V.R. DALAL & ORS. versus YOUGENDRA NARANJI THAKKAR & ANR.

Citation: [2008] 9 S.C.R. 107 · Decided: 16-05-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2008) 9 S.C.R. 107 
y 
V.R. DALAL & ORS. 
A 
v. 
YOUGENDRA NARANJI THAKKAR & ANR. 
(Crl. Appeal No. 925 of 2008) 
MAY 16, 2008 
B 
(S.B. SINHA AND HARJIT SINGH BEDI, JJ.) 
Penal Code, 1860; Ss.405 & 420/Partnership Act, 1932: 
Criminal complaint by a partner against other partners 
of dissolved firm for committing the offence of criminal breach c 
of trust - Justification of - Held: Not justified - Once the part-
nership deed was cancelled, question of any wrongful act on 
the part of partners did not arise - When the firm has been 
cancelled from its very inception, the question of depriving 
the claimant, partner from any benefit therefrom does not arise D 
... 
- Moreover, ingredients of criminal breach of trust and also of 
s.420 were absent in the instant case - Under the circum-
stances, continuance of the criminal proceedings against ac-
cused partners amounts to abuse of process of law and should 
not be allowed to continue - Hence, impugned judgment dis-
E 
missing the writ petition of accused-partners of the firm can-
not be sustained and set aside. 
The question which arose for determination in this 
appeal before this Court was as to whether the dissolu-
tion of a firm by accused partners allegedly in collusion F 
and behind the back of respondent-partner without fol-
lowing proper procedure of dissolution of firm with the 
sole aim to deprive him the benefit of the firm, constitutes 
an offence. 
Appellants contended that the dispute between the G 
parties being a civil dispute, if the criminal proceeding is 
.., 
allowed to continue, it would amount to an abuse of pro-
cess of law. 
107 
H 
108 
SUPREME COURT REPORTS 
(2008] 9 S.C.R. 
A 
Respondents submitted that as allegations made in 
y 
the complaint petition constitute an offence, this Court 
should not interfere with the impugned judgment. 
Allowing the appeal, the Court 
B 
HELD: 1.1 Once the partnership did not take off and 
the partnership deed was cancelled as it had never been 
acted upon, the question of any wrongful act on the part 
.. 
of the appellants did not arise. It is one thing to say that 
there exists a dispute amongst the partners inter se but it 
c is another thing to say that by constituting another firm 
wherein two firms would be represented by their respec-
tive nominees together with an outsider would itself indi-
cate an act of conspiracy. Once it has been accepted as 
of fact that the said partnership has been cancelled, the 
D question of relying thereupon for any purpose would not 
arise. (Para 9) [112-F & G] 
1.2 It may be true that in the event the court finds that 
the dispute between the parties is civil in nature, it may 
not allow the criminal proceedings to go on. But, no law, 
E as such can be laid down as in a given case both civil suit 
and criminal complaint would be maintainable although 
the cause of action for both the proceedings is the same. 
(Para 12) [113-E & F] 
F 
1.3 This Court is satisfied that the appellants by no 
... 
stretch of imagination can be said to have committed an 
offence particularly when admittedly the new firm has been 
cancelled from its very inception. If the new firm has not 
derived any income, the question of depriving the claim-
ant therefrom does not arise. Whether the constitution of 
G the said firm was illegal or mala fide, thus, need not be gone 
into as by reason thereof the respondent No. 1 cannot be 
said to have suffered any loss. (Para 13) [113-G & H; 114-A] 
2.1 The first ingredient of criminal breach of trust, that 
H is, entrustment is missing, the same would not constitute 
V.R. DALAL & ORS. v. YOUGENDRA NARANJI 
109 
THAKKAR & ANR. [S.B. SINHA, J] 
)' 
a criminal breach of trust. The ingredients of Section 420 A 
of Indian Penal Code are also absent in the instant case. 
(Paras 14 & 15) [114-8 & E] 
Indian Oil Corpn. vs. NEPC India Ltd. and Others (2006) 
6 SCC 736 and Suryalakshmi Cotton Mills Ltd. vs. Rajvir In-
B 
dustries Ltd. and Ors. 2008 (1) SCALE 331 - referred to. 
.,. 
2.2 When a proceeding is found to be an abuse of 
the process of court, this Court in exercise of is jurisdic-
tion under Article 142 of the Constitution of India may not 
allow it to continue. (Para -16) [114-F] 
c 
Sanapareddy Maheedhar and Another vs. State of 
Andhra Pradesh andAnother2007 (14) SCALE 321- referred 
to. 
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal D 
.., 
No. 925 of 2008 
From the Judgment and final Order dated 13.10.2006 of 
the High Court of Judicature at Bombay

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