P L D 1956 (W (PLP)

LARI, J.‑This is an application under sections 435, 439 and 561 (A), Cr. P. C. praying that proceedings in the case of Crown v. Wahid‑ud‑din and others under sections 409, 467 and 477 (A) read with 120 (B) P. P. C. pending before XI Additional City, Magistrate, Karachi be quashed. The proceedings in question are pending against five accused, namely, Mr. F. S. Wahid‑ud‑din, Khawaja Muhammad Iqbal, Rashid Ahmad Dar, F. S. Salah‑ud‑din and M. H. Qasmi. Mr. F. S. Wahid‑ud‑din is said to be a business magnate and a Director of the Bank of Bahawalpur Ltd. Khawaja Muhammad Iqbal was General Manager of the Bank of Babawalpur till the day of his arrest on 7th September 1955. Rashid Ahmad Dar and F. S. Salah‑ud‑din are said to be part ners in M/S. Food Grain Supplying Agency. F. S. Salah ud‑din is a brother of accused No.

1. M. H. Qasmi was an accountant in the Bank of Bahawalpur till his arrest in this case. The case of the petitioner is that in March 1955 marriage of a son of Mr. Abdul Qadir, Governor of the State Bank of Pakistan was solemnized in Bahawalpur State. A news item was splashed in banner headlines in all the papers of Bahawalpur State that the Governor of the State Bank accept ed Rs. 20,000 and 'thans' of brocade from His Highness, the Amir of Bahawalpur State on the occasion of the marriage of his son. A brochure published in Bahawalpur insinuated that the motive for this expensive gift from the Amir of Bahawalpur was that Moulvi Karamat‑ullah, the household Minister of His Highness, had a son whose services as an engineer were dispensed with by the P. W. D. But Mr. Abdul Qadir secured a post for him in the State Bank of Pakistan at the High salary of Rs. 1,700 p.m. Mr. Abdul Qadir suspect ed the applicant to be at the back of these news items and brochure, and conceived an ill‑will towards the petitioner. The petitioner enjoyed credit facilities from the National Bank of Pakistan in the sum of Rs. 40,00,000, from the Habib Bank, in the sum of Rs. 50,00,000, from the Chartered Bank of India, Australia and China in the sum of Rs. 20,00,000 and from the Bank of Bahawalpur in the sum of Rs. 50,00,000 Mr. Abdul Qadir decided to take revenge on the applicant by taking steps designed to injure his credit in the market. On 19th May 1955 Mr. Abdur Qadir got a circular issued under the signature of Mr. N. Mahmood to all the banks that they should excise caution in dealing with the applicant and 16 other firms and companies in which the applicant was reported to have interest. It may be noted that this circular is the subject‑matter of a Writ Petition pending before a Bench of this Court. On 31st May 1955 the State Bank of Pakistan lodged a F. I. R. disclosing an offence under section 7 (A) of the Bank ing Companies Control Act of 1948 and section 420, P. P. C. The main allegations were in the following words In accordance with this section (section 7) no banking company can make unsecured loans or advances to any of its directors or firms or any private company in which any director is interested. Col. Wahid‑ud‑din is interested in M/S. Food Grain Supplying Agency as shown by the docu ments mentioned above. This Food Grain Supplying Agency had outstanding of Rs. 10.04,950 on the 9th of April 1955, referred to in agreement App. I for release of the stocks held against which it was made, in terms of the resolution of the Board dated the 23rd of March 1955 referred to above. It may be noted that in view of the release of the stocks no security whatsoever was given to the bank and the method of payment provided was post‑dated cheques which do not amount to any security at all. As Col. Wahid‑ud‑din was one of the directors and was present in the meeting which passed the resolution, he clearly infringed the above provision of law, namely section 7 of the Banking Companies (Control) Act. He ought to have apprised the Bank of his own interest in M/S. Food Grain Supplying Agency. The General Manager of the Bank has advised us that the Directors of the Bank were not aware of the fact that Col. F. S. Wahid‑ud‑din was a proprietor or partner of M/S. Food Grain Supplying Agency when the resolution referred to above was passed by concealing the above fact he has deceived the Bank in passing the said resolution and thus committed the offence of cheating. The State Bank feels that an investigation in this case and into the affairs of M/S. Food Grain Supply ing Agency is called for". On 6th June 1955, the applicant Col. F. S. Wahid‑uddin filed a suit No. 554 of 1955 claiming Rs. 5,00,000 as damages from Mr. Abdur Qadir and State Bank of Pakistan. On 7th June 1955 the State Bank of Pakistan issued a directive to the Bank of Bahawalpur Ltd., to remove the applicant from the office of the Director of the Bank with immediate effect. Nest day, i.e., on 8th June, 1955 the applicant filed a suit against the State Bank of Pakistan and the Bank of Bahawalpur praying that the defendants be restrained from giving effect to the directive of the State Bank of Pakistan to remove him from the office of the Director of the Bank of Bahawalpur. On 5th August 1955 the applicant filed a complaint against Mr. Abdul Qadir for defamation under section 500, P. P. C. before a Magistrate. The complaint was admitted by the Magistrate and Mr. Abdul Qadir was summoned as an accused. Exactly a month later i.e. on 6th September 1955, A. R. Khan, P. I., C. I. D. lodged two reports against the applicant and his four co‑accused under sections 409, 468 and 471, P. P. C. read with section 120, P. P. C. One of them gave rise to the challan which is the basis of the proceedings sought to be quashed. The charge as narrated in the charge‑sheet No. 217 dated 27th January 1955 is reproduced in full "The accused persons named in column No. 3, in pur suance of criminal conspiracy to misappropriate the funds of the Bank of Bahawalpur Ltd., committed fraudulent misappropriation in so far that accused No. 1 in collaboration with accused Nos. 3 and 4 of M/S. Foodgrain Supply ing Agency drew an amount of Rs. 16,91,048 from the Bank of Bahawalpur duly authorised by accused No. 2 in further ance of such conspiracy in his capacity as General Manager, against securities shown to have been stocked in Jacobabad District which in fact never existed. Accused No. 2, who was entrusted or had domain over the Bank's funds and accused No. 5, who was an accountant of the Bank in charge of the cash credit department, accepted the cash credit pledge letters showing the details of the bogus securities and accused No. 5 also made false certificate by forging the signatures as Godown Keeper of the Bank, to support the misappropriation of the Bank's funds. He amount noted above was drawn through the cash credit account of the Firm Food Grain Supplying Agency in the Bank. This account was originally opened in 1951 when accused No. 1 and accused No. 3 were authorised to operate the same. Later the name of the accused No. 1 was struck off and that of F. S. Salah‑ud‑din was substituted. This account was closed on 31st March 1954, but was re‑opened on 8th February 1955, at the request of accused No. 3 in pursuance of the above conspiracy. Out of the above amount Rs. 14,58,108‑10‑9 were credited to the account of Fakir Spinning Mills in the same Bank which is operated by accused No. 1 as Managing Director of the said Mills Rs. 50,000 were sent through a draft to these Mills Rs. 40 000 were received in cash by accused No. 1 and Rs. 92,000 were paid as loan to William Sons another concern of accused No.

1. Accused Nos. 2, 3 and 5 also, in pursuance of the conspiracy prepared false agree ment and accused Nos .2 and 5 got the Bank's records changed to cover these fraudulent misappropriations. The alleged cash credit pledge letters contained false informa tion communicated in pursuance of criminal conspiracy and accused No. 5 had made initials of Godown Keeper to show that the possession of the securities was taken by the Bank. Thus all the accused persons, to serve the ends, conspired and thus misappropriated the Banks funds. The investigation has further disclosed that there was close conspiracy between the accused Nos. 1 and 2 and that the Bank's funds were fraudulently misappropriated by them in pursuance of the criminal conspiracy on other occasions as well. A prima facie case under sections 409/467/477‑A, read with 120‑B, P. P. C. is made out against them. It is prayed that they may be tried according to law. The above would show that the main charge is that F. S. Wahid‑ud‑din, F. S. Salah‑ud‑din and Rashid Ahmad Dar in concert with Khawaja Muhammad Iqbal fraudulently mis appropriated a sum amounting to Rs. 14,58,108‑10‑9 belonging to the Bank of Bahawalpur and in the course of this fraudulent misappropriation some of the accused committed acts punish able under sections 467 and 477 (A), P. P. C. The application under consideration was made imme diately after charge‑sheet had been submitted. No l evidence had been recorded by the Magistrate It was contended on behalf of the Crown that the application was unentertainable at such a stage. It was argued on behalf of the applicant that the charge‑sheet had been preceded by a police enquiry lasting several months and the entire evidence available to the prosecution has been recorded in the police diary running into several hundred pages and that it was open; to this Court to consider whether on the face of the allega tions made in the charge‑sheet or evidence recorded in the police diary any case whatsoever was made out against the accused. Reference was made to the case S. P. Jaiswal v. The State and another (1953 Cr.LJ 1018) Kapur J. observed "At this stage I may dispose of the objection that was taken on behalf of the State that I am not entitled to look into the police diaries for determining whether any case has been made out or not. This is a proposition of law which, has only to be stated to be rejected. I cannot believe nor do I think that that is the law that a man can be put on trial and his liberty jeopardized when there is no material on which the police could have made a report. That a Court has the power to look into the police records seems to be clear from the various sections of the Criminal P. C. that I have mentioned above". My attention was also drawn to the case Lasu Janu Pawar and others v. Emperor (49 Cr.LJ 1948 p.203). This case is an authority for the proposition that affidavits can be looked into to find out if there is any prima facie case against the accused. Mr. Dialmal also cited several un‑reported cases of the Sind Chief Court wherein the Chief Court interfered even at a stage when no evidence had been recorded. I may refer to Criminal Reference No. 263 of 1953 decided by Justice Agha and Vellani, J. on 25th March 1954, and Criminal Revision Petition No. 122 of 1946 decided by Chief Judge and Justice Thadani. This Court has undoubtedly power to quash proceedings if it is satisfied that on the basis of the allegations made or undisputed documents made available no prima facie case can be said to have been made out. I may note that the charge‑sheet` does not even allege that there was dishonest misappropriation although dishonesty as distinguished from fraud is a necessary ingredient of an offence under section 409, P. P. C. It is a matter of admission that M/S. Food Grain Supplying Agency opened cash credit account with the Bank of Bahawal pur on 26th March 1951, and continued it initially upto 31st March 1954. During this period the total transaction between the Bank of Bahawalpur and M/S. Food Grain Supplying Agency amounted to about four crores of rupees and M/S. Food Grain Supplying Agency paid about Rs. 2,00,000 (two lacs) to Bank of Bahawalpur by way of interest and other charges. The entire amounts withdrawn on the basis of cash credit agreement were paid up by 31st March 1954 and not a peny remained outstanding. I went through the accounts and found that at times more than Rs.20,00,000 (twenty lacs) remained outstanding against M/S. Food Grain Supplying Agency in the cash credit between the Bank of Bahawalpur and M/S. Food Grain Supplying Agency. These huge sums were advanced by the Bank of Bahawalpur on the basis of cash credit agreement supported by 21 cash credit pledge letters furnished from time to time. The goods sought to be pledged by these letters were never taken possession of by the Bank of Bahawalpur. Even the existence of these goods were not verified by anybody on behalf of the Bank. Each of them had the following endorsement at the bottom "I hereby certify that the goods mentioned above are my own property and no one else except the Bank has any lien over the same, as the Bank has relied on my statement as to the quality, quantity and valuation of the above mentioned goods. I am solely responsible for its correctness. If at any time my statements are found to be incorrect the Bank can correct the same and I shall be bound by the state ment made after correction". The following also appeared towards the end "Certified that the above stock have been taken by us on bank's behalf and all particulars and valuations given in this letter are correct and in order. Checked by : Godown Keeper". But in none of these cash credit pledge letters the second certi ficate just quoted above was ever signed by any person on behalf of the Bank. It is a matter of admission that the cash credit pledge letters were taken on their face value, nobody on behalf the bank checked of its correctness or otherwise nor the goods were entered in the stock register of the bank nor they were taken possession of. This means that all the huge sums during the years 1951,1952, 1953 and 1954 were advanced on the personal security of the partners of M/S. Food Grain Supplying Agency. This is exactly the case of the accused. They contend that there was so much mutual confidence between the Bank Manager, Mr. Muhammad Iqbal and the partners of M/S. Food Grain Supplying Agency that huge sums were advanced on the personal credit of the partners. The contention on behalf of the Crown is that Mr. Muhammad Iqbal was authorised to sanction fully secured advances to the extent of Rs. 50,000 in anyones case and in all upto Rs. 5,00,000 and that too on full security. This contention is based on a resolution adopted by the Board of Directors on 23rd December 1947. It runs thus :‑ Resolved that the General Manager is hereby authorised to sanction fully secured advances to the extent of Rs. 50,000 in any one case and in all upto Rs. 5,00,000 only subject to his being fully satisfied that the bank's interests are fully covered and protected in all respects . Khawaja Muhammad Iqbal was, however, appointed General Manager some time in 1949. He was preceded as manager by one Mr. Dominic Fonseca. The Mukhtarnama dated 29th August 1948 executed by the bank in favour of Mr. Dominic Fonseca provided in clause 6 that he could lend moneys and discount bills upon such securities or without securi ties as the same attorney deemed it fit. Khawaja Muhammad Iqbal himself was granted a power of attorney in terms of resolution adopted by the Directors of the bank on 7th November 1949. Under Clause 4 of this power of attorney Khawaja Muhammad Iqbal had full power to discount, negotiate or renew bills of exchange and promissory notes with or without security. Under clause 7 he had full power to settle and adjust all losses and claims under policies of insurance of all kinds and other accounts and reckonings whatsoever, whether claimable by the bank or against them and submit to arbitration and differences and disputes what soever. Resolutions of the Board passed from time to time show that Khawaja Muhammad lqbal made advances amount ing to crores. I, may note some of the resolutions of the Board. The resolution of the Board dated 10th June 1950 runs thus "The manager placed before the Board a list of advances against cotton during the year 1949‑

50. The Board was gratified to know that the bank was able to finance Cotton Ginners to the tune of Rs. 54.50 lacs and that out of 18 accounts only 3 accounts aggregating to Rs. 4,18,929 remained outstanding as on date". Another resolution dated 28th August 1953 runs thus "The Board reviewed the position of the Bank for the month ending July 1953 and examined the following figures pertaining to the month. Total deposit ... Rs. 1,45,30,000 Advances ; ... Rs. 1,53,48,000". Annual report of the bank ending 31st December 1950 showed that advances to the tune of Rs. 1,01,08,476 were made in the year 1950. Annual report for the year 1951 showed that advances to the tune of Rs. 1,50,79,460 were made in 1951. This amount went up to Rs. 1,96,88,192 at the end of December 1953. It further increased to Rs. 2,18,29,901 at the end of December 1954. The Balance Sheet of the account as it stood on 31st December 1954 showed that debts considered good in respect of which bank held no security other thandebtor's personal security amounted to Rs. 7,05,638‑14‑

11. The resolution relied upon by Mr. Raymond said that the manager could not advance loan in all exceeding Rs. 5,00,

000. While the actual position in 1950 to 1954 was that lacs and lacs were being advanced by Khawaja Muhammad Iqbal. The resolution of 1947 applied to the General Manager who was in service then, The powers of the succeeding managers are obviously governed by the powers of attorney executed in their favour by the Directors or practice as evidenced by the resolutions of the Board of Directors. There can be no doubt that Khawaja Muhammad Iqbal had full authority to make any amount of advances with or without securities. It was assumed in the charge sheet that the applicant Col. F. S. Wahiduddin was partner in firm of M/S. Food Grain Supplying Agency and that the cash credit account had been opened in 1951 at the request of the applicant and Rashid Ahmad Dar. The Crown produced before me the, agreement for cash credit account. It is dated 26th March 1951 and has been signed by Fakir S. Salahuddin and Rashid Ahmad Dar. If the applicant Col. F. S. Wahiduddin was also a party to the cash credit agreement he must have signed the agreement, The Crown has also produced before me current account opening form. It is dated 2nd April 1951 and is again signed only by Fakir S. Salahuddin and Rashid Ahmad Dar. Partnership letter is also available and is dated 2nd April 1951. It has been produced before me by the prosecution. It is signed by Fakir S. Salahuddin and Rashid Ahmad Dar. It is clear from these three documents, namely, cash credit agree ment, opening form and partnership letter that cash credit account on behalf of M/S. Food Grain Supplying Agency had been opened by Fakir S. Salahuddin and Rashid Ahmad Dar and the applicant Col. F. S, Wahiduddin was no party to it. The prosecution, however, relied on two circumstances. Firstly that on the opening page of the cash credit account in the loan ledger Vol. 2 page 68 originally the name of F. S. Wahiduddin appeared to have been written and then it was struck off and substituted by F. S. Salahuddin. The same is the position at page 69 which takes the entries upto 15th October 1951. The same is the position at page

224. But at page 225 wherein the entries begin on 14th November 1951 there is no substitution and the name of F. S. Wahiduddin does not appear and only the name of F. S. Salahuddin is to be found along with Rashid Ahmad Dar. Exactly the same is the position in subsequent volumes. It means that originally, if at all, the name of F. S. Wahiduddin along with Rashid Ahmad Dar appeared but the mistake was realised in the same year, namely, in 1951 and the name of F. S. Wahiduddin was not repeated. The insertion of the name of F. S. Wahiduddin in place of F. S. Salahuddin was obviously a mistake and natural too. F. S. Wahiduddin had an account in the name of M/S. Grain Traders with the bank and it continued upto 21st February.1951. The new cash credit account in the name of M/s. Food Grain Supplying Agency was opened on March 26th. The writer of the books was familiar with the name of F. S. Wahiduddin and he obviously wrote that name but subsequently the correct name was inserted. There was no reason whatsoever for substituting the name of F. S. Salahud din for F. S. Wahiduddin in 1951. It is an admitted fact that all moneys advanced to M/s. Food Grain Supplying Agency in 1951, 1952, 1953 and 1954 were paid to a pie. If F. S. Wahiduddin was to operate the cash credit account and not F. S. Salahuddin, there was no reason why the change would take place in 1951. It is admitted that in the years 1952, 1953 and 1954 it is F. S. Salahuddin who appears along with Rashid Ahmad Dar as partners of M/s. Food Grain Supplying Agency who had to operate the cash credit account. The second circumstance relied upon by the prosecution was a specimen signature of F. S. Wahiduddin on a card. When I looked into the card I found that this was in respect of a current account and not cash credit account. F. S. Wahidud din had a current account with the bank of Bahawalpur and it is nothing surprising that a card bearing his specimen signature was available with the Bank. Attempt had been made in that card to cut out the words "current account" and substitute it by "cash credit". It is a matter of admission that from beginning to the end i.e., from March 1951 till the end of 1954 when the cash credit account was temporarily closed, the applicant F. S. Wahidud din never operated the cash credit account. There can be no manner of doubt that the accused F. S. Wahiduddin was never a party to the cash credit transaction between the bank of Bahawalpur and Col. F. S. Wahiduddin. It is not necessary to decide for the purposes of this case whether F. S. Wahid uddin was a partner in M/s. Food Grain Supplying Agency. From the documents it is clear that he was not a partner at least from 1952 onwards. The applicant filed a letter from Income Tax Officer, Circle 4, Karachi. It runs thus :‑ "With reference to your application dated 16th February 1956 I have the honour to certify as under (1) The following returns of income are in your assess ment records which were transferred to me by the Income Tax Officer, G‑Ward, Lahore (i) 1952‑

53. This return was, received in the Income Tax Office on 22nd July 1953. (ii) Revised return dated 1st July 1954 for the assess ment year 1952‑53 was filed on 1st July 1954. (iii) Return for the assessment year 1953‑54 was filed on 6th April 1954. (2) Partners as per the returns noted are as under (1) Mr. Rashid Ahmad Dar. (2) Mr. Muhammad Rafiq Ahmad Dar. (3) Mr. Muhammad Yakub But. (4) Mr. Abdul Ghafoor Nainar Muhammad". The above conclusively shows that the applicant Col. F. S. Wahiduddin was not a partner in M/s. Food Grain Supplying Agency at least during the years 1952, 1953, 1954 and onwards. The documents relied upon by the prosecution only show that he was connected with M/s. Food Grain Supplying Agency in 1951. 1 have come to the conclusion that Col. F. S. Wahiduddin was not associated as a partner with M/s. Food Grain Supplying Agency from 1952 onward and that he was never a party to cash credit transaction between the Bank of Bahawalpur and M/s. Food Grain Supplying Agency. I may at this stage refer to the actual transaction which is the basis of criminal charge. The cash credit account between the Bank of Bahawalpur and M/s. Food Grain Supplying Agency came to a close for the time being on 31st March 1954 as having been adjusted in full. The account was, however, re‑opened on 8th February, 1955 when Rs. 24 000 were withdrawn. Rs. 7,00,000 were credited to M/s. Food Grain Supplying Agency having been received by transfer on February 14th. There were credit as well as debit entries and the highest amount outstanding against M/s. Food Grain Supplying Agency was about Rs. 10,00,000 in the month of April 1955. On 15th February, 1955 two cash credit pledge letters, each signed by Rashid Ahmad Dar, accused No. 3, were furnished. They were in the same form as the 21 cash credit pledge letters furnished earlier between 1951 and 1954, and reproduced in the earlier part of this judgment with this exception that the second certificate has been signed by accused No. 5 both below "checked by" and "Godown Keeper". The goods mentioned in these cash credit pledge letters were, however, not entered in the stock book nor actually taken possession of. In pursuance of a resolu tion adopted by the Board of Directors of the Bank an agreement was entered' into between the Bank arid M/s. Food Grain Supplying Agency on 9th April. This may be quoted in full :‑ "This Deed of agreement made at Karachi, this 9th day of April, one thousand nine hundred and fifty five, between the Bank of Bahawalpur Ltd., which expression shall deemed to include any successor in its place, hereinafter referred to as "the Bank" and Messrs Food Grain Supplying Agency, Karachi hereinafter referred as "the firm". Whereas the firm is having dealings with the dank since a period of four years in respect of all its business transac tions and has always been the reliable, dependable and credit worthy customer of the Bank. And whereas the Bank, in view of the reputation and sound solvency of the firm gave the firm banking facilities and other financial accommodation from time to time. And whereas now the Bank and the firm have agreed to bring to a close transactions between them fully and finally. And whereas the firm, due to the present prevailing market conditions and on account of the fact that their finance have been locked up in other long term investment agencies and are thus, in spite of their best intention to settle the dues fully, are not in a position to pay and liquidate all their dues to the Bank in one lump sum and are therefore agreeable to pay in the mode and manner hereinafter stated. And whereas in view of the assurances and credit worthiness of the firm, the Bank has agreed to realize all its dues from the firm in the manner and mode hereinafter stated. This Deed witnesseth (1) The firm is due to the Bank a sum of Rs. 10,04,950 (Rupees ten lacs four thousand nine hundred and fifty only) in full and final settlement of its transactions with the Bank up to 6th day of April, 1955. (2) The firm hereby undertakes to pay the entire dues viz., Rs. 10,04,950 (Rupees ten lacs four thousand nine hundred and fifty only) within a period of 3 (one and half years) years commencing from the 2nd of May, 1955. (3) The only and the entire cues to the Bank viz.,Rs. 10,04,950 (Rupees ten lacs four thousand nine hundred and fifty only) payable as envisaged in paras. (1) and (2) herein shall be payable in monthly instalments of Rs. 55,830‑8‑0 (Rupees fifty thousand eight hundred thirty and annas eight only) commencing from the 2nd of May 1955. (4) That in order to further assure and secure the pay ment of all its dues the firm hereby issues eighteen postdated cheques drawn in favour of the Bank indicating their bona fide intention to pay and honour its commitments. The details of these postdated cheques are stated in the Schedule hereunder. (5) The interest due on the total dues would be paid by the firm at the end of 1J years. The rate of interest would be 6010 per annum. (6) That in view of the undertaking to pay and clear all dues of the Bank, all documents of hypothecation, pledge or mortgage of the goods of the firm or any other document of any commitment, undertaking or liability, executed by the firm in favour of the Bank prior to this Deed are hereby cancelled and the firm's liability in respect of such claims hereby stands discharged. (7) That it is agreed between the Bank and the firm that apart from the dues mentioned in para. (1) of this Deed, there are no other dues claims or other liabilities of the firm to the Bank. (8) That the firm hereby undertakes and assures the Bank that it would honour all its obligations undertaken herein promptly and regularly. If, in case, at any time any of the cheque or cheques (as stated in the schedule) are not encashed or honoured, the Bank shall be at liberty forthwith to issue a claim notice on the firm or institute any civil proceedings against the firm for the recovery of the amount due at any time, at the cost and expense of the firm. In witness whereof the Bank and the firm hereby affix their respective seals and signatures to this Deed this 9th day of April, 1955, in the presence of the following, attesting witnesses :‑ Food Grain Supplying Agency (Sd.) Partner Witnesses

1. For the Bank

2. For the Bank For Bank of Bahawalpur Ltd (Sd.) General Manager SCHEDULE No. Cheque No. Amounta. p Date of Encashment 1 NCK 292482 55,830 8 0 2‑5‑55 2 NCK 292483 55,830 8 0 2‑6‑55 3 NCK 292484 55,830 8 0 2‑7‑55 4 NCK 292485 55,830 8 0 2‑8‑55 5 NCK 292486 55,830 8 0 2‑9‑55 6 NCK 292487 55,830 8 0 2‑10‑55 7 NCK 292488 55,830 8 0 2‑11‑55 8 NCK 292489 55,830 8 0 2‑12‑55 9 NCK 292490 55,830 8 0 2‑1‑56 10 NCK 292491 55,830 8 0 2‑2‑56 11 NCK 292492 55,830 8 0 2‑3‑56 12 NCK 292493 55,830 8 0 2‑4‑56 13 NCK 292494 55,830 8 0 2‑5‑56 14 NCK 292495 55,830 8 0 2‑6‑56 15 NCK 292496 55,830 8 0 2‑7‑56 16 NCK 292497 55,830 8 0 2‑8‑56 17 NCK 292498 55,830 8 0 2‑9‑56 18 NCK 292499 55,830 8 0 2‑10‑56 Karachi 9th April 1955". The underlined portions of the agreement are very important. They show conclusively that dealing between the parties had been based on the reputation and solvency of M/s. Food Grain Supplying Agency and the only security that was taken from the Agency was postdated cheques signed by the partners of the Agency, namely, accused Nos. 3 and

4. The agreement stipulated that the entire outstanding amount said to be misappropriated was to be paid up by 18‑monthly instalments of Rs. 55,830‑8‑0 each. It is a matter of admission that the agreement has been honoured by M/s. Food Grain Supplying Agency and half of the outstandings have been paid up. The police came up on the scene long after the agreement dated 9th April 1955 had finally closed the cash credit account between the parties and had placed dealings between them on a different footings. It is not the prosecution case that the agreement dated 9th April 1955 had been obtained fraudu lently or dishonestly. It is what happened prior to 9th April 1955 and subsequent to February 8th, namely advances which is the subject‑matter of criminal prosecution. The above discussion would show that on the basis of undisputed documents the following facts can be said to have been fully established

1. The accused No. 2 Khawaja Muhammad Iqbal had full authority to make advances in any amount with or without security.

2. The cash credit account on behalf of M/s. Food Grain y was entered into by accused Nos 3 and 4.

3. The accused No. 2 Khawaja Muhammad Iqbal had full confidence in the integrity and financial soundness of M/s. Food Grain Supplying Agency.

4. The Board of Directors also had faith in the financial soundness of the partners of M/s. Food Grain Supplying Agency.

5. All advances were made on personal security. The so‑called cash credit pledge letters were nothing but represen tations that certain goods existed. They never took the form of pledge in its legal sense.

6. There has not been a single instance where the amount due has not been paid by M/s. Food Grain Supplying Agency to the Bank of Bahawalpur at their stipulated time. As observed earlier the gravamen of the charge against the accused is that of misappropriation punishable under section 409, P. P. C. which runs thus :‑ "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 transportation for life, or with imprison ment of either description for a term which may extend to ten years, and shall also be liable to fine". Criminal breach of trust is defined by section 405, P. P. C. which says :‑ "Whoever, being in any manner entrusted with property, or with any dominion over property dishonestly misap propriates 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 willfully suffers any other person so to do, commits "Criminal breach of trust". To constitute an offence under section 409, P. P. C. there must be dishonest misappropriation, or conversion to ones use or dishonest user or disposal of property in violation of any direction of law or legal contract express or implied. The word "dishonestly" has been defined in section 24, P. P. C. which says :‑ "Whoever does anything with the intention of causing wrongful gain to one person, or wrongful loss to another person is said to do that thing "dishonestly". Wrongful gain and wrongful loss are defined by section 23, P. P. C. :‑ "Wronful gain" is gain by unlawful means of property to which the person gaining is not legally entitled". "Wrongful loss" is the loss by unlawful means of property. to which the person losing it is legally entitled". The word ''fraudulently" has been defined in another section of the Pakistan Penal Code, namely, section

25. The main contention of the learned counsel for the petitioner is that even on the basis of allegations made in the challan no offence under section 409, P. P. C. is made out. It is desirable to pause and analyze the allegations in the charge sheet. The allegations made in the challan come to this

1. Rs. 16,91,048 were advanced as against securities shown to have been stocked in Jacobabad District which in fact never existed and accused Nos. 2 and 5, namely, Khawaja Muhammad Iqbal and M. H. Qasmi accepted these bogus securities.

2. Accused No. 5 forged the signatures of Godown Keeper of the Bank on the two cash credit pledge letters, dated 15th February 1955.

3. The accused committed fraudulent misappropriations. In allegation No. 1 it is not specified that cash credit pledge letters bad been signed only by accused No. 3 and there is no allegation that other accused knew that the stocks sought to be pledged by accused No. 3 did not exist in fact. It has been admitted by the learned counsel for the Crown that there is no evidence to show that Khawaja Muhammad Iqbal or F. S. Wahiduddin or M. H. Qasmi knew that no stock existed in Jacobabad District. In regard to allegation No. 2 it is admitted that M. H. Qasmi did not purport to sign on behalf of anybody else. He himself signed both as an accountant and as a godown keeper. The question is whether mere pledging of goods which did not exist by one of the accused and its acceptance by others without express knowledge would give rise to inference of dishonesty on the part of other accused particu larly Khawaja, Muhammad Iqbal. The charge itself alleges that there was fraudulent misappropriation. It does not allege that there was any dishonest misappropriation. In the absence of any allegation of dishonesty or allegations which necessarily lead to an inference of dishonesty as defined in sections 24 and 23 P. P. C. no charge under section 409, P. P. C. can be spelled out. The position becomes worse if we bear in mind the back ground of the transactions and six circumstances enumerated by me as held proved by documentary evidence in possession of the Crown itself. I have gone through the diary running into several hundred pages. I did not come across any oral evidence having any bearing on the existence of a conspiracy among the accused to misappropriate any property of the Bank of Bahawalpur. I pointedly asked Mr. Raymond whether he had any evidence to that effect in his possession and the reply was in the negative. He sought to establish existence of criminal conspiracy as well as actual dishonest misappropriation on the basis of two premises. Firstly that Khawaja Muhammad Iqbal had no powers to make any advance without any security and secondly that the goods sought to be pledged by pledge letters dated 15th February did not exist in fact. The first is wholly a wrong assumption. I have shown that Khawaja Muhammad Iqbal had authority to make any advances without security. There is evidence in the police diary showing that stocks did not exist in Jacobabad. But admittedly there is no evidence to show that Khawaja Muhammad Iqbal bad any knowledge about the non‑existence of the stock. It is totally ignored by the prosecution that both before and after the two pledge letters in question advances had been made in view of personal security and not on the basis of any pledged goods. My attention was drawn by Mr. Raymond to the case of Ramchandra Rango Sawkar and others v. Emperor (A I R 1939 Bom. 129). 1 have gone through the judgment and found that the facts of the Bombay case were entirely different from the facts of the present case. The relevant observations appear at page 144 in the following words :‑ " If loans were granted beyond authority, of which there is prima facie proof, the person directly responsible for offending against the rules would be the manager who was obliged to obey and carry out the rules. The crucial question in the case is whether the manager has acted without authority and granted loans to his friends without the sanction of his superiors, namely, the managing director of the Board. There is considerable body of evidence on the point indicating that no sanction was obtained and that the transactions were imprudent and unbusiness like savoring of obvious dishonesty". In this case the manager fully acted within the terms of his authority and the transactions were neither imprudent nor businesslike. Much larger sums had been advanced in the same manner without any loss to the Bank and even subsequently the Board of Directors agreed to accept only personal security in the form of cheques from the debtor party. There is nothing in the transaction itself which can give rise to the inference that Khawaja Muhammad Iqbal had any dishonest intention. I may here quote another observation at the same page, it runs thus "With regard to accused 4, 5 and ?, the only circum stance against them is that they are partners in the firm of Joshi & Co., for whose benefit these loans were taken, but merely because a person is a partner in a firm, he is not liable for all the criminal acts of the managing partner unless he was aware of them or in some way has connived at them ". These observations fully apply to the case of accused No. 4 and necessarily to accused Nos.J and

5. There is allegation and even some evidence to show that goods sought to be pledged by cash credit pledged letters did not in fact exist and the presumption is that the Pledger, namely. Rashid Ahmad Dar had knowledge that the goods did not exist. But this act, though in itself dishonourable, cannot lead to an inference of dishonest mis appropriation for more than one reason. In the past this very person had submitted a' number of cash credit pledge letters, the Bank never cared to scrutinize their accuracy and always made advances on the basis of personal financial soundness. He must have regarded filing of pledge letter as a mere formality. I may here profitably refer to the observations of Madras High Court in the case of M. M. S. T, Chidambaram Chettiar v. Shanmugham Pillai (39 Cr. L J p. 261). " In the world of business things are often done which are betrayals of confidence and deceptions which arouse moral indignation but are nevertheless civil wrongs which can be righted by Civil Courts and are not crimes which can be punished by a criminal Court. Not every immoral act is criminal and it is an abuse of the process of a Court to attempt to create new crimes in order to compel men to conform to a high standard of probity in busi ness dealings or to force them to execute their promises". At the first sight the accused Rashid Ahmad Dar might be said to have committed an offence of cheating. But a closer examination would show that even offence of cheat ing cannot stand. To establish an offence of cheating the prosecution would have to establish not only deception but that deception induced the person deceived to deliver any property to him. The recitals in the agreement of 9th April 1955 would clearly establish that even apart from this deception Khawaja Muhammad Iqbal would have made advances to his firm on the basis of the firm s established reputation and soundness in the eyes of Khawaja Muhammad Iqbal. Khawaja Muhammad Iqbal, placed as he is, would not provide the necessary element as he is hound to state that it was personal position of the partners and their previous conduct which led him to make advances without caring for any bailment. On a careful review of the allegations made and the evidence available both documentary and oral I have come to the conclusion that no prima facie case of any conspiracy or dishonest misappropriation has been made out against any of the accused. Even charge of cheating is bound to fail in view of established confidence between the manager Khawaja Muhammad Iqbal and the partners of M/S. Food Grain Supplying Agency. Offences under sections 467 and 477 (a) are also said to have been committed. The basis of these charges is that the two cash credit pledge letters mentioned goods which in fact did not exist and accused No. 5 signed both as an accountant and a godown keeper. Section 467, P. P. C. runs thus :‑ "Whoever forges a document which purports to be a valuable security or a will or an authority to adopt a son, or which purports to give authority to any person to make or transfer any valuable security, or to receive the principal, interest, or dividends thereon, or to receive or deliver any money, movable property, or valuable security, or any document purporting to be an acquaintance or receipt acknowledge the payment of money, or an acquaintance or receipt for the delivery of any movable property or valuable security, shall be punished with transportation for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine ". A person is said to have committed forgery if‑ he makes a false document. What is making a false document is defined in section 464, P. P. C. Clauses 2 and 3 are obviously inapplicable. Clause 1 runs thus :‑ " Who dishonestly or fraudulently makes, signs, seals, or executes a document, or part of a document, or makes any mark denoting the execution of a document, with the intention of causing it to be believed that such document or part of a document was made, signed, sealed or executed by, or by the authority of, a person by whom or by whose authority he knows that it was not made, signed, sealed, or executed or at a time at which he knows that it was not made, signed, sealed or executed". Accused No. 5 made his own signature and acted on his own behalf. He did not represent that it was executed by or under authority of somebody else. Section 477 (A) is in the following words :‑ Whoever being a clerk, officer, or servant or employed or acting in the capacity of a clerk, officer, or servant wilfully and with intent to defraud, destroys, alters, mutilates, or falsifies any book, paper, writing, valuable security, or account, which belongs to, or is in the pos session of, his employer, or has been received by him for or on behalf of his employer, or wilfully and with intent to defraud, makes or abets the making of any false entry in or omits or alters, or abets the omission or alteration of, any material particular from or in, any such book, paper, writing, valuable security, or account, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both". I wonder how is this section applicable. The checking was on the basis of representation made by the pledger as it would appear from the certificate appended by the pledger in the following words " As the Bank has relied on my statement as to the quality, quantity and valuation of the above mentioned goods ". There can be no element of fraud or dishonesty in view of the wording of the certificate and the practice prevalent in the bank. I may here note that it was argued on behalf of the applicant that sanction was necessary for the prosecution of the accused under sections 467 and 477 (A) would apply only where object of the conspiracy is to commit an offence under sections 467 and 477 (A), P. P. C. But in this case the alleged object of the conspiracy was to commit criminal breach of trust pie offences of forger and falsification of account are said to have been committed to cover an alleged act of criminal breach of trust. Iii such a case section 196 (A) cannot apply. I may in this case refer to case Tofail Ahmad Khan and others v Crown (P L D 1952 Dacca 141). Their Lordships held :‑ " It is true that one of the objects, namely, falsification of accounts is a non‑cognizable offence and of course if a charge was framed in respect only of "falsification of account " and on no other offence, provisions of sec tion 196 (A) would be attracted. But in this case the accused is charged of having committed various offences in course of committing breach of trust. It will be noticed from the charge that the object was to commit criminal breach of trust and in order to commit such an offence the modus operandi of the accused was such as to bring him within the mischief of the other provisions of Pakistan Penal Code. So, it cannot be said that the object of conspiracy, to commit breach of trust cannot he separated from others for the latter were only means to an end ". To the same effect is the decision of Calcutta High Court in the case of Golam Rehman and others v. The King (51 Cr. L J p. 376). A bench of that Court observed :‑ " The mere fact that the subsidiary acts, which are means to the achievement of the principal object of the conspiracy or non‑cognisable offences will not attract the operation of section 196‑A (2) provided the principal or "dominant" object falls outside "its scope". The prosecution, therefore, is not bad on account of absence of sanction for prosecution under sections 466 and 477 (A), P. P. C. However, I have already held that on the basis of allegations made no case under these sections is made out against accused No. 5 or any one of the accused. It was next contended that the prosecution was malicious. It is not necessary to go into this question. It will suffice to say that there was no occasion for lodging a report with the police on 31st May 1955. The allegations therein made out a case for infringement of provisions of section 7 of the Banking Companies Control Act, 1948. Such infringe ment was punishable under section 15 of the same Act. And section 16 provides that no Court shall take cogniz ance of any offence punishable under section 15 except upon a complaint in writing made by an officer of the State Bank. The State Bank itself could prosecute the applicant for all offence under section 15 of the Banking Companies Control Act. I pointedly asked Mr. Raymond as to the reason which led the State Bank to approach the police on 31st May 1955. He replied that it was igno rance of the law. I am not prepared to accept this explanation. The obvious reason was to provide a handle to the police to probe into the, affairs of the petitioner. Whatever happened subsequently necessarily created ill will between the State Bank officials and the petitioner. Courts must always be anxious to see that their processes are not made a means of harassment to citizens. I thought it necessary to probe into the facade of high sounding allegations acid find out if there is a substratum of truth which could make out a case for prosecution. I have come to the conclusion that further prosecution would be an abuse of the process of the Court. I accordingly allow tile petition and quash the proceed ings pending against the applicant and the other co‑accused in the Court of XI Additional City Magistrate, Karachi. A. H. Proceedings quashed.