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Jashbhai Gordhanbhai Patel and anr. Vs. Hasmukhlal Kalidas Patel and anr. - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtGujarat High Court
Decided On
Judge
Reported in1972CriLJ945; (1972)GLR617
AppellantJashbhai Gordhanbhai Patel and anr.
RespondentHasmukhlal Kalidas Patel and anr.
Cases ReferredEmperor v. Lalloo Ghella
Excerpt:
- - & comnany and that all the work and management of the said firm including the work of getting accounts written as well as the work of keeping cash balance was being done by the accused persons. however i am satisfied that in ordinary cases where a partner receives moneys or an asset belonging to a partnership or holds moneys or assets of a partnership he does not hold that money in a fiduciary capacity. all the work of case transactions as well as keeping cash balance on hand was also being done by these accused persons only......food law in so far as the question of entrustment of partnership moneys or other property of the firm to a partner vis-a-vis other partners is concerned. the learned judges of the bombay high court considered the full bench decision of the calcutta high court in bhuban mohan rana's case : air1951cal69 (fb) (supra) and said at the end at p. 1304 in the state of bombay v. devakinandan 1959 cri lj 1302 as underit would appear that on the view taken by the calcutta high court the accused in this case cannot be convicted of criminal breach of trust. still the learned judges held him guilty, differing from the view taken by the calcutta high court. on the question of entrustment of money and agreeing with the view of the bombay high court in emperor v, jagannath raghunathdas air 1932 bom......
Judgment:
ORDER

D.P. Desai, J.

1. The original accused who are partners with the original complainant, have come to this Court for quashing the proceedings of Criminal Case No. 4072 of 1970 instituted in the Court of Judicial Magistrate. First Class, Baroda. This case was instituted upon a complaint filed on May 27. 1970. before the learned Magistrate by the opponent No. 1. i. e. the original complainant who will here after be referred to as the complainant against the present petitioners original accused Nos. 1 and 2 who will hereafter be referred to as the accused persons. The complainant's case was that he and accused persons were partners of a firm known as Messrs Pate.& Comnany and that all the work and management of the said firm including the work of getting accounts written as well as the work of keeping cash balance was being done by the accused persons. The complainant it was alleged was busy with his own business running in the name of National Engineering Company at Nadiad before the starting of the aforesaid firm, and therefore could not give any time to the work of the firm in which the accused were partners. The complaint then contains narration of certain facts relating to taking of books of accounts of several years from the accused persons and the correspondence between the parties. The complaint by its very terms. is restricted to an alleged criminal breach of trust by the accused in the sum of Rs.9956.81 and this allegation is based on the fact that in the Kachha roimel of 2021 there was a credit entry of Rs. 99.56.61 as the amount realised from sales. In its place the amount credited was only Rs. 225.14; therefore the balance of Rs. 9731.67 was misappropriated by the accused persons. On the same facts the complainant also stated that both the accused persons committed an offence under Section 477A of the Indian Penal Code. In the verification of the complaint the complainant stated that books of accounts were written by the Munim of the firm and it appears to be his case that the accused persons got these entries made by the Munim. Therefore the complaint was filed against the accused persons under Sections 406 and 477A of the Indian Penal Code. On this complaint the learned Magistrate ordered process to issue. After passing of this order. the petitioners came to this Court for quashing the proceedings saying that the allegations made in the complaint do not disclose any offence which would be committed by the accused persons as they were partners of the firm with the complainant.

2. At the hearing of this Petition. Mr. Bhatt the learned advocate for the petitioners urged that unless by a special agreement between the partners, the work of receiving cash belonging to the partnership was exclusively given to another partner it could not be said that a partner who received amounts of the firm in the ordinary course as a partner received it in a fiduciary capacity because, in the eves of law he is also the owner of that amount. He relied upon the decision of the Supreme Court for the proposition advanced by him. That decision is reported in Velji Raghavji State of Maharashtra : 1965CriLJ431 . Prior to this decision there was difference of opinion between the Calcutta High Court and the Bombay High Court on the question whether a partner who receives moneys of the firm can be said to be entrusted with those moneys or has a dominion over them. A Full Bench of the Calcutta High Court held in Bhuban Mohan v. Surendra Mohan Das : AIR1951Cal69 that a partner who receives partnership property has dominion over that property as a partner quite apart from any arrangement with his other partners. It was further observed:

The fact that he is a partner gives him dominion over the property and if the English view be right he does not hold that property in a fiduciary capacity. It may be that by special arrangement between the parties one partner could be regarded as being entrusted with property. But apart from such special arrangement it cannot be said that a partner who receives partnership property on behalf of his partners has been given dominion over that property by his co-partners or has been given dominion over the share of his co-partners by the latter.

Harries C.J. has he then was) speaking for Das. Bannerjee and Das Gupta, JJ. said at p. 74 as under:

However I am satisfied that in ordinary cases where a partner receives moneys or an asset belonging to a partnership or holds moneys or assets of a partnership he does not hold that money in a fiduciary capacity.

With regard to the special agreement. it was observed at p. 73 by the same learned Judge as under:

Whether or not a partner can be said to have been entrusted with property must depend upon whether there is any special agreement between the parties. If there is no special agreement he does not receive property in a fiduciary capacity. It might be that if there was a special arrangement between the partners then it could be said that a partner was entrusted with property or with dominion over it. For example if by the terms of the partnership agreement one partner was given the sole right to possession of the partnership assets or to receive moneys on behalf of the partnership then such a partner though it is unnecessary to hold it be said to have entrusted another partner with money if he gave such other partner money for a specific purpose.

The Supreme Court approved the view of the Calcutta High Court and referred to the decision of the Bombay High Court in AIR 1932 Bom 57. Having referred to these two decisions. Their Lordships said in para 6 as under

It seems to us that the view taken in Bhuban Mohan Rana's case : AIR1951Cal69 . By the later Full Bench of the Calcutta High Court is the right one. In view of this decision of the Supreme Court, the decision of another Division Bench of the Bombay High Court in Devakinandan Kanhvalal Agarwal's case. : AIR1959Bom486 cannot be treated as Food law in so far as the Question of entrustment of partnership moneys or other property of the firm to a partner vis-a-vis other partners is concerned. The learned Judges of the Bombay High Court considered the Full Bench decision of the Calcutta High Court in Bhuban Mohan Rana's case : AIR1951Cal69 (FB) (supra) and said at the end at p. 1304 in the State of Bombay v. Devakinandan 1959 Cri LJ 1302 as under

It would appear that on the view taken by the Calcutta High Court the accused in this case cannot be convicted of criminal breach of trust.

Still the learned Judges held him guilty, differing from the view taken by the Calcutta High Court. on the question of entrustment of money and agreeing with the view of the Bombay High Court in Emperor v, Jagannath Raghunathdas AIR 1932 Bom. 57. The learned Judges also came to the conclusion that, if the partner cannot be held guilty of an offence of criminal breach of trust he would certainly be guilty of the offence of criminal misappropriation. For this they relied upon Illustration (c) to Section 403 of the Indian Penal Code. In this connection they also considered the view of P.B. Mukharji, J. (as he then was) in Bhuban Mohan Rana's case : AIR1951Cal69 (supra) to the effect that a partner cannot be convicted even of criminal misappropriation in respect of partnership property. The learned Judges of the Bombav High Court disagreed with this view. In the Supreme Court's decision in Velji Raghavii's case : 1965CriLJ431 (supra) with regard to the question of criminal misappropriation. Their Lordships of the Supreme Court said under:

It is obvious that an owner of property, in whichever wav he uses his property and with whatever intention will not be liable for misappropriation and that would be so even if he is not the exclusive owner thereof. As already stated a partner has undefined ownership along with the other partners over all the assets of the partnership. If he chooses to use any of them for his own purpose he may be accountable civilly to the other partners. But he does not thereby commit any misappropriation. Mr. Chatterjee's alternative contention must be rejected.

Therefore, so far as the offence punishable under Section 406 is concerned we must take into consideration the allegations made in the complaint and find out whether those allegations would disclose any offence committed by the petitioners punishable under Section 406 of the Indian Penal Code.

3. Mr. Vin then submitted that the learned Magistrate had taken cognizance of the offence under Section 477A of the Indian Penal Code and. therefore the question whether there was any special agreement will depend on the leading of evidence. Therefore there was no reason to interfere under Section 561-A of the Criminal Procedure Code at this stage. Now the question as to when the High Court should interfere under Section 561-A of the Criminal Procedure Code has been dealt with by the Supreme Court in R. P. Kapur v. State of Punjab. : 1960CriLJ1239 . It was held that the inherent jurisdiction of the High Court could be exercised to Quash Proceedings in a proper case either to pre vent the abuse of the process of any court or otherwise to secure the ends of justice. Ordinarily criminal proceedings instituted against an accused person must be tried under the provisions of the Code. and the High Court would be reluctant to interfere with the said proceedings at an interlocutory stange. It was also observed that it was not possible desirable or expedient to lay down any inflexible rule which would govern the exercise of this inherent jurisdiction. Then some of the categories of cases where the inherent jurisdiction to Quash proceedings can and should be exercised were given. Three such categories were indicated and the second category is relevant for our purpose. It reads:

(ii) Where the allegation in the First Information Report or the complaint even if they are taken at their face value and accepted in their entirety. do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged in disclosed or not.

If therefore we look at the complaint and the verification in this case we find that there is no averment in the complaint that under a Special agreement or special arrangement between the partners or under the terms of the partnership deed the accused persons were solely entrusted with the work of management of the affairs. of the firm and with the work of getting the books of accounts written. The only averment is to be found in para 2 of the complaint which when translated reads as under:

2. All the work of management of this partnership firm and all the work pertaining to maintenance and writing and getting written of the books of accounts was being done by these account (accused?) persons. All the work of case transactions as well as keeping cash balance on hand was also being done by these accused persons only. I. the complainant before joining the partnership was doing separate business at Nadiad in the name of National Engineering Co. and I give my full time to that business with which the firm mentioned in the complaint has no concern.

The said averment only shows that the accused persons. being partners of the partnership firm were doing the aforesaid work alone. This work they could do as partners of the firm and it was not necessary that they should derive their authority from a special arrangement or agreement. Para 2 of the complaint contains averment with regard to the management of the partnership firm including the responsibility of cash amount and the work of writing of the account books. It does not speak of any arrangement between the partners under which this work was entrusted exclusively to the accused. Therefore as per the allegations made in the complaint these partners who were doing the work in their capacity as partners of the firm committed no offence of criminal breach of trust in respect of the sum of Rs. 9,731.67. if we take the view of the Supreme Court on the question of entrustment. It is not possible to accept the contention of Mr. Vin that the matter may be left as it is. so that the complainant may be in a position to adduce the evidence. It is therefore clear that the allegations in the complaint even if accepted at their face value would not disclose an offence of criminal breach of trust in the present case in view of the decision of the Supreme Court mentioned above on the interpretation of the word 'entrustment.'

4. Then, the next question is whether an offence under Section 477A of the Indian Penal Code can be said to have been committed on these allegations. Now the verification of the complaint makes it clear that the books of accounts were written by the Munim. The allegation is that the work was being done by the accused persons. Here again no arrangement resulting in the appointment of the accused persons to do that work as clerk servant or officer of the partnership firm is spoken of. Section 477A of the Indian Penal Code reads as under:

477-A. Whoever. being a clerk. officer or servant, or employed or acting in the capacity of a clerk. officer or servant. wilfully and with intent to defraud destroys alters mutilates or falsifies any books paper writing valuable security or account which belongs to or is in the possession of his employer or has been received by him for or on behalf of his employer or wilfully and with intent to defraud makes or abets the making of any false entry in. or omits or alters or abets the omission or alteration of any material particular from or in. any such book, paper writing valuable security or account shall be punished with imprisonment of either description for a term which may extend to seven years or with fine or with both.

A look at this section will make it clear that the offence contemplated by it can be committed in respect of certain specified documents only namely 'any book, paper, writing, valuable security or account which belongs to or is in the possession of his employer or has been received by him for or on behalf of his employer'. Therefore the offence can be committed only with regard to certain books belonging to the employer of the person. who is alleged to have committed the said offence. The latter cart of Section 477A which relates to making or abetting the making of any false entry in. or omitting or altering or abetting the omission or alteration of any material Particular from or in. any such book. paper writing valuable security or account also refers to these documents of the employer because, they are qualified by the word 'such'. Therefore it is clear that the offence, contemplated by Section 477A. can be committed only in respect of documents mentioned therein belonging to or in the possession of an employer or such documents which have been received by the person committing the offence for or on behalf of the employer. The idea that there must be an employer to whom the aforesaid documents must belong is underlying throughout the provisions of Section 477A.. Therefore. the question is whether a partner. who gets books of accounts written by a Munim and who had the custody of these books of accounts can be said to be clerk, officer or servant of the employer or acting in the capacity of a clerk. officer or servant of the said employer. Now it is clear that under the Law of Partnership each partner had access to the books of accounts. Each partner has the right to take part in the affairs of the management of the partnership, subject to a contract to the contrary which may be made between them. Now in the present case. no contract to the contrary has been alleged. If each partner under the Partnership Law has the right to manage the affairs of the partnership firm and get the entries made in the accounts books by the Munim it cannot be said that one of these partners, getting entries made. is falsifying the accounts of his employer. Nor could it be said that in petting the entries made. the said partner is acting in the capacity of a clerk, officer or servant of the employer. The relationship contemplated by Section 477A is the relationship of master and a servant. The relationship between the partners inter se is that of principal and agent. Therefore in the absence of any special arrangement to show a particular partner was, in fact, appointed to act in the capacity of a clerk officer or servant it could not be said that the said partner had committed an offence under Section 477A of the Indian Penal Code. by getting false entries made in the books of accounts because there was no employer of such a partner and the books belonged to the partner along with other partners. Therefore, even assuming the allegations in the complaint with regard to the offence under Section 477A to be correct no offence punishable under that section is disclosed. because the act of the accused persons does not fall within four corners of Section 477A of the Indian Penal Code. In this connection. Mr. Vin drew my attention to the decision in : AIR1959Bom486 . The learned Judges in that case were also considering the question whether a partner can be held guilty of Section 477A. In that connection they relied upon the decision in Emperor v. Lalloo Ghella (1904) 6 Bom LR 553. It was also a decision of a Division Bench. It was held in that case that 'where a partner in a firm is appointed as such to manage the business of the firm or to write its account. he acts as its servant; and if he falsifies accounts he is liable to be punished under Section 477A of the Indian Penal Code' This earlier decision of the Bombay High Court acknowledges the principle that in order to make a partner liable under Section 477A. he must be appointed as such to write the accounts of the firm. In the present case the person appointed to write the accounts is the Munim. Nor is there an allegation that the accusedner sons were appointed to write the accounts of the firm and. therefore they were acting as its servant. The Division Bench in the latter case of AIR 1959 Bom 488 (supra) simgly followed the earlier decision in Lalloo Ghella's case (1904) 6 Bom LR 553 (supra). Even applying the principle enunciated in Lalloo Ghella's case (1904) 6 Bom LR 553 it is clear that the averments made in the complaint do not show that the accused were appointed to write the books of account and therefore were acting in the capacity of clerk, servant or officer of the firm. Therefore the facts alleged in the complaint do not disclose any offence. The result is that the application succeeds.

5. In the result the application is allowed. The process issued by the learned Judicial Magistrate. First Class under Sections 406 and 477A of the Indian Penal Code in Criminal Case No. 4072 of 1970 and the subsequent proceedings thereunder are quashed. Rule made absolute.


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