Disposed

Dmi Finance Private Limited v. the State of Telangana

Telangana HC20 Jul 2021CRLP/4738/2021

Case brief

AI extract

What is this about?

This criminal petition was filed to quash the order dismissing an application to defreeze a petitioner company's bank account frozen during an investigation into loan app fraud. The High Court dismissed the petition to quash but directed the Investigating Officer to complete the investigation within four weeks and defreeze the account if no nexus with the crime is found.

What did the court decide?

Petition not allowed to quash; Investigation to be completed within four weeks and account to be defrozen if no nexus with the crime is found.

Dmi Finance Private Limited Vs the State of Telangana — Corruption | Telangana HC (2021)

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IN THE HIGH^{COURTFOR THE STATEOF TELANGANA} AT HYDERABAD

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TUESDAY ,THE^{TWENTIETHDAYOF JULY} TWO THOUSAND^ANDTWENTYONE

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PRESENT

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THE HONOURABLE^{SRI JUSTICEK.LAKSHMAN}

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CRIMINAL^{PETITIONNO: 4738oF 2021}

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Between:

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DMIFINANCEPRIVATELIMITED,Acomp-any^incorporatedunderthecompanresAct', igi'o [i]jrl.s Crr.'i^{ijosgZstilio*deirCitizTa'ghavinpits reoistered offrce at Express} Burldrns Third^{Floor g-io]-"*1,di'..tnet-.?lLiMars-New Delhi - 1'10002} Represlnted by^{its authorized signatory lvlr' Ralat Snarma'}

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...PETITIONER/^Petitioner

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AND

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The State Of^{TelanganaThroughPolrce Statron Cy?er Crime HyderabadRepresented} by rts Public Proseclutor^{High Courtfor the State ol lelangana}

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'''RESPONDENT/COMPLAINANT

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Petition under Sectron^{482 of Cr'P 'C praying that in the circumstancesstated} in the Memorandum^{of Grounds of Criminal Petition'the High Courtmaybe pleased} to^quash the^{ordersdated18/06/2021 in Crl M.P No 1675 of 2021in Cr No 2459 of} 2o2OonthefileoftheXllAdditionaIChiefMetropolitanMagistrate,Hyderabadand consequentially^{directto forthwith Defreeze the Bank Account of the Petitioner'} bearingNo62ll34gT0gofKotakMahindraPrivateLimited'BranchDwaraka'New Delhi which^{was debit freezed by the Police station cyber crime, Hyderabad}

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I.A, N :1O^{F 2021}

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PetitionunderSection4S2ofCr'P'Cprayingthatinthecircumstancesstated intheMemorandumofGroundsofCriminalPetition,theHighCourtmaybepleaSedto permit the Petitioner^{to operate its bank accountbearing No'6211349709of Kotak} Mahindra Private^{Limited, BranchDwaraka' New Delhi' pendingdisposal of the above} Criminal^Petition

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This Petition^{comlngon for hearing'uponperusing the Memorandumof} Grounds of Criminal^{Petit.onand upon hearingthe arguments of Sri S, RAVI Senior} CounselforSRlTKARTlKEYAGoUD,AdvocateforthePetitionerandthePUbllc Prosecutor on^{behalf of the Respondent'}

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The Courl made^{the following:ORDER}

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HON'BLE^{SRI JUSTICE K. LAKSHMAN} CRIMINAL^{PETITION No.4738 oF 202L}

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ORDER:

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This Criminal^{Petition is filed under Section 482 of the} Code of Criminal^{Procedure, 1973 (for short'Cr'P'C'')by the} petitioner companl'-DMl^{Finance Private Limited to quash the} order dated^{18.06.2021 passed in Crl'M'P'No 1675 of 2021to} Cr.No.2459 of^{2O2O by the XII Additional ChiefMetropolitan} Magistrate^{at Hyderabadand for consequentialdirectionto the} respondent-Poiice,^{Cyber Crime' Hyderabad' to defreezethe} bankaccountofthepetitionercompanyvideA/c.No. 6211349709^{with Kotak Mahindra Private Limited' Branch} Dwaraka,^{New Delhi.}

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2,HexdsriS.Ravi,learnedSeniorcounsel,representing Sri T.Kartikeya^{Goud, learned counsel for the petitioner} company^{and learned Public Prosecutorfor the respondent-State} and^{perusedthe record'}

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FACTS^{OFTHE CASE}

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i) On the complaint^{dated2i '12'2O2O lodgedby one Pinak} Gosu,ami,^{the police, Cvber Crimes Police Station'Hyderabad'} has registered^{a case in Cr'No'2459 of 2O2O for the offences} under Sectio^{n 67 ol the h-riormationTechnoioS'(Amendment)} Act, 2008^{and Sections 506 and 420 IPC'}

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ii) The^{allegations made by the defacto-complainantin the} said complaint^{are that on 2l'12'2020' he had taken loan from} mobile app.^{Later he was unable to pay the due arnountwithin}

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the stipulated^{period of time due to death of his father at AICI} Hospital, Gachibowli,^{He requestedthat he wili pay the said} amount, but^{the Concernedperson usedSiang language and} moreover, they^{have harassed and blackmailedhim by using his} pictures to his contact^{number and calling to his contact since} 14.12.2020.

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iii) The name^{of the petitioner companyis not there in the} said complaint^{and there is no allegation againstthe petitioner} company herein^{in the comPlaint'}

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iv) The account^{of the petitionercompanywas frozenby} the Investigating^{Officer in Cr'No'2459of 2O2O'}

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v) The petitioner^{herein has filed petition under Section} 451 of Cr.P.C.^{vide Crl.M'P'No'1675of 2O2l in Cr'No 2459 of} 2020 before the^{Court below seeking to defreeze the accountof} the petitioner^{companyvide A/c No '6211349709r'r'itl-rKotak} Mahindra^{Private Limited, Branch Dwaraka'Ner'r'Delhi'}

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vi) The Court^{beiow vide impugned order dated 1B'06'202 1'} dismissed^{the said aPPlication'}

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4. CONTENTI^{ONS OFTHE PETITIONER}

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i) The^{petitioner company isregistered under the} Companies^{Act, 2013 and it is a Non-Banking Finance Company} dealing with^{the business of financing'}

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ii) The petitioner^{Companyis registered with the Reserve} Bank of India^{to carry on the business of non-banking financial} Companl'(NBFC)

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iii) The petitioner company is working as NBFC, since more than a decade and has established in lending money to individuals, MSMEs etc, and serving in about 27 States across India r.vith about 19 lakhs customers.

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iv) The petitioner compar-ly strictly abides by the circulars a.cl gr-ridelines issr-red b,y the RBr from time to time. Its operarions are regularly audited by the RBI for compliance with the applicable RBI regulations and guidelines including compliance with KyC and anti-money laundering laws, and the last audit was conducted in October,2O2O.

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v) The petitioner company has a good reputation in financia.l services with the founders and senior management having finance professionals with several decades.

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vi) The registered office of the petitioner company is located at New Delhi having more than 250 employees and its creditors include SBI, HDFC and Kotak Mahindra.

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vri) Due to increase in use of technologr, the RBI permits the usage of digital platforms like lending through Website and Mobile Apps etc, to carry on the business.

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viii) The petitioner company has entered into a service Agreement/tie-up with Non Banking Financial Company (NBFC) i.e. M/s Redcarpet Tech private Limited, on 23.06.2A16 on the terms and conditions specifically mentioned therein for the purpose of connecting the borrowers to these NBFC,s/lenders. The nature of the activities being carried out by the petitioner comps? are also specifically mentioned.

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Crlp 4738_2021

ix) The Investigating Officer^{in Cr.No,2459 of 2020 has} frozen the account^of the^{petitioner company in connectionwith} thesaidCr.No.245gol2O2o.Ithasfiledtheabovesaidpetition seeking defreezing^{of its account. The Courtbelorv has dismissed} the said appiicatlon^{vide order dated 18.06 202 Iimpugned} herein, without considering^{the said contentions raised bv the} petitioner. Thus, according^{to learnedsenior counsel' the} impugned order^is without^{applicationof law and facts'}

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x). In support of his^{case,he also relied on the decisions of} the Hon'ble Apex Court,^{in T.Enrica Lexie Vs'Dorammarand} also a decision of the^{Delhi High Court in Sunil Bhargava Vs'} CBI2.

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xi) With the said submissions,^{he soughtto set aside the} impugned order dated^{18.06.2021passedby the Court belorv'}

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CONTENTIO NS^{OF LEARNEDPUBLICPROSECUTOR.}

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i) First Information^{Reportis not an encyclopedia'It is at} crime stage. The^{Investigating Officer has to investigateinto the} allegations made by complainant'^{The allegations are serious lt} is a 'Loan App fraud'.^{Many Chinese companies,floated} companies in India,^{cheating innocentpeopleand due to the} said harassment,^{hundredsof innocent victims committed} suicide. The Police^{have registered several cases in the entire} State of Telangana with^{regardto the verysame Loan Appissues} and harassment.

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I (20r2) 6 scc 760

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ii) The Investigating Officer has to collect evidence, ir-rvestigate into the allegations and also has to analyze the bank statements of the suspected companies to come to conclusion that the said amount was transferred into the accounts of the said companies.

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iii) The Investigating Officer, during the course of investigation, issued a notice dated 22.05.2021 to the petitioner company under Section 911160 of Cr.P.C, in the above said crlme seeking to furnish certain information by referring 30 points/ clarifications and got debit freeze of the account of the petitioner compan)r for the purpose of analyzing the statements and also to come to conclusion with regard to the amount transferred into the said account of the petitioner company There are several factual aspects to be investigated into b1" the lnvestigating Officer. The Investigating Officer has not shown petitioner companv as an accused in Cr.No.2.159 of 2020 as on todnr

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iv) The [nvestigating Officer, during the course of investigation, directed the petitioner's bank to lreeze the account of the petitioner for the purpose of analyzing the statements and also to come to a conclusion with regard to the amount transferred into the said account of the petitioner.

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v) On the analysis of the entire evidence, if the Inr,estigating Officer comes to a conclusion that the petitioner herein has committed offence, there is every possibility of the

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Investigating Officer including the petitioner company as an accused in the above said crimes.

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vi) The Investigating Officer has seized the documents and property from possession of the petitioner/ accused in the said crime since it is a suspect account. As part of ir-rve stigatio n, thc said account was sought to hold for the purpose of investigation.

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vii) The petitioner, instead of cooperating with the Investigating Officer, filed the present petition to set aside the order dated 18.06.2021 impugned herein.

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viii) Therefore, with the said submissions, learned Public Prosecutor sought to dismiss the Criminal Petition.

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ANALYSIS AND FINDING OF THE COURT

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A perusal of the of material would reveal that the Police, Telangana have received several complaints stating that they have obtained loans from Mobile Apps, they are unable to repay the same, they are also charging healy interest i.e. at the rate ol 150% to 450% interest and harassing the loanees/ innocents due to unbearable torture and harassing, several innocents have committed suicide in entire Telangana. Therefore, the Police. Telangana have registered the follou'rng six cases in the State.

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l Cr.No.234l2O20 under Sections 306 IPC of NTPC Police Station of Ramagundam Commissionerate

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2 Cr.No.6 of 2021, under Sections 306,420,384 of IPC & 67 of the ITA Act of Petbasheerbad Police Station, Cyberabad Commissionerate,

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3 Cr.No.538/2020, under Section 174 of Cr.P.C. of Siddipet I Town Police Station,

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.l Ct.No.263l2o2o,under Section 174 of Cr.P.C. of Narsapur Police Station,

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5 Cr.No.2O94l2O20 under Sections 420, 501, 506, 504 and 306 of IPC and Section 67 of ITA Act and Section 174 of the Cr.P.C. of Rajendra Nagar Police Station, Cyberabad Commissionerate,

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6 Cr.No.186/2020 under Section 306 of IPC of Ibhrahimpatnam Police Station, Jagityal District.

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KL.J Crlp 4738 2021

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A perusal of the record would also further reveal that due to the seriousness of the issue, Mr. Kall,an Dilip Sunkara Advocate, has filed a Public Interest Litigation vide Writ petition (PIL) No.73 of 2021, wherein the Division Bench of this Court directed the Director General of police, Telangana, to file status report on the Rampant Instant Sanction of Loans by Instant loan Apps at the rate of i50% to 4SOo/o interest and constantly harassing people to repay the loans. Notwithstanding the constant harassment by these instant Loan Apps at exorbitant interest on whatsapp, many people across the Telangana State have committed suicide. A report on the entire issue r,r,as sought for b.r' ti're Division Bench of this Court.

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TIte Division Bench further directed the Director General of Police, Telangana State, to take immediate and necessary prompt steps to nab the guilty parties and ensure that such lending Apps are deleted/blocked.

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It is also relevant to note that M/s.Save Them India Foundation represented by its Chairman has filed a pll before the Hon'ble Apex Court wherein he has specifically explained the threat to the Nation by the lending Apps, indirectly owned by the Chinese and sought necessary action into this.

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It is submitted by the Investigating Officer that regularly huge number of victims were being approached to Cyber Crime Police Station, Hyderabad and so far as 28 cases were registered at Cyber Crime police Station, CCS, DD, Hvderabad and some petitions were also being received and

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enquired by the Cyber Crime Police, Hyderabad. It is^also expected to be more than 100 cases across the Telangana^State. 11. During the course of investigation in all^{loan App fraud} cases, it is found that there are many loan applications that^are being uploaded by Chinese National keeping Indians^as Directors for their companies to escape from the clutches^{of law.} 12. The Chinese follow the strateg/ to the effect that^when the debtor fails to pa]' back the money, thel''^start harassing/threatening/blackmailing the victims.^{Further, thel'} would contact the friends and relatives and would inform^them that they are cheaters. Further, they make continuous^{calls to} the debtors and would use abusive language.^{Even after} repayment the loan atnount with double interest rates,^again without consent of the customer, they would credit^{the loan} amount in their bank accounts of the^{previous debtors and} would continue the harassment. Due to which,^{several suicide} deaths and attempts were taken^place in the^{State of Telangana.} 1 3. On receipt of the complaint from the^defacto- complainant, the Police have registered a^case in^{Cr.No.2459 of} 2020. ln the complaint, the defacto-complainant^{specificali5''} mentioned the manner in which the Loan App^{peopler,r''ho lent} loan to him, harassed him and caused damage^{to his reputation.}

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A perusal of the record would also reveal that^{the said} 'M/s Redcarpet Tech Private Limited'is an accused in^{one of the} above said crimes pertaining to Loan App fraud. In^{fact, the} petitioner has entered into a service agreement/tie-up with the

KL.J Crlp^.1738 2021

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said company/NBFc on 23.06.2016. During the course of investigation, the Investigating officer has issued said notice dated 22.05.2O2L to the petitioner company seeking to submit certain information. According to the learned counsel for the petitioner company, the Investigating Officer in Cr.No.2459 of 2o2o did not follow the procedure laid down under Section 1o2 of the Cr.P.C. The said facts were a_lso considered by the Court belorv and the application filed by the petitioner herein was dismissed vide impugned order on the ground that the lnvestigation is pending. Ir is an offence of Cyber Crimes. There are several victims.

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As srared above, admittedly, the investigation is pe,clirrg i, the present crime vide cr.No.2459 or 2020. The petitioner company, is not an accused in the present crime as on today. There are several cases registered in the entire State of Telangana with regard to Loan App fraud. Several suicidal deaths were noticed.

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The Apex Court in several judgments examined scope and ambit of powers of High Court u/s 4g2 CrpC. lo State of Haryana us. Bhajan La.ls, the Apex Court cautioned that power ol quashing should be exercised very sparingly and circumspection and that too in the rarest of rear cases. while examining a complaint, quashing of rvhich is sought, Court cannol embark upon an enquiry as to the reliabilit,y or genuineness or otherwise of the allegations made in the FiR or

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' 1992 fpp ( l) scc 335

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in the complaint. The Apex Court in the said^judgmentlaid down certain guidelines/parameters for exercise of^powers under Section - 482 of Cr.P.C., which are as under:

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"(1) Where the allegations made in the flrst 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 a-llegations in the hrst 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 puniew of Section^{155(2) of} the Code.

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(3) Where the uncol.l troverted allegations made in the FIR or compla.int and the evidence^{collected in} support of the same do not disclose the^commission of any offence and make out a case^againstthe accused.

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(4) Where the allegations in the FIR do not constitute a cognizable olfence but constitute^onlya non-cognizable offence, no investigation is^permitted by a police officer without an order of^{a Magistrate} as contemplated under Section¹⁵⁵⁽²⁾ ofthe^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^{prudentperson 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 engraftedⁱⁿ any of the provisions of the^{Code or the Act} concerned (under which a crimina.l^proceedingis instituted) to the institution and continuance^{of the} proceedings and/or where there is a specific provision in the Code or Act concerned,^providing efficacious redress for thc^{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 u'ith an ulterior motive for wreaking vengeance on the^accusedand wlth a view to spite him due to^{private a]1d personal} grudge."

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In Madhu K. Vs.^{Sub Inspector of Police4, the Kerala} High Court held that that^{account cannot be frozen on mere} surmise and conjecture.^{InvestigatingOfficer has to} scrutinize the entries and the nature^{of transactionsbefore} freezing the account.

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In His Holiness Sri Kanchi Kamakoti^{Vs. The State} of Tamil Nadus, the Madras High^{Court had an occasionto} examine the scope and ambit of^{Section 102 ol the Cr.P.C. and} held that the pou'er under the^{said provision is exhaustivepor'"'er} and only tr,r'o categories of^{propertiesare mentioned namely1)} alleged or suspected to have been^{stolen, or 2) which may be} found under circumstances which^{create suspicionof the} commission of any offence.

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As stated above, in the case^on hand,^{the Investigating} Officer has suspicion over the^{accountsof the petitionerwhich} were directed to be frozen. According to^{him, the saidaccounts} are suspect accounts in Cr.No.2459^of2O2O.

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In OPTO Circuit India Ltd.^{Vs. Axis bank6, the Apex} Court examined the scope and ambit^{of seizure ald searchetc.,} under Prevention of Money Laundering^{Act, 2OO2, and laid dou'n} certain parameters for exercising^{power under Section i 02 of} Cr.P.C.

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4 2020(0) Supreme (Ker)568

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5 2AQ5(o) supreme (Mad) 251

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"^{2005(D.1Supreme(SC) 48}

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In Mathews^{Peter Vs' Asst' Police InspectorT'the} Apex Court had an^{occasion todeal with thepowerol} Investigating^{Officer to seize the accounts/property and require} attendance^{of an accusedin a criminal case'}

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22.ln T.E;ntica^{Lexie (supra) relied upon by the petitioner} herein, the^{ApexCourt held that propertywhich has direct link} with commission^{of crime can be attached'The saidprinciple} was reiterated in^{Sunil Bhargava(supra)'}

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ln view of^{the law laid down in the above said} judgments, there is no^{dispute with regard to power of the} Investigating^{Officerto seize certain property including lreezing} of suspect bank^{accounts.Under Section 9I of the Cr'P C} '^the lnvestigating Officer^{can summon to produce documents or} things for^{purpose of investigation' in the present case' the} investigating Officer^{has issued the impugned notice directing} petitioner's bank^{to freeze account of the petitionerwhich is a} suspect account^{and petitioner is not an accused'}

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It is relevant^{to note that this Court in a common} 1n W.P.Nos.13363^{and 10565 of2O2Odated} judgment 03.12.2020,^{referring to variousjudgments of Apex Court and} this Court held^{that defect in intimation is curable and ground} of delay in intimation^{of seizure of propertyis per se not illegal'}

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ln view of the^{abovesaid law laid dou'nb1' the Hon'ble} Apex Court and^{various High Courts'coming to the facts on} hand, the^{petitionercompanyis not an accused in Cr'No 2459 of}

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' 200 l(0) Suprcme (AP) 906

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2O2O as on today. It is at crime stage. The Investigating Officer has to conduct investigation. As part of investigation, the Investigating Officer has frozen the account of the petitioner company. According to the investigating Officer, the said accounts are suspect accounts and Loan App transactions amounts were tralsferred into the account of the petitioner compan-Y Therefore, the Investigating Officer has issued notice dated 22.05.2021 to the petitioner compan_\r under Section 91 I 160 of Cr.p.C, in the above said crime seeking to furnish certain information by referring 3O points / clarifications. According to the petitioner company, it has already submitted a reply and clarifications.

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The petitioner is not an accused in the present crime. The petitioner has entered into a service agreement dated 23.06.2016 with^,M/s Redcarpet Tech private Limited,. The Investigating officer is conducting investigation in all the above crimes pertain to Loan App fraud. The petitioner has to cooperate with the lnvestigating Officer by furnishing information and docLlments as sought by him in concluding investigation. During the course of investigation, if the Investigating Olficer comes to a conclusion that the petitioner company is nothing to do with the said crime and that there is no nexus with the said crime and the petitioner company and its transactions, he has to issue necessary instructions to the bank to defreeze the said account of the petitioner herein. The Court below has considered all the said aspects in the impugned order.

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Therefore, the impugned^{order,dated18.06.2O21 is a reasoned} order. According to^{this Court, there is no error in it'The} petitioner herein fails to establish^{any groundto interfere with} the impugned order by^{invoking its powerunder Section 482 of} Cr.P.C. However, considering^{the fact that the petitioner has to} make trarsactions, do its^{business, pay salariesto its empioyees} as the account of the^{petitioner was frozen on 22'05'2021' this} Court inclines to^{pass certain directions to the Investigating} Officer in Cr.No.2459^{of 2020.}

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27 . In the result,^{the Criminal Petition is accordingly} disposed of directing^{the InvestigatingOfficer in Cr'No'2459of} 2O2O to complete investigation^{pursuant to the notice dated} 22.O5.2021 issued under^{Section 91/160 of Cr'P'C including} the role played by^{the petitionerin commission of offencesin the} present crime and other crimes^{pertain to Loan App fraud'as} expeditiously as^{possible, preferably within four weeksfrom the} date of receipt of copy^{of this order. He is further directed to} considerthereplydated22.O5.2o2lsubmittedbythepetitioner to the said notice^{dated 22.05.2021' Tlne petitioner shali} cooperate with the^{InvestigatingOfficer by furnishingany} further information^{and documentsas sought by him in} concluding the^{investigation.If the Investigating Officer comes to} a conclusion that the^{petitionercompany is nothing to do with} the said crime and^{that there is no nexus with the said crime} and the petitioner^{company and its transactions,he has to issue} necessary instructions to^{the bank to defreezethe saidaccount}

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of the petitioner herein. If he comes to^{a conclusionthat the} petitioner company, its transactions have nexus with the^said crimes including Cr.No.2459 ol 2020, he^{shall follow the} procedure laid dou,n under law.

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As a sequel, miscellaneous petitions, if any,^pending in^the Criminal Petition shall stand closed.

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Sd/. M. MANJULA' ASSISTANT^REGISTRAR //TRUE COPY//

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SECTION^OFFICER

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