Madhya Pradesh High Court
Jkv Multi State Credit Co Operative ... vs The State Of Madhya Pradesh on 9 December, 2016
M.Cr.C. No.13281/2015
(1)
THE HIGH COURT OF MADHYA PRADESH AT JABALPUR
(Single Bench - Rajendra Mahajan J.)
M.Cr.C. No.13281/2015
1. JKV Multi State Credit
Co-operative Society Ltd.
through its Vice Chairman,
Mr. Pravhal Kaushik s/o Shri
Vijendra Kaushik
2. Branch Manager,
Mr. Rajnesh Shukla, having
office at First Floor, M.P. Guest
House, Near State Bank of
India, Sidhi, District Sidhi
(M.P.)
Applicants
V E R S U S
1. The State of Madhya Pradesh
through the Collector, Sidhi,
District Sidhi (M.P.)
2. Upkhand Magistrate, Gopad
Banas, Sidhi, District Sidhi
(M.P.)
Respondents
.....................................................................................
For applicants : Shri Owais A. Pechkar with Shri
Subodh Kumar Gupta, learned
counsel.
For respondents-State : Shri Pramod Kumar Pandey, learned
Government Advocate.
.....................................................................................
O R D E R
(Passed on the 9 t h day of December, 2016) By moving this petition under Section 482 of the Cr.P.C., the applicants have prayed for quashing the orders dated 30.07.2014 and 12.01.2015 passed by the respondent M.Cr.C. No.13281/2015 (2) No.1 and orders dated 02.03.2015 and 29.06.2015 passed by the Sessions Judge and Special Judge Sidhi under the Madhya Pradesh Nikshepakon Ke Hito Ka Sarankshan Adhiniyam, 2000 (for short 'the Act') in Special Case No.1/15 and subsequent proceedings in the said case.
2. The background facts for adjudication of this petition in brief are as under:-
(2.1) The JKV Multi State Credit Co-operative Society Ltd.
(for short 'the Society') Headquarters at Lucknow is registered with the Government of India, Ministry of Agriculture, Department of Agriculture and Co-
operation under Section 7 of the Multi State Co-
operative Societies Act, 2002 (Act No.39 of the 2002), hereinafter called the 'the MSCS Act', and the rules framed thereunder. The activities of the Society are controlled and supervised by the Central Registrar of Co-operative Societies. The Society carries out welfare activities for its shareholder members through providing them with loans and credits. The Society does not accept the deposits of money from the public at large. The areas of operation of the Society are the States of Uttar Pradesh, Bihar, Uttarakhand, Rajsthan and M.Cr.C. No.13281/2015 (3) Madhya Pradesh. Applicant No.1 Pravhal Kaushik is the elected Chairman of the Society and applicant No.2 Rajnesh Shukla is the Branch Manager of the Society at Sidhi.
(2.2) Vide the common order dated 12.05.2014 passed in Writ Appeal No.596/2011 and other connected writ appeals and writ petitions, a Division Bench of the High Court of M.P. at Jabalpur has directed the State Authorities to proceed against the companies or persons in relation to the irregularities/ illegalities committed by them in respect of the provisions of the Act. In pursuance of the said directions, the State Government of Madhya Pradesh issued a communication dated 28.05.2014 directing all the District Collectors of the State, who are the Competent Authorities in terms of Section 5(1) of the Act, to take appropriate actions in this regard. Thereafter the District Collector Sidhi (for short 'the Collector'), having exercised the powers of the Competent Authority vested in him by virtue of Section 5(1) of the Act, issued a letter No.311/Parivad/2014/Sidhi dated 26.07.2014 to the Society and five other financial M.Cr.C. No.13281/2015 (4) establishments operating in District Sidhi to provide information on the points given in the letter and to appear before him on 28.07.2014 to record their statements in connection with the activities being carried out by them in the territorial jurisdiction of Sidhi district. The Society submitted a written reply dated 22.07.2014 and Sanjeev Mishra, the AGM- Compliance & Audit of the Society, recorded his statement on 28.07.2014 before the Collector in connection with the activities of the Society. Thereafter, the Collector issued an official order dated 30.07.2014, the impugned order, appointing various officers working under him with directions to each of them to make a detail enquiry into the working and functioning of a financial establishment assigned to him. The Society was one of the six establishments. Shailendra Singh, the SDM of Sub-Divsion Gopad Banas, was assigned to conduct enquiry in respect of the Society. To comply with the order, with his inspecting team he visited the office of the Society and made a thorough enquiry by inspecting records of the Society. The team seized all the movable properties and records of the Society preparing a Panchnama M.Cr.C. No.13281/2015 (5) (the seizure memo). He submitted his report to the Collector. Later, the Collector registered a case against the Society bearing No.28/B-121/2014-2015 titled State of M.P. Vs. JKV Multi State Credit Society. In that case, on 12.01.2015, the impugned order, the Collector passed an ad-interim order of attachment of the properties owned by the Society. He has also given a direction in the order to apply within fifteen days from the date of passing the order to the Special Court designated under the Act for making the ad-interim order of attachment absolute. He passed the said order with the direction under the provisions of Sections 4 and 5(3) of the Act. Be it noted, the court of Sessions Judge Sidhi is the Special Court designated under the Act. Thereupon, on behalf of the Collector, the Sub-Divisional Magistrate filed an application dated 21.01.2015 under Section 5(3) of the Act before the Sessions Court for making the order dated 12.01.2015 passed by the Collector absolute. In the application, he has also prayed that the Chief Executive and the members of the Board of Directors of the Society be prosecuted under Sub-
Section 4 of Section 3 of the Act for non-
M.Cr.C. No.13281/2015(6)
compliance of provisions of Sub-Sections 1 to 2 of Section 3 of the Act. Upon the said application, Special Case No.1/15 titled the Competent Authrority-cum-Collector Sidhi Vs. JKV Multi State Co-operative Society is registered in the Sessions Court Sidhi. The learned Sessions Judge initiated the proceedings in the case complying with the provisions of Section 8 of the Act. Having heard the learned counsel for the parties and having perused the documents on record, he passed the order dated 02.03.2015, the impugned order, whereby the ad-interim order dated 12.01.2015 passed by the Collector is made absolute by him.
(2.3) Later, the applicants filed an application dated 15.06.2015 before the Sessions Judge for quashment of the complaint and discharge of the applicants of the indictment made under Section 3(4) of the Act against them taking various grounds. Vide order dated 29.06.2015, the impugned order, the learned Sessions Judge dismissed the application.
(2.4) Hence, this petition.
3. The learned counsel for the applicants submitted that M.Cr.C. No.13281/2015 (7) the Society is not a financial establishment as per the definition given in Section 2(c) of the Act because the Society is registered under the MSCS Act and that the Society takes deposits of money only from its shareholder members. He submitted that the Society is regulated under the provisions of MSCS Act, therefore, the Society is only accountable to the Central Registrar of Multi State Co-operative Societies. Consequently, the provisions of the Act whatsoever are not applicable to the Society. He submitted that as per Section 5(1) of the Act, the Collector is the Competent Authority under his territorial jurisdiction. Therefore, the Collector himself has to file complaint against the Society and its promoters for their prosecution for violation of the provisions of the Act. But, the complaint is filed before the Sessions court with the signature of the SDM Sidhi. Hence, their prosecution on such complaint is incompetent and it is nothing but an abuse of process of law liable to be quashed. He submitted that the list of witnesses has not been attached with the complaint, which is mandatory. He submitted that the learned Sessions Judge has registered the complaint without recording the statements of the SDM and other witnesses under the provisions of Section 200 of the Cr.P.C. Hence, the complaint is registered violating the provisions of the said Section. He submitted that in a reply to the notice M.Cr.C. No.13281/2015 (8) dated 26.07.2014 the Society has provided detailed information as sought by the Collector stating that the Society has collected Rs.5,50,000/- (five lac and fifty thousand only) from the shareholder members of Sidhi district and distributed a total loan amount of Rs.5,30,000/- (five lac and thirty thousand only) to the shareholder members for their welfare. Hence, the Society does not owe presently any monetary obligation to its shareholder members of Sidhi district. However, the learned Sessions Judge has not considered these facts in right perspective while passing the order dated 29.06.2014. He submitted that in the aforesaid background facts of the case, the orders dated 30.07.2014, 12.01.2015, 02.03.2015 and 29.06.2016 have been passed in gross violation of relevant provisions of law concerned. Therefore, these orders and the prosecution against the applicants under Section 3(4) of the Act be quashed by this court in exercise of power under Section 482 Cr.P.C.
4. In reply, the learned Government Advocate submitted that the Society is neither owned nor controlled by the State Government or the Central Government because it is registered with the Ministry of Agriculture, Department of Agriculture Co-operation, Government of India as an independent Society. Therefore, the Society is a financial M.Cr.C. No.13281/2015 (9) establishment as defined in Section 2(c) of the Act. Consequently, provisions of the Act are applicable to the Society. He submitted that under the Shops and Establishment Act, 1958 and the M.P. Rules 1959 thereunder, the Society is registered in Sidhi district as "JKV Credit Co- operative Society Ltd." Pravhal Kaushik (applicant No.1), Rajnesh Shukla (applicant No.2) and Aditya Singh, are the owner, the Branch manager and the Agent respectively of the aforesaid Society. Thus, both the societies are different entities. Hence, the bye-laws of JKV Multi State Credit Co- operative Society Ltd. are not applicable to JKV Credit Co- operative Society Ltd Sidhi. He submitted that after the registration of the case on 16.02.2015, the said promoters of the said Society have filed an amendment application before the Labour Commissioner of the State for correction of the name of the Society as JKV Multi State Credit Co-operative Society, which proves their malafides. He submitted that as per the definition given in Clause(e) of Section 45-I of the Reserve Bank of India Act, 1934 (for short 'the RBI Act') the Society is a non-banking institution and, therefore, as per provisions of Sub-clause (iii) Clause(f ) of Section 45-I of the RBI Act, the Society cannot accept deposits even from his shareholder members before seeking the previous approval of the Central Government and before publication of the M.Cr.C. No.13281/2015 (10) notification in the Official Gazette in this respect. He submitted that the Society has not produced any relevant document to prove that it has approval of the Central Government with relevant notification in the Official Gazette for receiving deposits of money from his shareholder members or the public at large. After referring to Bye-laws No.8 of the Society, he submitted that any person may take membership of it just on payment of ten-rupees admission fee. The Society is taking this nominal admission fee as a Smoke-Screen to show that it does not receive deposits of money from the public at large. After referring to relevant provisions of the MSCS Act, he submitted that the Society is registered under the Act only because the area of operation of the Society is in more than one provinces. But in the said Act, there is no provision that in case a society is registered under the Act, then it is not necessary for such a society to obtain permission from the Reserve Bank of India in terms of Section 45-I (f )(iii) of the RBI Act to accept public deposits despite the fact that the society is a non-banking institution as per the amended definition of Section 45-I(e) of the RBI Act. He submitted that there is no specific provision in the Act that the competent authority i.e. the Collector himself has to file the complaint in terms of Section 3(4) of the Act for launching prosecution against a financial establishment which M.Cr.C. No.13281/2015 (11) has not complied with the provisions of Section 3(1)(2) and (3) of the Act. The Collector may authorize any officer working under him to file complaint against any defaulter financial establishment. Hence, the complaint is competent for the prosecution of the applicants. He submitted that since the complaint is filed by the SDM on behalf of the Collector qua as Public Servant for prosecution of the applicants, the recording of the statements of the SDM and other witnesses as per Clause(a) of the proviso to Section 200 of the Cr.P.C. is not necessary before the registration of the complaint. In support of this contention, he placed reliance upon the decisions rendered in Deputy Chief Controller of Imports and Exports Vs. Roshanlal Agarwal (AIR 2003 SC 1900) and National Small Industries Corporation Ltd. Vs. State (NCT of Delhi) (2009 (1) SCC 407). He submitted that the complaint against the applicants is filed for their prosecution under Section 3(4) of the Act for non-compliance of provisions of Section 3(1)(2) of the Act. The maximum punishment under Section 3(4) of the Act is the imprisonment up to three months or with fine which may extend to rupees one thousand or with both. Hence, the trial of the case will be held as a summons-case following the procedure laid down in Chapter-XX of the Cr.P.C. (Sections 251 to 259). Thus, the filing of a list of the witnesses with the complaint is not M.Cr.C. No.13281/2015 (12) mandatory as per the provisions of Section 254(1)(2) Cr.P.C. He submitted that as per the provisions of Section 11 of the Act, an appeal shall lie before the High Court against an order passed by the Special Court. Hence, this petition Under Section 482 Cr.P.C. is not maintainable. Upon these submissions, he prayed that the petition is devoid of merits and substance, therefore, it is liable to be dismissed.
5. I have considered the rival submissions made by the learned counsel for the parties at the Bar and perused all the impugned orders and material on record.
6. First, it will be seen what is the object behind enactment of the Act? In this respect, the statement of objects and reasons of the Act is germane. The statement reads thus:-
Statement of Objects and Reasons "1. It has come to the notice of the State Government that certain financial establishments take deposits of money from public but after some time they run away without returning the deposits of money to the public.
2. At present, there is no enactment to identify and take legal action against such financial establishments, who on receipt of deposit from public, commit default in returning the deposit after maturity. In order to safeguard the interest of the depositors and to identify the M.Cr.C. No.13281/2015 (13) financial establishments and to compel them to return the money by taking legal proceedings, a new enactment has been proposed. The proposed enactment prescribes procedure not only for taking legal proceedings against the financial establishment but also makes every persons responsible for the management of the affairs of such establishments. It is proposed that Special Court shall be designated and the Competent Authority shall be appointed by the State Government. It is also proposed that the person responsible shall be punished with imprisonment for a term which may extend to six years and shall also be liable to fine which shall not be less than fifty thousand rupees.
3. Hence this Bill."
From the perusal of said statement, it is evident that the Act is enacted to protect the interest of gullible depositors who fall easy prey to the unscrupulous and bogus financial establishments in the hope of getting high returns on their money, which is in fact nothing but promising them the moon. Moreover, the nomenclature of the Act itself suggests that it is drafted to protect the interest of depositors. Thus, the Act is a beneficial legislation. Keeping the aforestated in view, the provisions of the Act will be interpreted in this order in broad perspective.
7. The main contention raised on behalf of the applicants M.Cr.C. No.13281/2015 (14) is that the Society is not a financial establishment as defined in Clause(c) of Section 2 of the Act. Therefore, this contention will be dealt with first.
8. Section 2(c) of the Act defines financial establishment thus:-
"Financial establishments" means an individual, an association of individuals or a firm or a company incorporated under the Companies Act, 1956 (1 of 1956) receiving deposits 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 the State Government or the Central Government, or a Banking Company as defined under clause(c) Section 5 of the Banking Regulation Act, 1949 (No. 10 of 1949). "
From the perusal of bye-laws of the Society which is on record, I find that though the Society is a Co-operative Society yet it is neither owned nor controlled by the State Government or the Central Government, on the other hand, it is an independent Society. As per the certificate of registration of the Society, the area of operation of the Society is in the five States including the State of Madhya Pradesh. That is why, the Society is registered with the Multi State Co-operative Societies Act 2002, which is a central legislation. Had the operation of the Society been confined in M.Cr.C. No.13281/2015 (15) the State of Madhya Pradesh itself, then it would have been certainly registered with the Madhya Pradesh Co-operative Societies Act, 1961. The Society has given its objects and functions in Bye-laws No.5. The object No.(iii) of the Society is material, which reads thus:-
"To accept the deposits of money from the members of the Society for the purpose of lending and investment in accordance with the Act." The aforesaid object proves that the Society accepts deposits of money. Upon the perusal of provisions of the MSCS Act, I find that the Act does not allow the Society to accept deposits of money from its members. Hence, mere registration of the Society with the MSCS Act will not take out the Society from the purview of the definition of financial establishment as defined in Section 2(c) of the Act. For the aforesaid reasons, I hold that the Society is a financial establishment as defined in Section 2(c) of the Act. Therefore, the provisions of the Act are applicable to it.
9. As per the amended definition of non-banking institution given in Section 45-I (e) of the RBI Act, it includes in its sweep a co-operative society as well. It is an admitted fact that the Society is a co-operative society. Therefore, the provisions of Sub-clauses (ii) and (iii) of Clause-(f ) of Section-45-I of the RBI Act will be applicable to the Society. M.Cr.C. No.13281/2015 (16) According to the provisions of aforesaid sub-clauses, if any non-banking institution does principal business of receiving of deposits of money under any scheme or arrangement or in any other manner or lending in any manner, the previous approval of the Central Government by notification in the official gazette is a mandatory requirement. There is nothing on record to prove that the Society has obtained previous approval of the Central Government by notification that it can accept deposits of money from its members or the public. After examining the matter from this aspect either, I hold that the Society has no right to accept deposits of money even from its members for want of such approval and notification.
10. It is pertinent to mention at this stage that the State Government of Madhya Pradesh vide notification No.F-12-1- 2001-IF-IV dated 6 t h August, 2001 has appointed all the district Collectors of the State as Competent Authorities by virtue of posts under Section 5(1) of the Act.
11. As per the language of Sub-Section (2) of Section (5), the Competent Authority i.e. Collector of the district may exercise all the powers which are necessary for carrying out the purposes of the Act. Therefore, the District Collector qua the Competent Authority exercising the powers under the aforesaid Section may direct his subordinate for filing the M.Cr.C. No.13281/2015 (17) complaint against any financial establishment who is violating the provisions of the Act. Vide order dated 22.01.2015, the Collector Sidhi has directed the SDM Gopad Banas to file the complaint on his behalf in the designated court under the Act i.e. the Sessions Court Sidhi for the prosecution of the applicants. Pursuant to this order, the SDM has filed the complaint against the applicants for their prosecution under Sub-Section 4 of Section 3 of the Act. Therefore, the contention raised on behalf of the applicants is not acceptable that since the complaint is not filed against the applicants by the Collector himself but by the SDM, their prosecution upon such complaint is incompetent.
12. As the complaint against the applicants for their prosecution under Section 3(4) of the Act has been filed by the SDM in discharge of his official duties, therefore, recording of his statement under the proviso (a) to Section 200 Cr.P.C. is not required. In view of the aforesaid provision, it is held that the Sessions Judge has not committed an error in law in registering the complaint against the applicant without recording the statement of the SDM.
13. As per the record, the Society has not followed the provisions of Sub-Sections (1) and (2) of Section (3) of the Act. On account of which, the prosecution has been launched M.Cr.C. No.13281/2015 (18) against the applicants under Sub-Section 4 of Section 3 of the Act. As per the provisions of Sub-Section 4, the maximum punishment thereunder is imprisonment which may extend to three months or with fine which may extend to Rs.1000/- (rupees one thousand only) or with both. Therefore, the Sessions Court will try the case against the applicants as a summons-case following the provisions of Sections 251 to 259 of the Cr.P.C. As per the provisions of Sub-Section (2) of Section 254 of the Cr.P.C., it is not mandatory for the prosecution to file the list of witnesses with the complaint. Consequently, the complaint filed against the applicants is not invalid on the ground that the list of witnesses is not attached with the complaint.
14. The provisions of Section 3(4) of the Act authorize the Competent Authority i.e. the Collector to seek by a general or a special order any information from any financial establishment carrying on business in the area of jurisdiction which he deems necessary, therefore, the impugned order dated 30.07.2014 is valid.
15. Since the order dated 12.01.2015 passed by the Collector under Sections 4 and 5(3) of the Act is made absolute by the Sessions Judge vide order dated 02.03.2015 passed in terms of Section 8 of the Act, the order of the M.Cr.C. No.13281/2015 (19) Collector has been merged into the order of the Sessions Judge. In this view of the matter, the applicants are barred by law to challenge the said order of the Collector.
16. Sub-Section (1) of Section (11) of the Act provides that an appeal against the order passed by the Special Court shall lie before the High Court within thirty days from the date of order. Therefore, the applicants cannot challenge the orders dated 02.03.2015 and 29.06.2015 passed by the Sessions Judge Sidhi by filing this petition under Section 482 Cr.P.C. For the aforesaid embargo, this petition under Section 482 Cr.P.C. is not maintainable. Notwithstanding that, the learned counsel for the applicants have failed to point out any infirmities in the said orders passed by the Sessions Judge warranting the exercise of powers by this court under Section 482 Cr.P.C.
17. The Supreme Court in the cases of Indian Oil Corporation Vs. NEPC India Limited (2009 (1) SCC 516), R. Kalyani Vs. Janak C. Mehta (AIR 1992 SCW 237), State of Haryana Vs. Bhajanlal (AIR 1992 SCW 237) and Prashant Bharti Vs. State of NCT of Delhi (AIR 2013 SC 275) has laid down certain principles of law for quashing the FIRs/Complaints/Investigations and subsequent criminal proceedings. After testing the contentions raised on behalf of M.Cr.C. No.13281/2015 (20) the applicants on the touchstone of the said statements of law, I find that not a single ground is made out by the applicants to quash the impugned orders.
18. The Supreme Court in the case of MCD Vs. Ram Kishan Rastogi (1983 (1) SCC 1) has emphasized that the inherent powers under Section 482 Cr.P.C. should not be exercised to stifle a legitimate prosecution unless there are compelling circumstances. In the present case, not a single compelling circumstance exists. Therefore, the prosecution against the applicants cannot be quashed.
19. For the foregoing reasons, I find that this petition is meritless and devoid of any substance. Therefore, this petition is liable to be dismissed and is hereby dismissed.
20. With the final disposal of this petition, the efficacy of the interim order dated 15.10.2015, whereby the trial proceedings of the case are stayed by this court, comes to an end. Let the Sessions Judge Sidhi be informed regarding the final disposal of this petition without delay in view of the aforesaid interim order. He is directed to proceed in the case in accordance with law.
(Rajendra Mahajan) Judge ac/-