TaxTMI 
TaxTMI 
TaxTMI 
1982 (2) TMI 301
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....wo 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 two years' period allowed by section ....
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....r 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 called, for the making of quick or easy money, or for the receipt of....
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....ed, 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 ludicrous to say that the weapon devised by law to ban the making of quick....
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....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 or contingency relative or applicable to the enrollment of members into the pro....
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....ce 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 was promoting or conducting a scheme for the making of quick or easy money, dependent on an....
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....nterest, 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 the depositor agrees to subscribe"; and (x) In the process of its working, the scheme of the firm generate....
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....l 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, (that a statute which creates an offence and imposes a penalty of fine and imprisonment must be construed strictly....
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....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 investigate into the circumstances of an alleged cognizable offence without authority from a Magistrate cannot be interfer....
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.... 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 unacceptable. The question before the Privy Council was not whether the fresh F.I.R.. disclosed any offence at all. In fact, immedi....
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.... 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 jurisdiction and must, therefore, be quashed. I do accordingly and direct that no further investigation shall take place in pursuance. Or on t....
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....olved 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 (Rupees forty two lacs, sixteen thousand, five hundred and thirty) was recovered. The amount was tied in separate bundles of notes of different d....
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.... 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 deposits varied often between 50 to 80 lacs at a time. The amount of nearly Rs. 28 crores was withdrawn from the account steadily from November 11, 1980. The acc....
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....n 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 institute an inquiry into the affairs of the firm and, in the mean while, to regulate its affairs. I consider such a step essential in the interests of countless small depositors ....
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....ipulated 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 such chit and/or scheme participating in these, and/or receiving and remitting monies in pursuance of such chits and/or scheme in violation of the provisions of the prize chits and money cir....
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....stant 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 pays the interest to the depositors and also the principal amount deposited by them in terms of the agreement between the parties. In the writ petition there is a denial of the allegations made in the F.....
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.... 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 nature and directed towards luring away the investing public to the speculative market for making quick and easy money. These are some of the activities which are sought to be banned by the banning provisio....
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....trary 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 ......... I further say that payment of interest at the clandestine rate of 36% or 46% as against the aforesaid rate of 12% is in the context of the scheme promoted and conducted by the petitioners tantamount to activity which....
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.... 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 Savings Scheme (P) Ltd." which is to be distinguished' from 'Sanchaita Investments'. It appears that the organisation called "Sanchaita Investments" is receiving large amount of monies from the public ostensibly as loans, and in lieu the....
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....ing) 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 and seizures were also wrongful, illegal and improper; and in view of his finding the learned Judge quashed the proceedings and directed the return of all documents and the refund of cash monies seized, to the writ- petitioners. It appears from the judgment of the lear....
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....er 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 Ahmed (1944) L.R.I.A. 203, 212 observed as follows :- '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 ....
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....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 persons charged with the crime by the police in its report to the Court, and to award adequate punishment according to law for the offence proved to the satisfaction of the Court. There is thus a well defined and well demarcated function in the field of crime detection and its sub....
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....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 extra- ordinary jurisdiction conferred on the Court under Art. 226 of the Constitution. Mr. Chatterjee has contended that the violation of S. 3 of the Act has been alleged and it is his contention that the nature of business carried on by the firm indicates that the firm is conducting a '....
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.... 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. Various decisions were also referred to by Mr. Chatterjee in support of his submissions. Mr. A.K. Sen, learned counsel appearing on behalf of the firm has submitted that the learned Judge on a proper consideration of all the relevant materials and the provisions of the Act has correctly....
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....ation; 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 considered the materials which have been placed before him including the F.I.R. and he has properly analysed the provisions of the Act and on a proper interpretation of the Act and on a proper appreciation of the materials which were there before the Learned Judge, the Learned Judge has come to the conclusio....
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....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 allegations which are there in the F.I.R. and also in the other materials which have been placed before the Court are accepted to be correct, the said allegations do not go to show that the firm is conducting a money circulation scheme and do not disclose any offence under the Act. Mr. Sen in this connection....
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.... 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 drawn our attention to the relevant rules and he has argued that the rules leave no room for doubt that the Act has no application to the firm and no offence under the Act has been disclosed by the firm. Mr. Sen has submitted that the construction of the Act by the Learned Judge is correct and it is his sub....
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....rned 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 abundantly clear. The prepositions enunciated by the Judicial Committee and this Court in the various decisions which I have earlier noted, are based on sound principles of justice. Once an offence is disclosed, an investigation into the offence must necessarily follow in the interests of justice. If, howeve....
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....m 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 to be made, is disclosed or not, the Court has mainly to take into consideration the complaint or the F.I.R. and the Court may in appropriate cases take into consideration the relevant facts and circumstances of the case. On a consideration of all the relevant materials, the Court has to come to the conclus....
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.... 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 the firm is carrying on activities of accepting deposits from the members promising to pay them interest on such deposits at an agreed rate of 12% as stipulated in the loan certificate; but, in fact, it has been paying interest to them at much higher rate of interest The materials further indicate that the firm is making hi....
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.... 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 valuable thing as the consideration for a promise to pay money, 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 subscriptions." Prize Chit is defined in S. 2 (e) in the foll....
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....hit 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 purposes connected with, or with the promotion or conduct of, any such prize chit or money circulation scheme as aforesaid; (d) to seize all things found in the said premises which are intended to be used, or reasonably suspected to have been used, in connection with any such prize or money circulation scheme as aforesaid. (2) Any officer authorised by the Stat....
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....ation 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 reading of the said definition, the requirements of a money circulation scheme are: (i) there must be a scheme; (ii) there must be members of the scheme; (iii)the scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrollment of members into the scheme or there must be a scheme for the receipt of any money or valuable thin....
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....nd 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 to the stipulated rate of 12% has been reduced now to 24%, because of investments by the firm with political parties. In other words, the materials go to show that though the rate of interest stipulated in the loan certificate was 12% the firm used to pay altogether interest @ 48% previously and is now paying interest @ 36% inclusive of payment of interest stipulated in the loan certificate. Th....
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.... 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 scheme for the making of quick or easy money, though the transaction may offend against revenue laws or any other law. Transactions in black money do not come within the mischief of this Act. Judged from the point of view of the depositors, it cannot, therefore, be said that their investment in the firm for high return by way of interest, part of which is above board and a part of which is clandest....
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....ting 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 disclosed against the firm which does not conduct or promote money circulation scheme or a chit fund and the Act has no application to the firm. It may also be noted that the learned Judge has also in his judgment referred to the report of the Reserve Bank and the opinion of the learned Advocate General of the State which lent support to the view taken by the learned Judge. The view expressed by the lear....