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Petitioner: THE MUSLIM COMMERCIAL BANK LTD. VS Respondent: SHAHEEN IQBAL AND 4 OTHERS
1988 P Cr
1988 P Cr. L J 2294
[Special Court (Offences in Banks), Lahore]
Before Mr. Justice (Rtd.) Ghazanfar Ali Gondal
THE MUSLIM COMMERCIAL BANK LTD.--Complainant
versus
SHAHEEN IQBAL and 4 others--Accused
Complaint Cases Nos. 2 to 4 of 1984, decided on 28th February, 1988.
(a) Offences in Respect of Banks (Special Courts) Ordinance (IX of 1984)--
---S. 5-Criminal Procedure Code (V of 1898), Ss. 249-A & 265-K--Penal Code (XLV of 1860), Ss. 403 & 406--Entrustment--Accused granted loan facility under Export Refinance Scheme failing to export goods within stipulated period rendering themselves liable to pay penal interest @ 16% instead of facilitated interest @ 3%--No mention or indication of any criminal intention on part of accused given--Export Refinance Scheme making exporter liable only to re-pay principal amount alongwith penal interest but not contemplating any criminal prosecution for default in exporting goods--Complaints not explaining as to how loan amount was utilized in violation of enjoined terms of contract--Only penalty incurred by accused, held, was civil liability to repay principal amount with penal interest and their inability to expert goods did not by itself amount to commission of offence of criminal breach of trust--Condition of payment of interest for use of loan amount would also negate creation of any trust within meaning of said word used in S.406, P.P.C.--No offence under S.406, P.P.C. could be made out in circumstances.
(b) Offences in Respect of Banks (Special Courts) Ordinance (IX of 1984)--
---S. 5---Criminal Procedure Code (V of 1898), Ss. 249-A & 265-K- Penal Code (XLV of 1860), Ss. 403 & 406--Hypothecated goods, mis appropriation of--No ban on accused to sell hypothecated goods stored in their godowns--Accused failing to submit monthly statements of stocks in their godowns--On inspection no stocks found in godowns--No allegation of disposing of stocks by accused otherwise than in ordinary course of business--No criminal intention alleged against accused in failing to submit monthly statements--Mere fact that no monthly statements were submitted, held would not be proof of removal of hypothecated goods in violation of terms of contract--Charge under S.403, P.P.C. was groundless and there was no probability of their conviction under the said provisions.
(c) Criminal Procedure Code (V of 1898)--
---Ss. 249-A, 265-K, 204 & 367--Offences in Respect of Banks (Special Courts) Ordinance (IX of 1984), S.5--Penal Code (XLV of 1860), Ss.403 & 406--Interim order under S.204, Cr.P.C., whether bar on final order under S.249-A/265-K, Cr.P.C.--Interim order passed under definite provision of law, summoning accused to face trial on finding prima facie evidence--Order passed after hearing only one party not containing reasoning required by S.367, Cr.P.C. for judgment- Jurisdiction to consider question of acquittal at any stage of trial conferred by totally different and independent provisions of law--Final order passed after hearing both parties--Interim order passed under S.204, Cr.P.C., held, would not amount to judgment and order under S.249-A/265-K, Cr.P.C. being totally under different and independent provisions would not amount to review of earlier interim order so as to constitute a bar for passing order under S.249-A/265-K, Cr.P.C. in circumstances.
(d) Offences in Respect of Banks (Special Courts) Ordinance (IX of 1984)--
---S. 5--Criminal Procedure Code (V of 1898), Ss.249-A & 265-K--Penal Code (XLV of 1860), Ss.403 & 406--Jurisdiction, exercise of- Complaint on face of it disclosing no scheduled offence--No probability of conviction of accused of any offence--Trial resulting in unnecessary harassment and hardship to accused--Averments of complaint making out groundless charge--Discretion of Court to exercise jurisdiction and power under S.249-A/265-K, Cr.P.C., held, had no restraint in law.
Muhammad Siddique Chughtai for Complainant.
Shahzad Jahangir for Accused.
Date of hearing: 28th February, 1988.
JUDGMENT
This judgment will dispose of applications (filed in complaints No.2 to 4 of 1984) under section 249-A/265-K, Cr.P.C. for the acquittal of the accused in these complaints and for dismissal of the complaints on the ground that this Court has no jurisdiction to try the accused.
2. It is averred in these complaints by Muslim Commercial Bank Ltd., Circular Road Branch, Faisalabad, that accused directors/ managers of their companies were granted loan facility under Export Refinance Scheme introduced by the State Bank of Pakistan as a result of which they were advanced sums, totalling Rs.17,57,600 in complaint No.2/1984, Rs.28,91,000 in complaint No.3/1984 and Rs.6,70,000 in complaint No.4/1984, but no exports were made by them within the stipulated period of 180 days and on that account the complainant bank besides paying the loan amount had also to pay penal interest to the State Bank of Pakistan and that the accused had not paid to the complainant bank either the sums or the penal interest. On these facts, the charge as laid against the accused in para 13 of each of the complaints is that the accused had obtained the said loans of said amounts from the complainant bank for the purpose of export of goods against the contracts under the Refinance Facility and that the said amount was a trust with the said accused but they failed to export the goods and acted dishonestly, criminally misappropriated or converted to their own use the said amounts dishonestly, used or disposed of the said amounts in violation of the legal contracts which they had made touching the discharge of the said trust and had thus committed breach of trust punishable under section 406 of the Pakistan Penal Code.
3. Apart from that, it is also stated in the complaints that the bank granted to the accused cash credit over-draft facility under certain drawing limits and the said accused as security thereof hypothecated the goods of cotton textile at the borrowers' premises godowns as per deed of hypothecation Annexure 'J' and the companies of the accused which used to submit to the complainant bank monthly statement of stocks of hypothecated goods till a certain date failed to submit any such statement thereafter. Furthermore, on 4-6-1984 ands 23-7-1984, no stock was found lying in the godowns of the said companies of the accused persons. Again on these facts it is alleged in the said para 13 of each of the said complaints that the accused persons had thus criminally misappropriated the hypothecated goods and had thereby committed an offence punishable under section 403, P.P.C.
4. Mr. Shahzad Jahangir, Advocate, who appeared on behalf of the accused in all the three complaint cases conceded that this Court had jurisdiction to try cases under sections 406 and 403, P.P.C. as they were scheduled offences as defined in section 2(d) of the Offences in Respect of Banks (Special Courts) Ordinance, 1984 (IX of 1984) but his plea was, firstly, that on a fair appraisal of the complaints in these cases and documents relied upon by the complainant in the said complaints, no case was made out for offence under section 406 P.P.C. and the case was one of mere civil liability and, secondly that the loan advanced by a bank to customers, created only a relationship of creditor and debtor and did not create any relationship of trust between the parties and the grant of loan by the complainant to the accused in Refinance Export Scheme or otherwise did not amount to entrustment of the said sums of money within the meaning of the said word as used in section 405, P.P.C. and, therefore, no offence under section 406 could be said to have been committed by the accused in ail the three complaints. As for offence under section 403, P.P.C. it was submitted by him that in the hypothecation deed, Annexure 'J' there was no bar for sale of the hypothecated stock by the accused in the ordinary course of business and, therefore, the mere fact that no stock was available in the godown of the accused was no ground to hold that the accused had misappropriated the said stocks in which complainant bank had beneficial interest. It was also submitted that section 249-A/265-K, Cr.P.C. authorises this Court to acquit an accused person at any stage of the case if there was no probability of the accused being convicted of any offence.
5. I have heard detailed arguments from Mr. Shahzad Jahangir, Advocate, on the said three points raised by him. Similarly, I have also heard Mr. Muhammad Siddique Chughtai, Advocate, in reply, for a considerable length of time. I have also gone through the record minutely and the case law produced on behalf of both the parties.
6. So far as the first point raised by learned counsel for the accused is concerned, I have gone through the complaint. Paragraph 6 in each of the said complaints gives details of the part I of the Export Refinance Scheme under which the loan was granted to the accused. Relevant portion of the said para in each of the said complaints runs as below:-
"That the State Bank of Pakistan introduced an Export Re- finance Scheme, and under part I of the said, Scheme, all scheduled banks were authorised to finance the Exports of Pakistani Goods/ Commodities to foreign countries or a concessional interest at the rate of 3% per annum. In return, the State Bank of Pakistan had agreed to re-finance such Banks upto the limit prescribed for advances free of interest; provided that the loan was utilized by the exporter solely for the purpose of export on the basis of the firm export order/ letter of credit within 180 days from the date of re-finance facility obtained from State Bank of Pakistan by such scheduled banks. The refinance so obtained from the State Bank of Pakistan by the complainant bank was to be repaid within a period of 180 days. In case the amount received by the exporter against a firm export order/letter of credit is not utilized for the purpose of export within the specified time then in the circumstances the exporter is liable to repay the principal amount alongwith interest of 16% per annum. The penal interest of 16% per annum payable by the exporter to the bank is to be split up in the following manner:-
(a) 13% of such interest is to be paid to the State Bank of Pakistan.
(b) 3% is to be adjusted and retained by the financing bank.
In para 8 of each of the said three complaints, the complainant gave the basic facts on which his charge for criminal. breach of trust of sums of money advanced to the accused under Export Refinance Scheme was founded. Relevant portion of said paragraph which is common in all the three complaints is to the following effect:-
"That the accused persons started availing of the said facility from---from the complainant bank on the production of various Firm Export Orders/Letters of Credits for export, purposes. The conduct of the account reveals the failure of he accused persons to satisfy the requirements of the Scheme against which re-finance was obtained from the State Bank of Pakistan through the complainant bank. The payment of sum of Rs.----and----the subject-matter of the complaint, were paid to the accused persons as is evident from vouchers and statement of relevant current accounts attached. A statement showing the refinance facility availed of by the accused persons against Firm export order/letter of credit but no exports were made within the stipulated period of 180 days as a result of which the complainant bank besides paying the loan amount had also to pay the penal interest to the State Bank of Pakistan, Faisalabad. It is pertinent to point out here that the total amount of refinance facility amounts to----which the complainant bank paid to the State Bank of Pakistan, Faisalabad, alongwith total penal interest amounting to----However, the amounts of three items of refinance facility availed by the accused persons with effect from---to------the subject-matter of the complaint, are-----------respectively (total-----) which the complainant bank paid back to the State Bank of Pakistan, Faisalabad, by cheque/S.B.P. The penal interest of Rs.-----, Rs.-----and Rs.-----respectively (total Rs.-----) was paid to the State Bank of Pakistan, Faisalabad, on account of, failure of the accused persons to export the goods within the stipulated period of 180 days."
Thereafter, in the remaining paras. of each of the said three complaints there is no description of any conduct of the accused disclosing any mens rea on their part and in para. 13 of each of the said complaints, the complainant has straightaway jumped to the conclusion that the said amounts advanced to accused were a trust with the said accused persons and in failing to export the goods, the accused had committed criminal breach of trust of the said sums. It is clear from perusal of the paragraph 8 of each of the said three complaints that so far as the said sums are concerned, there is absolutely no mention or even indication of existence of any criminal intention on the part of the accused. In these paras. only thing which had been alleged is that the accused failed to export goods within the stipulated period. However, mere failure of the accused to satisfy the requirements of the scheme their inability to export goods; as described in the said paras. did not by itself amount to commission of the offence of criminal breach of trust on their part. In my opinion, therefore, the said averments in each of the said three complaints do not disclose the commission of offence under section 406 P.P.C.
7. Apart from that the scheme as described in para. 6 of each of the said complaints, visualises that in case the amount received by the exporter is not utilized for the purposes of export within the specified time, the exporter would be liable to re-pay the principal amount alongwith the interest at the penal interest of Rs.16% per annum out of which 3% was to be adjusted and retained by the financing bank and 13% was to be paid to the State Bank of Pakistan. Accordingly, the only consequence of non-export by the accused of the goods for which they had obtained the refinance facility was to pay the penal interest at the rate of Rs.16% per annum on said sums instead of Rs.3% which they would have paid if they had made the export within the stipulated period. The consequence of violation of the said scheme has been laid down in the Scheme and as per the averments in the complaints themselves, the said consequence is that the exporter shall pay alongwith the loan amount penal interest at the rate of 16% per annum instead of Rs.3%. The said scheme does not appear to contemplate the prosecution of the accused in case of default in making the necessary exports within the stipulated time. The complainant has not in the said complaints explained or even indicated how the accused had used the said sums in a manner other than the one enjoined by the terms of the contract. But even if that had been done so, the only penalty for which they were liable on the basis of averments made in the complaints is to pay the penal interest at the rate of 16% as the scheme itself has laid down the penalty in case of violation of terms of the contract made by the exporter with the bank in getting the Refinance Facility. The only averment made in each of the said three complaints is that the accused had not made the said export and had not made use of the said sums for making necessary exports within the prescribed period. From this averment arid others shade in these complaints, it appears to me that the only penalty incurred by the accused on facts made out in these complaints, was a civil liability of payment, besides the principal amount, of penal interest at the rate of I6% and that the said accused had not incurred criminal liability under section 406, P.P.C. For that reason too, I am of the opinion that the said complaints do not disclose commission of offence under section 406, P.P.C. in this case.
8. So far as the second point is concerned, in section 405, P.P.C which defines offence of 'criminal breach of trust' it appears to be an essential condition that the property which is the subject-matter of offence must have been entrusted irrespective of the manner in which it may have been done. Entrustment is an essential ingredient of the offence of criminal breach of trust. It is accordingly necessary to discover the meaning of the word 'entrustment' in the context of section 405, P.P.C. According to section 3 of the Trust Act, 1882, trust is an obligation annexed to the ownership of the property and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. When a property is entrusted to someone, a trust, or confidence is reposed in him i.e. the person receiving the property who holds the property not for himself, but for the owner or for such person as is named by the owner. The creation of the trust under the said Act may be express or implied. Section 405, P.P.C. however, does not contemplate the creation of trust with all the technicalities of the said law of trust but the said law gives an idea of meaning of the word 'entrustment'. Taken in the background of the said law, entrustment appears to mean handing over of the property to another person for the purpose of his holding it in a fiduciary capacity for the owner or for owner and the person named by him. It follows from it and also from section 405, P.P.C. itself that ownership of property or the beneficial interest in property in respect of which criminal breach of trust is committed must be in some person other than the accused and the latter must hold it on account of (in trust for) such other person or in some way for his benefit. It was, so held in Nga Po Seik v. Emperor (6 Low Bur Rul 62 = 17 IC 824, FB), in re: Ven Kata Gurunatha Sastri A I R 1923 Mad. 597, in Ramaswami Reddy v. Emperor AIR 1931 Mad. 235 and in Chellor Mankkal Marayan Ittiravi Nambudiri v. State of Travancore-Cochin AIR 1953 SC 478). It is thus basic in the concept of entrustment that the property which is handed over to other person or beneficial interest therein should continue to remain vested in the person who hands over the said property to the other and should not, even for the time being pass over to the accused to enable him to use it for his own purpose. However, in the loan advances to another person, the property in the said sum of loan does not continue to remain vested in the creditor but passes, for the time being to the debtor and enables him to use it for his own purpose. Apart from that, when a loan is advanced to a party by the bank, the said bank parts with the said money for consideration i.e. the interest which he has to receive in lieu of the debtor making use of the said sum of money which had been handed over to the debtor. When the money comes into the hands of a debtor, it does not for the moment, remain the property of the bank. It becomes the property of the debtor for the period for which loan had been granted as the debtor has obtained it on the basis of consideration viz. the interest which he has to pay for its use for that period. The condition of payment of the interest for the use of the said sum of money also seems to me to negate the creation of any trust or entrustment within the meaning of the said word as used in section 405, P.P.C. as the existence of term of payment of interest is a proof of passing of the property in the said amount of the loan to the transferee, for the time being.
9. I am fortified in above view of mine by the observation made in Bock Chang & Co. v. ka Do 7 Low Bur Rul 16 F.B = 14 Cr.LJ. 145 to the effect that if a sum of money is advanced by way of loan, there is no 'enturstment' within the meaning. of the said words as defined in section 405; Penal. Code. In that case, the accused was advanced a sum of money on the undertaking that he would buy padyy at the rate he could and would sell the same to the advancing firm at the market rate on the day of delivery. It was held that property in the money passed to the accused and his contract to use the money in a particular way did not operate to create a constructive trust and that in the circumstances no criminal liability for criminal breach of trust was incurred. Again in Nagha Po Ywet v. Emperor AIR Lower Burma 1=LBR 278 (FB) following observations were made:
"The question whether A entrusted property to B is one which depends upon facts of the case and not merely upon legal terms employed by the parties. If the real nature of the transaction is a loan, the fact that parties in writing call it a trust or agree that for the purposes of the Penal Code, the property in the money shall be deemed to remain in the original owner or agree that the party receiving the money shall be liable for criminal breach of trust. if he applied the money to a purpose other than, that agreed upon, would not bring the transaction within the scope of section 405 P.P.C. The Penal Code cannot be altered by agreement of parties so as to make section 405, applicable to a transaction which is in its real nature a loan. If A receives money from B for. certain specified purpose, the money is not entrusted to A within the meaning of section 405, P.P.C., if A is liable to return money in any event."
Again in Mrs. William Cecil Keymer v. Emperor AIR 1914 All. 196, it was held that if money is, taken on loan for its utilization for a certain purposes but it is applied by the accused to other purposes, the accused cannot be held guilty of criminal breach of trust. In this case the accused had obtained a sum of Rs.180 from Mrs. William Cecil Keymer, by which sum he was short, for the purpose of purchasing a car with a stipulation that the car shall be later sold it a higher price and half the profit of the transaction shall be paid to her. It was specifically observed by the learned Judge in his judgment in this case that if Mrs. William was merely asked for a loan, it was q9ite clear that the accused could have committed no criminal breach of trust with respect to said sum of money. After appraisal of evidence on record in that case, the learned Judge came to the conclusion that Mrs. William's evidence was perfectly consistent with her meaning that she gave the accused loan on the condition that he would carry through the transaction and would return the money and half the profits to her and if that was the transaction between the parties, then in the eves of law, there was no partnership between them and the accused could not be said to have been guilty of criminal breach of trust, if he applied the money which he borrowed for one purpose, to another purpose. Similarly in case titled Commercial Bureau v. NB Ghoshal and another AIR 1948 Cal. 1, wherein transaction whereby money was advanced to the accused was interpreted to be a mere loan it was held that failure to repay the loan did not constitute criminal breach of trust. Again in State v. Tirath Das A I R 1954 All. 583 the following observations are pertinent:-
"The one underlying idea in section 405 Penal Code is undoubtedly this that the property which is the subject-matter, of entrustment, or in respect of which dominion is passed over to the accused, does not even for the time being, become the property of the accused which he could use for its own purposes. Thus, the section does not cover the. case of a loan or of an advance of money when the borrower intends to use or utilize that money for the time being till he is in possession of it, although he may have to return an equivalent amount later on to the person making the advance with or without interest or compensation for .the use thereof.
When a loan is advanced, the relation of a creditor and debtor is created.".
Again in Fazal Karim alias Bibo v. Muhammad Mursaleen 1979 PCr.LJ 921 (Kar.) criminal proceedings for offence under section 406, P.P.C. taken on a complaint (which recited that accused took Rs.28,000 as a loan for six months and after stipulated period did not pay back the sum in spite of repeated requests) were quashed on the ground that the facts stated in the complaint at best gave rise to civil liability enforceable by the complainant in a civil Court and resort to a criminal Court had been made for the purpose of circumventing the law and finding out an easy manner of enforcing civil rights.
10. Learned counsel for the complainant has however, contended that when an amount is given to another person for the specific purpose of utilizing the said sum for a particular purpose in pursuance of a contract, the use of the said sum in violation of the relevant terms of the contract shall amount to commission of offence of criminal breach of trust as the definition of criminal breach of trust as given in
section 405, P.P.C. itself embraces the same within: its ambit. I am afraid, I…
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