TMI Blog1982 (2) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings against that firm and its partners and order that no investigation under the Act into affairs of the firm is to be carried on or continued. I agree with the final order proposed by the learned Chief Justice in regard to the return of the documents, books and cash. - Civil Appeal No. 11 29 of 1981 - - - Dated:- 2-2-1982 - Chandrachud, Y.V. ((CJ), Varadarajan, A. (J) And Sen, Amarendra Nath (J),JJ. JUDGMENT The following judgments were delivered : CHANDRACHUD, C. J. My learned Brother A.N. Sen has dealt fully with the various points argued before us. I agree respectfully with his judgment, but desire to add a few words in view of the importance which this matter has acquired by reason of the immense circulation of 'black money' clearly and almost concededly involved in the affairs of the firm which is facing a prosecution. These appeals by special leave arise out of the judgment dated March 5, 1981 of a learned single Judge of the Calcutta High Court in Matters Nos. 2829 of 1980 and 37 of 1981. The appeals are, in substance, by the State of West Bengal while the contesting respondents are a firm called 'Sanchaita Investments' and its three partners, Swapa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 48% per annum to its members until very recently. The rate of interest has of late been reduced to 36% per annum. Such high rates of interest were and are being paid even though the loan certificate receipts show the rate of interest to be 12% only. Thus, the amount in excess of 12% so paid clearly shows that the 'Money Circulation Scheme' is being promoted and conducted for the making of quick and/or easy money. Prizes and/or gifts in cash were and are also awarded to agents, promoters and members too. In view of the above, Sarvashri Bihari Prasad Murarka, Sambhu Mukherjee and Swapan Kumar Guha appear to have been carrying on business in the trade name of Sanchaita Investments' in prize chits and money circulation scheme in violation of section 3 of the Prize Chits and Money Circulation Schemes l,(Banning) Act, 1978 and are therefore, punishable under section 4 of the said Act. Necessary action may therefore, be kindly taken against the aforesaid offenders along with other accomplices as provided in the law. Yours faithfully, Sd/- Commercial Tax officer, Bureau of Investigation." Section 4 of the Act provides that whoever contravenes the provisions of section 3 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the acceptance of any particular interpretation of the provision, the contravention of which is visited by penal consequences. Commas or no commas, and howsoever thoughtfully one may place them if they are to be there, I find it impossible to take clause (c) to mean that any and every activity "for the making of quick or easy money" is comprehended within its scope. For the matter of that, I cannot believe any law to ban every kind of activity for making quick or easy money, without more, on pain of penal consequences. It is far too vague and arbitrary to prescribe that "whosoever makes quick or easy money shall be liable to be punished with fine or imprisonment". For then, in the absence of any demarcation of legitimate money-making activities from those which fall within the ban, the question whether the penal provision is attracted in a given case will depend upon the will and temper, sweet or sour, of the magistracy. Besides, speaking of law and morals, it does not seem morally just or proper to say that no person shall make quick or easy money, especially quick. A person who makes quick money may do so legitimately by the use of his wits and wisdom and no moral turpitude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or opportunity of making quick or easy money must be shown to depend upon an event or contingency relative or applicable to the enrollment of members into that scheme. The legislative draftsman could have thoughtfully foreseen and avoided all reasonable controversy over the meaning of the expression 'money circulation scheme' by shaping its definition in this form: 'money circulation scheme' means any scheme, by whatever name called, (i) for the making of quick or easy money, or (ii) for the receipt of any money or valuable thing as the consideration for a promise to pay money, B On any event or contingency relative or applicable to the enrollment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscription; I have reshaped the definition, in order to bring out its meaning clearly, without adding or deleting a single word or comma from the original text of section 2 (c). The substance of the matter is really not in doubt: only the form of the definition is likely to create some doubt as to the meaning of the expression which is n defined and, therefore, I have made a formal modifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom which to pay fanciful interest by luring the unwary customer. But, unless the project envisages a mutual arrangement under which, the happening or non-happening of an event or contingency relative or applicable to the enrollment of members into that arrangement is of the essence, there can be no 'money circulation scheme' within the meaning of section 2 (c) of the Act. Numerous persons lend their hard-earned monies in the hope of earning high returns. It is notorious that, eventually, quite a few of them lose both the principal and the interest, for no project can succeed against the basic laws of economics. Sharp and wily promoters pay A's money to and B's to in order to finance interest at incredible rates, and eventually, then high-risk investment made by them at the cost of the credulous lenders fails, the entire arrangement founders on the rock of foolish optimism. The promoters, of course, have easy recourse to gadgets of the law of insolvency. It is difficult to hold that the lender, himself a victim of the machinations of the crafty promoter, is intended by the Act to be arraigned as an accused. I do not think that any civilised law can intend to add insult to injury. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting point of a lawful investigation. In answer to the writ petitions filed by the accused in the Calcutta High Court, affidavits were filed on behalf of the prosecuting agency, which do not improve matters in any way. The affidavit filed by Arun Kanti Roy, Deputy Secretary, Finance Department, Government of West Bengal, alleges that: (i) The actual payment of a very high rate of interest against the professed rate of 12% attracted huge amounts of idle money into circulation. (ii) The investment of money as collected is not under the regulatory control of the Reserve Bank of India or any other agency of the State dealing with credit control in relation to the country's economy; (iii) The pooling of the purchasing power and the financial resources and the unfettered deployment thereof have resulted in the concentration of tremendous economic power in the hands of a few, posing a potential threat to the equilibrium of the country's economy; (iv) The entire process is speculative in nature and directed towards luring away the investing public to the speculative market for making quick and easy money; (v) The very basis of the so-called contractual arrangement between the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests is a matter which must engage the prompt any serious attention of the State and Central Governments. But the narrow question for our consideration is whether on the basis of the allegations made against the accused, there is reason to suspect that they are guilty of an offence under section 4 read with sections 3 and 2 (c) of the Act. The allegation which we have reproduced in clause (ix) above from the affidavit of Arun Kanti Roy is the nearest that can be considered relevant for the purpose of section 2 (c) of the Acts. But even that allegation does not meet the requirement of that section since, what it says is that "the payment of quick and easy money by way of high rate of interest is dependent upon the period of investment and/or efflux of time which are very much relative and/or applicable to the membership of the depositors of the scheme to which the depositor agrees to subscribe". This is too tenuous to show that the scheme is dependent upon an event or contingency of the description mentioned in section 2(c), apart from the fact that the only participation which is alleged as against the depositors is that they become members of the "investment scheme" by subscribing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pursue this matter any further in view of the fact that the language of section 2(c) is, in my opinion, clear and admits of no doubt or difficulty. In R.P. Kapur v. The State of Punjab, the question which arose for consideration was whether a first information report can be quashed under section 561-A of the Code of Criminal Procedure. The Court held on the facts before it that no case for quashing the proceedings was made out but Gajendragadkar J., speaking for the Court observed that though ordinarily, criminal proceedings instituted against an accused must be tried under the provisions of the Code, there are some categories of cases where the inherent jurisdiction of the Court can and should be exercised for quashing the proceedings. One such category, according to the Court, consists of cases where the allegations in the F.I.R. Or the complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; in such cases, no question of appreciating evidence arises and it is a matter merely of looking at the F.I.R. Or the complaint in order to decide whether the offence alleged is disclosed or not. In such cases, said the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of a cognizable offence by the accused. The only other decision to which I need refer is that of the Privy Council in King-Emperor v. Kawaja Nazir Ahmad, which constitutes, as it were, the charter of the prosecution all over for saying that no investigation can ever be quashed. In a passage oft-quoted but much-misunderstood, Lord porter, delivering the opinion of the Judicial Committee, observed; "In their Lordships' opinion, however, the more serious aspect of the case is to be found in the resultant interference by the court with the duties of the police. Just as it is essential that every one accused of a crime should have free access to a court of justice so that he may be duly acquitted if found not guilty of the offence with which he is charged, so it is of the utmost importance that the judiciary should not interfere with the police in matters which are within their province and into which the law imposes on them the duty of inquiry. In India, as has been shown, there is a statutory right on the part of the police to investigate the circumstances of an alleged cognizable crime without requiring any authority from the judicial authorities, and it would, as their Lor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the F.I.R. must disclose, prima facie, that a cognizable offence has been committed. It is wrong to suppose that the police have an unfettered discretion to commence investigation under section 157 of the Code. Their right of inquiry is conditioned by the existence of reason to suspect the commission of a cognizable offence and they cannot, reasonably, have reason so to suspect unless the F.I.R., prima facie, discloses the commission of such offence. If that condition is satisfied, the investigation must go on and the rule in Khwaja Nazir Ahmed (supra) will apply. The Court has then no power to stop the investigation, for to do so would be to trench upon the lawful power of the police to investigate into cognizable offences. On the other hand, if the F.I.R. does not disclose the commission of a cognizable offence, the Court would be justified in quashing the investigation on the basis of the information as laid or received. There is no such thing like unfettered discretion in the realm of powers defined by statutes and indeed, unlimited discretion in that sphere can become a ruthless destroyer of personal freedom. The power to investigate into cognizable offences must, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember of the Lok Sabha, wrote a confidential letter to Shri Charan Singh, the then Deputy Prime Minister, complaining that the business of the firm was "a cover-up for a parallel banking system for black money". A copy of Shri Rodrigues' letter was forwarded by the Director, Department of Economic Affairs, Ministry of Finance, to the Chief Officer, Department of Non-Banking Companies, Reserve Bank of India, Calcutta, for inquiry. By his letter dated August 7, 1979 the Chief officer pointed out the difficulty in directing investigation into the affairs of the firm since, its capital being less than Rs. One lakh, it did not come within the definition of a Non- Banking institution as provided in section 54 (c) of the Reserve Bank of India Act, 1934. On September 13, 1980 the Deputy Secretary Finance Department Government of West Bengal, wrote a letter to the Chief Officer requesting him to examine the question whether the business of the firm came within the purview of the prize Chits and Money Circulation Schemes (Banning) Act, 1978 and if not, under which Act the affairs of the firm could be regulated. On October 1, 1980, Shri Ashok Mitra, Finance Minister for the State of West Beng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st at the rate of 48 per cent upto September 1979 and 36 per cent thereafter for a short period. The interest was paid to each depositor every month by the agents who called on each depositor personally for that purpose. The interest in excess of 12 per cent was invariably paid in cash. The on coming elections to legislative bodies in 1980 appear to have led to reduction in the rate of interest, since the firm's circulating capital was needed by "political parties". Which parties, I do not know, but this much is fairly certain from the facts which have emerged before us that the funds available to the firm were diverted frequently for the use of political parties. Certain lists of agents were seized during the investigation which show that Code numbers were assigned to at least 84 of them. The agents have acquired large properties at various places, consisting of lands, apartments, cars etc. Some of the agents have started new business activities. A staggering revelation which came to light as a result of the searches at the office of the firm is that, as of September 1, 1980, the firm was holding deposits to the tune of Rs. 73,51,23,000 (Rupees seventy-three crores, fifty-one la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not filed any income-tax return after the financial year ending June 30, 1977. It had asked for an extension of time on the ground that its accounts were not finalised but the Department rejected that prayer on December 9, 1980. With further indulgence they have managed cleverly to secure is not yet known. These facts disclose a bizzare state of affairs. A token capital of Rs 7,000 has begotten a wealth of crores of rupees within a span of five years. A bank account opened by the firm in a fictitious name had a sum of Rs. twenty-eight crores in it, which was withdrawn within a week before the lodging of the F.I.R. Interest was being paid to depositors at the incredible rate of 48 p.c. p.a. The firm had no ostensible source of income from which such exorbitant amounts could be paid and its account books, such as were seized from its head-office, give no clue to its income or its assets. The partners of the firm have become millionaires overnight. Clerks and Chemists that they and some of their agents were in 1975, to-day they own properties which will put a prince to shame. "Rags to riches" is how one may justly describe this story of quick and easy enrichment. There is no quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed by a learned single Judge of the Calcutta High Court. The facts material for the purpose of this appeal have been fully set out in the judgment of the learned single Judge of the Calcutta High Court. The facts material for the purpose of this appeal may, however, be briefly indicated : Sanchaita Investments is a partnership firm duly registered under the Indian Partnership Act. Sanchaita Investments (hereinafter referred to as the firm) has its principal place of business at Nos. 5 and 6 Fancy Lane, Calcutta. Shambhu Prasad Mukherjee, Bihari Lal Murarka and Swapan Kumar Guha are the three partners of the Firm. The capital of the partnership firm is Rs. 7,000/-. The firm carries on the business as financiers and investors and in its business the firm accepts loans or deposits from the general public for different periods repayable with interest @ 12% per annum. Under the terms of deposits, the depositors have a right to withdraw their deposits with the firm at any time before the expiry of the fixed period of the deposit. In case of premature withdrawal, the depositors however loses interest of 1% and is paid interest @ 11% per annum. Under the terms and conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on business in the trade name of 'Sanchaita Investments' in prize chits and money circulation scheme in violation of section 3 of the Prize Chits and Money Circulation Scheme (Banning) Act, 1976 are therefore, punishable under S. 4 of the said Act. Necessary action may, therefore, be kindly taken against the aforesaid offenders along with other accomplice as provided in the law. Yours faithfully Sd/- Illegible 13.12.1980 Commercial Tax Officer, Bureau of Investigation." On the 13th of December, two of the partners of the firm were arrested. The office of the firm and also the houses of the partners were searched. Various documents and papers were seized and a large amount of cash was also seized from the office and also from the residence of one of the partners. Two partners who were arrested were, however, thereafter enlarged on bail. The firm and its two partners, namely, Shambhu Prasad Mukherjee and Bihari Lal Murarka filed this writ petition in the High Court challenging the validity of the F.I.R. and the proceedings arising out of the same including the validity of the searches and seizure of documents, papers and cash. The respondents in the writ petition wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oy, Deputy Secretary, Finance Department and Ex-officio Director of Small Savings, Government of West Bengal, on behalf of Respondents No. 1 and 2, that is, the State of West Bengal and Shri B.K. Kundu, there is an assertion that the Respondents come within the mischief of the Act and they have violated S. 3 of the Act. The relevant averments are contained in paragraphs 6, 7, 8 and 9 of the said affidavit and it is necessary to set out the same in their entirety: "6. With reference to paragraphs 3 and 4 of the petition, I say that the petitioner firm accepts loans and/or deposits from all and sundry for varying periods without any authority of law. Although the professed rate of interest of such deposit is at the rate of 12% per annum, the petitioner firm was actually paying interest at the rate of 48% per annum, which was recently reduced to 36% per annum. The actual payment of such high rate of interest against the professed rate of 12% attracts huge amount of idle money into circulation and the investment of money as collected is not under the regulatory control of the Reserve Bank of India or any other agency of the State dealing with credit control in relation to the country's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terfuge to provide a cloak of bona fide and legality over the under-hand transactions through which unaccounted for money comes into play in the market generating further unaccounted for money, a part thereof goes back to the depositors in the form of the balance of interest over 12% paid in cash month by month. All allegations contrary to and save as aforesaid are denied. 8. With reference to paragraph 8 of the petition I say that the petitioners have been very much working on the above scheme to which the depositors have subscribed. Whether such deposits are one time deposits and whether such deposits actually earn income in excess of the interest actually paid to the depositors or a matter of detailed investigation, which were in progress until the same was stopped by the order of the learned Court of Appeal passed on 8th January, 1981. From whatever particulars are so far available to the answering respondents it can be stated that the firm did not have so much income as the quantum of interest that was being paid by it and the irresistible conclusion from such state of affairs is that payment of interest was being made out of capital itself. All allegations contrary to and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her stated that as a result of the searches effected a mass of documents and a large amount of cash had been seized and the documents were being scrutinised. In the affidavit affirmed by Shri Rani Annaji Rao, filed on behalf of Reserve Bank of India, the deponent has stated that the Reserve Bank of India which has no regulatory control over the firm has been unnecessarily made a party to the proceeding. It has been further stated in the said affidavit that as desired by the parties and the Court, the Reserve Bank of India was placing the materials which had come to the knowledge of the Reserve Bank. In this affidavit reference has been made to certain correspondence between the State Finance Minister, Union Finance Minister and the Deputy Governor of the Reserve Bank of India and also to various queries made and the enquiries made by the Reserve Bank of India. It has been further stated that the view of the legal department of the Reserve Bank on the basis of the enquiries made had Been indicated to the Finance Minister of the State of West Bengal. In this connection it will be relevant to set out two letters which have been annexed to the said affidavit filed on behalf of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence (copy enclosed) to the Reserve Bank of India regarding the applicability of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 to this organisation. With regards, Yours sincerely, Sd/- Ashok Mitra Shri R.V. Venkataraman, Union Minister for Finance, North Block, New Delhi-110001" Annexure is a letter by Shri K.S. Krishnaswamy, Deputy Governor of Reserve Bank to Dr. Ashok Mitra, State Finance Ministry. The said letter is also here further set out: D.O. DNBC No. 2020/102 (Gen) LO-80/81 22nd Oct., 1980 Sanchaita Investments My Dear Ashok, You might recall that during my recent visit to Calcutta, you had sent me a copy of your o. Letter dated October 1, 1980 to Shri Venkataraman, Union Minister for Finance as also of a letter dated September 30, 1980 addressed to our Chief Officer, DNBC, Calcutta, in connection with the above firm. I have had the position examined by our Legal Department. According to them (vide extract of the note dated 17th October, 1980, enclosed for your confidential information) the acceptance of loans simpliciter by the firm by issue of receipts (as per the specimen received by us from our Calcutta Office) without flo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not have on the basis of the said finding interfered with the investigation into the affairs of the firm. Mr. Chatterjee contends that the question of applicability of the Act will only come for consideration after the investigation has been completed and all relevant materials have been gathered on such investigation. It is the contention of Mr. Chatterjee that at the investigation stage, the Court does not interfere and does not quash any proceedings before the investigation has been completed. In support of this contention, Mr. Chatterjee has referred to a number of decisions of this Court. I shall consider the relevant decisions referred to by Mr. Chatterjee at the appropriate time. Mr. Chatterjee has submitted that after the investigation has been completed and all relevant materials have been gathered a charge under the Act may or may not be framed against the appellant firm for violation of the provisions of the Act. It is his submission that if the materials collected do not indicate any infringement of the Act, no charge against the firm will be preferred, and all the accused persons will be discharged; if, on the other hand, materials gathered disclose an offences un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in error therefore in interfering with the powers of the police in investigating into the offence which was alleged in the information sent to the officer incharge of the police station". In the case of State of Bihar and Anr. v. J.A.C. Saldhana and Ors., this Court at p. 39-40 observed: "The next contention is that the High Court was in error in exercising jurisdiction under Art. 226 at a stage when the Addl. Chief Judicial Magistrate who has jurisdiction to entertain and try the case has not passed upon the issues before him, by taking upon itself the appreciation of evidence involving facts about which there is an acrimonious dispute between the parties and given a clean bill to the suspects against whom the first information report was filed. By so directing the learned Addl. Chief Judicial Magistrate the judgment of the High Court virtually disposed of the case finally. As we are setting aside the judgment of the High Court with the result that the case would go back to the learned Additional Chief Judicial Magistrate, it would be imprudent for us to make any observation on facts involved in the case. There is a clear cut and well demarcated sphere of activity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce unfettered power to investigate all cases where they suspect that a cognizable person can always seek a remedy by invoking the power of the High Court under Art. 226 of the Constitution under which, if the High Court could be convinced that the power of investigation has been exercised by a police officer mala fide the High Court can always issue a writ of mandamus restraining the police officer from misusing his legal powers". Relying on these decisions and the principles enunciated therein, Mr. Chatterjee has argued that the learned Judge clearly erred in interfering with the investigation and quashing the proceedings at the stage of investigation before framing of charges against the accused persons. Mr. Chatterjee argues that there is no allegation of mala fide in the instant case and the learned Judge has also come to a conclusion that there is no case of any mala fide on the part of the appellants. Mr. Chatterjee has submitted that the materials which have been gathered as a result of the investigation which could be carried on only for a short while go to indicate that the transactions of the firm are not above board and they are not what they pretend or purport to be. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscription. Further investigation according to Mr. Chatterjee, can only show whether the scheme of making quick or easy money depends on any contingency relative in the enrollment of members into the scheme. Mr. Chatterjee submits that the question of proper interpretation of the provisions of the Act and also of what money circulation scheme means, should come up only after investigation has been completed and all relevant materials have been collected. It is Mr. Chatterjee's submission that the interpretation of the provisions of the Act aud particularly what 'Money Circulation Scheme' means, is not to be made in a hypothetical way in the absence of relevant materials being gathered on completion of investigation. Mr. Chatterjee has argued that after all the materials have been collected on completion of the investigation, it may be that materials may show that the firm is not conducting a Money Circulation Scheme and no charge against the firm may at all be preferred; if however, on the other hand, the materials, indicate that the firm is conducting a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the Court to interfere with any investigation which is improperly and illegally carried on to the serious prejudice of the persons. In support of this contention Mr. Sen has referred to the decision of the Judicial Committee in the case of King Emperor v. Khwaja Nazir Ahmed (supra) and has relied on the following observations at p. 213: "No doubt, if no cognizable offence is disclosed and still more, if no offence of any kind is disclosed, the police would have no authority to undertake investigation. In this connection, Mr. Sen also referred to the decision of this Court in the case of R.P. Kapur v. State of Punjab and has placed very strong reliance on the following observations at p. 393: "Cases may also arise where the allegations in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged is disclosed or not. In such cases it would be legitimate for the High Court to hold that it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the firm is conducting a money circulation scheme, it is necessary to consider what a money circulation scheme is within the meaning of the Act and to find out whether on the materials alleged in the F.I.R.. and also in the affidavits, it can be said that the business carried on by the firm is one in the nature of conducting a money circulation scheme. Mr. Sen has argued that the learned Judge in his judgment has correctly interpreted what constitutes 'money circulation scheme' within the meaning of the Act, and it is the argument of Mr. Sen that such interpretation is absolutely essential to find out whether the allegations made in the F.I.R. make out a case that the firm is conducting a money circulation scheme. Mr. Sen submits that the materials on record including the allegations made in the F.I.R. even if they are all assumed to be correct, do not go to show that the firm is conducting a money circulation scheme; and, in that view of the matter there can be no investigation, if no offence under the Act is disclosed. Analysiag the F.I.R. and the other materials which have been placed before the Court, Mr. Sen submits that the materials go to indicate-(1) that the firm i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iption". According to Mr. Sen, the essential requirements of a money circulation scheme are (1) There must be a scheme for the making of quick or easy money on any event of contingency relative or applicable to the enrollment of members into the scheme whether or not such money is derived from the entrance money of the members of such scheme or periodical subscription; or (2) there must be a scheme for the receipt of any money or valuable thing as the consideration for promise to pay money on any event or contingency relative or applicable to the enrollment of members into a scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or from periodical subscription. Mr. Sen submits that neither F.I.R. nor any of the other materials go to show that the business carried on by the firm is, in any way, in the nature of conducting or promoting a money circulation scheme. In this connection Mr. Sen has drawn our attention to the statement of objects for the passing of this enactment. Mr. Sen has further submitted that this enactment which is in the nature of penal one has to be construed in the event of doubt or ambiguity in a manner benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o followed Mr. Sen mainly adopted the submissions made by Mr. Sen. Mr. Ray, further contended that to be a chit fund or to be a money circulation scheme, an element of uncertainty or luck is essential. It is the argument of Mr. Ray that in so far as the transactions carried on by the firm in the instant case are concerned, the said element is no where there. Mr. Ray, in this connection referred to the definition of conventional chit and has argued that the conventional chits have not been brought within the purview of this Act. Mr. Ray has drawn our attention to the decision of this Court in the case of Srinivasa Enterprises v. Union of India in which the validity of the Act came to be challenged in this Court and was upheld by this Court. The appeal before us has been argued at great length. A number of decisions have also been cited from the Bar. I have already referred to some of the decisions which were cited before us. I do not propose to consider all the case which were referred to in the course of argument by the learned counsel appearing on behalf of the parties as I do not consider the same to be necessary. As I have already stated that the matter appears to have been el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be brought to book and must be punished for the same. If the Court interferes with the proper investigation in a case where an offence has been disclosed, the offence will go unpunished to the serious deteriment of the welfare of the society and the cause of the justice suffers. It is on the basis of this principle that the Court normally does not interfere with the investigation of a case where an offence has been disclosed. The decision on which Mr. Chatterjee has relied are based on this sound principle, and in all these cases, an offence had been disclosed. Relying on the well- settled and sound principle that the Court should not interfere with an investigation into an offence at the stage of investigation and should allow the investigation to be completed, this Court had made the observations in the said decisions which I have earlier quoted reiterating and reaffirming the sound principles of justice. The decisions relied on by Mr. Chatterjee, do not lay down, as it cannot possibly be laid down as a broad proposition of law, that an investigation must necessarily be permitted to continue and will not be prevented by the Court at the stage of investigation even if no of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and disclose any offence under the Act. The materials are mainly contained in the F.I.R. which has been earlier set out in its entirety. An analysis of the F.I.R. mentions the following allegations on the basis of which the said F.I.R. has been lodged: - 1. Sanchaita Investments is a partnership Firm. Its partners are Behari Prasad Murarka, Sri Sambhu Mukherjee and Sri Swapan Kumar Guha The firm was started in and around 1975. 2. The Firm had been offering fabulous interest @ 48% to its members until very recently. The rate of interest has of late been reduced to 36% per annum. 3. Such high rate of interest were and are being paid even though the loan certificate receipts show rate of interest to be 12% only. 4. Thus, the amount in excess of 12% so paid clearly shows that 'Money Circulation Scheme' is being promoted and conducted for the making of quick and/or easy money, prizes and/or gifts 5. Prizes or gifts in cash are also being awarded to agents promoters and members too. 6. In view of the above, Sarvshri Behari Prasad Murarka, Sambhu Mukherjee and Swapan Kumar Guha appears to have been carrying on the business in the trade name of 'Sanchaita Investments' in priz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he efficacy of the monetary and credit policies of the country and affording a degree of protection to the interests of the depositors who place their savings with such companies. Paragraph 2 of the Statement of objects and Reasons of the Act states: "Prize chits would cover any kind of arrangement under which moneys are collected by way of subscriptions, contributions, etc. and prizes, gifts, are awarded. The prize chit is really a form of lottery. Its basic feature is that the foreman or promoter who ostensibly charges no commission collects regular subscriptions from the members. Once a member gets the prize, he is very often not required to pay further instalments and his name is dropped from further lots. The institutions conducting prize chits are private limited companies with a very low capital base contributed by the promoters, directors or their close relatives. Such schemes confer monetary benefit only on a few members and on the promoter companies. The Group had, therefore, recommended that prize chits or money circulation schemes, by whatever name called, should be totally banned in the larger interests of the public and suitable legislative measures should be undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such scheme or arrangement; (ii) refunding to the subscribers or such of them as have not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected with or without any bonus, premium, interest or other advantage by whatever name called, on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit. A Conventional Chit which is specifically excluded in the definition of prize chits in S. 2 (c) (ii) is defined in S. 2 (a) as follows - "Conventional Chit" means a transaction whether called chit, chit fund, kuri or by any other name by or under which a person responsible for the conduct of the chit enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or certain quantity of grain instead) by way of periodical instalments for a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be provided for in the chit agreement, be entitled to a prize amount". S. 3 of the Act the violation of which alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for:- (a) the office of the Reserve Bank to whom full information regarding any prize chit or money circulation scheme may be furnished under the first proviso to sub section (1) of Section 12, and the form in which and the period within which such information may be furnished; (b) the particulars relating to the winding up plan of the business relating to prize chits or money circulation schemes." The complaint alleges violation of S. 3 of the Act. In other words, the complaint is that the firm is promoting or conducting a prize chit or a money circulation scheme. The definition of prize chit has been earlier set out. I have also earlier analysed the F.I.R. and the other materials on the basis of which the complaint is made and the materials which have been placed before the Court. The materials do not indicate any thing to disclose that the firm is promoting or conducting any prize chit. I may also here note that no arguments have been advanced on behalf of the appellants that the firm is promoting or conducting any prize chit; and in my opinion, ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans any scheme for the receipt of any money or valuable thing as the consideration for the promise to pay money. Taking into consideration the language used in the section and particularly the two commas, one after the words "easy money" and the other after the words "pay money", it becomes clear that this stipulation is intended to cover both; and the interpretation contended for by Mr. Chatterjee that the further provision in the definition namely, "on any event or contingency relative or applicable to the enrollment of members into the scheme, whether or not such money or thing is derived from entrance money of such scheme or periodical subscription" applies only to the second part, namely, money circulation scheme 'means any scheme, by whatever name called, for the receipt of any money or valuable thing as the consideration for a promise to pay money, is not sound '. On this interpretation, of Mr. Chatterjee, the provision in the definition, namely, 'money circulation scheme means any scheme by whatever Dame called for the making of quick or easy money' will indeed become vague and meaningless. For properly appreciating whether the offence of promoting or conducting a money cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme' has not been defined in the Act. The word 'scheme', however, has been defined in the Rules, in cl. 2 (g) thereof. Cl. 2 (g) of the Rules state that a "scheme means a money circulation scheme or as the case may be a prize chit as defined in cl. (c) and (e) respectively of s. 2". The word 'scheme' as contemplated in S. 2 (c) of the Act is therefore, to be money circulation scheme within the meaning of the Act. To be a money circulation scheme, a scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrollment of the members into the scheme. The scheme has necessarily to be judged as a whole both from the view point of the promoters and also of the members. Even if it be assumed that the firm may be considered to be the promoter and the persons who invest their monies in the firm are members, the question has still to be considered whether investments of the monies with the firm in expectation of getting interest @ 48% and a big part of it in black in clandestine manner, can be said from the view point of the depositors that the investment is for the making of quick or easy money. If any individual invests is money in expec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of interest to the depositors in a clandestine manner. The clandestine manner of payment of interest in excess of the stipulated rate does not, in any way, indicate the existence of any scheme for making quick or easy money. It is again to be pointed out that in any event the mate rials do not indicate that the payment of interest by the firm in excess of the stipulated rate is in any way dependent on any event or contingency. There is nothing to indicate any scheme for the receipt of the money by the firm from its depositors as a consideration for promise to pay the interest in excess of the stipulated rate and also to pay back principal amount on the expiry of the term dependent in any way on any event or contingency relative or applicable to the enrollment of new depositors, considering the depositors to be members. I am, therefore, of the opinion, that not any, of the requirements of a money circulation scheme is satisfied in the instant case. As there is no money circulation scheme, there can be no scheme as contemplated in the Act in view of the definition of scheme in the Rules. The materials, appear to disclose violation of revenue laws. They, however, do not disclose a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eople change. the prospect by subscribing to the speculative scheme only to lose what they had. Can you save moths from the fire except by putting out the fatal flow ? Once this prize facet of the chit scheme is given up, it becomes substantially a 'conventional chit' and the ban of the law ceases to operate. We are unable to persuade ourselves that the State is wrong in its assertion, based upon expert opinions that a complete ban of prize chits is an overall or excessive blow. Therefore, we decline to strike down the legislation on the score of Article 19 (1) (f ) and (g) of the Constitution." As I have earlier noticed the materials in the instant case do not disclose any element of chance in the matter of business carried on by the firm. It may however, be said that these observations which were made while dealing with a case of chit fund are not of very great assistance while considering what may be a money circulation scheme within the meaning of the Act. As no offence under the Act is at all disclosed, it will be manifestly unjust to allow the process of criminal code to be issued or continued against the firm and to allow any investigation which will be clearly without a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
