This article has been written by Vishwendra Prashant, a law student at ICFAI University, Dehradun. This article discusses important case laws relating to Section 409 of IPC. However, most of these case laws are recent ones.
It has been published by Rachit Garg.
Table of Contents
Section 409 of the Indian Penal Code, 1860 deals with criminal breach of trust by public servants, bankers, merchants, factors, brokers, attorneys, or agents. However, the duties of such persons are highly confidential, involving great powers of control over the properties entrusted to them. So, a breach of trust by such persons is punishable under this Section.
Now coming to the punishment for the offence under Section 409 IPC, the offenders are punishable with imprisonment for life, or with imprisonment of up to 10 years along with a fine.
Sardar Singh v. State of Haryana (1976)
- In this case, the appellant was a patwari in Revenue Circle Raisina, Gurgaon.
- When he took charge of the post, a memo was prepared by setting out various books and documents that he had received at the time of taking charge.
- He was suspended based on a departmental inquiry.
- He was directed to hand over the charge of his post, but he failed to do so.
- The Revenue Assistant, Gurgaon ordered to break open the lock of his room.
- His successor took charge of the post, and a list was prepared by setting out the books and documents that were found in the room and of which possession was taken by the successor.
- Another list was prepared to show the books and documents missing from the room.
- As per the list, three documents, namely roznamcha waqiati (a diary of daily transactions which is maintained by the Patwari), copying fee register, and receipt book were missing from the room.
- The case of the prosecution was that the appellant had committed a criminal breach of trust regarding three documents and an amount of Rs. 26.50 p. that he had received for issuing certified copies in his capacity as Patwari.
- The Judicial Magistrate First Class acquitted the appellant and held that there was no proof of entrustment of the said amount to the appellant, and he had no charge on the roznamcha waqlati and copying fee register. Regarding the receipt book, the Magistrate found that the appellant had entrustment
- of the same in his capacity as Patwari, and it was not found in his room.
- The Magistrate convicted the appellant under Section 409 IPC and sentenced him to imprisonment till rising of the Court along with a fine of Rs 100.
- The appellant filed an appeal before the Sessions Judge. The Sessions Judge considered the order of the Judicial Magistrate First Class and dismissed the appeal.
- The appellant filed a revision petition before the Punjab & Haryana High Court. This Court dismissed the petition.
- Being aggrieved by the dismissal of the revision petition by the High Court, the appellant filed an appeal before the Hon’ble Apex Court.
- Whether the appellant is liable for criminal breach of trust regarding the receipt book under Section 409?
The Hon’ble Apex Court (Supreme Court) said that there was no receipt book in the room, and he did not return the same to his successor. However, he was not liable for criminal breach of trust due to the absence of evidence regarding the misappropriation of the receipt book. Hence, he was wrongly convicted under Section 409 of the IPC. The Supreme Court allowed the appeal and set aside the order of conviction. Thus, the sentence recorded against the appellant was set aside, and he was acquitted of the offence under the said Section.
The Supreme Court held that mere failure or omission to return properties is not enough to prove the commission of the offence under Section 409.
L. Chandraiah v. State of AP (2003)
- In this case, there were six accused persons named A1, A2, A3, A4, A5, and A6.
- A1 worked as a Sub-Postmaster at a Sub-Post Office from April 1986 to May 8, 1987. A2 was a successor of A1 and worked from May 8, 1987, to November 16, 1987. A3 was a Postal Assistant in the same Sub-Post Office. A4 was a postman in the same office. A5, an employee of the Postal Department, had resigned in 1987. A6 was a student living with A3 as a tenant.
- The workers of a company opened several recurring deposit accounts in that Sub-Post Office.
- The management of the company deducted the amount contributed in those accounts from the wages of the workers and directly remitted to the Post Office.
- The management remitted a single cheque for the total sum, and the Postal Authorities made the required entries in each account.
- The procedure for withdrawal of the amount from the recurring deposit account was that the management, after fixing its seal on the withdrawal voucher, would send the same to the Postmaster, and the workman would sign the said voucher for withdrawal in the presence of the Postmaster.
- The prosecution case was that the accused persons were involved in a conspiracy to make a huge number of withdrawals from those accounts. They withdrew a sum of Rs 91,280 from those accounts through fabricated vouchers with forged signatures.
- The workers stated that they had never withdrawn those amounts from their accounts.
- The Trial Court convicted A1, A2, and A3 under Sections 409, 467, and 471 IPC and Sections 5(1)(c) and (d) read with Section 5(2) of the Prevention of Corruption Act 1947. Moreover, this Court acquitted A4, A5, and A6.
- The Trial Court sentenced A1 to undergo rigorous imprisonment of one year under Section 409 IPC. Further, this Court sentenced A2 to undergo rigorous imprisonment of two years under Section 409 IPC.
- A1 and A2 filed appeals before the High Court of Judicature, Andhra Pradesh at Hyderabad to challenge the conviction. The High Court dismissed the appeals and upheld the conviction.
- Both the accused filed appeals before the Supreme Court.
- Whether the conviction of the appellants (A1 and A2) was correct in the eyes of the law?
- Whether the appellants knew that the vouchers were forged by A3?
The Supreme Court observed that A1 and A2 did not know that vouchers were fabricated by A3 dishonestly and fraudulently. There was no evidence to prove that A1 and A2 knew about the fraud, so A1 and A2 had no criminal intent. Therefore, the said conviction of the appellants was not maintainable. This Court acquitted them. Moreover, the Supreme Court held that the offence under the Section requires criminal intent or mens rea.
N. Bhargavan Pillai v. State of Kerala (2004)
- In this case, the accused was an Assistant Taluk Supply Officer.
- He was working as a Junior Manager on deputation in the Kerala State Civil Supplies Corporation at Kowdiar.
- Based on the order (dated April 14, 1983) of the Regional Manager of a Corporation, he took charge as Unit Manager in the Punalur Unit. His term of deputation to the Corporation was 5 years i.e., till June 30, 1986.
- The Corporation requested the Civil Supplies Department to extend the term by one year.
- Later, the Managing Director of the Corporation limited the request for an extension of the term up to Nov 30, 1986, by a request letter. He sent that letter to the Director of Civil Supplies, Board of Revenue.
- The Regional Manager of the Corporation issued an order to relieve the accused effective from Nov 29, 1986.
- However, the accused did not attend the office after Nov 27, 1986, and did not hand over the charge on Nov 29, 1986. He applied for leave. Moreover, he neither handed over the keys of the Punalur godown nor verified the stock.
- He reported to the godown on Dec 13, 1986, and brought the keys.
- He opened the godown in the presence of the then Assistant Manager. He also undertook in writing to hand over charge on the 13th, 15th, and 16th Dec 1986.
- In his presence, the verification of items found in the godown took place. Only a stock of 21.875 quintals of M.P. boiled rice and 84 kg of tamarind was found in the godown.
- The stock should be 123.65 quintals of boiled rice, so there was a shortage of 102 quintals. Moreover, there were no stocks of Palmolein and free-sale sugar as per the stock verification report.
- The total value of the shortage is shown in the table:
|Shortage||Value (in Rs.)|
|Rice (102 quintals)||Rs. 33,150|
|Palmolein (72 quintals)||Rs. 1,08,000|
|Free-sale sugar (30 quintals)||Rs. 22,620|
- The accused had also withdrawn loading and transporting charges for these items.
- Later, he undertook to remit Rs 1,63,770 the value of a shortage of 72 quintals of palmolein, 102 quintals of rice, and 39 quintals of sugar.
- In part payment, he deposited Rs. 50,000 in the Punalur Depot.
- The Board of Revenue suspended him from the service. He retired from the service on Feb 28, 1992.
- A case was registered against him.
- The Trial Court held that he was guilty under Section 5(2) of the Prevention of Corruption Act and Section 409 IPC.
- As far as Section 409 is concerned, this Court convicted him with a sentence of one year for the offence.
- The accused filed an appeal before the Kerala High Court. This Court confirmed his conviction.
- He filed an appeal before the Supreme Court.
- The Defence Counsel contended that no sanction was present in the said conviction in terms of Section 19 of the Prevention of Corruption Act and Section 197 of the Code of Criminal Procedure, 1973 (hereinafter referred to as CrPC). He also submitted that the prosecution did not establish any misappropriation and/or mens rea of the alleged crime. Therefore, the conviction was contrary to the law.
- The prosecution Counsel contended that the Courts have acted in accordance with the law. Misappropriation is not a part of an employee’s official duty, hence, the question of any sanction under Section 197 CrPC does not arise. In a corruption case, it would be against the public interest not to prosecute the accused who is guilty of misappropriating huge stock meant for people.
- Whether the conviction of the appellant (accused) was proper?
- Whether there was a need for sanction to prosecute him?
The Supreme Court observed that the Trial Court and the Kerala High Court were correct in holding that the prosecution was able to prove the entrustment of the said items (as mentioned in the table). Thus, the said conviction under the Prevention of Corruption Act and Section 409 of IPC was proper. The Supreme Court also observed that sanction under Section 197 of CrPC is not a condition precedent for prosecuting the accused under Section 409 IPC.
Further, it was held that the prosecution has to prove that the property in question is entrusted to the accused. It is then for the accused to show how he dealt with that property.
Sushil Kumar Singhal v. Regional Manager, Punjab National Bank (2010)
- In this case, the accused was a peon in a bank.
- He was handed over cash of Rs 5,000 to deposit the same as dues, for the Telephone Bill, in the Post Office. He did not deposit it and the Bank lodged an FIR against him under Section 409 IPC.
- The Trial Court convicted him under this Section. Moreover, the Bank dismissed him from the service.
- He raised an industrial dispute under the Industrial Dispute Act 1947 and the matter was referred to the Central Government Industrial Tribunal-cum-Labour Court-II (hereinafter referred to as “Tribunal”).
- In the meanwhile, he filed an appeal before the Appellate Court. This Court upheld the conviction but granted him the benefit of probation under the Probation of Offenders Act 1958. This Court released him on probation.
- Moreover, the Tribunal made the award rejecting his claim and holding his dismissal from service to be justified and in accordance with the law.
- The accused filed a writ petition before the Punjab & Haryana High Court to challenge the award. The High Court dismissed the petition.
- The accused (appellant) filed an appeal before the Supreme Court.
- The Counsel appearing for the appellant submitted that the Judgment and Order of the High Court as well as the Award of the Tribunal are liable to be set aside as per the benefit of the Act of 1958.
- The Counsel appearing for the Bank (respondent) contended that such benefit under the said Act takes away only punishment (sentence) and not the factum of conviction. Therefore, the employee of the Bank stands convicted of an offence involving moral turpitude. Moreover, it is permissible for the said Bank to dismiss him from service. This appeal is liable to be dismissed.
- Whether the act of the appellant involved moral turpitude?
- Whether the benefit granted to the appellant under the Act of 1958 entitles him to reinstatement in service?
Referring to various leading judgments and evidence, the Supreme Court held that the appellant had committed an offence involving moral turpitude. This Court also held that a conviction for an offence involving moral turpitude disqualifies an employee from continuing the employment. Therefore, this Court dismissed the appeal.
Sunil Dahiya v. State (NCT of Delhi) (2016)
- In this case, Sunil Dahiya was the Managing Director of Vigneshwara Group of Companies (VGC). Moreover, his brother was the Finance Head and his father was the Chairman.
- Sunil Dahiya was involved in two projects for the construction of IT parks in Gurgaon and Manesar. He along with his brother and father had incorporated the following companies in this regard:
- M/s Vigneshwara Developers Pvt. Ltd.;
- Vigneshwara Developwell Pvt. Ltd.; and
- M/s Aquarious Buildcon Pvt. Ltd.
(Apart from the above-mentioned companies, they had incorporated 15 other companies as well. Together, all these companies were referred to as VGC.)
- Sunil Dahiya received approval from the Haryana State Industrial & Infrastructure Development Corporation (HSIIDC) and the Directorate of Town & Country Planning, Government of Haryana for these two projects.
- Thereafter, he invited applications from the general public to invest in the projects. He invited such applications through advertisements in print media, TV, and FM Radio.
- The Punjab National Bank (PNB) invested in the said projects.
- Sunil Dahiya executed agreements with the investors somewhere between the years 2006-2008. He executed these agreements on behalf of the above-mentioned companies.
- He assured the investors that the construction would be completed within 60 months from the date of the agreement and after receipt of the completion certificate from the government authority.
- Moreover, he gave the investors a guarantee of assured return at the rate of 9% to 12% per month.
- The investors filed complaints on the following grounds:
- Despite a lapse of 60 months, Sunil Dahiya and his family (accused) did not complete the construction at the project sites;
- Despite demands, they (the accused) had not paid the assured returns since February 2014;
- They misappropriated more than Rs 600 Crores by colluding, conspiring, and illegally benefitting from the investors’ money;
- They purchased various properties owned by the investors (complainants) on the assurance that the accused would allot them a property equivalent to the value of the purchased property as compensation. But, the accused did not allow such property to the complainants;
- The accused invested the amount paid to the complainants (i.e., the amount that the complainants received after selling their properties to the accused) in their projects;
- The accused had forged the said agreements by changing the main clause dealing with a refund of the invested amount;
- The accused stated in an advertisement that PNB and Bank of India (BOI) had rated their projects, which was false;
- Sunil Dahiya and his family members were habitual offenders and had been accused of cheating several investors in several FIRs;
- They had committed criminal breach of trust, cheating, and fraud which are punishable under Sections 406, 420, 467, 468, and 471 read with Section 34 IPC.
- FIRs were lodged based on the above-mentioned grounds under Sections 409/ 420/ 423/ 467/ 471/ 120B IPC.
- The charge sheets revealed that there were more than 1,500 investors. Moreover, the charge sheets state that Sunil Dahiya (Managing Director) was not only acting as an agent of the said company but also was a trustee of the assets of the company. He along with his brother and father were carrying out day to day affairs of the company as well as planning the long-term policies.
- The Trial Court convicted Sunil Dahiya and his family members under the said Sections and sentenced them to life imprisonment.
- Sunil Dahiya filed three bail applications before the Additional Sessions Judge under Section 439 of the CrPC. The Additional Sessions Judge rejected these bail applications (1212/2016, 1221/2016 and 1222/2016).
- Thereafter, Sunil Dahiya filed three bail applications before the Delhi High Court under Section 439 CrPC.
- The Senior Counsel appearing for the applicant (Sunil Dahiya i.e., accused) submitted that the applicant had no dishonest intention regarding the implementation of the said projects. The project at Manesar is on the verge of completion. As far as the project at Gurgaon is concerned, the company could not proceed further for want of relevant sanctions and approvals from the government authorities. However, the applicant had been in judicial custody for over 21 months.
- The Additional Public Prosecutor (APP) submitted that only one out of six towers was constructed regarding the project at Manesar. No construction activity had taken place since long as the iron rod was found rusting. The intention of the directors of the company (VGC) was not to complete the projects on time.
- The APP further submitted that the construction could not be started at the Gurgaon Project site because the applicant had no licence. It was found that there had been no construction activity on this site except for digging a ditch.
- The APP also submitted that instead of repaying the investors their invested amounts, the applicant misappropriated crores of rupees for his luxuries and comforts.
- Whether the order of conviction against the applicant (accused) under Section 409 IPC was proper?
- Whether the Additional Sessions Judge was right in rejecting the bail applications?
The Delhi High Court observed that Sunil Dahiya and his family members had a common object and common intentions to act collusively. However, the applicant was accused of economic offences involving cheating and misappropriation of huge amounts of public funds. Hence, such offences are serious in nature. Therefore, the said order of conviction was proper.
This High Court held that granting regular bail in cases of criminal breach of trust by agents, etc. would harm the criminal justice system. It is possible in the following situations:
- If such offences affect a large number of individuals; and
- if there is a massive loss of public funds.
The Court also observed that economic offences are grave as these are serious threats to the financial health of the country.
Moreover, the Delhi High Court observed that the Additional Sessions Judge was right in rejecting bail applications. This Court rejected all three bail applications filed by the applicant (accused).
Lalita Saini v. State (2019)
- In this case, the accused (Respondent No. 2) along with other co-accused persons was a member of the governing body/ managing committee of one Vedanta Welfare Society.
- They misrepresented to the victims (Lalita Saini and his family members) that the Society, after allotting membership to 700 members, was in the process of acquiring more land to increase the membership of the Society to 850 members.
- The new members had to deposit the full value of the land which was approximately Rs. 11 Lakhs for a three-bedroom flat.
- The victims paid the demanded amounts (about Rs 33,95,000) but, the accused neither allotted any share certificate to the victims nor did they provide any membership. They did not refund the amount either.
- The victims lodged an FIR against the accused persons at Police Station Subhash Place, New Delhi. The registered FIR was under Sections 506/ 409/ 420/ 120B IPC. However, the Police arrested respondent No. 2.
- As per the report of the Investigating Officer, no property was registered in the name of the said Society. Moreover, no authority letter was ever issued to the said Society and the Society had no authority to collect public funds for purchasing the land.
- As per the status report filed on behalf of the State, apart from Lalita Saini, 47 more victims had filed their complaints against the accused persons.
- Respondent No. 2 filed a bail application before the Chief Metropolitan Magistrate (CMM) for seeking a “default bail” under Section 167(2) of the CrPC. Respondent No. 2 claimed that the prosecution failed to file the charge sheet within 60 days from the date of the first remand. However, the CMM rejected the bail application.
- Respondent No. 2 filed a revision petition before the Sessions Court to challenge the order of the CMM. The District and Sessions Judge (North-West), Rohini, Delhi granted a default bail (statutory bail) to the respondent and held that the stipulated period for filing the charge sheet was 60 days as per Section 167(2)(a)(ii) CrPC.
- Lalita Saini filed a petition before the Delhi High Court under Section 482 CrPC read with Section 439(2) CrPC. This petition was for challenging the order passed by the District and Sessions Judge.
- The petitioner contended that the stipulated period for filing the charge sheet is 90 days.
- The Learned Counsel for Lalita Saini (petitioner) submitted that the petitioner had deposited around Rs 12 Lakhs by way of banking channels only.
- The Learned Counsel for respondent No. 2 submitted that the stipulated period for filing the charge is 60 days.
- Whether the stipulated period for filing a charge sheet for an offence punishable under Section 409 IPC is 60 days or 90 days.
- Whether the order passed by the District and Sessions Judge was proper?
The Delhi High Court observed that the stipulated period for filing a charge sheet would be 60 days as per Section 167(2)(a)(ii) CrPC when an offence is punishable with the following:
- Minimum sentence: Less than 10 years;
- Maximum sentence: Neither death nor life imprisonment.
In the above situation, the accused is eligible for default bail after 60 days in case the charge sheet is not filed.
Moreover, the stipulated period for filing a charge sheet would be 90 days as per Section 167(2)(a)(i) CrPC when an offence is punishable with the following:
- Minimum sentence: Imprisonment up to 10 years or more;
- Maximum sentence: Death or life imprisonment.
In the above situation, the accused is eligible for default bail after 90 days in case the charge sheet is not filed.
The Delhi High Court also observed that the offence under Section 409 IPC is punishable with imprisonment for life or imprisonment up to 10 years along with a fine. Such an offence is serious in nature and extended time to file the charge sheet is required.
However, this Court held that the prosecution must file the chargesheet for the offence under Section 409 within 90 days. The Court also held that respondent No. 2 was not eligible for the default bail under Section 167 CrPC because the charge sheet had been filed within 90 days. Therefore, the order passed by the District and Sessions Judge was not proper.
The Court allowed the petition filed by Lalita Saini and set aside the above-mentioned order.
N. Raghavender v. State of Andhra Pradesh, CBI (2021)
- In this case, N. Raghavender (Accused No. 1; A1) worked as a Branch Manager in Sri Rama Grameena Bank, Nizamabad Branch from May 1990 to September 1995.
- A. Sandhya Rani (Accused No. 2; A2) worked as a Clerk-cum-Cashier in the same Bank from 1991-1996 and she also attended day-to-day transactions in current and saving accounts relating to preparation of credit and debit vouchers.
- C. Vinay Kumar (Accused No.3; A3) was treasurer of the Nishita Educational Academy and is the brother-in-law of A1.
- A3 opened Current Account No. 282 in the aforesaid Bank in his capacity as an authorised signatory of the said Academy. The account was opened with an initial deposit of Rs. 5,00,000.
- The prosecution case was that A1 and A2 abused their respective position in the Bank and conspired with A3 by allowing withdrawal of amounts up to Rs. 10,00,000 from the account of the Academy. The account had requisite funds for such withdrawal.
- Moreover, the allegations were that A1, in his capacity as a Branch Manager, issued loose-leaf cheques on 23rd April 1994. Thereafter, a sum of Rs. 2,50,000 was withdrawn and the debit was deliberately not entered in the ledger book. Another such transaction took place on 30th June 1994 for a sum of Rs. 4,00,000 but the debit was not entered in the ledger sheet of the Bank. A1 issued another cheque on 30th July 1994 of a closed account and Rs. 3,50,000 was withdrawn. This payment was in favour of A3 and the signature on the cheque was not matching with that of A3.
- A1 was also accused of prematurely closing two FDRs on 24th February 1995 and 25th February 1995, which were for a sum of Rs. 10,00,000 and Rs. 4,00,000 respectively. These FDRs were in the name of B. Satyajit Reddy.
- As per the vouchers issued by the Bank, a total of Rs. 14,00,000 were credited to account No. 282 but only Rs. 4,00,000 were shown in the ledger. The remaining Rs. 10,00,000 was secretly withdrawn from the said account during the year 1994.
- The prosecution case was also that A1, A2, and A3 were working together to carry out such transactions, which resulted in a wrongful loss to the Bank and its Depositors.
- The Chairman of the Bank filed a written complaint to the Superintendent of Police, Central Bureau of Investigation at Hyderabad (CBI).
- The CBI registered a case against A1, A2, and A3 under Sections 409, 477(A), and 120B IPC, and Section 13(2) read with 13(1)(c) & (d) of the Prevention of Corruption Act.
- In the Trial Court, a total of 11 witnesses (P.W.1 to P.W. 11) were examined by the Prosecution, and documentary evidence was also put forth. The Trial Court held that the Prosecution had adequately proved its case against A1.
- However, the Learned Special Judge held that A1 was guilty of offences under Sections 409, 420, and 477A IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act). The Judge sentenced him to a rigorous imprisonment of five years along with various fines for each offence. However, the Judge acquitted A2 and A3 of all the charges.
- A1 challenged his conviction and sentence before the High Court of Judicature, Andhra Pradesh at Hyderabad by filing a criminal appeal. This High Court agreed with the findings of the Trial Court and dismissed the appeal.
- Being aggrieved with the judgment of the aforesaid High Court, A1 filed a criminal appeal before the Supreme Court.
- The Learned Senior Counsel appearing for A1 (appellant) contended that there was no mens rea in the present case as no benefit was drawn by the appellant even if the cash was handed over to A3. The findings of the aforesaid High Court were self-contradictory.
- The Senior Counsel also contended that the appellant is not punishable under Sections 420, 409, and 477A IPC or under the provisions of the PC Act based on these grounds:
- That the appellant used loose cheques; and
- He had an allegation of omission to record relevant entries in the ledger of the current account No. 282.
- The Senior Counsel further contended that it was a case of gross administration misconduct for which the appellant had been dismissed from service and denied his pensionary benefits. This Court should mirror the aforesaid allegations in the light of the fact that the Bank had not suffered any losses.
- The Learned Additional Solicitor General (ASG) appearing for the Prosecution, CBI contended that to establish mens rea or criminality under the aforesaid Sections, it was necessary to prove that the appellant had derived benefit or caused any loss to the Bank. The appellant had to take the entire responsibility for the duties he had failed to discharge. Moreover, he had to show that he had complied with all transactions genuinely and that all the requirements or conditions were adhered to.
- Whether the conviction and sentence against the appellant were proper?
- Whether the criminal appeal filed by the appellant before the Court (i.e., Supreme Court) was sustainable?
The Supreme Court observed that neither the Trial Court nor the Andhra Pradesh High Court had discussed the ingredients of Sections 409, 420, and 477A IPC. Moreover, the Courts failed to make any effort to refer to the specific evidence that might satisfy such ingredients.
The Supreme Court also observed that no pecuniary loss was caused to the Bank or B. Satyajit Reddy or to any customer of the Bank. The evidence before this Court did not disclose any conspiracy between the accused persons. Despite misconduct in duties on the part of the appellant, none of his acts proved that he had committed offences under Sections 409, 420, 477A IPC, and provisions of the PC Act.
This Court pronounced the judgment regarding Section 409 of IPC. These are the observations given in the decision:
- The accused must be public servants, bankers, merchants, or agents;
- entrustment of public properties is mandatory; and
- there must be dishonest misappropriation or use of the same in the manner given under Section 405.
Further, the Court also held that the customers are lenders and the banks are borrowers. The banks do not hold money deposited by the customers on trust. That money becomes part of bankers’ funds. Banks are liable to pay that money to their customers if they demand the same. Until the customers demand that money, the banks may use it to earn profits. However, there must be strong evidence of misappropriation of funds. It is unsafe to prosecute the offender without such evidence.
Therefore, the Supreme Court held that the said conviction and sentence against the appellant were not proper. This Court allowed the aforesaid appeal as it was sustainable.
Brij Nandan And Anr v. State of Punjab (2022)
- In this case, there were five accused persons namely Rakesh Kumar Malhotra (Arakshn Supervisor), Parvesh Walia (Ticket Supervisor), Brij Nandan, Anwar Ansari, and Jarnail Singh.
- They were indulged in corruption in the Railway Department. Together, they conspired against one Ram Singh Meena as he lodged a complaint against them.
- On account of the aforesaid fact, they had got one Sohan Lal a teacher at DAV, School, Khanna and other employees of the Railway Department to make a complaint against Ram Singh Meena.
- Based on the aforesaid complaint, Ram Singh Meena was transferred from District Sirhind to District Ropar. After the transfer, the accused persons namely Brij Nandan, Rakesh Malhotra, and Anwar Ansari inspected his record from time to time but found everything in order.
- Brij Nandan and Rakesh Kumar Malhotra were continuously lodging various complaints against Ram Singh Meena.
- On 4th August 2018, the accused persons took away the relevant record regarding Ram Singh Meena’s service period from one Smt. Chanchal Bala. Moreover, the accused persons tampered with the said record, the details of which are as follows:
- LC No. 370416 record file, forwarding note, and ID proof were misplaced;
- LC No. 370431, ID proof changed; and
- LC No. 370448 to 49, all forwarding notes and ID proof were removed.
The accused persons did aforesaid acts to involve Ram Singh Meena in a case and the same resulted in the filing of a charge sheet against him.
- The complaint, filed by Ram Singh Meena against the accused persons, stated that they had committed various offences.
- An FIR was lodged against all the five above-mentioned accused persons based on the aforesaid complaint and subsequent inquiry. The FIR was regarding Sections 409 and 120B IPC.
- The Investigating Agency conducted a detailed investigation. The Officer in charge of the Police Station GRP, Srihind District Fatehgarh Sahib submitted a report under Section 173 CrPC against Brij Nandan, Anwar Ansari, and Jarnail Singh.
- The Court of Additional Civil Judge (Senior Division) Cum Chief Judicial Magistrate, Fatehgarh Sahib charged Brij Nandan and Anwar Ansari under Sections 409/120B IPC. But, this Court discharged Jarnail Singh.
- Brij Nandan and Anwar Ansari filed two Criminal Revision Petitions before the Additional Sessions Judge, Fatehgarh Sahib. Moreover, Ram Singh Meena along with the State filed a Criminal Revision Petition before the Additional Sessions Judge, Fatehgarh Sahib. This petition was for challenging the order of the said Chief Judicial Magistrate as Jarnail Singh was discharged.
- The Additional Sessions Judge, Fatehgarh Sahib decided the aforesaid three petitions. The Judge dismissed the petitions of the two accused persons and considered Ram Singh Meena’s petition. The Judge remanded the case of Jarnail Singh for fresh consideration.
- Brij Nandan and Anwar Ansari (petitioners) filed a Criminal Miscellaneous Petition before the Punjab & Haryana High Court. This petition was for quashing the said orders of the Chief Judicial Magistrate and the Additional Sessions Judge.
- The Learned Counsel for the petitioners argued that the Railway Department refused sanction (under Section 197 CrPC) for prosecuting the petitioners, the Trial Court could not frame charges against them. Moreover, the Railway Department did not lodge any complaint for taking away or tampering with the said documents. So, the FIR and the subsequent proceedings must be quashed.
- Whether the said FIR and the subsequent proceedings against the petitioners (Brij Nandan and Anwar Ansari) were proper?
- Whether the petitioners were liable under Sections 409/120B IPC?
- Whether the Criminal Miscellaneous Petition filed by the petitioners was sustainable?
Punjab and Haryana High Court observed that the petitioners had taken away the said documents (i.e., forwarding notes, ID proof, etc.). They had committed an offence under Section 409 IPC as they had allegedly misappropriated those documents.
The High Court also observed that there was no illegality in the following:
- Registration of the FIR;
- Framing of the said charges; and
- Dismissal of the said Criminal Revision Petitions by the Additional Sessions Judge.
Therefore, the High Court dismissed the said Criminal Miscellaneous Petition as the same was not sustainable.
The High Court held that the commission of an offence under Section 409 IPC is not regarding official duty. The Court also held that previous sanction is not required to prosecute the accused under the Section.
Yogesh Jagia v. Jindl Biochem Pvt. Ltd. (2022)
- In this case, there was a real estate development company named Jindl Biochem Pvt. Ltd. (hereinafter “private company”). The said company had four promoters, namely, Rajinder Kumar Jindal, Attar Singh, Kartar Singh, and A.P. Singh.
- In 2005, they jointly promoted V4 Infrastructure Pvt. Ltd. (hereinafter “V4”). Before the incorporation of V4, they contributed funds to a private company and acquired a commercial plot of land at Karkardooma Community Center, Delhi from the Delhi Development Authority. V4 had developed the said plot of land in terms of a development agreement dated 24 February 2005. However, the promoters wanted to bid on the said plot of land.
- In 2008, certain disputes arose among the promoters. Two of the promoters exited the V4 and sold their equity shares to the remaining promoters i.e., Rajinder Kumar Jindal and Attar Singh. Thereafter, Rajinder Kumar Jindal exited V4 and sold his shares to Attar Singh.
- The share purchase agreements were prepared. For the settlement of the said disputes, part of commercial property located at Plot No. 228, Sector-9, Dwarka (developed by V4) was agreed to be sold to the private company for an agreed consideration. For this purpose, two separate space buyer agreements were executed between the private company and V4 (both dated 7th October 2009).
- For the execution of the aforesaid agreements, Yogesh Jagia (a practising Advocate enrolled with the Bar Council of Delhi since 1991) was appointed.
- For the settlement of disputes, two conveyance deeds were executed as given below:
- In favour of V4 for the property at Karkardooma, as per the development agreement dated 24th February 2005; and
- In favour of the private company for part of Dwarka property as per space buyer agreements dated 7th October 2009 by V4.
- On verbal request, both the entities (V4 and private company) created an escrow account with Yogesh Jagia.
- V4 agreed to hand over possession letters for Dwarka property in an escrow account. However, the possession letters were not deposited due to non-compliance by the private company with the agreed terms. However, the private company alleged that the possession letters were handed over but illegally released by Yogesh Jagia herein to Sanjay Pal and Attar Singh.
- In 2010, the private company confirmed the creation of an escrow account vide letter dated 23rd July 2010 and Yogesh Jagia admitted the documents mentioned in the said letter except the possession letters. The private company reconfirmed the documents kept in the escrow account in the letter dated 21st May 2011.
- The private company alleged that Yogesh Jagia (Accused No.1; A1), Sanjay Pal (Accused No.2; A2) and Attar Singh (Accused No.3; A3) conspired together to make alterations to the space buyer agreements. A1 committed a criminal breach of trust and made improvements in the documents handed over to deter the private company.
- The private company filed a police complaint against A1 on 5th January 2011 with Police Station Safdarjung Enclave and before the Economic Offence Wing (EOW), Delhi. The allegations were as follows:
- Despite receiving the entire agreed sale consideration, A2 and A3, being directors of V4, failed to execute the sale deed; and
- A1 in connivance released documents out of the escrow account to A2 and A3. So, A1 committed a criminal breach of trust under Section 409 IPC.
- Further, the private company (complainant/ respondent) filed an application under Section 156(3) CrPC which was dismissed. The complainant challenged such dismissal before the Additional Sessions Judge and the application was again dismissed.
- After examination of evidence, and consideration of other material on record, A1 was summoned by the Metropolitan Magistrate, South Saket, New Delhi (i.e. Trial Court). As per the order of the Trial Court, A1 was liable under Section 409 IPC while A2 and A3 were liable under Section 420/34 IPC.
- Thereafter, A1 filed a petition under Section 482 CrPC before the Delhi High Court. This petition was for quashing the aforesaid summoning order.
- The Learned Senior Counsel for A1 (petitioner) submitted that:
- The respondent failed to make out a prima facie case of commission of any offence under Section 409 IPC;
- The respondent and its director (Rajinder Kumar Jindal) filed numerous complaints against the petitioner containing contradictory statements. They deliberately concealed material facts;
- The Police, in the status reports, had noted that the respondent had no documentary evidence to prove the allegations. So, the summoning order passed by the Trial Court was impugned in nature;
- The Trial Court did not assign any reason or basis while observing that the petitioner had committed an offence under Section 409 IPC;
- The respondent and other promoters deposited the documents with the petitioner in the escrow account. The joint consent of both parties was mandatory to release the documents;
- The disputes between the respondent and V4 were purely civil, wherein the petitioner had been intentionally dragged; and
- The impugned summoning order was liable to be set aside.
- The Learned Senior Counsel for the respondents (Jindl Biochem Pvt. Ltd. & Rajinder Kumar Jindal) submitted that:
- The summoning order had been passed upon finding sufficient grounds for proceeding against the petitioner under Section 409 IPC;
- All the evidence, as well as the other material on record, supported the case of the complainant;
- The petitioner (A1), A2 and A3 conspired together to hand over the complainant’s documents to V4 without ensuring compliance by them;
- The petitioner altered the terms and conditions of the space buyer agreements; and
- The petitioner did not hand over the following documents to the complainants:
- Original space buyer agreement (value of Rs. 7.75 Crores),
- Possession letters relating to 2nd floor and ground floor (3 shops) of the Dwarka property, and
- Settlement document (Brief history) dated 22nd August 2009 depriving the respondent/complainant of Rs. 1 Crore towards their goodwill share.
- Whether the said summoning order maintainable?
- Whether the petitioner was liable under Section 409 IPC?
- Whether the petition filed by the petitioner was maintainable?
The Delhi High Court observed the following:
- The Trial Court did not consider the facts of the case properly. Moreover, the Trial Court did not assign any reason for summoning the petitioner. So, the summoning order was liable to be set aside; and
- The petitioner had not misappropriated the documents and money deposited in the escrow account as per the material on record. So, he was not liable under Section 409 IPC.
Accordingly, the High Court allowed the said petition and set aside the following:
- The impugned order passed by the Metropolitan Magistrate; and
- Complaint filed by Jindl Biochem Pvt. Ltd. (Complainant/ Respondent).
However, the High Court held that the Magistrates can acquit the offenders at any stage of the trial. It is possible only if the Magistrates consider that the charges are unjustified.
CH K.S. Prasad @ K.S. Prasad v. State of Karnataka (2023)
- In this case, CH K.S. Prasad was an employee of M/s Vasan Healthcare Private Limited from 2012 to 13 September 2017.
- He donned multiple roles in the said company. He was Senior Vice-President, Human Resources for some time. He had the authority to sign certain forms related to the business of the company including the forms of the Employees Provident Fund (EPF).
- During the period from August 2014 to May 2015, the company deducted the EPF from the employees’ wages. But, the company had not deposited the said amount (Rs. 95,58,104) with the Employees Provident Fund Organization (EPFO).
- On 6th August 2015, a complaint was registered before the IV Additional Chief Metropolitan Magistrate, Bengaluru against CH K.S. Prasad (accused). The complaint was regarding offences under Sections 406 and 409 IPC. The Police had filed a charge sheet.
- The criminal proceedings (i.e., for the offences under Sections 406 and 409 IPC) were pending before the IV Additional Chief Metropolitan Magistrate, Bengaluru (Respondent 1).
- On securing all the documents, the accused filed a criminal petition under Section 482 CrPC before the Karnataka High Court. This petition was for quashing the said criminal proceedings against the accused.
- The Counsel appearing for the accused (petitioner) contended that on 15th September 2016, the Enforcement Officer, EPFO (Respondent 2) had registered about 21 complaints against the said company and its Chairman A.M. Arun before the Special Court for Economic Offences alleging non-payment of aforesaid amount. However, the said Chairman is acquitted in all the cases and the petitioner is replaced in his place according to an order passed by this Court. The petitioner was also acquitted before the Special Court for Economic Offences. The present case is against the petitioner alone without making the company an accused in the proceedings. The offences alleged can never be laid against the petitioner.
- The Counsel appearing for respondent 2 contended that the petitioner was liable for the non-deposit of the funds to the EPFO. Mere discharge in the proceedings for economic offences would not absolve the petitioner of the offences under IPC. Therefore, the aforesaid petition was liable to be dismissed.
- Whether the petitioner (accused) was liable under Section 409 IPC?
- Whether the said petition under Section 482 CrPC was sustainable?
The Karnataka High Court observed that there were sufficient funds in the accounts of the petitioner and he had the intention of paying the said funds. There was no wilful default on the part of the company. However, the properties of the company were attached by the Income Tax Department authorities, which was beyond the control of the company. The petitioner was not liable under Section 409 IPC due to the absence of mens rea in the facts and circumstances of this case.
This Court held that there must be any willful default on the part of the company. Otherwise, the vice president of the company is not liable under Section 409 IPC. Moreover, the Court allowed the petition under Section 482 CrPC and quashed the pending proceedings before the IV Additional Chief Metropolitan Magistrate, Bengaluru.
Chanda Kochhar v. ICICI Bank Ltd. (2022) & Chanda Kochhar v. Central Bureau of Investigation (2023)
- In the case of 2022, Mrs. Chanda Kochhar (Mrs. Kochhar) was recruited as a Trainee Officer in the ICICI Bank on 17th April 1984. She was eventually promoted from time to time. On 1st May 2009, she was recruited as Managing Director and Chief Executive Officer of ICICI Bank. Thereafter, she was reappointed from time to time for a term ending on 31st March 2019.
- During her employment, she had signed and accepted various policies of ICICI Bank which included a Code of Conduct, a Framework for dealing with conflict of interest, Deeds for Covenants, and a Clawback agreement.
- Further, she was also required to make various disclosures in compliance with the Companies Act 1956, the Companies Act 2013, the Banking Regulation Act 1949, the SEBI (Listing Obligation and Disclosure) Regulations 2015, and the RBI Master Circular on Loans.
- She was granted Employee Stock Ownership Plans (ESOPs) between April 2007 to March 2017 with each grant being made under the terms of an Award Confirmation Letter read with the Employee Stock Options (ESOs) formulated by the ICICI Bank following SEBI guidelines. Each grant was based on performance, continued good conduct, and the representations/ disclosures made by her to ICICI Bank.
- In July 2016, there were allegations of nepotism against her as per news articles. Such allegations were regarding the approval of loans to companies affiliated with Videocon Group/ Mr. Venugopal Dhoot. The purpose of these loans was to invest by Mr. Venugopal Dhoot or his affiliates in NuPower Renewables Pvt. Ltd. (NRPL), a company promoted by Mrs. Kochhar’s husband (Mr. Deepak Kochhar).
- On 26th December 2016, ICICI Bank appointed a reputed law firm to conduct an independent inquiry into the aforementioned allegations.
- Mrs. Kochhar and her husband in the said inquiry provided information and documents indicating that there were no investments made by Mr. Venugopal Dhoot and his affiliates in NRPL. Thereafter, the law firm submitted its report to ICICI Bank stating that the allegations had no merit.
- In April 2018, ICICI Bank received letters alleging abuse of position by Mrs. Kochhar and the business dealings between Videocon Group and Mr. Deepak Kocchar.
- However, Mr. Deepak Kocchar disclosed his business dealings with Mr. Venugopal Dhoot/ Videocon Group through a letter dated 30th April 2018.
- On 29 May 2018, the Board of Directors of ICICI Bank decided to conduct an inquiry into allegations against Mrs. Kochhar. On 30 May 2018, ICICI Bank informed the Stock Exchange, of its decision to conduct an inquiry into the said allegations.
- On 6th June 2018, the Audit Committee of ICICI Bank appointed Mr. Justice B.N. Srikrishna (Retired Judge of the Supreme Court) to conduct the aforesaid inquiry.
- On 18th June 2018, a Board meeting of ICICI Bank was held in which Mrs. Kochhar stated that she had decided to go on leave till the completion of the inquiry. The Board accepted her decision and made necessary disclosures to the Stock Exchange.
- On 3rd October 2018, Mrs. Kochhar requested the Board of Directors of ICICI Bank to grant her early retirement. For this purpose, she had sent a letter during the pendency of the inquiry.
- ICICI Bank by its letter dated 4th October 2018, intimidated the Board’s approval and referred to benefits under the Early Retirement Scheme (ERS). The ICICI Bank enclosed an Undertaking dated 19th July 2016 (regarding Mrs. Kochhar’s contract for employment) signed by Mrs. Kochhar.
- Between October 2018 and January 2019, Mrs. Kochhar exercised 6,90,000 ESOPs and received other benefits as per the letter dated 4th October 2018. It occurred during the pendency of inquiry.
- Mrs. Kochhar participated in the aforesaid inquiry. In December 2018, she submitted oral and written submissions.
- Justice Srikrishna (Retired) submitted an Inquiry Report on 27th January 2019 to ICICI Bank. The Inquiry Report held that Mrs. Kochhar had committed gross/ serious violations of the Code of Conduct for an extended period.
- On 30th January 2019, ICICI Bank sent an email to Mrs. Kochhar informing her about the decision taken by the Board of Directors of ICICI Bank. The email stated that communication regarding early retirement benefits to Mrs. Kochhar dated 4th October 2018 stands revoked with effect from the close of business hours on 30 January 2019. Moreover, the vested and unvested ESOPs allotted to her were revoked and returned to the IA-1014-2022-307-2020.DOC common pool of ESOPs as per various policies of ICICI Bank.
- On 1st February 2019, the Group Chief Human Resources Officer of ICICI Bank sent a letter to Mrs. Kochhar to reiterate that her separation from ICICI Bank would be treated as ‘termination for cause’. The bonuses paid by ICICI Bank to Mrs. Kochhar between April 2009 and March 2018 were INR 7,41, 36, 777. This amount was recovered from her due to said termination for cause.
- Mrs. Kochhar responded to the email dated 30th January 2019 and the letter dated 1st February 2019 through a letter dated 4th February 2019. The letter contended that the relationship of employer and employee between ICICI Bank and Mrs. Kochhar ended as the Board had accepted her early retirement in October 2018.
- On 13th March 2019, RBI approved the request of ICICI Bank for “Termination of Appointment” under Section 35B(1)(b) of the Banking Regulation Act, 1949.
- However, ICICI Bank sent letters to Mrs. Kochhar stating that she would have to pay back bonuses paid to her between April 2009 and March 2018. In response to such letters, she sought restoration of all benefits allegedly granted to her as per a letter dated 4th October 2018.
- On 20th November 2019, Mrs. Kochhar filed a Writ Petition No. 33151 of 2019 against ICICI Bank and RBI. She declared that the letter dated 4th October 2018 sent by ICICI Bank was valid, subsisting, and binding on ICICI Bank. The email dated 30th January 2019 and the letter dated 1st February 2019 were illegal, non est (missing), void ab initio (void from the beginning). The communication dated 13th March 2019 was non est, illegal, and void ab initio. She sought consequential relief in the Writ Petition.
- During the pendency of the aforesaid petition, ICICI Bank filed a suit (Suit No. 313 of 2020) against Mrs. Kochhar. On 5th March 2020, the Division Bench of the Bombay High Court dismissed the said Writ Petition.
- Mrs. Kochhar filed a Special Leave Petition to challenge the aforesaid dismissal. The same was also dismissed. Thereafter, she filed a suit (Suit No. 114 of 2022). The Bombay High Court dismissed this suit as well.
- In the case of 2023, an FIR was registered against Mr. Deepak Kochhar and Mrs. Chanda Kochhar under Sections 420 and 120B IPC, and Sections 7, 13(2) read with 13(1)(d) of the Prevention of Corruption Act 1988. On 23rd December 2922, the CBI arrested them. So they sought release from custody through interim relief.
- On 9th January 2023, the Bombay High Court released them on interim bail.
- On 24th December 2022, the CBI approached the Special CBI Court seeking to add Section 409 IPC against Mrs. Kuchhar. On 14th January 2023, Justice MR Purwar allowed the CBI to add the said Section. Moreover, the Judge said that an Investigating Officer (IO) is free to add or delete Sections based on the materials collected by him. No Court permission is required for the same.
- Thereafter, CBI added a charge of criminal breach of trust (Section 409 IPC) in the aforesaid FIR against Mrs. Kochhar.
- Whether Mrs. Kochhar had misappropriated the funds of ICICI Bank by approving the loans to the Videocon Group.
- Whether Mrs. Kochhar was liable under Section 409 IPC?
The Chanda Kochhar Case has not been decided yet and is still pending before the Bombay High Court. The final judgment of this case is yet to come.
As far as my opinion is concerned, Mrs. Chanda Kochhar had approved loans of Rs. 3,250 Crores to the Videocon Group. Her act violated the regulations of the ICICI Bank and RBI guidelines. She was entrusted with the power of approval of loans to the ICICI Bank’s customers.
She contended that the Videocon group had repaid the loans on time. Thus, it caused the bank ‘zero ultimate loss’. However, it is a well-settled law that the ‘zero ultimate loss’ does not absolve a person from liability under Section 409 IPC.
Moreover, it is clear from the facts of this case that Mrs. Chanda Kochhar concealed her husband’s involvement in the Videocon Groups and his relationship with Mr. Venugopal Dhoot. Such concealment violated RBI’s Master Circular guidelines and the “direction of law” as given under Section 405.
Therefore, the judgment of the Court would likely be that Mrs. Kochhar is liable under Section 409 IPC.
- Ratanlal & Dhirajlal, The Indian Penal Code, 36th Edition, 2020.
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