[Telangana Protection Of Depositors Act] Intention To Cheat Needs To Be Established From The Beginning: Telangana High Court

The Telangana High Court has held that alleged default by a company for a short period would not attract the offense punishable under Section 5 of Telangana Protection of Depositors of Financial Establishments Act, 1999.

Justice Dr. G. Radha Rani passed the order in a petition filed seeking anticipatory bail noting that the intention to cheat must be evident from the very beginning.

The Bench noted that the complainant had been investing money in the said company since 2012 and had been getting returns as promised till 2019. It was only after 2019 when the accused allegedly started to default on the payments.

The Bench clarified and reiterated that the Telangana Protection of Depositors of Financial Establishments Act, 1999 was enacted only to curb fraudulent and fake companies and not to deter companies who had defaulted in payment of returns.

"Thus, it cannot be stated that the Managing Director or the Directors of the company had an intention to cheat the complainant or other victims from the beginning. The complainant received interest for a long period of time from 2012 till April, 2022. The object of enacting the Telangana Protection of Depositors of Financial Establishments Act, 1999 was to protect the depositors from the hands of unscrupulous financial establishments which after offering attractive rate of interests and collecting deposits were vanishing suddenly. The petitioners or the companies floated by them had not vanished."

Background:

The case of the de facto complainant was that he was induced by the accused (board members) of the Company in 2012, and ever since she has been investing money in various business ventures taken up by the Company.

Until 2019, as per the averments in the complainant, the accused paid the returns on time, however, after that the Company defaulted in returning the principal amount of interest for two investments made by the de facto complainant in 2020 and 2021.

In 2023, a meeting was organized and the Company promised to pay back either the principal amount or the interest from time to time. Despite the said meeting, when no positive action was taken by the Company, the de facto complainant preferred a complaint before the Police.

The accused contended that an isolated incident of default will not attract the offense under Section 5 of the Act.

Conceding with this argument, the Bench held:

"As seen from the remand report of A2, M/s.Dhanwantari Foundation International was established by A2 and one Subba Rao in the year 2004. As per the complaint, the complainant started investing amounts in different companies floated by DFI from the year 2012 onwards and he got returns as promised till 2019. Subsequently also, the complainant made investments in the year 2020 and 2021 and he received interest till April, 2022. Thereafter also, as per the MoM dated 10.07.2023 signed by the Managing Director, he promised to pay the interest and principal amounts."

Lastly, the Bench noted that the offense alleged against the accused was vague and that the remand report was silent on the role of the accused in the alleged crime.

Thus, the criminal petition was allowed and the accused/petitioners were granted anticipatory bail.

Case title: Mrs. Anuradha Akella alias Akella Anuradha vs. State of TS

Case Number: CrlP 3119 of 2024 & One other

Counsel for petitioners: Y.Soma Srinath Reddy

Counsel for State: APP

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