IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF MARCH, 2019 BEFORE THE HON’BLE MR. JUSTICE B.A. PATIL CRIMINAL PETITION No.92/2019 BETWEEN:
Mr. Tabrez Ulla Shariff S/o Mr. Rahimulla Shariff, Aged about 33 years, R/at No.2, 2nd Floor, 3rd Cross, ‘C’ Street, J.J.Nagar, Bengaluru-560 026. …Petitioner (By Sri B.A.Belliappa, Advocate) AND:
The State by Jayanagara Police Station Rep. by the State Public Prosecutor, High Court Buildings, Bengaluru-560 001. …Respondent (By Sri Jagadeesha.B.N, SPP) This Criminal Petition is filed under section 439 of Cr.P.C praying to enlarge the petitioner on bail in Crime No.177/2018 of Jayanagar Police Station, Bengaluru City for the offence punishable under Section 406, 420 of IPC and Section 5, 38, 39 and 41 of Karnataka Money Lenders Act.
This Criminal Petition coming on for Orders, this day, the Court made the following:
ORDER The present petition has been filed by the petitioner- accused No.4 under Section 439 of Cr.P.C to release him on regular bail in Crime No.177/2018 of Jayanagar Police Station (Spl.C.C.No.105/2018) for the offences punishable under Sections 409, 420, 120(B) read with Section 34 of IPC, Sections 4, 5 and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and Section 9 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004.
2. I have heard the learned counsel for the petitioner and Sri Jagadeesha.B.N, learned Special Public Prosecutor for respondent-State.
3. The genesis of the case of the prosecution is that one D.T.Naveen Nanda filed a complaint alleging that M/s. Ajmeer Group Firm collected deposit of Rs.30.00 Crores from nearly 4000 customers with an intention to cheat the general public. Petitioner-accused No.4 and other two persons were partners and action may be taken in this behalf. On the basis of the complaint, a case has been registered.
4. It is the submission of the learned counsel for the petitioner that the petitioner-accused No.4 is an employee, being an employee of accused No.1-Firm he is not liable for any of the offences punishable under any of the Acts. He further submitted that he has not collected any deposits and not encouraged any people to deposit funds. No role has been played by him in the alleged crime. He further submitted that no persons who have invested the funds have filed the complaint. The
further submitted that as per the said Act, the maximum punishment is six years and the alleged offence is not punishable with death or imprisonment for life. He is ready to abide by any of the terms and conditions that may be imposed by this Court and also ready to offer surety, if he is released on bail. On these grounds, he prayed to allow the petition and to release the petitioner- accused No.4 on bail.
5. Per contra, learned Special Public Prosecutor vehemently argued and submitted that the petitioner- accused No.4 is the one who brought the customers to the Firm of accused No.1 and he has played a key role in making the people investing their funds to the accused No.1-Firm and nearly more than 4000 people have invested crores of rupees and the petitioner-accused No.4 who being the member of the said syndicate has cheated the public and now in order to evade the responsibility on him, he is saying that he is only an employee of the said Firm. He further submitted that knowingly fully aware about the scheme of the Firm, petitioner-accused No.4 encouraged the people to invest their funds and as such, he is also liable to be punished under Section 3 of the said Act. He further submitted that if he is released on bail, he may abscond and he may not be available for the investigation and interrogation, still the investigation is in progress. The Investigating Agency has to ascertain how many persons are involved in the said criminal activities and apart from frozen money, the deposits so which they have about to be seized has to be ascertained. On these grounds, he prayed to dismiss the petition.
6. I have carefully gone through the provisions of Sections 3, 4, 5 and 6 of the Chit Fund Act, 1982 which reads as follows;
3. Act to override other laws, memorandum, articles, etc.-Save as otherwise expressly provided in this Act-
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in the memorandum or articles of association or bye-laws 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.
4. Prohibition of chits not sanctioned or registered under the Act.-(1) Not chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Government in this behalf, and unless the chit is registered in that State in accordance with the provisions of this Act:
Provided that a sanction obtained under this sub-section shall laps if the chit is not registered within twelve months from the date of such sanction or within such further period or periods not exceeding six months in the aggregate as the State Government may, on application made to it in this behalf, allow.
(2) An application for the purpose of obtaining a sanction under sub-section (1) shall be made by the foreman in such form and in such manner as may be prescribed.
(3) The previous sanction referred to in sub- section (1) may be refused, if the foreman.-
(a) had been convicted of any offence under this Act or under any other Act regulating chit business and sentenced to imprisonment for any such offence; or (b) had defaulted in the payment of fees or the filing of any statement or record required to be paid or filed under this Act or had violated any of the provisions of this Act or the rules made thereunder; or (c) had been convicted of any offence involving moral turpitude and sentenced to imprisonment for any such offence unless a period of five years has elapsed since his release;
Provided that before refusing any such sanction, the foreman shall be given a reasonable opportunity of being heard.
(4) The order of the State Government, and, subject to the provisions of sub-section (5), the order of the officer empowered under sub- section (1), issuing or refusing previous sanction under this Section shall be final.
(5) Any person aggrieved by the refusal to issue previous sanction by an officer empowered under sub-section (1) may appeal to the State Government within thirty days from the date of communication to him of such refusal and the decision of that Government on such appeal shall be final.
5. Prohibition of Invitation for subscriptions except under certain conditions.- No person shall issue or cause to be issued any notice, circular, prospectus, proposal or other document inviting the public to subscribe for tickets in any chit unless such notice, circular, prospectus, proposal or document contains a statement that the previous sanction required under Section 4 has been obtained and the particulars of such sanction.
6. Form of chit agreement.-(1)Every chit agreement shall be is duplicate and shall be signed by each of the subscribers or by any person authorized by him in writing and the foreman and attested by at least two witnesses and it shall contain the following particulars, namely.-
(a) full name and residential address of every subscriber;
(b) the number of tickets including the fraction of a ticket held by each subscriber;
(c) the number of instalments, the amount payable for each ticket at every instalment and the interest or penalty, if any, payable on any default in the payment of such instalments;
(d) the probable date of commencement and the duration of the chit;
(e) the manner of ascertaining the prizing subscriber at each instalment;
(f) the maximum amount of discount which the prized subscriber has to forego at any instalment;
(g) the mode and proportion in which the discount is distributable by way of dividend, foreman’s commission or remuneration or expenses for running the chit, as the case may be;
(h) the date, time and place at which the chit is to be drawn;
(i) the instalment at which the foreman is to get the chit amount;
(j) the name of the approved bank in which chit moneys shall be deposited by the foreman under the provisions of this Act;
(k) where the foreman is in individual, the manner in which a chit shall be continued when such individual dies or becomes unsound mind or is otherwise incapacitated;
(l) the consequences to which a non-prized or prized subscriber or the foreman shall be liable in case of violation of any of the provisions of the chit agreement;
(m) the conditions under which a subscriber shall be treated as a defaulting subscriber;
(n) the nature and particulars of the security of to be offered by the foreman;
(o) the dates on which and time during which the foreman shall, subject to the provisions contained in Section 44, allow inspection of chit records to non-prized and unpaid prized subscribers;
(p) the names of the nominees of each subscriber, that is to say, the names of the persons to whom the benefits accruing to the subscriber under the chit may be paid in the case of the death of the subscriber or when he is otherwise incapable of making an agreement;
(q) any other particulars that may, from time to time, be prescribed.
Explanation.- For the purposes of this sub- section, it shall be sufficient if the signature of each subscriber is obtained in separate copies of the agreement.
(2) The duration of a chit shall not extend beyond a period of five years from the date of its commencement:
Provided that the State Government may permit the duration of a chit up to a period of ten years if it is satisfied that it is necessary so to do, having regard to,-
(a) the financial condition of the foreman;
(b) his methods of operation;
(c) the interests of prospective subscribers;
(d) the requirements as to security; and (e) such other factors as the circumstances of the case may require.
(3) The amount of discount referred to in clause (f) of sub-section (1) shall not exceed forty per cent of the chit amount.
(4) Where the prized subscriber at any instalment of the chit is required to be determined by auction and more than one person offer the maximum discount, the prized subscriber shall be determined by lot.
7. Section 9 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 which reads as follows;
9. Fraudulent default by financial establishment.- Any financial establishment, which fraudulently defaults any repayment of deposit on maturity along with any benefit in the form of interest, bonus, profit or in any other form as promised or fraudulently fails to render service as assured against the deposit, every person including the promoter, director, partner manager or any other person or an employee responsible for the management or conducting of the business or affairs of such financial establishment, shall on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lakh of rupees and such financial establishment also shall be liable for a fine which may extend to an amount equivalent to five lakhs of rupees. or where such deposits is quantifiable in terms of money twice the amount involved in such default whichever is more;
Provided that in the absence of special and adequate reasons recorded by the Special Court in the judgment of the Court, the imprisonment shall not be less than three years and the fine shall not be less than twenty thousand rupees as against each individual and not less than one lakh of rupees against such financial establishment.
Explanation.- For the purpose of this section a financial establishment, which commits default in repayment of such deposit with such benefits in form of interest, bonus, profit or in any other form as promised or fails to render any specific service promised against such deposit, or fails to render any specific service agreed against the deposit with an intention of causing wrongful gain to one person or wrongful loss to another person or commits such defaults due to its inability arising out of impracticable or commercially not viable promises made while accepting such deposit or arising out of deployment of money or assets acquired out of the deposits in such manner as it involves inherent risk in recovering the same when needed shall, be deemed to have committed a default or failed to render the specific service, fraudulently.
8. It is the case of the prosecution that the accused No.1-Firm and remaining accused persons being the partners have started investing the money without their being any license or permit either from the Reserve Bank of India or SEBI or Commercial Tax Authorities. As per the provisions of the said Act, investing deposit from the general public without there being any licence or permit is an offence. Whether the petitioner-accused No.4 has brought the depositors knowingly full well about the scheme which has been introduced by the accused No.1-
Firm whether it is a fraudulent firm and only with an intention to cheat the public, he made them to invest the money in the said Firm is a matter which has to be considered and appreciated only at the time of the trial.
9. As could be seen from the said Act, the alleged offences are not punishable with death or imprisonment for life. Even there are no overt acts for having taken active part in the activities of the firm. It is his case that he is only an employee. Under the said facts and circumstances, I feel that if the petitioner-accused No.4 is released on bail by imposing some stringent conditions then, it is going to meet the ends of justice.
10. In that light, the petition is allowed and petitioner-accused No.4 is ordered to be released on bail in Crime No.177/2018 of Jayanagar Police Station (Spl.C.C.No.105/2018) for the offences punishable under Sections 409, 420, 120(B) read with Section 34 of IPC, Sections 4, 5 and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and Section 9 of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, subject to following conditions:
1. The petitioner-accused No.4 shall execute a personal bond for a sum of Rs.5,00,000/-(Rupees Five Lakhs Only) with two sureties for the likesum to the satisfaction of the Trial Court.
2. He shall not tamper with the prosecution evidence directly or indirectly.
3. He shall cooperate with the Investigation.
4. He shall not leave the jurisdiction of the concerned Court without prior permission of the Court.
5. He shall mark his attendance before the jurisdictional police once in 15 days till the trial is concluded.
Sd/- JUDGE HA/-