Nirod Kumar Das .… v. State of Odisha
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK BLAPL No. 12151 of 2023, BLAPL No. 11245 of 2023 & BLAPL No. 14539 of 2023 (Applications under Section 439 of Cr.P.C.) --------------- AFR In BLAPL No. 12151 of 2023 Nirod Kumar Das .…… Petitioner - Versus - State of Odisha (OPID) ...…. Opp. Party Advocates appeared in the case through hybrid mode: For Petitioner : Mr. B.P. Rath, Advocate - Versus - For Opposite Party : Mr. B. Bhuyan, Counsel for OPID In BLAPL No. 11245 of 2023 Ratnakar Palai .…… Petitioner - Versus - State of Odisha (OPID) ...…. Opp. Party Advocates appeared in the case through hybrid mode: For Petitioner : Mr. Kanungo, Sr. Advocate along with Mr. P.K. Deo, Advocate - Versus - For Opposite Party : Mr. B. Bhuyan, Counsel for OPID In BLAPL No. 14539 of 2023 Gurtej Singh @ Sidhu .…… Petitioner - Versus - Page 1 of 19 State of Odisha (OPID) ...…. Opp. Party Advocates appeared in the case through hybrid mode:
Legal Reasoning
For Petitioner : Mr. A. Mohanty, Sr. Advocate along with Mr. S.K. Lenka, Advocate - Versus - For Opposite Party : Mr. B. Bhuyan, Counsel for OPID __________________________________________________________ CORAM: JUSTICE SASHIKANTA MISHRA JUDGMENT 1st May, 2024 SASHIKANTA MISHRA, J. These Bail Applications have arisen out of the same case and involve common questions of fact and law. As such, all the three applications were heard together and are
Decision
being disposed of by this common order. 2. The petitioner, in BLAPL No. 12151 of 2023, Nirod Kumar Das is in custody since 06.08.2023 in connection with EOW P.S. Case No. 22 of 2023 dated 28.07.2023 corresponding to C.T. case No. 9 of 2023 pending in the Court of learned Presiding Officer, Designated Court (under the OPID Act) at Cuttack for the alleged Commission of Offence under Section 420/467/468/471/120-B of IPC read Page 2 of 19 with Section 4,5 and 6 of Price Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS) and Section 6 of OPID Act. 3. The petitioner, in BLAPL No. 11245 of 2023, Ratnakar Palai is in custody since 15.08.2023 in connection with the aforementioned case. 4. The Petitioner, in BLAPL No. 14539 of 2023, is in custody since 09.08.2023 also in connection with the aforementioned case. Prosecution Case 5. The Inspector of Police (EOW Bhubaneswar) Rina Behera lodged an FIR on 28.07.2023 before the S.P. EOW on the basis of an inquiry conducted by her against Nirod Kumar Das, Gurtej Singh @ Sidhu and one David Gaze. The inquiry related to alleged dubious investment into crypto currency by the name STA Token through Ponzi Scheme in Bhadrak District of Odisha. Said Nirod Kumar Das is allegedly acting as District Head and Gurtej Singh @ Sidhu is the Country Head of STA (Solar Techno Alliance), the company that launched the crypto currency in the name of STA Token. The other petitioner, Ratnakar Palai, is a former Page 3 of 19 Member of the STA. It is alleged that the Petitioners have been targeting private individuals and encouraging them to invest in crypto currency STA Token by building a network of members. The investors are asked to recruit further investors on payment of interest or bonus which is expected to increase correspondingly to the number of members added by them. The Company, STA (Solar Techno Alliance), is a Netherland based company which launched STA Token over Block Chain in Binance Crypto exchange in 2022. The website of the company indicates that it aims to promote Solar Energy worldwide and to replace traditional payment systems. It is further alleged that the website is a dubious one as it does not give any details of the company and its directors. Further inquiry revealed that accused Nirod Kumar Das was introduced to STA through one Sushil Tudu of Jharkhand who convinced him to invest in STA for getting quick benefits by way of commission by enrolling others under his network in addition to the daily income through his own investment. Nirod Kumar Das invested Rs. 3,000/- in STA but has earned more than 18 crores of rupees/- by enrolling several persons. He convinced local persons Page 4 of 19 through public meetings to join his network by sending them referral links. As such, thousands of persons are acting as members of STA Token in Bhadrak District. The public meetings are said to be presided by the accused Gurtej Singh @ Sidhu. It was further ascertained during inquiry that two accounts standing in the name of Nirod kumar Das have credit of Rs. 5,03,15,462.59/- and Rs.10,39,74,794.30/- respectively between 1st January, 2022 till date. Several cash deposits were also made into the accounts which is believed to be the unaccounted money deposited by investors through him. It was also found that the offices of STA are opened in different districts and more than 1,000 members have been enrolled in each district. Further, STA Tokens have been used in Bhadrak market as a medium of exchange/currency to buy daily use items. It is thus alleged that having regard to the modus operandi adopted, the transaction is nothing but a Ponzi Scheme. Since virtual currency cannot be used as a legal tender, the use of STA token in Indian market is contrary to law. 6. Basing on such FIR, the aforementioned P.S. Case was registered and investigation was taken up. In course of Page 5 of 19 investigation the petitioners were taken to custody on different dates as mentioned above, their bank accounts were frozen and several documents were seized, besides recording of the statements of several persons. After completion of investigation, preliminary charge-sheet has been submitted on 30.11.2023 keeping the investigation open under Section 173(8) of Cr.P.C. 7. I have heard Mr. Asok Mohanty and Mr. Milan Kanungo, learned Senior Counsel appearing respectively for petitioner Gurtej Singh @ Sidhu and Nirod Kumar Das, being assisted by Mr. S.K.Lenka and B.P. Rath respectively. I have also heard Mr. D.K. Acharya learned Counsel for the Petitioner, Mr. Ratnakar Palai. I have also heard Mr. B. Bhuyan learned counsel appearing for the State in OPID matters. Submissions 8. Mr. Mohanty, learned Senior Counsel would argue that the entire case of the prosecution is based on misunderstanding and erroneous perception of the investigating agency as regards the use of crypto currency. Moreover, the essential ingredients of the alleged offences Page 6 of 19 are not made out in the least. The only allegation against the Petitioner is that a sum of Rs. 2,86,058/- was transferred to his account by co-accused Nirod Kumar Das. That apart, there is absolutely no evidence to show that the petitioner had induced any person to trade in crypto currency or to make any investment therein. There is also no evidence to show that any amount was paid to him by any investors. In any event, crypto currency is also legal tender as held by the Supreme Court in the case of Internet Mobile Association of India V. Reserve Bank of India.1 Mr. Mohanty concludes his arguments by submitting that, in any case, charge-sheet has already been submitted and therefore, there is no justification to detain the petitioners in custody any longer. 9. Mr. Kanungo, learned Senior Counsel would argue that the prosecution has been launched against the petitioner on a misconception regarding the crypto currency and its transactions. He also argues that the essential ingredients of the alleged offences are not made out. In this regard Mr. Kanungo would argue that crypto currency is not ‘money’ 1 2020 SCC online SC 275 Page 7 of 19 within the meaning of Section 2(b) of Price Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS) for which the offences under Section 4,5 and 6 of said Act are not made out. Similarly, according to Mr. Kanungo, the allegation of commission of offence under Section 6 of the OPID Act is also misconceived, since the amount invested by the individuals to trade in crypto currency cannot be treated as ‘deposit’ within the meaning of Section 2-b of the OPID Act. As regards the IPC offences also, Mr. Kanungo makes similar submissions and contends that there is absolutely no proof to show that the petitioner had acted fraudulently or with the specific intent to cheat any person. Mr. Kanungo further argues that the petitioner never promised returns to any person which would be evident from the statements of the witnesses examined by the I.O. most of whom have stated that being attracted by the high lifestyle maintained by others, they were induced to invest. No one has stated that he was directly or indirectly induced by the petitioner to deposit. Explaining the working of the scheme, Mr. Kanungo submits that the amount credited is on a person to platform basis (P 2 P) and is kept in a Trust Wallet in a secured Page 8 of 19 manner. It is not open to any person, other than the investor, to deal with such amount. 10. Mr. D. Acharya, learned Counsel appearing for the Petitioner, Ratnakar Palai, argues that the Supreme Court in the case of Internet and Mobile Association of India (supra) has categorically held that as on date, virtual currencies are not banned by the Reserve Bank of India or the Government of India. Mr. Acharya also makes similar arguments as learned Senior Counsel referred above. 11. Mr. Bhuyan learned State Counsel appearing in OPID matters would argue that the transactions effected by the petitioners is nothing but a Ponzi Scheme in the name of crypto currency. The entire modus operandi of the petitioners is to lure ordinary people into making investments on the promise of getting attractive returns in future. The petitioners have cleverly manipulated their operations only to cheat the Investigating Agencies, but investigation has clearly revealed that they were running a Ponzi Scheme. Mr. Bhuyan further contends that unlike other crypto currencies, the investor in STA Token does not have full control over his wallet since it is dependent upon Page 9 of 19 addition of members and further that the money in the wallet would remain locked for minimum 20 months. Mr. Bhuyan further submits that investigation revealed that the scheme was being operated as a pyramid structure, wherein persons like the petitioners were placed at different levels of the structure depending on the money earned by them through bonus, commission, royalty etc. All the persons investing money in STA Tokens have been assured of higher returns which is not to be found in case of other crypto currencies. In the process, huge amounts were collected from different persons. Analysis 12. I have heard the rival submissions at length and have perused the materials on record including the case diary produced by learned counsel for OPID carefully. A bare reading of the FIR would suggest that the petitioners, particularly Nirod Kumar Das has been alleged to have convinced local persons through public meetings to join his network by sending them referral links. As such, thousands of people are said to have become active members of STA Token in Bhadrak district itself. The statements of several Page 10 of 19 such persons have been recorded by the I.O. during investigation. It would be relevant to refer to statements of some such witnesses in order to appreciate the prosecution allegations. One Suvendu Behera states that being induced by Nirod Kumar Das, he has become a member in STA since 23.04.2023 by investing Rs. 1 lakh/-. Further he was asked by Nirod Kumar Das to spread STA network. He has explained the scheme in a following words;- “I further state that STA token operates as Multi Level Marketing scheme. One who gets enrolled as a member under any upline member needs to enroll atleast 4-5 members, or else his ID i.e. trust wallet ID is deleted. Most of the time as investors do not know how to operate the wallet Id or download Apps (Trust Wallet), the senior Upline members take cash deposits to open their Trust wallet Id. Nirod Kumar Das, had been doing this since long. He took cash and transferred his STA token to the new member wallet. Every member is asked not to withdraw STA token for 20 months by NirodDas, district head of STA, Gurtej Singh, country head and David Gaze of Europe. xxx xxx xxx xxx xxx xxx Solar Techno alliance (STA) is a website and it does not reveal the name of David Gaze as CEO, hence I believe the website is fraud in nature. Thus, Nirod Kumar Das, Gurtej Singh and David gaze dishonestly induced us to become the members of STA by investing money but ultimately id not get single farthing including our invested amount. Hence, they have cheated us. Similarly, more than 5000 people at Bhadrak, 20,000 in Odisha and more than lakhs of people in India have also been cheated by the above 3 persons who have looted people in crores.” He also says that the upline members have been living a royal life with big bungalows and landed properties. Page 11 of 19 13. Similar statements has been given by Keshab Behera, Rama Chandra Nayak, Siba Prasad Panda, Prafulla Kumar Behera and others. Not a single person so examined has stated to have paid any amount to Nirod Kumar Das nor about any promise being made by said Nirod Kumar Das of getting higher returns on such investment by him. The only thing that is evident from a reading of the statements is that the several persons were asked to enroll new members which would enhance their earnings. According to the informant, the modus operandi is as follows;- “I enquired into the above mentioned allegation and came to know that Nirod Kumar Das of Naripur, Bhadrak Rural is acting as District Head of STA Tokens and Prafulla Kumar Behera of Anand Bazar of Bhadrak used to be a member under Nirod Das, But at present has not been active in the networking of STA Tokens. From local enquiry, I came to know that STA token is the crypto currency launched by a company named Solar Techno Alliance based in Nertherlands and its CEO is one David Gaze. The country head of the STA Token is one Gurtez Singh Sindhu of Punjab. My enquiry further revealed that any new investor can become a member of the network after being referred through a what APP link and has to download the STA APP. Minimum investment in STA is 3000/-. After becoming a member a person one gets one time one amount, earns daily through referral, invested amount income on matching income on daily basis @ 8-15 % interest, royalty income and can earn on stacking the invested amount for a look in period, depending upon the rank of the person like diamond, topaz etc. Further, I state that on daily basis at 8.30 PM meetings with local leaders and country head David Gaze is held over Zoom.” the Page 12 of 19 14. The amount invested by the new members is kept in a Trust Wallet, which is apparently locked up for 20 months and thereafter is accessible to the investor. In case he arranges more members, he is paid commission, bonus etc. 15. Accepting the prosecution case as such, this Court is unable to appreciate as to how this act can constitute any of the offences alleged. As is evident, the members of the public who participated in trading in crypto currency appear to have done so on their own free will and volition as also being impressed by the lavish lifestyle led by persons like Nirod Kumar Das etc. There is not a whisper of allegation that said Nirod Kumar Das, or the other petitioners had promised them higher returns on their investment as usually happens in case of a Ponzi Scheme. Insofar as the Price Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS) is concerned, Section 2(b) thereof defines money as follows;- “Money includes a cheque, postal order, demand draft, telegraphic transfer or money order.” STA Token, on the other hand, is a crypto currency which is purchased by the investors by downloading Page 13 of 19 applications from Google Play Store and Binance Crypto Exchange and thereafter, kept in their respective Trust Wallet. Therefore, STA Token cannot be said to be money within the meaning of the Act. Such being the case, naturally, the offences under Section 4,5 and 6 of the said Act would prima facie not be made out. 16. Coming to the offence under Section 6 of the OPID Act is seen that Section 2(b) of the Act defines ‘deposit’ as follows;- “‘Deposit’ means the deposit of money either in one lump sum or by installments made with the Financial Establishment for a fixed period for interest or for return in any kind or for any service:” Thus, the essential ingredient required to invoke Section 6 of the OPID Act is that some money must have been deposited either in lump sum or by installments with the financial establishment. In the instant case, as already stated STA Token, being a crypto currency, is not deposited in any financial establishment but is kept secure in a Trust Wallet. This appears to have been interpreted as ‘deposit’ within meaning of section 2(b) of the OPID Act and sought to be projected as a Ponzi Scheme. There is an essential difference between deposits in a Ponzi scheme and trading Page 14 of 19 in crypto currency. In the case of Internet and Mobile Association of India (supra), the Supreme Court held that the ban imposed by RBI on use of digital currency is unreasonable and therefore, struck it down. It was held that virtual currencies are valid mode of payments in the exchange of goods and services and do not violate the provisions of Payments Settlements and Systems Act, 2007. The following observations made by the Supreme Court are worthy of note;- In case the said enactment (2019) had come “6.171. through, there would have been an official digital currency, for the creation and circulation of which, RBI/central government would have had a monopoly. But that situation had not arisen. The position as on date is that VCs are not banned, but the trading in VCs and the functioning of VC exchanges are sent to comatose by the impugned Circular by disconnecting their lifeline namely, the interface with the regular banking sector. What is worse is that this has been done (i) despite RBI not finding anything wrong about the way in which these exchanges function and (ii) despite the fact that VCs are not banned. xxx xxx xxx xxx 6.173. It is no doubt true that RBI has very wide powers not only in view of the statutory scheme of the 3 enactments indicated earlier, but also in view of the special place and role that it has in the economy of the country. These powers can be exercised both in the form of preventive as well as curative measures. But the availability of power is different from the manner and extent to which it can be exercised. While we have recognized elsewhere in this order, the power of RBI to take a pre- emptive action, we are testing in this part of the order the proportionality of such measure, for the determination of Page 15 of 19 which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. When the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate.” 17. It is clear that mere dealing in crypto currency cannot be treated as illegal in any manner. Thus, the offence under Section 6 of OPID Act is also not made out. 18. As regards the IPC offences, in view of what has been narrated hereinbefore, it is evident that the petitioners can only be said to have attempted to convince members of the public to trade in crypto currency STA Token. There is nothing on record to show that they had dishonestly induced any person to deliver any property to them. In other words, there is no evidence whatsoever of any money being transferred from any person to the petitioners. The Petitioners may have earned commission/bonus from the company but that by itself cannot be partake the nature of dishonest earning. The methodology adopted being person to platform (P 2 P), it cannot be said that the petitioners had cheated any person particularly in view of the fact that any amount invested by any person remains secure in his or her Page 16 of 19 Trust Wallet. Thus, the offence under Section 420 does not appear, prima facie, to be made out. There is no evidence that any documents, records etc. were forged, manipulated, manufactured etc. so as to attract the offences under Section 467/468/471 of IPC. Summation 19. From the forgoing narration, it is clear that the petitioners were dealing with crypto currency which, as on date is not illegal. There is no evidence to show that they had convinced members of the general public to invest money on promise of high returns rather it is borne out from the materials on record that the investors acted on their own volition being influenced by the lavish lifestyles enjoyed by the petitioners and similarly placed persons. There is no evidence to show that any person was defrauded or that his investment was misappropriated by the petitioner. On the contrary, there is evidence that the amounts invested are kept secure in a Trust Wallet of the investor without any scope of interference or manipulation by any other person. Further crypto currency is not money within the meaning of Price Chits and Money Circulation Schemes (Banning) Act Page 17 of 19 1978 (PCMCS). Finally, the investment made by the general public in crypto currency cannot partake the nature of deposit within the meaning of OPID Act. Thus, there is no evidence of a definite offence having been committed. The maxim nullum sine crimen lege meaning there can be no crime without law applies to the case at hand. It is needless to mention that there is an absence of a proximal nexus between the petitioners and the alleged offences. In the considered view of this Court, therefore, detention of the petitioners in custody, particularly when charge-sheet has already been submitted, appears to be unjustified. Conclusion 20. In the result the bail applications are allowed. Let the petitioners be released on bail on such terms and conditions as the Court below may deem and fit proper to impose including the following conditions;- (i) They shall deposit their passports if any in the Court below at that time of their release. (ii) They shall not leave the territorial jurisdiction of the Court below without obtaining leave. Page 18 of 19 (iii). They shall make themselves available as and when required by the IO. (iv). They shall appear before the Court below on each date of posting of the case without seeking representation. 21. The BLAPLs are accordingly disposed of. .……..…………………. Sashikanta Mishra, Judge Orissa High Court, Cuttack. The 1st May, 2024/ Monalisa Signature Not Verified Digitally Signed Signed by: MONALISA SWAIN Designation: JUNIOR STENOGRAPHER Reason: Authentication Location: High Court of Odisha Date: 03-May-2024 14:47:19 Page 19 of 19