AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 1521
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....e FIR in Cr.No.5 of 2015 that was registered on 01.04.2015 against the petitioner for an offence under Section 420 IPC and Section 5 of the Tamil Nadu Protection of Interests of Depositors (In Financial Establishments) Act, 1997 [hereinafter would be referred to as TNPID Act]. 3. W.P.No.14229 of 2015 has been filed by Viswapriya (India) Limited, formerly known as Viswapriya Financial Services and Securities Ltd., [hereinafter would be referred to as Viswapriya] for quashing the FIR in Cr.No.5 of 2013 that was registered on 21.10.2013 by the Deputy Superintendent of Police, Economic Offences Wing, for offences under Sections 120B, 406, 420 IPC and Section 5 of the TNPID Act. 4. It is indeed a sheer coincidence that, though Helios and Viswapriya have no relationship with each other, yet, they share a common Cr.No.5, but of course registered in different years. It is the specific case of the prosecution that, Helios and Viswapriya had collected deposits from public and on maturity, they failed to repay them, pursuant to which, on the complaint lodged by depositors, the aforesaid cases were registered against them for the offence under the TNPID Act along with IPC offences. At th....
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.... others 2008 (10) SCC 1 10 Saravana Thanga Nagai S.Thittam & others v. State Tr.Inspector of Police & another 6. In most of the judgments referred to above, the principle that has been laid down by the Supreme Court is that, where a single Judge is inclined to take a view different from the one that has been taken by a single Judge of the same Court or of the Division Bench of the same Court, then he should not embark upon an enquiry as a single Judge, but should refer the matter to a Division Bench or should seek for constitution of a larger Bench to examine the question. [a] In D.K.Trivedi and sons & others v. State of Gujarat [cited supra], the Hon'ble Supreme Court has held as follows: "In our opinion, the course adopted by the High Court was not correct. If the High Court thought that the point raised by the Appellants was the same as was pending in this Court, it ought to have stayed the hearing of the writ petition until this Court disposed of the other matters." [b] In Central Coal fields vs. H.M.P. [cited supra], the Supreme Court has held as follows: "2. It is open to the petitioners to apply in the High ....
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....ad to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the appellate authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the appellate authority would be restored and it can be said to be pending before the appellate authority after the quashing of the order of the appellate authority. The same cannot be said with regard to an order staying the operation of the order of the appellate authority because in spite of the said order, the order of the appellate authority continues to exist in law and so long as it exists, it cannot be said that that appeal which has been disposed of by the said order has not been disposed of and is still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the appellate authority dated January 7, 1991 does not have the effect of reviving the appeal which had been di....
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.... - II does not have the power to conduct the investigation in these cases as the accused are incorporated Companies. The circumstances under which the Economic Offences Wing was constituted is narrated in G.O.Ms.No.1697 itself, which is as follows: "ORDER The High Court of Madras, Chennai, in its order dated 29.9.99, in Company Application Nos.479 and 480 of 1999, filed by M/s Anubhav Plantations Ltd., Chennai, has ordered that a Special Wing comprising of persons, possessing skill and capable of acting with a sense of urgency, headed by an officer not below the rank of a Police Commissioner must be constituted without further delay to deal with the cases against non-banking financial companies and unincorporated financial institutions which have collected money from public as deposits and thereafter defaulted in repayment to them after maturity. It was also ordered that able and experienced senior officers with integrity, recently retired from Banks and financial institutions and also able senior professionals with integrity can be associated with such a specialised Wing as advisors or consultants. The High Court, has further ordered to employ competent persons, audit,....
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....established in Districts and in local places. These institutions were abolished by Regulation XI of 1816 which was passed by the Governor in Council of Fort St.George on 13.09.1816. A few provisions of the Regulation would make interesting reading: "It being expedient that a system of Police founded chiefly upon the ancient usages of the country, should be established throughout the territories subject to the Government of Fort St.George, and that the powers and authorities of the several classes of persons to be entrusted with the performance of police duties should be defined; The Right Honorable the Governor in Council has been pleased to enact the following rules. II. Regulation XXXV, 1802, and Section XII, Regulation IV, 1808 are hereby rescinded. III. The present establishments of Police Darogahs and Tanahdars shall from the first day of November 1816, be abolished, and the duties heretofore discharged by those persons shall be performed by persons of the descriptions herein-after mentioned. 1. Heads of villages as described in Section III, Regulation IV, 1816 aided by Curnums or Village Registers, and Tallyars and other Village Watchers. ....
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...., and for rendering such Force efficient in the discharge of all its duties. XXI Every Police Officer shall, for all purposes in this Act contained, be considered to be always on duty and shall have the powers of a Police Officer in every part of General Police District. It shall be his duty to use his best endeavours and ability to prevent all crimes, offences, and public nuisances; to preserve the peace; to apprehend disorderly and suspicious characters; to detect and bring offenders to justice; to collect and communicate intelligence affecting the public peace; and promptly to obey and execute all orders and warrants lawfully issued to him." 15. Discussion about these provisions will be taken up while dealing with similar provisions of the 1861 Act, about which we will come to, a little later. The 1859 Act was a self contained Code, and it conferred the following powers on the Police: Sections XXII - Police Officer may arrest without warrant; XXIII - Persons arrested without warrant to be taken to Station House until brought before Magistrate or bailed; XXIV - Releasing on bail; XXV - Superior Officer of Police may take recognizance for appearance of prosecu....
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....nspect any drinking shop, gaming-house or other place of resort of loose and disorderly characters." Section 46 of 1861 Act was substituted by the Police Act (1861) Amendment Act 1895 (Act VIII of 1895) and the substituted provision is as follows: "46(1) This Act shall not by its own operation take effect in any presidency, province or place. But the Governor General in Council, by an order to be published in the Gazette of India, may extend the whole or any part of this Act to any presidency, province or place, and the whole or such portion of this Act as shall be specified in such order shall thereupon take effect in such presidency, province or place." By Notification No.728 dated 31.10.1895 (Gazette of India, 1895, Part I p.876), Section 15, 15A, 16, 30, 30A, 31 and 32 of the Indian Police Act, 1861 was extended to the whole of Madras Presidency. Notification No.728 reads as follows: "The 31st October, 1895. No.728.-- In exercise of the power conferred by section 46, sub-section (1), of Act V of 1861 (an Act for the Regulation of Police), as amended by subsequent enactments, the Governor General in Council is pleased to extend sections 15, 15A, ....
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....ode of Criminal Procedure, 1861. The Governor General of India-in- Council passed an Act to repeal certain Regulations and Acts relating to Criminal Law and Procedure [Act XVII of 1862], which received the assent of the Governor General of India on 01.05.1862. The Preamble is worth extracting: "WHEREAS by Act XLV of 1860 a Penal Code has been prescribed for British India, and the said Code came into operation on the 1st day of January 1862; and whereas by Act XXV of 1861 a Code of Procedure is provided for the Courts of Criminal Judicature not established by Royal Charter, and the said Code likewise came into operation on the 1st day of January 1862 in the Presidencies of Bengal, Madras, and Bombay, and was at the same time, or has since been, or hereafter may be extended to other parts of British India; and whereas it is expedient to repeal, in the manner hereinafter provided, certain Regulations and Acts relating to Criminal Law and Procedure; It is enacted as follows: I. The several Regulations and Acts set forth in the Schedule hereunto annexed, so far as they provide for the punishment of offences, shall be held to have been and are hereby repealed from the 1....
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....mil Nadu District Police Act, 1859 with effect from 14 January 1969, after Madras State was renamed as Tamil Nadu. Roman numerals employed in Victorian legislations were replaced with Arabic ones. 21. In fine, as far as Tamil Nadu is concerned, the entire Police administration and powers flow from Tamil Nadu District Police Act, 1859 and on account of the Notification No.728 dated 31.10.1895, Section 15, 15A, 16, 30, 30A, 31 and 32 of the Indian Police Act, 1861 has been extended to Tamil Nadu. 22. The discussion will be incomplete without a reference to the Madras City Police Act, 1888 [Act II of 1888]. This Act created a position called "Commissioner of Police" for the city of Madras and vested the control of the Police force in Madras city on the Commissioner of Police. Section 16 of the Madras City Police Act, provides for employment of Police Officers appointed under the Tamil Nadu District Police Act, 1859 in the city of Madras. All Police men working under the Commissioner of Police are required to perform the duties adumbrated in Section 21 of the 1859 Act in addition to the duties under the Madras City Police Act, 1888. The Madras City Police Act, 1888 was re-christe....
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....ng in the already existing force for effective investigation of white-collared offences. 25. The learned counsel for the accused placed strong reliance upon the Division Bench judgment of this Court in Tamaraiselvan v. Government of Tamil Nadu [judgment dated 10.02.2015 delivered by the First Bench of this Court], wherein, the Government Orders constituting Land Grabbing Cell and Special Court for Land Grabbing Cells were quashed by the Court, and contended that, the Government Order constituting Economic Offences Wing should also meet the same fate. The Hon'ble First Bench of this Court quashed those two Government Orders as they were found to be violative of Article 14 of the Constitution of India, inasmuch as the Hon'ble Bench felt that, without a law prescribing what Land Grabbing Office is, creation of a special wing for land grabbing offences, would amount to arbitrary exercise of power. In this case, TNPID Act clearly defines "the offence" and for investigating the offence, if a Special Police Wing is created, it cannot be violative of Article 14 of the Constitution of India. Therefore, the judgment of the Hon'ble First Bench was rendered in the facts and circ....
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.... power to conduct investigation and prosecute the offender, would mean conferring police powers on a Revenue Official for which there is no provision either in the Act or in the Code. Section 5 of TNPID Act creates an offence made punishable upto 10 years. TNPID Act will fall within Classification II of the First Schedule of the Code of Criminal Procedure, 1973 and the offence under Section 5 will be cognizable and non29 bailable, thereby empowering the Police by virtue of Sections 4 and 5 the Code of Criminal Procedure, 1973 to take up the investigation and register FIR under Section 154 of the Code. Hence, this contention is rejected. 29. The next contention by the learned counsel is that, the accused are companies incorporated under the Companies Act, 1956 and therefore, only the provisions of Section 74 of the Companies Act, 2013 can be made applicable to them and not the provisions of the TNPID Act. 30. There is no force in this argument in the light of Section 14 of TNPID Act, which states as follows: "14. Act to override other laws.-- Save as otherwise provided in this Act, the provisions of this Act shall have effect notwithstanding anything inconsistent ther....
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....s of receiving deposits under any scheme or arrangement or in any other manner but does not include a corporation or a co-operative society owned or controlled by any State Government or the Central Government or a banking company as defined in section 5(c) of the Banking Regulation Act, 1949 (Central Act X of 1949). 33. The contention of Helios is that, they are not into the business of finance, and that they are into the Information Technology Sector. 34. The learned Advocate General and Mr.Sankar Narayanan, learned Amicus Curiae took a stand that TNPID Act would apply to any Company that refuses to pay back its depositor. This argument was strongly refuted by Mr.Ramakrishnan, learned Amicus Curiae and the learned counsel for the accused. The learned Advocate General and Mr.Sankar Narayanan brought to the notice of this Court the changes that were effected to the TNPID Act by the 2003 amendments. They contended that, when the Act was originally passed in 1997, it clearly excluded a Company registered under the Companies Act, 1956 and also a Non-Banking Financial Company as defined in Section (f) of Section 45-I of Reserve Bank of India Act, 1934, but whereas, by the 2003 am....
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....TNPID Act as originally enacted have been left undisturbed by the Amendment Act 30 of 2003. Mr.Ramakrishnan emphasised on the article "the" and submitted that the business of the Financial Establishment must be receiving deposits. There is sufficient force in the argument of Mr.Ramakrishnan, because the article "the" has to be given its due meaning as held by the Supreme Court in Shri Ishar Alloys Steels Ltd., Vs. Jayaswals NECO Ltd. [AIR 2001 SC 1161] while interpreting the words "the bank" in Section 138 of the Negotiable Instruments Act. Sri P.Ramanatha Aiyar's Advanced Law Lexicon 3rd Edition says: ""The" is the word used before nouns, with a specifying or particularizing effect opposed to the indefinite or generalising force of "a" or "an". The article "the" directs what particular things or things we are to take or assume as spoken of. It determines what particular thing is meant; that is, what particular thing we are to assume to be meant. Article 'THE' before word 'agreement' would refer to that agreement which is implicit in the sale occasioning the export. And the agreement spoken of must be the agreement with foreign buyer. ....
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....usiness of receiving deposits as defined in Section 2(3) of the TNPID Act. No doubt, the ultimate end of the manufacturing Company will be to earn profits by selling their manufactured goods, but that cannot be an indicator to bring them into the net of the TNPID Act. A manufacturing unit if it receives deposits under the Companies Act, is governed by the provisions of the Companies Act, 2013 and at present, Section 74 which is more stringent, takes care of a contingency where the Company is not able to repay the deposit to the depositors for various reasons. The deposits so received from the public is a loan simpliciter repayable with statutory interest. In fact, while receiving deposits under the Deposit Rules framed under the Companies Act, the receiving Company cannot pay fancy interest. They have to pay only the interest fixed by the Reserve Bank of India and nothing more. Whereas, TNPID Act was enacted because, fancy interest was being offered by Companies which were into the business of receiving deposits to lure innocent public. To say that an ordinary manufacturing unit which receives deposits under the Companies Act exclusively for augmenting its resources for the purpose....
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.... "where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however beneficent its intention, beyond the fair and ordinary meaning of its language."" 41. It is the contention of Mr.R.Sankaranarayanan, that the specific exclusion of Non-Banking Financial Company and specific inclusion of incorporated Company in the definition of the word "Financial Establishment" in 2003 would mean, any deposit received by a Company which is not a Non-Banking Financial Company, will fall within the purview of Section 5. Non-Banking Financial Company is not a body in abstract. It has been defined in Section 45-I(f) of the Reserve Bank of India Act, 1934 which is as follows: "45-I(f)"non-banking financial company" mean-- (i) a financial institution which is a Company; (ii) a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner; (iii) such other non-banking institution or class of such institutions, as the Bank may, with the previous approval of the Central Government and by notif....
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....culed it as merely a romantic hypothesis. He has been proved right by later commentators. To quote from the article, "Republicanism and the Foundations of Criminal Law by Richard Dagger [Philosophical Foundations of Criminal Law edited by R.A.Duff and Stuart P.Green, Oxford] : "If King Rex, to borrow Lon Fuller's famous example, is to rule through law rather than whim or sheer will, there are certain things he must and must not do--make his pronouncements public, for example, and not command his subjects to do what they cannot possibly do. In other words, laws must at least carry the appearance of satisfying Thomas Aquinas' definition of law as an 'order of reason for the common good by one who has the care of the community, and promulgated." 45. In England, where there is no Republican form of Government, the purpose of criminal law is heavily diced against the State as noticed in the dissenting judgment of Shah, J., in State of Gujarat v. Shyamlal [AIR 1965 SC 1251]: "The prevailing ideas on the subject of criminal law had been somewhat affected by the English law; and the departures from the rules of the English law which the Committee recommende....
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....eads the definition of the word "Financial Establishment", he will have no doubt in his mind that if he carries on the business of receiving deposits and fails to repay the amount, he will have to face penal consequences. For a man who is not into the business of receiving deposits, but into the business of ordinary manufacturing, this definition will not and should not instill fear, for that would be deleterious and counter productive to the progress of the Society. Thus looked at from any angle, in my considered opinion, an ordinary manufacturer or a Trading Company, say in jaggery, cannot be prosecuted under the TNPID Act for default in paying its depositor. They can be prosecuted under the Companies Act. It would never have been the intention of the Legislature to give unbridled power to the police to destroy legitimate business in this Country and reduce our countrymen to penury. 50. Coming to the case of Helios, it is contended by the learned counsel for the accused that their main business activity is into Information Technology and that they are not into the business of receiving deposits. During the arguments in the open Court, the website of Helios and Matheson was ope....
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....ined in the light of penal provisions in Section 5 of the TNPID Act. Section 5 of the TNPID Act states that "where any financial establishment defaults the return of the deposit or defaults the payment of interest on the deposit" it will be liable for prosecution. From a reading of the above, even in case of a single depositor, if the Financial Establishment fails to return the deposit amount or fails to pay the interest on the deposit amount, an FIR can be launched and investigation taken up. If this Court is to accept the plea of the State that the complainants, deposit receipts and amounts differ and therefore, there is no sameness in the complaints of new depositors, then it would lead to a very disastrous situation, whereby thousands of FIRs will stand registered and each time when the arrested accused is released on bail in one FIR, he can be re-arrested and kept in jail for the whole of his life time as a remanded prisoner. A common sense approach should be adopted and a pragmatic interpretation of the law should be made. A similar situation arose before this Court in V.Ettiappan and others v. Superintendent of Police, Chengalput and another [2002 MLJ Crl 162], wherein 600 p....