High Court
Legal Reasoning
{1} APPLN-2356-2022+IN THE HIGH COURT OF JUDICATURE OF BOMBAYBENCH AT AURANGABADCRIMINAL APPLICATION NO. 2356 OF 2022Laxminarayan S/o Jaynarayan RathiAge: 75 years, Occu. Business,Shri Ramdeobaba Charitable SocietyResiding at Near Shakil Garage,Plot No. 104, B-Wing, Nisarg Park, Akola....APPLICANTVERSUS1.The State of MaharashtraThrough Incharge Police InspectorPartur Police Station, Tal. Partur,Dist. Jalna.2.Ubed Bin Salam ChausAge: Major, Occu. Office SuperintendentIn Municipal Council, Partur, Tal. Partur,Dist. Jalna.3.Municipal Council Partur,Through Chief Executive Officer,Partur....RESPONDENTS Ms. A.S. Jadhav, Advocate for applicantMr. N.S. Tekale, APP for State Mr. Pawan K. Lakhotiya, Advocate for respondent No. 3WITHCRIMINAL APPLICATION NO. 139 OF 2023WITHCRIMINAL APPLICATION NO. 4689 OF 2024INCRIMINAL APPLICATION NO. 139 OF 2023Punkaji s/o Manikrao Kumbhare,Age: 50 years, Occu. Service as HeadInfrastructure of SGS India Private Limited,R/o. C-702, Venkatesh Flora,Phase-I, Kunveer Prabhu Nagar,Bhagyawant Punde {2} APPLN-2356-2022+Near Hadapsar Mundhwa, Pune....APPLICANT[Orig. Applicant]VERSUS1.The State of MaharashtraThrough Police InspectorPartur Police Station, Tal. Partur,Dist. Jalna.2.Ubed Bin-Salam ChausAge: 53 years, Occu. Service,R/o. Nagar Parishad, Partur,Tq. Partur, Dist. Jalna.3.Municipal Council Partur,Through Chief Executive Officer,Tal. Partur, Dist. Jalna....RESPONDENTS Mr. A.S. Bajaj, Advocate for applicantMr. N.S. Tekale, APP for StateMr. Pawan K. Lakhotiya, Advocate for respondent No. 3....... CORAM : NITIN B. SURYAWANSHI AND SANDIPKUMAR C. MORE, JJ. RESERVED ON : 04th AUGUST, 2025 PRONOUNCED ON: 04th SEPTEMBER, 2025ORDER : [PER NITIN B. SURYAWANSHI, J.]1.These applications filed under Section 482 of Code ofCriminal Procedure seek quashing of proceedings of R.C.C. No.298 of 2022, arising out of FIR No. 548 of 2020, registered withPartur Police Station, Taluka- Partur, Dist. Jalna for offencespunishable under Sections 409, 420 read with 34 of Indian PenalCode.Bhagyawant Punde {3} APPLN-2356-2022+2.Authorized by Chief Officer, Office Superintendent ofMunicipal Council Partur on 10.12.2020 lodged FIR alleging thatPartur Municipal Council floated tenders and invited bids inrespect of Integrated Housing and Slum Development Program(IHSDP) for construction of tenements/Gharkuls. Shri.Ramdeobaba Charitable Society and Gajanan Construction InfraLtd. were given contract for construction of 441Gharkuls/tenements in Survey No. 297 and 299 for Rs.18,30,52,000/-. Agreement to that effect was executed on29.04.2010. The construction was to be supervised andmonitored by Project Management Consultancy (PMC) and ThirdParty Inspection and Monitoring Agency Services (TPIMA) to beappointed by MHADA. The construction work was done as perthe agreement. When joint inspection was done by the ChiefOfficer and Vigilance and Quality Control Division, MHADA, theyfound that construction was of sub standard quality. GajananConstruction and Infra Pvt. Ltd., Ramdeobaba Charitable Society,Project Management Consultancy and Third Party SupervisingAgency appointed by MHADA in collusion have cheated theGovernment and misappropriated the Government funds.Bhagyawant Punde {4} APPLN-2356-2022+3.Applicant in Criminal Application No. 2356 of 2022 isthe President of Shri. Ramdeobaba Charitable Society (for short“Applicant-Society”). Applicant-society was given contract toconstruct to 359 Gharkuls at Indira Nagar slum area. Agreementof construction of tenements was executed by the Chief Officerand the applicant-society. 4.Learned advocate for applicant-society submittedthat work of construction of Gharkuls allotted to the applicant-society was completed during the period between 2011 to 2014and completion certificate was given to the applicant-society byMunicipal Council, Partur on 11.06.2014. The beneficiaries wereallotted said 359 houses constructed by the applicant-societyand there was no complaint from any of the beneficiaries. Shesubmitted that as per clause 10 of the agreement applicant-society was under obligation to carry out repairs of the technicaldefects in the construction. She submitted that there is nocomplaint from any of the beneficiaries of the housesconstructed by the applicant-society. Municipal Council, Parturdid not settle the payment of houses constructed by theapplicant-society and therefore, Special Civil Suit No. 23/2016was filed in the Court of Civil Judge, Senior Division, Jalna forBhagyawant Punde {5} APPLN-2356-2022+recovery of amount of Rs. 32,97,768/-. According to her, FIR istherefore lodged with a view to give counter blast to the civil suitfiled by the applicant-society. The allegation of incomplete workof tenements is in respect of Survey Nos. 297 and 249. The workof construction of tenements at those survey numbers was givento Gajanan Construction and Infra Pvt. Ltd. and not to theapplicant-society. According to her no criminal offence is madeout against the applicant-society. By relying on the additionalaffidavit filed by applicant-society she pointed out that fivemembers committee under the Chairmanship of Collector andEngineers from MHADA has conducted re-inquiry into theallegations and submitted a report dated 01.11.2021. It is statedin the said report that applicant-society has completed work of359 tenements and by the year 2014 all the tenements werehanded over to the beneficiaries. It is further mentioned that onrandom inspection of 568 tenements, they were found completeand beneficiaries were using the same.She has strongly relied on the decision of co-ordinatebench of this Court at Nagpur in Criminal Application (APL) No.381 of 2014, wherein according to her in identical facts theprosecution lodged against the applicant-society by MunicipalCouncil, Narkhed, Dist. Nagpur was quashed by this Court. SaidBhagyawant Punde {6} APPLN-2356-2022+decision is confirmed by the Apex Court on 13.12.2021 bydismissing the Special Leave Petition filed by Municipal Council,Narkhed. By relying on Delhi Race Club (1940) Limited andOthers vs. State of Uttar Pradesh and Another1, N. Raghavendervs. State of Andhra Pradesh, CBI2 and State of Gujarat vs.Jaswantlal Nathalal3 she submitted that FIR against theapplicant-society is liable to be quashed. 5.Applicant in Criminal Application No. 139 of 2023 isthe head of Infrastructure of SGS India Private Limited a ThirdParty Inspection and Monitoring Agency Services (for short“TPIMA”) appointed by MHADA vide agreement dated06.01.2010 for the project of construction of 441 houses whichwere to be constructed by Accused No. 1 and 2.6.Learned advocate for the applicant in CriminalApplication No. 139 of 2023 submitted that he had entered intoan agreement with MHADA for visiting and supervising the workof construction of Gharkuls. Pursuant to the agreement, threevisits were conducted by the applicant and joint inspectionreports were submitted to MHADA pointing out the1(2024) 10 SCC 6902(2021) 18 SCC 7031967 SCC OnLine SC 58Bhagyawant Punde {7} APPLN-2356-2022+deficiencies/shortcoming in the construction work. Therefore, itcannot be said that applicant is involved in the alleged offence asthere was no entrustment of property with the applicant.Therefore, no offence is made out against the applicant.Continuation of prosecution against the applicant is therefore anabuse of process of law and Court and proceeding is thereforeliable to be quashed and set aside.7.Learned APP strenuously opposed the applications bysubmitting that award of contract is not in dispute. In the jointinspection carried out by the Municipal Council and MHADA itwas revealed that sub standard material was used forconstruction and the work was not satisfactorily done. Accordingto him, since the property i.e. Survey No. 297 and 299 and someprivate lands of the beneficiaries were given to the applicant andpayment of construction was made to the applicant, there wasentrustment of property to the applicant-Construction Companyand by doing sub standard work, applicant has misappropriatedthe property and has committed criminal breach of trust. Since,TPIMA was having responsibility to supervise the constructionwork they are also involved in the misappropriation of theGovernment funds.Bhagyawant Punde {8} APPLN-2356-2022+8.Learned advocate for Respondent No. 3-MunicipalCouncil submits that genesis of the FIR is sub standard qualitywork done while constructing the tenements/Gharkuls. Accordingto him, since all the accused were involved in the said processeither as contractor or supervising agency, prima facie theirinvolvement in the misappropriation is clear. There is sufficientmaterial on record against the applicants for their prosecution.Filing of civil suit would not absolve applicant-ConstructionCompany from criminal liability.9.Heard learned advocates for the applicants, learnedAPP for State and learned advocate for Municipal Council atlength. With their assistance, we have perused the criminalapplications, documents filed on record, charge sheet, affidavitsfiled by the respective parties and the citations relied upon bythe parties.10.It is a matter of record that Crime No. 61/2014 dated14th June, 2014 was registered with Narkhed Police Station, Dist.Nagpur for offences punishable under Sections 409, 420, 468,471 r/w 34 of IPC against applicant-society and others whereinsimilar allegations were levelled against the applicant-society. Itwas alleged that applicant-society has not constructed theBhagyawant Punde {9} APPLN-2356-2022+tenements as per the specifications in the agreement and thematerial which was used by the applicant-society was of sub-standard quality. This Court at Nagpur has allowed theapplication filed by the applicant-society and quashed the FIR.Relevant observations are as follows:“5. We have carefully considered the contents of theFirst Information Report and the other materialproduced on record by the applicants. The FirstInformation Report accuses the applicant in CriminalApplication No.381 of 2014 for having committed theoffences punishable under Sections 420, 468 and 471 ofthe Indian Penal Code. Section 420 of the Indian PenalCode for ready reference, reads as under :“ 420. Cheating and dishonestly inducingdelivery of property- Whoever cheats andthereby dishonestly induces the person deceivedto deliver any property to any person, or tomake, alter or destroy the whole or any part of avaluable security, or anything which is signed orsealed, and which is capable of being convertedinto a valuable security, shall be punished withimprisonment of either description for a termwhich may extend to seven years, and shall alsobe liable to fine.”After carefully considering the definition of thecheating as provided under Section 415 and Section420 of the Indian Penal Code, the dishonest intentionat the inception of entering into the contract betweenthe parties is the essential ingredient. From reading ofthe First Information Report, the allegations againstthe said applicants is to the effect that the applicanthad constructed 611 tenements not as per theagreement entered into between the applicant and thenon-applicant No.2 which is on page No.27 of the saidapplication and has received an amount ofBhagyawant Punde {10} APPLN-2356-2022+Rs.4,04,99,196/-. The applicant has placed on recordthe correspondence between the applicant and thenon-applicant No.2. From the said correspondence, itappears that there was notice issued by the applicantto the non-applicant No.2 invoking arbitration clauseand the application was also filed under Section 11 ofthe Arbitration and Conciliation Act, 1996 in the year2012. From the correspondence it appears that theapplicant was demanding remaining dues of his workwhich was completed as per the agreement. Theimpugned First Information Report came to beregistered on 8th June 2014 which is after almostseven years from the date of execution of theagreement and after six years of the occupation of thetenements holders. During the course of hearing, wecalled upon the Advocates for the non- applicant Nos.1 and 2 to ascertain whether there was any complaintmade by the tenement holders about the quality of theconstruction or the material used by the applicantbeing of sub-standard nature. We have perused the agreement at page 27 andin particular clause 11 of the said agreement. Clause11 of the said agreement requires that the applicantshould carry out repairs of the construction in case ofthe defects in the construction. The non-applicant Nos.1 and 2 have not pointed out that such complaint wasmade with the applicant within period of six monthsfrom the date of completion of the construction. 6. Having considered the contents of the FirstInformation Report against the applicants in CriminalApplication No. 602 of 2014 and Criminal ApplicationNo. 598 of 2014 wherein there are accusations againstthe applicants that the applicants being Junior Engineerand Chief Officer, respectively have abetted the crimeof the applicant in Criminal Application No. 381 of2014. Having considered the said allegations in theFirst Information Report, we are satisfied that theBhagyawant Punde {11} APPLN-2356-2022+ingredients of the offences of Section 409 read withSections 420, 468 and 471 of the Indian Penal Code arenot made out against the said applicants. It is alsopertinent to note that there is neither any departmentalenquiry initiated against both the applicants nor thereis any show cause notice issued to them.7. We have also gone through the contents of theFirst Information Report in the context of theallegations as regards the commission of the offencesunder Sections 468 and 471 of the Indian Penal Code.After having carefully considered the clauses in theFirst Information Report, we do not find any avermentsin the First Information Report against all threeapplicants which prima-facie make out case offulfillment of the offences under Sections 468 and 471of the Indian Penal Code.8. We are satisfied that prima-facie the allegationsin the First Information Report do not constituteaverments alleged against all the three applicants. We,therefore, are satisfied that continuation of theproceedings against the applicants would amount toabuse of process of the Court. The present case issquarely covered by clause (1) of paragraph No.102given in the judgment in the case of State of HaryanaVs. Bhajan Lal, reported in 1992 Supp(1) SCC 335.”11.Admittedly, in the FIR in question similar allegationsare levelled against the applicant-society and therefore case ofapplicant-society is squarely covered by the above observations.12.The Municipal Council, Narkhed has challenged thesaid decision by filing Special Leave Petition, which wasBhagyawant Punde {12} APPLN-2356-2022+dismissed by the Apex Court on 13.12.2021.13.Record indicates that applicant-society hascompleted construction of 359 tenements and has handed overthe same to the Municipal Council, Partur. The beneficiaries areoccupying the said tenements. There is no material on record toindicate that the beneficiaries have made any complaints aboutthe quality of construction. It appears that agreement at page 20and in particular clause 10 of the said agreement casts a duty onthe applicant-society to carry out repairs/remove defects in theconstruction within six months. There is no material on record toshow that complaints were made against the applicant-societyduring the period of six months from the date of handing overthe tenements. Though, the tenements were handed over in theyear 2014, the FIR is belatedly lodged after a period of six years.In absence of any material on record to show dishonest intentionon the part of applicant-society at the initial stage andentrustment of an amount or valuable property to the applicant-society and misappropriation of it by the applicant-society inviolation of legal contract which was made for construction oftenements and/or the applicant-society has dishonestlyconverted the entrusted property to its own use or disposed it ofBhagyawant Punde {13} APPLN-2356-2022+in violation of any direction of law or contract, no offence can besaid to be made out against the applicant-society.14.In N. Raghavender (supra) it is held:“45. Section 409 IPC pertains to criminal breach oftrust by a public servant or a banker, in respect of theproperty entrusted to him. The onus is on theprosecution to prove that the accused, a public servantor a banker was entrusted with the property which heis duly bound to account for an that he has committedcriminal breach of trust. (See Sadhupati NageswaraRao v. State of A.P., (2012) 8 SCC 547).46.The entrustment of public property anddishonest misappropriation or use thereof in themanner illustrated under Section 405 are sine qua nonfor making an offence punishable under Section 409IPC. The expression “criminal breach of trust” isdefined under Section 405 IPC which provides, interalia, that whoever being in any manner entrusted withproperty or with any dominion over a property,dishonestly misappropriates or converts to his own usethat property, or dishonestly uses or dispose of thatproperty contrary to law, or in violation of any lawprescribing the mode in which such trust is to bedischarged, or contravenes any legal contract, expressor implied etc. shall be held to have committedcriminal breach of trust. Hence, to attract Section 405IPC, the following ingredients must be satisfied.46.1.Entrusting any person with property or withany dominion over property.46.2.That person has dishonestly misappropriated orconverted that property to his own use.46.3.Or that person is dishonestly using or disposingof that property or willfully suffering any other personBhagyawant Punde {14} APPLN-2356-2022+so to do in violation of any direction of law or a legalcontract.47.It ought to be noted that the crucial word usedin Section 405 IPC is “dishonestly” and therefore, itpre-supposes the existence of mens rea. In otherwords, mere rentention of property entrusted to aperson without any misappropriation cannot fallwithin the ambit of criminal breach of trust. Unlessthere is some actual use by the accused in violation oflaw or contract, coupled with dishonest intention,there is no criminal breach of trust. The secondsignificant expression is “misappropriates” whichmeans improperly setting apart for ones uses and tothe exclusion of the owner.”15.In Jaswantlal Nathalal (supra) it is held:“8. The term "entrusted" found in Section 405 IPCgoverns not only the words "with the property"immediately following it but also the words "or withany dominion over the property" occurring thereafter-see Velji Raghvaji Patel v. State of Maharashtra [1965]2 S.C.R. 429. Before there can be any entrustmentthere must be a trust meaning thereby an obligationannexed to the ownership of property and a confidencereposed in and accepted by the owner or declared andaccepted by him for the benefit of another or of anotherand the owner. But that does not mean that such anentrustment need conform to all the technicalities ofthe law of trust-see Jaswantrai Manilal Akhaney v. Stateof Bombay [1956] SCR 483, 498-500. The expression'entrustment' carries with it the implication that theperson handing over any property or on whose behalfthat properly is handed over to another, continues to beits owner. Further the person handing over the propertymust have confidence in the person taking the propertyBhagyawant Punde {15} APPLN-2356-2022+so as to create a fiduciary relationship between them. Amere transaction of sale cannot amount to anentrustment. It is true that the government had sold thecement in question to BSS solely for the purpose ofbeing used in connection with the construction workreferred to earlier. But that circumstance does not makethe transaction in question anything other than a sale.After delivery of the cement, the government hadneither any right nor dominion over it. If the purchaseror his representative had failed to comply with therequirements of any law relating to cement control, heshould have been prosecuted for the same. But we areunable to hold that there was any breach of trust.” 16.In Delhi Race Club (supra) the Apex Court has held:“47. Similarly, in CBI v. Duncans Agro Industries Ltd.,Calcutta reported in (1996) 5 SCC 591 this Court heldthat the expression “entrusted with property” used inSection 405 of the IPC connotes that the property inrespect of which criminal breach of trust can becommitted must necessarily be the property of someperson other than the accused or that the beneficialinterest in or ownership thereof must be in the otherperson and the offender must hold such property in trustfor such other person or for his benefit. The relevantobservations read as under: -“27. In the instant case, a serious dispute has beenraised by the learned counsel appearing for therespective parties as to whether on the face of theallegations, an offence of criminal breach of trust isconstituted or not. In our view, the expression“entrusted with property” or “with any dominionover property” has been used in a wide sense inSection 405 IPC. Such expression includes all cases inwhich goods are entrusted, that is, voluntarilyhanded over for a specific purpose and dishonestlydisposed of in violation of law or in violation ofBhagyawant Punde {16} APPLN-2356-2022+contract. The expression ‘entrusted’ appearing inSection 405 IPC is not necessarily a term of law. Ithas wide and different implications in differentcontexts. It is, however, necessary that the ownershipor beneficial interest in the ownership of the propertyentrusted in respect of which offence is alleged tohave been committed must be in some person otherthan the accused and the latter must hold it onaccount of some person or in some way for hisbenefit. The expression ‘trust’ in Section 405 IPC is acomprehensive expression and has been used todenote various kinds of relationships like therelationship of trustee and beneficiary, bailor andbailee, master and servant, pledger and pledgee.When some goods are hypothecated by a person toanother person, the ownership of the goods stillremains with the person who has hypothecated suchgoods. The property in respect of which criminalbreach of trust can be committed must necessarily bethe property of some person other than the accusedor the beneficial interest in or ownership of it mustbe in the other person and the offender must holdsuch property in trust for such other person or for hisbenefit. In a case of pledge, the pledged articlebelongs to some other person but the same is kept intrust by the pledgee.” (Emphasis supplied)”17.The case of the applicant-society is squarely coveredby the aforesaid rulings.18.There appears substance in the contention of theapplicant-society that it is implicated in the present crime with aview to give counter blast to the civil suit filed by it.Bhagyawant Punde {17} APPLN-2356-2022+19.So far as case of applicant in Criminal Application No.139 of 2023 is concerned, being TPIMA it was not party to thecontract of construction of tenements with Municipal Council. Itwas appointed by MHADA for supervising the construction work.Record indicates that on the instructions of MHADA three visitswere made by the TPIMA and reports were submitted to MHADApointing out deficiencies in the construction work. Therefore,there is absolutely no involvement of TPIMA in the alleged crime.In the FIR or in the charge sheet no ingredients of Section 409and 420 of IPC are made out against the TPIMA. The applicant’scase is also covered by the N. Raghavender (supra), JaswantlalNathalal (supra) and Delhi Race Club (supra).20.For the aforesaid reasons since no ingredients ofSection 409 and 420 of IPC are made out against the applicants,continuation of the prosecution against the applicants is anabuse of process of law and Court. Hence, the following order:ORDER(i)Criminal Applications are allowed.(ii)Charge Sheet No. 153 of 2022 and proceedings ofR.C.C. No. 298 of 2022 pending before learned JudicialMagistrate First Class, Partur, arising out of FIR No. 548of 2020, registered with Partur Police Station, Taluka-Bhagyawant Punde
Decision
{18} APPLN-2356-2022+Partur, Dist. Jalna for offences punishable underSections 409, 420 read with 34 of Indian Penal Codeare quashed and set aside against applicants-Laxminarayan Jaynarayan Rathi and Punkaji ManikraoKumbhare.(iii)In view of disposal of criminal applications, CriminalApplication No. 4689 of 2024 stands disposed of.(SANDIPKUMAR C. MORE, J.) (NITIN B. SURYAWANSHI, J.)Bhagyawant Punde