Can Police Register FIR For Offence Under Chhattisgarh Protection Of Depositors’ Interest Act?: SC To Examine

AOR Sameer Shrivastava appeared for the Petitioner.

An FIR was filed against the Petitioner-Accused for offences under Section 10 of the Act of 2005 along with other provisions under the Indian Penal Code, 1860. The investigation was completed and the chargesheet was filed before the Special Judge.

The accused had preferred an application before the High Court seeking to quash the charges under Section 10 of the Act of 2005, Section 409, 120B, 34 of the Indian Penal Code, 1860 and Sections 3,4,5,6 of the Inami Chit Fund Act. The High Court had rejected the application.

The prosecution story was that a complaint was filed alleging that the Accused had deposited more than 1 lakh rupees in different schemes in the company promulgated by him and and other co- accused named and styled as "Yash Dream Real Estate Limited Company" and as per the assurance given by the Accused and his company that Rs. 2000/- per month would be returned in the form of Bond but since 8 month back the Accused had not returned the said amount on the pretext that the SEBI has issued direction not to pay to any depositors.

The petitioner contended that the police could not have registered the FIR for the offence alleged to have been committed under the provisions of the Act of 2005 and the police had no jurisdiction to investigate so far as the offence under the Act of 2005 is concerned. Further, it was argued that the order of attachment passed under Section 7 of the Act of 2005 could not have been passed for the charge- sheet filed for the so-called offence under Section 10 of the Act of 2005.

The High Court had observed, "The judgments cited by the learned counsel for the petitioner that punishing anyone for conduct which was not an offence when it was committed and the criminal legislation prohibits retrospective effect is not applicable to the present facts and circumstances of the case, as petitioner was directed to repay the amount to all the investors by the order of SEBI which has also been violated and thereafter, he has paid money to some of the depositors not to all the depositors, thus, prima facie offence under the PDI Act has been committed as this Act has been enacted with an object of providing protection to the depositors by the fraudulent default committed by financial establishment."

The Supreme Court perused Section 2(h) and Section 2(i) of the Act of 2005 which defines “financial establishment” and “fraudulent default” respectively. Section 4 of the Act of 2005 provides for notifying a ‘special court’. Section 5 states that the State Government may by notification appoint any authority not below the rank of a District Magistrate as competent authority. Section 7 is with regard to the attachment of properties on default of return of deposits, power of special court regarding attachment.

The Court observed, “A plain reading of Section 7 would indicate that if the competent authority is satisfied upon complaints received from the depositors or otherwise that any financial establishment has fraudulently defaulted, it has the power to pass an ad-interim order attaching the money or other property alleged to have been procured either in the name of the financial establishment or in the name of any other person or establishment. The next step in the process is to get such ad-interim order of attachment made absolute through the special court.”

The Court also noted that Sub-section (4) of Section 7 stipulates that upon receipt of an application under sub-section (2) of Section 7, the special court shall issue a show cause notice accompanied by a copy of the application filed by the competent authority to the financial establishment or any other person whose property is attached calling upon to show cause why the order of attachment should not be made absolute.

“Thus, the power is ultimately with the special court to pass an order of attachment absolute or in part. We are informed that there is an order of attachment of assets of the financial establishment owned by the petitioner and the same is the subject matter of challenge as on date before the High Court.”, the Court said.

The Court noted the following issues:

(i) Whether Section 10 of the Act of 2005 constitutes any offence under the Act or is only a punishing clause;

(ii) What has Section 10 of the Act of 2005 to do with powers of attachment of properties under Section 7 of the Act of 2005;

(iii) Whether the jurisdiction is only with the District Magistrate as the competent authority under the Act to initiate necessary proceedings under the Act of 2005 or the police also has the power to register an FIR and file charge-sheet for the offence under the Act of 2005;

(iv) Section 13 of the Act of 2005 provides for the procedural powers of the special court regarding the offences. Section 13 has been referred to above. It says that the trial so far as the Act of 2005 is concerned, shall be in accordance with the procedure prescribed for the warrant trial in the Code of Criminal Procedure and the special court may take cognizance of the offence without having the case committed to it. The question is on what basis the special court may take cognizance of the offence without having the case committed to it;

(v) Whether a complaint under Section 200 of the Code of Criminal Procedure lies at the instance of the District Magistrate as the competent authority or whether Police can file charge-sheet straight way before the Special Court to enable the Special Court to take cognizance on the same without the order of committal.

Accordingly, the Court stayed the Proceedings pending before the Special Judge.

Cause Title: Amit Kumar Shrivastava v. State of Chhattisgarh & Ors.

Appearances:

Petitioner: AOR Sameer Shrivastava and Advocate Yashika Varshney

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