IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF MARCH 2019 BEFORE THE HON’BLE MR.JUSTICE JOHN MICHAEL CUNHA Criminal Petition No.876 of 2014 BETWEEN:
1. SRI P. KRISHNOJI RAO S/O LATE NARSOJI RAO, AGE: 47 YEARS, OCC: BUSINESS, ADD: NO. 32, 4TH MAIN, 1ST FLOOR, SHAKTI FARM ROAD, BOOBASANDRA, BANGALORE - 94 2. SMT H A PREMA AGE: 42 YEARS, W/O SRI P. KRISHNOJI RAO, OCC: HOUSE WIFE, ADD: NO 32, 4TH MAIN, 1ST FLOOR, SHAKTI FARM RAOD, BOOBASANDRA, BANGALORE - 94 (BY SRI. VENKATESH P DALWAI, ADV.) AND 1. THE STATE OF KARNATAKA ... PETITIONERS REPRESENTED BY POLICE SUB-INSPECTOR KALASIPALYAM POLICE STATION, BANGALORE 2. THE BANK OF INDIA J C ROAD BRANCH, NO.75, FARAH COMMERCIAL COMPLEX, J C ROAD, BANGALORE - 2 BY ITS SENIOR BRANCH MANAGER ... RESPONDENTS (BY SRI. VIJAYAKUMAR MAJAGE, ADDL.SPP FOR R1 SRI. M. MOHAMED IBRAHIM, ADV. FOR R2) THIS CRL.P. IS FILED U/S.482 CR.P.C PRAYING TO QUASH ENTIRE PROCEEDINGS ON THE FILE OF THE IV SADDL.C.M.M., BANGALORE IN C.C.NO.19346/2009 FOR THE OFFENCE P/U/S 406 AND 420 R/W 34 OF IPC PRODUCED AT ANNEXURE-A.
THIS PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R Petitioners herein availed loan from respondent No.2 - Bank of India. By way of security, they mortgaged their immovable property situated at No.28, House List No.763, Mallasandra Village, T. Dasarahalli, Bangalore. Without discharging the entire loan amount, during the subsistence of mortgage, on the strength of xerox copies of the documents, petitioners sold the above property to one Sri. Srinivas. The purchaser appears to have issued a cheque for Rs.47,18,000/- towards the consideration. The said cheque was deposited by petitioners with the creditor-Bank. However, the said cheque came to be dishonoured and separate proceedings were initiated in respect of the said transaction. As the petitioners committed default in repayment of the loan, recovery proceedings were initiated and ultimately the mortgaged properties were sold in Court auction and the amount due to the Bank has been recovered. The instant complaint came to be lodged against the petitioners on the allegation that the property which was mortgaged to Bank has been alienated by the petitioners with an intention to cheat and defraud the bank. After investigation charge-sheet has been laid against the petitioners for the offence under Sections 406 and 420 r/w 34 of IPC.
2. Learned counsel for the petitioners submits that the facts alleged in the charge-sheet do not constitute the ingredients of either the offence under Sections 405 or 420 of IPC. In order to constitute an offence under Section 405 of IPC, there must be entrustment of the property. In the instant case, petitioners themselves were the owners of the property. Placing reliance on the decision of the Hon'ble Supreme Court in the case of ANAND KUMAR MOHATTA & ANR. VS. STATE (GOVT. OF NCT OF DELHI) DEPARTMENT OF HOME & ANR.1, learned counsel has emphasized that in the absence of any material to show that there was entrustment of property and that the petitioners have dishonestly converted the said property to their own use or disposed of the property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, the petitioners cannot be held culpable for the alleged offence under Section 405 of IPC.
3. Insofar as the offence under Section 420 is concerned, learned counsel submits that the material on record clearly indicates that there was no intention 1 AIR 2019 SUPREME COURT 210 of any fraud or deception on the part of the petitioners either at the inception of contract or at a later point of time. On the other hand, the material on record clearly discloses that after selling the property, whatever consideration petitioners received, was deposited in the bank towards the discharge of debt/loan. If the petitioners had an intention to misappropriate the said amount so as to dupe the bank, they would not have deposited the said cheque with the bank.
4. Further it is submitted that with regard to the alleged dishonour of the cheque, the petitioners have approached this Court by filing a writ petition which clearly indicates that the petitioners did not entertain any intention of cheating so as to constitute the offence under Section 420 of IPC. In support of this contention, learned counsel has placed reliance on para 12 and 13 of the decision of Hon'ble Supreme Court in the case of MEDMEME, LLC & ORS. VS. M/S. IHORSE BPO SOLUTIONS PVT. LTD.2.
5. Learned Addl. SPP however argued in support of the impugned action contending that the material on record clearly make out the offences alleged against the petitioners and hence there is no ground for quashing the proceedings initiated against the petitioners.
6. I have considered the submission of the learned counsels appearing for the parties and have perused the records.
7. The basic facts are not in dispute.
Undisputedly, the property sold by the petitioners was mortgaged with the respondent No.2 - Bank of India as security for the loan availed by the petitioners. During the subsistence of the mortgage, the petitioners herein transferred the said property to a third party without the concurrence of the bank or the creditor. The 2 AIR 2017 SUPREME COURT 3656 question for consideration is whether the said act of the petitioners amounts to an offence within the meaning of Sections 405 and 420 of IPC ?
8. Section 405 of IPC reads thus:
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”.
9. As explained by the Hon'ble Supreme Court of India, the essence of the offence under Section 405 of IPC lies in the use of the property entrusted to a person by that person, in violation of any direction of law or any legal contract which he has made during the discharge of such trust. In the instant case, undisputedly the petitioners had mortgaged the said property as security for the loan availed by them. By virtue of this mortgage, a charge has been created over the said property, and hence the use of the property is entrusted to the petitioners subject to the mortgage held by the petitioners. Moreover this transaction was subject of a legal contract. In view of the charge created on the said property, even though the legal ownership of the property in question continued with the mortgagee, the property in question is deemed to have been left to the use of the mortgagor to be used as per the terms of the legal contract. As the said property has been used in violation of the terms of contract, in my view, the said act squarely amounts to breach of trust and therefore the accusations made against the petitioners, in my view, squarely fall within the definition of Section 405 of IPC.
10. The decision relied on by the learned counsel for the petitioners is rendered on a total different set of facts. In the said case, the accused failed to return the security deposit and in that context, the Hon'ble Supreme Court has held that having regard to the transactions between the parties, the occasion for returning the amount i.e., the developer handing over the possession of the area of the owners’ share in the group housing complex, has not occurred and under the said circumstances, it was held that no offence was committed under Section 405 of IPC as the said deposit could not be said to have been an “entrustment” of property within the meaning of the said transaction. The facts in the instant case are totally different and therefore the principle laid down in the said decision, in my view, cannot be applied to the fact situation of the instant case.
11. Insofar as the offence under Section 420 of IPC is concerned, suffice it to note that Section 415 of IPC defines cheating as under:
415. Cheating – Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat ”.
Explanation (i) to the said section is a complete answer to the contention raised by the learned counsel for the petitioner. The explanation reads as under:
(i) A sells and conveys an estate to B. A, knowing that in consequence of such sale he has no right to the property, sells or mortgages the same to Z, without disclosing the fact of the previous sale and conveyance to B, and receives the purchase or mortgage money from Z. A cheats.
12. In the instant case, undisputedly the property in question was mortgaged to the bank and the parties were governed by the terms of mutual agreement entered into between them. The petitioners had no right of sale or alienation of the said property without consent of the bank or creditor. Under the said circumstances, the sale of the said property amount to act of cheating within the meaning of Section 415 of IPC. Therefore, in my view, the allegations made against the petitioners in the instant case squarely fall within the purview of Sections 415 and 420 of IPC. Therefore, I do not find any merit in the contentions urged by the petitioners. Consequently, petition is dismissed.
13. It is made clear that any observation in the discussion made in this order pertains to the contentions raised by the petitioners. It is open for the petitioners to seek for their discharge on such grounds available under law. In such event, the trial Court shall consider the prayer without being influenced by the observations made in this order.
Sd/- Judge RD