IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE THIRTY FIRST DAY OF OCTOBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MS JUSTICE G.ROHINI WRIT PETITION NO : 9174 of 2008 Between: 1 M/S. Tilak Associates, An Unregistered Partnership Firm, Rep. by its Managing Partner, Mr. K. Venkateswara Tilak, Aged about 36 Years, R/o. 7/3, Arandalpet, Guntur District. 2 K. Venkateswara Tilak, S/o. Bal Gangadhar Tilak, R/o. 7/3, Arandalpet, Guntur District. 3 K. Jyothi Tilak, W/o. K. Venkateswara Tilak, R/o. 7/3, Arandalpet, Guntur District. 4 K. Bal Gangadhar Tilak, S/o. Hemantha Rao, R/o. 7/3, Arandalpet, Guntur District. 5 K. Susheela Tilak, W/o. Bal Gangadhar Tilak, R/o. 7/3, Arandalpet, Guntur District. ..... PETITIONER(S) AND 1 Government of Andhra Pradesh, Rep. by its Principal Secretary, Home (Gen-B) Department, Secretariat Buildings, Hyderabad. 2 Additional Director General of Police, CID, Andhra Pradesh, Hyderabad. 3 Collector, Guntur District, Guntur. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Aﬃdavit ﬁled herein the High Court will be pleased to to issue a Writ, order or direction; more particularly, one in the anture of a Writ of Mandamus declaring the action of the respondents in invoking the provisions of A.P. Protection of Depositors of Financial Establishments Act (17 of 1999) and Rules 1999 and against the petitioners as illegal and unconstitutional and consequently, set aside the G.O.ms.No. 84, dated 15-04-2006 issued by the 1st respondent after declaring that the provisions of A.P. Protection of Depositors of Financial Establishments Act (17 of 1999) and Rules 1999 are not applicable to the activities of the Petitioners herein and pass Counsel for the Petitioner:MR.K.S.MURTHY Counsel for the Respondent No.: GP FOR HOME The Court made the following : THE HON’BLE MS JUSTICE G.ROHINI W.P.NO.9174 OF 2008 ORDER The 1st petitioner is an un-registered ﬁrm, which claims to have been in the business of advising ﬁnancial investments, facilitating ﬁnancial investments and acting on instructions of its customers in the ﬁeld of ﬁnancial investments. The petitioners 2 to 5 are also connected with the business of petitioner No.1. On a complaint lodged by one A.V.Krishna Rao alleging that the petitioners failed to repay the amount given by him for depositing in State Bank of India Mutual Fund, the police registered FIR No.25 of 2006 dated.25-01-2006 on the ﬁle of the Arundelpet P.S., Guntur, under Section 5 of A.P. Protection of Depositors of Financial Establishments Act, 1999 (for short “the Act”). Pursuant thereto, the premises of the petitioners was sealed and a n ad interim order of attachment of the properties of the petitioners was passed by the 1st respondent vide G.O.Ms.No.84, dated.15-04-2006 in exercise of the powers conferred under Section 3 of the Act. Aggrieved by the same, the present writ petition is ﬁled seeking a declaration that the action of the respondents in invoking the provisions of the Act against the petitioners is illegal and unconstitutional and consequently to set aside G.O.Ms.No.84, dated.15-04-2006 after declaring that the said provisions are not at all applicable to the activities of the petitioners. It is primarily contended by the petitioners that since the ﬁrst petitioner is not a ﬁnancial company and never accepted deposits, the deﬁnitions of deposit and ﬁnancial establishment under Section 2(b) and Section 2 (c) of the Act are not attracted and therefore the action of the respondents in invoking the provisions of the Act and passing the impugned order of attachment is arbitrary and illegal. It is pleaded by the petitioners that except assisting the customers in trading in stocks and mutual funds as agents in the mutual funds ﬂoated by SBI, UTI, ICICI, HDFC and HSBC Banks on receiving some commission for the services rendered by them, the business of the petitioners does not involve receiving deposits under any scheme. However, in the counter ﬁled by the 2 nd respondent, the said plea has been denied and it is explained that the investigation disclosed that the petitioners not only made business in share marketing by collecting liquid cash but also accepted lumpsum deposits by way of non-banking transactions from the public oﬀering higher rate of interest either by issuing receipts or by executing promissory notes and ﬁnally misappropriated the said amounts without returning on maturity. It is further stated that the complainant speciﬁcally alleged that he gave Rs.10 lacs to the second petitioner for depositing it in SBI mutual fund and when the complainant asked him to give back the amount, he did not return the same and thus cheated the complainant. Basing on the said complaint Cr.No.25 of 2006 was registered against the petitioners under Sections.420, 409, 468, 471 and 120-B of IPC and Sec.5 of the Act on 25-01-2006 and the same is pending trial. That apart, at the instance of the competent authority, the 1st respondent issued G.O.Ms.No.84, dated.15-04-2006 attaching the properties of the accused under Sec.3 of the Act and the Special Court has taken cognizance of the same under Crl.M.P.No.702 of 2006 for making absolute the said attachment order. All the documents seized from the premises/oﬃce of the petitioners were also deposited in the Special Court, Guntur and copies of all documents were supplied to the petitioners. Having regard to the pleadings narrated above and the submissions made by the learned counsel for the parties, the question that arises for consideration is whether the provisions of the Act can be made applicable to the business activities of the petitioners so as to justify the penal proceedings initiated against them under Section 5 of the Act. In the impugned order of attachment, dated 15.04.2006, it is alleged that the petitioners cheated as many as 3000 gullible public by misappropriating their deposits and that they accepted a sum of Rs.86 lacs in the form of mutual fund units etc., and committed criminal breach of trust and ﬁnally cheated the customers, which are oﬀences punishable under Sections. 406, 420, 468, 477-A of IPC read with Sec.120-B IPC and Sec.5 of the Act. It is further alleged that the petitioners by using the money thus misappropriated purchased the properties described in annexures 1 and 2 to the said order. It is true that the penal provision under Section 5 of the Act can be invoked only in respect of a financial establishment which is deﬁned under Section 2 (c) of the Act as any person or group of individuals accepting deposit under any scheme or arrangement or in any other manner. The word ‘deposit’ is deﬁned under Section 2 (b) of the Act as deposit of a sum of money either in lumpsum or installments made with a ﬁnancial establishment for a ﬁxed period for interest or return in any kind. A reading of Section 5 together with the deﬁnitions under Sections 2 (b) & 2 (c) of the Act shows that the prosecution under the Act is permissible only where the ingredients of Sections 2(b) & 2(c) of the Act are satisfied. In the case on hand, though the petitioner claimed that it is only trading in stocks and mutual funds and not receiving deposits under any scheme, the 2nd respondent disputed the same and furnished several details in the counter-aﬃdavit to substantiate their plea that the petitioner has been collecting liquid cash under lumpsum deposit schemes. Such a disputed question of fact which requires a detailed enquiry on appreciation of voluminous information both oral and documentary gathered by the respondents during the investigation cannot be gone into and decided by this Court in exercise of writ jurisdiction under Article 226 of the Constitution of India. The Special Court constituted under Section 6 of the Act is presided over by a District & Sessions Judge and it is not as if the Special Court is not competent to go into the question with regard to the applicability of the provisions of the Act while proceeding under Section 5 or exercising the powers under the other provisions of the Act. Hence, it is always open to the petitioners to contest the proceedings before the Special Court on the ground that the business activity of the petitioners does not fall within the ambit of Section 2(b) or Section 2 (c) of the Act so as to attract the provisions of the Act. It is also relevant to note that the prayer in this writ petition for a declaration that the provisions of the Act are not applicable to the activities of the petitioners is nothing but seeking to quash the penal proceedings pending against the petitioners under Section 5 of the Act. The law is well-settled that the extraordinary power under Article.226 has to be exercised sparingly to quash the penal proceedings only in cases where the allegations made in the First Information Report or the Complaint even if they are accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. In my considered opinion, this is not such an exceptional case which warrants interference by this Court interdicting the proceedings before the Special Court at the threshold. Accordingly, the Writ Petition is disposed of permitting the petitioners to make an application before the Special Court raising the objection with regard to the maintainability of the proceedings under the provisions of the Act within a period four weeks from the date of receipt of this order. If any such application is made within the time speciﬁed above, the Special Court before which the proceedings are pending shall consider the same and pass appropriate orders in accordance with law without being inﬂuenced by any of the observations made in this order. Till such time, the order of this Court dated. 24-04-2008 staying the sale of properties of the petitioners under attachment shall continue. The writ petition is accordingly disposed of. No costs. _____________ G.ROHINI,J 31st October,2008 *TSNR