PLJ 2022 Cr.C. 1314
[Lahore High Court, Lahore]

Present: Tariq Saleem Sheikh, J.

MUHAMMAD SALEEM etc.--Petitioners

versus

STATE etc.--Respondents

Crl. Misc. No. 69238/B of 2021, decided on 23.2.2022.

Criminal Procedure Code, 1898 (V of 1898)--

----S. 498--Pakistan Penal Code, (XLV of 1860), S. 406--Business partnership--Civil dispute--Pre-arrest bail--grant of--Complainant is the nephew of one accused and they were doing business as partners--Accused has a job abroad--dispute between the parties is of civil nature--Complainant had already instituted a suit for rendition of accounts in the civil Court--Law recognized a distinction between investment of money and entrustment--In the former the sum paid or invested is to be utilized for a particular purpose and in later it  is to be retained and preserved for return to the giver and is not meant to be utilized for any other purpose--Criminal breach of trust u/S. 406, PPC is not attracted in respect of the property belonging to the partnership--The proper course for the aggrieved partner was to sue for accounts rather than instituting criminal proceedings--Element of entrustment contemplated by Section 405, PPC is conspicuously missing in the instant case--Pre-arrest confirmed.    

                                                        [Pp. 1321, 1325 & 1326] A, D, E, F

PLD 2021 SC 886; 2015 SCMR 1575; PLD 1978 Karachi 359;
1980 PCrLJ 818; AIR 1960 SC 889; AIR 1935 Rangoon 453;
AIR 1962 SC 1821; (1970) 1 SCC 521; (1995) 6 SCC 142 ref.

Criminal Procedure Code, 1898 (V of 1898)--

----S. 498--Pakistan Penal Code, (XLV of 1860), S. 406--Criminal breach of trust--Essential ingredients of criminal breach of trust are the accused must be entrusted with property or dominion and he must have dishonestly misappropriated the property
or converted it to his own use--An act of breach of trust simpliciter is a civil wrong and not an offence for which the affected person
may seek a civil remedy--Breach of trust when associated
with dishonestly triggers criminal liability--Even temporary misappropriation may attract Section 405, PPC.

                                                              [Pp. 1322, 1323 & 1324] B & C

(2009) 11 SCC 737; 1996 PCrLJ 2253; AIR 1965 SC 1433 ref.

Mr. Muzaffar Iqbal, Advocate, with Petitioner No. 2.

Ms. Rahat Majeed, Assistant District Public Prosecutor for State.

Mr. Muhammad Tauseef Tariq, Advocate, for Complainant.

Date of hearing: 23.2.2022.

Order

Through this application Petitioners Muhammad Saleem and Muhammad Faheem seek pre-arrest bail in case FIR No. 482/2021 dated 30.09.2021 registered at Police Station Atta Shaheed, District Sargodha, for an offence under Section 406, PPC.

2. This application was dismissed qua Petitioner No. 1 (Muhammad Saleem) vide order dated 14.02.2022 owing to his absence in view of the law laid down by the Hon’ble Supreme Court of Pakistan in Shazaib etc. v. The State (PLD 2021 SC 886).

3. As per FIR, the prosecution case is that the Complainant entrusted machinery worth Rs. 14,000,000/-to Petitioner No. 2 (Muhammad Faheem) and his father, co-accused Muhammad Saleem, which they misappropriated.

4. Arguments heard. Record perused.

5. The Complainant is the nephew of Muhammad Saleem and they were doing business as partners under the name and style of M/s. Super Shan Abid Stone Crusher. Since Muhammad Saleem had a job abroad, Faheem looked after the business on his behalf. He contends that the dispute between the parties is of civil nature and Section 406, PPC is not attracted. The Complainant has already instituted a suit for rendition of accounts in the Civil Court at Sargodha which is pending.

6. The concept of trust envisages that one person (the settlor) while relying upon another person (the trustee) and reposing special confidence in him commits property to him. There is a fiduciary relationship between the two in law. Section 405, PPC defines criminal breach of trust as follows:

405. Criminal breach of trust.--Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to 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 such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits criminal breach of trust.

7. The essential ingredients of criminal breach of trust under Section 405, PPC are: (i) the accused must be entrusted with property or dominion over it; and (ii) he must have dishonestly misappropriated the property or converted it to his own use or disposes it of in violation of any trust or willfully suffers any other person to do so. The offence of criminal breach of trust resembles the offence of embezzlement under the English law.[1] The punishment for ordinary cases is provided in Section 406, PPC but there are aggravated forms of the offence also which are dealt with under Section 407 to 409, PPC.

8. The first condition mentions three important terms: entrustment, dominion and property. “Entrustment” means handing over possession of something for some purpose without conferring the right of ownership[2] while “dominion” refers to “the right of control or possession over something, such as, dominion over the truck”.[3] The term “property” has been used without any qualification so it must be understood in the wider sense. There is no reason to restrict its meaning to movable property.[4] Further, the word “property” must be read in conjunction with “entrustment” and “dominion”. A trust contemplated by Section 405, PPC would arise only when the property belongs to someone other than the accused.

9. According to the second condition, the accused must be shown to have mens rea. Section 24, PPC defines “dishonestly” as the doing of an act with the intention of causing wrongful gain to one person or wrongful loss to another person. Thus, in the context of Section 405, PPC the property must be lost to the owner or he must be wrongfully kept out of it.[5] Dishonest misappropriation may sometimes be inferred from the circumstances if there is no direct evidence.[6] This second condition is satisfied by any one of four positive acts, namely, misappropriation, conversion, use or disposal of property.[7]

10. The offence of criminal breach of trust as defined in Section 405, PPC is distinct from the offence of cheating under Section 420, PPC. Basu explains: “Property obtained by cheating is not capable of being fraudulently converted under Section 405. The notion of a trust is that there is a person trustee or entrustee, in whom confidence is reposed by another who commits property to him; this again supposes that the confidence is freely given. A person who obtains a property by trick from another bears no resemblance to a trustee and cannot be regarded as a trustee under Section 405. The essence of the offence under Section 405 is the dishonest conversion of the property entrusted, but the act of cheating itself involves a conversion. Conversion signifies the depriving of the owner of the use and possession of his property. When the cheat afterwards sells or consumes or otherwise uses the fruit of his cheating, he is not committing an act of conversion, for the conversion is already done, but he is furnishing evidence of the fraud he practised to get hold of the property. Therefore, cheating is a complete offence by itself … The offence under Section 420 is complete as soon as delivery is obtained by cheating, and without further act of misappropriation there can be no breach of trust.”[8]

11. The law recognizes a distinction between investment of money and entrustment thereof. In the former the sum paid or invested is to be utilized for a particular purpose while in the latter case it is to be retained and preserved for return to the giver and is not meant to be utilized for any other purpose.[9]

12. It is pertinent to point out that every breach of trust is not criminal. A mere breach of the contract does not constitute criminal breach of trust. Ratanlal & Dhirajlal write:[10]

“Every offence of criminal breach of trust involves a civil wrong in respect of which the complainant may seek a civil redress for damages in the civil Court. But every breach of trust in the absence of mens rea or criminal intention cannot justify criminal prosecution … It may, however, be borne in mind that the same set of facts may give rise both, to a civil liability and a criminal prosecution. But if there is no mens rea, or if the other essential ingredients of the offence are lacking, the same facts may not sustain a criminal prosecution, through a civil action may lie.”

13. In R. Venkatakrishnan v. Central Bureau of Investigation [(2009) 11 SCC 737] the Supreme Court of India also emphasised that an act of breach of trust simpliciter is a civil wrong and not an offence for which the affected person may seek a civil remedy. However, breach of trust when associated with dishonesty triggers criminal liability. Thus, even temporary misappropriation may attract Section 405.[11] On the other hand, negligence which results in loss of the entrusted property may make a person liable for damages under the civil law but would not expose him to criminal prosecution.[12]

14. In a partnership business, a partner has undefined ownership over all the assets of the partnership along with other partners. Therefore, he holds them in his own right rather than in a fiduciary capacity. If he chooses to use any of them for his own purposes, the other partners may hold him accountable under the civil law. Criminal prosecution of a partner is possible only if it is shown that he was entrusted dominion over a particular partnership asset under a special agreement. In Velji Raghavji Patel v. State of Maharashtra (AIR 1965 SC 1433) the Indian Supreme Court explained:

“Every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property. But it is not dominion of this kind which satisfies the requirements of Section 405. In order to establish ‘entrustment of dominion’ over property to an accused person the mere existence of that person’s dominion over property is not enough. It must be further shown that his dominion was the result of entrustment. Therefore, as rightly pointed out by Harris C.J., the prosecution must establish that dominion over the assets or a particular asset of the partnership was, by a special agreement between the parties, entrusted to the accused person. If in the absence of such a special agreement a partner receives money belonging to the partnership he cannot be said to have received it in a fiduciary capacity or in other words cannot be hold to have been ‘entrusted’ with dominion over partnership properties.”

The Court further said:

“It is obvious that an owner of property, in whichever way he uses his property and with whatever intention will not be liable for misappropriation and that would be so even if he is not the exclusive owner thereof. As already stated, a partner has, undefined ownership along with the other partners over all the assets of the, partnership. If he chooses to use any of them for his own purposes he may be accountable civilly to the other partners. But he does not thereby commit any misappropriation.”

15. In Debabrata Gupta v. S. K. Ghosh [(1970) 1 SCC 521] the Supreme Court of India held that FIR under Sections 406 and 424/34 of the Indian Penal Code (which are pari materia with Sections 406 and 424/34 of the Pakistan Penal Code) against a partner can only be quashed if it is established that (a) the dispute is only between the partners; and (b) it does not relate to any special entrustment of property. In Anil Saran v. State of Bihar and another [(1995) 6 SCC 142] also it was contended that a partner could not be said to have committed criminal breach of trust of his own funds so it was a case of civil liability only. The Supreme Court ruled that “partnership firm is not a legal entity but a legal mode of doing business by all the partners. Until the firm is dissolved as per law and the accounts settled, all the partners have dominion in common over the property and funds of the firm. Only after the settlement of accounts and allotment of respective share, the partner becomes owner of his share. However, criminal breach of trust under Section 406 is not attracted in respect of the property belonging to the partnership firm but is an offence committed by a person in respect of the property which has been specially entrusted to such a person under a special contract and he holds that property in fiduciary capacity under special contract. If he misappropriates the same, it is an offence.”

16. Jurisprudence in our country has developed along the same lines. In Abdul Hakim and 2 others v. The State and another (PLD 1978 Karachi 359) the Sindh High Court quashed the FIR lodged by one partner against the other as he had received the money on behalf of the partnership and not in fiduciary capacity. It held that the proper course for the aggrieved partner was to sue for accounts rather than instituting criminal proceedings. Similarly, in Kazim Ali Dossa v. Faisal Malik and 5 others (1980 PCr.LJ 818) the Sindh High Court set aside the conviction under Section 406, PPC because special entrustment of the firm’s assets to the accused partner was not established.

17. Now coming to the case on hand, it is observed that Muhammad Saleem purchased a stone crushing plant from Muhammad Nauman son of Ashiq Hussain and entered into a partnership with the Complainant to run it. The Complainant operated it for 19 months and incurred huge losses. Saleem and Faheem then took over and operated it for four months but could not give better results. Thereafter they leased it out to third party which left after four months. Once again the Saleem and Faheem took the charge of the crusher and got it repaired and upgraded. Both the sides blame each other for the losses. The Complainant filed a suit for rendition of accounts against Saleem and Faheem and during the proceedings the parties referred the matter to Rana Munawar Ghous Khan (MPA) for arbitration. The latter delivered his award and Muhammad Saleem has filed an application in the Civil Court for making it rule of Court.

18. The element of entrustment contemplated by Section 405, PPC is conspicuously missing in the instant case. There is essentially a dispute between the partners regarding handling of the business and its earnings. Hence, in view of what has been discussed above, in my opinion, Section 405, PPC is not attracted. It is also debatable whether it can be invoked even against Petitioner Muhammad Faheem because he was working as a proxy for his father and not on his own account.

It appears that the Complainant has lodged the above-mentioned FIR to mount pressure on the other side.

19. In the result, this application is allowed. Ad-interim pre-arrest bail already granted to Petitioner No. 2 (Muhammad Faheem) is confirmed subject to his furnishing fresh bail bond in the sum of
Rs. 200,000/-(Rupees two hundred thousand) with one surety in the like amount to the satisfaction of the learned trial Court.

(K.Q.B.)          Bail confirmed


[1].      Ratanlal & Dhirajlal, The Indian Penal Code, 33rd Edition, p. 2763.

[2].      N.N. Burjorjee v. Emperor (AIR 1935 Rangoon 453).

[3].      https://definitions.uslegal.com

[4].      R.K. Dalmia and others v. The Delhi Administration (AIR 1962 SC 1821).

[5].      Basu’s Indian Penal Code, 14th Edition, p. 2680.

[6].      Jaikrishnadas Manohardas Desai v. The State of Bombay (AIR 1960 SC 889).

[7].      Ratanlal & Dhirajlal, The Indian Penal Code, 33rd Edition, p. 2763.

[8].      Basu’s Indian Penal Code, 14th Edition, p. 2679.

[9].      Shahid Imran v. The State and others (2011 SCMR 1614); and Rafiq Haji Usman v. Chairman, NAB and another (2015 SCMR 1575).

[10].    Ratanlal & Dhirajlal, The Indian Penal Code, 33rd Edition, p. 2782.

[11].    Kartikeswar Nayak v. State [1996 Cri LJ 2253 (Ori)] approvingly cited in R. Venkatakrishnan v. Central Bureau of Investigation [(2009) 11 SCC 737].

[12].    Basu’s Indian Penal Code, 14th Edition, p. 2673.