NAWAB KHAN vs THE STATE
This is a criminal miscellaneous application seeking pre-arrest bail in respect of F.I.R. No. 529 of 2007 registered under Section 406 of the Pakistan Penal Code 1860 at Police Station Barki, Lahore. The core legal question concerns whether the ingredients of criminal breach of trust are made out where money is advanced as a business loan and the majority of the principal has already been repaid, leaving only a small balance. The Lahore High Court held that the transaction constituted a loan rather than an entrustment of property, and since the essential prerequisites of Sections 405 and 406 of the Pakistan Penal Code 1860 were absent, the offence was prima facie not attracted, thereby confirming the pre-arrest bail. The key principle laid down is that the failure to repay a loan or a civil liability arising from a commercial transaction does not automatically constitute criminal breach of trust under Section 406 of the Pakistan Penal Code 1860 in the absence of entrustment and dishonest misappropriation.
- Does failure to repay a business loan constitute criminal breach of trust under Section 406 of the Pakistan Penal Code 1860?
- What are the essential ingredients required to constitute an offence under Sections 405 and 406 of the Pakistan Penal Code 1860?
- Can pre-arrest bail be confirmed when the foundational ingredients of the alleged criminal offence are prima facie missing from the contents of the F.I.R.?
- Section 405, Pakistan Penal Code 1860
- Section 406, Pakistan Penal Code 1860
ORDER
' SYED SHABBAR RAZA RIZVI, J.---The learned counsel has filed this application for pre-arrest bail in F.I.R. No.529 of 2007, dated 27-10-2007. The said F.I.R. Was registered at Police Station Barki, Lahore, under section 406, P.P.C.
2. Briefly, according to the F.I.R. The petitioner borrowed Rs.25 lacs from the complainant for doing a business. Thereafter at different times, /he petitioner returned most of the amount in different instalments. However, the petitioner failed to repay Rs.2,05,000 despite making several promises.
3. According to the learned counsel, the petitioner is innocent and he has been involved in this case malafidely. He is apprehensive of arrest of petitioner which would bring him disgrace.
4. On the other hand, the learned Deputy Prosecutor General, Punjab submits that there is no element of mala fide in the registration of F.I.R. The repayment of most of the amount shows that the contents of the F.I.R. Are correct.
5. I have heard the learned counsel for the parties. The F.I.R. Clearly mentions that Rs.25 lacs were paid by the complainant to the petitioner to do a business. In other words, the complainant gave a loan to the petitioner for the purpose of spending the same or for appropriation of his business. The purpose of paying money to the petitioner was not to keep it unused or to use the same, for any particular purpose, directed by the complainant. The contents of F.I.R. Clearly suggest that petitioner was supposed to invest the money in some business/trade for himself. Furthermore, the F.I.R. Shows that petitioner returned most of the borrowed money except of Rs.2,05,000 which is a small fraction of Rs.25 lacs, the original amount which was borrowed by the petitioner from the complainant. In the above context, it cannot be believed that Rs.25 lacs have been misappropriated by the, petitioner. The F.I.R. Does not show that the petitioner was under instructions to keep the money on behalf of the complainant or to use the same according to his instructions in any manner. The requirements/prerequisites to constitute an offence under sections 405 and 406, P.P.C. Are:--
(i) entrustment;
(ii) dishonest misappropriation or conversion by accused for his own use;
(iii) dishonest use or disposal of the property in violation of the direction of any law; and
(iv) dishonest use or disposal of property entrusted in violation of any legal contract.
' None of the above ingredients are present in the instant case. Rupees 25 lacs were not entrusted to the petitioner to keep the same on behalf of the complainant. The amount was given to the petitioner as a loan by the complainant so that petitioner could use or invest the same to do a business in any manner. The petitioner might be blamed for not returning or clearing the loan as required under the terms of agreement between the parties, nevertheless, prima facie, section 406, P.P.C. Is not attracted in the facts and circumstances of the present case.
6. The above discussion clearly shows that contents of F.I.R. Do not make out a case against the petitioner under section 406, P.P.C. And for the same reason involvement of the petitioner on ground of mala fide cannot be ruled out.
7. Thus, in view of the foregoing reasons, this bail application is allowed and interim bail already granted to the petitioner vide order, dated 23-11-2007 is confirmed subject to petitioner's furnishing surety bonds in the sum of Rs.300,000 with one surety in the like amount to the satisfaction of the trial Court or Area Magistrate.