K.V. Subbiah vs T. Chalapathi Rao

B.S. Somasundaram, J.—The petitioner herein (who is the same in both these revision petitions) was the Managing Partner of the firm

''Janaranjani Films'' at Madras. The respondent and another Suryanarayana were the other two partners. Clause 15 of the partnership agreement

provided that all monies belonging to the firm should be remitted into a scheduled Bank viz., the Andhra Bank at T. Nagar, by all the partners. On

10th July, 1968, a cheque for Rs. 2,000 on the Bank of Baroda was issued in favour of the aforesaid firm by Messrs. Ramalakshmi Movies, who

had entered into an agreement for exploiting a picture in the City of Madras. The respondent received this cheque, affixed his signature as partner

of Janaranjani Films, had it attested by the Andhra Bank at T. Nagar and cashed the same at the Bank of Baroda. He did not remit the amount,

but misappropriated the same. Similarly, he had misappropriated another amount of Rs. 10,000 which he had collected from one Rayala Films at

Vijayawada, on 23rd September, 1968. Two complaints were presented by the petitioner in the Court of the 3rd Presidency Magistrate, Madras,

and these complaints which were taken on file for an offence u/s 406, Indian Penal Code, were transferred for disposal to the 6th Presidency

Magistrate, Saidapet, Madras. Observing that every partner has dominion over the partnership properties and stating that there was no entrustment

of any amount by the petitioner with the respondent, the learned Magistrate has discharged him in both the cases, u/s 253(2) of the Criminal

Procedure Code. The correctness of these orders is now canvassed in these revisions.

On behalf of the petitioner, it is contended that the order of discharge u/s 253 (2) without recording any evidence, could not be sustained.

Section 253 of the Code reads thus:

(i) If, upon taking all the evidence referred to in Section 252, and making such examination (if any) of the accused as the Magistrate thinks

necessary, he finds that no case against the accused has been made out which, if unrebutted, would warrant his conviction, the Magistrate shall

discharge him.

(2) Nothing in this section shall be deemed to prevent a Magistrate from discharging the accused at any previous stage of the case if, for reasons to

be recorded by such Magistrate, he considers the charge to be groundless.

Section 252 of the Code requires the Magistrate to hear the complainant and take all the evidence produced by him in support of the prosecution.

Now, it is urged that only after such evidence is recorded, the Magistrate could pass an order of discharge u/s 253 of the Code. Section 253

begins by referring to the evidence to be recorded u/s 252, and says that after recording that evidence and after examining the accused, the

Magistrate can discharge him if he finds that no case has been made out. This is the normal procedure. Sub-section (2) of this section follows Sub-

section (i) and it states that nothing in the section shall prevent him from discharging the accused at any previous stage, if, for reasons to be

recorded, he considers the charge to be groundless. The words ""at any previous stage"" are perfectly clear. It is only reasonable that an accused

person should be allowed to show at any stage of the proceedings that there is no case against him. For example, he might show that there was

something in the nature of want of sanction which would render the entire proceedings invalid and in such a case it will be clearly a waste of time to

examine the complainant or his witnesses. In a suitable case, the Magistrate, may come to the conclusion that the charge is groundless even before

he has heard the complainant u/s 252 of the Code. In such circumstances, when he is satisfied that the offence alleged could not properly be

sustained, he can discharge him u/s 253 (2), and Sub-section (2) gives him ample jurisdiction to make the order at any stage of the case, even

previous to the stage referred to in Sub-section (i) of Section 253. Sub-section (i) of Section 253, refers to taking of evidence and also to the

examination of the accused. But, there is no such reference to the recording of any evidence or the examination of the accused in Sub-section (2).

Significantly, Sub-section (2) contains the words "" at any previous stage of the case"" and it further states that the Magistrate, for '''' reasons to be

recorded in writing "", may discharge the accused, if he considers the charge to be groundless. Therefore for a discharge u/s 253(2), recording of

evidence is not necessary in a case the complaint itself does not disclose an offence. Such a complaint could be thrown out on the ground that it is

groundless. As pointed out in Gopala Panicker v. Kesavan and Anr. (1966) M.L.J. 374 such a case might well be one in which, the Magistrate, in

issuing the process u/s 204, has mistakenly believed that an offence has been disclosed by the complainant and on the matter being brought to his

attention when the case comes before him, he sees his error and decides that in fact even if the allegations in the complaint are true, no criminal

offence in disclosed. Therefore, there is no substance in the contention that the order of discharge u/s 253(2) is not sustainable because the

Magistrate has not recorded any evidence in the case.

Next it is urged that the discharge of the accused on the ground that as between partners there could be no charge u/s 406 of the Indian Penal

Code, is erroneous and could not be sustained. u/s 405 of the Indian Penal Code, whoever being in any manner entrusted with the property or

with any dominion over property, dishonestly misappropriates or converts for 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 the trust has to be discharged or if any legal contract, express or implied,

which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits criminal breach of trust. Ordinarily, a

partner does not in the ordinary course hold partnership property in a fiduciary capacity, because the partnership property belongs to the partners,

and one partner has as much right to the property as any other partner. In other words, the partner who holds the partnership property, holds it in

his own right and it cannot be said that he holds it in a fiduciary capacity. This is on the basis that the partnership assets cannot be predicated until

an account has been taken and all the debts have been discharged and till this is done, it cannot be said that a particular asset belongs to a

particular partner. But in a case where there is some special agreement it would be different. Where it could be made out that one partner was

entrusted with the property or with dominion over it, no difficulty would arise. But, where a partner receives partnership property without any

special agreement there can be no breach of trust. It may be that by a special arrangement between the parties, the partner could be regarded as

being entrusted with the property, but apart from such special arrangement, it cannot be said that the partner who receives partnership property on

behalf of his partners, has been given dominion over that property by his co-partners. Thus, in some circumstances, a partner can be charged u/s

406 of the Indian Penal Code. Even then, the question of dishonset conversion would arise for consideration so as to justify a conviction. In other

words, by special agreement between the parties entrustment or dominion over property might be possible, and in such a case a breach of any

condition or arrangement might render the person accused, guilty of fraudulent breach of trust. The learned Magistrate has relied upon the decision

reported in Velji Raghavji Patel Vs. State of Maharashtra, , and said that since every partner has dominion over the partnership property there can

be no question of one partner committing breach of trust in respect of the property received by him. Even in this case, their Lordships have pointed

out that in a case where the prosecution establishes that dominion over the assets or a particular asset of the partnership was by special agreement

between the parties, entrusted to the accused person, there could be a case of breach of trust. But, in a case where there is no special agreement,

a partner who receives money belonging to the partnership cannot be said to have received it in a fiduciary capacity, or in other words, cannot be

held to have been entrusted with dominion over partnership property.

The petitioner in his complaint has averred that Clause 15 of the partnership agreement directs that all moneys belonging to the firm should be

remitted into a scheduled Bank agreed upon by all the partners and that all cheques should be drawn by the petitioner who should maintain proper

books of account. He has further averred that such an account has been opened in the name of the firm in the T. Nagar Branch of the Andhra

Bank. In other words, he has set up a case of special agreement, followed by a breach of the conditions of this agreement. The further question as

to whether there was a dishonest conversion of the money by the respondent, will also arise for consideration. For a determination of these

questions, the recording of evidence is necessary. The respondent in this case states that there was no special entrustment nor was he holding any

property in any fiduciary capacity. As pointed out by the Supreme Court in Debabrtaa Gupta v. Ghosh (1968) Crl. App. R. 156, it is neither

possible nor desirable to express any opinion on the merits of such a plea, because the facts are not in possession of the Court. Furthermore, the

facts cannot be before the Court with out proper investigation and enquiry. Such an investigation and enquiry is necessary and for this, evidence

will have to be recorded. Therefore, the discharge of the accused on the ground that the charge is groundless cannot be sustained.

The order of discharge is set aside. The complaints shall be restored to file and dealt with in accordance with law, after recording the evidence

necessary for the determination of the question, (i) whether there was any entrustment of any property or dominion over any property by any legal

contract, either express or implied, (2) whether there was any violation of any such contract within the meaning of Section 405 of the Indian Penal

Code, and (3) whether there was any dishonest misappropriation or conversion as contemplated by Section 405, Indian Penal Code.

Both the revisions are allowed.