Telangana High Court
M/S. Akshara Chit Funds Pvt Ltd, vs The State Of Telangana, on 10 January, 2025
Author: Juvvadi Sridevi
Bench: Juvvadi Sridevi
THE HONOURABLE SMT. JUSTICE JUVVADI SRIDEVI
CRIMINAL PETITION No.370 of 2025
ORDER:
Petitioners, who are arrayed as accused Nos.1 to
6, in FIR No.6 of 2024 pending on the file of CID Police
Station, Hyderabad, registered for the offences under
Sections 406, 420 read with 34 of the Indian Penal Code
and Section 5 of The Telangana Protection of Depositors of
Financial Establishment Act (for short “TSPDFEA Act”),
1999, is seeking to quash the proceedings against them.
02. Heard Sri Aravind Saini, learned counsel for
petitioner and Sri Jithender Rao Veeramalla, learned
Additional Public Prosecutor appearing for the State and
perused the record.
03. Learned counsel for the petitioners submits
that there is no default on the part of the Company as
alleged by respondent No.2 and the Company remains
committed to making payments to all the subscribers, but
due to COVID-19 pandemic, large number of subscribers
have defaulted in payment of installments, which resulted
in creating significant backlog to the Company. Though
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the Company had been striving to overcome the same,
since the process is time consuming, there are procedural
delays.
04. Learned counsel for the petitioners further
submits that in order to attract the offences under
Sections 406 and 420 of IPC, inducement to deliver
property with a fraudulent intention from the inception is
necessary, but there are no such averments in the
complaint. He further submitted that Section 5 of
TSPDFEA is not attracted, as in the present case, the
subject Chit Fund Company is not a Financial
establishment, which accepts deposits. In support of his
contention, learned counsel for the petitioners relied on
the judgment dated 01.11.2022 passed by this Court in
Crl.A.No.38 of 2019, wherein, at paragraph Nos.14, 15, 23
and 24, it was held as under:
“14. That apart, it is imperative to note that chit fund
is not a financial establishment and Section 2 (c) of
TSPEDFEA defines ‘Financial Establishment’, as under:
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“Financial Establishment’, means any
person or group of individuals
accepting deposit under any scheme
or arrangement or in any other
manner but does not include a
corporation or a cooperative society
owned or controlled by any State
Government or the Central
Government or a banking company as
defined under Clause (c) of Section 5
of the Banking Regulation Act, 1949″.
15. Section 2 (b) of the Act defines “deposit”, which
runs as under:
“deposit” means the deposit of a sum
of money either in lumpsum or
installments made with a financial
establishment for a fixed period, for
interest or return in any kind.”
23. In the case on hand, as narrated
above, it is not the case of the
prosecution at all that the accused
persons are running a financial
establishment. The case of the
prosecution is that the accused are
doing chit fund business. Therefore,
when it is not the case of the
prosecution that accused were not
running financial establishment and
accused were not accepting the
deposits, when PWs.1 to 4 and 6 and
other subscribers have not deposited
the money for interest and when they
have not committed the default of the
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alleged deposit, the question that the
accused, including the appellant, have
committed the offence punishable
under Section 5 of the Act does not
arise.
24. The Police should not have
filed charge sheet under Section 5 of
the Act. Similarly cognizance also
should not have been taken and that
charges also should not have been
framed.”
05. On the other hand, learned Additional Public
Prosecutor appearing for State-respondent No.1, opposed for
quash of proceedings stating that the petitioners are
allegedly a part of chit fraud which involved huge amounts
collected by several chit subscribers and serious allegations
are levelled against them. Furthermore, investigation is
progress, hence, prayed to dismiss the petition.
06. Having heard both sides and perused the
material on record, in view of the Judgment of this Court in
Crl.A.No.38 of 2019, Section 5 of TSPDFEA is not applicable
to the petitioners herein. Accordingly, the proceedings
against the petitioners for the offence under Section 5 of
TSPDFEA are hereby quashed.
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07. Insofar as Sections 406 and 420 of IPC are
concerned, since the punishment prescribed for the said
offence is less than seven (07) years, this Court deems it
appropriate to direct the Investigating Officer to follow the
procedure laid down under Section 41-A Cr.P.C., (presently
known as Section 35 (3) of the Bharatiya Nagarik Suraksha
Sanhita (for short ‘BNSS’) and also the guidelines formulated
by the Hon’ble Supreme Court in Arnesh Kumar v. State of
Bihar1 scrupulously. However, the petitioners-accused
Nos.1 to 6 shall co-operate with the Investigating Officer as
and when required by furnishing information and
documents as sought by him in concluding the
investigation. The petitioners-accused Nos.1 to 6 shall file all
the documents which he ought to file to prove that it do not
come under the criminal offences and the Investigating
Officer shall consider the same before filing appropriate
report before the Magistrate.
08. With the above observations, this Criminal
Petition is disposed of.
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(2014) 8 SCC 273
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Pending miscellaneous applications, if any, shall
stand closed.
__________________
JUVVADI SRIDEVI, J
Date: 10-JAN-2025
KHRM