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2024 DIGILAW 729 (TS)

Perala Srinivas Rao v. State of Telangana

2024-09-11

K.SUJANA

body2024
ORDER : The lis involved in these two petitions being one and the same, both the criminal petitions are heard together and are being decided by way of this common order. 2. These Criminal Petitions are filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (for short ‘BNSS’). Criminal Petition No.10494 of 2024 is filed to quash the proceedings initiated against the petitioner/accused No.3 in FIR.No.230 of 2024 dated 13.07.2024 before the Manuguru Police Station, Bhadradri Kothagudem District, for the offence punishable under Section 420 of Indian Penal Code, 1860 (for short ‘IPC’) and Section 5 of the Telangana Protection of Depositors of Financial Establishment Act, 1999 (for short ‘TSPDFEA’) and Criminal Petition No.10597 of 2024 is filed to quash the proceedings initiated against the petitioner/accused No.2 in FIR.No.236 of 2024 before the Manuguru Police Station, Bhadradri Kothagudem District, for the offence punishable under Section 420 of IPC and Section 5 of the TSPDFEA. Crl.P.No.10494 of 2024 3. The brief facts of this case are that the respondent No.2/de facto complainant lodged a complaint stating that the petitioner, along with two other, has cheated him stating that they work in Akshara Chit Funds (hereinafter referred to as ‘Company’) and pursued them to join in the chits promising to give extra commission and other bonus in the chit. It is alleged that the respondent No.2 believed in the deceitful words of petitioner and joined in the chit as subscriber in two different chits for an amount of Rs.15,00,000/- each and made monthly installment payments for 50 months using chit numbers ABCT0IP-23 and ABCT01P-06. However, when the respondent No.2 lifted the chit two years ago and asked the petitioner and other accused persons for returns of his share, no amounts were given to him. 4. On receipt of the said complaint, the Police registered FIR.No.230 of 2024 dated 13.07.2024, whereunder, the petitioner was arrayed as accused No.3 for the offences punishable under Section 420 of IPC and Section 5 of TSPDFEA. Aggrieved thereby, this Crl.P.No.10494 of 2024 is filed. Crl.P.No.10597 of 2024 5. The facts of this case are on similar lines with that of Crl.P.No.10494 of 2024. Aggrieved thereby, this Crl.P.No.10494 of 2024 is filed. Crl.P.No.10597 of 2024 5. The facts of this case are on similar lines with that of Crl.P.No.10494 of 2024. The respondent No.2/de facto complainant in this case lodged complaint stating that believing in the words of petitioner and other accused persons, he joined in two chits for an amount of Rs.10,00,000/- each and made monthly installment payments using chit reference numbers ABCT04M-19, ABCT11J-40 and ABCT11J-28. However, when he lifted his chits, he found that he was been cheated in the hands of petitioner and other accused persons. 6. On receipt of the said complaint, the Police registered FIR.No.236 of 2024 dated 17.07.2024, whereunder, the petitioner was arrayed as accused No.2 for the offences punishable under Section 420 of IPC and Section 5 of TSPDFEA. Aggrieved thereby, this Crl.P.No.10597 of 2024 is filed. 7. Heard Sri B.Mayur Reddy, learned senior counsel representing Sri Aravind Saini, learned counsel for petitioner in both the matters and Sri D.Arun Kumar, learned Additional Public Prosecutor, appearing for respondent No.1 – State in both the matters. No representation on behalf of respondent No.2/de facto complainant, respectively, in both the matters. 8. Learned senior counsel appearing for the petitioner submitted that there are no set of specific allegations leveled against the petitioner in the contents of both the FIRs. He contended that the Company comes under actively operating category and is committed to making payments to all the subscribers, but due to widespread economic impact of COVID-19 pandemic, large number of subscribers defaulted in payments of installments which resulted in creating significant backlog to the Company and though the Company had been striving to overcome the same, the process being time consuming, there are procedural delays. He lamented that initiation of criminal proceedings is against the provisions of Section 64 of Chit Funds Act, 1982 (for short ‘Act, 1982’) as the same enables the Company and subscribers, likewise, to adhere to legal process to recover the dues. 9. In addition, learned senior counsel for petitioner incessantly contended that in order to attract offence under Section 420 of IPC, inducement to deliver property with a fraudulent intention from the inception is necessary, but there are no such averments made in the complaint. 9. In addition, learned senior counsel for petitioner incessantly contended that in order to attract offence under Section 420 of IPC, inducement to deliver property with a fraudulent intention from the inception is necessary, but there are no such averments made in the complaint. He averred that as per the contents of respective complaints it is clear that when several installments were paid by the respective subscribers, the prized money was received by them from the subject chits and the same would portray that there was no intent of cheating on the part of petitioner. He asserted that Section 5 of TSPDFEA does not attract the facts of the cases on hand as the subject Chit Fund Company is not a financial establishment which accepts deposits. He reiterated that the Company merely acts as a foreman for managing the contributions collected from the subscribers and disbursing them to the prized subscriber each month basing on the payments made from non-prized subscribers. 10. In support of the above contention, learned senior counsel for the petitioner sturdily relied on the judgment dated 01.11.2022 passed by this Court in Crl.A.No.38 of 2019 whereunder, in paragraph Nos.23 and 24 it was held as under: “23. In the case on hand, as narrated above, it is not the case of the prosecution at all that the accused persons are running a financial establishment. The case of the prosecution is that the accused are doing chit fund business. Therefore, when it is not the case of the prosecution that accused were not running financial establishment and accused were not accepting the deposits, when PWs.1 to 4 and 6 and other subscribers have not deposited the money for interest and when they have not committed the default of the alleged deposit, the question that the accused, including the appellant, have committed the offence punishable under Section 5 of the Act does not arise. 24. The police should not have filed charge sheet under Section 5 of the Act. Similarly cognizance also should not have been taken and that charges also should not have been framed.” 11. 24. The police should not have filed charge sheet under Section 5 of the Act. Similarly cognizance also should not have been taken and that charges also should not have been framed.” 11. In addition, learned senior counsel for petitioner prayed the Court to consider the submissions made on behalf of petitioner and allow the criminal petitions, quashing the proceedings initiated against the petitioner in Crl.P.No.10494 of 2024 who is accused No.3 in FIR.No.230 of 2024 and the petitioner in Crl.P.No.10597 of 2024 who is accused No.2 in FIR.No.236 of 2024. 12. On the other hand, the learned Additional Public Prosecutor appearing for respondent No.1 – State, strongly opposed the submissions made by learned counsel for petitioner in both the matters and contended that the petitioner is allegedly a part of chit fraud which involves around huge chit amounts collected by several chit subscribers. He reiterated that there are serious set of allegations against the petitioner with regard to fraud and cheating in Chit Fund Company. He asserted that the matters require investigation, as such, prayed the Court to dismiss the criminal petitions as the same lacks merits. 13. Having regard to the rival submissions made and on going through the material placed on record, it is noted that the grievance of the petitioner is two fold ; the primary grievance is with regard to allegations leveled against the petitioner with regard to cheating in the chit fund which results in attracting Section 420 of IPC against him and the secondary grievance is with regard to non-applicability of Section 5 of TSPDFEA in the cases on hand, whereas, it is the specific contention of respondent No.2/de facto complainant in respective cases, that the petitioner/accused No.3 in Crl.P.No.10494 of 2024/accused No.2 in Crl.P.No.10597 of 2024 has cheated them in chit fund business by promising commission and bonus, etcetera., but when they approached the Company to receive their amounts by lifting their respective chits, they found that they were deceived by the words of petitioner. In support of his contentions, the learned senior counsel for petitioner relied on the judgment of this Court in Crl.A.No.38 of 2019 wherein, it was observed that the Chit Funds Act, 1982, is a self contained Act and observing that Section 2(b) of TSPDFEA defines the word “deposit” as a sum of money either in lumpsum or installments made with a financial establishment for a fixed period, for interest or return in any kind. 14. That apart, it is imperative to note that chit fund is not a financial establishment and Section 2(c) of TSPDFEA defines ‘Financial Establishment”, as under: “‘Financial Establishment’, 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 cooperative 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”. 15. At this stage, it is expedient to note that the Act, 1982 is a complete code in itself which is specifically designed to address and redress all grievances related to chit fund operations which provides comprehensive mechanisms for resolving disputes and also includes penal provisions, such as, Section 76 which is enshrined to address any misconduct within the chit fund business. Further, when there is a special enactment like the Act, 1982 which specifically governs the domain of chit funds, the same would prevail over general laws. Therefore, as there is a non-obstante clause in Section 3 of Act, 1982, the same would prevail over general law. 16. In view thereof, Section 5 of TSPDFEA is not applicable to the cases on hand against the petitioner. However, having regard to the circumstances of the cases on hand and considering the fact that the matters are at the stage of investigation, this Court is of the opinion that it is significant to continue the investigation against the petitioner with regard to offence punishable under Section 420 of IPC. 17. In the light of the above, it is to be concluded that the proceedings initiated against the petitioner/accused No.3 in Crl.P.No.10494 of 2024/accused No.2 in Crl.P.No.10597 of 2024 in FIR.Nos.230 and 236 of 2024, respectively, before the Manganuru Police Station, under Section 5 of TSPDFEA are hereby quashed. 17. In the light of the above, it is to be concluded that the proceedings initiated against the petitioner/accused No.3 in Crl.P.No.10494 of 2024/accused No.2 in Crl.P.No.10597 of 2024 in FIR.Nos.230 and 236 of 2024, respectively, before the Manganuru Police Station, under Section 5 of TSPDFEA are hereby quashed. However, the investigation against the petitioner in both the matters with regard to Section 420 of IPC shall continue. Since the punishment prescribed for the offence alleged against the petitioner in both the matters is less than seven (07) years, without going into the merits of the case, this Court deems it appropriate to direct the petitioner in both the matters to appear before the Investigating Officer on or before 20.09.2024 between 11:00 A.M., to 05:00 P.M., and in-turn, the Investigating Officer is directed to follow the procedure laid down under Section 41-A Cr.P.C., (presently known as Section 35 (3) of the Bharatiya Nagarik Suraksha Sanhita (for short ‘BNSS’) and also the guidelines formulated by the Hon’ble Supreme Court in Arnesh Kumar Vs. State of Bihar, (2014) 8 SCC 273 scrupulously. However, the petitioner/accused shall co-operate with the Investigating Officer as and when required by furnishing information and documents as sought by him in concluding the investigation. The petitioner/accused shall file all the documents which he ought to file to prove that it do not come under the criminal offences and the Investigating Officer shall consider the same before filing appropriate report before the Magistrate. 18. With the above observations, both the Criminal Petitions are disposed of. Miscellaneous applications, if any pending, shall also stand closed.