1.In this appeal from the judgment of the Bombay High Court the questionwhich falls to be considered is whether a partner can be convicted undersection 409, Indian Penal Code on the ground that his failure to account formonies belonging to the firm in which he was a partner amounts to criminalbreach of trust.
2. The admitted facts are briefly these :
3. The firm, Messrs. Bharat Silp Pramandal, which was formed for carrying onthe business of building construction, originally conisted of eight partnersand the appellant was its working partner. This firm was constituted in theyear 1954. But on February 6, 1957 three of the partners retired and thebusiness was continued by the remaining five partners. Disputes arose amongstthem, which were referred to arbitration of Mr. J. T. Desai, a Solicitor.Apparently, in pursuance of his award a fresh agreement (Ex. N) was enteredinto by the partners on June 4, 1958. By virtue of this agreement theappellant's share in the firm's business was to be of 50 nP. in a rupee whilethe other partners had different shares in the remaining 50 nP. Nagindas JivrajMehta, who is the complainant in this case had a share to the extent of 6 nP.Under this agreement the parties decided not to undertake new work. Theagreement required the appellant to complete all the accounts and prohibitedfrom borrowing money in the name of the firm. It required him 'to use hisbest efforts to realise all pending bills, security deposits, claims etc.'as well as to dispose of the plant, machinery etc. The agreement also providedthat partners, other than the appellant, would procure, if the need arose,further finance to the maximum limit of Rs. 25,000/- but that if a sum inexcess of this amount was required, that excess was to be brought in by all thepartners including the appellant 'individually pro rata in proportion totheir shares of profits and losses in the firm'. Clause 8 of thisagreement permitted the appellant to withdraw on his own account a sum of Rs.10,000 'no sooner he is able to realise any of the pending claims of billsof the firm or security deposits'. We have dealt with this agreement at somelength because it will be relevant to consider these matters in the context ofthe argument of Mr. Rana to the effect that the appellant as working partnerwas entitled to utilise the realizations made by him for carrying on the workof the firm.
4. According to the complainant the appellant committed misappropriation tothe tune of Rs. 8,905/- consisting of the following six items :
5. The trial court acquitted the appellant with respect to the last twoitems but convicted him in respect of the first four items.
6. The appellant admits that he realised these four items but he says thathe did so in his capacity as partner and he utilised them for the business ofthe partnership. Therefore, according to him, he is only liable to renderaccounts to his partners and cannot in any circumstances be said to be guiltyof an offence under section 409, I.P.C. He also points out that the complainanthas instituted a suit for the dissolution of the partnership and for renditionof accounts and that he instituted the present complaint solely with the ideaof making it difficult, if not impossible, for the appellant to defend thecivil suit properly.
7. On behalf of the appellant it is contended that even if the prosecutionhad succeeded in showing that the four items referred to above were realised bythe appellant and that he has not accounted for them properly he will not beliable for criminal breach of trust under section 409, I.P.C. but that thisliability would be only of a civil nature. In support of this contentionreliance is placed upon Bhuban Mohan Rana v. Surendra Mohan Das I.L.R. (1952) II Cal. 23.. There the following question was referred for decision by theFull Bench :
'Can a charge under section 406 of the Indian PenalCode be framed against a person, who, according to the complainant, is a partnerwith him and is accused of the offence in respect of property belonging to bothof them as partners ?'
8. All the five Judges constituting the Full Bench answered the question inthe negative. In the leading judgment which was delivered by Harris C.J., hepointed out that before criminal breach of trust is established it must beshown that the person charged has been entrusted with property or with dominionover property and that a partner does not, in the ordinary course, holdproperty in a fiduciary capacity. The learned Chief Justice further pointed outthat there is really no distinct or defined share of a partner in any itembelonging to the partnership. Upon the dissolution of the partnership and afteran account is taken it may turn out that a partner who retains an asset isentitled to the whole of the asset and may be, much more. He referred to the Englishview that a partner does not hold money belonging to the partnership in afiduciary capacity and said that this view appeared to him to be correct.Referring to the decision in The Queen v. Okhoy Coomar Shaw 13 Bengal LR 307. in which a Full Bench had held that a partner who dishonestlymisappropriates or converts to his own use any of the partnership property withwhich he is entrusted or over which he has dominion, is guilty of an offenceunder section 405, I.P.C., Harris C.J. observed :
'The Full Bench never seems to have considered thatthere is really no partner's share in the property until an account (sic) andit may well bee that a partner, who retains an asset, is entitled not only tohis share according to the partnership agreement in that asset, but, on takingan account, it may be found that he is entitled to the whole of the asset andconsiderably more. In such a case, how can it be said that he has been guiltyof a breach of trust and has acted dishonestly towards his co-partners, if anaccounts would show that he was entitled to everything which he had retained?'
9. He has referred to a number of decisions of the Indian High Courts insome of which the view taken in Okoy Coomar Shaw's case (13 Bengal Law Reports307.) was followed. One of those cases was Jagannath Raghunathdas v. EmperorA.I.R. 1932 Bom. 47. where it was held that a partner may be prosecuted undersection 406, I.P.C. for failure to account for partnership monies and assets.In that case the partner who was the accused was given authority by the otherpartners to collect monies or property and according to the Bombay High Courtin these circumstances he was 'entrusted' with dominion overcollections made by him. The learned Judges who decided that case had, however,pointed out that the court should approach cases of this kind very carefullybecause it was impossible to say in many cases what the share of the accusedmight be, whether the accused was indebted to the firm or whether the firm wasindebted to him. The High Court also pointed out that if the firm was indebtedto him there might be no dishonest intention in his dealing with thepartnership property. In the arguments before us, apart from these threedecisions, our attention was called to a few more decisions of the High Courtsin India. But whether they take one view or the other they do not seek to addto what has been said in these three decisions. We, therefore, do not feelcalled upon to make any reference to these decisions.
10. It seems to us that the view taken in Bhuban Mohan Rana's case I.L.R.1962 11 Cal. 23. by the later Full Bench of the Calcutta High Court is theright one. Upon the plain reading of section 405, I.P.C. it is obvious thatbefore a person can be said to have committed criminal breach of trust it mustbe established that he was either entrusted with or entrusted with dominionover property which he is said to have converted to his own use or disposed ofin violation of any direction of law etc. Every partner has dominion overproperty by reason of the fact that he is a partner. This is a kind of dominionwhich every owner of property has over his property. But it is not dominion ofthis kind which satisfies the requirements of section 405. In order toestablish 'entrustment of dominion' over property to an accusedperson the mere existence of that person's dominion over property is notenough. It must be further shown that his dominion was the result ofentrustment. Therefore, as rightly pointed out by Harris C.J., the prosecutionmust establish that dominion over the assets or a particular asset of thepartnership was, by a special agreement between the parties, entrusted to theaccused person. If in the absence of such a special agreement a partnerreceived money belonging to the partnership he cannot be said to have receivedit in a fiduciary capacity or in other words cannot be held to have been'entrusted' with dominion over partnership properties.
11. Mr. Chatterjee who appears for the respondent sought to show that therewas special agreement in this case. According to him, by virtue of certaindecisions taken at a meeting of the partners held on January 7, 1959 theappellant had been entrusted with the duty of making recoveries of monies fromthe debtors of the firm and, therefore, this was a case of specificentrustment.
12. All that he could point out was item No. 15 in the minutes of thatmeeting which runs thus :
'Shri Veljibhai agrees to recover the monies due byShri Kablasingh immediately and shall deposit the same with the Bankers of thefirm.'
13. He has, however, not been able to explain the next item in the minutes,the relevant portion of which runs thus :
'(16) If in future any further moneys are requiredto be spent the same shall be spent out of the recoveries of the firm and nopartner shall be bound or responsible to bring in any furthermoneys......'
14. Reading the two together the meaning seems to be only this that asworking partner the appellant should carry on the work of recovery of the duesof the partnership and that in respect of the dues from one Kablasingh it wasdecided that they should be deposited in the bank. It does not follow this thatany of the other partners was precluded from making the recoveries. Further,even if this is said to be a mandate to the appellant item 16 authorities himto spend the money for the business of the partnership. That is to say, if themoney was required for the business of the partnership it was not obligatoryupon the appellant to deposit it in the bank. In our opinion, therefore, theappellant cannot be said to have been guilty of criminal breach of trust evenwith respect to the dues realised by him from Kablasingh and in not depositingthem in the bank as alleged by the prosecution.
15. Mr. Chatterjee finally contends that the act of the appellant will atleast amount to dishonest misappropriation of property even though it may notamount to criminal breach of trust and, therefore, his conviction could bealtered from one under section 409 to that under section 403. Section 403 runsthus :
'Whoever dishonestly misappropriates or converts tohis own use any moveable property, shall be punished with imprisonment ofeither description for a term which may extend to two years, or with fine, orwith both.'
16. It is obvious that an owner of property, in whichever way he uses hisproperty and with whatever intention will not be liable for misappropriationand that would be so even if he is not the exclusive owner thereof. As alreadystated, a partner has, undefined ownership along with the other partners overall the assets of the partnership. If he chooses to use any of them for his ownpurposes he may be accountable civilly to the other partners. But he does notthereby commit any misappropriation. Mr. Chatterjee's alternative contentionmust be rejected.
17. In the result we allow the appeal and set aside the conviction andsentence passed against him.
18. Appeal allowed.