Maddineni Vanitha v. The State of Telangana

of Criminal Petition and upon hearing the arguments of Sri Chalakani Venkat Yadav, Advocate for th= Petitioner and Sri Jithender Rao Veeramalla, Additional Public Prosecutor for tl're State of Telangana on behalf of the Respondent No.1 and none appeared for the Respondent No.2. The Court made the following: ORDER ri1 HYDERABAD THE HON'BLE SMT. JUSTI CE TIRUMALA DEVI EADA CRIMINAL PETITION No.35 of 2026 Date: 06.01.2026 Between: Maddineni Vanitha AND The State of Telangana, Rep by its Public Prosecutor, High Court for the State of Telangana and another Petitioner ...Respondents ORDER This Criminal Petition is filed under Section 528 Bharatiya Nagarik Suraksha Sanhita, 2023 (for short 'BNSS') by the petitioner/accused seeking to quash the proceedings against her in C.C.No.S of 2024 on the file of learned Principal District Sessions Judge at Khammam.

Heard Sri Chalakani Venkat Yadav, learned counsel for petitioner and Sri Jithender Rao Veeramalla, learned Additionat Public Prosecutor appearing for the respondent No.1- State.

The brief facts of the case are that the petitioner along with her husband are running private chits ad that the de \ \ 2 facto complainant joined as a subscriber for a chit of Rs.5 lakhs and on its maturity, the petitioner failed to pay her the chit amount. Likewise the petitioner collected amounts from 32 persons and deceived them. Thus alleged to-have committed offences under Section 406, 420, 294 (b) and 506 r/w. 34 of lndian Penal Code, 1860 (for short'lPC') and Sections 4 and 5 of TS Chit Funds Act, 1982 (for short'Chit Fund Act') and Section 5 of Telangana State Protection of Depositors of Financial Establishment Act, 1999 (for short 'TSPDFE Act').

Learned counsel for the petitioner submits that the petitioner was running an unregistered chit fund and that all the transactions took place between the petitioner and the alleged victims i1 c"Sh. He further submits that the petitioner has already paid the cash collected from the victims under the chits. The de facto complainant has lodged a false complaint against the petitioner by showing only online transactions. He also submits that, sinr:e it is an unregistered chit fund, the provisions of the Chit Funds Act or the Depositors Act are not attracted and that the petitione'r has not committed any offence to attract the ingredients of Secticns 406 and 420 of the lPC. He therefore, prayed to quash tlre proceedings against the petitioner herein 3 "n

Learned Additional Public Prosecutor has submitted that it is a settled law that the cases registered with the allegations of non-payment of the amount to the subscribers in a chit would definitely falt under Section 5 of the TSPDFE Act as the definition of Financial Establishment clearly attracts the nature of business that is run by the petitioner, and hence, the principle laid down by this Court in Revathi v. State of A.P.l is clearly applicable to the present case and hence, prayed to dismiss the petition.

Perused the record. 7. lt is borne out by the complaint lodged by the de facto complainant that the petitioner herein lured the alleged victims through chit transactions and collected huge amounts from them, repaid certain individuals, but failed to pay returns to several others from the said transactions.

The recitals of the charge sheet further point out several online transactions and the payments made by the alleged victims. lt is alleged that amounts collected from 32 persons, to the extent of Rs.4,33,57,000/-, were not paid back to the alleged victimi. The charge sheet further discloses that LWs.1 ..i ' lzotel 3 ALT (crr) 116 -- L:" \ \ 4 ( to 32 are the victims. The veracity of these witnesses needs to be tested cluring the course of trial.

Before going into the principle laid down in Revathi v. State of A.P., it is pertinent to refer to the relevant provisions under ISPDFE Act and Chit Fund Act which are extracted hereunrler for the sake of reference: Section 5 of TSPDFE Act reads as follows: "5. Where any financial establishment defaults in the retum of the deposit either in cash or kind or defaults in the payment of interest on the deposit as agreed upon, every person responsible for the management of the affairs of the financial establishment including the promoter, Manager or Member of the financial establishment shall be punished with imprisonment for a term which may extend to ten years and with fine which may extend to rupees one lakh and such financial establishment shall also be liable for fine which may extend to rupees five lakhs.' Sections 4, 5 and 76 of the Chit Fund Act read as follows

4. Prohibition of chits not sanctioned or reglstered under the Act.- fiJNo chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Govemment in this behalf, and unless the chit is registered in that State in accordance with the provisions of this ActProvided that a sanction obtained under this sub-section shall lapse if the chit is not registered within twelve months from the date of such sanction or within such further period or periods not exceeding six months in the aggregate as the State Govemment may, on application made to it in this behalf, allow. (!.)An application for the purpose of obtaining a sanction under sub-section (1) shall be made by the foreman in such form and in such manner as may be prescribed. (QThe previous sanction refened to in sub-section (1) may be refused, if the foreman,-Qhad been convicted of any offence under this Act or under any other Act regulating chit business and sentenced to imprisonment for any such offence; or(b,)had defaulted in the payrnent of fees or the ftling of any statement or record required to be paid or filed under this Act or had violated any of the provisions of this Act or the rules made thereunder; o(q)had been convicted of any offence involving n 5 moral turpitude and sentenced to imprisonment for any such offence unless a period of five years has elapsed since his release: Provided that before refusing any such sanction, the foreman shall be given a reasonable opportunity of being heard. ([)The order of the State Government, and, subject to the provisions of sub-section (5), the order of the officer empowered under sub-section (1), issuing or refusing previous sanction under this section shall be final. G)Any person aggrieved by the refusal to issue previous sanction by any officer empowered under sub-section (1) may appeal to the State Govemment within thirty days of the date of communication to him of such refusal and the decision of that Government on such appeal shall be final.

5. Prohibition of invitation for subscrlptlon except under certaln conditions.- No person shall issue or cause to be issued any notice, circular, prospectus, proposal or other document inviting the public to subscribe for tickets in any chit unless such notice, circular, prospectus, proposal or document contains a statement that the previous sanction required under section 4 has been obtained and the particulars of such sanction. "76. Penalties.{1) Whoever contravenes or abets the contravention of anyof the provisions of sections 4,5,8,9, 11, 12, 13, 14, 19,20, 22,24,30,31, sub-section (4) of section 33, sections 46, 47 or sub-section (5) of section 61 shall, on conviction, be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees or with both. (2) Any foreman,- (a) who fails to file any document required to be filed under this Act within the period specified therefor or within such further time as may be allowed; or (b) who fails to comply with the requirements of the chit agreement regarding the date, time and place at which the chit is to be drawn or who fails to comply with the requirements of any direction given under sub-section (3) of section 38; or (c) who contravenes or fails to comply with any other requirement under this Act, shall, on conviction, be punishable with fine wtrich may extend to three thousand rupees. (3) Whoever willfully makes a statement in any document required to be filed under this Act which is false in any material particular shall, on conviction, be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupeesorwith both. "

8. lt was held in Revathi v. The State of A.P. that: '18. There is no penal provision under the 1971 Act providing for punlshment in case of 'default' cornmitted by organizer/foreman of the chit by not paying prize amount to the successful highest bidder or in case the o;:ganizer/ foreman of the chit absconds by discontinuing the chit during the course of its curency and by not repaying or refunding the subscription amounts already collected from the members. The \ \ 6 (1, 1971 Act predominantly deals with regulatory measures for starting chit fund business, for commencement of a chit and running of the chit till the end of the chit period. ln case, the organizer/foreman of the chit commits 'default', no penal remedy is prescribed and no penal liability is attached to such organizer/foreman of the chit under the 1971 Act. Similady, even if the 1982 Act comes into force, it also does not contain aoy provision dealing with penal remedy against organizer/foreman of the chit and attaching penal liability for Uefault' committed by such organizer/foreman of the chit. Therefore, I have no hesitation to conclude that the 1999 Act is equally applicable in the case of a chit fund transaction also in addition to applicability of the existing 1971 Act and also the 1982 Act as and when it comes into force-"

As discussed supra, Section 2(c) of the TSPDFE Act defines Financial Establishments and the nature of business involved in chit transaction squarely falls under the said definition. Any subscriber of a chit would pay the amount expecting returns from it and the person collecting the money would also promise the sarne to pay the amount in excess than what the subscriber pays. -[herefore, the offence, if any, would be covered under Section 5 of the said Act. Hence, it can be held that TSPDFE Act applies to the Chit Fund transaction. Further, running a chit fund without registration itself is an offence under Chit Fund Act.

ln the present case, the petitioner is alteged to have received amounts from the innocent subscribers under the guise of chits and has not repaid any returns to them. The contention of the learned counsel for the petitioner is that the offences under 7 -\ Sections 406 and 420 of the lPC, Sections 4 and 5 of the Chit Fund Act and Section 5 of the TSPDFE Act do not get attracted to the petitioner. But it is a triable issue and can be adjudged only after a full-fledged trial. Thus, the allegations point out prima facie case against the petitioner for the above said offences. Hence, in view of the above held discussion, it is held that the petition lacks merit and therefore, the proceedings against the petitioner bannot be quashed. Hence, this Court deems it appropriate to dispense with the presence of the petitioner before the trial Court.

The Principle District Sessions Judge at Khammam. 2. One CC to SRl. CHALAKANI VENKAT YADAV Advocate TOPUCI 3. Two CCs to the Public Prosecutor High Court for the State of Telangana, at Hyderabad [OUT]

4. Two CD Copies To ry, r' d HIGH COLIRT DATED: 015/0112026 ORDER CRLP.No.:3S of 2026 C)() ( t 1HES 1 2 i{ |\R 2tl7f, g t DISPOSING OF THE CRIMINAL PETITION :, a a I I I I o\ 1 $