Amarjit Singh vs State of Punjab

P.K. Jain, J.

This order shall dispose of two Criminal petitions bearing Nos. 7794M of 1995 and 4787M of 1966, as common questions of law and facts are involved therein and have arisen out of the same First Information Report.

The facts necessary for the disposal of these petitions are that Lok Priya General investment and Finance Limited Company, having its Head Office at S.C.O. No. 77 in Sector 40C, Chandigarh floated a scheme. According to the tenor of the scheme, in case a person deposits Rs. 5000/ with the company he will get Rs. 1000/ per month as his pay ; in case he arranges for three more members, he will get Rs. 1200/ per month; in case workers subordinate to him do not achieve the quota thus fixed, he will get Rs. 400/ per month up till the original security of Rs. 5000/ remains deposited with the company. The prospectus containing the said scheme has been placed on this record.

On 17.2.1990, Shri Major Singh Sandhu Advocate and six others moved a complaint addressed to Senior Superintendent of Police, District Ferozepur alleging therein that the accused persons who are the Managing Director, Directors and others employees of the said company, by making misrepresentation of facts in the manner alleged in their prospectus of the scheme induced the applicants and 37 other persons to deposit Rs. 5000/ each during the period 1.3.1990 to 1.5.1990. It has been further alleged that the company made the payment hardly for one or two months and thereafter stopped the same as no new members were available for enrolment. It is thus alleged that the accused persons dishonestly and fraudulently induced the complainant and others to part with their money and further they had misappropriated lacs of rupees. On the basis of this complaint, First Information Report No. 195 has been registered at Police Station Zira for an offence under sections 420/120B, I.P.C.

Amarjit Singh, petitioner in Criminal Misc. No. 7794M of 1995 the Managing Director of the said company, Ravinder Kaur and Pal Singh Saini, petitioners in Criminal Misc. No. 4787M of 1996 being the Zonal Manager and Director respectively of the said company have filed these petitions for quashing the said First Information Report on the grounds that assuming all the allegations in the complaint to be true, no criminal liability is made out and the complainant should approach the civil court for their remedy; that the company had made payments to all the depositors in question by effecting compromise with them and Annexure P.2 is an affidavit given by one of such depositors, and that the cognizance has been taken by the Magistrate after the expiry of the period of limitation.

Notice was given to the respondent. In reply it has been stated that the said company collected a sum of Rs. 2.15 lacks from 43 different persons named in the First Information Report under the scheme mentioned above; that the scheme was not fulfilled and thus prima facie the accused persons have committed an offence under section 420/120B, I.P.C. It has been further stated that the affidavit Annexure P. 2 does not amount to compromise with the aggrieved persons and even otherwise the criminal liability does not come to an end after the compromise. It has been explained that the delay in the investigation was caused as two main accused were declared proclaimed Offenders at the initial stage.

I have heard the learned counsel for the parties and have gone through the record.

Shri K.S. Brar, Advocate, the learned counsel for the petitioners, has argued that no offence under section 420 IPC is made out from the allegations contained in the complaint on the basis of which impugned First Information Report has been recorded. It has been further argued that the accused persons or the company never misrepresented the facts, that the floating of the scheme vide prospectus annexed to the petition cannot be said to be any fraudulent inducement either to the complainant or to any member of the public to part with his money and that if the scheme was not completed, the same would not give rise to any criminal liability but may be said to be a breach of civil contract only. In support of this plea, the learned counsel has placed reliance upon the decisions of this court rendered in Dharamvir and others v. State of Punjab, 1986(2) Recent Criminal Reports 559 , Ranjit Singh and others v. State of Punjab, 1991(1) Recent Criminal Reports 262 and Ghansham Dass v. State of Haryana, 1993(1) Recent Criminal Reports 34 .

On the other hand Shri Ramanjit Singh, learned Assistant Advocate General Punjab has argued that the company through the accused persons has collected lacs of rupees from the complainant and the general public by dishonest and fraudulent intention and by making misrepresentation of facts. It has been further argued by the learned Assistant Advocate General that the company made payments to the depositors only for one or two months and thereafter dishonestly stopped the same. It has been, thus, argued that prima facie a case under section 420/120B, IPC is made out against all the accused persons.

I have considered the respective arguments advanced at the Bar and have also perused the various precedents cited in support thereof.

At the cost of repetition, it may be stated that under the scheme floated by the company a person was called upon to make a fixed deposit of Rs. 5000/ for which receipt was being issued. Under the scheme, such a depositor was to get Rs. 1000/ per month as pay; in case he arranged three more members, he would get Rs. 1200/ per month; and in case workers subordinate to him could not achieve the fixed quota, he would be Rs. 400/ per month until the original security of Rs. 5000/ remains deposited with the company. It is also an admitted fact that certain original members were enrolled by the company who paid Rs. 5000/ each. These depositors were paid for one or two months in accordance with the scheme but thereafter the company stopped the payment. The question is as to whether the collection of the amount under the said scheme and stoppage of payment to the depositors after two months amount to an offence under section 420 IPC.

A somewhat similar question had arisen before Calcutta High Court in Radha Ballav Pal v. Emperor, AIR 1939 Cal. 327. In that case, the scheme was one of those snowball schemes which were speculative to the highest degree and unworkable but it was not dishonest or fraudulent in the sense that it either represented to the public something which was not true or concealed from them something which should have been disclosed. It was held that the scheme might appeal to the gambling instinct of humanity but this cannot per se amount to cheating. A similar view was expressed by the same High Court in Hari Das Barat v. Emperor, ILR 1939(2) Cal. 81. Both these decisions have been approved by the apex court in the State of Madhya Pradesh v. Mir Basit Ali Khan and others, AIR 1971 SC 1620. In this case their Lordships of the Supreme Court were pleased to hold that in the absence of misrepresentation or suppression of any material facts with a view to defraud or cheat the public the promoters of money circulation scheme are not guilty of cheating even if scheme is speculative and unworkable.

The entire scheme has necessarily to be judged as a whole, both from the viewpoint of the promoters and also of the members. If any individual invests his money in expectation of high return, there is nothing clandestine in the transaction which is above board. Various individuals may invest their monies in their business which may yield very high profits. Many individuals also may indulge in speculative business in the expectation of high return of their money and may succeed or may not succeed in speculative transactions. If such transactions are made openly and not in violation of any law, it cannot be said that the scheme amounts to commission of an offence of cheating within the meaning of Section 415 or 420 of the Penal Code.

The record in the case in hand shows that each subscriber deposited a sum of Rs. 5000/ against a Fixed Deposit Receipt which amount was refundable to him after a certain period as mentioned in the scheme. Every subscriber was also to get certain amount every month as laid down in the scheme. Therefore, there is nothing in the scheme which may amount to misrepresentation of facts, or fraudulent or dishonest inducement on the part of the company to allure the public to deposit the amount. The scheme may succeed or may not succeed, may be completed, may not be completed; may be highly speculative or unworkable, but the fact remains that this is purely a civil contract and does not give rise to any criminal liability. In view of this conclusion, I need not deal with other arguments advanced at the Bar.

As a result of the above discussion, this petition is allowed. First Information Report No. 195 date 13.12.1990 registered at Police Station Zira for the offences under section 420/120B IPC and the subsequent proceedings in pursuance thereof including the charge framed against the petitioners on 13.11.1995 (Annexure P.3) are hereby quashed.