K. C. BHANU, J. ( 1 ) CRIMINAL Petitions Nos. 1153 and 1154 of 2003 are filed to quash the proceedings in Crime No. 8/2003 of Police Station, C. I. D. , Hyderabad, and Crime No. 107/2003 of Police Station, C. C. S. , Hyderabad, respectively. ( 2 ) SINCE common questions of law and common facts are involved in both the petitions and since petitioners in both the petitions are same, they are disposed of by a common order. ( 3 ) THE Joint Registrar of Co-operative Societies and Chief Executive Officers, Vasavi Co-operative Urban Bank, Hyderabad, hereinafter to be referred to as vasavi Bank for the sake of brevity, lodged a report with the Additional Director General of Police, Criminal Investigation Department, Hyderabad, which was registered as Crime No. 8/2003 under Sections 120-B, 420, 409, 468, 477-A of the Indian Penal Code and Section 5 of the A. P. Protection of Depositors and Financial Establishments Act 1999 (for short act No. 17/1999), and Sri P. Anand, a depositor in the Vasavi Bank, lodged a report with the Deputy Commissioner of Police, Detective Department, Hyderabad, for 14 others also, which was registered as Crime No. 107/2003 under Sections 420 and 406, IPC and Sections 3 and 5 of Act 17 of 1999, inter alia alleging that the Directors of Vasavi Bank committed offences of criminal conspiracy and criminal breach of trust. Accused in those crimes filed the present petitions as aforesaid. ( 4 ) LEARNED senior counsel, Sri S. Ramachandra Rao, appearing on behalf of the petitioners argued at length with reference to Act 17 of 1999, the Banking Regulation Act, 1949 (hereinafter to be referred to as the banking Regulation Act ), and the Reserve Bank of India Act, 1934 (to be referred to as the reserve Bank of India Act ). Learned Public Prosecutor made elaborate submissions with reference to the above Acts besides the Companies Act, 1956. I shall specify their respective contentions at appropriate places. ( 5 ) THERE cannot be any dispute that a complaint can be quashed at the initial stage only if the allegations in the complaint do not make out a prima facie case. The scope of Section 482, Cr. P. C. is set out in State of Haryana v. Ch. I shall specify their respective contentions at appropriate places. ( 5 ) THERE cannot be any dispute that a complaint can be quashed at the initial stage only if the allegations in the complaint do not make out a prima facie case. The scope of Section 482, Cr. P. C. is set out in State of Haryana v. Ch. Bhajan Lal, AIR 1992 SC 604 and reiterated in State of Karnataka v. M. Devendrappa, (2002) 1 Supreme 192 , wherein some illustrative categories in which the power under Section 482, Cr. P. C. can be exercised are mentioned as below : (1) "where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the F. I. R. and other materials, if any, accompanying the F. I. R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156 (1) of the Code of except under an order of Magistrate within the purview of Section 155 (2) of the Code. (3) Where the uncontroverted allegations made in the F. I. R. or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where the allegations in the F. I. R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155 (2) of the Code. (5) Where the allegations made in the F. I. R. or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code of the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceeding and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (6) Where there is an express legal bar engrafted in any of the provisions of the Code of the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceeding and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due private and personal grudge. " ( 6 ) SO, it is well settled that unless the allegations in the complaint do not make out a prima facie case or constitute an offence, the question of quashing the complaint does not arise. ( 7 ) LEARNED senior counsel contended that Vasavi Bank is not a financial establishment within the meaning of Section 2 (c) of Act 17 of 1999 and is a banking company as defined under Section 5 (c) of the Banking Regulation Act. A banking company as defined under Section 5 (c) of the Banking Regulation Act is expressly excluded from the purview of Act 17 of 1999 Registration of Crime itself is bad as the State has to follow the procedure under Sections 3 and 7 to 9 of Act 17 of 1999 in the first instance and without the same being followed initiating steps under Section 5 of Act 17 of 1999 is illegal. Consequently the arrest of the petitioners under Section 5 of Act 17 of 1999 and producing them before the designated Court is illegal and, therefore, the petition has to be allowed. ( 8 ) ACT 17 of 1999 was enacted by the Andhra Pradesh Legislative Assembly and the President of India gave assent on 23-6-1999 and it was published on 1-7-1999 in the Andhra Pradesh Gazette. So, from 1-7-1999 this Act came into force. As seen from the Statement of Objects and Reasons, this Act is passed because a number of unscrupulous financial establishments in the State are cheating innocent, gullible depositors by offering very attractive rates of interest, collecting huge deposits and then vanishing suddenly. The depositors are being cheated and are put to grave hardship by losing their hard-earned savings. As seen from the Statement of Objects and Reasons, this Act is passed because a number of unscrupulous financial establishments in the State are cheating innocent, gullible depositors by offering very attractive rates of interest, collecting huge deposits and then vanishing suddenly. The depositors are being cheated and are put to grave hardship by losing their hard-earned savings. To curb these malpractices, the State Government has brought the Act for protecting the interest of depositors of financial establishment in the State and for matters connected therewith or incidental thereto. ( 9 ) AS per sub-section (1) of Section 6 of Act 17 of 1999, the State Government shall, with the concurrence of the Chief Justice of the High Court, by notification, constitute a District and Sessions Court as Special Court, and as per sub-section (2) no Court other than the Special Court shall have jurisdiction in respect of any matter to which the provisions of this Act apply. ( 10 ) IN exercise of the powers conferred under sub-section (1) of Section 6 of Act 17 of 1999, the Government constituted the Court of Metropolitan Sessions Judge, Hyderabad, as the special Court for the sessions division of Hyderabad, to try cases under Act 17 of 1999 vide G. O. Ms. No. 70, Home (General-B), dated 22-3-2000. ( 11 ) SECTION 5 of Act 17 of 1999 reads as follows :"penalty for default :- Where any financial establishment defaults in the return of the deposit either in cash or kind or defaults in the payment of interest on the deposit as agreed upon, every person responsible for the management of the affairs of the financial establishment including the promoter, Manager or Member of the financial establishment shall be punished with imprisonment for a term which may extend to ten years and with fine which may extend to rupees one lakh and such financial establishment shall also be liable for fine which may extend to rupees five lakh. " ( 12 ) A glance at the above provision shows that where any financial establishment defaults in the return of the deposits either in cash or kind or defaults in the payment of interest on the deposits as agreed upon, every person responsible for the management of the affairs of the financial establishment shall be punished. " ( 12 ) A glance at the above provision shows that where any financial establishment defaults in the return of the deposits either in cash or kind or defaults in the payment of interest on the deposits as agreed upon, every person responsible for the management of the affairs of the financial establishment shall be punished. What is a financial establishment is defined under Section 2 (c) of Act 17 of 1999 which is reproduced below :"financial establishment means an individual, an association or body of individuals or a firm carrying on the business of receiving deposits under any scheme or arrangement or in any other manner but does not include a Company registered under the Companies Act, 1956 (Central Act 1 of 1956) or a Corporation or a Co-operative Society owned and controlled by any State Government or the Central Government, or a Banking Company as defined under Section 5 (c) of the Banking Regulation Act, 1949 (Central Act 10 of 1949) or a non-Banking Financial Company as defined in Clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 (Central Act II of 1934 ). " ( 13 ) A perusal of the above provision makes it clear that "financial establishment" does not include inter alia a company registered under the Companies Act and a banking company as defined under Section 5 (c) of the Banking Regulation Act. Section 5 (c) of the Banking Regulation Act defines a banking company as any company which transacts the business of banking in India. Section 5 (d) of this Act defines that company means any company as defined in Section 3 of the Companies Act, 1956 and includes a foreign company within the meaning of Section 591 of that Act. ( 14 ) BASING on Section 5 (c) of the Banking Regulation Act, learned senior counsel vehemently contended that Vasavi Bank is controlled by the directions issued by the Reserve Bank of India and is notified as a Scheduled Bank and, therefore, it is not a "financial establishment" within the meaning of Section 2 (c) of Act 17 of 1999 and therefore the action taken by the police and the remand made by the designated Court are ab intio void and illegal. ( 15 ) ORIGINALLY Vasavi Bank was registered under the A. P. Co-Operative Societies Act, 1964. It started functioning from 27-10-1992. ( 15 ) ORIGINALLY Vasavi Bank was registered under the A. P. Co-Operative Societies Act, 1964. It started functioning from 27-10-1992. By a Notification, dated 29-4-1999, the Reserve Bank of India included the Vasavi Bank in the second schedule to the Reserve Bank of India Act, in pursuance of Clause (a) of sub-section (6) of Section 42 of that Act. On 4-12-2002, the Reserve Bank of India issued a circular limiting the maximum advances or loans to the Directors and their relatives. ( 16 ) VASAVI Bank has got a whole-time Director and one Chief Executive Officer appointed by the Board of Directors. It has got licence from the Reserve Bank of India which is mandatory to run business. As per the bye-laws of the Bank, the Board of Directors has got powers to resolve any bank transactions which include advances and finances, overdrafts, cash credits and borrowing funds besides fixation of rate of interest, modification, alterations, deletion or addition to the terms and conditions governing the outstanding loans and any other cash transactions. ( 17 ) THE term banking is defined under Section 5 (b) of the Banking Regulation Act as meaning, the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise. ( 18 ) LEARNED senior counsel relied upon Sections 20, 21, 35-A and 56 of the Banking Regulation Act and contended that Vasavi Bank is a banking company within the meaning of Section 5 (c) of the Act and since Section 2 (c) of Act 17 of 1999 excluded a banking company from the purview of that Act, the provisions of that Act would not apply in the present case. On the other hand, learned Public Prosecutor contended that merely because the Reserve Bank of India has issued certain directions/instructions to Vasavi Bank, Vasavi Bank cannot be said to be a banking company . ( 19 ) SECTION 20 (1) (b) (i) ordains that notwithstanding anything to the contrary contained in Section 77 of the Companies Act, no banking company shall enter into any commitment for granting any loan or advance to or on behalf of any of its directors. Section 21 deals with the power of Reserve Bank to control advances by banking companies. Section 21 deals with the power of Reserve Bank to control advances by banking companies. Section 35-A deals with the power of the Reserve Bank to give directions to banking companies, while Section 56 deals with the application of the Act to co-operative societies subject to certain modifications. Relying upon these provisions, learned senior counsel contended that Vasavi Bank is firstly a banking company, secondly a scheduled bank, and thirdly acts under the control and supervision of the Reserve Bank of India, and as such it is outside the purview of Act 17 of 1999. ( 20 ) ADMITTEDLY, Vasavi Bank is not registered under the Companies Act. Section 3 (i) of the Companies Act defines company as a company formed and registered under that Act or an existing company as defined in Clause (ii ). It is not the case of the petitioners that Vasavi Bank is formed and registered under the Companies Act. The term "banking company" defined under Section 5 (c) of the Banking Regulation Act has to be read in juxtaposition to "banking" as defined under Section 5 (b) of the Banking Act and "company" as defined in Section 3 (1) (i) of the Companies Act. So, the question is whether Vasavi Bank comes within the meaning of "banking company" as defined under Section 5 (c) of the Banking Act. ( 21 ) ADMITTEDLY, the Reserve Bank of India gave Vasavi Bank the status of a scheduled bank. The Reserve Bank performs normally functions of a Central Bank. Therefore, it has been described as a Bankers Bank. Under the Reserve Bank of India Act, the Reserve Bank has been given certain advisory and regulatory functions. But, as a Central Bank it acts as an agency for collecting financial information and statistics. From the provisions of the Reserve Bank of India Act, it can be said that the Reserve Bank has been created as a Central Bank with powers of supervision, advisory and inspection over banks, particularly those desiring that they may be included in the second schedule to the Act or those scheduled already. The Reserve Bank thus safeguards the economic and financial stability of the country. ( 22 ) A company registered under the Companies Act or a society registered under the Societies Registration Act need not obtain any licence from the Reserve Bank of India. The Reserve Bank thus safeguards the economic and financial stability of the country. ( 22 ) A company registered under the Companies Act or a society registered under the Societies Registration Act need not obtain any licence from the Reserve Bank of India. But, once the company or the society proposes to do "banking", then, certainly a licence is required under Section 22 of the Banking Regulation Act. Once a licence is given to the company or the society for carrying on banking business, such society or company would be governed by the provisions of the Banking Regulation Act and the Reserve Bank of India Act as well as by any directions that may be given by the Reserve Bank of India from time to time. Simply because the Reserve Bank included Vasavi Bank in the second schedule to the Reserve Bank of India Act, Vasavi Bank cannot be termed as a "banking company". If the Bank is to be termed as a banking company, it should primarily be a company as defined under the Companies Act, and secondly must transact banking business in India. The terms "banking company" and "company" as defined under Section 5 (c) and (d) respectively of the Banking Regulation Act have to be read in conjunction, as they have got to be, and not in isolation. When read as such, then a banking company means a company formed and registered under the Companies Act, and mere such registration does not bring the company within the meaning of banking company unless it transacts business of banking. ( 23 ) ON this aspect, it is pertinent to refer to a decision, which the learned Public Prosecutor relied upon, in M/s. Phoneix Impex v. State, AIR 1998 Raj 100 , wherein a Division Bench of the Rajasthan High Court held as follows :"it is obvious that a company becomes a banking company if it is formed and registered under the Companies Act, 1956 and also it transacts the business of banking in India. Admittedly, a Co-operative Bank is not formed and registered under the Companies Act, 1956. It is formed and registered under the Rajasthan Co-operative Societies Act of 1965. Thus, apparently a co-operative bank does not fall in the category of banking company defined in Cl. (e) of S. 2 of Act No. 51 of 1993. Admittedly, a Co-operative Bank is not formed and registered under the Companies Act, 1956. It is formed and registered under the Rajasthan Co-operative Societies Act of 1965. Thus, apparently a co-operative bank does not fall in the category of banking company defined in Cl. (e) of S. 2 of Act No. 51 of 1993. " ( 24 ) IN view of the above discussion, I am of the considered opinion that Vasavi Bank is only a society registered under the Societies Registration Act and doing banking business and is not a banking company within the meaning of Section 5 (c) of the Banking Regulation Act as it was not formed and registered under the Companies Act, and therefore Section 2 (c) of Act 17 of 1997, which excludes the applicability of the Act to a banking company, has no application to it. ( 25 ) LEARNED senior counsel has taken me through various circulars issued by the Reserve Bank of India including the notification including Vasavi Bank in the second schedule to the Reserve Bank of India Act. But those circulars will not improve the case of the petitioners for the simple reason that Vasavi Bank is not formed and registered under the Companies Act though it is doing banking business under the supervision and control of the Reserve Bank. ( 26 ) THOUGH it is contended by the learned senior counsel that the Reserve Bank of India has given various directions, which are given to a banking company, to Vasavi Bank, issuance of such directions does not per se bring Vasavi Bank within the meaning of Section 3 of the Companies Act, because the Reserve Bank has power to give directions to banks, societies, financial institutions etc. , which are doing banking business. ( 27 ) SECTION 45a of the Reserve Bank of India reads as under :"in the chapter, unless the context otherwise requires,- (a) "banking company" means a banking company as defined in Section 5 of the Banking Regulation Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), any corresponding new bank constituted by Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any other financial institution notified by the Central Government in this behalf. " ( 28 ) RELYING on the words "any other financial institution notified by the Central Government" the above Section contains, the learned senior counsel contended that by virtue of the notification, dated 29-4-1999, issued by the Reserve Bank of India, Vasavi Bank is included within the ambit of Section 5 (c) of the Banking Regulation Act. I am unable to accept this contention, for firstly the definition under Section 45a of the Reserve Bank of India Act applies only to Chapter III-A of that Act, which deals with collection and furnishing of credit information by the Reserve Bank and for which purpose a financial institution notified by the Central Government is deemed to be a banking company, and secondly Vasavi Bank has not been notified by the Central Government as required under Section 45a (a) of the Reserve Bank of India Act, though it was notified by the Reserve Bank of India in pursuance of Clause (a) of sub-section (6) of Section 42 of the Reserve Bank of India Act. ( 29 ) UNDER Section 56 of the Banking Regulation Act, the provisions of that Act shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to certain modifications mentioned therein, and any references to a "banking company" or "the company" or "such company" shall be construed as references to a co-operative bank. so, a co-operative bank doing banking business must fall within the provisions of the Banking Regulation Act and has to do banking business in accordance with the provisions of that Act. ( 30 ) TO summarize, in order that a bank is a banking company, it is in the first place necessary that it must be a company registered under the Companies Act and secondly it must do banking business. Only on fulfilment of these two conditions, it can be termed as a "banking company" within the meaning of Section 5 (c) of the Banking Regulation Act. A society registered under the Societies Registration Act, whether banking business is done by it or not, does not fall within the meaning of "banking company" (sic) Section 5 (c) of the Banking Regulation Act. A society registered under the Societies Registration Act, whether banking business is done by it or not, does not fall within the meaning of "banking company" (sic) Section 5 (c) of the Banking Regulation Act. ( 31 ) THE other argument advanced by the learned senior counsel is that in the first instance, resort must be had to the provisions under Sections 3, 7 to 10 of Act 17 of 1999 and after exhausting those remedies only, Section 5 of that Act must be pressed into service. This argument, in my opinion, is devoid of merits for the reason that the interest of depositors is of paramount consideration. Section 5 of the Act, which is a penal provision for default committed by any financial establishment, is an independent provision and can be invoked under the circumstances as mentioned therein. Therefore, other remedies need not first be exhausted so as to invoke this provision. As already observed supra, the main object of Act 17 of 1999 is to protect the interests of gullible and innocent depositors. ( 32 ) IT is alleged that the Vasavi Bank is unable to meet the demand of depositors for any payment due to lack of liquidity, that the Bank played fraud on the depositors by issuing pay orders, banker s cheques etc. , which cannot be honoured by the bank, and that the bank has continuously been in default for the last two years in the maintenance of statutory reserves as per the guidelines issued by the Reserve Bank of India which are having statutory force. It is also alleged that the Vasavi Bank has collected deposits from the common public and the bulk of these deposits have been shiponed off by the past directors of the Bank by availing themselves of loans in utter violation of the guidelines of the Reserve Bank of India and failed to re-pay the loans to the Bank on due dates resulting in collapse of the Bank. The Bank Management has failed to take prudent measures in sanctioning huge loans and overdrafts. ( 33 ) FROM the above averments, it is clear that Vasavi Bank prima facie committed defaults in the return of the deposit either in cash of kind and in the payment of interest on the deposits as agreed upon and, therefore, the promoter, Manager and Member of the Bank shall be liable for punishment. ( 33 ) FROM the above averments, it is clear that Vasavi Bank prima facie committed defaults in the return of the deposit either in cash of kind and in the payment of interest on the deposits as agreed upon and, therefore, the promoter, Manager and Member of the Bank shall be liable for punishment. As a prima facie case for the offence under Section 5 of Act 17 of 1999 is made out, the question of quashing the complaint does not arise. ( 34 ) THOUGH the F. I. R. are registered against the petitioners for the offences under the Indian Penal Code also, learned senior counsel confined his arguments only to the offence under Section 5 of Act 17 of 1999. Even otherwise, the offences alleged against are under Sections 120-B, 420, 409, 468 and 477-A, IPC. A mere reading of the complaints would prima facie disclose offences of criminal conspiracy, criminal breach of trust, fraud and cheating. ( 35 ) SINCE I have held above that Vasavi Bank is not a "banking company" within the meaning of Section 5 (c) of the Banking Regulation Act, the arrest of the petitioners by the police and remand made by the learned Sessions Judge, in pursuance of the provisions under Act 17 of 1999, cannot be said to be illegal. ( 36 ) FOR the foregoing reasons, there are absolutely no grounds to quash the proceedings at this stage. In the result, the petitions are dismissed at the stage of admission. Petitions dismissed.