STATE BANK OF INDIA v. RAJENDRA KUMAR SINGH & ORS. September 25, 1968 [J. C. SHAH, V. RAMASWAM! AND A. N. GROVER, JJ.] Code of Criminal Procedure, 1898, Ss. 517 and 520-0rder of the Court directing return of seized property-If necessary to give party adversel,y affected notice of hearing and opportunity to be heard-Who has 'rlght to possess' lVithin the meaning of s. 517.
21 currency notes of Rs. 1,000 each were seized from the Appellant Bank by the police in the course of an investigation of a case again.st the third respondent of cheating the fust and second respondents.
The seized· currency notes were said to be part of the property obtained by the third respondent from the other two respondents. The third respon· dent was acquitted by the trial court of the offence charged. In the
course of the trial the appellant made an application under section 517(1) of the Code of Criminal Procedure asking for the delivery of the currency notes to it on the ground that the appellant was an innocent third party who had received the said notes without any knowledge or suspicion 'of their having been involved in the commission of an … offence. By its order of 24th April 1962, the' trial court allowed the application and directed that the currency notes should be returned to the appellant. Snbseqently an appeal filed by the State' was allowed by the High Court whii:h set aside the trial court's order of acquittal of the third respondent and convicted him of the offence charged.
On an application made1 by the first respondent asking for delivery of the currency notes to him as they belonged to him and the second respondent, the High Court, by an order of April 5, 1963 directed that the notes be handed over to the first and second respondents.
In the appeal to this Court, it was contended, inter alia, on behalf of the appellant that the High Court had reversed the order of the trial court directing the return of the currency notes to the appellant without giving a notice to the appellant. and without giving an opportunity of being heard; and that the order of April 5, 1963 was therefore violative of the principles of natural justice and was illegal.
The contention on behalf of the respondents was that there was no provision in section 520 of the Code of Criminal Procedure for giving notice to the affected parties and the order of the High Court could not be challenged on the ground that no hearing was given ·to the appellant. It was also contend- ed that the High Court had a discretion under the statute as to whom the property was to be returned and there was no reason why this Court should interfere with the exercise of discretion by the High Court. HELD : The appeal must be allowed and the order of the High Court dated April 5, 1963 set ·aside.
The seized currency notes must be directed to be returned to the appellant. (!) Jt is mainfest that the High Court was bound to give notice to the appellant before reversing the order of the trial court directing the disposal of the property under s. 517 of the Code of Crimimrl Procedure. As no such notice was given to the appellant, the order of the High Court dated 5th April 1963 is vitiated in law.
Although the statute does not expressly require a notice to be issued, or a hearing to be given to the ,_ _, —-~ STATE BANK; v. R. K. SINGH (Ramaswami, J.) parties adversely affected, there is in the eye of law a necessary .implica· tion that the parties adversely affected should be heard be!fore the Court makes an order for return of the seized property. [220 C-D, 221 El c
Cooper v. Wandsworth Board of Works. (1863) 14 C.B.N.S. 180; Ridge v. Baldwin, (1963) 2 W.L.R. 935 and Board of High School and Intermediate Education, U.P. Allahabad v. Ghanshyam Das Gupta and Ors, A.LR. 1962 S.C. 1110, referred to.
(2) The appellant asserted that it had obtained the currency notes in the normal course of its business and without any koowledge or sus- pecion of their having been involved in the eommission of any offenoe and that the respondents had not alleged fraud or lack of good faith on the part of the appellant, In the circumstances the High Court shonld have directed the return of the currency notes to the appellant which had the "righrto possess" the notes within the language of s. 517 of the Code of Criminal Procedure. Property in coins and currency notes
passes by mere delivery and it is the clearest exception to the rule N emo dat quod non habet, [222 B. CJ Whistler v. Forster, (1863) 14 C.B.N.S. 257-258, referred to. CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
32 of 1965 . Appeal by special leave from the judgment and order dated April 5, 1963 of the Madhya Pradesh High Court, Indore Bench in Criminal Misc., Case No. 135 of 1962. Niren De, Solicitor-General, H. L. Anand, I. M. Bhardwaj
and K. B. Mehta, for the appellant. B. C. Mishra and C. P. Lal, for respondents Nos. 1 and 2. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought from the order of the High Court of Madhya Pradesh dated 5th April, 1963 in Crimi· nal Miscellaneous Case No. 135 of 1962 under section 520 of the Code of Criminal Procedure directing the return of 21 cur· rency notes of the denomination of Rs. 1,000 each to respondents Rajendra Kumar Singh and Virendra Singh .
The currency notes of the total value of Rs. 21,000 were seiz.• ed by the Madhya Pradesh Police from the Beawar Branch of the State Bank of India in the course of an investigation of a case under sections 420, 406 and 120B of the Indian Penal Code
registered in P. S. Thuko Ganj, Indore City as Crime No. 113 of 1961 against Kishan Gopal, the third respondent. It appears that the third respondent had come into possession of a sum of
Rs. 1,50,000 in Govermnent currency notes by cheating the first and second respondents. The currency notes seized from the appellant were said to be part of the property obtained by Kishan Gopal by the commission of the said offence.
The case of the appellant was that it had come into possession of the said cur- rency notes in the usual course of its business partly through the Bank of Rajasthan Limited and partly through the Mahalaxmi L2SuP CI 69-15
2.18 SUPREME. (;OlJ!lT REPORTS Mills Company Limited without any knowledge that the said cur- renC) notes had been the subject matter of an offence. In the proceedings that followed on the investigation of the said case, the accused persons including the third respondent were acquitted by the Court of the Fourth Additional Sessions Judge, Indore in Sessions Case No, 3 of 1962 by an order made on 24th April, 1962. In the course of tlie trial, the appellant made an applica- tion under section 517 ( 1) of the Code of Criminal Procedure asking for delivery of the aforesaid 21 currency notes to it on the ground that the said currency notes had been seized by the police from the appellant and that the appellant was an innocent third party who had received the said notes without any knowledge or suspicion of their having been involved in the commission of an offence.
By his order dated 24th April, 1962 the 4th Additional Sessions Judge, Indore allowed the application and directed that the currency notes should be returned to the appellant. Subse-
quently, an appeal was filed to the High Court by the State of Madhya Pradesh being Criminal Appeal No. 205 of 1962. The appeal was allowed and the High Court set aside the · order of acquittal of the third respondent and convicted him under sections 420, 406 and 120B of the Indian Penal Code and sentenced to undergo imprisonment. . The first respondent, Rajendra Kumar Singh, made an application to the High Court asking for delivery of the currency notes as they belonged to him and the second res- pondent and as they had been deprived of the said property by the third respondent by the commission of the aforesaid offence. The application was allowed by the High Court by its order dated 5th April, 1963 aild the currency notes were ordered to be handed over to the first and the second respondents.
The relevant portion of the order of. the High Court reads as follows :- "Now the bulk of the recovered property consists of Government currency notes either of the denomina- tion of rupees one thousand each or money obtained
after the tender of one thousand rupee notes by Kishan Gopal. · The position of the recovered money in short is this:- Rs. I. 37, one thousand rupee notes were reco- vered from the pillow of accused Kishan
Gopal after his arrest amounting to : 37,000 . 2. Money directly traceable to one-thousand ·rupee notes recovered from Dayabhai P.W. 52, with whom it was deposited by accused . Kishan Gopal and Mst. Tulsabai.
59,500 3: Money recovered from Mst. Tulsabai ihe sister of accused's cuncubine 10,-000 – c r _, c STATE BANK v. R. K, SINGH (Ramaswami, J.) 4. Money in Beawar Bank consisting of two
draits of ten-thousand each; on in the name of accused Kishan Gopal and the other in the name of Rukmanibai, his witness for which the accused tendered twenty one thousand rupee notes and one thousand
rupee notes with which he opened an ac- count with his Bank. 21,000 Total:- 1,27,500 This amount (Rs. 1,27,500) is directly traceable to the conversion of one thousand rupee notes.
We, therefore, direct it be given to Virendra Singh P.W. l, and Rajendra Kumar P.W. 73, who shall proportionately divide it between themselves. No other order is made in respect of other property and the parties are left to
establish their claim in Civil Court". Section 517 of the Code of Criminal Proced4,re states : "517. ( 1 ) When an inquiry or a trial in any Criminal Court is concluded, the Court may make such
order as it thinks fit for the disposal by destruc- tion, confiscation, or delivery to any person claiming to be entitled to possession thereof or otherwise of any property or document produc-
ed before 'it or in its custody or regarding which any offence appears to have been committed, or which has been used for the commission of any offence. ( 2) When a High Court or a Court of Session makes
such order and cannot through its own officers conveniently deliver the property to the person entitled thereto, such Court may direct that the order be carried into effect by the District
Magistrate. Section 520 provides as follows :- "Any Court of appeal, confirmation, reference or . revision may direct any order under section 518, section 518 or section 519 passed by a Court subordinate
thereto, to be stayed pending consideration by the former.: Court, and may modify, alter or annul such order '<lnd ' made any further orders that may be just" .. 221) (1969) 2 S.C.R.
In support of this appeal, it was contended in the first place that the High Court had reversed the order of the Sessions Judge directing the return of the currency notes without giving a notice to the appellant and without giving an opportunity to it for being heard.
The argument was stressed that there was a violation of the principle of natural justice and the order oi the High Court dated 5th April, 1963 was illegal. It was, however, contended
on behalf of the respondents that there was no provision in section 520 of the Code of Criminal Procedure for giving notice to the affected parties and the order of the High Court cannot be chal- lenged on the ground that no hearing was given to the appellant. In our opinion, there is no warrant or justification for the argu- ment advanced' on behalf of the respondents. It is true that the statute does not expressly require a notice to be issued, or a hear- ing to be given to the parties adversely affected.
But though the statute is silent and does not expressly require issue of any notice there is in the eye of law a necessary implication that the party adversely affected should be heard bfore the Court makes an order for return oi the seized property. The principle is clearly stated in the leading case of Cooper v. Wandsworth Board of Works('). In that case section 7 6 of the Metropolis Local Amendment Act, 1855 authorised the District Board to demolish the building if it had been constructed by the owner without giving notice to the Board of his intention to build.
The statute laid down no pro- cedure for the exercise of the power of demolition, and, therefore, the Board demolished the house in exercise of the above power without issuing a notice to the owner of the house.
It was held by the Court of Common Pleas that the Board was liable in dam- ages for not having given notice oif their order before they pro- ceeded to execute it. Erle, C.J. held that the power was subject to a qualification repeatedly recognised that no man is to be deprived of his property without his having an opportunity of being heard and that this had been applied to "many exercises of power which in common understanding would not be at all a more judicial proceeding than would be the act of the district board in ordering a house to be pulled down''. Willes, J. said that the rule was "of universal application and founded upon the plainest principles of justice" and Byles, J. said that "although there are no positive words in a statute requiring that the party shall be heard, yet the justice of the common law will supply the omission of the legisla- ture." The same principle has been reaffirmed in a recent case Ridge v. Baldwin (2). In that case, section 191 of the Municipal Corporations Act, 1881 provided that a watch coll1ll1ittee may at any time suspend or dismiss any borough constable whom they think negligent in the discharge of his duty, or otherwise unfit for the same.
The appellant, who was the chief constable o;f a (J) (1863) 14 C.B.N.S. 180. (2) (1963) 2 W.L.R. 935. t– • c c ….. STATE BANK v. R. K, SINGH (Ramaswami, J,) borough police force, was dismissed by the watch committee on the ground that he was negligent in the discharge of his duties as chief constable.
He brought an action against the members of the watch committee by stipulating that his dismissal was illegal and ultra vires the powers. It was held by the House of Lords that the decision of the watch committee was ultra vires because they dismissed the appellant on the ground of neglect of duty and as such they were bound to observe the principles of natural jus- tice by informin1t him of the charges made against him and giving him an opportunity of being heard.
The same principle was applied by this Court in Board of HiRh School and Interme- diate Education, U.P., Allahabad v. Ghanshyam Das Gupta and Ors. (1). It was held in that case that an examination committee of the Board of Secondary Education in Uttar Pradesh was acting quasi-judicially when exercising its power under rule 1 ( 1) of Chapter VI of the Regulations dealing with cases of examinees using unfair means in examination hall and the principle of natu- ral justice which require that the examinee must be heard, will apply to the proceedings before the Committee. Though there was nothing express one way or the other in the Act or the Regu- lations casting a duty on the committee to act judicially, where no opportunity whatever was given to the examinee to give an expla- nation and present their case before the Committee, the Resolu- tion of the committee cancelling their results and depriving them from appearing at the next examination was defective. Applying the principle to the present case it is manifest that the High Court was bound to give notice to the appellant before reversing the order of the Sessions Judge directing the disposal of the property under s. S 17 of the Code of Criminal Procedure.
As no such notice was given to the appellant, the order of the High Court dated Sth April, 1963 is vitiated in law. The next question which arises in this appeal is whether the High Court was justified on merits in ordering the currency notes · to be returned to respondents 1 and 2. It was argued by Mr. Mishra that the High Court had a discretion under the statute as to whom the pronertv was to be returned and there was no reason why this Court should interfere with such exercise of discretion by the High Court.
We are unable to accent this ar!!ument. It is true that sections Sl 7 and 520 of the Code of Criminal Procedure confer a discretion on the Hi!!h Court as regards the disposal of the oroperty seized or produced before it or regarding which any offence was said to have been committed. But as we shall pre- sently show the High Court has not exercised its discretion accord- in!! to proper legal orinciole and its order is hence liable to be set aside.
It was stated by Mr. Mishra that the question involved in (!) A.T.R. 1962 S.C. 1110. 2_22 this ·case is whether as to which out of two innocent parties should suffer, viz., the person who lost the property due to the criminal act of another or the person to whom the property
(currency notes) had been delivered in the normal course of its business. It is.not, however, correct to say that respondents 1 and 2 are equa 11 y innocent because respondents 1 and 2 had admittedly handed over the currency notes to respondent No. 3 "for the criminal purpose of duplication".
It was indeed urged on behalf of the appellant that respondents 1 and 2 ·had entered into a criminal conspiracy with respondent No. 3 for 'duplicating' the currency notes. In any event, we are satisfied that the High Court was in error in directing the return of the currency notes to respondents 1 and 2. The reason is that the property in coins and currency notes passes by mere delivery and it is the clearest exception to the rule N emo dat quod non habat.
This exception was engrafted in the interest of commercial necessity. But the exception only applies if the transferee of the coin. or currency notes takes in good faith for value and without notice of a defect in the title of the transforor. The rule is stated by Wills J. in Whistler· v.
Forster(') as follows:- "The general rule of law is undoubted, that no one can transfer a better title than he himself possesses : Nemo dat quod non habat. To this there are some exceptions; one of which arises out of the rule of the law m~rchant as to negotiable instruments.
These, being pairt of the currency, are subject to the same rule as money : and if such an instrument be transferred in good faith, for value, before it is overdue, it becomes available in the hands of the holder, notwithstanding
fraud which would render it unavailable in the hands of a. previous holder." In the present case the appellant asserted that it had obtained the currency notes in the normal course of its business and without any knowledge or suspicion of their having been involved in the commission of any offence. The respondents have not alleged fraud or lack of good faith on the part of the appellant.
The appellant hence contended that the property in the currency notes, passed in its favour by mere delivery and the appellant "had a right to possess' the currency notes within the meaning of s. 517 of the Code of Criminal Procedure. We do not wish to express any concluded opinion in this case on the ultimate question of liability for payment of the money as between the appellant on the one hand and respondents 1 and 2 on the other. But we are of ·opinion . that in the circumstances of this case the High Court should have directed the return of the said currency notes to the —-·–
(!) (1863) 14 C.B.N.S. 257-258, c l .. . .. ,. STATE BANK v. R. K. SINGH (Ramaswami, J.) appellant which had the "right to possess" the currency notes within the language of s. 517 of the Code of Criminal Procedure. We accordingly allow this appeal, set aside the order of the High Court dated April 5, 1963 and direct that the 21 currency notes of the denomination of Rs. 1000 each seized by the Madhya Pradesh Police should be returned to the appellant.
R.K.P.S. · Appeal allowed.