PETITIONER: <NAME> Vs. RESPONDENT: THE STATE OF BOMBAY. DATE OF JUDGMENT: 04/05/1956 BENCH: <NAME>, <NAME>: <NAME>, BHUVNESHWAR P. BOSE, VIVIAN JAGANNADHADAS, B. CITATION: 1956 AIR 575 1956 SCR 483 ACT: Criminal breach of trust-Conviction of a banker, Validity of--Government Promissory Notes pledged with a bank to cover overdraft -No overdraft by the <ORG>-Managing Director acting on behalf of all-the Directors pledging the Notes to borrow money for the use of the bank-Legality-Sale of the Notes by the creditors to realise their dues and consequent inability of the bank to return them-Mens rea --Sanction to prosecute by the Company Judge, if required Framing Of charge, if defective-Indian Penal Code (Act XLV of 1860), ss. 409, 79-Indian Contract Act (IX of 1872) s. 179-Indian Companies Act(VII of 1913), S.179-- code of Criminal Procedure(Act V of 1898), ss. 221 , 222 , 223 . HEADNOTE: The appellant was the Managing Director of a bank and held a power of attorney to act on behalf of its Directors and authorising him to borrow money on behalf of the bank. Certain Government -Promissory Notes were pledged with the bank by another bank to cover an overdraft account up to a specified amount. There was, however, no overdraft by the <ORG>. The <ORG> bank was in a precarious financial condition. The appellant pledged the securities with a third party to get a loan for the bank's use and on its failure 484 to repay the same on demand, the creditors sold the securities for realising their dues. The <ORG> bank was thus no longer in a position to return the securities on demand made by the <ORG>. Information. was lodged with the police at the instance of the -Official Liquidator appointed to wind up the bank and the appellant was put up for trial under s. 409 of the Indian Penal Code. Held, that the appellant was guilty of the offence charged and the appeal must be dismissed. Held further, that in the absence of any overdraft by the <ORG>, <ORG> acquired no interest in the securities which it could deal with and s. 179 of the Contract Act had no application. That the delivery of the securities by the <ORG> made the <ORG> a trustee for him and he remained the owner subject to any especial interest created in favour of the <ORG> by the agreement and in a case, such as the present, where there was no question of redeeming the securities by the <ORG>, there having been no overdraft, or sale by the <ORG> in enforcement of any especial interest, as none had accrued to it, <ORG> had no right to deal with the securities. That the question whether the remedy of the <ORG> was by way of a suit for damages for breach of contract or by way of a criminal prosecution would depend on whether or not there was mens rea and. other elements constituting the offence. That although the offence of criminal breach of trust presupposes an entrustment, such entrustment need not conform to all the technicalities of the law of trust, and, consequently, in a case such as the present where the accused had the necessary power and exercised dominion over the securities and caused wrongful loss to the <ORG> and wrongful gain to the <ORG> by dealing with the securities, he was guilty of the offence. That the provisions of s. 79 of the Indian Penal Code were of no avail to him as it was never pleaded in his written statement nor found by the courts below that he Was unaware of the fact that there had been no overdraft at all. That no sanction under s. 179 of the Companies Act was re- quired for the prosecution. The provisions of that section were of a permissive character enabling the court Liquidator to do certain things with the permission of the court and did not in any way control the general law so as to restrict the power of the court to take cognisance of an offence or of the <ORG> to initiate a prosecution or even of a private citizen to move the machinery of the criminal courts to bring an offender to justice. <NAME> v. King-Emperor, ( F.C.R. 93), distinguished and held inapplicable. That the charge framed against the accused fulfilled the requirements of ss. 221 and 222(1) of the Code of Criminal Procedure and 485 as the particulars mentioned in the charge were sufficient to give him notice of the matter he was being charged with it was not necessary to set out also the manner of the commission of the offence as required by s. 223 of the Code. JUDGMENT:

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 152 of 1954.

Appeal by Special Leave from the Judgment and Order dated the 20th October 1953 of <ORG> in Criminal Appeal No. 652 of 1953 arising out of the Judgment and Order dated the 9th April 1953 of <ORG>. <ORG> Bombay in Criminal Case No. 12164/P of 1949.

<NAME> and <NAME> for the appellant. <NAME> and <NAME> for <NAME> for the respondent.

1956. May 4. The Judgment of the Court was delivered by <NAME> is an appeal by special leave directed against the concurrent orders and judgments of the courts below convicting the appellant, under section 409 , Indian Penal Code and sentencing him to rigorous imprisonment for three months and a fine of Rs. 201 or in default, further six weeks rigorous imprisonment., As the appellant had been convicted and sentenced for a similar offence in another case tried by the same Presidency Magistrate, <ORG>, Esplanade, Bombay, he directed the sentence in this case to run concurrently with the sentence in the other case. The charge against the accused in the, trial court is in these terms:-

"The Accused is charged under section 409 of the Indian Penal Code for committing criminal breach of trust in respect of property to wit 3% Government Promissory Loan Notes 1966-68 of the face value of Rs. 50,000 and 2-1/4% Government Promissory Notes 1961 of the face value of Rs. 25,000 in or about February to May 1949 entrusted to him in his capacity as Managing Director of <ORG>, and belonging to <ORG>.. (Detailed charge is separately framed)".

The appellant at all material times was the Managing Director of <ORG>, with its head office at Bombay, which hereinafter will be referred to as <ORG>. He held a power of attorney to act as the Managing Director on behalf of the Directors of the Company. By that power the accused was invested with the authority to borrow money on behalf of the <ORG>. In 1944 the Cambay Hindu Merchants Co-operative <ORG> at Cambay, which hereinafter will be referred to as the Co- operative <ORG>., had opened a current account with <ORG>. On instructions from the Co-operative <ORG>, <ORG> purchased in August 1946 securities worth Rs. 25,000 in its own name with money belonging to the Co- operative <ORG> and the securities were kept with <ORG> as a cover for overdraft. In March 1948 two further lots of Government security of Rs. 25,000 each of the value of Rs. 50,000 were purchased likewise and left with <ORG> for the same purpose. On the 14th May 1948 the two banks entered into a contract evidenced by three documents to be noticed in detail hereinafter. Shortly stated, <ORG> agreed to grant the Co- operative <ORG> credit for overdraft up to a limit of Rs. 66,150 and as a security for the overdraft the Government securities of the value of Rs. 75,000 already in the custody of <ORG> was pledged to the latter. These securities of the face value of Rs. 75,000 will hereinafter be referred to as "the securities". But it appears that the Co-operative <ORG> had no occasion to operate on the overdraft account until the 28th February 1949 when the crucial event happened, namely <ORG> finding itself in an embarrassed financial position took a loan from the Canara <ORG> of one lakh of rupees by pledging the securities as also other securities with which we are not concerned in this case. On the 24th April 1949 <ORG> paid off the dues of the Canara <ORG> by taking a fresh loan of the same amount of one lakh from Messrs <NAME> & Co. and pledging the same securities as' had been pledged to the Canara <ORG>. On the 28th April 1949 Messrs <NAME> & Co. demanded back their money by the forenoon of the day following. As <ORG> could not -pay the amount as demanded, the pledgees aforesaid sold those securities including the securities belonging to the Co-operative <ORG>, for realising their dues, on the 3rd May 1949.

In the meantime, -in answer to a letter -from <ORG> to <ORG> asking for a certificate for the securities held by the latter on behalf of the former in the overdraft account, <ORG> issued the certificate dated the 1st April 1949 to the effect that at the close of business on the 31st March 1949 it held <ORG> of India securities of the total value of Rs. 75,000 as security against the overdraft facilities granted to <ORG> and that there was no overdraft against the said securities on that date. Subsequently, on the 29th April 1949 <ORG> wrote to <ORG> asking the latter to hand over securities of the face value of' Rs. 50,000 to <ORG>. <ORG> also on behalf of <ORG> made a similar demand and as <ORG> did not comply with that requisition, <ORG> informed <ORG> by a letter dated the 3rd May 1949 that the securities had not been banded over to <ORG> as directed by <ORG>. <ORG> then wrote to <ORG> for stoppage of the securities of the value of Rs. 25,000. It became clear by then that <ORG> was not in a position to return the securities to the owners, that is to say, <ORG>. In spite of the best efforts of the appellant as the Managing Director of <ORG>, to stave off the crisis by borrowing money from different sources, the run on the bank became so great that the directors applied for and obtained from <ORG>

pany Judge of <ORG> a moratorium of 15 days. On the 18th May 1949 a provisional liquidator was appointed in respect of <ORG> on a creditor's application and on the' 24th June 1949 the Official Liquidator was appointed to wind up the bank. On the 25th June 1949 one <NAME> as agent of the Official Liquidator lodged information with the police charging the appellant with breach of trust in respect of a number of securities including the securities belonging. to <ORG>. On the 31st October 1949 a charge-sheet was submitted by the police under section 409 , Indian Penal Code against the appellant in respect of the securities of the face value of Rs. 75,000 belonging to <ORG>. On the 4th April 1952 the charge as quoted above was framed against the appellant. The delay of about two and a half years in placing the appellant on trial is attributable to the fact that at the request of the accused the trial in respect of this charge was stayed pending the disposal of the other case against him.

At the trial the prosecution examined the Manager of <ORG> as P.W. 1. He proved the transactions between that <ORG> and the Exchange <ORG>. The second witness for the prosecution was a partner in the firm of Messrs <NAME> during the material time. He proved the transaction of the loan by his firm to the Exchange <ORG> of one lakh of rupees on the pledge of the securities belonging to the Co-operative <ORG>, as also other securities. He deposed to the fact that it was the appellant who finalised the transaction on behalf of the Exchange <ORG>. He also proved that in default of payment by the Exchange <ORG> on demand by his firm, it sold the securities including the securities in question and realised the dues from the <ORG> from the sale proceeds of securities of the value of one lakh of rupees. The third witness for the prosecution was' the Chief Accountant of the Exchange <ORG> who functioned as such till the 2nd May 1949 when the <ORG> closed down. He also had a power of attorney from the <ORG> to act jointly with another person with a similar power of attorney. According to this witness, the appellant as the Managing Director exercised the powers of borrowing, raising money, -purchasing, selling and pledging of bonds., scrips and other forms of securities on behalf of the <ORG> and its constituents during the relevant period. and that no one else exercised those powers. He -also testified to the fact that there was a crisis in the affairs -of the <ORG> from about the middle of February 1949-and that there was a rush on the <ORG> which continued till it closed down. He also proved the fact that during the-material time the Co-operative <ORG> had a credit balance in its favour and that there was no overdraft by that <ORG> from the Exchange <ORG>. He proved Exhibits E, F and G which are the documents evidencing the contract between the two banks in respect of the pledge of the security. He corroborated the previous witness that it was the appellant who negotiated and finalised the loan of one lakh of rupees from the Canara <ORG> and that the securities in question along with others had been pledged to the Canara <ORG>. It was he who had endorsed the securities to the Canara <ORG>. He stated that the Exchange <ORG> had submitted to the Canara <ORG> a declaration to the effect that the said securities belonged absolutely to the Exchange <ORG>. As there was a heavy rush of depositors on the bank,the loan from the Canara <ORG> was taken to satisfy the demand of the depositors. The most important witness examined on behalf of the prosecution is P.W. 4, <NAME>. He was an accountant in the Exchange <ORG> during the relevant period. He was also working with the Official Liquidator of the <ORG> after its liquidation was ordered by court. Like the previous witness, he also had a power of attorney to act only in conjunction with another per-son holding a similar power. He supports the previous witness in saying that the power of borrowing money or of purchasing, selling or pledging or repledging securities was exercised by the appellant and by no other person on all material dates. He also corroborates the previous witness and' states that there was a crisis in the bank from about the middle of February 1949 and that there was a heavy rush on the bank from that time till it closed down. He also proves Exs. E, F and G and states that from the 14th May 1948 when these documents were executed between the two banks till the 2nd May 1949 when the Exchange <ORG> closed its doors there was no overdraft by the Co-operative <ORG> which always had a credit balance. He also gives the -details of the transaction of the loan of one lakh between the Exchange <ORG> and the Canara <ORG> and the details of the securities pledged by way of security for that loan. He makes the following very significant statement:-

"I had handed over the two securities belonging to <ORG> to the accused for being handed over to <ORG> against the loan. The accused actually asked me for these securities and I handed them to the accused".

To a court question as to why he did not bring it to the notice of the appellant that the securities in question belonged to <ORG> and not to <ORG>, his answer is in these words.--

"In fact, the accused himself told me to bring securities pleged by <ORG> with <ORG>".

He also proves Ex. L, which is a very important document in this case and proves that it was signed by the accused. He further states that the declaration in that document that the securities rep I resented <ORG> investments was not correct. He also makes detailed statements as to the different kinds of interest which the appellant had in <ORG>. He was drawing Rs. 2,500 as monthly salary as the Managing Director. He was also drawing a salary of Rs. 1,000 from <ORG>, is its Managing Director. The Insurance Company and its branches had a current account with <ORG> and had advanced to the latter six to seven lakhs of rupees as "call deposits". The appellant was also connected with <ORG>, Advertising Agents, which had been given overdraft facilities by <ORG>. The appellant was also getting Rs. 2,000 per month as salary from the aforesaid Advertising Agents. The appellant and his wife were the principal shareholders in <ORG>, who were the Secretaries and Treasurers of <ORG>. <ORG> had advanced to the aforesaid <ORG> a loan of one crore and ten lakhs of rupees and Messrs <ORG> aforesaid were getting a remuneration of Rs. 2,500 per month from <ORG> Ltd. It would thus appear that the appellant along with his wife in one way or another was getting about Rs. 8,000 per mensem as remuneration from the different companies referred to above which were closely associated with one another from the financial point of view and that the, appellant was the chief person concerned with them and the connecting link between them. It was naturally his interest to see that <ORG> continued its existence as long as could be arranged even by borrowing large sums of money when there was already a run on the bank. It is in the background of all these facts and circumstances that the appellant'sacts of commission and omission had to be judged. The other four witnesses, P.Ws. 5 to 8 are more or less formal witnesses in the sense that they have proved certain documents and letters which need not be noticed. The evidence of P.W. 2 had to be set aside as he was not available for cross-examination after charge, being out of the country.

The appellant's defence is disclosed in a long written statement running into twenty paragraphs and seven closely typed pages submitted on the 3rd October 1952. Shortly stated, it is to the effect that the charge framed against him is bad in law and extremely vague; that the vagueness of the charge had "considerably handicapped" his defence, that the prosecution had not been fair in that it had not exa- mined the first informant, <NAME>, that if he had been examined 'by the prosecution, the appellant would have shown from the records in his possession  that <ORG> had not suffered any loss and that the <ORG> in the hands of the Liquidator had more than sufficient funds to pay the dues of the former; that the prosecution bad not been launched with the sanction of the Company Judge who was in seisin of the liquidation proceedings in respect of the Exchange <ORG> and that therefore the provisions of sections 179 and 237 of the Indian Companies Act had not been complied with; that the securities in question had not been entrusted to the appellant but to the Exchange <ORG>,' if at all there was any entrustment, and that as a matter of fact and law, the Ex- change <ORG> had not been entrusted with the securities, that the Exchange <ORG> "Court legally deal with the securities in any manner it liked", as provided in the documents, Exs. E, F and G, between the two banks; that the sub-pledging of the securities with the Canara <ORG> or with Messrs <NAME> was "perfectly. within the four corners of the law", and that the essential ingredients of an offence under section 409 , Indian Penal Code had not been made out. Grievance was also sought to be made of the fact that Inspector <NAME> who had investigated the case had not been called as a. prosecution witness, with the result that the appellant had been deprived of the right of challenging the prosecution evidence with reference to the police diary. The learned Magistrate after a very fair and full examination of the evidence in the case and the points raised by the appellant in his defence came to the conclusion that the appellant was guilty of the offence of criminal breach of trust under section 409 , Indian Penal Code and passed a lenient sentence, as stated above, *in view of the, consideration that "not a pie went to the pocket of the accused", and that "the accused had not taken up any dishonest defence". The learned Magistrate held that the charge as framed was not vague in view of the provisions of section 222 , Criminal Procedure Code , with special reference to the terms of sub-section (2) of that section. On the question of the non-examination of the first informant, <NAME>, and of the investigating police officer, the learned Magistrate observed that they were formal witnesses inasmuch as the facts of the case were not in dispute. Furthermore, the court observed that if the accused or his lawyer who defended him at the later stage of the prosecution, had applied to the' court for their being examined, they could have been called as witnesses and subjected to cross-examination by the accused. But no such, application had been made. As regards want of sanction of the Company Judge, he held that section 179 of the lndian Companies Act had no application to the facts of the present case, as it was not a prosecution under the Companies Act and that therefore no such sanction as is contemplated by that section was necessary. Dealing with the appellant's contention that there was no entrustment within the meaning of section 405 , Indian Penal Code the learned Magistrate observed that the accused held delegated powers from <ORG> and he held the property in trust on behalf of the Directors of the Exchange <ORG>. He further held that the contract of pledge dated the 14th May 1948 between the two banks did not vest any right in the Exchange <ORG> absolutely to deal with the securities and that at any rate, the Exchange <ORG> could not deal with the securities so long as the Cooperative <ORG> had not taken an overdraft from the former. In dealing with the question whether the appellant had dealt with the securities dishonestly, he held that in all the circumstances of the case there was no doubt that wrongful loss was caused to <ORG> and wrongful gain not to the accused personally but to the Exchange <ORG> which he represented during the transactions in question.

On appeal to <ORG>, <ORG> of that court dismissed the appeal. substantially agreeing with the findings of the trial court. Dealing with a new point raised before the appeal court, namely, that the appellant was under a mistake of fact or law as to the indebtedness of <ORG> to <ORG> or as to its powers to deal with the security, <ORG> held that there was no possibility of the appellant having made any mistake of fact in good faith. The court also pointed out that the appellant himself had not raised this plea of mistake either about the facts of the case or about any doubtful question of law. The court also pointed out the declarations made by the appellant on behalf of <ORG> that the securities belonged absolutely to the bank and represented its investments-statements which he knew were false. While dealing with the appeal on the question of sentence, <ORG> pointed out that there was good evidence to support the inference that the appellant had been actuated by motives of personal benefit also. In that view of the matter <ORG> maintained the conviction and the sentence passed by the trial Magistrate. The appellant then moved <ORG> for a certificate that the case was a fit one for appeal to this Court. The cer- tificate was refused by that court. Thereafter the. appellant moved this Court and obtained special leave to appeal.

In support of the appeal the learned counsel for the appellant has raised a number of questions of law and at the forefront of his argument contended that both in law and on a proper construction of the contract between the two banks the appellant was fully entitled to pledge the securities as long as the overdraft agreement subsisted, irrespective of whether or not there was an actual overdraft by <ORG> on the date of the pledge, that is to say, on the 28th February 1949.

Examining the position with reference to the contract between the two banks, we find that Exhibits E, F and G, all dated the 14th May 1948, are parts of the same transaction and evidence the terms of the contract between them. Ex. E is a promissory note executed by <ORG> in favour of <ORG> for the sum of Rs. 66,150 with interest at three per cent. per annum with half yearly rests. Ex. F is a letter addressed by <ORG> to <ORG> enclosing Ex. E, and Ex. G is the bond pledging all marketable securities and goods to <ORG> in consideration of its promise to grant credit for overdraft limited to the amount aforesaid in favour of <ORG> from time to time with interest at three per cent. per annum as aforesaid. The significant portion of the bond is in these terms:-

"........................... and we agree and undertake that in the event of our failure to maintain the margin on the said movable property marketable securities and goods in the manner hereinafter provided or failing repayment on demand to you by us of the amount of such advance or credit with interest cost charges and expenses as aforesaid you shall be entitled, but not bound, to sell or otherwise dispose of all or any of the said movable property marketable securities and goods by public auction or private contract in such manner and upon such terms and subject to such conditions as you may think fit without any reference to us or obtaining our consent, and the proceeds of such sale or disposal shall be applied first in payment of all costs charges and expenses of and incident to such sale or disposal and the enforcement of the -pledge and charge in your favour hereby created, secondly in repaying the amount of such advance or credit with interest as aforesaid and all costs charges and expenses incurred -by you in relation thereto not otherwise met including loss in exchange (if any) and all other debts and monies however due to you by us and lastly in payment to us of the surplus if any thereafter remaining, declaring as it is hereby expressly provided agreed and declared that this shall be continuing security to cover the amount of any advance or credit which you have allowed to us Or may from time to time allow us with interest costs, charges and expenses and all other debts and monies due as aforesaid................. "

Reading Exhibits E, F and G together, it is clear that the securities of the face value of Rs. 75,000 were pledged to <ORG> as security for overdraft up to the limit of Rs. 66,150 for which <ORG> had given the promissory note to <ORG>. It was further stipulated that in the event of the <ORG> making a default in payment on demand of the amount advanced by way of overdraft with outstanding interest it may be realised by <ORG> by sale of those securities and after -satisfying the pledgee's dues against the <ORG>, if there -was any outstanding amount the surplus of the sale proceeds shall be paid back to the <ORG>. Thus it is clear that according to the terms of the contract <ORG> was not entitled, as contended on behalf of the appellant, to sell the securities even though there may not have been any outstanding dues from <ORG>. The securities were to be kept by <ORG> charged with the payment of such amount as may from time to time have been advanced or be advanced under the overdraft arrangement. But that charge was not an absolute one without reference to the state of accounts between the two banks; in other words, there would be a charge only when there was an adverse balance against <ORG>. We know that at all material times <ORG> had not drawn any sum from <ORG> in pursuance of the agreement referred to above. The right of <ORG> to deal with the securities under the agreement would arise only on the happening of certain events, namely, that the <ORG> either had failed to maintain the proper margin or had made a default in repayment of the outstanding amount on demand by <ORG>. So long as those contingencies did not arise,-and it is nobody's case that any of those contingencies had arisen,--the pledgee bank had no right to deal with the securities by way of pledge, sub-pledge or assignment. In this connection our attention was invited to the provisions of section 179 of the Indian Contract Act in support of the contention that as the securities had been agreed between the two banks to be a cover for overdraft not exceeding Rs. 66,150, up to that amount the pledgee bank bad an interest in those securities which it could have dealt with. It was further argued that as there was nothing to show that the appellant had dealt with the securities for a larger amount than that, he could not be said to have contravened the terms of the contract. In our opinion, there is no substance in-this contention. Section 179 predicates that the <ORG> has a limited interest which he can deal with and his transaction to that extent would be valid. If <ORG> had as a matter of fact operated upon the overdraft account and bad drawn any sum with in the limit aforesaid, <ORG> would have an interest pro tanto in those securities and might then have been entitled to pledge or sub-pledge the securities with a third party. But so long as there was no overdraft by the <ORG>, the pledgee bad no such interest as it could in-its turn pledge or sub-pledge to a third party. Furthermore, it is clear from the narrative of events given above that the appellant dealt with the securities with third parties on the footing, after an express declaration had been made by him, that those securities were the absolute property of <ORG>. We are not here concerned with -the question of the extent of interest acquired by such third party. We are only concerned with determining the legal position as between the two banks <ORG> being represented by its Managing Director, the appellant. Hence there is no difficulty in holding that on the terms of the contract between the two banks the appellant was not entitled to transfer any interest in those securities and if be did so he did it in contravention of the terms -of the contract. We will now deal with the legal position, apart from the terms of the contract. On the facts stated above <ORG> had become the bailee in respect of the securities. The securities had been delivered by <ORG> to <ORG> for the express purpose, as disclosed in the contract set out above, that they shall be disposed of in ,accordance with the terms contained in Exhibit G set out above. By the very fact of the delivery of the securities to the bailee the latter became a trustee in terms of the contract, not for all purposes, but only for the, limited purpose indicated by the agreement between the parties. The <ORG> has in the present case only transferred his possession of the property to the pledgee who has a special interest in the property of enforcing his charge for payment of an overdraft, if any, whereas the property continues to be owned by the <ORG>. The special interest of the pledgee comes to an end as soon as the debt for which it was pledged is discharged. It is open to the <ORG> to redeem the pledge by full payment of the amount for which -the pledge had been made at any time if there is no fixed period for redemption, or at any time after the date fixed and such a right of redemption continues until the thing pledged is lawfully sold. Hence <ORG> in this case could have asked for a return of the securities at any time, because there never was any overdraft. As the pledge had been terminated neither by redemption,, nor by a lawful sale on the happening of such contingencies as the parties contemplated in their agreement or the law allowed, the securities continued to be the property of <ORG> and <ORG>, or the appellant as its Managing Director., bad no right to deal with them.

It was next contended, alternatively, that assuming that <ORG> had dealt with the securities in contravention of the terms of the agreement, the appellant had, as representing the bank, only committed a breach of contract, the remedy for which was a suit for damages and not a criminal prosecution. This argument assumes that the same set of facts cannot give rise both to a civil liability and a criminal prosecution. It is manifest that such an argument in its bald form cannot be acceptable. If there is no mens rea, or if the other essential ingredients of an offence are lacking, the same facts may not sustain a criminal prosecution, though a civil action may lie. We have therefore to examine whether or not there was mens rea in this case or whether the necessary element of a criminal. offence have been made out.

It has been contended that no offence under section 409 , Indian Penal Code has been brought home to the appellant for the reasons, (1) that there was no entrustment, (2) that there was no mens rea, and (3) that there was no dishonesty on the part of the appellant. For an offence under section 409 , Indian Penal Code , the first essential ingredient to be proved is that. the property was entrusted. It has been argued that in this case there was no such entrustment as is contemplated by that section; and that the securities were pledged with <ORG> by -<ORG> which was in the position of a debtor to the former. 'The contention is that the parties never contemplated the creation of a trust in the strict sense of the term. But when section 405 which defines "criminal breach of trust" speaks of a person being in any manner entrusted with property, it does not contemplate the creation of a trust- with all the technicalities of the law of trust. It contemplates the creation of a relationship whereby the owner of property makes it over to another person to be retained by him until a certain contingency arises or to be disposed of by him on the happening of a certain event. The person who transfers,, possession of the property to the second party still remains the legal owner of the property and the person in whose favour possession is so transferred has only the custody of the property to be kept or disposed of by him for the benefit of the other party, the person so put in possession only obtaining a special interest by way of a claim for money advanced or spent upon the safe keeping of the thing or such other incidental expenses as may have been incurred by him. In the present case <ORG> entrusted <ORG> with the securities for the purpose of keeping them as a security for the overdrafts if and when taken by the former. In law those securities continued to be the property of <ORG> and as it never borrowed any money from <ORG>, the latter had no interest in those,securities which it could transfer in any way to a third party so far as the two banks are concerned. The entrustment was to <ORG> itself But it being a non-natural person, its business had to be transacted by someone who was authorised to do so on its behalf The appellant held the power of attorney on behalf of the directors of the bank to transact business on behalf of the bank. In that capacity the appellant had-dominion over the securities. Hence the appellant can be said either to have been entrusted with the property in a derivative 'sense or to have dominion over the securities as a banker-, and thus in either case, the first essential condition for the application of section 409 , Indian Penal Code is fulfilled.

On the question of mens rea, it has to be determined whether or not the appellant dishonestly disposed of those securities in violation of any of the terms of the agreement aforesaid. As already indicated, the appellant did dispose of these securities in violation of the terms of the contract between the two banks. But still the question remains whether he did so dishonestly; in other words, whether when disposing of those securities the appellant had the intention of causing wrongful gain to <ORG> or wrongful loss to <ORG>. In our opinion, he intended both and, as. a matter of fact, he caused wrongful loss to the pledgor bank and wrongful gain to the pledgee bank. '<ORG> raised money on those securities which it was not entitled to do and <ORG> was deprived of those securities, even though not for all times. It is settled law that a deprivation even for a, short period is within the meaning of the expression. If he disposed of those securities with the intention of causing wrongful loss to the one and wrongful gain to the other, there can be no question but that the ap- pellant had the necessary mens rea.

It was next argued that-assuming that the essential ingredients of an offence under section 409 , Indian Penal Code had been made out, the appellant may have made a mistake of fact in assuming that <ORG> was indebted to <ORG> or may have made a mistake of law in mistakenly believing that <ORG> had the right as the pledgee to sub-pledge those securities for raising money for its own purposes. We know as a fact that <ORG> had not taken any overdraft from <ORG>. But it was argued that it had not been proved that the appellant had that knowledge. The appellant in his long written statement has not tried to take shelter behind any such mistake. He was in full control of the bank accounts and as pointed out by the courts below, it is impossible to believe that in the circumstances in which the bank had found itself and when the appellant was hard put to it to collect all the bank's resources to stave off the severe crisis through which it was passing, the appellant would not have known the fact that <ORG> did not owe his bank any money by way of overdraft. Hence, in our opinion, there is no room for the supposition that the appellant was not aware of the true state of accounts bet- ween the two banks. But then it was argued that the appellant may have made a mistake of law in thinking that he was justified by law in dealing with those securities. The attempt is to bring the case within one of the general exceptions contained in Chapter IV of the Indian Penal Code and set out in section 79 in these terms--

"Nothing is an offence which is done by any person who is justified by law, or who by reason of a mistake of fact and not by reason of a mistake of law in good faith, believes himself to be justified by law, in doing it". In considering a matter of this-kind the attitude of the accused is an important consideration. We note that here the appellant made no attempt in the trial court to set up such a defence. If he had ever said that he made a mistake of fact after exercising due care and caution that there was an overdraft against <ORG> in favour of <ORG>, he may have been able to take advantage of the exception. But as in this case there was no mistake of fact and as the court was in a position to find that the appellant must have known that there was no such overdraft, there is no room for the application of section 79 quoted above. The appellant cannot avail himself of the exception of section 79 simply by saying that he believed that in law he was entitled to deal with the securities as the property of <ORG>, as he attempted to do in his written statement. If he had further proved that he believed in good faith that <ORG> was indebted to his bank, his belief that he was justified by law in dealing with the securities as the property of the bank may have helped to bring him within the exception. But as there was no mistake about the basic fact, the provisions of section 79 , Indian Penal Code are not attracted to this case.

It now remains to deal with certain objections relating to the illegality or irregularity in the procedure followed in the trial of this case. It was argued that this prosecution was incompetent for the reason that no sanction of the Company Judge had been obtained under section 179 of the Indian Companies Act. The relevant portion of section 179 is as follows:-

"The official liquidator shall have power, with the sanction of the <ORG> to do the following things:-

(a) to institute or defend any suit or prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company;...................." In terms the section lays down the powers of the official liquidator. Such a liquidator has to function under the directions of the court which is in charge of the liquidation proceedings. One of his, powers is to institute prosecutions in the name and on behalf of the company under liquidation with the sanction of the court. This section does not purport to impose any limitations on the powers of a criminal court to entertain a criminal prosecution launched in the ordinary course under the provisions of the Code of Criminal Procedure. Where a prosecution has to be launched in the name of, or on behalf of, the company, it naturally becomes the concern of the Judge to see whether or not it was worthwhile to incur expenses on behalf of the company and therefore, the section requires the sanction of the Judge before -the liquidator can undertake the prosecution or defence in the name of and on behalf of the company. The present case is not a prosecution in the name or on behalf of the company; nor is the official liquidator interested in prosecuting the case. The prosecution was started on a charge-sheet submitted by the police, though the first information report had been lodged by an official under the official liquidator. This was not a prosecution initiated or instituted by the official liquidator. This is not a case which can come even by analogy within the rule laid down by <ORG> in the case of <NAME> v. King-Emperor(1), that a prosecution launched without the previous sanction of the <ORG> within the meaning of clause 16 of the Drugs Control Order, 1943, was completely null and void. In that case their Lordships of <ORG> had to consider the effect of the following words of clause 16 aforesaid:

"No prosecution for any contravention of the provisions of this Order shall be instituted without the previous sanction of <ORG>.......".

It will be noticed that section 179 of the Companies Act does not contain any words similar in effect to those quoted above. Where the legislature intended to place a limitation on the powers of the court to -take cognisance of an offence unless certain conditions were fulfilled, like the provisions of sections 196 and 197 , Criminal Procedure Code , it has used words such as these: "No court shall take cognisance There is nothing in section 179 of the Companies Act which can be construed as restricting the powers of the court to take cognisance of an offence or the powers of the police to initiate prosecution or even of a private citizen to move the machinery of the criminal courts to bring an offender like the appellant to justice. For a prosecution for breach of trust even by a director of a company no such condition precedent as the previous sanction of any authority is contemplated by law, unless it is a prosecution in the name and on behalf of the company by the official liquidator who has to incur expenses out of the funds of the company. Section 179 is an (1)  F.C.R. 93.

enabling provision to enable the liquidator to do certain things with the sanction of the court. It does not control the general law of the land.

It was next contended that the charge as framed by the trial court was illegal and vague and had caused material prejudice to the appellant. The charge as framed has already been set out. The learned trial magistrate had stated at the end that a detailed charge was to be separately framed. But no such charge is before us and the appeal has proceeded on the assumption that no such detailed charge was as a matter of fact framed by the trial court. The question therefore is whether the charge, such as it is, complies with the requirements of the law. It has been argued on behalf of the appellant that the charge is materially defective in so far as the nature of the breach of trust, the facts constituting the breach, the exact date and manner of the breach have not been set out. The charge as framed fulfils the requirements of section 221 , Criminal Procedure Code , because it has mentioned the name of the offence, namely, criminal breach of trust and specified section 409 , Indian Penal Code , which impliedly gives notice to the accused of every legal condition required by law to be fulfilled in order to constitute the offence of criminal breach of trust. It has also fulfilled the requirements of section 222(1) of the Code in so far as it has specified the securities in respect of which and <ORG> against which a criminal breach of trust had been committed. Those particulars, in our opinion, were sufficient to give the accused notice of the matter with which he was charged. The trial court has made reference to the provisions of sub-section (2) of section 222 . But it was in error in relying upon those provisions which relate to the offence of criminal breach of trust or dishonest misappropriation of money, which was not the present case. It is true that the manner of the commission of the offence as required by section 223 of the Code has not been set out. But that has to be set out only when the nature of the case is such that the particulars required by sections 221 and 222 had not given the accused suffi-

cient notice of the matter with which he is charged. In our opinion, though the charge could have been more detailed as was intended by the learned Magistrate, as framed, it gives the accused sufficient notice of the nature of the offence alleged against him. Even assuming that there were certain omissions in the charge, they cannot be regarded as material unless in terms of section 225 of the Code it is shown by the accused that he had in fact been misled by such omission or that there had been a failure of justice as a result of such error or omission. 'The illustrations under that section show that each case has got to be judged on its own particular facts and there cannot be any general presumption that every error or omission in a charge has materially affected a trial or occasioned a failure of justice. In this case from the long written statement filed on behalf of the appellant it is clear that he was aware of the gravamen of the charge against him and that he tried to meet it in all its bearings. We are not therefore impressed by, the argument advanced on his behalf that the omissions in the charge are material and that the case should be tried over again on a fresh charge. The learned Judges of <ORG> constituting <ORG> which heard the appeal have written separate but concurring judgments, but they did not notice any argument, having been advanced before them on the question of the illegality or irregularity in the charge. That also would show that the appellant did not make it a grievance at the time of the argument of the appeal, though a ground had been taken in the memorandum of appeal that the charge as framed was vague and defective and as such bad in law. In our opinion, this is not a case in which it can be said that the omission in the charge has materially affected the trial of the case or prejudiced the appellant in his defence or has occasioned a failure of justice.

As all the grounds raised in support of the appeal fail, it is accordingly dismissed.


PETITIONER: <NAME> & <NAME>. Vs. RESPONDENT: THE STATE OF U.P. AND <NAME>. DATE OF JUDGMENT04/12/1974 BENCH: <NAME>, HANS RAJ BENCH: <NAME>, HANS RAJ RAY, A.N. (CJ) REDDY, P. JAGANMOHAN GOSWAMI, <NAME> CITATION: 1975 AIR 389 1975 SCR (2) 916 1975 SCC (1) 40 CITATOR INFO : R 1978 SC 209 (2) D 1983 SC 383 (8,18,19) R 1992 SC 443 (11,12,13,14) ACT: Motor Vehicles Act , 1939-S.47-Amended by S. 43A of Motor Vehicles (U.P. Amendment) Act, 1972- Scope of amendment. Constitution of India, 1950-If amended section violative of Art. 19(1)(f) and (g). HEADNOTE: For the purpose of making it easier to secure permits in respect of non nationalised routes and to simplify the procedure for this purpose s.47 of the Motor Vehicles Act was amended by inserting s.43-A of the Motor Vehicles (U.P. Amendment) Act, 1972. The section provides that, in the case of non-nationalised routes. if <ORG> is of the opinion that it is in the public interest to grant permits to all eligible applicants it may by notification in the gazette, issue a direction accordingly. A Notification was issued by <ORG>. The appellant, questioned the validity of the section as well as of the notification both of which were upheld by <ORG>. On appeal it was contended (i) that <ORG> issued the impugned notification without applying its mind, as such a notification under s.43-A(2) could have been is- sued only in public interest; (ii) that the deletion of s.47(3) would have the effect of removing the limit on the number of permits for intra-region routes but that fact would not prevent the imposition of a limit for the number of permits for inter-region routes; and (3) that the impugned notification is violative of the rights of the appellants under Art. 19 )1)(f) and' (g) of the Constitution. Dismissing the appeal, HELD : There is no infirmity in the impugned notification. Sub- section 2 of s. 43A gives power to <ORG> to issue directions in respect of non-nationalised routes and areas by means of notification in case the Government is of the opinion that it is in the public interest to grant permits to all eligible applicants. The impugned notification recites that <ORG> is of the opinion that it is in the public interest to grant permits for non-nationalised routes and areas to all eligible applicants. The notification thus ,gives all the particulars which are required by the statute. The notification removed the bar created by the limit on the number of permits for buses which ,could be issued and facilitates the issue of such permits to fresh applicants if they satisfy the requirement of eligibility. Any measure which results in larger number of buses operating on various routes would necessarily eliminate or in any case minimise long hours of waiting at the bus stands. [920 G; 921 A-B] (2) There is no valid basis for the inference that if there is no limit on the number of permits for intra-region routes, limit on the number of permits for inter-region routes would have to be imposed. The object of the impugned notification is to liberalise the issue of permits and it is difficult to see how such a liberal measure can have the effect of introducing strictness or stringency in the matter of grant of permits for inter-region routes. [921 E] (3) There is no valid basis for holding that the impugned provisions were violative of Art. 19. There is nothing in the notification which prevents the appellants from acquiring, holding and disposing of their property or prevents them from practising any profession or from carrying on any occupation. trade or business. The fact that some others have also been enabled to obtain permit for running buses cannot constitute a violation of the appellants' right founder the above two clauses of Art. 19 of the Constitution. [922 B; 921 G] 917 JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2072 of 1972.

Appeal from the judgment and order dated May 17 /3rd August, 1972 of <ORG> in C.W. Petn. No. 2438 of 1972.

<NAME> and <NAME>, for the appellants. <NAME> and <NAME>, for the respondents. The Judgment of the Court was delivered by <NAME>, J.-The short question which arises in this appeal filed on certificate against the judgment of <ORG> is the validity of section 43A , inserted in the Motor Vehicles Act , 1939 by U.P. Act No. 25 of 1972, and the notification dated March 30, 1972 issued under that section. <ORG> upheld the validity of the section and the notification.

The material part of section 47 of the Motor Vehicles Act, 1939 (Act No, 4 of 1939), as it stood before the amendment made by section 43A in Uttar Pradesh, read as under :

"(1) <ORG> shall, in considering an application for a stage carriage permit, have regard to the following matters, namely :-

(a) the interest of the public generally;

(b) the advantages to the public of the service to be provided, including the saving of time likely to be effected thereby and any convenience arising from, journeys not being broken;

(c) the adequacy of other passenger transport services operating or likely to operate in the near future, whether by road or other means, between the places to be served;

(d) the benefit to any particular locality or localities likely to be afforded by the service;

(e) the operation by the applicant of other transport services, including those in respect of which applications from him for permits are pending;

(f) the condition of the roads included in the proposed route or area;

and shall also take into consideration any representations made by persons already providing passenger transport faci- lities by any means along or near the proposed route or area or by any association representing persons interested in the provision of road transport facilities recognised in this behalf by <ORG>, or by any local authority or police authority within whose jurisdiction any part of the proposed route or area lies-, (3) <ORG> may, having regard to the matters mentioned in sub-section (1), limit the number-

Of stage, carriages genarally, or of any specified. type for which stage carriage permits may be granted in the region or in any specified. area or any specified route within the region."

Section 43A has' been inserted by the Motor Vehicles (Uttar Pradesh Amendment) Act , 1972 (U.P. Act No. 25 of 1972). The material part of section 43A reads as under :-

"(1) The <ORG> Government may issue such directions of a general character as it may consider necessary or expedient in the public interest in respect of any matter relating, to road transport to,, the <ORG>, <ORG> or to any Regional <ORG>, and such <ORG> shall give effect to all such directions.

(2) Without prejudice to the generality of the foregoing power, where the State Government is of opinion that it is in the public interest to grant stage carriage permits (except in respect of routes or areas for which schemes have been published under section 68(C) or contract carriage permi ts or public carrier permits to all eligible applicants, it may by notification in the <ORG> issue a direction accordingly, and thereupon all transport authorities as well as <ORG> constituted under section 64 shall proceed to consider and decide all applications, appeals and revisions in that behalf (including any pending applications, appeals and revisions) as if-

(a) in section 47 ,-

(i) for sub-section (1) the following sub- section were substituted :

(i) <ORG>, Transport Authority shall, in considering an application for a stage car- riage permit, have regard to the following matters, namely-

(b) the advantage to the public of the service to, be,, provided,, including. the saving of time likely to be effected thereby and any convenience arising from journeys not being broken;

(c) the benefit to any particular locality or localities likely to be afforded by the service;

and shall also take into. consideration any representation made by any local authority or police authority within whose jurisdiction any part of the proposed route or area lies.';

(ii) sub-section (3) were omitted;

The impugned notification dated March 30, 1972 roads as under "WHEREAS the state government is of opinion that it is in the public interest to grant stage carriage permits (except in respect of routes or areas for which schemes have been published under section 68C of the Motor Vehicles Act, 1939), contract carriage permits and public carrier permits to all eligible applicants;

Now, therefore, in exercise of the power conferred by section 43A of the Motor Vehicles Act, 1939, the Governor is pleased to direct that stage carriage permits (except in respect of routes or areas aforesaid), contract carriage permits and public carries permits shall be granted according to the provision of the said Act to all eligible applicants." The petitioner-appellants hold stage carriage permits for operating buses on various routes in Uttar Pradesh. It is not necessary to set out any other fact because all that we are concerned with is the validity of section 43A and the notification issued thereunder.

The Motor Vehicles (Uttar Pradesh Amendment) Act, 1972 (U.P. Act No. 25 of 1972) received the assent of the President on May 1, 1972 and was published in <ORG> of the same date. Before that the Governor of U.P. had promulgated U.P. Ordinance No. 9 of 1972. U.P. Act No. 25 of 1972 took the place of that ordinance. The ordinance was repealed by section 3 of the amending Act. The following Statement of Objects and Reasons was given when introducing the Bill which- after being passed by the legislature took the shape of the amending Act:

"Operators engage in a race for securing permits for stage carriages on non- nationalised routes. Due to limitation on the number of permits this business is controlled by a few persons. Complaints in this regard are made every other day. Therefore, with a view to making it easier to secure permits in respect of non-nationalised routes and to introducing simplicity in procedure and to providing greater employment and securing equitable distribution thereof it was con- sidered necessary to amend sections 47 , 50 , 55 , 57 and 64 of the Motor Vehicles Act, 1939, suitably. Accordingly, in the public interest and with the aforesaid objects in view the Motor Vehicles (Uttar Pradesh Amendment) Ordinance, 1972 was promulgated. This Bill is introduced to replace the said ordinance."

Perusal of section 43A shows that the object of the legislature in inserting it in the Motor Vehicles Act was to make it easier to secure permits in respect of non- nationalised routes. The section seeks to simplify the procedure for this purpose. It has accordingly been pro- vided that in the case of non-nationalised routes if <ORG> is of the opinion that it is in the public interest to grant permits to all eligible applicants, it may by notification in the <ORG> issue a direction accordingly. Once such notification is issued a number of consequences which have been enumerated in the various clauses of sub-section (2) of section-43A, follow. One effect of such notification is that the transport authorities shall proceed to consider and decide applications, appeals and revisions (including pending applications appeals 'and revisions) as if sub-section (3) of section 47 were omitted. Under that sub-section <ORG> was required to limit the number. of stage carriages generally, or of any specified type for which stage carriage permits might be. granted in the region or in any specified area or on any specified route within the region. As a consequence of the omission of that sub-section, it would be no longer necessary for <ORG> to put a limit on the number of stage carriage permits. The result would be that it would be permissible to issue any number of such permits having regard to the interest of the public generally, the advantage to the public of the service to be provided, including the saving of time likely to be effected thereby and any convenience arising from journeys not being broken as also the benefit to any particular locality or localities likely to be afforded by the service. <ORG> has also to take into consideration any representations made by a local authority or police authority within whose. jurisdiction any part of the proposed route or area lies. Sub-section (1) of section 43A clothes <ORG> with power to issue directions of a general character as it may consider necessary or expedient in the public interest in respect of any matter relating to road transport. The transport authorities have been enjoined to give effect to all such directions. <ORG> in exercise of the power conferred apparently by sub-section (2) of section 43A has issued the impugned notification dated March 30, 1972 in respect of routes or areas for which schemes have not been published under section 68C of the Motor Vehicles Act. According to the notification, contract carriage permits and public carrier permits shall, except in respect of routes or areas mentioned above, be granted according to the provisions of the said Act to all eligible applicants.

It has been argued on behalf of the appellants that <ORG> issued the impugned notification without applying its mind, as such a notification under sub-section (2) of section 43A could have been issued only in public interest. We are unable to accede to this contention as we find no such infirmity in the impugned notification. Sub- section (2) of section 43A gives power to <ORG> to issue direction in respect of non-nationalised routes and areas by means of notification in case that Government is of the opinion that it is in the public interest to grant permits to all eligible applicants. The impugned notification recites that <ORG> is of the opinion that it is in the public interest to grant permits for non-nationalised routes and areas to all eligible applicants. The notification thus gives all the particulars which are required by the statute. It is no doubt true that <ORG> failed to file a return in <ORG> in support of its plea that the impugned notification was issued because the Government was of the opinion that it was in the public interest to grant permits to all eligible applicants, but that omission, in our opinion, is not very material as that fact is self-evident from the notification. The notification removes the bar created by the limit on the number of permits for buses which could be issued and, facilitates the issue of such permits to fresh applicants if they satisfy the requirement of. eligibility. It hardly need much argument to show that the larger number of buses operating on different routes would be for the convenience and benefit of the travelling public and as such would be in the public interest. Any measure which results in larger number of buses operating on various routes would necessarily eliminate or in any case minimise long hours of waiting at the bus stands. It would also relieve congestion and pro- vide for quick and prompt transport service. Good transport service is one of the basic requirements of a progressive society. Prompt and quick transport service being a great boon for those who travel, any measure which provides for such an amenity is in the very nature of things in the public interest.

Argument has also been advanced that the deletion of section 47(3) would have the effect of removing the limit on the number of permits for intra-region routes but that fact would not prevent the imposition of a limit for the number of permits for inter-region routes. This argument has been advanced in the context of the case of the appellants that the impugned provisions discriminate in the matter of issue of permits for intra-region routes and those for inter- region routes and as such are violative of article 14 of the Constitution. We arc not impressed by this argument for we find no valid basis for the inference that if there is no limit on the number of permits for intra-region routes, limit on the number of permits for inter-region routes would have to be imposed. The object of the impugned notification is to liberalise the issue of permits and we fail to see as to how such a liberal measure can have the effect of introducing strictness or,, stringency in the matter of grant of permits for inter-region routes. Assuming that a different rule is applicable in the matter of inter-region routes, the differentiation is based upon reasonable classification. It is nobody's case that the impugned provision brings about discrimination in the matter of grant of permits between applicants belonging to the same class. The argument about the impugned provision being violative of article 14 is wholly untenable.

The contention that the impugned notification is violative of the rights of the appellants under article 19(1)(f) or

(g) of the Constitution is equally devoid of force. There is nothing in the notification which prevents the appellants from acquiring, holding and disposing of their property or prevents them from practising any profession or from carrying on any occupation. trade or business. The fact that some others have also beer enabled to obtain permits for running buses cannot constitute a violation of the appellants, rights under the above two clauses of article 19 of the Constitution. The above provisions are not intended to grant a kind of monopoly to a few bus operators to the exclusion of other eligible persons. No right is guaranteed to any private party by article 19 of the Constitution of carrying on trade and business without competition from other eligible persons. Clause (g) of article 19(1) gives a right to all citizens subject to article 19(6) to practise any profession or to carry on any occupation, trade or business. It is an enabling provision and does not confer a right on those already practising a profession or carrying on any occupation, trade or business to exclude and debar fresh eligible entrants from practising that profession or from carrying on that occupation, trade or business. The said provision is not intended to make any profession, business or trade the exclusive preserve of a few persons. We, therefore, find no valid basis for holding that the impugned provisions are violative of article 19. The appeal consequently fails and is dismissed with costs. Appeal dismissed P.B.R.