Sanjay Malhotra vs The State Of Telangana
2025 Latest Caselaw 2379 Tel

Telangana High Court

Sanjay Malhotra vs The State Of Telangana on 20 February, 2025

          THE HON'BLE SRI JUSTICE E.V.VENUGOPAL

     CRIMINAL REVISION CASE Nos.851, 853 and 854 OF 2024


COMMON ORDER :

All these criminal revision cases are filed by the petitioner, who is

accused No.9 in CC No.651 of 2015 and accused No.13 in CC Nos.468

of 2016 CC No.551 of 2015, all on the file of the learned Chief

Metropolitan Magistrate at Hyderabad, under Sections 438 and 442 of

BNSS aggrieved by the common order dated 19.04.2024 passed by the

trial Court in Crl.M.P.Nos.826, 832 and 833 of 2013 in the calendar

cases referred above, wherein his prayer under Section 239 Cr.P.C.

seeking his discharge from the offences under Sections 420, 120(B) of

IPC and Sections 2(C), 3, 4, 5 and 6 of Prize Chis and Money Circulation

Schemes (Banning) Act, 1978, was rejected.

2. In all these criminal revision cases, this Court heard Sri

E.Umamaheshwar Rao, learned counsel for the petitioners and Sri Palle

Nageshwar Rao, learned Public Prosecutor for the respondents.

3. Since the parties in all these three criminal revision cases are one

and the same and the facts and the points to be adjudicated are

interrelated, this Court disposes of all these criminal revision cases

through this common order.

4. Before going into the facts of the case, the particulars of the three

cases, registered against the petitioners herein, as described in the

charge-sheets, are tabulated hereunder for brevity and easy

understanding :

Filed Case Crl.RC against Crime registered in De-facto complainant No. orders in No./Nos.

                                              PS
           Crl.M.P.No.
           833/2023          18/2009      Nacharam             Gojireddy Koti Reddy
                in
                             58/2009    Chikkadpally      Mankena Srinivasa Reddy
           CC No.651
851/2024
           of 2015 on
                                                               Matam Venkata Syam
            the file of     129/2010      RC Puram
                                                                     Sundar
           trial Court
            832/2023        232/2014       Jangaon                Md.Sadiq Ali.
               in CC                       I-Town
            No.648 of       161/2014                           Gollapudi Rama Rao
853/2024                                 Khammam
           2016 on the      302/2014      Subedari                  A.Anurag
            file of trial
               Court        Crime No.161/2014 was clubbed with Crime No.302/2014
            826/2023                     CCS, DD,

                in CC                    Hyderabad
             No.511 of                                         Matam Venkata Syam
854/2024
           2015 on the                                               Sundar
                            130/2014     Panjagutta
             file of the
            trial Court

The allegations levelled against the petitioner and other accused

persons, succinctly, are that the accused entered into an agreement to

do an illegal business of money circulation under the guise of direct

selling of the goods of accused No.1 company with a malafide intention

to cheat the general gullible public of India and in execution of such

conspiracy, they have promoted money circulation scheme by way of

joining or enrolling the members in the form of distributors called as

ABOs but the said act is nothing but enrollment of new members into

the scheme so as to enrich A1 company alone. In this process, some of

the accused have extended their co-operation in aggressively

propagating the scheme by conducting seminars and meetings so as to

attract the gullible public to become members of the money circulation

scheme with the intention of becoming rich quickly and easily within a

short span of time without any effort. In this process, the accused were

successful in luring the public by false representations that anybody

can make easy money and become rich in a short time and induced the

public to join as members on enrollment under the guise of marketing

the goods directly to the public and thereby they have committed

offences with which, they were charge-sheeted.

(a) More precisely, the modus operandi of the accused in this process

is that accused No.1/Amway India Enterprises Pvt. Ltd., is a company

registered under the Companies Act and its scheme is 6-4-3 means the

first person has to sponsor 6 persons and these 6 persons have to

sponsor 4 persons each totaling to 24 persons and in turn these 24

persons have to sponsor/enroll 3 persons each totaling to 72 persons.

These 103 persons are called as one leg for income calculation purpose

and this chain keeps on going unchecked. The persons should be

enrolled by an already enrolled member so as to maintain chain. The

initial entrance fee of Rs.4,400/- was waived off and subsequently, the

new entrants have to purchase products worth Rs.4,400/- or otherwise

the membership will expire. After payment of some amount, an identity

card and some products will be delivered by the company at the time of

joining in the name of business kit. Joining a member into the scheme

is treated as sale of product. The new person, who joined in the scheme

is called Amway Business Owner ADA or ABO or down liner. The

person who joins a new member in the scheme under him is called up-

line member. Commissions are given not only on the event of person

efforts their direct enrollment/sponsoring but also on the contingency

to sponsoring of new members by their down-line members.

(b) The allegation against the petitioner in all these cases is that he is

the employee of A1 company and was responsible for day to day

business affairs of the company besides responsible for spreading

multi-level marketing schemes designed by the company. Further, he

was the head of information technology and was responsible for

preparation of website of the company and publishing and advertising

the company business and receiving on-line orders from ABOs.

5. The investigating officer concerned upon conducting investigation

basing on the above allegations laid charge-sheets and the same were

assigned calendar case numbers by the trial Court by taking cognizance

against the accused for the offences with which they were charge-

sheeted.

6. Challenging his array as accused in the above calendar cases, the

petitioner filed the above referred applications seeking his discharge

from the above cases before the trial Court mainly contending that he is

innocent, falsely and in a casual manner he was implicated in the

cases; neither the charge-sheets nor the statements of witnesses

recorded during investigation disclose any facts to attribute the

petitioner that he committed the offences; no attributions can be made

against the petitioner only for his attending the employment of creating

a website or promoting the multi-level marketing on behalf of his

employer; no employee can be prosecuted by virtue of allegations

levelled against his employer as laid down by Hon'ble Apex Court in

catena of decisions.

7. The learned public prosecutor, representing the respondent/State

vehemently opposed the said discharge applications mainly contending

that the accused have criminally conspired to conduct a banned and

illegal business under the guise of direct selling resulting in wrongful

gain to themselves and wrongful loss to the public; the High Court, as

per orders in WP Nos.20470 of 2006 and 20471 of 2006 has

categorically held that the business activities carried out by the accused

in the present cases clearly attract the provisions of Prize Chits and

Money Scheme (Banning) Act, 1978 and that the petitioner was

instrumental in creating the website for the purpose of canvassing the

business and attracting the innocent public.

8. The trial Court dismissed the said applications holding that there

are grounds and material to frame charges against the accused and

hence, the petitioners cannot be discharged from the respective cases.

9. Aggrieved by the said dismissal orders, the present criminal

revision cases are filed by the petitioner mainly contending that except

stating that the petitioner is the employee of A1 company and

instrumental in creating website to canvass, publicize and attract the

public no grave allegations are made against the petitioner and he being

an employee of A1 company cannot be vicariously made liable for the

acts of the company and his prosecution in his individual capacity only

on the ground that his employer was made an accused, unless he is the

alter ego of the company, cannot stand for legal scrutiny as held by the

Hon'ble Supreme Court in Sunil Barthi Mittal Vs. CBI 1. There is

nothing on record to show that the petitioner acted as an alter-ego of A1

company. The orders of the trial Court are made without properly

appreciating the material placed before it and submissions made on

behalf of the petitioner. The contents of the charge-sheet do not make

out any offence against the petitioner. The scope of petitioner by virtue

(2015) 4 SCC 609

of his employment as Vice President (Information Technology) is very

limited in providing information related support to the company and he

has nothing to do with the business model of A1 company and even

according to the prosecution case, the petitioner did not participate in

the business of A1 nor he interacted with any of the persons dealing

with the business of A1 or he is a party to any of the documents relied

upon by the prosecution or he is the recipient of crime proceeds from

any of the customers of A1 company. No witness has referred the name

of the petitioner. The trial Court without specifically mentioning the

material which would lead the trial Court to frame charge against the

petitioner in the subject crimes, has erroneously held that there is

prima-facie material against the petitioner. The charge-sheets of the

prosecution are filled with vague and omnibus allegations. There is no

element of deception to be attributed to the petitioner. The trial Court

failed to take into consideration the findings of the High Court of Kerala

in the case between Anshu Budhraja and another vs. State of Kerala

(Crl.MC No.2510 of 2018, dated 07.02.2022), wherein it has

categorically held that activities of Amway are legal and are distinct

from the activities sought to be prohibited under the Act. The trial

Court further erred in ignoring the settled proposition of law that the

Court cannot blindly accept the assumption made by the prosecution in

its investigation and that when two views are possible upon sifting and

weighing of the evidence and the evidence produced before the Court

gives rise to some suspicion and not grave suspicion, the accused has

to be discharged.

10. Learned counsel for the petitioner, in support of the grounds

urged through these criminal revision cases, relied upon the decisions

rendered in Sunil Bharti Mittal Vs. Central Bureau of Investigation 2,

Sanjay Kumar Rai Vs. State of Uttar Pradesh and another 3 and

Amway India Enterprises and another Vs.Union of India and others

(SLP (Civil) No.13414 of 2007 of Hon'ble Supreme Court (from the

judgment and order dated 19.07.2007 in WP No.20470 of 2006 of

High Court of AP). The main crux of the decisions relied upon by the

learned counsel for the petitioner, referred above, is that the company is

only liable for the actions of its employees if the company's controlling

group had criminal intent and that the principle of alter ego can only be

applied to make a company liable for the actions of a person or group of

people who control the company. Basing on the above decisions

learned counsel for the petitioner also contended that while considering

the discharge applications the trial Court cannot act as a mere post

office and it has to sift through the evidence in order to find out whether

there are sufficient grounds to try the suspect and consider the broad

probabilities, total effect of evidence and documents produced and basic

information appearing in the case. It is further contended that the High

(2015)4 Supreme Court Cases 609

(2022)15 supreme Court Cases 720

Court is imbued with inherent jurisdiction to prevent abuse of process

of law or to secure the ends of justice having regard to the facts and

circumstances of the individual cases and when the contents of the

complaint or the other purported material on record is a brazen attempt

to persecute an innocent person, it becomes imperative upon the Court

to prevent abuse of process of law. Stating thus, learned counsel for

the petitioner prayed to allow these criminal revision cases by setting

aside the impugned orders of the trial Court.

11. Per contra, learned public prosecutor, by filing counter affidavit,

vehemently opposed the present criminal revision cases mainly

contending that the petitioner being the head of technology of A1

company played a pivotal role in the business of the company by way of

publishing its products all over India and by taking on-line orders

through its website including delivery of products through its agents at

ABOs level starts from silver to founder's crown ambassador, who were

engaged by A1 company to promote its products among the general and

innocent people. The accused including the petitioner have involved in

several cases with same modes operandi in promoting illegal money

circulation scheme under the guise of sale of goods by enrolment of

members in chain system with the intent of getting rich quickly. With

the main object to establish, develop a direct selling business to sell

their products without involvement of middleman/distributors/ dealers

etc., the Government of India, upon the request made by A1 company,

on 26.08.1994, permitted A1 to do direct selling business in India but

A1 company with a dishonest intention colluded with other accused and

started its business of multi-level-marketing scheme through its Amway

Business Owners (ABO), its top employees and other companies

including the petitioner, which model scheme is prohibited in India.

12. A1 company paid commission/incentives to the extent of 49.7%

to its chain members. It has collected crores of rupees by cheating

lakhs of consumers/subscribers through the other accused including

the petitioner by making false promise of getting quick money by

putting mental torture in the name of seminars. A1 company by

entering into agreements with abroad companies, illegally sent crores of

rupees in violation of provisions of FEMA, 1999 and the guidelines of

RBI. The High Court for the composite State of Andhra Pradesh vide its

orders dated 19.07.2007 in WP Nos.20470 and 20471 of 2006, filed by

A1 company, held that the business activities carried out by A1

company squarely attract the definition of Money Circulation Scheme as

provided under Section 2(c) of the Prize Chits & Money Circulation

Scheme (Banning) Act, 1978 and the same finding was also confirmed

by the Hon'ble Apex Court in SLP No.13414 of 2017 dated 14.08.2007

while denying the prayer of A1 company to interfere with the above said

findings of High Court. The accused including the petitioner have

violated the orders of the State Government in GOMs.No.178 dated

19.09.2008 restraining/advertising in newspapers and electronic media

propagating the scheme, luring the gullible public to join their company

as members and continuing issuance of advertisements.

13. The Hon'ble Apex Court as well as the erstwhile High Court for

the composite State of Andhra Pradesh have categorically held that

though there is no loss or misappropriation of funds, mere informing a

scheme, which covered under the Money Circulation Scheme (Banning)

Act, 1978 and enrolling members as subscribers itself is usurp offence

leading to mathematical impossibility that amounts to cheating. The

audit balance sheets of company for the period from 1999-2000 to

2012-13 revealed that it has been remitting dividend, royalty from their

holding companies/ultimate holdings, amounts paid towards import of

goods and other services etc., to their holding & associate companies to

an extent of Rs.2227.28 crores against its share capital of Rs.21.39

crores during the period from 1999 to 2013. The investigation done so

far revealed the complicity of the accused including the petitioner and

that itself is sufficient to frame charge against them for their criminal

conspiracy to cheat the public and violation of provisions of money

circulation scheme. The petitioner being the IT head of A1 company,

pretty well knows the objectives, nature of work and the way of

business carried out by it and his role is inseparable when it is

commonly read with other material accused on account of their

fraudulent activities and their cheating the public by luring them to the

rosy picture cut and in grabbing the hard-earned money of the innocent

public. In that view of the matter, not only the company but also its

administrators and other people prepared material and scheme for the

cause of execution of the plan hatched are also liable to be prosecuted.

The petitioner knowing well all these aspects, indulged in designing and

preparation of fraud. Roving enquiry by the Court, while adjudicating

the discharge petitions, cannot be expected. Once the charge-sheet is

filed with sufficient material, the trial Court has to give opportunity for

the prosecution to produce evidence during trial and the accused will

have fair opportunity to prove his innocence during trial by cross-

examining the witnesses and also to produce evidence in support of his

defence. The petitioner not only accused in these cases but also in SC

No.803 of 2023, on the file of the learned Metropolitan Sessions Judge,

Hyderabad at Nampally (Special Court), which is a case registered by

the ED under the provisions of PMLA/FEMA, is an accused. Keeping all

these aspects in mind, the trial Court, upon carefully analyzing the

material available on record, has rightly dismissed the discharge

petitions filed by the petitioner and hence, the said well-considered

findings cannot be interfered with under the present revisions.

14. The learned public prosecutor filed Form 32 stating that upon

working as Alternate Director in A1 company, the petitioner resigned

from the same with effect from 17.07.2014 i.e. after registration of FIRs,

as stated in the table supra (paragraph No.4 of this order), and hence,

the petitioner's association with accused No.1 in such capacity during

the period of commission of offence is established and in that view of

the matter, he cannot plead ignorance with regard to the crime

perpetrated by A1 company. Further, the petitioner was also one of the

directors of A1 company and responsible for its day to day functioning.

Learned public prosecutor further contended that against an order

made in interlocutory application, the revision under section 397 of

Cr.P.C. cannot lie in view of the decision of this Court in Criminal

Revision Case (SR) No.3198 of 2022.

15. While submitting the above, the learned public prosecutor relied

upon the decisions rendered in Adalat Prasad Vs. Rooplal Jindal and

others 4, Sheo Nandan Paswan Vs. State of Bihar and others 5, State

of Bihar Vs. PP Sharma and another 6, Sethuraman Vs.

Rajamanickam 7, orders of High Court of Jabalpur between Dr.(Mrs.)

Neena V.Patel Vs. State of Madhya Pradesh and others (Criminal

Revision No.219 of 2021) and Kuriachan Chacko and others Vs.

(2004) 7 SCC 338

AIR 1987 SC 877

AIR 1991 SC 1260

2009(1) ALD (Crl.)871

State of Kerala 8 and prayed to dismiss the present criminal revision

cases as quashing the criminal proceedings does not meet the ends of

justice since there is prima-facie material collected against the accused

including the petitioner during the course of investigation and hence,

the same requires full-fledged trial to know the complicity or otherwise

of the accused including the petitioner.

16. This Court heard the rival contentions advanced on either side

and perused the material available on record. The point to be

adjudicated in these three criminal revision cases is whether there is

any prima-facie material existing against the petitioner either for

discharging him or directing the trial Court to proceed with framing of

charges against the accused including the petitioner in all the three

calendar cases.

17. So far as the petitioner's association with accused No.1 company

during the period concerning to the present crimes is concerned, no

doubt he worked as an IT head and in execution of his post, as such, he

took responsibility of publicizing the advertisements with regard to the

features, nature, benefits and money returns given by A1 company to

its subscribers. The main question herein is to what extent his acts

contributed in perpetrating the crime of luring the gullible public in

joining as subscribers by paying subscription amount and losing their

Supreme Court Cases (2008) 8 SCC

amounts in that process and in A1 companies proceeding with multi-

level marketing will be the key for coming to a conclusion with regard to

his complicity or otherwise.

18. Section 3 of the Prize Chits and Money Circulation Schemes

(Banning) Act, 1978 (Act No.43 of 1978) says circulation of banned prize

chit and money circulation schemes or enrolment as members or

participation therein in the said schemes are prohibited. Further, no

person shall promote or conduct any prize chit or money circulation

scheme, or enroll as a member to any such chit or scheme, or

participate in it otherwise, or receive or remit any money in pursuance

of such chit or scheme. Section 6 says that when an offence 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. However, it is made clear

that the person who proves that the offence was committed without his

knowledge or that he exercised all due diligence to prevent the

commission of such offence cannot be prosecuted under this Act.

19. Copy of Form 32 filed by the prosecution proves that the

petitioner worked as Alternate Director in A1 company and

subsequently he resigned from the same with effect from 17.07.2014

that this itself is sufficient to establish the petitioner's association with

accused No.1. The allegations leveled against the petitioner are that he

being one of the directors of A1 company and worked as head of

technology is responsible for its day to day functioning and played a

pivotal role in the business of the company by way of publishing its

products all over India and by taking on-line orders through its website

including delivery of products among the general and innocent people.

It is also alleged in the charge-sheet that the accused including the

petitioner involved in various cases with same modes operandi in

promoting illegal money circulation scheme under the guise of sale of

goods by enrolment of members in chain system with the intent of

getting rich quickly. The High Court for the composite State of Andhra

Pradesh vide its orders dated 19.07.2007 in WP Nos.20470 and 20471

of 2006 held that the business activities carried out by A1 company

comes under the definition of Money Circulation Scheme as provided

under Section 2(c) of the Prize Chits & Money Circulation Scheme

(Banning) Act, 1978. The said finding was confirmed by the Hon'ble

Apex Court in SLP No.13414 of 2017 dated 14.08.2007. It is also the

allegations against the petitioner that the accused including the

petitioner by violating the orders of the State Government in

GOMs.No.178 dated 19.09.2008 and continued in promoting the A1

companies business in giving advertisements in newspapers and

electronic media and lured the gullible public. It is also alleged against

the petitioner that having known well the fraud played by A1 company,

the petitioner indulged in designing and preparation of fraud.

20. Proposition of law is very clear that review of a judgment is a

serious step and reluctant resort to it is proper only where a glaring

omission or patent mistake or like grave error has crept in earlier by

judicial fallibility. The scope of interference and exercise of jurisdiction

under Section 397 Cr.P.C., is extremely limited and it should be

exercised very sparingly and only where the decision under challenge is

grossly erroneous, or there is non-compliance of the provisions of law,

or the finding recorded by the trial Court is based on no evidence, or

material evidence is ignored or judicial discretion is exercised arbitrarily

or perversely by framing the charge. When the impugned orders are

perused, there is nothing on record to set aside the same since this

Court sees no apparent error warranting interference under the

revisional powers.

21. When the above facts and circumstances are evaluated, this

Court is of the considered opinion that there is prima-facie material

placed by the prosecution in the form of charge-sheet and the same

requires full-fledged trial to decide the complicity or otherwise of the

accused and without letting the accused to face trial, he cannot be

declared as innocent and it is premature to come to a conclusion with

regard to the genuineness or otherwise of the prosecution case.

Keeping in view the above facts in mind, the trial Court has rightly

rejected the prayer of the petitioner for his discharge and the said

findings, in my considered view, do not warrant interference of this

Court. Further, there is no force in the grounds urged by the petitioner

through these revisions to set aside the impugned orders. In that

view of the matter, this Court is not inclined interfere with the well

considered findings of the trial Court. Accordingly, the present criminal

revision cases are dismissed.

22. In the result, 851 of 2024, 853 of 2024 and 854 of 2024 are

dismissed.

23. As a sequel, the interlocutory applications, if any pending, shall

also stand dismissed.

________________________ E.V.VENUGOPAL, J Dated :20.02.2025 Abb