01Facts
The applicant served as the Secretary of Shiv-Shakti Plastic Utpadak Audyogik Sahakari Mandali Ltd.
The Society obtained a loan of ₹3,20,000/- from Kheda District Central Co-operative Bank Ltd., hypothecating machinery as security
p. 2Allegations were made that the Society shifted the machinery without the Bank's consent and failed to repay the loan
p. 3While the Society eventually repaid the loan during the pendency of a second complaint, the applicant was convicted under Section 406 of the IPC by the JMFC, Mahemdavad (Case No. 255/1999), and sentenced to one month simple imprisonment and a fine of ₹2,000/-
pp. 1-2The Additional Sessions Judge, Kheda, confirmed this conviction on 10.07.2009
p. 1The applicant moved the High Court in revision, contending he acted only in an official capacity and no criminal intent existed
p. 302Issues
i.1. Whether the applicant, acting as a Secretary of a registered Co-operative Society, can be held personally liable for Criminal Breach of Trust for actions taken on behalf of the Society
p. 4 / para. 7ii.2. Whether a default in loan repayment and shifting of hypothecated property constitutes a criminal offense under Section 406 IPC or is a dispute of a civil nature
p. 4 / para. 803Law Applied
The Court primarily applied Section 406 of the Indian Penal Code (IPC) regarding punishment for criminal breach of trust
p. 1Section 37 of the Gujarat Co-operative Societies Act, which establishes a Society as a separate legal entity, and Section 76 regarding the limited liability of officers
p. 4Lalit Chaturvedi v. State of Uttar Pradesh (2024 SCC OnLine SC 171) and Rikhab Birani v. State of Uttar Pradesh (2025 INSC 512), which discourage the use of criminal prosecution to settle civil disputes or pressure recovery in cases lacking mens rea
p. 5Provisions in the judgment · 6 · Linked ones open on LawLens
Code of Criminal Procedure, 1973 Section 397Section 401
Indian Penal Code, 1860 Section 406Section 420
Gujarat Cooperative societies Act-1961 Section 37Section 76
04Reasoning
The Court reasoned that the loan transaction was between the Bank and the Society, a distinct legal entity; the applicant did not avail the loan in his personal capacity nor did he use the funds for personal benefit
p. 4For a conviction under Section 406 IPC, the prosecution must prove "dishonest intention" or mens rea at the inception of the transaction, which was absent here as the dispute stemmed from a failure to adhere to loan terms—essentially a breach of contract
p. 4The Court observed that the complaint appeared to be an attempt to recover dues beyond the limitation period by giving a civil dispute a "color of criminality"
p. 4Consequently, the Court found that shifting hypothecated machinery and failing to repay did not meet the threshold of criminal misappropriation when the Society's management was vested in a Committee and the applicant acted only as an administrative officer
p. 405Holding
The High Court allowed the revision application, answering that the dispute was civil in nature and lacked the requisite criminal intent for a conviction under Section 406 IPC
p. 5The Court quashed and set aside the judgment of the JMFC dated 08.10.2001 and the appellate order dated 10.07.2009. The applicant was acquitted of all charges and his bail bonds were discharged
p. 5Original Court PDF
BIPINBHAI KHANABHAI JADHAVvsSTATE OF GUJARAT
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