M/S. Subhanjali Chit Fund Private ... vs The State Of Telangana
2022 Latest Caselaw 5582 Tel

               HON'BLE SRI JUSTICE K.SURENDER

              CRIMINAL PETITION No.4212 of 2019
ORDER:

1. This petition is filed to quash the proceedings against the

petitioners/A1 to A3 in Crime No.144 of 2019 on the file of

Metropolitan Sessions Judge, Nampally, Hyderabad.

2. The facts of the case are that A1 firm represented by A2 and

A3, who are the Managing Director and Director respectively of A1,

collected monthly subscription of chit amounts and failed to pay

prize bid amount of Rs.1,14,39,000/- and for the said reason, a

complaint was filed which was investigated and charge sheet was

filed for the offences under Sections 420 and 406 of IPC and Section

76 of Chit Funds Act, 1982 and Section 5 of the Telangana State

Protection of Depositors of Financial Establishment Act, 1995 (for

short the 'Act of 1995').

3. Sri Vedula Venkataramana, learned Senior Counsel appearing

for M/s.Bharadwaj Associates for the petitioners would submit that;

i) none of the ingredients of any of the penal provisions are

attracted; ii) The chit transaction is purely civil transaction and for

non-payment of chit money, the aggrieved have to approach the

Civil Court; iii) Even assuming that chit fund was not registered in

accordance with the Chit Funds Act, it is for the chit subscribers to

deal with the persons who are running the chits and it cannot be

said that non-registration and running the same is a criminal

offence; iv) When the complainant and other chit subscribers have

willingly entered as a chit member, the principle of pari delicto

would apply; v) When there is no deposit at all in chit transactions,

the question of attracting the offence under the Act of 1995 does

not arise; vi) The entire group of chit subscribers are struck only on

account of police seizing the record and in the process of running

chit funds business, the foreman would be custodian of the chit

subscribers and it cannot be said that the petitioners are liable; vii)

even admitting that there was shortage of any payment of chit

amount, no offence under Section 406 or 420 of IPC are made out

as none of the ingredients are attracted.

4. In support of his arguments, learned Senior Counsel relied

upon the following judgments; i) Prof.R.K.Vijayasarathy v Sudha

Seetharam [(2019) 16 Supreme Court Cases 739] and argued that

under Section 482 of Cr.P.C, a complaint can be quashed when the

allegations in the complaint taken on their face value and accepted

in its entirety, does not make out a criminal offence. Further, the

High Court under Section 482 of Cr.P.C can exercise its jurisdiction

to examine whether a case is essentially of a civil nature and when

the bare reading of the complaint does not constitute a criminal

offence, the proceedings are abuse of the process of the court; ii)

Oriental Kuries Limited rep. by its Chairman P.D.Jose v. Lissa and

others [(2019) 19 Supreme Court Cases 732], wherein it was held

that the relationship between chit subscriber and chit foreman is a

contractual obligation. Further, if a chit subscriber fails to make

payment of installments that would jeopardize interest of the

subscribers and the mechanism of chit fund system would fail; iii)

Loop Telecom and Trading Limited v. Union of India and another

[(2022) 6 Supreme Court Cases 762], it is argued by the learned

Senior Counsel that when the defacto complainant subscribed

himself to the running of chit business, rule of law offers protection

by applying the principle of pari delicto, whereby unless it is shown

that the participation is involuntary, the claim of the defacto

complainant would fail. Admittedly, he has participated in running

of chit voluntarily as evident from the complaint.

5. On the other hand, Sri B.Narasimha Sharma, learned counsel

appearing for the 1st respondent would submit that every breach of

contract cannot be a civil remedy. However, if the allegations

disclose criminal offence, the same can be tried by the competent

Criminal Court. In support of his contention, he relied on the

judgment of the Hon'ble Supreme Court in the case of Indian Oil

Corporation v. NEPC India Limited and others [(2006) 6 Supreme

Court Cases 736]. He further submits that the petitioners have

indulged in cheating the defacto complainant by taking the

amounts which were due to him.

6. As seen from the documents filed in the charge sheet, the chit

number, which was submitted to the Registrar was shown as

Rs.1.00 Crore, however with the very same chit number, passbook

was issued to the 2nd respondent for a chit of Rs.2.00 Crore. The

name of the defacto-complainant is not in the list of subscribers.

The allegation that the amounts which were given by the firm were

again taken back by the 2nd petitioner/A2 by misrepresentation and

fraudulent means from the defacto complainant. The said

fraudulent act of taking money of defacto complainant is stated by

the witnesses who are enlisted as L.Ws.5 and 8. Further, if the chit

amounts are not paid, Section 76 of the Chit Funds Act would

attract.

7. The argument advanced by the learned Senior Counsel on

behalf of the petitioners/Accused that the running of chit is a

contract and for any grievance, the parties have to approach the

civil court, cannot be disputed. However, in the present case, there

are several allegations, that the amounts which were due to the

defacto complainant were taken by A2 fraudulently. In the said

circumstances, where the transactions and the acts done by the

petitioners amounted to criminal offence or not can only be decided

only during the course of trial. As seen from the complaint, there

was deliberate misrepresentation, pursuant to which, the defacto

complainant had parted with amounts. The said acts of inducement

pursuant to which, the defacto complainant had parted with money

attracts offence of cheating prima facie. Further, when the

installments of chit amounts are paid, in the event of defalcation of

the said amount and/or non-payment of the prize money would

amount to criminal misappropriation.

8. The said acts would constitute an offence under Chit Funds

Act and the Act of 1995 can be agitated only during the course of

trial.

9. Accordingly, the Criminal Petition is dismissed. However, it is

made it clear that the observations and findings in the present

application are only for the purpose of deciding the case under

Section 482 of Cr.P.C, wherein the petitioners have sought

termination of criminal proceedings at the threshold. The trial

Court, uninfluenced by any of the observations made herein shall

come to its own conclusions on the basis of evidence adduced.

10. As a sequel thereto, miscellaneous applications, if any

pending, shall stand closed.

__________________ K.SURENDER, J Date: 02.11.2022 kvs

HON'BLE SRI JUSTICE K.SURENDER

CRIMINAL PETITION No.4212 of 2019

Date: 02.11.2022.

kvs