Date of Order:
July 25, 2023
Bench:
....…...….......………………....…..CJI.
[Dr Dhananjaya Y Chandrachud]
..…...........…...….......………………....…..J. [J B Pardiwala]
..………....…...….......………………....…..J. [Manoj Misra]
Parties:
Dhanraj N Asawani
[Appellant]
Versus
Amarjeetsingh Mohindersingh Basi and Others
[Respondents]
SUBJECT
- This appeal stems from a judgement issued on November 16, 2021, by a Division Bench of the High Court of Judicature in Bombay, which quashed FIR No. 806 of 2019, which was filed by the appellant at Police Station Pimpri, Chinchwad, for offences punishable by Sections 420, 406, 409, 465, 467, 468, and 471 read with Section 34 of the Indian Penal Code1.
- SC held that the high court erred in quashing the FIR, as it was related to a co-operative society audit. Sub-section (5B) cannot be used to interdict the police investigation process. The appeal was allowed, while the impugned judgment was set aside.
IMPORTANT PROVISIONS
- The 1960 Maharashtra Cooperative Societies Act was enacted to provide orderly development of the co-operative movement in Maharashtra
OVERVIEW
- Seva Vikas Co-operative Bank’s management faced complaints of cheating and misappropriation of funds. The Economic Offences Wing conducted investigations in January 2019 and 2020, registering FIRs 235 and 241 of 2019 for offences punishable under Sections 406 and 420 of the IPC. The EOW sought details on forensic audit, credit policy, collateral policy, loan policies, and RBI guidelines.
- In May 2019, the Police Inspector of the EOW, Pimpri-Chinchwad, wrote to the Commissioner of Co-operation and Registrar of Co-operative Societies Maharashtra, seeking a copy of the bank’s forensic audit report. The Joint Registrar (Audit) conducted an investigation and submitted an inspection report in June 2019. The appellant sought a copy of the report, which revealed loans were advanced to unworthy individuals and diverted for other purposes. The bank failed to recover the loans and declared many accounts as non-performing assets.
- The appellant filed FIR No. 806 of 2019 against the first and second respondents, alleging financial irregularities in a bank. The High Court allowed the petition, stating that Section 81(5B) contains special provisions for submitting a special report and obtaining permission before lodging an FIR. The court held that the general provisions in the Code of Criminal Procedure 19734 would be rendered otiose if the general provisions were to apply.
- The court concluded that the FIR was based on the auditor’s report, and it was not open for the appellant to fall back on the general principle that criminal law can be set in motion by any individual.
ISSUES RAISED
- Whether the provisions of Section 81(5B) can be construed as preventing a share holder of the society such as the appellant, who was also an erstwhile director, from independently setting the criminal law in motion.
ARGUMENTS ADVANCED BY THE APPELLANT
- The appellant claims loans were advanced to non-eligible individuals and entities, diverted for non-advanced purposes, and misappropriated funds. The bank failed to recover loans, leading to numerous non-performing assets.
ARGUMENTS ADVANCED BY THE RESPONDENT
- Respondents argue that the appellant’s FIR institution, based on audit reports, contravenes Section 81(5B). They contend that only auditors or Registrars can file an FIR under this special procedure, which prevails over Section 154 of the CrPC.
JUDGEMENT ANALYSIS
- Section 4(2) of the CrPC applies to all offenses under any other law, except the IPC. However, the CrPC’s application can be excluded if a special law prescribes special procedures for investigating, inquiry, or trialling a special offense. In Mirza Iqbal Hussain v. State of Uttar Pradesh, the court held that the CrPC’s provisions would apply in full force, as the Act did not provide for confiscation or prescribed a mode for confiscation.
- In Lalita Kumari v. Government of U P, the Constitution Bench ruled that an FIR aims to set criminal law in motion for the informant and investigating authorities to obtain information about alleged criminal activity. Criminal proceedings are initiated for the public’s interest, and without specific exceptions, criminal law can be set into motion by any individual.
- The auditor or the Registrar must submit a FIR, according to Section 81(5B) of the Act. It does not employ any negative language to forbid recording a FIR by anyone besides the auditor or the Registrar.
- Therefore, it would be against fundamental rules of legislative interpretation to claim that Section 81(5B) prohibits anyone from filing a FIR besides the auditor or the Registrar. The reasoning behind this Court’s ruling in Jamiruddin Ansari (supra) is based on a legal provision that is unrelated to the one that governs the current case.
- The High Court quashed a FIR lodged by the appellant, citing the State of Haryana v. Bhajan Lal decision. The court can quash an FIR under Article 226 of the Constitution or Section 482 of the CrPC, provided there is no legal bar in special law provisions. The court erred in quashing the FIR, as it was related to the co-operative society audit. Once criminal law is set into motion, the police must investigate the alleged offense, and sub-section (5B) cannot be used to interdict this process.
- The appeal was hence allowed while the impugned judgment was set aside.
