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IN THE HONBLE HIGH COURT, RANCHI

AT RANCHI, JHARKHAND

Under Section 482 of the Code of Criminal Procedure

Criminal Case No.: XXXX of 2016

IN THE MATTER OF

Denzil Topno.....................Petitioner
V.
State of Jharkhand................................................................Respondent

Name-

Semester- Section-

Roll No.-
TABLE OF CONTENTS

1. TABLE OF CONTENTS 1
2. ABBREVATIONS...2
3. INDEX OFAUTHORITIES.... 3
Statutes
Websites
Books
4. TABLE OF CASES..4-5
5. STATEMENT OF JURISDICTION...6
6. STATEMENT OF FACT....7
Entities involved
Facts Leading the Case.
7. STATEMENT OF ISSUES ....8
8. SUMMARY OF ARGUMENTS.9
9. ADVANCEMENT OF ARGUMENTS.... 10-21
10. PRAYER.....22

Memorial on behalf of the Petitioner. Page 1


ABBREVIATIONS

1. AC Appeal Court

2. AIR All India Reporter

4. & And

5. Ltd. Limited

6. Vol. Volume

7. SCC Supreme Court Case

8. Punj. Punjab

9. v. Versus

10. SCR Supreme Court Reporter

11. U/s Under Section

12. Honble Honorable

Memorial on behalf of the Petitioner. Page 2


INDEX OF AURTHORITIES

I. STATUTES :
1. THE INDIAN PENAL CODE,1860
2. CODE OF CRIMINAL PROCEDURE, 1973

II. WEBSITES :
1. www.manupatra.com
2. www.lexisnexis.com
3. www.jstor.org

III. BOOKS/MANUALS :

1. Ratanlal & Dhirajlal, The Indian Penal Code, 30th Edition, Lexis Nexis, Butterworths
Wadhwa, Nagpur, 2009.
2. P.S.A Pillias, Criminal Law, 12th Edition, Lexis Nexis, 2014
3. K.D. Gaur, Textbook on The Indian Penal Code, 4th Edition 2008, Universal Law
Publishing Co. Pvt. Ltd. New Delhi.

Memorial on behalf of the Petitioner. Page 3


TABLE OF CASES

1. Anil Mahajan v. Bhor Industries Ltd. (2005) 10 SCC 28.


2. Arab Mihan v. Emperor AIR 1942 Sind 167.
3. Asad Ali Tashildar v. Anwar Ali AIR 1959 Tripura 40.
4. B. Narappa Reddy v. Jagarlamudi Chandramauli AIR 1967 AP 219.
5. Bageswar v. Khandari Kaur AIR 1970 Patna 20.
6. Balthasar (1914) 41 Cal 844.
7. Central Buraeu of Investigation v Duncans Agro industries Ltd (1996) 5 SCC 591.
8. Chelloor Mankal Naryana Ravi v. State of Travancore and Cochin AIR 1953 SC 478.
9. Dalip Kaur v. Jagnar Singh (2009) 14 SCC 696.
10. Debi Prasad Bhattacharya v. State of West Bengal (2012) SCC Cal 9687.
11. Deivanaiammal v. Nachammal 1973 Cr.L.J. 729.
12. Delhi Municipality v. Ram Kishan AIR 1983 SC 67.
13. Hridaya Ranjan Pd Verma v. State of Bihar AIR 2000 SC 2341.
14. Indian oil Corporation v NEPC India Ltd. and Ors. AIR 2006 SC 2780.
15. Jaisrishnadas v. State of Bihar AIR 1960 SC 889.
16. JRD Tata v Payal Kumar (1987) Cr LJ 447 (Del).
17. K.Jagadeesan (Dr.) v. Inspector of Police (2001) 3 SCC 511.
18. Lake v. Simmons (1927) AC 487.
19. Minu Kumari v, State of Bihar (2007) 1 MLJ (CRL) 357 (SC).
20. Mobarik Ali (1958) SCR 328.
21. Mohammad Sulaiman v. Mohammad Ayub AIR 1965 SC 1319.
22. Nalahmaharaja v. State1989 LW. Cr 213.
23. Niranjna v. State of Maharastra (2011) 6 SCC Bom 819.
24. Nrisingha v. Kumudendu 20 CWN 1112.
25. P.K. Gupta v State, NCT of Delhi (2006) 132 DLT 296.
26. Pardeep Kumar v. State of Haryana 1996(2) Recent Criminal Reports 791.
27. Rajib Lochan v. State of Orissa 1983 CrLJ NOC 127 (Ori).
28. Rama Devi v. State of Bihar (2010) 8 SCC 775.
29. S.N Palatikar v. State of Bihar 2001 Cr LJ 4765 (SC).

Memorial on behalf of the Petitioner. Page 4


30. S.W.Palantikar v State of Bihar (2002) 1 SCC 241.
31. Sardar Singh v. State of Haryana AIR 1977 SC 1766.
32. Smt. Magawwa v. Veeranna Shivaningappa Konjalgi AIR 1976 SC 1947.
33. State of Gujarat v. Jaswantlal Nathalal, AIR 1968 SC 700.
34. State of Karnataka v. L. Munniswamy AIR 1977 SC 1489.
35. Sunita Bajaj v Punjab and Sind Bank 1998 (1) RCR (Cr.) 129.
36. Superindent and Rememberance of Legal Affairs v. S.K.Roy (1974) 4 SCC 230.
37. Surendra Prasad Verma v. State of Bihar AIR 1973 SC 488.
38. Ubeldulla Abdul Aziz Farid v Sharafuddin Abdul Fakih (1986) 3 Bom CR 207.
39. Velji Raghavji Patel v. State of Maharastra AIR 1965 SC 1433.
40. Vesa Holdings (P) Ltd v. State of Kerala (2005) 8 SCC 293.

Memorial on behalf of the Petitioner. Page 5


STATEMENT OF JURISDICTION

The petitioner has approached the respectable court under Section 4821 of Criminal procedure
Code,1973.

1
Sec 482 Saving of inherent power of High Court.

Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as
may be necessary to give effect to any order this Code, or to prevent abuse of the process of any court or otherwise
to secure the ends of justice

Memorial on behalf of the Petitioner. Page 6


STATEMENT OF FACTS

Entities involved-

Petitioner- Denzil Topno

Defendant- State of Jharkhand

Facts leading the Case-

Bank provided loan to DenzilTopno of Rs. 5 lacs for smooth running of business.
On 01/04/2010, DenzilTopno hypothecated stocks of medicines to bank against cash
credit facilities.
Under the contract DenzilTopno undertook not to assign, sell, pledge, charge, underlet, or
otherwise encumber or part with the possession, custody, or beneficial interest in respect
of the hypothecated property, without prior consent and bank has right to take
hypothecated property in case of default.
DenzilTopno paid Rs. 3 lacs to the bank and sold the entire stock of medicines without
clearing the outstanding amount.

Framing of Charges

On 01/08/2016 orders were framed against DenzilTopno under sections 406 and 420 of
IPC.

Memorial on behalf of the Petitioner. Page 7


STATEMENT OF ISSUES

1. WHETHER THE PETITION FILED BY PETITIONER FOR QUASHING OF


THE ENTIRE THE CRIMINAL PROCEEDING UNDER SECTION 482 OF THE
CRIMINAL PROCEDURE CODE IS MAINTAINABLE OR NOT?

1.1 WHETHER THE PROCEEDINGS CAN BE QUASHED IF THE DISPUTE IS


PURELY CIVIL IN NATURE.
1.2 WHETHER THE CASE CAN BE QUASHED ON GROUNDS OF NO PRIMA-
FACIE CASE BEING DEVELOPED.

2. WHETHER THE ACT COMMITTED BY THE PETITIONER CONSTITUTES


OFFENCE UNDER SECTION 405 OF INDIAN PENAL CODE, 1860?

2.1 WHETHER THERE WAS AN ENTRUSTMENT OF GOODS OR PROPERTY BY


THE COMPLAINANT TO THE PETITIONER.
2.2 WHETHER THE PETITIONER HAS DISHONESTLY MISAPPROPRIATED THE
GOODS IN HIS POSSESSION.

3. WHETHER THE ACT COMMITTED BY THE PETITIONER CONSTITUTES


OFFENCE UNDER SECTION 420 OF INDIAN PENAL CODE, 1860?
3.1 WHETHER THERE WAS A DISHONEST INENTION IN THE MIND OF THE
MIND OF THE PETITIONER WHILE ENTERING INTO THE CONTRACT

Memorial on behalf of the Petitioner. Page 8


SUMMARY OF ARGUMENTS

1. WHETHER THE PETITION FILED BY PETITIONER FOR QUASHING OF


THE ENTIRE THE CRIMINAL PROCEEDING UNDER SECTION 482 OF THE
CRIMINAL PROCEDURE CODE IS MAINTAINABLE.
It is humbly and respectfully submitted before this honorable High Court that the petition
filed by the petitioner for the quashing of entire the criminal proceeding under section
482 of Cr.P.C. is maintainable as the respectable Court has the inherent power to
adjudicate upon cases and quash criminal proceedings in purview of securing ends of
justice. The dispute between the parties was purely of civil nature, it may not allow
criminal proceedings to go on and the allegations are accepted on their face value,
accepted in their entirety, do not constitute the offences. The continuation of any further
proceeding would be nothing but an abuse of the process of the court. Unless charge or
complaint contains the ingredients of the offence, the High Court in its inherent power
under this section can quash the complaint.
2. WHETHER THE ACT COMMITTED BY THE PETITIONER CONSTITUTES
OFFENCE UNDER SECTION 406 OF INDIAN PENAL CODE, 1860.
It is humbly and respectfully submitted before the honorable court that no offence can be
constituted under the Section 406 of IPC as the facts leading the case does not correspond
to the ingredients of the offence. In order to constitute the offence of Criminal breach of
trust, it must be established that the property was dishonestly misappropriated or converted
into the property of the accused. No entrustment of the property took place, which is one of
the major ingredients of the offence. Hence, Denzil Topno could not be held liable under
this section.
3. WHETHER THE ACT COMMITTED BY THE PETITIONER CONSTITUTES
OFFENCE UNDER SECTION 420 OF INDIAN PENAL CODE, 1860.
It is humbly submitted before this Honble Court that the petitioner is not liable for
cheating as the essential ingredients for accusing a person under Sec. 420 of IPC, 1860
are not fulfilled. The essential ingredients of cheating as stated in Section 415 are not
found.

Memorial on behalf of the Petitioner. Page 9


ARGUMENTS ADVANCED

1. THE PETITION FILED BY PETITIONER FOR QUASHING OF THE ENTIRE


THE CRIMINAL PROCEEDING UNDER SECTION 482 OF THE CRIMINAL
PROCEDURE CODE IS MAINTAINABLE.

The Counsel on behalf of the petitioner humbly submits before this Honble court that this
Honble High Court has the inherent power conferred upon by section 482 2 of the Criminal
Procedure Code, 1872 to entertain the present petition and exercising its power the Honble
court shall quash the entire criminal proceedings initiated against the petioner . Section 4823 of
Cr.P.C saves the inherent power of the court and the court can exercise this inherent jurisdiction
to envisage three circumstances namely
(i) to give effect to an order under the code
(ii) to prevent abuse of the process of court and
(iii) to otherwise secure the ends of justice.
All courts, whether civil or criminal, possess, in the absence of any express provision, as inherent
in their constitutions, all such powers as are necessary to do the right and under a wrong in the
course of administration of justice. It is to be exercised exdebito justitiae to do real and
substantial justice for the administration of justice which courts done. In exercise of inherent
powers courts would be justified to quash abuse of the powers exits of court or quashing
proceeding would otherwise serve the ends of justice.4

Section 4825 of Cr.P.C. confers a separate and independent power on the High Court alone to
pass order in cases where grave injustice has been done or where the process of the court is
seriously abused. Abusing the process6 of the court is a term generally applied to a proceeding,
which is wanting in bona fides and is frivolous, vexatious or oppressive 7. High court is entitled

2
Ibid
3
Ibid
4
Minu Kumari v, State of Bihar, (2007) 1 MLJ (CRL) 357 (SC)
5
Supra note 1 at 5
6
[As defined in Evans, 50 B 741; AIR 1926 8 551 : Upendra, AIR 1931 P 81]
7
B. Narappa Reddy v. Jagarlamudi Chandramauli, AIR 1967 AP 219

Memorial on behalf of the Petitioner. Page 10


to quash a proceeding if it comes to the conclusion that allowing the proceeding to continue
would be an abuse of the process of the court or that the ends of justice require it.8

Where the allegations made in the F.I.R. or the complaint when taken at their face value and
accepted in their entirety do not prima facie constitute the alleged offence or make out a case
against the accused for the same, it will be the duty of the high court under Sec.4829 of Cr.P.C.to
quash the criminal proceedings against accused at the preliminary stage of proceedings itself to
prevent abuse of the process of court or otherwise to secure the end of justice.

1.1 WHETHER THE PROCEEDINGS CAN BE QUASHED IF THE DISPUTE IS PURELY


CIVIL IN NATURE.
It is humbly submitted before the court that mens rea or guilty intention is the sine qua non of a
criminal act and is an essential elements of a crime.

In S.W.Palantikar v State of Bihar10 the court held that every breach of trust may not result in
personal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent
misappropriation. An act of breach of trust involves a civil wrong in respect of which the person
wronged may seek his redress for damages in a civil court but a breach of trust with mens rea
gives rise to a criminal prosecution as well.

In the case of Mohammad Sulaiman v. Mohammad Ayub 11 , the apex court held that a mere
dispute of civil nature will not attract the provisions of the Section 405 and 406.
Also in the case of Nrisingha v. Kumudendu12, court held for a strong distinction between civil
cases and criminal cases and when the case was found to be civil, the court striked it down.

Where the party said to b aggrieved has an alternative remedy in a Civil Court, the matter should
not be allowed to be fought in a criminal court.

8
State of Karnataka v. L. Munniswamy AIR 1977 SC 1489
9
Supra note 1 at 5
10
(2002) 1 SCC 241
11
AIR 1965 SC 1319
12
20 CWN 1112

Memorial on behalf of the Petitioner. Page 11


This view was expressed in Bageswar v. Khandari Kaur13 and Asad Ali Tashildar v. Anwar
Ali14.

In the immediate matter as it shall be proved in the subsequent section, there has been no offence
of criminal breach of trust though it involves a civil wrong in respect of which the complainant
may seek his redress for damages in a Civil court yet, every breach of trust in the absence of
mens rea or criminal intention cannot legally justify a criminal prosecution as intention is the gist
of the offence.15

1.2 WHETHER THE CASE CAN BE QUASHED ON GROUNDS OF NO PRIMA- FACIE


CASE BEING DEVELOPED.
In cases where the allegations are accepted on their face value, accepted in their entirety, do not
constitute the offences as laid down by the court16 then the case can be quashed by the High
Court. In the instant matter we contend, that the Ld. Magistrate passed the summons without
looking into the merits of the case and accepted the allegations on their face value.
It was held by the apex court in the case Smt. Magawwa v. Veeranna Shivaningappa Konjalgi17
and in Delhi Municipality v. Ram Kishan18 that under Section 482 of Cr.P.C, an order issued by
the magistrate for process can be quashed where the allegations made in the complaint or the
statement of the witnesses recorded in support of the same taken at their face value make out
absolutely no case against the accused or the complaint does not disclose the essential
ingredients of an offence.
In the case of Rama Devi v. State of Bihar19 it was held by the Honble Supreme Court that in such
situations the best the High Court can do is to check whether their existed any intention to cheat Or
defraud at the time of the commission of the offence, as a criminal case would not lie in the absence
of any intention to cheat and/or defraud.

13 AIR 1970 Patna 20.


14 AIR 1959 Tripura 40.
15
State of H.P v. Ritu Raj, (1992) 1 Crimes 311 (313-14) (HP)
16
Nalahmaharaja v. State1989 LW. Cr; 213
17
AIR 1976 SC 1947
18
AIR 1983 SC 67.
19
(2010) 8 SCC 775

Memorial on behalf of the Petitioner. Page 12


In Deivanaiammal v. Nachammal20 it was held that a mere breach of contract cannot amount to
criminal prosecution.

Also in the case of S.N Palatikar v. State of Bihar21, it was held that if the ingredients of Section
405 were not satisfied so as to hold the accused liable under the given section.
In the immediate matter, it will be proved in subsequent parts that the ingredients of the Section
405 and Section 415 are not fulfilled hence the charged for offence punishable under section 406
and 420 is baseless.

2. THE ACT COMMITTED BY THE PETITIONER CONSTITUTES AN OFFENCE


PUNISHABLE UNDER SECTION 406 OF INDIAN PENAL CODE, 1860.

It is humbly submitted before this Honble court that the act of the petitioner does not amount to
an offence of criminal breach of trust as defined under section 405 22 of the Indian penal
Code,1860 as alleged hence no charge can be formed for punishment under section 40623 of the
Indian Penal Code,1860 against the petitioner. For a conviction for criminal breach of trust, the
prosecution must prove following two essential facts24:
i. The accused must be entrusted with proper or dominion over it
ii. The accused must have dishonestly misappropriated the property or converted it to
his own use or disposed of it in violation of such trust.
In Superindent and Rememberance of Legal Affairs v. S.K.Roy25, it has been held that There
are two distinct parts involved in the commission of the offence of criminal breach of trust.
The first consists of the creation of obligation in relation to the property movable or
immovable over which dominion or control is acquired by the accused and second part being
misappropriation or dealing with the property dishonestly and contrary to the terms of the

20 1973 Cr.L.J. 729


21
2001 Cr LJ 4765 (SC)
22
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
23
Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term,
which may extend to three years or with fine or with both.
24
JRD Tata v Payal Kumar (1987) Cr LJ 447 (Del)
25
(1974) 4 SCC 230

Memorial on behalf of the Petitioner. Page 13


obligation created. The principal ingredients of criminal breach of trust, thus are
entrustment and dishonest misappropriation.

2.1 WHETHER THERE WAS AN ENTRUSTMENT OF GOODS OR PROPERTY BY THE


COMPLAINANT TO THE PETITIONER.

In the present matter the accused entered into a loan cum hypothecation contract. Now it is
humbly submitted before this Honble high court that there was no entrustment of property by
the complainant to the accused, which is the first ingredient that is required to be fulfilled to
make an act, an offence of criminal breach of trust.

The word property includes the sale proceeds of goods entrusted to the accused.26

The word entrusted is not a term of law. In its most general significance all it imports is a
handing over of the possession for some purpose, which may not imply conferring of any
proprietary, right at all.27

In Sunita Bajaj v Punjab and Sind Bank28, It has been laid down by the Hon'ble Supreme Court
that the property in respect of which criminal breach of trust can be committed must necessarily
be the property of some person other than the accused. With the execution of the documents of
loan creating hypothecation in favour of the bank, of floating charge is created on the grounds,
which were supposed to be purchased ultimately by the loanee. The ownership of these goods
always remains with the loanee. For the sake of argument if some undertaking is given by the
loanee in the loan documents itself that the hypothecated goods shall not be disposed of without
the consent of the Bank, still it cannot be said that the property in respect of which the criminal
breach of trust is alleged to have been committed was the property of the Bank. Only the right of
recovery of the amount has been conferred upon the Bank, but by no stretch of imagination it can
be stated that any beneficial interest has been transferred in favour of the Bank by creating loan
documents vide which the loanee was supposed to purchase the goods from the loan amount.

26
Balthasar, (1914) 41 Cal 844
27
Per Lord HALDANE in Lake v. Simmons, (1927) AC 487
28
1998 (1) RCR (Cr.) 129

Memorial on behalf of the Petitioner. Page 14


It is humbly contended infront of this court that there is no entrustment in an hypothecation
deed. The definition of Hypothecation states that It is an act of pledging an asset as security
for borrowing, without parting with its possession or ownership. The borrower enters into an
agreement with the lender to hand over the possession of the hypothecated asset whenever called
upon to do so.29 It is a mode of creating a security without delivery of title or possession. Both
ownership of the movable property and possession thereof remaining with the debtor. In the
immediate matter, the bank did not have the entire right over the goods of the accused. The
accused would still be considered as the owner of the given goods. That is to say, it must be
proved that the beneficial interest in the property in respect of which the offence is alleged to
have been committed was vested in some person other than the accused who held that property
on behalf of that person.

While dealing with a similar situation the Honble Supreme Court in Indian oil Corporation v.
NEPC India Ltd. and Ors.30 relied upon this definition31 of Hypothecation and explained that
The creditor has an equitable charge over the property and is given a right to take possession and
sell the hypothecated movables to recover his dues. The creditor may also have the right to claim
payment from the sale proceeds. But there is no entrustment of the property or entrustment of
dominion over the property by the hypothecatee (creditor) to the hypothecator (debtor) in an
hypothecation. The court also held that When possession has remained with the debtor/owner
and when the creditor has neither ownership nor beneficial interest, obviously there cannot be
any entrustment by the creditor.

Rights of the bank whatsoever in the goods are only by way of security and rights of the
borrower of absolute ownership, possession, us, enjoyment and its disposal are not
affected/abridged or taken away by any of the hypothecation in the deed of hypothecation. The
borrower as absolute owner of the property has unfettered right to deal with the property
including disposal of the same and such removal or disposal does not amount to breach of trust.

29
P.Ramanath Aiyars Advance Law Lexicon [3 rd Edn.(2005),Vol. 2, pp.2179 and 2180]
30
AIR 2006 SC 2780
31
supra 28

Memorial on behalf of the Petitioner. Page 15


In the present case too, the hypothecated goods by the accused to the bank for the loan does not
make the bank its owner. The bank has the only the right to recover the loan amount. Hence, no
entrustment of property took place, which is one of the essentials of the offence.32

In Central Buraeu of Investigation v Duncans Agro industries Ltd.33 the apex court observed that
the expression entrusted appearing in section 405 IPC is not necessarily a term of law . It has
wide and different implicatons in different contexts. It is however necessary that the ownership
or beneficial interest in the ownership of the property entrusted in respect of which offence is
allegesd to have been committed must be in some person other than the accused and the latter
must hold it on account of some person or in some way for his benefit. The expression trust in
section 405 Indian Penal Code, 1860 is a comprehensive expression and has been used to denote
various kinds of relationships like the relationship of trustee and beneficiary, bailor,and bailee,
master and servant, pledger and pledgee. When some goods are hypothecated by a person to
another person, the ownership of goods still remains with the person who has hypothecated such
goods. The property in respect of which criminal breach of trust can be committed must
necessarily be the property of some person other than the accused or the beneficial interest in or
ownership of it must be in the other person and the offender must hold such property in trust for
such other person or for his benefit. In a case of pledge, the pledged article belongs to some other
person but the pledgee keeps the same in trust. It held that in such case for disposing of the goods
covering the security against credit facility the offence of criminal breach of trust is not
committed.

In Ubeldulla Abdul Aziz Farid v. Sharafuddin Abdul Fakih34 the Bombay High Court held that in
a deed of hypothecation when the goods are the absolute property of the debtor the question of
entrustment of the same by the bank does not arise, so no offence of criminal breach of trust are
not made out.

In P.K. Gupta v. State, NCT of Delhi35 the court while addressing a similar problem relied on the
definition of Hypothecation as defined in Sec 2(n) of Securitisation and Reconstruction of
financial assets and Enforcement of Security Interest Act, 2002 which stated that Hypothecation

32
Arab Mihan v. Emperor, AIR 1942 Sind 167
33
(1996) 5 SCC 591
34
(1986) 3 Bom CR 207
35
(2006) 132 DLT 296

Memorial on behalf of the Petitioner. Page 16


means a charge in or upon any movable property, existing in future, created by a borrower in
favour of a secured creditor, without delivery of possession of the movable property to such
creditor as a security for financial assistance and includes floating charge and crystallization of
such charge into fixed charge on movable property.

The court held that there is no entrustment of the property or entrustment of dominion over
the property by the hypothecate to the hypothecator in an hypothecation. When possession has
remained with the debtor/owner and when the creditor has neither ownership nor beneficial
interest, obviously there cannot be nay entrustment by the creditor.

In Velji Raghavji Patel v. State of Maharastra36 ,it has ben held in the said decision that in order
to establish entrustment of dominion over property to an accused person, the mere existence of
that persons dominion over property is not enough. It must be further shown that his dominion
was the result of entrustment.

In State of Gujarat v. Jaswantlal Nathalal37, it was indicated that the term entrusted found in
Sec 405 of Indian Penal Code, 1860 governs not only the words with the property immediately
following it but also the words or with any dominion over the property occurring thereafter.
Before there can be any entrustment, the entrustment carries with it the implication that the
person handing over any property ar on whose behalf that property is handed over to another,
continues to be its owner.

In Niranjna v. State of Maharastra38 , the Bombay high court while addressing a situation of
hypothecation of machinery in a plant went a step ahead to explain the difference when the
hypothecation is of assets like machinery and hypothecation of freely tradable-salable and
deliverable goods. It observed that the goods covered by generic hypothecation are freely
movable ,analogous to currency and hence in case of grievance by bank that stock in trade,or
other tradable goods and consumables etc were sold such grievance could be rebuffed as a
cantankerous plea.

36
AIR 1965 SC 1433
37
AIR 1968 SC 700
38
(2011) 6 SCC Bom 819

Memorial on behalf of the Petitioner. Page 17


In Debi Prasad Bhattacharya v. State of West Bengal 39 , where the petitioner a proprietor of
medicine store took a loan from Punjab National Bank, Dandrihatkhola hypothecating his entire
stock of medicine and then he sold the entire stock without the prior permission or knowledge of
the bank. Here the Calcutta High Court held that there was criminal breach of the trust as the
ownership and possession both remained with the accused.

2.2 WHETHER THE PETITIONER HAS DISHONESTLY MISAPPROPRIATED THE


GOODS IN HIS POSSESSION.

To constitute this offence of criminal breach of trust there must be a dishonest misappropriation
by a person in whom confidence is placed as to the custody management of the property in
respect of which the breach is charged. Dishonest intention is the gist of the offence40. Criminal
or dishonest intention is a sine qua non in an offence of criminal breach of trust. This being so
the prosecution has to show that the accused dishonestly misappropriated or converted to his own
use or dishonestly disposed of property entrusted to him.41 In the immediate matter, there is no
such averment even regarding any dishonest intention on the part of the petitioner in transacting
his business and selling the stock of medicine in his shop.

In the case of Chelloor Mankal Naryana Itu Ravi v. State of Travancore and Cochin42, it was
held by the honorable court that in order to constitute the Offence of Criminal breach of trust, it
must be established that the accused dishonestly misappropriated it or converted it for his own
use.

In Jaisrishnadas v. State of Bihar43, it was held that dishonest misappropriation or conversion


may not ordinarily be a matter a direct proof, but when it is established that property is entrusted
to a person or he had dominion over it and he has rendered false explanation for his failure to
account for it, then an inference of misappropriation with dishonest intent may readily be made.
Prosecution need not establish the precise mode of dishonest misappropriation or conversion44.

39
(2012) SCC Cal 9687.
40
State of H.P v Ritu Raj, (1992) 1 Crimes 311 (313-14) (HP)
41
Sardar Singh v. State of Haryana AIR 1977 SC 1766
42
AIR 1953 SC 478
43
AIR 1960 SC 889
44
Surendra Prasad Verma v. State of Bihar AIR 1973 SC 488

Memorial on behalf of the Petitioner. Page 18


Moreover, as already stated above, the petitioner had raised this loan only for the purpose of
carrying on his business of medical shop. It is evident that no particular item of medicals was
hypothecated to the complainant-Bank as it is clearly mentioned in the facts that the nature of the
surety is hypothecation of stock in shop. No specific and identified item of medicals was
hypothecated to the respondent-Bank. Still further, the petitioner has been paying the
installments in course of time, and is alleged to have defaulted after paying a part of the loan.
Non- payment or under payment of any price or loan does not constitute offence of breach of
trust or cheating45. In these circumstances, the allegations contained in the complain reveal only
a breach of contract, and does not constitute an offence either punishable under Section 40646 of
Indian Penal Code.47

Since both the essentials of the Offence under Section 40648 of Indian Penal Code could not be
fulfilled, no liability arises on the part of the accused for committing any crime.

3. THE ACT COMMITTED BY THE PETITIONER CONSTITUTES OFFENCE


PUNISHABLE UNDER SECTION 420 OF INDIAN PENAL CODE, 1860

It is humbly submitted before this Honble Court that the petitioner is not liable for cheating as
the following essential ingredients49 for charging a person under Sec. 42050 of IPC, 1860 are not
fulfilled. The essential ingredients of cheating as stated in Section 41551 are not found

The essential ingredients of the offence of cheating are52:

i. Deception of a person either by making a false or misleading representation or by


other action or omission,

45
Ratanlal Dhiraj Lal,Indian Penal Code, 34th Edition, Butter Worths Wadhwa Lexis Nexis ,Nagpur
46
Supra note 22 at 12
47
Pardeep Kumar v. State of Haryana, 1996(2) Recent Criminal Reports 791
48
Supra note 22 at 12
49
Mobarik Ali, (1958) SCR 328
50
Sec 420-Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any
person ,or to make, alter or destroy the whole or any part of a valuable security ,or anything which is signed or
sealed ,and which is capable of being converted into a valuable security, shall be punished with imprisonment of
either description for a term which may extend to seven years ,and shall also be liable to fine.
51
Sec 415- Whoever,by deceiving any person ,fraudulently or dishonestly induces the person so deceived to deliver
any property,or intentionally induces the person so deceived to do or omit to do anything which he would not do or
omit if he were not so deceived ,and which act or omission causes or is likely to cause damage or harm to that
person in body,mind,reputation or property is said to cheat
52
Supra note 29

Memorial on behalf of the Petitioner. Page 19


ii. Fraudulent or dishonest inducement of that person to either delivery any property or
the consent to the retention thereof by any person or to intentionally induce that
person to do or omit to do anything which he would not do or omit if he were not so
deceived and which act or omission causes or is likely to cause damage or harm to
that person in body, mind, reputation or property

3.1 WHETHER THERE WAS A DISHONEST INENTION IN THE MIND OF THE MIND
OF THE PETITIONER WHILE ENTERING INTO THE CONTRACT

In the present matter, the accused is the real owner of the property in question. The bank is
neither the legal beneficiary nor owner of the given property. The ownership of the goods has
always remain with the real owner.

In the famous case of Hridaya Ranjan Pd Verma v. State of Bihar53, it has been a mere
breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or
dishonest intention is shown right at the beginning of the transaction to establish the offence
of cheating it necessary to show that he had fraudulent or dishonest intention at the time of
making promise.

In Anil Mahajan v Bhor Industries Ltd.54, the court distinguished between mere breach of
contract and cheating the court held that from a mere failure of a person to keep up promise
subsequently, a culpable intention right at the beginning that is, when he made the promises
cannot be presumed. A distinction has to be kept in mind between mere breach of contract
and the offence of cheating. It depends upon the intention of the accused at the time of
inducement. The subsequent conduct is no the sole test. Mere breach of Contract cannot give
rise to criminal prosecution for cheating unless fraudulent dishonest intention is shown at the
beginning of the transaction.

In Vesa Holdings (P) Ltd v. State of Kerala55, the court held that every breach of contract
would not give rise to an offence of cheating and only in those case breach of contract would
amount to cheating where there was any deception played at the very inception. If the

53
AIR 2000 SC 2341
54
(2005) 10 SCC 28
55
(2005) 8 SCC 293

Memorial on behalf of the Petitioner. Page 20


intention to cheat has developed later on, the same cannot amount to cheating. For the
purpose of constituting an offence of cheating ,the complainant is required to show that the
accused had fraudulent or dishonest intention at the time of making promise or
representation.

In K.Jagadeesan (Dr.) v. Inspector of Police56, where the petitioner borrowed some amount
of money by entering into an agreement by way of Hypothecation deed repaid a portion of
the borrowed amount, when charged under Section 420 the court held that since the
petitioner ha repaid a portion of the amount, the act of the accused does not reflect any
intention hence missing the major ingredient of an offence amounting to cheating.

In Dalip Kaur v. Jagnar Singh57 the court held that an offence of cheating would be
constituted when the accused has fraudulent or dishonest intention at the time of making
promise or representation. A pure and simple breach of contract does not constitute an
offence of cheating.

In the present instance the accused while entering into the contract with the bank had no such
intention and neither the prosecution has been able to show that there lied any intention in the
mind of the accused at the inception of the hypothecation deed and the accused subsequently
had also paid a portion of the due amount to the bank and hence from the demeanor of the
accused it is very clear and prominent that there never existed a intention in the mind of the
accused to cheat on the bank.

Hence the counsel humbly submits infront of this court hat no necessary ingredients are
present in the act of the accused that will make it an offence under sec 415 of the Indian
Penal Code, 1860.

56
(2001) 3 SCC 511
57
(2009) 14 SCC 696

Memorial on behalf of the Petitioner. Page 21


PRAYER FOR RELIEF

Therefore, in the light of facts of the case, issues raised, arguments advanced and authorities
cited, this Court may be pleased to adjudge and declare that:

The order issued by the Ld. Chief Judicial Magistrate dated 01/08/2016 for carrying
entire criminal proceedings instituted against the petitioner should be quashed.
The petitioner is not liable for criminal breach of trust.
The petitioner is not liable for cheating.

And pass any order relief in favour of the Petitioner in the larger interest of justice
All of which is respectfully submitted

S/d

Counsel on behalf of Petitioner

Memorial on behalf of the Petitioner. Page 22