THE HON’BLE SMT. JUSTICE TIRUMALA DEVI EADA CRIMINAL PETITION No.10526 OF 2025

ORDER:

This Criminal Petition is filed by the petitioners – accused Nos.1 and 2 seeking to quash the proceedings in FIR No.169 of 2025 on the file of P.S. Sangareddy Town, Sangareddy District, registered for the offences under Sections 420, 406 read with Section 34 of the Indian Penal Code (for short “IPC”) and Section 5 of Telangana Chit Fund Act (for short “TSCF Act”) and Section 5 of The Telangana Protection of Depositors of Financial Establishment Act, 1999 (for short ‘TSPDFE Act, 1999”).

2. Heard the submissions of Sri N.Amarnath, learned counsel for the petitioners and Sri Jithender Rao Veeramalla, learned Additional Public Prosecutor for respondent No.1 – State.

3. The learned petitioners counsel has submitted that it is a Registered Chit Fund under Companies Act and that they are conducting chit fund business, therefore, TSPDFE Act does not get attracted and that it is falsely alleged by the de facto complainant that they have collected amounts from the victims and have deceived them. He further argued that there is no inducement to deliver the property and hence, the allegations under Section 420 IPC also do not get attracted. He further relied upon a decision in Rikhab Birani and others v. State of Uttar Pradesh and another, 2025 INSC 512 wherein the accused were alleged with offences under Sections 406, 415, 420 IPC and it was held that “the offence of cheating under Section 415 of IPC requires dishonest inducement, delivering of a property as a result of inducement, and damage or harm to the person so induced. The offence of cheating is established when the dishonest intention exists at the time when the contract or agreement is entered, for the essential ingredient of the offence of cheating consists of fraudulent or dishonest inducement of a person by deceiving him to deliver any property, to do or omit to do anything which he would not do or omit if he had not been deceived. As per the investigating officer, no fraudulent and dishonest inducement is made out or established at the time when the agreement was entered”. Therefore, it was held that a mere subsequent failure to fulfil a promise on contractual term, without proof of initial dishonest intention, does not amount to cheating.

4. Learned counsel further argued that any dispute in cases of chit fund should go before the Deputy Registrar of Chits, who has jurisdiction and that the complaint against the petitioners herein

cannot be sustained as there is no entrustment of property and also that the TSPDFE Act does not get attracted against the petitioners, therefore, prayed to quash the proceedings against the petitioners herein.

5. The learned Additional Public Prosecutor, on the other hand, has submitted that the law is well settled by a decision of this Court (the then High Court of Andhra Pradesh) in V.Revathi v. The State of A.P, (2013) 3 ALT (Crl) 116. Therefore, Section 5 of TSPDFE Act applies to the case on hand. Hence, prayed to dismiss the petition.

6. Perused the record.

7. In Revathi’s case (supra 2), it was held that “organizer of the chit becomes ‘financial establishment’ as defined in Section 2(c) of the 1999 Act since the organizer/foreman accepts the deposit by way of periodical subscriptions from the members under a scheme or arrangement specifically called as chit fund transaction. Therefore, the definitions of ‘deposit’ under Section 2(b) and ‘financial establishment’ under Section 2(c) of the 1999 Act are satisfied in case of organizer of a chit fund transaction receiving subscriptions from members of the chit. Therefore, I have no

hesitation to conclude that the 1999 Act is equally applicable in the case of a chit fund transaction also.”

8. The definition of Section 2(c) of the Act prevailed till 2003. However, the Act was amended in 2003 and at present Section 2(c)

reads as follows”-

Financial Establishment means “any person or group of individuals accepting deposit und