1. The question raised in this case is whether by receiving payment of certain amount of money as compensation for some lands acquired under the Land Acquisition Act, though under the terms as agreed upon between the petitioner who had executed a deed of mortgage in respect of these lands to the complainant, the whole of the compensation money was to be applied in the first place 'in and towards reduction and satisfaction of the loans', the petitioner can be said to have dishonestly misappropriated this sum. On a complaint on behalf of the Metropolitan Bank that the petitioner had committed an offence under Section 403, Penal Code, by receiving such money and omission to pay it to the Bank, The Magistrate issued a summons against the petitioner under Section 403, Penal Code. The accused appeared in Court and thereafter obtained this Rule which was issued on the Chief Presidency Magistrate, Calcutta and opposite party to show cause why the proceedings should not be quashed.
2. Quite clearly, if there is a binding agreement under which the compensation money has to be applied towards reduction and satisfaction of the amount of the loan and the petitioner having received the same, has not done so, there has been a breach of contract. It does not, however, necessarily follow that a criminal offence has been committed. Before any person can be said to have committed an offence under Section 403, Penal Code, it has to be proved that there was dishonest misappropriation.
It is contended before us by the learned counsel on behalf of the opposite party that the mortgage being in the form of an English Mortgage there had been an assignment of the entire property in the first place to the mortgagee and that consequently the money that was obtained as compensation for these lands was money belonging to the Bank. If the petitioner has kept the money for himself he has certainly misappropriated the money dishonestly. It is necessary, however, to look into the reality of the fact underneath the form. Though in form there was an assignment of the property, there can be no doubt, and indeed it is not disputed that what happened was in fact a loan and the mortgage of property as security for the loan. We are unable to agree in view of this that the money became in law the money of the Bank.
3. Nor do we think it right to say that because the petitioner refused to carry out the terms of his contract by paying the money received for the compensation, he misappropriated the money dishonestly. The refusal to pay every civil debt does not justify the finding of dishonesty. We are not aware of any case in which the refusal to pay a civil debt of this nature has been held to amount to dishonest misappropriation and we see no reason to extend the meaning of the word to include refusal to pay such debts.
4. We are, therefore, of opinion that theseproceedings should be quashed and we quash themI accordingly.