1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH AT NAGPUR Criminal Application (ABA) No.124/2011 ( Kunjbihari Rajaramji Jaju ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.125/2011 ( Devanand Bhagirathji Laddha and others ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.126/2011 ( Manohar Zumbarlalji Kothari ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.127/2011 ( Gopal s/o Laxman Kale ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.130/2011 ( Mahesh s/o Bansidhar Khandelwal ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.131/2011 ( Shivprakash s/o Kaluram Ruhatia ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) With Criminal Application (ABA) No.137/2011 ( Ram Godavaridas Pande & another ..Vs.. State of Maharashtra, through P.S.O.P.S. City Kotwali, Akola ) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Office Notes, Office Memoranda of Coram, Court's or Judge's orders appearances, Court's orders of directions and Registrar's orders - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Mr. A.S. Mardikar, Adv. for applicant in ABA No. 124/2011, 130/2011 & 131/2011. Mr. Amol Mardikar, Adv. for applicant in ABA No.137/2011. Mr. S.V. Sirpurkar, Adv. for applicant in ABA No.126/2011. Mr. H.M. Mohta, Adv. for applicants in ABA Nos.125/2011 & 127/2011. Mr. S.S. Doifode, A.P.P. for the State/respondents. 2 CORAM : M.N. GILANI J. DATE : 12 th AUGUST, 2011 1. All these applications are arising out of the Crime No.21/2011, under sections 406, 409, 420, 120-B, 166, 167, 217, 218 read with 34 of the Indian Penal Code, registered with the police station City Kotwali, Akola on the basis of the F.I.R. lodged by one Narayandas Malu. 2. Brijlal Biyani Credit Co-operative Society, Akola (for short “Society”) through an advertisement and also through personal contracts etc. invited public at large to make deposits with it. The Society promised to give a very attractive interest ranging from 10 to 15%. The F.I.R. enumerates names of 36 persons who had made deposits during the period from 2007 to 2009. Total deposits made by these 36 gullible persons comes to Rs.39,73,877/-. When these depositors went to withdraw their amount, with accrued interest, their request for withdrawal of the amount, was turned down on the ground that the Society has been closed. 3. It is alleged that the depositors were lured to make deposits by promising hefty rate of interest, which was neither permissible nor within the capacity of the Society to honour such promise. Thus the huge number of depositors have been cheated by the Directors/Office Bearers, Manager 3 etc. of the Society by not refunding their deposits and interest accrued thereon despite deposits getting matured two years before. 4. The Joint Registrar, Co-operative Societies had ordered the audit of the Society, which was accordingly conducted. The various irregularities committed by the Office Bearers of the Society, which ultimately made the Society bankrupt and consequently depositors have been left in the lurch. The alleged irregularities in a nutshell are : (i) Loan granted more than prescribed credit deposit cash ratio. (ii) Loan sanctioned and granted more than the loan capacity of the Society. (iii) The gross capital of the Society showed disproportionate depreciation which is because of deliberate and advertent acts and omissions of Directors and Manager. (iv) The loan limit has been exceeded the prescribed ratio, that means, the amount of the loan should not have exceeded more than 10 times of the deposits in the Society. (v) The non performance account (NPA) percentage is about 74%, that means, as against the loan of about 8 Crores disbursed, non performing accounts are in the tune of Rs.6 Crores. This is an act of deliberate and systematic plan of the accused persons which invited such situation. (vi) The loan amount about 55 Lakhs is outstanding and the record of this amount is misplaced. (vii) Although the Society was not in a capacity 4 to declare dividends, 10 % dividends was declared and Board of Directors caused wrongful loss to the Society and wrongful gain to themselves. The cash amount of about Rs.5 Lakhs was illegally withdrawn. In the balance-sheets of the year 2006-2007, 2007-2008 the Society was shown in profit, whereas it was in loss. (viii) Maximum loan disbursement is without security and mortgage and therefore, majority of the loan account has become non performing accounts. (ix) At the instance of Board of Directors and Managers misappropriation of 19 Lakhs has been noticed during audit. (x) Depositors were induced with a promise that interest up to 18% of their deposits would be given. This is contrary to the directions of the R.B.I. as well as impracticable and this was to the knowledge of the Board of Directors and Managers. Thus the Office Bearers of the Society has cheated the public at large. The accused no.13 who is Auditor of the Society deliberately refrained himself form lodging the F.I.R. and thus helped Office Bearers of the Society. (xi) There are 174 depositors who made deposits of Rs.78,28,000/-, none of them have got the refund, even of the principal amount. 5. The Board of Directors and Managers of the Society have with due deliberation conspired to invite gullible public to make deposits in the Society by promising the 5 interest neither permissible under law nor within the capacity of the Society to pay huge amount of interest and thus committed offences of misappropriation and cheating. 6. Now, I propose to deal with each application individually. (a) Criminal Application (ABA) No.124/2011. The applicant was the Director of the Society till 1/12/2009. The applicant after being elected as the Director of the Society, may be in the year 2003, was working as a Secretary of the Society. He being the Secretary was not concerned with the loan department. He never advanced loan to his relations or friends or was not instrumentality in sanctioning any loan to any borrower. Then he has made a mention of some depositors approaching the Consumer Forum, Akola and in that proceedings the Consumer Forum directed them to place their demand for refund of their deposits with Administrator and if so advised they may file proceedings under the Co-operative Societies Act, 1960. According to him, the ingredients of offence under sections 406, 409 of the Indian Penal code are not at all attracted and as such his arrest by the police and custodial interrogation is not at all warranted. He, therefore, prayed for confirmation of the interim bail. 6 (b) Criminal Application (ABA) No.125/2011. One Devanand Laddha, Anil Surekha and Gopal Katariya have jointly filed this application for grant of anticipatory bail. It is their case that they are the Directors of the Society from the year 2002. Due to some financial crisis in the Society, the request of the depositors to refund their deposits could not be honoured. All depositors simultaneously rushed to the Society asking for refunds, which was practically impossible. The complaint lodged by Narayandas Malu is false. According to them, the following factual aspects may be considered while deciding their application for anticipatory bail : (i) The applicant no.2 has fixed deposit in the sum of Rs.1,40,000/- in the name of M/s. Surekha Processors. The applicant no.3 has also fixed deposit in the name of his family members. The nephew of the applicant no.1 has fixed deposit of Rs.1,40,000/- in the Society. (ii) On 21/2/2011, Directors of the Society issued a letter to the Ministry of Co-operation to appoint the Liquidator. After receipt of the letter from the Liquidator dated 22/12/2010, they informed him to take over the charge of the Society. (iii) The advise of the District Government Pleader to the Auditor was not to lodge the criminal complaint against the Society and its Office Bearers. (iv) Under section 82 of the Maharashtra Co-operative 7 Societies Act, the Auditor is authorized to seek rectification from the Society in respect of irregularities in the Audit Report. On 8/2/2011, the Deputy Registrar of Co-operative Societies expressed satisfaction about recovery of dues in the small savings. In the enquiry under section 83 of the Maharashtra Co-operative Societies Act, the applicants and others have responded to the communication during the said enquiry. (v) By the end of September 2009, the Society has initiated recovery proceedings against the borrowers and huge amount has been recovered. This was informed to the Auditor by letter dated 20/11/2011. (vi) The allegations made in the F.I.R. are in respect of fixed deposits which are not due on the date of lodging report. (vii) No offence under sections 406, 409, 420 of the Indian Penal code is made out. Since the Directors are not the Public Servants, under section 21 of the Indian Penal Code, section 409 of the Indian Penal Code is not attracted. (viii) Out of 36 depositors, whose names are appearing in the F.I.R., 9 depositors have received back their deposits. (ix) The recovery proceedings have already been started. (x) The various Forums have been approached. (xi) The Auditor did not notice any misappropriation of the funds and the Society by the Directors or any of the Office Bearers. What is noticed, is mere irregularities and mismanagement, particularly in the matter 8 of disbursement of the loan to the borrowers. The losses, suffered by the Society because of the mismanagement, can be recovered from the Directors of the Society by initiating the necessary proceedings under section 88 of the Maharashtra Co-operative Societies Act. In view of this, setting the criminal law in motion is also an abuse of process of the Court and is not warranted. (xii) After seeking order of interim bail, from this Court, the applicants have attended the police station and co-operated in the investigation. They have prayed for grant of anticipatory bail in their favour. (c) Criminal Application (ABA) No.126/2011. The applicant is one of the Founder Members of the Society. For some period he acted as a Chairman. In the year 2009 one Shivprasad Katariya was appointed as Chairman of the Society and thereafter he was also appointed. After said period, he resigned and the applicant again became Chairman of the Society. It is contended that after this Court granted interim bail, he attended the police station and co-operated in the investigation. He has prayed for grant of anticipatory bail. For the purpose of brevity, the other contentions, which are similar, are not repeated while dealing with the facts of Criminal Application (ABA) Nos. 127/2011, 130/2011, 131/2001 and 137/2011 . 9 (d) Criminal Application (ABA) No.127/2011. The applicant is serving in Bharat Vidhyalaya, Akola. Since the year 2002, he is the Director of the Society. His amount of Rs.1,50,000/- is lying as a fixed deposit in the Society. Due to some financial crisis, the Society could not refund the deposits. The F.I.R. lodged by Narayandas Malu is false. It is contended that after this Court granted interim bail, he attended the police station and co-operated in the investigation. He has prayed for grant of anticipatory bail. (e) Criminal Application (ABA) No.130/2011. The applicant is a Businessman. Since inception, he had been Director of the Society till 3/11/2009. According to him, the F.I.R. lodged by Narayandas Malu is false and ill-founded. The Society never lured the said Narayandas or any other depositors by promising to pay interest at the rate of 10% to 15%. Many depositors whose deposits were not matured rushed to the Society claiming refunds. Naturally, this was not possible for the Society. He was not the active member of the Managing Committee and has not taken active part in the policy decision of the Society. None of his relations or friends are the benefices. He has prayed for grant of anticipatory bail. (f) Criminal Application (ABA) No.131/2011. The applicant was the Director of the Society till 10 19th of May 2009. It is submitted that as the applicant is not a Public Servant, the ingredients of the section 409 of the Indian Penal Code are not attracted. He has prayed for grant of anticipatory bail. (g) Criminal Application (ABA) No.137/2011. The applicants were initially appointed as Clerks and since then have been working with the said Society. According to the prosecution, the applicant no.1 Ram Godavaridas is holding the post of Manager from the year 1992 to 2010. The applicant no.2 is also holding the post of Manager from the year 2002 to 2010. It the case of the applicants that they cannot become vicariously liable for the act of Board of Directors or the Managing Body of the Society. They were never appointed as Managers of the main branch or any of its branch anywhere at Akola by a specific order passed by the Board of Directors. They were working on the temporary basis and were treated as daily wagers. They have prayed for grant of anticipatory bail. 7. After hearing the learned counsel for the applicants and the learned A.P.P. This Court on 2nd August, 2011, passed the following order : “The core issue is to do justice to those who deposited their hard earned money with the Society. 11 The applicants shall inform to this Court as to whether they have any plan/strategy which can be evolved and implemented to ensure refund of the various deposits within certain time- frame. The learned counsel for the applicants to make statement on next date.” 8. In pursuant to that, on 09/08/2011 the learned counsel for the applicants clarified that it would be possible for all the applicants/directors jointly to mobilize the funds to the tune of rupees fifty lakh. This amount they would be depositing with the society. The liquidator will have liberty to utilize this amount in refunding the deposits to the various depositors may be on pro-rata basis and after evolving some broad principle. Following are the circumstances relevant to decide these applications : ● Irregularities/mal-functioning pertain to the period of 2006-07 and 2007-08. ● The auditor had submitted report in the year 2009, covering the period up to March, 2009. ● The applicants moved the Sessions Court, Akola, for grant of anticipatory bail. Learned Additional Sessions Judge granted interim protection to these applicants on 19/03/2011, thereafter on 01/04/2011 the applications were rejected. During this period, the applicants attended the Police Station. 12 ● The liquidator was appointed by the Government, Ministry of Cooperation and he has taken over the charge. ● After rejection of the bail applications, the applicants moved this Court on 06/04/2011. This Court (Coram : P.D. Kode, J) on 08/04/2011 granted interim protection. In pursuant to the directions of this Court, the applicants attended the Police Station. There are no allegations that the applicants tried to interfere with investigation or tamper with the witnesses. ● The maximum strength of number of directors as per bye-laws is 17. Out of that the offence has been registered only against 13. ● The allegations are in the nature of exceeding the ratio of disbursing the loan, distributing the dividends though there is no profit in the society, offering more rate of interest to the depositors etc. ● There are no cases of fake or non-existing borrowers. ● In the written submission, dated 08/08/2011, the following details drawn from the certified balance- sheet are given : Loan to be recovered : Rs.3,51,49,474/- Amount to be paid : Rs.2,50,00,000/- Guaranteed & secured loan : Rs.1,81,09,139/- Immovable property loan : Rs. 30,92,311/- 13 Loan against F.D.R. : Rs. 16,13,060/- Hire purchase and two wheelers loans : Rs. 53,45,000/- Unsecured loan : Rs. 69,81,648/- Total : Rs.3,51,49,474/- ● Thereafter, during pendency of the present applications, out of 36 depositors in the present crime, 34 depositors were totally repaid which comes around Rs.30,00,000/-. ● Non granting benefit of Section 438 of the Code of Criminal Procedure to the applicants would be adverse to the interest of several depositors. Their offer to make deposits of the amount of rupees fifty lakh appears bona fide. It is hoped that the applicants would assist the liquidator in recovery of the dues of the society from the borrowers. 9. In the light of aforesaid circumstances and facts that the applicants have come out with a proposal of depositing about Rs.50,00,000/- in the society, I am of the view that police custody of the applicants-accused will not serve any purpose. On the contrary and as assured by the applicants, they would cooperate with the liquidators in recovering the loan amount. 10. As regards applicants in ABA No. 137/2011, they were appointed as Managers, but without any power. It is seen that while discharging the duties as managers, they had 14 no independent power or authority. They were required to act as per the directions of the directors. In the matter of sanctioning the loan and in all other important matters, the directors were having ultimate say. That being so, the interim protection granted to them by this Court on 08/04/2011, will have to be confirmed. As regards applicant-Ram Pande, there are allegations of he withdrawing the amount of Rs.66,150/- from the society’s account and had not been refunded till the date of filing F.I.R. 11. The learned counsel appearing for him produced the receipt showing that this amount has been deposited. The learned A.P.P. has confirmed the deposit of the said amount. In this view of the matter, the ABA No. 137/2011 is allowed, with the condition that the applicants shall attend the Police Station City Kotwali, Akola, as and when called, till filing of the charge-sheet. 12. The ABA Nos. 124/2011, 125/2011, 126/2011, 127/2011, 130/2011 and 131/2011 are allowed subject to following conditions. i. The applicants in all these applications shall individually or collectively make deposit of Rs.60,00,000/- (Rupees Sixty Lakh) with the Brijlal Biyani Urban Co-operative Credit Society Limited, Akola, which would be for a fixed period of at least 15 two years. ii. The liquidator shall exclusively use this amount for refunding the deposits of the depositors excluding the directors and closed relations of the directors like spouse, children etc. iii. The liquidator shall evolve a judicious scheme in consultation with the District Deputy Registrar, Akola, and shall proceed to disburse the amount forthwith. iv. Disbursal of the amount may be on pro-rata basis and in the beginning of the principal amount. v. In no circumstance, this amount shall be spent towards administrative expenses including salary etc. vi. There shall be moratorium on withdrawal of the deposits made by the applicants till all the depositors get refund of their principal amount. vii. The aforesaid deposits shall be made within a month from the date of this order. viii.The applicants shall attend the Police Station as and when called. JUDGE *Tambaskar/sdw