TaxTMI 
TaxTMI 
1982 (2) TMI 301
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....Mukherjee and Beharilal Murarka. The two Matters in the Calcutta High Court were in the nature of writ petitions under article 226 of the Constitution which were filed by the firm and its partners for quashing an investigation commenced against the firm. Allowing the writ petitions, the High Court issued a writ of Mandamus directing the State Government and its concerned officers to "forthwith recall, cancel and withdrew the First Information Report .. and all proceedings taken on the basis thereof", since the searches, seizures and arrests made in pursuance of the said F.I.R. are, according to the High Court, illegal and without jurisdiction. It has directed that the books, documents and moneys seized during the search be returned to the firm and its partners, including a sum of Rs. 52,11,930. The short question for consideration in these appeals by special leave is whether the F.I.R.. Lodged by the commercial Tax officer,Bureau of Investigation, against the firm and its partners discloses an offence under section 3 of "The Prize Chits and Money Circulation Schemes (Banning) Act", 43 of 1978. The Act, which was passed by the Parliament, came into force on December 13, 1978 and the....
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.... with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both, provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees. Though the F.I.R. is riddled with the "and/or" clauses more appropriate in deeds of conveyancing, it is clear firm its tenor and is common ground that the gravamen of the accusation against the accused is that they are conducting a 'money circulation scheme'. The reference in the F.I.R. to 'prize chits' rejects but a common human failing to err on the safe side and the notorious effort of draftsmen to embrace as much as possible so that no argument may be shut out for want of pleading. Since the sole question for consideration arising out of the F.I.R., as laid, is whether the accused are conducting a money circulation scheme, it is necessary to understand what is comprehended within the statutory meaning of that expression. Section 2(c) of the Act provides: " 'Money circulation scheme' means any scheme, by whatever name ....
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....to it. One need not travel after to find speaking examples of this. Indeed, there are honourable men (and now women) in all professions recognised traditionally as noble, who make quite quick money by the use of their talents, acumen and experience acquired over the years by dint of hard work and industry. A lawyer who charges a thousand rupees for a Special Leave Petition lasting five minutes (that is as far as a Judge's imagination can go), a doctor who charges a couple of thousands for an operation of tonsillitis lasting ten minutes, an engineer, an architect, a chartered accountant and other professionals who charge likewise, cannot by any stretch of imagination be brought into the dragnet of clause (c) Similarly, there are many other vocations and business activities in which, of late, people have been notoriously making quick money as, for example, the builders and real estate brokers. I cannot accept that the provisions of clause (c) are directed against any of these J 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 lu....
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.... the definition without doing violence to its language and indeed, without even so much as altering a comma. There is another aspect of the matter which needs to be underscored, with a view to avoiding fruitless litigation in future. Besides the prize chits, what the Act aims at banning is money circulation schemes. It is manifestly necessary and indeed, to say so is to state the obvious, that the activity charged as falling within the mischief of the Act must be shown to be a part of a scheme for making quick or easy money, dependent upon the happening or non- happening of any event or contingency relative or applicable to the enrollment of members into that scheme. A 'scheme,' according to the dictionary meaning of that word, is 'a carefully arranged and systematic program of action', a 'systematic plan for attaining some object', 'a project'. 'a system of correlated things'. (see Webster's New World Dictionary, and Shorter oxford English Dictionary, Vol. II), The Systematic programme of action has to be a consensual arrangement between two or more persons under which, the subscriber agrees to advance or lend money on promise of being paid more money on the happening of any event....
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....e question as to whether the First Information Report prima facie discloses an offence under section 4 read with section 3 of the Act has to be decided in the light of these requirements of section 2 (c) of the Act. I have already reproduced in extenso the F.I.R. Lodged by the Commercial Tax officer, Bureau of Investigation. Analysing-it carefully, and even liberally, it makes the following allegations against the firm 'Sanchaita Investments' and its three partners: (1) The firm had been offering fabulous interest (48% per annum to its members, which rate of interest was later reduced to 36% per annum; (2) Such high rate of interest was being paid even though the loan certificate receipts show that interest was liable to be paid at the rate of 12% per annum only; and (3) The fact that interest was paid in excess of 12% shows clearly that a 'Money Circulation Scheme' was being promoted and conducted for the making of quick or easy money. It seems to me impossible to hold on the basis of these allegations that any offence can be said to be made out prima facie under section 3 of the Act. In the first place, the F.I.R. does not allege, directly or indirectly, that the firm....
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....e firm and its depositors is founded on the fraudulent device to assure to the people a high rate of interest, the major portion of which is paid through unaccounted for money, thereby encouraging the growth of such unaccounted money in the hands of the investing public; (vi) The professed rate of interest is a mere subterfuge to provide a cloak of bona fides and legality to the under hand transactions, through which unaccounted for money comes into play in the market generating further unaccounted for money, a part whereof goes back to the depositors in the form of the balance of interest over 12% paid in cash, month by month; (vii) The firm did not have enough income or resources so as to be able to pay interest at such high rates; (viii) The irresistible conclusion, therefore, is that interest was being paid out of the capital itself; (ix) "The depositor becomes a member of the investment scheme of the firm by subscribing to it and the payment of the 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....
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....bscribing to it. There is no allegation even in any of the affidavits filed on behalf of the State of West Bengal and its concerned officers that the depositors and the promoters are animated by a community of interest in the matter of the scheme being dependent upon any event or contingency relative or applicable to the enrollment of members into it. That being an essential ingredient of the offence charged, it cannot be said in the absence of any allegation whatsoever in that behalf, that there is "reason to suspect" the commission of that offence within the meaning of section 157 of the Code of Criminal Procedure, so as to justify the investigation undertaken by the State authorities. My learned Brother, A.N. Sen J., has considered exhaustively the various authorities cited at the Bar by both the sides on the question as to the power of the courts to quash an investigation. I fully concur with his careful analysis of those authorities and would content myself with a broad indication of the trend of law bearing on the subject. Shri Ashok Sen and Shri Siddhartha Shankar Ray pressed upon us with considerable insistence the principle reiterated in W.H. King v. Republic of India, ....
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....es, said the Court, it would be legitimate for the High Court to hold that it would be manifestly unjust to allow the process of the criminal court to be issued against the accused. In S.N. Sharma v. Bipen Kumar Tiwari, a first information report was lodged naming an Additional District Magistrate (Judicial) as the principal accused. His application under section 159 of the Criminal Procedure Code asking that the Judicial Magistrate should himself conduct a preliminary inquiry was dismissed, but the Court observed that though the Code of Criminal Procedure gives to the police unfettered power to investigate all cases where they suspect that a cognizable offence has been committed, in appropriate cases, an aggrieved person can always seek a remedy by invoking the power of the High Court under Art. 226 of the Constitution and that the High Court could issue a writ of mandamus restraining the police from misusing their legal powers. Shri Som Nath Chatterjee has placed great reliance on the decision of this Court in State of West Bengal v. S.N. Basak, in which it was held that the statutory powers given to the police under sections 154 and 156 of the Code of Criminal Procedure to in....
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....d, as their Lordships think, be an unfortunate result if it should be held possible to interfere with those statutory rights by an exercise of the inherent jurisdiction of the court. The functions of the judiciary and the police are complementary, not overlapping, and the combination of individual liberty with a due observance of law and order is only to be obtained by leaving each to exercise its own function, always, of course, subject to the right of the court to intervene in an appropriate case when moved under section 491 of the Criminal procedure Code to give directions in the nature of habeas corpus. In such a case as the present, however, the court's functions begin when a charge is preferred before it, and not until then.' (pp. 212-213) I do not think that this decision supports the wide proposition canvassed before us by Shri Som Nath Chatterjee. In the case before the Privy Council, similar charges which were levelled against the accused in an earlier prosecution were dismissed. The High Court quashed the investigation into fresh charges after examining the previous record, on the basis of which it came to the conclusion that the evidence against the accused was unacc....
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....e offences must, therefore, be exercised strictly on the condition on which it is granted by the Code. I may, in this behalf, usefully draw attention to the warning uttered by Mathew J. in his majority judgment in Prabhu Dayal Deorah v. The District Magistrate, Kamrup to the following effect: "We say, and we think it is necessary to repeat, that the gravity of the evil to the community resulting from anti-social activities can never furnish an adequate reason for invading the personal liberty of a citizen, except in accordance with the procedure established by the Constitution and the laws. The history of personal liberty is largely the history of insistence on observance of procedure. Observance of procedure has been the bastion against wanton assaults on personal liberty over the years. Under our Constitution, the only guarantee of personal liberty for a person is that he shall not be deprived of it except in accordance with the procedure established by Law." For these reasons, which, frankly, are no different from those given by my learned Brother A.N. Sen, I am of the opinion that the investigation which has been commenced upon the First Information Report is without juri....
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....or the State of West Bengal, wrote a letter to Shri Venkataraman, Finance Minister to the Government of India, complaining that the firm was involved in high-risk investments and that large amounts of public moneys were kept in deposit with the firm, which were not subjected to any regulatory control. The letter of Shri Ashok Mitra appears to have been handed over informally to Dr. K.S. Krishnaswamy, Deputy Governor of the Reserve Bank, who, by his reply dated October 22, 1980, informed Shri Mitra that the legal department of the Reserve Bank was of the opinion that the mere acceptance of loans by the firm would not ordinarily be covered by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. There was further correspondence on the subject between the authorities of the Government of India and the State Government, but nothing came out of it. The Act came into force on December 13, 1978 and immediately on the expiry of the two years' period of grace allowed by it, the F.I.R. was lodged against the firm on December 13, 1980. On that day, the office of the firm at 5-6, Fancy Lane, Calcutta, was searched by the police, during the course of which a sum of Rs. 42,16,530....
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....eventy-three crores, fifty-one lacks, twenty-three thousand and five hundred). These deposits were received by the firm from persons drawn from all parts of the country, the pride of place belonging to Calcutta, Bombay, Delhi, Madras and Hyderabad. Remittances also appear to have been received by the firm from overseas clients. A compilation prepared by the State authorities in pursuance of an interim order passed by this Court shows that the total amount of deposits made by persons who had deposited a sum of Rs. 10,000 or less each comes to Rs. 11,49,40,950 (Rupees eleven crores, forty-nine lacs, forty- thousand, nine hundred and fifty). The documents relating to the account in the fictitious name of "Apcar Ave Toon" show that a person alleged to bear that name was introduced to the Syndicate Bank, Gariahat Branch, Calcutta by the firm's partner Sambhu Prasad Mukherjee. The pass-book relating to the account (Current Account No. 210) shows that the account was opened with a cash deposit of Rs. 28 lacs. A total sum of Rupees twenty seven crores, ninety seven lacs eighty six thousand and odd was deposited in that account until December 6,1980, all deposits being in cash. Such cash....
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....and easy enrichment. There is no question that this vast wealth has been acquired by the firm by generating and circulating black money. Indeed, rightly did Shri Ashok Sen appearing for the firm, ask us to be free to proceed on the assumption that the exorbitant amount of interest was being Paid from out of unaccounted money. In these circumstances though I see no alternative save to stop all further investigation on the basis of the F.I.R. as laid, no offence being disclosed by it under section 4 of the Act, I am unable to accept the contention of Shri Ashok Sen that all documents, books papers and cash seized so far during the investigation should be returned to the firm and its partners forthwith. The firm appears to be on the brink of an economic crisis, as any scheme of this nature is eventually bound to be. Considering the manner in which the firm has manipulated its accounts and its affairs, I have no doubt that it will secret the large funds and destroy the incriminating documents if they are returned to it. The State Government, the Central Government and the Reserve Bank of India must be given a reasonable opportunity to see if it is possible, under the law, to institu....
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....nnum. Under the terms and conditions of the deposits, the firm has also the liberty to repay the amount with interest to any depositor at any time before the expiry of the stipulated period of the deposit and in the event of such repayment by the firm, the firm is not required under the terms and conditions of the deposit or loan, to give any reason. It appears that the firm has been carrying on its business on a very extensive scale. In the year 1978, the Parliament passed an Act called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (hereinafter referred to as the Act). On the 13th December, 1980, the Commercial Tax Officer, Bureau of Investigation, lodged a complaint of violation of the Act by the firm with the Police. The F.I.R. has been set out in full in the judgment of the learned Trial Judge and the same reads as follows : "13.12.1980 The Deputy Superintendent of Police, Bureau of Investigation, 10, Madras Street. Calcutta-72 Sir, On a secret information that 'Sanchaita Investments' of 5 and 6 Fancy Lane, Calcutta, is carrying on business of promoting and/or conducting prize chit and/or money circulation scheme enrolling members of ....
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....pers and cash. The respondents in the writ petition were six. The first respondent was the State of West Bengal, Respondents No. 2 was the officer who had lodged the F.I.R.., Respondent No. 3 was the Assistant Commissioner of Police and Superintendent of Police, Bureau of Investigation, and respondent No. 4 was the Investigating officer in the cases pending before the Chief Metropolitan Magistrate Calcutta. Respondent No. S was the Reserve Bank of India and Respondent No. 6 was the Union of India. In brief the case made by the firm and its partners in the writ petition is that the firm is a non-banking financial institution which carries on business of accepting deposits or loans from the general public on terms and conditions mentioned in the agreement of loan or deposit, pays interest to persons who invest or advance money to the firm in terms of the agreement between the parties and repays all amounts received from the parties with interest in terms of the agreement between the parties. The further case made by the writ petitioners in the writ petition is that the amounts which they receive from parties are reinvested by them and out of the investments made by the firm, the firm....
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....dealing with credit control in relation to the country's economy. The receipt of such money from the members of public at such high rate of interest is without any fetters as against the case of the receipt of money by banking companies as also non-banking companies which are regulated under different provisions of law, to which I will crave reference at the time of hearing, if necessary The pooling of the purchasing power and/or the financial resources and the employment thereof being unfettered has 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. The term of the deposit are unilaterally determined without any scrutiny by the Reserve Bank of India or with reference to the norms as to the credit control which the said Bank lays down and follows from time to time. The acceptances of such deposits from the members of public with unrestricted use of the moneys so collected are completely repugnant to the accepted modes of public savings and investment thereof for generation of goods and services contributing to the economic growth of the country. The entire process is speculative in ....
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....e out of capital itself. All allegations contrary to and save as aforesaid are denied. 9. With reference to paragraph 7 of the petition I reiterate the statements made hereinbefore and deny all allegations contrary thereto. I specifically deny that no quick or easy money is accepted or received by the depositors or lenders or that payment of any such money is not contemplated or made by the firm as purported to be alleged. The depositor becomes a member of the investment scheme of the company by subscribing to it and the payment of the 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. In the process of its working the scheme of the firm generates quick and easy money so as to render such scheme or arrangement as a money circulation scheme within the meaning of the said Act. All allegations contrary to and save as aforesaid are denied. The following further averments contained in paragraph 22 and in paragraph 30 of the said affidavit may also be noted: "22 ......... ....
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....have been annexed to the said affidavit filed on behalf of the Reserve Bank of India and are annexures and thereto. Annexure is the copy of a letter addressed by Shri Ashok Mitra, State Finance Minister to the Union Minister for Finance and the said letter reads as follows: "Informally handed over to DG (K) at Calcutta. Ashok Mitra D.O. No. IM. 28-2-80 Calcutta, October 1, 1980 Dear Shri Venkataraman, In the context of the action being taken by the Government of West Bengal under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, a question has arisen whether an organisation called 'Sanchaita Investments, with the address at 5 & 6, Fancy Lane, Calcutta-1 come within the purview of the above Act. A reference in the matter has been made by our authorised officer under the above act to the Chief officer, Department of Non. Banking Companies, Reserve Bank of India, Calcutta today. I am enclosing a copy of an advertisement published by the above organisation in the local newspapers as also a copy of a loan certificate receipt issued by the said organisation. I may mention that the authorised officer has issued notice under the above Act to a "Sanchaita Sav....
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.... receipts (as per the specimen received by us from our Calcutta Office) without floating any scheme or arrangement would not ordinarily be covered by the definition of "Prize Chit" and hit by the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. However, you may also like to consult your Legal Adviser on the subject. 2. As you may know, there are a few writ petitions pending in the Calcutta High Court where the interpretation of section 2 (e) of the Banning Act is involved. In that context I have thought it advisable to write to you on a confidential basis, rather than send a separate official reply. I shall therefore be grateful if you could leave instructions with your staff to keep this matter and the views of our legal department strictly confidential. With warm regards, Sd/- K.S. Krishnaswamy Dr. Ashok Mitra, Minister of Finance" Further supplementary affidavits had also been filed. On consideration of the facts and circumstances of this case and the materials which were placed before the learned Judge, the learned Judge came to the conclusion that the Act did not apply to the firm and the learned Judge further held that the searches a....
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....ons will be discharged; if, on the other hand, materials gathered disclose an offences under the Act, proper charge against the accused persons will be framed and it will be open to the accused persons to raise the plea in the course of the prosecution that no offence under the Act has been committed by them and the Act has no application to the transactions of the firm and to the firm. In the case of State of West Bengal v. S.N. Basak, this Court held at page 55-56 as follows:- "The powers of investigation into cognizable offences are contained in Chapter XIV of the Code of Criminal Procedure. Section 154 which is in that Chapter deals with information in cognizable offences and s. 156 with investigation into such offences and under these section the police has the statutory right to investigate into the circumstances of any alleged cognizable offence without authority from a Magistrate and this statutory power of the Police to investigate cannot be interfered with by the exercise of power under s. 561-A of Criminal Procedure Code. As to the powers of the Judiciary in regard to statutory right of the police to investigate, the Privy Council in Ring Emperor v. Khawaja Nazir Ahme....
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....acts involved in the case. There is a clear cut and well demarcated sphere of activity in the field of crime detection and crime punishment. Investigation of an offence is the field exclusively reserved for the executive through the police department, the Superintendent over which vests in the State Government. The executive which is charged with a duty to keep vigilance over law and order situation is obliged to prevent crime and if an offence is alleged to have been committed it is its bounden duty to investigate into the offence and bring the offender to book. Once it investigates and finds an offence having been committed it is its duty to collect evidence for the purpose of proving the offence. Once that is completed and the investigating officer submits report to the Court requesting the Court to take cognizance of the offence under S. 190 of the Code its duty comes to an end. on a cognizance of the offence being taken by the Court the police function of investigation comes to an end subject to the provision contained in S. 173 (B), there commences the adjudicatory function of the judiciary to determine whether an offence has been committed and if so, whether by the person or....
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....sactions of the firm are not above board and they are not what they pretend or purport to be. It is his submission that materials gathered clearly indicate that though the loan certificates stipulate interest to be paid @ 12% a much larger sum by way of interest ranging between 36% to 48% is actually paid to the depositors, and the amount which is paid in excess of the rate stipulated in the loan certificates is paid in cash in a clandestine manner, depriving and defrauding revenue of its legitimate dues. Mr. Chatterjee comments that the payment of interest in this clandestine manner at a very high rate which is not shown or other-wise accounted for results not only in generation of black- money, but paralyses the economy of the State. Mr. Chatterjee has further commented that in view of this allurement to the depositors of payment of large sums of money in a clandestine manner, the firm which has a share- capital of only Rs. 7000 has succeeded in alluring depositors and the deposits received by the firm with the capital of Rs. 7000 now exceed crores of rupees. Mr. Chatterjee submits that a firm which carries on clandestine business of this nature is not entitled to invoke the extr....
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....e preferred; if however, on the other hand, the materials, indicate that the firm is conducting a money circulation scheme and a charge is preferred, it will be open to the accused persons to take the defence that the business conducted by them is not one which will be considered to be a money circulation scheme within the meaning of the Act. As I have earlier observed, the main grievance of Mr. Chatterjee is that the Court should have interfered at the stage of investigation and quashed the proceedings. Mr. Chatterjee has next contended that S. 7 of the Act, clearly empowers a Police officer not below the rank of an officer-in-charge of a police station to enter, search and seize in the manner provided in the said section. It is Mr. Chatterjee's contention that the searches have been carried out duly in terms of the provisions contained in the said section and cash money and other books and documents have been lawfully seized in terms of the provisions contained in the said section. Mr. Chatterjee has further submitted that even if there had been any irregularity in the matter of searches and seizure, the searches and seizure are not rendered illegal and void as a result thereof. ....
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.... is disclosed or not. In such cases it would be legitimate for the High Court to hold that it would be manifestly unjust to allow the process of the criminal court to be issued against the accused person." Mr. Sen has also referred to the decision of this Court in Jehan Singh v. Delhi Administration; in which the aforesaid observations made by Gajendragadkar, J. in the case of R.P. Kapur v. State of Punjab, (supra) have been reproduced and reiterated. Mr. Sen further points out that in the case of S.N. Sharma v. Bipin Kumar Tiwari (supra), this Court at p. 951 recognises that "in appropriate cases the aggrieved person can always seek remedy by invoking powers 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". Mr. Sen has argued that the Learned Judge having properly appreciated the legal position has made the correct approach to the consideration of the present case. It is his argument that the Learned Judge has carefully considere....
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....ave been placed before the Court, Mr. Sen submits that the materials go to indicate-(1) that the firm is accepting deposits or loans from the public for a term against loan certificates which stipulate payment of interest @ 12%; (2) though interest is stipulated to be paid @ 12%, the firm, in fact, is paying interest at a much higher rate. It used to pay interest @48% previously and is now paying interest @ 36%. The amount of interest paid in excess of the stipulated rate of 12% is paid in cash in a clandestine manner to the depositors. The excess amount of interest paid is not accounted for and results in accumulation of black-money; (3) the firm invests the monies received from the depositors in high risk investments earning huge amount of unaccounted profits. The investments made by the firm and the earnings from the investments made, also result in generation of black-money; (4) because of the allurement of high rate of interest offered to the depositors, a major part of which is given in unaccounted black-money, the firm which has a share-capital of about Rs. 7000 only has received deposits over crores of rupees. It is the contention of Mr. Sen that even if all these allegatio....
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....is in the nature of penal one has to be construed in the event of doubt or ambiguity in a manner beneficial to the party against whom any accusations is made. Mr. Sen has further argued that the rules framed under the Act can also be taken into consideration for proper interpretation of the Act and the learned Judge in the instant case was justified in referring to the rules in construing the provisions of the Act. In this connection Mr. Sen has referred to the decision in Ex parte Wier In re Wier and has relied upon the following observations at p. 879; "We do not think that any other section of the Act throws any material light upon the proper construction of this section, and if the question had depended upon the Act alone we should have had great doubt what the pro per construction was; but we are of opinion that, where the construction of the Act is ambiguous and doubtful on any point, recourse may be had to the rules which have been made by the Lord Chancellor under the authority of the Act, and if we find that in the rules any particular construction has been put on the Act, that it is our duty to adopt and follow that construction". Mr. Sen in this connection has draw....
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.... do not consider the same to be necessary. As I have already stated that the matter appears to have been elaborately argued before the learned Trial Judge who in his judgment has fully set out the relevant facts and circumstances of the case has noted the arguments which were advanced before him and the learned Judge has also referred to a number of decisions. I may, however, note that Mr. Chatterjee, appearing on behalf of the appellants, has made a grievance before us that some of the decisions cited by him have not been considered by the learned Judge. Though the matter has been argued at great length, yet, to my mind, the case appears to rest, in a fairly short compass. In my opinion, the legal position is well-settled. The legal position appears to be that if an offence is disclosed, the Court will not normally interfere with an investigation into the case and will permit investigation into the offence alleged to be completed; if, however, the materials do not disclose an offence, no investigation should normally be permitted. The observations of the Judicial Committee and the observations of this Court in the various decisions which I have earlier quoted, make this position a....
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....be permitted to continue and will not be prevented by the Court at the stage of investigation even if no offence is disclosed. While adverting to this specific question as to whether an investigation can go on even if no offence is disclosed, the judicial Committee in the case of King Emperor v. Khwaja Nizam Ahmed (supra) and this Court in R.P. Kapur v. State of Punjab (supra), Jehan Singh v. Delhi Administration (supra), S.N. Sharma v. Bipin Kumar Tiwari (supra) have clearly laid down that no investigation can be permitted and have made the observations which I have earlier quoted and which were relied on by Mr. Sen. As I have earlier observed this proposition is not only based on sound logic but is also based on fundamental principles of justice as a person against whom no offence is disclosed, cannot be put to any harassment by the process of investigation which is likely to put his personal liberty and also property which are considered sacred and sacrosanct into peril and jeopardy. Whether an offence has been disclosed or not must necessarily depend on the facts and circumstances of each particular case. In considering whether an offence into which an investigation is made or ....
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....apan Kumar Guha appears to have been carrying on the business in the trade name of 'Sanchaita Investments' in prize chits and money circulation Scheme in violation of S. 2 of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The other materials are contained in paragraphs 6, 7, 8, 9, 22, 27 and 30 of the affidavit and the two documents, namely, the article published in the Newspaper 'Business Standard' dated 1611.1980 and the documents seized in the course of searches. I have earlier set out in extenso the statement made in the said paragraphs of the affidavit filed on behalf of the State. A copy of the article has been enclosed to the affidavit filed on behalf of the State. The document seized in the course of searches and handed over to Court in the course of the arguments was a letter addressed by an officer of the Air Force to the firm in which the officer makes a grievance that the Firm which was paying interest @ 48% has now reduced the same to 36% in view of advances made to political parties. The letter further records the fact that the firm hopes to pay the enhanced rate of interest of 48% in the near future. An analysis of these materials suggest that t....
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....lled, should be totally banned in the larger interests of the public and suitable legislative measures should be undertaken for purpose." The relevant portion of paragraph 3 of the Statement of objects and Reasons reads as follows:- The Bill proposes to implement the above recommendation of the Group by providing for the banning of the promotion or conduct of any prize chit or money circulation scheme, by whatever name called, and of the participation of any person in such chit or scheme. The Bill provides for a period of two years within which the existing units carrying on the business of prize chits or money circulation schemes may be wound up and provides for penalties and other incidental matters." It is, therefore, clear that the main object of the Act is to ban promotion or conduct of any Prize Chit or money circulation scheme, by whatever name called, and of the participation of any person in such chit or scheme. S. 2 of the Act deals with definitions. Money Circulation Scheme is defined in S. 2 (c) in the following words:- "Money circulation Scheme' means any scheme, by whatever name called. for the making of quick or easy money, or for the receipt of any money or....
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....ner 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 reads:- "No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme." S. 7 of the Act provides: "(1) It shall be lawful for any police officer not below the rank of an officer in charge of a police station: (a) to enter, if necessary by force, whether by day or night with such assistance as he considers necessary any premises which he has reason to suspect, are being used for purposes connected with the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of this Act; (b) to search the said premises and the persons whom he may find therein; (c) to take into custody and produce before any judicial Magistrate all such persons as are concerned or against whom a complaint has been made or credible information has been received or a reasonable suspicion exists of their having been concerned with the use of the said premises for purpo....
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.... 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, rightly, as the allegations do not give any indication whatsoever of any case of a prize chit being promoted or conducted by the firm. The argument on behalf of the appellants has been that the firm is promoting or conducting a money circulation scheme. Though the Statement of objects and Reasons of the Act may suggest that the prize chit and a money circulation scheme are more or less of like nature, yet, in view of the separate definitions of these two being given in cl. 2 of the Act and in view of the further fact that S. 3 speaks of prize chit or money circulation scheme, each of the aforesaid must be considered to be separate and distinct for the purposes of the Act; and promoting or conducting either prize chit or any money circulation scheme or both must be held to he an offence under the Act. I shall now proceed to consider whether the materials disclose that the firm is promoting or conducting a money circulation scheme I have already set out the definition of money circulation scheme as given in S. 2 (c) of the Act. On a plain re....
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....of quick or easy money' will indeed become vague and meaningless. For properly appreciating whether the offence of promoting or conducting a money circulation scheme is disclosed or not, it becomes necessary to consider whether the materials, even if they are all accepted to be correct, indicate that the business carried on by the firm satisfies the requirements of money circulation scheme and disclose an offence under the Act. The materials show that the firm accepts loans or deposits from general public for a term against loan certificates which stipulate payment of interest @12%. Materials also indicate that the firm pays stipulated amount of interest and further pays a much larger amount of interest in a clandestine manner to the persons who invest their monies in the firm against loan certificates. The materials further indicate that the persons who have invested their monies with the firm against loan certificates used to receive, in fact, the stipulated amount of interest @ 12% and also used to receive an additional sum as further interest @ 36% in a clandestine manner. The materials also indicate that this further rate of interest @ 36% paid clandestinely in additional t....
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.... 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 expectation of getting a high return, say 50% or more and there is nothing clandestine in the transaction which is above board, can it be said that the investment is for making easy money or quick money ? Various individuals may invest their monies in their business which may yield very high profits. Many individuals also may indulge in speculative business in expectation of high return of their money and may succeed or may not succeed in speculative transactions. If such transactions are made openly and not in violation of any law, I have no doubt in my mind that it can never be said that such investment has been made for making quick or easy money, and such transactions can never come within the scheme for making easy or quick money as enumerated in the Act. The further question that, however, arises for consideration is whether the position will be any different, if a part of the transaction is not above board and is secretive in nature. To my mind, that will not make any difference and the transaction cannot be considered to be a sch....
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....n 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 any violation of the Act. The materials do not disclose that the firm is promoting or conducting money circulation scheme and the question, therefore, of any violation of S. 3 of the Act does not arise in the instant case. As the firm is not conducting or promoting a money circulation scheme, and as no case is made that the firm is conducting or promoting a chit fund, the Act cannot be said to be applicable to the firm. In my opinion, it does not become necessary to refer to the rules for coming to the conclusion. I may, however, add that a consideration of the rules also clearly lends support to the conclusion to which l have come. I find that the learned Judge has very carefully and elaborately considered all the aspects in his judgment and in the course of elaborate discussion, he has noted all the contentions raised by the parties and has carefully considered them. The learned Judge on a careful consideration of all aspects and on a proper interpretation of the Act, has expressed the view that no offence under the Act is disclos....