K.V. Gopalakrishnan Nair, J.
1. The petitioners have moved this Court under Section 561-A of the Code of Criminal Procedure for quashing the criminal proceedings pending against them before the Addl. District Magistrate at Poonch. The main grounds on which they rely are (1) that the criminal complaint preferred against them by the respondent does not disclose any offence whatsoever, and that (2) the complaint was instituted only to terrorise and harass them, If these grounds are made out the petitioners will be entitled to succeed, and this Court will be justified in quashing the criminal proceedings pending;against the petitioners, in exercise of the powers under Section 561-A of the Code of Criminal Procedure.
2. The first question for determination, therefore, is whether the complaint filed by the respondent against the petitioners discloses an offence? This takes us to the facts of the case. The petitioners and the respondent are partners of a firm carrying on business of selling cloth. The complaint alleges that a sum of Rs. 10,000 belonging to the partnership business was given to the petitioners by the respondent for purchase of cloth for the partnership business.
The petitioners did not proceed to purchase the cloth; instead they went to some other place and on being questioned by the respondent they are alleged to have told him that no money was handed over to them. The respondent thereupon filed a complaint before the Addl. District Magistrate at Poonch charging the petitioners with an offence under Section 409 of the Penal Code.
3. Learned Counsel for the petitioners contends that the facts alleged in the complaint do not disclose an offence under Section 409 or any other offence for that matter. According to him, the allegations in the complaint even if true, can only fasten a civil liability on the petitioners and a criminal prosecution is not justified.
4. The question whether a partner can be Leld guilty of criminal breach of trust in respect of the partnership property has come up for decision in several High Courts in India. One of the earliest decisions on the point was by a Full Bench of the Calcutta High Court in the Queen v. Okhoy Coomar, 21 Suth WR (Cr) 59: (13 Beng LR 307 (FB) ), Sir Richard Couch C. J., delivering judgment for the Full Bench observed:
We think the words in Section 405, Penal Code are large enough to include the case of a partner. If it be proved that he was in fact entrusted with the partnership property or with a dominion over it and has dishonestly misappropriated it or converted it to his own use. There is no reason that the case of a partner should be excepted from the operation of this section. Indeed there is every reason that it should be included in it. It is a question of fact whether there has been an entrusting of the property or giving a dominion over it sufficient to come within what is required.
5. This decision was rendered in 1874 and has been criticized in several subsequent decisions of the Calcutta High Court. In a Full Bench of the Calcutta High Court in Bhuban Mohan v. Surendra Mohan : AIR1951Cal69 , the decision of the earlier Full Bench was criticized and its application was confined to a narrow field. Harries C. J., delivering the leading judgment of the later Full Bench held that the F.B. case in 21 Suth WR (Cr) 59 cannot be regarded as correctly decided if it lays down any general rule applicable to prosecutions of partners for offences under Section 406 Penal Code.
In respect of property received or held by such partners on behalf of partnership in the ordinary course of partnership dealings, and that the case may however be regarded as rightly decided if it is confined to instances where under special agreements made between the parties entrustment of the property or dominion over it is given to any particular partner. The other four Judges who along with Harries C, J., constituted the Full Bench concurred in this view.
6. The decision of the Full Bench in Bhuban Mohan v. Surendra Mohan, was that a charge under Section 406 of the Penal Code cannot be framed against a person who according to the complainant is a partner with him and is accused of the offence in respect of partnership property. This decision was based upon a consideration of the nature, character and incidents of partnership property and the rights and liabilities of partnership inter se. Reliance was placed upon the English ease Piddooke v. Burt (1894) 1 Ch 343, where it was held that one partner receiving the assets of the partnership on account of himself and his co-partners is not liable to imprisonment under Section 4 (3) Debtors Act, 1869 as a person acting in a fiduciary capacity. The following observations of Chitty J., are important in this connection:
The case of a partner is quite different from these cases, because he receives money belonging to the firm on behalf of himself and his co-partners and it appears to me that I should be straining the law if I were to hold that a partner receiving money on account of the partnership that is on behalf of himself and his co-partners received it in a fiduciary capacity towards the other partners.
The law allows one partner, one of several joint creditors--to receive the whole debt on account of the firm to whom it is due and I am unable to recognise any such distinction, as was endeavoured to be made by Mr. Church, between the case of a partner receiving money of the firm and not accounting for it, and that of a partner overdrawing the partnership account; because if this distinction were true, it would apply to every case where one partner wrongly overdraws the partnership account.
The learned Judge held that no offence had been committed under the Debtors Act because a partner who receives payment of a debt due to a partnership firm does not hold the money in a fiduciary capacity.
7. Lord Lindley in his book on Partnership, Edn. 10 at p. 415 says:
In the absence of a special agreement to that effect all the members of an ordinary partnership are interested in the whole of the partnership property but it is not guite clear whether they are interested therein as tenants-in-common, or as joint tenants without benefit of survivorship, if indeed there is any difference between the two. It follows from this community of interest, that no partner has a right to lake any portion of the partnership property and to say that it is his exclusively.
No partner has any such right, either during the existence of the partnership or after it has been dissolved. What is meant by, the share of a partner is his proportion of the partnership assets after they have been all realised and converted into money, and all the partnership debts and liabilities have been paid and discharged. This it is, and this only, which on the death of a partner passes to his representatives or to a legatee of his share.
8. These observations show that the share of a partner in the partnership assets cannot be predicated until an account has been taken and all the debts have been discharged; until then it cannot be said that a partnership asset belongs to any particular partner or that any particular share of it belongs to any particular partner. Partners are joint owners or co-owners of the entire partnership property. Each partner is co-owner of the entire property.
Therefore it cannot be said that a partner who receives partnership property is entrusted with property or with dominion over property belonging to another person. Nor can it be said that a partner receiving partnership property is entrusted with his co-partner's share of that property. What share his co-partner has will be known only on dissolution and accounts. It follows that during the subsistence of the partnership there cannot be except by special agreement with which we are not concerned here any entrustment of a partnership property with a partner.
It is difficult to conceive how a partner can be entrusted with or with dominion over his own property or how he can commit breach of trust in respect of that property. A partner who holds partnership property holds it in his own right, and it cannot possibly be said that he holds it in a fiduciary capacity. I may reiterate that I am not here dealing with a case of any special agreement between the partners, but only with a case of an ordinary partnership agreement.
9. In Bhupendranath v Girdharilal, ILR 60 Cal 1316 : AIR 1933 Cal 582, a Division Bench of the (Calcutta High Court held that a partner who receives money belonging to the partnership on account Of himself and his co-partner does not do so in a fiduciary capacity and that each partner is co-owner of the whole of the common stock, though he receives or pays a share only in profits and losses arising therefrom, and though his share in the partnership property is only the value of his original contribution, increased or diminished by his share of profit or loss.
It was further held in that case that it is difficult to conceive how a partner can dishonestly misappropriate or convert to his own use a partnership property of which he is as much an owner as any other partner.
10. In M. Rahaman v. R. D. Khambatta AIR 1949 Cal 89 the gist of the complaint by a partner against another partner was that the complainant had provided funds, that timber had been bought and sold and that the complainant demanded the money from the accused who put off the complainant on some pretext and then made himself scarce. A Division Bench of the Calcutta Court held that
the question between the parties was one of accounting and that until it took place, it could not be said how much one owed to the other, and that in the absence of a prima facie case of criminal mis-appropriation of an unequivocal nature the criminal case could not be allowed to proceed.
11. A Single Judge of the Nagpur High Court in Jai Krishna v. Crown AIR 1950 Nag 99, held that a partner cannot be guilty of criminal breach of trust or misappropriation, and that a partner who receives money belonging to the partnership on account of himself and his co-partners does not do so in a fiduciary capacity. This was a case where the accused was convicted under Section 406 of the Penal Code on the allegation of the complainant that the accused was his servant who in that capacity used to sell, buy or 'pawn silver and hold on his behalf.
The trial Court found that the applicant misappropriated certain amounts, but it also found that the complainant and the accused were partners in the business. On this finding the High Court said that the complaint ought to have been rejected as untenable in a criminal court as soon as it was clear that the accused was not the servant of the complainant but his partner. The High Court accordingly set aside the conviction and sentence.
12. I might refer to a decision of the Bombay High Court in Emperor v. Jagannath Raghunathdas, 33 Bom LR 1518 : AIR 1932 Bom 57, and to another decision of the Madras High Court in Satya-Marayanmurthi v. Manikyala Rao air Mad 265 which take a different view. But the Bombay 'decision, followed the earlier decision of the Calcutta High Court which was criticised and whittled down in the later Full Bench of the Calcutta High Court, in : AIR1951Cal69 . The decision of the 'Bombay High Court was dissented from by a Division Bench of the Calcutta High Court in ILR 60 1316 : AIR 1933 Cal 582 which was followed by a Single Judge of the Nagpur High Court in AIR 1950 Nag 99, Bhupendranath's case has been approved by the later Full Bench decision of the 'Calcutta High Court in : AIR1951Cal69 . Harries C. J. has in this Full Bench decision made critical remarks about the Bombay decision.
The Madras decision in AIR 1940 Mad 265 has only followed the decision in AIR 1932 Born 57. The decisions of the Division Bench of the Bombay High Court and of the Single Judge of the Madras High Court referred to above cannot be regarded as good law in view of the later decision 'of the Full Bench of the Calcutta High Court with which I respectfully agree.
13. It may be that the Bombay and the Madras decisions may be good if they were cases where under some special agreement between the partners the accused partner was entrusted with partnership property or with dominion over partnership property. 'But as those eases appear to have been ordinary cases of partnership dealings without any special agreement between the partners regarding entrustment with or dominion over partnership property, I find it difficult to follow them.
14. On the facts of this case which relate only an ordinary partnership dealing it is difficult to say that the petitioners who are partners were entrusted with partnership property or with dominion over partnership property by the complainant their copartner, and that the petitioners have been guilty of criminal breach of trust as defined in Section 405 of the Penal Code, It follows that the petitioner cannot be held to be guilty under Section 409 of the Penal Code. Indeed in the circumstances of this case, the complaint discloses no offence under Section 409 or under any other section of the Penal Code. Even if the allegations in the complaint are assumed to be true, they only indicate civil proceedings according to Partnership Law.
15. The petitioners as already stated, have alleged that the complaint was filed against them with a view to territorial and harass them. On a consideration of the facts and circumstances of this case, I am inclined to believe that the criminal complaint was lodged by the respondent only for the purpose of dragooning and harassing the petitioners who are his co-partners. I am, therefore, satisfied that the criminal proceedings pending before the Addl. District Magistrate at Poonch against the petitioners: should be quashed. The proceedings are accordingly quashed.