Karnataka High Court
Smt. Chandrakala vs State Of Karnataka on 20 July, 2022
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF JULY, 2022
BEFORE
THE HON'BLE MR. JUSTICE HEMANT CHANDANGOUDAR
CRIMINAL PETITION NO.6787 OF 2018
BETWEEN:
SMT. CHANDRAKALA
AGED ABOUT 43 YEARS, W/O SRI G C GANGADHAR
R/A :NO.102, SHIVAKRUPA, 2 H MAIN, 11TH BLOCK,
2ND STAGE, NAGARABHAVI,
BANGALORE-560072 . ... PETITIONER
(BY SRI.NISHIT KUMAR SHETTY, ADVOCATE)
AND:
1. STATE OF KARNATAKA
BY VIJAYNAGAR POLICE STATION
REPRESENTED BY STATE PUBLIC PROSECUTOR
HIGH COURT BUILDINGS, BANGALORE-560001
2. MR H K RANGARAJU
MAJOR
S/O LATE H.D.KRISHANA SHETTY
R/AT NO.171, 4TH 'D'MAIN
NEAR B.N.E.S COLLEGE, MAHALAKSHMI LAYOUT
FURTHER EXTENSION, BANGALORE-560086
(BY SRI.ROHIT.B.J-HCGP FOR R1
R2 IS SERVED BUT UNREPRESENTED)
... RESPONDENTS
THIS PETITION IS FILED UNDER SECTION 482 CR.P.C
BY THE ADVOCATE FOR THE PETITIONER PRAYING THAT
THIS HON'BLE COURT MAY BE PLEASED TO QUASH THE
ENTIRE PROCEEDINGS IN C.C.NO.11471/2016
2
(CR.NO.159/2013) ON THE FILE OF THE IV A.C.M.M.,
BANGALORE REGISTERED FOR THE OFFENCES P/U/S
406,420,120B R/W 34 OF IPC AND SEC.9 OF INVESTORS
PROTECTION ACT AND ETC.
THIS PETITION COMING ON FOR ADMISSION, THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
Charge sheet is filed for the offences punishable under Sections 406, 420, 120(B) read with Section 34 of IPC and Section 9 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (for short `Act, 2004) alleging that the accused No.1 established a company in the name of Rubisco Chit Fund Pvt., Ltd., the accused No.2, who is the wife of accused No.1, is the Managing Director of the company and accused No.3 is the Collection Agent and the accused by stating that the company will give financial assistance for purchase of sites, houses and for education purpose, in all, collected a sum of Rs.10,17,000/- from CWs-1 to 3. Thereafter the accused persons closed the company and absconded.
2. The learned Magistrate after accepting the charge sheet took cognizance for the aforesaid offences. Taking exception of the same, this petition is filed. 3
3. The learned counsel for the petitioner submits that the allegation made in the First Information Report (for short 'FIR') and also charge sheet does not constitute the commission of the offences alleged against the petitioner. He further submits that the company having not been arraigned as an accused, the charge sheet filed against the petitioner- accused No.2 is impermissible, since the petitioner, who is director of the company, cannot be held vicariously guilty as specified under Section 9(3) of the Act, 2004.
4. On the other hand, the learned HCGP appearing for the State submits that the petitioner-accused No.2, who is the director of the company and having induced respondent No.2 to invest in the chit fund and having not returned the amount, has committed the aforesaid offences. The cognizance taken for the aforesaid offences against the petitioner-accused No.2 does not warrant any interference and sought for dismissal of petition.
5. I have examined the contentions raised by the learned counsel for the parties.
4
6. Section 2(2) of the Act, 2004 defines the term `deposit' which means receipt of money or acceptance of any valuable commodity by any financial establishment to be returned after a specified period and does not include any amount received by way of subscriptions in respect of a chit.
7. Section 2(4) of the Act, 2004 defines the term `financial establishment', which means any person or a group of persons accepting deposit under any scheme or arrangement or in any other manner.
8. Section 9 of the Act, 2004 deals with the fraudulent default by financial establishment.
9. In the instant case, the specific allegation against the petitioner - accused and other accused is that the petitioner - accused No.2 received money by way of subscription in respect of chit. The non-receipt of the chit money is not a offence under Section 9 of the Act, 2004. Even otherwise, the company having not been arraigned as an accused, the petitioner - accused No.2 cannot be held vicariously guilty as specified in Section 9 of the Act, 2004. 5
10. Section 3 of the Act, 2004 deals with attachment of properties on default of return of deposits and Section 4 deals with the power to enter the premises and inspect certain documents by the competent Authority or by any Authority authorized by the designated Authority. The competent Authority after following the procedure prescribed under Sections 6 and 7 of the Act, 2004, submits an application to the Special Court seeking for permission to make payment to the depositors from out of the money realized.
11. Section 10 of the Act, 2004 specifies that the government may with the concurrence of the Chief Justice of the High Court, by notification, constitute one or more Special Court not below the rank of District and Sessions Judge for the purposes of this Act.
12. Section 18 of the Act, 2004 deals with the procedure and powers of Special Court regarding offences under the Act and also to take cognizance of the offence. Hence, the cognizance can be taken by the designated Court 6 only on a report submitted by the competent Authority under Section 8 of the Act, 2004.
13. The allegation of collecting money by way of subscriptions in respect of the chit is regulated under the provisions of the Chit Funds Act, 1982. The allegation against the accused No.2 even accepted on the face of it constitutes the offence under the provisions of the Chit Fund Act, 1982.
14. Section 79 of the Chit Fund Act, 1982 which deals with the offences by companies and the director of the company who was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence. The company having not been arraigned as an accused, the accused No.2, who is the director of the company, cannot be held vicariously guilty of the offences.
15. In view of the above, the cognizance taken stands vitiated. Accordingly, I have passed the following:
ORDER
i) The criminal petition is allowed.7
ii) The impugned proceedings in CC No.11471/2016 (Crime No.159/2013) on the file of IV A.C.M.M court, Bangalore registered for the offences punishable under Sections 406, 420, 120(B) r/w Section 34 of IPC and Section 9 of Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 insofar as it relates to petitioner -accused No.2 is hereby quashed.
Sd/-
JUDGE BH