# NIRMALJIT SINGH HOON v. THE STATE OF WEST BENGAL AND ANR

- **Citation:** [1973] 2 S.C.R. 66
- **Court:** Supreme Court of India
- **Decided:** 1972-09-06
- **Case number:** Criminal Appeals Nos. 213 and 214 of 1968
- **Bench:** J. M. Shelat, I. D. Dua, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/nirmaljit-singh-hoon-v-the-state-of-west-bengal-and-anr-5886
- **Pages:** 31

## Headnote

B
Code of Crimirtal Procedure (Act 5 of 1898), ss. 156(3), 19:>(1)(c),
202 and 204-Scope of.
H-company (in voluntary liquidation) was the owner of 51 % di 1he
shares in T-company and 707 sha,..,,, out of them were in the possession
of T-company. The 5th respondent owned the balance of 49% shares.
In a suit filed by him against the H-company the High Court passed a
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decree directing H-company to deliver the 51 % shares to him on pay·
ment of a certain sum and issued an injunction reStraining H~company,
until delivery of the •hares, from exercising its righ!s as hl>lder of those
shares.
Some time later one of the liquidators, V, of H-company, and
M went to the office of T-company where V executed a receipt and an
indemnity bond.
The receipt recorded the fact that the 707 share certifi·
cates were received from the 2nrl respondent, one of the directors of the
T-company. It also contained two endorsements; one in the handwriting
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<if the 2nd respondent stating "shares with me" and another, addressed to
the 2nd respondent alleged to have been written by V, stating, "I do not
want to carry these with me, hence leaving meantime with personally for
delivery to me later". The indemnity bond purported to indemnify T-company against any claims by the 5th respondent in respect of the 707 shares
and contained also certain undertakings.
H-company took out execution against T-company for the delivery of
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the 707 shares claiming entrustment of the shares to the second respondent by V. Copies of the receipt and the indemnity bond were filed, and
the originals were shown to the. Counsel for T-company, during the pro-
<:eedings for satisfying them that the copies were correct copies.
Thereafter, the appellant, another liquidator of the H-company, filed
a complaint before the Chief Presidency Magistrate against respondents 2
to 5, the directors and Secretary of the T-company, alleging that V and
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M went to the office of T-company for obtaining the 707 shares for delivering them to respondent 5, that the second respondent delivered the
$hares to V, that since V had a luncheon engagement he did not want te
take them with him, that the second respondent made the first endorsement
on the receipt and V himself made the second endorsement to clarify why
the shares were left with the second respondent, that V took away the
:indemnity bond with him as the second" respondent wanted the signature
-of the appellant also, that later, on thaV day, the solicitors of H-company
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$ent their aSBistant C to the second respondent for the shares, that the
·oecond respondent gave an aSBurance that he would send them through
the solicitors of the T-company but did not do so, that the second resportdent was withholding the shares at the instance of the fifth respondent
who was, as a result of the injunction, in a position to control the T-company without having to pay for the 51 % shares and was therefore interested
in preventing H-company deliverng the shares to him, and that respondents
2 to 5 were guilty of offences under ss. !20B, 406 and 420, I. P. C.
H
The second respondent filed a counter complaint against the appellant,
V and M, under ss. 467, 471, 193, 474 and 109 LP.C. He alleged that Ille
707 shares were always lying with the T-company as the T-company
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N, S. HOON V, WEST BENGAL
67
claimed a lien over them -in respect of certain payments for incon1e·tax.
purposes, that the second respondent produced them before V for his inspection, that he objected to the word "received" in the receipt and wanted
instead the word "inspected", that V declined to alter the receipt and
thereupon the second respondent wrote out the first endorsement
with a view 10 clarify that tne shore certificates were still in his custody
and not with the fifth respondent.
He denied his having delivered
them to V or that V entrusted them to him or ihat he prom;sed to hand
them over to the solicitors Of H-company.
He alleged thae the appellant
later on made an interpolat

## Text

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66
A
NIRMALJIT SINGH HOON
v.
THE STATE OF WEST BENGAL AND ANR.
September 6, 1972
[J. M. SHELAT, I. D. DUA AND H. R. KHANNA, JJ.J
B
Code of Crimirtal Procedure (Act 5 of 1898), ss. 156(3), 19:>(1)(c),
202 and 204-Scope of.
H-company (in voluntary liquidation) was the owner of 51 % di 1he
shares in T-company and 707 sha,..,,, out of them were in the possession
of T-company. The 5th respondent owned the balance of 49% shares.
In a suit filed by him against the H-company the High Court passed a
C
decree directing H-company to deliver the 51 % shares to him on pay·
ment of a certain sum and issued an injunction reStraining H~company,
until delivery of the •hares, from exercising its righ!s as hl>lder of those
shares.
Some time later one of the liquidators, V, of H-company, and
M went to the office of T-company where V executed a receipt and an
indemnity bond.
The receipt recorded the fact that the 707 share certifi·
cates were received from the 2nrl respondent, one of the directors of the
T-company. It also contained two endorsements; one in the handwriting
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<if the 2nd respondent stating "shares with me" and another, addressed to
the 2nd respondent alleged to have been written by V, stating, "I do not
want to carry these with me, hence leaving meantime with personally for
delivery to me later". The indemnity bond purported to indemnify T-company against any claims by the 5th respondent in respect of the 707 shares
and contained also certain undertakings.
H-company took out execution against T-company for the delivery of
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the 707 shares claiming entrustment of the shares to the second respondent by V. Copies of the receipt and the indemnity bond were filed, and
the originals were shown to the. Counsel for T-company, during the pro-
<:eedings for satisfying them that the copies were correct copies.
Thereafter, the appellant, another liquidator of the H-company, filed
a complaint before the Chief Presidency Magistrate against respondents 2
to 5, the directors and Secretary of the T-company, alleging that V and
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M went to the office of T-company for obtaining the 707 shares for delivering them to respondent 5, that the second respondent delivered the
$hares to V, that since V had a luncheon engagement he did not want te
take them with him, that the second respondent made the first endorsement
on the receipt and V himself made the second endorsement to clarify why
the shares were left with the second respondent, that V took away the
:indemnity bond with him as the second" respondent wanted the signature
-of the appellant also, that later, on thaV day, the solicitors of H-company
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$ent their aSBistant C to the second respondent for the shares, that the
·oecond respondent gave an aSBurance that he would send them through
the solicitors of the T-company but did not do so, that the second resportdent was withholding the shares at the instance of the fifth respondent
who was, as a result of the injunction, in a position to control the T-company without having to pay for the 51 % shares and was therefore interested
in preventing H-company deliverng the shares to him, and that respondents
2 to 5 were guilty of offences under ss. !20B, 406 and 420, I. P. C.
H
The second respondent filed a counter complaint against the appellant,
V and M, under ss. 467, 471, 193, 474 and 109 LP.C. He alleged that Ille
707 shares were always lying with the T-company as the T-company
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N, S. HOON V, WEST BENGAL
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claimed a lien over them -in respect of certain payments for incon1e·tax.
purposes, that the second respondent produced them before V for his inspection, that he objected to the word "received" in the receipt and wanted
instead the word "inspected", that V declined to alter the receipt and
thereupon the second respondent wrote out the first endorsement
with a view 10 clarify that tne shore certificates were still in his custody
and not with the fifth respondent.
He denied his having delivered
them to V or that V entrusted them to him or ihat he prom;sed to hand
them over to the solicitors Of H-company.
He alleged thae the appellant
later on made an interpolation, namely the second endorsement in the receipt to give a false twist to the first endorsment and to show that the
certifica.tes were entrusted. to the second respondent by V.
The Chief Presidency Magistrate directed the police to enquire into
the appellant's complaint under s .. 156(3), Cr.P.C. The receipt was pro-
·duced before the police by the appellant, and the police seized the 707
shares from the fourth respondent, the Secretary of T-company. The
policto however reported that the complaint was a false one. The appellant
thereupon filed objections and the Chief Presidency Magistrate directed
a judicial enquiry into the complaint. The Chief Presidency Magistrate had
also directed a judicial enquiry into the counter complaint. The Magistrate
who enquired into the matter reported to the Chief Presidency Magistrate
that no prima facie case was made out in the complaint, by the appellant,
but that a prima facie case was made out again>! the appellant, V and M.
In the course of the enquiry, the appellant and C and M were
examined as witnesses, but V, who was in U.K., was not examined .. His
affidavit was sought to be filed, but it was held that the affidavit could not
.be rec.eived in evidence.
The Chief Presidency Magistrate
and the High Court in revision
agreed that the' complaint of the appellant shGuld be dismissed, but ·held
that in the cunter complaint process should issue but only against the
appellant
Reference was
alsG made by the High
CGurt tG the nonexamination of V during the judicial enquiry.
In appeals to this Court, (1) allowing the appeal .re~ar?ing the complaint by the appellant, (by the Majority) and (2) d1Sm1Sstng the appeal
regarding the complaint against the a.ppellant.
HELD (per Shelat and Dua, JJ.): (I) Under s. 202 Cr.P.C .. Magistrate, on receipt of a complaint, may postpone the issue of process an<l
either inquire into the case himself or direct ~n inquiry to be made by a
Magistrate subordinate to him or by a police officer for asccrmining its
truth or falsehood. The inquiry by the Magistrate envisaged at this stage
is for ascertaining the truth or falsehood of the complaint, that is, for
. ascertaining whether there is evidence in support of the complaint •O as
to justify the issue of process.
Unless, therefore, the Magistrate finds that
the evidence led before him is self-contradictory, or intrinsically untrustworthy, process cannot be refused if that evidence makes out a pri11111 fade
casC.
In a revision against such refusal, the High CGurt also has to apply
the same test. [79A-B, F-H]
In the present case, both the receipt and the indemnity bond were
before the Magistrate anu were marked as documents in the case. They
were also before the High Court. The receipt vri11111 facie shGwcd that V
at first ''received" the share ccrtiftcatcs from the 2nd rcsoondeot and the
endorsement admittedly written by the 2nd rcspGndcnt, indicates tho! V
had left them with the 2nd respGndent. The evidence of M and the appellant was that the 2nd respondent had
demanded an indemnity bond
which was signed by V and later by the apoella nt. Such a bor.d containing
68
SUPREME COURT REPORTS
[197~ 2 s.c.a.
the indemnity and undertakings would not have !Jeen executed unless the
share certificates had been delivered to V. According to the evidence of
M, C, and the appellant, the two documents were executed on the date
when V went to the T-company to obtain delivery of the shares. V, if
exan1ined, would have been the principal witness, and his affidavit, in his
absence, could not c:onstitutc admissible evidence. But examination of V
would have meant bringing him to India from England at considerable
cost. The mere fact that the appellant did not examine him could not be
a ground for throwing out the appellant's complaint when there was other
evidence making out a prin1a facie case. Neither the Magistrate nor the
High Court expressed any view that the evidence either of the appellant
or of the other witness~s was false or intrinsically unbelievable. It may
be that much could be said on both sides, but certainly this was not a case
of there being no prirna facie case or the evidence being so self-contradictory or intrinsically untrustworthy that process could properly be refused.
[81H; 82A-H]
(Per Khanna, J. dissenting) : An enquiry or investigation is ordered
under s. 202, Cr.P.C., by a Magistrate on receipt of a complaint for the
purpose of ascertaining the truth or falsehood of the complaint. If the
Magistrate, a'fter considering the
statement on oath of the complainant
and his witnesses and the result of the enquiry or investigation under the
section, is of the opinion that there is no sufficient cause for proceeding,
he may dismiss the complaint. If, on the contrary, he is of opinion that
there is sufficient cause for proceeding he should issue process against the
accused in accordance with s. 204.
The evidence which is required to be
adduced by the complainant at this stage need not be sufficient for recording a finding of conviction; but that does not absolve the complainant, who
wants the Magistrate to issue process against the accused, from leading
some credible evidence which shows, prima facie, that the offence
was
committed. [95E-HJ
In the present case, there seems to be an inconsistency in the receipt
between the writing of V and the endorsement by the 2nd respondent.
The receipt is thus ambiguous, and in the absence· of oral evidence, it is
difficult to infer from the receipt that the shares were entrusted by V to
the 2nd respondent. The best and most important person to explain the
ambiguity and' prove the entrust1nenr was V but he was not examined as a
\VitnesS, and his affidavit could not be received in evidence under s. 510A,
Cr.P.C., as his evidence was not of a formal character.
The other person,
who was present at the time of the alleged entrustment was M, but his
evidence does not prove the delivery of the shares to V or entrustment by
him to the second respondent.
The evidence of C, the indemnity bond,
the letters of the Solicitors of H-Company and the statement of the second
respondent in his compsaint-assuming it could be referred to in the
appellanf"s complaint-do not reveal any entrustment of the sh~res to the
2nd respondent. [92C; 93B-C; 94A-B, D, G; 95A-EJ
(2) (Per Cudam) : The first part of s. 195(1) (c), Cr.P.C.. provides
that the offence in respect of which the complaint in question is filed must
be one under s. 463, or s. 471, or s. 475 or ,;. 476, J.P.C. The second
part provides that such an offence must be alleged to have been commitB
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ted by a party to any proceeding in any court in respect of a document
produced or given in evidence in .such proceeding.
A doc1·ment can be
said to have been produced in a court when it is not only produced for
the purpose of being tendered in evidence, but also for some other purH
pose.
It is only if the two requirements arc sati~ed that no court can
take cognizanee of such an offence except on a complaint filed by such
·7011rt or a Court subordinate to it. [85-D-F: 870-H: 88A-B]
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N. S. HOON V. WEST BENGAL
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(a) In the present case, in respect of the co~nter complaint, the re·
ceipt was produced by the appellant before the pohce, and formed part of
the record of the case which went · to the Chief Presidency
Magistrate
along with the police report. It could not however be said that because
the investigation was ordered by the Chief Presidency Magistrate under
s.156(3), Cr. P.C. the investigation was part of the proceedin[!S in his
Court. [86E-G]
(i) Section 156(3) expressly states that an investigation ordered by a
Magistrate would be an investigation made by a police officer in his statu·
tory right under sub-sections (I) and (2). That being so, once an in•estigation by the police is ordered by the Magistrate, he cannot place any
limitations on, or direct the officer conducting it as to how to conduct it.
It cannot be said that the police officer acting under s.156(3) was a dele·
gate of the Magistrate or that the investigation by him was <>n investigation
hy or on behalf of the Magistrate. (868-F; 87 A-BJ
In re : Gopal Sidheshwar, (1907) 9 Born. L.R.737 and King Emperor
v. Klwwaja Ntzir Ahmad. 71 I.A. 203, referred to.
(ii) Before a Magistrate can be said to have taken congizancc of an
olTcnce under s. 190(1) (a), Cr.P.C. he must have not only applied his
mind to the con\ents of the complaint presented to him, but must have
Jone so for the purpose of proceeding under s. 200 and the following
;cctions.
Jn the present case, the Chief Presidency Magistrate applied his
mind only for the purpose of directing p6lice investigation under s. 156(3).
Therefore, the Chiof Presidencey Magistrate having not even taken cognizance of the offence, no proceeding could be said to have commenced
before him of which the inquiry by the police could be said to be part
and parcel. [86F-H]
R.R. Chari v. U.P. [1951] S.C.R. 312 and lamuna Singh v. Bhadai
Salz, [1964] 5 S.C.R. 37, referred to.
(b) (i) It is only the copies of the receipt and the indemnity bond, that
w~rc annexed to the affidavit in the execution proceeding that could be
so.:d to h~v~ been ~roduced in proceedings before the High Court and
not the originals, which were only shown to the Counsel of T-company
[87B-D]
.
(ii) Moreover, assuming the receipt was produced before the High
Court, ~be offence charge.d against the appellant is not its user in the
proceedings before tf;e . High Court, but its production and user b
h
ap~el!ant .durmg the investigation by the poliec in the appel!ar.f Y 1 e
plaint against the respondents. [87E-FJ
' · ' com·
.
(ii~) .It .could not ~ said that once a documen~ alleged to be forged
ts use
m any proceeding before any court at any time
195(
Cr._ P.C. would at once be attracted and would b
b ' s. ·
I) (C)'
f~g.,~~~!u! ~rr:h ctomplaining of its fraudulent us:r ~n =~yaf."t~:tp:~~~:
'
a were so, a party to the proceed'n b f
go on producing such a document d
.
.
1 g e ore a court can
ce~Jing~ ~ith impunity, if the Cou~t f,':(~;~m h~ ~e~eral subsequent pro·
th mks it inexpedient to file a complaint
Thw tic I it was first produced
respect of any of the offences enumer~t
a c ause only s~ys that in
be taken df a private com faint whe
ed there, ?O c_ongnizance can
co1n1nitted by a party to ,f proceedinn s~clz of/ence.1s said to ha1•e been
n?ent produced or te;ufered in evidef ' . a court in respect of a doci.-
comp/aint by such court. [88C·G)
ce •n that proceeding except on a
70
SUPIU!MB OOUllT REPORTS
[1973J 2 S.C.L
CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos.
213 and 214 of 1968.
Appeals by special leave from the judgment and orders dated
December 7, 1967 of the Calcutta High Court in Criminal Revisic.ns Nos. 304 and 291 of 1967.
M. C. Chag/a, K. K. Jain and H. K. Puri, for the appellant
(in ?oth the appeals).
P. K. Chatterjee, S. Joseph and D. N. Gupta, for respondent
No. '.! i in Cr. A. No. 213 of 1968 arid for respondents Nos. 2
n'ld 3 (in Cr. A. No. 214 of 1968).
Debabroto Mookherjee, G. S. Chatterjee, for respondent No. 1
(in Cr. A. No. 213 of 1968).
Debabroto Mookherjee, P. K. Chakravarty, Prodyot Kumar
Chakra1•art)', for respondent No. 1 (in Cr. A. No. 214 of 1968).
The Judgment of J.M. SHELAT & I. D. DuA, JJ. was delivered
by SHELAT, J., H. R. KHANNA, J., gave ~ dissenting opinion.
SHELAT, J. These two appeals, by special leave, arise out of
two complaints, both of which were filed in respect of the same
transaction and are therefore disposed of by a common juJg1l'lent.
Appeal No. 214 of 1968 is against the
judgment of the
High Court of Calcutta dismis9ing the
complaint filed by the
appellant on January 5, 1966 uncL'f secs. 1208, 406 and 420
of the Penal Code against respondents 2 to 5, who are the directors
and the secretary of M/s Turner, Morrison & Co. LtJ. (herein•
after referred to as the company).
The case of the appellant in the said complaint may be stated
as follows:
At the material time, the appellant, one S. Varma and Frank
Goldstein were the liquidators of Hungerford Investment Trust
Ltd. (in voluntary liquidation) hereinafter referred to as Hungerford). At all material times Hungerford was the registered owner
of 51"' of the shares of the company and as much was ordinarily
entitled to have the wntrol and management of that company.
These 51 % shares numbered 2295 shares of the face value of
Rs. 1,000 each.
Out of these, 707 shares were in possession of
the company.
Respondent 5, Haridas Mundra, owned the balanee of 49%
shares. In or about 1961, Hungerford agreed to sell and Mundra
agreed to pufchase the said 51 % shares. Mundra filed a suit
being Suit No. 600 of 1961 against Hunger~rd in the High
Court of Calcutta for specific performance of the said agreement.
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The High Court decreed the suit directing Hungerford to deliver
the said 2295 shares against payment of Rs. 86 lacs and odd and
issued, until delivery of the said shares was ~-~de t~ Mu_ndra, an
injunction restraining Hungerford from exercising its
n_gh~ . as
holder of those 51 % shares. The curious result of the said miuction was that Mundra could get control and management of the
company with the 49% shares held by him without having t~ pay
the price of the said 51 o/d shares, until Hungerford gave delivery
of all those 2295 shares, out or which, as aforesaid, _ 707 shares
were in the custody of the company.
The problem !or Hungerford was how to get .back those 707 shares from the company
so as to be able to deliver all those 2295 shares and obtaiin payment a·gainst such delivery of Rs. 86 lacs and odd from Mundrn.
The said S. Varma, who was then residing in England, came
to lndia in or abput May 1965. According to the complaint.
Vanna, accompanied by one N. K. Majumdar, ~ent to the office
of the company on May 27, 1965, and upon his request for the
s.aid 707 slrare certificates, obtained from respondent 2(0.M.
Jaffray) the said share certificates. Varma thereupon issued
a
receipt for those share certificates and also executed an indemnity
bond in favour of the company against any possible claims which
Mundra might make in respect of those 707 share certificates. By
the said bond the liquidators of Hungerford indemnified the company to the extent of Rs. 53 lacs said to have been paid by that
company by way ol taxes for the Turner famiJy, undertook
to
assht that company to recover that sum from the estates of that
family and furthermore to produce the said 707 share certificate.~
whenever required for delivery tu Mundra in terms of the said
decree and to indemnify any claim which might arise ~ a result
of delivery thereof to Varma. lt is clear that once those 707 snare
certificates were handed over to Verma, Hungerford would,
in
tenns of the said decree, be able to deliver to Mundra all the said
2295 shares and Mundra would have to take delivery of them
against payment of Rs. 86 lacs and odd.
"
The receipt (document 2) which Varma executed at the time
recorded the fact of the said 707 share certificates haviing been
received by him from Jaffray, and their particulars and numbers.
The prosecution case was that as Vanna had then a luncheon
engagement he did not wish to carry those scripts together with
the corresponding bJank transfer forms endorsed by the company,
aind therefore, gave them back to Jaffray to hold them on his
hehalf until called for them later in tlie day. He thereupon took
Jaffiay's endorsement, viz., "shares with me" under which Jaffray
llltixed his signa1ure. There was no dispute that the said endorsement and the signature underneath it were in the handwritiaig of
72
SUPREME COURT REPORTS
[1973] 2 S.C.R.
Jatfray. In order to clarify how the said share certificates remained
with Jaffray, Verma also wrote over the said endorsement the
foUowing:
"Dear Mr. Jaffray,
I do not want to carry these with me, hence leaving
meantime with you personally for delivery to me later."
Were this writing to be genuine, the word 'personally' therein
would mean safe custoday of Jaffray in his personal capacity as
distinguished from that of the company.
Later that day, on the instructions of Varma, M/s Sanderson
& Morgan, the Solictors of Hu.ngerford, sent their· assistant. one
Chaudhry, with their own letter as also a letter addressed
by
Varma to Jaffray with a request to hand over to Chaudhary those
707 share certificates. Jaffray declined to do so stating that he
would send them to M/s Sanderson & Morgan through M/s Orr
Dignam & Co .. the Company's solicitors.
Since the said
share
certificates were not sent to them, M/s Sanderson & Morgan, by
their letter, dated August 31, 1965 to the appellant, recorded the
fact of their having sent the said Chaudhary to Jaffray, the refusal
of Jaffray to deliver the said share certificates to Chaudhary and
his assurance to hand them over through the Company's solicitors.
and lastly, of their having not received so far the said share certificates either from Jaffray, or the Company's solid:ors. In the
meantime Jaffray went to England and the rest of the directors of
the company. when demands for the said shares were
made,
replied that they would wait for Jaffray's instructions on his return to India. This position appears . to emerge from V arnia's
letter dated November 29, 1965 to the appellant. In that letter
Varma, repeated that Jaffray had the said shares for safe custody
on his behalf. that Jaffray was
withholding delivery the.reof
at the instance of Mundra and the other directors, that Jaffray
thereby committed breach of trust and that the appellant should
adopt criminal proceedings against Jaffray and the other directors.
The appellant's case was that it was at the instance of Mundra
that Jaffray withheld delivery of those share certificates-with
a
view to prevent Hungerford from delivering all the said 2295
shares and compelling Mundra to pay Rs. 86 lacs and odd against
such delivery. It is clear that so long as the liquidators could not
deliver all the 2295 shares, Mundra could not be called upon to
pay the said price, and Mundra. in the me'antime could continue to
have the control of the Company. although he had o.1ly the minority holding of 49% shares and thus keep Hungerford at bay pr&-
ventirtg it by virtue of the said injunction from exercising its rights
in respect of its 51 % shares as against 49% held by Mundra. It
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N. s. HOON v. WEST BENGAL (She/at, I.)
73
was in this background that on January 5, 1966 the appellant
filed a complaint before the Chief Presidency Magistrate against
Jaffray, C.N. Rodewald and Mundra, the directors of the C.Jmpany and A.J. Hormusji, its secretary.
Para 3 of the said complaint set out the delivery of the s1id
707 share certificates with the corresponding blank transfer deed'
therefor by Jaffray to Varma, his having executed the receipt in
favour of the Company, Jaffray having made the said endorsement and Varma thereafter having written the said note partly by
the side of and partly over the said endorsement. Para 9 of the
complaint read as follows :
.. That your petitioner has come to know that
accused No. I (Jaffray) has parted custody of the said
707 shares illegally and wrongfully to Turner Morrison
& Co., Calcutta in conspiracy with the other thre.)
accused connected with Turner Morrison & Co. t,1
deprive your petitioner from the physical custody 0f
the said 707 share certificates and the blank transfer
deeds with the sole object of defeating your petitioner's
right to recover Rs. 86,60,000 from accused No. 4.
Haridas Mundhra against physical delivery of 2.295
shares of Turner Morrison & Co .. Calcutta."
The Chie.f Presidency Magistrate directed. under sec. 155(3)
of the Code of Criminal Procedure. the police to make an inquiry.
In the course of that inquiry the police seized the said 707 share
certificates from Hommsji.
It would appear that although the
appellant requested the investigating officer to examine the said
Ma.iumdar and Varma, who, it was said, was prepared to come
to India for that purpose, that officer declined to do so.
The
police thereafter made their report recommending discharge of
the accused on the ground that the complaint filed by the appellant was false, that the said receipt was a forged document and
sought permission of the Magistrate t<' take action against the
appellant.
On May 7. 1966, the appellant filed a protest application requesting the Chief Presidency Magistrate to take the
matter out of the hands of the police and to order a judicial
inquiry.
Thereupon the Chief Presidency Magistrate directed
the Presidency Magistrate, 3rd Court, Calcutta to hold such an
inquiry.
The proceedings thereupon went to t!iat magistrate
before whom the appellant and his witnesses P. R. Chaudhary
and Majumdar gave their depositions. Varma was not examined
as he was in England, but an affidavit by him was produced
before the Magistrate.
In his deposition before the Magistrate the appellant produced the said receipt (marked document
2)
and the said
74
SUPIU!ME COURT REPORTS
[1973] 2 s.c.1t.
indemnity bond (marked document 5) and stated on oath that
Ao
the receipt was in the handwriting of Varma, that the words
"shares with· me" marked '2' and the signature thereunder were
in the handwriting of Jaffray, and that the indemnity bond was
in Vanna's handwriting and which he had given to the witness
for his signature
He also deposed that he had gone to Jaffray
on that very day, that is, May 27, 1965, with the receipt, the
B
said bi:>nd and a letter from Varma to Jaffray and had demanded
from him the said 707 share certificates and had said at the
time that he was agreeable to sign the said bond as the other
liquidator of Hungerford, that Jaffray thereupon showed the
said share certificates to him and assured him that he would hand
them over to M/s Sanderson & Morgan, and that on that assurance he affixed his signature on the indemnity bond and told
Jaffray that he would send his solicitors to take delivery of the
said share certificates
His evidence further was that thereafter
·he returned back to his hotel where Mundra was waiting.
Mundra inquired of him as to why he wanted those share certificates to which he replied that he wanted them together with the
rest of the share certificates to be delivered to him against payment of Rs. 86 lacs, whereupon Mundra threate11ed that he would
see that the said 707 share certificates were not handed over to
him.
Faced with this threat, he called on his solicitors and
instructed them to call for those share certificates immediately.
M/s Sanderson and Morgan sent their assistant with their own
letter and the Jetter written by Varma, with whom he, (the
appell~nt) also went. The assistant ha111ded over those letters to
Jaffray and asked for the delivery of the share certificates.
Jaffray pleaded that it was l~te in the day, that the office was
closed and its key was not with him, but promised that he would
c
send them to his solicitors M/s Orr Dignam & Co. The share
certificates were, however, not sent and were later seized by the
F.
police from the custody, not of Jaffray, but of Hormusji to whom
Jaffray must have handed them over in his capacity as the sec re·
tary of the Company.
To the same effect was the deposition of P. R. Chaudhry,
the assistant of M/s Sanderson & Morgan with whom the appellant had on that day approached Jaffray.
Wit. N. M. MajumG
dar, who was said to have accompanied Varma earlier in the
day deposed that both Jaffray and Rodewald were present when
the~ went to the office of Turner ~orrison & Co., t~at on Vanna
asking for the shares, the two directors wanted him to execute
the indemnity bond, that Varma signed the bond, that as the
two directors wanted the signature of Hoon also, Varma kept
H
the bond with him so as to secure Hoon's signature,, that Varma
then left leaving the said certificates with Jaffray to be sent later
to M/s ~Sanderson & Morgan. He also deposed to the fact of
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7 '5
Varma having written out the receipt in his presen.c~ and Jaffray
making the said endorsement and then Vanna wntmg on the
receipt the reason why he left the said shares with Jaffray.
Varma did not come to India to give his deposition, but sent
an affidavit giving his version as to the delivery of the said share
certificates to him by Jaffray, his having been accompanied by
Majumdar at that time, his having. executed the said receipt and
the indemnity bond, his having then entrusted the said shares
1o Jaffray, and Jaffray having assured him to keep them in his
per~onal custody and to hand them over later to M/s Sandi:rson
& Morgan, his having given a note addressed to Jaffray to deliver
the said share certificates to the appellant, and lastly, Jaffray
having told him on telephone that as the representative of M/s
Sanderson & Morgan had arrived late he had not been able to
hand over the said share certificates and once again assuring him
that he would deliver them to M/s Sanderson & Morgan.
At that stage of the inquiry, when no process had ye1 been
issued, Jaffray could not give his version.
But his version as
to what took place on May 27, 1965 is available from his deposition in the counter-complaint he lodged against Hoon.
That
complaint is the subject matter of Criminal Appeal No. 213 of
1968 heard along with this appeal.
His case in that deposition
was that the said 707 share certificates were \ying with the company as the company claimed a lien over them in respect of a
su~ of Rs. 53 lacs having been paid by it to the Income Tax
authorities in India for and on behalf of Hungerford and for
which the company had filed a suit and had a receiver appointed
to obtain possession of them. There is, however, no doubt that
these share ·certificates were with the compaPy on May 27, 1965,
for, even according to Jaffray, when Varma saw him oo that day
complaining that the company had parted with those share certificates to Mundra, he produced them before Varma for
hi~
inspection.
According to him, Varma at that stage brought out
a typed receipt "to show that be had inspected the ~hares". His
case was that he cbjected to the word "received" in that receipt
and wanted instead the word "inspected", but Varma declined
to alter the receipt and thereupon he wrote out the words "shares
with me" with a view to clarify that. the share certificates were
still in his custody and not with Mundra. He denied his having
deliver~d them to Varma, or Varma having entrusted them to
him, or his having promised to hand them over to M/s Sanderson
& Morgan, and alleged that Hoon later on made an interpolation
ff
[marked (3)] in the said receipt to give a false twist to his said
endorsement and to show that the said certificates were entrusted
to him by Varma.
Since the share certificates remained alt
along in the possession of the company, the police seized them
76
SUPREME COURT REPORTS
[1973] 2 s.c.R.
later on from Hormusji.
We may note that Jaffray in his depos.''.lon did not mention the indemnity bond though it had b.een
executed at the same time when the said receipt was executed.
The Presidency Magistrate, 3rd Court, held by his order
-Oated January 5, 1967 that the appellant had failed to make
-0'ut a prima facie case, and he could !!lot, therefore, recommend
.the issue of process.
His order records two main reasons why
he thought that no prima facie case was made out.
The first
was that though, according to him, the receipt, if believed, would
.establish entrus:ment, it could not be given "even its face value .. ,
since Varma, the central figure, had failed to give evidence.
Though in England at that time, he could have flown to India
for the purpose of giving evidence.
He discarded .his affidavit
.as acceptance of such evidence was not permissible either under
:sec. 60 or sec. 32 of the Evidence Act.
He also discarded the
evidence of Majumdar on the ground that sec. 60 required the
·best evidence and such best evidence would have been that of'
Varma, had he been examined.
Besides, Majumdar's evidence,
according to him, contained "some points of obvious absurdities'',
in that Jaffray's insistence that a.n indemnity bond should be
·signed by both Vam1a and Hoon indicated that he could not
have parted with the share certificates before Hoon had signed
that bond.
The case together with the report went back to the Chief
Presidency Magistrate.
By his order dated February 15, 1967,
·the Chief Presidency Magistrate held that "it cannot be said that
the s.hare scripts ~n question were entrusted to accused No, 1 and
-accordingly therefore the suggested charges cannot be brought
against any of the accused persons".
The reasons he gave ~r
his order were : ( 1) that though entrustment of share certificate>"
was stated in para 5 of the complaint, it was no where stated
that it was done on the strength of the receipt, (2) that the
receipt was introduced i11 the case "in a curious way'', in that.
'it was brought on record by Hoon, who was not present either
at the time when Varma wrote out the portion marked (3) in
the receipt, or when he entrusted the said share certificates to
Jaffray, and that he (Hoon) had "very carefully avoided that
issue in his statement", and ( 4) that though Hoon had .the
-Opportunity to examine Varma, he failed to do so.
Reason No. I was factually incorrect.
Para 3 of the CCllll·
plaint. dated January 5, 1966 clearly asserts that Vanna entq1sted the said share certificates to Jaffray and to record that
entrustment wrote the note [portion marked (3) in the receipt]
and that Jaffray also for that purpose made his endorsement that
the said share certificates were with him. Reason No. 2 is
:understandable.
It is difficult to appreciate how the Magistrate
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77
A couid remark that Hoon either introduced the receipt "in a
curious way" or that he "avoided the issue carefully".
Admittedly, Hoon was not present at the time of the execution of
the receipt or the alleged entrustment of the share certificates
to Jaffray.
Obviously, he could. not depose to those two facts
from his personal knowledge.
There was accordingly no quesB tion of his avoiding the issue.
These observations, therefore,
could not have been justifiably made.
As for the third reason,
Varma was, no doubt, not examined.
The question is whether
at that preliminary stage when the only consideration was whether a prima facie case of entrustment was made out or 111ot, it
was necessary for Varma to be called from England to give
c
evidence ?
Besides examining himself, the
appellant
had
examined Majumdar, who claimed to be an eye-witness to the
delivery of the said share certificates to Varma and Varma's
entrustment of' them to Jaffray, the execution of the receipt and
the bond by Varma, and finally, Jaffray's assurance to hand them
over later when called for.
Strangely, the learned
Magistrnte
did not discuss Majumdar's evidence, nor the two documents nor
D the evidence of Chaudhary, nor the letter writtea by Mis Sanderson & Morgan on that very day to Hoon of their not having
been given the share certificates by Jaffray.
The revision application filed by the appellant
against the
order of dismissal was rejected by the High Court.
The High
E Court gave two grounds for dismissing that application : firstly,
the failure of the complainant to explain how the said 707 share
certi;;cates got into possession of the Company, which failure
made the story of Varma about delivery to him and entrustment
by him to Jaffray of the said share certificates "open to criticism";
secondly, his failure to explain ~he reasons for
furnishing the
inclemnity bond oo behalf of Hungerford. The High Court was
F of the view that these two circumstances were "the most unusual
circumstances which could be inconsistent with the prosecution
story of entrustment and of criminal misapprnpriation and cheating".
It noted the omission to examine Varma and also the
refusal by the Magistrate to consider Verma's affidavit. Accordinl! to the High Court, however, this was "not an important
G aspect of the case.
The really important aspect are (sic) provided by the two most unusual circumstances that I have referred
to above.
Unless those circumstances could be sufficiently explained to the satisfaction of the court, no process could be
issued.
And those circumstances were not explained."
H
It is clear from these remarks that unlike the Magistrate, the
High Court did not attach much importance to the
omission
to examine Verma although he was said to be the author of the
entrustment.
What appears to have m~inly weighed with the
78
SUPREME COURT REPORTS
[1973] 2 S.C.R.
High Court were the "two most unusual circumstances", namely,
A
the omission to explain the initial possession of the said share
certificates by the Company and the omission to explain why the
indemnity bond had to be executed.
With respect to the High Court, the fact that the said 707
share certificates were initially with the Company was never in
B
issue between the parties. The issue between them was whether
.on May 27, 1965 Jaffray and Rodewald had delivered them to
Varma, and whether Varma in his turn had handed them over
to J affray's personal custody to be returned to him later on •that
day. Therefore, the question as to how and in what circumstances the said share certificates were in possession of th(~ ComC
pany was totally irrelevant. Equally irrelevant were the reasons
why the indemnity bond was executed first by Varma ana then
.by the appellant. In any case, the reasons for executing it were
not ~ar to seek.
The Company claimed a lien on those share
certificates on account of its hr.ving satisfied the tax liabilities
of Turner family as recited in the bond itself. As further recited
in the bond, Mundra also claimed those shares by virtue of the
D
said decree in bis favour. According to the appellant, Jaffray
and Rodewald, thererore, insisted <that the liquidators of Hun~erc
ford should execute the said bond to cover the company agamst
any risk arising from the said claims.
Besides, there was no
question of the appellant having to explain how the said share
certificates were fo possession of ~he comp~ny, for, on that aspect
E
the parties were never at varia.nce.
So far as the bond .. was
-concerned, both the appellant and wit.
Majumd~r had deposed
that it had been executed at the insistence of Jaffray and Rodewald. Therefore, these two circumstances, the failure to explain
which the High Court characterised as the most unusual circum-
·S'tances, were on record and since the parties were mot at issue
-0n the first and the bond itself recited the reasons for its execuF
tion, there was no question of the appelfam and his witnesses
having failed to explain them.
Under sec. 190 of the Code of Criminal Procedure, a magistrate can take cognizance of an offence, either on· receivin~ a
complaint or on a police report or on information otherwise
G
received.
Where a complaint is presented before him. he call
under sec. 200 take cognizance of the offence made out therein
and has then to examine the complainant and his witnesses. The
object of such examination is to ascertain whether there i; a
prima facie case against the person accused of the offence in the
complaint, and to prevent the issue of process on a complaint
H
which is either false or vexatious or intended only to harass such
a t>erson.
Such examination is provided therefore ~o find out
whether there is or not sufficient ground for proceeding. Un4er
c
N, s. HOON v. WEST BENGAL (She/at, J.)
79
sec.