Criminal Petition No. 13200 of 2025 · The High Court · 2025

Order

This Criminal Petition is filed by the petitioner-accused seeking to quash the proceedings in FIR No.312 of 2025 on the file of Hanamkonda Police Station, Warangal Distrrct, for the offences under Sections 420, 506 read with 34 IPC and Section 5 of the Telangana Protection of Depositors of Financial Establishments Act, '1 999 (hereinafter referred as 'TSPDFE Act').

2. Heard Sri CIVIR Velu, learned counsel for the petitioner and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor for the respondent No '1-State

3. Learned counsel for the petitioner has submitted that the present case is registered under Sections 420, 506 read with 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 learned counsel for the petitioner is that a chit fund transaction does not amount to collection of deposit and thus, the provisions under the Depositors Act do not get attracted. Therefore, registration of the crime under the said Act would be an abuse of process of law. lf that offence is setbside, then the other allegations under Sections 42O and 506 IPC \ EfD,J crt_P. No_132000120?s also do not get attracted against the petitioner as there is no dishonest inducement and criminal intimidation 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 al.legations of non- payment of the amount to the subscribers in a chit would definitely fall under Section 5 of the fSPDFE 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 allegations under Sections 506 or 420 IPC cannot be proved and hence, prayed to dismiss the petition. 1 lzot:1 a alr lcrry rto /1 ETD,J Crt.P. No-13200 ol 2025

5. Perused the record.

6. The contention of the learned counsel for the petitioner is that once it is a chit fund transaction, it is squarely covered under the Chit Fund Act, which is a complete code in itself and hence, invoking Section 5 of the TSPDFE Act is not maintSinable. On the other hand, learned Additional Public Prosecutor relied on Revathi v. State of A.P. (1 supra)

7. Before going into the principle laid down in Revathi v. State of A.P., it is pertinent to refer to the relevant provisions under TSPDFE Act and Chit Fund Act which are extracted hereunder for the sake of reference: Section 2 (b) and (c) of the TSPDEF Act reads as follows "2. ln this Act, unless the context otherwise requires,- (a) xxxx (b) "deposit" means the deposit of a sum of money either in lumpsum or installments made with a financial establishment for a fixed period, for interest or return in any kind. (c) "Financial Establishments" 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 co-operative society owned or controlled by any State Government or the Central Government or a banking company as defined under 4 ctl.P No.13200012025 clause (c) of section 5 of the Banking Regulation Act, '1O/rO' Section 5 of TSPDFE Act reads as follows: "5. Where any frnancral 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 whrch may extend to rupees five lakhs. " Section 76 of the Chit Fund Act reads as follows "76. Penalties.-(1) Whoever contravenes or abets the contravention of any of 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 6'l 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 dccument required to be filed under this Act within the perrod 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 plabe 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 3g; or i F t ! I t I I III I I i i E I E B I I l Efo..J Cn.P- No.1320o ol 2025 (c) who contravenes or fails to comply with any olher requirement under this Act, shall, on conviction, be punishable with fine which may extend to three lhousand 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 rupees or with both." B. lt was held in Revathi v. The State of A.P. that: "18. There is no penal provision under the 1971 Act providrng for punishment in casd of 'default' committed by organizer/foreman of the chit by not paying prize amount to the successful highest bidder or in case the organizer/ foreman of the chit absconds'by discontinuing the chit during the course of its currency and by not repaying or refunding the subscription amounts already collected from the members. The 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 organ,zerlforeman of the chit under the 1971 Act. Similarly, even if the 1982 Act comes into force, it also does not contain any provision dealing with penal remedy against organizer/foreman of the chit and attaching penal liability for 'default' 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 (r EfD,J C.P,No.1i20oot2045 applicability of the existing 1971 Act and also the 1 982 Act as and when it comes into force."

9. The learned counsel for the petitioner has filed 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 IPC 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 matter, vide Crl.P. No.733 l of 2025, this Court has observed that even a registered Chit Fund Company falls under the definition of Frnancial 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. 'l 'l . The definition of Section 2(c) ol the TSpDFE Act as it prevailed till 2003 excluded a registered company. However, the Act .-*. : : r i I I I I EfD,J Ctl.P. No.1320O ot 202s was amended in 2003 and at present Section 2(c) ot TSPDFE Act makes it clear that it does not exclude the companies which are registered under the Companies Act. Hence, it was held by this Court that the registered Chit Funds also get covered under the definition of Financial Establishment as defined under Section 2(c) of the TSPDFE Act and thus, the provisions of the TSPDFE Act get attracted to the offences alleged in the said case. By holding the same, the quash petition was dismissed

12. Another case ylde Crl.P. No.10526 of 2025 was filed before this Court to quash proceedings in CC No.03 of 2021 for the offences under Section 406 and 420 IPC and Section 5 of the TSPDFE Act. The contention of the learned counsel for the petitioners in the said case was that the provisions of TSPDFE Act does not get attracted against the petitioners in the case and that the disputes in cases of chit fund should go before the Deputy Registrar of Chits, the other offences do not have any strength, because the offences under Sections 406 and 420 IPC cannot go together, the petitioners should not be prosecuted. ln the said case, applying the same analogy as was observed in Revathi v. State of A.P., (1 supra), this Court has held that the provisions of TSPDFE Act S EfD,J c .P No 13200 0f 2025 applies to the said case and has not granted the relief of quashing the proceedings '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 IPC '14 No doubt, Telangana State Chit Fund Act is a complete Code rn itself, it is pertinent to take note of the fact that the Chit Fund Act was erracted by the Parliarnent in 1982 while the TSPDFE Act came into existence in 1999. 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 innocent people with their attractive returns and after collecting the amounts from them, are turning down their business.

15. The lndian Finance ft/inster lras 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 into existence. Now the question is whether the chit transaction falls I I I t I I I i I ! * i I I I I I // 9 ETO,J c,t.P. No.13200 0l 2025 under the definition of Financial Establishment and if so, whether the TSPDFE Act applies to the said transaction.

17. 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 same to pay the amount in excess than what the subscriber pays Therefore, the offences, 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. Now, the question arises that when there are two enactments occupying the same field, which enactment would prevail 'iB. Section 14 of the TSPDFE Act and Section 3 of the Chit Fund Act are relevant to be referred in this regard Section 14 of the TSPDFE Act reads as follows: "'14. Act to override other laws: Save as otherwise provided in this Act, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage or any instrument having affect by virtue of any such law." 10 EfD,J ctt P No 13200 012025 Section 3 of the Chit Fund Act reads asfollows: "3. Act to override other laws, memorandum, articles, etc.- Save as otheMise expressly provided in this Act,- (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained rn any other law for the time being in force or in the memorandum cr articles of association or byeJaws 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. articles, 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 '1 9. 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 conviction of an offender under two different enactments, but the bar is only to the pun,shment 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 punished under either or both enactments but shall not be liable to be punished twice for the same offence. 1. The same set of 'z Crffinal Appeat No.1195 of 2018 i I I I I 11 EfD J Ctl.P. No 13200 6, 7025 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 taken note of the General Clauses Act, 1897 which reads as follows: "Provrsions as to offences punishable under two or more enactments Where an act or omission constitutes an offence under two or more enactments. then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence."

20. Thus, in the light of the Apex Courts decision, it is to be held that both the laws would operate. Applying the said analogy it is held that the offences alleged in the present case would attract the provisions of Chit Fund Act as well as the TSPDFE Act I I

21. ln the present case, the petitioner is alleged to have received amounts from the innocent subscribers under the guise of chits and has not repaid any returns to them. The investigation is still in progress and the truth is yet to be unraveled. The allegations clearly point out that the subscribers were lured to pay the amounts in terms of chit transactions, but the petitioner failed to show any returns or repay their amounts. The contention of the learned counsel for the petitioner is that the offences under Sections 506 and 420 IPC do not go together but it can be adjudged only after a full- ETD.J c.t,P- No.1320001202s fledged trial as to which of these two offences would get attracted Thus. the allegations prima facie point out the offences under Sections 420 and 506 IPC 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 d ism issed

22. ln the result, the Criminal Petition is dismissed Miscellaneous Petitions, if any pending, shall stand closed. //TRUE COPY// SdT L. VIJAYA LAXMI ASSISTANT REGISTRAR e' ' SECTION OFFICER To, l.ThellAddl.JudicialFirstClassMagistrate,HanamkondaatWarangal' Warangal District

2. Th; SfiO Hanumakonda Police Station' Hanamkonda District' 3. One CC to SRl. C M R VELU, Advocate [OPUC] +. i*. C"pi"" to PUBLIC PROSECUTOR' High Court for the State of Telangana at HYderabad [OUT]

5. Two CD CoPies PUDL d I I HIGH COURT DATED:1211112025 ORDER CRLP.No.13200 of 2025 i;11 .)S 't c(-) 2 4 JAtl 2[2$ * PASC .Z I C) .). * CRIMINAL PEITITION IS DISMISSED. ( B I I