Mere Dispute On Monetary Demand Does Not Attract Offence Of Criminal Breach Of Trust U/S 405 IPC : Supreme Court

The Supreme Court observed that a mere dispute on monetary demand does not attract the offence of criminal breach of trust under Section 405 IPC. 

In this case, the complainant had alleged that “a forged demand of Rs. 6,37,252.16p had been raised by the accused JIPL". Though complainant had invoked Sections 405, 420, 471, and 120B of the IPC, the Magistrate issued summons only under Section 406 of the IPC. This summoning order was unsuccessfully challenged before the Allahabad High Court.

The Apex Court bench first noted that, for Section 405 of the IPC to be attracted, the following have to be established:

(a) the accused was entrusted with property, or entrusted with dominion over property;

(b) the accused had dishonestly misappropriated or converted to their own use that property, or dishonestly used or disposed of that property or wilfully suffer any other person to do so;

(c) such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.

The bench noted that, in the instant case, materials on record fail to satisfy the ingredients of Section 405 of the IPC and the complaint does not directly refer to the ingredients of Section 405 of the IPC and does not state how and in what manner, on facts, the requirements are satisfied. Pre-summoning evidence is also lacking and suffers on this account, it said.

"Criminal breach of trust would, inter alia, mean using or disposing of the property by a person who is entrusted with or otherwise has dominion. Such an act must not only be done dishonestly, but also in violation of any direction of law or any contract express or implied relating to carrying out the trust... A mere wrong demand or claim would not meet the conditions specified by Section 405 of the IPC in the absence of evidence to establish entrustment, dishonest misappropriation, conversion, use or disposal, which action should be in violation of any direction of law, or legal contract touching the discharge of trust. Hence, even if complainant is of the opinion that the monetary demand or claim is incorrect and not payable, given the failure to prove the requirements of Section 405 of the IPC, an offence under the same section is not constituted...In the absence of factual allegations which satisfy the ingredients of the offence under Section 405 of the IPC, a mere dispute on monetary demand of Rs. 6,37,252.16p, does not attract criminal prosecution under Section 406 of the IPC.", the bench said.

The bench also examined whether other offences were attracted. For this purpose, it discussed ingredients of Section 415, 420 and 471 IPC (Please see headnotes section).

The court, while allowing the appeal, quashed the summoning order. (This aspect is dealt seperately in another report)

Case details

Deepak Gaba vs State of Uttar Pradesh | 2022 LiveLaw (SC) 3 | CrA 2328 OF 2022 | 2 January 2023 | Justices Sanjiv Khanna and J K Maheshwari

Headnotes

Code of Criminal Procedure, 1973 ; Section 204 - Summoning order is to be passed when the complainant discloses the offence, and when there is material that supports and constitutes essential ingredients of the offence. It should not be passed lightly or as a matter of course. When the violation of law alleged is clearly debatable and doubtful, either on account of paucity and lack of clarity of facts, or on application of law to the facts, the Magistrate must ensure clarification of the ambiguities. Summoning without appreciation of the legal provisions and their application to the facts may result in an innocent being summoned to stand the prosecution/trial. Initiation of prosecution and summoning of the accused to stand trial, apart from monetary loss, sacrifice of time, and effort to prepare a defence, also causes humiliation and disrepute in the society. It results in anxiety of uncertain times. (Para 21)

Indian Penal Code, 1860 ; Section 405 , 406 -   A mere dispute on monetary demand does not attract the offence of criminal breach of trust - Mere wrong demand or claim would not meet the conditions specified by Section 405 of the IPC in the absence of evidence to establish entrustment, dishonest misappropriation, conversion, use or disposal, which action should be in violation of any direction of law, or legal contract touching the discharge of trust. (Para 15)

Code of Criminal Procedure, 1973 ; Section 202,204 - While summoning an accused who resides outside the jurisdiction of court, it is obligatory upon the Magistrate to inquire into the case himself or direct investigation be made by a police officer or such other officer for finding out whether or not there is sufficient ground for proceeding against the accused. (Para 22)

Indian Penal Code, 1860 ; Section 415, 420 - The sine qua non of Section 415 of the IPC is “fraudulence”, “dishonesty”, or “intentional inducement”, and the absence of these elements would debase the offence of cheating - For the offence of cheating, there should not only be cheating, but as a consequence of such cheating, the accused should also have dishonestly adduced the person deceived to deliver any property to a person; or to make, alter, or destroy, wholly or in part, a valuable security, or anything signed or sealed and which is capable of being converted into a valuable security. (Para 17)

Indian Penal Code, 1860 ; Section 464, 470 471- The condition precedent of an offence under Section 471 of the IPC is forgery by making a false document or false electronic record or part thereof - A person is said to have made a ‘false document’: (i) if he has made or executed a document claiming to be someone else or authorised by someone else; (ii) if he has altered or tampered a document; or (iii) if he has obtained a document by practising deception, or from a person not in control of his senses. Unless, the document is false and forged in terms of Sections 464 and 470 of the IPC respectively, the requirement of Section 471 of the IPC would not be met. (Para 18)

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