STEPHEN Vs. CHANDRA MOHAN AND ORS.

JUDGEMENT

(1.) The first respondent pledged some ornaments and on their security secured a loan from the Iritty branch of the North Malabar Gramin Bank of which the petitioner is the manager, after executing an agreement also. The bank demanded the amount back and the first respondent remitted the same. But the ornaments were not returned by "the petitioner for the reason that a loan transaction by another person for which the first respondent stood surety was not discharged. The first respondent prosecuted the petitioner before the Judicial First Class Magistrate, Mattannoor in C. C. No. 3 of 1986 for offences punishable under Sections 409 and 420, Indian Penal Code. The petitioner seeks to quash the complaint invoking the inherent powers of this court. The short question for consideration is whether the facts constitute offences under the above sections.

(2.) Section 409 involves criminal breach of trust by a public servant or by a banker, merchant or agent. In order to constitute criminal breach of trust as defined in Section 405 of the Indian Penal Code, there must be entrustment with property or with dominion over the same. Admittedly, there was entrustment of the ornaments. The other ingredients required are dishonest misappropriation or conversion of the property by the accused for his own use. Those ingredients are not there because the ornaments continued with the, bank as earlier and it was possessed only as security. The only difference is that when one transaction was closed, it was retained as security solely for another transaction. No question of misappropriation or conversion is involved. Dishonest use or disposal of the property in violation of any direction of law prescribing the mode in which the trust is to be discharged, or of any legal contract, express or implied, which the accused made touching on the discharge of such trust is also sufficient to constitute the offence. The argument was that the ornament was used by the petitioner, in his capacity as manager, as security for the transaction to which the first respondent was a surety, in violation of the provisions of the legal contract entered into at the time of the pledge. There is no such allegation specifically. Still, that contention also could be considered because such a case could be brought within the allegations.

(3.) Annexure 4 is a copy of the agreement executed by the first respondent at the time of the loan transaction. That agreement contains a provision by which the first, respondent authorised the bank to treat the ornaments not only as security for that loan transaction but also for any other transaction or liability towards any branch of the bank, existing or to be incurred in future. The liability of a surety is joint and several with that of the principal debtor. Therefore, the liability as a surety also, whether existing or in future, comes within the ambit of the above provision in the agreement. The first respondent has no case that he is not having the liability towards the bank as surety for the loan transaction of another person. The action of the petitioner in treating the ornament as security for that transaction cannot, therefore, be said to be dishonest use or disposal in violation of the terms of the legal contract constituting an essential ingredient of the offence touching on the discharge of trust. The petitioner was only acting according to the terms of the agreement. Treating the ornament as security for another transaction coming within the purview of the agreement does not involve dishonest use or disposal in violation of a contract touching on the discharge of the trust.