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TMI Blog2010 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... d deposits from the public vide Circular dated December 6, 1998 and that monies had been invested by the petitioner and his wife in the Pensioner's Benefit Fund, pursuant to the approval of the scheme by the Reserve Bank of India ; that the company had issued letters on May 18, 1999 and June 14, 1999, to the investors not to present their interest warrants and that payments of interests would be made by August, 1999 ; that the company had since closed its business and the amount due to respondent No. 2 was about Rs. 2,91,778 ;" 5. Respondent No. 2 lodged a first information report on October 15, 1999, with the Indira Nagar Police Station alleging the offence under section 420 of the Indian Penal Code, 1860, read with sections 3, 4, 5 and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. In the FIR, it was stated that the alleged offences, if any, were committed during the period between May, 24, 1998 and September 17, 1999. 6. According to the appellant, he ceased to be a director of the company from December 27, 1997, therefore, he was not responsible in any manner for what had happened in the company after he had resigned as a director of the company. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case that he also being an investor, the ratio followed by this court in the case of similarly situate persons, applies to his case also. However, it is for the trial court to ascertain as to whether there is investment by the petitioner or not, when he was appointed as a director, when he resigned and whether the alleged incident has taken place during his directorship and further, to ascertain the preliminary aspect as to whether there is a prima facie case against him and whether he has participated in the proceeding or not as in charge and managing affairs keeping in view the various decisions and pass orders in accordance with law." 13. The court further observed that the petition was disposed of with a direction to the appellant to approach the trial court seeking for an order of discharge. 14. According to the appellant, even according to the averments of the complaint in the first information report there were no allegations whatsoever against the appellant, in that event, the High Court ought to have quashed the proceedings against the appellant instead of compelling him to approach the trial court for obtaining the order of discharge. The casual approach of the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RPS Benefit Fund Ltd., on December 8, 1997, whereas I have deposited my money with the company only in December, 1998 and in the year 1999. His name has been inadvertently included as an accused by the investigating officer. Hence I am withdrawing all my criminal charges against Mr. M. A. A. Annamalai and the company. Thanking you, Yours faithfully, Sd/- R. Narayanamurthy. Date : 16-9-2009" 19. This letter indicates that respondent No. 2 is not interested in prosecuting the appellant. According to the appellant, the proceedings initiated against the appellant in this case are liable to be quashed. 20. It may be pertinent to mention that respondent No. 2 also filed an affidavit on September 16, 2009, before this court. In this affidavit, reference has also been made to the affidavit filed before the High Court on June 24, 2009, in which he prayed that all cases against the company and the directors be withdrawn as he had already received 55 per cent, of the deposit amount from the Official Liquidator, High Court of Madras at Chennai. In the said affidavit filed before this court, it was also mentioned that the appellant had resigned as director from RPS Benefit Fund Ltd., on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stage of the alleged inducement of inviting depositors to deposit money with the company. Furthermore, the complaint against the chairman and the managing director itself has been quashed by an order of the High Court for the very reason that such dishonest/fraudulent intention was not made out in this case. The judgment of the High Court acquired finality before no appeal was preferred before this court. 25. It is submitted that the FIR merely alleged a violation under the Money Circulation and Banning Act without giving any basis or material for the same, cannot be sustained. In the instant case, a company was operating under licence from the Reserve Bank of India and was so carrying on a legitimate business under a license by the statutory authority. The mere fact that the company got into financial distress and went into liquidation would not in any manner make the activity carried out by them unlawful so as to invoke sections 3 to 6 of the Money Circulation and Banning Act. In fact, to fall within the mischief of the Act, it must be shown that the activity ought to be an unlawful one to make quick and easy money and a lawful activity duly approved by the Reserve Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case, the appellant ceased to be the director of the company with effect from December 27, 1997, following his resignation on December 8, 1997, which fact was also recorded in the statutory Form No. 32 filed before the Registrar of Companies. The complaint itself expressly stated that the offence had taken place only thereafter and in fact the FIR expressly stated that the occurrence of offence was between May 24, 1998 and September 17, 1999. At that stage, the appellant had admittedly ceased to be a director of the company and was not even connected with the company in any manner at the time when the alleged offence was committed and cannot be prosecuted in respect of such acts of the company. 29. The appellant, in order to strengthen his stand, has placed reliance on a numbers of judgments of this court. Reliance has been placed on the case of Him Lal Hari Lal Bhagwati v. CBI, New Delhi [2003] 5 SCC 257. In this case, the court has observed that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his failure to keep promise subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as under (page 760) : "28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support -thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused." 34. Learned counsel appearing for the State of Karnataka supported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be up to the trial court to test the prosecution case. 38. Reliance was also placed on the case of Medchl Chemicals &. Pharma (P.) Ltd. v. Biological E. Ltd. [2000] 3 SCC 269, wherein this court observed as under (page 278) : "Needless to record however and it being a settled principle of law that to exercise powers under section 482 of the Code, the complaint in its entirety shall have to be examined on the basis of the allegation made in the complaint and the High Court at that stage has no authority or jurisdiction to go into the matter or examine its correctness. Whatever appears on the face of the complaint shall be taken into consideration without any critical examination of the same. But the offence ought to appear ex facie on the complaint." 39. It is further submitted by counsel for the State that the complaint clearly disclosed the offences under sections 3, 4, 5 and 6 of the Act and also offence under section 420 of the IPC. 40. Reliance has been placed by learned counsel for the State that this court in Kuriachan Chacko v. State of Kerala [2008] 8 SCC 708, while dealing with the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, has held that (page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness/benefit funds after receiving due approval of the scheme from the Reserve Bank of India. Therefore, in any event, the element of cheating as alleged cannot be made out by any stretch of imagination. (d)The complainant/respondent No. 2 submitted in writing to this court that he does hot want to proceed against the appellant because according to him the appellant has been inadvertently included as an accused by the investigating officer. He further mentioned in the letter that he had already received 55 per cent, of the deposited amount from the official liquidator and he did not want to proceed against the appellant. (e)Even assuming that there could have been a vicarious liability thrust on the appellant; even then there cannot be any such vicarious liability in absence of any allegations and material to show that the appellant was in charge of or responsible for the conduct of the company's business which had given rise to the offence. From any angle of the matter, the appellant cannot be compelled to face the criminal trial in this case. 43. The inherent power should not be exercised to stifle the legitimate prosecution but at the same time no person be compelled to face ..... X X X X Extracts X X X X X X X X Extracts X X X X
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