Andhra Pradesh High Court - Amravati
M/S. Quest Net Enterprises Pvt.Ltd vs The State Of Andhra Pradesh on 20 February, 2023
HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
****
CRIMINAL REVISION CASE No.969 OF 2022
Between:
1. M/s. Quest Net Enterprises Private
Limited, Rep. by its Managing Director,
Pushpam Appalanaidu, Office:Rain Tree Place,
9th Floor, MC Nichols Road, Chetpet,
Chennai-31, Tamilnadu.
2. Pushpam Appalanaidu, D/o.Appala Naidu,
Aged about 58 years, Occ: Managing Director,
M/s. Quest Net Enterprises India Pvt. Ltd.,
R/o.8th Floor, High Breeze Apartment,
Aharms Road, Kilpauk, Chennai-10.
Tamilnadu. .... Petitioners
Versus
The State of Andhra Pradesh,
Through Deputy Superintendent of Police,
CID, RO, Nellore, Rep. by its Special
Public Prosecutor, High Court of A.P.,
Amaravati. .... Respondent
DATE OF ORDER PRONOUNCED : 20.02.2023
SUBMITTED FOR APPROVAL:
HON'BLE SRI JUSTICE A.V.RAVINDRA BABU
1. Whether Reporters of Local Newspapers
may be allowed to see the order? Yes/No
2. Whether the copy of order may be
marked to Law Reporters/Journals? Yes/No
2. Whether His Lordship wish to see
The fair copy of the order? Yes/No
______________________________
A.V.RAVINDRA BABU, J
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AVRB,J
Crl.R.C. No.969/2022
* HON'BLE SRI JUSTICE A.V.RAVINDRA BABU
+ CRIMINAL REVISION CASE No.969 OF 2022
% 20.02.2023
# Between:
1. M/s. Quest Net Enterprises Private
Limited, Rep. by its Managing Director,
Pushpam Appalanaidu, Office:Rain Tree Place,
9th Floor, MC Nichols Road, Chetpet,
Chennai-31, Tamilnadu.
2. Pushpam Appalanaidu, D/o.Appala Naidu,
Aged about 58 years, Occ:Managing Director,
M/s. Quest Net Enterprises India Pvt. Ltd.,
R/o.8th Floor, High Breeze Apartment,
Aharms Road, Kilpauk, Chennai-10.
Tamilnadu. .... Petitioners
Versus
The State of Andhra Pradesh,
Through Deputy Superintendent of Police,
CID, RO, Nellore, Rep. by its Special
Public Prosecutor, High Court of A.P.,
Amaravati. .... Respondent
! Counsel for the Petitioners : Sri Posani Venkateswarlu,
Learned Senior Counsel,
appearing for Sri Ch.
Chaitanya Bhargava,
Learned counsel.
^ Counsel for the Respondent : Smt. Y.L.Siva Kalpana Reddy,
Learned Standing Counsel-
cum-Special Public Prosecutor.
< Gist:
> Head Note:
? Cases referred:
(2022) 9 SCC 457
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Crl.R.C. No.969/2022
(2002) 1 SCC 241
(2005) 10 SCC 228
(2019) 17 SCC 193
(2011) 3 SCC 351
(2015) 1 SCC 103
(1994) 4 SCC 142
1995 (2) MWN (Cr.)
(2020) 12 SCC 467
2023 (1) ALD (Crl.) 85 (AP)
This Court made the following:
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AVRB,J
Crl.R.C. No.969/2022
HON'BLE SRI JUSTICE A.V.RAVINDRA BABU
CRIMINAL REVISION CASE No.969 OF 2022
ORDER:
This Criminal Revision Case came to be filed, under Sections 397 and 401 of the Code of Criminal Procedure, 1973 (for short, „the Cr.P.C‟), by the petitioners herein, who are the accused Nos.1 and 2 in C.C. No.11 of 2022 (split up case from Calendar Case No.5 of 2017) on the file of the Court of Principal Sessions Judge- cum-Special Court under APPDFE Act, 1999 Nellore (for short, „the learned Special Judge‟), challenging the order, dated 03.08.2022, where under the learned Special Judge, framed charges under Sections 420 of the Indian Penal Code, 1860 (for short, „the IPC‟), Section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 (for short, „the APPDFE Act‟) and further Section 406 IPC against the petitioners.
2. As evident from the copy of charges, enclosed to the grounds of Criminal Revision Case, it appears that the Investigating Agency filed a combined charge sheet pertaining to Crime No.119 of 2008 of IV Town Police Station, Nellore District; Crime No.38 of 2008 of Kuchipudi Police Station, Krishna District; Crime No.156 of 2008 5 AVRB,J Crl.R.C. No.969/2022 of Kakinada I Town Police Station, East Godavari District; Crime No.186 of 2008 of Kadapa I Town Police Station, Kadapa District and Crime No.75 of 2008 of Ganapavaram Police Station, West Godavari District, pursuant to the orders of the erstwhile High Court of Andhra Pradesh at Hyderabad in Writ Petition No.10535 of 2014, dated 04.04.2014. The papers pertaining to this Criminal Revision Case are enclosed with the copy of the charge sheet pertaining to C.C. No.5 of 2017.
3. Before going to deal with the Criminal Revision Case, it is pertinent to refer here the case of the prosecution in the above said Calendar Case. The case of the prosecution pertaining to the above five crimes, as set out in the charge sheet, which can be referred here insofar as deciding this Criminal Revision Case concerned, in substance, is that the accused in execution of criminal conspiracy, cheating, misappropriation and violation of the provisions under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (for short, „the PCMCS Act‟) and APPDFE Act, committed the offences under Sections 406 and 420 IPC and Section 5 of the APPDFE Act.
4. In the year 2001, Dato Vijay Eswaran (A-3), conspired with A-2, A-4 to A-7 to run money circulation scheme in India. In 6 AVRB,J Crl.R.C. No.969/2022 pursuance of their conspiracy, A-2 to A-7 registered a company in Registrar of Companies, Chennai on 18.01.2001 in the name and style of M/s.Gold Quest International Private Limited, in India. Pushpam Appala Naidu (A-2) is the Managing Director. A-3 to A-7 are the Directors. They were running Money Circulation Scheme by collecting deposits.
Functioning of the Scheme:
5. Any person can join in this scheme only through an Independent Representative (IR) and there is no direct enrollment in the scheme without introduction of IR. Any person, who wants to join as IR, has to deposit a sum of Rs.460/- through DD or online to the Company, which is a non-refundable amount. After deposit, IR is provided with ID Number. The company serves a voucher named as Registration Confirmation Receipt. IR has to deposit money through DD or online to avail products of A-1 at an exorbitant price fixed by the Company. On receipt of the deposit, accused issues a voucher called Certificate of Purchase. Accused made the members believe that its products have numismatic and antique value and it would fetch its members several lakhs in future. The accused further induced the members that they could amass wealth depending upon their enrollment of new members down the line and made them to deposit the amounts to avail their 7 AVRB,J Crl.R.C. No.969/2022 products at excessive prices. The various products of the accused company are as follows:
Sl. Details of the product of the Cost of the product No. accused Company Rs.
1 Gold Coin, 6 Grams & Silver, 30z Rs.32,200/- Medallion 2 60th Independence day Gold & Silver Rs.33,000/- Medallion 3 2005 Gentlemen‟s Gold MMC 25,300/-, 28,000/- Watches 4 2005 Ladies Gold MMC Watches 25,300/-
5 Diamond Watch 51,600/-
6 White La Novella Diamond watch 28,980/-
7 Cell Phones 35,700/-
6. Every IR who enrolled two new members into the scheme would earn commission. Newly enrolled members should also deposit Rs.460/- towards registration and avail products. On completing the two enrollments, IR gets commission of Rs.2,300/- as incentive. Each product is assigned Unit Value (UV). Gold medallion packs, comprising gold artistic coin of limited edition weighing 6 grams and silver coin of 1 oz costing Rs.32,000/- is of one UV. Once IR ensures 6 UVs, he reaches first step and gets the commission of Rs.11,500/- including incentives of Rs.2,300/-. On 8 AVRB,J Crl.R.C. No.969/2022 further ensuring of another 6 UVs, he reaches the second step and gets another Rs.11,500/-. Once he completes 18 UVs on either side, he is said to have completed one cycle. At the last step i.e., the 6th step, IR becomes eligible for „E-Voucher‟ worth Rs.11,500/-. On completion of one cycle, IR gets cash of Rs.57,500/- and E-Voucher worth Rs.11,500/-
7. To promote the business of money circulation scheme, accused got printed the attractive brochures and pamphlets and distributed them in order to attract the gullible public enrolling in the scheme of A-1‟s company.
8. IR is eligible to receive commission limited to 180 UVs on either side for a week. He will not be given commission beyond 180 UVs. The limited 180 UVs enable IRs to receive a maximum of Rs.5,75,000/- and E-Voucher of Rs.1,15,000/-, totally Rs.6,90,000/- per week.
9. The registration deposit of Rs.460/- is only for one calendar year. The IRs have to renew their registrations annually.
10. Accused had been promoting the scheme by claiming that the products have numismatic value and are of limited edition. They deliberately suppressed the fact of their claim of numismatic 9 AVRB,J Crl.R.C. No.969/2022 value and paid customs duty only for the value of precious metals they contain. They evaded paying tax. The Commissioner of Customs, Air Cargo Complex, Meenambakkam, Chennai is dealing with non-payment of tax. The accused for the purpose of making financial transactions, maintained accounts in several Banks (26 branches). Believing the inducements made by the accused, 10,616 people joined as IRs in the scheme and each member deposited a sum of Rs.460/- and on further deposit they availed companies products ranging from Rs.25,300/- to Rs.51,600/- which are claimed to be unique and have antique value.
11. The accused company delivered its products to the members through Blue Dart Courier and most of the delivered products are medallion packs consisting of gold and silver coins each weighing 6 grams of gold coin and 1 oz silver coin valued Rs.10,838/- in the open market. The accused, thus, dishonestly induced the people to deposit money and misappropriated the money of such depositors, which also resulted in default in refund of deposits.
12. The specific allegations pertaining to Crime No.119 of 2008 of IV Town Police Station, Nellore District basing on the report of the de-facto complainant i.e., Duvvuri Vijaya Sekhar Reddy, dated 09.05.2008, are that the FIR was registered and investigated into. 10
AVRB,J Crl.R.C. No.969/2022 The allegations are that the accused lured several persons to join as members and avail company‟s products, which are said to have numismatic or antique value by assuring that they would fetch lakhs of rupees in future. Believing the inducement, complainant and others deposited amounts. They received medallion packs consisting of one gold and one silver coin and on verification, it came to light that the medallion has no numismatic or antique value. So, the complainant and others sustained loss. The accused cheated the complainant and others. The CID took up further investigation as per the orders of the Additional Director General of Police, CID, Andhra Pradesh, examined witnesses, collected the necessary documents and the investigation discloses totally 128 persons joined as members and only 1 member received commission more than the amount he deposited and remaining 127 members deposited Rs.460/- individually towards registration charges, which comes to Rs.58,420/-. They further deposited Rs.37,63,100/- but received medallions worth Rs.13,76,426/- and commission of Rs.2,91,900/- and sustained loss of Rs.21,53,194/- and accused committed default in payment to 127 members. The investigation reveals the offences under Sections 120(B), 406 and 420 IPC, Sections 4, 5 and 6 of the PCMCS Act and Section 5 of the APPDFE Act.
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13. The specific allegations pertaining to Crime No.38 of 2008 of Kuchipudi Police Station, Krishna District are that the de-facto complainant viz., Chagantipati Sivarama Krishna presented a written complainant on 16.05.2008. The allegations are that the accused approached the de-facto complainant, propagated the scheme and made him to believe that the medallion pack consisting of one gold and one silver coin would have the numismatic and antique value. Accordingly, the de-facto complainant and others paid the amounts. Though the de-facto complainant was issued with three medallion packs but later A-11 and A-12 got the same returned to transfer to other persons for higher price but he did not get back any amount. Further, the value of the medallion pack was not increased as promised by the accused. The Investigating Officer, during the course of investigation, examined several persons, secured the bank account statements and the investigation discloses that totally 1,732 persons joined as members and 97 members received commission more than the amount they deposited and remaining 1,635 members deposited Rs.460/- individually towards registration charges, which comes to Rs.7,52,100/-. They further deposited Rs.4,85,33,350/- but they received medallions worth Rs.1,77,20,130/- and commission of Rs.18,10,100/- and 12 AVRB,J Crl.R.C. No.969/2022 sustained loss of Rs.2,97,55,220/- and accused committed default in payment to 1,635 members. The investigation reveals the offences under Sections 120(B), 406 and 420 IPC, Sections 4, 5 and 6 of the PCMCS Act and Section 5 of the APPDFE Act.
14. The specific allegations in Crime No.156 of 2008 of Kakinada I Town Police, East Godavari District are that the complainant - Kovvuri Durga, originally filed a private complainant before the learned III Additional Judicial First Class Magistrate, Kakinada which was forwarded to Police for investigation. Crime No.156 of 2008 was registered and investigated into. The allegations are that the Directors and the Promoters of the M/s. Quest Net Enterprises India Private Limited lured the public with a promise of huge profits for the amounts deposited with the company and the complainant believing the inducement, deposited the amounts and received a medallion pack consisting of one gold and one silver coin and no commission was paid as promised. The CID took up the investigation as per the orders of the Additional Director General of Police, CID, Andhra Pradesh examined witnesses and collected the necessary documents and the investigation discloses that totally 5,579 persons joined as members and 337 members received 13 AVRB,J Crl.R.C. No.969/2022 commission more than the amount they deposited and remaining 5,242 members deposited Rs.460/- individually towards registration charges, which comes to Rs.24,11,320/-. They further deposited Rs.14,82,12,796/- but they received medallions worth Rs.5,68,12,796/- and commission of Rs.11,17,800/- and sustained loss of Rs.9,27,73,554/- and accused committed default in payment to 5,242 members. The investigation reveals the offences under Sections 120(B), 406 and 420 IPC, Sections 4, 5 and 6 of the PCMCS Act and Section 5 of the APPDFE Act.
15. The specific allegations pertaining to Crime No.186 of 2008 of Kadapa I Town Police Station, Kadapa District are that the de- facto complainant viz., Anyam Rajendra Prasad on 19.05.2008 presented a written report to Kadapa I Town Police Station against the accused. The Sub-Inspector of Police registered the FIR and investigated into the allegations that the accused induced the public to join as members in the scheme by depositing the amount for registration and purchase of company‟s products, which are said to have numismatic/antique value which would fetch lakhs in future. Believing the same, the de-facto complainant deposited Rs.40,000/- and received medallion pack consisting of one gold and one silver coin. On verification, it came to light that the 14 AVRB,J Crl.R.C. No.969/2022 medallion has no numismatic or antique value and its value is less than the amount he deposited. The Sub-Inspector of Police during investigation examined the complainant. As per the orders of Additional Director General of Police, CID, AP, the CID Officers examined other witnesses and collected necessary documents. The investigation disclosed that 106 persons joined as members in the accused company and only 21 members received commission. The 85 members deposited Rs.460/- individually towards registration, which comes to Rs.39,100/-. They further deposited Rs.26,04,940/- and received medallions worth Rs.9,21,230/- and commission of Rs.3,90,270/-. Thus, they sustained loss of Rs.13,32,540/-. The accused committed default in payment to 85 members. The investigation disclosed the offences under Sections 120(B), 406 and 420 IPC, Sections 4, 5 and 6 of the PCMCS Act and Section 5 of APPDFE Act.
16. The specific allegations pertaining to Crime No.75 of 2008 of Ganapavaram Police Station, West Godavari District are the de- facto complainant viz., Vegesna Ravi Kumar Raju presented a written report to the Station House Officer. Based on the same, the SI took up investigation. The allegations leveled against the accused are that the accused lured the de-facto complainant to 15 AVRB,J Crl.R.C. No.969/2022 join as member in the scheme by assuring that it has various products which have numismatic or antique value and would fetch lakhs in future. Believing the inducement, he deposited a sum of Rs.27,600/- and received medallion pack consisting of one gold and one silver coin and on verification he found that it has no numismatic or antique value and its value is less than the amount he deposited. When he questioned the accused, he did not respond. CID, AP, Hyderabad took up further investigation in this case. Accordingly, the Inspector of Police, RO, CID, Rajahmundry examined several witnesses and found that totally 3,071 persons joined as members in the scheme of A-1‟s company and 136 members received commission more than the amount they deposited. The deposits made by remaining 2,935 members is Rs.13,50,100/-. They further deposited Rs.8,54,65,330/- and received medallions worth Rs.3,18,09,530/- and commission of Rs.47,08,200/-. Thus, they sustained loss of Rs.5,02,97,700/-. Further, the accused committed default in payment to 2,935 members. The investigation discloses the offences under Sections 120(B), 406 and 420 IPC, Sections 4, 5 and 6 of the PCMCS Act and Section 5 of APPDFE Act.
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17. It is not in dispute that, originally, basing on the above charge sheets, C.C. No.5 of 2017 was registered and due to absconding of some of the accused, it was split up and C.C. No.11 of 2022 is separately numbered. There is also no dispute that the learned Special Judge framed charges under Sections 406 and 420 IPC and Section 5 of the APPDFE Act against the accused, which is now under challenge before this Court.
18. Now, in deciding this Criminal Revision Case, the point that arises for consideration is as to whether the impugned order in C.C. No.11 of 2022 (Split up case from C.C. No.5 of 2017), dated 03.08.2022, by the learned Special Judge in framing the charges under Sections 406 and 420 IPC and Section 5 of the APPDFE Act suffers with any irregularity, illegality and impropriety and whether there are any grounds to set-aside the said charges?
19. POINT: Sri Posani Venkateswarlu, learned Senior Counsel, appearing for the petitioners, would contend that the then learned Special Judge informed the petitioners company to disburse the pending amounts to all the aggrieved members for compounding the case and after that the petitioners paid certain amounts and filed proof to that effect and that the Court below was pleased to record the same in the docket proceedings. The present learned 17 AVRB,J Crl.R.C. No.969/2022 Special Judge, in spite of the material available on record, proceeded to frame the charges on 03.08.2022 and also issued trial schedule from 10.08.2022 and even examined some of the witnesses. As the petitioners have the statutory period of limitation to file the Criminal Revision Case, they could not file the same immediately. He would further contend that there is no material to show that the petitioners committed an offence under Section 5 of the APPDFE Act. Instead of discharging the present petitioners under Section 227 Cr.P.C, the learned Special Judge erred in framing the charge under Section 5 of the APPDFE Act. Even according to the averments in the charge sheet, the amounts that were said to be paid by the prosecution witnesses are non- refundable amounts and even the accused was alleged to have issued a Certificate of Voucher labeling it as a Certificate of Purchase. So, it cannot be brought under the purview of the receipt. The prosecution alleged that the members paid certain amounts to the accused company towards the cost of gold and silver coins to a tune of Rs.32,200/-. The same cannot be brought under the purview of the „deposit', as defined under Section 2(b) of the APPDFE Act. Even the accused company cannot be brought under the purview of „financial establishment‟, as defined under Section 2(c) of the APPDFE Act. The so called registration charges 18 AVRB,J Crl.R.C. No.969/2022 paid by the members were non-refundable one. So, when the amounts said to be paid by the members were only towards the cost of the products allegedly canvassed by the accused, the said amounts cannot be brought under the purview of Section 2(b) of the APPDFE Act, under the caption of „deposit' and further accused company cannot be brought under the purview of Section 2(c) of the APPDFE Act, under the caption of „financial establishment‟. The very framing of charges by the Court below under Section 5 of the APPDFE Act is not at all sustainable and it is irregular and illegal. Apart from this, to constitute the allegation of cheating, the prosecution should aver that there was initial dishonest intention on the part of the accused so as to deceive the members and, in the absence of it, subsequent violation of the promise, if any, would only give rise to civil cause of action but not criminal action. The charge sheet filed by the CID, does not disclose all these things as such charge under Section 420 IPC should not have been framed. The ingredients of Section 406 IPC, criminal breach of trust, are altogether different and the allegations under Sections 420 and 406 IPC are in mutual exclusion of each other and both the charges are not liable to be framed. Even according to the scheme of the accused, as alleged by the prosecution, there was no question of return of money and 19 AVRB,J Crl.R.C. No.969/2022 the amounts were only non-refundable and even the prosecution claim that the accused has to give commission to its members as such the very allegations under the APPDFE Act are bad under law. There were no allegations in the charge sheet that the Directors of the Company are responsible towards running of the Company and prosecution did not place any piece of material to prove those allegations.
20. Learned Senior Counsel for the revision petitioners, to contend that the case of the prosecution would not invite the essential ingredients of Section 5 of the APPDFE Act, would rely upon a decision of the Hon‟ble Apex Court in State of Maharashtra v. 63 Moons Technologies Limited1. To contend that the allegations would not attract the essential ingredients of Sections 406 and 420 IPC, he would rely upon the decisions of the Hon‟ble Apex Court in S.W.Palanitkar and others v. State of Bihar and another2 and Anil Mahajan v. Bhor Industries Limited and another3. To contend that the allegations of the prosecution would not reveal as to who were in charge of the affairs of the accused company and that vicarious liability cannot 1 (2022) 9 SCC 457 2 (2002) 1 SCC 241 3 (2005) 10 SCC 228 20 AVRB,J Crl.R.C. No.969/2022 be fixed upon A-2, he would rely upon the decisions of the Hon‟ble Apex Court in Shiv Kumar Jatia v. State of NCT of Delhi4, Harshendra Kumar D. v. Rebatilata Koley and others5 and Gunmala Sales Private Limited v. Anu Mehta and others6. To contend that the remedy open to the revision petitioners is to challenge the impugned order, to set-aside the same, he would rely upon a decision of the Hon‟ble Apex Court in Minakshi Bala v. Sudhir Kumar and others7. He would further rely upon a decision of the Madras High Court in Vadivel v. Bagialakshmi8 to contend that the charges under Sections 406 and 420 IPC does not reconcile with each other, run in mutual exclusion with each other and that both cannot sustain. He would further submit that, at any rate, the allegations, even if taken on its face value, would attract the offence under the PCMCS Act and though the CID laid the charge sheet for the above provisions of law, but there is no such charge framed. He would further submit that the charges framed against the revision petitioners are liable to be set-aside.
21. Smt. Y.L. Siva Kalpana Reddy, learned Standing Counsel- cum-Special Public Prosecutor for CID, appearing for the 4 (2019) 17 SCC 193 5 (2011) 3 SCC 351 6 (2015) 1 SCC 103 7 (1994) 4 SCC 142 8 1995 (2) MWN (Cr.) 21 AVRB,J Crl.R.C. No.969/2022 respondent-State, would contend that the allegations of the prosecution would clearly attract the essential ingredients of offences under Sections 406 and 420 IPC and further Section 5 of the APPDFE Act. She would submit that the accused lured the members from the beginning with a dishonest intention so as to induce them to become Independent Representatives by subscribing a sum of Rs.460/-. The functioning of the scheme has been narrated clearly in the charge sheet. The core allegations against the present petitioners are that the accused canvassed that they have certain products such as gold coin 6 grams + silver 30z medallion. Apart from it, they also canvassed that they have certain other products and made the members to believe that the products they have numismatic and antique value especially the gold coin 6 grams and silver 30z medallion would worth about Rs.32,200/-. They collected the amounts from the members accordingly. They have delivered products as medallion packs consisting of gold coin weighing 6 grams and silver coin of 1 oz of silver coin which could fetch only Rs.10,838/- in the open market. On verification, the members learnt that the medallion packs have no numismatic or antique value. So, the members lost the differential amount. She would further contend that the allegations of the prosecution would establish the definitions of the 22 AVRB,J Crl.R.C. No.969/2022 „deposit' and „financial establishment' as defined under Section 2(b) and 2(c) of the APPDFE Act. The amounts that were paid by the members need not carry any interest. The return can be in any kind. Here, the members did not receive any numismatic or antique value to the products and medallion packs and they were delivered with normal packs which could only fetch Rs.10,000/- and odd. So, the difference of the amount would be treated as return in any kind as laid in Section 2(b) of the APPDFE Act. She would further submit that the allegations would attract Section 5 of the APPDFE Act. She would rely upon a decision of the Hon‟ble Apex Court in Dr. Nallapareddy Sridhar Reddy v. State of Andhra Pradesh and others9 to contend that in the said case there were charges under Sections 406 as well as 420 IPC and the act of the trial Court in framing such charges was also upheld by the Hon‟ble Supreme Court. The basis for the charge would be the charge sheet, statement of the witnesses enclosed thereto and the relevant material enclosed. The so called subsequent payments, claimed to be made by the accused just before framing of charges and which were said to be brought to the notice of the then learned Special Judge, should not have been the basis for framing the charge. It is clearly held even in the decision cited by learned 9 (2020) 12 SCC 467 23 AVRB,J Crl.R.C. No.969/2022 Counsel for the petitioners in Minakshi Bala (7th supra). She would submit that almost 95 witnesses were examined before the trial Court after framing of charges and the petitioners have participated in the trial and all of a sudden, they filed this present Criminal Revision Case, which is liable to be dismissed.
22. A look into the copy of the charges framed against the petitioners on 03.08.2022 discloses that the learned Special Judge framed charges under Sections 406 and 420 IPC and Section 5 of the APPDFE Act by looking into the allegations of the prosecution in the charge sheet filed, whose details were already referred to herein above. The substance of the charges is corresponding to the allegations in the charge sheet.
23. Firstly, this Court would like to deal with as to whether the allegations would attract Section 5 of the APPDFE Act. Section 5 of the APPDFE Act runs as follows:
"5. Penalty for default:- Where any financial establishment defaults in the return of the deposit either in cash or kind or defaults in the payment of interest on the deposit as agreed upon, every person responsible for the management of the affairs of the financial establishment including the promoter, Manager or Member of the financial establishment shall be punished with imprisonment for a 24 AVRB,J Crl.R.C. No.969/2022 term which may extend to ten years and with fine which may extend to rupees one lakh and such financial establishment shall also be liable for fine which may extend to rupees five lakh."
24. So, the gist of the offence under Section 5 of the APPDFE Act is that making default in return of deposit either in cash or kind or default in payment of interest on the deposit as agreed upon and that such default should be made by a financial establishment. What are the deposit and financial establishment are defined under Section 2(b) and 2(c) of the APPDFE Act. So, according to Section 2(b) of the APPDFE Act, deposit means:
"(b) "deposit" means the deposit of a sum of money either in lumpsum or instalments made with a financial establishment for a fixed period, for interest or return in any kind;"
25. Further, according to Section 2(c) of the APPDFE Act, financial establishment means:
"(c) "Financial Establishment" means any person or group of individuals accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a co-operative society owned or controlled by any State Government or the Central Government or a banking company as defined under clause (c) of Section 5 of the Banking Regulation Act, 1949, (Central Act 10 of 1949)"25
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26. A close perusal of the allegations in the charge sheet shows that apart from the allegations regarding deposit of Rs.460/- by a member i.e., IR and their commission etc., the important allegation is that the accused canvassed that they have different products as mentioned in Para No.5 hereinabove. So, the worth of gold coin 6 grams and silver 30z medallion would cost about Rs.32,200/-. The case of the prosecution is that in the open market the cost of this medallion is fetching only Rs.10,838/- and the remaining amount Rs.21,162/- goes to the company. Further, the allegation of the prosecution is that the accused made the members to believe that the above gold coin 6 grams, silver 30z medallion and other products have numismatic and antique value, which would fetch several lakhs in future. Further allegation is that they deliberately suppressed the fact that their claim of numismatic or antique value was not there. It is also the allegation that accused delivered its products as above to the members through Blue Dart Courier and most of the delivered products are medallion packs consisting of silver and gold coins weighing each 6 grams of gold coin and silver 30z medallion at Rs.10,838/- in the open market. On verification, it came to light that the medallion has no numismatic or antique value.
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27. It is to be noticed that though it is the claim of the revision petitioners that for the amounts paid by the members, they have issued Purchase Certificates or Vouchers but this Court is of the considered view that in common parlance one may use the words that they made a fixed deposit or purchased a fixed deposit. So, simply because accused are alleged to have issued a purchase voucher, it would not alter the nature of the transaction. Here, according to Section 2(b) of the APPDFE Act, deposit means the deposit of a sum of money either in lump sum or installments made with a financial establishment for a fixed period for interest or return in any kind. Here, the return in any kind would cover the promise made by the accused that their products have numismatic or antique value which would fetch in future lakhs of rupees. So, the kind of return which can be expected in the light of the allegations made by the prosecution would be a return of gold coin + silver coin which should have numismatic or antique value. The numismatic or antique value of the gold coins means that they hold more value than the spot or current market price of the gold due to rarity, age and other factors. The case of the prosecution is that the medallion packs delivered by the accused have no numismatic or antique value. The case of the prosecution can be brought under the purview of return in any kind. It is not the case 27 AVRB,J Crl.R.C. No.969/2022 of the accused that the payments made by the members would be non-refundable forever. According to the case of the prosecution, the initial deposit of Rs.460/- towards membership would be non- refundable but not the amounts paid the members towards the value of the products of the accused. Apart from this, there is no dispute that A-1 company is not a corporation or a co-operative society owned or controlled by the State or Central Government or a banking company. Undoubtedly, the company of A-1 can be taken as a financial establishment.
28. This Court has looked into the decision cited by learned counsel for the petitioners in 63 Moons Technologies Limited (1st supra). It arose under the provisions of the Maharashtra Protection of Interests of Depositors (in Financial Establishments) Act, 1999 (for short, „the MPID Act‟). The factual aspects, in brief, which are necessary for the purpose of appreciating the contention of the revision petitioners, are that the National Spot Exchange Limited (NSEL) is a limited company incorporated under the Companies Act, 1956. Their nature of business on NSEL was to launch products for buying and selling of commodities on its trading platform with different settlement periods. It was only a platform to facilitate the seller and buyer to do their activities. 28
AVRB,J Crl.R.C. No.969/2022 While so, on account of certain allegations against NSEL, the Maharashtra State Government issued certain notifications attaching the property of the NSEL under Section 4 of the MPID Act, which was challenged before the High Court of Maharashtra. The High Court of Maharashtra having held that NSEL is an electronic trading platform which only facilitated transactions between the buyers and sellers and it did not receive the pay in its own right but it received the amount only for the purpose of passing it on to the selling trading members on the same day, quashed the notifications which were issued under Section 4 of the MPID Act attaching the property of the NSEL. Then the State of Maharashtra filed a Civil Appeal before the Hon‟ble Supreme Court. The Hon‟ble Supreme Court had an occasion to deal with the definition clauses as to the „deposit' and „financial establishment' as defined in Section 2(c) and 2(d) of the MPID Act. They are as follows:
"2. (c) "deposit" includes and shall be deemed always to have included any receipt of money or acceptance of any valuable commodity by any financial establishment to be returned 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 -29
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(v) amounts received in the ordinary course of business by way of -
(a) security deposit,
(b) dealership deposit,
(c) earnest money,
(d) advance against order for goods or services;
2. (d) "Financial establishment" means any person accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a co- operative society owned or controlled by any State Government or the Central Government or a banking company as defined under clause (c) of Section 5 of the Banking Regulation Act, 1949."
29. Ultimately, the Hon‟ble Supreme Court in the aforesaid decision held at Para No.94 as follows:
"94. The High Court has lost sight of the fact that Section 2(c) of the MPID Act defines "deposit‟ in broad terms. Further, according to the definition, the return may be either in money, commodity or service, and it is not necessary that the commodity or the money must be returned in the same form. The definition includes the receipt of money and the return of a commodity, or even the receipt of a commodity and a return in the form of a service. Further, Bye-law 10.8 indicates that NSEL was not merely an intermediary. The bye-law states that the buyer shall pay the clearing house the value of the delivery allocation. However, till the completion of the delivery process, the money will be retained by the clearing house of NSEL."30
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30. While holding so, the Hon‟ble Supreme Court allowed the Appeals and set-aside the judgment of the Bombay High Court holding that the impugned notifications issued under Section 4 of the MPID Act are valid.
31. Coming to the case on hand, though the definition of financial establishment either under Section 2(d) of the MPID Act or under Section 2(c) of the APPDFE Act are similar but there is a vast difference to the term deposit between the MPID Act and APPDFE Act. When compared to the scope of the deposit under Section 2(b) of the APPDFE Act, the word „deposit' in MPID Act is wide enough. Even otherwise, as this Court already pointed out the return in kind which was expected to be made from the accused after accepting the payment of Rs.32,200/- by the depositors would be to give the product which should have numismatic and antique value. In my considered view, the factual aspects in the present case are much better than the factual aspects in 63 Moons Technologies Limited (1st supra) because NSEL is only an intermediary facilitator to certain acts between the seller and the buyer. Even then looking into the broad definition deposit, it was held to be a financial establishment and the allegations therein would attract the deposit. Here the 31 AVRB,J Crl.R.C. No.969/2022 allegations are directly against the accused as if they made the members to believe that they have certain products which would fetch numismatic and antique value. In my considered view, the decision of the Hon‟ble Apex Court in 63 Moons Technologies Limited (1st supra) would negative the contention of the revision petitioners.
32. The charge sheet filed by the CID has been enclosed with statements of the witnesses which would support the case of the prosecution. It cannot be held by any stretch of imagination that Section 5 of the APPDFE Act has no application to the case on hand.
33. It is no doubt true as evident from the essential ingredients of Section 420 IPC and as held by the Hon‟ble Supreme Court in S.W. Palanitkar (2nd supra) and Anil Mahajan (3rd supra), cited by learned counsel for the petitioners that, virtually, the dishonest intention must be shown to be existing from the very beginning of the transaction. Here, there are clear cut allegations in the charge sheet that the accused canvassed with brochure and promised that they have different products which have numismatic and antique value and as such induced the members to part with their amounts and when the members parted with their amounts, 32 AVRB,J Crl.R.C. No.969/2022 medallion packs were given to the members, which have no numismatic or antique value and even some members were not given any such products. There are allegations that the accused defaulted in payments. The allegations in the charge sheet would further attract the essential ingredients of Section 420 IPC. The case of the prosecution is that by collecting various amounts, accused have control over the amounts and they did not discharge their obligations as promised. As evident from the charges under Sections 406 and 420 IPC, the learned Special Judge keeping the allegations in view framed the charges. Though it is held in Vadivel (8th supra), cited by learned counsel for the petitioners, that the allegations under Sections 406 and 420 IPC are mutually exclusive and different in the basic concept but the Hon‟ble Supreme Court in Dr. Nallapareddy Sridhar Reddy (9th supra), cited by learned Standing Counsel for the respondent, clearly approved the act of the learned trial Judge in framing charges under Sections 406 and 420 IPC. Hence, this Court has to follow the principle laid down in Dr. Nallapareddy Sridhar Reddy (9th supra). In the said case, the Hon‟ble Supreme Court did not find fault with the act of the trial Judge in framing charges under Sections 406 and 420 IPC.
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34. Turning to the contention of the petitioners by relying upon the decisions of the Hon‟ble Apex Court in Shiv Kumar Jatia (4th supra), Harshendra Kumar (5th supra) and Gunmala Sales Private Limited (6th supra) to the effect that there is no allegation as to who were in charge of the affairs of the A-1 company and, in the absence of the same, petitioners cannot be held liable, this Court would like to make it clear that there is a clear allegation in the charge sheet filed by the CID that A-3 - Dato Vijay Eswaran conspired with A-2 - Pushpam Appala Naidu to run a money circulation scheme and flouted the company by name M/s.Gold Quest International Private Limited. It is alleged that A-1 and its Directors are running the company by actively involving in the issues. It is alleged that A-1 is the company, A-2 is the Managing Director, A-3 to A-7 are the Directors and A-8 and A-54 are the Promoters. It is alleged that they used to carry out advertising, conducting seminars, posting websites and further coercive methods to run the money circulation scheme etc., Having regard to the above, this Court is of the considered view that the contention of the petitioners that they have nothing to do with the affairs of the company, deserves no merit. The case of the prosecution is that the 2nd petitioner (A-2) is actively managing the affairs of A-1 company. Hence, the aforesaid decisions cited by 34 AVRB,J Crl.R.C. No.969/2022 learned counsel for the petitioners in this regard would not enable this Court to set-aside the charges.
35. Another contention canvassed by the revision petitioners is that, according to the directions of the then learned Special Judge, the petitioners paid the amounts to the aggrieved members for compounding the offence and though it was brought on record, the present learned Special Judge did not look into the said aspect. In dealing with such contention, firstly, this Court would like to make it clear that Section 5 of the APPDFE Act is non- compoundable one. The petitioners enclosed a copy of the docket proceedings of the case before the Court below which runs to the effect that on 01.04.2019, LWs.57 to 62, 64 to 75, 77, 78 and 175 are present and filed affidavits and receipts that they received the money. The further dockets are as follows:
"16.04.2019 Undertaking notary affidavits of LWs.88, 98 and 120 are filed and found tallied.
01.05.2019 ..........undertaking notary affidavits of LWs.1, 4, 7, 33, 34, 43, 44, 45, 46, 82, 86, 87, 91, 93, 94, 95, 133, 193 are filed and found tallied.35
AVRB,J Crl.R.C. No.969/2022 16.05.2019 .......... Undertaking notary affidavits of LWs.2, 3, 39, 41, 42, 85, 89, 90, 92, 176, 177, 180, 181, 183, 185, 186 and 187 are filed and found tallied. 07.06.2019 .......... Undertaking notary affidavits of LWs.47, 52, 84, 182, 191, 194 are filed and found tallied. 19.06.2019 .......... Undertaking notary affidavits of LWs.54, 96, 97 are filed and found tallied.
04.07.2019 .......... Undertaking notary affidavits of LWs.179, 188, 189 and 199 are filed and found tallied. 25.07.2019 .......... Notary affidavits of LWs.72, 73, 74, 75, 76, 198 are filed and found tallied.
08.08.2019 .......... Undertaking affidavit of LW.190 is filed and found tallied.
22.08.2019 .......... Undertaking notary affidavits of LWs.35 to 38, 49 to 51, 53, 178, 184, 192, 196 and 197 are filed and found tallied."
36. The petitioners enclosed 11 affidavits with the so called undertakings. It is not in dispute that the learned Special Judge did not look into the same at the time of framing of charges. In this regard, this Court would like to make it clear that the basis to frame charges before the Court below is the charge sheet, 36 AVRB,J Crl.R.C. No.969/2022 statements of witnesses and documents, if any, enclosed to the charge sheet. Here, the so called affidavits and undertaking affidavits are only pertaining to the year 2019. The cognizance of the offence was taken in the year 2017 after completion of investigation by the CID. So, according to the petitioners, in the year 2019, they made payments to the aggrieved members towards full and final settlement and the undertaking affidavits are that the difference of the amounts of the products value and the amount paid by the aggrieved persons were refunded. This Court in Dunga Sarojini v. State of Andhra Pradesh and others10, while dealing with the relevant provisions in the Cr.P.C with regard to framing of charges in the cases instituted on a police report, held at Para No.10 as follows:
"10. While Section 239 Cr.P.C. deals with the powers of the Magistrate to discharge the accused basing on the police report and the documents sent to the Court under Section 173 of Cr.P.C. and after making such examination, if any, Section 240 Cr.P.C., on the other hand, deals with framing of charges after consideration of the material as contemplated under Section 239 Cr.P.C. and further the examination, if any, of the accused done under Section 239 Cr.P.C. So, the basis for framing of charges in cases instituted on a police report would be that of police report and the documents 10 2023(1) ALD (Crl.) 85 (AP) 37 AVRB,J Crl.R.C. No.969/2022 enclosed thereto under Section 173 of Cr.P.C. and further by making examination of the accused as regards the allegations in the charge-sheet etc."
37. Apart from this, the decision cited by learned counsel for the petitioners in Minakshi Bala (7th supra), the Hon‟ble Supreme Court dealt with the remedy available to the petitioners against the charges framed. While holding that it is only a Revision to quash the charges but held that the basis for the charges under Sections 239 and 240 Cr.P.C would only be the material available before the Court along with the charge sheet and enclosures thereof and examination of the accused if it thinks fit. Having regard to the above, this Court is of the considered view that the so called payments or refunds claimed to be made by the petitioners towards the aggrieved persons in the year 2019 should not have been the basis for framing of charges. Either the powers under Section 239 Cr.P.C for discharge or powers under Section 240 Cr.P.C for framing proper charges will have to be exercised by looking into the allegations in the charge sheet and the material enclosed thereto either in the form of statements of the witness or in the form of documents. The basis for the charge sheet should not be basing on the events happened after the cognizance was taken. According to Section 13(1) of the APPDFE Act, in trying the 38 AVRB,J Crl.R.C. No.969/2022 accused persons, the Special Court shall follow the procedure prescribed in the Cr.P.C for the trial of warrant cases by the Magistrate as such framing of charges by the Court below are under Sections 239 and 240 Cr.P.C. It is not under Section 227 Cr.P.C as canvassed by the revision petitioners.
38. It is not understandable as to how the learned Special Judge was going on by allowing the accused to file affidavits and undertaking affidavits when the matter was coming for securing the presence of some of the accused against whom NBWs were pending. It is not a case where the petitioners filed any application before the Court below praying for discharge under Section 239 Cr.P.C. So, accepting the so called affidavits and undertaking affidavits by the Court below from the accused was not in accordance with the procedure. Even otherwise, the contention of the petitioners that the then learned Special Judge asked them to refund the amounts to the aggrieved persons i.e., members for compounding the offence is without any basis from the Court. The offence alleged, especially Section 5 of the APPDFE Act is a non- compoundable one. Having regard to the above, this Court is of the considered view that the learned Special Judge was not supposed to look into the so called affidavits and undertaking 39 AVRB,J Crl.R.C. No.969/2022 affidavits filed by the aggrieved persons i.e., members stating that they have received the due amounts. The whole grievance of the petitioners appears to be that the learned Special Judge did not look into the material that was produced by the petitioners in the form of affidavits and undertaking affidavits of some of the prosecution witnesses. As pointed out, such a course of action is not permissible under law. The act of the learned Special Judge in allowing the petitioners to file such material does not vouchsafe a situation that they shall be considered at the time of framing of the charges. Viewing from any angle, this Court is of the considered view that the material available before the Court below is sufficient to frame the charges under Sections 406, 420 IPC and Section 5 of the APPDFE Act.
39. It is also the contention of the petitioners that the learned Special Judge did not frame the charge under the PCMCS Act though the charge sheet was filed. Here, the petitioners approached this Court stating that the allegations would not attract the offences under Sections 406 and 420 IPC and Section 5 of the APPDFE Act and their contention is not tenable. Here is a case that the prosecution did not move this Court seeking to revise the impugned order so as to include the charges under the PCMCS 40 AVRB,J Crl.R.C. No.969/2022 Act. Having regard to the above, the contention advanced on behalf of the petitioners deserves no merit so as to decide this Criminal Revision Case.
40. This Court is conscious of the fact that though the limitation for filing this Revision is there from the date of order, but the petitioners approached this Court after the learned Special Judge made the case as part heard. There is no denial of the fact that the learned Special Judge fixed the trial schedule and during the course of trial, according to the learned counsel for the respondent, the Court below examined PWs.1 to 95. So, it is clear that simply because the period of limitation was available to challenge the charges framed, the petitioners are not supposed to wait till the end of the period of limitation when there was an urgency. But petitioners appears to have participated in the trial process also. Hence, having participated in the trial process, their approaching this Court by way of this Criminal Revision Case is also not proper. It all goes to show that not only there are no merits in the Revision even the conduct of the petitioners in approaching this Court after examining PWs.1 to 95 dis-entitles them to pray for the relief in this Criminal Revision Case. 41
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41. Needless to mention here that the observations made by this Court in appreciating the case of both parties to decide as to whether the material available on record would attract the ingredients of Sections 406 and 420 IPC and Section 5 of the APPDFE Act are only for the purpose of deciding this Criminal Revision Case and it shall not bind upon the learned trial Judge in any way at the time of final adjudication of C.C. No.11 of 2022 (Split up case from C.C. No.5 of 2017).
42. In the result, the Criminal Revision Case is dismissed. Looking into the peculiar facts and circumstances, the learned Special Judge is directed to dispose of C.C. No.11 of 2022 (Split up case from C.C. No.5 of 2017), as expeditiously as possible, preferably not later than six months from the date of receipt of a copy of this order.
43. The Registry is directed to transmit a copy of this order, without any delay, to the Court below on or before 24.02.2023.
Consequently, Miscellaneous Applications pending, if any, shall stand closed.
________________________________ JUSTICE A.V.RAVINDRA BABU Date: 20.02.2023 DSH