2024 (5) TMI 981 - HC - Indian Laws

Betting operators cannot quash FIR for misappropriating GST and TDS payments under Section 482 CrPC

Surya And Co., M/s. Tejashwini Enterprises, M/s. Sri Hari Enterprises, M/s. Banashankari Enterprises, M/s. Paras And Co., Aditya Enterprises, M/s. Maruthi Enterprises, M/s Sri Manju Associates, M/s. Meghana Enterprises, M/s. Satty Associates, M/s Metro Associate, M/s. Neelakanta, M/s Samrat And Co., M/s. A.A. Associate, M/s. Amruthaya And Co., Karthik And Co., M/s Srivari And Company, R.K. Enterprises, M/s Royale Enterprises, R.R. Enterprises, Chamundeshwari Enterprises, M/s. Sri Rama Enterprises, Nirmal And Co., M/s. Vikranth Enterprises, M/s. Sai Ratan, HNS And Co. Versus State Of Karnataka, State Of Karnataka By Central Crime Branch Bengaluru City, Police Officer CCB Unit, Special Investigation.

Surya And Co., M/s. Tejashwini Enterprises, M/s. Sri Hari Enterprises, M/s. Banashankari Enterprises, M/s. Paras And Co., Aditya Enterprises, M/s. Maruthi ... Issues Involved:1. Quashing of FIR u/s 482 Cr.P.C.2. Applicability of Section 78(1)(a)(i) of the Karnataka Police Act, 1963.3. Jurisdiction of Police vs. GST Authorities.4. Preliminary Enquiry by Police before FIR Registration.5. Allegations of Misappropriation of GST and TDS.Summary:1. Quashing of FIR u/s 482 Cr.P.C.:Accused Nos. 1 to 26 sought to quash the FIR in Crime No. 9/2024 registered by High Grounds Police Station for offences under Section 78(1)(a)(i) of the Karnataka Police Act, 1963, Section 12 of Karnataka Race Betting Act, and Section 420 of IPC. The court examined whether the accusations and allegations made in the FIR prima facie disclosed the commission of a cognizable offence.2. Applicability of Section 78(1)(a)(i) of the Karnataka Police Act, 1963:The court noted that Section 78(1)(a)(i) of the Act would not apply to licensed bookies if they strictly complied with the terms of their license. However, unlicensed bookies were not covered under the exception found in Section 2(7) of the Act, making them liable under Section 78(1)(a)(i). The compliance of licensed bookies with their licenses needed verification during the investigation.3. Jurisdiction of Police vs. GST Authorities:The petitioners argued that only GST authorities could take action for non-deposit of GST and TDS, not the police. The court referenced the Supreme Court's judgment in State (NCT of Delhi) vs. Sanjay, which held that the provisions of special acts do not bar prosecution under the IPC. The court found that the allegations of misappropriation of GST and TDS collected from punters and winning bettors justified the police's involvement.4. Preliminary Enquiry by Police before FIR Registration:The petitioners contended that the preliminary enquiry by CCB police before FIR registration was illegal. The court referred to the Supreme Court's judgment in Dr. Saleem Ur Rehman, which allowed preliminary enquiries to establish a prima facie case for FIR registration. The court held that the preliminary enquiry conducted by the first informant was lawful.5. Allegations of Misappropriation of GST and TDS:The court found significant discrepancies in the amounts collected by bookies and the amounts reported. The allegations included unauthorized collection of betting money, failure to maintain proper records, and non-deposit of GST and TDS. The court cited the Delhi High Court's judgment in Ajay Home Product Limited, which held that misappropriation of public money collected as tax constitutes criminal breach of trust.Conclusion:The court dismissed the petition to quash the FIR, emphasizing that the allegations made in the FIR and the material collected during the investigation prima facie disclosed a cognizable offence. The court stressed that the investigation should not be interfered with at the initial stage and that the police have the statutory right to investigate cognizable offences.