The present case involves more than 127 investors and an amount exceeding Rs. 7 crores, where the applicant, by projecting himself as a financial advisor and promising fixed returns, under the garb of a finance investment company, assumed the role of an agent and fiduciary, and since the investors entrusted their funds to him, the applicant is obligated to apply the money only for the stated purpose. The failure of the applicant to do so and the act of siphoning off funds into his personal account have brought the case squarely within the ambit of Section 409 IPC, based on the act of entrustment of money and its dishonest misappropriation.
Therefore, while clarifying that the allegations of cheating and breach of trust not only fall under the provisions of the Maharashtra Protection of Interest of Depositors Act, 1999 (MPID Act) but also attract Sections 406, 409 and 420 of the IPC, and the purpose of the MPID Act is to provide for speedy trial of offences by fraudulent financial establishments and to ensure effective recovery of money for protecting the small investors, the Bombay High Court ruled that once a Sessions Court is designated as an MPID Court, its competence to try IPC offences connected with the same fraudulent transaction cannot be curtailed merely because the MPID Act does not use the same wording as the Prevention of Corruption Act, 1988 (PC Act).
The Court pointed out that the jurisdiction once vested in a Court is not taken away except by express provision or necessary implication. Since the MPID Act does not contain any provision that curtails the ordinary powers of a Sessions Court, and rather, confers an additional jurisdiction on the Sessions Court to ensure effective and speedy trial of offences relating to fraudulent financial establishments, the Bench explained that the Sessions Court, even after being designated as an MPID Court, continues to exercise its full powers under the CrPC as a Sessions Court, and thus, the designation is an enlargement of jurisdiction, not a restriction.
The Court observed that if the same fraudulent transaction gives rise to both MPID Act offences and IPC offences, then two different trials would have to be conducted, one before the Magistrate for IPC offences and another before the Designated Court for MPID offences, which would cause unnecessary multiplicity of proceedings and may even result in conflicting findings by different Courts on the same set of facts.
A Single Judge Bench of Justice Amit Borkar observed that the alleged conspiracy was not only between the complainant and the Finance company, but the applicant, along with other co-accused, had hatched a conspiracy to cheat innocent investors on the false promise of extraordinary returns. Thus, when natural persons are involved in designing and executing such a fraudulent scheme, the non-biological character of a company does not in any way take away the offence of conspiracy. The Bench noted that the conduct of the applicant, along with the co-accused, in siphoning off huge amounts running into several crores of rupees from about 127 investors, and luring investors to borrow money from banks on the false promise of fixed monthly returns of 5% to 10%, shows a systematic design to defraud, which cannot be brushed aside merely because a fraction of the money has been repaid.
Justice Borkar also noted from the statements of investors, the receipts issued to them, and the agreements executed, that the investors were lured into handing over their money on the assurance of fixed profits, and the nature of the transaction was a unilateral promise of fixed returns, irrespective of any actual performance. Such arrangements are exactly what the Legislature intended to include within the definition of “deposit” under the MPID Act, in order to prevent exploitation of small and unsuspecting depositors. Therefore, considering the gravity of allegations, the magnitude of fraud, the manner in which innocent investors have been duped, and the antecedents of the applicant, the Bench refused to grant bail to the applicant.
Briefly, the original complainant, after getting introduced by his friend to an investment scheme of an establishment named Mars Finance, visited the office of Mars Finance, where he was introduced to the accused persons, namely, Milind Sawant and Rupesh Shah, who assured the complainant of a monthly return of 5% on the amount invested. When the accused informed the complainant that they would also arrange a loan facility in case he did not have sufficient funds for investment, the complainant was impressed with such representation, and he agreed to participate in the scheme. The accused did not disclose to the complainant the exact bank or lending institutions from which the loan would be procured. Still, later, a sum of Rs. 38.19 lacs was credited into the Bank of Maharashtra account of the complainant, which was disbursed by five different banks as loans. Out of the total loan proceeds, an amount of Rs. 34.30 lacs was transferred to the account of Mars Finance belonging to the accused, after which they handed over an agreement to the complainant as per which the complainant would get Rs. 1.70 lacs as monthly returns for a period of five years against the invested amount of Rs. 34 lacs.
Since the complainant was not paid any returns or benefits as promised, he personally visited the office of Mars Finance, only to discover that the said office premises were shut. This led to the filing of a complaint before the police against the accused persons for duping Rs. 33.80 lacs and cheating friends to the extent of approximately Rs. 59.00 lacs, claiming that the accused persons had closed down their office establishment and absconded in order to evade repayment of the invested amounts and returns. Since the said crime was registered for offences punishable under Sections 406, 409, 420, read with Sections 34 and 120-B of the IPC, as well as under Sections 3 and 4 of the MPID Act, the Applicant had approached the High Court seeking regular bail.
Appearances:
Advocates Nitin Pradhan, Shubhada Khot, Ameeta Kuttikrishnan, Shambhavi Desai, and Gayatri Pore, for the Applicant
APP Shilpa G. Talhar, for the State – Respondent
