# VEUI RAGHAVn PATEL v. STATE OF MAHARASIITRA

- **Citation:** [1965] 2 S.C.R. 429
- **Court:** Supreme Court of India
- **Decided:** 1964-12-11
- **Case number:** Criminal Appeal No. 43 of 1963
- **Bench:** Raghubar Dayal, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/veui-raghavn-patel-v-state-of-maharasiitra-3420
- **Pages:** 7

## Headnote

Indian Penal Code, 1860 (Act 45 of 1860), ss. 403 and 409-PDl'tnerFailure to account for monies of firm-If guilty of criminal breach of trust
or dishonest misappropriation of property.
The appellant was the working partner in a firm. It was agreed among
the partners that he should carry on the work of recovery of the dues
of the partnership. On the allegation that he misappropriated certain auma
and also failed to depooit in bank some collections as he was required to
do, he was convicted for the offence of criminal breach of trust under
s. 409, Indian Penal Code. In appeal to the Supreme Court it was contended that as he realised the sums in his capacity as partner and utilised
them for the business of the partnership, he was only liable to render
accounts to his partners and his failure to do so would not amount to criminal breach of trust.
HELD : The appellant could not be said to have been guilty of criminal
breach of trust.
Though as a partner he had dominion o\·er the property of the partoership for the purpose of criminal breach of trust the mere existeoce of such
dominion is not enough.
I~ must be further shown that his dominion wu
the result of entrustment, that is, the prosecution must establish that the
E
dominion over the partnership assets was, by a specific agreement, entrusted
to the accused. (432 E-GJ
Bhuban Mohan Rana v. Surendra Mohan Das, l.L.R. (1952) 2. Cal.
23 (F.B.) approved.
Even if there was a mandate to the appellant with respect to aome
dues to collect and deposit in bank, faliure to do so would not constilllle
F
the offence, as he was also authorised by the other partners to spend
the money for the business of the partnership.
[434 D-EJ
G
H
The appellant would not also be guilty. of dishonest misappropriation
of property, nnder s. 403 of the code, because, he had nndefined ownership along with the other partners over all the assets of the partnership
and as such owner, in whichever way, and with whatever intention he used
the property, he would not be liable for misappropriation. [434 HJ
CluMINAL APPELLATE JURISDICTION : Criminal Appeal No.
43 of 1963.
Appeal by special leave from the judgment and order dated
February l, 1963 of the Bombay High Court in Criminal Appeal
No. 972 of 1962.
0 .P. Rana, for the appellant.
P. K. Chatterjee and B. R. G. K. Achar, for the respondent.
.t30
SUPllEME
COUllT
lll!PORTS
(1965] 2 S.C.ll •

## Text

A
B
c
D
VEUI RAGHAVn PATEL
v.
STATE OF MAHARASIITRA
December 11, 1964
[RAGHUBAR DAYAL AND J. R. MUDHOLKAR, JJ.]
Indian Penal Code, 1860 (Act 45 of 1860), ss. 403 and 409-PDl'tnerFailure to account for monies of firm-If guilty of criminal breach of trust
or dishonest misappropriation of property.
The appellant was the working partner in a firm. It was agreed among
the partners that he should carry on the work of recovery of the dues
of the partnership. On the allegation that he misappropriated certain auma
and also failed to depooit in bank some collections as he was required to
do, he was convicted for the offence of criminal breach of trust under
s. 409, Indian Penal Code. In appeal to the Supreme Court it was contended that as he realised the sums in his capacity as partner and utilised
them for the business of the partnership, he was only liable to render
accounts to his partners and his failure to do so would not amount to criminal breach of trust.
HELD : The appellant could not be said to have been guilty of criminal
breach of trust.
Though as a partner he had dominion o\·er the property of the partoership for the purpose of criminal breach of trust the mere existeoce of such
dominion is not enough.
I~ must be further shown that his dominion wu
the result of entrustment, that is, the prosecution must establish that the
E
dominion over the partnership assets was, by a specific agreement, entrusted
to the accused. (432 E-GJ
Bhuban Mohan Rana v. Surendra Mohan Das, l.L.R. (1952) 2. Cal.
23 (F.B.) approved.
Even if there was a mandate to the appellant with respect to aome
dues to collect and deposit in bank, faliure to do so would not constilllle
F
the offence, as he was also authorised by the other partners to spend
the money for the business of the partnership.
[434 D-EJ
G
H
The appellant would not also be guilty. of dishonest misappropriation
of property, nnder s. 403 of the code, because, he had nndefined ownership along with the other partners over all the assets of the partnership
and as such owner, in whichever way, and with whatever intention he used
the property, he would not be liable for misappropriation. [434 HJ
CluMINAL APPELLATE JURISDICTION : Criminal Appeal No.
43 of 1963.
Appeal by special leave from the judgment and order dated
February l, 1963 of the Bombay High Court in Criminal Appeal
No. 972 of 1962.
0 .P. Rana, for the appellant.
P. K. Chatterjee and B. R. G. K. Achar, for the respondent.
.t30
SUPllEME
COUllT
lll!PORTS
(1965] 2 S.C.ll •
The Judgment of the Court was delivered by
A
Mudholkar J. In this appeal from the judgment of the
Bombay High Court the question which falls to be considered is
whether a partner can be convicted under s. 409, Indian Penal
Code on the ground that his failure to account for monies
belonging to the firm in which he was a partner amounts to
B
criminal breach of trust.
The admitted facts are briefly these :
The firm, Messrs. Bharat Silp Pramandal, which was formed
for carrying on the business of building construction, originally
C
conisted of eight partners and the appellant was its working
partner. This firm was constituted in the year 1954. But on
February 6, 1957 three of the partners retired and the business
was continued by the remaining five partners.
Disputes arose
amongst them, which were referred to arbitration of Mr. J. T.
Desai, a Solicitor.
Apparently, in pursuance
of his award a
D
fresh agreement (Ex. N) was entered into by the partners on
June 4, 1958. By virtue of this agreement the appellant's share
in the firm's business was to be of 50 nP. in a rupee while the other
partners had different shares in the remaining 50 nP. Nagindas
Jivraj Mehta, who is the complainant in this case had a share E
to the extent of 6 nP. Under this agreement the parties decided
not to undertake new work. The agreement required the appellant to complete all the accounts and prohibited from borrowing
money in the name of the firm. It required him "to use his best
efforts to realise all pending bills, security deposits, claims etc."
as well as to dispose of the plant, machinery etc. The agreement
F
also provided that partners, other than the appellant,
would
procure, if the need arose, further finance to the maximum limit
of Rs. 25,000/- but that if a sum in excess of this amount was
required, that excess was to be brought in by all the partners
including the appellant "individually pro rata in proportion to
their shares of profits and losses in the firm".
Clause 8 of this
G
agreement permitted the appellant to withdraw on his
own
account a sum of Rs. 10,000 "no sooner he is able to realise any
of the pending claims of bills of the firm or security deposits".
We have dealt with this agreement at some length because it will
be relevant to consider these matters in the context of the arguH
ment of Mr. Rana to the effect that the appellant as working
partner was entitled to utilise the realizations made by him for
carrying on the work of the firm.
j
A
B
c
VELJI RAGHAVJI v. STATE (Mudholkar, J.)
0)
According to the complainant the appellant committed misappropriation to the tune of Rs. 8,905/- consisting of the following six items :
TOTAL
Rs. 2,871/-
3,000/-
1,100/-
1,100/-
750/-
84/-
8,905/-
The trial court acquitted the appellant with respect to the last
two items but convicted him in respect of the first four items.
The appellant admits that he realised these four items but he
says that he did so in his capacity as partner and he utilised them
D for the business of the partnership. Therefore, according to him,
he is only liable to render accounts to his partners and cannot in
any circumstances be said to be guilty of an offence under s. 409,
l.P .C.
He also points out that the complainant has instituted a
suit for the dissolution of the partnership and for rendition of
accounts and that he instituted the present complaint solely with
E the idea of making it difficult, if not impossible, for the appellant
to defend the civil suit properly.
F
G
On behalf of the appellant it is contended that even iif the
prosecution had succeeded in showing that the four items referred
to above were realised by the appellant and that he has
not
accounted for them properly he will not be liable for criminal
breach of trust under s. 409, I.P.C. but that his liability would
be only of a civil nature. In sapport of this contention reliance is
placed upon Bhuban Mohan Rana v. Surendra Mohan Das(').
There the following question was referred for decision by
the
Full Bench:
"Can a charge under s. 406 of the Indian Penal
Code be framed against a person, who, according to
the complainant, is a partner with him and is accused
of the offence in respect of property belonging to both
of them as partners T'
H All the five Judges constituting the Full Bench answered
the
question in the negative.
In the leading judgment which
was.
(I) I. L. R. (19521 ll Cal. 23 ..
432
SUPREME
COURT
AEPORTS
[1965] 2 S.C.l\.
A
delivered by Harris C.J., he pointed out 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 a partner does not, in tbe ordinary course,
hold property in a fiduciary capacity. The learned Chief Justice
further pointed out that there is really no distinct or defined share
of a partner in any item belonging to the partnership. Upon the
B
dissolution of the partnership and after an account is taken it
may turn out that a partner who retllins an asset is entitled to
the whole of the asset and may be, much more. He referred to
the English view that a partner does not hold money belonging
to the partnership in a fiduciary capacity and said that this view
appeared to him to be correct. Referring to the decision in The
Queen v. Okhoy Coomar Shaw(') in which a Full Bench had
held that a partner who dishonestly misappropriates or converts
to his own use any of the partnership property with which he is
entrusted or over which he has dominion, is guilty of an offence
under s. 405, I.P.C., Harris C.J. observed:
"The Full Bench never seems to have considered
that there is really no partner's share in the property
until an account (sic) and it may well be that a partner, who retains an asset, is entitled not only to his
share according to the partnership agreement in that
asset, but, on taking an account, it may be found that
he is entitled to the whole of the asset and considerably more. In such a case, how can it be said that he
has been guilty of a breach of trust and has
acted
dishonestly towards his co-partners, i( an account would
show that he was entitled to everything which he had
retained?"
He has referred to a nwnber of decisions of the Indian High
Courts in some of which .the view taken in Okoy Coomar Shaw's
case(') was followed. One of those cases was /agannath Raghunathdas v. Emperor(') where it was held that a partner may be
prosecuted under s. 406, I.P.C. for failure to account for partnership monies and assets.
In that case the partner who was the
accused was given authority by the other partners to
collect
monies or property and according to the Bombay High Court iB
these circumstances he was "entrusted" with dominion
over
collections made by him. The learned Judges who decided that
cas~ had, however, pointed out that the court should approach
(!} 13 Boog•I Law Reports 307.
(2} A. I. R. 1932 Born. 47.
c
D
G
H
VELJI RAGHAVJI v. STATE (Mudho/kar, l.)
433
A cases of this kind very carefully because it was impossible to say
in many cases what the share of the accused might be, whether
the accused was indebted to the firm or whether the firm was
indebted to him.
The" High Court also pointed out that if the
firm was indebted to him there might be no dishonest intention
B
C·
in his dealing with the partnership property.
In the arguments
before us, apart from these three decisions, our attention
was
called to a few more decisions of the High Courts in India. But
whether they take one view or the other they do not seem to add
to what has been said in these three decisions.
We, therefore,
do not feel called upon to make any reference to these decisions.
It seems to us that the view taken in Bhuban Mohan Rana's
case(') by the later Full Bench of the Calcutta High Court is
the right one. Upon the plain reading of s. 405, I.P.C. it is
obvious that before a person can be said to have committed
criminal breach of trust it must be established that he was either
D entrusted with or entrusted with dominion over propery which he
is said to have converted to his own use or disposed of in violation
of any direction of law etc. 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
E
property. But it is not dominion of this kind which satisfies the
requirements 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 mtrustment.
Therefore, as rightly pointed out by Harris C.J., the prosecution
must establish that dominion over the assets or a particular asset
F
of the partnership was, by a special agreement between
tl1e
parties, entrusted to the accused person.
H in the absence of
such a special agreement a partner receives money belonging to
the partnership he cannot be said to have received it in a fiduciary capacity or in other words cannot be held to have been
G
"entrusted'.' witll dominion over partnership properties.
Mr. Chatterjee who appears for tile respondent sought
to
show that there was special agreement in this case.
According
to him, by virtue of certain decisions taken at a meeting of the
partners held on January 7, 1959 the appellant had been entrusted with the dqty of making recoveries of monies from the debtors
H
of the firm and, therefore, this was a case of specific entrustment.
(1) l.L.R. 1962 11 Cal. 23.
434
SUPll.J!MB
OOU&T
ILBPOl.TS
(1116.5) 2 S.C.Jl.
All that he could point out was item No. 15 in the minutes of A
that meeting which runs thus :
"Shri Veljibhai agrees to recover the monies due
by Shri Kablasingh immediately and shall deposit the
same with the Bankers of the fum."
He has, however, not been able to explain the next item in the B
minutes, the relevant portion of which runs thus :
"(16) Hin future any further moneys are required
to be spent the same shall be spent out of the fD..
coveries of the firm and no partner shall be bound or ·
responsible to bring in any further moneys .....•. "
c
Reading the two together the meaning seems to be only this that .
as working partner the appellant should carry on the work of
recovery of the dues of the partnership and that in respect of the
dues from one Kablasingh it was decided that they shoilld be
deposited in the bank. It does not follow from this that any of D
the other partners was precluded from making the recoveries.
Further, even if this is said to be a mandate to the appellant item
16 authorises him to spend the money for the business of the
partnership. That is to say, if the money was required for the
business of the partnership it was not obligatory upon the appellant to deposit it in the bank. In our opinion, therefore, the E
appellant cannot be said to have been guilty of criminal breach
of trust even with respect to the dues realised by him from Kablasingh and in not . depositing them in the bank as alfeged by the
prosecution.
Mr. Chatterjee finally contends that the act of the appellant F
wiH at least amount to dishonest misappropriation of property
even though it may not amoilnt to criminal breach of trust and,
therefore, his conviction coUld be altered from one under s. 409
to that under s. 403. seCtion 403 runs thus :
"Whoever dishonestly misappropriates or converts
to his own use any moveable property, shall be punished
with imprisonment of either description for a term which
may extend to two years, or with fine, or with both."
It is obvious that an owner of property, in whichever way he uses
G
his property and with whatever intention will not be liable for misappropriaion and that would be so even if he is not the exclusive H
owner thereof. As already stated, a partner has, undefined ownership along with the other partners over all the assets of the part-
VELJI RAGHAVJI v. STATE (Mudholkar, J.)
435
A nership. If he chooses to use any of them for his own purposes
he may be accountable civilly to the other partners. But he d~
not thereby commit any misappropriation. Mr. Chatterjee's ajternative contention must be rejected.
In the result we allow the appeal and set aside the conviction
B and sentence passed against him.
Appeal .Jlowed .
•