Srinivas Bodke vs The State Of Telangana
2022 Latest Caselaw 109 Tel

               HON'BLE SRI JUSTICE K. LAKSHMAN

            CRIMINAL PETITION Nos.439 AND 443 OF 2020

COMMON ORDER:

      Criminal Petition No.439 of 2020 is filed by the petitioner -

accused No.1 to quash the proceedings in C.C. No.168 of 2019 on the file

of Judicial Magistrate of First Class, Bichkunda, whereas Criminal

Petition No.443 of 2020 is filed by accused Nos.2 to 4 to quash the

proceedings in the very same C.C. against them.

      2. The petitioners in both the Criminal Petitions are accused Nos.1

to 5. The offences alleged against them are under Section - 420 of IPC

and Section - 17 of Telangana Micro Finance Institutions (Regulation of

Money Lending) Act, 2011 (for short 'Act, 2011').

      3.     Heard Mr. S. Niranjan Reddy, learned Senior Counsel

representing Ms. Rubaina S Khatoon, learned counsel for the petitioners

in both the Criminal Petitions and learned Public Prosecutor appearing on

behalf of respondent No.1 - State.     Despite service of notice, none

appears for respondent No.2.

4. FACTS:

i) Respondent No.2 is resident of Madnoor Village and

Mandal, Kamareddy District, and she is Member of

Shanthoshi Maata Mahila Sangam.

ii) She along with LWs.2 to 8 and some other Villagers formed

the said Sangam with an intention to take loans on low

interest.

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iii) The petitioners herein have been working in M/s. Bharath

Finance, and they have made propaganda in the surrounding

villages including the village of respondent No.2 that their

Company i.e., M/s. Bharath Finance, has been providing

loans at low interest.

iv) In the said process, about seven (07) months back, the

petitioners - accused Nos.1 to 4 have done the propaganda

that some persons in Madnoor Village, which is beside

Degloor Taluka, gave an amount of Rs.25,000/- to each

person including respondent No.2 and some other persons as

loans, like IKP Loans.

v) The petitioners took an amount of Rs.500/- each from the

above said persons / borrowers including respondent No.2

towards paper expenses. They have instructed the borrowers

to repay the said loan amount to the said Finance Company

by depositing an amount of Rs.550/- in a week for 52 weeks.

Thus, they are collecting an amount of Rs.29,100/- from

each borrower.

vi) The petitioners herein - accused Nos.1 to 4 have not

obtained any registration from the Telangana State as

required under the provisions of the Act, 2011 and they are

collecting excess interest from the borrowers other than the

interest decided by the Government.

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vii) After collecting the excess interest from the borrowers, they

gave the same to his Branch Manager - Rajendra Gaikwad,

accused No.2, the then Branch Manager and gave the said

amount to Unit Manager and his colleagues, namely accused

No.4. They have also collected excess interest from the

borrowers.

viii) Thus, the said acts of the petitioners constitute the aforesaid

offences.

5. On the complaint lodged by respondent No.2, Madnoor Police

Station, Kamareddy District, have registered a case in CrimeNo.14 of

2019 for the aforesaid offences against the aforesaid Finance Company.

During the course of investigation, the Investigating Officer had recorded

the statements of respondent No.2 as LW.1 and other beneficiaries as

LWs.2 to 8. On considering the evidence, both oral and documentary,

the Investigating Officer has laid the charge sheet against the petitioners

herein.

6. CONTENTIONS ON BEHALF OF THE PETITIONERS:

i) Mr. S. Niranjan Reddy, learned senior counsel appearing on

behalf of the petitioners, would submit that the petitioners herein are

innocent of the offences alleged and they are nothing to do with the

offences alleged against them. There is no inducement or cheating by the

petitioners. The contents of the charge sheet lack the ingredients of the

offences alleged against the petitioners, more particularly, Section - 17 of

the Act, 2011. There is no misrepresentation by the petitioners herein.

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In the entire Act, 2011, there is no maximum interest specified. The said

Company has been conducting its business strictly in accordance with the

guidelines issued by the Reserve Bank of India (RBI) from time to time.

Without considering the said facts, the Investigating Officer had laid the

charge sheet against the petitioners herein, employees of Bharat Financial

Inclusion Limited (BFIL). The Investigating Officer has not made the

said Company as an accused and, therefore, the present proceedings in

C.C. No.168 of 2019 are liable to be quashed on the said ground alone.

ii) Referring to the order dated 10.06.2019 passed by the National

Company Law Tribunal (NCLT), the learned senior counsel would

submit that the Composite Scheme of Arrangement between erstwhile

BFIL and Indus Bank Limited (IBL) and also IndusInd Financial

Inclusion Limited (IFIL) approved by the NCLT which came into force

w.e.f. 04.07.2019. As per the said order and scheme, all the employees

of erstwhile BFIL became employees of IFIL on the basis of continuation

of service. The Registrar of Companies, Mumbai, has w.e.f. 02.08.2019

approved the change of name of IFIL to BFIL.

iii) The learned senior counsel would further submit that

respondent No.2 approached the erstwhile BFIL for loan and treating the

said application, the said Company had extended the loan to respondent

No.2 on specific terms and conditions mentioned in the said loan

agreement. Respondent No.2 had paid only 24 installments from August,

2018 to February, 2018 amounting to Rs.11,415.90ps., and thereafter

failed and neglected to repay the loan installments and the said default

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continues. An amount of Rs.13,594.10ps., remains payable by

respondent No.2 as per the Loan Ledger. To evade the said payment,

respondent No.2 has implicated the petitioners herein in the present

crime.

iv) With the aforesaid submissions, the learned senior counsel

sought to quash the proceedings in the afore C.C. against the petitioners

herein.

7. CONTENTIONS ON BEHALF OF RESPONDENT No.1

i) On the other hand, the learned Public Prosecutor, on

instructions, would submit that as per Section - 3 of the Act, 2011 the

Company has to submit an application for registration within 30 days

from its formalities and that there are specific allegations against the

petitioners herein. They have been conducting business in violation of

the provisions of the Act, 2011. They are triable issues. The petitioners

are having alternative remedy of filing an application under Section - 239

of Cr.P.C. seeking their discharge from the said C.C. Instead of doing so,

they have filed the present petition. There is serious allegation of

cheating the innocent people, more particularly people belong to lower

income group.

ii) With the above said submissions, the learned Public Prosecutor

sought to dismiss the present petitions.

8. ANALYSIS AND FINDING OF THE COURT:

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i) In view of the above said rival submissions, it is relevant to

extract the objects of the Act, 2011.

"3. (1) All Micro Finance Institutions operating in the State of Telangana as on the date of the commencement of this Act, shall within thirty days from the date of commencement of this Act, apply for registration before the Registering Authority of the district specifying therein the villages or towns in which they have been operating or propose to operate, the rate of interest being charged or proposed to be charged, system of conducting due diligence and system of effecting recovery and list of persons authorized for conducting the activity of lending or recovery of money which has been lent.

(2) No MFIs, operating at the commencement of this Act or intending to start the business of lending money to SHGs, after the commencement of this Act, shall grant any loans or recover any loans without obtaining registration under this Act from the Registering Authority.

(3) The Registering Authority shall conduct verification of the details furnished by the MFI and accord registration in such manner as may be prescribed for operation of MFls for a period of one year, after obtaining a written undertaking from the MFI that it shall always act in conformity with the provisions of this Act.

(4) Where the MFI applies for renewal of registration, an application for that purpose shall be filed by the MFI within sixty days before the expiry of the period of one year referred to in sub-section (3) and the Registering Authority shall decide either to grant renewal or refuse renewal of registration within fifteen days before the date of expiry of registration, after due verification of the performance of the MFls in the field level and after hearing objections, if any, from the general public regarding extension of Registration."

"8. (1) All MFls shall display the rates of interest charged by them in a conspicuous place in their premises in bold letters visible to the members of the public.

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(2) No MFI shall charge any other amount from the borrower except any charge prescribed in the rules for submission of an application for grant of a loan".

"9. (1) No MFI shall recover from the borrower towards interest in respect of any loans advanced by it, whether before or after commencement of this Act, an amount in excess of the principal amount.

(2) All loans in respect of which an MFI has realized from the borrower, whether before or after commencement of this Act, an amount equal to twice the amount of the principal, shall stand discharged and the borrower shall be entitled to obtain refund and the MFI shall be bound to refund the excess amount paid by the borrower."

"10. (1) No MFI shall extend a further loan to a SHG or its members where the SHG has an outstanding loan from a Bank unless the MFI obtains the prior approval in writing in such manner as may be prescribed from the Registering Authority after making an application seeking such approval.

(2) The Registering Authority while considering such application from an MFI seeking approval as aforesaid shall secure the following information in writing from the MFI in regard to every member of SHG, namely:-

(i) name of the Borrower;

(ii) name of the SHG;

(iii) bank from which loan has been obtained by the SHG;

(iv) date of the loan granted by the bank;

(v) amount paid to the SHG by the bank;

(vi) amount due from the SHG;

(vii) fresh amount of loan sought by the SHG from the MFI;

(viii) terms of repayment proposed by the MFI;

(ix) details of due diligence including the capacity of the SHG for repayment; and

(x) such other details as may be prescribed.

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(3) The Registering Authority shall, not later than fifteen days from the date of filing of such application for approval under sub-section (2), cause an enquiry into the contents of] the application and shall grant approval for further loan unless the Registering Authority is satisfied that the SHG and its members have passed a resolution that they have understood the conditions of the loan and terms of repayment and unless the Registering Authority is also satisfied that such further loan would generate additional income to the SHG and its members, needed for servicing the debt.

(4) No MFI shall grant loan to a member of SHG during the subsistence of two previous loans irrespective of the source of the previous two loans."

ii) Section - 2 (b) of the Act, 2011 deals with 'interest', and it says

that the interest for the purposes of the terms defined under the

provisions of the said Act would mean a return on the amount lent by the

MFI to a SHG. Section - 2 (c) of the Act deals with 'loan', which means

an advance whether of money or in kind given to the borrowing SHG at

interest, whether given before the commencement of the said Act or after

such commencement and includes advance, discount, money paid for or

on account of or paid on behalf of or at the request of any person, or any

account whatsoever, and every agreement (whatever its terms or form

may be) which is in substance or effect a loan of money of in kind given

to an SHG and further includes, an agreement relating to the repayment

of any such loan. Section - 2 (d) deals with 'Micro Finance Institution

(MFI)' and it means any person, partnership firm, group of persons,

including a Company registered under the provisions of the Companies

Act 1956, a Non-Banking Finance Company as defined under the

Reserve Bank of India Act, 1934, a Society registered under the

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Telangana Co-operative Societies Act, 1964, or the Telangana Societies

Registration Act, 2001 and the like, in whichever manner formed and by

whatever name called, whose principal or incidental activity is to lend

money or offer financial support of whatsoever nature to the below

poverty line population.

iii) Section - 2 (d) of the Act deals with 'Self Help Group (SHG)'

and it means a group of women formed on principles of self help and

registered as such with the Society for Elimination of Rural Poverty

(SERP) in the rural areas or Mission for Elimination of Urban Poverty in

municipal areas (MEPMA) in urban areas. Section - 2 (k) deals with

'SHG Member' and it means a registered member of a SHG who intends

to avail a loan through such SHG and thus a borrower under the

provisions of the Act.

iv) Section - 3 of the Act, 2011 deals with 'registration of MFIs,

and as per sub-Section (1), all the Micro Finance Institutions operating in

the State of Telangana as on the date of the commencement of the said

Act shall within thirty (30) days from the date of commencement of the

said Act, apply for registration before the Registering Authority. As per

sub-section 2 of Section - 3 of the Act, 2011, no MFIs, operating at the

commencement of the said Act or intending to start the business of

lending money to SHGs, after the commencement of the said Act, shall

grant any loans or recover any loans without obtaining registration under

this Act from the Registering Authority.

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v) Section - 7 of the Act, 2011 deals with 'MFIs not to seek

security for loan. Section - 8 of the Act, 2011 deals with 'display of rates

of interest charged by MFIs, and as per sub-section (1), all MFls shall

display the rates of interest charged by them in a conspicuous place in

their premises in bold letters visible to the members of the public, and as

per sub-section (2) of Section 8, no MFI shall charge any other amount

from the borrower except any charge prescribed in the rules for

submission of an application for grant of a loan. Section - 9 of the Act,

2011 deals with 'maximum amount of interest recoverable on loans and

discharge of loans in certain cases. As per sub-section (1) of Section - 9,

no MFI shall recover from the borrower towards interest in respect of any

loans advanced by it, whether before or after commencement of this Act,

an amount in excess of the principal amount.

vi) As per sub-section (2) of Section - 9 of the Act, 2011, all loans

in respect of which an MFI has realized from the borrower, whether

before or after commencement of this Act, an amount equal to twice the

amount of the principal, shall stand discharged and the borrower shall be

entitled to obtain refund and the MFI shall be bound to refund the excess

amount paid by the borrower. Section - 10 of the Act deals with 'prior

approval for grant of further loans to SHGs or their members', and as per

sub-section (1) of Section - 10, no MFI shall extend a further loan to a

SHG or its members where the SHG has an outstanding loan from a Bank

unless the MFI obtains the prior approval in writing in such manner as

may be prescribed from the Registering Authority after making an

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application seeking such approval. Thus, a duty is cast upon the MFI to

register it as per Section - 3 of the Act, 2011.

vii) In view of the above, it is clear that section - 8 of the Act

mandates display of rates of interest charged by MFIs and Section - 9 of

the Act mandates maximum amount of interest recoverable on loans and

discharge of loans in certain cases, and it cannot recover from the

borrower towards interest in respect of any loan advanced by it an

amount in excess of the principal amount.

viii) As discussed above, respondent No.2 - de facto complainant

claims that she is the Member of Shanthoshi Mahila Sangam, which they

have formed with an intention to avail loans at low interest. Further,

prima facie, there are specific allegations against the petitioners herein

that they have induced respondent No.2 and LWs.2 to 8 and that they are

extending loans at low interest. They have paid an amount of Rs.500/;-

towards paper expenses. They have instructed respondent No.2 and

LWs.2 to 8 to deposit an amount of Rs.550/- in a week for 52 weeks and

thus, collected an amount of Rs.29,100/- from each borrower. They have

not obtained necessary registration from the Government of Telangana

State in terms of the Act, 2011 and they are also collecting interest over

and above the interest prescribed by the Government. The role played by

each of the petitioner is also specifically mentioned in the charge sheet.

Thus, there are several triable issues which are to be considered by the

trial Court after conducting full-fledged trial. The petitioners have to

face trial and prove their innocence.

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ix) The contention of the petitioners that the Investigating Officer

has not arraigned the said BFIL as an accused is again a triable issue.

Section - 319 of Cr.P.C. deals with power to proceed against other

persons appearing to be guilty of offence, and sub-section (1) of Section

319 says that where, in the course of any inquiry into, or trial of, an

offence, it appears from the evidence that any person not being the

accused has committed any offence for which such person could be tried

together with the accused, the Court may proceed against such person for

the offence which he appears to have committed.

x) The contention of the petitioners that the said Company has

been conducting its business activities strictly in accordance with law and

the guidelines issued by the RBI from time to time is again a triable

issue. Therefore, this Court is of the considered opinion that prima facie

there are specific allegations against the petitioners and the role played

by them is also specifically mentioned in the charge sheet.

xi) In M. Hardei v. State of U.P.1, the Hon'ble Supreme Court

held that it is well accepted in criminal jurisprudence that F.I.R. may not

contain all the details of the occurrence or even the names of all the

accused. It is not expected to be an encyclopedia even of facts already

known. There are varieties of crimes and by their very nature, details of

some crimes can be unfolded only by a detailed and expert investigation.

This is more true in crimes involving conspiracy, economic offences or

cases not founded on eye witness accounts. The fact that Police chose

not to send up a suspect to face trial does not affect power of the trial

. AIR 2016 SC 1615

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court under Section - 319 of the Cr.P.C. to summon such a person on

account of evidence recorded during trial. Thus, the petitioners have to

face trial, take the said defences during trial and prove their innocence.

xii) The Apex Court in Kamal Shivaji Pokarnekar v. The State

of Maharashtra2 has categorically held that quashing criminal

proceedings was called for only in a case where complaint did not

disclose any offence, or was frivolous, vexatious, or oppressive. If

allegations set out in complaint did not constitute offence of which

cognizance had been taken by Magistrate, it was open to the High Court

to quash the same. It was not necessary that, a meticulous analysis of

case should be done before trial to find out whether the case would end in

conviction or acquittal. If it appeared on a reading of the complaint and

consideration of allegations therein, in light of the statement made on

oath that the ingredients of the offence are disclosed, there would be no

justification for the High Court to interfere. The defences that might be

available, or facts/aspects which when established during trial, might lead

to acquittal, were not grounds for quashing a complaint at the threshold.

At that stage, the only relevant question was whether averments in the

complaint spell out ingredients of a criminal offence or not. The Court

has to consider whether complaint discloses any prima facie offences that

were alleged against the respondents. Correctness or otherwise of the

said allegations has to be decided only during trial. At the initial stage of

issuance of process, it was not open to Courts to stifle proceedings by

. AIR 2019 SC 847

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entering into merits of the contentions made on behalf of the accused.

Criminal complaints could not be quashed only on the ground that,

allegations made therein appear to be of a civil nature. If ingredients of

offence alleged against Accused were prima facie made out in complaint,

criminal proceeding shall not be interdicted.

xiii) In Skoda Auto Volkswagen India Private Limited v. The

State of Uttar Pradesh3, the Apex Court referring to the earlier

judgments rendered by it has categorically held that the High Courts in

exercise of its inherent powers under Section - 482 of Cr.P.C has to

quash the proceedings in criminal cases in rarest of rare cases with

extreme caution.

9. CONCLUSION:

i) In view of the above discussion and the principle laid down by

the Apex Court in the aforesaid decisions, the petitioners herein failed to

make out any ground to quash the proceedings and, therefore, the present

petitions are liable to be quashed.

ii) Both the Criminal Petitions are accordingly dismissed.

As a sequel, miscellaneous petitions, if any, pending in the

criminal petitions shall stand closed.

__________________ K. LAKSHMAN, J 17th January, 2022 Mgr

. AIR 2021 SC 931