Court finds lack of incriminating evidence against petitioner, rules trial court failed to apply judicial mind; Enforcement Directorate's summons to petitioner under PMLA upheld.
In a significant judgment dated July 29, 2026, the Karnataka High Court, presided over by Justice R. Nataraj, quashed the FIR and subsequent criminal proceedings against Shri Vijay Tata in connection with a case registered under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, and related provisions of the Indian Penal Code (IPC). The court held that the prosecution had failed to produce any incriminating material against the petitioner, who was arraigned as accused No.5, and emphasized that the trial court's order taking cognizance was a mere omnibus statement lacking judicial scrutiny.
Background and Case Details:
The case originated from FIR No. 137/2018 registered at Devarajeevanahalli Police Station against M/s Ambidant Marketing Pvt. Ltd. and its directors for offences under Sections 4, 5, and 6 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Vijay Tata, acting as the authorized representative of M/s Sanchaya Land and Estate Pvt. Ltd., was not initially named as an accused. The case involved allegations of fraudulent schemes promising high returns to investors.
During investigation, the police transferred the case to the Central Crime Branch (CCB) Fraud and Misappropriation Squad. Vijay Tata was subsequently arraigned as accused No.5 in the charge sheet filed before the Special Court designated under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004.
Contentions and Court's Findings:
The petitioner contended that he was merely an authorized representative of M/s Sanchaya and that the company itself was not made an accused, thus he could not be prosecuted for acts of the company. He challenged the legality of the transfer of investigation to CCB, arguing that CCB was not a police station as defined under Section 2(s) of the Criminal Procedure Code (Cr.P.C.) and hence had no authority to investigate or file charge sheets. He further claimed that the trial court failed to apply judicial mind when taking cognizance.
The State and Enforcement Directorate countered that the petitioner was involved in the transactions wherein M/s Ambidant Construction Pvt. Ltd. invested heavily in flats developed by M/s Sanchaya as part of a scheme to settle claims by investors. They argued that the petitioner was behind the scene, receiving proceeds of crime, and that the CCB investigation was valid as the State Government had notified CCB officers as superior to police station officers.
Upon scrutiny, the High Court observed:
- - No incriminating material was produced against Vijay Tata despite multiple opportunities.
- - The petitioner was not a director of M/s Sanchaya, and mere accusations in confession statements of other accused were inadmissible and insufficient.
- - The trial court's order taking cognizance was a routine act without application of mind.
- - The prosecution's failure to arraign M/s Sanchaya itself as an accused undermined the case against the petitioner.
- - The question of CCB's authority was kept open due to pending Supreme Court proceedings.
- - Enforcement Directorate's summons to the petitioner under the Prevention of Money Laundering Act, 2002 (PMLA) were valid since the petitioner was an authorized representative and might possess knowledge regarding proceeds of crime.
Outcome:
The Karnataka High Court allowed the writ petition (W.P. No. 56732/2018) and quashed the FIR and charge sheet against Vijay Tata. The trial court's cognizance order was also set aside. However, the petition challenging the Enforcement Directorate's summons was dismissed, affirming the Directorate's power to summon individuals connected to the predicate offence. The Court directed that the sum of Rs. 4,71,18,816/- deposited by the petitioner be released after the trial concludes.
Significance:
This judgment reiterates the principle that courts must apply judicial mind while taking cognizance and cannot proceed on mere allegations lacking material evidence. It also clarifies that individuals cannot be prosecuted for acts of companies without proper arraignment. The ruling underscores the Enforcement Directorate's wide powers under the PMLA to summon persons who may hold information related to proceeds of crime, even if they are not accused in the predicate offence.
Bottom Line:
Quashing of FIR and subsequent proceedings due to absence of incriminating evidence against the petitioner. Enforcement Directorate empowered to summon individuals for investigation under the Prevention of Money Laundering Act.
Statutory provision(s): Prize Chits and Money Circulation Schemes (Banning) Act, 1978 Sections 4, 5, 6; Indian Penal Code Sections 120B, 406, 409, 411, 413, 420, 465, 468, 471; Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004 Section 9; Criminal Procedure Code Sections 2(s), 36; Prevention of Money Laundering Act, 2002
Vijay Tata v. Directorate of Enforcement, (Karnataka) : Law Finder Doc Id # 2978358
