The High Court · 2025

stated in the fvlemorandum of Grounds of Criminal Petition, the High Court may be pleased to quash the C.C.No.540 of 2008 on the file of the First Additional Chief Metropolitan Magistrate, Hyderabad in the interest of justice. l.A. NO: 1 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 direct the preliminary issue as to whether the criminal proceedings can continue against the petitioners after the demise of Karta (Petitioner No.2) in CC No 540 of 2008, and whether continuation of criminal proceedings would constitute an exercise in futilitY. These Petitions coming on for hearing, upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the arguments of IVlr.Siddarth Luthra & lVr.S. Nagamuthu, representing Sri K.V.Raman, Advocate for the Petitioners and tVr.B.Rajeshwar Reddy, Government Pleader on behalf of the Respondent No.1 and of t\rlr. L. Ravichander, appearing on behalf of tvl.Rathanga Pani Reddy & B.Shiva Ram Sharma Advocate for the Respondent No.2 and l\/r.Palle Nageshwar Rao, Public Prosecutor for the state of Telangana for respondent No.3 and also Mr.Arun Kumar Vundavalli (Party-in-Person) as respondent No.4. The Court made the following : COMMON ORDER THE IIONOURABLE SRI JUSTICE P.SAN{ KOSHY AND TTIE HONOURABLE SMT. JUSTTCE K. SUJANA CITIMINAL PETITION No.597l ol' 20 1 I ANI) I.A.No.1 of 2025 IN / AND CRIN,IINAL PIiTITION No.6280 OF 2011 COMMON ORDER: (pcr thc lton ble Sru.lustice P Sa t Ko.th\;) Heard Mr. Mukul Rohatgi, Ii4r. Siddarlh Luthra, & Mr. S. Nagamuthu, learled Senior counsel represcnting Mr. K.V. Raman, lcarned counsel lbl the petitioncrs; Mr. B. Iiaieshwar lteddy, lear-necl (iovcrnnrcrrr pleadcr fbr thc State of A.P. tbr rcspondent No. I, Mr. L. Ravichandcr^ lcanrcd Senior Counsel appearing on behalf of Mr. K. Rathanqa Pani Rcddy & B. Shiva Rarn Sharma, fbr respondcnt No.2 (Reserve Bank ol India) and Nzfr. palle Naseshu,ar Rao. learlcd Public Plosccutor lor the Statc of 'I'clangatra [br responcient No.3, and ancl also Mr. Aruna Kumar Vundavalli ( Party-rn- Person) as respondcnt No.4

2. These are hl,o criminal petitions filed undcr Section 482 of Code of Criminal Procedure, 1908 (lor- short, 'Cr.I,.C') by rhe petitioncrs / accused Nos.l & 2, seeking for quashing of thc crirninal cornplainr case No.540 oi2008, seized by the I Additional Chicl Metropolitan Magistrate, Nampally, Hyderabad, wherein the two petitioners have been nrade as an accused lor the oflences punishablc under Sections 45S (1Xi) and 45S (l)(ii), read with secrion 58ll of the Reservc Bank of hrdia Aot 1934 (tbr short, the 'RBI Acr'). P age 2 of 29

3. The State of Andhra Pladesh (the combined as it then was) being the cornplainant filcd a cornplaint case before the I Additionat chief Metropolitan Magistlate, Narnpally, llydcrabad, against thc two petitioncrs hercin alteging that they have cornrnittcd oflLnccs punrshable undcr Sections a5S (l)(i) and a5 S(lXii), read with section 588 olthe RBI Act along with other related offences under the RBI Act

4. It was allcgcd that the petitioncrs have becn leceiving deposits lrom the general public in total violatron of ScctioLr 45S ol'tlie RBI Act. Tlic allegation was that tl-re petitioncls have aoccpted deposits frorn the genclal public contrary to tlre aforesaid provision of the RBI Act with eflect from 01.04.1997 . Furthcr, it was also alleged that thc pclitioners have also lailed iu repaying the entire deposits by the l't April, 2000 as was tlre rcquircrnent of law then. Thus, establishing thc offencc under Sectiou 45S of the RBI Act.

5. Subscquently, rvhen thc pctitioners carnc to know about the filing of thc cornplairrt, they have liled crirninal rniscellaneous pctition ylde Crl.M.P.No.885 of 2010 under Sections 218 and 219 of Cr.P.C. to delist tl.re inquiry of the pctitioners under Section 25 I ol Cr.P.C. to any of the three offences cited. The said petition got dismissed on 01.07.201 1, lcading to the filing of the instant two crirninal petitions. Pagc 3 of 29

6. Meanwhile, the Stale Governtnent issucd a G.O. vide G.O.Ms.No.S01 dated 19.12.2006, appointing one Srr'f.Krishna Raj r.r, as thc aulhorizcd officer under Section 58A of the ItBI Act to take act.ion agaitlst the petitioners ln excrcise o1' such alrtholity. It is based upon this that the onginaI criminal complaint case No.540 of 2008 camc to be filed

7. It is also pe(inent to mention that tl.re validity ol G.O.N4s.No.80l, datcd l9 t2.200(r, rvas challenged in W.P.No.270(r5 of 20()6, rvherein, ttrc intct-inr praycr lor susllensiorl of thc said G.O. u,as disnrissccl lcatlinq to thc filing of thc S L.P (C) No.2487 of 2007 before thc Hon'ble Supleme (lourt, and the Hon'ble Supreme Court vide its order dated 20.04.2007, made it clcal'that thcre shall not be any lieezing of accounts of the pctitiotlcrs or attachmcnts ttnder Tho A.I']. Protection of Dcpositors of Financial Estab lish rne r-rts Act. 1999 (tirr shott, thc 'Aot of 1999') subject to the dircctions given in the order. .[-[rc Hon'ble Suptetne Clourt recorded the undertaking given by thc cor-rnsel tbr thc pctitioncrs and others beforc thc Supreme Couft that ltecessary amounts rvill be deposited in the Escrorv account periodically and as and rvheu the FllRs are maturcd the amounts wor.rld be paid to the depositors. The I{on'blc Supremc Court also directed the first petitionet to fumish the cletails of thc payrnents made to the depositors to the RBI and the State Goverument and, il there is any delay in rnaking payment to the depositors whose deposits havc tnatured. thc sanic had ;:a to be rcpofted to the RBI and the State Govemment and they will be at liberty to take appropriate action against the petitioncrs herein under thc Act o11999

8. Tlre pctitioners bctween 01.04.2001 to 31.03.2011 havc made payments to dcpositors in a sur.r.r of ILs.2-596.25 cr-ores (inclusive of interest) out of a total deposited amount ol Rs.254l .59 crores outstanding as on 01.04.2007. At present, thc totaI outstanding deposit liability IS only Rs.5.3 3 crores fbr paynrent, of rvhich the pctitionels have bccu holding the aniount in thc Escrow account with Union Bank of lndia, Sarlabad t]ranch, Hyderabad (A/c.No.370601010036137) since a long tirnc. However, since the concemed depositors have not corne forward to suruendcr thc flxed deposit receipts for recovcring the payrncnt of thc maturity arnount, the petitioncrs could not pay the sarne

9. The nratter earlier catne up for hearing bclore thc lcarned Single Bencl-r o1' this High Coult on 31.12.2018, on which date, the [eamed Single Bcnch hearing [he crin nal miscellaneous petitions had allowed the sarne on the following grounds: "25. The certificate issued blt tlte Clrurtered Accountants sltows tlrut the out.tlanding deposit liabili4, tts on 31.03.2007 is Rs.2,541.59 crores. Repaltnsrll pve)e.ssed durittg 01.04.2007 to 31.08.2018 i.s Rs.2,596.98 crores. The outstandittg deposit liability as 31.08.2018 r.r R.r.J--iJ crores, and tlrc Page 5 o[ 29 balant:e availahlc in escrow account is Rs-5.43 uores- It i:.firther obso-ved iu the ccrtiJicate thot balance lying tn the escft)i) account is in e-rcess of lhe out.ttu ding liabtlity, a5 on 3 I.08.2018. 27. [:rorrt the fact that no depositor:- havt conc Jbnldrtl vith otn totnplaint agairtst the lctitioners and that, in pursuonce o/'the ulh:gatiotts natfu irt tlu: cctntplnittt, the p(,titionet.s have t,tLot up tht treti'i.tr' ,tl payitg lrut:k thc deposit.s, it t:un br understood that lhere was no malafidt ifie tiotl on the part of the petitioners to conmit any offences with tagard to the tleposits tollectct! fro m t h t' d e1 xt s i I o r-r. 28. Hcttc:c, lhrs Court opine.s, tlrul this is a atse wltcre lhe irlnrtnt pou:tr untbr Su tion ,l[i) ol' Cr.P.C. can h' exert:isel fbr quasltitt:1 tht pt or:tedirtg.s agrLin.\ I I h e pct i t to nc rshrccused. 29 ltcortlinglt, t,ith thc ubove oltscrvatir;n, lht ('rinrntl I'ttitiort \o 6280 o/ 20ll i.s allovterl und all firrther proceedings agulnsl tlrc petilionerskrt u-,;ed u C.C No.510 ol 2006. on tlrc .lile oJ thc Court of Llddrtiotrul C;lrir:l MetropoIitan Mo:<istrate, Hyderabad, ue lterehy t1ttashcd."

10. 'l'his order ol the learned Single Bench ."vas subjcctcil to challengc bclbrc the Hon'ble Supretne Courl in Crl.A.No.20 l-5 al 2024 alons \\,ith Cr[.A.Nos.20l6 &)017 of 2024 and which werc disposcd olby the I-lon'ble Supreme Couft rnaking the following obscrvations, viz., "5. As may be.'ggnftom lhe extrdcts o_/ the lligh Court's order, reproduced above, the prinrury and foremo.st reason assigned by thc High Court for quashing CC No.540/2008 is that the respondcnt had ulready processetl repavntent to the tune of Rs.2,596.98 crores du|ittg 01.04.2007 to .11.08.2018 and rhe onl, outstonding liability os on 31.08.2018 was /ttr Rs.5.33 crcres against v+,hich the bolance available in escrow account was Rs.5.43 crores_ 'l-he High Courl further noticed that to depositor ltas cone lbr,,vard x,ith any I)age 6 of29 cornploint against the respondent and there being no mala lide inlention, tlte crintirrul prosecution w,as liable to be quashcd. 8. Thnt being said, we find that the Higlt (itLu't, be.fbre quashing lhc criruit proceedirtgs, ougltt to huyc tuleart tltc follotvitrp steDS itt tlxe larger Dublic i lercsl: (i) As thc llcsportdents werc alleged to have accepted the deposils itt violtttion of th( RBI norms , the RBI o:ttght to lmve lseen lrcard t0 con rehensiveI understq d the ittricqcies involved itt llrc taller. u Since one of tlre raison d'Atre of ltrigh Cou rt's ordcr fi'as thql no depositor hqd conrc fortuard, tlrc Hish Court should lmve issuetl a public notice for irrviling clairtts of llrc investor.s- This t'tts eccssurl :;o as to ursure lll lhe t:luiurs of all lhe bona fide invesktrs are snisfied anl tlrul tlte Respondett irt fitct ditl rrot htrbor utv tnqlu lile intcnti<ttt. 9. techtical grourtds (withoul going irtto the nerit) and renit tlte case to tlrc High Court .[or .fi'e.sh adjudication of' the petitio .liled b), the respondent (Margadarsi FinarLciet o^) in accordartce u,itlt law and after hearing the State of ll/e are, lhus. irtclirrcd to set asid( tlu' in4tugned.jucl,lurcnt ott tlrc.se Telangana, tlrc State qf Artdlua Pradesh. tlrc Reserve Banlt of Irtdia ard the bona.fide investors, if they orc so irtcli.ncd lo.loitr tlrc proceedirry-s. Mr. l4rndavaLli Aruna Kumar, the appe:llatt irt persott, L.s al.so gratted libertv to as.sist lhe High Courl ut the pading procccdirtg.:. t0- ll wilt be opeu fr.tr the tligh Court tct ittvitc cktints/ob1et:ttorts.fi ont the lnna .fida inve-ttots, ard if such cluint^^ are rcceit'el atul require deterniration/.scrutiny, lhe High Court ruy, if so rr:tlLtired, tppoirt a fornrcr High Court Judge/Senior Judicial Officer to deterntine suclt claints, so tts to enable the responderi-Financiet s to settle the petd tg clains over and above the deposits xthich are alreadv refunded. Such an exercise, however, may be urtdertaken in a tinrc bound ruanner. I l. The Hish Court may, thereafter, Droceed to dcterruine ts lo trhctlw the conthtuetion of the criniqdl proceediflps ;uill serve llrc ctuse of ustice ststem or it will be an exercise in adminislratiort of the criminal i fu tilitv. I 3. The llon'ble Chiel Justice of the High Court is reque"^ted to place this ntalkr before his own bench or some otller J[airly rsfi6y [.y' s.on I]e (.h. 14. All lhe cantcntions of the parties raised before the Uigh Court or this Court ure kcltl olttn <tnd urc pcrntittcd to be urged beJbre tlrc fligh Coa.t. 15. It gocs tr,ithout saying that the High Cottrt shull lte at lilx'.rty kt I utthl( t ttll .\ut 1., onttntiuu\ os pcr thcir owu ut('t-it. 16. l{r.nuaycr, this order will .nol enlitle the Slate of Antlhra Prutlesh to iflstitulc fresh u tDI int(s) asai sl the res|orulenl on tha sarfle utuse of aclio or in a related issue. " I l. Pursuant to the aforosaid directions, thc rnatter carne ult [br Irearing he lbrc this []ench lbr a fresh heirrin-e. [t is at tlris.junctLrr-c, tha{ lutcrlocLllory Application No. I ol-2025 in Cr.irninal Petition No.6280 ol20l I was filed in rhe light of subsequent dcvelopments that have taken place. 'l'he devclopment was that ol thc dcath of the original petitioner No.2. viz., CH. Rarnoji Itao, Slo. Late Vckata Subba ltao, on 08.06.2024 irnmediately after thc Hon'blc Suprcrne Court lrad disposed o f the criminal appeal rernanding the matter to the High Cotrrt on 09-04.2024.

12. Thus, the death of thc petitioner No.2, the proprietor of the fimr or Kafta ol the said Hindu Undividcd Family (for short 'the HUF) had expired on

08.06.2024 In the ligtrt of the death of the said deceascd petitioner / accuscd No.2, the instant Intcr loeutory Application has been filcd praying lbr dropping of the criminal cases. at this juncture, on this very ground itself as any lurther- Page 8 ol29 continuation ol crirninal procecdings would be nothing bttt an cxercise in futility

13. Leirmed counsel lbr the petitionets drcw thc rttcntlon of the Bcnch to the avenllents made iu the complaint case No.540 of 2008 and contended that upon plain reading ol the entile averments in the cornplairlt, t1o other individuals werc implicated bcsides thc flrm and thc deceascd petitioncr No 2 viz., CH. Rarnoji l{ao. Fur.ther thc deceascd petitioner, CH. Rarnoji l{ao, was irt lact the Karta of thc t{UIr and it u,as hc alone who had allegcdly takcn dcposits in violation o[' the provisions of thc RBI Act as amended in the year 1997- Furthcrmore, there was no mention of any other party's involvcment in the busincss opcrations dur-in! ttre relcvant period. Howcvcr, upon the dcath of CH Rarnoji ttao, the or.igiurl petitioncr No.2, no other individuals u,cre natllcd in thc criminal cornplaint ancl there are no other accused lcft against whotn thc cr iminal courplaint case could survive and, as such, the crilninal casc is liablc to bc droppcd having abetted.

14. According to the leamed counsel for the petitioners, the Hon'blc Supreme court itself whilc rernanding the rnatter back to the High court wanted the High Cour-t to scrutinize and deterrninc as to whether the continuation of the criminal I'age 9 ot 29 proceedings is requiled in the administration oljustice systelrr or witl it be an exeroise in Iirtilitv

15. Accorcling to thc learned couusel lor the petitionels, upolt notice, thc RBI made their appciiral)cc ancl lLled thcir objcctions and a paper publication lvas madc calling r-rpon all the depositors if any to come lbr,,vard clairning lor any refiurd against zury dcposit ruade by them or to visit thc olllce of the pctitioncrs 1br reccivinc tllc arrount if anv due to them. Even othenvisc, it u,as contcnclccl that hugc anloLult ol- ruoncy hus alreadl, bccn kcpt as rcservc iLr thc Ilscrou, accolrnt to rncet thc claim o['any of the dcpositor if thcy come even zrt a later stage and thcse l-acts had alLcady bccn taken note of by thc Hon'ble Supreme court in its clccision, dated 09.04.2024, rvhile remanding tlre rnatter back to thc I{igh C--ourt

16. [t was lirrther-contended that since the petitioner No.2 was t[-re Karla of the HLJF and HLIF lacks legal idcntity under the I{BI Act and given that he was the sole person who alleged to have cornmitted inegularities under thc RBI Act. the criminal proceedings should automatically be dropped upon his death Horvever, thcrc werc t',vo accused i.e., the HUF (accused No. 1) and CH. Ramoji Rao as its Karta (accused No.2). The prosecution of the I{UF cannot continue after the Karla's dcath since the HUF is not recognized as a petson r-rnder the Page l0 ol29 RBI Act. The leamed Senior Counsels argued vehemently that as thc offence said to havc cornmitted by the deceased CH. Ranoji Rao, his lcgal hcirs or other lnelnbels ol HUF, thc subsequcnt Karta of HUF- cannot be prosecuted in the criurinal proceedings as there is no vicarious tiability ol the deceascd and the acoused carr inherit only civil tiabilities and so far as criminal tiability is concemerl, it cannot be passcd to the next generation

17. So 1ar as rcspondcnt Nos-I and 3 (thc Statc of Andhra Pradesh and the State ol- Tclangana), thc cotrnsel replesenting both stal-es, acting ol) specific instructions, ackrrowledgcd that in light of the Hor-r'ble Suprenie Court's obseruations in its order dated 09.04.2024, and the subsequent eventualities that occurcd insofar as the dcath of petitioner No.2 CH. Ramoji ltao, thc critniual prosccution has Iost its legal sanctity. Both states too[< a categorical stand that any lurther procccdings rn C.C.No.540 of 2008 would be a lutilc exercise, and thcy expressed thcil intention not to continuc with thc procccdings. I8. So lar as respondent No.2 is concerned i.e., the Reservc Bank of India, it was contended that insofar as thc offence committed by the petitioner No.2 to be in violation of the provisions of the RBI Act, the sarnc is punishablc under Scction 45S read with Scction 58B (5A) of the RBI Act I'age llof29

19. Refenrng to the provisions of Income Tax Act, 1961. the learned Scnior Counsel reprcsenting the RBI contended that a I:IUF thus has a legal status under the Inconre Tax Act and in support of his contcntion hc rclicd upon a judgrnent ol' Patna Iligh Court in thc casc ol Shotkath Hussain vs. 'I-[re Commissioncr of [ncomc'I'ax. Hc fulther contended tliat even otherwise thc pctitioner No- I can be safely brought uudcr the purvie\{, of un-incorporated association ol individrLals under 4-5S(1) of the RRI Act and such include HLJF also and therefole it nrav be construed "ejusdent ganeris"

20. According to the learned Senior Counsc[ representing the RBI on the death of petitioner No.2 viz Sri CIl. Ramo.ji Rao, the Katta of the l" petitioner, it was at thc behest of ouc CH. KiLan. S/o. Late Ranioji Rao, who had r,oluntarily ulrvcd a pctition lbl strbstrtLrting hinrself in placc ol (hc petitioner No.2 to pursuc witli thc ir-rstant case. Upon substitrrtion petition being allorvcd by the Division Bench of ttris High Court, the petitioner No.1 HUF remains ir.r existence and since they have moved a petition for further procecding with the petition, thc causc ol action sti[[ survives. Therclbre, accolding to the RBI, the criminal complaint case need not be droppcd or held to bc abetted 2L. It was also thc stand ol the RBI that norv that Sri CH. Kiran has got himself substituted in placc ol CH. Ramoji Rao, the status of the accused nor,"' Paga 12 ol29 stands passed to the newly impleadcd pctitioner No.2 herein in the compendia's terms ol I IUF and as stated above since ttre petitioner No.l is a oontinuing entity. As regards the other rrnplications ol'law and thc liabitity, as suoli would fat[ upon the pLesent petitioners and the crirninal coinplaint case tleed not bc droppcd or ordercd to be abctted.

22. Having heard thc contcntions on behalf of all the parties to the procceclings, tlte core issur: to be decicled while considering I A'No- I o12025 in C]rirninalPctittclrlNo.5gTlo{.20llis..whetlrerintlrclightoftlredeathol. CH. I(aLnoj i Rao, S/o Late Venkata Subba Rao, would the cornplaint case and theproceedingsthereon,orthecriminalproceedingsinitiatedbasedona complaint survivc any lurther or not?"

23.Nowlorbetterunderstandingtheissue,inthetightoftllefactualrnatrix thathar,ebeennarratedintheinitialpartofthcprcserrtjudgLrrent,itianutshcll whatisreflectedistlratthecrstwlrileconrbinedStateofAndhraPradeshhad fitedacotnplaintcasebeforettrclAdditionalMetropoIitanMagistrate, Hyderabad, against the two petitioners herein alteging them to have violated ccrtain provisions of the RBI Act like Section 45 S(lxD and Section 45 (SX2) r.ead with secrion 58 B(5A). In view ol the said allegcd violation of the Pagc I3 o[29 provisions ol the Rtrr Act, the petitioners were liable for orirninal prosecution under Section 58 B(5A) reacl wirh Secrion -5g(E) olthe RBI Act.

24. The allegatiou *,as pri*arily that thc accusecl pcrsons havinc rcceived hugc dcposits fi'om s*'e'a[ ureurbcrs of'the gcnerar pubric, the rccused rvcre allcgedly rcceiving dcposits fi.orn tlre gcncral public with sood ycarly returns, such reccivi.g ol trre dcp.sits r'o,r re,cra[ public wcre n,rt pen,issibre under the Ittlt Act. and rvhich arnountecl to violatior.r 6l'rhc provisions oltIc RBi Act entaili'g crirrrirrel I)r,r\ccrti(,r. Irrrrr.,iillcrl ,)rr lrr(' c,)rlPlairrt c;rsc Lreing registercd, the petitioners had rnoved an Interlocutory Apptication beforc the I Additional Metroporitan Magistrate for clis*-rissing of the con-rpraint amongst othcrs, pri.na.ily on trrc count of ther-c bei,g no depositor who lras co,re forl'arcl alleging the so ca ccl nrisrrsc or rrre pror isi.us .r'Lrre RIlt Act a'd, in thc ubsencc of a gcntrirrc depo:it.r' as conrprainrrrt or. thc rquricved pcrsorr, the case itselfought to had been re_jccted. 25' The said Interlocutory Apptication stootr r.cjected by the I Additional Metropolitan Magistrate, which initiarty red to the firing of the present criminat Petitions. Thc further conrentio, was thar the Fron'brc Suprcrnc Cour-t permitred the petitioners to ope'ate thc busi,ess ensuring that the entirc payment of each and every depositor be crearerl and fbr which rhe accounts of the petitioners Pagc 14 ol29 were not permittcd to be fieezcd. The l{on'ble Supreme Courl itself had pcrmitted that thc pctitioners shall also ensure certain arnount of moncy to be put iu an Esclo Accouut cnabling the amount due to the depositors, if any, and wl'ro approach loi withdlawal of tllc amount, the samc can be tnade. Therefore, the subscquent registration of the cornplaint case by the Govemment was liable to be rejectecl.

26. 'l'he Crt.Nt. P. Nos.597 and (r2E of 2011, rr.reanwhile, were alkrwcd vide order datecl 31.11.2018. The said order u'as subjectcd to challenge bc{bre the Hon'blc Supreme Clourt and thc l-lon'blc Supretnc Couft remitted the rnatter back for a fresh re-consideration, the relevant operative part of which has already bcen reproduced in thc preoccling paragraphs of this judgment. 27 . At the cost o f repetition, wc would tikc to hightight three paragraphs of thc said judgrnent ol tho tton'blc Supreurc Court i.c. paragraph Nos.l l, l2 and I 6, which reads thus: " lt. The tligh Court nra1,, ther<:aftcr, proceed lo determine as to whether the cotllinuation o.[ the crinfurul proccedings will serve the cause of administratiort of the criminal ju,stice slsten or it will be an exercise infutility.

12. IVe request lhe High Court to decide the rualter a,freslt, preferably withirt six months. During .such period, the complaint proceedings shall remain staltg6l- Page l5 o[ 29

16. Hov,eva', this order will not entitle thc State of Andhra Prade.slt to institute frcsh comploint(s) against the rc.spondeut on the same cause of action or in a re lated issue "

28. From plain reading of tlic aloresaid observation nlade by thc Hon'ble Suprcmc Cour1, firstly, the Hon'ble Suprcrne Court rvanted the High Coufl to scrutirlize thc lacts and reach to a conclusion whether thet e is any necessity in corltirluing with the criuiinal plocecdings, sccondly, r.r,hcthcr thc continrration of thc criminal procccdings will at alL scryc thc adnrinistraiion of'criminal iustice and, tltirdly, thc cntire exercisc shoulcl not be rrr lirtility

29. [n additior-r to tlre aforcsaid dircctions, thcrc u,as also a verv clear unambiguous and a categorical rnandatu by the Hon'blc Suprerne Court restraining the Sl-ate Govemment ftoru int;tituting lrcsh complaint against thc petitioners in respect of (a) ttre sanle causc olaction and ib) in a relatcd issuc This rn other words also means that thc High Court in thc course of its scr.utiny has to peruse only the lacts and records whiclr [rave corne belbre the High Court from the proceedings drawn titl norv. [l wc rcad the ortler of the t{on,ble Supreme Court dated 09.04.2024, particulariy the contents of paragraph No.8, the reason to rcmand back the matter was also cnsuring that all the claims ol any bona fide investor should not go unatterdcd or unsatisl-red. This rvas also to ensure that the petitioners did not have any mala fide intention against any of Pagc l6 ol29 the depositors' dcposit is concemcd and that the petitioners arc still scrious in meeting any claim that is raised by any of the depositors and, for which also. sufficient security rvas ensuLed to be rnadc availabic by l-[ie petitioncrs

30. It is at this sihration that petitioner No.2, the pcrson who was, in fact thc person entirely rcsponsible in operating the business till 08.06.2024 on which date hc had expircd- In the given cilcutnstances, the question is also, can anyone clse be substitutcd in placc of petitioner No.2 in thc original oriminal case i.e C.C.No 540 o12008

31. True it is that Chckun Kiran Rao had got himsolf substituted in place of the deceased petitioncr No.2 so tar as contesting the instant two criminal pctitions. What is more tclcvant is, what happens to thc crin'rinal case C.C.No.540 ol 2008 wherc thete has bccn no steps taken by the petitioners to get thernselves substitutcd. NeithcL the compLainaut, nor thc State Governtnent have taken any stcps to replace the deceased pctitioner No.2 in thc crimiual case for its continuation to a [ogical cr-rd.

32. In thc given facts, if the Govemment, on onc haud or the complainant on the other hand having not taken any steps lor substitution and if the conccmed Court proceeds with the criminal case it would be as if the criminal case is being proceeded against a dead pelson I'age l7 ol29

33. Another aspect which necds consideration at this jrncture is, r.vhether in thc cornplaint or whether there is any rnaterial available on rccord to show that othcr than thc deccased, anyone else u,as also equally shaling thc burclen in thc operation of business. h-r other words, rvhat is also necdeii to bc apprcciatcd is "as to whethcr the name of the legal hcirs of thc deccased has beeu rnentionecl an1'rvhere in thc rccords shor.r,ing them also to bc involvcd in th(r opcration ol busincss at tlic rclevant point ol tir-nc.

34. [. thc casc olS.K. Alagh ts. Statc,l'tJ.[,.r, thc Ho,'blc SupLc.re Court in paLagraph No l9, has held as under: " 19. .-.ll and when o statute contemplotas creation of such a legal .fictictn. it providct .tpacifically therefor. In ab.gence of'any prot,isiort ltrid t.lotvtr undu tlrc stulute, a Direclor o.f a contpuny or un entpktt,t,c t:ttnrttt b<, haltl to l_ta t'icarictuslt, liable.fbr any ojletca comntittetl by llrc conpul, ttstlf (Sce Suhirhu Rantontrt tlt:, t'. R.B S. C hanntbasavarudlt.\,a 1Q006) t 0 .\'a_ (.' -t,S1 : ()a07) t SCC (Cti) 62ll .)"

35. In the casc of Sham Sunder vs. State of Harr,atra 2. thc [{on,ble Suplcrue Coult in paragraph No.9, has held as undor "9. But we are concerned with a criminal liability under penal prct,,,ision ctnd tot a ciyil liability.'l'he penal provision nust be strictly construed in the first '11zoos1 s scc eoz {2008) 2 scc (cri) 6s6l ' 11ISSO1 a SCC e:O , 1989 SCC (Cri) 7831 Page 18 of29 place. Secondllt, there is no vicaru)us liabittty in crintinal law unless the statute takes lhat also within its [o\d......"

36. 'l'he Madras High Court in the casc ol Devendra Pundir vs. Ra.iendra Prasad Mauryar, lias concluded thus: "7. This Court is o-f the r:onsidered vrew lltat lhe abovc proposition oI law laid d.own by the Hon'ble Ape: Court in thc deci.siort of Fine Tubes [(2007) 5 SCC 103 . (2007) 2 SCC (Cri) 155J is squarcly applicable ro 1l.lc.facts of tlrc utstar case. Even t lhis cast:, as ulreatly poinled oul. tlrc first accusetl is adntittedll' the sole proprietrix o[ tha cottcttrt. rtnnrclt, 'Kunuli.shi l:nterytri.scs' cutd os such, the qu?.\tion of tlkt .sctttnd uccused lct bc vicu iou.sl.r, held liable .fttr thc offurcc .said to have bc,:rt r.:onnillt:tl Ly llxt.lir.;t tt,:'cu.s,:t] urtder Sct:tion 133 rtf the Negotiable lrtstru rc t.\ ,4cl ttot ot ttll nrise "

37. Vicarious liability means making one person liable for the action ot inaction of another on the basis ol their rclatiorrship rvith cach other'. Undet the [ndian Pcnal Code, 1860, a person in sourc cascs can bc nrade vicariously liable for the actiou of another, such as itt cases relating to Sections 149, |54, 155, 156, etc. [n criurinal law in India, thelc ts no collcept of strict vicarious tiability except where it is so provided uuder law or by judicial precedents Thus, accountabitity for a cr irninal action is based upon a factual situation or incident prima facie establishcd at the initial stage of cr-irninal proceedings and proving it beyond doubt when it concludes '2008 cri u zzz 1w"d1 Pagc I0 Uf 'o

38. T[re law is well-settled that a proprictary conccm is synonymous to the proprictor. 'Ihc concept of vicarious liability was introduced in the penal statutcs, like thc Negotiable Instrurnents Act to nlakc the Dircctors. pzrrtncrs or other pcrsons, in-char-gc of and control of the brLsincss ol the company or othe rrvise responsible fbr its affairs; thc cornpany itself beirg a .juristic l]crson.

19. A proprietary concerrl, howevcr', stands absolutcly on a cliffercnt footing. A person may carry ou business in the namc of a busincss col,.cern. but lrc bcing propr-iclor thereol-, u,oLrld be solell, responsible lor rhc conductinq ol rts aflhirs. A proprietary cotlcem is not a Company.

40. The Hon'ble Suprerne Courl in the case of Manual vs. Statc of Kerala, reprcscnted bv I'ublic Plosccutor and Anothera has hclcl as under:

7. I/icariou.; liabilih, i.\ a form of a slrict. secondart, !iahilin, tlttt trt i.;L,s unler llu: crtrunon law doctt ine o.f agency,- respondent sLrpt:r ittr. lh,: re.;1tott.sibili11, r2[ lhe supetiot for the ucts o/ their .subordinale, or, in a houtler .sctt.tLt Llte respon.sihiLittt impo.sed on ofie person Jbr the wrong/irl a<:tuttts of atotlrcr per.son. ,\uch a liability arises usually because of sonte or the otlLer lt,gul relotionship behueen the two. This o.ften ocats in the contet of civil lavt fctr exatnple, in employnrent cases. In a.criminal context, vicarious liability assigns guilt, or criutinal liabiliq,, b a personfor wrongful acts corunitted by .soneone e lse. E. Generally, perso can be crimina y liable for the acts of anothar if tlrcv ure u party to lhe olfence. Now, strict vicarious criminal liability ts sontew,httt ofon { 2022 sCC Online Ker 990 Pagc 20 of 29 cxception to the general rule of direct personal cubability and is a modcnt developmentthroughstaluto\)prot,isions.sttchcritttittult,icariousliabili,lcan. be attributerl onlf if il is provi(led turler a pattu:ulnr Slatute' Pcnal Code' 1860 ([ot short, 'the tPC') nukes tt dtpur tLu e frtttn thc ganer ul rula in -fcr cases' tttr thc principle ttf respondent superk)r ln suth u c(ts( tL Tasler is held liablc urtder various Sections of the II'C.litr ttcts connitted b) his ttgcttls or scrvatls' Scction 149 of lI'C providcs.fot vicrtrious liabilit.)'' lt stdtas tlmt ilan offence Ls contmilted b1, an;, ntentber o.f an unlawful assanbly in proseculiort of a conntott oblcct thereof, or such as the mentters of lln( assenblv lcttcv" that tlrc offalcc to br, iikell, lo be conlt itled in prostculiotr (l lh(tl ohjact' every ltct'rrr wln' at tlrc time of r:omntittittg tlrut offence was menLter' woult] ltc guiltv ttl the offenr:e contrrtitted

41. Recently, the Hon'ble Suprerne Court in the casc of Vinayak PurshottamDubevs.JayashreePadamkarBhat.he[datparaglaphNo.27as " 27. On a reading of the above, il it clear, t'lLen it (:o tc!; lo l:'crsondl rigltts (Ls opposed to a pt ol)rietalt rights) trre rights orisi g ottt of ant contru(:tual obligalions or the rights tltat reloLc to slatus' Such pcrsonal rigllls are ttot trans[erable antl al.so rtrtl inhetik ic Cortespondngly Sectin 306 of tltc Succession Act, lg25 (for .short "the t925 Act") applic's lhe ntxtnt "actio personalis morilur cum persona" (a personal ri1ht of actiot dies with the per.son) which is linited to a certaitt class of cases and v'ould apply when the right litigated is not heritable By the same logic' a decree lnltler camot ettforce the same againsl the legal represenlalives oJ.a decettsed judgntent- dehtor unless the sante survive.s as agahst his legal represe ntatives ' " '1zoz+1 s scc:ss l'age 2l ol 29

42. Again, vc.y recently, the Dclhi I{igh Courl in the case of Mehra Prashantbhai Mukunrlray partner vs. Magnifico Minerals l,vt. [,1d.6 pararraph No.9 lras held as under ''q lt ts vt:ll settltd law that a sole proprietor.firm ha.; uo .\,epar( c irlentitl' tnd thc xic proprietor n,ill be re.tponsible for tlte sunte_ The Hon'ble Sultrt'nte Ccturt in Raglur Lakshmin(rayatl(ut r,. Firr: I.ttlrc-s had obscryerl orul helcl as tnder. "9 TltL' lesuiption o.f tht ucc:tt.ted in the contplttittt p,.tition i\ absalutL,lt.' r'trgtrt A jut i.srit: 1)erson cln be a tonprutl, trrlitttr t/Lc ut(utirtlta ctf' tltc provistous of' tlrc (itnponic.t Act, l9i6 or u pertntr\hip wtthin the neaning of' the provision.s ol tlrc Patt (t-\hip )ct, 1932 ot ofl aljsociatiott of per-yort.s r:ltk:lt ordinarily y,,ould mean a body of persons which t.s rtot inu)t pot.eted utdcr un., -9lafuk. A propiefary (:ottL.(.:1t, Iralr,t:tl ,r. .;tund.s rtb.solutel.r on a difJLrent.fitctting A persorr nrttl, (:qr[.1, t)tt ltu.:;ittc:.s in llk,tune of u btt.sittcss. L:oru:ern, btr/ lrc baing proprietor there of . y,ould bc: solel.t, rc.sponril,l,, /. r. condrtct of its a/lhirs. A pt.oprietaD) co1c<.rtt is nol tr comtnnt, ,, 43. [n the prcsent casc, as per the complaint, the accLrsccl \rras thc sole proprictor of the propriety concem, and according to accuscd, hc is thc Karta ot. the HUF (Hindu undivided Farniry). In both scenarios, the crirninal proceedings naturally abate upo. the death of trre accused during the peudency of the trial. It was co,tendcd that criminal proceeding initiated against the sole accused callnot transfer criminal liability to the next kin. This rs pafticularly clear sincc 6 2025 scc onLine Del 2514 Page 22 oF 29 from the beginning until his death, hc remained the solc proprietor ol the pl.oprietaty concetrr and nolle of his larnily melnbers were involved in the business. From the contents ol the cornplaint also it is not refleotcd, nor were any narnes added to the proceedings at any point ol titne' L{owevct, any financial obligations which rernaincd unfutfittcd would be subject to oivil proceedings, leaving the case open fbr recovery of dues through civil legal mechanisLns- Whcn an accused pcrson dies whilc crirninal procccdings are sti[[ pcncling, thc caSC against thcnt comcs to an end. Undcr ctinlinaL lau', liability lbr criminal acts is personal and does not pass on to othels. 'l he prinoiple of actus nonfacit reum nisi mens sit red - one guilty unless done wittr a guitty mind - tneatting an act alone does not tnake undcrscores the personal naturc of crirninal responsibility. once the accuscd is no longcr alivc, the cloufl cannot continue the trial, as punishment or exoneration can only be applicd to a living individual.

44. The dcath oi the accused typically results in the abatement of crirninal proceedings. This applies to botl'r trial and appcal stagcs, except whete specihc laws pr ovide otherwise. For exatnple, under Indian crin-rinal law (such as the code of criminal Procedure, l9l3), if the accused dies during trial, the case is cloSed and no verdict is issued. [n case of an appeal against conviction, some Courts may altow the legal heirs to continue the appeal for the lirnited puryose Pagc 23 of 29 of clearing the deceased's nalne, especia y when the conviction caries reputationaI consequences

45. crinrinal tiability does not transfer to thc next ol'ki* or a*y rnembcr of thc lamily. Urrlikc civir eases, whcre p.opcrly or. firrarrr.iar riability nry be inherited, c.irninal procecdi.gs arc directcd only at the person accused ol com,ritting tlre oflense. Howevcr, il therc arc allcgations that involve othcr individuals (incl,ding rar,ily .rcrnbcrs), those cases wilr procccd indepcndently.

46. It i. the aloresaid backdrop that wc need to apprcciatc the contcntions o1. thc parly-in-person, rvho in his submissions pri*rarily agitated at the nature ol thc olrcnce said t. havc becn couunitted by the deccased-petitioner No.2, Sri I{a*roji Rao. LIc contendcd that inespective of rvhether petitioner No.l is a 'HUF' or is a Proprietorship, r''crely because petitior-rcr N..2, Sri Ramoji Rao, who n'as in fact the perso, n,ho was operating the business, rras since expircd, that by itself would not abatc the crirninal proceedings as it coutd stilr co,ti,ue against petitioner No. 1-Firm. He further contended that even if petitioner No.2, Sri Ramoji Rao. lras sincc admittedly expired. bur thc provisions of Secrion 45 of the Reserve Bank of India Act would still remain in force to bc scrutinized as to whether the petitioners have cornmitted a default as is stipulatcd under the Resele Bank of India Act

47. Sin-rilar was the line of argumenl advanced by thc leamcd Senior Counsel, Mr. L. Ravictrander, represeflting respondent No.2 (Reserve Bank of lndia), categorically contending that so lar as the Reselve Bank of India is concerncd, they are only conccntlating upon the provisions of Chapler III-C rvhich deals with pLohibition of acccptancc of deposits by unincorporated bodics. According to rcspondcnt No.2,Reserve tsank ol tndia, it is undct this chapter as thc petitioncr.s violatcd the provisions of RBI Act thereby acccpting deposits fiorn invcstors in contravention to Section 45S. When this fact came to the notice ol rcspondent No.2-Rcserve Bank of India, they ir-mncdiatcly took stcps fbr prosecuting the pctitioners lor the said violation' 4g- He furthcr contended that so far as thc Rcsen e Bank ol India is concemed thcy arc concentrating on the deposit side and contended that if there are beneficiaries who havc not been repaid their money, the liability "r'ould remain against thc petitioner. According to him, since the business is continuing, the liabitity part would rot ccase. That whether therc is vicarious liability and q,hether such vicarious liability shifts to the tlext genetation or on to the prescnt pcrsons who are operating the busincss arc all matter of facts to Pagc 25 ol29 bc looked into by the Trial coud. Therefore, at this juncture it wourd not be appropriate lbr thc i{igli courl to olose the proceedings hording it to havc abated

49. He lirrthcr co,tcndcd that it is.ot a case where this High court has to tlecide only so Iar as lhe alratcmcrrt of thc proccedi.gs on thc dcath of the petitio,er No 2, Sri Itamo.ii Rao, but also trrc qucstion as to rvhethcr rvhen an 'HtlF' is sued, x,oulcl the case against him u,oulcl abate or not.

50. In vie* ol thc aloresaid c.utc*tio,s a*cr the deliberations ,rade by this Be*ch i, the preceding paragraphs, we carlno[ brush aside tlie categ.r.ical stand taken by the trvo Goverrnte,ts, viz., Covernment of Telangana and the Govenuuent ol Andhra Pr adesh.

51. Learnecl Govemme^t preacrcr rcpresenting the state or rera*gana had in no u,certai, tenns made a statemerlt that for-the reason that therc is no vicarious tiabitity undcr the criminal procccdings it could be passed on to the ,exr gencration, the criminal case lodged against the petitioners upon the death of the main accused, viz., petitioner No,2, Sri Ramoj i Rao, the entire case wourd stand abated and rather the instant criminal case also has to be closed as having become infi-uctuous on abatement. Page 26 ol29

52. If not identical, srmilar stand has been taken by the Governmcnt of Andhra Pradesh which trad also in very categorioal terms has made a statement that a barc pcrusai ol the plaint and the allegations and contentiol-Is raised therein would reveaI thaL there is no allegation against any other person in thc famity of the deceased petitioner No'2 who is said to have been involved in the operation of thc business then or had cither <iirectly or in<lircctly involved in the comtnissiou of thc offcncc contlary to the provisions ol the Reserue Bank of Lrdia Act. In aclclition to thc aforesaid' lcarned counseI relrresenting the State ol Andhra praclesh had also answcrcd thc anxiety exprcssed by thc Horr'blc Supreme Court while remanding the matter by stating that in the light of the dcath of pctitioncr Nu Z' Sri Rarnoji Rao' the cotttinrration of, the prosccution itself hcnccl'urrh woultl bc a lutilc cxercise' 53. At this juncture, if we look into the observations made by the l{on'ble Suprcme Couft whrle remanding the tnatter it would reveal that in lact thc Hon'ble Supreme Couft did not hold the earlier finding of thc lcan'red single Bench in its earlier order dated 31'12 2018 quashing the entire criminal case to be bad in law or to have tbundcd to be contrary to facts and evidence' Rather' the llon'ble Supreme Couft has set aside the said orrler on technical ground of having got the matter decided without hearing the Reserve Bank of India and also without lrearing any of the bona fide investors who stitt have arry grievance Pagc 27 o[ 29 of non?ayment of their deposits once madc and it was only for these two reasolls the matter u,as re,randed to the High courl and after hearing thcse two pelsons, viz., thc ltcservc Bank of Inclia on the one hand ancl thc investors / depositors whosc claim is stilt to be scttled o, thc other, the Fligh Court may take an app.opriate dccision by hotdi,g whethcr thc criminal proceedings have to continuc or it will bc an cxercise in futility. This is amlrly evitlent from the conterlts olpa.agraph Nos.9 and l0 orthe.rdcr passcd by ttre Hon'bre Supr.crnc court u4rile rernanding the mattcr to the I Iigtr Court. [t is i. this backdrop rve need to look irrto thc co.rtc.tio.s by thc Ica'rccl Senior counsel 'aisecl representing the Reser,e Bank or India, the lea,reri counser r.epresenting the State of Andhra Pradesh as also the statc of relangana a,d the parly-in1erso.. The contentio, o['the lear,ed Senior counsel lbr the lteserve l]ank ol India ancl the party-in-person was that, what they are concer,ecr more is in respect of tr-re so-called r,iolation o1'the provisions ol the Resen,e Bank of India on the one hand also i* lespcct of a,y depositor who has been reft out rrom being paid of a*y of the in'cstrncnt or deposits ,-rade by them at that point of time. As regarcls the notice to the depositors is concemed, in spite of notice there has been none who has comc up claiming that in spite of efforts made they have not got the refum of the investrnent rnade on its rnalurity. Pagc 28 of 29 54- However', what is notewofthy is that even if there would have been anybody who is u.paid there is a categorical staternent rnade by cach ol the learned Senior counsel rcprescnting the petitioners that therc is enough of funds in the Escror'v account kept resc.ved and even today if there is anybody whosc invesl.ment has not becn r etuled yet they can sti[[ approach the ncwly added petitioner- No.2 who is presently {.aking carc of operation ol thc business and hc undcflakcs that thc cntire amount payabtc to such per.sons would be tbrth releascd fi-orn the cscrow accourlt_

55. AII said ad do.c, in the abscnce of there being no allegation against any of the family rnernbers of the deceased petitioner No.2, sri Ramoji Rao, in spite of they also being involved along rvith the dcceasccl pctitioncr No_2, Sri Ramoji Rao, in thc cornrnission of violation under the Reservc Bal* ol Intlia Act and also in the light of thc stand takcn by thc Governmcnt of Andhra pradesh as also the covcnunent of rclar-rgana that they do not intend to proseoutc any ol the succcssors of the deccased-petitioner No.2; and lastly, in the absence of any substitution petition moved by the prosecuting agency in the criminal case, Lhis Bench is of the considcred opinion that the complaint case has to be declared to have bcen abated and in further continuation of thc said proceedings parliculaLly in the backdrop of deceased petitioner No.2, sri Ramoji Rao, the entire criminal proceedings and its continuation rvould be an exercise in futility. Prgc 29 ul2')

56. Therofore. for all the aforesaid reasons, I.A.No.] of 2025 in Criminal Petition No.6280 ol 2011 which is filcd raising a prelirninary issue on the continuation of crinrinal procecdings in thc light of the death ol petitioncr No.2 cleserves to be ald is accordingty allowed. consequeutly, the criminal Pctition No.5g71 of 201 1 and crimina[ Pctition No.6280 of 201 I seeking quashmcnt of the crirninal cornplaint case No.540 of 2008 pending on the file of I Additional chiel Metr-opoLitan Magistratc, Narnpa[[y, Hyderabad, rvould also stand allowed by holding that thc crirninal prosccutiofl case against thc petitioncrs is ordered to have abated. No oosts.

57. As a sequcl, miscellaneous petitions pending if any, shall stand closed NOTE: The name of Respondent No.4 lvlr. Arun Kumar Undavalli is shown in the cause title as per the order dated 07 -02-2025 This order substitutes the earlier order despatch ed on 22-OB-2O25. //TRUE COPY// SD/- MOHD. ISMAIL DEPUTY REGISTRAR I n I I SD/- MOHD. ISMAIL PUTY REGISTRAR SECTION OFFICER To,

1. The I Additional chief Metropolitan fulagistrate, Hyderabad- 2- One CC to Sri K.V.Raman, Advocate IOPUC] 3. Two CCs to the Government Pleader, High Court for the state of Telangana, at Hyderabad. [OUT] 4- One CC to Sri tril.Rathanga Pani Reddy & B.Shiva Ram Sharma, Advocate loPUCl i I i I 1 I I I i r i 5- One CC to [t/r.Arun Kumar Undavalli, Party-in-Person [OPUC] 6.TwoCCstothePublicProsecutor,HighCourtforthestateofTelangana,at Hyderabad. [OUT]

7. Two CD CoPies SVS/gh 'ftl I HIGH COURT DATED:0410812025 \ \ A HlnlDtsD COMMON ORDER ) 'i 4 sEP 2m5 :.:.,'.r. t,'i .../ CRIMINAL PETITION NO: 5971 OF 2011 AND I.A NO.1 OF 2025 IN/AND CRIMINAL PETITION NO.6280 0F 2011 ALLOWING THE CRIMINAL PETITION c"e$ &"tu