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Ramesh Kumar vs State & Anr on 11 April, 2017

S.B. Criminal Misc(Pet.) No. 1643 / 2013
Ramesh Kumar S/o Shri Harji Ram, By Caste Suthar, R/o Village
Dhanwara, Post Ropsi, Tehsil Raniwara, Dist. Jalore.


1. The State of Rajasthan

2. Tata Motors Limited (The then Tata Motors Finance) Office,
Address : E-43, Kalpatru Commercial Complex, Shastri
Nagar, Jodhpur At present : Near PWD Circle, PS Ratanada,

For Petitioner(s) : Mr. BS Rathore
For Respondent(s) : Mr. V.S. Rajpurohit, P.P., for the State
Mr. K.C. Sharma, for the complainant.

Accused-petitioner has laid this criminal misc. petition under

Section 482 Cr.P.C. to assail impugned order dated 04.06.2013

passed by District and Sessions Judge, Jodhpur, District Jodhpur

(for short, ‘learned revisional Court’), whereby the learned

revisional Court has partly allowed his revision petition under

Section 397 Cr.P.C. and set aside order dated 11.09.2012 passed

by Chief Judicial Magistrate, Jodhpur District (for short, ‘learned

trial Court’) framing charge against him for offence punishable

under Sections 420 406 IPC. The learned revisional Court, upon

examining correctness, legality or propriety of the order of learned

trial Court, has found that offence under Section 420 is not made
(2 of 7)

out against the accused petitioner but maintained the order of trial

Court to the extent charge under Section 406 IPC is framed.

Succinctly stated, the facts of the case are that respondent-

complainant filed a complaint against petitioner before learned

trial Court, inter-alia, alleging therein that it is a finance company

which disburses loans for purchase of vehicles to the aspiring

incumbents and accordingly, a loan to the tune of Rs. 5,00,000/-

was sanctioned and disbursed to the petitioner for purchase of

Tata Suma Victa vehicle. As a consequence of disbursement of

loan, a hire-purchase agreement was also entered between the

parties on 18.07.2004. As per agreement, the petitioner was

under an obligation to pay monthly installment of Rs.16,600/-but

after paying few installments, petitioner did not make any

endeavour to pay rest of the installments, therefore, he became

defaulter. It is further averred in the complaint that though loan

amount was outstanding against the petitioner but in defiance of

the terms of agreement, he has transferred the vehicle to some

other incumbent.

Learned trial Court sent the complaint for investigation to

Police Station, Shastri Nagar, Jodhpur and pursuant to CR

No.49/2006, requisite investigation was carried out and charge-

sheet is filed against the petitioner for offence under Section 420

406 IPC. The learned trial Court, upon examining the materials

available on record, framed charge against the petitioner for the

aforesaid offences.

Feeling dismayed with the order of learned trial Court,

petitioner approached learned revisional Court and the learned
(3 of 7)

revisional Court partly allowed the revision petition and dropped

charge under Section 420 IPC but maintained charge under

Section 406 IPC. It is in that background, petitioner has invoked

inherent jurisdiction of this Court.

At the threshold, when the matter came up before Court on

05.09.2013, the Court was pleased to admit petition and stayed

further proceedings before learned trial Court. While admitting

the petition, Court has placed reliance on a decision of Supreme

Court in Indian Oil Corpn. Vs. NEPC India Ltd. and Others : (2006)

3 SCC (Cri) 188. In this verdict, Supreme Court, while examining

the ingredients of criminal breach of trust, as envisaged under

Section 405 IPC, observed that complaints related to purely

contractual disputes of a civil nature per se cannot constitute

offence of criminal breach of trust and therefore, charge under

Section 406 IPC cannot be slapped against an individual. The

Court has also threadbare examined the inherent powers of this

Court under Section 482 Cr.P.C. for quashment of complaint in

such matters.

Taking note of the fact that there is a growing tendency in

the business circles to convert purely civil disputes into criminal

cases, the Court has deprecated this practice of a complainant

who initiates or persists with a prosecution in such matters and,

while finding it undesirable, observed :

“13 While on this issue, it is necessary to take notice
of a growing tendency in business circles to convert
purely civil disputes into criminal cases. This is
obviously on account of a prevalent impression that
civil law remedies are time consuming and do not
adequately protect the interests of lenders/creditors.
Such a tendency is seen in several family disputes
(4 of 7)

also, leading to irretrievable break down of
marriages/families. There is also an impression that if
a person could somehow be entangled in a criminal
prosecution, there is a likelihood of imminent
settlement. Any effort to settle civil disputes and
claims, which do not involve any criminal offence, by
applying pressure though criminal prosecution should
be deprecated and discouraged. In G. Sagar Suri v.
State of UP this Court observed:

It is to be seen if a matter, which is essentially of a civil
nature, has been given a cloak of criminal offence. Criminal
proceedings are not a short cut of other remedies available in
law. Before issuing process a criminal court has to exercise a
great deal of caution. For the accused it is a serious matter. This
Court has laid certain principles on the basis of which the High
Court is to exercise its jurisdiction under Section 482 of the
Code. Jurisdiction under this Section has to be exercised to
prevent abuse of the process of any court or otherwise to secure
the ends of justice.

14. While no one with a legitimate cause or grievance
should be prevented from seeking remedies available
in criminal law, a complainant who initiates or persists
with a prosecution, being fully aware that the criminal
proceedings are unwarranted and his remedy lies only
in civil law, should himself be made accountable, at
the end of such misconceived criminal proceedings, in
accordance with law. One positive step that can be
taken by the courts, to curb unnecessary prosecutions
and harassment of innocent parties, is to exercise their
power under Section 250 CrPC more frequently, where
they discern malice or frivolousness or ulterior motives
on the part of the complainant. Be that as it may.”

Upon examining the requisite components of criminal breach

of trust within the four corners of Section 405 IPC, the Court


“21. We will next consider whether the allegations
in the complaint make out a case of criminal breach
of trust under Section 405 which is extracted below:

“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 wilfully suffers any other person so
to do, commits’ criminal breach of trust’.”

(5 of 7)

22. A careful reading of the section shows that a
criminal breach of trust involves the following
ingredients : (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 willfully suffer any other person to do so;

(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. The
following are examples (which include the
illustrations under Section 405) where there is

(i) An “executor” of a will, with reference to the
estate of the deceased bequeathed to legatees.

(ii) A “guardian” with reference to a property of a
minor or person of unsound mind.

(iii) A “trustee” holding a property in trust, with
reference to the beneficiary.

(iv) A “warehouse keeper” with reference to the
goods stored by a depositor.

(v) A carrier with reference to goods entrusted for
transport belonging to the consignor/consignee.

(vi) A servant or agent with reference to the
property of the master or principal.

(vii) A pledgee with reference to the goods
pledged by the owner/borrower.

(viii) A debtor, with reference to a property held in
trust on behalf of the creditor in whose favour he
has executed a deed of pledge-cum-trust. (Under
such a deed, the owner pledges his movable
property, generally vehicle/machinery to the creditor,
thereby delivering possession of the movable
property to the creditor and the creditor in turn
delivers back the pledged movable property to the
debtor, to be held in trust and operated by the

23. In Chelloor Mankkal Narayan Ittiravi Namhudiri
v. State of Travancore, Cochin this Court held: (AIR
p. 484, para 21)
… to constitute an offence of criminal breach of
trust, it is essential that the prosecution must prove
first of all that the accused was entrusted with some
property or with any dominion or power over it. It
has to be established further that in respect of the
(6 of 7)

property so entrusted, there was dishonest
misappropriation or dishonest conversion or
dishonest use or disposal in violation of a direction
of law or legal contract, by the accused himself or by
someone else which he willingly suffered to do.

It follows almost axiomatically from this
definition that the ownership or beneficial interest in
the property in respect of which criminal breach of
trust is alleged to have been committed, must be in
some person other than the accused and the latter
must hold it on account of some person or in some
way for his benefit.

[Emphasis supplied]

24. In Jaswantrai Manilal Akhaney v. State of
Bombay this Court reiterated that the first ingredient
to be proved in respect of a criminal breach of trust
is “entrustment”. It, however, clarified:

“But when Section 405 which defines
‘criminal breach of trust’ speaks of a person being in
any manner entrusted with property, it does not
contemplate the creation of a trust with all the
technicalities of the law of trust. It contemplates the
creation of a relationship whereby the owner of
property makes it over to another person to be
retained by him until a certain contingency arises or
to be disposed of by him on the happening of a
certain event.”

25. The question is whether there is “entrustment”
in an hypothecation? Hypothecation is a mode of
creating a security without delivery of title or
possession. Both, ownership of the movable property
and possession thereof, remain with the debtor. The
creditor has an equitable charge over the property
and is given a right to take possession and sell the
hypothecated movables to recover his dues (note :
we are not expressing any opinion on the question
whether possession can be taken by the creditor,
without or with recourse to a court of law). The
creditor may also have the right to claim payment
from the sale proceeds (if such proceeds are
identifiable and available). The following definitions
of the term “hypothecation” in P. Ramanatha Aiyar’s
Advanced Law Lexicon [3rd Edn. (2005), Vol.2, pp.
2179 and 2180] are relevant:

“Hypothecation”.- It is the act of pledging an asset
as security for borrowing, without parting with its
possession or ownership. The borrower enters into
an agreement with the lender to hand over the
possession of the hypothecated asset whenever
called upon to do so. The charge of hypothecation is
(7 of 7)

then converted into that of a pledge and the lender
enjoys the rights of a pledgee.

* * *
‘Hypothecation’ means a charge in or upon any
movable property, existing or future, created by a
borrower in favour of a secured creditor, without
delivery of possession of the movable property to
such creditor, as a security for financial assistance
and includes floating charge and crystallization of
such charge into fixed charge on movable property.
[Borrowed from Section 2(n) of Securitisation and
Reconstruction of Financial Assets Enforcement of
Security Interest Act, 2002]”

But there is no “entrustment of the property” or
“entrustment of dominion over the property” by the
hypothecate (creditor) to the hypothecator (debtor)
is an hypothecation. When possession has remained
with the debtor/owner and when the creditor has
neither ownership nor beneficial interest, obviously
there cannot be any entrustment by the creditor.”

The law laid down by Supreme Court in India Oil Corpn.

(supra) squarely covers the issue in the present case so as to

absolve petitioner from the charge of criminal breach of trust

(S.406 IPC)

In this view of the matter, in my opinion, instant one is a fit

case wherein allowing proceedings to continue before learned trial

court would result in miscarriage of justice and furthermore,

prolonging proceedings in the matter may result in sheer abuse of

the process of the Court, and therefore, it is desirable to interfere

in the matter in exercise of inherent jurisdiction.

Consequently, the instant petition is allowed and the

impugned order passed by learned revisional Court is quashed and

set aside.



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