Dismissed

Rmp Infotec Private Limited, v. The State of Andhra Pradesh

Telangana HC11 Dec 2012CRLP/12913/2011

Case brief

AI extract

What is this about?

Single Judge High Court dismissed petitions seeking quashing of FIRs and bank account freezing orders against RMP Infotech and other accused in money circulation cases, holding that substantive scrutiny of business activity is not required at investigation threshold.

What did the court decide?

All criminal petitions and writ petition dismissed; Company liberty to approach by separate petition for withdrawal of bank monies in compulsory circumstances.

Rmp Infotec Private Limited, Vs The State of Andhra Pradesh — Money Laundering | Telangana HC (2012)

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HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU

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Crl.P.Nos.9771, 10597, 10603, 11729, 12472, 12476, 12610, 12913 of 2011 and W.P.No.17544 of 2012

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COMMON ORDER:

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Crl.P.No.10597 of 2011 is filed by A.5 in Cr.No.338 of 2011 of Arundalpet Police Station, Guntur; Crl.P.No.10603 of 2011 is filed by the accused in Cr.No.267 of 2011 of Old Guntur Police Station; Crl.P.No.11729 of 2011 is filed by A.1 in Cr.No.206 of 2011 of II Town Police Station, Ongole; Crl.P.No.12472 of 2011 is filed by RMP Infotech Private Limited relating to Cr.No.82 of 2011 of Santhamagulur Police Station; Crl.P.No.12476 of 2011 is filed by the accused company in Cr.No.370 of 2011 of Pattabhipuram Police Station, Guntur; Crl.P.No.12610 is filed by RMP Infotech Private Limited in Cr.No.387 of 2011; and Crl.P.No.12913 of 2011 is filed by the same Company in Cr.No.95 of 2011 of Kothapeta Police Station for quashing respective FIRs under Section 482 Cr.P.C. One of the main grievances of the petitioners in these petitions is that the accused are being harassed by the police in Guntur and Prakasam Districts by registering various crimes making the same or similar allegations in all the cases. It is contended

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by Senior Counsel for the petitioners that instead of registering different cases, the police could have taken facts relating to the subsequent FIRs as additional information in FIR registered on the first occasion. The said course suggested by the petitioners’ Senior Counsel could not have been adopted because facts/allegations in each FIR occurred within the territorial jurisdictions of different police stations in different districts. The police from one police station may not have territorial jurisdiction to make investigation into the allegations relating to other FIRs occurred within the territorial limits of other police stations either in the same district or in another district. For that reason, the premier crime investigation agency of the State namely CID took over all the above cases from Guntur Urban and Prakasam Districts vide Memo C.No.2614/C.12/CID/2012 dated 13.06.2012 of Additional Director General of Police, CID, Andhra Pradesh, Hyderabad for investigation; and all the matters were entrusted to Deputy Superintendent of Police, CID, RICU, Guntur for further investigation.

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2. It is contended by Senior Counsel for the petitioners that business activity of RMP Infotech Private Limited does

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not attract any penal provisions of any enactment. All the above cases were registered by the respective police against the respective accused in each case for offences punishable under Section 420 IPC and Sections 4 & 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (in short, the Act). It is contended that there is no element of cheating in the business activity attracting Section 420 IPC muchless activity of the petitioners and more particularly RMP Infotech Private Limited (in short, the Company) does not attract definition of ‘Money Circulation Scheme’ contained in Section 2(c) of the Act. On the other hand, it is contended by counsel for the de facto complainant in Santhamaguluru Police Station that activity of the Company through its local branches in different parts of the State squarely attracts the definition under Section 2(c) of the Act. It is further contended on behalf of the de facto complainant that activity of the Company resembles that of Speekasia Online Private Limited covered by unreported decision of this Court dated 30.08.2011 in Crl.P.No.5626 of 2011 and also that of Amway Case as laid down by this Court in Amway India Enterprises v Union of India^[1] .

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3. In police proceedings/special report of the police which is FIR in Cr.No.338 of 2011 of Arundalpet Police Station, Guntur the business activity and modus operandi of the Company is noted in the words of an independent distributor of the Company who was taken into custody, from

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the following lines:

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“2. Mr.Pravin Jaya Chandan is the Managing Director, Mr.Dhaval Jaya Chandan is the Chairman along with few more directors of our company.

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3. Head office is located in Chennai, Mahalingapuram.

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4. In the beginning through multi level marketing I have purchased an Oven and Siyaram suit length for 6500 from RMP Infotec Private Limited and from that time I am working as independent distributor.

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5. In the beginning when I joined the company as independent distributor, I submitted a demand draft of Rs.6500 in favour of RMP Infotec Private Limited payable at Chennai along with a completed application, ID Proof, Age proof and Pan card at the franchisee located in Gandhinagar, Vijayawada and took my product from there.

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6. There are 16 products in our company.

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7. Whenever I sell these products to two people, the company gives a commission of Rs.1000 on my name.

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8. In this way I have said my friends and relatives about this scheme and products, likewise 1 person grew into 2, 2 grew into 4 and so on and as of now I am earning Rs.60,000 as commission per week.

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9. In the same way I have given training to other people and help them to increase the turnover.

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10. There are 98 franchises of our company in India. 11. We are buying products and applications from these franchisees by paying the concerned prices through DD.

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12. After purchasing product, all independent distributors are paid commissions on product sales.

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13. We consider this as multi level marketing.

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14. There are around 18000 people who have purchased products and are placed below me as distributors.

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15. My ceiling money does not exceed 1,30,000 per week.

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16. We some times conduct Business Opportunity presentation.

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17. We keep on training our distributors and that’s how we increase our company sales.

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18. We create complete confidence on our company to the public and cheat them by telling that they can make huge money in less time and make them join us as distributors.”

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4. It is contended for the petitioners that the Company which is based in Chennai is indulging in direct selling of products to the customers for lower cost which is upto 70% of maximum retail prize (MRP) of the products by directly securing them from reputed Companies like Siyaram, Big Bazar, Wipro, HCL etc. and in that process, the Company avoids C & F Agent, Super Stockist, Stockist, Distributor, Wholesale dealer and retail dealer and also avoids cost of advertisement and that by virtue of direct selling of products to the customer/buyer who joins as independent distributor/member of the Company and that in that process, the company earns huge profits out of which 35% is distributed among independent distributors. In the process of business of the Company, when a member joins as independent distributor, by purchasing products of the

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Company, he has to sell the Company’s products to at least two new customers and in which event, he gets profits/commission from out of value of products sold by him to those two new members and also certain percentage of money paid by those two new members towards their membership. Those two new members/independent distributors have to again sell the products by each of them to two more outsiders; and the activity percolates to the downwards. In all such types of Direct Selling or Multi level marketing, the process reaches a saturation level when new members joining at that level will not be able to sell products

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to any new members.

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5. In State of West Bengal v Swapan Kumar

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Guha^[2] three Judges Bench of the Supreme Court after rearranging definition of Money Circulation Scheme in Section 2(c) of the Act, observed:

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“On a plain reading of the said definition, the requirements of a money circulation scheme are-

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(i) there must be a scheme;

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(ii) there must be members of the scheme;

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(iii) the scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrolment of members into the scheme or there must be a scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money on any event or contingency relative or applicable to the enrolment of members into the scheme;

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(iv) the event of contingency relative or applicable to the

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enrolment of members into the scheme will however not be in any way affected by the fact whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscription.”

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6. This Court is of the opinion that at the threshold of the investigation, it may not be proper for this Court to scrutinize the alleged activity of the Company and its branches, independent distributors etc. and to come to any conclusion whether the said activity attracts the definition of Money Circulation Scheme contained in Section 2(c) of the Act or not.

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7. Senior Counsel for the petitioners also fairly submitted that even if investigation is allowed to be proceeded further, freezing of bank accounts of the Company by the police during investigation is causing untold hardship to the Company in its business activity. For that reason, the Company filed Crl.P.No.9771 of 2011 questioning the same and seeking quashing of directions of Sub-Inspector of Police, Arundalpet (L&O) Police Station, Guntur directing IDBI Bank to freeze two CMS accounts of the Company in that bank, by way of letter dated 04.10.2011 addressed to the bank. Further, after CID took over investigation of all the cases, Inspector of Police, CID, RCIU, Guntur addressed another letter dated 15.05.2012 to ING

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Vysya Bank Limited, Chennai to freeze another account of the Company pending investigation. Questioning the same, the Company filed W.P.No.17544 of 2012.

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8. It is contended by the Public Prosecutor that Section 7(1)(d) of the Act empowers the Investigating Officer to seize all things which are intended to be used or reasonably suspected to have been used in connection with any Money Circulation Scheme. It is further contended that it is only for the purpose of ultimate seizing of money which is derived from the Money Circulation Scheme covered by these offences, the Police Officers have frozen bank accounts of the Company.

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9. As interim measure in Crl.P.No.9771 of 2011, this Court permitted the Company to withdraw Rs.11.00 crores from IDBI Bank to meet immediate needs of the Company towards his obligations to its employees etc. It is reported that the Company could not withdraw the said amount as by then the Kerala High Court also have passed an order relating to freezing of the said accounts. In the circumstances and having regard to there being prima facie case for the prosecution, this Court is of the opinion that it would not be just and proper to allow the Company to deal

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with the bank accounts as it likes.

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10. I find no legal or justifiable reason either for quashing FIRs in these crimes or for quashing letters of Police Officers freezing bank accounts of the Company pending investigation.

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11. In the result, all the criminal petitions as well as writ petition are dismissed. At the same time, in case of any compulsive circumstances and dire necessities, the Company is at liberty to approach this Court by separate and independent petitions for withdrawal of portions of monies lying in the bank accounts.

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_____________________________ SAMUDRALA GOVINDARAJULU,J

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Dt.11^th December, 2012 PNV

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[1] 2007(4) ALT 808 (D.B)

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[2] (1982) 1 Supreme Court Cases, 516

Rmp Infotec Private Limited, v. The State of Andhra Pradesh

Case brief

What is this about?

What did the court decide?

Rmp Infotec Private Limited, v. The State of Andhra Pradesh

Case brief

What is this about?

What did the court decide?

What the court decided

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