Mergu Chander vs The State Of Telangana

This petition is filed under Section 482 of Bharatiya Nagarik Suraksha Sanhita, 2023 (for short, “BNSS”), seeking the relief of anticipatory bail.

The petitioner is arrayed as Accused No.4 in FIR No.1560 of 2025 on the file of Kukatpally police station, Cyberabad for the offences punishable under Sections 316(2), 318(4) r/w 3(5) of Bharatiya Nyaya Sanhita, 2023 (for short, “BNS”) and Section 3 and 5 of Telangana Protection of Depositors of Financial Establishments Act, 1999 (for short ‘TSPDFEAct’).

Heard Mr. Macharla Sreekanth, learned counsel for the petitioner, and Mr. Syed Yasar Mamoon, learned Additional Public Prosecutor, appearing for the respondent-State.

The prosecution case, in brief, is that the de facto complainant joined a chit group conducted by the accused company and regularly paid the monthly subscriptions. The company was managed by its Directors, including the petitioner/Accused No.4. Upon completion of the chit period, the accused allegedly failed to repay the amounts due to the subscribers and further collected amounts towards advance payments for future chits and hand loans, assuring that they would be adjusted in subsequent chit transactions. Though cheques were allegedly issued towards repayment, the complainant contended that their validity expired and that neither fresh cheques were issued nor the amounts were repaid. The complainant alleged that Rs.22,00,000/-was due towards matured chit amounts and Rs.23,00,000/- towards advances and hand loans, totalling Rs.45,00,000/-. It is alleged that the accused dishonestly collected the said amounts and failed to repay them, pursuant to which the present crime was registered.

Learned counsel for the petitioner submitted that the petitioner/Accused No.4 ceased to be associated with the chit fund company in September, 2024, owing to disputes with Accused No.1, and had no role thereafter in its management or day-to-day affairs. He neither induced subscribers to invest nor collected any deposits, subscriptions, advances, or hand loans, and was allegedly implicated solely due to his erstwhile association with the company. It is further submitted that the FIR contains vague and omnibus allegations, without attributing any specific overt act to the petitioner or disclosing the essential ingredients of the alleged offences. Since the investigation is predominantly documentary and the relevant documents are already in the custody of the investigating agency, custodial interrogation is unnecessary, particularly as Accused No.2, stated to be similarly situated, has already been arrested and enlarged on bail.

Learned counsel contended that the chit fund company is duly incorporated and its chit groups were registered in compliance with the statutory requirements. Any dispute arising from the chit transactions, therefore, would fall within the jurisdiction of the competent authority and be amenable to arbitration under the relevant Act. Consequently, invocation of the TSPDFEAct is alleged to be unsustainable. It is further submitted that the petitioner requires continuous medical treatment, is a permanent resident, and is unlikely to abscond. He undertakes to cooperate with the investigation and abide by any conditions imposed by the Court. Hence, anticipatory bail is sought.

Learned counsel relied upon Md. Kaleemullahmoosa v. State of Andhra Pradesh, 2003 Supreme Online AP 26160, wherein it was held that alleged offences committed by chit fund companies do not attract the provisions of the Protection of Depositors of Financial Establishments Act. Reliance was also placed on the order dated 23.07.2026 in Crl.P.No.10517 of 2026, whereby Accused No.2, stated to be similarly situated, was granted anticipatory bail. The petitioner undertakes to cooperate with the investigation and comply with any conditions imposed by the Court.

Per contra, the learned Additional Public Prosecutor opposed the petition, submitting that the allegations disclose a well-organized financial fraud involving substantial amounts collected from the complainant and other subscribers under the guise of conducting a chit fund business. The petitioner was one of the Directors and was associated with the company's affairs during the relevant period.

According to the prosecution, the FIR specifically alleges wrongful loss of Rs.45,00,000/- to the subscribers. The petitioner's claim that he resigned from the company is a matter of defence, the truth and effect of which can be examined during investigation and, if necessary, at trial.

The prosecution further submitted that the petitioner's precise role, his alleged involvement in collection and diversion of funds, and the extent of his participation in the company's affairs are yet to be ascertained. Custodial interrogation may therefore be necessary to trace the flow of funds and determine the role of the accused. Considering the seriousness of the alleged economic offences, it is contended that granting anticipatory bail at this stage may impede the investigation. Accordingly, dismissal of the petition is sought.

I have carefully considered the rival submissions of and perused the materials available on record.

The FIR alleges that the petitioner, along with the other accused, being a Director of the chit fund company, jointly collected subscriptions, advances, and hand loans from the de facto complainant and other subscribers and thereafter failed to repay the matured chit amounts, allegedly causing wrongful loss of Rs.45,00,000/-.

It is well settled that, while considering an application for anticipatory bail, the Court is not required to conduct a mini-trial or adjudicate disputed questions of fact. The Court must consider the nature and gravity of the accusation, the specific role attributed to the applicant, the material available against him, the likelihood of absconding or tampering with evidence, and the necessity of custodial interrogation for a fair and effective investigation. The object is to balance personal liberty with the legitimate interests of investigation. (see. Gurbaksh Singh Sibbia v. State of Punjab, (1980) 2 SCC 565; Siddharam Satlingappa Mhetre v. State of Maharashtra, (2011) 1 SCC 694). Further, in Arnesh Kumar v. State of Bihar, (2014) 8 SCC 273, the Supreme Court held that arrest cannot be made mechanically merely because an offence is cognizable; the investigating officer must satisfy the statutory requirements of necessity. Thus, the mere power to arrest does not, by itself, justify its exercise.

In the present case, the allegations against the petitioner principally arise from his status as a Director, and the material presently available does not disclose any distinct overt act specifically attributable to him apart from the general allegations against the Directors. His contention that he ceased to be associated with the company in September, 2024, and that the alleged defaults occurred thereafter, requires investigation and appreciation of evidence at the appropriate stage. This Court is not required to determine the correctness of that defence at this stage; the relevant consideration is whether his custodial interrogation is indispensable for an effective investigation. The prosecution has not placed any specific material showing that custodial interrogation is necessary for recovery of incriminating material or for any purpose that cannot be achieved without arrest. The investigation appears substantially documentary, involving company records, accounts, receipts, bank transactions, and subscriber statements, which are either already available with or capable of being secured by the investigating agency. Custodial interrogation must also be distinguished from the general requirement of questioning the accused. Section 482(2)(i) of the BNSS permits a condition requiring the applicant to make himself available for interrogation as and when required. Thus, protection from arrest does not preclude effective interrogation or cooperation with the investigation.

Accused No.1, who is alleged to have managed the day-to-day affairs of the company, has already been arrested and enlarged on bail. Though parity is not, by itself, determinative, the treatment of a co-accused is a relevant circumstance where the roles and circumstances are substantially comparable. It is also relevant that as per the petitioner, the chit fund company was duly incorporated and its chit groups were registered with the jurisdictional Registrar of Chits. While such registration does not exonerate the petitioner or determine the applicability of the penal provisions invoked, it is a relevant circumstance in assessing the nature of the transactions, the petitioner's role, and the necessity for custodial interrogation.

Having regard to the nature of the allegations, the material presently available, the absence of any specific overt act independently attributed to the petitioner, the documentary nature of the investigation, the absence of demonstrated necessity for custodial interrogation or recovery, and the petitioner's willingness to cooperate, this Court is of the view that custodial arrest is not shown to be indispensable at this stage. In the circumstances, this Court is satisfied that the petitioner has made out a case for exercise of the discretionary jurisdiction under Section 482 of the BNSS, subject to appropriate conditions securing his availability for interrogation, cooperation with the investigation, non-interference with evidence or witnesses, and presence as and when required in accordance with law.

Accordingly, the Criminal Petition is allowed, subject to the following conditions:

It is made clear that any observations made herein are confined solely to the adjudication of the present application for anticipatory bail and shall not be construed as an expression on the merits of the case.

Pending miscellaneous applications, if any, shall stand closed.