Karnataka High Court
Smt. Raksha T vs The State Of Karnataka on 23 October, 2025
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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C/W CRL.P No. 5197 of 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF OCTOBER, 2025
BEFORE R
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
CRIMINAL PETITION NO. 2991 OF 2025 (482(Cr.PC) / 528(BNSS)
C/W
CRIMINAL PETITION NO. 5197 OF 2025 (482(Cr.PC) / 528(BNSS)
IN CRL.P No. 2991/2025
BETWEEN:
1. SMT. RAKSHA T
W/O CHETHAN NARAYAN
AGED ABOUT 35 YEARS
OCC HOME MAKER
RF/ATNO 107, 7TH CROSS
30TH MAIN, K G MEDICAL COLLGE
BSK III STAGE, VTC, BENGALURU SOUTH
BENGALURU 560 085.
PRESENTLY R/AT BAHRAIN.
2. SRI CHETHAN NARAYAN
S/O LATE NARAYANA GANIGA
AGEDABOUT 40YEARS
Digitally signed by OCC MEDICALPRACTISIONER
CHANDANA B M R/ATNO 2-83, KRISHNA GANIGASHOUSE
NAVUNDA, KUNDAPURA TALUK
Location: High UDUPI DISTRICT 576 224
Court of PRESENTKY R/AT BHARAIN.
Karnataka ...PETITIONERS
(BY SRI. ARUNA SHYAM, SENIOR COUNSEL FOR
SRI. M.R. BALAKRISHNA, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY BASAVESHWARNAGAR POLICE STATION
BENGALURU
REP BY ITS STATE PUBLIC PROSECUTOR
HIGH COURT BUILDNG
BANGALORE 560 001.
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2. VIVEK P HEGDE
S/OLT PRABHAKAR J HEGADE
AGED ABOUT 47 YERS
R/ATNO 76, 1ST 'J' CROSS
SHARADAD COLONY
BASAVESHWARNAGAR
BENGALURU CITY 560 079.
...RESPONDENTS
(BY SRI. K. NAGESHWARAPPA, HCGP FOR R-1
SRI. BRIJESH PATIL, AND
SRI. AJITH A.SHETTY, ADVOCATES FOR R-2)
THIS CRL.P IS FILED U/S 482 CR.PC (FILED U/S 528 BNSS)
PRAYING TO QUASH THE FIR AND COMPLAINT IN CR.NO.37/2024 DATED
04.02.2025 FOR THE ALLEGED OFFENCE P/U/S 316(2), 318(4), 3(5) OF
BNS 2023 AND U/S 21 OF BUDS ACT, 2019 BY THE RESPONDENT NO.1
BASAVESHWARA NAGAR POLICE STATION AND NOW PENDING ON THE
FILE OF HONBLE PRL. CITY CIVIL AND SESSIONS JUDGE, AT
BENGALURU (CCH-1)
IN CRL.P NO. 5197/2025
BETWEEN:
RAJESHWARI P N
W/O RAMAKRISHNA RAO T
AGED ABOUT 65 YEARS R/AT NO.107,
7TH CROSS, 30TH MAIN,
BANASHANKARI 3RD STAGE,
NEAR K G MEDICAL COLLEGE
BENGALURU SOUTH,
BANASHANKARI IIND STAGE
BENGALURU-560 085.
...PETITIONER
(BY SRI. TONY SEBASTIAN, SENIOR COUNSEL FOR SRI. RAJATH,
ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
BY BASAVESHWARANAGARA
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POLICE STATION
REPRESENTED BY
THE STATE PUBLIC PROSECUTOR,
HIGH COURT BUILDING
BENGALURU-560 001.
2. VIVEK P HEGADE
S/O LATE PRABHAKARA J HEGADE
AGED ABOUT 47 YEARS,
R/AT NO.76, 1ST J CROSS
SHARADA COLONY
BASAVESHWARANAGARA
BENGALURU CITY-560 079.
...RESPONDENTS
(BY SRI. K. NAGESHWARAPPA, HCGP FOR R-1
SRI. BRIJESH PATIL, AND
SRI. AJITH.A.SHETTY, ADVOCATES FOR R-2)
THIS CRL.P IS FILED U/S.482(FILED U/S.528 BNSS) CR.P.C PRAYING
TO QUASHING THE FIR DATED 04.02.2025 REGISTERED IN CRIME
NO.37/2024 BASAVESHWAR NAGAR P.S., FOR THE OFFENCE P/US/
316(2),318(4),3(5) OF BNS 2023 AND U/S.21 OF BUDS ACT 2019 PENDING
BEFORE THE Ld. PRINCIPAL CITY CIVIL AND SESSIONS JUDGE AT
BENGALURU.
THESE PETITIONS ARE BEING HEARD AND RESERVED ON
24.07.2025 COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY,
THE COURT MADE THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
CAV ORDER
Both these petitions arise out of Crime No.37/2024 dated
04.02.2025 registered by the 1st respondent - Police for offences
punishable under Sections 316(2) , 318(4) and 3(5) of BNS, 2023
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and Section 21 of the Banning of Unregulated Deposit Schemes,
Act 2019 (for short 'the BUDS Act'). It is an undisputed fact and
the matter of record that the impugned FIR was registered
pursuant to the impugned complaint dated 04.02.2025 lodged by
Sri. Vivek P. Hegde, who is the 2nd respondent - de facto
complainant in both the petitions.
2. Crl.P.No.21995/2025 is preferred by accused Nos. 3 and
5, while Crl.P.No.5197/2025 is filed by accused No.2. Accused Nos.
1 and 4 are not before this Court in the present petitions.
3. Heard learned Senior counsel for the petitioner and
learned Addl. SPP for 1st respondent- State as well as learned
counsel for 2nd respondent and perused the material on record.
4. In addition to reiterating the various contentions urged in
the petitions and referring to the material on record, learned Senior
counsel for the petitioners submits that the impugned complaint
and FIR seek to convert a civil dispute into a criminal dispute by
giving a cloak of criminality to an essentially criminal transaction,
which is impermissible in law. It is submitted that the impugned
complaint and FIR do not disclose the commission of any
cognizable offences by the petitioners and that the invocation of
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Section 21 of the BUDS Act and registration of the FIR by the 1st
respondent is also illegal and invalid as per the provisions
contained in the BUDS Act. It is therefore submitted that the
impugned complaint and FIR deserve to be quashed. In support of
his submissions, learned Senior counsel placed reliance upon the
following judgements:-
(i) Srijith vs. State of Karnataka - Crl.P. No.
201497/2024 dated 24.01.2025;
(ii) Nijamuddin Jakati vs. State of Karnataka - Crl.P.
No. 103201/2024 dated 04.10.2024;
(iii) Abdul Rahman Khan vs. State of Karnataka -
Crl.P. No. 101916/2023 dated 31.08.2023;
(iv) Shailesh Kumar vs. State of Uttar Pradesh - 2025
SCC OnLine SC 1462;
(v) Manish vs. State of Maharashtra - 2025 SCC
OnLine SC 707;
(vi) Staish Chandra Ratan Lal vs. State of Gujarat -
(2019) 9 SCC 148;
(vii) Manjunatha Reddy vs. State of Karnataka -
Crl.P. No. 2390/2025 dated 16.06.2025.
5. Per contra, learned Addl. SPP for the 1st respondent -
State submits that the averments made in the impugned complaint
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and FIR clearly disclose the commission of the offences by the
petitioners. It is also submitted that the complaint does not indicate
that a purely civil transaction is sought to be converted into criminal
proceedings, especially when it is permissible in law to initiate /
institute both civil and criminal proceedings by the 2nd respondent.
It is also submitted that the Karnataka State Police Department has
adopted a Standard Operating Procedure (SOP) dated 30.10.2021
under the BUDS Act, which clearly indicates that the invocation of
Section 21 of the said Act in the FIR is perfectly legal and proper
and the contention of the petitioners cannot be accepted in the light
of the judgment of the co-ordinate Bench of this Court in the case
of Yellappa Sham Managutakar- Crl.P.100048/2024 dated
17.01.2025. It is therefore submitted that there is no merit in the
petition and the same is liable to be dismissed.
6. So also, learned counsel for 2nd respondent - de facto
complainant submits that there is no merit in the petition and that
the same is liable to be dismissed.
7. Before adverting to the rival submissions, it is necessary
to extract the impugned complaint (Translated version) which reads
as under:-
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04/02/2025
To,
The Police Inspector
Basaveshwaranagar Police Station
Basaveshwaranagar,
Bengaluru - 560 079
From,
Vivek P. Hegde, S/o Late Prabhakar J. Hegde,
Aged approximately 47 years,
Address: No. 76, 1st J Cross,
Sharada Colony,
Basaveshwaranagar - 560 079.
Mobile: 9742210284
Respected Sir/Madam,
Subject: Request for appropriate legal action against
Ramakrishna Rao, his wife Smt. Rajeshwari Rao, their
children Smt. Raksha Thonse, Rahul Thonse, and Chetan
Narayan for committing acts of cheating, fraud, breach of
trust, and criminal conspiracy.
I, the undersigned/complainant, have been residing at the
above-mentioned address for the past ten years. I own a
logistics company called TPS Ahead in Basaveshwaranagar,
which has cold-storage vehicles used for transporting
perishable goods across the country, and currently employs
a total of 75 people. I am bringing to your attention the
criminal acts committed by a person named Sri Ramakrishna
Rao, who conspired with his wife Smt. Rajeshwari Rao,
daughter Raksha, son-in-law Chetan Narayan, and son
Rahul, to cheat me and many other individuals under the
pretext of funding their investments in Sri Lanka and Dubai.
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On 07/02/2023, my friend Naveen Chandra Kothari
introduced me to Ramakrishna Rao. Recently, I have started
to suspect that Naveen Chandra Kothari, who has been my
friend since December 2022, is also a part of the conspiracy
involving Ramakrishna Rao and his family. Naveen Chandra
Kothari proposed several real estate deals and claimed to
know many influential people. During these discussions, on
07/02/2023 at about 2 PM, Ramakrishna Rao met us in his
car at my office in Basaveshwaranagar, and we held a
meeting in our office regarding giving him money in the form
of a loan. Ramakrishna Rao stated that there was a high
profit margin in several businesses in Sri Lanka and the
Middle East, and that his daughter Raksha, son-in-law
Chetan Narayan, and son Rahul were managing all their
businesses. He connected us with his daughter Raksha and
son-in-law Chetan Narayan via his mobile, and they spoke
about their investments in the hospitality sector in Dubai and
how Ras Al-Khaimah would be the next casino and
entertainment hub. They offered to pay an interest rate of 4%
if we provided money for this business in the form of a loan
or deposit.
Ramakrishna Rao, Smt. Raksha, and Chetan Narayan made
us believe that they owned tables at a casino called Bellagio
in Sri Lanka and that his son, Sri Rahul, was managing the
business there. Over the course of the next month, we had
several conversations with him over the phone, and he
promised to give high interest. Based on his instruction and
the assurance from Raksha and Chetan Narayan, we gave a
loan of Rs. 30,00,000/- (Rupees Thirty Lakhs Only) on
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18/03/2023 via RTGS from my Equitas Bank account near
Shankar Mutt Signal, Basaveshwaranagar, to the account of
Sri Rahul T (IDBI Bank, Account No. 08681020001418).
I transferred the above-mentioned amount entirely to Rahul's
account at the request of Ramakrishna Rao. As a guarantee
for the money we provided, they gave us the original
documents of his Porsche Cayenne car (HR 26 BN 0013)
and two cheque leaves (Cheque No. 377042, 377043) from
IDBI Bank as security. During those days, Smt. Raksha and
Chetan Narayan called us and said that once their
investment was complete, they would arrange for us to travel
to Sri Lanka and visit the casino where they were investing.
On 22/4/23, Ramakrishna Rao arranged for tickets and
accommodation in Sri Lanka. I traveled to Sri Lanka with
Rahul T and Naveen Chandra Kothari. Rahul T booked a
suite for me and Naveen at the Shangri-La Hotel and
informed us that they had a permanent suite there.
Rahul took us to the Bellagio Casino in Sri Lanka and
showed us two tables, claiming they were owned by his
father. The staff accompanying him behaved in a manner
that portrayed him as the owner of the place. We noticed that
the casino freely provided him with cars and food as needed.
A dedicated chef was at his service, fulfilling all his requests.
He introduced us to a person called "Clifford," stating that he
was the CEO of Bellagio and a close friend. He showed us
the 30 lakh I had invested in his casino accounts.
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In the meantime, we were receiving the correct profit share
for the money we had given, right on time. They never
missed a payment date, and we were impressed by their
business in Sri Lanka. By the end of June 2023, at the
special request of Ramakrishna Rao, we transferred an
additional Rs. 76,00,000/- to Rahul T's IDBI Bank account for
business investment. Furthermore, by 07/07/23, the total
amount of the loan we had given to Ramakrishna Rao, his
two children, and his son-in-law had reached Rs. 3 Crore.
On 17/07/23, Sri Ramakrishna Rao informed us that the
situation in the Sri Lankan casino was not good and
expressed doubt about the security of their investments
there. Since we were specifically concerned about the
security of the loan we had given them, he told us that he
would withdraw the majority of their investments. On
17/07/23, he returned Rs. 2 Crore out of the Rs. 3 Crore he
owed us. By this time, some other people in our circle of
friends had also loaned money to Ramakrishna Rao and his
children. In August, they contacted us again and informed us
that the situation in Sri Lanka was now better and that they
were constantly monitoring the situation there. They assured
us that "our money would be safe" and requested us to loan
them money again. Since they had returned the money they
had borrowed from us, we completely trusted them, and we
started collecting money from various sources and loaned
them a larger amount. It is estimated that I and my friends,
M.P. Ravi, T. Kashivelu, Manoharlal, T. Nagaraj, Mallikarjun
Rahul, and Vivek Raj Shetty, together gave Ramakrishna
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Rao over Rs. 7 Crore in installments, both through bank
transfers and cash.
Sri Ramakrishna Rao was in constant touch with us, asking
us to introduce more people, and he took us to Sri Lanka
many times to show us their new projects. On 06/10/23, I,
Sridhar (my friend), and Rahul T traveled to Sri Lanka.
Sridhar, also impressed by their business, gave a cash loan
of Rs. 10 Lakh through me. Sri Ramakrishna Rao arranged
for tickets and travel to Dubai, and I and Rahul T went to
Dubai on 10/10/23. In Dubai, T. Rahul received us and
connected me via phone to Raksha and Chetan Narayan.
They informed me that they were in Bahrain at the time.
These individuals proposed various investments, including a
ticket agency for casino customers, and explained about
future investments in Ras Al-Khaimah. We all finally returned
on 16/10/23. By this time, Ramakrishna Rao had become
like a family friend and was even asking for my help for his
son's wedding. Although Ramakrishna Rao asked on many
occasions to consider our money as investments instead of
loans, we were not inclined to take the risk of investing our
hard-earned money in businesses we were not familiar with.
Ramakrishna Rao organized a get-together and lunch at
Swathi Hotel in Rajajinagar on October 24, 2023, and asked
us to invite as many people as possible for a business
presentation or an online presentation. He said that an
opportunity had arisen to invest in the 'casino floor' of a new
project in Sri Lanka called 'City of Dreams'. He mentioned
that his daughter and son-in-law, Chetan Narayan, were
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marketing this in the Middle East and had received a good
response. Their presentation depicted Sri Lanka as an
alternative to Goa. He stated that the booming tourism was
the reason for Sri Lanka's fast GDP growth. He said that
many Chinese and European tourists prefer Sri Lanka over
India and that they usually visit casinos. He stated that the
new project would be Asia's biggest casino and that they
were very lucky to get 12 tables on its casino floor.
He told us that they needed Rs. 25 Crore for the investment,
and Rs. 12.50 Crore needed to be in an escrow account by
the end of December. The Rs. 25 Crore investment was
necessary. He offered to give me 50% interest and initially
asked me to arrange Rs. 10 Crore by the end of December
2023. He insisted that we invite at least 100 people to this
presentation. I invited my family and friends, and about 150
people attended the event in person and through a Zoom
meeting. Smt. Raksha and Chetan Narayan participated in
this meeting via video conference. They spoke extensively
about the profits from the investments made by them and
Ramakrishna Rao. Based on this presentation, 40 people
came forward to invest in this venture.
The meeting was primarily managed by Raksha, Chetan
Narayan, and Ramakrishna Rao. On 15/11/24, a dinner party
was held at their son Rahul's flat in Banashankari, where
Ramakrishna Rao presented the idea again with more
details. Raksha and Chetan Narayan attended the meeting
online. On 29/12/23, Rahul T invited me to Dubai and hosted
me well there. He showed good rapport and told me that he
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considered me like his elder brother. He made me believe
that they could run a successful business in Sri Lanka and
Dubai. He told me that he would relocate to Dubai after
starting their business at City of Dreams, and he would give
me the responsibility of all the business operations in Sri
Lanka, while he would spend his time establishing the
business in Ras Al-Khaimah, Dubai.
By 05/01/24, I and others had collected Rs. 10 crore from
various sources. We transferred this amount to Rahul's
personal account and other accounts as per the instructions
of Ramakrishna Rao. When asked about these accounts,
Ramakrishna Rao assured us that they belonged to his
associates. The money received as returns was reinvested,
bringing the total investment up to Rs. 10 crore. The
responsibility for cash transactions was managed by
Rajeshwari Rao, i.e., Sri Ramakrishna Rao's wife, and a
person named Harish (6363106373). Rajeshwari Rao and
Harish mainly paid all the returns in cash, and seeing such
senior family members involved in the business further
increased our trust in the family.
In January 2024, Raksha, Chetan Narayan, and
Ramakrishna Rao started introducing other schemes at
Bellagio and Bally's casinos. They told us that since the
inauguration of the casino floor at City of Dreams was not yet
finalized, we should loan our money to Bellagio and Bally's
casinos, and they would later transfer this money to the
escrow account for City of Dreams. They stated that these
schemes would last for 15 to 30 days and the money would
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be returned immediately if needed. They introduced new
schemes offering high profits during every festival season.
Right at the time of paying the interest and the principal
amount, they would introduce new schemes to reinvest that
amount into another business.
In February 2024, Raksha and her husband Chetan Narayan
visited India, and we met them on 13/02/24. The couple
explained in detail about the schemes at Bellagio and Bally's
casinos and the casino floor. They encouraged us to fully
utilize the schemes they described, as we would not be able
to participate in them once City of Dreams (Cinnamon Life)
started. In February 2024, Ramakrishna Rao came up with a
new plan to get an agency at the Singapore casino "Marina
Bay." He said that as agents, we would get a commission on
all transactions made by customers introduced by us. We
were told that we would need to invest Rs. 1 crore to start
the agency, and this amount, along with interest, would be
returned one month after our customers started arriving at
the casino.
Refusing to call the money we gave an investment and
insisting it be considered a loan, they took another Rs. 1
crore from us on various dates in February. However, as it
now appears, the accused individuals had devised a detailed
plan to lure us into an uncontrolled deposit scheme with the
intention of never returning the money. On 21/02/24,
Ramakrishna Rao told us that the casino floor at City of
Dreams would be inaugurated in May 2024, and we needed
to invest an additional Rs. 2.5 crore to reach the 50%
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investment of Rs. 12.5 crore. He mentioned that an official
agreement would be made soon. By 04/03/24, we had
loaned a total of Rs. 12.70 crore. Meanwhile, Ramakrishna
Rao, Raksha, Chetan Narayan, and Rahul continued to
describe various schemes for investments in Bellagio and
Bally's casinos in Sri Lanka. On 04/04/2024, Ramakrishna
Rao invited me to Sri Lanka and said that there had been a
fallout with Clifford (CEO of Bellagio), and as a result, they
had withdrawn from investing in the new casino floor. He
hosted a party at Bellagio, which Rahul attended. We stayed
at Shangri-La. He assured me that the casino floor
investment plan would proceed as planned and that Clifford's
withdrawal was a good thing.
He told us that if we loaned an additional Rs. 5 crore, we
would also get a share of the profits equal to Clifford's share,
and the agreement would happen soon. He said that since
our ideas aligned, he was very comfortable with us and did
not want to involve other investors. By May 2024, they had
postponed the inauguration of the new casino floor several
times. In May 2024, Ramakrishna Rao brought a new plan
about Bitcoin investment in Dubai. He said that his son
Rahul was a classmate and close friend of Sri Nischal
Shetty, the CEO of WazirX. He said they were launching a
new Bitcoin. He mentioned that his son Rahul T was a
certified miner and would manage the Bitcoin investments.
He claimed Rahul was so enthusiastic about it that he had
transferred all his personal investments from Sri Lanka to
this new project. By the end of May, we had loaned Rs. 7.5
crore for the other schemes in the Sri Lankan casino that
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Ramakrishna Rao could potentially start and that Raksha
and her husband were marketing. The total amount given to
Ramakrishna Rao reached Rs. 21 crore (Rs. 12.50 crore for
City of Dreams, Rs. 1 crore for Singapore investment, and
Rs. 7.50 crore for Sri Lanka Casino investment).
On 02/06/24, Rahul called me and asked me to bring more
people to invest in Sri Lanka so that we could reinvest the
profits in Dubai. Accordingly, I brought two famous
"entrepreneurs," Sri Nagaraj and Rahul Mallikarjunayya, to
Sri Lanka. Rahul T hosted them well and influenced them to
invest, making them ready to invest in the casino business.
In early June, Rahul contacted me and informed me that the
Bitcoin would be launched to the public in a few months.
Since they were in touch with the person launching the
Bitcoin, he said they had received an early offer, and if we
invested beforehand, we would surely get at least 50% profit.
He said that since he was a certified miner and an expert in
determining the success of the Bitcoin, he had stopped all
his other work and invested all his money in this Bitcoin. He
mentioned that the June profits were due, and they were
insisting that the profits be reinvested and not withdrawn. On
14/07/2024, we loaned Rs. 2.50 crore for Bitcoins in Dubai.
Ramakrishna Rao, Chetan Narayan, and Raksha were
constantly pressuring us to bring more investments for the
Dubai project. They told us that the inauguration of City of
Dreams was being delayed, and we should not lose this
opportunity which would only be available until the Bitcoin
launch.
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On 01/08/2024, we collected another Rs. 6.5 crore from our
various sources to loan for the Dubai investment. By
01/08/24, including the reinvestments, the total amount
loaned for the above-mentioned investments was Rs. 30
crore. Excluding my and my immediate family members'
investments, the total amount so far was Rs. 14,40,20,580
(Rupees Fourteen Crore Forty Lakh Twenty Thousand Five
Hundred and Eighty Only). It is known that the loan money
given by many other individuals is even more, and these
individuals are also coming forward to take legal action
against Ramakrishna Rao and his associates.
On 05/08/24, Ramakrishna Rao told me that a major
blockchain event was taking place in October 2024 and that
Sri Nischal Shetty had started a Bitcoin portfolio of Rs. 250
crore. He said he had been given the responsibility of raising
50 crore for this. He mentioned that if he could raise the
money for the portfolio, he would join the elite club of Bitcoin
billionaires. He took Rs. 5 lakh from me and organized a trip
for me and my wife to the Maldives. He promised that upon
our return, which was around 05/08/24, he would pay all the
money that was due in July. However, from 05/08/24
onwards, he reduced contact with us and was unreachable
on the phone. Once, he did answer my call and informed me
that Rahul was admitted to the hospital with severe back
pain, and to prove this, he sent us the hospital's location.
Since they were unreachable on the phone and the interest
money due to us for July and August was pending, we
became anxious about them. Under these circumstances, on
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14/08/24, Rahul T called me on behalf of Ramakrishna Rao
and said that all the business was hopeful, and since the
deadline to raise the Rs. 50 crore was 26/08/24, they were
coming to India soon to raise this amount. He said that the
pending Rs. 6 crore for August had been invested in Dubai,
and our Rs. 17.50 crore investment from Sri Lanka had been
moved to Dubai. I was angry with him for making this
decision without discussing it with me or my investors. I
expressed my suspicions about Bitcoin to him. I asked him to
return 50% of the loan money I had given and all the money
to the other individuals, as they were not ready to invest in
coins. He told me this was the first risk they were taking, and
this investment would give us 110% profit in one month. He
said he would come to India and explain everything to me
and the investors. I finally agreed to invest another Rs. 5
crore. When I asked him to provide documentation as
security for the money I had given so far, he wrote a "loan
agreement" on a bond paper and also gave me some blank
signed papers, saying, "Write whatever security you want for
your money on these." Further, on 23/08/24, Ramakrishna
Rao took another Rs. 25 lakh in cash as a loan from me. As
security for this, he told me to take his new Innova Hycross
vehicle (KA 05 NL 0170) which was at his house. He said
that the car's documents were with Rahul, and he would
come to India on 26/08/2024 and give the documents to me.
Rahul came to India on 26/08/24 and met me at the office.
My close friend, Sri Manoharlal, agreed to give 1.25 crore
on the security of Rahul T's flat documents. Accordingly,
Manoharlal transferred Rs. 1 crore to Rahul's IDBI Bank
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account, and the remaining Rs. 25 lakh in cash was given to
Ramakrishna Rao. Rahul told us that this investment would
be completed in two months and no money would be given
until October 2024. When I objected to this, he promised to
arrange at least Rs. 5 crore by the end of August. Rahul
went to Dubai, and at that time, Ramakrishna Rao and
Raksha were not reachable on the phone. We went to
Ramakrishna Rao's residence several times but could not
contact him.
In the first week of September, we were able to contact
Rahul, and I expressed our concerns about the casino floor
still not being opened. He invited me and Nagaraj to Sri
Lanka, promising to take us to the City of Dreams casino and
show us the tables. Nagaraj and I traveled to Sri Lanka on
19/09/24 and met Rahul T. He took us to the City of Dreams
project, which was still under construction. When we insisted
on seeing the casino floor, he said it was not possible as the
installation of security cameras was underway. He arranged
our stay at Shangri-La. On the morning of 21/09/24, he left
Sri Lanka for Dubai without informing us. He called in the
morning and said he had to fly to Dubai due to an
emergency and that return tickets had been booked for us.
When we checked out of the hotel, it was found that the bill
had not been fully paid as he had claimed. I paid the bill after
arranging money in LKR currency. This caused me a lot of
trouble, and I had an argument with him on the phone about
it.
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On 08/10/24, Rahul organized a meeting with investors at
The Oberoi in Bengaluru. I and a few investors met him
there. He assured me that the investments were going well
and that profits would be available soon. He had been
ignoring my calls and was not in contact, but every week, he
would call me to say that everything was fine and that the
portfolio would be completed as planned on 26/10/24. On
17/10/24, he called me and said he had arranged to raise 5
crore and asked me to return the flat documents he had
given me earlier for security. But I told him I would not return
the documents until I received the money that was due to
me. Then, Rahul put me on a conference call with the person
who had agreed to give him the money. The person on the
call asked for the flat documents, stating he was giving
Rahul Rs.5 crore. I told Rahul that the documents were with
my father-in-law, and I would not speak to him. He contacted
my father-in-law and requested the documents. My father-in-
law asked him to deposit his passport and then collect the
documents. Rahul agreed to this. On 08/10/24, Rahul visited
my father-in-law's office, deposited his passport, collected
the documents, and left. When I arrived later and checked, I
found that the passport, though valid, had been cancelled.
My father-in-law had only checked the validity and had not
noticed the 'cancelled' stamp on the passport.
Later, when my wife contacted Rahul, he insisted that he
had traveled using the same passport and claimed that even
though it had a cancellation stamp, he had a letter of
authorization from the police department to travel with that
passport. On 19/10/2024, he called me and said he needed
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Rs.1.5 crore. I refused to give him money and said I wanted
to see both the escrow account and the Dubai investment. I
told him that he had not kept his word since July and that I
would not invest any further. I insisted on the return of all my
money on 26/10/24. On 23/10/24, he called and said
everything was fine and that the deadline for returning the
money was 26/10/24, promising to return all the money by
31/10/24.
He called me and other investors many times to collect an
additional Rs.1.5 crore for the inauguration of the casino
floor in Sri Lanka. He told us that the delay in the
inauguration was due to this money. On 24/10/24, he called
my wife and asked her to come to the court at 11 am, as his
passport needed to be submitted to the court in connection
with a case. She went to the court and gave him the
passport. A little later, he returned the passport and told her
that everything would be sorted out on 26/10/24 and that
everything was on the right track. The same day, my wife
insisted that Rahul give a written confirmation for all the
money taken from us. He told her he would return the
documents soon.
On 24/10/24, he called me and said that the Sri Lanka
casino floor would be inaugurated in the first week of
November and that my wife and I should attend it in Sri
Lanka. He asked me to arrange for a priest to conduct the
puja for the floor inauguration. He asked for the priest's
passport to book the tickets. I consulted with the priest and
fixed 06/11/24 as the auspicious day for the puja. Further, on
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01/11/24, Rahul called me and said that an additional Rs.1.5
crore was needed, and if it wasn't provided, the floor would
not be inaugurated. He said he had received an email about
this, but since it was confidential, he could not forward it. On
02/11/24, he called me and introduced a person named Jatin
on the call, who had invested in the Rs.250 crore portfolio.
Jatin said everything would be resolved on 07/11/24. I
reminded them to send me the pending documents for the
Toyota Hycross on 03/11/24.
On 04/11/24, Rahul called me and reaffirmed that everything
would be resolved on 07/11/24, and he would send me the
tickets. He also promised to show evidence that Rs.12.5
crore was kept in the escrow account.
I was unable to contact him for 2 days, and on 05/11/24, I
called Ramakrishna Rao. When I called him, Ramakrishna
Rao was initially polite and asked me to request everyone
else to give him and his two children a little more time. When
I started insisting, he bluntly told me to forget our money and
said that he and his children were capable enough to handle
any senior police officer or court judge. He said that he had
enough contacts in the police department and the judiciary,
and if we went against them legally, we would not get any
money. Rahul immediately messaged me, threatening that
the consequences would not be good if I went to his father
and asked for money, and said, "I know which school your
children attend. If this matter goes to money, your children
will not come home."
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After this, on 06/11/24 at 9 PM, they sent me tickets to come
to Sri Lanka. The flight was on 07/11/24 at 11 AM. I traveled
alone. They had booked a room for me at Hotel Kingsbury.
They informed me that they would be traveling from Dubai
on 07/11/2024 and would meet me on the morning of the 8th.
They did not arrive on the 8th. They said they would come
late at night, but they did not arrive, and I returned to
Bangalore on the 9th. On the way back, I contacted them,
and they said that they had received life threats from Sri
Lanka and that was why they did not come. It was difficult
to contact them. They would call me once a day, assuring
me that they would come to India and meet me in two days.
On 18/11/24, my wife and mother visited Ramakrishna Rao's
residence and asked for the money back. He promised that
the money was safe and that Rahul was facing health
issues, but he would fix everything.
On 22/11/24, two Crime Branch constables from
Chennamma Kere Police Station came to our house looking
for Rahul T's I-Cross vehicle, which was parked in our
parking lot. I was not at home. They called me and asked me
to come to the police station the next day. We came to know
that Ramakrishna Rao had visited the Commissioner's office
and filed a complaint stating that I had taken the car from
him in August and had not returned it. On 25/11/24, we were
forced to return the car to Ramakrishna Rao. After that,
Ramakrishna Rao, Smt. Raksha, and Rahul T have
completely ignored us and have blocked all my phone
numbers.
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Ramakrishna Rao, in criminal conspiracy with his two
children, Smt. Raksha and Sri Rahul T, cheated us by
promising high profits and interest, taking Rs.3,50,00,000/-
from me and Rs.22,00,00,000/- from my friends, and have
not returned the money. When asked for the money, they
have abused and threatened us. Furthermore, I later learned
that Rahul T was caught with a famous Kannada film actress
in connection with narcotics. Therefore, with the intention of
defrauding and cheating us, Ramakrishna Rao, his wife Smt.
Rajeshwari Rao, their children Smt. Raksha Thonse, Rahul
Thonse, and Chetan Narayan, have systematically taken
crores of rupees in installments, promising high interest and
profits, and have now abused and threatened us when asked
for the money. I request that appropriate legal action be
taken against them.
With regards,
Yours faithfully
Sd/-
(Vivek. P Hegde)"
8. A perusal of the impugned complaint will indicate that
prima facie, all necessary ingredients disclosing the commission of
the alleged cognizable offences have been stated and detailed in
the impugned complaint and FIR, which also contain the sequence
of events, transactions etc., leading to the impugned complaint and
FIR. It is therefore clear that the contention of the petitioner that the
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complaint and FIR do not disclose the commission of the alleged
cognizable offences cannot be accepted having regard to the
various averments made in the complaint and at this prima facie
stage, it would not be permissible to exercise the jurisdiction of this
Court under Section 482 Cr.P.C. and quash the impugned
proceedings.
9. It is well settled that at the stage of considering a plea for
quashment of FIR, the same cannot be construed or treated as an
encyclopaedia and if the substance of the complaint makes out the
commission of a cognizable offence, the question of interfering with
the same and scuttling or interdicting the proceedings would not
arise.
10. In the case of Neeharika Infrastructure (P) Ltd. v.
State of Maharashtra - (2021) 19 SCC 401, the Apex Court held
as under:-
12.7. In CBI v. Tapan Kumar Singh [CBI v. Tapan
Kumar Singh, (2003) 6 SCC 175 : 2003 SCC (Cri) 1305]
and in State of U.P. v. Naresh [State of U.P. v. Naresh,
(2011) 4 SCC 324 : (2011) 2 SCC (Cri) 216] , it is
observed and held by this Court that FIR is not an
encyclopaedia, which must disclose all facts and details
relating to the offence reported. In para 20 in Tapan
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Kumar Singh [CBI v. Tapan Kumar Singh, (2003) 6 SCC
175 : 2003 SCC (Cri) 1305] , it is observed and held as
under : (Tapan Kumar Singh case [CBI v. Tapan Kumar
Singh, (2003) 6 SCC 175 : 2003 SCC (Cri) 1305] , SCC
pp. 183-84)
"20. It is well settled that a first information report is
not an encyclopaedia, which must disclose all facts and
details relating to the offence reported. An informant may
lodge a report about the commission of an offence though
he may not know the name of the victim or his assailant.
He may not even know how the occurrence took place. A
first informant need not necessarily be an eyewitness so
as to be able to disclose in great detail all aspects of the
offence committed. What is of significance is that the
information given must disclose the commission of a
cognizable offence and the information so lodged must
provide a basis for the police officer to suspect the
commission of a cognizable offence. At this stage it is
enough if the police officer on the basis of the information
given suspects the commission of a cognizable offence,
and not that he must be convinced or satisfied that a
cognizable offence has been committed. If he has
reasons to suspect, on the basis of information received,
that a cognizable offence may have been committed, he
is bound to record the information and conduct an
investigation. At this stage it is also not necessary for him
to satisfy himself about the truthfulness of the information.
It is only after a complete investigation that he may be
able to report on the truthfulness or otherwise of the
information. Similarly, even if the information does not
furnish all the details he must find out those details in the
course of investigation and collect all the necessary
evidence. The information given disclosing the
commission of a cognizable offence only sets in motion
the investigative machinery, with a view to collect all
necessary evidence, and thereafter to take action in
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accordance with law. The true test is whether the
information furnished provides a reason to suspect the
commission of an offence, which the police officer
concerned is empowered under Section 156 of the Code
to investigate. If it does, he has no option but to record
the information and proceed to investigate the case either
himself or depute any other competent officer to conduct
the investigation. The question as to whether the report is
true, whether it discloses full details regarding the manner
of occurrence, whether the accused is named, and
whether there is sufficient evidence to support the
allegations are all matters which are alien to the
consideration of the question whether the report discloses
the commission of a cognizable offence. Even if the
information does not give full details regarding these
matters, the investigating officer is not absolved of his
duty to investigate the case and discover the true facts, if
he can."
13.12. The first information report is not an
encyclopaedia which must disclose all facts and details
relating to the offence reported. Therefore, when the
investigation by the police is in progress, the court should
not go into the merits of the allegations in the FIR. Police
must be permitted to complete the investigation. It would
be premature to pronounce the conclusion based on hazy
facts that the complaint/FIR does not deserve to be
investigated or that it amounts to abuse of process of law.
During or after investigation, if the investigating officer
finds that there is no substance in the application made
by the complainant, the investigating officer may file an
appropriate report/summary before the learned
Magistrate which may be considered by the learned
Magistrate in accordance with the known procedure.
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33.12. The first information report is not an
encyclopaedia which must disclose all facts and details
relating to the offence reported. Therefore, when the
investigation by the police is in progress, the court should
not go into the merits of the allegations in the FIR. Police
must be permitted to complete the investigation. It would
be premature to pronounce the conclusion based on hazy
facts that the complaint/FIR does not deserve to be
investigated or that it amounts to abuse of process of law.
After investigation, if the investigating officer finds that
there is no substance in the application made by the
complainant, the investigating officer may file an
appropriate report/summary before the learned
Magistrate which may be considered by the learned
Magistrate in accordance with the known procedure.
Under these circumstances, this contention of the petitioners
cannot be accepted.
11. Similarly, the contention of the petitioner that the
complaint and FIR seek to give a criminal colour to an essentially
civil dispute also cannot be accepted in the facts and
circumstances obtaining in the instant case as can be discerned
from the impugned complaint and FIR; it is well settled that both
civil and criminal action / proceedings are permissible as held in
various judgments of the Apex Court.
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12. In the case of P.Swaroopa Rani vs. N.Harinarayana -
(2008) 5 SCC 765, the Apex court held as under:-
"11. It is, however, well settled that in a given case, civil
proceedings and criminal proceedings can proceed
simultaneously. Whether civil proceedings or criminal
proceedings shall be stayed depends upon the fact and
circumstances of each case. (See M.S. Sheriff v. State of
Madras [AIR 1954 SC 397] , Iqbal Singh
Marwah v. Meenakshi Marwah [(2005) 4 SCC 370 : 2005
SCC (Cri) 1101] and Institute of Chartered Accountants of
India v. Assn. of Chartered Certified Accountants [(2005) 12
SCC 226 : (2006) 1 SCC (Cri) 544] .)
12. It is furthermore trite that Section 195(1)(b)(ii) of the
Code of Criminal Procedure would not be attracted where a
forged document has been filed. It was so held by a
Constitution Bench of this Court in Iqbal Singh
Marwah [(2005) 4 SCC 370 : 2005 SCC (Cri) 1101] stating :
(SCC pp. 387-88, paras 25-26)
"25. An enlarged interpretation to Section
195(1)(b)(ii), whereby the bar created by the said
provision would also operate where after commission
of an act of forgery the document is subsequently
produced in court, is capable of great misuse. As
pointed out in Sachida Nand Singh [Sachida Nand
Singh v. State of Bihar, (1998) 2 SCC 493 : 1998
SCC (Cri) 660] after preparing a forged document or
committing an act of forgery, a person may manage
to get a proceeding instituted in any civil, criminal or
revenue court, either by himself or through someone
set up by him and simply file the document in the
said proceeding. He would thus be protected from
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prosecution, either at the instance of a private party
or the police until the court, where the document has
been filed, itself chooses to file a complaint. The
litigation may be a prolonged one due to which the
actual trial of such a person may be delayed
indefinitely. Such an interpretation would be highly
detrimental to the interest of the society at large.
26. Judicial notice can be taken of the fact that
the courts are normally reluctant to direct filing of a
criminal complaint and such a course is rarely
adopted. It will not be fair and proper to give an
interpretation which leads to a situation where a
person alleged to have committed an offence of the
type enumerated in Clause (b)(ii) is either not placed
for trial on account of non-filing of a complaint or if a
complaint is filed, the same does not come to its
logical end. Judging from such an angle will be in
consonance with the principle that an unworkable or
impracticable result should be avoided. In Statutory
Interpretation by Francis Bennion (3rd Edn.), Para
313, the principle has been stated in the following
manner:
'The court seeks to avoid a construction of an
enactment that produces an unworkable or
impracticable result, since this is unlikely to have
been intended by Parliament. Sometimes, however,
there are overriding reasons for applying such a
construction, for example, where it appears that
Parliament really intended it or the literal meaning is
too strong.' "
In regard to the possible conflict of findings between
civil and criminal court, however, it was opined :
(SCC pp. 389-90, para 32)
"32. Coming to the last contention that an effort
should be made to avoid conflict of findings between
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the civil and criminal courts, it is necessary to point
out that the standard of proof required in the two
proceedings are entirely different. Civil cases are
decided on the basis of preponderance of evidence
while in a criminal case the entire burden lies on the
prosecution and proof beyond reasonable doubt has
to be given. There is neither any statutory provision
nor any legal principle that the findings recorded in
one proceeding may be treated as final or binding in
the other, as both the cases have to be decided on
the basis of the evidence adduced therein."
It was concluded : (SCC p. 390, para 33)
"33. In view of the discussion made above, we are
of the opinion that Sachida Nand Singh [Sachida
Nand Singh v. State of Bihar, (1998) 2 SCC 493 :
1998 SCC (Cri) 660] has been correctly decided and
the view taken therein is the correct view. Section
195(1)(b)(ii) CrPC would be attracted only when the
offences enumerated in the said provision have been
committed with respect to a document after it has
been produced or given in evidence in a proceeding
in any court i.e. during the time when the document
was in custodia legis."
13. Filing of an independent criminal proceeding,
although initiated in terms of some observations made by the
civil court, is not barred under any statute."
13. In the case of Kathyayini v. Sidharth P.S. Reddy -
2025 SCC OnLine SC 1428, the Apex Court held as under:
7. It is clear from the facts that a prima facie case for
criminal conspiracy and cheating exists against
respondent Nos. 1 and 2. It appears that they, along
with their uncles Guruva Reddy and Umedha
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Reddy, have attempted to defraud their aunts by
creating a forged family tree and partition deed with
a motive to gain all the monetary award for land in
question bypassing the appellant and her sisters.
They succeeded in their plan until Sudhanva Reddy
revealed it to the authorities by a letter. The High
Court has erroneously relied upon the statement of
Sub-Registrar who stated that partition deed dated
24.03.2005 was presented for registration on
26.03.2005 and due to health reasons concerning
K.G. Yellappa Reddy, his thumb impressions were
secured at his house in presence of the Sub-
Registrar. However, we must note this statement of
the Sub-Registrar has not been put to cross
examination. It would be unwise to rely on unverified
testimony of a Sub-Registrar to ascertain the
genuineness of Partition deed. The High Court erred
in heavily relying on his statement to conclude that
the Partition deed was genuine and thus no offence
is made out against the respondents under
Sections 463 and 464 IPC.
18. Further, the High Court could not find any
justification to deny that respondents
misrepresented the family tree. The Court itself has
acknowledged that respondents were bound to
disclose the names of daughters of K.G. Yellappa
Reddy and Jayalakshmi in the family tree.
Considering the fact that both the partition deed and
the family tree were used in gaining the monetary
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compensation awarded for the land, it is necessary
that genuineness of both the documents is put to
trial.
19. We now come to the issue of bar against
prosecution during the pendency of a civil suit. We
hereby hold that no such bar exists against
prosecution if the offences punishable under
criminal law are made out against the parties to the
civil suit. Learned senior counsel Dr.Menaka
Guruswamy has rightly placed the relevant judicial
precedents to support the above submission. In the
case of K. Jagadish v. Udaya Kumar G.S. - (2020)
14 SCC 552, this Court has reviewed its precedents
which clarify the position. The relevant paragraph
from the above judgment is extracted below:
"8. It is thus well settled that in certain cases the
very same set of facts may give rise to remedies in
civil as well as in criminal proceedings and even if a
civil remedy is availed by a party, he is not
precluded from setting in motion the proceedings in
criminal law."
20. In Pratibha Rani v. Suraj Kumar - (1985) 2 SCC
370, this Court summed up the distinction between
the two remedies as under:
"21. ... There are a large number of cases where
criminal law and civil law can run side by side. The
two remedies are not mutually exclusive but clearly
coextensive and essentially differ in their content
and consequence. The object of the criminal law is
to punish an offender who commits an offence
against a person, property or the State for which the
accused, on proof of the offence, is deprived of his
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liberty and in some cases even his life. This does
not, however, affect the civil remedies at all for suing
the wrongdoer in cases like arson, accidents, etc. It
is an anathema to suppose that when a civil remedy
is available, a criminal prosecution is completely
barred. The two types of actions are quite different
in content, scope and import. It is not at all
intelligible to us to take the stand that if the husband
dishonestly misappropriates the stridhan property of
his wife, though kept in his custody, that would bar
prosecution under Section 406 IPC or render the
ingredients of Section 405 IPC nugatory or abortive.
To say that because the stridhan of a married
woman is kept in the custody of her husband, no
action against him can be taken as no offence is
committed is to override and distort the real intent of
the law."
21. The aforesaid view was reiterated in Kamaladevi
Agarwal v. State of W.B- (2002 1 SCC 555),
"17. In view of the preponderance of authorities to
the contrary, we are satisfied that the High Court
was not justified in quashing the proceedings
initiated by the appellant against the respondents.
We are also not impressed by the argument that as
the civil suit was pending in the High Court, the
Magistrate was not justified to proceed with the
criminal case either in law or on the basis of
propriety. Criminal cases have to be proceeded with
in accordance with the procedure as prescribed
under the Code of Criminal Procedure and the
pendency of a civil action in a different court even
though higher in status and authority, cannot be
made a basis for quashing of the proceedings."
22. After surveying the abovementioned cases, this
Court in K. Jagadish (supra) set aside the holding of
High Court to quash the criminal proceedings and
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held that criminal proceedings shall continue to its
logical end.
23. The above precedents set by this Court make it
crystal clear that pendency of civil proceedings on
the same subject matter, involving the same parties
is no justification to quash the criminal proceedings
if a prima facie case exists against the accused
persons. In present case certainly such prima facie
case exists against the respondents. Considering
the long chain of events from creation of family tree
excluding the daughters of K.G. Yellappa Reddy,
partition deed among only the sons and grandsons
of K.G. Yellappa Reddy, distribution of
compensation award among the respondents is
sufficient to conclude that there was active effort by
respondents to reap off the benefits from the land in
question. Further, the alleged threat to appellant and
her sisters on revelation of the above chain of
events further affirms the motive of respondents. All
the above factors suggest that a criminal trial is
necessary to ensure justice to the appellant.
24. Therefore, we set aside the Impugned order of
High Court dated 23.11.2023 in Writ Petition No.
23106 of 2021. Accordingly, we direct the Trial Court
to continue its proceedings against respondent Nos.
1 and 2 in accordance to law
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14. In the case of Priti Saraf v. State (NCT of Delhi) -
(2021) 16 SCC 142, the Apex Court held as under:-
31. In the instant case, on a careful reading of the
complaint/FIR/charge-sheet, in our view, it cannot be said
that the complaint does not disclose the commission of
an offence. The ingredients of the offences under
Sections 406 and 420IPC cannot be said to be absent on
the basis of the allegations in the complaint/FIR/charge-
sheet. We would like to add that whether the allegations
in the complaint are otherwise correct or not, has to be
decided on the basis of the evidence to be led during the
course of trial. Simply because there is a remedy
provided for breach of contract or arbitral proceedings
initiated at the instance of the appellants, that does not by
itself clothe the court to come to a conclusion that civil
remedy is the only remedy, and the initiation of criminal
proceedings, in any manner, will be an abuse of the
process of the court for exercising inherent powers of the
High Court under Section 482CrPC for quashing such
proceedings.
32. We have perused the pleadings of the parties,
the complaint/FIR/charge-sheet and orders of the courts
below and have taken into consideration the material on
record. After hearing the learned counsel for the parties,
we are satisfied that the issue involved in the matter
under consideration is not a case in which the criminal
trial should have been short-circuited. The High Court
was not justified in quashing the criminal proceedings in
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exercise of its inherent jurisdiction. The High Court has
primarily adverted on two circumstances,
(i) that it was a case of termination of agreement to
sell on account of an alleged breach of the contract and;
(ii) the fact that the arbitral proceedings have been
initiated at the instance of the appellants.
Both the alleged circumstances noticed by the
High Court, in our view, are unsustainable in law. The
facts narrated in the present complaint/FIR/charge-sheet
indeed reveal the commercial transaction but that is
hardly a reason for holding that the offence of cheating
would elude from such transaction. In fact, many a times,
offence of cheating is committed in the course of
commercial transactions and the illustrations have been
set out under Sections 415, 418 and 420IPC.
33. Similar observations have been made by this
Court in Trisuns Chemical Industry v. Rajesh
Agarwal [Trisuns Chemical Industry v. Rajesh Agarwal,
(1999) 8 SCC 686 : 2000 SCC (Cri) 47] : (SCC p. 690,
para 9)
"9. We are unable to appreciate the reasoning that
the provision incorporated in the agreement for referring
the disputes to arbitration is an effective substitute for a
criminal prosecution when the disputed act is an offence.
Arbitration is a remedy for affording reliefs to the party
affected by breach of the agreement but the arbitrator
cannot conduct a trial of any act which amounted to an
offence albeit the same act may be connected with the
discharge of any function under the agreement. Hence,
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those are not good reasons for the High Court to axe
down the complaint at the threshold itself. The
investigating agency should have had the freedom to go
into the whole gamut of the allegations and to reach a
conclusion of its own. Pre-emption of such investigation
would be justified only in very extreme cases as indicated
in State of Haryana v. Bhajan Lal [State of
Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992
SCC (Cri) 426] ."
15. In the case of K. Jagadish v. Udaya Kumar G.S., -
(2020) 14 SCC 552, the Apex Court held as under:-
7. One of the striking features of the matter is that
on the day when the Sale Deed was executed, not a single
paisa was actually received by way of consideration. Three
post-dated cheques were handed over to the appellant and
one of those three cheques was deposited in the bank for
encashment on the next date. It is a matter of record that
subsequent cheques were not even sought to be encashed
and the appellant showed his willingness to deposit even
the sum of Rs.15 lakhs received by encashment of first
cheque. Further, neither the conveyance deed was
preceded by any agreement of sale nor any advertisement
was issued by the appellant showing his inclination to
dispose of the property in question.
8. It is true that civil proceedings have been
subsequently initiated to get the registered Sale Deed set-
aside but that has nothing to do with the present criminal
proceedings.
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9. It is thus well settled that in certain cases the very
same set of facts may give rise to remedies in civil as well
as in criminal proceedings and even if a civil remedy is
availed by a party, he is not precluded from setting in
motion the proceedings in criminal law. 10. In Pratibha
Rani v. Suraj Kumar and another1 this Court summed up
the distinction between the two remedies as under:
"21. ............ There are a large number of cases
where criminal law and civil law can run side by side. The
two remedies are not mutually exclusive but clearly
coextensive and essentially differ in their content and
consequence. The object of the criminal law is to punish an
offender who commits an offence against a person,
property or the State for which the accused, on proof of the
offence, is deprived of his liberty and in some cases even
his life. This does not, however, affect the civil remedies at
all for suing the wrongdoer in cases like arson, accidents
etc. It is an anathema to suppose that when a civil remedy
is available, a criminal prosecution is completely barred.
The two types of actions are quite different in content,
scope and import. It is not at all intelligible to us to take the
stand that if the husband dishonestly misappropriates the
stridhan property of his wife, though kept in his custody,
that would bar prosecution under Section 406 IPC or
render the ingredients of Section 405 IPC nugatory or
abortive. To say that because the stridhan of a married
woman is kept in the custody of her husband, no action
against him can be taken as no offence is committed is to
override and distort the real intent of the law."
11. In Rajesh Bajaj v. State NCT of Delhi and others
- this Court observed:
"10. It may be that the facts narrated in the present
complaint would as well reveal a commercial transaction or
money transaction. But that is hardly a reason for holding
that the offence of cheating would elude from such a
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transaction. In fact, many a cheatings were committed in
the course of commercial and also money transactions.
One of the illustrations set out under Section 415 of the
Indian Penal Code [Illustration f] is worthy of notice now:
"(f) A intentionally deceives Z into a belief that A means to
repay any money that Z may lend to him and thereby
dishonestly induces Z to lend him money, A not intending
to repay it. A cheats."
11. The crux of the postulate is the intention of the
person who induces the victim of his representation and
not the nature of the transaction which would become
decisive in discerning whether there was commission of
offence or not. The complainant has stated in the body of
the complaint that he was induced to believe that the
respondent would honour payment on receipt of invoices,
and that the complainant realised later that the intentions of
the respondent were not clear. He also mentioned that the
respondent after receiving the goods had sold them to
others and still he did not pay the money. Such averments
would prima facie make out a case for investigation by the
authorities.
12. The High Court seems to have adopted a strictly
hypertechnical approach and sieved the complaint through
a colander of finest gauzes for testing the ingredients under
Section 415 IPC. Such an endeavour may be justified
during trial, but certainly not during the stage of
investigation. At any rate, it is too premature a stage for the
High Court to step in and stall the investigation by declaring
that it is a commercial transaction simpliciter wherein no
semblance of criminal offence is involved."
12. The aforesaid view was reiterated in Kamladevi
Agarwal v. State of West Bengal and others as under:
"9. Criminal prosecution cannot be thwarted at the
initial stage merely because civil proceedings are also
pending. After referring to judgments in State of Haryana v.
Bhajan Lal and Rajesh Bajaj v. State NCT of Delhi, this
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Court inTrisuns Chemical Industry v. Rajesh Agarwal held:
(SCC p. 690, paras 7-8)
"7. Time and again this Court has been pointing out
that quashing of FIR or a complaint in exercise of the
inherent powers of the High Court should be limited to very
extreme exceptions (vide State of Haryana v. Bhajan Lal4
and Rajesh Bajaj v. State NCT of Delhi5).
8. In the last referred case this Court also pointed
out that merely because an act has a civil profile is not
sufficient to denude it of its criminal outfit. We quote the
following observations: (SCC p. 263, para 10) '10. It may
be that the facts narrated in the present complaint would as
well reveal a commercial transaction or money transaction.
But that is hardly a reason for holding that the offence of
cheating would elude from such a transaction. In fact,
many a cheatings were committed in the course of
commercial and also money transactions."
After referring to various decisions it was finally concluded
as under:
"17. In view of the preponderance of authorities to
the contrary, we are satisfied that the High Court was not
justified in quashing the proceedings initiated by the
appellant against the respondents. We are also not
impressed by the argument that as the civil suit was
pending in the High Court, the Magistrate was not justified
to proceed with the criminal case either in law or on the
basis of propriety. Criminal cases have to be proceeded
with in accordance with the procedure as prescribed under
the Code of Criminal Procedure and the pendency of a civil
action in a different court even though higher in status and
authority, cannot be made a basis for quashing of the
proceedings."
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13. In R. Kalyani v. Janak C. Mehta and others, this
Court culled out propositions concerning interference under
Section 482 of the Code as under:
"15. Propositions of law which emerge from the said
decisions are: (1) The High Court ordinarily would not
exercise its inherent jurisdiction to quash a criminal
proceeding and, in particular, a first information report
unless the allegations contained therein, even if given face
value and taken to be correct in their entirety, disclosed no
cognizable offence.
(2) For the said purpose the Court, save and except
in very exceptional circumstances, would not look to any
document relied upon by the defence.
(3) Such a power should be exercised very
sparingly. If the allegations made in the FIR disclose
commission of an offence, the Court shall not go beyond
the same and pass an order in favour of the accused to
hold absence of any mens rea or actus reus.
(4) If the allegation discloses a civil dispute, the
same by itself may not be a ground to hold that the criminal
proceedings should not be allowed to continue.
14. In the light of the principles as mentioned
hereinabove, we have no hesitation in concluding that the
High Court erred in quashing the criminal proceedings. We,
therefore, allow this appeal, set aside the decision
rendered by the High Court and direct that criminal
proceedings shall be taken to logical conclusion in
accordance with law.
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16. In the case of Pratibha Rani v. Suraj Kumar - (1985) 2
SCC 370, the Apex Court held as under:-
21. After all how could any reasonable person
expect a newly married woman living in the same house
and under the same roof to keep her personal property or
belongings like jewellery, clothing etc., under her own
lock and key, thus showing a spirit of distrust to the
husband at the very behest. We are surprised how could
the High Court permit the husband to cast his covetous
eyes on the absolute and personal property of his wife
merely because it is kept in his custody, thereby reducing
the custody to a legal farce. On the other hand, it seems
to us that even if the personal property of the wife is
jointly kept, it would be deemed to be expressly or
impliedly kept in the custody of the husband and if he
dishonestly misappropriates or refuses to return the
same, he is certainly guilty of criminal breach of trust, and
there can be no escape from this legal consequence. The
observations of the High Court at other places regarding
the inapplicability of Section 406 do not appeal to us and
are in fact not in consonance with the spirit and trend of
the criminal law. There are a large number of cases
where criminal law and civil law can run side by side. The
two remedies are not mutually exclusive but clearly
coextensive and essentially differ in their content and
consequence. The object of the criminal law is to punish
an offender who commits an offence against a person,
property or the State for which the accused, on proof of
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the offence, is deprived of his liberty and in some cases
even his life. This does not, however, affect the civil
remedies at all for suing the wrongdoer in cases like
arson, accidents etc. It is an anathema to suppose that
when a civil remedy is available, a criminal prosecution is
completely barred. The two types of actions are quite
different in content, scope and import. It is not at all
intelligible to us to take the stand that if the husband
dishonestly misappropriates the stridhan property of his
wife, though kept in his custody, that would bar
prosecution under Section 406 IPC or render the
ingredients of Section 405 IPC nugatory or abortive. To
say that because the stridhan of a married woman is kept
in the custody of her husband, no action against him can
be taken as no offence is committed is to override and
distort the real intent of the law.
17. In the case of Kamaladevi Agarwal v. State of West
Bengal - (2002) 1 SCC 555, the Apex Court held as under:
9. Criminal prosecution cannot be thwarted at the
initial stage merely because civil proceedings are also
pending. After referring to judgments in State of
Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992
SCC (Cri) 426 : AIR 1992 SC 604] and Rajesh
Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999
SCC (Cri) 401] this Court in Trisuns Chemical
Industry v. Rajesh Agarwal [(1999) 8 SCC 686 : 2000
SCC (Cri) 47] held: (SCC p. 690, paras 7-8)
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"7. Time and again this Court has been pointing
out that quashing of FIR or a complaint in exercise of
the inherent powers of the High Court should be limited
to very extreme exceptions (vide State of
Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992
SCC (Cri) 426 : AIR 1992 SC 604] and Rajesh
Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999
SCC (Cri) 401] ).
8. In the last referred case this Court also
pointed out that merely because an act has a civil
profile is not sufficient to denude it of its criminal outfit.
We quote the following observations: (SCC p. 263, para
10)
'10. It may be that the facts narrated in the
present complaint would as well reveal a commercial
transaction or money transaction. But that is hardly a
reason for holding that the offence of cheating would
elude from such a transaction. In fact, many a cheatings
were committed in the course of commercial and also
money transactions.' "
10. In Medchl Chemicals & Pharma (P)
Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269 : 2000 SCC
(Cri) 615] this Court again reiterated the position and
held: (SCC pp. 272 & 278, paras 2 & 14)
"2. Exercise of jurisdiction under the inherent
power as envisaged in Section 482 of the Code to have
the complaint or the charge-sheet quashed is an
exception rather than a rule and the case for quashing
at the initial stage must have to be treated as rarest of
rare so as not to scuttle the prosecution. With the
lodgement of first information report the ball is set to roll
and thenceforth the law takes its own course and the
investigation ensues in accordance with the provisions
of law. The jurisdiction as such is rather limited and
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restricted and its undue expansion is neither practicable
nor warranted. In the event, however, the court on a
perusal of the complaint comes to a conclusion that the
allegations levelled in the complaint or charge-sheet on
the face of it does not constitute or disclose any offence
as alleged, there ought not to be any hesitation to rise
up to the expectation of the people and deal with the
situation as is required under the law.
***
14. Needless to record however and it being a
settled principle of law that to exercise powers under
Section 482 of the Code, the complaint in its entirety
shall have to be examined on the basis of the allegation
made in the complaint and the High Court at that stage
has no authority or jurisdiction to go into the matter or
examine its correctness. Whatever appears on the face
of the complaint shall be taken into consideration
without any critical examination of the same. But the
offence ought to appear ex facie on the complaint. The
observations
in Nagawwa v. VeerannaShivalingappaKonjalgi [(1976)
3 SCC 736 : 1976 SCC (Cri) 507] lend support to the
above statement of law: (SCC p. 741, para 5)
'(1) where the allegations made in the
complaint or the statements of the witnesses recorded
in support of the same taken at their face value make
out absolutely no case against the accused or the
complaint does not disclose the essential ingredients of
an offence which is alleged against the accused;
(2) where the allegations made in the complaint
are patently absurd and inherently improbable so that
no prudent person can ever reach a conclusion that
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there is sufficient ground for proceeding against the
accused;
(3) where the discretion exercised by the
Magistrate in issuing process is capricious and arbitrary
having been based either on no evidence or on
materials which are wholly irrelevant or inadmissible;
and
(4) where the complaint suffers from
fundamental legal defects, such as, want of sanction, or
absence of a complaint by legally competent authority
and the like.'
The cases mentioned by us are purely
illustrative and provide sufficient guidelines to indicate
contingencies where the High Court can quash
proceedings."
11. In Lalmuni Devi v. State of Bihar [(2001) 2
SCC 17: 2001 SCC (Cri) 275] this Court held: (SCC p.
19, para 8)
"8. There could be no dispute to the proposition
that if the complaint does not make out an offence it can
be quashed. However, it is also settled law that facts
may give rise to a civil claim and also amount to an
offence. Merely because a civil claim is maintainable
does not mean that the criminal complaint cannot be
maintained. In this case, on the facts, it cannot be
stated, at this prima facie stage, that this is a frivolous
complaint. The High Court does not state that on facts
no offence is made out. If that be so, then merely on the
ground that it was a civil wrong the criminal prosecution
could not have been quashed."
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12. Again in M. Krishnan v. Vijay Singh [(2001) 8
SCC 645 : 2002 SCC (Cri) 19] this Court held that while
exercising powers under Section 482 of the Code, the
High Court should be slow in interfering with the
proceedings at the initial stage and that merely because
the nature of the dispute is primarily of a civil nature, the
criminal prosecution cannot be quashed because in
cases of forgery and fraud there is always some element
of civil nature. In a case where the accused alleged that
the transaction between the parties is of a civil nature and
the criminal court cannot proceed with the complaint
because the factum of document being forged was
pending in the civil court, the Court observed: (SCC pp.
647-48, para 5)
"5. Accepting such a general proposition would be
against the provisions of law inasmuch as in all cases of
cheating and fraud, in the whole transaction, there is
generally some element of civil nature. However, in this
case, the allegations were regarding the forging of the
documents and acquiring gains on the basis of such
forged documents. The proceedings could not be
quashed only because the respondents had filed a civil
suit with respect to the aforesaid documents. In a criminal
court the allegations made in the complaint have to be
established independently, notwithstanding the
adjudication by a civil court. Had the complainant failed to
prove the allegations made by him in the complaint, the
respondents were entitled to discharge or acquittal but
not otherwise. If mere pendency of a suit is made a
ground for quashing the criminal proceedings, the
unscrupulous litigants, apprehending criminal action
against them, would be encouraged to frustrate the
course of justice and law by filing suits with respect to the
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documents intended to be used against them after the
initiation of criminal proceedings or in anticipation of such
proceedings. Such a course cannot be the mandate of
law. Civil proceedings, as distinguished from the criminal
action, have to be adjudicated and concluded by adopting
separate yardsticks. The onus of proving the allegations
beyond reasonable doubt, in a criminal case, is not
applicable in the civil proceedings which can be decided
merely on the basis of the probabilities with respect to the
acts complained of."
13. Referring to the judgments of this Court
in Manju Gupta v. Lt. Col. M.S. Paintal [(1982) 2 SCC 412
: 1982 SCC (Cri) 459] , Sardool Singh v. Nasib
Kaur [1987 Supp SCC 146 : 1987 SCC (Cri) 672]
and Karamchand Ganga Pershad v. Union of
India [(1970) 3 SCC 694 : AIR 1971 SC 1244] the learned
counsel appearing for the respondents submitted that the
High Court was justified in quashing the complaint which
does not require any interference by this Court in this
appeal.
14. In Manju Gupta case [(1982) 2 SCC 412 : 1982
SCC (Cri) 459] the criminal proceedings were quashed
under the peculiar circumstances of the case. After
referring to para 20 of the complaint and holding (at SCC
p. 414, para 4) "such an averment in our view, is clearly
inadequate and insufficient to bring home criminality of
the appellant in the matter of the alleged offences", the
Court found that simply because the accused was the
Secretary of the Society, the Magistrate was not justified
in presuming her connection or complicity with the
offence merely on that ground. The allegations in the
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complaint pertinent to forgery of rent receipts were held to
be vague and indefinite. Sardool Singh case [1987 Supp
SCC 146 : 1987 SCC (Cri) 672] was also decided on its
facts on the basis of law earlier settled by this Court.
In Karamchand Ganga Pershad case [(1970) 3 SCC 694
: AIR 1971 SC 1244] an observation was made that "it is
a well-established principle of law that the decisions of
the civil courts are binding on the criminal courts. The
converse is not true" (SCC p. 695, para 4). In that case
the appellants had filed a writ petition in the High Court
for the issuance of appropriate directions requiring the
Union of India to release and deliver to them some
consignments of maize transported from the State of
Haryana to Howrah. Alleging that the movement of maize
had been controlled by the provisions of the Essential
Commodities Act read with the Northern Inter-Zonal
Maize (Movement Control) Order, 1967 promulgated by
the State Government, the restrictions on export imposed
by the Order were removed by the State of Haryana in
October 1967 which was duly published and advertised.
The contention of the Union was that the State of
Haryana had not lifted the ban on export and further that
it had no power to lift the ban. The High Court dismissed
the writ petition on the sole ground that in view of the
pendency of the criminal proceedings before some court
in the State of West Bengal it was inappropriate for the
High Court to pronounce on the question arising for
decision in the writ petition. In that context the Court held:
(SCC p. 695, para 4)
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"In our opinion the High Court seriously erred in
coming to this conclusion. If the appellants are able to
establish their case that the ban on export of maize from
the State of Haryana had been validly lifted all the
proceedings taken against those who exported the maize
automatically fall to the ground. Their maintainability
depends on the assumption that the exports were made
without the authority of law. It is a well-established
principle of law that the decisions of the civil courts are
binding on the criminal courts. The converse is not true.
The High Court after entertaining the writ petitions and
hearing arguments on the merits of the case should not
have dismissed the petitions merely because certain
consequential proceedings had been taken on the basis
that the exports in question were illegal."
15. We have already noticed that the nature and
scope of civil and criminal proceedings and the standard
of proof required in both matters is different and distinct.
Whereas in civil proceedings the matter can be decided
on the basis of probabilities, the criminal case has to be
decided by adopting the standard of proof of "beyond
reasonable doubt". A Constitution Bench of this Court,
dealing with similar circumstances, in M.S.
Sheriff v. State of Madras [AIR 1954 SC 397 : 1954 Cri LJ
1019] held that where civil and criminal cases are
pending, precedence shall be given to criminal
proceedings. Detailing the reasons for the conclusions,
the Court held: (AIR p. 399, paras 15-16)
"15. As between the civil and the criminal
proceedings we are of the opinion that the criminal
matters should be given precedence. There is some
difference of opinion in the High Courts of India on this
point. No hard and fast rule can be laid down but we do
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not consider that the possibility of conflicting decisions in
the civil and criminal courts is a relevant consideration.
The law envisages such an eventuality when it expressly
refrains from making the decision of one court binding on
the other, or even relevant, except for certain limited
purposes, such as sentence or damages. The only
relevant consideration here is the likelihood of
embarrassment.
16. Another factor which weighs with us is that a
civil suit often drags on for years and it is undesirable that
a criminal prosecution should wait till everybody
concerned has forgotten all about the crime. The public
interests demand that criminal justice should be swift and
sure; that the guilty should be punished while the events
are still fresh in the public mind and that the innocent
should be absolved as early as is consistent with a fair
and impartial trial. Another reason is that it is undesirable
to let things slide till memories have grown too dim to
trust.
This however, is not a hard and fast rule. Special
considerations obtaining in any particular case might
make some other course more expedient and just. For
example, the civil case or the other criminal proceeding
may be so near its end as to make it inexpedient to stay it
in order to give precedence to a prosecution ordered
under Section 476. But in this case we are of the view
that the civil suits should be stayed till the criminal
proceedings have finished."
16. In the present case we have noticed that
before issuance of the process, the trial Magistrate had
recorded the statement of the witnesses for the
complainant, perused the record including the opinion of
the expert and his deposition and prima facie found that
the respondents were guilty for the offences for which the
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process was issued against them. The High Court rightly
did not refer to any of those circumstances but quashed
the proceedings only on the ground:
"Consideration is and should be whether any
criminal proceeding instituted before a court subordinate
to this Court should be allowed to continue when the very
foundation of the criminal case, namely, forgery of
document is under scrutiny by this Court in a civil
proceeding instituted by same person i.e. the complainant
in the criminal case. In my considered view it would not
be proper to allow the criminal proceeding to continue
when the validity of the document (deed of dissolution) is
being tested in a civil proceeding before this Court.
Judicial propriety demands that the course adopted by
the Hon'ble Supreme Court in the case of Manju
Gupta [(1982) 2 SCC 412 : 1982 SCC (Cri) 459]
and Sardool Singh [1987 Supp SCC 146 : 1987 SCC
(Cri) 672] should be followed. If such course of action is
adopted by this Court, that would be in consonance with
the expression used in Section 482 of the Code of
Criminal Procedure -- 'or otherwise to secure the ends of
justice'. In both the cases referred to above civil suits
were pending, where the validity and genuineness of a
document were challenged. It was held by the Hon'ble
Supreme Court that when the question regarding validity
of a document is sub judice in the civil courts, criminal
prosecution, on the allegation of the document being
forged, cannot be instituted."
17. In view of the preponderance of authorities to
the contrary, we are satisfied that the High Court was not
justified in quashing the proceedings initiated by the
appellant against the respondents. We are also not
impressed by the argument that as the civil suit was
pending in the High Court, the Magistrate was not
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justified to proceed with the criminal case either in law or
on the basis of propriety. Criminal cases have to be
proceeded with in accordance with the procedure as
prescribed under the Code of Criminal Procedure and the
pendency of a civil action in a different court even though
higher in status and authority, cannot be made a basis for
quashing of the proceedings.
18. In the case of Punit Beriwala v. State (NCT of Delhi) -
2025 SCC OnLine SC 983, the Apex Court held as under:
MERE INSTITUTION OF CIVIL PROCEEDINGS CANNOT
ACT AS A BAR TO INVESTIGATION OF COGNIZABLE
OFFENCES
28. It is trite law that mere institution of civil
proceedings is not a ground for quashing the FIR or to hold
that the dispute is merely a civil dispute. This Court in
various judgments, has held that simply because there is a
remedy provided for breach of contract, that does not by
itself clothe the Court to conclude that civil remedy is the
only remedy, and the initiation of criminal proceedings, in
any manner, will be an abuse of the process of the court.
This Court is of the view that because the offence was
committed during a commercial transaction, it would not be
sufficient to hold that the complaint did not warrant a further
investigation and if necessary, a trial. [See : Syed
AksariHadi Ali Augustine Imam v. State (Delhi
Admin.), (2009) 5 SCC 528, Lee KunHee v. State of
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UP, (2012) 3 SCC 132 and Trisuns Chemicals v. Rajesh
Aggarwal, (1999) 8 SCC 686].
19. In the instant case, the complaint and FIR prima facie do
not indicate that the respondents intend to convert a civil dispute
into criminal proceedings and in the light of specific averments,
details and particulars including sequence of events leading to the
filing of the complaint contained in the complaint and FIR which are
elaborately averred by the respondents, in the facts and
circumstances of the case on hand, it cannot be said that the
impugned complaint and FIR are nothing but an attempt to give a
criminal colour to a civil dispute and as such, even this contention
of the petitioners cannot be accepted.
20. Insofar as the contention of the petitioners that the
registration of the FIR for offence punishable under Section 21 of
the BUDS Act is illegal and deserves to be quashed in the light of
various judgments of this Court relied upon by the petitioner is
concerned, all the judgments relied upon by the petitioners were
considered by a co-ordinate Bench of this Court in Yellappa's
case supra, wherein it is held as under:-
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" In these two petitions filed under Section 482 of the
Cr.P.C, accused Nos.2 and 1 respectively have sought for
quashing the criminal proceedings initiated against them in
Spl.C.No.197/2022 on the file of Prl.District and Sessions
Judge, Belagavi, for the offences punishable in Sections 406
and 420 IPC and Section 21(1)(2) and (3) of The Banning of
Unregulated Deposit Schemes Act, 2019 ('BUDS Act' for
short).
2. While Crl.P.No.102510/2023 is filed by accused
No.1, Crl.P.No.100048/2024 is filed by accused No.2.
3. Since these two petitions are arising out of the
same case, they are clubbed together and disposed of by a
common order.
4. In support of the petition, the petitioners have
contended that absolutely there is no material in the charge
sheet to proceed against them and as such, it is liable to be
quashed, as it amounts to abuse of process of law. As per
Section 27 of BUDS Act, no designated Court shall take
cognizance of an offence punishable under the said section,
except upon a complaint made by the regulator. As per
Section 7 of the said Act, the Government shall first appoint a
regulator and thereafter designate a Court to deal with the
matters to which the provisions of the said Act apply, and the
designated Court can take cognizance only on complaint in
writing made by the regulator. In the present case,
respondent No.2 who is a private person has given the first
information and on the basis of it, FIR is registered. During
the course of investigation, the provisions of BUDS Act are
invoked and after investigation, charge sheet is filed. The trial
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Court ought to have complied with the provisions of Section
27 of BUDS Act. The non-compliance of said provision, has
vitiated the entire proceedings.
5. The petitioners are in no way concerned with
the allegations made in the complaint. Allegations made in the
complaint are not believable. There is no material to show
that complainant has invested Lakhs together. As per the
statements of CW-2, 12 to 17, it is alleged that accused No.1
has cheated the innocent investors to the tune of `55 Crores,
which is not believable. Viewed from any angle, the
proceedings are not sustainable and pray to allow the
petitions and quash the criminal proceedings against the
petitioners.
6. In support of their arguments, the learned
counsel for petitioners have relied upon the following
decisions:
(i) Shivaji s/o Baburao Patil and Anr. Vs. The State of
Karnataka (Shivaji)
(ii) Santosh Kumar S/o Gadeppa Khot and anr. Vs. The
State of Karnataka and Ors. (Santosh Kumar)
(ii) Sri.Ravikiran s/o Sureshkamlakar and Anr. Vs. The
State by Chikkodi Police Station Belagavi District and Ors.
(Ravikiran)
7. Learned counsel for respondent
No.2/complainant submitted oral objections stating that
initially, first information came to be filed by Arjun Kallappa
Patil stating that since 10 years, he is doing vegetable
business. He is having agriculture land and also doing diary
business. While doing vegetable business, he came to be
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acquainted with accused No.2-Yallappa Managutakar.
Accused No.2 convinced the complainant that if he invest in
steel and cement business, he would pay handsome return.
Therefore, on 25.01.2021, complainant paid `40 lakhs to
accused No.2. After two months, accused No.2 paid him `2
lakhs by way of profit. Convinced by the fact that accused
No.2 would give him handsome profit and also return the
investment made by him, on 01.04.2021 complainant invested
`35 lakhs with accused No.2.
8. Subsequently, when he requested accused
No.2 to return his money, time and again he went on
postponing. On enquiry, accused No.2 revealed that he has
invested the said money with accused No.1 Shivanand
Kumbar and after taking money invested by several persons,
on 18.07.2021 accused No.1 absconded and he is also
searching for him. In whatsapp also, he came across the
information regarding accused No.1 Shivananda Kumbar
having absconded. However, later accused No.2 Yallappa
Managutakar also absconded and he is not receiving the
calls. Both accused Nos.1 and 2 have cheated the
complainant in a sum of `75,00,000/- and accordingly, he filed
the complaint.
9. Based on the said complaint, the CEN Crime
Police, Belagavi City have registered case in Cr.No.26/2021
for the offences punishable under Sections 406 and 420 IPC
and taken up investigation. Accused Nos.1 and 2 were
arrested and based on their voluntary statement, incriminating
evidence was collected. The investigation reveal that accused
No.1 who is hailing from Sadalaga of Chikkodi, dropped out of
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college after failing in PUC. For six years, he worked at
Doodhaganga Sugar Factory and left his job when he was not
confirmed. Thereafter, he was driving tractor belonging to his
father till it was sold and he worked as a driver with one
Ingale and left the job after 2-3 years. In 2002, he started
working in the Ashram of Shirdi Junglee Maharaj, at
Kokamthana. There he was working as a driver of tractor and
tempo. While working in the said Ashram, he started getting
cement and steel at concession rate in the name of Ashram
on credit basis and supply the same to those person who
were in need of it and used to pay the amount belatedly.
9.1 In this manner, he started getting money. He
used to make the payment for the cement and steel
purchased on credit basis, after he received money from the
next prospective buyer. In this way, he used to retain certain
amount for a short period. Those who are not in need of
cement and steel, started investing with him. Though he was
not getting high margin of profit, in order to gain the
confidence of investors, he used to pay profit to them out of
the investment made by subsequent investors. He used to
utilise the money at his hand for his personal needs, including
investment in real estate, construction of apartments, farm
house and for purchasing agricultural land etc. Lured by the
high returns in short time business people started investing
with him.
9.2 With the money received from such investment,
he also started tours and travel business by name, Nayikba
Yatra tours. In the meanwhile, he came to be acquainted with
accused No.2-Yallappa Managutakar. Through accused No.2,
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he started getting heavy investments ranging from 50 lakhs to
crores. He used to pay benefit to the previous investor out of
the investment received from the new investor. He has not
taken any license from the concerned authority. This was
going on smoothly till 2019-2020.
9.3 On account of COVID and lockdown, the
investment slowed down and on the other hand, the investor
started demanding back the money invested by them. Since
he has already utilised the investment for purchasing lands,
construction of house, etc., he could not return the said
investment. Therefore, he along with his wife and children
escaped to Maldives. From there, they proceeded to other
places, including Egypt, Dubai, Ajman and Nepal. Till
26.06.2022, he managed to keep the police away. However,
on 26.06.2022, at 11.00 p.m, when he came to Mumbai from
Nepal, he was apprehended by the concerned police. Before
he was apprehended, accused No.2 was arrested by the
concerned police and through him, they came to know about
the part played by accused No.1. During investigation, the
concerned police have seized and attached the movable and
immovable properties of accused Nos.1 and 2. The
investigation reveal that accused Nos.1 and 2 have cheated
complainant, CW-2, 12 to 17 and many other persons to the
tune of `55 crores spread across Karnataka and Maharashtra.
He has acquired properties not only in his name, but also in
the name of his wife, Smt.Vijaya Kumbar. There is prima facie
material to proceed against the petitioners and pray to
dismiss the petitions.
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10. During the course of the argument, learned
counsel for petitioners submitted that as per Section 27 of the
BUDS Act, the designated Court can take cognizance only on
a complaint filed by the regulator and therefore the entire
proceedings initiated based on the first information furnished
by respondent No.2/defacto complainant before the
concerned police and the charge sheet filed is vitiated and on
this ground alone, the petitioners are entitled for quashing of
the criminal proceedings against them. He would submit that
in the similar cases in Shivaji, Santosh Kumar and
Ravikiran referred to supra, the criminal proceedings initiated
are quashed, reserving liberty to the regulator to file complaint
under Section 200 Cr.P.C before the designated Court.
11. On the other hand learned counsel
representing respondent No.2/defacto complainant as well as
learned High Court Government Pleader submitted that the
restriction in Section 27 relates to an offence punishable
under Section 4 committed by a deposit taker, who is
running a Regulated deposit scheme and commit any
fraudulent default in the repayment or return of deposit on
maturity or in rendering any specified service promised
against such deposit. They would further submit that,
however, if the offence is committed by any person or entity
who are running an Unregulated deposit scheme and also
where the offence under Section 4 is committed by a
company, then the complaint may be filed by anyone who is
aggrieved or by the concerned for this and cognizance is to
be taken on such charge sheet by the designated Court. In
the present case, since the offences punishable under
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Section 21 (1)(2) and (3) of BUDS Act, committed by accused
Nos.1 and 2 comes under the definition of Unregulated
Deposit Scheme, the restriction contained in Section 27 of the
BUDS Act is not applicable and therefore question of
quashing the said proceeding would not arise. He would
further submit that in the decisions relied upon by the
petitioners, this aspect is not examined and therefore the said
decisions are not applicable to the case on hand.
12. Heard arguments of both sides and perused
the record.
13. The crux of the argument submitted by the
learning counsel representing for petitioners is that under
Section 27 of the BUDS Act, there is prohibition for the
designated Court to take cognizance of an offence under the
Act, except upon a complaint made by the regulator.
According to the learned counsel for the petitioners, the
designated Court can take cognizance only on the basis of a
complaint filed under Section 200 by the regulator and
therefore the proceedings initiated upon the first information
report furnished by the defacto complainant i.e., respondent
No.2 and ultimately charge sheet filed against the petitioners
are vitiated and as such, the petitioners are entitled for
quashing of the proceedings, but right may be reserved to the
concerned authorities to file complaint under Section 200 of
Cr.P.C. and proceed with the matter.
14. Before going to the merits of the case, it is
necessary to refer to some of the provisions of the BUDS Act.
The object of the said Act is to provide for a comprehensive
mechanism to ban the Unregulated deposit schemes, other
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than the deposits taken in the ordinary course of business
and to protect the interest of depositors and matters
connected there with or incidental thereto.
15. Section 2 (4) define the term deposit means an
amount of money received by way of an advance or loan, or
in any other form, by any deposit taker with a promise to
return whether after a specified period or otherwise, either in
cash, or in kind or in the form of a specified service, with or
without any benefit in the form of interest, bonus, profit or in
any other form, but does not include-
(a) amounts received as loan from a scheduled
bank or a co-operative bank or any other banking company as
defined in Section 5 of the Banking Regulation Act, 1949;
(b) amounts received as loan or financial
assistance from the Public Financial Institutions notified by
the Central Government in consultation with the Reserve
Bank of India or any non-banking financial company as
defined in clause (f) of section 45-I of the Reserve Bank of
India Act, 1934 and is registered with the Reserve Bank of
India or any Regional Financial Institutions or insurance
companies;
(c) amounts received from the appropriate
Government, or any amount received from any other source
whose repayment is guaranteed by the appropriate
Government, or any amount received from a statutory
authority constituted under an Act of Parliament or a State
Legislature;
(d) amounts received from foreign Governments,
foreign or international banks, multilateral financial
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institutions, foreign Government owned development financial
institutions, foreign export credit collaborators, foreign bodies
corporate, foreign citizens, foreign authorities or person
resident outside India subject to the provisions of the Foreign
Exchange Management Act, 1999 and the rules and
regulations made thereunder;
(e) amounts received by way of contributions towards the
capital by partners of any partnership firm or a limited liability
partnership;
(f) amounts received by an individual by way of loan from
his relatives or amounts received by any firm by way of loan
from the relatives of any of its partners;
(g) amounts received as credit by a buyer from a seller on
the sale of any property (whether movable or immovable);
(h) amounts received by an asset re-construction
company which is registered with the Reserve Bank of India
under section 3 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002;
(i) any deposit made under section 34 or an amount
accepted by a political party under section 29B of the
Representation of the People Act, 1951;
16. Section 2(5) defines the term 'depositor' means
- 'any person who makes a deposit under the BUDS Act;
17. Section 2(6) defines the term 'deposit taker'
means -
(i) any individual or group of individuals;
(ii) a proprietorship concern;
(iii) a partnership firm (whether registered or not);
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(iv) a limited liability partnership registered under the Limited
Liability Partnership Act, 2008;
(v) a company;
(vi) an association of persons;
(vii) a trust (being a private trust governed under the provisions
of the Indian Trusts Act, 1882 or a public trust, whether
registered or not);
(viii) a co-operative society or a multi-State co-operative
society; or
(ix) any other arrangement of whatsoever nature, receiving or
soliciting deposits, but does not include--
(i) a Corporation incorporated under an Act of Parliament or a
State Legislature;
(ii) a banking company, a corresponding new bank, the State
Bank of India, a subsidiary bank, a regional rural bank, a co-
operative bank or a multi-State co-operative bank as defined in
the Banking Regulation Act, 1949;
18. Section 2(14) defines the term "Regulated
Deposit Scheme" means the schemes specified under column
(3) of the First Schedule.
19. Similarly, Section 2(15) defines the term
'Regulator' means the Regulator specified under column (2)
of the First Schedule.
20. Section 2(16) defines the term 'Schedule'
means the Schedule appended to the BUDS Act.
21. Section 2(17) defines the term 'Unregulated
Deposit Scheme' means a Scheme or an arrangement under
which deposits are accepted or solicited by way of business,
and which is not a Regulated Deposit Scheme as specified
under column (3) of the First Schedule.
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22. Chapter-II of the BUDS Act, deal with Banning
of Unregulated Deposit Schemes. Section 3 states that - On
and from the date of commencement of the BUDS Act, (a) the
Unregulated Deposit Schemes shall be banned, and (b) no
deposit taker shall directly or indirectly promote, operate,
issue any advertisement soliciting participation or enrolment
in or accept deposits in pursuance to an Unregulated Deposit
Scheme.
23. Thus, while Section 3(a) totally banned
Unregulated Deposit Schemes, Section 3(b), prohibits any
deposit taker from directly or indirectly promoting, operating,
issuing any advertisement, soliciting participation, or
enrolment in, or accept deposits in pursuance of an
Unregulated Deposit Scheme.
24. Section 5 also prohibits any person by
whatever name called knowingly, make any statement,
promise, or forecast, which is false, deceptive or misleading in
material facts or deliberately conceal any material facts, to
induce another person to invest in, or become a member of or
participate in any Unregulated Deposit scheme.
25. Section 6 clarifies that a prize chit or money
circulation scheme banned under the provisions of the prize
Chits and Money Circulation Scheme (Banning) Act, 1978,
shall be deemed to be an Unregulated Deposit Scheme under
the BUDS Act.
26. While Sections 3, 5 and 6 deals with
Unregulated Deposit Schemes, Section 4 makes certain acts
of deposit taker of Regulated Deposit Scheme punishable,
who commits fraudulent default in the repayment or return of
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deposit on maturity or in rendering any specified service
promised against such deposit.
27. Chapter 6 of the BUDS Act deals with offences
and punishments. Section 21 prescribes punishment for
contravention of Section 3. Section 21(1) states that any
deposit taker who solicits deposits in contravention of Section
3 shall be punished with imprisonment for a term which shall
not be less than one year, but which may extend to five years
and fine, which shall not be less than `2 lakhs, but which may
extent to `10 lakhs. This is for soliciting deposits in
contravention of Section 3.
28. Section 21(2) states that any deposit taker who
accepts deposits in contravention of Section 3 shall be
punished with imprisonment for a term which shall not be less
than 2 years, but which may extend to 7 years and fine, which
shall not be less than `3 lakhs, but which may extend to `10
lakhs. This is for accepting deposits in contravention of
Section 3.
29. Section 21(3) provides that that any deposit
taker who accepts deposits in contravention of Section 3 and
fraudulently default in repayment of such deposits or in
rendering any specified service shall be punished with
imprisonment for a term which shall not be less than 3 years,
but which may extend to 10 years and fine, which shall not be
less than `5 lakhs, but which may extend to twice the amount
of aggregate funds collected from the subscribers, members
or participants in the Unregulated Deposit Scheme. This is for
fraudulent default in repayment of such deposits or in
rendering any specified service in contravention of Section 3.
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30. Section 23 prescribes punishment for
contravening the provisions of Section 5 and states that any
person who contravenes the provisions of Section 5 shall be
punishable with imprisonment for a term which shall not be
less than one year, but which may extend to 5 years and with
fine, which may extend to ten lakhs.
31. Section 24 deals with second and subsequent
offence, except under Section 26, prescribing higher
punishment, which shall not be less than 5 years, but which
may extend to 10 years and fine, which shall not be less than
`10 lakhs, but which may extend to `50 Crores.
32. Section 25 deals with offences by deposit
takers who are other than individuals such as company and
other entities and every person who at the time the offence
committed was in charge of and responsible to the deposit
taker for conduct of its business, as well as deposit taker shall
be deemed to be guilty of the offence and punished
accordingly. Sub-section (2) carves out exception.
33. Section 26 punishes those persons who failed
to furnish any statement, information or particulars as
required under Section 10(2) (1), with fine, which may extend
to `5 lakhs.
34. At this stage, it is relevant to note that as per
Section 28, notwithstanding anything contained in the Code of
Criminal Procedure, 1973, every offence punishable under
this Act, except offence under Section 22 and 26 shall be
cognizable and non-bailable.
35. Section 22 prescribe punishment for
contravention of Section 4 by any deposit taker means
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deposit taker of Regulated deposit Scheme who commits
offence relating to a Regulated deposit scheme. Section 26
deals with failure to give information required under Section
10(1). Except these two offences, the rest of the offences are
cognizable and non-bailable.
36. Thus, perusal of Sections 3, 5 and 6 makes it
evident that while Section 3 ban the Unregulated Deposit
Schemes, Section 5 makes punishable a person knowingly
making any statement, promise, or forecast, which is false,
deceptive or misleading in material facts and deliberately
conceals any material fact to induce any person to invest in or
become member or participate in any Unregulated Deposit
Scheme. Section 6 includes any chit or money circulation
scheme which is banned under the
provisions of prize chits and Money Circulation Scheme
(Banning) Act 1978, as Unregulated deposit scheme. The
violation of Section 3 and 5 are made punishable under
Sections 21 and 23.
37. Section 4 concerns with Regulated deposit
taker and prohibits such a Regulated deposit taker from
committing fraudulent default in repayment or return of the
deposit on maturity or rendering any specified service
promised against such deposit.
38. It is to be remembered that as defined under
Section 2(14) Regulated Deposit Schemes are those which
are specified under column (3) of Serial number (1) of the first
schedule. Serial number (2) provides that (a) Deposits
accepted under any scheme or an arrangement, registered
with any regulatory body in India, constituted or established
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under a statute and (b) Any other scheme, as may be notified
by the Central Government under the BUDS Act shall also be
treated as Regulated Deposit Schemes under the BUDS Act.
As per Section 2(15) to regulate such Regulated Deposit
Schemes, a regulator is appointed who is specified in column
(2) of first schedule. Thus for every Regulated deposit
scheme, there is a regulator. Section 40 deals with power of
the Central Government to amend the First Schedule by
Notification and add to, or omit from the First Schedule any
scheme or arrangement and on such addition or omission,
such scheme or arrangement shall become or cease to be a
Regulated Deposit Scheme.
39. Chapter 4 deals with information on deposit
takers, which necessarily mean a Regulated Deposit Scheme.
As per Section 9(1) the Central Government may designate
an authority, whether existing or to be constituted, the duty of
which is to create, maintain and operate an online database
for information on deposit takers operating in India. As per
Section 9(2) the authority so designated under sub-section
one may require the regulator or the competent authority to
share such information on deposit takers, as may be
prescribed. Section 10 deals with information of business by
the deposit taker.
40. Section 10(1) mandates that every deposit
taker, which commences or carries on its business as such
and on or after the commencement of the BUDS Act to
intimate the authority referred to in Section 9(1) about its
business in such form and manner and within such time as
may be prescribed. Section 10 (2) requires that where the
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competent authority has reason to believe that the deposits
are being solicited or accepted, pursuant to an Unregulated
deposit scheme, direct any deposit taker to furnish such
statements, information, or particular, as it considers
necessary, relating to or connected with the deposits received
by such deposit taker.
41. The explanation (a) clarify that the requirement
of intimation under the sub-section (1) is applicable to deposit
takers accepting or soliciting deposits as defined under
Section 2(4), which means a Regulated deposit, since the
Unregulated deposit is banned under Section 3. Similarly
explanation (b) clarifies that the intimation under sub-section
(1) also apply to a company, if the company accepts the
deposits under Chapter 5 of the Companies Act.
42. Thus, the information on deposit takers is
required to be collected by the authority designated by the
Central Government, whether existing or to be constituted,
which necessarily mean the information which is required to
be regularly maintained by the deposit taker of Regulated
Deposit Scheme. The requirement of designated authority
directing any deposit taker to furnish such statement,
information, or particulars with regard to Unregulated deposit
schemes is an exception, and it happens only when the
competent authority has reason to believe that deposits are
being solicited or accepted in respect of Unregulated Deposit
Scheme.
43. Chapter 7 deals with investigation, search and
seizure. Under Section 29, a police officer on recording
information about the commission of an offence under this Act
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is duty bound to inform the same to the competent authority,
while Section 11 deals with requirement of competent
authority to share information received under Section 29 with
the Central Bureau of Investigation and with the authority,
which may be designated by the Central Government under
Section 9. Similarly, as per Section 11 (2) the appropriate
Government, any regulator, income tax authorities, or any
other investigation agency, having any information or
documents in respect of the offence investigated under this
Act by the police or the Central Bureau of Investigation shall
share all such information or documents with the police or the
Central Bureau of Investigation. Similarly, as per Section
11(3) the principal officer of any banking company, a
corresponding new bank, the State Bank of India, a subsidiary
bank, original rural bank, a Co-operative bank or multi-
cooperative bank has a reason to believe that any client is a
deposit taker and is acting in contravention of the provisions
of BUDS Act, shall forthwith inform the same to the competent
authority.
44. Section 31 deals with the power to enter,
search and seize without warranty. It authorise any police
officer, not below the rank of an officer in charge of a police
station, who has reason to believe that anything necessary for
the purpose of an investigation into any offence under this Act
may be found in any place within the limits of jurisdiction of
police station of which he is in charge and other cases with
the written authority of an officer, not below the rank of
Superintendent of Police, may conduct search and seizure.
As per Section 31(2), in case it is not practicable to seize the
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record or property, he may make an order in writing to freeze
such property, account, deposits or valuable securities
maintained by any deposit taker regarding the offence under
the Act initially for a period of 30 days and it may be extended
for further period as per the order of the designated Court.
45. As per sub-section (3) of Section 31, where an
officer takes down any information in writing or records
ground for his belief or makes an order in writing under sub-
section (1) or sub-section (2), within 72 hours shall send a
copy there to the designated Court in a sealed envelope. The
owner or occupier of the building, conveyance, or place shall
on application entitled for a copy to be furnished free of cost,
by the designated Court. Section 32 (1) provides that the
designated Court may take cognizance of offence under the
Act without the accused being committed to it for trial.
46. Chapter 3 deals with authorities. As required
under Section 7, the appropriate Government is required to
appoint one or more officers, not below the rank of Secretary
to that Government as the competent authority for the
purpose of BUDS Act. As per sub-section (2), the appropriate
Government is also required to appoint such other officer or
officers to assist the competent authority in discharge of its
functions under the Act. Perusal of provisions of chapter 3
makes it evident that wherever the competent authority or
officers appointed under sub-section (2), have reason to
believe that any deposit taker is soliciting deposits in
contravention of Section 3, he may order for attachment, etc.
It is having powers as vested in Civil Court. Under this
chapter, Section 8 deals with constitution of designated
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Courts, not below the rank of a District and Sessions Judge.
No Courts other than the designated Court shall have the
jurisdiction in respect of any matters to which the provision of
the BUDS Act apply. While trying the offences under the
BUDS Act, the designated Court may also try an offence
under other enactments.
47. As per Section 37 of the Act, the Central
Government and under Section 38 the State Government or
Union Territory Government as the case maybe in
consultation with the Central Government may make rules for
carrying out the provisions of the Act.
48. Accordingly vide Notification dated 12.02.2020,
the Central Government has framed the Banning of
Unregulated Deposits Schemes Rules 2020 ('Central Rules'
for short). Rule 3 of the Central Rules state that while the
competent authority pass order provisionally, attaching the
property of the deposit taker, in addition to the other
information, enumerated in class B to D, as per clause A it
shall also take into consideration any complaint against the
promotion or operation of an Unregulated deposit scheme,
whether the complainant is a depositor in the said
Unregulated deposit scheme or not, any information received
from Central Government and State Governments. Rule 10
of the Central rules deals with authorisation for search and
seizure relating to an Unregulated Deposit Scheme.
49. In exercise of the provisions of Section 37, vide
Notification dated 27.10.2020, the State Government has
framed the Karnataka Banning of Unregulated Deposit
Schemes Rules, 2020 ('State Rules' for short). As per Rule
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4(1), while conducting investigation or enquiry under Section
7(4) of the Act, Notices may be issued in form No. A and C,
which clearly referred to the violation of provision of Section 3
of the Act. Similarly, as per Rule 4(2), the order of provisional
attachment shall contain the details enumerated in 1 to 9
which includes details of the complaint, enquiry report from
the police, complaints received from the public.
50. The plain reading of Section 27 makes it
evident that the designated Court is prohibited from taking
cognizance of an offence under Section 4, except upon the
complaint made by the regulator. It does not refer to any other
offence under the provisions of BUDS Act. The reason behind
this is that in case of Regulated deposit schemes, prescribed
authorities are there to monitor the same. Database is created
and maintained. Such Regulated deposit schemes are
managed by the regulators who are constituted under
respective statutory provisions.
51. The offence that could be committed by a
deposit taker running a Regulated deposit scheme under
Section 4, are where it may fraudulently default in repayment
or return of deposit on maturity or in rendering any specified
service, promised against such deposit. This offence could be
established by the regulator on the basis of information
available with it. It may not require an extensive investigation
by the police as in case of other offences under Section 3 and
5. In fact, a deposit taker of Regulated deposit scheme may
commit an offence punishable under Section 3 (2) or 5, if he
directly or indirectly promote, operate, issue any
advertisement, soliciting, participation or enrolment in or
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accept deposits in pursuance of an Unregulated deposit
scheme. He may commit the offence under Section 5 in case
he succeeds in persuading any person to invest in or become
a member or participant of any Unregulated Deposit Scheme.
52. Thus, while Section 3 deals with Unregulated
Deposit Schemes and that all the Unregulated Deposit
Schemes shall be banned, Section 4 punishes a deposit
taker, who is running a Regulated Deposit Scheme,
committing an offence in the respective Regulated Deposit
Scheme, by committing any fraudulent default in the
repayment or return of deposit on maturity or in rendering any
specified service promised against such deposit. There is
sea of difference between an offence under Section 4 and the
other offences under Sections 3 and 5. While Section 4 deals
with an offence committed by a deposit taker who is running a
Regulated deposit scheme, Section 3 and 5 deals with
offences concerning Unregulated Deposit Schemes.
53. The Regulated Deposit Schemes are run under
the supervision and control of the regulator. While under
Section 9, the designated authority is required to create a
central database, under Section 10, every regulated deposit
taker is duty bond intimate the designated authority and
furnish statements, information or particulars concerning the
deposits. Explanation makes it very explicit that the deposit
taker means under a Regulated Deposit Scheme, since a
deposit taker of Unregulated deposit scheme cannot be
expected to intimate the designated authority that he is
running an illegal deposit scheme.
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54. While the offence under Section 4 is punishable
under Section 22, the failure to give intimation under Section
10(1) and failure to furnish statements, information or
particulars as required under Section 10(2) is made
punishable under Section 26 of the Act. Except these two
sections, rest of the offences which are punishable under
Sections 21, 23 to 25 are cognizable. In fact, for these
cognizable offences, minimum sentence is prescribed. Having
regard to the nature of the offences under Section 3 and 5, it
requires extensive investigation by a police agency.
Therefore, the arguments of the learned counsel for
petitioners that there is prohibition under Section 27 to take
cognizance, except by way of a complaint under Section 200
Cr.P.C by the regulator in respect of the offences punishable
under Section 3 and 5 is not correct and the same cannot be
accepted.
55. However, if the offence under Section 4 is
committed by a company, then also it is required to
investigated by the police. As per the proviso, the exception
carved out by Section 27 is not applicable to an offence
committed under Section 4 by company.
56. The object behind the requirement of filing of
complaint under Section 200 by a regulator in case of an
offence under Section 4 by a deposit taker running Regulated
deposit scheme, which is not a company, appears to be that
when this scheme is run by a regulator, unnecessarily, the
deposit taker shall not be subject to ignominy of facing a
criminal investigation and trial, by unscrupulous persons and
also to face multiple complaints. Only when the regulator after
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verifying all the records is convinced that a deposit taker who
is running a Regulated deposit scheme is guilty of committing
any fraudulent default in the repayment or return of the
deposit on maturity or in rendering any specified service
promised against such deposit, he may file a complaint under
Section 200 Cr.P.C with all the information available at his
hand and request the designated Court to take action against
such person. Similar provision is available under the ESIC,
EPFO and Drugs and Cosmetics Act. However, this
protection is not available to those persons who run
Unregulated Deposit Schemes and cheat innocent and
gullible people.
57. Therefore, when a deposit taker running a
Regulated Deposit Scheme, commit an offence under Section
4, the complaint is required to be filed by the regulator under
Section 200 Cr.P.C as the said offence is non-cognizable
which is punishable under Section 22 of the Act. The
remaining offences under Sections 21, 23 to 25 are
cognizable and required to be investigated by the police.
58. Undisputedly, there is Prima-facie material to
show that the petitioners are guilty of soliciting investment
from innocent and gullible persons and cheated them to the
tune of around `55 Crores. In fact, the detailed investigation
conducted by the investigating officer and charge sheet
makes out a strong prima facie case against the petitioners.
In the decisions relied upon by the petitioners, the
co-ordinate Bench of this Court has not examined these
aspects and as such, they are not applicable to the case on
hand.
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59. Thus from the above discussion, this Court is of the
considered opinion that the petitions are liable to be dismissed and
accordingly, the following:
ORDER
The criminal petition in Crl.P.No.100048/2024 filed by accused No.2 and Crl.P.No.102510/2023 filed by accused No.1 under Section 482 of Cr.P.C. in Crime No.26/2021 in Special Case No.197/2022 registered by respondent police-CEN Police Station, Belagavi city, for the offences punishable under Sections 406 and 420 of IPC and Section 21(1)(2)(3) of BUDS Act, 2019, on the file of Prl. Dist. & Sessions & Special Judge, Belagavi, are hereby rejected.
21. In view of the aforesaid judgment of this Court in Yellappa's case supra, I am of the view that even this contention cannot be accepted.
22. In view of the foregoing discussions, I am of the considered opinion that the question of this Court exercising its jurisdiction under Section 482 Cr.P.C. and quash the impugned proceedings would not arise in the facts and circumstances of the instant case and as such, I do not find any merit in the petition and that the same is liable to be dismissed.
23. Accordingly, the petition is hereby dismissed.
Sd/-
(S.R.KRISHNA KUMAR) JUDGE Srl.