Lottery-based donation scheme held illegal where chance determined benefits and the company's substratum was destroyed.

A donation-certificate scheme that offered interest-free loans and later cash bonuses through drawings was treated as a lottery because the benefit depended on chance rather than skill. The court held that the scheme's charitable or investment features did not change its character, since the lottery element was integral to the business and not merely incidental. As the arrangement fell within the mischief of section 294-A of the Indian Penal Code, the illegal feature destroyed the company's substratum, and compulsory winding up was justified. The appeal accordingly failed.

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Issues: Whether the company's donation-certificate scheme, including the interest-free loan and later cash-bonus variants, constituted a lottery within the meaning of section 294-A of the Indian Penal Code and justified compulsory winding up of the company.

Analysis: The scheme conferred benefits on certificate holders by drawings, so the chance of obtaining loans or cash bonuses depended on luck and not on skill. The charitable character of part of the company's objects did not alter the nature of the transaction, because the lottery feature was an integral part of the business and not a collateral incident. Since section 294-A of the Indian Penal Code prohibits keeping an office or place for drawing an unauthorised lottery and publishing such a scheme, the arrangement fell within the mischief of the provision. Once the objectionable lottery feature was removed, the substratum of the company disappeared.

Conclusion: The scheme was a lottery and was illegal under section 294-A of the Indian Penal Code; compulsory winding up was justified, and the appeal failed.

Ratio Decidendi: A scheme under which subscribers obtain prizes or benefits by chance, even if linked to a charitable or investment structure, is a lottery if chance determines the winning of the benefit, and if such lottery is an integral part of the business, the company may be compulsorily wound up when its substratum is destroyed.

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