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Nathmull Poddar v. Salil Kumar Chakraborti
Factual and Procedural Background
The accused-petitioner, Nathmull Poddar, manager of Naskarpara Jute Mills Company, Ltd., and co-accused K.L Jalan, a director of the company, were summoned in Case No. C. 1583 of 1969 under Sections 406 and 403 of the Indian Penal Code (IPC) by the Chief Presidency Magistrate, Calcutta. The complaint was filed by Salil Kumar Chakraborti, an Insurance Inspector of the Employees' State Insurance Corporation, alleging that the accused deducted employees' contributions for the period between March 1967 and October 1968 but failed to deposit these funds with the Corporation as required under Section 40 of the Employees' State Insurance Act, 1948, read with Regulation 26 of the Employees' State Insurance (General) Regulations, 1950. Summons and a search warrant were issued. The accused appeared and applied for exemption from personal attendance and for dropping the proceedings, which the Magistrate rejected on 19 July 1969. This order was challenged by the accused, leading to the present rule for quashing the proceedings.
Legal Issues Presented
- Whether proceedings under Sections 406/403 IPC are maintainable when the offence arises under the special Employees' State Insurance Act, 1948, which prescribes a different penal regime and procedure.
- Whether the essential ingredient of "entrustment" as defined under Section 405 IPC is present to sustain prosecution under Sections 406/403 IPC in the facts of this case.
- Whether prosecution of accused in their fictional capacity as "principal employer" under the IPC sections is legally valid.
- Whether the prosecution is an attempt to circumvent mandatory provisions relating to sanction and limitation under the Employees' State Insurance Act, 1948.
Arguments of the Parties
Appellant's Arguments
- The proceedings under the IPC are not maintainable because the offence is punishable under the special Employees' State Insurance Act, 1948, which prescribes specific sanctions and limitations.
- The essential elements of "entrustment" under Section 405 IPC are absent, as there is only a fictional transfer of property and no actual physical transfer by the owner, thus vitiating the prosecution under Sections 406/403 IPC.
- The accused cannot be prosecuted under IPC in their fictional capacity as "principal employer" as defined under Section 2(17) of the Employees' State Insurance Act, 1948.
- The prosecution is an attempt to evade the mandatory provisions of sanction and limitation under Sections 86(1) and 86(3) of the Employees' State Insurance Act, 1948.
Respondent's Arguments
- The prosecution under Sections 406/403 IPC is maintainable notwithstanding the special Act, in view of Section 26 of the General Clauses Act, which allows prosecution under either special or general enactments but prohibits double punishment.
- The deeming provision in Section 40(4) of the Employees' State Insurance Act creates a fictional entrustment of deducted sums to the principal employer, thereby satisfying the ingredient of entrustment for IPC prosecution.
- Section 85(a) of the Employees' State Insurance Act does not cover all failures to pay contributions, and post-deduction offences may be prosecuted under IPC.
- The concept of entrustment includes not only actual physical transfer but also notional or fictional transfers, and restricting it to physical transfer would frustrate legislative intent.
- The accused can be held responsible in their capacity as principal employers for offences related to the business conducted by the company.
- The prosecution is not motivated by an attempt to circumvent sanction or limitation provisions but is based on legitimate interpretation of the statute.
- The socio-economic purpose of the Employees' State Insurance Act should not be frustrated by hyper-technical constructions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Satya Narayan Choudhuri v. K.P Bhatta [Criminal Revision Case No. 1193 of 1968] | Where a special Act prescribes a special procedure for prosecution, prosecution must follow that procedure; attempts to circumvent are disallowed. | The Court noted this decision but found it conflicted with a prior Division Bench ruling and did not accept it as binding. |
| Nagendra Chandra Ghosh v. State [Criminal Revision Case No. 1565 of 1960] | Prosecution under general law (IPC) is not barred even if offence falls within special Act's scope, subject to no double punishment. | The Court relied on this Division Bench decision to hold prosecution under IPC maintainable alongside special Act prosecution. |
| Basir-ul-Huq v. State of West Bengal [1953 S.C.R 836] | Section 195 Cr.P.C. cannot be evaded by charging offences under different IPC sections to avoid sanction provisions. | The Court referenced this to discuss prosecution legitimacy and sanction requirements. |
| Chandrika Sao v. State of Bihar [A.I.R 1967 S.C 170] | Prosecution for graver offence under general law is not colourable and necessary to avoid impunity. | The Court agreed with this principle supporting prosecution under IPC. |
| Bhuban Mohan Das v. Surendra Mohan Das [A.I.R 1951 Cal. 69] | Criminal breach of trust requires entrustment of property or dominion in fiduciary capacity. | The Court used this to analyze the essential element of entrustment under Section 405 IPC. |
| Jaswantrai Manilal Akhaney v. State Of Bombay [A.I.R 1956 S.C 575] | Entrustment implies transfer of possession with continued ownership by transferor and fiduciary custody by transferee. | Referenced to clarify the nature of entrustment necessary for criminal breach of trust. |
| Velji Raghavji Patel v. State Of Maharashtra [A.I.R 1965 S.C 1433] | Dominion over property must arise from entrustment, not merely by ownership or partnership status. | Used to distinguish mere ownership dominion from entrustment for IPC offences. |
| Narayan Das Shreeram v. Sangli Bank Ltd. [A.I.R 1966 S.C 170] | Payment may be effected by book entries; physical transfer of cash is not always necessary. | Discussed but distinguished as it pertains to payment, not entrustment. |
| Indrajit Singh v. State [A.I.R 1967 Cal. 460] | Entrustment followed by misappropriation constitutes offence under Section 406 IPC. | Referred to illustrate clear entrustment with physical possession transfer, unlike present case. |
| State Of Gujarat v. Jaswantlal Nathalal [A.I.R 1968 S.C 700] | Entrustment requires transfer of property custody while ownership remains; sale does not constitute entrustment. | Used to reject argument of entrustment by deeming clause alone without actual transfer. |
| S.C Guha v. Emperor [32 Cri. L.J 149] | Entrustment to a firm does not equate to personal entrustment to an individual for criminal liability. | Applied to emphasize entrustment must be to a person, not merely to a company or firm. |
| Thakarsi Damjee v. Crown [A.I.R 1952 Nag. 255] | Property passing to a firm upon delivery to a member negates personal entrustment to that member. | Supported the view that no personal entrustment existed with accused individually. |
| Indrapuri Studio (Private) Ltd. v. Employees' State Insurance Corporation [1961-II L.L.J 306] | Employer is primarily liable to pay contributions, with right to reimbursement from employees. | Referred to explain statutory liability and obligations under Section 40 of the Employees' State Insurance Act. |
| Shaw v. Director of Public Prosecution [1962 A.C 220] | Judicial role is to apply law as it is, not legislate based on policy or socio-economic considerations. | Quoted to emphasize the Court’s duty to decide strictly on legal grounds, rejecting expediency-based arguments. |
Court's Reasoning and Analysis
The Court first addressed the contention that prosecution under IPC was barred by the special Employees' State Insurance Act, 1948. It found that although a single Judge had held otherwise, the Division Bench decision in Nagendra Chandra Ghosh prevailed, allowing prosecution under both special and general Acts, subject to no double jeopardy. The Court relied on Section 26 of the General Clauses Act to support this view and also referred to Supreme Court decisions affirming the legitimacy of prosecution under general law even when a special Act applies.
Regarding the essential ingredient of "entrustment" under Section 405 IPC, the Court carefully analyzed the legal principles and precedents. It accepted the appellant's argument that entrustment requires actual transfer of possession and a fiduciary relationship, and that mere fictional or deeming clauses do not suffice. The Court found that in this case, the accused were only deemed to be entrusted with the deducted sums under the special Act, but no actual entrustment as required under IPC was established. The Court also held that entrustment must be to a person, not merely to a company, further undermining the prosecution's basis.
On the prosecution of accused in their fictional capacity as principal employers, the Court concluded that while this may be sufficient under the special Act, it cannot form the basis for IPC prosecution, as it goes beyond the legal bounds of entrustment required under IPC sections 406/403.
The Court rejected the contention that the prosecution was a circumvention of sanction and limitation provisions, finding no material to support this and holding that the prosecution was instituted on a proper interpretation of law rather than improper motive.
The Court also declined to consider socio-economic policy arguments for sustaining the prosecution, emphasizing judicial restraint and adherence to the law as it stands.
Holding and Implications
The Court made the rule absolute and quashed the proceedings under Sections 406/403 of the Indian Penal Code, Case No. C. 1583 of 1969, pending before the Chief Presidency Magistrate, Calcutta.
This decision terminates the criminal proceedings against the accused under the IPC in this matter on the ground that the essential element of entrustment is absent and that prosecution under IPC in the fictional capacity of principal employer is untenable. The Court did not set a new precedent limiting prosecution under the Employees' State Insurance Act but clarified the limits of IPC application in such cases. The ruling underscores the necessity of actual entrustment for criminal breach of trust charges under IPC and affirms the coexistence of special and general penal provisions subject to no double jeopardy.
JUDGMENT
1. This rule is at the instance of the accused-petitioner, Nathmull Poddar, for quashing proceedings under Ss. 406/403, Indian Penal Code, being Case No. C. 1583 of 1969, pending in the Court of the learned Chief Presidency Magistrate, Calcutta.
2. The facts leading on to the rule are short and simple. The accused-petitioner, Nathmull Peedar, is the marager of Naskarpara Jute Mills Company, Ltd., having its office at No. 220/2, Sbib Gopal Banerjee Lane, Ghusuri, Howrah, while the co-accused, K.L Jalan, is a director thereof. The opposite party, Salil Kumar Chakraborti, is an Insurance Inspector attached to the Regional Office of the Employees' State Insurance Corporation at No. 5/1, Grant Lane, Calcutta. A petition of complaint was filed on 5 June, 1969, by the abovementioned Insurance Inspector in the Court of the learned Chief Presidency Magistrate, Calcutta, under Ss. 406/403, Indian Penal Code, averring inter alia that the accused being the principal employers of the aforesaid factory deducted contributions from the wages of the employees for the period between March, 1967 and October 1968, and also for certain earlier periods but failed to desposit the same with the Employees' State Insurance Corporation as required under S. 40 of the Employees' State Insurance Act, 1948, read with Regn. 26 (wrongly stated as Regn. 23 in the petition of complaint) of the Employees' State Insurance (General) Regulations, 1950, thereby committing offences of criminal breach of trust and misappropriation in respect of Rs. 1,00,898.94. The learned Chief Presidency Magistrate, by his order of the same date, took cognizance and issued summons against the accused-persons under Ss. 406/403, Indian Penal Code. A search warrant was also issued, as prayed for. In pursuance of the summons the accused 1, Nathmull Poddar, appeared before the learned Chief Presidency Magistrate, Calcutta, through his lawyer on 2 July, 1969, and filed two applications, viz., one under S. 205, Criminal Procedure Code, for exemption of both the accused-persons from personal attendance and another for dropping the proceedings under Ss. 406/403, Indian Penal Code, as not maintainable in law. The applications were heard in part on that date and further heard on 7 July, 1969. Ultimately, by his order, dated 19 July, 1969, Sri K.J Sen Gupta, Chief Presidency Magistrate, Calcutta, rejected the prayer for dropping the proceedings at that stage and directed that the same shall continue and the search-warrant issued shall not be recalled. This order has been impugned by the accused 1, Nathmull Poddar, and the present rule was issued on 28 July, 1969.
3. Sri Ajit Kumar Dutta, advocate (with Sri Amiya Kumar Chakraborti, advocate), appearing in support of the rule on behalf of the accused-petitioner, Nathmull Poddar, has made a threefold submission. Sri Dutta contended in the first instance that a contravention of S. 40 of the Employees' State Insurance Act, 1948, read with Regn. 26 of the Employees' State Insurance (General) Regulations, 1950, being punishable under Sub-secs, (a) and (g) of S. 85 of the said special Act, the present proceedings under Ss. 406/403 of the Indian Penal Code, which is a general Act, are not maintainable in law. A reference was made to an Unreported decision dated 2 June, 1969, by Bagchi, J., in Criminal Revision Case No. 1193 of 1968. Sri Dutta in this context further submitted that the proceedings under the general Act have been started in order to circumvent the mandatory provisions relating to sanction and limitation, as enjoined under Sub-sees. (1) and (3) of S. 86 of Act 34 of 1948 (Employees' State Insurance Act, 1948). The second contention of Sri Dutta is that even if the proceedings be otherwise maintainable under the Indian Penal Code, the essential ingredients of “entrustment”, within the bounds of S. 405 of the Indian Penal Code are non est, inasmuch as, amongst others, there is only a fictional transfer and not an actual physical transfer by the owner of the property concerned vitiating thereby the present proceedings under Ss. 406/403, Indian Penal Code. Several cases were cited by the learned advocate for the accused-petitioner in support of his contention. The third and the last submission of Sri Dutta is that the present proceedings are bad and improper inasmuch as there cannot be any prosecution in law of the accused-persons under Ss. 406/403, Indian Penal Code, in their fictional capacity of “principal employer” as defined in S. 2(17) of Act 34 of 1948. Sri Debesh Chandra Mukherjee, advocate, appearing on behalf of the opposite party, Salil Kumar Chakraborti, an Insurance Inspector attached to the Employees' State Insurance Corporation, submitted that the first contention made on behalf of the accused-petitioner is not maintainable in law in view of the material provisions of S. 26 of the General Clauses Act and he referred in that context to an unreported decision, dated 11 September, 1961, by S.K Sen, and N.K Sen, JJ., in Criminal Revision Case No. 1569 of 1960. In reply to the second submission of Sri Dutta that the essential ingredients of “entrustment” not being satisfied, the present proceedings under Ss. 406/403, Indian Penal Code, are not maintainable, Sri Mukherjee contended that the proceedings under Ss. 406/403, Indian Penal Code, are proper proceedings relating to the contravention of S. 40 of the Employees' State Insurance Act, 1948, in view of the provisions of Sub-sec. (4) thereof, enjoining that any sum deducted by the principal employer from wages under the said Act
“shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted.”
Sri Mukherjee further submitted that S. 85 does not provide the penalty for all cases of failure to pay contribution under S. 40 of Act 34 of 1948 and that S. 85(a) merely lays down the punishment for a contravention of S. 40(1) of the Employees' State Insurance Act, 1948, constituting a pre-deduction offence or an offence committed by a failure to pay contribution before the employee's share is deducted from his wages under S. 40(2) and that with respect to cases of post-deduction offences or offences committed after deductions have been made by the principal employer from the wages of the employees, such deductions being deemed to have been entrusted to such employer, the proper proceedings are under Ss. 406/403, Indian Penal Code. In this context Sri Mukherjee further contended that the essential ingredients of “entrustment” within the bounds of S. 405, Indian Penal Code, include a notional or a fictional transfer and not merely an actual physical transfer by the owner of the property concerned and that the submissions made in this behalf by Sri Dutta, if accepted, would unnecessarily circumscribe the meaning of the expression “entrustment” and defeat the intention of the legislature. Several cases were cited by Sri Mukherjee in support of his submissions and the same would be considered in the proper context. Sri Mukherjee lastly contended that the third submission of Sri Dutta is more technical than real and that when the business of the company is being carried on or conducted by some persons, any one in charge thereof or responsible for the conduct of the same, at the time when the offence is committed including the “principal employer” as defined in S. 2(17) of Act 34 of 1948, can be saddled with the responsibility for the same.
4. Having heard the learned advocates appearing on behalf of the respective parties and on going through the materials on record, I will now proceed to determine the points raised by the learned advocates for the respective parties. As to the first contention raised by Sri Dutta, and not pressed ultimately, I must hold that the same is not maintainable and I agree with the contentions made in this behalf by Sri Mukherjee. Sri Dutta contended that the present proceedings have been instituted under the general Act, to circumvent the bar imposed on such prosecutions by the special Act and as such the present proceedings are bad and without jurisdiction. Sri Dutta relied on the unreported decision in Satya Narayan Choudhuri v. K.P Bhatta [Criminal Revision Case No. 1193 of 1968, dated 2 June, 1969], by Justice Sri S.N Bagchi wherein it was held that:
“It is settled law that where a special Act enjoins special procedure for initiation of proceedings for violation of any penal provision of such special Act, the prosecution must be initiated according to the provisions of the special Act. Any attempt to circumvent the bar of prosecution enjoined by the special Act would be discountenanced by a Court of law.”
The learned Judge further proceeded to hold that:
“There is a public policy behind the provisions of S. 86 of the Employees' State Insurance Act when the employer is said to have contravened the provisions of the Act thereby making himself liable to be punished under S. 85, Cl. (g), of the Act.”
It was ultimately held that in view of the provisions in S. 85(g) read with Ss. 40 and 86 of the Employees' State Insurance Act, the learned Magistrate could not assume jurisdiction under Ss. 406 and 403 of the Indian Penal Code. The view taken in the aforesaid single Bench decision however is in conflict with an earlier Division Bench decision, which appears not to have been cited before Bagchi, J. It is pertinent, therefore, to refer to the same. In Nagendra Chandra Ghosh v. State [Criminal Revision Case No. 1565 of 1960, dated 11 September, 1961], by S.K Sen and N.K Sen, JJ., it was held by their lordships that:
“The prosecution under S. 420 of the Indian Penal Code would not be bad even if the offence with which the petitioner was charged had come within the scope of S. 84 of the Employees' State Insurance Act.”
The decision of the Division Bench must prevail and I hold, as observed by their lordships of the Division Bench, that a prosecution, if otherwise maintainable, would lie both under the special Act and the general Act subject to the overriding consideration that the accused shall not be liable to be punished twice for the same offence. The contention of Sri Dutta is also de hors the provisions of S. 26 of the General Clauses Act. Section 26 of the General Clauses Act, 1897, runs as follows:
“Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactment, but shall not be liable to be punished twice for the same offence.”
In this context it will be pertinent also to refer to two Supreme Court decisions on the point. In the case of Basir-ul-Huq v. State of West Bengal [1953 S.C.R 836], Mahajan, J. (as his lordship then was), held that:
“Section 195 cannot, however, be evaded by the device of charging a person with an offence to which that section does not apply and theft convicting him of an offence to which it does, on the ground that the latter offence is a minor one of the same character, or by describing the offence as one punishable under some other section of the Indian Penal Code, though, in truth and substance, the offence falls in the category of sections mentioned in S. 195, Criminal Procedure Code.”
In a later decision, however, viz., in the case of Chandrika Sao v. State of Bihar [A.I.R 1967 S.C 170], Mudholkar, J., observed that in choosing to prosecute the accused for a graver offence under the general law the prosecution could not be regarded as having acted colourably and that if the prosecution were to be so restricted, graver offence would go unpunished. I respectfully agree with the said observations and I hold that in view of the provisions of S. 26 of the General Clauses Act and in view of the principles laid down by their lordships of the Supreme Court in Chandrika Sao case [A.I.R 1967 S.C 170] (vide supra) and by this Court in the unreported decision in Nagendra Chandra Ghosh case [Criminal Revision Case No. 1569 of 1960, dated 11 September, 1961] (vide supra) there is no bar in limine on the prosecution to proceed under the general Act on an offence which otherwise lies, merely because the same facts also constitute an offence under the special Act subject only to the overriding consideration of double jeopardy. The first contention raised by Sri Dutta accordingly fails.
5. The second contenion put forward by Sri Dutta is, however, of some importance and requires consideration in all its facets. Sri Dutta submitted that even if a prosecution under the general Act is permissible under S. 26 of the General Clauses Act, the present proceedings under Ss. 406/403, Indian Penal Code, are not however maintainable because there is no “entrustment” constituted by the facts alleged within the bounds of S. 405, Indian Penal Code. Sri Dutta urged that the essential ingredients of “entrustment” are fivefold and the absence of any one of these material ingredients would fail to constitute “entrustment” forming the corner-stone of a prosecution under Ss. 406/403, Indian Penal Code. The steps of Sri Dutta's reasoning in this context are that in order to constitute entrustment the complainant must be the owner of the property; that there must be a transfer of possession; that such transfer must be an actual transfer and not a fictional or notional one; that the transfer must be made to somebody who has no right, excepting that of a custodian; and that such entrustment must be made to a person and not to a company or a firm. These five ingredients, according to Sri Dutta, when satisfied, will constitute “entrustment” within the ambit of S. 405, Indian Penal Code, leading on to a valid prosecution, if otherwise entertainable on merits, under Ss. 406/403, Indian Penal Code. Sri Dutta submitted that one looks in vain to the facts incorporated in the petition of complaint in this case for the presence of any one of these elements and that it appears on the other hand that the sheet-anchor of the prosecution case is the deeming clause in Sub-sec. (4) of S. 40 of Act 34 of 1948, which certainly cannot do duty for an actual transfer of the property forming the subject-matter of the present proceedings, implicating the accused in their fictional capacity of a principal employer. Sri Mukherjee joined issue and submitted that the interpretation put by Sri Dutta on the concept of “entrustment” would unnecessarily circumscribe the meaning thereof and frustrate the intention of the legislature. It is relevant in this context to consider the various cases cited by the learned advocates appearing on behalf of the respective parties in support of their contentions as to what constitutes in law “entrustment” within the ambit of S. 405, Indian Penal Code, forming the basis of a prosecution under Ss. 406/403, Indian Penal Code. In the case of Bhuban Mohan Das v. Surendra Mohan Das [A.I.R 1951 Cal. 69], Harries, C.J, observed (at p. 70) that:
“Before criminal breach of trust is established it must be shown that the person charged has been entrusted with property or with dominion over property and that he has been guilty of ‘breach of trust’ using that latter phrase loosely. There must be entrustment and, therefore, the person accused must be shown to have held the property in a fiduciary capacity.”
The learned Chief Justice proceeded to consider several English cases in this context including the case of Piddocke v. Burt [(1894) 1 Ch. 343], wherein it was held that one partner receiving assets of the partnership on account of himself and his co-partners is not liable to imprisonment under S. 4(3) of the Debtors Act, 1869, as a person acting in a fiduciary capacity. A reference was also made to the observations of Chitty, J., at p. 346 in the abovementioned decision that:
“The case of a partner is quite different from these cases, because he receives money belonging to the firm on behalf of himself and his co-partner and it appears to me that I should be straining the law if I were to hold that a partner receiving money on account of the partnership—that is, on behalf of himself and his co-partners—received it in a fiduciary capacity towards the other partners.”
A reference was also made to the case of Jaswantrai Manilal Akhaney v. State Of Bombay [A.I.R 1956 S.C 575], wherein B.P Sinha, J. (as his lordship then was), delivering the judgment of the Court observed (at p. 582) that:
“Entrustment contemplates the creation of a relationship whereby the owner of property makes it over to another person to be retained by him until a certain contingency arises or to be disposed of by him on the happening of a certain event. The person who transfers possession of the property to the second party still remains the legal owner of the property and the person in whose favour possession is so transferred has only the custody of the property to be kept or disposed of by him for the benefit of the other party, the person so put in possession only obtaining a special interest by way of a claim or money advanced or spent upon the safe keeping of the thing or such other incidental expenses as may have been incurred by him.”
Sri Dutta has further referred in this connexion to the case of Velji Raghavji Patel v. State Of Maharashtra [A.I.R 1965 S.C 1433], wherein Mudholkar, J., delivering the judgment of the Court observed (at p. 1435) that:
“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 requirement of S. 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.”
Sri Mukherjee referred to several cases in this context to establish his proposition that there need not be any physical transfer of the articles in question and that even a notional transfer will do and that each case must depend on its own facts. Sri Mukherjee referred to several decisions in this context. He referred in the first instance to the case of Narayan Das Shreeram v. Sangli Bank, Ltd. [A.I.R 1966 S.C 170], and relied upon the observations of Bachawat, J., delivering the judgment of the Court (at p. 174) that:
“To support the plea of payment, it is not necessary to show that cash passed. Illustration (a) to S. 50 of the Indian Contract Act, 1872, shows that payment may be made by means of transfer entries in books of account.”
I respectfully agree with the observations made there but I must hold that the said observations are made in quite a different context against the backdrop of S. 50 of the Indian Contract Act, namely, that it is not necessary that cash must pass to establish a plea of payment. The question here is one of entrustment and the point for consideration is whether there can be any entrustment without being accompanied by an actual transfer. Sri Mukherjee next referred to the case of Indrajit Singh v. State [A.I.R 1967 Cal. 460], wherein Justice Sri A.K Das, delivering the judgment of the Court, held on the facts of the said case. (at p. 460) that:
“… after seizure, the lorry was entrusted with the petitioner with a direction to produce it in Court. Due notice for production was served and he has failed to produce it. The ingredients for an offence under S. 406, viz., entrustment followed by misappropriation and conversion in violation of the direction of law are present and prima facie an offence of criminal breach of trust has been committed for trial under S. 406, Indian Penal Code.”
It is difficult to understand how the principles laid down in the abovementioned case would apply to the point at issue in the present proceedings. Nobody can dispute the factum of entrustment in that case of the property when the same was made over to the accused therein with a direction to produce it in Court. The point here is entirely different, viz., as to whether there has been a fictional entrustment or actual entrustment. Sri Mukherjee lastly cited the case of State Of Gujarat v. Jaswantlal Nathalal [A.I.R 1968 S.C 700]. Justice Sri Hegde, delivering the judgment of the Court, held (at p. 701) that:
“The expression ‘entrustment’ carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner… A mere transaction of sale cannot amount to an entrustment.”
The facts of the case under consideration by their lordships of the Supreme Court are again quite different and the observations made by Justice Sri Hegde, delivering the judgment of the Court, really do not support the present contention of Sri Mukherjee. One of the elements of entrustment as pointed out therein, is that the property must be handed over by the aggrieved person, who continues to be the owner thereof. In the facts and circumstances of the present case, it is difficult to agree with Sri Mukherjee's submission that there has been in fact an actual transfer of property by the real owner to a party who has no right excepting that of a mere custodian and I hold accordingly that the essential elements of entrustment, within the meaning of S. 405 of the Indian Penal Code are non est, vitiating thereby the present proceedings under Ss. 406/403, Indian Penal Code, and as such a continuance thereof is unwarranted and untenable. It is pertinent now to consider the fifth element referred to by Sri Dutta, viz., such entrustment must be made to a person and not to a company. In the case of S.C Guha v. Emperor, (32. Cri. L.J 149], Mr. Justice Baguley observed (at p. 152) that:
“it seems to me to follow that the goods were entrusted to the firm and not to Guha, and, if there was no personal entrustment to Guha, he cannot be regarded as criminally liable for breach of trust.”
A further reference may be made to the case of Thakarsi Damjee v. Crown [A.I.R 1952 Nag. 255], wherein Justice Sri Mudholkar, delivering the judgment of the Court, observed (at p. 256) that:
“The cheque was drawn in the name of Ladharasn Kheta and it is said to have been handed over to the applicant for being credited to his account with the firm Ladharam Kheta. It follows, therefore, that the property in the cheque passed from the complainant to the firm Ladharam Kheta as soon as the cheque was handed over to the applicant. Since that is so, there is no entrustment of any money by the complainant to the applicant.”
I respectfully agree with the said observations and I hold that in the facts of the present proceedings there is no actual entrustment of the amount in question with the accused persons, but they are merely deemed to be entrusted therewith under S. 40(4) of Act 34 of 1948. This runs off at a tangent from the concept of entrustment as defined from time to time by the different High Courts as also the Supreme Court, forming the basis of a proceeding under S. 406 or 403, Indian Penal Code. The second contention of Sri Dutta accordingly succeeds.
6. The third submission of Sri Dutta also stands on a firm footing. It is abundantly clear from the facts of the present case that the accused are being prosecuted under Ss. 406/403, Indian Penal Code, not in their personal capacity for having committed the offence of criminal breach of trust or of misappropriation of any article actually made over to them but on the footing of their fictional capacity as the “principal employer” of Naskarpara Jute Mills, for not making over the contributions which under Act 34 of 1948 are liable to be paid to the authority concerned. A prosecution of the accused for a failure on their part to pay the contributions enjoined under S. 40 of Act 34 of 1948 in their fictional capacity as principal employers, may be good enough for a prosecution under S. 85 read with S. 86 of the Employees' State Insurance Act, 1948, inasmuch as for the purpose of the said Act 34 of 1948, any sum deducted by the principal employer from the wages under this Act can be deemed to have been entrusted to the said accused, but the concept of such entrustment cannot transgress the bounds of the said special Act to form a necessary ingredient of entrustment within the ambit of S. 405, Indian Penal Code, which alone can form the basis of a valid prosecution under Ss. 406/403 of the Code. Anything short of that would be long off the mark and de hors the intention of the legislature. I find on ultimate analysis that the entrustment alleged in this case is merely on the footing of the deeming provision incorporated in Sub-cl. (4) to S. 40 and in the fictional capacity of the accused as principal employers. The ingredients constituting a valid entrustment within the ambit of S. 405, Indian Penal Code, are covered by the principles referred to above, receiving the imprimatur of judicial decisions and I accordingly uphold She third and last submission of Sri Dutta.
7. In order to appreciate and understand the essential ingredients of S. 40-of Act 34 of 1948, it would be relevant to refer to the case of Indrapuri Studio (Private), Ltd. v. Employees' State Insurance Corporation [1961-II L.L.J 306]. Justice Sri P.N Mookerjee, delivering the judgment of the Court, observed (at p. 308) that:
“In S. 40, the statute gives a clear mandate and categorically imposes an obligation on the employer to pay both the contributions in the first instance, subject to a right of reimbursement from the employee or employees concerned in regard to his or their portion or portions of the same … thus making it clear beyond dispute in the proceedings or aforesaid context that, vis-a-vis the Corporation, the liability for both the above types of contributions is of the employer—at least in the first instance.”
I respectfully agree with the said observations and I hold that the same leads on clearly, in the facts and circumstances of the present case, to a proceeding under S. 85 read with S. 86 of Act 34 of 1948.
8. Two ancillary points raised by the learned advocates appearing on behalf of the respective parties now abide my consideration. The first one was raised by Sri Dutta on behalf of the accused-petitioner that the present proceedings have been launched by the prosecution in order to circumvent the mandatory provisions, relating to sanction and limitation enjoined under Sub-secs. (1) and (3) to S. 86 of Act 34 of 1948. As no sanction was obtained and as the period of six months provided for under the Employees' State Insurance Act, 1948, had expired, the authorities concerned had no other option but to institute the present proceedings under the general Act. No materials are there to lend assurance to Sri Dutta's contention and I hold that the institution of the present proceedings is not in any way motivated but has been done on principle and on an interpretation of the relevant statute, which may or may not be upheld ultimately by the Court of law. This contention of Sri Dutta is accordingly overruled. Sri Mukherjee also made an ancillary submission. He contended that the Employees' State Insurance Act is a special Act enacted
“to provide for certain benefits to employees in certain cases”
as referred to in the object of the Act and therefore the intention of the legislature as contained therein should not be frustrated by a hyper-technical construction of the provisions thereof. Sri Mukherjee has also referred to the question of prejudice because several cases of a similar nature, have been instituted under the Indian Penal Code. The other cases referred to by Sri Mukherjee as pending, are not before me for consideration and I will only observe that the point at issue is one of principle and one of law, irrespective of any consideration of expediency or of convenience. The requirements of legislation based on socioeconomic needs of the society cannot be overemphasized. As was observed by Mr. Justice McCardie in the case of Ronald True, in Notable British Trials, Volume on Ronald True, p. 246, that
“All laws must progress or it must perish in the esteem of man.”
But the line must be drawn somewhere as otherwise the Judge deciding a case would enter into the realm of legislation. In a recent decison by the House Lords in the case of Shaw v. Director of Public Prosecution [1962 A.C 220] (popularly known as Ladies Directory Case), there has been a sharp conflict of opinion between the Law Lords. The dissentient judgment came from Lord Reid, whose difference of opinion with the majority was sharp and fundamental. Lord Simonds delivered the “policy statement” on behalf of the majority and Lord Tucker delivered the judgment “in depth”. Lord Simonds relied on the observations of Chief Justice Mr. Mansfield that
“the Court is the castos morum of the people and has the superintendency of offences contra bonos mores” and asserted the power of the Courts to superintend offences which are prejudicial to public welfare and not hitherto covered by statute and proceeded to pose the following question rhetorically
“Must we wait until Parliament finds time to deal with such conduct.”
Lord Reid in his dissenting judgment answered emphatically and explicitly “yes”. I have given my anxious consideration to the contentions made by Sri Mukherjee in this behalf but I am unable to transgress the bounds of law and hold in favour of Sri Mukherjee on the ground of expediency or on the ground of socio-economic needs. I agree with the observations of Mr. Francis Bacon in this context that Judges should dispose of cases “jus dicere”— in accordance with law as it is—and not “jus dare”— in accordance with law as it should be.
9. Before I part with the case I must place on record my appreciation of the able assist ance I received from the learned advocates appearing on behalf of the respective parties. They left no stone unturned is placing the pros and cons and in assisting the Court to come to a proper decision.
10. In the result, I make the rule absolute and quash the proceedings under Ss. 406/403, Indian Penal Code, being Case No. C. 1583 of 1969, pending in the Court of the learned Chief Presidency Magistrate, Calcutta.
11. The affidavit-in-opposition filed on behalf of the complainant-opposite party be kept on the record.
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