Andhra Pradesh High Court - Amravati
M/S. Quest Net Enterprises ... vs The State Of Andhra Pradesh on 20 February, 2023
Bench: A V Babu
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
2
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* 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
3
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(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:
4
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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.)
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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
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„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
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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
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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)"
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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
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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.
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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 -
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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."
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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
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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,
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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
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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.
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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,
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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)
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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
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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
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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
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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.
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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
