Manish Mittal & Others vs State & Others
2010 Latest Caselaw 2304 Del

CRL.M.C. Nos. 2683/2007 & 2136/2008            1




                                       REPORTABLE
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CRIMINAL M.C. NOS. 2683 OF 2007 AND 2136 OF 2008

                                            Reserved on: 8th April, 2010
                                       Date of decision: 30th April, 2010

       MANISH MITTAL & OTHERS ..... Petitioners in 2683/2007
                     Through Mr. Vijay Aggarwal & Mr. Rakesh
                     Mukhija, Advocates.

       P.K.SHARMA                         ..... Petitioner in 2136/2008
                              Through Mr. Udyan Jain, Advocate.


                                      versus

       STATE & OTHERS                   ..... Respondents

Through Dr. Mahesh Chand Jain, respondent No. 2 in person.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in the Digest ?

SANJIV KHANNA, J.:

1. Mr. P.K. Sharma, Assistant General Manager, State Bank of India, (C&I Division), Chandni Chowk, Delhi and Mr. Manish Mittal have filed the present petitions under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the Code, for short) for quashing of Order dated 2nd June, 2007 passed by the learned Metropolitan Magistrate taking cognizance and summoning them as accused to stand trial for offences under CRL.M.C. Nos. 2683/2007 & 2136/2008 2

Section 425/427 of the Indian Penal Code, 1860 (hereinafter referred to as IPC, for short). The impugned order dated 2nd June, 2007 reads as under:-

"Counsel for the Complainant Arguments on summoning order heard. Record perused.

I found sufficient material on record to summon the accused for the offence U/s.425/427 IPC, as prima facie case is made out against the accused.

Issued summons to the accused on PF/RC for 18/09/07"

2. Dr. Mahesh Chand Jain, the respondent No. 2 has filed a

criminal complaint in his individual capacity as a partner and on

behalf of partnership firm M/s Biopolymer Systems. From the

complaint, pre summoning evidence and documents relied upon

by Dr. Mahesh Chand Jain, the following facts are apparent -

(i) Dr. Mahesh Chand Jain and Mr. Manish Mittal are partners of the partnership firm and are bound by the terms of the partnership deed dated 15th July, 1994. The said partnership firm has two current accounts with State Bank of India, (C&I Division), Chandni Chowk, Delhi, which could be operated jointly by both the partners for the purpose of withdrawal. It is stated in the complaint that arbitration applications are pending before the Additional District Judge for dissolution, settlement of accounts and disputes of the partnership firm.

(ii) The complainant by letter dated 5th September, 2002 had called upon Mr. Manish Mittal to arrange for conversion CRL.M.C. Nos. 2683/2007 & 2136/2008 3

of balance lying in the current account into a fixed deposit receipt (FDR, for short) till dissolution, settlement of accounts and disputes of the partnership firm by the arbitrator. It is stated in the complaint that this was pragmatic and prudent to prevent loss of value and utility of firm‟s property and was in accord with Section 12(b) of the Partnership Act, 1932 (Partnership Act, for short) which requires that every partner is bound to attend diligently to his duties in conduct of business. It is stated that Mr. Manish Mittal by his letter dated 12th September, 2002 called upon Dr. Mahesh Chand Jain to first deposit Rs.4,50,000/- along with the interest accrued on it in the said bank account. This amount received from Haryana Financial Corporation was deposited in the Union Bank of India, Model Town, Delhi, a new proprietory account in the name of the firm opened by Dr. Mahesh Chand Jain. It was stated that only after the deposit he i.e. Mr. Manish Mittal, shall take a prudent decision. It was further alleged in the letter that Dr. Mahesh Chand Jain was trying to cover up his illegalities and misdeeds.

(iii) By letter dated 17th September, 2002, Dr. Mahesh Chand Jain called upon The Chief Manager, State Bank of India, (C&I Division), Chandni Chowk, Delhi to convert the credit balance in the account into FDR. This was followed by letter dated 10th October, 2002 to Mr. Manish Mittal stating that non-conversion of the credit balance in the current account into FDR was causing loss of Rs.170/- approximately per day on account of loss of interest. It was also stated that the State Bank of India CRL.M.C. Nos. 2683/2007 & 2136/2008 4

had informed that till both the partners agreed, FDR cannot be issued by transferring the amount from the current account. By another letter dated 10th October, 2002, Mr. P.K. Sharma, AGM, State Bank of India (C&I Division), Chandni Chowk was reminded about an earlier letter dated 17th September, 2002 and asked to issue an FDR. Copy of the correspondence exchanged between Dr.Mahesh Chand Jain and Mr. Manish Mittal was enclosed.

(iv) It is stated in the complaint that Mr. Manish Mittal and Mr. P.K. Sharma, AGM, State Bank of India (C&I Division), Chandni Chowk, Delhi had deliberately omitted to convert the credit balance into an FDR which resulted in diminishing the value and utility of property of the partnership firm and affected the firm‟s property as interest could not be earned. Thus, both Mr. Manish Mittal and Mr. P.K. Sharma have intentionally and deliberately caused loss or damage to the property of the partnership firm and Dr. Mahesh Chand Jain, the partner and were liable to be prosecuted under Sections 425 and 427 of the IPC. It is stated that till the date of filing of complaint on 31st October, 2002, loss of Rs.6,800/- on account of interest was caused.

3. Dr. Mahesh Chand Jain in his statement recorded on 22nd

March, 2005 has , inter alia, stated that in spite of letters, credit

balance standing in the current account was not converted into CRL.M.C. Nos. 2683/2007 & 2136/2008 5

FDR, thus, causing loss and this amounts to an offence under

Section 425/427 of the IPC.

4. Sections 425 of the IPC reads as under:-

"425. Mischief.-- Whoever with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or to any person, causes the destruction of any property, or any such change in any property or in the situation thereof as destroys or diminishes its value or utility, or affects it injuriously, commits" mischief".

Explanation 1.- It is not essential to the offence of mischief that the offender should intend to cause loss or damage to the owner of the property injured or destroyed. It is sufficient if he intends to cause, or knows that he is likely to cause, wrongful loss or damage to any person by injuring any property, whether it belongs to that person or not.

Explanation 2.- Mischief may be committed by an act affecting property belonging to the person who commits the act, or to that person and others jointly.

Illustrations

(a) A voluntarily burns a valuable security belonging to Z intending to cause wrongful loss to Z. A has committed mischief.

(b) A introduces water in to an ice- house belonging to Z and thus causes the ice to melt, intending wrongful loss to Z. A has committed mischief.

CRL.M.C. Nos. 2683/2007 & 2136/2008 6

(c) A voluntarily throws into a river a ring belonging to Z, with the intention of thereby causing wrongful loss to Z. A has committed mischief.

(d) A, knowing that his effects are about to be taken in execution in order to satisfy a debt due from him to Z, destroys those effects, with the intention of thereby preventing Z from obtaining satisfaction of the debt, and of thus causing damage to Z. A has committed mischief.

(e) A having insured a ship, voluntarily causes the same to be cast away, with the intention of causing damage to the under-writers. A has committed mischief.

(f) A causes a ship to be cast away, intending thereby to cause damage to Z who has lent money on bottomry on the ship. A has committed mischief.

(g) A, having joint property with Z in a horse, shoots the horse, intending thereby to cause wrongful loss to Z. A has committed mischief.

(h) A causes cattle to enter upon a field belonging to Z, intending to cause and knowing that he is likely to cause damage to Z' s crop. A has committed mischief."

5. The first part of the Section 425 of the IPC sets out mensrea

or the guilty mind which is the intention or knowledge that he is

likely to cause wrongful loss or damage to public or any other

person. The second part of the Section pertains to the actus reus i.e.

to say the criminal act. Thus the ingredients of Section 425 of the CRL.M.C. Nos. 2683/2007 & 2136/2008 7

IPC are as under:-

"(1) Intention or knowledge of likelihood to cause wrongful loss or damage to the public or to any person.

(2) Causes destruction of some property or any such change in any property or in the situation thereof; and

(3) Such changes must result in destroying or diminishing the value or utility of any property or „affecting it injuriously‟."

(emphasis supplied)

6. Ingredient No. 2 requires destruction or change in the

property or situation thereof. Destruction can be of a property,

which was already in existence and change is with reference to a

property or the situation prevailing at a particular time. There is no

allegation in the complaint of destruction of existing property or

change in any existing property or situation. In fact, the allegation

made in the complaint is that Mr. Manish Mittal by his inaction had

prevented change in the property or situation by not agreeing to

conversion of the amount lying in the current account into an FDR.

The allegation is not that any property has been destroyed but the

allegation is that Mr. Manish Mittal by not signing and agreeing to

conversion of the credit balance lying in the current account into

an FDR had prevented accrual of interest, i.e., the property which

may have come into existence in future but has not come into CRL.M.C. Nos. 2683/2007 & 2136/2008 8

existence. However, I need not examine this aspect in detail as

the allegations in the complaint, the statement of Dr. Mahesh

Chand Jain and documents filed by him do not establish and

satisfy the requirements of ingredient No. 1.

7. Ingredient No. 1 as quoted above requires intent or

knowledge on the part of a person to cause wrongful loss or

damage. The term "wrongful loss" as defined in Section 23 of the

IPC requires loss by unlawful means of a property to which a

person is legally entitled to. The loss should be caused by

unlawful means adopted by the accused. A person who has lost

property because of unlawful means adopted by another person is

said to have suffered wrongfully. Mischief as defined in Section

425 of the IPC is not confined to cases of „wrongful loss‟ but

engulfs cases of "wrongful damages" i.e. damage by unlawful

means. The word "damage" is not limited in scope by definition

and is to be given natural meaning but the word "wrongful" will

also qualify the requirement "damages". Loss or damage must be

caused by unlawful means to come within the purview of section

425 of the IPC. This ensures difference between an act which is

criminal wrong and an act which can be categorized as a morally

wrong act. What is morally wrong is subjective depending upon

custom, habit and social milieu to which a person belongs. These CRL.M.C. Nos. 2683/2007 & 2136/2008 9

wrongs are uncertain and difficult to prove.

8. Word „unlawful‟ has not been defined in the IPC but word

„illegal‟ has been broadly defined in Section 43 of the IPC as

anything which is prohibited by law, which constitutes an offence

and which furnishes basis for a civil suit, ending in damages.

These provisions were examined in Punjaji Bapuji Bagul versus

Emperor, AIR 1935 Bom 164. The Court discussed Explanation I

to the Section and the meaning of „wrongful loss‟. It held „Wrongful

loss is defined in Section 23 of the IPC as being „loss by unlawful

means of property to which the person losing it is legally entitled,‟

and the expression in Section 425 of the IPC, „wrongful loss or

damage‟ must mean loss or damage by unlawful means.‟ With

respect to the contention of the complainant who relied on the

definition of „illegal‟ in Section 43 of the IPC, the Court observed

as under:

" That definition includes anything which is an offence or which is prohibited by law, or which furnishes ground for a civil action, and it is argued that the word „unlawful‟ in the definition of „wrongful loss‟ must have the same meaning as the word „illegal‟. Generally speaking, I should say that there is no difference in meaning between the word „unlawful‟ and „illegal‟, but it does not follow that if one of those words is specially defined in the statute, and the other is not the two words must necessarily have the meaning given to the one word by the definition.....The word 'illegal' has been defined as covering everything which gives rise to a civil suit, but I am not

prepared to say that in the Penal Code the word 'unlawful', which is not been so defined, must be taken throughout as having the very wide meaning"

(emphasis supplied)

9. Similar view has been taken in Shippaliar Singh versus

Krishna AIR 1957 All. 405 , Babu Krishna Ghose versus State

AIR 1957 Cal. 385 and Arjuno Gondo & others versus State &

others AIR 1969 Orissa 200. In Dr. Hari Singh Gour‟s "Penal Law

of India", 11th Edition at page 219 it has been explained that the

term „unlawful‟ when used in criminal jurisdiction is limited to

convey an act which may be prohibited as well as punishable but

the said term in a given case can be interpreted flexibly.

10. Applying the said principles it can be said that Section

425/427 of the IPC even applies when there is a wrongful loss or

damage to one‟s own property but no loss or damage is wrongful

if it is caused by bonafide exercise of right which a person has

over one„s own property. Even if the claim of the party is ill-

founded he will not be guilty if his claim or dispute is bonafide.

Right to bonafide claims or dispute may give rise to a civil cause

but will not give rise to or create a criminal act under Section

425/427 of the IPC.

11. Learned Metropolitan Magistrate while taking cognizance CRL.M.C. Nos. 2683/2007 & 2136/2008 11

and summoning petitioners by the impugned order dated 2nd June,

2007 has not given any reasons as to why and how the

ingredients of Section 425/427 of the IPC are satisfied. As noticed

above, even the Assistant General Manager of State Bank of

India, Chandni Chowk, Delhi, Mr. P.K Sharma has been

summoned. A bank Manager or a bank is bound by the rules and

regulations and Reserve Bank of India guidelines for opening or

conversion of credit balance lying in a current account into an

FDR. As per the complaint itself, the admitted position is that the

current accounts require joint signatures of both parties.

Admittedly, Mr. Manish Mittal has not signed any of the letters or

authorized withdrawal or conversion from the current account into

FDR. Therefore, as per the terms of operation given to the bank,

the current bank account could not be operated and debited. No

case whatsoever is made out against Mr. P.K. Sharma, Assistant

General Manager of the bank.

12. Dr. Mahesh Chand Jain in the complaint and the pre-

summoning evidence has stated that Mr. Manish Mittal had not

acted prudently when he did not join and accept the petitioner‟s

request for conversion of the amount lying in the current account

into an FDR. Failure to act prudently does not constitute an

offence under Section 425/427 of the IPC. As stated above, the CRL.M.C. Nos. 2683/2007 & 2136/2008 12

first ingredient of Section 425 of the IPC is wrongful loss or

damage and not failure to act prudently. It is admitted in the

complaint that disputes between Dr. Mahesh Chand Jain and Mr.

Manish Mittal were subject matter of proceedings under the

Arbitration and Conciliation Act, 1996, which was pending before

the learned Additional District Judge and with the Arbitrator. It

was always open to Dr. Mahesh Chand Jain to move an

application before the court or before the Arbitrator for directions

to convert and transfer the amount lying in the current account into

an FDR.

13. During the course of hearing, Dr. Mahesh Chand Jain, who

appears in person had stated that he had filed an application with

the same prayer before the learned Additional District Judge but

was forced to withdraw the said application. This does not make

the case of Dr. Mahesh Chand Jain any better. On the other

hand, it shows that the civil court did not accept the contention

that Dr. Mahesh Chand Jain can compel Mr. Manish Mittal to

convert the amount lying in the current account into an FDR. It

may be relevant to state here that Dr. Mahesh Chand Jain had

filed a petition under the Arbitration and Conciliation Act, 1996

before the District Judge on 8th August, 2002, which is before

letters dated 17th September, 2002 and 10th October, 2002 were CRL.M.C. Nos. 2683/2007 & 2136/2008 13

written.

14. Mr. Manish Mittal has filed on record copy of court orders

passed in Writ Petition (Criminal) No. 1868/2005 dated 7th

February, 2006 and LPA No. 394/2006 dated 3rd March, 2006. By

the first order, petition filed by Dr. Mahesh Chand Jain for

quashing of FIR No. 101/2002 under Section 406/420 of the IPC,

Police Station Model Town and the consequential proceedings

was dismissed. By order dated 3rd March, 2006, LPA No.

394/2006 filed by the appellant was dismissed. Special Leave

Petition filed by the petitioner against the said order has also been

dismissed. Dr. Mahesh Chand Jain is, therefore, facing

prosecution under Section 406/420 of the IPC in respect of

Rs.4,50,000/-, which was remitted to the said firm but was

received by Dr. Mahesh Chand Jain and deposited in a new bank

account. Letter dated 12th September, 2002 written by Mr. Manish

Mittal and filed by Dr. Mahesh Chand Jain before the learned

Metropolitan Magistrate states that this amount should be

deposited in the account of the partnership firm and thereafter Mr.

Manish Mittal would take a prudent decision. The aforesaid stand

of Mr. Manish Mittal cannot be regarded as an action/inaction

which is "wrongful" and, so as to satisfy the first ingredient of

Section 425.

CRL.M.C. Nos. 2683/2007 & 2136/2008 14

15. Under Section 12(b) of the Partnership Act, a partner is

duty bound to diligently attend to his duties in conduct of business

but degree of liability is not widely interpreted and extended. A

loss sustained by a firm may be imputed to conduct of one partner

more than another, still if the former has acted bonafidely and

without culpable negligence, loss must be borne equally by all. A

partner‟s liability to indemnify the firm arises only when the loss is

due to his fraud, culpable negligence or willful default. The said

strict parameters have to be kept in mind to bring an act of a

partner within „mischief‟ under Section 425 of the IPC.

16. The learned Metropolitan Magistrate has clearly erred in

taking cognizance of an offence under Section 425/427 of the IPC

and erred in summoning the petitioners. Thus the allegations

made in the complaint, pre-summoning evidence and the

documents filed by the complainant do not establish any offence

under Section 425/427 of the IPC. The present case is duly

covered under para 102 of the judgment in State of Haryana

versus Bhajan Lal & Others 1992 Supp. (1) SCC 335, in which

the Supreme Court has observed that a summoning order can be

interfered with and quashed when allegations or complaint made,

on face value ex facie does not establish commission of any

offence.

CRL.M.C. Nos. 2683/2007 & 2136/2008 15

17. In view of the aforesaid discussion, the present petitions are

allowed and the summoning order and the order taking

cognizance dated 2nd June, 2007 passed by the learned

Metropolitan Magistrate is quashed. No costs.

SANJIV KHANNA, J.

APRIL 30, 2010 VKR