Bombay High Court Allows Three Revision Applications Challenging Order Framing Charge Under Section 409 IPC in Share Retention Case. High Court Restores Trial Court’s Discharge of Accused No.1 and No.4 and Charge Under Section 406 IPC Against Accused No.2.

Case Note & Summary

The three criminal revision applications before the Bombay High Court arose out of a private complaint filed by Hari Narayan G. Bajaj against four accused persons – Pramod Parmeshwarlal Banka (accused no.1), Vijaykumar Agarwal (accused no.2), Naval Sharma (accused no.3, later dropped) and Rani Vijay Agarwal (accused no.4) – alleging commission of offence under Section 406 read with Section 114 of the Indian Penal Code, 1860. The complainant alleged that in August 1995 he needed a loan of Rs.50 lakhs and through a financial consultant he came in contact with accused no.2. An agreement was entered into whereby the complainant pledged 19,000 equity shares of Sesa Goa Limited as security for a loan of Rs.50 lakhs advanced by Creative Outerwear Limited (COL), a public limited company in which the accused held positions. The loan was to be repaid within six months with interest at 27% per annum. According to the complainant, he repaid the loan along with interest, but out of the pledged shares only 15,000 shares were returned and the remaining 4,000 shares were retained by the accused and eventually transferred in the name of COL. He alleged that accused no.4, who was an authorized signatory of COL, got those shares transferred. The complainant claimed that the shares were entrusted to the accused and not returned, thereby constituting criminal breach of trust. After recording evidence before charge, the learned Additional Chief Metropolitan Magistrate, 40th Court, Girgaon, Mumbai, by order dated (not specified), discharged accused nos.1, 3 and 4 and directed framing of charge under Section 406 IPC against accused no.2 alone, holding that no prima facie case was made out against the others. Aggrieved, the complainant preferred Criminal Revision Application No.529 of 2007 before the Sessions Court, Mumbai. The Additional Sessions Judge, Mumbai, by order dated 24th August 2007, allowed the revision, set aside the discharge of accused nos.1 and 4, and directed the Magistrate to frame charge under Section 409 read with Section 34 IPC against all the accused (accused no.3 having been dropped). The applicants, being accused nos.1, 4 and 2 respectively, challenged the revisional court’s order by filing three separate revision applications before the High Court. The High Court heard the matter at length on 4th and 5th July 2011 and, after giving the parties an opportunity to settle, pronounced the order on 19th July 2011 making the rule absolute in terms of prayer clause (a) of each application. The legal issues were whether the revisional court was justified in interfering with the well-reasoned discharge order of the trial court and whether the ingredients of Section 409 IPC could be made out against the applicants who were officers of the company on the allegations made. The applicants argued that the transaction was purely civil in nature, that the shares were retained as security for another parallel loan transaction with the complainant’s sons, that the company was a separate legal entity, and that vicarious liability could not be imposed in the absence of specific allegation of entrustment and dishonest misappropriation against them. The respondent-complainant contended that accused no.4 actively transferred the shares and was aware of the facts, and accused no.1 was involved from the beginning as President (Finance) of COL. He relied on two Supreme Court judgments. After considering the submissions and the evidence on record, the High Court allowed the revisions, thereby setting aside the impugned order of the Sessions Court and restoring the trial court’s order of discharge.

Headnote

Issue of Consideration

Final Decision

The High Court allowed all three revision applications. The rule was made absolute in terms of prayer clause (a) of each application, thereby setting aside the impugned order dated 24th August 2007 of the Additional Sessions Judge in Criminal Revision Application No.529/2007, and restoring the order of the learned Additional Chief Metropolitan Magistrate, 40th Court, Girgaon, Mumbai, which had discharged accused nos.1 and 4 and directed framing of charge under Section 406 IPC against accused no.2.

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