Karnataka High Court

Sri N Murali Shankar vs State By Vijayanagar P S on 28 June, 2021

Author: K.S.Mudagal

                              1

                                          Crl.P.No.3136/2018


     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

          DATED THIS THE 28th DAY OF JUNE 2021

                         BEFORE

         THE HON'BLE MRS. JUSTICE K.S.MUDAGAL

          CRIMINAL PETITION No.3136/2018
BETWEEN:

1.     SRI.N.MURALI SHANKAR
       S/O LATE S NAGA MANICKAM
       AGED ABOUT 57 YEARS

2.     SRI.ETHIRAJU
       S/O LATE S NAGA MANICKAM
       AGED ABOUT 59 YEARS

3.     SARASIJA M SHANKAR
       W/O MURALI SHANKAR
       AGED ABOUT 54 YEARS
       ALL ARE R/AT NO.67/A
       KANAKAPURA ROAD
       BASAVANAGUDI
       BANGALORE - 560 004                ...PETITIONERS
(BY SRI B.A.BELLIAPPA, ADVOCATE)

AND:

1.     STATE BY VIJAYANAGAR P.S.
       REPRESENTED BY ITS S.P.P.
       HIGH COURT BUILDING
       BANGALORE - 560 001

2.     SRI BALAKRISHNA R SHET
       AGED ABOUT 45 YEARS
       R/AT NO.1853/1
       18TH CROSS, 17TH MAIN
       NEAR VIJAYANAGAR POST OFFICE
       VIJAYANAGAR, BANGALORE - 560 040    ...RESPONDENTS
(BY SRI.THEJESH P, HCGP FOR R1;
    SRI.R.HEMANTH RAJ, ADV. FOR R2)
                                 2

                                             Crl.P.No.3136/2018


        THIS CRIMINAL PETITION IS FILED UNDER SECTION 482
OF   CR.P.C.    PRAYING   TO   QUASH   THE   PROCEEDINGS    IN
P.C.R.NO.9735/2017 (CR.NO.473/2017) PENDING ON THE FILE
OF XXIV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE,
BENGALURU FOR THE OFFENCE PUNISHABLE UNDER SECTIONS
420 AND 506 OF IPC AND SECTION 76 OF THE CHIT FUNDS ACT,
1982.


        THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 18TH JUNE 2021, COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE COURT THROUGH
VIDEO CONFERENCE MADE THE FOLLOWING:


                           ORDER

"Whether the proceedings in PCR No.9735/2015 on

the file of XXIV Additional Chief Metropolitan Magistrate,

Bengaluru and the consequent FIR in Crime No.473/2017 of

Vijayanagar Police Station amount to abuse of the process

of the Court ?" is the question involved in this case.

2. Petitioners were the Directors of Sri Meghdooth

Sharada Chits Private Limited, a company registered under

the Companies Act, 1956. Annexure-E is the copy of the

said registration certificate issued during the year 2012-13.

The said company was carrying on chit fund business.

Crl.P.No.3136/2018

3. The second respondent filed complaint in PCR

No.9735/2017 against the petitioners before the trial Court.

Gist of the complaint is as follows:

That the petitioners collected 2,21,00,000/- by way

of chit subscription from the complainant and others named

in the complaint for a period of 20 months. The petitioners

represented that after completion of 2 years they will get

the return of Rs.35,00,000/- each, but failed to pay the

amount. When they demanded for refund of the amount,

petitioners threatened the complainant and other

beneficiaries of their lives. Petitioners are carrying on chit

fund business in violation of Sections 4, 5, 8, 9, 11 to 14,

19, 20, 22, 24, 30, 31, 33(4), 46, 47 and 61(5) of Chit

funds Act, 1982 ('the Act' for short) and cheated the public.

4. In the complaint itself, the second respondent

sought reference of the complaint to Vijayanagar Police for

investigation. On receiving the complaint, learned

Magistrate by order dated 14.08.2017 acting under Section

156(3) of Cr.P.C referred the matter to the Police Inspector

of Vijayanagar Police Station for investigation. On the

basis of such reference the first respondent police

Crl.P.No.3136/2018

registered FIR in Crime No.473/2017 as per Annexure-C

against the petitioners for the offences punishable under

Sections 420, 506 read with Section 34 of IPC and Section

76 of the Act, 1982.

5. On the basis of such FIR the second petitioner

was arrested and released on bail. Going a step further the

Investigating Officer submitted requisition to the trial Court

for freezing the account of Sri Meghdooth Sharada Chits

Private Limited maintained in Mysore Silk Cloth Merchants

Cooperative Bank Ltd. On such requisition, the learned

Magistrate by order dated 20.09.2017 freezed the account

of the company.

6. Petitioners seek quashing of the complaint in

PCR No.9735/2017 and FIR in Crime No.473/2017 on the

following grounds:

i) The dispute is in the nature of recovery

proceedings and the complaint is filed only to harass the

petitioners.

ii) The order of reference passed by the learned

Magistrate is contrary to Section 156(3) of Cr.P.C.

Crl.P.No.3136/2018

iii) Without arraigning the company as accused,

complaint against petitioners was not maintainable.

7. Reiterating the grounds of petition

Sri B.A.Belliappa, learned counsel for the petitioner submits

that Section 64 of the Act has its own mechanism for

resolution of the dispute between the subscribers and the

company and to evade that, the complaint was filed. He

further submits that facts of the case do not attract Section

76 of the Act.

In support of his contentions, he relies upon the

following judgments:

i) Aneeta Hada vs. God Father Travels and Tours Pvt. Ltd1

ii) Maksud Saiyed vs. State of Gujarat and ors2

8. Per contra, learned counsel for the second

respondent opposes the petition on the following grounds:

i) The accused have cheated the public to the

tune of 2.2 Crores and the complaint is only for

Rs.35,00,000/-. The accused to avoid payment absconded

(2012)5 SCC 661

(2008)5 SCC 668

Crl.P.No.3136/2018

and managed with the Police to see that the complaint of

the second respondent is registered only as a non-

cognizable case.

ii) The order of reference shows application of

mind of the trial Court.

iii) The company has already been wound up.

Therefore the company need not be arrayed as accused and

the judgment in Aneeta Hada's case is not applicable.

iv) The petition is prematured. The petitioner-

company is not registered under the Chit Funds Act and RBI

guidelines.

9. Learned HCGP submits that the matter requires

detailed investigation.

10. The learned Magistrate purportedly referred the

complaint to Vijayanagar Police exercising the powers

under Section 156(3) of Cr.P.C. Section 154 Cr.P.C. deals

with the information to the Police and the powers of the

Police to investigate cognizable offences. Section 154(3)

states that, if the Officer incharge of the Police Station

refuses to register the FIR in cognizable cases, the

complainant may send the substance of such information in

Crl.P.No.3136/2018

writing by post to the concerned Superintendent of Police.

It further states that, if Superintendent of Police is satisfied

that cognizable offence is made out, he shall either

investigate the case himself or direct his subordinates for

investigation into the case.

11. Section 154(1) of Cr.P.C. states that a Police

Officer incharge of the Police Station without the order of

the Magistrate can investigate any cognizable case. Section

156(3) empowers the Magistrate to order investigation in

such case.

12. The Hon'ble Supreme Court in Priyanka

Srivastava and another vs. State of Uttar Pradesh and

others3 while considering the power of the Magistrate

under Section 156(3) Cr.P.C. and the right of the

complainant to seek such reference observed that there is a

tendency of invocation of the jurisdiction of the Magistrate

in a routine manner to harass certain persons.

13. In para 31 of the said judgment, it was held

that whenever such complaint is filed seeking reference

under Section 156 Cr.P.C. the complaint should clearly spell

(2015)6 SCC 287

Crl.P.No.3136/2018

out in the application that the concerned Police declined to

Superintendent of Police as required under Section 154(3)

Cr.P.C. It was further held that the complainant shall not

only state so in the complaint, but shall file an affidavit

along with the complaint supported by the documents to

the effect that he submitted the complaint to the concerned

Police and to the Superintendent of Police under the

registered post as required under Section 154(1) and (3) of

Cr.P.C.

14. In para 11 of the complaint the second

respondent himself stated about NCR No.679/2015 and

produced only the copy of the endorsement issued by police

in NCR No.679/2015. The averment regarding compliance

of Section 154(3) Cr.P.C. regarding approaching the

Superintendent of Police was conspicuously absent. No

documents were produced along with the complaint

regarding compliance of Section 154(3) of Cr.P.C.

15. Despite such reference to NCR No.679/2015 in

the complaint the trial Court contrary to the guidelines laid

down in the judgment of the Hon'ble Supreme Court in

Crl.P.No.3136/2018

Priyanka's case referred the complaint to the first

respondent Police. Therefore, such complaint and the order

of reference amount to abuse of the process of the Court.

16. Admittedly, the alleged chit transactions were

with Sri Meghdooth Sharada Chits Private Ltd incorporated

under the Companies Act. Petitioners were only the

Directors of the said company. The company was not

arraigned as accused. Though it is contended before this

Court that the said company was wound up, in the

complaint there is no whisper about such winding up of the

company.

17. In Aneeta Hada's case while dealing with

Section 141 of NI Act the Hon'ble Supreme Court held that

for maintaining prosecution against the Directors for the

offence alleged to have been committed by the company, it

is imperative to arraign the directors as well as the

company as accused in the case. It was further held that

the commission of the offence by the company is an

express condition to attract the vicarious liability of its

Directors or office bearers.

Crl.P.No.3136/2018

18. Section 79(1) of the Chit Funds Act is pari

materia to Section 141(1) of the NI Act which reads as

follows:

"79. Offences by companies.--

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed 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 and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub- section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence."

19. Having regard to the language of Section 79(1)

and the principle laid down in Aneeta Hada's case, the

second respondent could not have sought prosecution of

the petitioners alone without arraigning the company as the

accused. Without noticing that and contrary to the

judgment in Aneeta Hada's case learned Magistrate

Crl.P.No.3136/2018

mechanically referred the matter to the Police for

investigation.

20. It is clear that when the second respondent

could not succeed before the Police, he engineered the

private complaint before the Magistrate to achieve his