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2005 DIGILAW 332 (AP)

Pothani Chandrasheker v. State Of A. P.

2005-04-06

V.V.S.RAO

body2005
V. V. S. RAO, J. ( 1 ) THIS common order shall dispose of all the above 29 criminal Petitions filed under Section 482 of the CODE OF CRIMINAL PROCEDURE, 1973 (Cr. P. C. ). The petitioner is the Chairman of m/s. Koratla Permanent Fund Limited, karimnagar. On complaints given by various depositors, cases under Sections 406, 420 of INDIAN PENAL CODE, 1860 (I. P. C.) and section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments act, 1999 (for brevity the Act ) were registered. After the charge-sheet is filed, the petitioner, who is accused in all the crimes, invoked the inherent power of this court praying to quash the criminal complaints on various grounds. The matters were directed to be listed for hearing. In some of the cases the respondents i. e. , the de facto complainants were served with notices and in some other cases the petitioner did not choose to make the de facto complainants as respondents. Be that as it is, as the allegations made against the petitioner and his company are of very serious nature and by reason of the interim orders passed by this Court in the month of december, 2002 the entire proceedings have come to stand-still, this Court heard the matters in detail and all the matters are being disposed of by this common order. ( 2 ) TAKING Criminal Petition No. 5573 of 2002 the facts may be noticed. Be it also noted that the defacto complainant, by name vasala Ganga Rao, son of Veeresham, resident of Mallial, Karimnagar District, is not made a party respondent though the cognizable offences under Sections 420 and 406 I. P. C. were registered by the police on information given by him. Coming to the facts of the case, the complainant in his complaint alleged that, as requested by the petitioner, he collected an amount of rs. 5,00,000/- from different people and gave money to the petitioner. In spite of repeated requests to return the money, the petitioner dodged the issue promising that he would return the money after disposing of his property. Insofar as other complaints are concerned, it was the same story. M/s. Koratla Permanent Fund Limited, promoted by the petitioner, invited deposits from the general public promising to give twice the amount or thrice the amount after expiry of five years. Insofar as other complaints are concerned, it was the same story. M/s. Koratla Permanent Fund Limited, promoted by the petitioner, invited deposits from the general public promising to give twice the amount or thrice the amount after expiry of five years. A large number of people deposited the amount and the petitioner representing the company gave Deposit receipts in May, 1995. But after expiry of the period he did not return the redeemable value of deposit receipt amount of Rs. 15,000/ -. On these complaints, P. S. Mallial registered some cases under Sections 406 and 420 i. P. C. The police also registered some cases under Section 5 of the Act and other cases under Section 5 as well as Section 3 (1) (x) of the Scheduled Castes and the Scheduled tribes (Prevention of Atrocities) Act, 1989. After investigation, as noticed supra, the charge-sheet was filed. In the cases filed by some of the persons belonging to Scheduled castes and Scheduled Tribes, an allegation is made to the effect that when the depositors approached the petitioner for return of money, the petitioner abused those persons by using the caste name so as to insult and intimidate them. ( 3 ) IN these petitions the learned counsel for the petitioners Sri Bethi venkateswarlu appearing in some of the cases and also representing Sri N. V. Ranga rao, who filed appearance in other cases, made the following submissions. When the petitioner invited deposits promising to pay twice or thrice the amount after expiry of five years, there was no dishonest fraudulent intention to cheat, and therefore, the offence of cheating is not made out. According to the learned Counsel, the facts do not disclose any element of misappropriation. Secondly, he would urge that M/s. Koratla Permanent Fund Limited has filed a petition being Company Petition no. 113 of 2000 before the Company Court and the said company is in liquidation, by reason of which criminal act complaints are not maintainable. Thirdly, it is his submission that the complaints were registered by P. S. Mallial and other Police Stations in gross violation of the provisions of Section 220 (1) of Cr. P. C. He would urge that by reason of the definition financial Establishments under Section 2 (c) of the Act, a company registered under Companies Act, 1956 is not liable for prosecution for an alleged offence under Section 5 of the Act. P. C. He would urge that by reason of the definition financial Establishments under Section 2 (c) of the Act, a company registered under Companies Act, 1956 is not liable for prosecution for an alleged offence under Section 5 of the Act. Lastly he submits that all the complainants are the shareholders of the company, that after receiving the amount the company issued share certificates to all the shareholders, and therefore, the offence under Sections 406, 420 of I. P. C. and Section 5 of the Act are not attracted. ( 4 ) OPPOSING the petition, learned counsel for the contesting respondents and the learned Additional Public Prosecutor submit that whether the company issued share certificates to the depositors in addition to the deposit receipts in consideration of having received the deposit amounts, whether the company dishonestly with an intention to cheat invited deposits from the depositors and whether the company failed to pay the redeemable amounts after expiry of five years due to business losses are all matters of evidence in which event petitions for quashing under Section 482 of Cr. P. C. would not lie. They also submit that the petitioner did not issue share certificates to all the shareholders and lastly the petitioner made wide publicity inviting deposits promising thrice the amount after expiry of five years. Therefore, they would urge to dismiss the petitions. ( 5 ) THE submission of the learned counsel that the Act has no application to an incorporated company is misconceived. Andhra Pradesh State Legislature enacted the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 inter alia to curb the malpractices by the financial establishments and restore the confidence among the innocent depositors and also to serve as a deterrent against the malpractices and against such establishments. Andhra Pradesh State Legislature enacted the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 inter alia to curb the malpractices by the financial establishments and restore the confidence among the innocent depositors and also to serve as a deterrent against the malpractices and against such establishments. The Act came into force in 1999 and the term "financial Establishment" was defined by Section 2 (c) as under:"2 (C) 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 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 or a non-banking financial company as defined in clause (f) of section 45-1 of the Reserve Bank of India act, 1934;" ( 6 ) THE above definition did not permit the police to take action against the companies registered under Companies Act, 1956. Therefore, Andhra Pradesh Legislature by Amendment Act No. 12 of 2003 amended the definition of financial Establishment with effect from 14-7-2003. After amendment, the definition reads as under. "2 (C) financial Establishments means any person or group of individuals accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a co-operative society owned or controlled by any State Government or the Central Government or a banking company as defined under clause (c) of section 5 of the Banking Regulation act, 1949 (Central Act 10 of 1949 ). " ( 7 ) A reading of the definition of financial Establishments as it stands in the Statute would belie the submission of the learned Counsel for the petitioner that the Act has no application. As per law, a person or group of individuals accepting the deposits under any scheme or arrangement is liable for punishment for a term which may extend to ten years, if such person or group of persons defaults in return of the deposit either in cash or in kind. (See section 5 read with Section 2 (c) of the Act ). Therefore, the submission is rejected. (See section 5 read with Section 2 (c) of the Act ). Therefore, the submission is rejected. ( 8 ) THE mere fact that the company is in liquidation does not give any immunity to a company from being prosecuted for offences under Sections 406, 420 of I. P. C. as well as Section 5 of the Act. Further the copy of the winding up order is not placed before this Court nor any authority is cited before this Court in support of the submission. The submission is, therefore, rejected. ( 9 ) A reading of Section 220 (1) of cr. P. C. would show that the contravention of the same does not in any manner vitiate the prosecution of the petitioner for the offence he alleged to have committed. Section 220 speaks of the procedure and does not in any way confer any right on the accused. Further, even according to the petitioner, the cases were registered by different Police Stations on the complaints given by different depositors and this court does not find any infirmity on the part of the police in registering cognizable offences about which information is given to them. ( 10 ) THE last submission that the complainants are shareholders, that after accepting the deposit they were given share certificates, and therefore, they cannot be treated as depositors is also misconceived. As per Section 2 (b) the term "deposit" means the deposit of a sum of money either in lumpsum or instalments made with a financial establishment for a fixed period, for interest or return in any kind. The petitioner has brought to the notice of this court the share certificate issued to one sudhakar Reddy Chinta Reddy as well as the Deposit Receipts issued to some persons. A perusal of the same does not lead to any inference that share certificates are issued in consideration of the amount covered by Deposit Receipt. Prima facie, both the transactions are different and in case of a company issuing share certificates, after accepting the face value of the shares there was no necessity for the company to issue separate deposit receipts. In any view of the matter, it is for the petitioner to take such a plea before the criminal Court and prove to the satisfaction of the Criminal Court that the share certificates were issued only in consideration of the amount paid by the depositor. In any view of the matter, it is for the petitioner to take such a plea before the criminal Court and prove to the satisfaction of the Criminal Court that the share certificates were issued only in consideration of the amount paid by the depositor. ( 11 ) THE learned Counsel for the petitioner has placed strong reliance on the oft-quoted judgment of the Supreme Court in Hridaya Ranjan Pd. Verma v. State of bihar, 2000 (1) ALT (Crl.) 349 (SC) = 2000 scc (Crl.) 786 = 2000 (1) ALD (Crl.) 848 (SC), in support of the submission that the petitioner cannot be said to have deceived the depositors by fraudulently and dishonestly inducing and that he had no intention to deceive anybody initially. He placed reliance on Paragraph-14 of the said judgment, which reads as under:"on a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. "in the same judgment, in Paragraph-15, the supreme Court made the following observations:"in determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning that is, when he made the promise cannot be presumed. " ( 12 ) IT is no doubt true that textually the offence of cheating requires fraudulent dishonest intention to cheat on the part of the accused at the very beginning when the deceived person delivered property or valuable security. If the same were interpreted textually, the same would result in a situation where no person can be accused of cheating and can be made punishable under Section 420 I. P. C. It may not require a big logical argument to conclude that, a person, however, gullible the deceived may be, would not reveal his true intention before making the deceived person to part with valuable property. It is always done by some inducement of making false promises or making to believe the other person to deliver the property in the existence of certain facts, which are non-existent. For instance, no depositor would deposit money in any Non-Banking financial Company, if such company were to announce that the chance of returning the deposit made by a person with interest would be remote or would be doubtful. Therefore, every financial company would certainly induce persons to part with the money by promising attractive rates of interest as well as attractive benefits by way of gifts. Therefore, the subsequent conduct of a person receiving the property should furnish some indication of his original intention. Indeed, as observed by the supreme Court in the above case, the intention of the accused at the time of inducement can always be inferred by subsequent conduct associated with other factors. ( 13 ) IN this case, it is not the case of the petitioner that he has not received the deposits from large number of persons, that he has paid/returned the deposits with interest to substantial number of persons but failed to return the deposits only to few people, who lodged complaints. ( 13 ) IN this case, it is not the case of the petitioner that he has not received the deposits from large number of persons, that he has paid/returned the deposits with interest to substantial number of persons but failed to return the deposits only to few people, who lodged complaints. The petitioner and his company accepted the deposits by promising thrice the amount after five years and did not return the deposits to any person, who has deposited the amount. This is a clear indication of fraudulent dishonest intention on the part of the petitioner. This Court, however, hastens to add that these are the observations in the context of considering rival submissions and are not intended to be binding on the criminal Court where the facts are to be marshalled based on evidence that may be let in by the prosecution. ( 14 ) IN these petitions all the complaints made by the depositors do disclose the offence of cheating as well as the offence under Section 5 of the Act, and therefore, any further enquiry into the matter is unwarranted. It is now axiomatic that in a petition for quashing a criminal case or F. I. R. the Court should be cautious and the power should be exercised in rare cases with abundant circumspection having regard to the fact that an accused person has number of remedies under the Code of Criminal procedure to prove his innocence as well as to get fair justice. ( 15 ) THESE petitions are all misconceived and accordingly dismissed. The learned magistrate, before whom the cases are pending, shall dispose of the cases as expeditiously as possible within a period of six months from the date of receipt of a copy of this order.