Chit fund transactions are classified as financial establishments under the TSPDFE Act, allowing for prosecution alongside Cheating provisions in BNS.

ORDER:

TIRUMALA DEVI EADA, J.

This Criminal Petition is filed by the petitioner-accused seeking to quash the proceedings in FIR No.567 of 2024 on the file of Hanamkonda Police Station, Warangal District, for the offences under Sections 318(4) read with 3(5) of BNS and Section 5 of the Telangana Protection of Depositors of Financial Establishments Act, 1999 (hereinafter referred as ‘TSPDFE Act’).

2. Heard Sri CMR Velu, learned counsel for the petitioner and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor for the respondent No.1-State.

3. Learned counsel for the petitioner has submitted that the present case is registered under Sections 318(4) read with 3(5) of BNS and Section 5 of the TSPDFE Act and that the said Act does not get attracted to the present case. The contention of the learned counsel for the petitioner is that a chit fund transaction does not amount to collection of deposit and thus, the provisions under the Depositors Act do not get attracted. Therefore, registration of the crime under the said Act would be an abuse of process of law. If that offence is set aside, then the other allegation under Section 318(4) read with 3(5) of BNS also do not get attracted against the petitioner as there is no dishonest inducement by the petitioner. He further submitted that the ingredients of the complaint did not point out that there is dishonest intention of the petitioner from the inception to constitute the offence of cheating under Section 318(4) of BNS. Hence, the learned counsel submitted that all the alleged offences cannot be made out from the recitals of the complaint therefore, he prayed to quash the proceedings against the petitioner herein.

4. Learned Additional Public Prosecutor has submitted that it is a settled law that the cases registered with the allegations of non- payment of the amount to the subscribers in a chit would definitely fall under Section 5 of the TSPDFE Act as the definition of Financial Establishment clearly attracts the nature of business that is run by the petitioner, and hence, the principle laid down by this Court in Revathi v. State of A.P. , (2013) 3 ALT (Crl) 116 is clearly applicable to the present case and thus, the contention of the learned counsel for the petitioner cannot be maintained and further unless the matter is subjected to trial, the allegations under 318(4) of BNS cannot be proved and hence, prayed to dismiss the petition.

5. Perused the record.

6. The contention of the learned counsel for the petitioner is that once it is a chit fund transaction, it is squarely covered under the Chit Fund Act, which is a complete code in itself and hence, invoking Section 5 of the TSPDFE Act is not maintainable. On the other hand, learned Additional Public Prosecutor relied on Revathi v. State of A.P. (1 supra).

7. Before going into the principle laid down in Revathi v. State of A.P. , it is pertinent to refer to the relevant provisions under TSPDFE Act and Chit Fund Act which are extracted hereunder for the sake of reference:

Section 2 (b) and (c) of the TSPDEF Act reads as follows:

“2. In this Act, unless the context otherwise requires,-

(a) xxxx

(b) “deposit” means the deposit of a sum of money either in lumpsum or installments made with a financial establishment for a fixed period, for interest or return in any kind.

(c) “Financial Establishments” means any person or group of individuals accepting deposit under any scheme or arr