Ms. Neha Kapoor and Mr. Kaushal Mehta, Advocates v. STATE

Judgment

1. The present petition under Section 482 of the Code of Criminal Procedure, 1973, (for short, ‘CrPC’), has been filed seeking the following prayers: - “In view of the above, it is most respectfully prayed that this Hon'ble Court may kindly be pleased to:- Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023 (a) allow the present petition and set aside the order dated 8.2.2023 passed by the court of Ld ASJ-03, N/W, Rohini Courts Sh Babru Bhan in Cr Rev 331/2022 titled "Bhim Sain Arora & Ors versus State" in FIR No. 70/2019 P.S EOW U/S 406/409/420/120B IPC and Section 4/5/6 PCMS Act and discharge the petitioners; (b) Call for the Trial Court records from the court of Ld CMM Sh Rohit Gulia in Cr Case No. 115/2020 titled "State Versus Bhim Sain Arora" in FIR No. 70/2019 P.S EOW u/s 409/420 IPC r/w 120B and Section 4/5/6 of Prize Chits and Money Circulation Schemes(Banning) Act; (c) Pass any other further order as this Hon’ble court may deem fit and proper in the facts of the present case;”

2. In the present case, FIR No. 70/2019, under Sections 406/409/420/120B of the Indian Penal Code, 1860, (for short, ‘IPC’), and Sections 4/5/6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, (for short, ‘PCMCS Act’) was registered at Police Station Economic Offences Wing, on the basis of the complaint filed by one Saurabh Gupta and 20 other complainants wherein, they alleged that Bhim Sain Arora (Petitioner No.1), Kanchan Arora (Petitioner No.2), his wife and Paras Arora, his son, (who was kept in Column No. 12 of the chargesheet) were known to them for last 20 years and they used to run a company in the name of Multicity Chit Fund Pvt. Ltd., Petitioner No.3/accused company, having its registered office in Gurugram, Haryana. It was alleged that the said persons, since inception, were operating their business of chit fund in Ashok Vihar, Delhi and were carrying their activities related to finance/public funds under various names/companies. It was further alleged that during the said period, the petitioners while acting in conspiracy had lured the complainants to invest/deposit the money with them under the pretext of running committees Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023 with the promise of good return at the time of maturity. It was further alleged that on further inducement by the petitioners, the complainants had also introduced their family members/relatives into various committees, chit fund schemes run by alleged persons/petitioners herein and they invested their hard earned money in the said schemes. Thus, in said manner, the petitioners have cheated the complainants to the tune of Rs. 3 Crores approximately for the sake of committee and deposit money for interest and Rs. 21,18,600/-, under the head of chit fund which were paid by the complainant via cash, cheques, RTGS transfer from time to time.

3. During investigation, statements under Section 161 of the CrPC were recorded of the victims/complainants and the relevant documents were obtained from them regarding their investment in the company of the petitioners and it was revealed that the petitioner No.1 used to run the business of chit fund/committee in 4-5 groups of approximately 20 members each. After going through the schemes floated by the petitioners, complainants had invested on his assurance in the said scheme, with alluring 15-28% return per annum and that interest used to remain with the petitioner No.1 for further capital appreciation and after some time, he used to add them into the funds of the investors which he held in lieu of interest. It was further revealed during investigation that on the assurance of the petitioners, complainants had invested in their company for the return of their payments whenever required, however, later the petitioners requested to extend further time to repay and further allure the complainants with good interest return, Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023 but till date they did not even repay the principal amount invested by the complainants. It was further revealed that initially the petitioners used to pay the interest regularly, however, in January 2019, they called the investors and informed them that they do not have money to repay and in 2019, they sold their house and fled away without paying the complainants/investors. During investigation, the search of the house of the petitioners was conducted and a laptop containing all the records of the investment of the investors, i.e., Chit fund, committee, loan amount etc., was found. The petitioners, during interrogation, admitted to the amount invested by the investors as a loan for 18% per annum interest to the tune of Rs.2,86,20,000/-.

4. During investigation, it was revealed that the amount so deposited by the investors for the chit fund has been siphoned off to the personal account of the accused persons/petitioners and the said company, as per report from Reserve Bank of India, has not been registered and it was not authorized to collect money from the investors as per the guidelines/norms of RBI. It was further observed that the said amount deposited by the investors was further transferred into various other accounts of the subsidiary companies formed by the petitioners and then, utilized by them for their own personal use. It was further revealed that the petitioners were authorized signatories of their company named, Multicity Chit Fund Pvt. Ltd., petitioner No.3, since inception. On completion of investigation, chargesheet was filed before the Court of competent jurisdiction against the petitioners and the aforesaid company. Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023

5. Learned Chief Metropolitan Magistrate based on the allegations made in the chargesheet framed charges for the offences punishable under Sections 409/420 read with Section 120B of the IPC and Sections 4/5/6 of the PCMCS Act against all the accused persons vide order dated 19.07.2022. The said

order was challenged by way of Criminal Revision Petition No. 331/2022 before the learned ASJ and the same was dismissed vide order dated

08.02.2023. Hence, the present petition has been filed assailing the impugned order on charge passed by learned CMM.

6. Learned counsel for the petitioners has submitted that charges for the offences punishable under Sections 409/420 of the IPC cannot coexist together and is not prima facie maintainable as the ingredients of both these offences are altogether different. It is further submitted that the learned CMM has wrongly distinguished the judgment of Hon’ble Supreme Court in N. Raghavender v. State of Andhra Pradesh 1, by observing that the said judgment is not related to consideration on charge and the same was rendered academically. It is further submitted that learned ASJ had erred in concluding that the Court with the aid of Section 221 of the CrPC can frame charge for both the offences, however, conviction can be made only for the one offence. It is further submitted that the charge for the offence punishable under Sections 409/420 of the IPC is not simultaneously maintainable as nothing has been revealed from the charge sheet which could show that the petitioners 1 (2021) 18 SCC 70 Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023 have misappropriated the funds invested by the complainant. It is submitted that the present dispute is purely civil in nature. Reliance has been placed on Delhi Race Club Ltd. v. State of Uttar Pradesh2, to contend that although the offence of breach of trust and cheating involved dishonest intention, yet they are mutually exclusive and different in their foundation. In case of criminal breach of trust, the offender is lawfully interested with the property and he dishonestly misappropriate the same, whereas in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any such property. This shows that both these offences cannot coexist simultaneously. Reliance has also been placed on the judgment of Coordinate Bench of this Court in Wolfgang Reim & Ors. v. State & Anr.3, to contend that a person cannot be charged with offence of cheating and criminal breach of trust simultaneously for the same transaction as for the offence of cheating the dishonest intention must exist at the inception of transaction, whereas, for criminal breach of trust, the dishonest intention comes at the later stage after the person has been entrusted with or has dominion over the subject property. Reliance has also been placed on the judgement of Hon’ble Guwahati High Court in Mahindra & Mahindra Financial Services Ltd. v. M/s Delta Classic Pvt. Ltd.4, to contend that a person cannot be charged on the same facts for the offence of criminal breach of trust, as well as the offence of cheating. 2 (2024) 10 SCC 690 3 2012: DHC: 3908 4 2009 SCC OnLine Gau 105: 2010 Cri LJ 4591 Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023

7. Learned counsel for the petitioners has further submitted that the learned ASJ has incorrectly held that petitioners used to collect money from the investors in their capacity as the agents of their company. However, there is not a single averment in the charge sheet in respect of the fact that the petitioners used to collect money in in the said capacity and it cannot be concluded on the basis of allegations levelled in the charge sheet that they were acting as agents of Multiplicity Chit Fund Company. It is the case of the petitioners that no offence as such has been committed by the company and in absence of any offence having been committed by the said company, the petitioners cannot be charged for the offence punishable under Section 409 of the IPC. It is further submitted that there is no vicarious liability of a director of a company as per law. It is further submitted that the petitioners had never induced or deception any of the complainants to invest nor there was any mens rea on their part to cheat the complainants. It is pointed out that as per the case of complainants, they were dealing with the petitioners for past two decades and were withdrawing committees from time to time and the same shows that petitioners never intended to cheat them. Therefore, the charge for the offence punishable under Section 420 of the IPC is not made out. Reliance has been placed on Vesa Holdings Pvt. Ltd. v. State of Kerala5, to argue that for constituting the offence of cheating, the complainant(s) is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. It is the case of the petitioners that they never intended to cheat the complainants at all and in the present case, a civil 5 (2015) 8 SCC 293 Signature Not Verified Digitally Signed By:SHIWANI NEGI Signing Date:28.08.2025 19:47:46 CRL.M.C.1186/2023 dispute has been given the colour of a criminal dispute. Moreover, in the present case has been registered belatedly after a span of 20 years.

8. Insofar as the charge for the offences punishable under PCMCS Act are concerned, it is submitted that both the courts below have not given any findings in respect of said offences. It is further submitted that the activity carried on by the petitioners cannot be considered as running “Prize Chit” or “Money Circulation Scheme” as defined under Section 3 of the PCMCS Act. Reliance has been placed on State of West Bengal v. Swapan Kumar Guha & Ors.6, to contend that the clandestine manner of payment of interest in excess of the stipulated rate does not in any way indicate existence of any scheme for making quick or easy money. It is thus prayed that the impugned order framing charge passed by learned CMM be set aside and the petitioners be discharged in the present case FIR.

9. Per contra, learned APP for the State, assisted by learned counsel for the complainants, has submitted that allegations made in the present FIR against the petitioners are serious in nature inasmuch as they had siphoned off the money which was entrusted with them for returns by the complainant(s). It is further submitted that the learned ASJ had rightly observed that the charge for the offences punishable under Sections 409/420 of the IPC can be framed against the petitioners with the aid of Section 221 of the CrPC. It is