@JUDGMENTTAG-ORDER
Rathnakala, J.@mdash1. The petitioner is arrayed as accused in the FIR registered by the respondent/Police in respect of the offence under Sections 409 and 420 of IPC.
2. The allegation is, the petitioner is the former President of Sree Anjaneya Co-operative Bank Limited (for brevity ''the Co-operative Bank''). He was one of the members of the Committee of the Society sanctioned loan; during his tenure, the Committee sanctioned loan to one J.T. Rajan on the security of his immovable property vide resolution dated 9.4.2011 and the loan amount was disbursed on 15.4.2011. Subsequently, the Federal Bank instituted a suit before the Debt Recovery Tribunal alleging that, in respect of the property pledged to the Federal Bank, the Co-operative Bank has sanctioned loan. This petitioner by misusing his official position as the President of the Bank has subsequently tampered the loan application and at column No. 7 page 4 meant for the opinion of the Board Members, endorsed to the effect that the title deed since is a Xerox copy, he has objection to sanction the loan and same shall be recorded in the proceedings of the meeting with his signature dated 9.7.2011, thereby he has cheated the Bank.
3. Sri V. Laxminarayana, learned Senior Counsel for the petitioner submits that, the complainant is the in-charge Manager of the Bank. This petitioner had filed complaints against him and also the present President. To weed out this petitioner from the affairs of the Bank, present complaint is filed vindictively. Even by accepting the entire allegation of the complaint at their face value, then also it will not attract ingredients of Sections 409 and 420 of IPC. The complaint allegation will not prima facie show culpable intention of the petitioner. It is a cover-up act by the present Board Members for facing enquiry, criminal proceedings and disqualification proceedings for massive misappropriation and fraudulent acts against the interest of the Bank. This petitioner initiated an enquiry under Section 64 of the Karnataka Co-operative Societies Act, 1959 (''the Act'' for short) against the complainant and the disqualification proceeding against the present President for gross misappropriation of funds. The acts alleged against the petitioner is totally inconsequential as the Bank has already secured mortgage property in its name and no culpable intention attracting the ingredients of Sections 420 and 409 of IPC are traceable in the act alleged against the petitioner. The loan transaction was of 2011. On the day of the meeting itself, this petitioner recorded his disagreement and the document is marked in evidence before the Joint Registrar of Co-operative Societies during 2012. As per the certified copy of the loan application obtained on 7.7.2015 allegedly marked and the original loan application, which are at Annexures-H and J respectively, clearly show that they are not the same; loan application marked before the Registrar was a forged document written by the Secretary and created by the second respondent/Co-operative Bank. The loan applications are not written or filled up by the applicant Sri J.T. Rajan and they do not bear any serial numbers making it easy for the Bank officials to replace and meddle with. The Manager of the Co-operative Bank himself has created false documents and produced the same with mala fide intention. Section 111(2) of Act is a bar for civil court to take cognizance. Reliance is placed on the judgment reported in 1971 Mys. L.J. SN 287 in the matter of B.Y. Neelegowda vs. C. Marigowda.
4. Sri M.P. Srikanth, learned Counsel appearing for the second respondent would submit that, the complaint averments categorically make out a case that the petitioner being the member of the Loan Sanction Committee along with the other members was responsible to sanction loan in favour of J.T. Rajan on the basis of Xerox copies of his title deeds. Thereafter to shirk off his liability he has endorsed his objections to the loan sanctioned. Now the Federal Bank has initiated action against the Bank. He has interpolated his endorsement while he was the President of the Bank by misusing his official position. There is enough of averment in the complaint in respect of the cognizable offence and the investigation cannot be scuttled at this stage. In view of the judgment of this Court in , ILR 2004 KAR 4439 in the matter of State of Karnataka vs. Marigouda, sanction is not required in respect of the prosecution under Section 408 of IPC and the petition is liable to be dismissed.
5. It is undisputed between the parties that, at the time of sanction of the loan, the petitioner was one of the Members of the Loan Sanction Committee and the Committee has sanctioned loan. It is also not in dispute that on the default of the loanee to clear off the loan, the Bank initiated proceedings under Section 70 of the Act and the petition of the Bank is allowed for recovery of the loan amount with interest and penalty. On the failure of the loanee to abide by the order, execution proceedings were initiated and his property was brought for auction. Since nobody came forward to purchase the property, request was made to the Recovery Officer and the property is now made over to the Bank. Subsequently, before the Debt Recovery Tribunal, the Federal Bank has instituted a suit claiming that the property was mortgaged in their favour. The Co-operative Bank is arrayed as a party in the said case.
6. The penal provisions under which FIR is registered are Sections 409 and 420 of IPC.
Sections 420 of IPC read thus:
"420. Cheating and dishonestly inducing delivery of property. - Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine".
7. The Apex Court in the case of Bishan Dass Vs. State of Punjab and Another, reported in , (2014) 15 SCC 242, has held thus:
"The essential ingredients to attract Section 420 of IPC are: (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or is capable of being converted into a valuable security and (iii) mens rea of the accused at the time of making the inducement".
8. In V.Y. Jose vs. State of Gujarat and Another [, (2009) 3 SCC 78], the Apex Court observed thus:
"An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:
i) deception of a person either by making a false or misleading representation or by other action or omission.
(ii) fraudulently or dishonestly inducing any person to deliver any property; or
(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit".
9. In Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Another. [, (2000) 4 SCC 168], the Apex Court held:
"14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not to or omit to do if he were not so deceive. In the first class of cases the inducing must be fraudulent or dishonest.
In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one.
It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show 11 that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed".
Section 409 of the IPC reads thus:
"409. Criminal breach of trust by public servant, or by banker, merchant or agent. - Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine".
10. In the matter of Sadhupati Nageswara Rao vs. State of Andhra Pradesh reported in , AIR 2012 SC 3242, the Apex Court analyzed Section 409 of IPC thus:
". . . In order to prove the offence of criminal breach of trust which attracts the provision of Section 409 IPC, the prosecution must prove that one who is, in any manner, entrusted with the property, in this case as a dealer of fair price shop, dishonestly misappropriates the property, commits criminal breach of trust in respect of that property. In other words, in order to sustain conviction under Section 409 IPC, two ingredients are to be proved: namely, i) the accused, a public servant or a banker or agent was entrusted with the property of which he is duty bound to account for; and ii) the accused has committed criminal breach of trust. What amounts to criminal breach of trust is provided under Section 405 IPC. The basic requirement to bring home the accusations under Section 405 are the requirements to prove conjointly i) entrustment and ii) whether the accused was actuated by dishonest intention or not, misappropriated it or converted it to his own use to the detriment of the persons who entrusted it".
11. In the judgment of the Full Bench of this Court in State of Karnataka vs. Marigouda (supra), on a survey of earlier decisions, it is held thus:
"A reading of the above provisions makes it clear that the offences punishable under the Act are mentioned in Section 109 and as per Section 111(2) of the Act sanction to prosecute the accused is required only for the offences committed under the Act mentioned in Section 109 of the Act, and if any offence is committed under any other law, sanction to prosecute the accused is not necessary. In our view, in the given case, obtaining of the sanction under Section 111(2) of the Act is not necessary".
The Full Bench judgment supra since is binding, the ruling of this Court in B.Y. Neelegowda''s case (supra) cannot be availed by the petitioner. Hence, sanction under Section 111 of the Act is not a requirement to prosecute an offender on the allegation of offence under the Indian Penal Code, except the offences mentioned in Section 109 of the Act.
12. The President of the Co-operative Society is not the custodian of the records, but it is the Chief Executive of the Bank, who is responsible, as per Clause 63.5 of the Bye-Laws of Sree Anjaneya Co-operative Bank Limited, Bangalore. Hence, he cannot be attributed the position of a custodian of records of the Bank. The complaint averments fail to make out how the endorsement allegedly made on the loan application subsequent to the Loan Committee Meeting has resulted in any financial loss to the Co-operative Bank. It is not the case of the complainant that he has misappropriated any property of the Bank or converted any such property to the detriment of the persons, who entrusted it. The complaint allegations fail to make out a case either under Section 409 or 420 of IPC, nonetheless any other offences. The complaint allegation is vague as to when the endorsement is made by the accused on the document. Admittedly, at the instance of this petitioner, the present Manager and President are brought to book on certain allegation. Glaringly the so-called alleged original loan application and the application marked in evidence in the loan recovery proceeding are different. Such being the veracity of the documents relied for the complainant, in the light of the judgment of the Apex Court in State of Haryana and Others Vs. Bhajan Lal and Others reported in , 1992 Supp (1) SCC 335, wherein it is held:
"Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge".
the petition succeeds.
The petition is allowed. The F.I.R. in Crime No. 212/2015 is quashed.
