Telangana High Court
Kalvakuntla Taraka Ram Rao vs The State Acb, Ciu on 7 January, 2025
Author: K. Lakshman
Bench: K. Lakshman
1
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
HON'BLE SRI JUSTICE K.LAKSHMAN
CRIMINAL PETITION No.15847 OF 2024
Between:
Kalvakuntla Taraka Rama Rao, .........Petitioner
vs.
The State ACB, CIU, Hyderabad
and another, ....... Respondents
DATE OF COMMON ORDER PASSED: 07.01.2025
SUBMITTED FOR APPROVAL.
THE HON'BLE SRI JUSTICE K.LAKSHMAN
1 Whether Reporters of Local newspapers
may be allowed to see the Judgment? Yes/No
2 Whether the copies of judgment may be
marked to Law Reporters/Journals Yes/No
3 Whether His Lordship wish to see the fair
copy of the Judgment? Yes/No
______________________
JUSTICE K.LAKSHMAN
2
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT: HYDERABAD
CORAM:
* HON'BLE SRI JUSTICE K. LAKSHMAN
+ CRIMINAL PETITION No.15847 OF 2024
% Delivered on: 07-01-2025
Between:
# Kalvakuntla Taraka Rama Rao, .. Petitioner
Vs.
$ The State ACB, CIU, Hyderabad
and another. .. Respondents
! For Petitioner : Mr. Siddharth Dave, Ld.Sr.Counsel
Representing. Mr.A.Prabhakar Rao,
Ld.Counsel
For Respondents : Mr. A.Sudharshan Reddy,
Ld.Adv.General representing
Mr. T.Bala Mohan Reddy,
Ld.Standing Counsel for ACB
Mr.C.V.Mohan Reddy,
Ld.Sr.Counsel
rep. Mr.Tera Rajinikanth Reddy,
Ld.Addl.Adv.General
Gist :
> Head Note :
? Cases Referred :
1. (1999) 6 SCC 667
2. 1967 SCC OnLine SC 58
3. (2021) 18 SCC 70
4. 2024 SCC OnLine SC 2995
5. 1928 SCC OnLine Bom 102
6. (2002) 1 SCC 241
7. (2008) 2 SCC 561
8. (2010) 10 SCC 547
9. (2023) 3 SCC 423
10. (2023) 15 SCC 135
11 (2024) 10 SCC 690
12. (2009) 10 SCC 660
13. (2013) 1 SCC 205
14. 1992 Supp (1) SCC 335
15. (2016) 6 SCC 310
16. (2021) 2 SCC 427
3
17. (2021) 19 SCC 401
18. (1999) 3 SCC 259
19. (2003) 6 SCC 175
20. (2010) 11 SCC 374
21. (2002) 10 SCC 667
22. (2024) 10 SCC 527
23. (2023) 4 SCC 338
4
HON'BLE SRI JUSTICE K. LAKSHMAN
CRIMINAL PETITION No. 15847 of 2024
ORDER
The present criminal petition is filed under Section 528 of the
Bharatiya Nagrik Suraksha Sanhita (hereinafter ‘BNSS’) seeking to
quash the criminal proceedings arising out of Crime No. 12/RCO-
CIU-ACB/2024 dated 19.12.2024 registered by Respondent No. 1
(hereinafter ‘ACB’) under Sections 409 r/w 120B of the Indian Penal
Code (hereinafter ‘IPC‘) and Sections 13(1)(a) r/w 13(2) of the
Prevention of Corruption Act, 1988 (hereinafter ‘PCA’).
2. Heard Mr. Siddharth Dave, learned Senior Advocate
representing Mr. A. Prabhakar Rao, learned advocate appearing for
the Petitioner. Also, heard Mr. A. Sudarshan Reddy, learned Advocate
General representing Mr. T. Bala Mohan Reddy, learned Standing
Counsel for the ACB i.e., Respondent No. 1 and Mr. C.V. Mohan
Reddy, learned Senior Advocate representing Mr. Tera Rajinikanth
Reddy, learned Additional Advocate General appearing for
Respondent No. 2.
5
FACTS OF THE CASE:
3. The impugned criminal proceedings i.e., Crime No. 12/RCO-
CIU-ACB/2024 (hereinafter ‘FIR’) was registered based on the
complaint lodged by Respondent No. 2 (hereinafter ‘complainant’). It
is relevant to note that the complainant herein is the current Principal
Secretary to the Government of Telangana, Municipal Administration
& Urban Development (hereinafter ‘MA & UD’) department.
4. As per the complaint, the allegations leveled against the
petitioner herein are as follows:-
The Petitioner herein was the erstwhile Minister of the MA &
UD department and on his initiative, the Government of Telangana
decided to host a car racing event titled ‘FIA Formula E
Championship’ in Hyderabad city. Initially, a tripartite agreement
dated 25.10.2022 was entered into between M/s Formula E Operations
Ltd. (hereinafter ‘FEO’), the MA & UD department, Government of
Telangana and M/s Ace Nxt Gen Private Ltd. (hereinafter ‘ACE’). As
per the terms of the said tripartite agreement, it was agreed that ACE
would be the promoter of the event and would be obligated to make
payments to FEO as per Schedule IV of the agreement. The MA &
UD department was to act as a host and provide all the civic
6amenities. Further, the said tripartite agreement contemplated
conducting four events in Hyderabad i.e., one event each in Seasons 9,
10, 11 and 12. The total fee agreed for Seasons 9 and 10 was £
90,00,000/- ((ninety lakh Great British pounds, hereinafter referred to
‘GBP’only).
5. Season 9 of the said car race was conducted successfully.
However, as per the complaint and the Office Note dated 14.12.2023
referred to in the complaint, ACE backed out as the promoter and the
name of Hyderabad did not feature in the list of cities hosting an event
in Season 10. Therefore, it is alleged that the Petitioner herein had
discussions with the officials of FEO to get the Government of
Telangana to act as a promoter/host and conduct an event for Season
10 in Hyderabad. In furtherance of these talks, allegedly, the
Petitioner herein ‘telephonically’ directed the Hyderabad Metropolitan
Development Authority (hereinafter ‘HMDA’) to act as a promoter
and host the event. As per the complaint, the Metropolitan
Commissioner, HMDA had put a file before the Petitioner herein on
27.09.2023 seeking approval of the draft agreement in which HMDA
was shown as the promoter, administrative sanction for payment of
£90,00,000/- (ninety lakh GBP) in addition to Rs. 50,00,00,000/-
7
(rupees fifty crores only) was also sought along with the permission to
pay the first installment of £22,50,000/- (twenty-two lakhs GBP). It is
alleged that the Petitioner herein approved the said file.
6. As the Petitioner approved the file, HMDA remitted the first
installment of £ 22,50,000/- (twenty-two lakhs fifty thousand GBP) on
03.10.2023 and a second installment of £ 22,50,000/- (twenty-two
lakhs fifty thousand GBP) on 11.10.2023 through Indian Overseas
Bank, Himayat Nagar Branch. After the above-said payments were
made, FEO addressed an email dated 27.10.2023 terminating the
initial tripartite agreement dated 25.10.2022. In the said email, ACE
was also informed that FEO and the MA & UD department will enter
into a new agreement to host and conduct Seasons 10 to 12.
7. Accordingly, a new agreement dated 30.10.2023 was entered
into between FEO and MA & UD department. The agreement was to
conduct race events in Hyderabad city for Seasons 10 to 12. It is
pertinent to note that HMDA was not a party to the said agreement. In
this regard, it is alleged that the Model Code of Conduct was in
operation owing to the State assembly elections. Therefore, the
agreement dated 30.10.2023 could not have been entered into.
8
8. It is further alleged that HMDA was made to pay the huge
sums of money even before the agreement dated 30.10.2023 was
entered into. Likewise, HMDA was made to make the said payments,
however, it was not made a party to the agreement dated 30.10.2023.
The foreign remittances caused HMDA an additional tax burden of
Rs. 8,06,75,404/- (rupees eight crores six lakh seventy-five thousand
four hundred and four only). Further, the total amounts remitted to
FEO came down to Rs. 54,88,87,043/- (rupees fifty-four crores
eighty-eight lakhs eighty-seven thousand and forty-three only).
HMDA cannot spend more than Rs. 10,00,00,000/- (rupees ten crore
only) without obtaining administrative sanction from the Government
and the finance department. However, the Petitioner, abusing his
authority and without obtaining the necessary sanctions, directed
HMDA to make such payments.
9. It is also alleged that the agreement dated 30.10.2023 makes
a financial commitment of Rs. 600,00,00,000/- (rupees six hundred
crores only) along with additional recurring expenditure for the next
three years. This according to the complaint is in violation of
Secretariat Business Rules, the Telangana State Finance Code and
Article 299 of the Constitution of India. Allegedly, the tripartite
9
agreement dated 25.10.2022 and the new agreement dated 30.10.2023
were entered into without any sanction from the Governor authorizing
the then Special Chief Secretary to enter into such agreements.
10. After the assembly elections, a new Government came to be
formed in the State of Telangana and they were served with an
arbitration notice by FEO alleging breach of the agreement dated
30.10.2023. Apparently, it is then, that the new Government noticed
the irregularities and the alleged loss caused to the State exchequer.
11. It is further alleged that the Petitioner herein and the other
accused i.e., Mr. Arvind Kumar, the then Special Chief Secretary, MA
& UD department and Mr. B.L.N. Reddy, the then Chief Engineer,
HMDA have conspired to cause loss to the State and a consequential
gain to third parties.
12. With the said allegations, 2nd respondent requested 1st
respondent to take action against the petitioner and other accused.
13. Based on the abovementioned complaint of 2nd respondent,
1st respondent registered the impugned FIR against the petitioner
herein and other accused for the aforesaid offences punishable under
Sections 409 r/w 120B of the IPC and Sections 13(1)(a) r/w 13(2) of
the PCA.
10
CONTENTIONS OF THE PETITIONER
14. The Petitioner contended that none of the ingredients of the
alleged offences are made out. In relation to Section 409 of the IPC, it
was specifically argued that, there is no ‘entrustment’ of ‘public
money’ in an elected legislator like the Petitioner. Therefore, the
complaint lacks the primary ingredient of criminal breach of trust. In
this regard, reliance was placed on the decision in Common Cause v.
Union of India 1, State of Gujarat v. JaswantlalNathalal2, N.
Raghavender v. State of Andhra Pradesh 3 and HDFC Bank v.
State of Bihar 4.
15. It was also contended that there are no allegations of
dishonest intention and misappropriation as required under Section
409 of the IPC. The Petitioner relied on Lala RaojiMahale v.
Emperor 5, S.W. Palnitkar v. State of Bihar 6, Onkar Nath Mishra
v. State (NCT of Delhi) 7, Asoke Basak v. State of Maharashtra 8,
Deepak Gabha v. State of U.P. 9, Usha Chakraborty v. State of
1
(1999) 6 SCC 667
2
1967 SCC OnLine SC 58
3
(2021) 18 SCC 70
4
2024 SCC OnLine SC 2995
5
1928 SCC OnLine Bom 102
6
(2002) 1 SCC 241
7
(2008) 2 SCC 561
8
(2010) 10 SCC 547
9
(2023) 3 SCC 423
11
West Bengal 10 and Delhi Race Club (1940) Ltd. v. State of Uttar
Pradesh 11.
16. It was contended that the allegations, even if accepted, at
best constitute irregular exercise of power de hors the dishonest
intention. The same cannot constitute an offence. The Petitioner relied
on Sudhir Shanti Lal Mehta v. Central Bureau of Investigation12
and C.K. Jaffer Sharief v. State 13.
17. According to the Petitioner, the uncontroverted allegations
in the impugned FIR do not constitute any of the alleged offences.
Further, the FIR is politically motivated, malicious and constitutes
abuse of process. In such cases, the trite law is to quash such an FIR.
Reliance was placed on State of Haryana v. Bhajan Lal 14, Ramesh
Rajagopal v. Devi Polymers Pvt. Ltd. 15, Arnab Manoranjan
Goswami v. State of Maharashtra 16 and Neeharika Infrastructure
Pvt. Ltd. v. State of Maharashtra 17.
18. Further, the Petitioner contends that the allegation that third
parties received benefits cannot be accepted as none of them have
10
(2023) 15 SCC 135
11
(2024) 10 SCC 690
12
(2009) 10 SCC 660
13
(2013) 1 SCC 205
14
1992 Supp (1) SCC 335
15
(2016) 6 SCC 310
16
(2021) 2 SCC 427
17
(2021) 19 SCC 401
12
been named in the FIR. Further, the Government has failed to take any
action seeking recovery of the alleged losses.
19. No preliminary inquiry was conducted before lodging the
FIR.
CONTENTIONS OF THE RESPONDENTS
20. According to the Respondents, the FIR is still at the stage of
investigation and the same cannot be interfered with at this stage.
Further, the powers under 528 of the BNSS have to be exercised
rarely and not to scuttle a legitimate investigation. Reliance was
placed on Neeharika Infrastructure (supra).
21. Also, it was contended by the Respondents that the FIR
need not disclose all the ingredients of the alleged offences and that an
FIR is not an encyclopedia. Reliance was placed on Rajesh Bajaj v.
State NCT of Delhi 18 and Superintendent of Police, CBI v. Tapan
Kumar Singh 19.
22. The Respondents reiterated the allegations in the complaint.
They contended that the Petitioner herein conspired with the other
accused to cause huge losses to the State exchequer which resulted in
gains to third parties. Further, argued that the actions of the Petitioner
18
(1999) 3 SCC 259
19
(2003) 6 SCC 175
13
were contrary to the Business Rules and were without the sanction of
the State Cabinet and against Article 299 of the Constitution of India.
Relying on M.R.F. Ltd. v. Manohar Parrikar 20, it was contended
that the compliance of Business Rules and Article 299 is mandatory
and any decision contrary to the same is non-est.
23. Sri Siddharth Dave, learned Senior Counsel appearing for
the petitioner and Sri A.Sudharshan Reddy, learned Advocate General
representing Sri T.Bala Mohan Reddy, learned Standing Counsel for
the 1st respondent and Sri C.V.Mohan Reddy, learned Senior Counsel
representing Mr. Tera Rajinikanth Reddy, learned Additional
Advocate General made their submissions extensively.
FINDINGS OF THE COURT
24. From the facts of the case, it is clear that the allegations
against the Petitioner pertain to dishonest abuse of powers, acting
contrary to the applicable procedures and business rules,
misappropriating HMDA’s money, causing loss to the State exchequer
and causing gain to third parties. The alleged offences against the
Petitioner are Section 409 of the IPC and Sections 13(1)(a) & 13(2) of
the PCA.
20
(2010) 11 SCC 374
14
25. Before discussing whether the impugned FIR deserves to be
quashed, it is pertinent to mention that the power to quash an FIR
under Section 528 of the BNSS (which corresponds with the earlier
Section 482 of the Code of Criminal Procedure) is limited and should
be exercised rarely and only in cases where continuation of the
investigation would result in abuse of process or miscarriage of
justice. It is equally well settled that the investigating powers of the
State cannot be usurped and this Court cannot scuttle investigation.
Further, this Court cannot go into the correctness of the allegations
and conduct a mini-trial while exercising its inherent power under
Section 528 of BNSS.
26. In this regard, the following paragraphs of Bhajan Lal
(supra) may be referred to:
102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of
the principles of law enunciated by this Court in a series of
decisions relating to the exercise of the extraordinary
power under Article 226 or the inherent powers under
Section 482 of the Code which we have extracted and
reproduced above, we give the following categories of
cases by way of illustration wherein such power could be
exercised either to prevent abuse of the process of any
court or otherwise to secure the ends of justice, though it
may not be possible to lay down any precise, clearly
defined and sufficiently channelised and inflexible
guidelines or rigid formulae and to give an exhaustive list
15of myriad kinds of cases wherein such power should be
exercised.
(1) Where the allegations made in the first information
report or the complaint, even if they are taken at their
face value and accepted in their entirety do not prima
facie constitute any offence or make out a case against
the accused.
(2) Where the allegations in the first information report and
other materials, if any, accompanying the FIR do not
disclose a cognizable offence, justifying an investigation
by police officers under Section 156(1) of the Code except
under an order of a Magistrate within the purview of
Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR
or complaint and the evidence collected in support of
the same do not disclose the commission of any offence
and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there
is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which
a criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act,
providing efficacious redress for the grievance of the
aggrieved party.
(7) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance
on the accused and with a view to spite him due to private
and personal grudge.
16
103. We also give a note of caution to the effect
that the power of quashing a criminal proceeding
should be exercised very sparingly and with
circumspection and that too in the rarest of rare cases;
that the court will not be justified in embarking upon
an enquiry as to the reliability or genuineness or
otherwise of the allegations made in the FIR or the
complaint and that the extraordinary or inherent
powers do not confer an arbitrary jurisdiction on the
court to act according to its whim or caprice.
27. The decision in Bhajan Lal (supra) has been consistently
applied and was reiterated in Neeharika Infrastructure (supra). The
relevant paragraph is extracted below:-
13. From the aforesaid decisions of this Court, right
from the decision of the Privy Council in Khwaja Nazir
Ahmad [King Emperor v. Khwaja Nazir Ahmad, 1944 SCC
OnLine PC 29 : (1943-44) 71 IA 203 : AIR 1945 PC 18] ,
the following principles of law emerge:
13.1. Police has the statutory right and duty under the
relevant provisions of the Code of Criminal Procedure
contained in Chapter XIV of the Code to investigate into
cognizable offences.
13.2. Courts would not thwart any investigation into
the cognizable offences.
13.3. However, in cases where no cognizable offence
or offence of any kind is disclosed in the first
information report the Court will not permit an
investigation to go on.
13.4. The power of quashing should be exercised
sparingly with circumspection, in the “rarest of rare cases”.
(The rarest of rare cases standard in its application for
quashing under Section 482CrPC is not to be confused
with the norm which has been formulated in the context of
the death penalty, as explained previously by this Court.)
17
13.5. While examining an FIR/complaint, quashing of
which is sought, the Court cannot embark upon an enquiry
as to the reliability or genuineness or otherwise of the
allegations made in the FIR/complaint.
13.6. Criminal proceedings ought not to be scuttled
at the initial stage.
13.7. Quashing of a complaint/FIR should be an
exception and a rarity than an ordinary rule.
13.8. Ordinarily, the courts are barred from
usurping the jurisdiction of the police, since the two
organs of the State operate in two specific spheres of
activities. The inherent power of the court is, however,
recognised to secure the ends of justice or prevent the
above of the process by Section 482CrPC.
13.9. The functions of the judiciary and the police are
complementary, not overlapping.
13.10. Save in exceptional cases where non-
interference would result in miscarriage of justice, the
Court and the judicial process should not interfere at
the stage of investigation of offences.
13.11. Extraordinary and inherent powers of the Court
do not confer an arbitrary jurisdiction on the Court to act
according to its whims or caprice.
13.12. The first information report is not an
encyclopaedia which must disclose all facts and details
relating to the offence reported. Therefore, when the
investigation by the police is in progress, the court
should not go into the merits of the allegations in the
FIR. Police must be permitted to complete the
investigation. It would be premature to pronounce the
conclusion based on hazy facts that the complaint/FIR
does not deserve to be investigated or that it amounts to
abuse of process of law. During or after investigation, if
the investigating officer finds that there is no substance
in the application made by the complainant, the
investigating officer may file an appropriate
report/summary before the learned Magistrate which
may be considered by the learned Magistrate in
accordance with the known procedure.
18
13.13. The power under Section 482CrPC is very wide,
but conferment of wide power requires the Court to be
cautious. It casts an onerous and more diligent duty on the
Court.
13.14. However, at the same time, the Court, if it thinks
fit, regard being had to the parameters of quashing and the
self-restraint imposed by law, more particularly the
parameters laid down by this Court in R.P. Kapur [R.P.
Kapur v. State of Punjab, 1960 SCC OnLine SC 21 : AIR
1960 SC 866] and Bhajan Lal [State of Haryana v. Bhajan
Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] , has
the jurisdiction to quash the FIR/complaint.
13.15. When a prayer for quashing the FIR is made
by the alleged accused, the Court when it exercises the
power under Section 482CrPC, only has to consider
whether or not the allegations in the FIR disclose the
commission of a cognizable offence and is not required
to consider on merits whether the allegations make out
a cognizable offence or not and the court has to permit
the investigating agency/police to investigate the
allegations in the FIR.
28. Keeping the above law in mind, it is to be noted that the
main thrust of the Petitioner’s case is that Section 409 of the IPC is
not made out against him. For the sake of convenience, Section 409 of
the IPC is extracted below:
409. Criminal breach of trust by public servant, or by
banker, merchant or agent.–Whoever, being in any
manner entrusted with property, or with any dominion over
property in his capacity of a public servant or in the way of
his business as a banker, merchant, factor, broker, attorney
or agent, commits criminal breach of trust in respect of that
property, shall be punished with imprisonment for life], or
with imprisonment of either description for a term which
may extend to ten years, and shall also be liable to fine.
19
29. According to Mr. Siddharth Dave, learned Senior Counsel,
the essential ingredients of criminal breach of trust are entrustment of
property or entrustment of dominion of property, dishonest intention
and misappropriation of the said property. He contended that
Ministers dealing with State largesse / public funds do not act as
‘trustees’ and that there is no ‘entrustment’ of public money in elected
legislators. Therefore, according to him, a Minister like the present
Petitioner cannot be charged with criminal breach of trust. He relies
on the following paragraphs of the decision in Common Cause
(supra):
159. These observations indicate that the Court was
of the opinion that a person on being elected by the
people and on becoming a Minister holds a sacred trust
on behalf of the people. This, we may venture to say, is a
philosophical concept and reflects the image of virtue in
its highest conceivable perfection. This philosophy
cannot be employed for determination of the offence of
“criminal breach of trust” which is defined in the Penal
Code, 1860. Whether the offence of “criminal breach of
trust” has been committed by a person has to be
determined strictly on the basis of the definition of that
offence set out in the Penal Code to which we would advert
a little later.
160. The Court also appears to have invoked the
“Doctrine of Public Trust” which is a doctrine of
environmental law under which the natural resources such as
air, water, forest, lakes, rivers and wildlife are public
properties “entrusted” to the Government for their safe and
proper use and proper protection. Public Trust Law
recognises that some types of natural resources are held in
20trust by the Government for the benefit of the public. The
“Doctrine of Public Trust” has been evolved so as to prevent
unfair dealing with or dissipation of all natural resources.
This doctrine is an ancient and somewhat obscure creation
of Roman and British law which has been discovered
recently by environmental lawyers in search of a theory
broadly applicable to environmental litigation.
161. This doctrine was considered by this Court in its
judgment in M.C. Mehta v. Kamal Nath [(1997) 1 SCC 388]
to which one of us (S. Saghir Ahmad, J.) was a party. Justice
Kuldip Singh, who authored the erudite judgment and has
also otherwise contributed immensely to the development of
environmental law, relying upon ancient Roman “Doctrine
of Public Trust”, as also the work of Joseph L. Sax,
Professor of Law, University of Michigan and other foreign
decisions, wrote out that all natural resources are held in
“trust” by the Government. The doctrine enjoins upon the
Government to protect the resources for the enjoyment
of the general public rather than to permit their use for
private ownership or commercial purposes. But this
doctrine cannot be invoked in fixing the criminal liability
and the whole matter will have to be decided on the
principles of criminal jurisprudence, one of which is that
the criminal liability has to be strictly construed and
offence can be said to have been committed only when all
the ingredients of that offence as defined in the statute
are found to have been satisfied.
162. The matter may be examined from another angle.
163. Election to the State Legislature or the House of
the People are held under the Constitution on the basis
of adult suffrage. On being elected as a Member of
Parliament, the petitioner was inducted as Minister of
State. The Department of Petroleum and Natural Gas
was allocated to him. Under the allocation of business
rules, made by the President of India, the distribution of
petroleum products, inter alia, came to be allocated to
the petitioner. This allocation of business under the
Constitution is done for smooth and better
administration and for more convenient transaction of
21
business of the Government of India. In this way, neither
a “trust”, as ordinarily understood or as defined under
the Trust Act, was created in favour of the petitioner nor
did he become a “trustee” in that sense.
164. In Tito v. Waddell (No. 2) [(1977) 3 All ER 129]
the question of the Crown’s status as a trustee was
considered and it was laid down:
“I propose to turn at once to the position of the Crown as
trustee, leaving on one side any question of what is meant by
the Crown for this purpose; and I must also consider what is
meant by ‘trust’. The word is in common use in the English
language, and whatever may be the position in this Court, it
must be recognised that the word is often used in a sense
different from that of an equitable obligation enforceable as
such by the courts. Many a man may be in a position of trust
without being a trustee in the equitable sense; and terms
such as ‘brains trust’, ‘anti-trust’, and ‘trust territories’,
though commonly used, are not understood as relating to a
trust as enforced in a court of equity. At the same time, it
can hardly be disputed that a trust may be created without
using the word ‘trust’. In every case one has to look to see
whether in the circumstances of the case, and on the true
construction of what was said and written, a sufficient
intention to create a true trust has been manifested.
When it is alleged that the Crown is a trustee, an element
which is of special importance consists of the governmental
powers and obligations of the Crown; for these readily
provide an explanation which is an alternative to a trust. If
money or other property is vested in the Crown and is used
for the benefit of others, one explanation can be that the
Crown holds on a true trust for those others. Another
explanation can be that, without holding the property on a
true trust, the Crown is nevertheless administering that
property in the exercise of the Crown’s governmental
functions. This latter possible explanation, which does not
exist in the case of an ordinary individual, makes it
necessary to scrutinise with greater care the words and
circumstances which are alleged to impose a trust.”
165. Many earlier decisions were relied upon and with
reference to an earlier decision reported in Kinlochv. Secy.
22
of State for India [(1880) 15 Ch D 1] it was observed as
under:
“In the Court of Appeal, this decision was unanimously
reversed. The court held that no trust, ‘in the sense of a trust
enforceable and cognizable in a court of law’, has been
created, despite the use of the word ‘trust’ in the Royal
Warrant: see per James, L.J. Furthermore, the Secretary of
State for India in Council, though by statute made capable of
suing and being sued in that name, had not been made a
body corporate.All that had been done had been to
provide that the Secretary of State for the time being
should be the agent of the Crown for the distribution of
the property. James, L.J. regarded the consequences of
holding that there was a trust enforceable in the courts as ‘so
monstrous that persons would probably be startled at the
idea’. He referred to matters such as the right of every
beneficiary to sue for the administration of the trust and
have the accounts taken, and ‘imposing upon the officer
of State all the obligations which in this country are
imposed upon a person who chooses to accept a trust’.
He also emphasised the words at the end of the Royal
Warrant as showing clearly that questions were to be
determined, not by the courts, but by the Secretary of State,
with an ultimate appeal to the Treasury, as advising the
Queen. Baggallay and Bramwell, L.JJ. delivered concurring
judgments, with the latter emphasising the ‘monstrous
inconvenience’ and ‘enormous expense of litigation’ if there
were a trust enforceable by the courts, so that ‘one would be
reluctant, even if the words were much stronger than they
are, to hold that there is a trust’.
The House of Lords (Kinloch v. Secy. of State for India)
[(1882) 7 App Cas 619 : 47 LT 133 (HL)] unanimously
affirmed the Court of Appeal. In the leading speech, Lord
Selborne, L.C. attached some weight to the words in the
Royal Warrant being ‘the Secretary of State for India in
Council’, and ‘for the time being’, instead of his being
described by his personal name, as indicating that he was
not intended to be a trustee in the ordinary sense, but was
intended to act as a high officer of State. After discussing
the Order in Council, Lord Selborne, L.C. quoted the part of
23the Royal Warrant which contained the words ‘in trust for
the use of’, and said:
‘Now the words “in trust for” are quite consistent
with, and indeed are the proper manner of expressing,
every species of trust — a trust not only as regards those
matters which are the proper subjects for an equitable
jurisdiction to administer, but as respects higher
matters, such as might take place between the Crown
and public officers discharging, under the directions of
the Crown, duties or functions belonging to the
prerogative and to the authority of the Crown. In the
lower sense they are matters within the jurisdiction of,
and to be administered by, the ordinary courts of equity;
in the higher sense they are not. What their sense is here,
is the question to be determined, looking at the whole
instrument and at its nature and effect.’ ”
(emphasis of this Court)
166. Applying the principles laid down above, the
petitioner does not, on becoming the Minister of State for
Petroleum and Natural Gas, assume the role of a
“trustee” in the real sense nor does a “trust” come into
existence in respect of the government properties.
167. This brings us to the definition of the offence of
“Criminal Breach of Trust” as defined in Section 405 of the
Penal Code, 1860 which, minus the Explanation, provides as
under:
“405. Criminal breach of trust.–Whoever, being in any
manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes of that
property in violation of any direction of law prescribing the
mode in which such trust is to be discharged, or of any legal
contract, express or implied, which he has made touching
the discharge of such trust, or wilfully suffers any other
person so to do, commits ‘criminal breach of trust’.”
168. A trust contemplated by Section 405 would arise
only when there is an entrustment of property or dominion
over property. There has, therefore, to be a property
belonging to someone which is entrusted to the person
24
accused of the offence under Section 405. The
entrustment of property creates a trust which is only an
obligation annexed to the ownership of the property and
arises out of a confidence reposed and accepted by the
owner. This is what has been laid in State of
Gujarat v. JaswantlalNathalal [AIR 1968 SC 700 : (1968) 2
SCR 408] . In Rashmi Kumar v. Mahesh Kumar
Bhada [(1997) 2 SCC 397 : 1997 SCC (Cri) 415] the
essential ingredients for establishing the offence of criminal
breach of trust, as defined in Section 405, have been spelt
out as follows: (SCC pp. 406-07, para 13)
“(i) entrusting any person with property or with any
dominion over property; (ii) the person entrusted dishonestly
misappropriating or converting to his own use that property;
or dishonestly using or disposing of that property or wilfully
suffering any other person so to do in violation of any
direction of law prescribing the mode in which such trust is
to be discharged, or of any legal contract made touching the
discharge of such trust.”
169. In this case, the earlier decision in Pratibha
Rani v. Suraj Kumar [(1985) 2 SCC 370 : 1985 SCC (Cri)
180] was affirmed. The case essentially related to the
entrustment of “Stridhan”, but nevertheless, it is important
in the sense that the ingredients of the offence are set out
and discussed. In ChelloorMankkal Narayan Ittiravi
Nambudiri v. State of Travancore-Cochin [(1952) 2 SCC
392 : AIR 1953 SC 478 : 1954 Cri LJ 102] it was laid down
that every breach of trust in the absence of mens rea or
dishonest intention cannot legally justify a criminal
prosecution.
170. The expressions “entrusted with property” and
“with any dominion over property” used in Section 405
came to be considered by this Court in CBI v. DuncansAgro
Industries Ltd. [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045 :
AIR 1996 SC 2452] and the view earlier expressed was
reiterated. It was held that the expression “entrusted” has
wide and different implication in different contexts and the
expression “trust” has been used to denote various kinds of
relationships like trustee and beneficiary, bailor and bailee,
master and servant, pledger and pledgee.
25
171. Mr K. Parasaran contended that “power to allot
petrol pumps”, and that too under discretionary quota,
cannot be treated as “property” within the meaning of
Section 405 of the Penal Code, 1860. It is pointed out by
him that the Minister merely makes an order of
allotment. Subsequently, the Indian Oil Corporation or
the Bharat Petroleum Corporation enters into a
dealership agreement with that person and the business
is regulated by the agreement between the allottee and
the Corporation (Indian Oil Corporation or Bharat
Petroleum Corporation). It is also pointed out that in
pursuance of the agreement, the allottee invests money,
constructs the building and sets up the petrol pump.
Mere exercise of “power to allot”, it is rightly contended,
cannot, therefore, be treated as “property” within the
meaning of Section 405, capable of being misutilised or
misappropriated.
172. The word “property”, used in Section 409 IPC
means the property which can be entrusted or over
which dominion may be exercised. This Court in R.K.
Dalmia v. Delhi Admn. [AIR 1962 SC 1821 : (1963) 1
SCR 253] held that the word “property”, used in Section
405 IPC, has to be interpreted in a wider sense as it is not
restricted by any qualification under Section 405. It was
held that whether an offence defined in that section
could be said to have been committed would depend not
on the interpretation of the word “property” but on the
fact whether that particular kind of property could be
subject to the acts covered by that section. That is to say,
the word “property” would cover that kind of property
with respect to which the offence contemplated in that
section could be committed.
173. Having regard to the facts of the case discussed
above and the ingredients of the offence constituting
criminal breach of trust, as defined in Section 405, or the
offence as set out in Section 409 IPC, we are of the opinion
that there was no case made out against the petitioner for
any case being registered against him on the basis of the
judgment passed by this Court nor was there any occasion to
direct an investigation by CBI in that case.
26
30. This Court cannot agree with the argument advanced by Mr.
Dave and his reliance on Common Cause (supra). The Hon’ble
Supreme Court’s reasoning in the said decision was that a minister
appointed to distribute government property acts as an agent of the
government. Such a minister acts in furtherance of a duty imposed on
him to ensure smooth functioning and better administration.
Therefore, there is no trust created in him to deal with public money.
31. Likewise, the English decisions relied upon by the Apex
Court show that ‘monstrous inconvenience’ and ‘enormous expense of
litigation’ were the reasons to hold that general public cannot sue the
government for breach of trust. Another relevant fact in the said case
was that the Court therein dealt with a case where the accused-
minister therein misused the ‘power to allot petrol pumps’ under a
discretionary quota. On examination of the facts of the said case, the
Apex Court held that ‘power to allot petrol pumps’ cannot constitute
property that can be misappropriated.
32. The decision in Common Cause (supra) is inapplicable to
the facts of the present case. The Petitioner herein is alleged to abuse
his authority to misappropriate HMDA’s money. Therefore, it cannot
27
be said that the Petitioner was using public money of which there can
be no entrustment. HMDA is a body corporate which can own
property, enter into contracts, sue and be sued. The allegations in the
FIR clearly state that it was HMDA’s money which was misused. It is
not in dispute that HMDA is under the control of MA & UD
Department. The petitioner, being the Minister of MA & UD
Department, has control over the HMDA, he has approved note before
signing of the agreement. Therefore, prima facie, the funds belongs to
HMDA were entrusted with the petitioner.
33. Also, in the present case, it is not a general member of the
public who has filed a complaint alleging criminal breach of trust
against the petitioner and other accused. He is a responsible officer of
the Government who alleges that HMDA’s money was
misappropriated by the Petitioner in conspiracy with the other
accused. Therefore, this Court cannot accept the contention that there
was no ‘entrustment’. The other allegations pertaining to dishonest
intention and misappropriation are matter of investigation.
34. At this stage, it is apt to point out that the correctness of
Common Cause (supra) was doubted by a Three Judge Bench of
28
Hon’ble Supreme Court in Sheila Kaul v. Shiv Sagar Tiwari 21.
However, in the said case, the Court left the correctness of the same to
be decided by a Constitution Bench in an appropriate case. The
relevant paragraph of the said judgment is extracted below:-
2. On examining the impugned reviewed judgment reported in
Common Cause (1999) 6 SCC 667: 1999 SCC (Crl) 1196), we,
prima facie, do not agree with several conclusions on law, but
since that judgment has been rendered by a Three Judge Bench,
we cannot go into the question except referring the matter to a
Constitution Bench. But, having regard to the peculiar facts and
circumstances of Smt. Kaul, who is stated to be old and ailing and the
gross hardship of the case, we think it appropriate to quash the
damages part of the impugned judgment which was awarded against
Smt. Kaul. We make it clear that the correctness of the reviewed
judgment of this Court in Common Cause (1999) 6 SCC 667; 1999
SCC (Crl) 1196) can appropriately be considered in an
appropriate case by a Constitution Bench. We further make it clear
that the direction to launch criminal prosecution on the basis of
investigation by CBI is not being altered in any manner and if any
criminal proceeding has already been instituted, that must take its own
course on the material produced. This petition stands disposed
accordingly.
35. The other offence alleged against the Petitioner is Section
13(1)(a) of the PCA. The same is extracted below:
21
(2002) 10 SCC 667
29
13. Criminal misconduct by a public servant.– (1)
A public servant is said to commit the offence of criminal
misconduct,–
(a) if he dishonestly or fraudulently misappropriates or
otherwise converts for his own use any property entrusted
to him or any property under his control as a public servant
or allows any other person so to do; or
(b) if he intentionally enriches himself illicitly during the
period of his office.
Explanation 1.–A person shall be presumed to have
intentionally enriched himself illicitly if he or any person
on his behalf, is in possession of or has, at any time during
the period of his office, been in possession of pecuniary
resources or property disproportionate to his known
sources of income which the public servant cannot
satisfactorily account for.
Explanation 2.–The expression “known sources of
income” means income received from any lawful sources.
(2) Any public servant who commits criminal
misconduct shall be punishable with imprisonment for a
term which shall be not less than four years but which may
extend to ten years and shall also be liable to fine.
36. As can be seen from the above provision, Section 13 of the
PCA deals with criminal misconduct by a public servant. The essential
ingredients of criminal misconduct are fraudulent or dishonest
misappropriation or converting the property to one’s own use. Further,
such property needs to be entrusted to the public servant or such
property should be in the public servant’s control. From the facts, it
isprima facie clear that HMDA’s funds were under the control of the
Petitioner. Whether the Petitioner dishonestly misappropriated the
30
same or not is a factual aspect to be investigated. Therefore, a prima
facie case is made out against the Petitioner.
37. At this stage, this Court would like to advert to another
reason why the allegations in the impugned FIR need to be
investigated. Even if the contentions of the Petitioner are accepted and
this Court reaches a conclusion that neither Section 409 of the IPC nor
Section 13(1)(a) of the PCA are made out, the impugned FIR cannot
be quashed. It is relevant to note that the FIR need not disclose any
specific offence. The FIR should indicate that prima facie an
allegation of commission of an offence exists and such an allegation
requires an investigation. In other words, the uncontroverted
allegations in the FIR should make out a prima facie case warranting
an investigation. Further, allegations in the FIR may constitute
offences which are not mentioned in the FIR. Where ingredients of the
alleged offences are not satisfied, but the allegations constitute other
offences, this Court cannot quash an FIR. For instance, in a given case
the FIR may mention Section 405 of the IPC as the alleged offence.
However, the allegations may not satisfy the requirements of Section
405, but may very well make out a prima facie case of Section 420 of
the IPC or any other offence. In such cases, the Court cannot quash
31
the FIR. The Court under Section 528 of the BNSS is not required to
see which particular offence is made out, it has to see whether the
gravamen of allegations disclose commission of an offence. In this
regard, the following paragraphs of Somjeet Mallick v. State of
Jharkhand 22 are relevant:
15. Before we proceed to test the correctness of the
impugned order, we must bear in mind that at the stage
of deciding whether a criminal proceeding or FIR, as
the case may be, is to be quashed at the threshold or
not, the allegations in the FIR or the police report or
the complaint, including the materials collected during
investigation or inquiry, as the case may be, are to be
taken at their face value so as to determine whether a
prima facie case for investigation or proceeding against
the accused, as the case may be, is made out. The
correctness of the allegations is not to be tested at this
stage.
16. To commit an offence, unless the penal statute
provides otherwise, mens rea is one of the essential
ingredients. Existence of mens rea is a question of fact
which may be inferred from the act in question as well as
the surrounding circumstances and conduct of the accused.
As a sequitur, when a party alleges that the accused,
despite taking possession of the truck on hire, has failed to
pay hire charges for months together, while making false
promises for its payment, a prima facie case, reflective of
dishonest intention on the part of the accused, is made out
which may require investigation. In such circumstances, if
the FIR is quashed at the very inception, it would be
nothing short of an act which thwarts a legitimate
investigation.
17. It is trite law that FIR is not an encyclopaedia of
all imputations. Therefore, to test whether an FIR
22
(2024) 10 SCC 527
32
discloses commission of a cognizable offence what is to
be looked at is not any omission in the accusations but
the gravamen of the accusations contained therein to
find out whether, prima facie, some cognizable offence
has been committed or not. At this stage, the court is
not required to ascertain as to which specific offence
has been committed.
18. It is only after investigation, at the time of
framing charge, when materials collected during
investigation are before the court, the court has to draw
an opinion as to for commission of which offence the
accused should be tried. Prior to that, if satisfied, the
court may even discharge the accused. Thus, when the
FIR alleges a dishonest conduct on the part of the
accused which, if supported by materials, would
disclose commission of a cognizable offence,
investigation should not be thwarted by quashing the
FIR.
19. No doubt, a petition to quash the FIR does not
become infructuous on submission of a police report under
Section 173(2)CrPC, but when a police report has been
submitted, particularly when there is no stay on the
investigation, the court must apply its mind to the materials
submitted in support of the police report before taking a
call whether the FIR and consequential proceedings should
be quashed or not. More so, when the FIR alleges an act
which is reflective of a dishonest conduct of the accused.
38. In the present case, the allegations indicate that the
Petitioner herein without any approval from the State Cabinet or the
finance department directed the HMDA to pay huge sums of money to
a foreign company. Whether the Petitioner directed the said payments
with a dishonest intention to cause gain to himself or third parties is
required to be investigated. The allegations when read together make
33
out a prima facie case of wrong doing and misappropriation of funds
of the HMDA. The same are enough to warrant an investigation.
39. Further, investigating agencies need to be given enough
opportunity to investigate the allegations.
40. In State v. M. Maridoss 23, the Supreme Court dealt with a
case where a petition to quash an FIR was filed on the very next day
of the registration of FIR. The Court held that the High Court therein
erred in quashing the FIR without giving opportunity to the
investigating agency. The relevant paragraphs are extracted below:
10. It is also required to be noticed that in the
present case without giving any reasonable time to the
investigating agency to investigate the allegations in the
FIR, the High Court has, in haste, quashed the criminal
proceedings. The FIR came to be lodged on 9-12-2021,
immediately, on the very next date, the quashing
petition was filed and within a period of four days i.e.
14-12-2021, the impugned judgment and order [M.
Maridoss v. State, 2021 SCC OnLine Mad 13703] has
been passed and the criminal proceedings are quashed.
11. As per the settled position of law, it is the right
conferred upon the investigating agency to conduct the
investigation and reasonable time should be given to
the investigating agency to conduct the investigation
unless it is found that the allegations in the FIR do not
disclose any cognizable offence at all or the complaint is
barred by any law.
12. Under the circumstances also, the impugned
judgment and order [M. Maridoss v. State, 2021 SCC
OnLine Mad 13703] passed by the High Court quashing23
(2023) 4 SCC 338
34and setting aside the criminal proceedings deserves to be
quashed and set aside.
41. In the present case too, the Complaint was lodged on
18.12.2024 and the FIR was registered on 19.12.2024. Immediately
and on the very next day i.e., on 20.12.2024, the Petitioner herein filed
the present criminal petition. The investigating agency should have a
reasonable opportunity to investigate and collect evidence. Therefore,
this Court cannot haste and thwart the investigation in the present
case.
42. Once this Court holds that a prima facie case is made out,
the other allegations pertaining to malice, absence of dishonest
intention and misappropriation, failure to arraign the alleged third-
party beneficiaries, etc. becomes a subject matter of investigation.
43. Needless to say, that the observations made in the order are
only to decide the present petition.
44. In view of the aforesaid discussion, the present criminal
petition is liable to be dismissed and is accordingly dismissed. The
interim order dated 20.12.2024 stands vacated.
35
As a sequel, the miscellaneous applications, if any, pending in
the present Criminal Petition, shall stand closed.
_________________
K. LAKSHMAN, J
Date:07.01.2025
Note: Issue CC today.
L.R. copy to be marked.
b/o. vvr