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of <h1>Security cheque presented under loan agreement-no 'entrustment' or breach of trust under IPC s.409; complaint quashed</h1> The dominant issue was whether presentation of a security cheque issued under a loan agreement could constitute criminal breach of trust by an agent ... Dishonour of Cheque - misappropriation of the cheque - security cheque or otherwise? - Challenge to summoning Order - whether presentation of the Security Cheque for realization of alleged outstanding amount, would constitute an offence of criminal breach of trust by Agent, which is punishable under Section 409 IPC? - HELD THAT:- The offense of criminal breach of trust under Section 406 IPC requires two foundational elements: first, an 'entrustment' of property, and second, a dishonest misappropriation of that property. The Apex Court in Central Bureau of Investigation, SPE, SIU(X), New Delhi vs. Duncans Agro Industries Ltd., Calcutta, [1996 (7) TMI 552 - SUPREME COURT] held that the expression 'entrusted with property' used in Section 405 of the IPC, connotes that the property in respect of which criminal breach of trust can be committed, must necessarily be the property of some person other than the accused or that the beneficial interest in or ownership thereof must be in the other person and the offender must hold such property in trust for such other person or for his benefit. As observed in the case of N. Raghavender vs. State of Andhra Pradesh, CBI [2021 (12) TMI 1490 - SUPREME COURT], the entrustment of public property and dishonest misappropriation or use thereof in the manner provided under Section 405 IPC, are a sine qua non for making an offence punishable under Section 409 IPC. From the facts as narrated, it emerges that there was no entrustment of property by the Complainant to the Petitioners; rather the very fact that it was a security cheque under the Loan Agreement, which was intended to secure any debt and liability which may arise under the Loan Agreement in future and for the realization of the same, the cheque would be presented - The cheque was voluntarily issued as part of a commercial transaction and formed an integral component of the contractual security mechanism, intended to be encashed in case of default of Loan liability. The issuance of a security cheque pursuant to a commercial loan transaction, does not create a fiduciary relationship, but merely evidences a contractual arrangement between creditor and debtor. There is neither any entrustment nor any misappropriation of the cheques; the presentation of which was strictly in terms of the Loan Agreement. Thus, no prima facie offence under Section 409 IPC is made out in the Complaint. Rather it is evident that the present Complaint had only been filed as a counterblast to the Complaint under Section 138 NI Act. Also, by way of this Complaint, the Complainant intended to prove its defences which is required to be done in the Complaint under Section 138 NI Act. The present Complaint is blatantly an abuse of the process of law on which ground as well, it is liable to be quashed. The impugned Order of the Ld. MM dated 12.07.2017 summoning the Petitioners under Section 409 IPC, and the Order whereby NBWs were issued are hereby, set aside - Petition allowed. Issues: Whether the complaint alleged facts constituting the essential ingredients of the offence under Section 409 IPC (entrustment of property and dishonest misappropriation) so as to sustain the summoning order dated 12.07.2017 and the subsequent NBWs dated 01.12.2017; and whether the complaint is an abuse of the process of law warranting quashing under inherent jurisdiction.Analysis: The pleaded case shows that the cheque was issued and held as a contractual security under a working capital loan agreement that expressly permitted enforcement of security on default. Authorities explain that criminal 'entrustment' requires a trust-like fiduciary relationship and that mere commercial transactions or securities given to secure contractual obligations do not ordinarily create entrustment in the criminal sense. The complaint lacked specific factual averments of dishonest intention at the inception or of a fiduciary entrustment of the cheque distinct from the contractual security arrangement. The core allegations therefore did not establish, even prima facie, the dual ingredients of entrustment and dishonest misappropriation required for Section 409 IPC. The complaint further amounted to a counterblast to the bank's Section 138 NI Act proceedings and sought to litigate contractual defences in criminal garb, amounting to abuse of process. The inherent jurisdiction under Section 482 CrPC permits quashing where no prima facie offence is disclosed and the process is abused.Conclusion: The summoning order dated 12.07.2017 and the order dated 01.12.2017 issuing NBWs are set aside; the complaint No. 621809/2016 is quashed and the petitioners are discharged. The relief is granted in favour of the petitioners (appellants).
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