S') and also the guidelines formulated by the Hon'ble Supreme CourtinArnesh Kumar v. State of Bihart scrupulously. However, the

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 quash the FIR No. '174 of 2024 dated 06-05-2024 on th|e file of the Kodad Town Police station at Kodad, suryapet District against Petitioner/Accused No. 3infor the alleged offence uls. 420 of IPC and section 5 of Telangana Protection of Depositors of Financial Establishment Act (TSPDFEA), 1999. l.A. NO: 2 OF 2024 Petition under section 528 of BNSS praying that in the circumstances stated in the lvlemorandum of Grounds of Criminal Petition, the High Court may be pleased to stay all . further proceedings including the arrest of the Petitioner/Accused No. 3 in FIR No. '174 0l 2024 dated 06-05-2024 0n the file of theKodad Town Police station at Kodad suryapetfor the alleged offence u/s. 420 of IPC and section 5 of Telangana Protection of Depositors of Financial Establishment Act (TSPDFEA), 1999. This Petition coming on for hearing, upon perusing the l4emorandum of Grounds of crrminar petition and upon hearing the arguments of s.i saini Aravind, Advocate for the petitioner and sri Jithender Rao Veeramfla, Additionar pubric Prosecutor on behalf of the Respondent No. 1. The Court made the following Order : ,// HON'BLE SMT. JUSTICE JUVVADI SRIDEVI CRIMINAL PETITION No.15976 of2024 ORDER: Petitioner, who is arrayed as accused No.3, Crime No.174 of 2024 pending on the file of P.S.Kodad Town, Suryapet District, registered for the offences under Section 420 of IPC and Section 5 of The Telangana Protection of Depositors of Financial Establishment Act (for short "TSPDFEA Act"), 1999, is seeking to quash the proceedings against him. 2 Heard Sri Aravind Saini, leamed counsel for petitioner and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor appearing for the l't respondent-State and perused the record. J The case of the prosecution is that petitioner along with other accused has cheated the de facto complainant by not paying Rs.18,82,000 l- chit amount even after completion of chit installments. I I I 2 'a

4. Learned counsel for the petitioner submits Llrat there is no default on the parl of the Company as all';ged by respondent No.2 and the Company remains comnritted to making payments to all the subscribers, but due to COVID-19 pandemic, large number of subscribers have defaulted in payment of installments, which resulted in creating significant backlog to the Company. Though the Company had been striving to overcome the same, since the process is time consuming. there are procedural delays. 5 Learned counsel for the petitioner further submits that in order to attract an offence under Section 420 of IPC' inducement to deliver property with a fraudulenl intention from the inception is necessary, but there are no such averments in the complaint. He furlher submitted that Section 5 of TSPDFF.A is not attracted, as in the present case, the subject Chit lund Company is not a Financial establishment, which accepts deposits. In supporl of his contentiorL, leamed counsel for the petitioner relied on the judgment dated 3

01.11.2022 passed by this Courl in Crl.A.No.3S of 2019, wherein, at paragraph Nos.14, 15, 23 and 24, it was held as I under: "14. That apar1, it is imperative to note that chit fund is not a financial establishment and Section 2 (c) of TSPEDFEA defines 'Financial Establishment', as under: "Financial Establishment', means any person or group of individuals accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a cooperative society owned or controlled by any State Government or the Central Government or a banking company as defined under Clause (c) of Section 5 of the Banking Regulation Act, 1949".

15. Section 2 (b) of the Act defines "deposit", which runs as under: "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."

23. In the case on hand; as narrated above, it is not the case of the prosecution at all 4 th:rt the accused persons are running a financial establishment. The case of the prosecution is that the accused are doing chit fund business. Therefore, when it is not thc case of the prosecution that accusr:d were not running financial establishment and accused were not accepting the deposits, when PWs.l to 4 and 6 and other subscribers have not deposited the money for interest and whcn they have not committed the default of the alleged deposit, thc question that the accused, including the appellant, have committed the offence punishablc under Section 5 of the Act does not arisc.

24.The Police should not have filed charge shcet under Section 5 of the Act. Similarly cognizance also should not have been taken and that charges also should not have been framed." 6 On the other hand, learned Additional Public Prosecutor appearing fbr respondent No.1-State, opposed for quash of proceedings stating that the petitioner is allegedly a part ofchit fraud which involved huge amounts collected by several chit subscribers and serious allegations are levelled against him. Fr.rrthermore, investigation is progress, hence, prayed to dismiss the petition. r 5 7 Having heard both sides and perused the material on record, in view of the judgment of this Court in Crl.A.No.38 of 2019, Section 5 of TSPDFEA is not applicable to the petitioner herein. Accordingly, the proceedings against the petitioner for the offence under Section 5 ofTSPDFEA are hereby quashed. 8 Insofar as Section 420 of IPC is concerned, since the punishment prescribed for the said offence is less than seven (07) \ 1 years, this Court deems it appropriate to direct the Investigating Officer to follow the procedure laid down under Section 41-A 0 t Cr.P.C., (presently known as Section 35 (3) of the Bharatiya Nagarik Suraksha Sanhita (for short 'BNSS') and also the guidelines formulated by the Hon'ble Supreme CourtinArnesh Kumar v. State of Bihart scrupulously. However, the petitioner/accused No.3 shall co-operate with the Investigating Officer as and when required by furnishing information and documents as sought by him in concluding the investigation. The petitioner/accused No.3 shall file all the documents which he ought to file to prove that it do not come under the criminal offences and the Investigating Officer shall '1zor+1 a scc zz: 6 consider the same before filing appropriate reporl before the a.' Magistrate. 9 With the above observations, this Criminal petition is disposed of. Pending miscellaneous applications, if any,, shall stand closed. To, //TRUE COPY// Sd/.MOHD. ISMAIL ASSISTANT REGISTRAR i1 r) S ON OFFICER 1 2 J 4 5 The Principal Judicial First Class Magistrate at Kodad The Station House Officer, Kodad Town, Suryapet District Two CCs to the Public Prosecutor, High Court for the State of Telangana, Hyderabad [OUT] One CC to Sri Saini Aravind, Advocate [OPUC] Two CD Copies Vtugh o. I I l i l I I.l HIGH COURT DATED:0310112025 f I ORDER CRLP.No.15976 of 2024 (, F x- (-') i. '' L.,rt ,- \\ . '.\. s .a s l'-J t'\i, .:7 t.i ,,, f (. ),. ,/' ( DISPOSING OF THE CRLP 0\ {