Criminal Writ Petition No.1224 of 2001

24th January, 2002

Petitioner Counsel: Shri. V.G.PRADHAN,Shri J.S.KINI
Respondent Counsel: P.JANARDHANAN, Dr. F.R.S.SHAIKH A.P.P.

Cases Cited:
Union of India Vs. Thamisharasi, (1995) 4 SCC 190 [Para 4]
Uday Mohanlal Acharya Vs. State of Maharashtra., 2000 ALL MR (Cri) 1551=2000 (4) Mh.L.J.742 [Para 4]

JUDGMENT

F.I.REBELLO, J. :- The Petitioner was served summons under Section 160 and 91 of the Criminal Procedure Code by respondent No.1. Petition has been filed to challenge the summons. By way of reliefs the petitioner has prayed for issuance of writ of certiorari and any other appropriate writ, order or direction to stay the proceedings initiated by respondent Nos.1 and 2 against the petitioner on the basis of CR No.156 of 2001. There are also some other consequential reliefs. Respondent No.1 had on 4.1.2000 registered C.R.No.156/2001 against one Ajay Thakkar and Smt.Bhavana Thakkar. The case being C.R.No.33/2001 was being investigated under sections 406, 420 and 114 of Indian Penal Code read with sections 3 and 4 of the Maharashtra Protection of Interest of Depositors Act, 1999. It transpires that in the course of investigation Ajay Thakkar expired. The respondent No.1 registered the offence on the strength of oral complaint made by one Shri Ajit Vithal Pangam whose statement was also recorded. It is averred in the petition that the statement of Ajit Vithal Pangam recorded by respondent No.1 based on which C.R.No.156/2001 was registered clearly and conclusively showed that the complainant's grievance was that the late Ajay Thakkar and Bhavana Thakkar as financial establishment had taken deposits from the complainant on the understanding that the deposits would be returned with interest. The aforesaid persons have fraudulently defaulted payment of the deposits. It is then averred that this being the grievance, the officers recording the said statement ought to have realized, that the grievance of the complainant Pangam against the accused could be sorted out exclusively by a designated Court and not by any of the Metropolitan Magistrate's Court in the city. It is further pleaded that the jurisdiction to try all offences of fraudulent deposits which are covered by the provisions of the Maharashtra Protection of Interest of Depositors (In Financial Establishment) Act, 1999 (hereinafter referred to as the "Act") lay only with the designated Court and that the respondents had no jurisdiction. It is further pleaded that the respondent No.1 ought to have realized that his powers to register an offence for violation of any offence under the Act or of carrying out seizure of the premises and, documents and funds of the petitioner would only arise if the Commissioner of Police were to instruct him to do so. This also after the complaint had been referred to the said Commissioner by the District Collector. It is averred that the respondent Nos.1 and 2 acted without bearing in mind that the powers to attach, seal or seize any property of a financial establishment fell exclusively within the jurisdiction of the Competent Authority under Section 5 of the Act. Respondents 1 and 2 it is contended are not empowered to act in this behalf unless help was sought by the Competent Authority.

2. The Governor of Maharashtra initially promulgated the Maharashtra Protection of Interest of Depositors (In Financial Establishment) Ordinance, 1999 on 29.4.1999 which came into effect immediately. The said Ordinance has been replaced by the Act. It is contended that the entire scheme of the Act is to provide for recovery of deposits of defaulting financial establishments when it involves section of public at large consisting of small depositors. It is then averred that all cases of cheating, criminal breach of trust, criminal misappropriation etc. involving any individual/private party and/or dealing with individuals as such are not public at large and are meant to be taken cognizance of and tried by Magistrate's Court. Such individuals at best for the purpose of recovery of their deposits from the defaulting party cannot directly approach the designated Court created and constituted under section 6 of the Act. It is further contended that before the designated Court set up under the Act assumes jurisdiction of public grievance of defaults by financial establishments, the complaints are required to be gone through a quasi judicial stage of inquiry culminating in a report and notification in the Government Gazette. Reference is then made to section 4 of the Act and the procedure that has to be followed. The petition then sets out the scheme of the Act.

3. On behalf of the respondents, the 2nd respondent has filed an affidavit. It is therein set out that the General Branch, Crime Branch, CID, Mumbai is investigating the offence under sections 406, 420 and 114 of I.P.C. r/w sections 3 and 4 of the Act. The affidavit discloses that the accused Ajay Thakkar (now dead) and Smt. Bhavana Thakkar were conducting business as finance brokers at Malad. They used to accept deposits from the members of the public for the minimum period of three months in lieu of bill of exchange. The rate of interest was 1% to 1.5% p.m. and the interest amount of three months was paid in advance. Deposits were accepted both by cheque as well as cash. Whilst making payment, in respect of those who issued cheques they would pay by cheque and those who paid by cash would be paid in cash. The complainant on whose complaint investigation has been carried out had invested Rs.12 lakhs by cheques in the name of his firm Ameya Constructions Company. Initially some interest was paid. Thereafter inspite of demands and visits neither the invested amount nor the interest was paid. It is then set out that whilst searching the investors list, ledger, bank details and other important documents with the accused, it was found that the accused persons had collected most of the information on the computer. The accused persons were conducting business in the names of various firms as set out in paragraph eight of the affidavit in reply. The accused used to deposit the amount received by cheque from the depositors in respective bank accounts of the firms. The accused had given some money by cheques to businessmen and some other companies on higher rate of interest. The amount had been mobilized from the depositors, the borrowers were shown as debtors in the account of the firm of the accused person. It is then set out that the branch had received complaints from 983 depositors. The amount invested was to the tune of Rs.50,87,98,198/-. In paragraph twelve it is averred that from the records of the accused it was disclosed that the petitioner had taken huge amounts from different firms of the accused persons on 25.1.2001, together totalling Rs.Seventy lakhs. It was in these circumstances that the petitioner was called to the office of the 1st respondent. It is then set out that the case of the petitioner was that the loan amount had already been paid. The petitioner was called upon to produce necessary documents thereto. There was reminder sent 2.8.2001. The petitioner failed to turn up and instead filed anticipatory bail application.

4. Though in the petition various grounds had been raised at the time of hearing it is submitted on behalf of the petitioner that the respondents 1 and 2 had no jurisdiction to entertain the complaint. It is contended that on reading section 4(3) of the Act it would be clear that it is only when the Collector of the district sends a copy of the complaint to the concerned district Police Superintendent or Commissioner of Police then only can investigation be commenced. Section 3 of the Act it is contended, has to be considered in the light of sub-section (3) of section 4 and if so considered it is pointed out that there can be no individual complaint. Apart from that, the Act does not provide for any delegation of powers by the authorities named under sub-section 3 of section 4 and consequently the direction by the respondent Nos.1 and 2 to the petitioner is without jurisdiction. Pointing out to the summons dated 3.8.2001 specific reference is made to the below mentioned part of the 1st paragraph:

"....... ...... ........ ........ ....... and during the course of investigation it is revealed that, you have taken loan/financial assistance from the different firms of the accused persons in your name and/or in the name of your firm and the amount of Rs.70,00,000/- (as described below) is due from you, which was mobilized/collected by them from the members of public and as the same are required to be returned to various depositors in this case, you are directed to return the said amount forthwith by pay order drawn in the name of Sr.Inspector of Police, GB CB CID, Mumbai." (emphasis supplied)

Taking exception to the said demand it is pointed out that respondent No.1 or 2 considering provisions of the Act have acted without jurisdiction as they had no authority to call on the petitioner to forthwith pay the said amount.

In support of the contention reference has been made to the statements and objects annexed to the bill. The Legislative Assembly of the State of Maharashtra it is contended took note of the mushrooming growth of financial establishments in the State of Maharashtra in the recent past. It was also noted that the sole object of these establishments is of grabbing money received as deposits from public, mostly middle class and poor on the promises of unprecedented highly attractive rates of interest or rewards and without any obligation to refund the deposit to the investors on maturity, or without any provision for ensuring rendering of the services in kind in return, as assured. Many of these financial establishments have defaulted to return the deposits on maturity or to pay interest or render the services in kind, in return, as assured to the public. Deposits run into crores of rupees and has resulted in a law and order problem in the State of Maharashtra especially in city like Mumbai, which is treated as financial capital of India, it is in these circumstances that the Act was enacted. It is sought to be contended that this being the object, the Legislature thought it fit that they may not fall under any of the provisions of Indian Penal Code and as such treated such cases as offences under the provisions of the Act to enable such defrauded parties to make recoveries of the moneys under the Act, under the various provisions. However the responsibility and powers are vested in the Collector of District, District Police Superintendent and Commissioner of Police, Officers not below the rank of Deputy Collector and on persons of rank of no less than that of Home Secretary. These authorities it was contended are required to act in quasi judicial manner. At the subsequent stage it is the designated Court that requires to exercise jurisdiction which is exclusive to it. It is further submitted that section 4 of the Act does not spell out any offence either cognizable or non-cognizable. Therefore any grievance made under section 4 or 5 cannot be the subject matter of complaint of information given either to a Magistrate or to Police Officer considering that no Police Officer can assume any powers or purport to perform any function and/or otherwise interfere with the nature of operation of sections 4 to 5 of the Act. It is further submitted that in the entire scheme of section 4, the police machinery at its best is brought into picture only at the level of District Superintendent of Police or Commissioner of Police for investigation. Investigation under sub-section (3) of section 4 can be construed to mean investigation into an offence as spelt out in the provisions of Criminal Procedure Code. It is only when the Collector of District sends a copy of the complaint to the District Superintendent of Police or Commissioner of Police and after considering the same would the District Superintendent of Police or Commissioner of Police be required to investigate the complaint for any offence disclosed therein. It is submitted that even the District Superintendent of Police or Commissioner of Police cannot interfere or divert or deviate with the subsequent steps required to be taken under Section 4 and/or other steps to be followed considering sections 7,8,9 and 10 of the Act.

It is also submitted that under section 162 of the Criminal Procedure Code the Police Officer investigating the offence is not empowered to administer oath or take on record affidavit of person examined by him. Such police officer is not authorized to obtain signature of person whose statements are recorded in the course of investigation. Section 4 really envisages application of mind leading to forming a reasonable belief that recovery proceedings are necessary and for this purpose recording evidence, taking of affidavit is provided. The enquiry and investigation into nature and scope of any scheme provided by Financial Establishments to its investors resulting in a loss, as provided in section 4 and subsequent sections is much wider. An investigation by police officer at the Station House level would apart from resulting in injustice to the concerned parties will substantially result in curtailing the scope of section 4 and other sections of the Act.

In reply on behalf of respondents learned Additional Advocate General contends that the petition is without foundation. Considering the scheme of the Act and the provisions of the Criminal Procedure Code it is contended that if the offence is cognizable, a police officer can investigate into the offence. The Act does not provide that it is only in the event of complaint received under sub-section 3 of section 4 by officer named therein that the matter can be investigated. Section 3 it is contended is independent and the provisions of Criminal Procedure Code can be put into motion even on the single complaint. It is pointed out that the procedure to be followed for investigation would be the provisions of Criminal Procedure Code considering that the Act does not provide for any special procedure. The learned Additional Advocate General relied upon judgment of the Apex Court in the case of Union of India Vs. Thamisharasi and others, (1995) 4 SCC 190 and Division Bench Judgment of this Court in the case of Uday Mohanlal Acharya Vs. State of Maharashtra, 2000 (4) Mh.L.J.742 : (2000 ALL MR (Cri) 1551) in support of his contention that in the absence of any special procedure being provided by the Act, provisions of the Criminal Procedure Code would apply.

5. With the above we may now examine as to whether there is force in the submission made on behalf of the petitioner by the learned counsel, which can be summarized as under :

i) Can an investigation for an offence under Section 3 of the Act commence only in the event the Collector authorized to entertain the complaints under sub-section (3) of section 4 sends copies of the complaint to the District Superintendent of Police or Commissioner of Police and further that no individual complaint can be entertained;

ii)Can an officer other than the District Superintendent of Police or the Commissioner of Police investigate into an offence under Section 3 of the Act.

The entire argument of the petitioner is based on interpretation of sub-section (3) of section 4. It would therefore be relevant to consider the nature and scope of section 4.

"4. (1) Notwithstanding anything contained in any other law for the time being in force.

(i) where upon complaints received from the depositors or otherwise, the Government is satisfied that any Financial Establishment has failed,

(a) to return the deposit after maturity or on demand by the depositor; or

(b) to pay interest or other assured benefit; or

(c) to provide the service promised against such deposit; or

(ii) where the Government has reason to believe that any Financial Establishment is acting in a calculated manner detrimental to the interest of the depositors with an intention to defraud them;

and if the Government is satisfied that such Financial Establishment is not likely to return the deposits or make payment of interest or other benefits assured or to provide the services against which the deposit is received, the Government may, in order to protect the interest of the depositors of such Financial Establishment, after recording reasons in writing, issue an order by publishing it in the Official Gazette, attaching the money or other property believed to have been acquired by such Financial Establishment either in its own name or in the name of any other person from out of the deposits, collected by the Financial Establishment, or if it transpires that such money or other property is not available for attachment or not sufficient for repayment of the deposits, such other property of the said Financial Establishment or the promoter, director, partner or manager or member of the said Financial Establishment as the Government may think fit.

(2) On the publication of the order under sub-section (1), all the properties and assets of the Financial Establishment and the persons mentioned therein shall forthwith vest in the Competent Authority appointed by the Government, pending further order from the Designated Court.

(3) The Collector of the District shall be competent to receive the complaints from his District under sub-section (1) and he shall forward the same together with his report to the Government at the earliest and shall send a copy of the complaint also to the concerned District Police Superintendent or Commissioner of Police, as the case may be, for investigation."

Further let us understand the provision of section 4. Do they constitute an offence for which a person can be punished. Under Section 4, if the State Government is satisfied that the financial establishment is not likely to return the deposits or make payment of interest or any other benefits assured or to provide the services against which deposits were received, the Government may, in order to protect the interest of depositors of such financial establishment, after recording reasons in writing, issue an order and publish the same in the official gazette, attaching money or other property believed to have been acquired by such financial establishment either in its own name or in the name of any other person from out of deposits, collected by financial establishment, or if it transpires that such money or other property is not available for attachment or not sufficient for repayment of deposits, such other property of the said financial establishment or of the promoter, director, partner or manager or member of the said financial establishment as the Government may think fit. In other words, it is clear that the order passed is not only in respect of property in the hands of the financial establishment but in the event such property is not sufficient to meet the amounts due to the depositors, then to attach moneys and properties including moneys and properties of the financial establishment in the hand of others. A person who has taken loan from such financial establishment would be a debtor considering section 4 and the property in the hands of such defaulter would also be liable for attachment. However, before passing such order the Government has to take into consideration the report submitted by the Collector of District based on the complaints received by him. The twin requirements therefore are report from the Collector based on complaints received and thereafter passing of the order by giving reasons and publishing the same in the official gazette u/s.4(1) of the Act. Section 4(1) therefore provides for attachment of property of the defaulter etc. However subsequent order of attachment if made does not result into an offence which is punishable. Such a person can only be punished if it constitutes an offence under section 3.

6. The question then arises as to whether the procedural provisions of the later part of sub-section (3) of section 4 can be an aid to construction or interpretation of section 3. For the purpose of construing section 3 the same may be reproduced.

"3. Any Financial Establishment, which fraudulently defaults any repayment of deposits on maturity along with any benefit in the form of interest, bonus, profit or any other forms as promised or fraudulently fails to render service as assured against the deposit, every person including the promoter partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or affairs of such Financial Establishment shall, on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lac of rupees and such Financial Establishment also shall be liable for a fine which may extend to one lac of rupees.

Explanation - For the purpose of this section, a Financial Establishment, which commits default in repayment of such deposit with such benefits in the form of interest, bonus, profit or in any other form as promised or fails to render any specified service promised against such deposit, or fails to render any specific service agreed against the deposit with an intention of causing wrongful gain to one person or wrongful loss to another person or commits such default due to its inability arising out of impracticable or commercially not viable promises made while accepting such deposit or arising out of deployment of money or assets acquired out of the deposits in such a manner as it involves inherent risk in recovering the same when needed shall, be deemed to have committed a default or failed to render the specific service, fraudulently."

At the outset it may be pointed out that under section 3 for failure to do any of the acts specified thereunder every person including the promoter, partner, director manager or any other person or an employee responsible for the management or conducting of the business or running of such financial establishment shall conviction be punished with imprisonment for a term which may extend to six years with fine which and the financial establishment shall also be liable for fine which may extend to one lakh of rupees. A plain reading of Section 3 therefore atleast does not disclose or indicate that it would constitute an offence only in the event there is collectively a group of persons who have filed the complaint. As rightly pointed out on behalf of the Respondents the procedure of investigating the complaint would be the Criminal Procedure Code, 1973. Section 4(2) of the Criminal Procedure Code, 1973, sets out that all offences under any other law shall be investigated, inquired into, tried and otherwise dealt with according to the same provisions (Criminal Procedure Code) but subject to any enactment for the time being in force regulating the manner of steps to investigate into, try or otherwise deal with such offences. A perusal of schedule I of Criminal Procedure Code, part II, would show that it deals with classification of offences against other laws. In respect of an offence punishable with imprisonment for three years and upwards but not more than seven years is shown cognizable. If that be the case an investigating officer would have jurisdiction to proceed to investigate/enquire into the matter under Section 156 of the Criminal Procedure Code. In other words, u/s.3 of the Act read with powers of the police officer to investigate the complaint u/s.156 of Criminal Procedure Code, there is no requirement that investigation can be commenced only in the event there is a group of persons who have filed the complaint.

Does, sub-section (3) to section 4 aid the contention which is sought to be advanced on behalf of the petitioners. It is cardinal rule of interpretation that Courts must give effect to the objects of the Act. No provision should be rendered otiose or language made surplusage or to give a meaning which would defeat the object for which the Act is enacted. The first rule of construction is to go by the literal interpretation where the language of the section is clear. We have earlier referred to the statements of objects and reasons. A perusal of the objects and reasons would indicate that the Act has been enacted to protect investors who have been duped by establishments grabbing moneys of the poor and middle class by accepting deposits and thereafter not repaying. The expression "establishments" in the objects and statement clause does not mean that it should be two or more establishments. The expression is used in plural only to point out that more than one establishment has sprung up in the State of Maharashtra. Even otherwise the statement of objects and reasons clause cannot be used to read down a provision which is clear and in respect of which there is no difficulty in interpretation. The statements and objects clause therefore is of no assistance in support of the contention advanced on behalf of the petitioners.

In our opinion, it is possible to harmoniously construe both sub-section (3) of section 4 and section 3. Sub-section (3) of section 4 provides that in the course of any investigation into complaints received by the Collector under Section 4(3) of the Act for preparing his report to be submitted to the State Government for passing the order under sub-section(1) of the Section 4, the Collector shall also send a copy of the complaint to the concerned District Police Superintendent or the Commissioner of Police as the case may be for investigation. In other words, the law mandates the Collector to send a copy of the complaint to the District Police Superintendent or Commissioner of Police for investigation. There is atleast nothing further in the sub-section which says that it is only the District Superintendent of Police or the Commissioner of Police who can only proceed to investigate the complaint. It is only that the sub-section requires that a copy be sent to the District Superintendent of Police or Commissioner of Police for investigation. It does not mean and cannot mean that because of complaint has to be forwarded to the District Police Superintendent or the Commissioner of Police that the provisions of Section 156 of the Criminal Procedure Code are excluded. The sending of the complaint is merely a procedural requirement. Once such a complaint is received that complaint can only be acted upon under section 3. On reading of section 3 it is clear that the complaint need not be, by more than one person. The complaint for the purpose of investigation can be by an individual also. On the complaint being received it can be investigated by an officer considering the provisions of section 156 of Criminal Procedure Code and other provisions. In so far as sub-section (3) of section 4 is concerned all that it provides for is preparation of a report based on complaints received, to enable the State Government to pass an order under sub-section (1) of Section 4. The later part of sub-section (3) of sending the copy for investigation to the District Superintendent of Police or Commissioner of Police for investigation could be to enable the Collector to prepare the report for sending it to the Government. Though on a literal reading of the section this view may not be possible. The other meaning is to send the complaint for the purpose of investigation to the Deputy Superintendent of Police or Commissioner of Police who can direct that the complaint may be investigated. This investigation can only be in terms of section 3 of Act read with section 156 of Criminal Procedure Code so as to read provisions of the Act and Criminal Procedure Code harmoniously. This harmonious construction would meet the objects of the Act and not defeat it; otherwise it would tantamount to contending that whereas the object of the Act was to protect the small investors from being duped of their money, by reading into section 3 of the Act something not provided therein, the very purpose of the Act would be defeated. That to our mind, is not for which the Act was enacted for. A complaint by a single individual under section 3 is maintainable. The other sections would come into play only when the designated Court takes cognizance of the complaint of which it has exclusive jurisdiction. That would be the second part with which we are really not concerned in the present petition. The question therefore of delegation of powers by the District Superintendent of Police or Commissioner of Police does not arise at all as they are not the Investigating Officer.

7. We may now refer to the summons sent to the petitioner herein. It is true that neither respondent No.1 nor respondent No.2 can demand from the petitioner any amount which may be in the hands of the petitioner while investigating an offence under section 3 of the Act. Once an order of attachment is passed under sub-section (1) of section 4 the property vests in the Competent Authority under the Act. Neither respondent No.1 nor respondent No.2 are the Competent Authority for that purpose. Also no order yet has been passed under sub-section (1) of section 4. The last part of paragraph 1 of the summons to our mind would indicate that though there was a demand, in fact what was sought for was only the voluntary payment in the event the petitioner wanted to make payment as the offence is being investigated also under the provisions of Indian Penal Code. Otherwise there was no need to state in the second paragraph of the summons the need to examine, scrutinize books of accounts etc. The petitioner has acknowledged that though the amounts had been received they have been paid back. A proper reading of the summons therefore would indicate that it was in the nature of request for voluntary compliance if the petitioner so desired and not a demand. Considering that though the language of the summons in the first part may not be happily worded to our mind, the investigating officer had jurisdiction to investigate the offence and to that extent issue summons for the purpose of examining and scrutinizing account books etc. That cannot be faulted with. Though it is set out that the matter is being investigated also under section 4, as already explained earlier the order passed under sub-section (1) of section 4 is an order of attachment by the Government. It does not constitute an offence. That order by virtue of sub-section (2) will continue to be in force pending further order from the Designated Court under section 7 of the Act. Apart from the provision of the Act the matter is being also investigated for offence under the Indian Penal Code. Thus explained there is no merit in the contention that the demand is illegal or without jurisdiction.

8. Considering the interpretation given by us to section 4(3) and section 3 of the Act there is no merit in this petition which is consequently dismissed.

Rule stands discharged. There shall be no order as to costs.

Petition dismissed.