2016 (5) TMI 1511 - HC - Indian Laws

Pre-arrest bail - offences punishable under Sections 120(B) and 420 of the Indian Penal Code and under Sections 3 5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act 1978 and Section 3 of Maharashtra Protection of Interest of Depositors (In Financial Establishments Act) - HELD THAT - On considering parameters of section 438 of the Code of Criminal Procedure I am not inclined to protect the accused. It won t be out of place to mention that such circulation is required to be stopped. It is necessary for the prosecution to take injunctive steps against this business activity which is prima facie illegal. Though by stopping this business a large group of people may get financially affected however it will save larger groups of people from becoming prey of this activity. The Anticipatory Bail Applications are rejected.

Issues Involved:
1. Pre-arrest bail applications.
2. Allegations of cheating and fraud under Sections 120(B) and 420 of the Indian Penal Code.
3. Violations under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
4. Violations under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act.
5. Arguments regarding the legality of the business model and marketing practices.
6. Evaluation of the necessity and justification of arrest.
7. Economic offences and their impact.
8. Compliance with Section 41A of the Code of Criminal Procedure.

Detailed Analysis:

1. Pre-arrest Bail Applications:
The applicants moved for pre-arrest bail as they faced charges under Sections 120(B) and 420 of the IPC, Sections 3, 5, and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, and Section 3 of the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act. The prosecution alleged that the applicants were involved in a fraudulent scheme involving the sale of gold-plated coins and other products under various company names, leading to significant financial losses for numerous members.

2. Allegations of Cheating and Fraud:
The prosecution's case detailed a scheme where members were induced to purchase overpriced gold-plated coins and other products with promises of commissions for enrolling new members, structured in a pyramid scheme. The applicants were accused of continuing these fraudulent activities under different company names even after previous legal actions and settlements.

3. Violations under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978:
The prosecution argued that the business model of the applicants involved a money circulation scheme, which is a cognizable offence under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The court noted that the scheme was a multilevel marketing activity with a pyramid structure, which falls under the definition of a money circulation scheme.

4. Violations under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act:
The court considered whether the offence under Section 3 of the MPID Act, a non-bailable section, could be attracted. The prosecution alleged that the applicants collected deposits under the guise of selling products, leading to significant financial losses for the members.

5. Arguments Regarding the Legality of the Business Model and Marketing Practices:
The applicants' counsel argued that the business model was legal and involved direct marketing, which is permissible globally. They contended that the company had a refund policy and that the members were not compelled to enroll others. The court, however, found that the business practices involved deceitful inducement and aggressive marketing, leading to financial losses for many members.

6. Evaluation of the Necessity and Justification of Arrest:
The court evaluated the necessity of arrest, considering the guidelines laid down by the Supreme Court in cases like Arnesh Kumar vs. State of Bihar. The court found that the police had complied with Section 41A of the Code of Criminal Procedure by issuing notices and that the applicants had provided explanations. However, the police were not satisfied with the explanations, and the court found no element of vengeance or prestige issue in the police's actions.

7. Economic Offences and Their Impact:
The court recognized the grave and serious impact of economic offences on the economy and the mental health of the people. It noted that the business practices of the applicants had led to significant financial losses for a large number of people and that such activities needed to be stopped to prevent further harm.

8. Compliance with Section 41A of the Code of Criminal Procedure:
The court noted that the police had complied with Section 41A by issuing notices and that the applicants had cooperated by providing explanations. However, the court found that the explanations were not satisfactory, and the police needed to investigate further to uncover the full extent of the fraudulent activities.

Conclusion:
The court rejected the anticipatory bail applications, emphasizing the need to stop the fraudulent business activities and protect the public from further financial harm. The court continued the interim relief for the applicants until 15th July 2016, allowing them time to challenge the order before the Supreme Court.

← Previous Next →