The High Court · 2025

Order

This Criminal Petition is filed by the petitioner-acc used seeking to quash the proceedings in FIR No.483 of 2024 r n the flle of Hanamkonda Police Station, Warangal District, for the offences under Section 420 read with 34 IPC and Section 5 of t le Telangana Protection of Depositors of Financial Establishmer s Act, 1999 (hereinafter referred as 'TSPDFE Act')

2. Heard Sri CtvlR Velu, learned counsel for the retitioner and Sri Jithender Rao Veeramalla, learned Additional Puc ic Prosecutor for the respondent No.1-State

3. Learned counsel for the petitioner has subr ritted that the present case is registered under Section 420 read wi h 34 IPC and Section 5 of the TSPDFE Act and that the said Act does not get attracted to the present case. The contention of the l': rrned counsel for the petitioner is that a chit fund transaction does rot amount to collection of deposit and thus, the provisions under 1 re Depositors Act do not get attracted. Therefore, registration of tlt ) crime under the gaid Act would be an abuse of process of law. lt' hat offence is set aside, then the other allegation under Section 42 ) IPC also do i : I \ 2 Crl.P. No.13390 ot 2025 €fD,J not get attracted against the petitioner as there is no dishonest inducement by the petitioner. He further submitted that the ingredients of the complaint did not point out that there is dishonest intention of the petitioner from the inception to constitute the offence of cheating under Section 420 lpc. Hence, the learned counsel submitted that all the alleged offences cannot be made out from the recitals of the complaint therefore, he prayed to quash the proceedings against the petitioner herein.

4. 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 fall 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.1 is clearly applicable to the present case and thus, the contention of the learned counsel for the petitioner cannot be maintained and further unless the matter is subjected to trial, the allegation under Section 420 IPC cannot be proved and hence, prayed to dismiss the petition.

5. Perused the record 1 lzor:1 : aLr 1c,r1 rro I // 3 ETI',J C.t P. No-1ji98 ol 2025

6. The contention of the learned counsel for tlt petitioner is { that once it is a chit fund transaction, it is squarely cov': ed under the Chit Fund Act, which is a complete code in itself and he rce, invoking Section 5 of the TSPDFE Act is not maintainable. On t'- other hand, learned Additional Public Prosecutor relied on Revatt i v. State of A.P. (1 supra).

7. Before going into the principle laid down it Revathi v. State of A.P., it is pertinent to refer to the relevant pr: risions under TSPDFE Act and Chit Fund Act which are extracted rereunder for the sake of reference: Section 2 (b) and (c) of the TSPDEF Act reac s as follows "2. ln this Act, unless the context otherwise requtres (a) xxxx (b) "deposit" means the deposit of a sum ol mon: in lumpsum or installments made with a f establishment for a fixed perrod, for interest or r ' either 'lancial turn in any kind. (c) "Financial Establishments means any p(rl group of individuals accepting deposit under any I or arrangement or in any other manner but (l( include a corporation or a co-operative society cl controlled by any State Government or the Government or a banking company as defin€c clause (c) of section 5 of the Banking Regulali )on or es not ned or lenlral rn Acl,

1949." \ \ 4 ETO,J Cd.P. No.133g8 ol 202s Section 5 of TSPDFE Act reads as follows: "5. Where any financial establishment defaults in the return 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." Section 76 of the Chit Fund Act reads as follows: "76. Penalties.-('l ) Whoever contravenes or abets the contravention of any of the provisions of sections 4, 5, 8, I, 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 wlrich 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 frle any document required to be filed under this Act within the period specified therefor or wrlhrn such fu(her 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 whrch the chit is to be drawn or who fails to comply with the requrrements 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, // { i 5 EID,J Crl.P- No-1i39a of 2025 shall, on conviction, be punishable with fine wh ( I may extend to three thousand rupees. (3) Whoever willfully makes a statement in any d(,( ument required to be filed under this Act which is fatse n any material particular shall, on conviction, be punisha r : with imprisonment for a term which may extend to two )r ars or with fine which may extend to five thousand rupees ,r with both." B. lt was held in Revathi v. The State of A.P. ttr t "'18. There is no penal provision under the 't E / providing for punishment in case of 'default' comm t organizer/foreman of the chit by not paying pnze ar ( the successful highest bidder or in case the orr; foreman of the chit absconds by discontinuing the chlt the course of its cunency and by not repaying or ret the subscription amounts already collected f rc r members. The 1971 Act predominantly deals with rer; measures for starting chit fund business, for commenc of a chit and running of the chit titl the end of the chrt 1 ln case, the organizer/foreman of the chit commtls',1 no penal remedy is prescribed and no penat lial attached to such organizer/foreman of the chit unj 1971 Act. Similarly, even if the 1982 Act comes into i also does not contain any provision dealrng witl- remedy against organizer/foreman of the chit and atti penal liability for 'default' commrtted by organizer/foreman of the chit. Therefore. I hesitation to conclude that the 1999 Act is equa y apt) in the case of a chit fund transaction also in add t applicability of the existing '1971 Act and also the j(t as and when it comes into force " h a 1 Act ed by unt to nizer/ Jurrng latory )ment eriod. fa u lt' rty is rr the rce, it s uch /e no )n to 2 Act 6 ETD,J crt.P. oji398 0t m25

9. The learned counsel for the petitioner has flled the decisions of a coordinate Bench of this Court in Crl.p. Nos.10494 & 10597 of 2024, wherein the proceedings were quashed under section 5 of the TSPDFE Act and since the other offences under lpc attract punishment of less than 7 years of imprisonment, notice under Section 35(3) of the BNSS were issued. The principle laid down in Revathi v. State of A.p., was not placed before the said Benches. Thus, a different view was expressed in the said cases.

10. ln an earlier mafier, vide Crl p. No.733.1 of 2025, this Court has observed that even a registered Chit Fund Company falls under the definition of Financial Establishment. The contention of the petitioner in the said case was that a registered Chit Fund Company is excluded from the definition of Financial Establishment under the TSPDFE Act,'1999 and further that the matters pertaining to the Registered Chit Fund Company has to be dealt under Chit Fund Act. But, the amended definition of financial establishment does not provide for the said exclusion.

11. The definition of Section 2(c) of the TSpDFE Act as it prevailed till 2003 excluded a registered company. However, the Act was amended in 2003 and at present Section 2(c) of TSpDFE Act ./ ; 1 EfO,J crl-P. No 1 t3g8 0t 2025 makes it clear that it does not exclude the comparri :s which are registered under the Companies Act' Hence' it wat held by this CourtthattheregisteredChitFundsalsogetcoveltedunderthe definition of Financial Establishment as defined under iection 2(c) of theTSPDFEActandthus'theprovisionsoftheTl])DFEActget attracted to the offences alleged in the said case l iy holding the same, the quash petition was dismissed'

12. Another case vide Crl'P' No'10526 of ":025 was filed before this Court to quash proceedings in CC No Oli cf 2021 for the offences under Section 406 and 420 IPC and St ction 5 of the TSPDFE Act. The contention of the learned ; runsel for the petitioners in the said case was that the provisions lf TSPDFE Act does not get attracted against the petit'rcners in the : tse and that the disputes in cases of chit fund should go before the Ileputy Registrar of Chits, the other offences do not have any strer( th' because the offences under Sections 406 and 420 IPC canno Jo together' the petitioners should not be prosecuted ln the said r; rse' applying the same analogy as was observed in Revathi v' S tate of A'P'' (1 supra), this Court has held that the provisions of TSPDFE Act applies to the said case and has not granted the elief of quashing the proceedings. i 8 c,t.p. N..,,ica "XiJg

13. Now, a batch of cases are filed seeking to quash the proceedings under Section 5 of the TSPDFE Act apart from the offences under lpC.

14. No doubt, Telangana State Chit Fund Act is a complete code in itserr it is pertinent to take note of the fact that the chit Fund Act was enacted by the parliament in 1982 while the TSpDFE Act came into existence in 1g99. lt is pertinent to refer to the objectives of the TSpDFE Act in this regard. lt was observed that the innocent people are being victimized by unscrupulous businessmen conducting chit fund business and are deceiving the rnnocent people with their attractive returns and after collecting the amounts from them, are turning down their business. '15. The lndian Finance Minsler has recommended the State Governments to bring down an effective legislation to take control of the situation

16. ln the said back drop the TSPDFE Act came irto existence' Now the question is whether the chit transaction fars under the definition of Financial Estabrishment and if so, whether the TSPDFE Act applies to the said transaction. / 9 EfD,J crt.P. No.1339A o12025

17. As discussed supra, Section 2(c) of the ISPDFE Act defines Financial Establishments and the nature of business involved in chit transaction squarely falls under the s lid definition. Any subscriber of a chit would pay the amount exgtt cting returns from it and the person collecting the money would alt;, r promise the same to pay the amount in excess than what the sll scriber pays. Therefore, the offences, if any, would be covered und: ' Section 5 of the said Act. Hence, it can be held that TSPDFE Ac1 lpplies to the Chit Fund transaction. Now, the question arises that r{ ren there are two enactments occupying the same field, which ena :tment would prevail. 18 Section 14 of the TSPDFE Act and Secticr 3 of the Chit Fund Act are relevant to be referred in this regard. Section '14 of the TSPDFE Act reads as follcys ' 14. Act to override other laws: Save as ()l terwrse provided in this Act, the provisions of this Act slri ll have effect notwithstanding anything inconsistent :l erewith contained in any other law for the time being in fortx or any custom or usage or any instrument having affect by irtue o1 any such law.' Section 3 of the Chit Fund Act reads asfo I rws "3. Act to override other laws, memor rndum, articles, etc.- Save as otherwise expressly provid 3 I in this Act,- l l : a i l0 EID,J c.t.P. No.li3980t 2025 (a) the provisions of this Act shall have etfect notwithstanding anything to the contrary contained in any other law for the time being in force or in the memorandum or articles of association or bye-laws or in any agreement or resolution whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, arlicles, bye-laws, agreement or resolution aforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.,, Thus, both the enactments would prevail as far as there is no inconsistency between the two

19. The Hon'ble Supreme Court in the case of State of Maharashtra and another v. Sayyed Hassan Sayyed Subhan2, held as follows: "7. There is no bar to a trial or convictton of an offender under two different enactments, but the bar rs only to the punishment of the offender twice for the offence Where an act or an omission constitutes an offence under two enactments, the offender may be prosecuted and punrshed under either or both enactments but sha not be hable to be punished twice for the same offence. 1 . The same set of facts, in conceivable cases, can constitute offences under two different laws. An act or an omission can amount to and constitute an offence under the and at the same time, an offence under any other law. 2 The High Court ought to have 2 Criminat Appeal No.119S of 2018 EF!7 i I EfD,J Ctl.P. tlo.13390 ol 2025 taken note of the General Clauses Act, 1897 which t't ads as follows: "Provisions as to offences punishable under more enactments Where an act or omission const t offence under two or more enactments, then the r shall be liable to be prosecuted and punished under r any of those enactments, but shall not be liab( punished twice for the same offence.' two or rtes an ffender ither or to be

20. Thus, in the light of the Apex Courts deci'; cn' it is to be held that both the laws would operate. Applying the t aid analogy it is held that the offences alleged in the present case w( uld attract the provisions of Chit Fund Act as well as the TSPDFE A<l

21. ln the present case, the petitioner is all >ged to have received amounts from the innocent subscribers un<ll.r the guise of chits and has not repaid any returns to them. The inv:;tigation is still in progress and the truth is yet to be unraveled. t he allegations clearly point out that the subscribers were lured to p€ y the amounts in terms of chit transactions, but the petitioner failt: I to show any returns or repay their amounts. The contention r f the learned counsel for the petitioner is that the offence under ll:ction 420 IPC does not get attracted to the petitioner. But it can be adjudged only after a full-fledged trial as to the said offence gets e itracted or not. Thus. the allegations prima facie point out the 'rffences under r 12 ETD,J c,l P. No 1i193 0t 202s Section 420 lp9 and Section 5 of the TSPDFE Act. Hence, in view of the above held discussion, it is held that the petition lacks merit and therefore, the proceedings against the petitioner cannot be quashed and the petition is liable to be dismissed.

22. ln the result, the Criminal petition is disrnissed. Miscellaneous Petitions, if any pending, shall stand closed SD/. M. OSMAN ALI BAIG I ISTANT REGISTRAR. A //TRUE COPY// ECTION OFFICER To,

1. The Station House Officer, Hanamkonda Police Station, Warangal District. 2. One CC to Sri. C M R Velu, Advocate [OPUC] 3. Two CCs to Public Prosecutor, High Court for the State of Telangana. [OUT] 4. Two CD Copies YIR i Sa Y? i i I I HIGH COURT DATED:1211112025 ORDER GRLP.No.13398 ot 2025 * LI SIa i) I 2 3 J\N 2026 v ..,, DISMISSING OF THE CRIMINAL PETITI)N. {, I T IL H .{4+ Yr-- G[+s