Heard Sri Rajul Bhargawa, learned counsel for the applicants, Sri Abhijit Banerjee for opposite party no.2 and the learned AGA for the State.
By the present application under Section 482 Cr.P.C., the applicants have sought for quashing of the proceedings of complaint case no.806 of 2012, pending in the Court of Additional Chief Judicial Magistrate, Court No.10, Agra, under Section 406 IPC.
A perusal of the record reveals that the opposite party no.2 filed a complaint against M/s. Halonex Limited (applicant no.1), hereinafter referred to as the Company, alleging therein that the complainant is the proprietor of M/s. Shiv Enterprises, which was a distributor of the Company, for the city of Agra. It is alleged that the Company is a producer and distributor of electrical equipments, like CFL and tube lights, etc. under the distributorship agreement, there used to be a warranty for the products of 18 months from the date of its production and of 12 months from the date of its sale. It has been alleged that so long the distributorship agreement was in operation, the customers of the products, in case of any defect, could get the same replaced from the Company and in normal practice such replacements took place within 30-40 days.
In para 3 of the complaint, it has been alleged that in the month of July, 2010, the accused Company appointed another distributor in the city of Agra, in addition to the complainant, and authorized the new distributor to receive goods for replacement under warranty and gave instructions to the complainant not to receive goods for replacement, under warranty. It has been alleged that on representation of the complainant, the Director of the accused Company, namely, Rakesh Zutsi (applicant no.2) and its National Distribution Manager Chetan P. Trivedi (applicant no.3) (whose name has been typed as Dwivedi instead of Trivedi) agreed that in respect of last supply of goods by the Company to the complainant, there would be a warranty of 14 months and in case those goods are found to be defective, the same would either be replaced or in lieu thereof new goods of the same value would be given. It has been alleged that despite the above agreement, the accused Company refused to accept the faulty goods for replacement and in respect of faulty goods already received by the Company, up to December, 2010, no payment was made.
In para 4 of the complaint, it has been stated that for the faulty goods supplied by the Company to the complainant firm, a sum of Rs.2,81,730/- remains to be paid by the Company to the complainant and the Company was also guilty of not receiving back faulty goods, under the warranty, worth Rs.3,54,172/- and, as such, the accused Company caused a loss of Rs.6,35,902/- to the complainant. It has been further alleged that when the complainant made a demand for his claim, the accused threatened the complainant.
In support of the complaint allegations, the statement of the complainant Rajeev Garg as well as his brother Sunil Garg was recorded under sections 200 and 202 Cr.P.C, respectively.
In his statement, under Section 200 Cr.P.C., the complainant stated that he was a distributor of CFL products of the accused Company; the accused Company stopped receiving back faulty goods for replacement and failed to send back goods or the money equivalent to its value, amounting to Rs.2,81,000/- for which the complainant made several demands, but to no avail; and instead the accused threatened the complainant of filing cases against him. The statement recorded under section 202 is more or less the same.
The Court of Additional Chief Judicial Magistrate, Court No.10, Agra, vide its order dated 28th January, 2013, summoned Rakesh Zutsi (applicant no.2) and Chetan P Trivedi (applicant no.3) under Section 406 IPC.
Challenging the complaint and the proceedings in pursuance thereof, Sri Rajul Bhargawa, learned counsel for the applicants, submitted that even if the allegations made in the complaint read with the statement recorded under Sections 200 and 202 Cr.P.C. are accepted at their given face value, no offence including the offence punishable under Section 406 IPC is made out for proceeding against the applicants 2 and 3, particularly when they were not even arrayed as accused, although the Company was made an accused through the applicants 2 & 3. It has been submitted that from the statement recorded under Sections 200 and 202 Cr.P.C. as also the complaint allegations, the necessary ingredient i.e. dishonest intention on the part of the accused is not made. Relying on the demand notice dated 02.05.2011 issued on behalf of the complainant, at page 30 of the paper book, and the reply notice dated 19.05.2011 sent on behalf of the Company, at page 34 of the paper book, Sri Rajul Bhargawa submitted that there is a serious dispute with regards to the amount payable to the complainant from the Company and, in fact, it is the Company, which is entitled to a sum of Rs. 10,21, 797.11 from the complainant. Accordingly, the dispute is of a civil nature. It has also been submitted that in respect of the goods that were not accepted for replacement, no offence punishable under Section 406 IPC could be made out, inasmuch as, there would be no entrustment in respect of those goods, whereas so far as non-payment of Rs.2,81,000/-, in respect of goods sent for replacement, is concerned, there is nothing to show that there had been any dishonest intention on the part of the applicants in not doing so. More over, the applicants 2 and 3 are officers of the Company and as the liability, if any, for payment would be of the Company, the officers cannot be proceeded against on principle of vicarious liability. It was submitted that the dispute between the Company and the complainant is of a civil nature relating to the replacement claims under the warranty scheme. To buttress his submission the learned counsel for the applicants drew attention of the Court to Annexure-CA-'2' filed by the complainant along with his counter affidavit, which reads as follows:
"CLAIM SETTLEMENT CONFIRMATION "I, Rajiv Garg representing Shiva Enterprises Agra, Hereby confirm that we are not (scored off) having any (scored off) pending claims of approx 12 lakhs (interpolated by hand) with Halonix Ltd. as on 17.12.2010.
For any future defective material being received as per company policy of Warranty on our side, we expect Halonix Ltd to settle the same in the form of FOC material of either the same wattage or an alternate material at the 'Distributor Landed Price' as per Invoice Price as agreed by after confirmation of product.
Meanwhile we also request Halonix Ltd to communicate it to their existing distributor in our market to collect the defectives from the retail counters. This arrangement will be continued for a period of 14 months from date of last billing. The replacement will be inspected and settled within 60 days as per Warranty norm. Fresh material lying at our point shall be either transferred to the new distributor or taken back by Halonix Ltd.
Thanking you, Yours truly, Name of Receiving Person : Rajiv Garg.
Drawing attention of the Court to the statement made in the claim settlement confirmation document, learned counsel for the applicants submitted that the use of the word "claims" would reveal that as yet they are not admitted by the Company as an amount payable to the claimant, otherwise the word "dues" would have been used. Sri Rajul Bhargawa further drew attention of the Court to the bottom of the claim settlement confirmation, which indicates that on 8th November, 2010, a cheque of Rs.4,81,230/- drawn on ICICI Bank Ltd., Noida was delivered to the complainant in lieu of settlement of his claim which signifies that there is no dishonest intention on the part of the applicants, so as to make out a case for prosecution under Section 406 IPC.
Sri Rajul Bhargawa further submitted that in respect of goods not received for replacement, no case of breach of trust would be made out, inasmuch as there would be no entrustment, whereas in respect of alleged non payment of part claims, there could at best be a civil dispute, therefore, in either case, there would be no justification to draw proceedings under section 406 read with section 405 of the Penal Code. In nutshell, the submission is that the dispute between the Company and the complainant is of a civil nature and, therefore, the proceedings drawn against the applicants amount to abuse of the process of the Court and the same deserve to be quashed in exercise of powers under Section 482 Cr.P.C.
In reply to the aforesaid submission, learned counsel for opposite party no.2 submitted that the case of the applicants that no amount is due from their side to the complainant is a matter of defence which cannot be considered at this stage. It has been submitted that the term 'entrustment' as used in Section 405 IPC has been given a wider interpretation. It has been submitted that the goods returned by the complainant to the Company for replacement or for reimbursement would be deemed to have been entrusted to the Company and as the applicants 2 & 3 were handling its affair they become responsible. To buttress the said submission, the learned counsel for the complainant drew attention of the Court to a decision of the Apex Court in the case of Ram Narayan Popli Vs. Central Bureau of Investigation : (2003) 3 SCC 641, wherein it was observed that: "the term "entrustment" is not necessarily a term of law. It may have different implications in different contexts. In its most general signification all it imports is the handing over possession for some purpose which may not imply the conferring of any proprietary right at all." Attention was also drawn to an observation made in the judgment of the aforesaid case, where it was observed that: "to establish the charge of criminal breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted if proved, may, in the light of other circumstances, justifiably lead to an inference of dishonest misappropriation or conversion."
Relying on the aforesaid observations of the Apex Court, the learned counsel for the complainant submitted that even if in the statement, recorded under Section 200 Cr.P.C., the complainant may not have specifically used the word that the accused were dishonest in their conduct or that they had dishonestly converted the property given to them for replacement, the proceedings cannot be quashed at the threshold, inasmuch as, it becomes a matter of trial whether there was a dishonest intention in not making payment of the claimed amount. In the light of the above observations, it was submitted that the complaint does disclose that in respect of certain faulty goods sent to the Company for replacement, neither goods of the same value nor amount equivalent to their value was paid, therefore, a prima facie case for drawing proceeding under section 406 read with section 405 IPC is made out.
Learned counsel for the opposite party no.2 also submitted that it is trite law that a dispute may generate both civil and criminal cause of actions and that it is equally well settled that a complainant cannot be precluded from taking recourse to criminal proceedings merely because he has an alternative remedy of taking recourse to civil remedies. It has thus been prayed that the application be dismissed.
Having considered the submissions of learned counsel for the parties, at the outset, it may be observed that there can be no cavil to the proposition that an act may generate both civil and criminal cause of actions and merely because a person can take recourse to civil remedies there cannot be a bar to his initiating criminal proceedings. But whether an act, alleged in the complaint, constitutes an offence or not, what is to be seen is whether from the complaint allegations, when read with the statement recorded under Sections 200 and 202 Cr.P.C. as also any other material brought before the court concerned, the necessary ingredients for an offence are disclosed or not.
In the instant case, the court below has drawn proceedings against the applicants 2 & 3 under section 406 IPC. Section 406 IPC provides the punishment for an offence of criminal breach of trust as described by Section 405 IPC, which reads as follows :
"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".
In the case of Supdt. & Remembrancer of Legal Affairs v. S.K. Roy, (1974) 4 SCC 230, the apex court observed that there are two distinct parts involved in the commission of the offence of criminal breach of trust. The first consists of the creation of an obligation in relation to the property over which dominion or control is acquired by the accused. The second is a misappropriation or dealing with the property dishonestly and contrary to the terms of the obligation created.
Likewise, in the case of S.K. Alagh V. State of UP: (2008) 5 SCC 662, the apex court culled out the ingredients of the offence punishable under Section 406 as follows:
"(1) a person should have been entrusted with property, or entrusted with dominion over property;
(2) 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;
(3) 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."
In S. K. Alagh's case (supra) an ex dealer of a company had given drafts to the company for supply of goods. Upon failure on the part of the company in supplying the goods a complaint was filed against the managing director of the company. The apex court while quashing the proceedings observed that as there was no direct entrustment to the managing director, inasmuch as, the drafts were in the name of the company, there could be no proceeding against its managing director under section 406 IPC by invoking the principle of vicarious liability.
In S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241, the apex court observed that the ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property, (ii) that person entrusted (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust. In S.W. Palanitkar case (supra), the apex court observed:
"Many a times, complaints are filed under Section 200 CrPC by the parties with an oblique motive or for collateral purposes to harass, to wreck vengeance, to pressurize the accused to bring them to their own terms or to enforce the obligations arising out of breach of contract touching commercial transactions instead of approaching civil courts with a view to realize money at the earliest. It is also to be kept in mind that when parties commit a wrongful act constituting a criminal offence satisfying necessary ingredients of an offence, they cannot be allowed to walk away with an impression that no action could be taken against them on the criminal side. A wrongful or illegal act such as criminal breach of trust, misappropriation, cheating or defamation may give rise to action both on civil as well as on the criminal side when it is clear from the complaint and sworn statements that necessary ingredients of constituting an offence are made out. Maybe parties are entitled to proceed on civil side only in a given situation in the absence of an act constituting an offence but not to proceed against the accused in a criminal prosecution. Hence before issuing a process a Magistrate has to essentially keep in mind the scheme contained in the provisions of Sections 200-203 CrPC keeping in mind the position of law stated above and pass an order judiciously and not mechanically or in a routine manner."
A conspectus of the law noticed above, would go to show that to constitute an offence of criminal breach of trust, apart from showing that the accused was entrusted with property or with dominion over property it should be shown that there was either a dishonest misappropriation or dishonest conversion of the property or dishonest use or dishonest disposal of the property, etc. in violation: (a) of any direction of law prescribing the mode in which such trust is to be discharged; or (b) of any legal contract made, touching the discharge of such trust. The Court before whom the complaint is filed before drawing process must satisfy itself with regards to, at least a prima facie, existence of the necessary ingredients so as to disclose an offence. Even in the decision of the Apex Court in the case of Ram Narayan Popli (supra), relied by the learned counsel for applicant, it was observed that the principal ingredient of the offence of criminal breach of trust being dishonest misappropriation or conversion is to be proved, in the light of circumstances, which may justifiably to lead to an inference of dishonest misappropriation or conversion.
In the instant case, according to the complainant he was a distributor of the accused Company. The Company changed its distributor and appointed a fresh distributor. The dispute relates to payment in respect of faulty goods sent for replacement, under warranty, by the distributor to the Company. There is also a dispute with regard to non-lifting of faulty goods by the Company for replacement. From the allegations made as also from the claim settlement confirmation, which has been brought on record by the complainant himself, at page 15 of the counter affidavit, it appears that there has been payment of some amount by the Company to the complainant against his claims though, according to the complainant, certain claims are still pending. There is nothing in the statement, recorded in support of the complaint, which may suggest that there had been a dishonest intention on the part of the accused persons including the Company. When from the own document of the complainant i.e. Annexure CA-'2' to the counter affidavit, it appears that some payment was received by the complainant against his claims from the Company. Therefore, in absence of clear allegation of a dishonest intention on the part of the accused Company in not making the full payment, the dishonest intention on the part of the accused cannot be presumed. Further, it is not the case of the complainant that his goods have been dishonestly misappropriated/ converted or disposed of by the accused contrary to the terms of the agreement. This court is, therefore, of the considered view that the necessary ingredient for an offence of criminal breach of trust, that is a dishonest intention on the part of the accused, is lacking. Accordingly, there is no justification to draw proceedings against the applicants for an offence punishable under section 406 IPC.
Even otherwise, from the statement recorded under sections 200 and 202 CrPC, it is not even prima facie established that the goods were entrusted to the applicants 2 and 3, who are alleged to be Director and National Distribution Manager respectively of the Company, inasmuch as it is not the case of the complainant that the goods were handed over to the applicants 2 & 3 or that they received and held the same. In such circumstances, no proceeding can be drawn against them by invoking principle of vicarious liability in the light of decision of the apex court in the case of S.K. Alagh (supra). No doubt, in the complaint, the complainant made allegations that the accused threatened the complainant, but, such allegation would not be of much help to the complainant to draw proceeding against the applicants 2 & 3, inasmuch as, in the complaint the accused is only the Company impleaded through the applicants 2 & 3. Further, the allegation in that regard is completely vague, without any material particulars with regards to the place, time and date of the alleged threats. Even otherwise, the court below did not find sufficient ground to proceed against the applicants for an offence other than the one punishable under section 406 IPC.
For the reasons given above, this Court is of the view that the dispute between the parties is purely of a civil nature and the necessary ingredients of a criminal offence are not disclosed by the complaint and the statements in support thereof so as to justify proceeding against the applicants.
The application is, accordingly, allowed. The complaint and the consequential proceedings of complaint case no.806 of 2012, pending in the Court of Additional Chief Judicial Magistrate, Court No.10, Agra, under Section 406 IPC are hereby quashed.
It goes without saying that this order will not come in way of the complainant to pursue civil remedies in respect of his claim.
Order Date :- 27.2.2014.
Rks.