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Lok Nath Vs. Jagbir Suri and anr. - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtJammu and Kashmir High Court
Decided On
Judge
Reported in1982CriLJ1328
AppellantLok Nath
RespondentJagbir Suri and anr.
Cases ReferredJagannath Raghunathdas v. Emperor
Excerpt:
- .....from the bank the amounts paid to him by the respondents in violation of the express terms of the special agreement and dishonestly appropriated the same to his own use.2. sub registrar judicial magistrate, jammu, to whom this complaint was transferred, dismissed it by his order dated 3-6-1978, without even recording the statements of the complainants on the ground that the partnership deed being silent on its terms, the special agreement set up by the respondents could not be proved against the clear bar contained in sections 91 and 92 of the evidence act, and in the absence of the special agreement, the petitioner, who was admittedly a partner in the firm, could not under law be said to hold the money paid to him by the respondents, which was partnership property, as a trustee.....
Judgment:
ORDER

I.K. Kotwal, J.

1. This revision petition arises in the following circumstances:

A complaint Under Sections 406 and 408 R. P. C. was brought by the respondents against the petitioner alleging that the parties, along with some others, had entered into a partnership for running a cinema known as Indira Theatre. The share of the respondents in the partnership business was 25% i.e. 124% each and each of them had to contribute a sum of Rs. 1,75,000/- towards the initial investment which was to be spent exclusively on the construction of the cinema house. A deed of partnership was executed on 1-11-1976. Since the deed was compulsorily registrable, it was agreed that the respondents will contribute their share of investment and hand over the money to the petitioner who will hold it in trust for them till the partnership deed was registered. Pursuant to this agreement, the first respondent paid to the petitioner a sum of Rs. 1,64,750.00 whereas the second respondent paid to him a sum of Rs. 1,75,000.00, which was deposited by him with United Commercial Bank, Ashoka Market Jammu. But, the petitioner, before the deed of partnership came to 1982 Cri. L. J./84 VII be registered on 3-4-1977, withdrew from the Bank the amounts paid to him by the respondents in violation of the express terms of the special agreement and dishonestly appropriated the same to his own use.

2. Sub Registrar Judicial Magistrate, Jammu, to whom this complaint was transferred, dismissed it by his order dated 3-6-1978, without even recording the statements of the complainants on the ground that the partnership deed being silent on its terms, the special agreement set up by the respondents could not be proved against the clear bar contained in Sections 91 and 92 of the Evidence Act, and in the absence of the special agreement, the petitioner, who was admittedly a partner in the firm, could not under law be said to hold the money paid to him by the respondents, which was partnership property, as a trustee thereof.

3. This order was challenged by the respondents in revision before Additional Sessions Judge, Jammu, who by his order dated 18-4-1978 reversed it on the authority of R. K. Dalmia v. The Delhi Administration : [1963]1SCR253 , holding that a partner in a firm holding dominion over partnership property was under law merely a trustee qua it and transferred the case to City Magistrate Jammu, for further enquiry.

4. The City Magistrate recorded the statement of one of the complainants and issued process against the petitioner Under Section 406 R. P. C. by his order dated 1-5-1978.

5. The petitioner has challenged the aforesaid two orders i.e. order dated 18-4-1978 passed by the Additional Sessions Judge and order dated 1-5-1978 passed by the City Magistrate. The challenge is twofold. Its first limb is that a partner in the absence of a special agreement that he shall hold the partnership property in trust cannot be said to be a trustee qua it, and its second limb is that the terms of the special agreement set up by the respondents cannot be proved in face of the clear bar contained in Sections 91 and 92 of the Evidence Act. The argument in reply is also twofold. In the first place it has been .contended that a partner in a firm, even in the absence of a special agreement to that effect, holds the partnership property as a trustee, and secondly, that even if it were not so, the respondents, had pleaded the special agreement which they are entitled to prove under law, even if it was not incorporated in the partnership deed.

6. The point whether or not a partner holds partnership property as a trustee is no more res integra. Doubting the correctness of the view taken in its two earlier decisions that a partner dishonestly misappropriating or converting to his own use any of the partnership property, with which he is entrusted, or over which he hag dominion is guilty of an offence Under Section 405 IPC, the following two questions were referred to a Full Bench of five Judges of the Calcutta High Court in Bhuban Mohan Das v. Surendra Mohan Das : AIR1951Cal69 :

(1) Can a charge Under Section 406 Penal Code be framed against a person who, according to the complainant, is a partner with him and is accused of the offence In respect of property belonging to both of them as partners?

(2) Are Queen v. Okhoy Coomar, (1874) 13 Beng LR 307:21 WR Cri 59)(FB) and Alia Rakha v. Liakat Hussain, 44 Cal WN 650: AIR .1940 Cal 371: 41 Cri LJ 796, correctly decided?

The Bench unanimously answered the first question in the negative and the second question in these words (Para 35):

The answer to question 2 must be that these cases cannot be regarded as correctly decided if they lay down any general rules 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 the partnership in the ordinary course of partnership dealings. However, the cases may be regarded as rightly decided, if they are confined to cases where under special agreements made between the parties entrustment of the property or dominion over it could be given to any particular partner.

This view was approved by the Supreme Court in Velji Raghavji Patel v. State of Maharashtra : 1965CriLJ431 . Their Lordships held that every. partner has dominion over partnership property by reason of the fact that he is a partner and that this is a dominion of a kind which a joint owner has over joint property. Since no joint owner can commit misappropriation in respect of the property which he holds jointly with other co-owners, likewise no partner can commit misappropriation of partnership property belonging to him and his other partners. To quote their Lordships ipsissima verba (Para 6 :

It seems to us that the view taken in Bhuban Mohan Rana's case : AIR1951Cal69 (FB, by the, later Full Bench of the Calcutta High Court is the right one. Upon the plain reading of Section 405 IPC it is obvious that before a person can be said to have committed criminal breach of trust it must be established that he was either entrusted with or entrusted with dominion over property which he is said to have converted to his own use or disposed of in violation of any direction of law, etc. Every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property. But it is not dominion of this kind which satisfies the requirements of Section 405. In order to establish 'entrustment of dominion', over property to an accused person the mere existence of that person's dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. Therefore, as rightly pointed out by Harris, C. J., the prosecution must establish that dominion over the assets or a particular asset of the partnership was by a special agreement between the parties, entrusted to the accused person. If in the absence of such a special agreement a partner receives money 'belonging to the partnership, he cannot be said to have received it in a fiduciary capacity or in other words cannot be held to have been 'entrusted' with dominion over partnership properties.

A similar view was taken by this Court also in Hardev Singh v. Karam Dad Khan AIR 1959 J & K 19:1959 Cri LJ 322).

7. R. K. Dalmia's case, (1962-2 Cri LJ 805)(supra) relied upon by the Additional Sessions Judge and by Mr. Gupta is clearly distinguishable on facts. In that case, the accused R. K. Dalmia had in conspiracy with other accused persons, misappropriated the funds of Bharat Insurance Company, of which he was at the relevant time the Chairman and Principal Officer, by diverting the funds to another company owned by his relation. Their Lordships on the authority of a few decided cases held that a Chairman or a Director of a Company being in law a trustee qua its property by virtue of his office the accused R K. Dalmia and others had been rightly convicted by the courts below Under Section 409, IPC This is .amply borne out from the following observations contained in the judgment (Paras 73 to 78):

Both Dalmia and Chokhani therefore had dominion over the funds of the Insurance Company.

In Peoples Bank of Northern India Ltd. v. Harkishen Lai AIR 1936 Lah 408, it was stated at p. 409:

Lala Harkishen Lai as Chairman is a trustee of all the moneys of the Bank.'

In Palmer's Company Law, 20th Edition, is stated at page 517:

Directors are not only agents but they are in some sense and to some extent trustees or in the position of trustees.

In Great Eastern Ry. Co. v. Turner, (1872) 8 Ch A 149 at p. 152 Lord Sel-borne said:

The directors are the mere trustees or agents of the company-trustees of the company's money and property - agents in the transactions which they enter into on behalf of the company.

In Re Forest of Dean Coal Mining Co., (1878) 10 Ch D 450 at p. 453 Sir George Jessel said:

Directors are called trustees. They are no doubt trustees of assets which have come into their hands, or which are under their control.

We are therefore of opinion that Dalmia and Chokhani were entrusted with the dominion over the funds of the Insurance Company in the Banks.

8. Their Lordships in this case no doubt made reference to Okhoy Coomar's case 1874) 13 Beng LR 307(FB)(supra) as also to Jagannath Raghunathdas v. Emperor AIR 1932 Bom 57:1932) 33 Cri LJ 317) but, as appears from the quotations given by their Lordships from the aforesaid two judgments, they never meant to hold that a partner having dominion over partnership property invariably held the same as a trustee by virtue of his position as a partner in the firm even though there was no special agreement to that effect. It is, therefore, amply, clear that a partner, unless there is a special agreement to that effect does not hold the partnership property as a trustee and consequently cannot be held guilty of an offence Under Section 405, even if he is shown to have dishonestly misappropriated that property or converted the same to his own use. Viewed thus, the learned Addl. Sessions Judge was not right in holding that the petitioner was a trustee of the money paid to him by the respondents, even if there was no special agreement between the parties to the effect that he would hold the money as a trustee till the deed was registered.

9. The respondents have undoubtedly pleaded the aforesaid special agreement. It is also undeniable that there is no clause in the partnership deed evidencing any such agreement. The only question which thus falls for determination is : Can the respondents prove the aforesaid special agreement? Basing his opinion on Sections 91 and 92 of the Evidence Act, the Magistrate who dismissed the complaint Under Section 203 held that they could not. The learned Addl. Sessions Judge who upset his aforesaid order in revision did not advert to this aspect at all. In my opinion, none of the two sections create any bar against the proof of the aforesaid special agreement. Section 91 runs into two parts. Its first part provides that if the terms of any contract, grant or other disposition of property have been reduced into a written document, then the existence of the document excludes all other evidence of its terms. Its second part provides that in all cases in which any matter is required by law to be reduced to the form of a written document, then the document itself must be put in evidence, unless secondary evidence of its contents is admissible under the Evidence Act. This Section will obviously apply where the parties intended the document to contain all. the terms and conditions of. the transaction-Where however, it is shown that they did not intend to reduce all such terms and conditions into writing, then the section will not come into play and the parties will be entitled to give oral evidence of the terms which they did not intend to [reduce into writing.

10. Section 92 forbids giving evidence of any oral agreement or statement for the purpose of contradicting, varying, adding to, or subtracting from the terms of the written document mentioned in Section 91. It does not forbid giving evidence of a separate oral agreement on a distinct collateral matter, which cannot have the effect of contradicting, varying, adding to, or subtracting from any of its terms, even though it may, in a way, have the effect of adding another distinct and independent term to the written agreement between the parties on a collateral matter. Even proviso (2) to Section 92 lays down that the existence of any separate oral agreement as to any matter on which a document is silent may be led provided it is not inconsistent with any of its terms.

11. The oral agreement set up by the respondents is an agreement on a distinct collateral matter which, even if proved, will not contradict, vary, add to, or subtract from any of the existing terms and conditions of the, partnership deed. Whether or not the parties wanted the partnership deed, to be a complete statement on the terms and conditions settled by them, is a question of fact to be determined by the trial Court in taking evidence. Mr. Sehgal is, therefore, not right in contending that oral evidence of the special agreement set up by the respondents is barred under Sees. 91 and 92 of the Evidence Act. Enquiry has been initiated in the matter by the trial Magistrate by issuing process to the petitioner Under Section 406 R.P.C. wherein evidence is yet to be led by the parties. this Court cannot clutch at the jurisdiction of the trial Magistrate at this stage by assuming either that the partnership deed was intended by the parties to be a complete statement on the terms and conditions of the transaction, or that there was in fact no such special oral agreement, and scuttle the prosecution midstream.

12. For the foregoing reasons, the revision petition fails which is dismissed accordingly.


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