Lottery character of chit schemes can arise where a prize by lot is part of the bargain, with restitution still available to less-guilty subscribers.

A prize kuri or chit scheme was treated as a lottery because payment of subscriptions bought a chance of winning an earlier prize by lot, and the assurance of eventual return of principal did not change that character; the promoters were therefore liable under the penal provision against lotteries. A subscribing purchaser who did not organise or control the scheme was not in pari delicto with the promoters, so restitution of the subscriptions was allowed under the protective principle reflected in the Trusts Act. The regulations did not limit liability to the scheme fund alone, so the promoters were personally liable to refund the amount, and the refund decree was sustained.

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Issues: (i) whether the prize kuri/chit scheme constituted a lottery and, if so, whether the promoters committed offences under Section 294-A of the Indian Penal Code; (ii) whether the subscribing plaintiff, being a purchaser of tickets, was in pari delicto so as to be disentitled from recovering the subscriptions paid; (iii) whether the promoters were personally liable to refund the money.

Issue (i): whether the prize kuri/chit scheme constituted a lottery and, if so, whether the promoters committed offences under Section 294-A of the Indian Penal Code

Analysis: The scheme involved payment of subscriptions in return for a chance of obtaining an earlier prize by lot, and the chance of winning formed part of the bargain. The fact that subscribers were assured eventual return of the principal, or that prizes were paid out of interest or other receipts, did not negative the lottery character of the arrangement. The regulations and the actual working of the scheme also showed repeated drawings at the temple premises and circulation of the scheme proposals, bringing the promoters within the mischief of the provision.

Conclusion: The scheme was a lottery, and the promoters were liable under Section 294-A of the Indian Penal Code.

Issue (ii): whether the subscribing plaintiff, being a purchaser of tickets, was in pari delicto so as to be disentitled from recovering the subscriptions paid

Analysis: The provision against unauthorised lotteries was treated as one enacted to protect the class of persons tempted to subscribe to such schemes. The plaintiff did not organise or control the lottery, did not abet the publication or keeping of the place for the draw, and stood in a materially less guilty position than the promoters. In those circumstances, the rule of in pari delicto did not bar restitution, and Section 84 of the Indian Trusts Act supported recovery by a transferor who was not as guilty as the transferee.

Conclusion: The plaintiff was not in pari delicto and was entitled to recover the subscriptions.

Issue (iii): whether the promoters were personally liable to refund the money

Analysis: The regulations did not exclude personal liability; they only provided additional security by making the kuri property liable in default. The promoters managed the scheme and held the money for its due appropriation, so their liability was not confined to the fund itself.

Conclusion: The promoters were personally liable to refund the amount claimed.

Final Conclusion: The civil revision petition failed, and the decree directing refund of the subscriptions was sustained.

Ratio Decidendi: A scheme is a lottery when the chance of obtaining a prize by lot is part of the bargain, even though subscribers may eventually recover their principal, and subscribers to an unauthorised lottery who are not as guilty as the promoters may recover their money under the protective principle embodied in Section 84 of the Indian Trusts Act.

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