TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 981
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Cr. P.C. with a prayer to quash the FIR in Crime No. 9/2024 registered by High Grounds Police Station for the offences punishable under Section 78 (1) (a) (i) of the Karnataka Police Act, 1963 (hereinafter referred to as 'the Act' for short) Section 12 of Karnataka Race Betting Act and Section 420 of IPC, which is now pending before the Court of I Additional Chief Metropolitan Magistrate, Bengaluru. 2. Heard the learned Senior counsel appearing on behalf of the petitioners and the learned Advocate General appearing on behalf of respondents. 3. Factual matrix of the case are as follows:- On 12.01.2024 credible information was allegedly received by the first informant, who is a Police Inspector attached to CCB Unit, Special Investigation Squad, Bengaluru City, to the effect that in Bangalore Turf Club, certain bookies, who have been issued license from the State Government were accepting betting on the horse races, without maintaining proper registers, documents etc. with regard to the amount collected by them from the punters and thereby they were evading tax payable to the State and certain others, who had no license from the State Government for collecting betting m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plicable and the same does not get attracted considering the allegations found in the first information. The other offences are non-cognizable in nature and therefore, to avoid compliance of Section 155 (2) of Cr. P.C., the police have wrongly invoked Section 420 of IPC. He submits that even if the allegations made are presumed to true, it is only competent GST Officers, who can take action and not the police. He submits that the CCB is not a Police Station and therefore, the first informant could not have received credible information and visited the Bangalore Turf Club, even before registering the FIR. He submits that the entire exercise is done by the CCB and only thereafter, an FIR was registered by the jurisdictional police. 6. He submits that the Hon'ble Supreme Court in the case of Dr. K. R. Lakshmanan vs. State of T. N. And Another reported in (1996) 2 SCC 226, has held that Horse Race is a game of skill and it cannot be considered as a 'Gaming' for the purpose of Police Act. He has referred to the judgment of the Co-ordinate Bench of this Court in Rakesh Shetty vs. State of Karnataka reported in 2020 SCC OnLine Kar 4638 and submits that CCB is not a Police Sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is taken into consideration, the total betting amount for the aforesaid period amounts to Rs. 1302,57,69,570/- and as against the same, collection shown for the aforesaid period is Rs. 24,96,30,667/-. He submits that during the course of investigation, the statement of the President of Bangalore Turf Club has been recorded and the said statement reflects that the bookies are not authorized to enter transactions in Pencil Sheets, which were recovered from the bookies during the course of raid. He submits that the sample of betting card has been produced as Anenxure-R3 before this Court, whereas petitioners have been issuing betting cards which are not in the requisite format and the same does not even contain tax invoice or GST number. He submits that since a huge fraud has been unearthed, wherein crores of money has been collected by accused under the guise of payment towards GST and TDS and the so collected amount has not been deposited to the account of the concerned Department, investigation in the case is necessary. 8. He submits that since the material collected by the Investigation Officer are sufficient to make out a prima facie case against the accused persons for the off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Act and Section 420 of IPC, against the petitioners herein and others. 11. Section 78 (1) (a) (i) of the Act, reads as follows:- "78. Opening, etc., of certain forms of gaming.-(1) Whoever.- (a) being the owner or occupier or having the use of any building, tent room, enclosure, vehicle, vessel or place or at cyber cage or online gaming involving wagering or betting including computer resource or mobile application or internet or any communication devise as defined in the Information Technology Act, 2000 (Central Act 21 of 2000) opens, keeps or uses the same for the purpose of gaming.- (i) on a horse race; or (ii) to (vii) xxx (b) to (d) xxx shall, on conviction, be punished with imprisonment which may extend to three years, or with fine which may extend to one lakh rupees, or with both: Provided that in the absence of special reasons to be recorded in writing, the punishment to be imposed on an offender on conviction for an offence under this sub-section shall be imprisonment for not less than six month or fine of not less than ten thousand rupees or both." Section 2 (7) of the said Act defines the word 'Gaming' and it reads as follows:- "(7) "Gaming" m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mplied the terms of license issued to them by competent authority is a subject which needs verification during the course of investigation and merely for the reason that petitioners are licensed bookies, it cannot be said that Section 78 (1) (a) (i) of the Act would not be applicable to them. 12. Section 2 (16) of the Act, reads as follows:- "(16) "police officer" means any member of the police force appointed or deemed to be appointed under this Act and includes a special or an additional police officer appointed under section 19 or 20;" Section 65 of the Act, reads as follows:- "65. Duties of a Police Officer.-It shall be the duty of every Police Officer,- (a) promptly to serve every summons and obey and execute every warrant or other order lawfully issued to him by competent authority, and to endeavour by all lawful means to give effect to the lawful commands of his superior; (b) to the best of his ability to obtain intelligence concerning the commission of cognizable offences or designs to commit such offences; (c) to lay such information and to take such other steps, consistent with law and with the orders of his superiors, as shall be best calculated to bring offe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....legal. The Hon'ble Supreme Court in the case of Dr. Saleem Ur Rehman (supra), in paragraph No. 30 has observed as follows:- "30. So far as the submission on behalf of the respondent that in the present case by conducting a preliminary enquiry, detailed investigation has been made and only thereafter the FIR is registered and that at the time of preliminary enquiry, investigation is not permissible since the FIR is lodged is concerned, the aforesaid submission seems to be attractive but has no substance. While holding a preliminary enquiry under Rule 3.16, whatever is conducted will be in the form of enquiry into the allegations to consider whether any prima facie case is made out or not which requires further investigation after registering the FIR or not. While considering the prima facie case for the purpose of registering the FIR, some enquiry/investigation is bound to be there, however, the same shall be only for the purpose of finding out a prima facie case for the purpose of registration of the FIR only. Whatever enquiry is conducted at the stage of preliminary enquiry, by no stretch of imagination, will be considered as investigation under the Code of Criminal Procedur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which defines criminal breach of trust. The Illustration (e) of Section 405 IPC which reads as under: (e) A, a revenue officer, is entrusted with public money and is either directed by law, or bound by a contract, express or implied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust." 18. I consider that all companies and employers and those persons who collect taxes under an obligation of tax : laws are legally bound to deposit the same with income tax/sales tax departments. They hold money in trust and if they do not deposit the money with the concerned department as per law and misappropriate the money for their own use, offence of breach of trust is committed. Similarly, those employers who receive money from their employees against provident funds, ESI etc. hold this money in trust. This money belongs to the employees and it has to be deposited with the concerned department i.e., provident fund trust or ESI and if money is not deposited and is misappropriated, an offence under Section 406 IPC is made out. 19. Cheating is defined under Section 415 of IPC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egations made against accused are presumed to be true, it is only the competent authority of the GST Department, who can take action and the police have no jurisdiction to register a criminal case on the ground that the accused have not deposited the GST or TDS amount before the concerned Department. In the case of State (NCT of Delhi) vs. Sanjay reported in (2014) 9 SCC 772, the question that arose for consideration before the Hon'ble Supreme Court was whether the provisions contained under the Mines and Minerals (Development and Regulation) Act, 1957 operates as a bar against the prosecution of a person for the offences punishable under the Indian Penal Code. In other words, the question for consideration was whether the provisions of Mines and Minerals (Development and Regulation) Act, 1957 explicitly or impliedly excludes the provisions of Indian Penal Code when the act of an accused is an offence both under the Indian Penal Code and also under the provisions of the Mines and Minerals (Development and Regulation) Act, 1957. In paragraph Nos. 61, 62, 69, 70, 71, 72 and 73 of the aforesaid judgment, the Hon'ble Supreme Court has observed as follows:- "61. Reading the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where there is a mining activity by any person in contravention of the provisions of Section 4 and other sections of the Act, the officer empowered and authorised under the Act shall exercise all the powers including making a complaint before the Jurisdictional Magistrate. It is also not in dispute that the Magistrate shall in such cases take cognizance on the basis of the complaint filed before it by a duly authorised officer. In case of breach and violation of Section 4 and other provisions of the Act, the police officer cannot insist the Magistrate for taking cognizance under the Act on the basis of the record submitted by the police alleging contravention of the said Act. In other words, the prohibition contained in Section 22 of the Act against prosecution of a person except on a complaint made by the officer is attracted only when such person is sought to be prosecuted for contravention of Section 4 of the Act and not for any act or omission which constitutes an offence under the Penal Code. 71. However, there may be a situation where a person without any lease or licence or any authority enters into river and extracts sand, gravel and other minerals and remove or transport....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ustained in law and, therefore, overruled. Consequently, these criminal appeals are disposed of with a direction to the Magistrates concerned to proceed accordingly." 20. In the present case, allegation against the accused is that the licensed bookies who have collected GST amount from the punters and TDS amount from the winning bettors have failed to deposit the same before the competent authority. They have also failed to maintain proper registers and documents in their stalls and also had failed to give proper receipts to the punters for having collected the betting amount. So far as the unauthorized bookies, who had no license or authorization from the competent authority to collect the betting amount from the punters, the allegation is that they have collected betting money from the public representing themselves to be licensed bookies and the money so collected by them from the punters was not being properly accounted nor was proper receipts being given to the same. In addition to the same, GST amount collected or TDS amount collected were also not being deposited before the concerned Department. Under the circumstances, it cannot be said that there is absolutely no material....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the first information report the Court will not permit an investigation to go on. 13.4. The power of quashing should be exercised sparingly with circumspection, in the "rarest of rare cases". (The rarest of rare cases standard in its application for quashing under Section 482 Cr.PC. is not to be confused with the norm which has been formulated in the context of the death penalty, as explained previously by this Court.) 13.5. While examining an FIR/complaint, quashing of which is sought, the Court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR/complaint. 13.6. Criminal proceedings ought not to be scuttled at the initial stage. 13.7. Quashing of a complaint/FIR should be an exception and a rarity than an ordinary rule. 13.8. Ordinarily, the courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities. The inherent power of the court is, however, recognised to secure the ends of justice or prevent the above of the process by Section 482 Cr.PC. 13.9. The functions of the judiciary and the police are complementary, not overla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he police was duty bound to start the investigation. 24. In the case of Skoda Auto Volkswagen (India) Private Limited vs. State of Uttar Pradesh and Others reported in (2021) 5 SCC 795, the Hon'ble Supreme Court in paragraph Nos.41 and 42, has observed as follows:- "41. As cautioned by this Court in State of Haryana v. Bhajan Lal, the power of quashing should be exercised very sparingly and with circumspection and that too in the rarest of rare cases. While examining a complaint, the quashing of which is sought, the Court cannot embark upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or in the complaint. 42. In S.M. Datta v. State of Gujarat, this Court again cautioned that criminal proceedings ought not to be scuttled at the initial stage. Quashing of a complaint should rather be an exception and a rarity than an ordinary rule. In S.M. Datta, this Court held that if a perusal of the first information report leads to disclosure of an offence even broadly, law courts are barred from usurping the jurisdiction of the police, since the two organs of the State operate in two specific spheres of activities and one ought not to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed, the amount of bet and the amount of prize money payable if the horse wins. The winning punters collect their money directly from the bookmaker concerned. The net result is that 75% of the tote collections of each race are distributed as prize money for winning tickets, 20% is paid as betting tax to the State Government and the remaining 5% is retained by the Club as commission. Similarly, the bookmakers collect from their punters, besides the bet amount specified in the betting card, 20% bet tax payable to the State and 5% payable to the Club as its commission. It is thus obvious that the Club is entitled to only 5% as commission from the tote collections and also from the total receipts of the bookmakers. According to the appellant the punters who bet at the totalizator or with the bookmakers have no direct contract with the Club. 18. The Club pays from its own funds the prize money (stake money) to the winning horses. The horses which win the first, second, third and up to 5th or 6th places are given prizes by the Club. The Club income consists of entrance fee, 5% commission paid by the bookmakers and the totalizators, horse entry fee paid by the owners of the horses partic....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... In the present case only for the purpose of verification of the correctness of the credible information received, the first informant, who is a police officer had visited the premises of the Bangalore Turf Club and after holding a preliminary enquiry, being satisfied with regard to the correctness of the first information received by him, had proceeded to lodge a first information before the jurisdictional Police Station, which had culminated in registration of FIR in Crime No. 9/2024 and investigation in the case was conducted only thereafter and therefore, the contention raised by the learned Senior counsel for the petitioners that procedure followed by the police in the present case is contrary to the principles laid down by the Hon'ble Supreme Court in the case of Lalita Kumari is devoid of any merit. 32. The High Court while exercising its power under Section 482 of Cr. P.C. wherein a prayer is made to quash the FIR registered against accused is not required to hold mini trial. The only point that arises for consideration before the High Court at that stage is whether the nature of accusations and allegations made in the first information report prima facie discloses th....