Allowed

Achutuni Bhanumurthy v. The State of Andhra Pradesh

Andhra Pradesh HC9 Dec 2024CRLP/1697/2020

Case brief

AI extract

What is this about?

Accused office bearers of a finance company sought quashing of four deposit-related cheating cases. Citing an earlier court-sanctioned amalgamation scheme binding depositors to a Collection and Disbursal Committee, the High Court held continued proceedings were an abuse of process and quashed them.

What did the court decide?

Proceedings in C.C.Nos.523, 517, 525 and 521 of 2024 (V Additional Civil Judge (Junior Division), Guntur) quashed against petitioners.

Achutuni Bhanumurthy Vs The State of Andhra Pradesh — Quashing and FIR | Andhra Pradesh HC (2024)

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APHC010808402018

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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction)

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[3333]

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TUESDAY, THE THIRTIETH DAY OF JULY TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SMT JUSTICE V.SUJATHA

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CRIMINAL PETITION NOs: 1072 of 2019, 1663, 1696 and 1697 of 2020

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CRIMINAL PETITION NO: 1072/2019

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Between:

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A.Venkata Lakshmi and others

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...PETITIONER/ACCUSED(S)

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AND

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State of A.P. and another ...RESPONDENT/COMPLAINANT(S)

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Counsel for the Petitioner/accused(S):

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1.M R S SRINIVAS

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Counsel for the Respondent/complainant(S):

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1.PUBLIC PROSECUTOR (AP)

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CRIMINAL PETITION NO: 1663/2020

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Between:

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Achutuni Bhanumurthy and another ...PETITIONER/ACCUSED(S)

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AND

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The State of Andhra Pradesh and ...RESPONDENT/COMPLAINANT(S) another

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Counsel for the Petitioner/accused(S):

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1.KRISHNA KISHORE BHATRAJU

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Counsel for the Respondent/complainant(S):

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1.PUBLIC PROSECUTOR (AP)

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CRIMINAL PETITION NO: 1696/2020

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Between:

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Achutuni Bhanumurthy, and another

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...PETITIONER/ACCUSED(S)

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AND

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The State of Andhra Pradesh and another

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...RESPONDENT/COMPLAINANT(S)

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Counsel for the Petitioner/accused(S):

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1.KRISHNA KISHORE BHATRAJU

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Counsel for the Respondent/complainant(S):

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1.PUBLIC PROSECUTOR (AP)

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CRIMINAL PETITION NO: 1697/2020

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Between:

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Achutuni Bhanumurthy and another

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...PETITIONER/ACCUSED(S)

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AND

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The State of Andhra Pradesh and another

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...RESPONDENT/COMPLAINANT(S)

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Counsel for the Petitioner/accused(S):

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1.KRISHNA KISHORE BHATRAJU

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Counsel for the Respondent/complainant(S):

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1.PUBLIC PROSECUTOR (AP)

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The Court made the following:

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COMMON ORDER:

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Since all these criminal petitions under Section 482 Cr.P.C. have been filed the accused who are office bearers of M/s. Deepika Leasing and Finance Company seeking quashing of respective criminal cases registered against them in connection with similar offecnes relating to the affairs of the said company and the issue that arises for consideration in all these criminal cases is one and the same, they are heard together and are being disposed of by this common order.

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Crl.P.No.1072 of 2019 is filed seeking to quash the proceedings in C.C.No.523 of 2024 on the file of learned V Additional Junior Civil Judge, Guntur against the petitioners herein.

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Crl.P.No.1663 of 2020 is filed seeking to quash the proceedings in C.C.No.517 of 2024 on the file of learned V Additional Junior Civil Judge, Guntur against the petitioners herein.

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Crl.P.No.1696 of 2020 is filed seeking to quash the proceedings in C.C.No.525 of 2024 on the file of learned V Additional Junior Civil Judge, Guntur against the petitioners herein.

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Crl.P.No.1697 of 2020 is filed seeking to quash the proceedings in C.C.No.521 of 2024 on the file of learned V Additional Junior Civil Judge, Guntur against the petitioners herein.

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Brief facts in Crl.P.No.1072 of 2019 are as under:

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Respondent No.2 has filed a report with the Arundelpet Law & Order Police Station, Guntur, on 25.08.2001, alleging that he had deposited a total amount of Rs. 1,40,070/- with M/s. Deepika Leasing and Finance Company at its Brodipet Branch, Guntur, in the form of various financial instruments, such as Fixed Deposits, Cumulative Deposits, and Chit amount. However, despite the deposits having matured, the company has failed to repay the amounts. It was, therefore, alleged that accused Nos.1 and 2, who are the Directors of the company, and accused Nos.3 to 5, who are the Managing Directors of the company’s Head Office, have cheated him and several other depositors. Basing on the said report, a case in Crime No.240 of 2001 has been registered on the file of Arundelpet Police Station, for the offence punishable under Section 420 I.P.C. After due investigation, the police filed charge sheet against accused Nos.1 to 5 for the offences punishable under Section 420 I.P.C., Sections 5 and 6 of the Prize Chit (Banning) Act, 1979 and Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, which was taken cognizance by the jurisdictional Court. Aggrieved thereby, Crl.P.No.1072 of 2019 has been filed by the accused, seeking to quash the proceedings against them.

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The record reveals that accused No.2 has expired during the pendency of the proceedings and further, accused Nos.1, 3 to 5 are discharged from the charge under Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, vide order dated 25.03.2023 passed in Crl.M.P.No.685 of 2015 in C.C.No.4/FD/2015. Subsequently, the case was

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transmitted to the Court of V Additional Civil Judge (Junior Division), Guntur, and was renumbered as C.C.No.523 of 2024.

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Brief facts in Crl.P.No.1663 of 2020 are as under:

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Respondent No.2 has filed a report with the Arundelpet Law & Order Police Station, Guntur, on 12.11.2000, alleging that he has subscribed to a chit of Rs.1,00,000/- with Deepika Chits & Leasing Finance Limited and paid the total monthly subscriptions. Despite completion of the chit period and payment of monthly subscriptions, the company failed to pay him the amount to which he is entitled. It was also alleged that he deposited a total amount of Rs.5,04,000/- in the form of Fixed Deposits and despite the same having matured, the company has failed to repay the amounts. Basing on the said report, a case in Crime No.388 of 2000 has been registered on the file of Arundelpet Law & Order Police Station, for the offence punishable under Section 420 I.P.C. After due investigation, the police filed charge sheet against the accused for the offences punishable under Sections 406 & 420 r/w 34 I.P.C., Sections 5 and 6 of the Prize Chit (Banning) Act, 1979 and Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, which was taken cognizance by the jurisdictional Court. Seeking to quash the proceedings against them in the said C.C, Crl.P.No.1663 of 2020 has been filed by the accused.

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The record reveals that accused No.1 has expired during the pendency of the proceedings and further, accused No.2 is discharged from the charge

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under Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, vide order dated 25.03.2023 passed in Crl.M.P.No.683 of 2015 in C.C.No.2/FD/2015. Thereafter, the case was transmitted to the Court of V Additional Civil Judge (Junior Division), Guntur, and was renumbered as C.C.No.517 of 2024.

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Brief facts in Crl.P.No.1696 of 2020 are as under:

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Respondent No.2 has filed a report with the Arundelpet Law & Order Police Station, Guntur, on 03.03.2001, alleging that in view of higher returns offered by M/s. Deepika Leasing & Finance Limited, he has deposited various amounts to a total tune of Rs.78,320/-, the maturity value of which is Rs.1,65,000/- and that despite approaching many times, he was not paid the amounts to which he is entitled and that he came to know that the said company has cheated many investors. Basing on the said report, a case in Crime No.81 of 2001 has been registered on the file of Arundelpet Law & Order Police Station, for the offence punishable under Section 420 I.P.C. After due investigation, the police filed charge sheet against the accused for the offences punishable under Sections 406 & 420 r/w 34 I.P.C., and Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, which was taken cognizance by the jurisdictional Court. Seeking to quash the proceedings in the said case, Crl.P.No.1696 of 2020 has been filed by the accused.

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The record reveals that accused No.1 has expired during the pendency of the proceedings and further, accused No.2 is discharged from the charge under Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, vide order dated 25.03.2023 passed in Crl.M.P.No.684 of 2015 in C.C.No.3/FD/2015. Thereafter, the case was transmitted to the Court of V Additional Civil Judge (Junior Division), Guntur, and was renumbered as C.C.No.525 of 2024.

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Brief facts in Crl.P.No.1697 of 2020 are as under:

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Respondent No.2 has filed a report with the Assistant Superintendent of Police, Guntur, on 15.11.2000, alleging that she has deposited an amount of Rs.1,50,000/- with Deepika Leasing & Finance Limited and also subscribed to three chits valued upto Rs.3,00,000/-. It is alleged that though she became successful bidder for two chits with a difference of one month, she was not paid the balance chit amount. It is further alleged that after repeated demands, the accused gave her four post-dated cheques and when they were deposited with the bank, they were dishonoured and returned due to insufficient funds in the account of the company. The said report has been forwarded to Arundelpet Law & Order Police Station, for necessary action. Thereupon, a case in Crime No.409 of 2000 has been registered on the file of Arundelpet Law & Order Police Station, for the offence punishable under Section 406 and 420 I.P.C. and Sections 3, 5 and 6 of the Prize Chit (Banning) Act, 1979 and Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, I.P.C. After due investigation, the police filed charge sheet against the

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accused for the offences punishable under Sections 406 & 420 r/w 34 I.P.C., Sections 5 and 6 of the Prize Chit (Banning) Act, 1979 and Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, which was taken cognizance by the jurisdictional Court. Seeking to quash the proceedings against them in the said C.C, Crl.P.No.1697 of 2020 has been filed by the accused.

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The record reveals that accused No.1 has expired during the pendency of the proceedings and further, accused No.2 is discharged from the charge under Section 5 of the A.P. Protection of Depositors of Financial Establishments Act, 1999, vide order dated 25.03.2023 passed in Crl.M.P.No.682 of 2015 in C.C.No.1/FD/2015. Thereafter, the case was transmitted to the Court of V Additional Civil Judge (Junior Division), Guntur, and was renumbered as C.C.No.521 of 2024.

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Learned Assistant Public Prosecutor contended that the alleged acts of the petitioners are sufficient to conclude that the petitioners committed offence and requested to dismiss the petition.

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Having heard the submissions made by the learned counsel representing both parties and on perusal of the material available on record, the point that arises for consideration is as follows:

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“Whether the proceedings in C.C.Nos.523, 517, 525 and 521 of 2024 on the file of learned V Additional Civil Judge (Junior Division), Guntur, is liable to be quashed against the petitioners by exercising jurisdiction under Section 482 of Cr.P.C.?”

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The present petition has been filed under Section 482 of Cr.P.C.

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Section 482 of Cr.P.C saves the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under the Code or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. It is an obvious proposition that when a Court has authority to make an order, it must have also power to carry that order into effect. If an order can lawfully be made, it must be carried out; otherwise it would be useless to make it. The authority of the Court exists for the advancement of justice, and if any attempt is made to abuse that authority so as to produce injustice, the Court must have power to prevent that abuse. In the absence of such power the administration of law would fail to serve the purpose for which alone the Court exists, namely to promote justice and to prevent injustice. Section 482 of Cr.P.C confers no new powers but merely safeguards existing powers possessed by the High Court. Such power has to be exercised sparingly in exceptional cases and this power is external in nature to meet the ends of justice.

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Time and again, the scope of powers of this Court under Section 482 of Cr.P.C. were highlighted by the Apex Court in long line of perspective pronouncements, which are as follows:

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In “ R.P. Kapur v. State of Punjab¹ ”, the Apex Court laid down the following principles:

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(i) Where institution/continuance of criminal proceedings against an accused may amount to the abuse of the process of the court or that the quashing of the impugned proceedings would secure the ends of justice;

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(ii) where it manifestly appears that there is a legal bar against the institution or continuance of the said proceeding, e.g. want of sanction;

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(iii) where the allegations in the First Information Report or the complaint taken at their face value and accepted in their entirety, do not constitute the offence alleged; and

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1 AIR 1960 SC 866

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(iv) where the allegations constitute an offence alleged but there is either no legal evidence adduced or evidence adduced clearly or manifestly fails to prove the charge.

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Section 482 of the Code of Criminal Procedure empowers the High Court to exercise its inherent power to prevent abuse of the process of Court. In proceedings instituted on complaint exercise of the inherent power to quash the proceedings is called for only in cases where the complaint does not disclose any offence or is frivolous, vexatious or oppressive. If the allegations set out in the complaint do not constitute the offence of which cognizance is taken by the Magistrate it is open to the High Court to quash the same in exercise of the inherent powers under Section 482. It is not, however, necessary that there should be a meticulous analysis of the case, before the trial to find out whether the case would end in conviction or not. The complaint has to be read as a whole. If it appears on a consideration of the allegations, in the light of the statement on oath of the complainant that ingredients of the offence/offences are disclosed, and there is no material to show that the complaint is mala fide, frivolous or vexatious. In that event there would be no justification for interference by the High Court as held by the Apex Court in “ Mrs.Dhanalakshmi v. R.Prasanna Kumar² ”

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In “ State of Haryana v. Bhajan Lal³ ” the Apex Court considered in detail the powers of High Court under Section 482 and the power of the High Court to quash criminal proceedings or FIR. The Apex Court summarized the legal position by laying down the following guidelines to be followed by High Courts in exercise of their inherent powers to quash a criminal complaint:

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(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

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(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

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2 AIR 1990 SC 494

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3 1992 Supp (1) SCC 335

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(3) Where the allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

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(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non- cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

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(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

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(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.

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(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

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Keeping in view the above principles, I would like to examine the case

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on hand.

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As can be seen from the record, M/s. Deepika Chit Fund Pvt. Ltd. and M/s. Deepika Leasing and Finance Company have entered into a scheme of arrangement for amalgamation of two companies and filed Company Petition Nos.196 and 197 of 2003. The scheme was approved by all the classes of creditors of both the companies and ultimately sanctioned by the erstwhile High Court of Andhra Pradesh, vide order dated 25.11.2008, under Sections 391 and 394 of the Companies Act, 1956.

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A copy of the order dated 25.11.2008 passed in Company Petition Nos.196 and 197 of 2003, is filed along with the material papers in Crl.P.No.1072 of 2019. Perusal of the same would show that the erstwhile

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High Court of Andhra Pradesh has taken note of Clause 6.5 of the Scheme, which is relevant. The said Clause 6.5 reads as under:

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“6.5 The scheme of arrangement proposed with the creditors of the

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Transferor company and the Transferee company is as follows:

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i) That upon sanction of the scheme of Arrangement, and after obtaining other requisite permissions, 80% of the principle debt owed to DSL, and DEL be converted into equity, and 64,000 equity shares of Rs.100/- each to DSL and DEL will be allotted in the Transferee Company.

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ii) The balance principal sum due being Rs.16,00,000/- to DSL and Rs.16,00,000/- to DEL be paid to these companies, after discharge of the dues to creditors as detailed hereinafter.

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iii) Creditors of both the Transferor Company and the Transferee Company be paid, a sum equal to the principle sum due shown and reflected in books of both the Transferor and the Transferee Company, as on the Appointed Date together with interest at 4% p.a. from the date these debts became due till the Appointed Date in such instalments as may be proposed by the Collection and Disbursal Committee to be constituted and approved by this Hon’ble Court.”

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Sub-clause (iii) of Clause 6.5 deals with payment of amounts payable to

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the creditors/depositors of both the Transferor and Transferee companies as proposed by the Collection and Disbursal Committee to be constituted and approved by this Court.

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It is also seen from the order that a meeting of the deposit holders of the company was convened on 22.11.2003 and the meeting was attended by 1153 deposit holders either in person or through proxies, out of which 1011 deposit holders/proxies had cast their votes in favour of the scheme.

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Thus, it is clear that the interest of the creditors/deposits has been taken care of and the Collection and Disbursal Committee has been appointed.

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Earlier, when criminal proceedings were initiated against M/s. Deepika Chit Fund (P) Ltd. and others for the offence under Section 138 of Negotiable Act by a subscriber of the chit, they approached this Court under Section 482 Cr.P.C. by filing Crl.P.Nos.1970 and 1973 of 2015, seeking to quash the proceedings against them. In the said Criminal Petitions, this Court, having taken note of the terms of the scheme and that the Collection and Disbursal Committee has been appointed for recovery of the amount and discharge of dues, observed that when the creditors, subscribers of the chits including shareholders agreed to the scheme, it is for them to approach the Collection and Disbursal Committee for recovery of the amount and not by initiating proceedings under Section 138 of N.I. Act. This Court has also taken note of Clause 6.10(11) of the Scheme, which reads as under:

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“Once the scheme is approved by the deposit holders and the share holders of the transferor company and the chit subscribers and the share holders of the transferee company and sanctioned by the Hon’ble High Court of Andhra Pradesh all suits, applications and other proceedings, both civil and criminal including the cases before the Company Law Board and various consumer forums, if any, filed by deposit holders of the transferor company or by the chit subscribers of the transferee company as the case may be against the respective company and its directors and still pending shall be withdrawn.”

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Having considered the clauses of the scheme as indicated above, this Court held as under:

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“….In view of the guidelines laid down by the Apex Court in Meters and Instruments Private Limited v. Kanchan Mehta (referred supra) when the respondent No.2, directors, shareholders and chit subscribers agreed for such amalgamation incorporating certain terms in the scheme approved by the High Court, they are bound by such scheme; and in fact it is the contention of the petitioner that the amount was already deemed to be paid in view of execution of assignment deed. Therefore, notwithstanding the actual discharge of amount, continuation of

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proceedings against the petitioners for the offence punishable under Section 138 of the N.I. Act despite the scheme approved by the High Court and in view of assignment of decree debts, is nothing but abuse of process of the Court. Consequently, the proceedings are liable to be quashed.”

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Having held so, this Court allowed the Crl.P.Nos.1970 and 1973 of 2015, by quashing the criminal proceedings against M/s. Deepika Chit Fund (P) Ltd. and others.

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In view of the above facts and circumstances, since this Court has already considered the issue as regards the maintainability of criminal proceedings against the company and its office bearers after the scheme of amalgamation has been sanctioned by this Court and it was categorically held that the depositors/secured creditors and chit subscribers are bound by the terms of the scheme, as per which criminal proceedings filed by the deposit holders of the transferor company or by the chit subscribers of the transferee company against the respective company and its directors and still pending shall be withdrawn and the deposit holders/chit subscribers have to approach the Collection and Disbursal Committee putting forth their claim for recover of the amounts to which they are entitled, this Court is of the considered opinion that continuation of present criminal proceedings against the petitioners is nothing but abuse of process of law and hence, the same are liable to be quashed.

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