Madras HC Upholds Deposit-Scheme Proprietor’s Conviction, Cuts 10-Year Sentence To 4 Years 3 Months After 78 Depositors Receive Partial Payout

The prosecution alleged that the second appellant, proprietor of the first appellant concern, promoted four deposit schemes promising high annual returns and collected ₹1,21,13,000 from 81 depositors.

Following a complaint, he was prosecuted for 81 counts each under Section 420 of the Indian Penal Code, 1860 (IPC) and Section 5 of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 (TNPID Act).

The trial court convicted him and imposed imprisonment and fines for both offences.

On appeal under Section 374 of the Code of Criminal Procedure, the appellants did not, in effect, challenge the finding of guilt, but sought a reduction in sentence, relying on the sale of the second appellant’s properties and the distribution of proceeds to depositors.

The Competent Authority reported that ₹75,48,278 had been realised from the sale and that 78 depositors had been paid a proportionate amount; two depositors’ shares remained undistributed.

Section 420 IPC concerns cheating and dishonestly inducing delivery of property; Section 5 of the TNPID Act addresses fraudulent default by a financial establishment in repaying deposits or paying interest.

Section 374 CrPC provides for an appeal against conviction.

The Court applied these provisions to review the conviction and sentence.

No precedent was cited in the judgment.

The Court upheld the conviction because the depositors had consistently testified to making deposits and had produced deposit receipts supporting their evidence; it therefore found no infirmity in the trial court’s finding of guilt.

In considering sentence, the Court took account of the second appellant having served 1,574 days, the realisation of ₹75,48,278 through the sale of his properties, and the settlement of 78 depositors, while noting that the appellant owned no other properties.

In those circumstances, it considered that the period already undergone, together with reduced fines and a further distribution to depositors, would meet the interests of justice.

For each offence, the term of imprisonment was reduced to the period already undergone, and the fine was reduced to ₹2,00,000, with three months’ simple imprisonment in default of payment.

The Court directed that ₹3,50,000 out of the fine amount deposited be credited to the Competent Authority/District Revenue Officer, Erode, for proportionate distribution to depositors.