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2025 DIGILAW 522 (TS)

Perala Srinivas Rao v. State of Telangana

2025-04-30

E.V.VENUGOPAL

body2025
ORDER : E.V.VENUGOPAL, J. 1. Heard Sri Mayur Reddy, learned senior counsel appearing on behalf of Sri Saini Aravind, the learned counsel for the petitioner and Sri M.V.Hanumantha Rao, the learned counsel for the second respondent and Mr.E.Ganesh, learned Assistant Public Prosecutor for the first respondent – State. 2. This criminal petition is filed seeking to quash the proceedings against the petitioner in C.C.No.27 of 2022 on the file of the Court of Principal District and Sessions Judge, Hanumakonda registered for the offences under Sections 420 , 406, 506 IPC and section 5 of Telangana Protection of Depositors of Financial Establishments Act, 1999 . 3. The case of the prosecution is that the 2 nd respondent herein filed a report dated 06.01.2021 before the Commissioner of Police, Warangal stating inter alia that she and her husband are subscribers of Chits in Akshara Chit Funds Pvt. Ltd. and its branches at Hanumakonda, Ramnagar, Warangal, Kazipet, Jangaon, Siddipet, Jammikunta and Mahabubabad. The Head office of M/ s.Akshara Chit Funds Pvt. Ltd., is located at Nakkalagutta, Hanumakonda. It is alleged that Akshara Chit Fund Company Pvt. Ltd. has removed the 2 nd respondent and her husband from Non-prized chit groups up to 2017 without their knowledge and chit amounts and dividends were not paid. It is said that four house sites in (1) Sy.No.1087-200 sq. Yards, (2) Plot No.74 in Sy.No.93- 216 sq. Yards, (3) Plot No.260 in Haripuri Township, Yadadri (4) Plot No.2 & 3 admeasuring 426.09 sq. Yards in Jangaon were mortgaged with Akshara Chit Funds Pvt. Ltd., company. It is said that the 2 nd respondent is also working as an agent in Akshara Chit Funds Pvt. Ltd., company and its branches at Jammikunta, Kazipet, Ramnagar, Jangaon, Warangal, Siddipet, Mahabubabad and Hanumakonda branches. It is said that a request was made to the petitioner to pay the amounts and release mortgaged plots which were taken as surety. It is alleged that the petitioner alleged to have threatened her on several ways. The Dy.Registrar, Chits, Warangal despite request did not order for release of mortgaged four plots or for payment of amounts. It is also stated in the report expressing doubt about their signatures and fake sureties were furnished to grab the chit amount of Rs.2.5 crores. It is alleged that the petitioner alleged to have threatened her on several ways. The Dy.Registrar, Chits, Warangal despite request did not order for release of mortgaged four plots or for payment of amounts. It is also stated in the report expressing doubt about their signatures and fake sureties were furnished to grab the chit amount of Rs.2.5 crores. It is alleged that the Chairman and Managing Director has involved in Financial fraud, irregularities, fraudulent and manipulation of chit subscribers amount, fake sureties and illegal way of mortgaging plots. It is further stated that the 2 nd respondent have to get more than Rs.2.5 crores with interest from Akshara Chit Funds Pvt. Ltd., company. The police of P.S.Subedari on the endorsement made by the Commissioner, registered a case in Crime No.11 of 2021 under section 420, 506 IPC . The Inspector of Police, PS. Subedari filed a charge sheet in the Court of the Principal District and Sessions Judge: Hanumakonda for the offences under sections 420, 406, 506 IPC and section 5 of Telangana Protection of Depositors of Financial Establishments Act, 1999 . 4. The learned senior counsel appearing for the petitioner submitted that the petitioner has not committed any offence as alleged by the prosecution much less the offence with which he was charge sheeted. It is submitted that Akshara Chit Funds Pvt. Ltd., company is a company registered under Indian Companies Act, carrying its business in Chits having been established on 27.11.2009. The petitioner is the Chairman and Managing Director of the aforesaid company. The company has been working since then carrying its business in chits from the date of its inception without any complaint of whatsoever in nature and gain reputation in the society. The company, due to overwhelming response from the subscribers has opened its branches at Hanumakonda, Warangal, Kazipet, Khammam-2, Khammam, Mahabubabad, Raparthy Nagar, Kothagudem, Kothagudem-2, Sathupally, Palvancha, Nalgonda, Suryapet, Karimnagar, Mankammathota, Rampur, Rekurthy, Jagtial, Peddapalli, Godavarikhani, Nizamabad, Adilabad, Mancherial, Nagole, Dilsukhnagar, AS Rao Nagar, Kukatpally, Sangareddy, Vikarabad, Mahaboobnagar. The business in chit fund is governed by the provisions of Chit Fund Act, 1982 . The company is carrying on its business in accordance with the provisions of Chit Fund Act, 1982 . 5. The business in chit fund is governed by the provisions of Chit Fund Act, 1982 . The company is carrying on its business in accordance with the provisions of Chit Fund Act, 1982 . 5. The learned senior counsel further submitted that the 2 nd respondent was working as an agent to the Akshara Chit Fund Company Pvt. Ltd., by introducing various subscribers to the Chit fund company. The second respondent has subscribed as many as 251 chits in various branches of Akshara Chit Fund Company Pvt. Ltd., The 2 nd respondent lifted some of the chits, received amounts to a tune of about Rs.28,89,432/ - by way of cheque. The 2nd respondent lifted some of the chits as prized subscriber, the chit amount was adjusted to the non-prized chits with a letter given by the 2nd respondent. The 2 nd respondent gave a letter to the Akshara Chit Fund Company Pvt. Ltd., requesting to close non-prized chits and the amounts lying to its credit were adjusted to other prized chits. The 2 nd respondent committed default in payment of amounts in respect of prized chits. The 2 nd respondent and her husband lifted some of the chits as a prized subscriber and mortgaged four house sites with the chit fund company i.e., (1) Sy.No.1087-200 sq. Yards, (2) Plot No.74 in Sy.No.93- 216 sq. Yards, (3) Plot No.260 in Haripuri Township, Yadadri (4) Plot No.2 & 3 admeasuring 426.09 sq. Yards in Jangaon to ensure for payment of monthly subscription. The chit fund company raised disputes in respect of 9 chits before the Arbitrary under section 64 of Chit Funds Act for recovery of amounts. Those arbitration proceedings are pending for consideration. The 2 nd respondent has stopped payment of monthly subscription to the chits subscribed by her from the year 2017. The 2 nd respondent when insisted for payment of subscription by the foreman of the branch in which the 2 nd respondent became a member of chit group, the 2 nd respondent threatened the staff of the said branch with dire consequences. It is submitted that the 2 nd respondent has sold one of the mortgaged plot to the third parties. Akshara Chit Fund Company Pvt. Ltd., on coming to know this, filed a report before the P.S.Subedari against the 2 nd respondent and the purchaser. It is submitted that the 2 nd respondent has sold one of the mortgaged plot to the third parties. Akshara Chit Fund Company Pvt. Ltd., on coming to know this, filed a report before the P.S.Subedari against the 2 nd respondent and the purchaser. The same has been registered as case in crime No.135 of 2021 under section 420 read with Section 34 IPC and the same is pending for investigation. 6. The learned senior counsel further submitted that the 2 nd respondent fell due a sum of Rs.33,64,926/ - towards payment of monthly subscriptions of about 36 chits. The Akshara Chit Fund Company Pvt. Ltd., is taking steps to file about 27 cases against the 2 nd respondent and her husband for recovery of amount due from her and her husband in respect of 27 chits of various branches of Akshara Chit Fund Company Pvt. Ltd. It is submitted that the petitioner is only the Chairman and Managing Director of Akshara Chit Fund Company Pvt. Ltd. Under the provisions of Chit Fund Act, the Foreman is alone the competent person to run chit fund company under section 20 of Chit Fund Act. The Chairman and Managing Director has no role in running the chit business under the provisions of Chit Fund Act, 1982 . The 2 nd respondent, in order to harass the petitioner filed a case against him as if the petitioner misappropriated the amounts and committed the offence of cheating. The petitioner did not misappropriate any amount nor committed any offence of cheating. The 2 nd respondent, being an agent to the company, subscribed chits in various branches of Akshara Chit Fund Company Pvt. Ltd., committed default in payment of monthly chit subscriptions. The 2 nd respondent having received prized money from the chits lifted by her failed to pay the chit amount and cases have been registered against her before the Chit Registrar for recovery of amounts. It is submitted that the 2 nd respondent had lifted as many as 127 chits in various branches of the chit fund company. She furnished non-prized chits by way of surety for ensuring the payment of chit subscriptions of lifted chits. The 2 nd respondent gave a letter to the concerned branch for adjusting the prized chit amount towards payment of subscriptions due and payable by her in respect of prized chits. She furnished non-prized chits by way of surety for ensuring the payment of chit subscriptions of lifted chits. The 2 nd respondent gave a letter to the concerned branch for adjusting the prized chit amount towards payment of subscriptions due and payable by her in respect of prized chits. The 2 nd respondent knew very well about the chit business, subscribed chits in various branches, lifted chits, received amounts and some amounts received by her under prized chits were adjusted against other chits. If she had any grievance about the functioning of the concerned branch, remedy is provided under Chit Fund Act to raise a dispute before the Chit Registrar under Section 64 of Chit Fund Act. The 2 nd respondent instead of availing the remedy under law, filed a complaint before the police with false and baseless allegations to evade payment of amount due and payable by her to the chit fund company. 7. The learned senior counsel further submitted that the 2 nd respondent did not deposit any amount with the chit fund company for interest. In fact, it is not the case of the 2 nd respondent that she deposited amounts in the chit fund company for interest and the said amount was misappropriated by the chit fund company. The police filed charge sheet by adding section 5 of Protection of Depositors of Financial Establishment Act, 1999. There is no allegation either in the first report or in the charge sheet attracting the offences under section 5 of Protection of Depositors of Financial Establishment Act, 1999. The Chit fund company is not a financial establishment as defined under section 2(c) of Protection of Depositors of Financial Establishment Act, 1999. The police purposefully added section 5 of Protection of Depositors of Financial Establishment Act, 1999 to harass the petitioner and to be tried by the Learned Principal Sessions Judge. He lastly contended that assuming without admission that some irregularities as alleged have taken place in the chits subscribed by the 2 nd respondent, a case could have been filed against the concerned Foreman of the branch but not against the petitioner. The petitioner, being Chairman and Managing Director is not responsible for day to day affairs of the chit fund business in each branch. The petitioner, being Chairman and Managing Director is not responsible for day to day affairs of the chit fund business in each branch. The allegations in the FIR as well as charge sheet even if they were taken on their face value and accepted in its entirety, no case is made out against the petitioner for the offence under section 420, 406, 506 read with section 5 of Protection of Depositors of Financial Establishment Act, 1999, as such the proceedings in CC.No.27 of 2022 are liable to be quashed. In support of his submissions, the learned counsel for the petitioner has relied on the following judgments: 1) Sharad Kumar Sanghi vs. Sangita Rane , (2015) 12 SCC 781 , 2) GHCL Employees Stock Option Trust vs. India Infoline Ltd. , [ (2013) 4 SCC 505 ] , 3) Sushil Sethi and Ors. vs. The State of Arunachal Pradesh and Ors. , [ (2020) 3 SCC 240 ] , 4) Vesa Holdings P. Ltd. and Ors. vs. State of Kerala and Ors. , [ (2015) 8 SCC 293 ] , 5) Hira Lal Hari Lal Bhagwati vs. C.B.I., New Delhi, (2003) 5 SCC 257 8. On the other hand, the learned Assistant Public Prosecutor as well as the learned counsel for the 2 nd respondent vehemently contended that this is not a case where the extraordinary jurisdiction of this Court has to be exercised since the averments/allegations levelled against the petitioner are grave in nature and that the truth or otherwise will come out only upon a full-fledged trial before the trial court. 9. As seen from the record, the 2 nd respondent expressed doubt about their signatures and fake sureties were furnished to grab the chit amount of Rs.2.5 crores. It is further alleged that the Chairman and Managing Director has involved in Financial fraud, irregularities, fraudulent and manipulation of chit subscribers amount, fake sureties and illegal way of mortgaging plots. It is also to be seen that the petitioner is involved in several cases on the same set of allegations. In Sharad Kumar Sanghi case (1 supra) the Hon’ble  Supreme Court observed that without arraying the company as accused criminal proceedings cannot be continued against the foreman or the other director of the company. However, in the instant case, the entire allegations are levelled against the petitioner only but not against the company. In Sharad Kumar Sanghi case (1 supra) the Hon’ble  Supreme Court observed that without arraying the company as accused criminal proceedings cannot be continued against the foreman or the other director of the company. However, in the instant case, the entire allegations are levelled against the petitioner only but not against the company. It is the specific case of the second respondent that the petitioner had forged her signatures and threatened her with dire consequences and he had also cheated her without disbursing the priced chit amounts. Moreover, it is also the specific case of the second respondent that the petitioner herein is the in-charge of administration and management of the company and thereby vicariously liable. It is also the specific case of the second respondent that the petitioner being the Managing Director of the company, evaded to pay the prized chit amounts to a tune of Rs.2.5 crores to the second respondent and deceived the complainant and her husband. So the judgments relied upon by the learned counsel for the petitioner is not applicable to the facts of the present case. Further, the charge sheet and the accompanying material contain allegations indicating commission of the offences stated supra by the petitioner. Hence the court shall proceed with the trial of the case. Nowhere in the charge sheet it was alleged that the chit fund company i.e. Akshara Chit Funds Pvt. Ltd committed the alleged offences but it is the petitioner who committed the offences. Hence the company need not be arraigned as accused. 10. It is also to be noted from the record that the petitioner herein had filed Crl.P.Nos.10494 & 10597 of 2024 and this Court by a common order dated 11.09.2024 observed as under: 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. 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 . 11. In view of the above findings given by a coordinate Bench of this Court, I am also of the opinion that the proceedings against the petitioner for the offence under Section 5 of the Telangana Protection of Depositors of Financial Establishments Act, 1999 are hereby quashed. However, the prayer for quashing of the proceedings in respect of the offence punishable under sections 420, 406, 506 IPC is hereby dismissed. The trial Court is directed to proceed against the petitioner for the offences punishable under Sections 420 , 406, 506 IPC in accordance with law. 12. Accordingly, this criminal petition is dismissed. As a sequel miscellaneous petitions if any shall also stand dismissed.