The High Court · 2025

... Respondents Petition under Section 528 of BNSS praying that in the circumstances stated in the Memorandum of Grounds of criminar petition, the High court may be preased to quash the FrR No. 6 0f 2024 dared 20-06-2024 0n the fire of the clD Poiice station, Hyderabad against petitioner/Accused No. i to 6 for the alleged offence Section 406,420 of rpc, read with section 34 of rpc and section 5 ofthe TSPDFEA, 1999 i I l I I 7 l.A. NO: 2 OF 2025 Petition under Section 528 of BNSS praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition, the High Court may be pleased to stay all further proceedings including the arrest r:f the Petitioner. Accused No. 1 to 6 in FIR No. 6 of 2024 dated 20-06-2024 on the file of the ClD, Police Station. Hyderabad for the alleged Section 406,420 of lPC, read with Section 34 of IPC and Section 5 of the TSPDFEA, 1999. This Petition coming on for hearing, upon perusing the Memorandum of Grounds of Criminal Petitron and upon hearing the arguments of Sri Saini Aravind, Advocate for the Petitioners and the Additional Public Prosecutor (TG/AP) on behalf of the Respondent No.1 The Court made the following Order:- I I { THE HONOURABLE SMT. JUSTICE JTIWADI SRIDEVI cRIMINAL PETITION No.37O of 20.25 ORDER: Petitioners, who are arrayed as accused Nos. 1 to 6, in FIR No.6 of 2024 pending on the hle of CID police Station, Hyderabad, registered for the offences under Sections 406, 42O read with 34 of the Indian penal Code and Section 5 of The Telangana protection of Depositors of Financia,l Establishment Act (for short "TSpDFEA Act,,), 1999, is seeking to quash the proceedings against them.

02. Heard Sri Aravind Saini, Iearned counsel for petitioner and Sri Jithender Rao Veeramalla, iearned Additiona_l public prosecutor appearing for the State and perused the record.

03. Learned counsel for the petitioners submits that there is no default on the part of the Company as a-lleged by respondent No.2 and the compa'y remains committed to making payments to all the subscribers, but due to covlD-19 pandemic, large number of subscribers have defaulted tn payment of insta_llments, which resulted rn creating significalt backlog to the Company. Though I i 2 the Company had been striving to overcome the same, since the process is time consuming, there are procedural delays.

04. Learned counsel for the petitioners further submits that in order to attract the offences under Sections 406 and 42O of IPC, inducement to deliver property with a lraudulent intention from the inception is necessar5r, but there are no such averments in the complaint. He further submitted that Section 5 of TSPDFtrA is uot attracted, as in the present case, the subject Chit Fund Company is not a Financial establishment, which accepts deposits. In support of his contention, learned counsel for the petitioners relied on the judgment dated O1.\1.2O22 passed by this Court in Cr1.A.No.38 of 2019, wherein, at paragraph Nos. 14, 75,23 and 24, it was heid as under: "14. That apafi, it is imperative to note that chit fund is not a finalcial establishment and Section 2 (c\ of TSPEDFtrA defines 'Financial trstablishment', as under: 1' 3 "Financial Establishment,, means any person or group of individuals accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a cooperative society owned or controlled by any State Government or the Central Government or a banking company as defined under Clause.(c) of Section S of the Banking Regulation Act, 1949,,. 15. Section 2 (b) of the Act defines ,,deposit,,, which runs as under: l "deposit" means the deposit of a sum of money either in lumpsum or installments made with a linancial establishment for a fixed period, for interest or return in any kind.,, 23. ln the case on hand, as narrated above, it is not the case of the prosecution at all that the accused persons are running a financial establishment. The case of the prosecution is that the accused are doing chit fund business. Therefore, when it is not the case of the prosecution that accused were not running linancial establishment and accused were not accepting the deposits, when pWs. I to 4 and 6 and other subscribers have not deposited the money for interest and when they have.not committed the default of the 4 alleged deposit, the question that the accused, including the appellant, have committed the offence punishable under Section 5 of the Act does not arise.

24. The Police should not have filed charge sheet under Section 5 of the Act. Similarly cognizance also should not have been taken and that charges also should not have been framed."

05. On the other hand, learned Additional Public Prosecutor appearing for State-respondent No. 1, opposed for quash of proceedings stating that the petitioners are allegedly a part ol chit fraud which involved huge amounts collected by severai chit subscribers and serious allegations are levelled against them. Furthermore, inve:stigation 1S progress, hence, prayed to dismiss the petition.

06. Having heard both sides and perused the material on record, in view of the Judgment of ttiis Court in Crl.A.No.38 of 2019, Section 5 of TSPDFEA is not applicable to the petitioners herein. Accordingly, the proceedings against the petitioners for the offence under Section 5 of TSPDFEA are hereby quashed I I / I 5

07. Insofar as Sections 406 and. 42O of IpC are concerned, since the punishment prescribed. for the said offence is less than seven (07) years, this Court deems it appropriate to direct the Investigating Officer to follow the procedure laid down under Section 41_A Cr.p.C., (presently known as Section 35 (3) of the Bharatiya Nagarik Suraksha Sanhita (for short'BNSS) and also the guidelines formulated by the Hontrle Supreme Court in Arnesh Kumar a. State of Biharr scrupulously. However, the petitioners_accused Nos. 1 to 6 shall co-operate with the Investigating Officer as and when required by furnishing information and documents as sought by him in concluding the investigation. The petitioners-accused Nos.1 to 6 shall fire all the documents which he ought to file to prove that it do not come under the criminal offences ald the Investigating Officer shall consider the same before filing appropriate report before the Magistrate.

08. With the above observations, this Crimina_l Petition is disposed of. ' lzor+1 s scc zz3 6 Pending miscellaneous applications, if any' shall a stand closed. //TRUE COPY// Sd/- V. KAVITHA ASSISTANT REGISTRAR T ION OFFICER To, I \

1. The Station House Officer' CID (ClD) P S.' Hyderabad 2 Two ccs to the pubric prosecutor, High court for the state of rerangana at HYderabad [OUT] \

3. One CC to Sri Saini Aravind' Advocate [OPUCI 4. Two CD CoPies vC/gh .W I HIGH COURT DATED:1UA1nA25 ORDER CRLP.No.37O of 2025 lHE sI4 t" 14 FEE 2025 t' a * .4--_.,.._ ' .'a' : i-r(: DISPOSING OF THE CRLP ..^,l9 d. la{