KABC010017422023
IN THE COURT OF LXV ADDL CITY CIVIL & SESSIONS
JUDGE, BENGALURU CITY (CCH-66)
PRESENT
SHRI. HEMANTH KUMAR. C.R.
B.A.L., L.L.B.,
LXV Addl. City Civil & Sessions Judge,
Bengaluru.
Dated this the 31 st day of January, 2023
Crl.Misc.No.557/2023
PETITIONER/S:-
1.

MADHURAJA RAI,
s/o lae Narayana Rai,
Aged about 40 years,
M/s. Rock Champs & Co.,
R/at No.146/3, DASH Pentagum,
1st Coconut Avenue Road,
7th Cross, Malleshwaram,
Bengaluru -560055.

2.

SRI. GANESH. P,
s/o Parameshwaran,
Aged about 71 years,
Chartere Accountant,
M/s. Ganesh & Co.,
R/at No.4, NTI Layout, 1st Main,
RMV Layout, 2nd Stage,
Bengaluru -560094.

3.

V.V. GURUMURTHY,
s/o Vaitheeswaran,
Aged about 72 years,
Chartered Accountant,
M/s. VVG & Associates,
R/at Flat No.6/2, Mahalakshmi Nilaya,
Crl.Misc.No.557/2023
2
Opp. J.P. Park, Mattikere,
Bengaluru -560054.
(By Sri. MD., Advocate)
V/s.
RESPONDENT/S:-
THE STATE OF KARNATAKA,
By Basavanagudi Police Station,
Bengaluru.
(Rep. by Public Prosecutor)
ORDER ON PETITION FILED UNDER
SECTION 438 OF CR.P.C
This petition is filed under Section 438 of Cr.P.C., seeking
anticipatory bail to the petitioner in Crime No.140/2022 registered by
the respondent Basavanagudi police for offences punishable under
Sections 420, 477A of IPC and Section 109(12A) of the Karnataka
Societies Act.
2.

Brief facts of the case.-
The complainant- K. Shridhar, Joint Director Co-operative
Societies, Bengaluru District, has lodged a complaint alleging that the
petitioners being licensed statutory auditors have conducted audit of
Guru Raghvendra Sahakari Niyamita Co-operative Bank, Bengaluru
for the year 2014-15 to 2018-19 in a defective manner and thereby
committed the offences punishable under Sections 109(12-A) of
Karnataka Co-operative Societies Act, and that he is authorized under
Section 111(2)(A) to conduct re-audit for the said years and during that
time the defect came to be found out and therefore sought action
against the petitioners for the offences punishable under Sections
109(12-A) of the Karnataka Co-operative Societies Act. As such the
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complainant has lodged the complaint.

Crl.Misc.No.557/2023
The police on the basis of the
said complaint have registered the case in Crime No.140/2022 for the
offences punishable under Sections 420, 477A of IPC and Section
109(12A) of the Karnataka Societies Act.
3.

The petitioners apprehending their arrest have filed this
bail petition seeking anticipatory bail on the following among other
grounds. The petitioners submit that the 1st petitioner has conducted
statutory audit pertaining to the year 2014-2015 and 2015-16 and the
same is defective as he could not detect the misappropriation done by
the Guru Raghavendra Sahakari Niyamita Co-operative Bank, which is
banking institution, while preparing profit and loss audit report. The 2 nd
petitioner has conducted an defective audit for the financial year
pertaining to 2016-17 and 2017-18 and the 3rd petitioner has carried
out a statutory audit for the financial year pertaining to 2018-19 and
the same are defective respectively. The petitioners submit that the
complaint, FIR and other materials produced in the case prima facie
does not constitute any offence and they being the statutory auditors
for the Guru Raghavendra Sahakari Niyamita Co-operative Bank, for
the respective years have carried out the audit report based on the
documents/ internal audit reports, vouchers and have no personal
knowledge of the transaction of the bank in whatsoever nature. The
petitioners submit that the preparation of audit report by the petitioners
for respective years on the basis of the materials/ documents furnished
by the bank itself and as the management of Guru Raghavendra
Sahakari Niyamita Co-operative Bank has swindled money by giving
loans in the name of various people and not given money to the FDs
holders and other public including to the 2nd petitioner, several cases
were registered against the bank such officials and transferred to CID
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Crl.Misc.No.557/2023
for further investigation in which all the accused persons were granted
bail in those cases the petitioners were summoned and treated as
witnesses.

The petitioners submit that the offences alleged in the
case though non-bailable, cognizable offences and triable by the
Magistrate are neither punishable with death nor imprisonment for life
and the petitioners No.2 and 3 being the senior citizens and they are
chartered accounts and they are ready and willing to abide by the
conditions imposed by this court and also co-operate with the
investigation. Hence, prays to allow the bail petition.
4.

After service of notice, the learned Public Prosecutor has
appeared and filed objection contending that the offences alleged
against the petitioners are grievous in nature and further contended
that the complaint averments prima facie shows that the petitioners
have committed the alleged offences. The learned Public Prosecutor
has further contended that the investigation is still in progress and
there is a prima facie case against the accused for having involved in
the alleged offences and at this stage if the bail petition of the
petitioners are granted there are every chances of petitioners
threatening the prosecution witnesses, destroying the evidence,
abscond and hamper the trial. Hence, prays to reject the bail petition.
5.

Heard the arguments. Now the points that arise for my
consideration.-
6.

1.

Whether the petitioners have made out
sufficient ground to allow the petition
filed under Section 438 of Cr.P.C?

2.

What order?

My answer to the above points are.-
5
Point No.1:–
In the Negative
Point No.2:–
As per final order
for the following
Crl.Misc.No.557/2023
REASONS
7.

Point No.1:- The petitioner counsel has addressed the
arguments contending that if the complaint is read to their face value
as true the alleged offences made punishable under Section 109 (12A)
of the Karnataka Co-operative Societies Act, 1959 for which action
sought to be instigating by the 1st informant against the petitioners
would not constitute and also further contended that the 1st informant
requested the respondent investigation agency to register the case for
the offences punishable under Section 109(12A) of the Karnataka Cooperative Societies Act, and despite the fact the complaint does not
disclose the commission of the offence made penal under Sections
420, 477A of IPC, the respondent investigator has wrongly invoked the
sections 420, 477A of IPC without any basis as against the petitioners.
The petitioners counsel has also further contended that the complaint,
FIR and other materials produced in the case prima facie does not
constitute any offence let alone the offences made penal under
Sections 420, 477A of IPC and Section 109(12A) of the Karnataka Cooperative Societies Act.

The petitioners
counsel has further
contended that the basis and essential ingredients to constitute the
offence made penal under Sections 420, 477A of IPC i.e., wrongful
loss and wrongful gain is not attributed as the petitioners have not
made any wrongful gain for themselves while preparing the alleged
audit report, which is claimed to be defective by the 1 st informant. In
order to constitute the offence made penal under Section 477A of iPC,
the petitioners are neither clerks nor servants or officers attached to
Guru Raghavendra Sahakari Niyamita Co-operative Bank. The
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petitioners
Crl.Misc.No.557/2023
counsel has also further contended that the petitioners
being the statutory auditors for the Guru Raghavendra Sahakari
Niyamita Co-operative Bank, for the respective years have carried out
the audit report based on the documents/ internal audit reports,
vouchers and have no personal knowledge of the transaction of the
bank in whatsoever nature. Mere preparation of audit report by the
petitioners for respective years on the basis of the materials/
documents furnished by the bank itself ipso fact would not constitute
the offence of 420, 477A of IPC in the absence of making wrongful
financial gain for the petitioners. The petitioners counsel has also
further contended that the management of Guru Raghavendra
Sahakari Niyamita Co-operative Bank has swindled money by giving
loans in the name of various people and not given money to the FDs
holders and other public including to the 2nd petitioner, several cases
were registered against the bank such officials and transferred to CID
for further investigation in which all the accused persons were granted
bail in those cases the petitioners were summoned and treated as
witnesses. The petitioners counsel has also further contended that
the offences alleged in the case though non-bailable, cognizable
offences and triable by the Magistrate are not punishable with death or
life imprisonment and also further contended that the 1st informant has
given show cause notice dated 04.03.2022 and other dates to the
petitioners with regard to the defects in the audit reports to which the
petitioners had suitably replied on different dates while bringing the
actual facts and procedures. Even in a revised audit done by the 1 st
informant there were mismatches and the said report was also
defective. Consequently gain they have conducted another re-audit
report based on which the 1st informant claimed their audit report is a
defective one. The 2nd petitioner being a senior citizens, by reposing
Crl.Misc.No.557/2023
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faith and confidence in banking system has kept fixed deposits in the
Guru Raghavendra Sahakari Niyamita Co-operative Bank, to the tune
of Rs.40,00,000/- which amount came to be transferred from his bank
accused, for which Guru Raghavendra Sahakari Niyamita Cooperative Bank issued fixed deposits receipts to the 2 nd petitioner.
Therefore, the 2nd petitioner is also one of the victims at the hands of
the Guru Raghavendra Sahakari Niyamita Co-operative Bank and lost
his precious lifetime savings kept for his survival during his evening
days. The petitioners counsel has also further contended that the
petitioners are ready and willing to assist the investigating agency and
also undertakes to be present regularly before the court and also
furnish surety to the satisfaction of the court and also abide by the
conditions imposed by this court.

Hence, prays to allow the bail
petition.
8.

The learned Public Prosecutor has addressed the
arguments contending that the offences alleged against the petitioners
are grievous in nature and also further contended that the investigation
is still in progress. The learned Public Prosecutor has also further
contended that the said Guru Raghavendra Sahakari Niyamita Cooperative Bank has cheated many of the investors and separate case
has been registered against them.

The allegation against the
petitioners is that they have given false audit report colluding with the
CEO of the said bank and they have cheated the investors.

The
learned Public Prosecutor has also further contended that the
allegations made by the complainant in the complaint prima facie
shows that the accused persons have colluded with the bank officials
and have given false report and cheated the public.

The learned
Public Prosecutor has also further contended that as the case is still
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Crl.Misc.No.557/2023
under the stage of investigation and if the bail petition of the petitioners
are allowed there are every chances of petitioners threatening the
prosecution witnesses, destroying the evidence, abscond and hamper
the trial. Hence, prays to reject the bail petition.
9.

On perusal of the records it is noticed that the complainant has
lodged the complaint against the petitioners alleging that they have
furnished false audit report for the years 2014-2015, 2015-2016, 20162017, 2017-2018 and 2018-2019 as such the audit has been
conducted and found that for the years 2014-2015 to 2018-19 the audit
has been conducted in a defective manner and thereby committed the
offences punishable under Section 109(12A) of the Karnataka Cooperative Societies Act and having conducted the re-audit for the said
years and during that time the defect came to be found out and
therefore action has been sought against the petitioners by filing the
complaint.

On perusal of the records it is noticed that the petitioners
are chartered accounts by profession and they have conducted the
audit of the bank for various years from 2014-2015 to 2018-2019. The
allegation against the petitioners is that they have conducted the audit
which is defective and they were unable to detect the misappropriation
done by the Guru Raghavendra Sahakari Niyamita Co-operative Bank
which is a banking institution, while preparing profit and loss audit
report for the various years as the petitioners have conducted statutory
audit from 2014-2015 to 2018-2019. On the basis of the report given
by the RBI and also on the basis of the said report given for the
concerned department the complainant has lodged the complaint. As
the case is still under the stage of investigation.

The petitioners
counsel has further contended that the case is registered against the
bank officials with respect to the cheating and misappropriation of
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Crl.Misc.No.557/2023
funds. In the said case the accused persons have already granted bail
by this court and also further contended that the said petitioners have
been treated as witnesses in the said case and also the petitioners
counsel has further contended that the petitioners have conducted the
audit for the years 2014-2015 to 2018-2019 on the basis of the
documents/ internal audit reports and vouchers they have conducted
the audit and furnished the audit report. As such the petitioners have
not committed any wrong in furnishing the audit report. As the case is
still under the investigation and the allegation of the complainant
against the petitioners is that they have furnished the false audit report
pertaining to the years 2014-2015 to 2018-2019 and they were unable
to detect the misappropriation done by the Guru Raghavendra
Sahakari Niyamita Co-operative Bank, while preparing profit and loss
audit report as such the complaint has been filed against the
petitioners. In the present case the said Guru Raghavendra Sahakari
Niyamita Co-operative Bank has cheated several investors to a tune of
several crores of rupees. As such the main case is registered against
the bank officials of the Guru Raghavendra Sahakari Niyamita Cooperative Bank is also pending investigation, so also the present case
is also still under the stage of investigation as the amount involved in
the said both case is the public amount which runs to several crores
of rupees.

The said Guru Raghavendra Sahakari Niyamita Co-
operative Bank has swindled crores of rupees from thousands of
people, and the petitioners have failed to unearth the fraud, they being
the professional auditors of the said bank. As such at this stage if the
bail petition of the petitioners are allowed there is every chances of the
petitioners threatening the prosecution witnesses, destroying the
evidence, abscond and hamper the trial. Hence, the petitioners have
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Crl.Misc.No.557/2023
not made out sufficient grounds to allow the bail petition. Accordingly, I
answer the point No.1 in the ‘Negative’.
10.

Point No.2:- In view of the findings given on point No.1,
I proceed to pass the following.ORDER
The petition filed by the petitioners under
Section 438 Cr.P.C., is dismissed.
(Dictated to the Stenographer online directly on the computer, computerized by her, the same is
corrected and then pronounced by me in the Open Court on this the 31st day of January, 2023)
(HEMANTH KUMAR. C.R)
LXV Addl. City Civil & Sessions Judge,
Bengaluru.