Calcutta HC refuses to interfere in CBI probe against ‘Chit Fund scam’

Case Details: MPS Greenery Developers Ltd. v. State of West Bengal - [2022] 142 taxmann.com 441 (HC-Calcutta)

Judiciary and Counsel Details

• • Sabyasachi Bhattacharyya, J.
  • Ashok Banerjee, Ashok Gupta , Dipankar More, Ajoy Lal Acharya, Surajit Nath Mitra, Prasanta Kumar Dutt, Susanta Kumar Dutt, Shyamantak Banerjee, Amajit De, Amitesh Banerjee, Tarak Karan, Bikash Ranjan Bhattacharaya, Subhasis Chakraborty, Ms Sushmita Kumar Singh, Amit Chowdhury, Amal Baran Chatterjee, Arundhati Banerjee & Kaustav Banerjee for the Appearing Parties.

Facts of the Case

In the instant case, the writ petition was filed challenging the investigation of the petitioners – MPS Greenery Developers Ltd. by the Central Bureau of Investigation (CBI) on the ground of lack of jurisdiction. The petitioners also sought for quashing of the charge sheet.

The petitioners submitted that the petitioner was not a Chit Fund company engaged in chit business, however, was a company governed by the SEBI Act, 1992 and the SEBI (Collective Investment Scheme) Regulations, 1999. The petitioners relied on a Professional/Provisional Registration Certificate issued by the SEBI in favour of the petitioner.

Therefore, the petitioner requested that the investigation by the CBI and all action taken on the basis thereof, including the framing of charges and initiation of the criminal case are liable to be quashed.

The learned counsel on behalf of the SEBI relied on the affidavits filed by the SEBI and submitted that the SEBI had granted the Provisional Registration Certificate to the petitioner under certain conditions, including that the petitioners would be restrained from operating in terms of such certificate during the two-year period of the tenure of such certificate.

Further, it was submitted that the petitioners have flagrantly violated the SEBI provisions for which the petitioner was still in custody. It was also contended that the CBI investigation was independent of the SEBI measures and, as such, cannot be a ground in the present writ petition.

High Court Held

The High Court observed that the Provisional Registration Certificate issued by the SEBI was restricted and conditional and not conclusive of the petitioners’ status as CIS (Collective Investment Schemes) fall outside the purview of the expression ‘chit fund’.

Further, the High Court observed that only the investigation and the trial of the CBI case, on its completion, shall reveal whether the source of money involved in the chit fund scam and rerouting of the huge sums involved can be traced to the petitioner-company, even if the petitioner, it was assumed was not a chit fund company in the strict sense of the term.

The High Court held that mere investigation by the CBI, and that too, when the criminal proceedings were at the stage of trial and after such a long time subsequent to the unsuccessful challenge to the charges framed, cannot be a violation of any legal or fundamental right of the petitioners.

The High Court, further held that it cannot be observed that the CBI investigation of the petitioners and the framing of charges are vitiated in any manner, sufficient for the writ court to quash the same. Accordingly, the writ petition was to be dismissed.