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TMI Blog2008 (7) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... ne unit of lotteries from the promoters. The promoters will make use of ₹ 350/- to purchase 35 lottery tickets of the Kerala State Government each of ₹ 10/- for the unit holder for the next 35 weeks. If the unit holder wins any prize up to ₹ 5,000/- in the 35 draws, the promoters shall collect the amount and pay the same to the unit holder. If the unit holder wins any prize above ₹ 5,000/-, the ticket shall be handed over to the unit holder for collection of the amount. The balance of ₹ 275/- (₹ 625 - ₹ 350) will be used to make the unit holder a subscriber of a magazine by name `Thrikalam' for one year. The said magazine would reproduce relevant and important materials from other magazines. It would also furnish necessary information about the lottery tickets which have won prizes. 5. The unit holder will be returned (paid) not only ₹ 625/- which he had initially invested, but twice his investment i.e. ₹ 1,250/- (less ₹ 100/- as service charges for the promoters and legal deduction for tax, etc.) on an early date. As per the scheme, on sale of three tickets of ₹ 10/- each, the Government would pay commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores. Amounts were being paid to the unit holders initially very promptly--on many occasions even before the expiry of 35 weeks. More and more subscribers joined the queue. There was aggressive publicity and marketing through visual (TV) and printed media (pamphlets and newspapers). The scheme was proceeding very happily. More and more amounts were coming into the kitty of the promoters from unit holders. 7. Suddenly, however, there was a jolt to the scheme. Police Authorities registered a crime against the promoters for an offence punishable under Section 420 of Indian Penal Code (IPC), under the Prize, Chits & Money Circulation Scheme (Banning) Act, 1978 (hereinafter referred to as `the Act') and also under the Reserve Bank of India Act, 1934. Certain proceedings were initiated even earlier with which we are not concerned in the present proceedings. The learned Chief Judicial Magistrate, Ernakulam by an order, dated November 14, 2006, framed charge against the appellants herein for offences punishable under Section 420 read with Section 34, IPC and under Sections 4 and 5 read with Section 2(c) and 3 of the Act. He, however, discharged all the accused for the offences pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22, 2008, the matters were ordered to be posted for final hearing on a non-miscellaneous day. That is how they are before us. 13. We have heard learned counsel for the parties. 14. The learned counsel for the appellants submitted that the trial Court and the High Court were right in discharging the accused for certain offences punishable under the Act and also under the Reserve Bank of India Act, 1934. The State has not preferred appeal against the said order and the decision has become final. He, however, contended that both the Courts were wrong in not discharging the accused for offences punishable under Sections 4 and 5 read with Sections 2(c) and 3 of the Act as also for an offence punishable under Section 420 read with Section 34, IPC. 15. It was submitted that the scheme formulated by the appellants could not fall within the mischief of `Money Circulation Scheme' as defined in clause (c) of Section 2 of the Act. If it is so, ban envisaged by Section 3 would not apply. Consequently, penal provisions of Sections 4 and 5 cannot be invoked. The Courts below were wrong in observing that prima facie, the provisions of the Act got attracted and appellants could not be dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment, 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 subscriptions; 21. Section 3 bans money circulation schemes or enrolment as member to any such scheme or participation in such scheme. Sections 4 and 5 are penal provisions and prescribe punishment. Section 6 deals with offences committed by Companies. Section 7 authorizes Police Officer not below the rank of officer in charge of a police station to exercise power to enter and search premises and to seize things used for such scheme. Section 8 provides for forfeiture of newspaper and publication containing money circulation scheme. Section 9 declares that no Court inferior to the Court of Chief Metropolitan Magistrate or Chief Judicial Magistrate shall try any offence punishable under the Act. All offences punishable under the Act have been made cognizable under Section 10. Section 11 grants exemption from the operation of the Act to certain money circulation schemes. 22. From the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for example, the builders and real estate brokers. I cannot accept that the provisions of Clause (c) are directed against any of these categories of persons. I do not suggest that law is powerless to reach easy or quick money and if it wills to reach it, it can find a way to do it. But the point of the matter is that it will verge upon the ludicrous to say that the weapon devised by law to ban the making of quick or easy money is the provision contained in Section 2 (c) of the Prize Chits and Money Circulation Schemes (Banning) Act". 24. Explaining the ambit and scope of the expression `Money Circulation Scheme', the Court proceeded to state; "In order to give meaning and content to the definition of the expression 'money circulation scheme' which is contained in Section 2(c) of the Act, one has, therefore, to look perforce to the adjectival Clause which qualifies the words "for the making of quick or easy money". What is within the mischief of the Act is not "any scheme, by whatever name called, for the making of quick or easy money" simpliciter, but a scheme for the making of quick or easy money, "on any event or continge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits with the other or lends to that other a sum of money on promise of being paid interest at a rate higher than the agreed rate of interest cannot, without more, be a 'money circulation scheme' within the meaning of Section 2(c) of the Act, howsoever high the promised rate of interest may be in comparison with the agreed rate. What that section requires is that such reciprocal promises, express or implied, must depend for their performance on the happening of an event or contingency relative or applicable to the enrolment of members into the scheme. In other words, there has to be a community of interest in the happening of such event or contingency". (emphasis supplied) 27. On the facts of the case, the Court held that it was not a `Money Circulation Scheme' and proceedings initiated against the accused were liable to be dropped. 28. Strongly relying on Swapan Kumar Guha and the observations of this Court, the learned counsel for the appellants contended that the point is directly covered by the said decision and the Courts below were not right in distinguishing it and in not discharging the accused. 29. We are unable to uphold the contention. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtered accountant and other professionals who charge likewise. There are many other vocations and business activities in which people notoriously make quick money, e.g. builders and real estate brokers. From that, however, one cannot jump to the conclusion that they are all liable to be punished under Sections 4 and 5 of the Act. 31. The Court also took into account, apart from FIR, a detailed affidavit in reply filed in the High Court. Even in the said affidavit, there was no clear basis in respect of allegations, nor material was disclosed to show that prima facie, the firm was promoting or conducting a scheme for making quick or easy money which was dependent on any event or contingency relative or applicable to the enrolment of members into the scheme. The `song' of the State was that the scheme conducted by the accused would generate black money and would paralyze economy of the country. The Court was conscious and alive of seriousness of the problem and observed that unquestionably a private party could not be allowed to issue `bearer bonds' by a back door. At the same time, however, such activities should be curbed by the Government by taking appropriate action in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that payment of money must be dependent on an event or contingency relative or applicable to the enrolment of more persons into the scheme, nothing more, though nothing less. In the present case, the second ingredient is very much present. 34. It was then contended by the learned counsel for the appellants that in the present case, all the promises have been fulfilled by the promoters and contract was complete inasmuch as for payment of ₹ 625/- by the unit holder, he was given 35 lottery tickets each of ₹ 10/- and thus an amount of ₹ 350/- gets appropriated. Likewise, for the balance amount of ₹ 275/- (₹ 625/- - ₹ 350/-), he has been made subscriber of a magazine `Thrikalam' for one year. Nothing, therefore, remains to be done thereafter by the promoters except the benefit which is likely to accrue in future. Such a scheme cannot be termed as a scheme for the making quick or easy money on any event or contingency relative or applicable to the enrolment of the members of the scheme. 35. We are unable to agree with the learned counsel. The Courts below rightly held that prima facie case had been made out against the accused. Both the ing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he member, the membership is ceased, and no more ticket or Thrikalam will be given to him, even if the promised 35 tickets and one year Thrikalam are not yet over. 8. To justify this stand of ours, though the ₹ 1150 paid is actually the commission, we term it as Refund and Commission so that the member shall not make any claim for the remaining tickets or Thrikalam. 9. If the member wish to get lottery ticket and Thrikalam again he has to join again by taking new membership. 10. The lottery commission available to us on Kerala Government Lottery is 28% alone. As the commission we are paying to the member is 27%, the margin for us is only 1%. But then there will be a lot of other commissions on prizes bagged by the members which will add to our gain. 11. At the beginning, we offered the Superlotto and Thunderball online tickets also. But we stopped that since 2 months and now we are issuing only Kerala Govt. tickets. By October end, we will be purchasing a minimum of 1 lakh tickets every week i.e. 10 lakh rupees worth tickets in a week from Kerala Government. 37. The High Court also upheld the argument of the prosecution that the scheme was a `mathematical imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assume that the offence of cheating would not lie if the persons deceived are gullible, unintelligent and stupid persons. The system and the law has a duty to protect such victims of crime also. According to me, there is no reason to assume that the promoters had no contumacious intention and they embarked on the venture without any culpable motive on the honest assumption that the tickets sold through them will win prizes and sufficient commission will be available to pay double the amount to all the unit holders". 39. The Court also stated; "I take note of the fact that inherently there is merit in the allegation of the prosecution that the Scheme is so grossly unworkable that the persons who made representations to that effect and induced persons to part with money did entertain the contumacious intention. They knew fully well that unworkable false representations were being made. The obvious attempt, it can be presumed at this stage, was to induce persons by such false unworkable representations to part with money. Initially some subscribers can be kept satisfied to induce them and others similarly placed to join the long queue. But inevitably and inescapab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was aware that the representation was not true and by such representation, he deceived the victim to believe the representation to be true and actuated him to act on such representation. The promoters induced common public to part with money on the lure of doubling the amount. Prima facie, the Courts were satisfied that but for such representation and the benefit sought to be given under the scheme, the victims would not have acted on such representation. It was, therefore, a case of application of Section 415, IPC. Prima facie case had been made out in absence of better explanation by the accused. If it is so, it could be said to be a case for application of Section 420 read with Section 34, IPC, of course, at this stage. 46. In our opinion, the Courts below have not committed any error in coming to such conclusion at the stage of framing of charge and no interference by this Court is, therefore, called for. 47. For the foregoing reasons, in our opinion, both the Courts below were right in framing the charge against the appellants and no illegality has been committed by them in coming to such conclusion. It is no doubt, true, that the above orders do not mean that the accused ..... X X X X Extracts X X X X X X X X Extracts X X X X
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