Madras High Court Upholds Conviction in ₹4.65 Crore EMU Farm Deposit Scam

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Case Name

V. Ravibalan & Ors. v. State represented by The Deputy Superintendent of Police, Economic Offence Wing-II, Dindigul (High Court of Madras)

Crl.A.(MD)Nos.260, 287 and 353 of 2022 & Crl.M.P(MD).Nos.6522 and 11798 of 2023

Date: 12th March 2024

Key Takeaways

• Court confirmed convictions: The Madurai Bench of the Madras High Court upheld the conviction and sentences of the accused for cheating, criminal conspiracy, criminal breach of trust, forgery, and violations under the TNPID Act.
• Unchallenged evidence: The court emphasized that the prosecution’s evidence was largely unchallenged, as the accused did not cross-examine most witnesses.
• Active involvement: The court found that the accused were not just collection agents but actively involved in the fraudulent schemes, including creating false documents.
• Public protection: The judgment reinforces the purpose of the TNPID Act—to protect depositors from fraudulent financial schemes not regulated by the RBI.
• No leniency: The court refused to reduce the sentence, noting the seriousness of the offence and the lack of any effort by the accused to repay the victims.

Issue

Did the actions of the accused constitute offences under the TNPID Act and various sections of the Indian Penal Code, justifying their conviction and sentence?

Facts

• Who was involved?
• The main accused were the directors (A2 & A3) and close associates (A4 & A5) of Subhashree EMU Farms India Pvt. Ltd. (A1).
• What happened?
• The company collected deposits from 177 people, totaling ₹4,65,09,000, promising high returns and benefits through schemes involving EMU birds and goats.
• Schemes offered:
• Depositors would get EMU birds or goats, sheds, feed, insurance, and monthly/annual payments, with the principal returned after 2-3 years.
• What went wrong?
• The company defaulted on payments and did not return the deposits. A complaint was filed, leading to criminal charges under IPC sections 406, 420, 120B, 468, 471, and Section 5 of the TNPID Act.
• Trial and conviction:
• The Special Court convicted the accused, sentencing them to various terms of imprisonment and fines.

Arguments

For the Appellants (Accused):

• Legitimate business claim:
• The accused argued they were running a genuine business, providing birds, sheds, and making some payments as promised. They claimed the TNPID Act did not apply, and there was no criminal intent.
• No cheating:
• They said non-payment of incentives/profits was a civil matter, not criminal cheating.
• Limited role:
• A4 & A5 argued they were only collection agents, not involved in the company’s management or fraud.
• Precedents cited:
• They relied on previous High Court decisions where mere collection agents were acquitted.

For the Respondent (State):

• Fraudulent scheme:
• The prosecution argued the accused made false promises, collected large sums, and then defaulted, which was clear cheating and a violation of the TNPID Act.
• Active participation:
• Evidence showed all accused were actively involved, not just as agents but in creating false documents and misleading depositors.
• Unchallenged evidence:
• Most prosecution witnesses were not cross-examined, so their testimony stood unchallenged and credible.

Key Legal Precedents

• Rajinder Pershad v. Darshana Devi, (2001) 7 SCC 69
• Principle: If a witness’s statement is not challenged in cross-examination, it is accepted as true.
• Paulmeli v. State of T.N., (2014) 13 SCC 90
• Principle: Failure to cross-examine a witness on a point means the fact cannot be disputed later.
• Atluri Brahmanandam v. Anne Sai Bapuji, (2010) 14 SCC 466
• Principle: Unchallenged evidence stands as proof.
• Laxmibai v. Bhagwantbuva, (2013) 4 SCC 97
• Principle: Same as above.
• Unreported Madras High Court cases (Crl.R.C.No.591 of 2009, Crl.R.C.No.481 of 2015, Crl.A.(MD).No.119 of 2015)
• These were distinguished by the court, as in those cases, the accused were only collection agents, whereas here, the accused were actively involved in the fraud.

Judgement

• Decision:
• The High Court dismissed the appeals and confirmed the convictions and sentences of the accused.
• Reasoning:
• The court found overwhelming, unchallenged evidence that the accused collected deposits, made false promises, and failed to repay.
• The accused were not mere agents but actively involved in the fraudulent scheme, including creating false documents to cover up their actions.
• The court emphasized the purpose of the TNPID Act—to protect depositors from such scams—and refused to reduce the sentence, noting the seriousness of the offence and the lack of any effort to repay the victims.
• Order:
• The appellants are to serve their sentences as imposed by the trial court.

FAQs

Q1: What is the TNPID Act, and why was it applied here?

A: The Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Act, 1997, is designed to protect depositors from fraudulent financial schemes not regulated by the RBI. It was applied because the accused collected public deposits with false promises and defaulted on repayment.

Q2: Why did the court reject the argument that the accused were only collection agents?

A: The court found evidence that A4 & A5 were actively involved in the company’s affairs, including creating false documents and misleading depositors, not just collecting money.

Q3: What was the significance of not cross-examining witnesses?

A: The court relied on Supreme Court precedents to hold that unchallenged testimony stands as proof. Since most witnesses were not cross-examined, their statements were accepted as true.

Q4: What sentences were imposed?

A: The accused received various terms of rigorous imprisonment (up to 10 years) and fines for offences under the TNPID Act and IPC sections 120B, 406, 420, 468, and 471.

Q5: Did the court consider reducing the sentence?

A: No, the court refused to reduce the sentence, citing the seriousness of the offence and the lack of any effort by the accused to repay the victims.

Q6: What does this judgment mean for depositors in similar schemes?

A: It reinforces that courts will strictly enforce the TNPID Act to protect depositors and punish those running fraudulent schemes.