF DECEMBER 2019 / 20TH AGRAHAYANA,
1941
Crl.MC.No.4325 OF 2016
CC 1612/2015 DATED 22-06-2015 OF ADDITIONAL CHIEF JUDICIAL
MAGISTRATE, ERNAKULAM
PETITIONERS:
1 PAUL JOSEPH
AGED 40 YEARS, S/O. JOSEPH,VALIYAPARAMBIL
HOUSE, N.K.SREEDHARAN ROAD,PACHALAM P.O.,
COCHGIN – 682 012.
2 GREGORY P.J
AGED 52 YEARS, S/O. JOSEPH,PANDIYATHUMPARAMBIL
HOUSE,VADUTHALA P.O., COCHIN – 682 023.
3 P.J.JOSEPH
AGED 52 YEARS, S/O. JOHN, PADINJATTUMURI
HOUSE,VADUTHALA P.O., COCHIN – 682 023.
4 V.J.PETER
AGED 65 YEARS, S/O. JOSEPH,VALIYAPARAMBIL
HOUSE, VADUTHALA P.O.,COCHIN – 682 023.
5 GILROY MENDEZ
AGED 40 YEARS, S/O.ANTONY MENDEZ,VALIYAPARAMBIL
HOUSE, VADUTHALA P.O.,COCHIN – 682 023.
6 JOHN BOSCO D SILVA
AGED 65 YEARS, S/O. LAWRENCE
D’SILVA,ALINGAPADATH HOUSE, VADUTHALA
P.O.,COCHIN – 682 023, NOW RESIDING AT
C/O.BABURSHAH,PATHALA HOUSE, ALANGAD P.O.,
KOTTAPPURAM – 683 511.
7 PYLEE EUGINE
AGED 49 YEARS, S/O. PYLEE,KUNNATH HOUSE,
VADUTHALA P.O.,COCHIN – 682 023.
Crl.M.C.No.4325/2016
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8 JEROME EMILIAN MENDEZ
AGED 51 YEARS, S/O. LEONS MENDEZ,VALIYAPARAMBIL
HOUSE, VADUTHALA P.O.,COCHIN – 682 023.
9 GEORGE MARTIN
AGED 51 YEARS, S/O. GEORGE,VALIYAPRAMABIL
HOUSE, PACHALAM P.O.,COCHIN – 682 012.
10 DOMINIC SAVIO
AGED 45 YEARS, S/O. JOSEPH,MANAYIL HOUSE,
VADUTHALA P.O.,COCHIN – 682 023.
11 JOSEPH LANGTON CORREYA
AGED 62 YEARS, S/O. MANUEL CORREYA,AMBAT HOUSE,
S.R.M ROAD,KOCHI – 682 012.
12 JERROME CORREYA
AGED 75 YEARS, S/O. JOHN CORREYA,AMBAT HOUSE,
S.R.M ROAD,KOCHI – 682 012.
13 GASPER CORREYA
AGED 75 YEARS, S/O. FRANCIS CORREYA,AMBAT
HOSUE, S.R.M ROAD, KOCHI – 682 012.
14 EPHREM N.M
AGED 40 YEARS, S/O. N.J.MATHEW,NEDUMPILLY
HOUSE, PACHALAM P.O.,KOCHI – 682 012.
15 PETER LOPEZ
AGED 50 YEARS, THUNDIPARAMBIL HOUSE,VADUTHALA
P.O., KOCHI – 682 023.
BY ADVS.
SRI.N.J.MATHEWS
SRI.MADHU N.NAMBOOTHIRIPAD
RESPONDENTS:
1 STATE OF KERALA
REPRESENTED BY THE PUBLIC PROSECUTOR,HIGH COURT
OF KERALA, KOCHI-682031.
Crl.M.C.No.4325/2016
3
2 JUDE A LUIZ
S/O. LAWRENCE LUIZ,AGED 65 YEARS,CHERUPUNATHIL
HOUSE,PACHALAM P.O.,KOCHI – 682 012.
R2 BY ADV. SRI.AJITH MURALI
R2 BY ADV. SRI.K.V.ANIL KUMAR
R2 BY ADV. SRI.T.A.SHAJI SR.
SRI E C BINEESH-PP
THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON
26.10.2019, THE COURT ON 11.12.2019 PASSED THE FOLLOWING:
Crl.M.C.No.4325/2016
4
R.NARAYANA PISHARADI, J
************************
Crl.M.C.No.4325 of 2016
—————————————————–
Dated this the 11th day of December, 2019
ORDER
The petitioners are the directors of the company by name
‘M/s.Bhagyodayam Company’ (hereinafter referred to as ‘the
company’). It is a public company limited by guarantee.
2. The petitioners are accused 1 to 15 in the case
C.C.No.1612/2015 on the file of the Court of the Additional Chief
Judicial Magistrate, Ernakulam. The offence alleged against the
petitioners is punishable under Section 406 read with 34 and
120B I.P.C.
3. The case against the petitioners is based on
Annexure-VIII complaint filed in the court by the second
respondent (hereinafter referred to as ‘the complainant’).
4. The material averments in Annexure-VIII complaint
can be stated as follows: The complainant is a member of the
Crl.M.C.No.4325/2016
5
company. The first accused is the Managing Director of the
company. Accused 2 to 5 are the trustees and accused 6 to 10
are the directors of the company who were elected in the Annual
General Meeting held on 28.12.2013. Accused 5 and 10 to 15
are the nominated directors of the company. They have no right
to officiate as directors. SectionArticle 40 of the Articles of Association
of the company provides that the profits of the company shall not
be distributed among members. The accused, in furtherance of
their common intention to swindle the funds of the company,
illegally spent an amount of Rs.13,50,000/- and distributed
computers with printers and internet facility to 45 members of
the company. They also spent an amount of Rs.28,600/- for
booking tickets for a pleasure trip to Goa for 28 members of the
company. The funds of the company were entrusted to the
accused as persons responsible for the management of the
company and its affairs. The accused have illegally spent the
money which was entrusted to them as the trustees. The
accused, being the directors of the company, are entrusted with
the funds and the property of the company and they have the
Crl.M.C.No.4325/2016
6
obligation to manage and dispose of the property of the company
only according to the provisions of the Articles of Association of
the company. The accused have dishonestly misappropriated the
property of the company in violation of SectionArticle 40 of the Articles
of Association. They have taken part in the decision making
process of the company which ended in spending the amount, as
stated above. They had conspired together to commit
misappropriation of the funds of the company.
5. This petition is filed under Section 482 Cr.P.C to quash
the proceedings against the petitioners on the ground that the
allegations/averments in Annexure-VIII complaint do not
constitute the ingredients of an offence punishable under Section
406 I.P.C.
6. Heard learned counsel for the petitioners and the
second respondent.
7. Learned counsel for the petitioners contended that the
averments in Annexure-VIII complaint do not make out the
ingredients of the offence of criminal breach of trust which is
defined under Section 405 I.P.C and which is made punishable
Crl.M.C.No.4325/2016
7
under Section 406 I.P.C. Learned counsel for the petitioners
would submit that the amount allegedly spent by the accused
belonged to the company and that the complainant had not
entrusted the amount to the petitioners and therefore, there was
no entrustment of money which is the basic ingredient of an
offence defined under Section 405 I.P.C.
8. It is admitted in the petition that the petitioners are
the directors of the company.
9. The crux of the allegations in Annexure-VIII complaint
is that the petitioners, being the directors and trustees of the
company, spent an amount of Rs.13,50,000/- and distributed
computers with printer and internet facility to 45 members of the
company and that the petitioners also booked tickets for a
pleasure trip to Goa for 26 members of the company by spending
Rs.28,600/- and the aforesaid acts of the petitioners violated
SectionArticle 40 of the Articles of Association of the company.
10. Section 405 of the Indian Penal Code reads as follows:
“Criminal breach of trust. – Whoever, being in
any manner entrusted with property, or with any
Crl.M.C.No.4325/2016
8
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 wilfully suffers any other person so
to do, commits “criminal breach of trust.”
11. The ingredients of an offence of criminal breach of trust,
as defined under Section 405 I.P.C, are the following: (a) a
person should have been entrusted with property, or entrusted
with dominion over property; (b) that person should dishonestly
misappropriate or convert to his own use that property, or
dishonestly use or dispose of that property or wilfully suffer any
other person to do so; and (c) that such misappropriation,
conversion, use or disposal should be in violation of any direction
of law prescribing the mode in which such trust is to be
discharged, or of any legal contract which the person has made,
touching the discharge of such trust.
12. Learned counsel for the petitioners contended that the
Crl.M.C.No.4325/2016
9
complainant had not entrusted any money with the petitioners
and that the petitioners had not dishonestly used or disposed of
such amount. Learned counsel would contend that the
complainant is only a member or shareholder of the company
and he has no right over the property of the company.
13. Learned counsel for the petitioners referred to the
decision of the Supreme Court in SectionBacha F. Guzdar v.
Commissioner of Income Tax : AIR 1955 SC 74 in support of
his contention that a shareholder has no right over the property
of a company. In this decision, the Apex Court has held that a
shareholder has got no right or interest in the property of the
company and that the company is a juristic person and is distinct
from the shareholders and it is the company which owns the
property and not the shareholders. However, the Apex Court has
further held that the shareholders of the company have the sole
determining voice in administering the affairs of the company
and are entitled, as provided by the Articles of Association, to
declare that dividends should be distributed out of the profits of
the company to the shareholders. In the instant case, no
Crl.M.C.No.4325/2016
10
question of declaration of dividends arises as the company is
limited by guarantee. But, the right to decide how profits shall
be used, otherwise than specifically provided in SectionArticle 40 of the
Articles of Association, vests with the members.
14. In order to attract the offence defined under Section
405 I.P.C, there is no need of entrustment of property or money
to the petitioners by the complainant himself. Entrustment of
property as envisaged in Section 405 I.P.C need not be in any
particular manner. The entrustment may arise in “any manner”
whatsoever.
15. SectionIn Som Nath Puri v. State of Rajasthan : AIR
1972 SC 1490, the Supreme Court has held as follows:
“Section 405 merely provides, whoever being in
any manner entrusted with property or with any
dominion over the property, as the first ingredient
of the criminal breach of trust. The words ‘in any
manner’ in the context are significant. The section
does not provide that the entrustment of the
property should be by someone or the amount
received must be the property of the person on
whose behalf it is received. As long as the accused
Crl.M.C.No.4325/2016
11is given possession of property for a specific
purpose or to deal with it in a particular manner,
the ownership being in some person other than the
accused, he can be said to be entrusted with that
property to be applied in accordance with the
terms of entrustment and for the benefit of the
owner”.
(emphasis supplied)
16. The expression ‘entrusted with property’ or ‘with any
dominion over property’ has been used in a wide sense in Section
405 I.P.C. The expression ‘entrusted’ appearing in Section 405
I.P.C is not necessarily a term of law. It has wide and different
implications in different contexts. The property in respect of
which criminal breach of trust can be committed must necessarily
be the property of some person other than the accused or the
beneficial interest in or ownership of it must be in other person
and the offender must hold such property in trust for such other
person or for his benefit.
17. The funds or the profits of the company do not belong
to the directors of the company. It is the property of the
company. Therefore, when the directors of a company
Crl.M.C.No.4325/2016
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dishonestly use the money owned by the company in violation of
any direction or obligation regarding the manner in which it is to
be used, they commit the offence of criminal breach of trust.
18. SectionIn R.K. Dalmia v. Delhi Administration : AIR 1962
SC 1821 it has been categorically held by the Apex Court that
directors are not only agents but trustees of the company’s
money and property and they are no doubt trustees of assets
which have come into their hands, or which are under their
control. In the said decision it was further held that entrustment
of property in the capacity of agent will by itself be sufficient to
make out the offence of criminal breach of trust against the
directors who are the agents of the company.
19. At this juncture, the relevant clauses in the Articles of
Association of the company (Annexure-I) shall be looked into.
SectionArticle 40 reads as follows:
“The profit of the Company cannot be
distributed among the members. The net
profit of the Company to be entrusted with
the Rev.Vicar of this Parish to be utilised for
Crl.M.C.No.4325/2016
13the general welfare of the Chathiath Roman
Catholic Latin Church, and for the uplift of
Education, Industry etc. of the parish as
resolved in the General Meeting. It shall also
be utilised for any other purposes to anybody
else if so decided by a majority of not less
than 75% of the members present in a
general meeting.”
20. The petitioners have pointed out that, in the year
1985, SectionArticle 40 was amended as per Annexure-XII resolution
passed by the general meeting of the company. As per the
amendment, the provision regarding entrustment of the profits of
the company to the Vicar of the parish has been deleted and a
stipulation has been made that the profits shall be used only for
the purposes of the Roman Catholic Latin Church, Chathiath and
also for the educational development in the parish and for other
charitable purposes, as contemplated under the SectionIncome Tax Act.
21. Even after the amendment, the stipulation in SectionArticle
40 of the Articles of Association of the company that the profits
shall not be divided among the members of the company remains
without any change or alteration. Therefore, as per SectionArticle 40, if
Crl.M.C.No.4325/2016
14
the profits of the company had to be used for any purpose other
than the purposes specifically mentioned therein, it could be
done only by a decision taken in a general meeting of the
members of the company with majority of not less than 75% of
the members present.
22. In the instant case, the petitioners have no case that
the decision to spend money for purchase of computers and for
conducting pleasure trip to Goa was taken by the members in the
general meeting of the company.
23. At this juncture, the other provisions in the Articles of
Association of the company regarding the powers of the directors
and trustees of the company may be noticed. SectionArticle 27 provides
that the directors shall manage the business of the company.
SectionArticle 29 stipulates that the movable and immovable property of
the company shall be in the name of the Managing Director and
trustees and all the transactions relating to moneys and
properties of the company shall be conducted in the name of the
Managing Director and the trustees. SectionArticle 31 provides that the
Managing Director and trustees shall do jointly all the
Crl.M.C.No.4325/2016
15
expenditure of the company. It is further stipulated that
expenditure exceeding Rs.500/- could be made by them only
according to the decision of the general meeting.
24. In the instant case, the petitioners have no case that
the general meeting of the members of the company had
permitted or sanctioned expenditure incurred for purchase of
computers and conducting pleasure trip to Goa for the members
of the company.
25. In the aforesaid circumstances, I am of the view that,
a prima facie case against the petitioners for committing an
offence punishable under Section 406 I.P.C has been made out as
per the averments in Annexure-VIII complaint. Therefore, I find
that the proceedings against the petitioners in the case cannot be
quashed. The petition is liable to be dismissed.
26. The petitioners are at liberty to raise all their
contentions in the court below. This is a warrant case instituted
otherwise than upon a police report. The petitioners would get
opportunity for filing application for discharge under Section 245
Cr.P.C, if they are advised that the evidence adduced by the
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16
complainant under Section 244 Cr.P.C does not make out a prima
facie case against them.
27. Consequently, the petition is dismissed. It is made
clear that nothing stated in this order will preclude the petitioners
from raising their contentions at the stage of the proceedings
before the trial court under Section 245 Cr.P.C.
(sd/-)
R.NARAYANA PISHARADI, JUDGE
jsr
Crl.M.C.No.4325/2016
17
APPENDIX
PETITIONERS’ EXHIBITS:
ANNEXURE-1: TRUE COPY OF THE MEMORANDUM AND ARTICLES OF
ASSOCIATION OF THE BHAGYODAYAM COMPANY.
ANNEXURE-II: TRUE COPY OF THE MINUTES OF THE GENERAL
MEETING HELD ON 17.08.2015.
ANNEXURE-III: TRUE COPY OF MINUTES OF THE EXTRA ORDINARY
GENERAL MEETING HELD ON 4.7.2015.
ANNEXURE-IV: TRUE COPY OF THE ORDER IN I.A.NO.9826/2014
DATED 10.04.2015 OF THE MUNSIFF’S COURT, ERNAKULAM.
ANNEXURE-V: TRUE COPY OF THE ORDER OF THE MUNSIFF’S COURT,
ERNAKULAM DATED 17.8.2015 IN I.A.6071/2015.
ANNEXURE-VI: TRUE COPY OF THE ORDER DATED 19.01.2016 IN
C.M.A.NO.55 OF 2015.
ANNEXURE-VII: TRUE COPY OF THE JUDGMENT OF THIS COURT IN
O.P.(C) 438/2016 DATED 23.2.2016.
ANNEXURE-VIII: TRUE COPY OF THE COMPLAINT FILED BEFORE THE
ADDITIONAL CHIEF JUDICIAL MAGISTRATE, ERNAKULAM.
ANNEXURE-IX: TRUE COPY OF THE BALANCE SHEET OF THE
PETITIONERS COMPANY AS AT 31/03/2016 AND INCOME AND
EXPENDITURE STATEMENT FROM 01/04/2015 TO 31/03/2016.
ANNEXIRE X: TRUE PHOTOCOPY OF COUNTER AFFIDAVIT FILED BY
THE PETITIONERS IN I.A.NO.3928/2015 IN O.S.NO.6/2015 IN THE
MUNSIFF’S COURT, ERNAKULAM.
ANNEXURE XI: TRUE PHOTOCOPY OF THE I.A.6071 OF 2015 IN
O.S.NO.1638/2014 FILED AGAINST THE PETITIONERS’ COMPANY.
ANNEXURE-XII: TRUE COPY OF THE MINUTES OF THE ANNUAL
GENERAL MEETING OF THE COMPANY HELD ON 26.10.1985.
Crl.M.C.No.4325/2016
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ANNEXURE-XIII: TRUE COPY OF THE MINUTES OF THE 84TH ANNUAL
GENERAL MEETING OF THE COMPANY HELD ON 26.9.2016.
ANNEXURE-XIV: TRUE COPY OF THE COMPANY PETITION NO.29/2017
BEFORE THE NATIONAL COMPANY LAW TRIBUNAL, CHENNAI BENCH.
RESPONDENTS’ EXHIBITS:
ANNEXURE-B(1): A TRUE COPY OF THE JUDGMENT DATED
10.11.1952 IN A.S.NO.47 OF 1125 (ME)OF TRAVANCORE-COCHIN
HIGH COURT WITH TYPED COPY.
ANNEXURE-B(2): A TRUE COPY OF THE ORDER DATED 18.06.2015
IN I.A.NO.3928/2015 IN O.S.6/2015 OF THE ADDL.MUNSIFF AND
RENT CONTROL COURT, ERNAKULAM WITH TYPED COPY.
TRUE COPY
PS TO JUDGE
