1. The petitioner No. 1 is a firm duly registered under the Indian Partnership Act carrying on business as financiers and investors and has its principal office and/or place of business at Nos. 5 and 6, Fancy Lane, Calcutta, 2. The petitioners Nos. 2 and 3 are partners along with one Swapan Kumar Guha of the petitioner No. 1 firm and are citizens of India. 3. In its business of financiers and investors, the petitioner firm accepts loans and/or deposits from all kinds of persons for different periods repayable with interest at the rate of 12 per cent per annum.
4. Under the terms of the deposit, the depositors have the right to withdraw the sum deposited with the firm at any time before the expiry of the original period of deposit in the case, however, of such premature withdrawal, the depositor loses interest of 1% and is paid interest at the rate of 11% per annum. All such deposits as are made by depositors and accepted by the firm are repaid by the firm with stipulated interest upon the expiry of the original period of deposit, There are other terms of the loan agreement which are not material for our purposes. According to the petition, in the context of the petitioner's business, the terms 'deposit' and 'depositor' are terms of convenience, the real nature of the transaction being the obtaining of loans by the firm for its aforesaid business from the public and repayment thereof with interest.
5. Under the terms and conditions of the deposit contractually binding the firm and its depositors, the petitioner firm has the liberty to repay the amount with full interest at any time before the expiry of the original period of deposit. In the event of such repayment by the firm, the firm is not required under the terms and conditions aforesaid, to give any reason.
6. In the year 1978, the Indian Parliament passed an Act called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (hereinafter referred to as the Act). The Act received the assent of the President on the 12th December, 1978.
7. Section 2 of the Act contains the usual definition clause and, in so far as is material for our purpose, may be set out below:
Section 2(a) defines "conventional chit." as follows:
2 (a) 'conventional chit' means a transaction whether called chit, chit fund, kuri or by any other name by or under which a person responsible for the conduct of the chit enters, into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or certain quantity of grain instead) by way or periodical instalments for a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction, or by tender or in such other manner as may be provided for in the chit agreement, be entitled to a prize amount.
Explanation -- In this clause 'prize amount' shall mean the amount, by whatever name called, arrived at by deducting from out of the total amount paid or payable at each instalment by all the subscribers,
(i) the commission charged as service charges as a promoter of a foreman or an agent; and
(ii) any sum which a subscriber agrees to forego, from out of the total subscriptions of each instalment, in consideration of the balance being paid to him;
(c) '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 enrolment 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;
(e) 'prize chit' includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter, foreman, agent or in any other capacity, monies in one lump sum or in instalments by way of contributions or subscriptions or by sale of units, certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings, mutual benefit, thrift, or any other scheme or arrangement by whatever name called, and utilises the monies so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes, namely;
(i) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind, whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement;
(ii) refunding to the subscribers or such of them as have not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected, with or without any bouns, premium, interest or other advantage by whatever name called on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional;
8. Section 3 is really the banning section and runs as follows:
"No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme."
Section 4 contains the penalty for contravention of Section 3 of the Act and makes it punishable with imprisonment which may extend to three years, or with fine which may extend to five thousand rupees, or with both.
9. Section 7 of the Act confers the power on any police officer not below the rank of an Officer-in-Charge of a Police Station, to enter any premises subject to certain conditions. It also empowers such police officer to search the premises and persons whom he may find therein, it confers further powers to take into custody 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 the transactions prohibited by the Act. There is further power to seize all things found at the said premises on similar grounds,
10. Section 7(2) of the Act empowers any officer authorised by the State Government, which is the implementing authority under the Act, to enter into and search any premises, examine any person, or order production of documents, books or any other literature found in the said premises.
11. Sub-section (3) of Section 7 of the Act is very material for our purpose and is set out hereinbelow:
"All seraches under this section shall be made in accordance with the provisions of the Code of Criminal Procedure, 1973."
12. These are the material provisions of the Act for our purposes.
13. Turning to the facts, according to the petition, all of a sudden on Saturday, the 13th December, 1980 between 12 and 12-30 noon the respondent No. 4 along with 5 or 6 other persons and/or officers unknown to the petitioners Nos. 2 and 3 came to the said office premises of the firm. The petitioner No. 2 was present at the office at that time. The number of persons, who came with the respondent No. 4 augmented from time to time until it rose about 15 or 16 persons. The respondent No. 4, in spite of requests, failed to produce any search warrant but went on indiscriminately searching the premises of the office and seized all books, papers and documents including the books of accounts of the firm for the current year. The respondent No. 4 also seized a sum of Rs. 42,16,930/- lying in the office. The petitioner Nos. 2 and 3 were arrested and thereafter enlarged on bail.
14. Similar indiscriminate search was made at the residential premises of Swapan Kumar Guha the other partner who was then out of Calcutta on the 13th December 1980.
15. From the residence of petitioner No. 2 a sum of Rs. 9,95,000/- belonging to the petitioner firm was seized.
16. On or about 15th December, 1980 the petitioners applied for and obtained a copy of the First Information Report through the Court of the Chief Metropolitan Magistrate, Calcutta. The first Information Report is very material for the purpose of the arguments in the present case and is set out in full hereinbelow:
To The Deputy Superintendent of Police, Bureau of Investigation, 10, Madan Street, Calcutta 72.
Sir, On a secret information that "Sanchaita Investments of 5-6, 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, praticipating in those, and/or receiving and remitting monies in pursuance of such chits and/or schemes in violation of the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act 1978, inquiry was held secretly to verify correctness of otherwise of the aforesaid secret information. Enquiry reveals that the said 'San-chaita Investments' is a partnership firm, partners being Shri Bihari Prasad Murarka, Sri Sambhu Mukherjee and Shri Swapan Kumar Guha and that it was floated in or around 1975. Enquiry further reveals that the said firm had been offering fabulous interest @48% per annum to its members until very recently. The rate of interest has of late been reduced to 36% per annum. Such high rates of interest were, and are being paid even though the loan certificate receipts show the rate of interest to be 12% only. Thus, the amount in excess of 12% so paid clearly shows that the 'Money Circulation Scheme' is being promoted and conducted for the making of qucik and/or easy money, prizes and/or gifts in cash were and are also awarded to agents, promoters and members too.
In view of the above, Sarbasree Bihari Prasad Murarka, Sambhu Mukherjee and Swapan Kumar Guha appear to have been carrying on business in the trade name of 'Sanchaita Investments' in prize chits and money circulation scheme in violation of Section 3 of the Prize Chits and Money Circulation Scheme (Banning) Act 1978 are therefore, punishable under Section 4 of the said Act. Necessary action may therefore, be kindly taken against the aforesaid offenders along with other accomplice as provided in the law.
Yours faithfully, sd. Illegible, 13-12-80 Commercial Tax Officer, Bureau of Investigation."
17. It is this First Information Report and the investigation started on the basis thereof that are challenged before me in the present application.
18. Before I come to the various legal controversies that have been raised before me, it would be necessary to set out some more facts which were adverted to at different times by different parties. In Paragraph 21 of the petition it is stated that after the promulgation of the Act the respondent State of West Bengal after a scrutiny of all relevant materials made a list of all persons, firms or institutions or concerns or companies whose business came within the mischief of the Act and published the same through the medium of newspapers. Annexure "D" to the petition .contains such a list published by the respondent No. 1 which was advertised in the Statesman, Calcutta Edition on the 25th September, 1980. From the list it appears that no less than 113 companies firms or institutions were included therein. The significant fact that was frequently referred to by the learned advocates for the petitioners is that the name of the petitioner No. 1 does not figure in the said list. I asked the learned advocate appearing for the respondents as to whether the name of the petitioner No. 1 has been published in any subsequent list. According to the learned lawyers for the respondents, there has been no such publication. A photo copy of the advertisement mentioned above as published in the Statesman was tendered by consent of parties and made part of the records of this case. The opening words are as follows:
"The Deputy Secretary Finance Department and Ex-Officio Additional Director, Small Savings, Government of West Bengal, who is the Authorised Officer, issued notices under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978 and rules made thereunder to the following companies/organisations to submit plans for winding up Prize Chits/Money Circulation Schemes conducted by them in this State." The second paragraph of the advertisement is also worth noting and is as follows :
"In pursuance of the notice, a few of the Companies mentioned above have submitted their Scheme for winding up. Attention of the defaulting Companies is drawn to the penal provisions of the Prize Ghits and Money Circulation (Banning) Act, 1975.
This is, however, not a notice to those who are covered by any order of Court." .
19. I may record that on behalf of the Reserve Bank of India the respondent No. 5 herein an affidavit was originally filed on the 12th January, 1981 by Rani Annaji Rao, in Paragraph 7 whereof it was stated that the Reserve Bank of India forwarded to the State of West Bengal a list of 109 concerns which were limited companies and which were covered by the Reserve Bank of India's direction to miscellaneous Non-Banking Companies Conducting Prize Chits. On the 22nd January, 1981, the same deponent has filed a further affidavit elaborating the circumstances in which the list was sent by the Reserve Bank of India and enclosing both the list and the relevant correspondence in that behalf. I do not propose to elaborate this factual aspect because it will have little bearing on the legal position,
20. It appears from the petition and its Annexures that a question was asked in the Rajya Sabha with regard to the financial activities of the petitioner No. 1. The answer of Mr. R. Venkataraman, the Finance Minister of Government of India is set out Annexure "D" to the petition and the relevant portion may be set out hereinbelow:
"Presumably, Hon'ble member has in mind 'Sanchaita Investments' with present address at 5 & 6, Fancy Lane, Calcutta 1. This firm is reported to have been established in 1&75 and is having 3 partners viz. Shri S.K. Guha, B.L. Murarka and S.P. Mukherjee. As this firm is an unincorporated body, Reserve Bank have no statutory control over this firm and Reserve Bank's aforesaid directions are not applicable to it. The Reserve Bank has no direct information regarding this firm. However, complaints had been made against this firm alleging that this organisation was offering rates of interest much higher than 12% indicated in the loan certificate receipts issued by it and it was involved hi financing high risk investments/film industry and smuggling. The allegations were enquired into by the West Bengal State Authorities who came to the conclusion that the firm advanced money at the usual rates of interest ranging from 15% to 18% to film industry and others but financing of smugglers could not be substantiated,"
21. In the original affidavit-in-opposition filed on behalf of the Reserve Bank of India quite a number of documents had been annexed At Paragraph 3 of the affidavit it is stated that at the time of the hearing of the application before me as also in the Court of Appeal where this matter went up from the interim order which I had passed, repeated submissions were made on behalf of the petitioner that the Reserve Bank of India should bring such facts to the notice of the Court as are within its knowledge. According to that paragraph, a similar view was expressed by me at the time of the hearing of the application for interim order. As such the Bank has been advised to bring all the facts to the notice of the Court. From the affidavit as also the Annexures it appears that one Shri Rudolph L. Rodrigues a member of Parliament wrote a letter to Shri Chowdhury Charan Singh, the then Deputy 'Prime Minister of India alleging that the Sanchaita Investments, the petitioner No. 1 was allegedly doing business of parallel banking in black money. A copy of that letter was forwarded to the Department of Non-Banking Companies, Reserve Bank of India. In reply to that letter the Reserve Bank pointed out its inability to carry out any investigation as to the fact of the petitioner firm in the absence of any statutory authority. It may be mentioned at this stage that under the relevant statutory provisions the Reserve Bank has the power to issue directions to all Companies and only to firms which have a capital of more than Rs. 1,00,000/-. Admittedly, the capital of the petitioner No. 1 is Rs. 7,000/-.
22. On the 30th September, 1980 a letter was addressed from the Deputy Secretary, Finance Department, Government of West Bengal to the Chief Officer, Department of Non-Banking Companies Reserve Bank of India which is as follows:
"Sir, I am directed to state that a question has arisen whether the business carried by Sanchaita Investments, 5 & 6, Fancy Lane, Calcutta 1 come within the purview of the Prize Chits & Money Circulation Schemes (Banning) Act, 1978. A copy of a receipt issued by the concern is endorsed. It will appear therefrom terms and conditions under which deposits are accepted.
I have been directed to request you to kindly examine the matter and let us know as quick as possible if the business of the above concern come within the purview of the Act. In case the business does not come within the purview of the Act, it may kindly be intimated under provisions of which Act conduct of such business is regulated and what are the regulatory provisions of the Act."
23. On the 1st October, 1980 Mr. Ashok Mitra, the Finance Minister of the respondent No. 1 addressed a letter to Mr. Venkataraman, the Finance Minister, Government of India to the following effect.
"Dear Shri Venkataraman, In the context of the action being takes 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 'Sanchaits Sayings Schemes (P) Ltd.' which is to be distinguished from "San-chaita Investments". It appears that the organisation called 'Sanchaita Investments' is receiving large amount of monies from the public ostensibly as loans, and in lieu they are issuing loan certificates receipts. While we have no documentary evidence, the news is strongly circulating in the market that the organisation is in fact offering rates of interest as high as 30 to 40 per cent even though the loan certificate receipts indicate a rate of interest of 12 per cent only. There seems reasonable grounds for suspicion investments which only can enable them to pay such rates of interest. Since the security of monies deposited by the public is involved, we would suggest that thorough enquiry of this organisation particularly for finding out whether they are infringing provisions of any relevant statute. It is, I feel, necessary to conduct such an investigation on an urgent basis since large amounts of public monies are reported to be kept with this organisation which does not seem as yet to have been subjected to any regulatory control. We are meanwhile awaiting a reply to our reference (copy enclosed) to the Reserve Bank Money Circulation Scheme (Banning) Act, 1978 to this organisation.
With regards, Yours sincerely, (Ashok Mitra)
24. From the copy annexed to the affidavit of Rao it appears that a copy of that letter dated 1st October, 1980 was handed over to the Deputy Governor of Reserve Bank of India Dr. K.S. Krishnaswamy at Calcutta.
25. On the 22nd October, 1980 Dr. Krishnaswamy sent a reply to Mr. Ashok Mitra with reference to that letter which is in the following terms:
"You might recall that during my recent visit to Calcutta, you had sent me a copy of your D. O. Letter dated October 1, 1980 to Shri Venkataraman. Union Minister for Finance as also of a letter dated September 30, 1980 addressed to our Chief Officer, DNBC, Calcutta, in connection with the above firm. I have had the position examined by our Legal Department. According to them (Vide extract of the note dated 17th October, 1980 enclosed for your confidential information), the acceptance of loans simpliciter by the firm by issue of receipts (as per the specimen received by us from om Calcutta Office) without floating any scheme or arrangement would not ordinarily be covered by the definition of "Prize Chit" and hit by the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. However, you may also like to consult your legal Adviser on the subject.
2. As you may know, there are a few writ petitions pending in the Calcutta High Court where the interpretation of Section 2(e) of the Banning Act is involved. In that context, I have thought it advisable to write to you on a confidential basis, rather than send a separate official reply. I shall therefore be grateful if you could leave instructions with your staff to keep this matter and the views of our Legal Department strictly confidential.
With warm regards, Sd. K.S. Krishnaswamy Enclos: 2 sheets Dr. Ashok Mitra, Minister of Finance, Development & Planning & Excise, Govt. of West Bengal, Calcutta."
26. It may be mentioned in this connection that in the affidavit of Arun Kanti Roy affirmed on behalf of the respondents Nos. 1 and 2 on the 13th January, 1981, it is stated in Paragraph 6 that the petitioner firm accepts loan and/or deposits from all and sundry for varying periods without any authority of law. It is further stated that although the proposed rate of interest of such deposit is at the rate of 12 per cent per annum the petitioner firm actually paid interest at the rate of 48 per cent per annum which has recently been reduced to 36 per cent per annum. According to that paragraph, the actual payment of such high rate of interest against the professed rate of 12 per cent attracts huge amount of idle money into circulation and the investment of the 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 which is central in relation to the country's economy. The acceptance of such deposit from the members of the public with unreasonable power to determine the terms, rate of interest and manner of use of the monies so collected are completely repugnant to the accepted modes of public saving and investment thereof for generation of goods and services contributing to the economic growth of the country,
27. It should be mentioned that in the affidavit-in-reply filed on behalf of the petitioners and affirmed by Beharilal Murarka the petitioner No. 3 it is stated in Paragraph 37 as follows:--
"I state that by Section 7 of the said Act all provisions of the Code of Criminal Procedure relating to search and seizure including those of Section 165 thereof have been made applicable and deny that any recording as required by Section 165(1) or Section 165(3) of the Code was made or that there was any reason to believe as required in Section 165(1) that there was any material for entertaining such belief or that any recording was made with regard to the said alleged belief or the particulars or things to be seized or any recording was made with regard to authorising an officer. From the records before the Chief 'Metropolitan Magistrate, certified copies whereof to date have been obtained it also does not appear that the provisions of the Act including those of Section 165(1) or Section 155(3) or Section 165(5) have been complied with."
28. Although these grounds are stated for the first time in the affidavit-in-reply and do not find place in the petition. I thought that for, the ends of justice, these points should be allowed to be canvassed. I called upon the respondents to file further affidavits dealing with these allegations as they have had no other opportunity of dealing with the same. Although some affidavits have been filed subsequently, as will appear from what has been stated hereinafter, no materials on this aspect of the matter appear to have been brought to the notice of this Court by the respondents.
29. In Paragraph 62 of the affidavit-in-reply of Murarka mentioned above, it is stated that in spite of having been in possession of very important materials and records pertaining to the business of the petitioner firm coming from the highest authorities including the principal financial institution of the country and the Central Ministry, the respondent No.- 1 has deliberately suppressed the same and did not produce any materials at the hearing either on December 24, 1980 before me or on any day between the 5th January and the 8th January, 1981 before the Court of Appeal or even in the Special Leave petition filed in the Supreme Court of India. In the same pragraph, it is reiterated, as stated in the petition, that the petitioners have been caught in the cross-fire of Centre State clash of authorities. As mentioned above, a further affidavit-in-opposition was filed by Sunil Kumar Chakraborty on the 21st, January, 1981 pursuant to the leave granted by me. Paragraph 3 of the affidavit deals with the allegations contained in Paragraph 37 of the affidavit-in-reply. Material portions of that paragraph may be set out hereinbelow:--
I state that recording as required by Sections 165(1) and 165(3) of the Code of Criminal Procedure was made in the case diary as provided in Section 172 of the said Code. I state that there was sufficient reason to believe that many things necessary for the purpose of investigation into the offence would be found. I state that I issued orders in writing to the Inspectors of Police attached to the Bureau specifying the places to be searched and as far as possible the things for which searches were to be made as required under Section 165(3) of the said Code. I state that the provisions of the Act including those of Sections 165(1) and 165(2) and 165(3) of the Code have been duly complied with."
30. Before I complete the narration of facts, it is necessary to point out that Mr. A.K. Sen who appeared in a connected Rule which was obtained by a partner of the petitioner firm who was not in Calcutta when the earlier Rule was obtained and is marked Swapan Kumar Guha v. The State of West Bengal (Matter No. 37 of 1981) wanted to urge a point which does not appear to have been specifically pleaded in the petition. In that view of the matter, and, again for the ends of justice, I felt that the petitioner in the connected Rule should be given a chance to file a further affidavit taking those grounds. As I gave leave to the petitioner in the connected Rule, Mr. R.C. Deb appearing for the petitioner in the present case asked for and obtained a similar leave. Pursuant to that leave, an affidavit has been filed by Murarka on the 22nd January, 1981. In Paragraph 7, the additional grounds have been taken. The principal contention of Mr. Sen on this aspect of the matter was that Section 19-A of the Bengal Finance (Sales Tax) Act, 1941, which circumscribes the power of the respondent Nos. 2 and 3 in relation to search and seizure, authorises such search and seizure only in connection with any violation of the provisions of the Bengal Finance (Sales Tax) Act, 1941 or any offence thereunder. As, admittedly, the petitioners were not guilty of any violation of that Act nor were they guilty of any offence thereunder the respondent Nos. 2 and 3 had no power, authority or jurisdiction to authorise search and seizure in respect of the petitioners.
31. In answer to these allegations, Sum'1 Kumar Chakraborty has affirmed an affidavit on the 27th January, 1981 on behalf of the respondents. In Paragraph 7 of the affidavit, it is stated that by a Notification dated the 10th December, 1980 the Governor in exercise of the power conferred by the sub-section (2) of the Section 7 of the Act, authorised Sarbasree Subankim Chatterjee Arabinda Bose, Asoke Kumar Kanjilal, Hemendra Nath Dasgupta, Ranjit Kumar Dey, all Inspectors of Police attached to the Bureau of Investigation constituted under Section 19A of the Bengal Finance (Sales Tax) Act, 1941 to exercise the powers specified in the said sub-section throughout the State of West Bengal.
32. Similarly, the Governor, in exercise of the abovementioned power, by two Notifications authorised nine Commercial Tax Officers and fourteen Commercial Tax Inspectors attached to the Bureau of Investigation constituted under Section 19A of the Bengal Finance (Sales Tax) Act, 1941 to exercise powers specified in the said sub-section throughout the State of West Bengal. By an Order dated the 16th December, 1975 the Governor appointed Shri Chakraborty, the deponent, who was the Deputy Superintendent of Police, West Bengal as an Assistant Commissioner of Police in the town of Calcutta and its suburbs and also as a Deputy Superintendent of Police for the rest of West Bengal with effect from the 23rd June, 1975 and until further orders. The relevant Orders and Notification have been annexed to the affidavit of Chakraborty affirmed on the 27th January, 1981 to which it will be necessary to advert at a later stage.
33. This completes the narration of the relevant facts in this case.
34. Mr. R.C. Deb appearing for the petitioners in this case opened with the principal contention that the F. -I. R. in the present case, which I have set out in full, does not disclose any offence under the Act. Mr. A.K. Sen, who argued on behalf of the petitioner in the second Rule advanced a similar contention. Mr. Somnath Chatterjee appearing for the respondents Nos. 1 and 2 argued with reference to various cases, which will be dealt with later, that in the contentions of Mr. Deb and Mr. Sen, the F. I. R. has been put on too high a pedestal. According to Mr. Chatterjee, an F. I. R. is of a limited value and an investigation can be started even without an F. I, R.
35. It seems to me however that a more fundamental question, which has been also fully argued before me by all the parties, is whether the petitioners come within the mischief of the Act. This ii because if the Act does not apply to the petitioners, then the question of the F. I. R. disclosing any offence under this Act would not arise. In other words, a finding on this fundamental question of the applicability of the Act may conclude the matter if it is found that the Act does not apply to the petitioners. Although in a case of this description, the decision cannot be rested on one ground alone, and I certainly do not propose to do so, I will deal first with this fundamental question whether the Act applies to the petitioners or not. Needless to say, if I come to the conclusion that this Act applies to the petitioner, the further question as to whether the F. I. R. disclosed any offence under the Act would be pertinent. If however I come to the opposite conclusion, the enquiry as to the F. I. R, would lose much of its significance. With these observations, I now deal with the question of the applicability of the Act in so far as the petitioners are concerned.
36. The Act in Section 2 thereof, as already mentioned, contains various definitions of which two are relevant for our purpose. One is the definition of "Money Circulation Scheme" which I have set out thereinabove contained in Section 2(c) of the Act and the other is of "Prize Chits" which is contained in Section 2(e) of the Act and which also I have set out hereinabove. Able arguments were advanced by the learned lawyers appearing for all the parties on the analysis of these twp definitions which I shall now deal with.
37. According to Mr. Somnath Chatter-jee, Section 2(c) which, defines "Money Circulation Scheme" contains four limbs:--
(a) Any Scheme for the making of quick or easy money.
(b) Any Scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money.
(c) Oh any event or contingency relative or applicable to the enrolment of members into the scheme.
(d) Whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.
38. It was not disputed that limbs (a) and (b) referred to two different type of schemes both of which come within the definition. The real controversy centered around the question whether limb (c) qualifies limbs (a) and (b) or not. Both Mr. Deb and Mr. Sen emphatically asserted that limbs (c) qualified both (a) and (b). In other words, Scheme (a) and Scheme (b) were both dependent on an 'event' or 'contingency' which, in their submission, meant a chance.
39. Before I come to the Dictionary meaning of the expressions 'event and 'contingency', it will be useful to set out Mr. R.C. Deb's analysis of Section 2(c) of the Act. According to Mr. Deb, although he analysed Section 2(c) in a different manner it consists of four limbs, viz.
A. "Money Circulation Scheme" means any scheme, by whatever name called, for the making of quick money on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money is derived from the entrance money o the members of such scheme or periodical subscriptions.
B. "Money Circulation Scheme" means any scheme, by whatever name called, for the making of easy money on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money is derived from the entrance money of the members of such scheme or periodical subscriptions.
C. "Money Circulation Scheme" means any scheme, by whatever name called for the receipt of any money as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money is derived from the entrance money of the members of such scheme or periodical subscriptions.
D. "Money circulation scheme" means any scheme, by whatever name called, for the receipt of any valuable thing as the consideration for a promise to pay money on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such thing is derived from the entrance money of the members of such scheme or periodical subscriptions.
40. According to Mr. A.K. Sen "Money circulation scheme" by reason of its definition in Section 2(c) of the Act must necessarily have the following features:--
1. Membership which necessarily means restricted number of persons as members having equal rights qua members.
2. Subscription or contribution of membership fees either in one lot or in instalments is pooled.
3. Distribution from the pool or the fruits of the investment of the common fund not equally but unequally.
4. The unequal distribution is dependent upon an event or contingency relative to or applicable to the enrolment of members into the scheme.
41. Coming to the Dictionary meaning of the various expressions my attention was drawn to Jowitt's Dictionary of English Law by John Burke, Volume 2 (page 1610) according to which a "Scheme" means "a document containing provisions for regulating the management or distribution of property, or for making an arrangement between persons having conflicting rights."
42. Mr. Chatterjee appearing for the respondent No. 1 also referred to various Dictionaries for the meaning of the word "scheme". According to the Chambers's --Twentieth Century Dictionary -- New Edition, 1972 (page 1208) "scheme" means "a plan of purposed action for achieving an end; a project; a programme of action". According to Shorter Oxford English Dictionary, 3rd Edition (page 1804) it means "a plan, design, a programme of action."
43. Similarly in Chambers (page 1106) "quick" means "swift; speedy, rapid". According to Random House Dictionary of the English Language (College Edition) at page 1034 it means "carrying with promptness and rapidity, prompt, swift or rapid".
44. The expression "easy" as pointed out by Mr. Chatterjee means in Chambers (407) "Without difficulty; easy money means money made without much exertion or difficulty". In Shorter Oxford Dictionary it means "Characterised by ease or rest; comfortable; without trace of effort", In Random House Dictionary it means "not difficult, requiring little effort or labour".
45. Similarly, the expression "event" was also referred to for its Dictionary meaning. Both Mr. Naranarayan Gooptu and Mr. Somnath Chatterjee handed up the Dictionary meaning of the expression "event" which do not tally in all particulars. So I propose to set out both. According to Mr. Chatterjee event in Shorter Oxford Dictionary (642) and Random House (457) means "an occurrence, consequence". In Chambers (452) it means "that which happens, result, any incidence or occurrence." According to Mr. Gooptu the expression "event" in Random House (457) means "1. Anything that happens or is regarded as happening; an occurrence, esp. one of some importance.
2. the outcome, issue or the result at anything; consequence".
According to Shorter Oxford Dictionary (642) according to Mr. Gooptu it means "1. An incident, occurrence, esp. (in mod. use) an occurrence of some importance.
2. Any one of the possible (mutually exclusive) occurrences, one of which must happen under stated conditions, and the relative probability of which may be calculated.
3. The outcome, issue, of a course of proceedings; that which results from the operation of a cause; a consequence."
46. According to the petitioners, the expression "event" connotes the certainty that some of the lucky members of the scheme would get a larger benefit than the luckless ones. The expression "contingency" occurring in the definition mean? that some of them will get it but not the others.
47. Before I come to my conclusion OB the analysis of Section 2(c) of the Act, it is necessary to refer to certain provisions of the Rules and the Schedule appended thereto. The Rules were framed by the Governor in consultation with the Reserve Bank of India in exercise of powers conferred by Section 13 of the Act and notified on the 25th July, 1979 being No. 1025-SSD. Rule 4 (1) provides for a statement of "particulars of the schemes" which are being conducted on the date of the commencement of the Act together with a de-tailed plan for the winding up of the business of such scheme as (required under Section 12(1) of the Act. The Schedule which provides the Statutory Form for the furnishing of all the particulars as aforesaid contains an Annexure Part 1 of which deals with the "particulars of the scheme". Column 5 of the particulars is headed "number of persons/members contemplated to be enrolled as per the scheme". Column 6 is headed "number of subscribers enrolled and actually subscribing". Column 7 has the heading "amount of subscriptions collected". Column 8 has the heading "amount of subscriptions forfeited." Column 9 is described as "amount of subscriptions He-funded to the subscribers". Column 10 is headed "amount by way of prizes in cash or kind offered during the currency of the scheme".
48. On the strength of the above particulars, which are mentioned in the Statutory form, Mr. Deb emphatically contended that a scheme as contemplated by Section 2(c) read with the Statutory particulars in the Form must necessarily mean one in which a number of persons were involved. In other words, the "scheme" within the meaning of Section 2(c) of the Act read with the statutory particulars must necessarily mean a collective affair. According to this submission, the transactions undertaken by the petitioner firm, which merely consists of the receipt of a certain sum of money from a depositor and the payment to such a depositor of a certain percentage of interest (whatever may be the percentage) and eventually the principal does not amount to a "scheme" -within the meaning of Section 2(c) of the Act. According to Mr. 'Chatterjee, the expression "scheme" must be given its natural wide dictionary meaning and should be held to mean any arrangement including those undertaken by the petitioner firm.
49. In my view, the contention of Mr. Deb is sound and should be accepted. Reading the expression ""scheme" as occurring in Section 2(c) of the Act, together with the particulars contained in the Statutory Form, it cannot ruler to a simple bilateral transaction between a depositor and the petitioner firm whereby a certain sum is deposited which is ultimately returned with a certain amount 'of interest over a period of time. It is not the case of the respondents that, apart from what may be called the loan transactions the petitioner firm has any other "scheme" within the meaning of the Section 2(c) of the Act. The simple loan transaction, which appears from the records of this case, does not in my view, amount to a "scheme" within the meaning of Section 2(c) of the Act.
50. Coming to my conclusions about the analysis of Section 2(c) of the Act, limbs (a) and (b) of that sub-section, and I refer in this connection the analysis submitted by Mr. Somnath Chatterjee, relates to two different kinds of schemes. Limb (a) relates to a scheme for the making of quick or easy money whereas limb (b) relates to a scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money. Limb (c) in my view, refers to the modus operandi of a scheme mentioned in (a) and (b). In other words, limb (c) qualifies both (a) and (b). Similarly, limb (d) in my view is only referable to the source of the fund for the purpose of scheme mentioned in (a) and (b). As is clear, limb (d) refers to two different sources of funds viz., either the entrance money of the members of the scheme or a periodical subscription. This limb (d) also, equally in my view, must qualify both (a) and (b).
51. It would necessarily follow, from what has been stated above, that both (c) and (d) must qualify both limbs (a) and (b). In other words, it would be either (a) + (c) + (d) or (b) + (c) + (d).
52. Mr. Somnath Chatterjee, after his analysis of the limbs, submitted that (a) and (b) are alternatives or disjunctive. As already indicated I am in full agreement with this part of Mr. Chatterjee's submission. He further submitted that (d) can only be read as relating to (b). I am entirely unable to accept this submission because, if this is correct, then there is no indication in the definition as to where the funds for scheme (a) is to come from Mr. Chatterjee further submitted that (c) cannot be read with (a) and is only referable to (b) and (d). As I have already indicated (d) contemplates the source of the fund and must qualify both (a) and (b) and also (c) being the modus operandi must equally qualify both (a) and (b).
53. Finally, on this point, Mr. Chatterjee submitted that, in whatever way the definition is construed, it is not necessary that in all cases there should be an. element of wagering or chance involved or that there should be a drawing of lot or award of prizes. He submitted that a bilateral transaction would also fall within the ambit of the definition. According to Mr. Chatterjee, otherwise it would mean reading words into the Section for which there is neither any authority not warrant. If the petitioner's contention is accepted, the argument proceeds "money circulation scheme" could also be "prize Chit". But the Legislature clearly intended to refer to different types of activities by the two definitions. It was submitted that, if there is any arrangement or a plan or a project whereby money can be earned without much exertion or difficulty or speedily or rapidly, such an arrangement will come within the scope of the Act.
54. For the reasons given above, I am unable to accept this contention of Mr. Chattejee. In my view, the business under-taken by petitioner firm viz. receipt or deposits, payment of interest and the eventual return of the deposit does not amount to a "scheme" or a "money circulation scheme" within the meaning of Section 2(c) of the Act.
55. Before I leave Section 2(c) of the Act, it will be necessary to refer to two cases which were referred to and relied on by Mr. A.K. Sen in support of his argument. The first decision that of Sykes v. Beadon reported in (1879) II Ch. D. 170. In judgment of Jessel M. R. the following passage occurs at page 190 of the Report:--
"Now, I pause there for a moment, because I want to see what the position of the holders of the certificates is, and what their rights are. It is clear as I read it, and as I shall show presently, that they are entitled to have their certificates drawn. Now how? Clauses 8 and 9 are these :--/His Lordship read them/-- As I read that, as I said before, not intending to decide the point, because it has not been argued, but stating my opinion so far as I ought to state it this is a lottery, and is illegal and under the Lottery Acts. The holders of certificates are persons who subscribe money to be invested in funds which are to be divided amongst them by lot, and divided unequally. That is, the person who gets the benefit of the drawings get a bond bearing interest and a bonus which gives them different advantage from the persons whose certificates are not drawn, and it depends upon change which gets the greater or the lesser advantage. It is, therefore, a subscription by a number of persons to a fund for the purpose of dividing that fund between them by chance and unequally." Relying on the above observations of Jessel M. R. Mr. Sen submitted that a "money circulation scheme" within meaning of Section 2(c) of the Act was equally dependent on a chance and was necessarily unequal more going to the lucky few and very much less to the luckless many.
56. The next decision relied on by Mr. Sen is the leading case of Carlill v. The Carbolic Smoke Ball Co. reported in (1892) 2 QBD 484. At page 490-491 of the Report, the following passage occurs.
"The third question is whether the contract I have found to exist is a contract by way of gaming or wagering within the meaning of statutes 8 and 9 Vict. C. 109 S. 18, which renders such contracts null and void, and, therefore, not enforceable by action. It think it is not. It is not easy to define with precision what amounts to a wagering contract, nor the narrow line of demarcation which separates a wagering from an ordinary contract; but, according to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him a sum of money or other stake; neither of the contracting parties having any other interest in that contract that the sum or stage he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that such party may under it either win or lose, whether he will win or loss being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract."
57. These observations again underscore the element of chance in wagering contracts according to Mr. Sen.
58. The next question that was canvassed before me was whether the business undertaken by the petitioner firm came within the meaning of definition of "Prize Chit" in Section 2(c) of the Act, I must mention that in the F. I. R., which I have set out above, although the expression 'prize chit' occurs in the first sentence and the last paragraph of it, no facts appear to have been stated in the F. I. R. which would make it a "prize chit". Although Mr. Somnath Chatterjee appearing on behalf of the respondent No. 1 did not press the point that it was a "prize chit", Mr. Naranarayan Gooptu who appeared for the respondents Nos. 2, 3 and 4 argued this point in considerable detail. Having regard to the argument, if would be necessary to advert to the same
59. Mr. Gooptu analysed the various limbs of the definition of 'prize chit'. He particularly emphasised the fact that the definition of "prize chit" which is an inclusive definition includes in (i) "gifts in cash or in kind". He pointed out that 'prize chit', inter alia, including giving periodically or otherwise gifts in cash or in kind whether or not the recipient of the gift is under a liability to make any further payment in respect of such scheme or arrangement.
60. My attention was drawn in this connection to the dictionary meaning of the expression 'gift'. In Random House Dictionary at page 556 'gift means 'something given voluntarily without charges; present'. In Oxford Companion to Law at page 526 gift means:
"The voluntary or gratuitous transfer of any property from one person to another. It may be conditional but, condition apart, is not revocable nor terminable. Acceptance is presumed unless dissent is signified, but a gift may be rejected when the donee becomes aware of it. The title to the subject of gift must be transferred in whatever way necessary for the kind of property concerned. Gifts may be made inter vivos, or on death, by Will or donatio mortis causa".
61. In Stroud's Judicial Dictionary at p. 1162 and p. 1163 the following passages occur.
"(9) A direction in a will that its trustees are to be paid an annual remuneration if they carry on the testator's business was "gift" payable out of the personal estate of the testator within Section 4 of the Revenue Act 1845, and as such was a LEGACY liable to duty.
(16) To constitute a "gift" within the meaning of Section 78 (1) (a) of the Income-tax Assessment Act, 1936-1966, it must appear that the property was transferred voluntarily and not as the result of a contractual obligation, and that no material advantage was received by the tax payer (author of the gift)". In Shorter Oxford Dictionary at Page 792 ' gift' means --
"1. A transfer of property in a thing, voluntarily and without any valuable consideration.
2. Something, the property in which is voluntarily transferred to another without the expectation or receipt of an equivalent."
62. On the strength of the above definition, it was argued that the petitioner firm pays to its depositors 24 per cent per annum as interest in cash. This was submitted on the strength of the allegations in F. I. K. that the petitioner firm is paying 36 per cent interest per annum to its depositors. It was pointed out that, in the loan deposit receipt, the interest payable is only 12 per cent per annum. Consequently, it was submitted that it must be assumed for the purpose of the investigation that the allegations in the F. I. R. are correct and that 24 per cent per annum was being paid by the petitioner firm to its depositors in cash. This, according to Mr. Gooptu, is a gift on the condition of keeping the money in deposit with the firm. It is not a return on the investment according to him. There is no obligation to pay any particular percentage over 12 per cent per annum in cash and the depositor has no enforceable legal claim with respect to such excess.
63. According to Mr. Gooptu, Section 2(c) both in (i) and (ii) contemplates the cases of prizes and gifts. According to this submission, while prize can be claimed only by a selected few, the gift in the sense indicated above, is given to every depositor without any process of selection. If the recipients of the gift are to be determined by lot or draw or any other manner then the gift no longer retains its character but becomes a prize which according to Mr. Gooptu is a sever-able part from the rest of the definition. In other words, the payment of gift is not determined by lot or draw or any similar manner.
64. In reply to this contention, both Mr. Deb and Mr. Sen gave their OWD analysis of Section 2(c) of the Act. According to the contentions of both these learned counsel, (i) in Section 2(c) is the real benefit conferred by 'prize chit'. The benefit consists in giving or awarding, periodically or otherwise, to a specified number of subscribers prizes or gifts in cash or in kind. The determination of the number of subscribers who are to be given these prizes or gifts is determined either by lot or by draw or in any other manner which expression according to this submission is to be construed ejusdem generis. In other words, both prizes and gifts as contemplated in (i) are given or awarded on the basis of a chance event (ii) according to the submission of both Mr. Deb and Mr. Sen contemplates a residuary benefit which may be given to the subscribers but may also be given to those luckless ones who have not won any prizes or gift as contemplated in (i). In other words (ii) contemplates something like what is known as a "consolation prize".
65. On the facts of this case, it was contended on behalf of the petitioner that the payment of 24 per cent interest per annum in cash, assuming it to be true, was a certain definite and regular payment which was not dependent on any chance or contingency. Hence, it could not be "gift" within the meaning of Section 2(e)(1) of the Act.
66. Mr. A.K. Sen particularly stressed another aspect of this contention of Mr. Gooptu by reiterating the submission of Mr. Gooptu that a gift must be without consideration. He however, refuted the contention of Mr. Gooptu that the payment of 24 per cent, assuming it to be a gift, was without consideration. He submitted that both the payment of 12 per cent and 24 per cent, assuming them to be true for the sake of argument, were both supported by the same consideration. The consideration for both the payment of 12 per cent and 24 per cent was the same viz. the deposit or investment by the depositor. In other words, it was impermissible to import a dichotomy between 12 per cent and 24 per cent from the point of view of consideration. According to this submission of Mr. Sen, irrespective of the mode of payment, the consideration for the entire payment of interest, whatever be the percentage, is the deposit or investment
67. Mr. Sen also submitted that, in order to constitute a gift from the petitioner firm to the depositor, the amount which constitutes the subject-matter of the 'gift must belong to the petitioner firm which would be the donor. According to Mr. Sen, in so far as the deposits are concerned, the petitioner firm never became its owner but was merely a trustee. That being so, there was no question of any gift from the petitioner firm to its depositors.
68. In my view, the contention of Mr. Deb and Mr. Sen should be accepted. In my opinion (ii) of Section 2(c) of the Act contains the residuary provision and contemplates payment to those who are not lucky enough to get the "prize" or "gifts" which are contemplated in (i) of Section 2(c) of the Act. Further, in my view, the receipt of the prize or gifts mentioned in (i) are entirely dependent on a chance event viz., the lot or draw or some similar contrivance. That being the position in law, the payment of what Mr. Gooptu calls the excess 24 per cent per annum by the petitioner firm to its depositors assuming that such payment is made and is made in cash, cannot be called "gift" within the meaning of Section 2(c) of the Act because it is a regular and certain payment and is not dependent of any chance event It would necessarily follow that the business undertaken by the petitioner firm cannot come within the meaning of "prize chit" as defined in Section 2(c) of the Act.
69. I also accept the contention of Mr. Sen that the payment of the so called excess 24 per cent cannot be said to be a "gift" which must necessarily be without consideration. I hold that the deposit or the investment by the depositor is equally a consideration for the payment of 12 per cent, interest as also for the excess payment of 24 per cent, if any. On this ground also it cannot be called a "gift" at all as understood in law,
70. For the reasons given above, it cannot be said that the petitioner firm carries on business in any "prize chit" as defined in Section 2(c) of the Act,
71. It would follow from what has been stated hereinabove that, in the view that I have taken, none of the provisions of the "Money Circulation Scheme" or "Prize Chit" as defined in Section 2(c) and 2(e) of the Act are applicable to the petitioner firm. Consequently, it must be held that the petitioner firm cannot be guilty of any offence under the Act.
72. In view that I have taken, it cannot be said that the F. I. R. in the instant case disclosed any offence under the Act.
73. Before I leave this aspect of the matter a reference may be made to an argument that was advanced by Mr. Deb on one aspect of the F. I. R. Mr. Deb drew my attention to the concluding sentence of the first paragraph of the F, I. R. which is in the following terms:--
"Prize and/or gifts in cash were and are also awarded to agents, promoters and members too". Since the second paragraph starts with the expression "in view of the above" Mr. Deb submitted that these payments were alleged to be offence under the Act.
74. My attention was next drawn to the last clause of Section 2(e) of the Act which says that the definition of "prize chit does not include a "conventional chit". My attention was next drawn to the definition of "conventional chit" which has already been set out above. On the strength of this definition, it was contended by Mr. Deb that the payment of prize or gift to agents or promoters was permissible within the definition of a "conventional chit" which is not an offence under the Act.
75. Before I leave this aspect of the matter and go to the other arguments, reference may be usefully made to a very recent decision of the Supreme Court and the only decision which was cited on the Act. That is the case of Srinivasa Enterprises v. Union of India, . In that case, a challenge was thrown to the vires of the Act mainly on the ground of violation of Article 19(1)(g) of the Constitution of India. It was held that the restrictions imposed by the Act were not unreasonable and were saved by Article 19(6) of the Constitution of India.
76. In repelling that challenge, Krishna lyer, J. of the Supreme Court extracted large portions from the Report of a study group which was headed by Dr. J.S. Raj and wherein pointed reference was made to "prize chit" and allied schemes. After setting out various paragraphs from that Report, which recommended the total banning of prize chits, the learned Judge in paragraph 12 observed as follows:--
"The twin requirements of Article 19(6) are (a) the reasonableness of the restriction upon the fundamental right to trade, and (b) the measure of the reasonableness being the compelling need to promote the interest of the general public. There is no controversy in the present case as regards the existence of public interest in restricting the freedom to fleece through prize chits.
Public interest of course there is. But the controversy rages round the compulsive necessity to extinguish the prize chit interprises altogether as distinguished from handcuffing them with severe conditions geared to protection of public interest. We have already indicated that the Raj Report does recommend a total Ban on prize chits. In matter of economics, sociology and other specialised subjects, courts would not embark upon views of half-lit infallibility and reject what economists or social scientists have, after detailed studies, commended on the correct course of action. True, the final word is with the Court in constitutional matters but judges hesitate to 'rush in' where even specialists 'fear to tread'. If experts fall out, court per force must guide itself and pronounce upon the matter from the constitutional angle, since the final verdict, where constitutional contraventions are complained of, belongs to the judicial arm. The alternative proposals to save the public from prize chit rackets attractively presented by Shri Venugopal do not impress us. In many situations, the poor and unwarry have to be saved from the seducing processes resorted by unscrupulous racketeers who glamourise and prey upon the gambling instinct to get rich quick through prizes. So long as there is the resistless spell of a chance, though small, of securing a prize though on paper, people chase the prospect by subscribing to the speculative scheme only to lose what they had. Can you save moths from the fire except by putting out the fatal glow? Once this prize facet of the chit scheme is given up, it becomes substantially a "conventional chit" and the ban of the law ceases to operate. We are unable to persuade ourselves that the State is wrong in its assertion, based upon expert opinions that a complete ban of prize chits is an overkill or excessive blow. Therefore, we decline to strike down the legislation on the score of Article 19(1) (f) and (g) of the Constitution."
In paragraph 16 of the Report His Lordship observes as follows:--
"The final submission of Shri Venugopal was regarding legislative competency. He urged that legislation regarding lottery falls within the State List (Entry 34, List II) and Parliament cannot enact such a law under Entry 7 of List [II, Relying upon State of Bombay v. R. M. D, Chamarbagwala counsel contended that the present legislation was aimed at prize chits and intended to ban lotteries. Such an anti-lottery law could not be sustained under Entry 7 of List III. We are not persuaded that in pith and substance the present legislation is one against lotteries. It deals with a special species of contracts with sinister features, although one such feature is the award of prizes to subscribers. While motives cannot validate or invalidate a legislation the core of the subject-matter must govern competency. So viewed, it is easy to accept the submission of the Union of India that Parliament wanted to restrict and prohibit certain types of contract because of the noxious element of gambling and lottery implicit therein and apt to entice the credulous and uncautious. We do not think it necessary to expand on the subject and the incidental impact on lotteries does not affect the vires of the Act."
77. These two paragraphs were repeatedly referred to both by Mr. Deb and Mr. Sen in aid of their submissions that the scheme of the ban under the Act was entirely in respect of lottery, gambling end an element of chance. This, it was submitted, is very clear from the two paragraphs of the judgment of the Supreme Court extracted above.
78. As I have already indicated, these findings of mine are really sufficient to dispose of this application. Having regard to the elaborate arguments advanced from the bar, on various other aspects of the matter, I will now deal with them.
79. In Order to appreciate the next branch of the argument it will be necessary to set out certain Sections of the Code of Criminal procedure, 1973 (herein-after referred to as the Code), Section 154 of the Code provides as follows :--
"154. (1) Every information relating to the commission of a cognizable offence, if given orally to an officer in charge of a police station, shall be reduced to writing by him or under his direction, and be read over to the informant; and every such information, whether given in writing or reduced to writing as aforesaid, shall be signed by the person giving it, and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in this behalf.
(2) A copy of the information as recorded under Sub-section (1) shall be given forthwith, free of cost, to the tar formant.
(3) Any person aggrieved by a refusal on the part of an officer in charge of a police station to record the information referred to in Sub-section (1) may send the substance of such information, in writing and by post, to the Superintendent of Police concerned who, if satisfied that such information discloses the commission of a cognizable offence, shall either investigate the case himself or direct an investigation to be made by any police officer subordinate to him in the manner provided by this Code, and such officer shall have all the powers of an Officer in charge of the Police Station in relation to that offence."
80. Section 156 of the Code provides as follows:--
(1) Any officer in charge of a police station may, without the order of a Magistrate, "investigate any cognizable case which a Court having jurisdiction over the local area within the limits of such station would have power to inquire into or try under the provisions of Chapter XII.
(2) No proceeding of a police officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was not empowered under this section to investigate.
(3) Any Magistrate empowered under Section 190 may order such an investigation as above-mentioned."
Section 157 which is very material for our purpose provides as follows:
"(1) If, from information received or otherwise, an officer in charge of a police station has reason to suspect the commission of an offence which he is empowered under Section 156 to investigate, he shall forthwith send a report of the same to a Magistrate empowered to take cognisance of such offence upon a police report and shall proceed in person, or shall depute one of his subordinate officers not being below such rank as the State Government may, by general or special order prescribe in this behalf to proceed, to the spot, to investigate the facts and circumstances of the case, and, if necessary to take measures for the discovery and arrest of the offender;
(a) When information as to the commission of such offence is given against any person by name and the case is not of a serious nature the officer in charge of a police station need not proceed in person or depute a subordinate officer to make an investigation on the spot;
(b) If it appears to the officer in charge of a police station that there is no sufficient ground for entering on any investigation he shall not investigate the case..
(2) In each of the case mentioned in Clauses (1) and (b) of the proviso to Subsection (1), the Officer in Charge of the Police station shall state in his report ..his reasons for not fully complying with requirements of that Sub-section, and, in the case mentioned in Clause (b) of the said proviso, the Officer shall also forthwith notify to the informant, if any, in such manner as may be prescribed by the State Government, the fact that he will not investigate the case or cause it to be investigated."
81. The next material section is Section 165 of the Code on which a lot of arguments turned and which provides as follows:--
"(1) Whenever an officer in charge of a Police Station or a Police Officer making an investigation has reasonable ground for believing that anything necessary for the purposes of an investigation into any offence which he is authorised to investigate may be found in any place within the limits of the Police Station of which he is in charge, or to which he is attached, and that such thing cannot in his opinion be otherwise obtained without undue delay, such Officer may, after recording in writing the grounds of his belief and specifying in such writing, so far as possible, the thing for which search is to be made search, or cause search to be made, for such thing in any place within the limits of such station.
(2) A Police Officer proceeding under Sub-section (1), shall, if practicable, conduct the search in person.
(3) If he is unable to conduct the search in person, and there is no other person competent to make the search present at the time, he may, after recording in writing his reasons for so doing, require any Officer subordinate to him to make the search, and he shall deliver to such subordinate Officer an order in writing, specifying the place to be searched, and so far as possible, the thing for which search is to be made; and such subordinate Officer may thereupon search for such thing in such place.
(4) The provisions of this Code as to search-warrants and the general provisions as to searches contained in Section 100 shall, so far as may be, apply to a search made under this section.
(5) Copies of any record made under Sub-section (1) or Sub-section (3) shall forthwith be sent to the nearest Magistrate empowered to lake congnizance of the offence, and the owner or occupier of the place searched shall, on application, be furnished, free of cost, with a copy of the same by the Magistrate."
82. The only other Section necessary for our purpose is Section 172 which is as follows:--
"(1) Every police officer making an investigation under this Chapter shall day by day enter his proceedings in the investigation in a diary, setting forth the time at which the information reached him, the time at which he began and closed his investigation, the place or places visited by him, and a statement of the circumstances ascertained through his investigation.
(2) Any Criminal Court may send for the police diaries of a case under inquiry or trial in such Court, and may use such diaries, not as evidence in the case, but to aid it in such inquiry or trial.
(3) Neither the accused nor his agents shall be entitled to call for such diaries, nor shall he or they be entitled to see them merely because they are referred to by the Court; but, if they are used by the Police Officer who made them to refresh his memory, or if the Court uses them for the purpose of contradicting such Police Officer, the provisions of Section 161 or Section 145, as the case may be, of the Indian Evidence Act 1872 (1 of 1872), shall apply."
83. Certain authorities were cited by both parties on the First Information Report which is "information" within the meaning of Section 154 of the Code and which may be considered now.
84. Mr. R. C. Deb strongly relied on a decision of the Judicial Committee in the case of King Emperor v. Khwaja Nazir Amhad reported in 71 Ind App 203 : (AIR 1945 PC 18). Strong reliance was placed on a paragraph at page 213 of the Report which is as follows:
"No doubt, if no cognizable offence is disclosed, and still more, if no offence of any land is disclosed, the police would have no authority to undertake an investigation, and for this reason Newsam J. may well have decided rightly in M. M. 6. T. Chidambaram Chettiar v. Shan-mugham Pilial, (AIR 1938 Mad 129). But that is not this case. In the present case the Police have under Sections 154 and 156 of the Criminal Procedure Code a Statutory right to investigate a cognizable offence without requiring the sanction of the Court, and to that extent the case resembles Chhatrapat Singh Dugar v. Kharag Singh Lachmiram. (AIR 1916 PC 64) in which, as the High Court has pointed out their Lordships' Board expressed the viaw that to dismiss an application on the ground that it would be an abuse of the powers of the Court might be to act on treacherous grounds. Of course, in the present case, as in the petition brought by Mr. Gauba, no prosecution is possible unless the necessary sanction under Section 197 of the Criminal Procedure Code has first been obtained. But that stage, like the stage at which the Court may legitimately intervene, has not in their Lordship's opinion, yet been reached. The question so far is one of investigation not prosecution."
85. Referring next to the provisions of Section 157 of the Code, Mr. Deb submitted that the condition precedent for starting an investigation is the "reason to suspect" and such suspicion must have an objective basis. Although certain dictionary meanings of the word 'suspect' were referred to by the respondents which includes a meaning that it may be even fanciful, Mr. Deb submitted that since the word "suspect" is qualified by the expression "reason", that makes the test objective. My attention was drawn in this connection to paragraph 16 of the affidavit of Arun Kanti Roy affirmed on behalf of the respondent Nos. 2 and 3 on the 31st January, 1981 in which no facts are stated with regard to the "reason to suspect". It is merely stated that the search and seizure was conducted strictly in conformity with law. Similarly, in paragraph 12 of the affidavit of Sunil Kumar Chakraborty affirmed on behalf of the respondents Nos. 3 and 4 on the 13th January, 1981 there is merely a bald allegation that the F. I. R, disclosed commission of cognizable offence without specifying what those offences are.
86. On this aspect of the submission that "reason to suspect" must be objective and not merely subjective, Mr. Deb relied on a decision of the Madras High Court in the case of K. V. Muhammad v. Chakkappayyan Kannan reported in AIR 1943 Mad 218. Although that case dealt with the power to arrest in the Madras District Police Act, 1959 the following observation occurs at page 219-220 of the Report.
"I agree that in considering the question of the lawfulness of an arrest or imprisonment, distinctions have been and will have to be drawn between the powers of a Police Officer and that of a private citizen, and that there may be cases where the former may without a warrant arrest on reasonable suspicion, "reasonable" being understood to mean a bona fide belief that an offence had been committed or is about to be committed, necessitating the arrest of the person concerned."
87. Reference was also made to a Division Bench decision of the Patna High Court in the case of Haramohan Patnaik v. Emperor reported in AIR 1939 Pat 129. In that case, of course, the Division Bench was considering Section 54 (1) of the old Criminal Procedure Code of 1898 which contained inter alia the expression "reasonable complaint". At page 133 of the Report the following observation occurs:
"In my view the arrest and detention of the petition cannot be justified under these provisions. The only information which the Railway Police had in this case was the warrant issued by the District Magistrate, Dhenkanal State. Such can hardly be said to be a reasonable complaint or to amount to credible information or to create reasonable suspicion. What is a reasonable complaint or suspicion depends on the circumstances of each case but it must be founded on some definite fact or some tangible proof which is sufficient to establish in the mind of a reasonable Police Officer the reasonableness or credibility of the charge, information or suspicion".
88. Mr. Somnath Chatterjee appearing for the State sought to distinguish both the above decisions by pointing out that the language of the relevant provisions was different in the sense that the expression 'reasonable' or 'credible' were there in the relevant sections which expressions are not there in Section 157 of the Code.
89. Mr. Deb also referred to the well-known decision of the Judicial Committee in the case of King Emperor v. Vimlabai Deshpande reported in 73 Ind App 144 : (AIR 1946 PC 123). Reference was made to a passage at pages 152-53 of the Report where it is stated that where a police officer makes an arrest under Rule 129, Sub-rule (1) of the Defence of India Rules, he is bound to prove to the satisfaction of a Court before whom the arrest is challenged that he had reasonable grounds of suspicion. Of course, the expression in Rule 129 was 'reasonable grounds of suspicion' which was the distinction sought to be drawn by Mr. Somnath Chatterjee. The finding of the Judicial Committee however is at page 154 and is in the following terms:--
"In their Lordships' opinion, therefore, the High Court was right in holding that the burden lay on the police officer to satisfy the Court that his suspicions were reasonable, and it is plain that on the evidence he had not discharged that burden."
90. Lastly, on this point, Mr. Deb referred to the decision of the Division Bench of this Court in the case of Subodh Chandra Ray Choudhury v. The King Emperor reported in 29 Cal WN 98: (AIR 1925 Cal 278). This case also related to Section 54 of the Code. Clause 7 of which contained the expression "credible" and 'reasonable, expressions which, according to Mr. Chatterjee, were not to be found in Section 157. At pages 102 and 103 of the Report the following passage occurs.
"The first of these requisites contemplates either the proof of a fact, namely, the fact of the person having been concerned in the act or a reasonable complaint, or credible information or a reasonable suspicion of his having been concerned therein. The wording of this part of the clause is very similar to that of clause firstly of the section. Under that clause it has been held by this Court in the matter of Charu Chandra Majumdar that the section gives a police Officer personal authority and involves personal responsibility and the reasonable suspicion and credible information must be based upon definite facts which the Police Officer must consider for himself before he acts under this section, and that he cannot delegate his discretion or take shelter under the belief or judgment of another Police Officer. ...... ...... ...... ... The wording of Clause seventhly clearly indicates that the arresting Police Officer has to exercise his own judgment and form his own opinion as to whether he should or should not act and to enable him to do so he must have the necessary facts before him. What is a reasonable complaint or suspicion must depend on the circumstances of each particular case, but it must be at least founded on some definite fact tending to throw suspicion on the person arrested and not on mere vague surmise or information. A general definition of what constitutes reasonableness in a complaint or suspicion or credibility of an information cannot be given; both must depend upon the existence of some tangible proof within the cognisance of the arresting Police Officer and he must judge whether it is sufficient to establish the reasonableness or credibility of the charge, information or suspicion."
91. These are all the decisions cited by Mr. Deb on this aspect of the matter.
92. Mr. A.K. Sen, in course of his submissions, referred to the case of Entick v. Carrington reported in (1965) 19 State Tr 1029 (1030). Reference was made to certain well-known passages in judgment of Lord Camden C. J. some of which may be noticed.
"The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The case where this right of property is set aside by positive law are various. Distresses, executions, forfeitures, taxes, etc. are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good.
By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my licence, but he is liable to an action, though the damage be nothing; which is proved by every declaration in trespass, where the defendant is called upon to answer for bruising the grass and even treating upon the soil. If he admits the fact, he is bound to show by way of justification, that some positive law has empowered or excused him. The justification is submitted to the judges, who are to look into the books; and see if such a justification can be maintained by the text of the statute law, or by the principles of common law. If no such excuse can be found or produced, the silence of the books is an authority against the defendant, and the plaintiff must have judgment ...............
Papers are the owner's goods and chattels; they are his dearest property; and are so far from enduring a seizure, that they will hardly bear an inspection; Ind though the eye cannot by the law of England be guilty of a trespass, yet where private papers are removed and carried away, the secret nature of these goods will be an aggravation of the trespass, and demand more considerable damages in that respect. Where is the written law that gives any magistrate such a power? I can safely answer, there is none; and therefore it is too much for us without such authority to pronounce a practice legal, which would be subversive of all the comforts of society."
93. These passages were relied on by Mr. Sen to underscore the sacrosanct nature in which the English law looks upon the books and papers belonging to a citizen.
94. Mr. Somnath Chatterjee while addressing me on this aspect of the matter prefaced his submission with the observation that an F. I. R. must not be construed as if it was a Statute or a will or a deed. An F. I. R. is not ordinarily the language of a person learned in the law and as such must be liberally construed. He further submitted on the strength of the authorities, which will now have to be considered, that the principle enunciated by the Supreme Court with regard to a show cause notice in the East India Commercial Co.'s Case* does not apply to an F. I. R. He emphasised the expression "reason to suspect" in Section 157 of the Code and compared it with the Section 166(3) of the Code which contains the expression 'reason to believe'. Relying on well known principles of construction, Mr. Chatterjee contended that in enacting Section 157 of the Code where the expression is "reason to suspect", the Legislature intended it to mean something other than "reason to believe".
95. In this connection, reference was made by Mr. Chatterjee to a decision of (he Supreme Court in the case of Chandra Bhal v. The State of U. P. . At paragraph 4 of the Report the following passage occurs:
"No doubt the first information report being an early record and the first version of the alleged criminal activity conveyed to the Police Officer with the object of putting the police in motion in order to investigate, is an important and valuable document. But it has also to be remembered that it is not a substantive piece of evidence and it can only be used for the purpose of corroborating or contradicting its maker. The statute does not provide that it must be made by an eye witness to the commission of the alleged offence or that it must give full and precise details. It is, therefore, not intended to be treated as the last word of the prosecution in the matter. It merely marks the beginning of the investigation into the reported offence and its value must accordingly depend on the circumstances of each case including the nature of the crime, the position of the informant and the opportunity he had of witnessing the whole or part of the commission of the alleged offence. Now, if this be the legal position then the contents of the first information report cannot serve as the sole and conclusive test for determining the question whether there should be one or several trials of the several offences disclosed in the report. The matter has to be determined on the basis of the result of the investigation in the light of the provisions of .the Code of Criminal Procedure. "Reference was also made to a decision of the Supreme Court in the case of Hasib v. State of Bihar . In that case it was observed by the same learned Judge as in the earlier case that the object of First Information Report\from the point of view of the informant is to set the Criminal Law in motion. From the point of view of the investigating authorities it is to obtain information about the alleged Criminal activity so as to be able to take suitable steps for tracing and bringing to book the guilty party. The report does not constitute substantive evidence though it is important as conveying the earliest information about the occurrence. It can be used only as a previous statement for the purpose contemplated under Section 157 or Section 145 of the Evidence Act, that is for corroborating or contradicting its maker and not of other witnesses."
96. Again, in the case of Nanhku Singh v. State of Bihar there are very similar observations with regard to an F. I. R. by Jaganmohan Reddy, J.
97. Reference was next made to another decision of the Supreme Court in the case of Duraipandi Thever v. State of Tamil Nadu . From the Report it appears that information was given to the effect that a certain person was stated to have hit the deceased without giving the names of the accused persons. It further appears that information was based on village gossip and that the informant was not an eye-witness to the occurrence. In this context, Dua J. in paragraph 7 observed as follows :--
"It was clearly open to the authorities concerned to take action on this information if they so chose, but it was equally open to them to wait for more authentic or reliable information for taking appropriate action, treating the earlier information as based on mere village gossip."
98. On the strength of this authority, it was contended by Mr. Chatterjee emphatically that a mere hearsay evidence based on a village gossip can be an 'information' within the meaning of Section 154 of the Act.
99. Reference was next made to a decision of the Supreme Court in the case of Hallu v. State of Madhya Pradesh . At para. 7 of the Report it appears that High Court refused to attach any importance to the Report given by one Tibhu as the names of the appellants were not mentioned in the Report on the ground that though it was earliest in point of time, it could not be treated as the First Information Report under Section 154, Criminal Procedure Code, as Tibhu had no personal knowledge of the incident and the Report was based on hearsay evidence. The Supreme Court observed as follows:--
"In this view the High Court clearly erred for Section 154 does not require that the Report must be given by a person who has personal knowledge of the incident reported. The section speaks of an information relating to the commission of a cognizable offence given to an officer in charge of a Police Station. Tibhu had given such information and it was in consequence of that information that the investigation had commenced."
100. Reference was next made to a Full Bench decision of this Court in the case of A.K. Roy v. State of West Bengal . At paragraph 7 of the Report the following sentence occurs:
"If, from information received or otherwise, an officer-in-charge of a Police Station suspects the commission of an offence which he is empowered to investigate, he shall forthwith send a report of the same to a Magistrate empowered to take cognizance of such offence, and shall proceed in person, or shall depute one of his subordinate officers to the spot to investigate the case."
101. On the strength of this decision, it is submitted by Mr. Chatterjee that the expression "reason to suspect" has been equated with 'suspect' by the Full Bench.
102. Reference was made next by Mr. Chatterjee to the well-known decision of a five Judge Bench of this Court in the case of Jay Engineering Works v. State of West Bengal, . Sinha C. J. at paragraphs 41 and 42 of the Report deals with a Circular of the State of West-Bengal wherein it was stated that in the case of a "legitimate labour movement" the police was to make an investigation that the complaint had a basis in fact before taking "action provided under the law". Analysing the group of Sections starting from Section 154 and referring to certain decisions Sinha C. J. comes to the following conclusion. At the end of paragraph 42 of the Report:
"There are numerous cases upon this point which is not necessary to state here. It is plain therefore that a blanket direction, that whenever a complaint is made, even of the commission of a cognizable offence, in connection with any trade union activity the officer in charge must first make an investigation into the complaint and satisfy himself that it is based on fact before taking any action whatsoever, is violative of Section 154 of the Code."
103. Reference was made to a decision in the case of B. Walvekar v. King Emperor reported in 30 Cal WN 713 : (AIR 1926 Cal 966). That case turned on the interpretation of Section 46 of the Calcutta Police Act, 1866. At pages 716-717 of the Report the following passage occurs.
"Section 46 of the Calcutta Police Act authorises the issue of a warrant, after the preliminaries referred to above have been complied with, only when the issuing officer has reason to believe that any house, room or place is used as a common gaming house. In other words, he may then, and then only, issue his warrant authorising the police to enter such house, room or place and take into custody all persons who are found therein and to seize all instruments of gaming and all monies and articles reasonably suspected to have been used or intended to be used for the purpose of gaming and to search all parts of the house, room or place used as a common gaming house and to seize etc. In the present warrant, it is stated that the issuing officer has cause to suspect that the premises in question are used and kept as and for a common gaming house. Now, the expression 'reason to believe' is entirely different from the expression 'cause to suspect'. It is obvious that the former connotes a great deal more than is conveyed by the latter."
104. Strong reliance was placed by Mr. Chatterjee on the contradistinction between 'reason to believe' and 'cause to suspect' in the above decision.
105. Great emphasis was placed by Mr. Somnath Chatterjee on a paragraph in the first decision cited by Mr. Deb that is to say the case of King Emperor v. Khwaja Nazir Ahmad reported in 71 Ind App 203 : (AIR 1945 PC 18). That paragraph may be set out hereinbelow:
"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 and 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, and it would, as their Lordships think, be an unfortunate result if it should be held possible to interfere with those statutory rights by an exercise of the inherent jurisdiction of the Court. The functions of the judiciary and the police are complimentary 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. It has sometimes been thought that Section 561-A has given increased powers to the Court which it did not possess before that section was enacted. But this is not so. The section gives no new powers, it only provides that those which the Court already inherently possesses shall be preserved and is inserted, as their Lordships think, lest it should be considered that the only powers possessed by the Court are those expressly conferred by the Criminal Procedure Code and that no inherent power had survived the passing of that Act,"
106. Mr. Chatterjee also referred to certain Supreme Court decisions in which the above passage has been cited with approval.
107. Mr. Deb in dealing with these cases and, in particular, the above paragraph, submitted that the observations of the Judicial Committee with regard to the respective fields occupied by the judiciary and the police authorities are only applicable to a case where there is evidence of some cognizable offence having been committed and does not apply to a case where no cognizable offence is disclosed.
108. Reference was made by Mr. Somnath Chatterjee to another decision of the Supreme Court in connection with Section 154 of the Code. That is the case of Apren Joseph v. State of Kerala . In that decision it has been held that the "receipt and recording of information report by the police is not a condition precedent to the selling in motion of a criminal investigation. Nor does the statute provide that such information report can only be made by an eye-witness. First Information Report under Section 154 is not even considered a substantive piece of evidence. It can only be used to corroborate or contradict the informant's evidence in Court.." Almost identical observations are made by the same learned Judge of the Supreme Court viz. Dua, J. in the case of D.R. Bhagare v. State of Maharashtra .
109. On the question whether an illegal search affects the validity of the seizure, Mr. Chatterjee relied on a very recent decision of the Supreme Court in the case of State of Maharashtra v. Nat-warlal Damodardas Soni . At para. 9 of the Report Sarkaria, J. observed as follows: --
"Taking the first contention first, it may be observed that the police had powers under the Code of Criminal Procedure to search and seize this gold if they had reason to believe that a cognizable offence had been committed in respect thereof. Assuming arguendo, that the search was illegal, then also, it will not affect the validity of the seizure and further investigation by the Customs Authorities or the validity of the trial which followed on the complaint of the Assistant Collector of Customs."
110. Some new cases on the question of F. I, R, were cited by Mr. Deb in reply for the first time for which adequate opportunity was given to the respondents to deal with. These cases may now be noticed.
111. Mr. Deb strongly relied on a decision of the Punjab and Haryana High Court in the case of Balwant Singh v. District Food and Supplies Controller reported in (1975 Cri LJ 687). In that decision, in dealing with the inherent jurisdiction of the High Court under Section 482 of the Code it was held that the expression "in the interest of justice" used in Section 482 would call for the interference of the High Court in the interest, of justice even at the stage were only an F. I. R. is lodged with the police, if the F. I. R. does not disclose any offence whatsoever. For in a matter where the F. I. R. does not disclose any offence cognizable or non-cognizable, then allowing the investigating agency to continue with the investigation and harass a citizen would certainly not be in the interests of justice. Against this kind of harassment of a citizen, the Court must exercise its inherent power whenever its assistance is sought by a citizen. Mr. Gooptu for the respondents sought to distinguish this decision by saying that it was rendered in another jurisdiction viz. the inherent jurisdiction of the High Court under the Code and was not of any relevance in the Writ jurisdiction of this Court.
112. Reference was made to the case of Moni Mohon Ghose v. The King Emperor reported in 35 Cal WN 623 (628): (AIR 1931 Cal 745). It was held in that decision that First Information under Section 154 is not substantive evidence of the facts stated therein but it can be used to corroborate the informants under Section 157 of the Evidence Act or to contradict him under Section 155 and Section 145 or is admissible under Section 32(1) or Section 8 of that Act.
113. As I have already indicated, I have noticed the authorities in some detail in deference to the reference to them from the Bar.
114. I do not feel that I have to express any opinion on this aspect of the matter. This is because, on my finding that the provisions of the Act have no application to the petitioner firm, it must necessarily follow that the F. I. R. in the instant case cannot and does not disclose any offence under the Act. This contention on behalf of the petitioner therefore succeeds as a corollary of my conclusion that the provisions contained in the Act do not have any application to the case of the petitioner firm.
115. The next branch of the argument centered around Section 165 of the Code. Section 165 of the Code, which has been set out above contemplates three different stages. First, when an officer-in-charge or a police officer making an investigation has reasonable ground for believing that anything necessary for the purpose of an investigation into any offence may be found in any place within the limits of the police station and such thing cannot be obtained without undue delay, such officer may, after recording in writing the grounds of his belief and specifying in writing the thing for which the search is to be made by him may make a search of any such thing. Therefore, Section 165(1) contemplates not only the recording of the grounds of the belief of the police officer in writing but such recording must not only state that that particular thing or things are necessary for the purpose of an investigation, but also that such thing or things cannot be obtained except by way of a search without undue delay. Section 165(1) therefore clearly obliges the police officer to conduct a search after applying his mind to both these aspects of the case and recording his reasons in respect thereof.
116. Section 165(2) provides that the police officer proceeding under Sub-section (1) shall as far as practicable conduct the search in person. Section 165(3) of the Code provides that if the police officer is unable to conduct the search in person and there is no other person able to make the search present at the time, he may, after recording in writing his reasons for so doing require any officer subordinate to him to make the search and such subordinate officer is to be supplied with an order specifying the place to be searched and as far as possible the thing for which search is to be made. This Sub-section therefore casts a twofold obligation on a police officer who is unable to conduct the search in person to record in writing the reasons for authorisation of a subordinate officer but also to supply to such subordinate officer a written order containing the particulars of the place to be searched and also, as far as possible, the thing to be searched.
117. Sub-section (5) of Section 165 of the Code contains a valuable safeguard for the owner or occupier of the place which is to be searched under the earlier provisions of Section 165. It provides that copies of any record made under sub-sec-lion (1) or Sub-section (3) shall forthwith be sent to the nearest Magistrate empowered to take cognizance of the offence and the owner or occupier of the place searched shall be furnished, free of cost, with a copy of the same by the Magistrate.
118. As indicated earlier, this contention was not to be found in so may words in the petition but was taken, for the first time, specifically in paragraph 37 of the affidavit-in-reply filed by Beharilal Murarka on behalf of the petitioners on the 20th January, 1981. Although objections were raised on behalf of the respondents to the petitioners being allowed to urge this point, I felt that, for the ends of justice, this point should be allowed to be agitated and suitable opportunities are to be given to the respondents to file supplementary affidavits dealing with the factual aspect of the matter. Pursuant to leave granted by this Court the respondents have filed supplementary affidavits dealing with the factual aspect of this matter.
119. Paragraph 37 of the affidavit-in-reply in effect states that there has been no recording of reasons as required by Sections 165 (1) and 165(3) of the Code also the allegation that there was no material for entertaining any such belief. There is also the further allegation that neither Section 165(1) nor Section 165(3) nor Section 165(5) have been complied with.
120. In the affidavit of Sunil Kumar Chakraborty affirmed on 21st January, 1981 the allegations contained in paragraph 37 of the affidavit-in-reply are dealt with. The relevant portions of paragraph 3 of that supplementary affidavit may be set out hereinbelow:--
"I state that recording as required by Sections 165(1) and 165(3) of the Code of Criminal Procedure was made in the case diary as provided in Section 172 of the said Code. I state that there was sufficient reason to believe that many things necessary for the purpose of investigation into the offence would be found. I state that I issued orders in writing to the Inspectors of Police attached to the Bureau specifying the places to be searched and as far as possible the things for which searches were to be made as required under Section 165(3) of the said Code. I state that the provisions of the Act including those of Sections 165(1) and 165(2) and 165(3) of the Code have been duly complied with. I state that records of the case including seizure lists, forwarding reports were duly sent to the learned Magistrate and that the case diary was produced before the learned Magistrate apprising the grounds and the places of search."
121. I must record at this stage that in course of the hearing and although, in my view, adequate opportunities were given to the respondents, no recorded reasons under either Section 165(1) or Section 165(3) of the Code were at any stage produced or sought to be tendered on behalf of the respondents as part of the records of this case. Mr. Naranarayan Gooptu appearing for the respondents Nos. 3 and 4 repeatedly emphasised the fact that no application has been made by the petitioner as contemplated by Section 165(5) of the Code for the recorded reasons. He also, more than once, mentioned the fact that he had the recorded reasons with him.
122. This submission of Mr. Gooptu was sought to be refuted by Mr. Deb on both the factual and legal aspects. On the legal aspect, reference was made to Section 172 of the Code which provides for keeping of a case diary by a police officer making an investigation. Particular reference was made to Section 172(3) of the Code which provides that neither the accused nor his agents shall be entitled to call for such diaries, nor shall he or they be entitled to see them merely because they are referred to by the Court. With reference to the scheme of Section 172 of the Code and the particulars which are to be entered in the case diary it was submitted on behalf of the petitioners that the recording of reasons under Section 165 of the Code is not to be made in the case diary but should be independently recorded somewhere outside the case diary. This was particularly by reason of the fact that under Section 172(3) of the Code contents of the case diary were made privileged in so far as the accused or his agent is concerned. It was submitted that if the reasons which are required to be recorded under Section 165 of the Code are made part of the case diary then the valuable right conferred on a citizen under Section 165(5) of the Code of obtaining a copy of the recorded reasons free of cost would be rendered nugatory and would in effect be taken away. Therefore, it was submitted with considerable emphasis that the reasons which are statutorily required to be recorded under Section 165 of the Code cannot be made part of the case diary as contemplated by Section 172 of the Code.
123. On the factual aspect, reference was made to a document which was tendered and forms part of the records of this case by my order dated 4th February, 1981. The tendering was subject to the objection of Mr. Gooptu that his clients had no opportunity of dealing with the document. Mr. Biswarup Gupta appearing for the petitioner stated that a copy of the document had been supplied to the advocate-on-record of the respondents.
124. The document is a cyclostyled one and is headed "Application for information" in High Court Form No. (M)55C/H (30) (Criminal). In the column headed "nature of information required" it is stated by the petitioners Nos. 2 and 3 through their advocate that they want the information whether any recording of the ground of belief in writing by any police officer in respect of the search is made at the various premises or any other record under Section 165(1) or 165(3) of the Code has been sent to the Court of the Chief Metropolitan Magistrate. It is further stated that the requisition is being made pursuant to Section 165(5) of the Code in connection with the pending criminal case before the Chief Metropolitan Magistrate, Calcutta. At the foot of the document on the right-hand side there is an endorsement by a Clerk of the above Court, to the following effect: "No such report under Section 165(5) Cr. P. C. appears to have been sent to this Court."
125. Considerable arguments were advanced on the question whether the provisions of Section 165 of the Code were mandatory or directory. Mr. Gooptu for the respondents submitted that the provisions of Section 165 of the Act were merely directory and the violation of it only amounts to an irregularity. It was submitted that if there was substantial compliance with the provisions of Section 165, the Court should not interfere. On the other hand, it was submitted on behalf of the petitioners that the provisions of Section 165 were mandatory and the non-compliance thereof would render the proceedings illegal. Strict compliance with the provisions, it was submitted, was called for. In this connection reference was made to certain authorities which may now be considered.
126. Mr. Gooptu relied on a decision of the Supreme Court in the case of Radha Rishan v. State of U. P. . In paragraph 4 of the Report the contentions on behalf of the appellant in that case are recorded and the third contention is summarised as follows:
"That the search was illegal inasmuch as it was in contravention of the provisions of Sections 103 and 165, Cr. P. C." At paragraph 5 of the Report the following observations occur:
"We shall deal with the last four points first. So far as the alleged illegality of the search is concerned it is sufficient to say that even assuming that the search was illegal the seizure of the articles is not vitiated. It may be that where the provisions of Sections 103 and 165, Code of Criminal Procedure are contravened the search could be resisted by the person whose premises are sought to be searched. It may also be that because of the illegality of the search the Court may be inclined to examine carefully the evidence regarding the seizure. But beyond these two consequences no further consequence ensues".
127. On the strength of the above observations, it was contended that non-compliance with Section 165 of the Code does not make the search and seizure illegal.
128. Mr. Gooptu also relied strongly on a decision of a Division Bench of the Delhi High Court in the case of Fedders Lloyd Corporation v. B. A. L. Swami . In that decision, after analysing Section 165 of the Code and referring to certain decisions of the Judicial Committee and the Supreme Court the Court came to the following conclusion at paragraph 21 of the Report:
"On a consideration of all the above-mentioned aspects and the language of Sub-section (1) of Section 165 of the Criminal Procedure Code we are of the opinion, "and we hold, that the provisions in the said Sub-section (1) are only directory and not mandatory, and consequently substantial compliance with the requirements in the said Sub-section (1) would be sufficient. This view of ours gives effect to both the object of the legislature in conferring the power to search upon the police officers under Section 165(1) and the object to provide safeguards or protection against any mala fide, whimsical or arbitrary searches by the police officers,"
Mr. Gooptu also referred to a decision of the Allahabad High Court in the case of Churamani Chaturvedi v. Emperor reported in AIR 1928 AH 402 (1). I do not see how that decision is of any relevance to the present case. It was held by Sulaiman, A. C. J. that an order directing the application for copies under Section 165(5) to be filed is tantamount to refusing to grant the copies. Such an order cannot be treated as an extra-judicial order, and being actually in disregard of the specific provisions of the law, is illegal and can be set aside under Section 435.
129. Mr. Deb in his reply on the question whether Section 165 was directory or mandatory relied on an unreported decision of this Court in the case of Hindustan Motors Limited v. T. N. Kaul (Appeal from Original Order No. 280 of 1970) in which the judgment was delivered by a Division Bench of this Court on the 25th March, 1971. Although references were made to certain observations in the unreported judgment, I refrain from dealing with them because they have been considered by a subsequent decision of this Court to which I shall presently refer.
130. Mr. Deb placed very strong reliance, on this aspect of the matter, on a decision of this Court in the case of Kesoram Industries and Cotton Mills Ltd. v. S.K. Rattan reported in (1974) 78 Cal WN 121. In this decision, A.K. Sen, J. dealt with this aspect of the matter. Paragraph 20 of the Report starts with the following observations:
"Next I proceed to consider Mr. Dutt's challenge to the search and seizure as made on the dates from June 15 to 18, 1967 by respondents Nos. 2 and 3 on the authorisation of respondent No. 1 dated June 13, 1967. According to Mr. Dutt such search and seizure are illegal. Search as made is illegal according to him firstly because it was not made on the basis of any reasonable grounds of belief as contemplated under Section 165(1) of the Code. Secondly it is claimed to be illegal because the search as conducted was in the nature of a general search and was not in respect of any particular thing necessary for-the purpose of investigation specified as such in writing. Thirdly the search is said to be illegal as there was no compliance with Section 165(5) of the Code".
In the same paragraph reference is made to the unreported decision in Hindustan Motors Ltd, v. T. N. Kaul (A. F. O. O. No. 280 of 1970) (Cal) as an authority for the proposition that where power is to be exercised subject to certain preconditions as in Section 165(1) of the Code and such conditions must be fulfilled and where one of the preconditions is reasonable ground for belief with reference to objective considerations set out in the section itself, the grounds are justiciable though to a limited extent viz. that the same must be established to exist and the considerations are relevant.
131. In paragraph 30 of the Report A.K. Sen, J. proceeded to consider the important question as to the effect of the infringement found by his Lordship. The finding of his Lordship which is followed by the discussion of a number of cases is to be found at paragraph 30 of the Report and is in the following terms:--
"The provision of Section 165 had been subject to judicial interpretation hereinbefore. On the text of the provision it lays down certain conditions to be fulfilled. First of all the police officer proposing to make the search must have reasonable grounds for believing that anything necessary for the purpose of an investigation may be found in the place to be searched. Secondly, he is to form an opinion that but for such an immediate search such thing cannot be obtained without undue delay. Thirdly, he is to incorporate in writing the grounds of his belief and fourthly, he must specify in such writing so far as possible the thing for which search is to be made. On the language it is quite explicit that very strict provisions have been made for the guidance of the police officer conducting a search at his own responsibility. Such provision is made as such search by its very nature is likely to be arbitrary in character. Strict compliance with such statutory provision is called for to avoid any abuse of the power or wrongful search violating citizens' privacy. Though the jurisdiction to conduct a search may not arise only on due compliance with each of these statutory requirements yet in order to make the search legal a mandatory requirement enforcing such compliance is called for."
His Lordship refers to the case of State of Rajasthan v. Rahaman , where the Supreme Court held that a search in contravention of Section 165 of the Code is illegal. Various other decisions of this Court and other courts are also considered in this connection. After distinguishing a number of decisions of the Supreme Court and other Courts and dealing with them ins Lordship takes the view that articles which are obtained as a result of an illegal search and seizure should be directed to be returned.
132. Mr. Deb finally draws my attention to the operative part of the Order in the above case which is to fee found at paragraph 37 of the Report and is in the following terms:
"The Rule is made absolute, the impugned search and seizure being declared illegal and without jurisdiction I direct return of all documents and articles seized to the petitioner.......,...,." Paragraph 38 is in the following terms :-- "Let a writ in the nature of Mandamus do issue directing and commanding the respondents and each of them forthwith to return to the petitioner all documents and articles seized in course of the impugned search." 133. Mr. Deb invited me to pass a similar order with regard to the documents seized in the instant case.
134. With respect, I am in entire agreement not only with the lucid analysis of A.K. Sen J. of the scheme of Section 165 of the Code, but also his Lordship's finding on the mandatory nature of the requirements and the effect of non-compliance thereof. I am also in entire agreement with the form of the order passed by A.K. Sen, J. That being so, I refrain from going into an elaborate analysis of the various other cases which were cited on this point.
135. Coming to the facts of the instant case, as I have already indicated, adequate opportunity, in my view, 'was given to the respondents to answer this challenge of non-oompliance with the various ^requirements of Section 165 of the Code and in particular of Sections 165(1), 165(3) and 165(5). On the materials before me, I must hold that there is nothing to show that these provisions of Section 165 of the Code have been complied with. 1 and of the view that a case diary maintained under Section 172 of the Code is not the document in which the reasons which are required to be recorded under Sections 165(1) and 165(3) of the Code should be so recorded. This is because, as already indicated, the ban of Section 173(3) of the Code would completely render nugatory the valuable statutory rights which is given to a citizen under Section 165(5) of the Code.
136. It would necessarily follow and hold that on the materials before me, compliance with the various requirements of Section 165 of the Code has not been established. On the other hand, the Information Slip to which I have referred above and, which has been tendered and forms part of the record of this case, seems to indicate that the requirements of Section 165(5) of the Code have not been complied with. This challenge of the petitioner therefore succeeds and it must be held that they are entitled to the return of the seized documents and the monies seized on this ground alone.
137. The last argument which was made by Mr. A.K. Sen who appeared for the petitioner in the second Rule is based on Section 19A of the Bengal Finance (Sales Tax) Act, 1941. Section 19-A (1) and (2) speak of the constitution and composition of a Bureau of Investigation for discharging the functions referred to in Sub-section'(3).
138. Sub-section (3), which is the basis of this argument, provides as follows :--
"The Bureau may, on information or of its own motion, or when the State Government so directs, carry out investigation or hold inquiry into any case of alleged or suspected evasion of sales tax as well as mal-practices connected therewith and send a report in respect thereof to the Commissioner."
139. Mr. Sen emphatically submitted that the investigation or inquiry by the Bureau of Investigation can only be in respect of alleged or suspected evasion of sales tax or with regard to any mal-practice connected therewith. Since, admittedly, there was no question of any alleged or suspected evasion of sales tax by the present petitioners or any mal-practice connected therewith, the Bureau of Investigation in the present case had no jurisdiction to carry on any investigation.
140. This contention does not appear to have been specifically taken by the petitioner in the first petition. In the second matter it was submitted that there were sufficient materials to justify this contention being advanced by Mr. Sen. To put the matter beyond the pale of all controversy, I allowed the petitioners in both the matters to file supplementary affidavits pursuant to such leave, Beharilal Murarka has filed an affidavit on the 22nd January, 1981 in the first matter. In paragraph 7 of that affidavit it is stated, that the search, seizure, arrest, the lodging of the F. I. R. by the respondent No. 2 with the respondent No. 3, both of the said Bureau of Investigation, is bad, illegal, ultra vires the Bengal Finance (Sales Tax) Act, 1941, arbitrary and in violation of the rights of the petitioners on, inter alia, ground that neither the petitioner firm nor any of the two partners thereof have committed any violation of the provisions of the Bengal Finance (Sales Tax) Act, 1941 or are guilty of any offence thereunder. It is further stated that no offence has been committed by them under that Act and hence the respondents have usurped a jurisdiction which they do not possess.
141. In answer to this allegation, an affidavit has been filed by Sunil Kumar Chakraborty affirmed on the 27th January, 1981. The relevant statements contained in the said affidavit have already been noticed by me in an earlier part of the judgment. Without repeating the same, I am of the opinion that, in view of the authorisation of the Commercial Tax Officers and Commercial Tax Inspectors under the provisions of Section 7 (2) of the Act, they have become fully empowered and have acquired jurisdiction to undertake the search, seizure investigation etc. in this case. This point of Mr. Sen therefore fails.
142. Before I leave this argument, I must record a contention advanced by Mr. R. C. Deb in this connection. Mr. Deb drew may attention to the various orders which were issued by S.K. Chakraborty on the 13th December, 1980 and which are to be found at pages 9 to 11 of the Annex-ures to the affidavit of S.K. Chakraborty affirmed on the 27th January, 1981. These orders are the directions on various Inspectors of Police to search the houses of the three partners of the petitioner firm, The direction ends with the following sentence. "He is also directed to arrest offenders concerned with such transactions'. Mr, Deb contended that this type of direction without specifying the persons to be arrested is contrary to the provisions of the Code. In my view, this contention is of substance and should be accepted.
143. Another contention, which was indicated but not pressed very hard, is the contention that the proceedings are mala fide. It was specifically stated by learned lawyers appearing for the petitioners that there was no question of any personal malice. The argument was more or less on the lines that it was really a case of malice in law. Mr. Deb submitted that an attempt to control the business of the petitioners knowing fully well that the Act does not apply to them is mala fide, Reference was made to the affidavit-in-opposition of Ray paragraph 20 and the affidavit-in-reply of Murarka paragraphs 62 and 63 in this connection.
144. In view of my findings on the other questions, I do not feel called upon to express any opinion on this argument.
145. Finally, I must observe that there is an allegation in the petition that a country-made revolver was seized from the residence of Sambhu Prosad Mukherjee, the petitioner No. 2 herein, which according to the petitioner, was planted at the premises before seizure. According to the respondents this revolver does not have a licence. I make it clear that I am not expressing any opinion on this controversy before me.
146. This disposes of all the contentions raised on behalf of the parties.
147. In the result, this application succeeds and the Rule is made absolute. There will be a writ in the nature of Mandamus directing the respondents to forthwith recall, cancel and withdraw the First Information Report No. 43 dated the 13th December, 1980 and all proceedings taken on the basis thereof. The impugned search, seizure and arrest being declared illegal and without jurisdiction, there will be a writ in the nature of Mandamus directing the respondents to forthwith return to the petitioners all books, documents, and papers including the copies thereof, if any. seized as a result of the respective searches made at premises Nos. 5 and 6 Fancy Lane, Calcutta-64, Taltola Library Row, Calcutta and 127B, Rash Behari Avenue. Calcutta.
148. The respondents Nos. 3 and 4 are directed to file an affidavit stating that the respondents have, pursuant to my order, returned all the books, papers and documents including the copies thereof to the petitioners.
149. There will also be a writ in the nature of Mandamus directing the respondents to refund to the petitioners a sum of Rs. 52,11,930/- forthwith. There will be a writ in the nature of Certiorari quashing the proceedings before the Chief Metropolitan Magistrate, Calcutta being G. R. No. 4298 of 1980 and Section G Case No. 1099 dated the 13th February, 1980 and G. R. 4299 of 1980 respectively.
150. There will be no order as to costs.