Jaikrishnadas Manohardasdesai And... vs The State Of Bombay

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Criminal Appeal No. 159 of 1957

Decision Date: 16 March 1960

Coram: P.B. Gajendragadkar, K.N. Wanchoo, Shah

In the matter of Jaikrishnadas Manohardasdesai and another versus the State of Bombay, decided on 16 March 1960, the Supreme Court of India rendered its judgment. The opinion was authored by Justice P B Gajendragadkar, who sat with Justice K N Wanchoo on the bench. The petitioner, identified as Jaikrishnadas Manohardasdesai and a co‑appellant, challenged the conviction imposed by the State of Bombay. The citation for this decision appears as 1960 AIR 833 and 1960 SCR (3) 329, with subsequent references recorded in various law reports.

The first appellant held the position of Managing Director, while the second appellant served as Director and technical expert of a cloth‑dyeing enterprise known as Parikh Dyeing and Printing Mills Limited. The company entered into a contract with the Textile Commissioner, agreeing to dye a large quantity of cloth that the Commissioner supplied for that purpose. Under the terms of the contract the company successfully dyed and delivered a portion of the cloth, but it failed to dye and return the remaining fabric that stayed in its possession despite repeated demands from the Commissioner. Consequently, the two appellants were prosecuted for criminal breach of trust under Section 409 read with Section 34 of the Indian Penal Code and were convicted by a trial conducted with a common jury.

On appeal, the Bombay High Court examined the evidence, alleging that the jury had been misdirected. The High Court nonetheless concluded that the appellants were liable for accounting for the cloth over which they exercised dominion, and that their failure to provide such account rendered each of them guilty of the offence of criminal breach of trust. The court rejected the appellants’ argument that the cloth had become old and had been destroyed by white ants and moths. The appellants then sought special leave to appeal their convictions to this Court.

The Supreme Court held that, to establish a charge of criminal breach of trust, the prosecution is not required to demonstrate the exact manner in which the accused converted, misappropriated, or misapplied the entrusted property. The essential element of the offence is dishonest misappropriation; therefore, merely failing to account for entrusted property does not automatically constitute the basis for conviction in every case. However, where the accused is unable to account for the property and offers an explanation that is false, an inference of dishonest misappropriation may be readily drawn. Regarding liability under Section 34, the Court explained that the core requirement is the existence of a common intention animating the offenders and their participation in a criminal act carried out in furtherance of that shared intention. The Court further observed that physical presence at the scene of the offence is not, by the terms of the statute, a mandatory condition for the application of Section 34 in every circumstance.

The Court observed that the presence of the accused at the location where the offence is alleged to have been committed is not, according to the language of Section 34, a mandatory condition for the provision to apply in every case. This principle was affirmed in the earlier authority Barendra Kumar Ghose v. The King Emperor, (1929) L.R. 52 I.A. 40, and was subsequently explained and distinguished in Shreekantiah Ramayya Munipalli v. The State of Bombay, [1955] 1 S.C.R. 1177. The present matter arose as Criminal Appeal No. 159 of 1957, taken on special leave from the judgment and order dated 14 February 1956 of the Bombay High Court in Criminal Appeal No. 1232 of 1955. That High Court decision itself had arisen from the judgment and order dated 3 October 1955 of the Additional Sessions Judge for Greater Bombay in Case No. 38 of the Vth Sessions 1955. Counsel for the appellant was present, while the second appellant did not appear. Counsel for the respondent also appeared. The appeal was heard on 16 March 1960, and the judgment was delivered by Justice Shah.

At the original trial, which was conducted before a common jury in Case No. 38 of the Vth Session 1955 before the Additional Sessions Judge of the City Court, Greater Bombay, the two appellants were found guilty of offences under Section 409 read with Section 34 of the Indian Penal Code. The trial judge sentenced the first appellant to five years of rigorous imprisonment and the second appellant to four years of rigorous imprisonment. The appellants appealed to the High Court of Bombay, which examined the evidence and concluded that the jury’s verdict had been tainted by a material misdirection of legal importance. Nevertheless, the High Court held that, on the basis of the evidence, the convictions under Section 409 read with Section 34 could not be set aside. Consequently, the High Court affirmed the convictions but altered the sentences, reducing the first appellant’s term to three years of rigorous imprisonment and the second appellant’s term to one year of rigorous imprisonment. The appellants then sought special leave to appeal this order to the Supreme Court. The factual background leading to the charges was as follows: On 15 June 1948, the Textile Commissioner invited tenders for the dyeing of Pugree cloth. Parikh Dyeing and Printing Mills Ltd., Bombay, hereinafter referred to as “the company,” submitted a tender that was accepted on 27 July 1948, subject to certain general and special conditions. The first appellant served as the Managing Director of the company, and the second appellant was a Director and technical expert. Under the contract, 2 51 059‑¾ yards of cloth were supplied to the company for dyeing. The company failed to complete the dyeing within the stipulated period, prompting correspondence between the company and the Textile Commissioner. Approximately 1 11 000 yards of the cloth were eventually dyed and delivered to the Textile Commissioner.

In this case, the Textile Commissioner acted on the company’s request dated 3 April 1950 and formally cancelled the contract for the remaining 96,128 yards of cloth, after initially cancelling part of the contract on 25 March 1950. Later, on 20 November 1950, the Commissioner issued another cancellation covering the balance of the undelivered cloth and instructed the company to furnish an immediate account of the undelivered material, warning that the company would be held liable for any material that was spoiled or could not be accounted for. On 4 December 1950, the company replied with a detailed statement of account showing the quantity of cloth it had actually delivered for dyeing, the quantity it had returned after proper dyeing, and the remaining balance of 1,32,160 yards that it still owed to the Government. Regarding the admitted remaining cloth, the company claimed a wastage allowance of 2,412 yards and acknowledged responsibility for delivering the remaining 1,29,748 yards that were still held on Government account. At roughly the same time, the company experienced serious financial difficulties; in December 1950 the first appellant departed Bombay to manage a factory in Ahmedabad, leaving the day‑to‑day affairs of the company to an individual identified as R. K. Patel. In June 1952 an application was filed in the Insolvency Court at Ahmedabad seeking a declaration of insolvency against both appellants, while a separate insolvency notice was presented in the Bombay High Court by another creditor. Concurrently, winding‑up proceedings were initiated against the company in the Bombay High Court, and the mortgagee of the company’s machinery and factory entered possession of the factory premises under a reserved covenant. The Textile Commissioner continued efforts to recover the undelivered cloth; a letter dated 16 April 1952 demanded that the company deliver 51,756 yards of bleached cloth to the Chief Ordnance Officer at the Ordnance Depot in Sewri, but the letter was returned as undelivered. The Commissioner eventually served the demand on the second appellant with police assistance in October 1952. A further notice dated 7 November 1952 was subsequently served on the second appellant on 25 November 1952, reminding the company that 1,35,726‑¾ yards of cloth remained on Government account and that the earlier instruction to deliver 51,756 yards to the Chief Ordnance Officer had not been complied with. The Commissioner invited the company’s representatives to clarify the situation and to render an account of the material. After receiving this notice, the second appellant visited the Commissioner’s office and, on 27 November 1952, wrote a letter stating that the principal reasons for not delivering the finished goods were the advanced age of the material, varied bleaching conditions, and loss of suitability for vat‑colour dyeing, among other technical difficulties.

In its explanation for not delivering the goods in finished condition, the company asserted that the material was very old, that it had been dhobibleached in separate lots, and that it had been bleached under varying conditions which rendered it unsuitable for vat‑colour dyeing in heavy shades; it further stated that the cloth differed in length, weight and finish and had lost its affinity for vat‑colour dyeing. The company also claimed that, in attempting to dye the basic material, it had suffered huge losses estimated at rupees forty thousand. Despite these difficulties, the company expressed a willingness to cooperate with the Government and offered to make good the Government’s bare cost, requesting details of the actual amount to be deposited so that payment could be made at an early date, and asking for an appointment to discuss the final amount in respect of the balance quantity of the basic material. On 29 December 1952 the premises of the company and the residences of the appellants were searched, but no trace of the cloth was found. A police complaint was thereafter filed charging the two appellants with criminal breach of trust in relation to 1,32,4041 yards of cloth belonging to the Government. It was undisputed that approximately 1,30,000 yards of the cloth entrusted to the company by the Textile Commissioner for dyeing had not been returned. By a letter dated 4 December 1950 the company had admitted liability to deliver 1,29,748 yards of cloth, yet that quantity had not been returned to the Textile Commissioner despite repeated demands. The trial court did not question the fact that the appellants, as directors of the company, possessed dominion over the cloth. The contention that other directors also had dominion over the cloth was rejected by the High Court and, in the present judgment, was rightly upheld. Although there was no direct evidence to establish misappropriation of the cloth over which the appellants had dominion, the prosecution was not required to prove the exact mode of conversion, misappropriation or misapplication by the accused of the entrusted property. The essential element of the offence is dishonest misappropriation or conversion, which may not ordinarily be proved directly; therefore, entrustment of property together with a failure to fulfill the duty to account for that property, if proved, may, in light of surrounding circumstances, justify an inference of dishonest misappropriation or conversion. A conviction for criminal breach of trust cannot always be based solely on the accused’s failure to account for the entrusted property, even where a duty to account exists, but where the accused is unable to account or provides an untrue explanation for the failure, the inference of misappropriation with dishonest intent may be drawn.

In this matter, the Court understood that an inference of dishonest misappropriation could be drawn when a person fails to account for property placed under his control and provides an untruthful explanation for that failure. The factual matrix showed that a search of the factory premises on 29 December 1952 revealed that the cloth which the company was obligated to deliver could not be located. At the trial, the appellants attempted to justify the disappearance of the cloth by asserting that the material was old, had been consumed by white ants and moths, and consequently had been discarded as refuse. The High Court rejected that explanation, and the present Court agreed with that view. No communication was ever made to the Textile Commissioner after 4 December 1950 indicating that the cloth had been damaged by insects or that it had been discarded or destroyed, and the appellants produced no evidence to support the contention that the material had been consumed in that manner.

The counsel for the first appellant argued that the failure to return the cloth gave rise only to a civil liability to compensate for the loss and that, under the circumstances, the first appellant could not be held guilty of criminal breach of trust. He further submitted that the first appellant had left Bombay in 1950, taken up residence in Ahmedabad, and was engaged in the management of a factory there. He claimed that the appellant subsequently became involved in insolvency proceedings, which prevented him from attending to the affairs of the Bombay company, and that any loss of goods while he was pre‑occupied in Ahmedabad could not be imputed to him as criminal misappropriation. The Court, however, found that the appellant’s own testimony contradicted this line of defence. In his statement before the trial court, the first appellant admitted that he continued to travel to Bombay after his migration to Ahmedabad, that he inspected the mill premises, and that he observed the Gurkha watchman opening the factory. He reported seeing the heap of cloth in the mill diminish each time he visited and recalled the watchman telling him that a basketful of sweepings was being discarded daily. He also described being shown several locations within the factory compound where pits were filled with sweepings, and he noted a small accumulation of material beside the “Tulsipipe gutter” and in the warehouses. From this admission and the other evidence on record, the Court concluded that the first appellant remained a frequent visitor to the Bombay factory even after his relocation.

The evidentiary record further indicated that the directors of the company convened meetings from time to time, yet the minutes of those meetings were not produced before the Court. Likewise, the company’s books of account that would reveal any remunerations paid to directors for attending such meetings, as well as any expenses incurred for the alleged collection and disposal of the sweepings, were also not produced. The Court noted that the first appellant admitted the absence of these documents, which left the Court without the financial records that might have illuminated the handling of the missing cloth.

In this case, the first appellant asserted that the letter dated 27 November 1952 had been drafted by the second appellant under his instructions. The first appellant’s testimony at trial further stated that he had become aware of a letter dated 26 November 1952 from the Textile Commissioner and that he was unable to appear before that officer because he was occupied with insolvency proceedings; consequently he authorized the second appellant to attend the officer’s office and to explain and discuss the matter. The trial record then includes a statement that the parties had informed the Commissioner that the company was prepared to pay for the cloth remaining after deducting the amount claimed as damages. The letter of 27 November 1952 was therefore clearly written under the direction of the first appellant, and through that letter the liability to pay for the cloth, after certain adjustments for losses alleged by the company in performing the contract, was admitted. Earlier, the letter of 4 December 1950 had admitted liability to deliver the cloth, and the later letter of 27 November 1952 affirmed liability to pay compensation for the loss suffered by the Government. The appellants, who were entrusted with accountability for the cloth over which they exercised dominion, failed to render such account and offered a false explanation for their failure. The High Court held that this false defence, viewed together with the failure to produce the books of account, the stock register, and the complete absence of any reference in the correspondence with the Textile Commissioner concerning the cause of the disappearance, established misappropriation with criminal intent. Counsel for the first appellant suggested that the goods might have passed into the possession of the mortgagees of the company’s assets, but no evidence on that point was produced at trial. Counsel for the first appellant also relied on the observations in Shreekantiah Ramayya Munipalli v. The State of Bombay (1) to argue that a charge under section 409 read with section 34 of the Indian Penal Code could not be sustained against the first appellant unless it was shown that he was physically present at the time of the misappropriation. However, the essence of liability under section 34 lies in the existence of a common intention animating the offenders, leading to the commission of a criminal act; physical presence of the offender is not a condition stipulated by the statute. As explained by Lord Sumner in Barendra Kumar Ghose v. The King Emperor (') the chief feature of section 34 is participation in the action. To establish joint responsibility, it must be shown that a criminal act was performed by several persons and that each participated in that act.

The Court explained that participation in an unlawful act, for the purpose of applying section 34 of the Indian Penal Code, did not always require the offender to be physically present at the scene. It held that a common intention, meaning a meeting of minds to commit an offence, together with participation in carrying out that offence, brought section 34 into play. However, the Court clarified that such participation could be established without the accused being physically present in every case. In offences that involve physical violence, the presence of each accused at the place of the offence is normally essential to invoke joint liability. By contrast, for offences composed of a series of acts that may occur at different times and locations, physical presence was not a necessary condition. The Court referred to the earlier decision in Shree Kantiah’s case, where the misappropriation involved removal of goods from a government depot and the first accused was absent at the moment of removal. In that situation, the Court expressed doubt that the first accused had participated in the commission of the offence and consequently held that participation was not established. The Court emphasized that the observations in Shree Kantiah’s case were to be read only in the factual context of that case and were not intended to create a universal rule applicable to all situations involving section 34.

The Court then turned to the findings of the High Court, which had concluded that the two appellants were liable to account for cloth over which they exercised dominion and that their failure to do so amounted to criminal breach of trust. The High Court observed that if the first and second appellants alone dealt with the receipt of the goods, continuously handled the goods, corresponded with the Textile Commissioner’s office and sent replies, and if the role of each was evident from the manner in which they managed the contract, then both persons were entrusted with the goods and a breach of trust was clearly committed by both. The appellants contended that the High Court erred in convicting them under section 409 of the Indian Penal Code when the charge was framed as section 409 read with section 34. They argued that a charge referring to section 34 merely gave notice that the principle of joint liability was being invoked, since section 34 itself did not create a separate offence but only set out the principle of joint liability for criminal acts done in furtherance of a common intention. Accordingly, a conviction based on that principle was, in their view, for the offence committed in furtherance of the common intention, and any reference to section 34 in the order of conviction was merely surplusage and not illegal.

The judgment observed that the conviction of the accused rested on an offence committed in furtherance of a common intention shared with other persons, and therefore the reference in the conviction order to section 34 of the Indian Penal Code could be regarded as redundant. Nonetheless, the order of the High Court that recorded the conviction of the appellants under section 409 of the Indian Penal Code was held not to be illegal. The first appellant argued that the sentence imposed on him was unduly severe and that, in any event, no distinction should have been drawn between him and the second appellant regarding sentencing. The Court noted that the findings accepted by it showed that property of considerable value had been misappropriated by the first appellant, who had acted as the Managing Director of the company and exercised dominion over the property entrusted to the firm. By contrast, the second appellant, although also a Director, was described as essentially a technician. Given these circumstances, the Court concluded that if the High Court had distinguished between the two appellants in imposing sentences, such a distinction was warranted and the sentence imposed could not be characterised as excessive. Accordingly, the appeal was dismissed and the order of the High Court affirmed.