Supreme Court Clarifies Theft Definition in Document Misappropriation Case: Birla Corporation vs. Adventz Investments (2019)

Date of the Judgment: May 09, 2019

Citation: 2019 INSC 461

Judges: R. Banumathi, J., R. Subhash Reddy, J.

Can using internal company documents in a legal battle be considered theft? The Supreme Court of India recently examined this question in a case involving Birla Corporation Limited. The court had to decide if the act of temporarily removing and using company documents in court proceedings qualifies as theft under the Indian Penal Code, 1860. This judgment clarifies the nuances of what constitutes theft, especially concerning confidential documents used in litigation. The judgment was authored by Justice R. Banumathi, with Justice R. Subhash Reddy concurring.

Case Background

The case revolves around a criminal complaint filed by Birla Corporation Limited, part of the Madhav Prasad Birla (MPB) Group, now controlled by Harshvardhan Lodha. This complaint is one of many legal disputes arising from a family feud. Priyamvada Devi Birla (PDB) and her husband Madhav Prasad Birla (MPB), who controlled the M.P. Birla Group, had no children. They established several trusts for charitable activities, particularly in education. Following PDB’s death on July 3, 2004, a dispute arose over a will allegedly executed by her on April 18, 1999, in favor of Rajendra Singh Lodha and his son, Harshvardhan Lodha. This led to a series of legal battles.

A probate petition for the 1999 will was filed by Rajendra Singh Lodha at the High Court of Calcutta, which was converted into a testamentary suit. Krishna Kumar Birla (KKB), Basant Kumar Birla (BKB), Ganga Prasad Birla (GPB), and Yashovardhan Birla (YB) opposed the grant of probate. Additionally, KKB, Kashi Nath Tapuriah (KNT), and Pradip Kumar Khaitan (PKK) filed an application for probate of MPB’s 1982 will. These proceedings are still ongoing.

Furthermore, shareholders of Birla Corporation Limited (respondents No. 1 to 5) and the Birla Education Trust (represented by respondent No. 6) filed a company petition before the Company Law Board (CLB) alleging oppression and mismanagement by Harshvardhan Lodha. In this petition, they used copies of 54 documents, some of which were also used in civil suits filed by respondents No. 12 to 16, who challenged the revocation of five trusts created by MPB and PDB.

Timeline:

Course of Proceedings

The appellant-company filed a criminal complaint alleging theft and misappropriation of 54 documents. The Magistrate, after examining the complainant and a witness, issued summons to the respondents for offences under Sections 380, 411, and 120B of the Indian Penal Code, 1860. The respondents then filed a petition before the High Court of Calcutta under Section 482 of the Criminal Procedure Code, seeking to quash the criminal proceedings.

The High Court quashed the complaint concerning documents No. 1 to 28, reasoning that the originals were still with the complainant and that the information contained in the documents could not be considered movable property. However, the High Court remitted the matter back to the trial court for documents No. 29 to 54, as the originals were missing. Both the appellant and the respondents appealed this decision to the Supreme Court.

Legal Framework

The core of this case involves the interpretation of several sections of the Indian Penal Code, 1860:

• Section 379, Indian Penal Code, 1860: Defines the punishment for theft.
• Section 403, Indian Penal Code, 1860: Deals with dishonest misappropriation of property.
• Section 411, Indian Penal Code, 1860: Addresses the offense of dishonestly receiving stolen property.
• Section 120B, Indian Penal Code, 1860: Concerns criminal conspiracy.

The case hinges on whether the act of taking copies of documents and using them in legal proceedings constitutes “theft” under Section 378, Indian Penal Code, 1860, which defines theft as:
“Whoever, intending to take dishonestly any moveable property out of the possession of any person without that person’s consent, moves that property in order to such taking, is said to commit theft.”

The definition of “dishonestly” under Section 24, Indian Penal Code, 1860 is also crucial:
“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”.”

The definitions of “wrongful gain” and “wrongful loss” under Section 23, Indian Penal Code, 1860 are also relevant:
“Wrongful 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 Court also considered the definition of “movable property” under Section 22, Indian Penal Code, 1860, which includes corporeal property of every description, except land and things attached to the earth.

Arguments

Appellant’s Arguments:

• The appellant argued that the respondents had stolen and misappropriated confidential documents. They contended that the respondents gained unauthorized access to the documents, which were meant for internal use only.
• The appellant asserted that the Magistrate had sufficient grounds to issue summons based on the complaint and the statements of witnesses. They claimed that the High Court should not have substituted its view for that of the Magistrate.
• The appellant relied on the precedent set in Pyare Lal Bhargava v. State of Rajasthan AIR 1963 SC 1094, arguing that temporary removal of documents for replicating information constitutes theft.
• They emphasized that the respondents did not disclose the source of the documents, which further indicated dishonest removal.

Respondents’ Arguments:

• The respondents argued that the complaint lacked specific details about the time and manner of the alleged theft. They contended that the averments in the complaint did not constitute a prima facie case of theft.
• They submitted that the Magistrate did not apply his mind adequately before issuing summons, and the High Court should have quashed the proceedings entirely.
• The respondents argued that producing documents in the Company Law Board (CLB) proceedings and civil suits to substantiate their claims of oppression and mismanagement could not be termed as theft.
• They argued that the documents were produced to vindicate their rights and defend themselves. They characterized the criminal complaint as a “legal thumb screw” to harass them.
• Respondents No. 10 and 11 argued that there were no specific allegations against them, and their mere responsibility for building maintenance did not imply involvement in the theft.
• Respondent No. 11 further argued that the doctrine of vicarious liability does not apply to offenses under the Indian Penal Code, 1860.
• Other respondents argued that they could not be held vicariously liable merely because of their positions in the companies or trusts involved.

[TABLE] of Submissions by Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the allegations in the complaint and the statements of the complainant and other materials before the Magistrate were sufficient to constitute a prima facie case to justify the Magistrate’s satisfaction in issuing process against the respondents?
2. Whether the respondents are right in contending that in taking cognizance of the offences under Sections 380, 411, and 120-B IPC and ordering issuance of process against the respondents is vitiated due to non-application of mind?
3. Whether the High Court was right in quashing the criminal proceedings qua documents No. 1 to 28 on the ground that mere information contained in the documents cannot be considered as “movable property” and cannot be the subject of the offence of theft or receipt of stolen property?
4. Whether filing of the documents in question in the petition before the Company Law Board to substantiate their case of oppression and mismanagement and document No. 1 in the civil suits challenging revocation of the trust deeds would amount to theft justifying taking cognizance of the offences?
5. Whether there is dishonest moving of documents causing wrongful loss to the appellants and wrongful gain to the respondents?
6. Whether filing of documents in the judicial proceedings can be termed as an act of theft causing wrongful gain to oneself and wrongful loss to the opponent so as to attract the ingredients of Section 378 IPC?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

On the scope of inquiry under Section 202 Cr.P.C. and the satisfaction of the Magistrate:

• National Bank of Oman v. Barakara Abdul Aziz and Another (2013) 2 SCC 488 – Supreme Court of India
• Mehmood Ul Rehman v. Khazir Mohammad Tunda and Others (2015) 12 SCC 420 – Supreme Court of India
• Bhushan Kumar and Another v. State (NCT of Delhi) and Another (2012) 5 SCC 424 – Supreme Court of India
• Vijay Dhanuka and Others v. Najima Mamtaj and Others (2014) 14 SCC 638 – Supreme Court of India
• Abhijit Pawar v. Hemant Madhukar Nimbalkar and Another (2017) 3 SCC 528 – Supreme Court of India
• Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others (1998) 5 SCC 749 – Supreme Court of India
• GHCL Employees Stock Option Trust v. India Infoline Limited (2013) 4 SCC 505 – Supreme Court of India
• Punjab National Bank and Others v. Surendra Prasad Sinha 1993 Supp (1) SCC 499 – Supreme Court of India
• Jagdish Ram v. State of Rajasthan and Another (2004) 4 SCC 432 – Supreme Court of India
• Chandra Deo Singh v. Prokash Chandra Bose alias Chabi Bose and Another AIR 1963 SC 1430 – Supreme Court of India

On the definition of theft and movable property:

• Pyare Lal Bhargava v. State of Rajasthan AIR 1963 SC 1094 – Supreme Court of India
• Section 22, Indian Penal Code, 1860 – Definition of “Movable Property”
• Section 29, Indian Penal Code, 1860 – Definition of “Document”
• K.N. Mehra vs. State of Rajasthan AIR 1957 SC 369 – Supreme Court of India

On vicarious liability:

• Sunil Bharti Mittal v. Central Bureau of Investigation (2015) 4 SCC 609 – Supreme Court of India

On the admissibility of illegally obtained evidence:

• Pooran Mal v. Director of Inspection (Investigation), New Delhi and Others (1974) 1 SCC 345 – Supreme Court of India

On quashing of criminal proceedings:

• Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi and Others (1976) 3 SCC 736 – Supreme Court of India
• State of Haryana and Others v. Bhajan Lal and Others 1992 Supp (1) SCC 335 – Supreme Court of India
• Indian Oil Corpn. v. NEPC India Ltd. and Others (2006) 6 SCC 736 – Supreme Court of India
• Madhavrao Jiwajirao Scindia and Others v. Sambhajirao Chandrojirao Angre and Others (1988) 1 SCC 692 – Supreme Court of India

[TABLE] of Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Pyare Lal Bhargava v. State of Rajasthan [AIR 1963 SC 1094]: The Court acknowledged the principle that temporary removal of documents can constitute theft, but distinguished the present case based on the absence of dishonest intent.

• National Bank of Oman v. Barakara Abdul Aziz and Another [(2013) 2 SCC 488]: Cited to explain the scope of inquiry under Section 202 Cr.P.C.

• Mehmood Ul Rehman v. Khazir Mohammad Tunda and Others [(2015) 12 SCC 420]: Cited to discuss the scope of inquiry under Section 202 Cr.P.C. and the satisfaction of the Magistrate.

• Bhushan Kumar and Another v. State (NCT of Delhi) and Another [(2012) 5 SCC 424]: Cited to reiterate the mandatory requirement of application of mind in the process of taking cognizance.

• Vijay Dhanuka and Others v. Najima Mamtaj and Others [(2014) 14 SCC 638]: Cited to discuss the scope of amendment to Section 202 Cr.P.C.

• Abhijit Pawar v. Hemant Madhukar Nimbalkar and Another [(2017) 3 SCC 528]: Cited to discuss the purpose or objective behind the amendment to Section 202 Cr.P.C.

• Pepsi Foods Ltd. and Another v. Special Judicial Magistrate and Others [(1998) 5 SCC 749]: Cited to emphasize that the order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law governing the issue.

• GHCL Employees Stock Option Trust v. India Infoline Limited [(2013) 4 SCC 505]: Cited to reiterate that summoning an accused in a criminal case is a serious matter.

• Punjab National Bank and Others v. Surendra Prasad Sinha [1993 Supp (1) SCC 499]: Cited to hold that the issuance of process should not be mechanical.

• Jagdish Ram v. State of Rajasthan and Another [(2004) 4 SCC 432]: Cited to hold that at the stage of issuing the process to the accused, the Magistrate is not required to record reasons.

• Chandra Deo Singh v. Prokash Chandra Bose alias Chabi Bose and Another [AIR 1963 SC 1430]: Cited to hold that the object of an enquiry under Section 202 Cr.P.C. is for the Magistrate to scrutinize the material produced by the complainant.

• K.N. Mehra vs. State of Rajasthan [AIR 1957 SC 369]: The Court used this case to define wrongful gain and loss, stating that it doesn’t need to be total acquisition or deprivation, but can be temporary.

• Sunil Bharti Mittal v. Central Bureau of Investigation [(2015) 4 SCC 609]: Cited to discuss the active role required for individual liability in corporate offenses.

• Pooran Mal v. Director of Inspection (Investigation), New Delhi and Others [(1974) 1 SCC 345]: Cited to hold that illegally obtained evidence can be considered if relevant.

• Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi and Others [(1976) 3 SCC 736]: Cited to summarize principles for quashing the issue of process.

• State of Haryana and Others v. Bhajan Lal and Others [1992 Supp (1) SCC 335]: Cited to consider the scope of inherent powers of the Court.

• Indian Oil Corpn. v. NEPC India Ltd. and Others [(2006) 6 SCC 736]: Cited to observe the tendency to convert civil disputes into criminal cases.

• Madhavrao Jiwajirao Scindia and Others v. Sambhajirao Chandrojirao Angre and Others [(1988) 1 SCC 692]: Cited to discuss the test to be applied when a prosecution is asked to be quashed.

Reasoning of the Court:

• The Court held that the Magistrate’s order issuing summons was flawed due to non-application of mind. The Magistrate did not demonstrate a proper understanding of the facts or the law before issuing the summons.
• The Court clarified that documents, including their contents, are considered “movable property” and can be the subject of theft under the Indian Penal Code.
• The Court emphasized that the essential element of theft is “dishonest intention.” In this case, the respondents used the documents in legal proceedings to substantiate their claims, which does not constitute a “dishonest intention” to cause wrongful loss or gain.
• The Court distinguished this case from the precedent set in Pyare Lal Bhargava v. State of Rajasthan, noting that the temporary removal of documents in that case was for the purpose of replicating information, whereas in this case, the documents were used as evidence in legal proceedings.
• The Court noted that the criminal complaint was a clear attempt to use the criminal justice system to settle a civil dispute.

Final Order

The Supreme Court allowed the appeals of the respondents and set aside the order of the High Court. The Court quashed the criminal proceedings against all respondents, including those related to documents No. 29 to 54. The Court held that the criminal complaint was an attempt to use criminal proceedings to harass the respondents and settle a civil dispute.

Implications of the Judgment:

• The judgment clarifies that using documents in legal proceedings to substantiate claims does not constitute theft unless there is a clear “dishonest intention” to cause wrongful loss or gain.
• The Supreme Court emphasized that Magistrates must apply their minds adequately before issuing summons in criminal cases.
• The judgment underscores that the criminal justice system should not be used to settle civil disputes.
• The judgment provides clarity on the definition of “movable property” under the Indian Penal Code, 1860, including documents and their contents.

Flowchart of the Decision-Making Process