Bangalore District Court
India vs 5. The Ofences : 58B(5) R/W Sec.45Mb on 21 April, 2021
C.C.No.14227 /2000
1
IN THE COURT OF THE 1 st ADDL.CMM: BENGALURU
Dated this the 21 st day of April 2021.
Present: Shri Bhat Manjunath Narayan,
B.Com., LL.B.
I st Addl. C.M.M BENGALURU.
C.C.No.14227 of 2000
The Reserve Bank of India,
represented by Authorized Ofcer
B.K.Das, aged about 31 years,
Assistant Manager,
Department of Non-Banking Supervision,
Reserve Bank of India,
Regional ofce, 10/3/8,
Nrupatunga road,
Bengaluru 560 001. .....Complainant
(Rep. by Nitin Prasad Advocate )
Vs
1. Kirloskar Investments and Finance
Ltd., Unity Building, II Floor,
'C' Block, J.C. road, Bengaluru 560 002,
represented by its Chairman
Harisingh Champawat,
aged about 34 years,
S/o Padamsingh Champawat
2. Harisingh Champawat
aged about 34 years,
S/o Padamsingh Champawat
No.36, Hirabhai Market,
Diwan Ballubhai road,
Ahmedabad 380 022,
3. Kesharsingh Rathore
aged about 35 years,
S/o Govindsingh Rathore,
C.C.No.14227 /2000
2
Bhagwat Niwas,
Bhulabhaichar Rasta,
Gita Mandir road,
Ahmedabad 380 022.
4. Manohar Singh Rathore
aged about 37 years,
S/o Bhimsingh Rathore,
No.101, Shreeji Complex,
near Elis Bridge Post Ofce,
Ashram road,
Ahmedabad 380 006, .....Accused
(Rep by Sri Srivastav, Advocate)
1. Sl. No. of the case : CC No.14227 of 2000
2. The date of : After 13.08.1999
commission of the
ofence
Name of Reserve Bank of
3. :
Complainant India
4. Name of the : As stated above
accused
5. The ofences : 58B(5) R/w sec.45MB
complained or & 58C of Reserve
proved Bank of India Act,
1934
6. Plea of the accused : Pleaded not guilty
and their
examination
7. Date of : 21-07-2007
Commencement of
evidence
8. Date of Closing of : 07-09-2019
complainant
evidence
C.C.No.14227 /2000
3
9. Opinion of Judge : Accused not guilty
10. Date of Judgment : 22.04.2021
(Bhat Manjunath Narayan)
Ist Addl. CMM., Bengaluru.
C.C.No.14227 /2000
4
JUDGMENT
That, Reserve Bank of India represented by authorized ofcer Shri B.K.Das, Assistant Manager, has fled this private complaint alleging that the accused No.1 to 4 have committed an ofence punishable under Sec.58B(5) R/w sec.45MB & 58C of Reserve Bank of India Act, 1934.
2. The averments made in the complaint necessary for disposal of this case are stated in brief as under:
That, it is submitted in the complaint that the complainant Reserve Bank of India is a statutory corporation established by Reserve Bank of India Act, 1934 having Central ofce at Mumbai and one of the branch at Bengaluru along with other places. It is submitted by the complainant Reserve Bank of India that B.K. Das, Assistant Manager, Department of Non-
Banking Supervision has been duly authorized under the provisions of Sub-regulation (1) of Regulation 17 of Reserve Bank of India General Regulations, 1949 R/w Sub-section (1) of Section 58 E of Reserve Bank of India Act to fle this complaint. The complainant further C.C.No.14227 /2000 5 submitted that the accused No.1 Kirloskar Investments and Finance Ltd., is a Non-Banking Financial Company and accused No.2 was the Chairman of the company.
The complainant submits that when violation amounting to the ofence alleged took place, the accused No.3 was the Whole-time Director & Vice-Chairman, accused No.4 is Directors of the company. The complainant RBI submitted that the Directors of the company are responsible for conduct of its business and liable to be prosecuted as per Sec.58C of the Act. It is submitted by the complainant Reserve Bank of India that as per Para 11 A Non-Banking Financial Companies Acceptances of Public Deposits (Reserve Bank) Directions, 1998 (herein after referred as 'The Acceptance of Public Deposits Directions'), accused No.1 company failed to repay the deposits and as such accused No.1 company was advised not to grant any loan or other credit facilities by whatever name called or make any other asset until the default in payment of matured deposit continues. The complainant RBI submits that in this connection a letter was written to accused No.1 company on 26.04.1999.
C.C.No.14227 /2000 6
3. It is submitted by Complainant-Reserve Bank of India that from May 25 to July 1, 1999 inspection of accused No.1 company was undertaken by Reserve Bank of India under Sec.45N of Act with reference to its fnancial position as on 31-3-1999. It is submitted by the complainant Reserve Bank of India that upon inspection of the books of accused No.1 company, it is found that following violations are made by the company in contravention of the provision of Reserve bank of India Act 1934 and The Acceptance of Public Deposits Directions issued with respect to functioning of Non-Banking company. The violations stated by Reserve Bank of India are as below:
i). The accused No.1 company did not maintain liquid assets in the form of unencumbered approved securities at the specifed percentage of the outstanding deposits, during the period from April 1998 to March 1999 and thereby violated the provisions of section 45IB(1) of Reserve Bank of India Act, 1934.
ii). As on March 31, 1999, the accused No.1 company held public deposits aggregating ₹.374.46 lakhs which had matured for repayment. These deposits included deposits aggregating ₹.128.15 lakhs in 578 deposit accounts which were claimed for repayment but not repaid has increased further to ₹.972.94 lakhs in 6,529 deposit accounts as on June 15, 1999. The accused No.1 company C.C.No.14227 /2000 7 has thus defaulted in repayment of deposits on the date of maturity and thereby violated the provisions of Section 45 QA(1) of Reserve Bank of India Act, 1934.
iii). The public deposits aggregating ₹.10927.55 lakhs held by the accused No.1 company as on January 1, 1998 were in excess of its eligibility to hold public deposits under the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 The accused No.1 company was, therefore, not eligible to accept fresh deposits or renew the existing public deposits, exceeding the amount of public deposits held by it as on January 1, 1998. However, the accused No.1 company continued to accept fresh deposits and renew existing deposits up to March 31, 1999 and as such, violated the provisions of paragraph 4(6) of the Acceptance of Public Deposits.
iv). The accused No.1 company did not pay interest on the deposits which it had failed to repay on the date of maturity for the period from the date of claim till the date of repayment, at the contracted rate of interest.
The accused No.1 company thereby violated the provisions of paragraph 4(10) of the Acceptance of Public Deposits Directions.
v). The form of application for acceptance of deposits used by the accused No.1 company did not contain particulars relating to the credit rating assigned for its fxed deposits, address of the Bench of the Company Law Board, addresses of the Consumers Disputes Redressal Forum, a statement regarding correctness of the fnancial position of the accused No.1 company, the role and responsibility of Reserve Bank of India and a verifcation clause to be signed by the applicant depositor. The accused No.1 company has thereby violated the provisions of paragraph 4(12)(ii) of the Acceptance of Public Deposits Directions.
C.C.No.14227 /2000 8
vi). The accused No.1 company has neither issued an advertisement for soliciting deposits nor has it submitted to the Reserve Bank of India a statement in lieu of advertisement (SILA) after August 22, 1997(viz., the date of receipt of the last SILA from the accused No.1 company). The accused No.1 company has thereby violated the provision of paragraph 4 (13) of the Acceptance of Public Deposits Directions.
vii). The accused No.1 company has not recorded in the register of deposits maintained by it, the dates of claim made by the depositors and the reasons for delay in repayment of deposits beyond 5 working days. The accused No.1 company has thereby violated the provisions of paragraph 4 (16)(i)(e) and (g) of the Acceptance of Public Deposits Directions.
viii). The accused No.1 company stopped charging the minimum statutory depreciation on leased assets after they turned Non-Performing Assets. The accused No.1 company has thus not adhered to the accounting Standards and Guidance Note issued by the Institute of Chartered Accounts of India and thereby violated the provisions of paragraph 5 of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 (herein after referred to as "the prudential Norms Directions).
ix). The accused No.1 company has not provided for depreciation in investment to the extent of ₹.276.94 lakhs and has thereby violated the provisions of Paragraph 6(2) of the prudential Norms Directions.
x). The accused No.1 company did not classify certain leased assets in accordance with the norms stipulated for classifcation of Non- Performing Assets. The accused No.1 company has thereby violated the provisions of paragraph 7 (1) of the prudential Norms Directions.
C.C.No.14227 /2000 9
xi). The amount of provisions made by the accused No.1 company against Non-
Performing Assets was found to be less than the provisions required to be made. The shortfall in provisioning was ₹.32,74.11 lakhs. The accused No.1 company has thereby violated the provisions of paragraph 8 of the Prudential Norms Directions.
xii). The realisable value of assets of the accused No.1 company at ₹.118,53.12 lakhs was less than its outside liabilities at ₹.174,04.21 lakhs and therefore the accused No.1 company cannot be deemed to be solvent. The accused No.1 company has thus failed to maintain the minimum capital adequacy and has thereby violated the provisions of paragraph 10 (1) of the Prudential Norms Directions.
4. It is submitted by the complainant Reserve Bank of India that bank has issued prohibitory order by exercising the power conferred on it under sec.45K(4) R/w sec.45MB(1) of the Act on August 30, 1999 prohibiting the accused No.1 company from accepting deposits in any form either by way of fresh deposit or renewal of existing deposit. It is further submitted that Reserve Bank of India has also issued direction to the accused No.1 company to the efect that the company shall not sell, transfer create, charge or mortgage or deal in any manner with its property & assets without prior written permission of the bank as per Sec.45MB(2) of the Act.
C.C.No.14227 /2000 10
5. The Reserve Bank of India has contended that the prohibitory order dated 13.08.1999 was served on the accused No.1 company by fax on its Pune ofce. The complainant Reserve Bank of India further submitted that copy of the order was also sent through courier to accused No.1 company and same has been served on 16.08.1999. It is further submitted by Reserve Bank of India that the prohibitory order dated 13.08.1999 was also sent to accused No.1 to 4 through registered post acknowledgement due which was served on accused No.1 company on 17.08.1999. It is the specifc case of the complainant Reserve Bank of India that on 13.08.1999 itself bank gave press release furnishing details regarding passing of orders dated 13.08.1999 and same was reported in The Economic Times, The New Indian Express, The Business Standard and therefore, the accused No.1 to 4 had sufcient knowledge regarding passing of prohibitory order by Reserve Bank of India. The Reserve Bank of India further submitted that after noticing the news-papers reports one P.Vasudevan, Assistant General Manager, C.C.No.14227 /2000 11 Department of Non-Banking Supervision, Reserve Bank of India, Bengaluru has received phone call from N.D.Patankar, the Chief Executive of the accused No.1 company on 14.08.1999 and he was informed regarding prohibitory order. It is submitted by the Reserve Bank of India that as per prohibitory order dated 13.08.1999 it was ordered that the accused No.1 company shall not transfer its assets to third party. It is specifc case of the Reserve Bank of India that during the period of 28.08.1999 to 02.09.1999 inspection and special scrutiny of bank accounts of accused No.1 was conducted and it is found that the accused No.1 company has transferred its fund in violation of the order dated 13.08.1999. The complainant submits that the accused have purchased pay order from Centurion Bank Ltd., Ahmedabad from the funds of accused No.1 company in favour of one M/s Girish Metals and Construction a Proprietorship concern owned by one Dholaram J Choudhary whose address is same that of accused No.2. It is submitted by the complainant Reserve Bank of India that the accused have paid an amount of ₹.24,50,000/- on 14.08.1999 as per pay C.C.No.14227 /2000 12 order No.084981, ₹.25,00,000/- on 14.08.1999 as per pay order No.084982 and ₹.25,000/- on 17.08.1999 as per pay order No.084994. It is further submitted by Reserve Bank of India that the accused No.1 has issued cheque No.099155 dated 21.08.1999 for ₹.10 lakhs in favour of M/s Girish Metals and construction. It is the specifc case of the complainant Reserve Bank of India that for payment of money as stated above to M/s Girish Metals and Construction, the accused No.1 company has not obtained prior permission. The complainant further submits that the Special Ofcer appointed by Reserve Bank of India has sought explanation from the accused No.1 company vide letter No.12/99 dated 04-11-1999 regarding the transactions stated above. The complainant Reserve Bank of India further submits that the accused No.1 company has permitted one Dashrathsingh to operate current account opened with Centurion Bank Ltd., Ahmedabad on 02.08.1999 as per board resolution dated 05.08.1999. The accused No.1 to 4 were given an opportunity to bring back an amount of ₹.59,75,000/- paid in violation of prohibitory order within one month C.C.No.14227 /2000 13 as per letter No.DNBS(BG)No.3015-3019/KT(LC)K- 336/99-2000 dated 17.12.1999. The Reserve Bank of India has contended that the accused No.1 did not bring back the said amount nor the certifcate of statutory auditors evidencing the credit of the funds brought back has been submitted by accused No.1 to 4. Therefore, it is contended by Reserve Bank of India that the accused No.1 to 4 have contravened the order / direction given by Reserve Bank of India by exercising the powers under Chapter IIIB of the Act and as such the accused No.1 to 4 being responsible for the afairs and conduct of the company are liable to be prosecuted. This being the case the complainant Reserve Bank of India has contended that the accused No.1 to 4 have committed an ofence punishable under Section 58B(5) R/w sec.45MB and 58C of the Act.
6. After fling complaint, sworn statement of the complainant is dispensed with as per sec.200 (a) of Cr.P.C. and cognizance for the ofence punishable under sec. 58B(5) R/w sec.45MB & 58C of Reserve Bank of India Act, 1934 is taken against the accused. In C.C.No.14227 /2000 14 response to summons issued, accused have appeared, and got themselves released on bail. Copy of the complaint is supplied to the accused as contemplated under Sec.207 of Cr.P.C.
7. After hearing both complainant RBI and accused, charge for the ofence punishable under sec. 58B(5) R/w sec.45MB, 58C of Reserve Bank of India Act, 1934 is framed, read over and explained to the accused and they pleaded not guilty. As accused pleaded not guilty, the Reserve Bank of India, to prove the guilt of the accused, got examined its ofcial by name Subodh Kumar as P.W.1 and got marked 25 documents as Exs.P1 to P25.
8. After closure of evidence on behalf of complainant RBI, statement of accused under Sec.313 of Cr.P.C. is recorded. The accused have denied the incriminating materials in the evidence. Accused have fled their written say under Sec.313 of Cr.P.C. Ex-D1 to 18 are marked on behalf of the defence.
C.C.No.14227 /2000 15
9. On the basis of charge sheet allegation, oral evidence adduced by the prosecution, the following points arose for my consideration:
i). Whether the complainant Reserve bank of India proves beyond reasonable doubt that after-coming in to force of directions as per Non-Banking Financial Companies Acceptances of Public Deposits (Reserve Bank) Directions, 1998, accused No.1 company has violated prohibitory order dated 13.08.1999 and accused thereby committed an ofence punishable under Section 58 B(5) R/w S.45 MB & 58 C of Reserve Bank of India Act, 1934.?
ii). What order ?
10. Heard learned Counsels appearing for the complainant & accused. Perused the oral and documentary evidence adduced by the complainant RBI & defence. My fndings on the above points are as under:
Point No.1 : In the Negative
Point No.2 : As per fnal order, for
the following:
REASONS
Point No.1 : -
11. That, Complainant Reserve Bank of
India, has fled this complaint alleging that the accused No.2 to 4 being responsible for conduct of the business C.C.No.14227 /2000 16 of the accused No.1 company have violated the prohibitory order dated 13.08.1999 and they are guilty of ofence punishable under sec.58B(5) of the Act. In order to prove the allegations made against the accused No.1 to 4, the prosecution has adduced evidence of one Subodh Kumar. Subodh Kumar during his examination-in-chief has produced 25 documents which are marked as Ex.P1 to P25. P.W.1 is cross-
examined extensively by the learned counsel appearing for the accused. Apart from the evidence of P.W.1 there is no further oral evidence adduced by the complainant bank though they have cited 5 witnesses as per list fled along with complaint.
12. It is argued on behalf of Advocate appearing for the complainant that as per power vested in the Reserve Bank of India under Sec.45K(iv) MB(i) it has issued prohibitory order on 13-08-1999 prohibiting the accused No.1 company from selling, transferring, or mortgaging or dealing with the assets of the company without prior permission of the complainant bank. It is argued that in spite of prohibitory order the accused have made payment to C.C.No.14227 /2000 17 M/s Girish Metals and Construction a proprietorship concern of one Dholaram J Choudhary who is residing in the address of accused No.2 with an intention to take away the funds of the accused No.1 company. The learned counsel appearing for the complainant has argued that the payments made on 14.08.1999, 17.08.1999, 20.08.1999 and 23.08.1899 as per Exs.P23 to P25 and the pay orders marked as per Ex.P19 and P20, are contrary to the prohibitory order issued by the complainant bank on 13.08.1999. Therefore, it is argued on behalf of Reserve Bank of India that in view of contravention of prohibitory order, the accused No.2 to 4 who are responsible for the conduct of the company are liable to be prosecuted and also convicted.
13. The learned counsel appearing for the accused has argued that the payment made by the accused No.1 company to M/s Girish Metals and Construction is in accordance with law as there was a contractual obligation as per agreement entered into between the accused No.1 company and M/s Girish Metals and Construction prior to issuance of prohibitory order. It is also argued on behalf of the learned counsel C.C.No.14227 /2000 18 appearing for the accused that on December 17, 1999 the Reserve Bank of India has sent notice to accused No.1 to 4 stating that they have to bring back the amount paid to M/s Girish Metals and Construction within one month otherwise the accused No.1 to 4 are liable to be prosecuted. The counsel for accused No.1 to 4 has contended that they have fled suit against M/s Girish Metals and Construction before XXVI Addl. City Civil & Sessions Judge at Mayo Hall (CCH 20) for recovery of ₹.61,41,731/- on 02.02.2000 and the said suit has been decreed on 09.07.2001. It is submitted by the counsel appearing for the accused that they have taken steps to bring back the money paid to M/s Girish Metals and Constructions which shows that the intention of the accused No.2 to 4 is not to cheat the company or to use the amount belonging to accused No.1 company in contravention of prohibitory order dated 13.08.1999. As the company has initiated legal proceedings for recovery of amount, the prosecution is bad in law. Therefore, counsel appearing for the accused submitted that the accused No.1 to 4 be acquitted.
C.C.No.14227 /2000 19
14. With these connections taken by the parties to the proceedings I have perused the oral and documentary evidence adduced by the parties in this case. It is not in dispute that the accused No.1 company is a non-banking fnancial institution governed under Non-Banking Financial Companies Acceptance of Public Deposit Directions issued by Reserve Bank of India on 31.01.1998. It is submitted by the Reserve Bank of India that on 13.08.1999 Reserve Bank of India has issued prohibitory order against the accused No.1 company. The issuance of prohibitory order dated 13.08.1999 is not in dispute. As per Ex.P9 said prohibitory order is served on the adduced No.1 company on 16-08-1999 at 12.20 p.m. The prohibitory order sent through Registered Post Acknowledgement Due is served on 17-09-1999. So, it is clear that the prohibitory order though passed on 13.08.1999 has been communicated to accused No.1 company on 16.08.1999 and served on accused No.2 to 4 on 17.08.1999. Though in the complaint it has been alleged that on 14.08.1999 one N.D.Patankar Chief Executive of accused No.1 company has contacted C.C.No.14227 /2000 20 P.Vasudevan Assistant General Manager of Reserve Bank of India, no evidence has been adduced to show that on 14.08.1999 itself the accused No.1 company had knowledge regarding passing of prohibitory order by Reserve Bank of India. The News-paper cuttings marked at Exs.P11, P2, P13 show that the issuance of prohibitory order is reported in the leading News-papers of the country. However, the paper reports cannot be treated as a service. The prohibitory order is served on company on 16-08-1999 and on accused No.2 to 4 on 17-08-1999. So, if at all any transaction is made by accused No.1 company without obtaining permission from Reserve Bank of India between 13.08.1999 and 17.08.1999 same cannot be termed as violation of prohibitory order. The accused No.2 to 4 came to know about the prohibitory order on 17.08.1999 only. So, the payments made to Girish Metals and Construction between 14.08.1999 and 17.08.1999 cannot be considered as violative of prohibitory order dated 13.08.1999. Another payment is made on 21.08.1999 by accused No.1 company through cheque bearing No.099155 to M/s Girish Metals and Construction. It is C.C.No.14227 /2000 21 the case of the accused No.1 to 4 that the said amount was paid to Girish Metals and Construction as per the contractual agreement between accused No.1 and M/s Girish Metals and construction. Accused No.2 to 4 have not produced the agreement entered into by accused No.1 company with Girish Metals and Construction. However, in Ex.D18 suit fled by accused No.1 company against M/s Girish Metals and Constructions at O.S.NO.15157/2000, it is stated that on 28.07.1999 the accused No.1 company has entered into an agreement with Girish Metals and Constructions and Girish Metals and Constructions was entrusted with construction of Apartment. Agreement was produced before the Civil Court for claiming the amount. It is clear that out of the said contractual obligation cheques were issued on 14.08.1999 for ₹.24,53,675/- as per cheque No.099153, 14.08.1999 for ₹.25,03,750/- as per cheque No.099154, 17.08.1999 for ₹.25,050/- as per cheque No.099152 and 23.08.1999 for ₹.10,00,000/- as per cheque No.099155.
15. So, it is clear that payment made by the accused No.1 company is for construction of Apartment as per agreement dated 28.07.1999. The agreement C.C.No.14227 /2000 22 was prior to issuance of prohibitory order by Reserve Bank of India. The three payments made is prior to communication of prohibitory order dated 13.08.1999 except fourth cheque dated 23.08.1999. It is argued on behalf of the counsel appearing for the accused No.1 to 4 that all four cheques were issued on 14.08.1999 in favour of Girish Metals and Constructions by putting diferent dates. However, there is no evidence in this regard.
16. I have perused the contents of the prohibitory order issued by the Reserve Bank of India in detail. As per Ex.P7 prohibitory order dated 13.08.1999 the accused No.1 company has been prohibited from parting with the assets as below:
3. In view of the above, it is clear that your company has failed to comply with various provisions of the directions issued by Reserve Bank of India and the provisions of Reserve Bank of India Act, 1934. Under the circumstances, the bank is satisfed that for the purpose of protecting the interest of the depositors and in the public interest, it is necessary to prohibit your company forthwith from accepting deposit from the public and that any delay in doing so would be prejudicial afecting the public interest and interest of the deposito₹. In view of this, the Reserve Bank of India, in exercise of the powers conferred on it under sec.45K (4) C.C.No.14227 /2000 23 read with S.45MB(1) of Reserve Bank of India Act, 1934,hereby prohibits with immediate efect your company from accepting public deposits from any person in any form either by way for fresh deposits or renewals or otherwise, until further order.
4. Further Reserve Bank of India, on being satisfed that it is necessary so to do, in the public interest, hereby directs your company in exercise of the powers conferred under the provisions of Section 45MB(2) of the Reserve Bank of India Act, 1934 not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the Reserve Bank of India.
17. I have perused the paragraphs 3 and 4 of prohibitory order dated 13.08.1999. As per paragraph No.3 of prohibitory order dated 13.08.1999 the accused No.1 company was prohibited with immediate efect from accepting public deposit from any person in any form either by way of public deposit or renewal or otherwise until further order. As per para No.4 of prohibitory order dated 13.08.1999 the complainant Reserve Bank of India has directed accused No.1 company not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior permission of Reserve Bank of India. It is clear from the wordings of Ex.P7, paragraph C.C.No.14227 /2000 24 4 that prohibition order is with respect to immovable property / assets of accused No.1 company. By order dated 13-08-1999 the Reserve Bank of India has not prohibited accused No.1 from conducting business.
Paragraph 9 of the prohibitory order makes it clear that company should not default in repayment of deposits on maturity and if any asset of the company is required to be sold then the accused No.1 company can approach Reserve Bank of India for permission. So, it is clear that if with available liquid cash at hand or at bank, the accused company can repay the deposits and only in the event of any assets to be sold then permission has to be obtained by accused No.1 company. So, if paragraph 4 is read with para 9 of the prohibitory order dated 13.08.1999 it is clear that the prohibitory order is with respect to immovable properties belonging to the accused No.1 company prohibiting the accused No.1 company from selling, transferring, creating charge or mortgage or to deal with in any manner the said properties. Therefore, there is no prohibition for accused No.1 company to deal with liquid cash available with them or at bank.
C.C.No.14227 /2000 25
18. The object behind passing of prohibitory order dated 13.08.1999 is to protect the interest of the depositor. The accused No.1 company has made payment to Girish Metals and Constructions for construction of building / fats for accused No.1 company. So, the payment made is with respect to improving the value of the assets of the company by constructing the structure in the same. By making appreciation in the value of the asset by constructing structures, is in the interest of the depositors as value of the property is appreciated. Accused No.1 company has not made any new investment, but it has only developed existing property. The accused No.1 company by constructing structure over the property belonging to them has not violated paragraph 4 of the prohibitory order. So, the payment if any made in lieu of contractual obligation for construction of building cannot be considered as violation of prohibitory order which is to protect the interest of the depositor.
19. Apart from this the accused No.1 company has taken steps for recovery of amount as per the directions of Reserve Bank of India. Soon after C.C.No.14227 /2000 26 receipt of notice to bring back the amount paid to Girish Metals and Constructions, the accused No.1 company has fled O.S.No.15157/2000 before XXVI Addl. City Civil & Sessions Judge at Mayo Hall on 02-02-2000. Said suit is decreed on 09-07-2001 which is clear from Ex.D18 certifed copies of proceeding before the Hon'ble XXVI Addl. City Civil & Sessions Judge, Sitting at Mayo Hall, Bengaluru. So, the conduct of the accused No.1 company also shows that the amount is paid out of the contractual obligation and not to cheat the depositors or against the interest of the depositor. So, in my considered opinion three payments stated in the complaint was made prior to knowledge of the prohibitory order and payment made on 23-08-1999 is also not against the object of prohibitory order wherein prohibition is only with respect to immovable property. Therefore, in my considered opinion it cannot be held that the accused have violated the order of Reserve Bank of India dated 13-08-1999 which is passed under the provisions of Chapter IIIB of the Act. Once there is no violation, question of convicting the accused No.2 to 4 for the acts stated in the complaint does not arose C.C.No.14227 /2000 27 for consideration. Therefore, I answer point No.1 in the negative.
Point No.2: -
20. In view of discussion and conclusion arrived at point No.1, the accused are entitled to be acquitted. Therefore, I proceed to pass following :
ORDER Acting under Section 248(1) of Cr.P.C. the accused No.1 to 4 are acquitted for the ofence punishable under Section 58B(5) R/w sec.45MB & 58C of Reserve Bank of India Act, 1934.
The bail and surety bond of
the accused No. 1 to 4 stand
canceled.
(Dictated to the stenographer directly in the computer, typed by her, then corrected by me and then pronounced in open court on this the 21 st day of April 2021).
(Bhat Manjunath Narayan)
Ist Addl. CMM., Bengaluru.
ANNEXURE
List of witnesses examined for prosecution :-
P.W.1, Subodh Kumar;
C.C.No.14227 /2000
28
List of exhibits marked for prosecution :-
Ex.P1, Authorization letter issued by Director of Reserve Bank of India, Ex.P2, Form No.32, Ex.P3, Letter written by RBI to accused No.1 on 26-4-1999, Ex.P4, Copy of letter dated 7-5-1999, Ex.P5, Letter dated 23-6-199, written by R.B.I., Ex.P6, Copy of letter dated 30-6-1999, Ex.P7, Copy of prohibitory order, Ex.P8, Copy of Fax confrmation, Ex.P9, Acknowledgment through courier, Ex.P10, Postal acknowledgement, Ex.P11 to Ex.P13, Photocopy of press release publication, Ex.P14, Letter dated 4-11-1999 written by R.B.I., Ex.P15, Copy of letter dated 17-12-1000 written by R.B.I. to accused No.1 company, Ex.P16, Copy of Account opening application, Ex.P17, Copy of Board resolution dated 5-8-1999, Ex.P18, Transaction History Enquiry of the account, Ex.P19 to Ex.P21, Copies of 3 pay orders, Ex.P22, copy of account payee cheque dated 21-8-1999, Ex.P23 to Ex.P25, Copies of cheques;
List of witnesses examined for defence:-
NIL List of documents marked for defence:-
Ex.D1, Notifcation issued by RBI in No.DFC,118/DG(SPT) 08 dated 31-1-1997, Ex.D2, Notifcation issued by RBI in DFC(COC)No.107.ED (JPR(/97 dated 31-1-1998, Ex.D3, Monthly statistical data, Ex.D4, Kirloskar Investment and Financial Company Brocher, C.C.No.14227 /2000 29 Ex.D5, Letter dated 10-9-1999 regarding violations of RBI Provisions and Act, Ex.D6, Appointment of Special ofcer letter dated 1-9-1999, Ex.D7, Registration of case before the Appellate Authority, Ex.D8, Order passed by Company Law Board dated 21-3-2000, Ex.D9, Prohibitory order dated 13-8-1999, Ex.D10, Letter dated 28-9-1999 as to violation of provisions of RBI, Ex.D11, Order passed by the Hon'ble High Court of Karnataka in Company Petition No.2/2000 dated 24-12-2010, Ex.D12, Application for grant of certifcate of registration dated 21-9-1999, Ex.D13, Order passed by RBI dated 21-9-1999, Ex.D14, Letter dated 10-1-1998 to RBI, Ex.D15, Letter dated 9-7-1998 to RBI, Ex.D16, Letter dated 23-7-1998 to RBI, Ex.D17, Letter dated 13-11-1998 to RBI, Ex.D18, Judgment and decree passed by the Hon'ble XXVI Addl.City Civil Judge, Bengaluru in O.S.No.5157/2000.
(Bhat Manjunath Narayan) I st Addl. CMM., Bengaluru.