State Of West Bengal & Ors
v.
Swapan Kumar Guha & Ors
(Supreme Court Of India)
Civil Appeal No. 1129 And 1130 Of 1981 | 02-02-1982
1. These appeals by special leave arise out of the judgment dated March 5, 1981 of a learned single Judge of the Calcutta High Court in Matters Nos. 2829 of 1980, 37 of 1981. The appeals are, in substance, by the State of West Bengal while the contesting respondents are a firm called Sanchaita Investments, its three partners, Swapan Kumar Guha, Sambhu Prasad Mukherjee, 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, its partners for quashing an investigation commenced against the firm.
2. Allowing the writ petitions, the High Court issued a writ of Mandamus directing the State Government, its concerned officers to "forthwith recall, cancel, withdrew the First Information Report .. all proceedings taken on the basis thereof", since the searches, seizures, arrests made in pursuance of the said F.I.R. are, according to the High Court, illegal, without jurisdiction. It has directed that the books, documents, moneys seized during the search be returned to the firm, its partners, including a sum of Rs. 52, 11, 930. Section 4 of theprovides that whoever contravenes the provisions of section 3 shall be punishable 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, adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year, the fine shall not be less than one thousand rupees.
3. Though the F.I.R. is riddled with the "and/or" clauses more appropriate in deeds of conveyancing, it is clear firm its tenor, 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 faili ng to err on the safe side, 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.Numerous persons lend their hard-earned monies in the hope o f earning high returns. It is notorious that, eventually, quite a few of them lose both the principal, the interest, for no project can succeed against the basic laws of economics. Sharp, wily promoters pay As money to, Bs to in order to finance interest at incredible rates, eventually, then high-risk investment made by them at the cost of the credulous lenders fails, the entire arrangement founders on the rock of foolish optimism.
4. The promoters, of course, have easy recourse to gadgets of the law of insolvency. It is difficult to hold that the lender, himself a victim of the machinations of the crafty promoter, is intended by the to be arraigned as an accused. I do not think that any civilised law can intend to add insult to injury.
5. 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. In the first place, the F.I.R. does not allege, directly or indirectly, that the firm was promoting or conducting a schemeof quick or easy money, dependent on any event or contingency relative or applicable to the enrollment of members into the scheme. Secondly, the F.I.R. does not contain any allegation whatsoever that persons who advanced or deposited their monies with the firm were participants of a schemeof quick or easy money, dependent upon any such event or contingency.
6. The F.I.R. bears on its face the stamp of hurry, want of care. It seems to assume, what was argued before us by Shri Som Nath Chatterjee on behalf of the prosecution, that it is enoughof section 2 (c) to show that the accused is promoting or conducting a schemeof quick or easy money, an assumption which I have shown to be fallacious. An essential ingredient of section 2 (c) is that the scheme for making quick or easy money must b e dependent on any event or contingency relative or applicable to the enrollment of members into the scheme.A First Information Report which does not allege or disclose that the essential requirements of the penal provision are prima facie satisfied, cannot form the foundation or constitute the starting point of a lawful investigation. In answer to the writ petitions filed by the accused in the Calcutta High Court, affidavits were filed on behalf of the prosecuting agency, which do not improve matters in any way. The affidavit filed by Arun Kanti Roy, Deputy Secretary, Finance Department, Government of West Bengal, alleges that:, It is clear from these averments that even at the stage when the State of West Bengal, its concerned officers submitted detailed affidavits to the High Court, there was no clear basis for alleging, no material was disclosed to show that, prima facie, the firm was promoting or conducting a scheme for making quick or easy money which was dependent upon an event or contingency relative or applicable to the enrollment of members in to that scheme.
7. The burden of the States song is that the scheme conducted by the accused generates black money, will paralyse the economy of the country. These are serious matters indeed, it is unquestionable that a private party cannot be permitted to issue bearer bonds by the back door. The fact that the accused are indulging in an economic activity which is highly detrimental to national interests is a matter which must engage the prompt any serious attention o f the State, Central Governments.
8. But the narrow question for our consideration is whether on the basis of the allegations made against the accused, there is reason to suspect that they are guilty of an offence under section 4 read with sections 3, 2 (c) of the. The allegation which we have reproduced in clause (ix) above from the affidavit of Arun Kanti Roy is the nearest that can be considered relevantof section 2 (c) of thes. But even that a llegation does not meet the requirement of that section since, what it says is that "the payment of quick, 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".This is too tenuous to show that the scheme is dependent upon an event or contingency of the description mentioned in section 2(c), apart from the fact that the only participation which is alleged as against the depositors is that they become members of the "investment scheme" by subscribing to it. There is no allegation even in any of the affidavits filed on behalf of the State of West Bengal, its concerned officers that the depositors, 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.
In R.P. Kapur v. The State of Punjab, the question which arose for consideration was whether a first information report can be quashed under section 561-A of t he Code of Criminal Procedure. The Court held on the facts before it that no case for quashing the proceedings was made out but Gajendragadkar J. speakingobserved that though ordinarily, criminal proceedings instituted against a n accused must be tried under the provisions of the Code, there are some categories of cases where the inherent jurisdiction of the Court can, should be exercised for quashing the proceedings. One such category, according to the Court, consists of cases where the allegations in the F.I.R.
Or the complaint, even if they are taken at their face value, accepted in their entirety, do not constitute the offence alleged; in such cases, no question of appreciating evidence arises, it is a matter merely of looking at the F.I.R. Or the complaint in order to decide whether the offence alleged is disclosed or not. In such cases, said the Court, it would be legitimateCourt 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, 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 Benga l v. S.N. Basak, in which it was held that the statutory powers given to the police under sections 154, 156 of the Code of Criminal Procedure to investigate into the circumstances of an alleged cognizable offence without authority from a Ma gistrate cannot be interfered with by the exercise of powers under section 439 or under the inherent powers conferred by section 561 A of the Code. It must be remembered that no question arose in that case as to whether, the allegations contained in the F.I.R. disclosed any offence at all.
9. The contention of the accused in that case was that the statutory power of investigation given to the police under Chapter XIV of the Code is not available in respect of an offence triable under the West Bengal Criminal Law Amendment (Special Courts) Act 1949, that being so, the investigation undertaken by the police was without jurisdiction. That contention was negatived and, therefore, the application filed by the accused under sections 439, 561A of the Code was dismissed . In Jehan Singh v. Delhi Administration, the application filed by the accused under section 561-A of the Code for quashing the investigation was dismissed as being premature, incompetent, but that was because the Court found (per Sarkaria J. page 797) that prima facie, the allegation in the F.I.R. if taken as correct, disclosed the commission of a cognizable offence by the accused. In their Lordships opinion, however, the more serious aspect of the case is to be found in the resultant interference by the court with the duties of the police.Just as it is essential that every one accused of a crime should have free access to a court of justice so that he may be duly acquitted if found not guilty of the offence with which he is charged, so it is of the utmost importance that the judiciary should not interfere with the police in matters which are within their province, into which the law imposes on them the duty of inquiry. In India, as has been shown, there is a statutory right on the part of the police to investigate the circumstances of an alleged cognizable crime without requiring any authority from the judicial authorities, it would, as their Lordships thin k, 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, the police are complementary, not overlapping, the combination of individual liberty with a due observance of law, order is only to be obtained by leaving each to exercise its own function, always, of course, subject to the right of the c ourt 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.
10. In such a case as the present, however, the courts functions begin when a charge is preferred before it, 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, immediately after the passage which I have extracted above, the Privy Council qualified its statement by saying;, The firm Sanchaita Investments commenced its business on July 1, 1975, its three partners contributing a total capital of Rs. 7000 (Rupees seven thousand). On December 2 5, 1978 an advertisement appeared in the "Hindu" in the name of firm, claiming falsely that its business was "approved by the Reserve Bank of India".
Since the representation was likely to mislead the public, the Reserve Bank advised the firm in M ay 1979 too issue a suitable corrigendum, which the firm did. The firm, its two partners, namely, Shambhu Prasad Mukherjee, Bihari Lal Murarka filed this writ petition in the High Court challenging the validity of the F.I.R. the proceedings arising out of the same including the validity of the searches, seizure of documents, papers, cash. The respondents in the writ petition were six. The first respondent was the State of West Bengal, Respondentswas the officer who had lodged the F.I.R..
11. Respondentwas the Assistant Commissioner of Police, Superintendent of Police, Bureau of Investigation, respondentwas the Investigating officer in the cases pending before the Chief Metropolitan Magistrate Calcutta. Respondent No. S was the Reserve Bank of India, Respondentwas the Union of India. In brief the case made by the firm, 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, 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, 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, out of the investments made by the firm, the firm pays the interest to the depositors, 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.I.R.. the case is further made that even if the allegations made in the F.I.R.. are assumed to be correct, there cannot be any question of any violation of the, no offence under the is disclosed. It is the positive case of the writ petitioners in the writ petition that the has no application to the firm. In the writ petition, the validity of the F.I.R.. the proceeding arising therefrom is challenged mainly on the ground that the F.I.R. does not disclose any offence under the which-does not apply to the firm, there can be question of any violation of any provisions of the which has no application to the firm at all.
In answer to the averments made in writ petition, an affidavit affirmed by Shri Arun Kanti Roy, was filed on behalf of respondent Nos. 1, 2, an affidavit affirmed by Shri Sunil Kumar Chakravorty on behalf of respondents Nos. 3, 4 was filed, an affidavit affirmed by Shri Rani Annaji Rao on behalf of the Reserve Bank of India was also filed. In the affidavit affirmed by Arun Kanti Roy, Deputy Secretary, Finance Department, Ex-officio Director of Small Savings, Government of West Bengal, on behalf of Respondents, 2, that is, the State of West Bengal, Shri B.K. Kundu, there is an assertion that the Respondents come within the mischief of the, they have violated S. 3 of the. The relevant averments are contained in paragraphs 6, 7, 8, 9 of the said affidavit, it is necessary to set out the same in their entirety:, With reference to paragraphs 3, 4 of the petition, I say that the petitioner firm accepts loans and/or deposits from all, sundry for varying periods without any authority of law.
12. Although the professed rate of interest of such deposit is at the rate of 12% per annum, the petitioner f irm was actually paying interest at the rate of 48% per a nnum, which was recently reduced to 36% per a nnum. The actual payment of such high rate of interest against the professed rate of 12% attracts huge amount of id le money into circulation, the investment of money as collected is not under the regulatory control of the Reserve Bank of India or any other agency of the State dealing with credit control in relation to the countrys econom y. 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 regu lated 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, 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 countrys economy.The term of the deposit are unilaterally determined without any scru tiny by the Reserve Bank of India or with reference to the norms as to the credit control which the said Bank lays down, follows from time to time. The acceptances of such deposits from the members of public with unrestricted us e of the moneys so collected are completely repugnant to the accepted modes of public savings, investment thereof for generation of goods, services contributing to the economic growth of the country. The entire process i s speculative in nature, directed towards luring away the investing public to the speculative market for making quick, easy money.
13. These are some of the activities which are sought to be banned by the banning p rovisions of the said Act, which has replaced similar regulatory measures contained in the several directions issued by the Reserve Bank of India under the Reserve Bank of India Act, 1934, to the various financial institutions, non-banking companies. The present Act is applicable not only to such companies but also to individuals, firms. All allegations contrary to, save as aforesaid are denied. With reference to paragraph 5 of the petiti on I call upon the petitioner to disclose full particulars of their deposit scheme, which is disclosed will go to show that the terms, conditions are wholly arbitrary, contrary to the economic norms.
14. The very basis of th e so called contractual arrangement between the petitioner firm, its depositors is founded on the fraudulent device to assure the people with a high rate of interest, the major portion of which is paid through unaccounted fo r money, thereby encouraging growth of such unaccounted for money in the hands of the investing public. The professed rate of interest is a mere subterfuge to provide a cloak of bona fide, legality over the under-ha nd transactions through which unaccounted for money comes into play in the market generating further unaccounted for money, a part thereof goes back to the depositors in the form of the balance of interest over 12% paid i n cash month by month. All allegations contrary to, save as aforesaid are denied. With reference to paragraph 8 of the petition I say that the petitioners have been very much working on the above scheme to which the depositors have subscribed.Whether such deposits are one time deposits, whether such deposits actually earn income in excess of the interest actually paid to the depositors or a matter of detailed investiga tion, which were in progress until the same was stopped by the order of the learned Court of Appeal passed on 8th January, 1981. From whatever particulars are so far available to the answering respondents it can be stated that the firm did not have so much income as the quantum of interest that was being paid by it, the irresistible conclusion from such state of affairs is that payment of interest was being made out of capital itself. All allegations contrary to, save as aforesaid are denied.
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, conducted by the petitioners tantamount to activity which is banned under the banking provisions of the said Act. No question of the depositors being ruined should arise if the petitioners had been running their business on sound economic line, had invested the fund collected from the depositors in safe, sound investment. The very fact that the petitioners are apprehensive of innumerable depositors being ruined goes to show that they engaged themselves, also the depositors in the speculative market, have rendered the investment insecure by reasons of the very nature of the business i.e. money circulation scheme transacted by them.
15.In the affidavit affirmed by Shri Sunil Kumar Chakraverty, Assistant Commissioner of Police, Deputy Superintendent of Police, Bureau of Investigation, Government of West Bengal, Finance, Taxation Department, filed on behalf of Respondents Nos. 3, 4, the deponent adopts the statements made in the affidavit of Arun Kanti Roy, the deponent denies that the searches, seizures were unlawful, illegal. The deponent further stated that as a result of the searches effected a mass of documents, a large amount of cash had been seized, the documents were being scrutinised. Further supplementary affidavits had also been filed. On consideration of the facts, circumstances of this case, the materials which were placed before the learned Judge, the learned Judge came to the conclusion that the did not apply to the firm, the learned Judge further held that the searches, seizures were also wrongful, illegal, improper;, in view of his finding the learned Judge quashed the proceedings, directed the return of all documents, the refund of cash monies seized, to the writ-petitioners.It appears from the judgment of the learned Judge that the matter had been very fully argued before him, the learned Judge in an elaborate judgment had considered the arguments advanced before him, thereupon recorded his findings, passed the order allowing the said writ petition. Against the judgment, order passed by the learned Judge, the State of West Bengal, its three officers have preferred this appeal with special leave granted by this Court. The writ petitioners, the Reserve Bank of India, Union of India have been made respondents in this appeal.
16. It does not appear that Union of India has participated in the proceedings before the learned Judge, no affidavit on behalf of t he Union of India appears to have been filed before the learned Judge. Mr. Som Nath Chatterjee, learned counsel appearing on behalf of the appellant has attached the judgment under appeal on the main ground that the learned Judge in this extraordinary jurisdiction should not have held that the has no application to the Respondent Firm, should not have on the basis of the said finding interfered with the investigation into the affairs of the firm. Mr. Chatterjee contends t hat the question of applicability of the will only come for consideration after the investigation has been completed, all relevant materials have been gathered on such investigation.
17. It is the contention of Mr. Chatterjee that at the investigation stage, the Court does not interfere, does not quash any proceedings before the investigation has been completed. In support of this contention, Mr. Chatterjee has referred to a number of decisions of this Court. I shall consider the relevant decisions referred to by Mr. Chatterjee at the appropriate time.
18. Mr. Chatterjee has submitted that after the investigation has been completed, all relevant materials have been gathered a charge under the may o r may not be framed against the appellant firm for violation of the provisions of the. It is his submission that if the materials collected do not indicate any infringement of the, no charge against the firm will be preferred, all the accused persons will be discharged; if, on the other hand, materials gathered disclose an offences under the, proper charge against the accused persons will be framed, it will be open to the accused persons to raise the plea in the course of the prosecution that no offence under the has been committed by them, the has no application to the transactions of the firm, to the firm. Counsel appearing on behalf of the appellant urged that such a n interpretation is likely to be very prejudicial particularly to officers of the judiciary who have to deal with cases brought up by the police, frequently give decisions which the police dislike.In such cases, the police ma y engineer a false report of a cognizable offence against the judicial officer, may then harass him by carrying on a prolonged investigation of the offence made out by the report. It appears to us that, though the Code of Criminal Procedure gives to the police unfettered power to investigate all cases where they suspect that a cognizable person can always seek a remedy by invoking the power of the High Court under Art. 226 of th e 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 polic e officer from misusing his legal powers". Relying on these decisions, the principles enunciated th erein, Mr. Chatterjee has argued that the learned Judge clearly erred in interfering with the investigation, quashing th e proceedings at the stage of investigation before framing of charges against the accused persons. Mr. Chatterjee argues that there is no allegation of mala fide in the instant case, the learned Judge has also come to a conclusion that there is n o case of any mala fide on the part of the appellants.
19. Mr. Chatterjee has submitted that the materials which have been gathered as a result of the investigation which could be carried on only for a short while go to indicate that the transacti ons of the firm are not above board, 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 large r sum by way of interest ranging between 36% to 48% is actually paid to the depositors, the amount which is paid in excess of the rate stipulated in the loan certificates is paid in cash in a clandestine manner, depriving, 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 otherwise accounted for results not only in generation of black- money, but para lyses 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, 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 has been alleged, it is his contention that the nature of business carried on by the firm indicates that the firm is conducting a Money Circulation Scheme. According to Mr. Chatterjee, Money Circulation Scheme by virtue of its definition in S. 2 (c) of the means any scheme by whatever name called, ing of quick or easy money.
20. It is his argument that the transactions disclose that the firm, the depositors are both trying to make quick or easy money, the scheme being that the depositors will deposit money against certific ate stipulating interest to be paid @ 12% but they will in fact be paid interest at a much higher rate, thereby make quick or easy money, the firm invests the money received from the depositors in such transactions as to enable them to earn easy or quick money. Mr. Chatterjee has further argued that money circulation scheme has to be interpreted to mean any schemeof quick or easy money, orof 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 subscript ion. Further investigation according to Mr. Chatterjee, can only show whether the scheme of making quick or easy money depends on any contingency relative in the enrollment of members into the scheme. Mr. Chatterjee submits that the qu estion of proper interpretation of the provisions of the, also of what money circulation scheme means, should come up only after investigation has been completed, all relevant materials have been collected.It is Mr. Chatterjees submission that the interpretation of the provisions of the aud particularly what Money Circulation Scheme means, is not to be made in a hypothetical way in the absence of relevant materials being gathered on completion of investigation. Mr. Ch atterjee has argued that after all the materials have been collected on completion of the investigation, it may be that materials may show that the firm is not conducting a Money Circulation Scheme, no charge against the firm may at all be preferred; if however, on the other hand, the materials, indicate that the firm is conducting a money circulation scheme, a charge is preferred, it will be open to the accused persons to take the defence that the business conducted b y them is not one which will be considered to be a money circulation scheme within the meaning of the. As I have earlier observed, the main grievance of Mr. Chatterjee is that the Court should have interfered at the stage of investigation, quashed the proceedings.
Cases may also arise where the allegations in the First Information Report or the complaint, even if they are taken at their face value, accepted in their entirety, do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged is disclosed or not. In such cases it would be legitimateCourt 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 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 argum ent that the Learned Judge has carefully considered the materials which have been placed before him including the F.I.R. he has properly analysed the provisions of the, on a proper interpretation of the, on a proper appreciation of the materials which were there before the Learned Judge, the Learned Judge has come to the conclusion that no offence under the is disclosed, the has no application to the firm.Mr. Sen argues that for a proper appreciation of the question whether the materials disclose any offence under the, it is imperative to interpret the. He contends that it will not be a proper approach to leave the question of interpretation to the stage after the investigation is complete, as according to Mr. Sen, there can be no investigation unless an offence has been disclosed. Mr. Sen argues that if the materials do not disclose any offence, no investigation can be permitted to find out whether as result of the investigation an offence may be disclosed or not.
21. Mr. Sen submits that investigation can legitimately go on, once an offence is disclosed for collecting materials for establishing, proving the offence. It is the contention of M r. Sen that the case of the-appellants is that the firm is conducting money circulation scheme which is banned by the. Mr. Sen argues that to find out whether the firm is conducting a money circulation scheme, it is necessary to consider what a money circulation scheme is within the meaning of the, to find out whether on the materials alleged in the F.I.R.. also in the affidavits, it can be said that the business carried on by the firm is one in the nature of conducting a money circulation scheme.
22. Mr. Sen has argued that the learned Judge in his judgment has correctly interpreted what constitutes money circulation scheme within the meaning of the, it is the argument of Mr. Sen that such interpretation is absolutely essential to find out whether the allegations made in the F.I.R. make out a case that the firm is conducting a money circulation scheme. Mr. Sen submits that the materials on record including the allegations made in the F.I.R. even if they are all assumed to be correct, do not go to show that the firm is conducting a money circulation scheme; and, in that view of the matter there can be no investigation, if no offence under the is disclosed.Analysiag the F.I.R. the other materials which have 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, is now paying interest @ 36%. The amount of interest paid in excess of the stipulated r ate of 12% is paid in cash in a clandestine manner to the depositors. The excess amount of interest paid is not accounted for, 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, 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.
23. The appeal before us has been argued at great length. A number of decisions have also been cited from the Bar. I have already referred to some of the decisions which were cited before us. I do not propose to consider all the case which were referred to in the course of argument by the learned counsel appearing on behalf of the parties as I 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, circumstances of the case has noted the arguments which were advanced before him, 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 t he 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. The complaint alleges violation of S. 3 of the.
24. In other words, the complaint is that the fir m is promoting or conducting a prize chit or a money circulation scheme. The definition of prize chit has been earlier set out. I have also earlier analysed the F.I.R. the other materials on the basis of which the complaint is made, the materials which have been placed before the Court. The materials do not indicate any thing to disclose that the firm is promoting or conducting any prize chit.
I may also here note that no arguments have been advanced on behalf of the appellants that the firm is promoting or conducting any prize chit;, 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, Reasons of the may suggest that the prize chit, 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, 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, distinct f or the purposes of the;, promoting or conducting either prize chit or any money circulation scheme or both must be held to he an offence under the.
Judged from the point of view of the firm, there is nothing to indicate that the firm makes any investment in consultation with its depositors. The materials only indicate that the firm indulges i n high risk investments, also advances monies to political parties. Neither of these acts appears to be illegal, they do not go to show that the firm makes easy or quick money.lt is no doubt true that the materials go to show that the firm plays a larger amount by way of interest than payable on the basis of the rates stipulated in the loan certificate, the firm pays the excess amount of interest to the depositors in a clandestine manner. The clandestine manner of payment of interest in excess of the stipulated rate does not, in any way, indicate the existence of any scheme for making quick or easy money. It is again to be pointed out that in any event the mate rials do not indicate that the payment of interest by the firm in excess of the stipulated rate is in any way dependent on any event or contingency. There is nothing to indicate any schemeof the money by the firm from its depositors as a consideration for promise to pay the interest in excess of the stipulated rate, also to pay back principal amount on the expiry of the term dependent in any way on any event or contingency relative or applicable to the enrollment of new depositors, considering the depositors to be members.
I am, therefore, of the opinion, that not any, of the requirements of a money circulation scheme is satisfied in the instant case. As there is no money circulation scheme, there can be no scheme as contemplated in the in view of th e definition of scheme in the Rules. The materials, appear to disclose violation of revenue laws. They, however, do not disclose any violation of the.
25. The materials do not disclose that the firm is promoting or conducting money circulation sc heme, the question, therefore, of any violation of S. 3 of the does not arise in the instant case. As the firm is not conducting or promoting a money circulation scheme, as no case is made that the firm is conducting or promoting a chit fund, the 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 con clusion to which l have come. I find that the learned Judge has very carefully, elaborately considered all the aspects in his judgment, in the course of elaborate discussion, he has noted all the contentions raised by the parties, has carefully considered them. The learned Judge on a careful consideration of all aspects, on a proper interpretation of the, has expressed the view that no offence under the is disclosed against the firm which does not conduct or promote money circulation scheme or a chit fund, the 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, the opinion of the learned Advocate General of the State which lent support to the view taken by the learned Judge.
26. The view expressed by the learned Judge that the materials do not disclose that the firm is promoting or conducting a money circulation scheme, the has, therefore, no application to the firm meets with my approval, I agree with the same.
27. The Judgment in Civil Appeal No. 1130 of 1981 will also govern Civil Appeal No. 1129 of 1981.
28. Appeals dismissed.
2. Allowing the writ petitions, the High Court issued a writ of Mandamus directing the State Government, its concerned officers to "forthwith recall, cancel, withdrew the First Information Report .. all proceedings taken on the basis thereof", since the searches, seizures, arrests made in pursuance of the said F.I.R. are, according to the High Court, illegal, without jurisdiction. It has directed that the books, documents, moneys seized during the search be returned to the firm, its partners, including a sum of Rs. 52, 11, 930. Section 4 of theprovides that whoever contravenes the provisions of section 3 shall be punishable 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, adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year, the fine shall not be less than one thousand rupees.
3. Though the F.I.R. is riddled with the "and/or" clauses more appropriate in deeds of conveyancing, it is clear firm its tenor, 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 faili ng to err on the safe side, 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.Numerous persons lend their hard-earned monies in the hope o f earning high returns. It is notorious that, eventually, quite a few of them lose both the principal, the interest, for no project can succeed against the basic laws of economics. Sharp, wily promoters pay As money to, Bs to in order to finance interest at incredible rates, eventually, then high-risk investment made by them at the cost of the credulous lenders fails, the entire arrangement founders on the rock of foolish optimism.
4. The promoters, of course, have easy recourse to gadgets of the law of insolvency. It is difficult to hold that the lender, himself a victim of the machinations of the crafty promoter, is intended by the to be arraigned as an accused. I do not think that any civilised law can intend to add insult to injury.
5. 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. In the first place, the F.I.R. does not allege, directly or indirectly, that the firm was promoting or conducting a schemeof quick or easy money, dependent on any event or contingency relative or applicable to the enrollment of members into the scheme. Secondly, the F.I.R. does not contain any allegation whatsoever that persons who advanced or deposited their monies with the firm were participants of a schemeof quick or easy money, dependent upon any such event or contingency.
6. The F.I.R. bears on its face the stamp of hurry, want of care. It seems to assume, what was argued before us by Shri Som Nath Chatterjee on behalf of the prosecution, that it is enoughof section 2 (c) to show that the accused is promoting or conducting a schemeof quick or easy money, an assumption which I have shown to be fallacious. An essential ingredient of section 2 (c) is that the scheme for making quick or easy money must b e dependent on any event or contingency relative or applicable to the enrollment of members into the scheme.A First Information Report which does not allege or disclose that the essential requirements of the penal provision are prima facie satisfied, cannot form the foundation or constitute the starting point of a lawful investigation. In answer to the writ petitions filed by the accused in the Calcutta High Court, affidavits were filed on behalf of the prosecuting agency, which do not improve matters in any way. The affidavit filed by Arun Kanti Roy, Deputy Secretary, Finance Department, Government of West Bengal, alleges that:, It is clear from these averments that even at the stage when the State of West Bengal, its concerned officers submitted detailed affidavits to the High Court, there was no clear basis for alleging, no material was disclosed to show that, prima facie, the firm was promoting or conducting a scheme for making quick or easy money which was dependent upon an event or contingency relative or applicable to the enrollment of members in to that scheme.
7. The burden of the States song is that the scheme conducted by the accused generates black money, will paralyse the economy of the country. These are serious matters indeed, it is unquestionable that a private party cannot be permitted to issue bearer bonds by the back door. The fact that the accused are indulging in an economic activity which is highly detrimental to national interests is a matter which must engage the prompt any serious attention o f the State, Central Governments.
8. But the narrow question for our consideration is whether on the basis of the allegations made against the accused, there is reason to suspect that they are guilty of an offence under section 4 read with sections 3, 2 (c) of the. The allegation which we have reproduced in clause (ix) above from the affidavit of Arun Kanti Roy is the nearest that can be considered relevantof section 2 (c) of thes. But even that a llegation does not meet the requirement of that section since, what it says is that "the payment of quick, 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".This is too tenuous to show that the scheme is dependent upon an event or contingency of the description mentioned in section 2(c), apart from the fact that the only participation which is alleged as against the depositors is that they become members of the "investment scheme" by subscribing to it. There is no allegation even in any of the affidavits filed on behalf of the State of West Bengal, its concerned officers that the depositors, 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.
In R.P. Kapur v. The State of Punjab, the question which arose for consideration was whether a first information report can be quashed under section 561-A of t he Code of Criminal Procedure. The Court held on the facts before it that no case for quashing the proceedings was made out but Gajendragadkar J. speakingobserved that though ordinarily, criminal proceedings instituted against a n accused must be tried under the provisions of the Code, there are some categories of cases where the inherent jurisdiction of the Court can, should be exercised for quashing the proceedings. One such category, according to the Court, consists of cases where the allegations in the F.I.R.
Or the complaint, even if they are taken at their face value, accepted in their entirety, do not constitute the offence alleged; in such cases, no question of appreciating evidence arises, it is a matter merely of looking at the F.I.R. Or the complaint in order to decide whether the offence alleged is disclosed or not. In such cases, said the Court, it would be legitimateCourt 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, 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 Benga l v. S.N. Basak, in which it was held that the statutory powers given to the police under sections 154, 156 of the Code of Criminal Procedure to investigate into the circumstances of an alleged cognizable offence without authority from a Ma gistrate cannot be interfered with by the exercise of powers under section 439 or under the inherent powers conferred by section 561 A of the Code. It must be remembered that no question arose in that case as to whether, the allegations contained in the F.I.R. disclosed any offence at all.
9. The contention of the accused in that case was that the statutory power of investigation given to the police under Chapter XIV of the Code is not available in respect of an offence triable under the West Bengal Criminal Law Amendment (Special Courts) Act 1949, that being so, the investigation undertaken by the police was without jurisdiction. That contention was negatived and, therefore, the application filed by the accused under sections 439, 561A of the Code was dismissed . In Jehan Singh v. Delhi Administration, the application filed by the accused under section 561-A of the Code for quashing the investigation was dismissed as being premature, incompetent, but that was because the Court found (per Sarkaria J. page 797) that prima facie, the allegation in the F.I.R. if taken as correct, disclosed the commission of a cognizable offence by the accused. In their Lordships opinion, however, the more serious aspect of the case is to be found in the resultant interference by the court with the duties of the police.Just as it is essential that every one accused of a crime should have free access to a court of justice so that he may be duly acquitted if found not guilty of the offence with which he is charged, so it is of the utmost importance that the judiciary should not interfere with the police in matters which are within their province, into which the law imposes on them the duty of inquiry. In India, as has been shown, there is a statutory right on the part of the police to investigate the circumstances of an alleged cognizable crime without requiring any authority from the judicial authorities, it would, as their Lordships thin k, 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, the police are complementary, not overlapping, the combination of individual liberty with a due observance of law, order is only to be obtained by leaving each to exercise its own function, always, of course, subject to the right of the c ourt 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.
10. In such a case as the present, however, the courts functions begin when a charge is preferred before it, 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, immediately after the passage which I have extracted above, the Privy Council qualified its statement by saying;, The firm Sanchaita Investments commenced its business on July 1, 1975, its three partners contributing a total capital of Rs. 7000 (Rupees seven thousand). On December 2 5, 1978 an advertisement appeared in the "Hindu" in the name of firm, claiming falsely that its business was "approved by the Reserve Bank of India".
Since the representation was likely to mislead the public, the Reserve Bank advised the firm in M ay 1979 too issue a suitable corrigendum, which the firm did. The firm, its two partners, namely, Shambhu Prasad Mukherjee, Bihari Lal Murarka filed this writ petition in the High Court challenging the validity of the F.I.R. the proceedings arising out of the same including the validity of the searches, seizure of documents, papers, cash. The respondents in the writ petition were six. The first respondent was the State of West Bengal, Respondentswas the officer who had lodged the F.I.R..
11. Respondentwas the Assistant Commissioner of Police, Superintendent of Police, Bureau of Investigation, respondentwas the Investigating officer in the cases pending before the Chief Metropolitan Magistrate Calcutta. Respondent No. S was the Reserve Bank of India, Respondentwas the Union of India. In brief the case made by the firm, 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, 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, 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, out of the investments made by the firm, the firm pays the interest to the depositors, 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.I.R.. the case is further made that even if the allegations made in the F.I.R.. are assumed to be correct, there cannot be any question of any violation of the, no offence under the is disclosed. It is the positive case of the writ petitioners in the writ petition that the has no application to the firm. In the writ petition, the validity of the F.I.R.. the proceeding arising therefrom is challenged mainly on the ground that the F.I.R. does not disclose any offence under the which-does not apply to the firm, there can be question of any violation of any provisions of the which has no application to the firm at all.
In answer to the averments made in writ petition, an affidavit affirmed by Shri Arun Kanti Roy, was filed on behalf of respondent Nos. 1, 2, an affidavit affirmed by Shri Sunil Kumar Chakravorty on behalf of respondents Nos. 3, 4 was filed, an affidavit affirmed by Shri Rani Annaji Rao on behalf of the Reserve Bank of India was also filed. In the affidavit affirmed by Arun Kanti Roy, Deputy Secretary, Finance Department, Ex-officio Director of Small Savings, Government of West Bengal, on behalf of Respondents, 2, that is, the State of West Bengal, Shri B.K. Kundu, there is an assertion that the Respondents come within the mischief of the, they have violated S. 3 of the. The relevant averments are contained in paragraphs 6, 7, 8, 9 of the said affidavit, it is necessary to set out the same in their entirety:, With reference to paragraphs 3, 4 of the petition, I say that the petitioner firm accepts loans and/or deposits from all, sundry for varying periods without any authority of law.
12. Although the professed rate of interest of such deposit is at the rate of 12% per annum, the petitioner f irm was actually paying interest at the rate of 48% per a nnum, which was recently reduced to 36% per a nnum. The actual payment of such high rate of interest against the professed rate of 12% attracts huge amount of id le money into circulation, the investment of money as collected is not under the regulatory control of the Reserve Bank of India or any other agency of the State dealing with credit control in relation to the countrys econom y. 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 regu lated 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, 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 countrys economy.The term of the deposit are unilaterally determined without any scru tiny by the Reserve Bank of India or with reference to the norms as to the credit control which the said Bank lays down, follows from time to time. The acceptances of such deposits from the members of public with unrestricted us e of the moneys so collected are completely repugnant to the accepted modes of public savings, investment thereof for generation of goods, services contributing to the economic growth of the country. The entire process i s speculative in nature, directed towards luring away the investing public to the speculative market for making quick, easy money.
13. These are some of the activities which are sought to be banned by the banning p rovisions of the said Act, which has replaced similar regulatory measures contained in the several directions issued by the Reserve Bank of India under the Reserve Bank of India Act, 1934, to the various financial institutions, non-banking companies. The present Act is applicable not only to such companies but also to individuals, firms. All allegations contrary to, save as aforesaid are denied. With reference to paragraph 5 of the petiti on I call upon the petitioner to disclose full particulars of their deposit scheme, which is disclosed will go to show that the terms, conditions are wholly arbitrary, contrary to the economic norms.
14. The very basis of th e so called contractual arrangement between the petitioner firm, its depositors is founded on the fraudulent device to assure the people with a high rate of interest, the major portion of which is paid through unaccounted fo r money, thereby encouraging growth of such unaccounted for money in the hands of the investing public. The professed rate of interest is a mere subterfuge to provide a cloak of bona fide, legality over the under-ha nd transactions through which unaccounted for money comes into play in the market generating further unaccounted for money, a part thereof goes back to the depositors in the form of the balance of interest over 12% paid i n cash month by month. All allegations contrary to, save as aforesaid are denied. With reference to paragraph 8 of the petition I say that the petitioners have been very much working on the above scheme to which the depositors have subscribed.Whether such deposits are one time deposits, whether such deposits actually earn income in excess of the interest actually paid to the depositors or a matter of detailed investiga tion, which were in progress until the same was stopped by the order of the learned Court of Appeal passed on 8th January, 1981. From whatever particulars are so far available to the answering respondents it can be stated that the firm did not have so much income as the quantum of interest that was being paid by it, the irresistible conclusion from such state of affairs is that payment of interest was being made out of capital itself. All allegations contrary to, save as aforesaid are denied.
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, conducted by the petitioners tantamount to activity which is banned under the banking provisions of the said Act. No question of the depositors being ruined should arise if the petitioners had been running their business on sound economic line, had invested the fund collected from the depositors in safe, sound investment. The very fact that the petitioners are apprehensive of innumerable depositors being ruined goes to show that they engaged themselves, also the depositors in the speculative market, have rendered the investment insecure by reasons of the very nature of the business i.e. money circulation scheme transacted by them.
15.In the affidavit affirmed by Shri Sunil Kumar Chakraverty, Assistant Commissioner of Police, Deputy Superintendent of Police, Bureau of Investigation, Government of West Bengal, Finance, Taxation Department, filed on behalf of Respondents Nos. 3, 4, the deponent adopts the statements made in the affidavit of Arun Kanti Roy, the deponent denies that the searches, seizures were unlawful, illegal. The deponent further stated that as a result of the searches effected a mass of documents, a large amount of cash had been seized, the documents were being scrutinised. Further supplementary affidavits had also been filed. On consideration of the facts, circumstances of this case, the materials which were placed before the learned Judge, the learned Judge came to the conclusion that the did not apply to the firm, the learned Judge further held that the searches, seizures were also wrongful, illegal, improper;, in view of his finding the learned Judge quashed the proceedings, directed the return of all documents, the refund of cash monies seized, to the writ-petitioners.It appears from the judgment of the learned Judge that the matter had been very fully argued before him, the learned Judge in an elaborate judgment had considered the arguments advanced before him, thereupon recorded his findings, passed the order allowing the said writ petition. Against the judgment, order passed by the learned Judge, the State of West Bengal, its three officers have preferred this appeal with special leave granted by this Court. The writ petitioners, the Reserve Bank of India, Union of India have been made respondents in this appeal.
16. It does not appear that Union of India has participated in the proceedings before the learned Judge, no affidavit on behalf of t he Union of India appears to have been filed before the learned Judge. Mr. Som Nath Chatterjee, learned counsel appearing on behalf of the appellant has attached the judgment under appeal on the main ground that the learned Judge in this extraordinary jurisdiction should not have held that the has no application to the Respondent Firm, should not have on the basis of the said finding interfered with the investigation into the affairs of the firm. Mr. Chatterjee contends t hat the question of applicability of the will only come for consideration after the investigation has been completed, all relevant materials have been gathered on such investigation.
17. It is the contention of Mr. Chatterjee that at the investigation stage, the Court does not interfere, does not quash any proceedings before the investigation has been completed. In support of this contention, Mr. Chatterjee has referred to a number of decisions of this Court. I shall consider the relevant decisions referred to by Mr. Chatterjee at the appropriate time.
18. Mr. Chatterjee has submitted that after the investigation has been completed, all relevant materials have been gathered a charge under the may o r may not be framed against the appellant firm for violation of the provisions of the. It is his submission that if the materials collected do not indicate any infringement of the, no charge against the firm will be preferred, all the accused persons will be discharged; if, on the other hand, materials gathered disclose an offences under the, proper charge against the accused persons will be framed, it will be open to the accused persons to raise the plea in the course of the prosecution that no offence under the has been committed by them, the has no application to the transactions of the firm, to the firm. Counsel appearing on behalf of the appellant urged that such a n interpretation is likely to be very prejudicial particularly to officers of the judiciary who have to deal with cases brought up by the police, frequently give decisions which the police dislike.In such cases, the police ma y engineer a false report of a cognizable offence against the judicial officer, may then harass him by carrying on a prolonged investigation of the offence made out by the report. It appears to us that, though the Code of Criminal Procedure gives to the police unfettered power to investigate all cases where they suspect that a cognizable person can always seek a remedy by invoking the power of the High Court under Art. 226 of th e 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 polic e officer from misusing his legal powers". Relying on these decisions, the principles enunciated th erein, Mr. Chatterjee has argued that the learned Judge clearly erred in interfering with the investigation, quashing th e proceedings at the stage of investigation before framing of charges against the accused persons. Mr. Chatterjee argues that there is no allegation of mala fide in the instant case, the learned Judge has also come to a conclusion that there is n o case of any mala fide on the part of the appellants.
19. Mr. Chatterjee has submitted that the materials which have been gathered as a result of the investigation which could be carried on only for a short while go to indicate that the transacti ons of the firm are not above board, 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 large r sum by way of interest ranging between 36% to 48% is actually paid to the depositors, the amount which is paid in excess of the rate stipulated in the loan certificates is paid in cash in a clandestine manner, depriving, 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 otherwise accounted for results not only in generation of black- money, but para lyses 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, 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 has been alleged, it is his contention that the nature of business carried on by the firm indicates that the firm is conducting a Money Circulation Scheme. According to Mr. Chatterjee, Money Circulation Scheme by virtue of its definition in S. 2 (c) of the means any scheme by whatever name called, ing of quick or easy money.
20. It is his argument that the transactions disclose that the firm, the depositors are both trying to make quick or easy money, the scheme being that the depositors will deposit money against certific ate stipulating interest to be paid @ 12% but they will in fact be paid interest at a much higher rate, thereby make quick or easy money, the firm invests the money received from the depositors in such transactions as to enable them to earn easy or quick money. Mr. Chatterjee has further argued that money circulation scheme has to be interpreted to mean any schemeof quick or easy money, orof 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 subscript ion. Further investigation according to Mr. Chatterjee, can only show whether the scheme of making quick or easy money depends on any contingency relative in the enrollment of members into the scheme. Mr. Chatterjee submits that the qu estion of proper interpretation of the provisions of the, also of what money circulation scheme means, should come up only after investigation has been completed, all relevant materials have been collected.It is Mr. Chatterjees submission that the interpretation of the provisions of the aud particularly what Money Circulation Scheme means, is not to be made in a hypothetical way in the absence of relevant materials being gathered on completion of investigation. Mr. Ch atterjee has argued that after all the materials have been collected on completion of the investigation, it may be that materials may show that the firm is not conducting a Money Circulation Scheme, no charge against the firm may at all be preferred; if however, on the other hand, the materials, indicate that the firm is conducting a money circulation scheme, a charge is preferred, it will be open to the accused persons to take the defence that the business conducted b y them is not one which will be considered to be a money circulation scheme within the meaning of the. As I have earlier observed, the main grievance of Mr. Chatterjee is that the Court should have interfered at the stage of investigation, quashed the proceedings.
Cases may also arise where the allegations in the First Information Report or the complaint, even if they are taken at their face value, accepted in their entirety, do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged is disclosed or not. In such cases it would be legitimateCourt 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 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 argum ent that the Learned Judge has carefully considered the materials which have been placed before him including the F.I.R. he has properly analysed the provisions of the, on a proper interpretation of the, on a proper appreciation of the materials which were there before the Learned Judge, the Learned Judge has come to the conclusion that no offence under the is disclosed, the has no application to the firm.Mr. Sen argues that for a proper appreciation of the question whether the materials disclose any offence under the, it is imperative to interpret the. He contends that it will not be a proper approach to leave the question of interpretation to the stage after the investigation is complete, as according to Mr. Sen, there can be no investigation unless an offence has been disclosed. Mr. Sen argues that if the materials do not disclose any offence, no investigation can be permitted to find out whether as result of the investigation an offence may be disclosed or not.
21. Mr. Sen submits that investigation can legitimately go on, once an offence is disclosed for collecting materials for establishing, proving the offence. It is the contention of M r. Sen that the case of the-appellants is that the firm is conducting money circulation scheme which is banned by the. Mr. Sen argues that to find out whether the firm is conducting a money circulation scheme, it is necessary to consider what a money circulation scheme is within the meaning of the, to find out whether on the materials alleged in the F.I.R.. also in the affidavits, it can be said that the business carried on by the firm is one in the nature of conducting a money circulation scheme.
22. Mr. Sen has argued that the learned Judge in his judgment has correctly interpreted what constitutes money circulation scheme within the meaning of the, it is the argument of Mr. Sen that such interpretation is absolutely essential to find out whether the allegations made in the F.I.R. make out a case that the firm is conducting a money circulation scheme. Mr. Sen submits that the materials on record including the allegations made in the F.I.R. even if they are all assumed to be correct, do not go to show that the firm is conducting a money circulation scheme; and, in that view of the matter there can be no investigation, if no offence under the is disclosed.Analysiag the F.I.R. the other materials which have 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, is now paying interest @ 36%. The amount of interest paid in excess of the stipulated r ate of 12% is paid in cash in a clandestine manner to the depositors. The excess amount of interest paid is not accounted for, 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, 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.
23. The appeal before us has been argued at great length. A number of decisions have also been cited from the Bar. I have already referred to some of the decisions which were cited before us. I do not propose to consider all the case which were referred to in the course of argument by the learned counsel appearing on behalf of the parties as I 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, circumstances of the case has noted the arguments which were advanced before him, 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 t he 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. The complaint alleges violation of S. 3 of the.
24. In other words, the complaint is that the fir m is promoting or conducting a prize chit or a money circulation scheme. The definition of prize chit has been earlier set out. I have also earlier analysed the F.I.R. the other materials on the basis of which the complaint is made, the materials which have been placed before the Court. The materials do not indicate any thing to disclose that the firm is promoting or conducting any prize chit.
I may also here note that no arguments have been advanced on behalf of the appellants that the firm is promoting or conducting any prize chit;, 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, Reasons of the may suggest that the prize chit, 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, 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, distinct f or the purposes of the;, promoting or conducting either prize chit or any money circulation scheme or both must be held to he an offence under the.
Judged from the point of view of the firm, there is nothing to indicate that the firm makes any investment in consultation with its depositors. The materials only indicate that the firm indulges i n high risk investments, also advances monies to political parties. Neither of these acts appears to be illegal, they do not go to show that the firm makes easy or quick money.lt is no doubt true that the materials go to show that the firm plays a larger amount by way of interest than payable on the basis of the rates stipulated in the loan certificate, the firm pays the excess amount of interest to the depositors in a clandestine manner. The clandestine manner of payment of interest in excess of the stipulated rate does not, in any way, indicate the existence of any scheme for making quick or easy money. It is again to be pointed out that in any event the mate rials do not indicate that the payment of interest by the firm in excess of the stipulated rate is in any way dependent on any event or contingency. There is nothing to indicate any schemeof the money by the firm from its depositors as a consideration for promise to pay the interest in excess of the stipulated rate, also to pay back principal amount on the expiry of the term dependent in any way on any event or contingency relative or applicable to the enrollment of new depositors, considering the depositors to be members.
I am, therefore, of the opinion, that not any, of the requirements of a money circulation scheme is satisfied in the instant case. As there is no money circulation scheme, there can be no scheme as contemplated in the in view of th e definition of scheme in the Rules. The materials, appear to disclose violation of revenue laws. They, however, do not disclose any violation of the.
25. The materials do not disclose that the firm is promoting or conducting money circulation sc heme, the question, therefore, of any violation of S. 3 of the does not arise in the instant case. As the firm is not conducting or promoting a money circulation scheme, as no case is made that the firm is conducting or promoting a chit fund, the 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 con clusion to which l have come. I find that the learned Judge has very carefully, elaborately considered all the aspects in his judgment, in the course of elaborate discussion, he has noted all the contentions raised by the parties, has carefully considered them. The learned Judge on a careful consideration of all aspects, on a proper interpretation of the, has expressed the view that no offence under the is disclosed against the firm which does not conduct or promote money circulation scheme or a chit fund, the 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, the opinion of the learned Advocate General of the State which lent support to the view taken by the learned Judge.
26. The view expressed by the learned Judge that the materials do not disclose that the firm is promoting or conducting a money circulation scheme, the has, therefore, no application to the firm meets with my approval, I agree with the same.
27. The Judgment in Civil Appeal No. 1130 of 1981 will also govern Civil Appeal No. 1129 of 1981.
28. Appeals dismissed.
Advocates List
Somnath Chatterjee, M. Ramamurthi, S. C. Birla, A.R. Sen, S. S. Ray, Kapil Sibal, B. Gupta, T.R. Bose, Rathin Das, Tarun Kumar Bose, D. Mandal, Miss Bina Gunpta, O.P. Khaitan, K. L. Hathi, Mrs. H. Wahi, Mrs. Sarla Sahedad Puri, Advocates.
For Petitioner
- Shekhar Naphade
- Mahesh Agrawal
- Tarun Dua
For Respondent
- S. Vani
- B. Sunita Rao
- Sushil Kumar Pathak
Bench List
HON'BLE CHIEF JUSTICE MR. Y. V. CHANDRACHUD
HON'BLE MR. JUSTICE A. VARADARAJAN
HON'BLE MR. JUSTICE A. N. SEN
Eq Citation
(1982) 1 COMPLJ 217 (SC)
[1982] 3 SCR 121
(1982) 1 SCC 561
AIR 1982 SC 949
1982 CRILJ 819
1982 (1) SCALE 38
LQ/SC/1982/36
HeadNote
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