Iswar Prasad Kund vs State of Orissa

L. Rath, J.—The Petitioner, who was a Purchaser-cum-Millier-cum-Storage Agent (for short �agent�) under the State Government for the kharif year 1971-72 having been convicted u/s 409, Indian Penal Code for misappropriation of 3374.55 quintals of rice and sentenced to R. I. for two years and a fine of Rs. 2.000/- also confirmed in appeal, has preferred this revision~ The appointment of the Petitioner as agent was under agreement, Ext. 8, under which he had a two-fold responsibility of procuring paddy on behalf of Government arid to supply rice converting the delivered stock of paddy received, from non-miller purchasing agents, at the rate of 65%. Originally the complaint was lodged against the Petitioner by the C. s. O., Kalahandi that during the period in question the Petitioner had procured paddy and had also been delivered 4886 quintals of paddy, known as delivered stock, for which he was to deliver 3374.55 quintals of rice, but he had failed to supply rice against the delivered stock as also the procured paddy. However, charge-sheet was submitted and charge was framed only for non-supply of the delivered stock of rice.

The conviction of the Petitioner is assailed by Mr. Mohanty, learned Counsel for the Petitioner, urging:

(a) That even accepting the entire case of the prosecution, no criminal liability can be fastened to the Petitioner and that the liability, if any, is only of a civil nature ;

(b) There was never any criminal misappropriation since as an agent the Petitioner was to hold the paddy until direction was given for despatch of the same to any destination and no such direction having been issued there could not be any misappropriation ;

(c) The fact of misappropriation has never been proved, inasmuch as there was no physical verification of the stock by the Magistrate who had been sent for the purpose;and (d) No conviction u/s 409, Indian Penal Code can be made since a dishonest misappropriation by the Petitioner has never been proved and that mere absence of stock would not necessarily lead to the conclusion of a criminal breach of trust.

I wish to consider the first point at the last and take up the other points raised first. An offence of criminal breach of trust necessarily involves the facts of (a) entrustment of the property; and (b) a dishonest misappropriation or conversion of the property by the agent to his own use; or (c) dishonest use or disposal of the property in violation of mandate of the law prescribing the mode in which the entrustment is to be discharged; or (d) dishonest use or disposal of the property in violation of the terms of any legal contract either express or implied regarding the discharge of the entrustment or wilfully allowing some other person to do so. To establish a charge under the section, the fact of entrustment of the property as well as any or more of the other alternatives as aforesaid have to be established by the prosecution, the gist being a dishonest intention on the part of the agent. The burden of proving such dishonest intention is on the prosecution though however it being often difficult to get any direct evidence of intention, it may be justifiably inferred from the attending circumstances the conduct of the accused and a false explanation given by him may also be an additional factor against him to be taken into consideration. If entrustment is proved and the accused fails to account for the property when he is accountable or is not able to offer an acceptable explanation for the loss the onus to establish which is upon him, or offers a false explanation, a criminal intention may readily be inferred. It must however be kept in mind that mere suspicion cannot take the place of proof and that as long as the accused has offered a plausible explanation which in the background of the circumstances appears to be better probable, then he has discharged the onus upon him, the preponderance of probability being that his explanation might be true. Once the explanation of the accused appears to be so possible, the prosecution cannot be said to have established the case beyond all reasonable doubt since the accused has succeeded in raising a doubt through his explanation. When such is the case, there is no offence u/s 409, Indian Penal Code even if entrustment is proved, since in the absence of intention of conversion by the accused, a mere failure to account for the property would not be criminal breach of trust even though wise a breach of trust. It is therefore for prove the explanation as false, if at all.

So far as entrustment is concerned, Mr. Mohanty has not rightly contested the same and indeed Ext. 3 is the acceptance note signed by the Petitioner acknowledging receipt of non-miller stock of 4886 quintals of paddy from the non-miller agent and he also does not dispute his liability for the claimed quantity of rice (3175.90 quintals). It is however his contention that as the agent the Petitioner, after milling, was only to hold the rice awaiting despatch instructions from the� authorities, but since no instructions whatsoever were given he could not be said to have violated any lawful direction and -hence an offence u/s 409, Indian Penal Code is not made out. As a submission of fact, the contention is substantiated by evidence. The entire case of the prosecution is that even though the Petitioner was supplied with paddy and was liable for the rice, yet on verification of his godowns no stock of rice was found. Even though the learned Sessions Judge has found in para-12 of his judgment that the Petitioner had,been asked to supply rice of the delivered stock and he failed to do so, yet such finding is not supported by evidence on record and indeed the evidence is to the contrary. P. w. 1 is the C. S. O. who though stated in his examination-in-chief of demand notice having been issued calling upon the Petitioner to deliver the rice and that the latter did not so deliver, yet has given a complete go-by in the cross-examination and stated that after the acceptance note Ext. 3 was signed, to his knowledge no direction had been issued to the Petitioner for delivery of the rice at a particular place or to a particular person. He had not verified if the Petitioner had received any demand notice and no demand notice was also then on record. According to him, the Petitioner was to deliver the rice at the destination according to the instructions of the Collector or his officers and that till such directions are received by an agent, he is to stock the rice in the store after milling. It has been conceded by the learned Addl. Standing Counsel that there is no other it might be other the prosecution to evidence showing issue of any delivery instruction to the Petitioner.

The question however does not rest there. The substantial case against the Petitioner is that at the time of inspection and verification by the Executive Magistrate (p.w. 2) on 2-6-1974. there was no rice relating to the delivered stock in the godown of the Petitioner which fact would lead to the inference of the stock having been disposed of clandestinely. The stand of the State is contested by Mr. Mohanty contending in the first phase that absence of the stock was never factually established and that even if the stock would have been so absent, yet no offence u/s 409, Indian Penal Code is made out because mere non-accounting for the stock or mere absence of the stock in the godown would never lead to a conclusion of conversion of the properties by the Petitioner to his own use and that the liability, if any, of the Petitioner would be only damages against him and that the evidence of p.w. 7 showed of a certificate proceeding pending against the Petitioner for recovery of the dues. Such contention of Mr. Mohanty though arresting on the face of it yet does not stand closer scrutiny. An agent of the type the Petitioner was had no absolute right of disposal of the stock held by him in respect of the delivered paddy. Under the terms of Ext. 8, an agent is required to� maintain the same standard of quality and variety of the delivered stocks as were received by him, without any deterioration damage and loss and for this purpose he is given sealed sample of the delivered stocks with a copy of the refraction report of the said sample to indicate its quality and in the event of any dispute with regard to the quality, the sample and the refraction report are to serve as the basis of comparison. The agent has the responsibility of milling the paddy delivered to him within a period of one month from the date of delivery so as to ensure quick delivery of rice and ensure compliance with die programme of export or of internal consumption and in the event of failure on the part of the agent to stick to the time and deliver the rice conforming to the desired standard, the Government has the authority to take over the paddy or deliver the same to other agents for milling. The storage depots are opened by the agents and when required by the Collector and the stocks are stored therein for effective delivery of them in the retail centres. Clause 3 (a) (xi) provides that the final disposal of the stocks held by the agent can only be in accordance with the direction of the Collector and that he is not entitled to dispose of the stock otherwise. Under Clause 9 the agent is bound to afford every facility for physical varication of the stocks at any time at his own cost- to the Collector or the Secretary and under Clause 11 his responsibility continues even after termination of the agreement and such continuance of responsibility includes the safe and scientific storage of foodgrains held by him on the date of the said termination of the agreement until the foodgrains are finally disposed of. Such final disposal can only be made in accordance with the directions of the Collector. An analysis of the terms in the agreement leads to the only conclusion that an agent is required to hold the stocks in the godowns for the benefit of the State and that such stocks must conform to the same paddy delivered to him. The agent remains accountable for the very stock received by him and that the absence of the stock in the godown at the time of verification may justifiably lead to the conclusion of its illegal conversion unless the same is satisfactorily explained. .

Though however the submission of Mr. Mohanty is not acceptable, yet there is force in his contention that absence of stock in the godown was actually not proved. The sole evidence on the point is that of P.Ws. 1 and 2. P. w. 1 candidly admitted that he had never verified the stock and that the stock of paddy and rice with the Petitioner was being verified from time to time by the Civil Supply staff and by the Executive Magistrate. P. w. 2 is the Magistrate who conducted the verification on 2-6-1974 on the direction of the Collector and his stock verification reports and Ext. 4 series. It is the very statement of the witness that he had never verified the shortage of the stock and had not ascertained the quintals for shortage, but he had verified the accounts and the book balance of the stock had been mentioned in the report. The defence of the Petitioner in his statement u/s 313, Criminal Procedure Code as regards the evidence of p.w. 2 is that the stock of paddy and rice was then on the date of verification though in a damaged condition. It is the further evidence of p.w. 2 that the reports Ext. 4 series were never prepared by him but were in the handwriting of others whom he could not name and that he had only signed the reports but claimed that the reports Were prepared in his presence. This being the only evidence, it cannot be said that the shortage of stock was clearly established in the absence of actual verification.

The only other evidence against the Petitioner is the Ext. 4 series reports themselves wherein he is opposed to have signed acknowledging their correctness. The reports show the stock to be nil as also the explanation of the Petitioner in five, of them that the stock had been damaged due to storage in Kutcha godown and leakage of rain water through the roofs for which, he had destroyed it. The reports a re not available to be used as evidence against the Petitioner since absolutely no question has been addressed to him during his examination u/s 313, Cr. P.C. in respect of them or his signatures thereon.

The reports being grossly adverse to the Petitioner as containing his signature to the shortage statement, should have been brought to his notice and his answer thereto obtained but the same having not been done, they are in themselves of little worth.

The next contention advanced by Mr. Mohanty is that the liability of the Petitioner is only of a civil nature and that the agreement itself has in-built mechanism for solution of disputes arising between the parties and hence at best there could only be a case of breach of contract against him, but never any criminal misappropriation.

Reliance for the purpose is placed on Clause 3 (a) (iv) charging the agent with the responsibility to compensate the Government for any deterioration, damage or lass to the delivered stocks respective of the period of storage; Clause 3 (a) (ii) authorising the, Collector, in case of any, shortage, without prejudice to such other action as he may take according to law for the time being in force, for imposing a penalty of Rs. 15/- per quintal of shortage in excess of the admissible shortage, in addition to the value of all� the shortages being recovered at the ex-godown prices fixed by the Government, levy of penalty under Clause 3 (e) and Clause 12 providing for, any dispute or controversy arising out of or in any way touching or concerning the agreement to be� referred to arbitration. The provisions so referred to however in no way show that apart from the civil liability that, an agent may incur, there can never be any criminal liability also arising out of his functioning. A purchasing agent�s agreement does not stand on any different footing then that of the contract of other agents and such an agent is as much prone to criminal liability for any criminal conduct of his as might also arise in case of every other class of agents. Section 409; Indian Penal Code itself stipulates commission of criminal breach of trust by agents and where an agent after being entrusted with the principal�s property conducts himself in a manner to show a dishonest conversion of the property so as to bring it within any of the three other ingredients of the section as discussed supra he would have opened himself for a prosecution under the section. Merely because an agreement exists it is never a shield against prosecution for criminal breach of trust where the act complained of clearly reveals a fraudulent conversion of the property. This is not to say that every breach of trust between the principal and the agent would necessarily give scope for a criminal proceeding. While all criminal breach of trusts must necessarily first be a breach of trust entitling damages, the reverse is not correct and a mere breach of trust would not warrant a prosecution. But only because the agreement provides for levy of compensation as additional mode of recovery or also for levy of penalty or settlement of disputes by arbitration, it does not mean a complete freedom from criminal prosecution where it is otherwise due.

Dealing with the question Hon�ble Mr. Justice B. K. Behera (as he then was) held in the case of Bhikari Charan Mohapatra v. State of Orissa 1978 C.L.R. 164, as follows:

Every breach of trust may give rise to a suit for damages but it is only when there is evidence of a mental act of fraudulent misappropriation that the commission of embezzlement of any sum of money becomes a penal offence punishable as criminal breach of trust. It is this mental act of fraudulent misappropriation that clearly demarcates an act of embezzlement which is a civil wrong or tort from the offence of criminal breach of trust. It may be kept in mind that every offence of criminal breach of trust involves a civil wrong in respect of which the complainant may seek his redress for damages in the civil court, but every breach of trust in the absence of mens rea, cannot legally justify a criminal prosecution:� 11. In the result the revision is allowed and the order of conviction and sentence passed against the Petitioner is set aside. The Petitioner is entitled to get refund of the fine, if any, realised from him.