- (1.) The accused is charged under S. 409, Indian Penal Code for committing criminal breach of trust in respect of property to wit 3 per cent Government Promissory Loan Notes 1966-68 of the face value of Rs. 50,000 and 2 1/2 per cent Government Promissory Notes 1961 of the face value of Rs. 25,000 in or about February to May 1949 entrusted to him in his capacity as Managing Director of the Exchange Bank of India and Africa Ltd. and belonging to the Cambay Hindu Merchants Co-operative Bank. (Detailed charge is separately framed).
(2.) The appellant at all material times was the Managing Director of the Exchange Bank of India and Africa Ltd., with its head office at Bombay, which hereinafter will be referred to as the Exchange Bank. He held a power of attorney to act as the Managing Director on behalf of the Directors of the Company. By that power the accused was invested with the authority to borrow money on behalf of the Bank. In 1944 the Cambay Hindu Merchants Co-operative Bank at Cambay, which herein-after will be referred to as the Co-operative Bank, had opened a current account with the Exchange Bank. On instructions from the Co-operative Bank, the Exchange Bank purchased in August 1946 securities worth Rs. 25,000 in its own name with money belonging to the Co-operative bank and the securities were kept with the Exchange Bank as a cover for overdraft. In March 1948 two further lots of Government security of Rs. 25,000 each of the value of Rs. 50,000 were purchased likewise and left with the Exchange Bank for the same purpose. On 14-5-1948 the two banks entered into a contract evidenced by three documents to be noticed in detail hereinafter. Shortly stated, the Exchange Bank agreed to grant the Co-operative Bank credit for overdraft up to a limit of Rs. 66.150 and as a security for the overdraft the Government securities of the value of Rs. 75,000 already in the custody of the Exchange Bank were pledged to the latter. These securities of the face value of Rs. 75,000 will hereinafter be referred to as "the securities," But is appears that the Co-operative Bank had no occasion to operate on the overdraft account until 28-2-1949 when the crucial event happened, namely, the Exchange Bank finding itself in an embarrassed financial position took a loan from the Canara Bank of one lakh of rupees by pleading the securities as also other securities with which we are not concerned in this case. On 24-4-1949 the Exchange Bank paid off the dues of the Canara Bank by taking a fresh loan of the same amount of one lakh from Messrs Merwanji Dalal and Co. and pleading the same securities as had been pledged to the Canara Bank. On 28-4-1949 Messrs Merwanji Dalal and Co. demanded back their money by the forenoon of the day following. As the Exchange Bank could not pay the amount as demanded, the pledges aforesaid sold those securities including the securities belonging to the Co-operative Bank, for realising their dues, on 3-5-1949.
(3.) In the meantime, in answer to a letter from the Co-operative Bank to the Exchange Bank asking for a certificate for the securities held by the latter on behalf of the former in the overdraft account, the Exchange Bank issued the certificate dated 1-4-1949 to the effect that at the close of business on 31-3-1949 it held Government of India securities of the total value of Rs. 75,000 as security against the overdraft facilities granted to the Co-operative Bank and that there was no overdraft against the said securities on that date. Subsequently, on 29-4-1949 the Co-operative Bank wrote to the Exchange Bank asking the latter to hand over securities of the face value of Rs. 50,000 to the Central Bank. The Central Bank also on behalf of the Co-operative Bank made a similar demand and as the Exchange Bank did not comply with that requisition, the Central Bank informed the Co-operative Bank by a letter dated 3-5-1949 that the securities had not been handed over to the Central Bank as directed by the Co-operative bank. The Co-operative Bank then wrote to the Reserve Bank for stoppage of the securities of the value of Rs. 25,000. It became clear by then that the Exchange Bank was not in a position to return the securities to the owners, that is to say, the Co-operative Bank.;