Allowed

Girish K @ Layout Gunda v. State of Karnataka

Karnataka HC7 Aug 2023CRL.P/2345/2023

Case brief

AI extract

What is this about?

This criminal petition sought quashing of proceedings against the petitioner accused of lending money without a license and charging exorbitant interest. The High Court quashed the proceedings, holding the police search was illegal as it was conducted by unauthorized officers, the FIR was not registered before the raid, and no borrower complaint existed under the Exorbitant Interest Act.

What did the court decide?

The criminal proceedings in CC No.8426/2020 pending before the I Additional Chief Metropolitan Magistrate, Bengaluru, are quashed insofar as they relate to the petitioner.

Girish K @ Layout Gunda Vs State of Karnataka — Money Laundering | Karnataka HC (2023)

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NC: 2023:KHC:27771 CRL.P No. 2345 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7^TH DAY OF AUGUST, 2023

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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CRIMINAL PETITION NO. 2345 OF 2023

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BETWEEN:

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GIRISH K @ LAYOUT GUNDA S/O K KEMPAIAH, AGED ABOUT 40 YEARS, R/AT NO.69/A, 2ND CROSS, MUNESHWARA BLOCK, MAHALAKSHMI LAYOUT, BENGALURU-560 086.

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…PETITIONER

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(BY SRI. M SHASHIDHARA, ADVOCATE)

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AND:

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Digitally signed by B K MAHENDRAKUMAR Location: HIGH COURT OF KARNATAKA

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STATE OF KARNATAKA BY C.C.B POLICE, REPRESENTED BY SPP, HIGH COURT OF KARNATAKA, BENGALURU-560 001.

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…RESPONDENT (BY SRI. K S ABHIJITH, HCGP)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, PRAYING TO QUASH THE PROCEEDINGS IN C.C.NO.8426/2020 ORIGINATED FROM CRIME NO.289/2017 OF MAHALAKSHIPURAM POLICE AND CHARGE SHEET FILED BY THE RESPONDENT C.C.B. POLICE, FOR OFFENCES P/U/S 41, 38 OF KARNATAKA MONEY LENDERS ACT 1961 AND SECTION 3 AND 4 OF KARNATAKA PROHIBITION OF CHARGING EXORBITANT INTEREST ACT, 2004, AND SEC.420 OF IPC WHICH IS PENDING ON THE FILE OF THE I ADDL. C.M.M. AT BENGALURU.

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THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:

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2 - NC: 2023:KHC:27771 CRL.P No. 2345 of 2023

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ORDER

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The petitioner - accused No.1, who is sought to be prosecuted for the offences punishable under Sections 41, 38 of the Karnataka Money Lenders Act, 1961, and Sections 4, 3 of the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004, is before this Court.

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2. The case of the prosecution is that, credible information was received that the accused have established the Finance Company and lending money to the general public without obtaining any license, and for the money lent, they take blank cheques, on demand promissory note, and blank e-stamp paper towards security, and charging exorbitant interest at the rate of 6 to 8 percent per month.Upon conducting a raid, the incriminating materials were seized from the accused No.1 herein. The cognizance for the offences is impugned by the petitioner herein.

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3. The learned counsel for the petitioner submits that the raid conducted by the police officer is not an officer prescribed under Section 15 of the said Act. Hence, conducting of the raid culminating in filing charge sheet by the police stands vitiated. He further submits that the offences under Sections 3 and 4 of the said Act are cognizable, and the police, before investigation, ought to have registered the FIR or made an entry in the general diary or station house diary.

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NC: 2023:KHC:27771 CRL.P No. 2345 of 2023

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4. On the other hand, the learned High Court Government Pleader for the respondent - State submits that, the charge sheet material discloses that, the accused herein without license from the competent Authority was in the business of lending money to the general public, and charging exorbitant interest, and the same constitutes the offences alleged against him. Hence, he submits that the cognizance taken by the learned Magistrate does not warrant any interference.

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5. Considered the submissions of the learned counsel for the parties.

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6. The issue involved in this petition was examined by the coordinate Bench of this Court in the case of Puttaswamy Gowda -vs- State of Karnataka (2019 (3) AKR 747), wherein at paras-5 and 6, it was held as follows:

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5. Having heard the learned Advocates appearing for parties and on perusal of the case papers, it would disclose that on 11.05.2017, first respondent on the strength of credible information received, is said to have proceeded to the residential premises of the petitioner after obtaining search warrant from the jurisdictional Deputy Superintendent of Police and entered the premises of the petitioner and found on verification of the records that petitioner is doing money lending business without licence and charging exorbitant interest on borrowings and was intimidating the borrowers to pay higher rate of interest. Co-ordinate Bench of this Court while examining similar plea has held it is only authorized officers who are empowered to enter the premises, to inspect and seize the documents as contemplated under Section 15 of the Act. The authorized officers prescribed under the Act are Registrar and Assistant Registrar or such other person authorized by the State Government in that behalf. In the absence of any material to show that police officer who

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4 - NC: 2023:KHC:27771 CRL.P No. 2345 of 2023

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entered the business/residential premises of the petitioner were authorized by the State Government, it cannot be said that persons, who had entered the premises, were authorized or in other words, such inspection can be held as having been conducted by authorized persons. In the instant case, police officers have entered the premises of the petitioner and entry of the said officers to the residential premises of the petitioner is not accordance with the mandate of Section 15 of the Act. Thus, proceedings initiated against petitioner would be illegal.

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6. In this petition, respondent has invoked Sections 3 & 4 of the Act which offences are cognizable offence. When that is so, jurisdictional police on receipt of credible information of commission of a cognizable offence, ought to have entered the same in the general diary or station house diary and thereafter registered the FIR before proceeding to investigate the matter. Even according to the prosecution, panchas were secured on 11.07.2015 and along with panchas, police officers of first respondent had entered the residential premises of the petitioner and had seized the documents. Credible information was received at 6.00 p.m. Panchanama was drawn between 6.30 p.m. to 8.00 p.m. and FIR has been registered at 8.15 p.m., which is contrary to the mandatory requirement of Section 154(1) Cr.P.C. There is no material on record to establish that police have entered the information in the case diary prior for search being conducted. Following the order dated 22.06.2017 passed in Crl.P.No. 101569/2016 & connected matters, this Court in Crl.P.No.10038/2017 disposed of on 16.04.2018 had quashed proceedings against petitioners herein on identical grounds by opining as under:

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7. In the instant case also, there has been no such complaint to the jurisdictional Court by the borrowers alleging that petitioner had charged exorbitant interest as stated in the complaint. Thus, initiation of the prosecution against the petitioner on the basis of Police report is illegal. Records would clearly disclose that registration of the complaint by respondent No.2 is without taking recourse Section 5 of the Exorbitant Interest Act, 2004, and such further proceedings would be illegal.

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NC: 2023:KHC:27771 CRL.P No. 2345 of 2023

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7. Hence, the conduct of search and seizure by the Police who are not the authorized officers under Section 15 of the Act stands vitiated.

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8. The Offences under Sections 3 & 4 of the Act are cognizable. The Police before conducting the raid were required to register the complaint or either make an entry in the General diary or Station House Diary with regard to the credible information received. In the instant case, the FIR is neither registered nor an entry is made.

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9. In the absence of any complaint made by the borrower that the Petitioner is charging exorbitant interest, the cognizance taken of the offence under Section 5 of the Exorbitant Interest is also not permissible.

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10. Therefore, the continuation of criminal proceedings will be an abuse of the process of law. Accordingly, I pass the following:

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ORDER

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i) Criminal petition is allowed.

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ii) The impugned proceeding in CC No.8426/2020 arising out of Crime No.289/2017 pending on the file of the learned I Additional CMM, Bengaluru, insofar as it relates to the petitioner - accused No.1, is hereby quashed.

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Sd/JUDGE

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BKM

Girish K @ Layout Gunda v. State of Karnataka

Case brief

What is this about?

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Girish K @ Layout Gunda v. State of Karnataka

Case brief

What is this about?

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