Criminal Misc. No. M-42460 of 2007 v. State of Punjab

Present: Mr. B.S. Bhalla, Advocate, for the petitioners. Mr. T.S. Salana, Deputy Advocate General, Punjab, for respondent No. 1 – State. Mr. S.S. Bedi, Advocate, for respondent No. 2. SHAM SUNDER, J. This petition under Section 482 Cr.P.C., for quashing FIR No. 15, dated 24.02.98, under Sections 406 and 408 IPC and 7 of the Essential Commodities Act, Police Station Baghapurana, District Moga, and, all the subsequent proceedings, arising therefrom, has been filed by the petitioners. Criminal Misc. No. M-42460 of 2007 2

2. The facts, in brief, are that, M/s National Rice and General Mills, Moga Road, Baghapurana, Distt. Moga, through its partner Gurbachan Singh, entered into an agreement with the complainant/respondent No. 2, for custom milling of paddy, as a result whereof, 66904 bags, weighing 43487.66 quintals of paddy, were entrusted, to them, against proper receipts. The petitioners were to deliver 28553.96 quintals of rice to the Food Corporation of India, in the account of PUNSUP, as per the conversion policy upto

28.02.95. However, the petitioners delivered the rice, weighing 1417 quintals, to the Food Corporation of India, in the account of PUNSUP, whereas, 22855 quintals of rice, was adjusted, against open sale scheme. It was stated that, on 04.06.96, physical stock verification of the petitioners, was conducted, by a departmental committee, wherein, 7235 bags of paddy, were found less. Again, in the month of July, 1996, another physical verification of the stock of the petitioners, was conducted, wherein, shortage of 4226 bags of paddy, weighing 3192.80 quintals was found. It was further stated that shortage of 366.90 quintals was also found. It was further stated that, thus, total shortage of paddy, came to 3559.70 quintals. It was further stated that the cost of the short paddy, which was found, on physical verification, was Rs. 33,87,731/-, out of which, the petitioners, deposited a sum of Rs. 11,88,750/-, and committed criminal breach of trust, in respect of the remaining amount. Consequently, the aforesaid, FIR was registered.

3. I have heard the Counsel for the parties, and, have gone Criminal Misc. No. M-42460 of 2007 3 through the documents, on record, carefully.

4. The Counsel for the petitioners, submitted that, there was an agreement, between the petitioners and the PUNSUP, which contained an arbitration clause. He further submitted that all the disputes, between the petitioners, and the PUNSUP, were referable to the Arbitrator. He further submitted that when the disputes arose, an Arbitrator, was appointed to give the award. He further submitted that, it was only a civil dispute, which was converted, into a criminal dispute. He further submitted that, no offence, whatsoever, was committed, by the petitioners. He also placed reliance, on Kailash Verma Vs. Punjab State Civil Supplies Corporation and another, 2005(1), RCR (Criminal), 727 (SC), and, Punjab State Civil Supplies Corporation (PUNSUP) Vs. Deepak Kumar and another, 2007(2), RCR (Criminal), 550, in support of his contention. He further submitted that continuation of the FIR, and further proceedings, would be sheer abuse of the process of the Court and law, and, as such, are liable to be quashed.

5. On the other hand, the Counsel for the respondents, submitted that an agreement, was executed, between the petitioners and the PUNSUP. They further submitted that, in pursuance of that agreement, 66904 bags of paddy, weighing 43487.66 quintals, were entrusted, to the petitioners, against proper receipts, issued by Gurbachan Singh, partner of petitioner No. 1. They further submitted that, after custom milling of the paddy, the same, was to be delivered, to the Food Corporation of India, by the petitioners, in the Criminal Misc. No. M-42460 of 2007 4 account of PUNSUP. They further submitted that rice, weighing

1417.40 quintals, was delivered, by the petitioners, to the Food Corporation of India, in the account of PUNSUP, and, 22855 quintals of rice, was adjusted, against open sale scheme. They further submitted that physical verification of the stock, lying in the sheller of the petitioners, was conducted, by the Departmental Committee, according to which, a shortage of 7235 bags of paddy was found. They further submitted that, again physical verification of the stock of paddy, lying in the sheller of the petitioners, was conducted, in July, 1996, and shortage of 4226 bags of paddy, weighing 3192.80 quintals was found. They further submitted that weight shortage of

366.90 quintals was also found. They further submitted that, thus, total shortage of paddy, came to be 3559.70 quintals. They further submitted that the cost of the short paddy, which was found, on physical verification, was Rs. 31,87,731/-, out of which, the petitioners, deposited a sum of Rs. 11,88,750/-, and committed criminal breach of trust, in respect of the remaining amount. They further submitted that the mere fact, that there was an arbitration clause and the Arbitrator, was appointed, did not mean, that the petitioners, were absolved of the criminal liability. They further submitted that the same gamut of facts, can constitute criminal as well as civil dispute. They further submitted that the Arbitrator, could not adjudicate upon the criminality of the petitioners. They further submitted that the petitioners, committed the offences, punishable under Sections 406 and 408 IPC and Section 7 of the Criminal Misc. No. M-42460 of 2007 5 Essential Commodities Act.

6. After giving my thoughtful consideration, to the rival contentions, raised by the Counsel for the parties, in my considered opinion, the petition, is liable to be dismissed, for the reasons, to be recorded, hereinafter. Undisputedly, the paddy, referred to above, was entrusted to M/s National Rice and General Mills, Moga Road, Baghapurana, District Moga, of which, petitioner No. 2, is a partner for custom milling. After custom milling the paddy, the petitioners, were to supply rice, to the extent of 28553.96 quintals. The petitioners, did not supply the rice, to the aforesaid extent, but, on the other hand, paddy worth Rs. 33,87,731/- (less Rs. 11,88,750/- deposited by the petitioners), was allegedly misappropriated by them. The PUNSUP, was the owner of the paddy, which was entrusted, to M/s National Rice and General Mills, Moga Road, Baghapurana, District Moga, of which, petitioner No. 2, is a partner. Section 405 IPC, reads as under:- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust.”

7. In order to constitute the offence of criminal breach of trust, necessary ingredients are (i) a person should have been Criminal Misc. No. M-42460 of 2007 6 entrusted with property, or entrusted with dominion over property; (ii) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; (iii) that 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.

8. In order to maintain a complaint/lodge an FIR, the complainant, was required, to prima-facie disclose the ingredients of the offence of misappropriation, as extracted hereinabove. The allegations, contained in the FIR, in the instant case, clearly constituted the offences, punishable under Sections 406 and 409 IPC. M/s National Rice and General Mills, Moga Road, Baghapurana, District Moga, were the agents of the PUNSUP, for the purpose of custom milling of the paddy and the return of rice, in lieu thereof. As stated above, the rice, which was to be supplied, in lieu of the paddy, entrusted to the petitioners, came to be 43487.66 quintals, but, they only supplied 1417.40 quintals of rice, which fell much short of the actual quantity. Thus, M/s National Rice and General Mills, Moga Road, Baghapurana, District Moga, and the petitioners, misappropriated the paddy worth Rs. 33,87,731/-, out of which they deposited an amount of Rs. 11,88,750/-. The mere fact, that there was an arbitration agreement, providing for referring the dispute, to the Arbitrator, did not mean, that no criminal liability of the Criminal Misc. No. M-42460 of 2007 7 petitioners, was constituted. The Arbitrator, could not decide the criminal liability of the petitioners, in pursuance of the arbitration agreement. Only the Criminal Courts, can decide the criminal liability of the petitioners. The arbitration agreement, therefore, did not debar the PUNSUP, from initiating criminal proceedings, against the petitioners, for misappropriation of the paddy, entrusted to them. In Pawan Kumar Vs. State of Haryana, 2006(2), RCR (Criminal), 162, it was held, that arbitration clause, would not be a bar, if the act of the party, amounted to a criminal offence. It was further held that both criminal and civil proceedings, could be launched. In Trisuns Chemical Industry Vs. Rajesh Aggarwal, 1999(4), RCR (Criminal), 2236 (SC), Raj Kumar Singla Vs. State of Punjab, 2000(1), RCR (Criminal), 161 (P&H), S.W. Palanitkar Vs. State of Bihar, 2001 (4), RCR (Criminal), 572 (SC), and, Sham Lal Vs. State of Punjab, 2001(3), RCR (Criminal), 535 (SC), it was held, that criminal and civil proceedings, can continue together, if the same arise out of the same gamut of facts.

9. In Kailash Verma's, and, Punjab State Civil Supplies Corporation (PUNSUP)'s cases (supra), no absolute proposition of law, was laid down, that the existence of an arbitration clause, would necessarily oust the right of an aggrieved party, to lodge an FIR. In Kailash Verma's case (supra), the appellant, was discharged, by the trial Court. The said order was reversed and the matter was remitted to the trial Court. The Apex Court, held that, as there was no prima- facie evidence of entrustment of paddy or shortage of rice, supplied Criminal Misc. No. M-42460 of 2007 8 to the Corporation, and the dispute disclosed, being civil in nature, the petitioner, could not be prosecuted. So, no help, can be drawn, by the Counsel for the petitioners, from these cases. The submission of the Counsel for the petitioners, in this regard, being without merit, must fail, and the same stands rejected.

10. For the reasons recorded above, Criminal Misc. No. M-42460 of 2007, being devoid of merit, must fail, and the same stands dismissed. Any observation, made in this order, shall not be taken, as an expression of mind, on merits of the case.

11. Registry is directed, to comply with the order, by sending the copies thereof, to the Courts concerned.

11.03.2010 Amodh (SHAM SUNDER) JUDGE