Telangana High Court
Gunda Praksh Rao vs State Of Telangana on 9 December, 2024
Author: Juvvadi Sridevi
Bench: Juvvadi Sridevi
THE HONOURABLE SMT. JUSTICE JUVVADI SRIDEVI
CRIMINAL PETITION No.15059 of 2024
O R D E R:
Petitioners who are arrayed as accused Nos.1 to 3 in FIR No. of 2024 on the file of Station House Officer, Huzurabad Police Station, registered for the offences under Sections 406, 420 read with Section 34 of Indian Penal Code (for short 'IPC') and Section 76 of the Chit Funds Act (for short 'the Act') and Section 5 of the Telangana Protection of Depositors of Financial Establishment Act (for short 'TSPDFE Act') are seeking to quash the proceedings against them.
02. Heard Sri Mandala Nagendra Babu, learned counsel for petitioners and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor appearing for the State- respondent No.1 and perused the record.
03. The case of the prosecution is that petitioner along with other accused has cheated the de facto complainant by not paying Rs.27,06,748/- chit amount even after completion of chit installments.
04. Learned counsel for petitioners submits that there is no default on the part of the chit fund company as alleged by respondent No.2 and the company remains 2 committed to making payments to all the subscribers, but due to COVID-19 pandemic, large number of subscribers have defaulted in payment of installments, which resulted in creating significant backlog to the Company. Though the Company had been striving to overcome the same, since the process is time consuming, there are procedural delays.
05. Learned counsel for petitioners further submits that in order to attract an 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 in the complaint. He further submitted that Section 5 of TSPDFEA is not attracted, as in the present case, the subject Chit Fund Company is not a Financial establishment, which accepts deposits. In support of his contention, learned counsel for petitioners relied on the Judgment dated 01.11.2022 passed by this Court in Crl.A.No.38 of 2019, wherein, at paragraph Nos.14, 15, 23 and 24, it was held as under:
"14. That apart, it is imperative to note that chit fund is not a financial establishment and Section 2 (c) of TSPEDFEA defines 'Financial Establishment', as under: 3
"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. Section 2 (b) of the Act defines "deposit", which runs as under:
"deposit" means the deposit of 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."
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 4 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."
06. On the other hand, learned Additional Public Prosecutor appearing for respondent No.1-State, opposed for quash of proceedings stating that petitioners are allegedly a part of chit fraud which involved huge amounts collected by several chit subscribers and serious allegations are levelled against them. Furthermore, investigation is progress, hence, prayed to dismiss the petition.
07. Having heard both sides and perused the material on record, in view of the Judgment of this Court in Crl.A.No.38 of 2019, Section 5 of TSPDFEA is not applicable to petitioners herein. Accordingly, the proceedings against petitioners for the offence under Section 5 of TSPDFEA, are hereby quashed.
08. Insofar as Section 420 of IPC is concerned, since the punishment prescribed for the said offence is less than seven (7) years, this Court deems it appropriate to direct the Investigating Officer to follow the procedure laid down under Section 41-A Cr.P.C., (presently known as Section 35 (3) of the 5 Bharatiya Nagarik Suraksha Sanhita (for short 'BNSS') and also the guidelines formulated by the Hon'ble Supreme Court in Arnesh Kumar v. State of Bihar 1 scrupulously. However, petitioners-accused Nos.1 to 3 shall co-operate with the Investigating Officer as and when required by furnishing information and documents as sought by them in concluding the investigation. Petitioners-accused Nos.1 to 3 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.
09. With the above observations, this Criminal Petition is disposed of.
Pending miscellaneous applications, if any, shall stand closed.
__________________ JUVVADI SRIDEVI, J Date: 09-DEC-2024 KHRM 1 (2014) 8 SCC 273