Criminal Petition No. 1534 of 2023 · The High Court · 2025

1 Heard Sri Mayur Reddy, learned senior counsel appearing on behatf of Sri Saini Aravind, the learned counsel for the petitioner and Sri M.V.Hanumantha Rao, the learned counsel for the second respondent and Mr.E.Ganesh, learned Assistant Public Prosecutor for the first respondent - State. 2 This criminal petition is fited seeking to quash the proceedings against the petitioner in C.C.No.27 of 7022 on the fil.e of the Court of Principal District and Sessions Judge, Hanumakonda registered for the offences under Sections 420, 406,506 IPC and section 5 of Tetangana Protection of Depositors of Financial Establishments Act,

1999. 3 The case of the prosecution is that the Znd respondent herein fited a report dated 06.01 .7021 before the Commissioner of Police, Warangal stating inter olio that she and her husband are subscribers of Chits in Akshara Chit Funds Pvt. Ltd. and its branches at Hanumakonda, Ramnagar, Warangat, <^zipqt, Jangson, Siddipet, T 7 Jammikunta and Mahabubabad. The Head office of M/s.Akshara chit Funds Pvt. Ltd., is tocated at Nakkatagutta, Hanumakonda. lt is alteged that Akshara Chit Fund Company pvt. Ltd. has removed the Znd respondent and her husband from Non-prizbd chit groups up to 2017 without their knowledge and chit amounts and dividends were not paid. lt is said that four house sites in (1)Sy.No.10g7_200 sq. Yards, (2) Ptot No.74 in Sy.No.93- 216sq. yards, (3) ptot No.260 in Haripuri Township, yadadri (4) ptot No.2 & 3 admeasuring 426.09 sq. Yards in Jangaon were mortgaged with Akshara Chit Funds pvt. Ltd., company. lt is said that the 2nd respondent is atso working as an agent in Akshara Chit Funds pvt. Ltd., company and its branches at Jammikunta, Kazipet, Ramnagar, Jangaon, Warangat, Siddipet, Mahabubabad and Hanumakonda branches. lt is said that a request was made to the petitioner to pay the amounts and retease mortgaged plots which were taken as surety. lt is atteged that the petitioner alteged to have threatened her on several ways. The Dy.Registrar, chits, warangat despite request did not order for release of mortgaged four ptots or for payment of amounts. lt is also stated in the report expressing doubt about their signatures and fake sureties were furnished to grab the chit amount of Rs.2.5 3 crores. lt is atteged that the Chairman and Managing Director has involved in Financial fraud, irregutarities, fraudulent and maniputation of chit subscribers amount, fake sureties and ittegat way of mortgaging ptots. lt is further stated tha[ the 2nd respondent have to get more than Rs.2.5 crores with interest from Akshara Chit Funds Pvt. Ltd., company. The police of P.S.Subedari on the endorsement made by the Commissioner, registered a case in Crime No.11 of 2021 under section 420,506 lPC. The lnspector of Potice, PS. Subedari fited a charge sheet in the Court of the PrincipaL District and Sessions Judge: Hanumakonda for the offences under sections 470, 406, 506 IPC and section lof Telangana Protection of Depositors of Financial Estabtishments Act, 1999. 4 The learned senior counsel appearing for the petitioner submitted that the petitioner has not committed any offence as atLeged by the prosecution much less the offence with which he was charge sheeted. lt is submitted that Akshara Chit Funds Pvt. Ltd., company is a company registered under lndian Companies Act, carrying its business in Chits having been estabtished on 27.11.7009. The petitioner is the Chairman and Managing Director of the aforesaid company. The company has been working since then T 4 ii,: carrying its business in chits from the date of its inception without any complaint of whatsoever in nature and gain reputation in the society. The company, due to overwhetming response from the subscribers has opened its branches at Hanumakonda, Warangat, Kazipet, Khammam-2, Khammam, Mahabubabad, Raparthy Nagar, Kothagudem, Kothagudem-2, Sathupatly, Patvancha, Nalgonda, Suryapet, Karimnagar, Mankammathota, Rampur, Rekurthy, Jagtiat, Peddapatli, Godavarikhani, Nizamabad, AdiLabad, Mancheriat, Nagole, Dilsukhnagar, AS Rao Nagar, Kukatpatl.y, Sangareddy, Vikarabad, Mahaboobnagar. The business in chit fund is governed by the provisions of Chit Fund Act, 1982. The company is carrying on its business in accordance with the provisions of Chit Fund Act,

1987. 5 The learned senior counse[ further submitted that the 2nd respondent was working as an agent to the Akshara Chit Fund Company Pvt. Ltd., by introducing various subscribers to the Chit fund company. The second respondent has subscribed as many as 251 chits in various branches of Akshara Chit Fund Company pvt. Ltd., The 2nd respondent tifted some of the chits, received amounts to a tune of about Rs.78,89,432/- by way of cheque. The 2nd 5 respondent tifted some of the chits as prized subscriber, the chit amount was adjusted to the non-prized chits with a [etter given by the 2nd respondent. The 2nd respondent gave a letter to the Akshara Chit Fund Company Pvt. Ltd., requesting to cLose non-prized chits and the amounts tying to its credit were adjusted to other prized chits. The Znd respondent committed default in payment of amounts in respect of prized chits. The Znd respondent and her husband Lifted some of the chits as a prized subscriber and mortgaged four house sites with the chit fund company i.e., (1 )Sy.No.1087-200 sq. Yards, (2) Ptot No.74 in Sy.No.93- 216 sq. Yards, (3) Ptot No.260 in Haripuri Township, Yadadri (4) Ptot No.2 & 3 admeasuring 476.09 sq. Yards in Jangaon to ensure for payment of monthty subscription. The chit fund company raised disputes in respect of 9 chits before the Arbitrary under section 64 of Chit Funds Act for recovery of amounts. Those arbitration proceedings are pending for consideration. The Znd respondent has stopped payment of monthly subscription to the chits subscribed by her from the year 2017. The 2nd respondent when insisted for payment of subscription by the foreman of the branch in which the 2nd respondent became a member of chit group, the 2nd respondent threatened the staff of 7 6 f the said branch with dire consequences. lt is submitted that the 2nd respondent has sotd one of the mortgaged pl.ot to the third parties. Akshara Chit Fund Company Pvt. Ltd., on coming to know this, fited a report before the P.S.Subedari against the Zld respondent and the purchaser. The same has been registered as case in crime No.135 of 2021 under section 420 read with Section 34 lpc and the same is pending for investigation. 6 The learned senior counsel further submitted that the 2nd respondent fett due a sum of Rs.33,64,976/- towards payment of monthly subscriptions of about 36 chits. The Akshara Chit Fund Company Pvt. Ltd., is taking steps to fite about 27 cases against the 2nd respondent and her husband for recovery of amount due from her and her husband in respect of 27 chits of various branches of Akshara Chit Fund Company Pvt. Ltd. lt is submitted that the petitioner is onl.y the Chairman and Managing Director of Akshara Chit Fund Company Pvt. Ltd. Under the provisions of Chit Fund Act, the Foreman is alone the competent person to run chit fund company under section 20 of Chit Fund Act. The Chairman and Managing Director has no role in running the chit business under the provisions of Chit Fund Act, 1982. The 2'd respondent, in order to 7 harass the petitioner fited a case against him as if the petitioner misappropriated the amounts and committed the offence of cheating. The petitioner did not misappropriate any amount nor committed any offence of cheating. The 2nd respondent, being an agent to the company, subscribed chits in various branches of Akshara Chit Fund Company Pvt. Ltd., committed defautt in payment of monthty chit subscriptions. The 2nd respondent having received prized money from the chits tifted by her faited to pay the chit amount and cases have been registered against her before the Chit Registrar for recovery of amounts. lt is submitted that the 2nd respondent had tifted as many as 177 ehits in various branches of the chit fund company. She furnished non-prized chits by way of surety for ensuring the payment of chit subscriptions of tifted chits. The Znd respondent gave a letter to the concerned branch for adjusting the prized chit amount towards payment of subscriptions due and payable by her in respect of prized chits. The 2nd respondent knew very wetl about the chit business, subscribed chits in various branches, lifted chits, received amounts and some amounts received by her under prized chits were adjusted against other chits. lf she had any grievance about the functioning of the 7 8 t:.^1 concerned branch, remedy is provided under Chit Fund Act to raise a dispute before the Chit Registrar under Section 64 of Chit Fund Act. The 2nd respondent instead of avaiting the remedy under [aw, fited a complaint before the potice with'fatse and base[ess atlegations to evade payment of amount due and payabte by her to the chit fund company. 7 The learned senior counsel further submitted that the 2"d respondent did not deposit any amount with the chit fund company for interest. ln fact, it is not the case of the Znd respondent that she deposited amounts in the chit fund company for interest and the said amount was misappropriated by the chit fund company. The potice fited charge sheet by adding section 5 of protection of Depositors of Financial Establishment Act, 1999. There is no atlegation either in the first report or in the charge sheet attracting the offences under section 5 of Protection of Depositors of Financiat Estabtishment Act, 1999. The Chit fund company is not a financia[ establishment as defined under section 2(c) of protection of Depositors of FinanciaI Estabtishment Act, 1999. The potice purposefutly added section 5 of protection of Depositors of Financial Establishment Act, 1999 to harass the petitioner and to be tried by 9 the Learned Principat Sessions Judge. He [astty contended that assuming without admission that some irregutarities as atleged have taken place in the chits subscribed by the 2nd respondent, a case could have been fil.ed against the concerned Foreman of the branch but not against the petitioner. The petitioner, being Chairman and Managing Director is not responsibte for day to day affairs of the chit fund business in each branch. The allegations in the FIR as wetl as charge sheet even if they were taken on their face vatue and accepted in its entirety, no case is made out against the petitioner for the offence under section 420, 406, 506 read with section 5 of Protection of Depositors of Fjnanciat Estabtishment Act, 1999, as such the proceedings in CC.No.27 of 7022 are tiabLe to be quashed. ln support of his submissions, the learned counsel for the petitioner has relied on the fottowing judgements: 1) Sharad Kumar Sanghi vs. Sangita Ranel, 2) GHCL Employees Stock Option Trust vs. lndia lnfoline Ltd.2, 3) Sushil Sethi and Ors. vs. The State of Arunachal Pradesh and Ors3, 4) Vesa Holdings P. Ltd. and Ors. vs. ' (201s) 12 sCC 781 '? lzor t1 l scc sos r (zozo) 3 scc 240 7 l I i I 10 State of Kerala and Ors.a, 5) Hira Lal Hari Lal Bhagwati vs. C.B.l., New Delhi5. 8 On the other hand, the tearned Assistant Pubtic Prosecutor as wet[ as the tearned counsel for the 2nd respondent vehemently contended that this is not a case where the extraordinary jurisdiction of this Court has to be exercised since the averments / altegations levetted against the petitioner are grave in nature and that the truth or othenrryise witl come out onty upon a futt-ftedged trial before the trial court. 9 As seen from the record, the 2nd respondent expressed doubt about their signatures and fake sureties were furnished to grab the chit amount of Rs.2.5 crores. lt is further atteged that the Chairman and Managing Director has involved in Financial fraud, irregularities, fraudutent and maniputation of chit subscribers amount, fake sureties and il.tega[ way of mortgaging ptots. lt is also to be seen that the petitioner is involved in several cases on the same set of e[legations. ln Sharad Kdlfidi Sanghi case (1 supra) the Hon'bte \ 4 (2ol 5) 8 scc 293 5 lzool; s scc zsz l I i 11 Supreme Court observed that without arraying the company as accused criminal proceedings cannot be continued against the foreman or the other director of the company. However, in the instant case, the entire atlegations are [evelted against the petitioner onty but not against the company. lt is the specific case of the second respondent that the petitioner had forged her signatures and threatened her with dire consequences and he had also cheated her without disbursing the priced chit amounts. Moreover, it is also the specific case of the second respondent that the petitioner herein is the in-charge of administration and management of the company and thercby vicariously liable. lt is also the specific case of the second respondent that the petitioner being the Managing Director of the company, evaded to pay the prized chit amounts to a tune of Rs.2.5 crores to the second respondent and deceived the comptainant and her husband. So the judgments retied upon by the learned counsel for the petitioner is not appticable to the facts of the present case. Further, the charge sheet and the accompanying material contain attegationi indicating commission of the offences stated supra by the petitioner. Hence the court shat[ proceed with the 7 1Z trial of the case. Nowhere in the charge sheet it was atteged that the chit fund company i.e. Akshara Chit Funds pvt. Ltd committed the aLteged offences but it is the petitioner who committed the offences. Hence the company need not be arraigned as accused. 10 lt is atso to be noted from the record that the petitioner herein had fited Crt.P.Nos.10494 &.10597 of ZOZ4 and rhis Court by a common order dated 11.09.2024 observed as under:

15. At this stage, it is expedient to note that the Act, 19g2 is a comptete code in itself which is specificatty designed to address and redress atl grievances retated to chit fund operations which provides comprehensive mechanisms for resotving disputes and atso inctudes penal provisions, such as, Section 76 which is enshrined to address any misconduct within the chit fund business. Further, when there is a specia[ enactment [ike the Act, 1982 which specificatty governs the domain of chit funds, the same woutd prevail over qeneral [aws. Therefore, as there is a non.obstante ctause in Section 3 of Act, 1982, the same woutd prevail over genera[ [aw.

16. ln view thereof, Section 5 of TSpDFEA is not appticabte to the cases on hand against the petitioner. However, hav.ing regard to the circumstances of the cases on hand and considering the fact that the matters are at the stage of investigation, this Court is of the opinion that it is significant to continue the investigation against the petitioner with regard to offence punishabte under Section 420 of tPc. 11 ln view of the above findings given by a coordinate Bench of this Court, I am atso of the opinion that the proceedings against the petitioner for the offence under Section 5 of the Tetangana Protection of Depositors of Financiat Estabtishments Act, 1999 are I 13 hereby quashed. However, the prayer for quashing of the proceedings in respect of the offence punishabte under sections 470,406,506 IPC is hereby dismissed- The trial Court is directed to proceed against the petitioner for the offences punishabte under Sections 4ZO, 406 , 506 IPC in accordance with law. 17 Accordingty, this criminal petition is dismissed. As a sequel misce[taneous petitions if any shatt atso stand dismissed. //TRUE COPY// SD/. MOHD. ISMAIL DEPUW REGISTRAR ,.ffi* OFFICER To, 1 2 J 4 The Principal District and Sessions Judle, at Hanumakonda, One CC to SRl. SAINI ARAVIND, Advocate IOPUCI To the Public Prosecutor, High Court For the State Of Telangana, at Hyderabad. [OUT] Two CD Copies ANV/gh ,/u'"'Gi6'. r,1r ':j fl 1 JUt 20fr I i-s.at cHs-i -a + HIGH COURT DATED:3010412025 ORDER GRLP.No.1534 of 2023 DISMISSING OF THE CRIMINAL PETITION 7 //5 //a //