Mohd. Sulaiman vs Mohd. Ayub and Anr

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

Court: Supreme Court of India

Case Number: Criminal Appeal No. 128 of 1962

Decision Date: 9 December, 1964

Coram: K.N. Wanchoo, P.B. Gajendragadkar, J.C. Shah, N. Rajagopala Ayyangar, S.M. Sikri

In this matter the Supreme Court of India heard an appeal filed by Mohd. Sulaiman against Mohd. Ayub and another respondent, the appeal being dated 9 December 1964. The judgment was authored by Justice K.N. Wanchoo and the bench was comprised of Justices K.N. Wanchoo, P.B. Gajendragadkar, J.C. Shah, N. Rajagopala Ayyangar and S.M. Sikri. The citation of the decision is recorded as 1965 AIR 1319 and 1965 SCR (2) 398. The dispute arose under civil law concerning a transaction in which the appellant had taken an electric motor from an electrical works where the respondent was employed. The central issue was whether the motor had been hired for the appellant’s use and later claimed to be purchased, thereby raising the question of the nature of the agreement and whether the appellant’s conduct amounted to a breach of trust punishable under sections 405 and 406 of the Indian Penal Code. The factual background disclosed that the appellant removed the motor from the works and subsequently sent a letter to the works asserting that he had purchased the motor after paying its full price, whereas the works, acting through the respondent, maintained that the motor had been given to the appellant only on a hire basis. The works consequently lodged a criminal complaint alleging breach of trust. The trial magistrate dismissed the complaint, but on appeal under section 417(3) of the Criminal Procedure Code the Calcutta High Court reversed that decision, holding that the appellant’s claim of ownership expressed in his letter was not made in good faith. The High Court further concluded that by sending the letter the appellant sought to secure an unlawful benefit for himself and to cause a loss to the works, thereby violating the entrustment and rendering him guilty under section 406 of the Penal Code. The appellant then obtained special leave to appeal to the Supreme Court. In its analysis the Court observed that section 405 of the Penal Code requires conduct indicating either misappropriation or conversion of the property, or the use or disposal of the property in breach of an express or implied contract. The Court found that in the present case the appellant did not engage in any use of the motor that diverged from the terms of the hiring agreement. The motor remained in the appellant’s possession and was employed for the same purpose for which it had been hired. The letter asserting purchase merely gave rise to a civil dispute between the parties and did not constitute a criminal breach of trust under section 406. Consequently, the Court held that the appeal must succeed and set aside the conviction, reasoning that there was no misappropriation, conversion, or contractual violation warranting criminal liability. The judgment concluded that the appellant’s actions did not satisfy the elements required for an offence under sections 405 and 406, and therefore the criminal conviction was unsustainable.

Counsel for the appellant, S. C. Mazumdar, appeared, and counsel for respondent No. 2, P. K. Bose, also took part. The judgment was delivered by Justice Wanchoo. The matter before the Supreme Court was an appeal against a certificate that had been granted by the Calcutta High Court. The appellant had entered into a hiring arrangement on 4 April 1958 for a Westinghouse D‑C motor with the firm Modern Electrical Works, hereinafter referred to as “the Works.” The agreed monthly hire charge was forty rupees, and the lease was to continue for at least three months. The parties further agreed that, should the motor or any of its parts be lost or become damaged while in the appellant’s possession, the appellant would be liable to pay the entire cost of the motor and its parts. The motor remained in the appellant’s use, and he paid the stipulated hire charges from April 1958 through January 1959. After January 1959, however, the appellant ceased to make any further hire payments. On 8 June 1959 the appellant sent a letter to the Works asserting that he had purchased the motor for six hundred rupees on the condition that it would be tried for three months; if it proved satisfactory, the payment would be final and the purchase completed. The letter further stated that, should the motor be unsatisfactory, the appellant would pay hire at forty rupees per month for three months and then return the motor. The appellant concluded the correspondence by claiming that the Works had received a total of six hundred twenty rupees, that the purchase was therefore complete, and he requested a receipt confirming the sale because no additional monies were owed. On 15 June 1959 the Works replied, denying the existence of any such agreement and rejecting the allegation that six hundred twenty rupees had been paid. The Works asserted that the purchase was not complete and that the appellant had in fact paid only four hundred rupees, leaving two hundred rupees outstanding for the months of February through June 1959. The appellant responded to this reply by restating the position set out in his earlier letter and by providing a detailed account of how the six hundred twenty rupees had been paid. Subsequently, on 1 July 1959 the Works filed a criminal complaint through its servant, Mohd. Ayub, alleging that the appellant had committed criminal breach of trust punishable under section 406 of the Indian Penal Code. Acting on that complaint, the Presidency Magistrate of the Ninth Court, Calcutta, summoned the appellant. After taking limited evidence for the prosecution, the magistrate discharged the appellant, holding that there was no satisfactory proof of dishonest misappropriation or conversion of the motor, and that the dispute between the parties was essentially civil in nature. Dissatisfied, Mohd. Ayub filed a revision petition before the High Court.

The High Court set aside the magistrate’s order of discharge and instructed that a different magistrate conduct a further inquiry into the matter. After this direction, the case returned to the Third Presidency Magistrate in Calcutta, who again examined the evidence and ultimately held the appellant not guilty, ordering his acquittal. The magistrate based this decision on the existence of a dispute between the parties regarding the true nature of the transaction, concluding that there was no proof of a dishonest intention by the appellant to misappropriate the motor. Following this acquittal, Mohd Ayub filed an appeal before the High Court under Section 417(3) of the Code of Criminal Procedure. The appeal was later heard by a Division Bench of the High Court, which examined the letter dated 8 June 1959 that had previously been referenced. The Bench concluded that the contents of that letter could not have been written unless the appellant, acting dishonestly in breach of the trust placed in him, intended to cause a wrongful loss to the complainant and to obtain an unlawful gain for himself. The Bench further observed that the letter did not demonstrate a genuine claim of ownership over the motor; instead, the claim was a pretence that could not excuse the appellant from liability under Section 406 of the Indian Penal Code. The appellant subsequently applied for a certificate authorising him to file a further appeal to the Supreme Court, and the certificate was granted. The Supreme Court therefore became seized of the matter, and the Court expressed the opinion that the appeal should succeed.

The record shows that it is not contested that the motor was entrusted to the appellant by the Works for his use. The core disagreement lies in whether the entrustment was intended merely as a hire arrangement, as the Works assert, or whether the parties had agreed that the appellant would have the option to purchase the motor after a three‑month trial period, paying Rs 600 as the purchase price and returning the motor if unsatisfied while paying Rs 40 per month as hire during the trial. Consequently, the real dispute concerns the character of the agreement that existed when the motor was handed over to the appellant in April 1958, a dispute that is essentially civil in nature. The Works, however, maintain that by writing the 8 June 1959 letter, the appellant committed a breach of trust and thus violated Section 406 of the Indian Penal Code. In that letter, the appellant set out his version of the terms under which he received the motor in April 1958. The question before the Court is whether the act of writing that letter can be said to constitute the offence defined in Section 405 of the Indian Penal Code, which is punishable under Section 406. Section 405 reads as follows: “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 wilfully suffers any other person so to do, commits criminal breach of trust.” It may be accepted that the appellant was indeed entrusted with the motor according to an agreement whose terms remain seriously disputed. The remaining issue is whether the appellant, by acting in a manner not authorized under the agreement, dishonestly misappropriated or converted the motor to his own use.

Section 405 of the Indian Penal Code provides that a person who, having been entrusted with property or given dominion over property, dishonestly misappropriates or converts that property to his own use, or who dishonestly uses or disposes of the property in violation of any legal direction prescribing the mode of discharge of the trust, or in breach of any legal contract—express or implied—relating to the trust, or who wilfully permits another to do so, commits criminal breach of trust. The Court recognised that the appellant had been entrusted with the motor by virtue of an agreement with the Works, although the precise terms of that agreement were heavily disputed. The pivotal issue, therefore, was whether the appellant had dishonestly misappropriated or converted the motor to his own use. The factual record showed that the motor had been handed over to the appellant for his use, a fact that even the Works admitted. Consequently, unless it could be demonstrated that the appellant performed an act with respect to the motor that he was not entitled to do, thereby dishonestly misappropriating or converting it, he could not be held guilty of breach of trust under this portion of section 405. The Works argued that the appellant’s writing of the letter dated 8 June amounted to misappropriation or conversion. However, the Court observed that the letter did not alter the manner in which the motor was being used; according to the Works, the appellant had hired the motor for his own use. The appellant had been using the motor before the letter and continued to use it in the same way after the letter. Accordingly, the Court concluded that the mere act of writing the letter could not be said to constitute misappropriation or conversion of the motor to the appellant’s own use within the meaning of section 405 in the circumstances of the present case.

The Works further contended that, even if the letter did not amount to misappropriation, the appellant must be held to have dishonestly used or disposed of the motor in violation of the legal contract—express or implied—relating to the trust, because of the June 8 letter. The Court examined the receipt given by the appellant to the Works when he took possession of the motor in April 1958. The receipt indicated that the appellant was taking the motor for his own use under certain terms. There was no evidence that the June 8 letter caused the appellant to use the motor in violation of any such legal contract, express or implied. Moreover, the evidence did not show that the appellant had disposed of the motor in contravention of the contract; the Works did not allege that the appellant had transferred possession of the motor to any other person. Had the appellant sold the motor, a claim of disposal in violation of the contract might have been viable, even under a hire‑purchase arrangement. Instead, the letter merely set out the appellant’s position with respect to the transaction of 4 April 1958. There was no change in the use of the motor that would indicate misappropriation, conversion, or unlawful disposal. Therefore, the Court held that section 405 requires an act indicating such misappropriation or conversion, which was absent in this case. Consequently, the appellant could not be found guilty of criminal breach of trust under the provisions of sections 405 and 406 of the Indian Penal Code.

The Court observed that there was no proof that the appellant had transferred possession of the motor to any other person. Consequently, it could not be said that the appellant had disposed of the motor in breach of any legal contract he had entered into concerning the vehicle. The Works did not allege that the appellant had surrendered the motor to a third party at any time. The Court noted that, had the appellant actually sold the motor, a reasonable argument could have been made that such sale amounted to disposal in violation of the contract. This would have been true even if the contract had been a hire‑purchase agreement between the parties. However, the factual record showed that the only effect of the letter dated June 8 was to set out the appellant’s version of the transaction that had occurred on April 4, 1958. Regarding the motor’s use, the Court found that no change occurred after that date that would indicate misappropriation, conversion, or any unauthorized disposal. Such conduct would have been contrary to the terms of the contract, whether those terms were express or implied. The Court explained that section 405 of the Indian Penal Code requires an act that shows misappropriation, conversion, or use of property in violation of an existing contract. In the present case, the Court observed that the appellant did nothing with the motor that departed from the hiring agreement between the parties. Therefore, the Court concluded that the statutory conditions for misappropriation or conversion under section 405 were not satisfied.

The Court clarified that it was not expressing any view on which party’s legal case was correct with respect to the civil dispute. It emphasized that the June 8 letter merely raised a civil disagreement between the appellant and the Works and did not give rise to a criminal charge of breach of trust concerning the motor. On this basis, the Court allowed the appellant’s appeal, set aside his conviction, and ordered his acquittal. The Court further directed that any fine that had already been paid by the appellant be refunded to him. The appeal was consequently allowed, and the fine was to be refunded to the appellant. The Court remarked that the existence of a civil dispute does not automatically convert the matter into a criminal offence punishable under the provisions relating to criminal breach of trust. It further stated that the evidence on record did not demonstrate any dishonest intention or fraudulent handling of the motor by the appellant. Consequently, the statutory elements required to sustain a conviction under section 405 were absent in this case. The Court therefore ordered that the conviction recorded against the appellant be vacated and that he be formally acquitted of all charges. In addition, the Court directed that the monetary penalty imposed, if already collected, be returned to the appellant without any deduction.