The High Court · 2025

THE H:ONOURABLE SMT. JUSTICE K. SUJANA CRIMINAL PETITION No.16214 of2or24 / ORDER,: The pl e sent Criminal Petition is filed uncler fiect: o-r 528 Bharatil'a Nrirgarik Suraksha Sanhita (for short tsNSliJ to 'luash the proceeclinqs against the petitioner/ accused No 7 irr Crime No. 174 ot .2(24 of Kodad Town Police Station, Suryaoet J)istrict, registerec fir - the offences punishable under Sectior 42 ) of the Indian Pe tu Code, 186O (for short 'IPCJ and Secticn l'i of the Telangr nir Pr,)tecLion o[ Depositors of Financia] trs.labljshment Act. 1q'lq ([c r short TSPDFEA).

2. l,::.rcl :lri Remidala Kotaiah, learned cottnsel ap'p:aring on bt--l'r:rlt o' the petitioner as well as Sri E. Cianesh., [t arned Assistanl Flrbiic Prosecutor appearing on behaif cf the responrlr:nt ',,1'r 1. Lr:::rrLr'<l counsel for [he petitioner submittod tl-rirt the

3. matter j ; ;rlttarely covered by the common c rde: dated 1 I .O9.: O.l+ Lr, Criminal Petition Nos.1O494 and 10597 t1 2024 and en,-'[c ser [ :r copt' of the said order. 2 SI(S,J c.rl.P.No.16214 of 2024 Learned Assistant Public Prosecutor also submitted that

4. the issue in the present criminal petition is covered by the earlier order in the above criminal petition.

5. ln view of the said representation and as the matter is squarely covered by the common order in the above criminal petition, this criminal petition is disposed of in terms of the above said order, adopting the reasoning contained therein. The proceedings against the petitioner in Crime No. 174 of 2024 of Kodad Town Police Station, Suryapet District, are hereby quashed. Pcnding miscellaneous petitions, if any, in this Criminal Petition shall also stand closed. /TTRUE COPY// SD/. L. LAKSHMI BABU PUTY REGISTRAR SECTION OFFICER To,

1. The Prl. Judicial lvlagistrate of First Class, Kodad' Suryapet District 2. Tne Station House Officer, Police Station, Kodad' Suryapet Drstrict ^. .-. 5 rwo ccs ro the puBLlc PROSECUTOR, High court at Hyderabad (oUT) q One CC to SRI REMIDALA KOTAIAH Advocate [OPUC] 5. Two CD CoPies tpk gh HIGH COURT DATED:1AA312025 -1 dE S)7 : I q 5 Il 5 ;u,l Z]ZI z o * l') t SP,rt 1t E :-i.: - --_ 2 d+ * o ORDER CRLP.No ,16214 of 2024 CRIMINAL PETITION IS DISPOSED OF ) o'\ v THE HONOURABLE SMT JUSTICE K. SUJANA CRIMINAL PETITION Nos.1O494 & 1()597 of 2o24 COMMON ORDER: The lis involved in these two petitions being one and the same, both the criminal petitions are heard together and are being decided by way of this common order.

2. These Criminal Petitions are filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (fot short 'BNSS]. Criminal Petition No.10494 of 2024 is filed to quash the proceedings initiated against the petitioner/ accused No.3 in FIR.No.230 of 2O24 dated

13.O7 .2024 before the Manuguru Police Station, Bhadradri Kothagudem District, for the offence pugishable under Section 420 of Indian Penal Code, 1860 (for short 'lPC') and Section 5 of the Telangana Protection of Depositors of Financial Establishment Act, 1999 {for short TSPDFEAJ and Criminal Petition No.lO597 of 2024 is filed to quash the proceedings initiated against the petitioncr/ accused No.2 in FIR.No.236 of 2024 before the Manuguru Potice Station, Bhadradri Kothagudem District, 2 :iKS, J crt P N-o ri r,rr & 1tt19 o 2021 br the offence punishable under Section 42O r'f lP ) and SC.:tJC N 5 Of thc TSPDFEA SILP_T o.LO494 of 2024 'l he brief facts of this case are that lhc respc'nCent

3. N(:.21 de facto complainant lodged a compla nt slatir g that th,r Ielitioner, along with two other, has; ch:ar:e'I him statir g that they rvork in Akshara Chit Fund'; [h.'e nafter reJerr,.Lt o.," 'Company') and pursued them to Joirl 'n the chits promising to give extra commission ancl ol herr brlnus in ttr,: :hit. It is allegcd that the respondent No 2 b':lieved in th: deceitful words o[ petitioner and joined Ln t[.e chit as s;rrlrscriber in trvo different chits for atl lrrLo rrtt of Rs,. 11,,{)O,OO0/ - eat:h and made rnonthlv insta llnent payrrerts for'50 nronths using chit numbt'rs ABCTi)\P-23 and ABCTOlP 06. Horvever, when the rt'spor dr:nl. No.2 iifte{i the chit two \c.rrs ago and asked thc pet tion':r and othe'r accuscd pr:rsons for returns of his shra e, no arncr'r'ls were Sivcrt lo llim. SKS, J Crl.P.No.l0494 & 10597 ol2024

4. On receipt of the said complaint, the Police registered FlR.No.230 of 2024 dated 13.O7.2024, whereunder, the petitioner was arrayed as accused No.3 for the offences punishable under Section 420 of IPC and Section 5 of TSPDFEA. Aggrieved thereby, this Crl.P.No. 10494 of 2024 is hled. Crl.P.No.l0597 of 2024

5. The facts of this case are on similar lines w'ith that of Crl.P.No.iO494 of 2024. The respondent No.2lde facto complainant in this case lodged complaint stating that believing in the words of petitioner and other accused persons, he joined in two chits for an arnount of Rs.10,0O,0O0/- each and made monthly installment payments using chit reference numbers ABCTO4M- 19, ABCTI lJ 40 and ABCT1 1J-28. Howev€r, when he lifted his chits, he louncl that he was been cheated in (he hands of petitioner and other accused persons.

6. On receipt of the said complaint, the Police registered FIR.No.236 of 2024 dated 77.O7.2024, 4 SKS, J Crl P.No lO.r9a ,i 1t)5< 1 n 2024 wher lrnder, the petitioner was arrayed as ac(ruse I No 2 fo: 1:lLe offences punishable under Section '120 of It'C and Sr:cti;n 5 of TSPDFEA. Aggrieved there by, this Crl.l? N o.10597 of 2024 is filed.

7. I{eard Sri B.Mayur Reddy, learned seni:r c rrrnsel represonting Sri Aravind Saini, learncrl cour-rs:l for p€titj3Der in both the matters and Sri [).Anrn I umar, leiun:cl Additional Pubtrc Prosecutor, apl;,:arir g for respc ndent No.1 - State in both the m 11ters. No r( presentation on behalf of respondenl !o.2/dt facto complz.inant, respectively, in both the matt( rs.

8. Learned senior counsel appearing for rh( ltet troner subrritted that there are no set of specrfrc alle5a:rons leveled against the petrtioner in the conteltrs cl bc[1. the FIRsr. He contended that the Compan,\' colrcs under acti\( llr operating category ancl is commil tt:r:l ro n ra krng paymerlts to all the subscribcrs, but due ro rviclc:,prcad ec,lr.( nlic impact of COVID l9 pandemic, Iirrgc nrrn ber of subsr:r.bers defaulted in pavnrcnts of instrillrnt nts uhich re:;ul'ei in creating signific:rnt backlog to th(, Clr)r rt )any 5 SKS, J Crl.P.No.r0494 & 10597 of 2O2a and though the Company had been striving to overcome the same, the process being time consuming, there are procedural delays. He lamented that initiation of criminal proceedings is against the provisions of Section 64 of Chit Funds Act, 1982 (for short Act, I982J as the same enables the Company and subscribers, likewise, to adhere to legal process to recover the dues. g. In addition, learned senior counsel for petitioner incessantly contencled that in order to attract offence under Section 42O of lPC, inducement to deliver property with a fraudulent intention from the inception is necessary, but there are no such averments made in the complaint. He averred that as per the contents of respective complaints it is clear that when several installments "verc prized money rvas received by them from the subject chits paid by the respective subscribers, the and the same would portray that there was no intent of cheating on the part of petitioner. He asserted that Section 5 of TSPDFEA does not attract the facts of the cases on hand as the sub.lect Chit Fund Company is not a financial 6 SKS, J crl.P N. 0:(l.l ,, lr)5( 7 rt2024 estal lishment which accepts deposits. He reit,rra.tr d that the (lompany merely acts as a foreman fo; manag; n;1 the conl.r itrutions collected from the subscrrbers and di sbr r sing them to the prized subscriber ezlch rnonth ba.sir g on the paJments made front non prized sLr b:ir )ribers 1Cr. In support of the above contentron, lcarned s:nior coun;e1 for the petitioner sturdily relied on th( jLrcgrnent datec' i11.11.2022 passed by this Court in Crl.A.Nr.ii8 of 2C 111 n,hereunder, in paragraph Nos.23 anr 21 tr w: s held as ur d er: "23. In the case on hand, as narralcd .borc. r, rs I ot the case of the prosecution at all rhar rhr ;t-.Lrsi..l persons are running a financial estatrhshflr,.rir 'l rr case of the prosecution is that the .r((use.l frr rll,r rt chit fund business. Therefore. rvhen rt rs rror 'Lrt,tr ;., of tbe prosecution that accused \rer. rrot rr...r \J finarcial establishment aod a.clrscd r,r, accepting the deposits, rvhen PWs I to I a. I ri :r r(l other subscribers have not deposl(d lh. |r )|,rv ,.)r interest and when they have rmt .om i((l ( ),1 default of the alleged deposit, the qLreslron lr,rf I rc accused, including the appellan{. havc conrnr rr,rl t rr: 4 I I 7 SKS, J Crl.P.No.l0494 66 rO59Z of 2024 o{Ience punishable under Section 5 of the Act does not arise

24. The police should not have filed charge sheet under Section 5 of rhe Act. Similarly cognizance also should not have been taken and thar charges also should not have been framed ,'

11. In addition, learned senior counsel for petitioner prayed the Court to consider the submissions made on behalf of petitioner and allow the criminal petitions, quashing the proceedings iniiiated against th€ petitioner in Crl.P.No. 10494 of 2024 who is accused No.3 in FIR.No.230 of 2024 and the petitroner in Crl.p.No. 10597 of 2024 w}ro is accused No.2 in FIR.No. 236 ot 2024.

12. On the other hand, the learned Additional public Prosecutor appearing for respondent No.1 State, strongly opposed the submissions made by learned counsel for petitioner in both the matters and contended that the petitioner is allegeclly a part of chit fraucl which involves around huge chit amounts collected by several chit subscribers. He reiterated th:rt there are serious set of a-llegations against the petitioner u,ith regarcl to fraud and 8 SKS, J CrlP.No. 0rq.r ,: lt)5r 7 )t2024 cl'ezrring in Chit Fund Company. He assertel tha the rn atfcrs require investigation, as such, prayed the C )rlrt to dr;nr ss the criminal petitions as the same lacks mer its. 1:: . I{aving regard to the rival submissions m rde , Lr d on gorng lhrough the material placed on recor d, it is rLoted that the grievance of the petitioner is :wo fo d : the prirniLr-y grievance is with regard to allegaticns c'relcd againsr. the petitioner with regard to chealing ir.r tl Le chit luncl u'hich results in attracting Section 42O of IPC) :,gtinst hi r rrrcl the secondarJr grievance is with rcgarcl t r non appli,:ability of Section 5 of TSPDFEA in thr car es on hzrnrl ',rrhereas, it is the Specific contentior, of 1(,sp(,rdcltt Nr . 2 , n e facto complainant in respective <:asr:r.. th :ti the petiti rrrer/accused No.3 Crt.P-No.1 ).19. of 2[)2.1 /rrccused No.2 in CrI.P.No.1O597 o1 202. has c h ca.t srl them in chit fund business lrv pr o r r rsi r-rg (omnuilsron and bonus, etcetera., but ,.r hi n thev apprr a ched the Company to receive their arrroLllLt; bv lilting lheir respective chits, they found lhat tllc. r,ere :le.ci',cd by the words of petitioner. ln sup},o11 s' 6i5 I ! : , , ; i i !' * tI I 9 SKS, J Crl P No.lO494 & 10597 of 2024 lq.I I I ; i contentions, the learned senior counsel for petitioner relied on the judgment of this Court in Crl.A.No.3S of 2O19 wherein, it was observed that the Chit Funds Act, 1982, is a self contained Act and observing that Section 2(b) of TSPDFEA defines the word "deposit" as a sum of money either in lumpsum or installments made with a finoncial establishment Jor a ftxed peiod, for interest or return in anA kind-

14. That apart, it is imperative to note that chit fund is not a flnancial establishment and Section 2(c) of TSPDFtrA defines Financial Establishment", as under: " 'Financial Establlshmenr', tne.lns any person or group of individuals acceptrng cleposit under any scheme or arrangement or in irny other manner but does not inclLlde a corporatioll or a cooperative society owned or controllcd by any State Government or the Central Government or a banking company as dcfined ur)der Clausc (cl of Section 5 of the Banking Regul:rtror) AcL, 1949". 10 SKS, J Crl.P.N , lC49 I 5 tC t9? ot 2O).+ conrpreJrensive

15. At this stage, it is expedient to note tlrat th3 Act, I 9U:l is a complete code in itself which is spe:;itcally d.:si11;ecl to address and redress all grievance s rellled to .rl)rt tund operations which provides mecl anLsms for resolving disputes and alsc ir c udes 1.rr rrit trovrsions, such as, Section 76 whi<:h is ens h -ined lo ad lr-ess any misconduct within the chit funcL bu,.ritress. ["r:rrl c -, when there is a specia_l enactmerlt li[:e t] e Act, 19t..1 r,rhich specifically governs the domain of r:hit uncls, ht. :;,rrre would prevail over general laws. Thr:refo _e , as 1lrtr. is a non obstante clause in Section 3 of r\cl, 1(rg2. tlrr :, r rc rvould prevail over general law. rr view thereof, Section 5 of TSpDFE{ is not al)lrlr .i []l(' to the cases on hand against the J)etitj lrrcr. Flo',, r,,. :r , ltaving regard to the circumstances of :he r ases t), 'r' r (r ..d considering the fact that the nlattfrs are at 1l t' ;rrr g, of investigation, this Court is of thc opi.icn').t it ,i \r:r llicant to continue the investigatiorr ag.rjnsl tltc l)(rrlro llr rvith regard to offence punishable undcr Se<.tic. 4:O ): irrl I I I I F ! : l : ; 11 Crl.P.No.10494 & lO5S? .:5:;, I q f v ;

17. In the light of the above, it is to be concluded that the proceedings initiated against the petitioner/accused No.3 in Crl.p.No. 1O494 of 2024 / accused No.2 in Crl.P.No.1O597 of 2O24 in FIR.Nos.23O and 236 of 2r)24, respectively, before the Manganuru police Station, under Section 5 of TSpDFEA are hereby quashed. However, the investigation against the petitioner in both the marters with regard to Section 42O of IpC shall continue, Since the punishment prescribed for the offence alleged against the petitioner in both the matters is less than seven (O7) years, without going into the merits of the case, this Court deems it appropriate to direct the petitioner in both the matters to appear before the Investigating Officer on or betore 2O.O9.2024 bettveer- 1l:00 A.M., ro 05:00 t,.M.. and in-turn, the Investigating Officer is directed to follorv the procedure laid down under Section 41_A Cr.p,C , (prescnug knotun as Section 35 (3) of the Bharatiya Nagarik Suraksha Sanhita (for short tsNSS) and also the gr.ridelines lormulated by the Hon,ble Supreme Court in Arnesh Kumar Vs. State of Bihar r scrupulously_ Hou,evcr, the '1zor+1a scc zzr 72 SKS, J Crl.P.No.1Oa94 t. 1(i5t I rl2024 petrti )rLer/accused shall co-operate with the Invest grlting Office r as and when required by furnishing i.rfcrrt airtion ar.d Jrrcumcnts as sought by him in concludirrg the in\rcs illation. The petitioner/accused shall file z ll the .locLrrn,rnts which he ought to file to prove that it k not .o nr: rrnder the criminal offences and the Invest:grrting CI:ir:r r shall consider the same before frling appr<:priate r.')',r r), fort. thc Magistrate. 1 8 . \',tLth the above observations, both the ()rim Lr al Pe:itiru s are disposed of. l,llscellaneous applications, if arry pencting, rihall rl: c sI nrl closed )r ti' I I O(l 2024 PT K. SUJANA, J : I t , I I