WALGAMAGE v. THE ATTORNEY-GENERAL

001-SLLR-SLLR-2000-V-3-WALGAMAGE-v.-THE-ATTORNEY-GENERAL.pdf


WALGAMAGE
v.THE ATTORNEYGENERAL
SUPREME COURTFERNANDO, J.
KULATUNGA, J. ANDGOONEWARDENE. J.
SC APPEAL NO. 38/90
CA NO. 126/85
MC MATARA NO. 5/83
3rd DECEMBER 1990, AND
1 7th JANUARY AND 3rd MARCH 1991
Penal Code – Criminal misappropriation and Criminal breach of trust -Sections 386 and 388 of the Penal Code – Whether an innocent taking inthe Jirst instance is essential to constitute the offence – Meaning of“entrustment" in criminal breach of trust.
The appellant was the Manager of a Rural Bank functioning in thepremises of a multi-purpose co-operative Society ("M.P.C.S”). The Bankaccepted savings deposits and granted small loans, and also carried onthe business of a pawn broker. According to prescribed operatingprocedures, its cash balance at any given time should not have exceededRs. 5000/-. Whenever the Bank required cash, on the request of itscashier the appellant prepared a voucher and submitted it to theManager M.P.C.S. for approval. Upon approval, a cheque drawn in thename of the appellant was issued. The appellant would endorse it andpresent it to the cashier M.P.C.S. who would paycash. The appellant wasexpected to hand over the cash to the cashier of the Bank. Fourteencheques for Rs. 5000/- each had been issued, and in respect of ten ofthese, the M.P.C.S. cashier had paid cash to the appellant, which he hadnot handed over to the Bank's cashier. The appellant was convicted ofcriminal breach of trust in respect of the said sum of Rs. 50.000/-.
It was argued on behalf of the appellant that the offence of criminalbreach of trust had not been made out because :
there had been no initial taking bereft of a dishonest intention, theoffender being already in possession at the time the offence wascommitted.
there had been no entrustment (of property) on the basis of trueconsent.
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Held :
(1) Ex facie section 386 of the Penal Code does not impose a requirementthat the initial taking must be innocent, but only that a dishonestintention must exist at the time of misappropriation or conversion.Insistence upon an initial innocent taking amounts to adding a furtheringredient, which is not a permissible principle of interpretation.
Per Fernando, J.
“Illustrations (b). (c) and (f) to explanation 2 to section 386 areagainst learned President's Counsel's contention that criminalmisappropriation deals with cases where the offender is already inpossession, for they show that a person who finds property not in thepossession of any one, and immediately misappropriates it is guiltyof that offence.”
In the instant case there was an entrustment of property within themeaning of section 388.
Per Fernando, J.
““entrustment" does not contemplate the creation of a trust withall the technicalities of the law of trust: it includes the deliveryof property to another to be dealt with in accordance with anarrangement made either then or previously.”
Cases referred to :
A.G. v. Menthis (I960) 61 NLR 561
Ranasinghe v. Wyendra (1970) 74 NLR 38
King v. Kabeer (1920) 22 NLR 105
Rajendra v. State of Uttar Pradesh AIR (1960) Allahabad 387
Ram Dayal (1886) P.R. No. 24 1886
Shamsooudur (1870) 2 N.W.P. 475
Raza Husain (1905) 25 A.W.N. 9, 2 Cr.L. 394
Me Iver (1935) 69 M.L.J. 681
Stickney u. Sinnatamby (1886) 5 Tamb 112
Peries v. Anderson (1928) 6 Times 49
Georgesy v. Saibo (1902) 3 BR. 88
Kanavadipillai v. Koswatta (1914) 4 Bah N.C. 74
R. u. Suppaih (1901) 5 NLR 119
, 14. S.C. 61 P.C. Chilaw 29737: 4. 3. 1910. 6 C.L. Revision 137. 15315. Gratiaen Perera v. The Queen (1960) 61 NLR 522
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Walgamage v. The Attorney-General
(Fernando, J.)
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APPEAL from the judjement of the Court of Appeal reported in (1990) 2Sri LR 212
D.S. Wijesinghe. P.C., with Ananda Malalgoda, Nihal Somasiri and AID.Dharmadasa for accused-appellant.
A.R.N. Fernando, S.S.C. for Attorney General.
Cur. adv. vult.
July 10, 1991.
FERNANDO. J.Special leave to appeal was granted in this case in view ofconflicting decisions (in A.G. v. MenthisJ" and Ranasinghe v.Wijendra,(2> and the decisions cited therein) upon the questionwhether to constitute the offence of criminal misappropriationor criminal breach of trust it is essential that the initial takingbe innocent.
The Appellant was convicted of criminal breach of trust, inrespect of a sum of Rs. 50,000/- while being employed asManager of a Rural Bank. The Rural Bank accepted savingsdeposits, and granted small loans, and also carried on thebusiness of a pawn broker. According to prescribed operatingprocedures, its cash balance at any given time should not haveexceeded Rs. 5,000/-. If the Bank required cash, a sum notexceeding Rs. 5,000/- at a time was obtained from theMulti-Purpose Co-operative Society (“M.P.C.S.”) within whosepremises it functioned. The Bank’s cashier would make an oralrequest for cash to the Appellant, who would prepare avoucher for that purpose, and submit it to the Credit Managerof the M.P.C.S. The latter was expected to satisfy himself thatcash was actually required, and would then authorise acheque to be drawn for the stipulated amount, in the name ofthe Appellant. A cheque would then be prepared, and dulysigned, and delivered to the Appellant, who would endorse it;his endorsement would be authenticated by the Accountant,and the cheque would then be presented to the cashier of theM.P.C.S., who would pay cash. TheAppellant was expected tohand over the cash to the cashier of the Bank.
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Fourteen vouchers for Rs. 5,000/- each were prepared bythe Appellant, at times when the cashier had not requiredcash, and had made no request for cash; the Credit Managerhad approved the vouchers and sanctioned payment withoutdue care. Fourteen cheques for Rs. 5,000/- each had beenissued, and in respect of ten of these, the M.P.C.S. cashier hadpaid cash to the Appellant, which he had not handed over tothe Bank’s cashier. The Appellant was found guilty by the HighCourt of Matara of criminal breach of trust under section 391of the Penal Code, and was sentenced to two years R.I., and afine of Rs. 50,000/- (in default 1 1/2 years R.I.). The Court ofAppeal while upholding the conviction, suspended the prisonsentence for a term of five years, and affirmed the fine anddefault sentence, with appropriate directions to the HighCourt.
If there was an “entrustment”, it was not merely of thecheque but also of the cash obtained in exchange. In King u.Kabeer/31 a jail guard was entrusted with a railway warrant,and instructed to accompany a prisoner who had served hissentence to the railway station, to receive a train ticket inexchange for the warrant, and to give him the ticket. Havingobtained the ticket the jail guard sold it. De Sampayo, J.,upheld an acquittal on a charge of criminal breach of trust inrespect of the warrant. The trust in respect of the railwaywarrant was to deliver it to the proper officer at the railwaystation and to receive a ticket in exchange; although it was truethat he had failed to perform the further duty of handingthe ticket to the prisoner, that had no immediate connectionwith the trust in respect of the warrant. That case isdistinguishable: there was no charge of criminal breach oftrust in respect of the ticket and in any event, the ticket wasnot “entrusted” by the prison authorities, but handed over bya third party, the railway officer. In the present case, the Bankhad an arrangement with the M.P.C.S. whereby the latterwould provide cash to designated officers of the Bank. TheM.P.C.S., through one or more of its officers, provided cash,and as part of its internal procedure (and it is immaterial
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whether this was made known to the Bank or not) first issueda cheque through one officer, and cash upon presentation ofthe cheque to another officer. That transaction cannot beseparated into two distinct components: the delivery of acheque subject to a “trust”, and the delivery of cash inexchange for the cheque, free of such “trust”. In pursuance ofan arrangement with the Bank, the M.P.C.S. through itsofficers caused cash to be delivered to the Appellant, and it was .part of the arrangement that this sum was ‘‘entrusted” to theAppellant to be handed over to the Bank’s cashier. It is truethat the officers of the M.P.C.S. did not themselves, personally,“entrust” the cash; they were no more than the hands whichdelivered the cash, there being an entrustment by the legalperson, namely the M.P.C.S., whose business organisationthey served.
It is possible that the Appellant had no dishonest intentionon the first occasion (and perhaps even on the second) whenhe obtained cash in this way; it may well be that he obtainedcash in anticipation of requests by the Bank’s cashier in orderto expedite the Bank’s business, by immediately responding toa request for cash without having to spend time in goingthrough the process of approval, documentation, andpayment. But the sum obtained on the first occasion was notactually paid to the Bank’s cashier. Hence it is reasonable toconclude that at least on the subsequent occasions, he had adishonest intention at the outset. Learned President’s Counselsubmitted that the Prosecution evidence thus established theoffence of cheating; and that criminal breach of trust had notbeen made out because :
there had been no initial taking bereft of a dishonestintention, and
there had been no entrustment: because a trust impliesconfidence reposed by one person in another, and it is ofthe essence of confidence that it must be freely given andthat there must be a true consent; there is no true consent,if consent is obtained as a result of a trick.
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In support of his contention that the initial taking must beinnocent, and that a dishonest intention must be formedsubsequently, learned President’s Counsel advanced threearguments. He conceded that ex facie section 386 does notimpose such a requirement, but only that a dishonestintention must exist at the time of misappropriation orconversion to the offender’s own use. Insistence upon an initialinnocent taking amounts to adding a further ingredient,namely “whoever having obtained possession of any movablepropertu without a dishonest intention, theregfter dishonestlymisappropriates or converts to his own use such movableproperty …” His first submission was that in respect ofoffences against property there are clear lines of demarcationin the Penal Code between those where the victim is in.possession at the time the offence is committed (such as theftand cheating) and those where the victim is out of possessionthe offender being already in possession (such as criminalmisappropriation and criminal breach of trust); all theseoffences are intended to be self-contained without anyoverlapping, so that the same act could not constitute bothcheating and criminal misappropriation. He urged that “it isan established principle that criminal laws must beconstrued narrowly or in favorem vitae aut libertatis”. citingMaxwell (Interpretation of Statutes, 12th Edition, p. 245):
“Similarly, statutes dealing with jurisdiction andprocedure are, if they relate to the infliction of penalties,strictly construed: compliance with proceduralprovisions will be stringently exacted from thoseproceeding against the person liable to be penalised, andif there is any ambiguity or doubt it will, as usual, beresolved in his favour. This is so even though it may enablehim to escape upon a technicality.”
Secondly he contended that the Indian Courts hadconsistently taken this view; the decision in Rajendra v. Stateof Uttar Pradesh,t4) cited in the Court of Appeal judgment wasnot in line with the Indian trend.
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(Fernando, J.)
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In support of these two contentions reference was made tothe observations of Weeramantiy, J., in Ranasinghe v.Wifenclra(Supra)
“This indeed would appear to be the understanding of thisoffence in India as well. Thus Ratanlal & Thakore begintheir comment on this section with the observationthat “criminal misappropriation takes place when thepossession has been innocently come by, but where, by asubsequent change of intention, or from the knowledge ofsome new fact with which the party was not previouslyacquainted, the retaining becomes wrongful andfraudulent. The offence consists in the dishonestmisappropriation or conversion, either permanently or fora time, of property which is already without wrong in thepossession of the offender.” The authors go on to point outthat in this respect the Penal Code is at variance with theEnglish law according to which the intention of theaccused only at the time of obtaining possession is takeninto account.
So also the original texts of the Penal Law of India by SirHari Singh Gour himself would appear to draw thisdistinction. It is there stated: “The question whether theact is theft or misappropriation depends upon when thedishonesty began – was it before or after the thingcame into possession. This is a point of division asmuch between the two offences of theft and criminalmisappropriation in the Code, as between criminalmisappropriation and a civil wrong under English law."This absence of wrongful initial taking is stressed again forhe observes in a later passage that in theft the initialtaking is wrongful but in criminal misappropriation itis indifferent and may even be innocent but becomeswrongful by a subsequent change of intention or fromknowledge of some new fact with which the party was notpreviously acquainted. The word “indifferent" in thispassage would appear to refer to a neutral state of mind -that is where the doer has not affirmatively formed awrongful intention at the time of taking.
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Later editions of this celebrated work by other editorsseem to depart however from the view of the distinguishedauthor, for the 8th edition states that it is difficult tosay that misappropriation cannot be committed if theaccused had a dishonest intention at the moment oftaking possession of the article. I would prefer on thispoint to follow the view expressed by Sir Hari Singh Gourhimself, “(pp 42-43)”
Thirdly he urged that the cursus curiae in Sri Lankawas to regard innocent initial taking as an indispensableingredient of criminal misappropriation, except for a briefinterlude of ten years between A.G. v. Menthis and Ranasinghev. Wijendra(Supra) this was the view expressed by professorG.L. Peiris (Offences under the Penal Code, p 460).
Neither the Penal Code nor any other statute lays down aprinciple of interpretation that the there is no offences in thePenal Code must be presumed not to overlap. It is because theCriminal Procedure Code of 1898 recognised that there may besuch overlapping that section 180(2) (corresponding to section175(2) of the present Code of Criminal Procedure Act) providedthat:
“If the acts alleged constitute an offence falling within twoor more separate definitions of any law in force for the timebeing by which offences are defined or punished theperson accused of them may be charged with and tried atone trial for each of such offences …”
The first illustration to that section demonstrates that thesame act could constitute the offence of causing hurt as wellas of using criminal force. The principle that penal statutes areto be strictly construed does not apply where a statute is clearand unambiguous. I am therefore of the view that thesuggested principles of interpretation cannot be applied so asto introduce an additional ingredient into the definition of an
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(Fernando, J.)
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offence. It is unnecessary to consider when and how thoseprinciples could be utilised to resolve an ambiguity, becausewe are here concerned not with an ambiguity but with theimposition of an additional ingredient through interpretation.It is true that at the time the Penal Code was enacted in Indialarceny in English law did not include cases where propertywas taken without a dishonest intention; probably the offenceof criminal misappropriation was intended to cover suchcases. However, the definition actually adopted to give effect tothat intention covers not only such cases, but extends also tocases where a dishonest intention existed at the outset.Illustrations (b), (c) and (f) to explanation 2 to section 386 areagainst learned President’s Counsel’s contention that criminalmisappropriation deals with cases where the offender isalready in possession, for they show that a person who findsproperty not in the possession of any one, and immediatelymisappropriates it is guilty of that offence. This explanation,is not an exception to, or an extension of, the section, butnamely illustrates the principle contained therein. It serves toemphasise that all that is required is dishonesty at the time ofthe act of misappropriation or conversion.
The position in India is by no means consistent. Gour’sview has not been acted upon in many instances. Casesreferred to in the Commentaries on the Indian Penal Codeinclude the following:
“A Hindu girl having picked up a gold necklet and made itover to a sweeper girl, the accused, the brother of thefinder, represented to the latter that the necklet belongedto a person of his acquaintance and thus got possessionof it from her. On inquiry by a police constable a few hourslater, he repeated the representations, but afterwardsgave up the necklet. These representations were foundto be untrue to the knowledge of the accused. It washeld that he had committed this offence (criminalmisappropriation).” Ram Dayal,151.
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“Where money is paid to a person by mistake, and suchperson, either at the time of the receipt or at any timesubsequently, discovers the mistake, and determines toappropriate the money, that person is guilty of criminalmisappropriation.” ShamsooudurJ61.
“A and B were about to travel by the same train fromBenares City. A had a ticket for Ajudhia. B had two ticketsfor Benares Cantonment. A voluntarily handed over herticket to B in order that he might tell her if it was right. Bunder the pretence of returning A’s ticket, substitutedtherefore one of his own, and kept A's ticket. It was heldthat the offence committed by B was that of criminalmisappropriation rather than that of cheating." RazaHusain,171.
“Even though the accused when they inducedthe complainant to part with certain properties hadthe intention of deceiving him, a subsequentmisappropriation by them of the property to their own usewould amount to criminal breach of trust. The fact thatthere was a complete offence of cheating when theproperty was received would not prevent the accusedbeing guilty of the offence of criminal breach of trust.”Me Iver,181.
[Ratanlal and Thakore, Law of Crimes, 22nd ed, pp 1040,1041, 1045, 1051; Gour, Penal Law of India, 10,h ed,pp 3450, 3459, 3460)
In view of such decisions it is not suprising that thepresent edition of Gour’s work (at p. 3453) states :
“The argument that criminal misappropriation cannot becommitted if the accused had dishonest intention atthe time of taking possession of the article, cannot beaccepted.”
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Walgamage v. The Attorney-General
(Fernando. J.)
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The first of the local cqses relied on as establishing acursus curiae is Stickney v. Sinnatamby,191. There, upon beingasked for his gun by the accused, the complainant voluntarilyparted with it. The accused ran away with it. It was held thatthe accused was wrongly convicted of theft and that he couldnot be convicted of cheating as there was no dishonest orfraudulent inducement to the complainant to deliver the gun.The conviction was altered to criminal misappropriation. InPeries v. Anderson,1101 the Appellant gave his chauffeur anidentifiable 25-cent coin, and sent him to a boutique to buycigarettes. The chauffeur placed the coin on the table,whereupon it rolled into the drawer, but the salesman deniedreceipt of the money and refused to give the cigarettes. Whenthis was told to the Appellant, he insisted on searching thedrawer, and found the coin; he then took the salesman to thePolice Station, using some degree of force or compulsion. TheAppellant was charged for that offence, and the question waswhether he could justify the arrest of the salesman on the basisthat the salesman had committed a cognisable offence. It washeld that the salesman had not committed theft as :
“there was no taking of the property from (the chauffeur);
. . . there was nothing dishonest in the manner in whichhe acquired possession of it, but the dishonesty occurredwhen he denied the receipt of the money. This offencetherefore was dishonest misappropriation.”
These decisions are not authority for the principle that ifa dishonest intention exists at the time possession is acquired,there can be no conviction for criminal misappropriation.
In Georgesy v. SaiboJll) the payee of a cheque, havingendorsed it, put it into an envelope with a letter addressed tohis banker requesting that the proceeds be placed to his credit.The accused having come into possession of the cheque,endorsed it in favour of a Chetty who thereupon paid him theamount of the cheque, less his commission. The accused wasfound guilty under section 394 of dishonestly receiving stolen
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property. It was held in appeal that there was no definiteevidence that the cheque had been stolen, for it might havebeen lost in the post. Faced with an imminent acquittal.Counsel suggested that the Court should consider whether theaccused could be convicted of criminal misappropriations.Middleton, j., having held that on the evidence the onlyinference was that the accused had come dishonestly by thecheque, observed:
“Now all the cases which have been decided by the IndianCourts point to the conclusion that in order to constitutethe offence of criminal misappropriation there must befirst an innocent possession . . . and then a subsequentchange of intention. If I find that the man dishonestlycame by the cheque, as I do, although that would put himin a worse position morally than if he had come by it insuch a way as would make him amenable under section386, yet I am bound to confess that it is impossible to meetthe weight of authority that has been put before me, andto say that the original misappropriation constitutes anoffence under section 386.”
However, neither the names nor the references of theIndian decisions are set out in the judgement. In Kanavadipillaiv. Koswatta,,I2lthe accused asked a boutique keeper for a boxof matches, and having obtained it, gave a five rupee note. Theboutique keeper said he had no change and gave back the note.The accused took the note and the box of matches “to therailway station, there got the note changed, and was returningwhen he met the constable and the complainant.” Although itwas observed that he should not have been convicted ofcriminal misappropriation, as that offence requires an initialinnocent acquisition of possession, yet it was held on the factsthat there was no appropriation or conversion to his own useby the accused, nor an intention to cause wrongful loss tothe complainant. These two decisions do not discuss theprovisions of section 386, and state the proposition thatcriminal misappropriation requires an initial innocentpossession almost as if it were axiomatic. Georgesy v.
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Saibo(Supra) referred to this proposition only in referenceto the invitation to convict the accused on a different charge,and Kanauadipillai v. KoswattafSupra) could have beendetermined, on the facts, without any reliance on thisproposition.
On the other hand, in R. v. Suppaiya,"3) it was held that aservant who receives money on behalf of his master and entersthe amount received in his master’s book, but afterwardsdenies the receipt of the money is guilty of criminal breach oftrust. Although the judgement does not consider whether thedishonest intention should have been formed after receivingthe money, yet the contention for the prosecution on appealwas that “the original taking was with dishonest intention.”Clearly, the Court did not consider this to negative criminalmisappropriation. In the sixth volume of the Ceylon LawReview there is a note of a decision that:
“It is not enough in a case of criminal misappropriation ofproperty to say that the accused must have known at the timehe took the propertu that it belonged to the complainant. Theremust be undoubted proof of such knowledge on the part of theaccused.”114'
Thus it can hardly be said that by 1960 there was a clear,definite and consistent line of authority on this point. InGratiaen Perera u. The Queen,"51 Sinnetamby, J., stated that“the authorities seem to suggest that there must be an initialhonest possession followed by a dishonest conversion” but itwas not necessary to decide the point; when it did becomenecessary, a week later, he held in A.G. v. Menthis,(Supra) thatif the initial taking of property, not in the possession of anyone,was dishonest, the offence was made out.
In Ranasinghe v. Wijendra,t2) Weeramantry, J.,distinguished A.G. v. Menthis"1 as applicable only to the takingof property not in the possession of anyone. Relying onGeorgesy v. Saibol111 and KanavadipiUai v. Koswatte,|,a| andGout’s views as to the demarcation between theft and criminal
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misappropriation, he held that for the latter offence an initialinnocent taking was essential. R. v. Suppaiya{Supra) does notappear to have been cited.
With much respect to that distinguished Judge, 1 regretthat I am unable to agree. The plain language of section 386imposes no such requirement; the Penal Code does notcontain any rigid demarcation between offences; the cursuscuriae in India and Sri Lanka does not reveal an emphatic anduniform insistence on such a requirement. Section 388 is evenplainer: it refers to an ingredient of “entrustment” (which isanterior to and distinct from the dishonest misappropriation,conversion, use or disposal which is another ingredient), butdoes not require that there be an innocent intention at the timeof entrustment. The Appellant's first contention therefore fails.
The Appellant’s second contention is based upon theassumption that the M.P.C.S. and its officers were induced toentrust each cheque to him by a trick. The arrangementbetween the Bank and the M.P.C.S. was that upon a voucherbeing submitted, a cheque would be issued to the Appellant;the M.P.C.S. was not required to inquire into the motives ofthe Appellant or whether the Bank actually needed cash;the operative cause of each cheque being entrusted to theAppellant was the submission of vouchers in due form. Thuseven if it be correct that an entrustment induced by a trick willnot satisfy section 388 – and I express no opinion as to whetherthat is an inflexible rule – that question does not arise here.“Entrustment” does not contemplate the creation of a trustwith all the technicalities of the law of trust; it includes thedelivery of property to another to be dealt with in accordancewith an arrangement made either then or previously. That wasthe case here. I
I therefore dismiss the appeal and affirm the order of theCourt of Appeal.
KULATUNGA, J.GOONAWARDENE, J.
I agree.I agree.
Appeal dismissed.