State of Maharashtra vs Ouseph Varghese

C.S. Dharmadhikari, J.—Respondent-accused Ouseph Varghese together with one other person by name Babu Thomas alias K. T. Thomas had made an application to the Registrar of Firms, Nagpur, for the registration of the firm in the name of "Popular Syndicate, Central Avenue Road, Nagpur". The said firm was registered in the office of the Registrar of Firms under Registration No. 609/ 65-66 Thereafter the accused and the said Thomas started this firm in the year 1965 and it had branches at Amraoti, Akola, Jalgaon and some other places. The Head-Office was situated at Popular Chambers, Central Avenue Road, Nagpur-2. The said firm started a scheme known as ''Chit Scheme''. Under the said scheme a person could become a member by agreeing to pay to the firm Re 1 Rs. 2 or Rs. 5 daily for 170 days. Then a group of 25 persons contributing equal amount, i. e., either Re. 1, Rs. 2 or Rs. 5 per day was to be formed. The period of the said scheme as declared was 200 days. However, the member was not required to pay his subscription for all 200 days but he was required to pay only for 170 days. The firm used to issue Pass-books to its members. It had also appointed some persons to collect subscription amount from the members and the members were given pass books, and it was the duty of the collector to make entry in the pass-book in respect of the amount paid by the subscriber or the member. According to the scheme, after the first ten days after collection of the group of persons was commenced, an auction was to be held by taking bids of the members of a particular group for the amount claimed by them and the person whose bid was accepted was to get the amount after expiry of 5 days from the date of auction, but this was also in the nature of a loan. He could get this amount after he produces two sureties from out of the group and who had not taken any loan amount from the firm. If he was unable to give such sureties then the auction was to take place over again. If a person wanted to withdraw the amount before 114 days then he was to get Rs. 60 less and if he wanted to take the amount before the expiry of 130 days, there was a deduction of Rs. 50 and if a person wanted to take the amount before the expiry of 150 days, he was to get Rs. 40 less. The pass book issued was to be in force till the expiry of the period of Chit i. e. 200 days. The member was entitled to get back the amount after the expiry of 200 days subject to deduction of Rs. 10 as a commission of the firm. It was also stipulated that if the amount paid by the person or member was less than Rs. 10, then he was not entitled to get anything, The person who paid Re. 1 for 170 days was to get at the expiry of the said period Rs. 190. The office of the firm was working on all the days except Sunday and under the rules the firm had reserved the right to itself to amend or change or modify the rules. The firm issued pamphlets like Article B calling upon the people to join the Chit fund in whatever group they desire and representing to the people that they will be getting loan without interest. Application forms like Article A were printed. Thus the firm started its business in the name and style of ''Popular Syndicate''. Many persons joined the scheme of the firm. The firm had appointed P. W. I Narayan Chimurkar as one of the bill collectors and subsequently he was appointed as an Accountant from September 1967. It is the case of the prosecution that i n November 1967, both the partners of the firm went to their branch offices and did not return. In October when some people had been to the office of the firm, they did not find the respondent-accused or other partner there and, therefore, the members began to demand back their amount. The staff members of the firm were unable to meet these demands and hence they approached the police. However, thereafter a complaint was lodged with the police by Sayed Husen, the complainant in the present case, on 19 11-1967 and on this complaint a crime was registered under sections 406 and 420 of the Indian Penal Code against the accused persons.

It seems that during the course of investigation on 20-11-1967 and 21-11-1967 the police attached under Panchanamas (Exhs. 16 and 17) various documents, registers and records of the firm and other articles like Clock, Tube-lights, Ceiling-fans, steel cupboards etc. P. S, I. Madhukar Choube (P. W. 11 sent messages to all Superintendents of Police all over India for arresting the respondent accused. For sometime Shri Choube was in charge of the investigation and then the investigation was entrusted to the State C.I.D. as per orders of the Inspector General of Police. From the record it seems that thereafter P. W. 12 Narayan Ganpatrao, Head-constable, C. I. D-, Nagpur Unit, made further investigation in the matter. According to him, he prepared statements of accounts, produced by him before the Court which are marked by the trial Court as Articles 54, 55 and 56 from Article 53, which is said to be the accounts of the firm written by Narayan Chimurkar (P. W. 1). The said account book is for the period commencing from 5-5 1967 to 8-11-1967. After completing the investigation, charge-sheet was filed before the Court against the respondent-accused and it was alleged therein that the accused with other partner started the firm with the intention to earn money by dishonest and fraudulent means. It was further alleged that they absconded from Nagpur and misappropriated the amount of Rs. 1329 of complainant Syed Husenali, his brother Syed Vajiraji and Pandurang Patel. Thus it was the case of the prosecution that the respondent-accused cheated these persons and others and misappropriated a total amount of Rs. 58,269.68 p. The learned Magistrate of the trial Court framed charge? against the accused-respondent u/s 420 and 406 of the Indian Penal Code for having cheated the above said three persons and for having misappropriated the amount of Rs. 1329 between the period from March 1967 to October 1967. During the course of the trial the prosecution examined in all 12 witnesses, namely, Narayan Chimurkar (P. W. I), who was appointed as Accountant of the firm, Sk. Habib Abdul Sattar, who was working as a Bill-Collector with the firm. The prosecution further examined another bill collector namely, Nizamuddin Abdul Razaq and Suman Mahadeo Gupta. The prosecution also examined complainant Syed Husenali, a Hotel-keeper and a member of the Chit-fund, Shrikrishna Shioram, Clerk of the Registrar of Firms, Pandurang Motiram Tayade, a subscriber of the Chit-fund, Wajirali Usmanali another subscriber and Purushottam Mangalayya, who was Police-Inspector and who arrested the accused-respondent in April 1969. The Panch witness, namely, Chandrabhan who had attested the Panchanamas Exhs. 16 and 17 about the seizure of the articles by the police was also examined. The prosecution also examined the Police Officers, viz., Police Sub-Inspector Choube and Narayan Ganpatrao.

The accused on his part denied the allegations made by the prosecution. In his statement u/s 342 of the Code of Criminal Procedure he admitted that the Popular Syndicate is a registered firm and he was a partner of the said firm. He further admitted that a pamphlet like Article B and application form like Article A was published by the Syndicate for attracting people to become members. He also admitted that it was provided in the scheme that if the subscriber paid Rs. 170 for 170 days, then he used to get Rs. 190 after a period of 200 days. He further admitted that this scheme was extended from Re. 1 daily to Rs. 5 daily. He further admitted that the bill collectors used to collect the amount from the members and then used to pay the same to the firm. He further admitted the pass-books issued by the Popular Syndicate which are on record to be the pass-books of the firm. According to the accused, for the last 9 or 10 months P. W. 1 Chimurkar was managing the syndicate and money was also deposited with him. However, he admitted that it is true that the above money must have been deposited in the Syndicate. He further admitted that the office was closed before the claim of the complainant was received. He further admitted that complainant Pandurang vide pass-book No. 225 had deposited the amount with the Syndicate. When a question was put to him that he had left the Popular Syndicate in the month of November 1967 and his whereabouts were not known, he contended that he was keeping the manager in the office and when he returned from the branches he saw the office was sealed by the police. A question was put to him that P. W. 9 Choube made extraordinary efforts to search him and he went to many places such as Verul, Delhi and ultimately he was apprehended in Ranchi in Bihar carrying on again a Chit-Fund business under a different name. To this question the accused replied that at Ranchi he was serving in Ashok Banking business and he produced an appointment letter and relieving order. He further contended that the Popular Syndicate had to receive amount from Husenali and, therefore, contended that Husenali might have reported the matter to the police because of the enmity. So far as the seized articles were concerned, according to the accused, the property was his and it should be returned to him. He admitted in his statement that the Syndicate had no bank account with any bank because, according to him, there was no need to keep the money in the bank. Finally he stated that the Popular Syndicate has to receive near about two lakhs of rupees from others. Promissory notes were not returned to him and, therefore, he could not recover the loan back. He further stated that he had no intention to deceive anybody and if the account books, etc. were not seized, he would have received much more amount from others and then paid to the persons, but as the police sealed and seized all the material, he became helpless to carry the business or to return the money to the members. He further stated that he has been acquitted by another Court in the similar proceedings. Thus in substance it was the case of the accused that he could not carry on the business or return money because the Registers, account-books and other property was seized by the police and the police had sealed the Syndicate office itself. He further contended that he had no intention to cheat people. Thus the accused denied the allegations made against him by the prosecution. The learned judicial Magistrate, First Class, After going through the evidence on record, came to the conclusion that the accused has dishonestly misappropriated the amount entrusted to him. The learned Magistrate further found that the accused had admitted the entrustment of the amount in question to the Popular Syndicate of which he was the partner. The learned Magistrate further found that once it is proved that money was entrusted to the person, burden shifts on him to show that as to what ne did with the money and the accused has failed to discharge this burden. He has further drawn an adverse inference of guilt against the accused from the fact that he was absconding and was carrying on business under a different name in Ranchi. Thus considering the admissions of the accused, the account-books Article 53, his running away from place of business and not maintaining accounts of the firm in any other bank, the learned Judicial Magistrate, First Class, came to the conclusion that the prosecution has proved beyond doubt that the accused had dishonestly misappropriated the amounts of Husenali, Vaziraii and Paudurang. However, the learned Judicial Magistrate found that the charge u/s 420 of the Indian Penal Code was not required to be considered after seeing the nature of the prosecution case and the evidence. Therefore, ultimately the learned Judicial Magistrate convicted the accused for an offence punishable u/s 406 of the Indian Penal Code and sentenced him to undergo rigorous imprisonment for six months and to pay a tine of Rs. 500 or in default of payment of fine, further rigorous imprisonment for three months. The learned Magistrate also passed a consequential order regarding disposal of property. Thus the learned Magistrate convicted the accused for the offence u/s 406 of the Indian Penal Code only.

Being aggrieved by this conviction, the accused filed an appeal before the Sessions Court. The said appeal was heard by the Additional Sessions Judge, Nagpur and the Additional Sessions Judge by his judgment dated 27-10-1971 allowed the appeal. He set aside the conviction of the accused u/s 406 of the Indian Penal Code and passed a consequential order regarding disposal of the property. It is pertinent to note that though the accused was acquitted for the offence punishable u/s 420 Indian Penal Code the State has not filed any appeal against the said acquittal of the accused. However, being aggrieved by the order of the acquittal passed by the Additional Sessions Judge, Nagpur, acquitting the accused for an offence punishable u/s 406 of the Indian Penal Code, the State of Maharashtra has filed the present appeal.

Shri Rajkarne, Assistant Government Pleader, contended before me that the learned Additional Sessions Judge has approached the whole controversy involved in the case from wrong approach. He contended that having held that the complainant as well as the prosecution witnesses had entrusted the amount to the accused, the learned Additional Sessions Judge committed an error in acquitting the accused because, according to the Assistant Government Pleader, the accused has failed to discharge the burden which was upon him. According to Shri Rajkirne, the Additional Sessions Judge has placed a wrong burden on the prosecution to prove as to in what manner the amount was appropriated or misappropriated. He contended that once the prosecution proves beyond reasonable doubt that the amount was entrusted to the accused, the burden shifts upon the accused to show in what manner precisely the said amount was utilised. He further contended that the whole conduct of the accused shows that he has misappropriated the amount. Inspite of best efforts made by the police, the accused could not be traced. He took sufficient care to conceal himself so that he could not be traced. The accused started business over again at Ranchi in a different name. He further contended that the accused has not explained the circumstances found against him nor he had explained his absence from Nagpur.

On the other hand, it is contended by Shri Salve, the learned counsel for the accused, that the scheme started by the Syndicate was a genuine business scheme and the rules regarding the whole scheme were printed in the pass-book itself. The prosecution has not proved the entrustment of the amount or that the accused had acted in breach of any agreement either implied or express. According to him, from the evidence on record it is quite clear that the rules as published in the pass-book were duly observed. From time to time auctions were held for payment of loans to the subscriber-members. However, for the reasons beyond the control of the accused collection of the subscription failed to a considerable extent. The loans advanced by the firm amounted to several thousands and could not be recovered. The accused has taken all steps to repay the amount. He had acted honestly and he had an intention to pay the amount. He brought money from branches to make the payment. He further contended that though several documents including Registers, account-books, auction-book, as well as promissory notes were seized by the police, they were never produced before the Court. He further brought to my notice the application filed by the accused for production of the documents before the Court. According to Shri Salve, inspite of this application the prosecution failed to produce all the documents before the Court and, therefore, he had no effective opportunity to cross-examine the witnesses examined on behalf of the prosecution. He further contended that the burden was upon the prosecution to show the dishonest intention on the part of the accused or that the rules as published in the pass-book were not followed. According to Shri Salve, because of the conduct of the police in attaching all the property belonging to the Syndicate and sealing the office has resulted in loss to the firm as well as to the accused. Because of this hasty conduct on the part of the police it was not possible for him to carry on business or make repayments. Not only this, according to Shri Salve, the seizure and attachment of the promissory notes has resulted in heavy loss to the firm and the accused and because of this attachment and seizure of the promissory notes it was not possible for the firm to recover the amount from the member-subscribers. So far as Ex. 53 is concerned, he contended that the said Ex. 53 does not reflect the accounts maintained by the firm. It is merely extract prepared by the Head-constable and P. W. 1 Chimurkar. The prosecution has not explained as to from what document the said extracts have been prepared nor the original books or other documents have been placed before the Court nor they are legally proved. In substance, therefore, according to Shri Salve, the prosecution has failed to prove any case against the accused even u/s 406 of the Indian Penal Code. He further contended that having regard to the rules under which the said scheme was being carried out, it is quite clear that the subscriber members were depositing the amount with the firm and were not entitled to the same species. Hence in substance the whole transaction was in the nature of a banking transaction and relationship between the firm and the subscriber-member was that of a debtor and creditor. In this view of the matter, it is contended by Shri Salve that it cannot be said that there is any entrustment of a particular amount to the Syndicate by a particular subscriber member. Thus according to Shri Salve, the prosecution has failed to prove any entrustment of the amount to the accused. Hence he has supported the order of acquittal passed by the Additional Sessions Judge and has also challenged the finding recorded by the Additional Sessions Judge regarding the entrustment of the amount to the accused.

It is not challenged before me that the accused was a managing partner of the firm. The prosecution has produced during the course of the trial 6 passbooks issued by the Popular Syndicate, Nagpur, of which the accused was managing partner. One pass-book is in the name of Pandurang Motiram (P. W. 7) bearing No. 10 of Chit No. 225. According to this pass-book Pandurang Motiram Tayade has deposited an amount of Rs. 148/ and the same was duly entered in the pass-book. This witness further stated that he did not get back the amount and the accused left the bank. He went to the bank three times but he found that the office was closed. Another pass-book is in the name of Sd. Wazirali (P. W. 8) bearing book No. 4 of Chit No. 233. According to this witness, he has paid the amount of Rs. 204/- but he did not get the amount back as the partners of the company ran away. The fourth pass-book is in the name of Syed Husanali complainant (P. W. 5). This pass-book related to group No. 224 of Chit No. I. The fifth pass-book is also in the name of Syed Husenali for group No. 240 pass-book No. 15 and the sixth is in the name of again Syed Husenali for group No. 230 and Chit No. 18. On four of these pass-books there is signature of the accused-respondent. These pass-books so bear entries regarding payment and the witnesses referred to herein before have deposed on oath that they had made payments as shown in the pass-books and the said pass-books were given to them by the firm. Therefore, from the evidence of Syed Husenali, Pandurang Motiram and Wazirali it is quite clear that they had made payments through the collectors, who were the agents of the firm. It is also clear from the evidence on record that ultimately the said amount reached the partners of the firm. So this amount which was paid by these witnesses to the collectors who were acting as collecting agents of the firm was entrusted or given to the firm as their contribution towards the Chit fund. Inasmuch as the respondent accused was managing partner of the Syndicate firm, it must be held that this amount was entrusted to him in that capacity. From the nature of the transaction or the business which was being carried out by the firm, it is quite clear that the said amount was paid by these witnesses who were the subscriber-members for a particular purpose to be dealt with according to the rules of the firm. In this view of the matter, in my opinion, the learned Judges of both the Courts below were right in coming to the conclusion that the payments made by the subscriber-members to the collectors of the firm, who were acting as the agents of the firm, was a good payment to the managing partner and as such it could be said that the amount was entrusted to the respondent accused and he had a dominion over it. From the evidence of P.W. 1 Chimurkar also it is clear that the amount which was recovered by the collectors used to be deposited with the firm. The said amount finds place in the pass-book issued by the firm itself. The business carried out by the Popular Syndicate cannot be compared with the banking business. Even in the case of a bank it has been held by this Court that a Managing Director of a Bank, who was at the material time entrusted with the full dominion of the funds of the Bank, including the rights to recover debts due to the Bank, was capable of committing dishonest misappropriation or conversion of the amount entrusted. Such a view has been taken by this Court in Gopaldas v. State of Maharashtra 1973 Mh. L J 237. That was a case where the Managing Director of the Bank was prosecuted for an offence u/s 409 of the Indian Penal Code and in that context it was observed by this Court as under:-

"It is true that u/s 405 there must be entrustment of property to the accused but section 405 uses two expressions-"whoever being; in any manner entrusted with property r with any dominion over property", that is to say, the accused must the entrusted with the Property itself or he must be entrusted with dominion over the property before he can commit the offence of criminal breach of trust in respect thereof."

In that case the accused was the Managing Director of the Bank and was clothed with all powers and authorities to deal with the funds of the Bank. He was also entrusted with complete dominion over the property and was capable of committing dishonest misappropriation or conversion of the funds of the Bank. In my opinion, similar is the case in the present case also. Similar view has been taken by the Delhi High Court in Bikram Singh v. The State 1974 Cr. L J 418. The said case also dealt with the scheme known as Chit Fund. After referring to section 405 of the Indian Penal Code it was observed by the Delhi High Court:-

"This shows that it is not necessary that a person should be entrusted with the property before he can be said to misappropriate the same. Even where a person has not been entrusted with the property but comes to have a dominion over it can be guilty of misappropriation In the instant case the subscribers had entrusted their moneys to the Company through its employees. This amount was to be used in accordance with the contract between The subscribers and the Company. A person having dominion over this amount which has been entrusted with the Company has to explain as to what has happened to the money since it was not paid to the complainant who was legally entitled to be paid. Thus, The duty of the prosecution is to prove that the moneys were in fact paid to the Company and that the accused had a dominion over the same.

A Director of a Company may not have any dominion over the funds of the Company, but whether he has the dominion or not will depend on the facts of each case. However, as far as Managing Director of the Company is concerned, he is under the Companies Act a Director who has been entrusted with substantial powers of management by virtue of an agreement with the Company or of a resolution passed by the Company in the general meeting or by its Board of Directors, or by virtue of its memorandum or articles of association. According to the prosecution the petitioner is the Managing Director of the Company and thus has substantial powers of management. He thus has prima facie dominion over property of the Company including the amounts received from the subscribers."

In my opinion, the present case is still on a stronger footing. In the case before me the Syndicate has been registered as firm under the Partnership Act. The respondent-accused was a Managing Partner and in that capacity he had complete dominion over the property of the Syndicate as well as the amounts received from the subscribers. It is further clear from the evidence on record that pamphlets as well as application forms like Articles A and B were issued under the signature of the accused. Even the pass-book was signed by the accused. The amount collected by the collectors from the subscriber-members was deposited with the firm and the respondent-accused had complete dominion over the affairs of the firm including the amount received from the subscriber members. In this view of the matter, in my opinion, both the Courts below were right in coming to the conclusion that the amount paid by the subscriber-members was entrusted to the accused-respondent and he had a complete dominion over it.

It is no doubt true that initially it was the case of the prosecution that the whole scheme itself was fraudulent one. It was also alleged by the prosecution that by misrepresentation and fraud the accused and the firm had induced people to deposit their amount with the firm. However, the accused, though charge-sheeted for an offence u/s 420 of the Indian Penal Code, was acquitted by the Judicial Magistrate, First Class and the State has not chosen to file any appeal against the said order of acquittal. Therefore, it is not necessary for this Court to go into the said question in this appeal.

However, it was contended by Shri Rajkarne, Assistant Government Pleader, that once the prosecution has proved entrustment of the amount to the accused beyond reasonable doubt, the burden shifts upon the accused to prove as to in what precise manner he has dealt with the said amount. In support of this proposition Shri Rajkarne has relied upon two decisions of the Supreme Court Krishan Kumar Vs. The Union of India, and Jaikrishnadas Manohardas Desai and Another Vs. The State of Bombay, . In Krishan Kumar v. Union of India i.e., the Supreme Court was concerned with a case u/s 5(1) (c) of the Prevention of Corruption Act and in that context it was observed by the Supreme Court in para 9 of the said judgment:-

"It is not necessary or possible in every case to prove in what precise manner the accused person has dealt with or appropriated the goods of his master. The question is one of intention and not a matter of direct proof but giving a false account of what he has done with the goods received by him may be treated a strong circumstance against the accused person. In the case of a servant charged with misappropriating the goods of his master the elements of criminal offence of misappropriation will be established if the prosecution proves that the servant received the goods, that he was under a duty to account to his master and had not done so. If the failure to account was due to an accidental loss then the facts being within the servant''s knowledge, it is for him to explain the loss. It is not the law of this country that the prosecution has to eliminate all possible defences or circumstances which may exonerate him. If these facts are within the knowledge of the accused then he has to prove them. Of course the prosecution has to establish a prima facie case in the first instance. It is not enough to establish facts which give rise to a suspicion and then by reason of section 106 of the Evidence Act to throw the onus on him to prove his innocence. See Harries C. J. in Emperor v. Santa Singh A I R 1944 339 at page 345."

(Italics is mine).

In Jaikrishnadas Manohardas Desai and another v. State of Bombay it was also observed by the Supreme Court as under:

"Direct evidence to establish misappropriation of the cloth over which the appellants had dominion is undoubtedly lacking, but to establish a charge of criminal breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of as obligation to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to an inference of dishonest misappropriation or conversion. Conviction of a person for the offence of criminal breach of trust may not, in all cases, be founded merely on his failure to account for the property Entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made."

(Italics is mine.)

Shri Salve has brought to my notice another decision from Chelloor Mankkal Narayan Ittiravi Nambudiri Vs. State of Travancore-Cochin, , wherein it was laid down by the Supreme Court that to constitute an offence of criminal breach of trust it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted, there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by someone else which he willingly suffered to do.

In the present case it is no doubt true that the complainant and other two prosecution witnesses had entrusted the amount paid by them as subscriber-members of the Syndicate to the accused. The prosecution has further proved that is a managing partner of the firm the accused had a dominion over the said amount. But it will have to be seen as to whether the prosecution has further proved at least prima facie, that the accused has acted contrary to the expressed or implied contract between the parties or whether he has acted contrary to the rules of the scheme as published in the pass-book. The rules published in the pass-book constitute a contract or agreement between the parties and it is under the said scheme that amount was paid by the subscriber-members to the Syndicate. The prosecution has examined P. W. 1 Narayan Chimurkar, who was at the relevant time working as an Accountant of the Syndicate, to establish the fact of entrustment as well as misappropriation of the amount. After deposing as to what was the scheme, this witness further stated that bill collector used to recover the amount every day, and then the said amount paid to the accused or the other partner. He further stated that the Syndicate had branches at Amraoti, Akola, Dhulia, Nandurbar, Bhopal, Jabal-pur, Raipur and other places. He also stated that the business of the firm was advertised in Cinema and papers. According to him, the partners of the firm including the accused used to attend the office upto November 1967 and then they went to the branch offices and did not return. He waited for them for 4-5 days and as the members were pressing their demand and were troubling them, he held a meeting and applied for protection from the police According to this witness, on 17th November 1967 police came, sealed the office and on 18-11-1967 the police seized papers and this seizure lasted for three days He identified the pass books produced before the Court to be one issued by the Syndicate. He further stated that the office stopped functioning since November 1967 and thereafter the accused was not seen. He further admitted money was also not returned to the pass-book bearers. According to him, the Syndicate was to return more than Rs. one lac to the subscriber members. However in the cross-examination this witness has stated that the rules as given by the pass-book were followed by the company. Bond was taken when loan was advanced with the sureties and they were 17 to 18 collectors. He further stated that the loan, which the company has to recover, may be to the tune of Rs. one lac He further stated that whenever the loan was not recovered regularly money from branches was brought to return the money. He further stated that since May 1967 there was shortage in the collection and this incident was also pub lished in the newspaper. He has not calculated what amount is to be taken back from loanee. According to him, there are about 9 to 10 books and every book contains about 100 bonds. He further stated that about 88 bonds were used. He also admitted that the amount received from the collector was acknowledged on their books. He has not calculated the commission amount. He has also not calculated the amount received back nor he has calculated the amount which was advanced as a loan. Ex. 53, which was an extract of account, was shown to this witness. P. W. 3 Nizamuddin who was one of the collectors collecting amount on behalf of the Syndicate'' had stated that there were about 10 groups of 25 men each. He further stat d that the some amount was not received from the depositors According to him when the loan was given, two sureties were taken. He had also made a reference to the bonds. P. W. 4 Suman, who was another collector, in his Cross-examination stated that in every week the amount collected was returned to the members as a loan and this loan was also collected by the collectors Even the complainant (P. W. 5) Syed Husenali had stated in his cross-examination that he met the accused for the first time in the year 1965 and he had become Subscriber member of the scheme. According to him, on previous 3 or 4 occasions all the amount paid by him was returned back, but this time the amount was not returned. He further stated that he had not felt previous to this fourth time that the Syndicate has cheated him and that the amount collected for 10 days was given on loan. P. W. 8 Vazirali also stated in his cross-Examination that he knew about the advance of loan though he had not stood suretv at any time. From the seizure Panchanama (Exhs. 16 and 17) it is quite clear that all the counter-foils, ledger, account-books, registers, bill-books auction note-book, application forms, etc. were seized by the police from the office of the Syndicate. However, it is quite clear from the record of the case that all the seized property was not produced before the Court. It seems from th record that at the initial stage itself an application was filed by the accused for producing these documents before the Court, but no orders were passed on the said application by the learned Judicial Magistrate. The prosecution has also not cared to go through the account books to verify the true state of affairs. The prosecution did not examine any one even to show that the books of accounts were either regularly kept or not. No attempt was made to lead evidence in this behalf, though all these documents were seized by the prosecution and were there in "their custody. Even the account books and other registers seized were not produced before the Court inspite of application filed by the accused. No evidence in regard to the mode and manner of keeping the accounts has been placed on record. The prosecution has conducted the case without placing before the Court the detailed information about the working of the scheme, working of the Head-office or the branch offices. No effort is made to ask questions in this behalf to the employee, namely, the Accountant who was at the relevant time in service, though he has been examined as prosecution witness. No question has been asked to him as to the nature of the business conducted by the Syndicate and the method of maintaining accounts. No effort was also made either at the investigation stage or during the course of the trial to audit the accounts or ascertain the true facts regarding the assets and liabilities of the Syndicate. Even no questions were asked to the prosecution witnesses to ascertain the facts as to whether there was any dishonest misappropriation or dishonest conversion or disposal of money in violation of the terms of expressed or implied contract or whether the money was disposed of contrary to the rules of the scheme. Articles 54, 55 and 56 were prepared by the Head-constable on the basis of Article 53 in the presence of Chimurkar. The Head-Constable has not made any inquiry about the bonds which were seized. According to the Head-Constable, Chimurkar told him and he prepared the documents and it was not possible for him to see whether the loan entries are taken or not. He had not taken entries about the expenses of the branches, expenses incurred by the Head office etc. In this vague state of affairs and the vague state of record and in the absence of evidence on material and important points, in my opinion, it is unsafe to hold that the charge of breach of trust has been brought home to the accused.

However, it is contended by Shri Rajkarne that an inference regarding dishonest intention of the accused could be drawn from the fact that he was absconding. In my opinion, it will not be possible having regard to the facts and circumstances of the present case to draw such an inference from the mere fact of absconding. The accused has. explained as to why he was afraid of coming to Nagpur. According to him, the office was sealed and all the material was seized by the police. There was a general demand about refund of money and he had an apprehension that his life was also in danger. As observed by the Supreme Court in Matru alias Girish Chandra v. The State of U. P. A I R 1971 S C 1050, the act of absconding is no doubt relevant piece of evidence to be considered along with other evidence but its value would always depend on the circumstances of each case. Generally the Courts consider it as a very small item in the evidence for sustaining conviction. It cannot certainly be held as a determining link in completing the chain of circumstantial evidence consistent only with the hypothesis of the guilt of the accused. Therefore, in this view of the matter, from the mere absence of the accused from Nagpur it is not possible for me to draw an inference regarding dishonest intention or misappropriation. Initially the accused was prosecuted for the offence u/s 420 of the Indian Penal Code for cheating. It was the case of the prosecution that the whole scheme itself was nothing but a fraud. It seems that the State has undertaken this trial to bring home the offenders charged with the malversation of funds in the name of Chit schemes, in the interest of investing public. The public exposure of malpractices in connection with such schemes wherever they are brought to light and the punishment of the delinquents should ordinarily be the first concern of the State. The investing public is entitled to protection against the consequences of such schemes, if they are based on fraud. The public is also entitled to protection against the consequences of organized crime envisaged by such scheme. Otherwise the condonation of the acts of all those concerned with the scheme will have a very disastrous effect on the community in general. Therefore, initially thought that it will be in the interest of general public that a thorough inquiry and trial of the offenders against whom the charge is framed should be ordered. However, after due consideration of the arguments I think that no useful purpose will be served by directing re-trial against the present accused person. To say the least, the investigation of the crime was most perfunctory. No responsible police officer was deputed to investigate this case and it was left to the Head-constable alone. No efforts were made even to audit the accounts or to ascertain the facts as to what is the nature of the scheme, whether the scheme as promulgated was followed and implemented by the accused, as to whether the rules published on the pass books were also observed or not, which could have thrown considerable light upon the intention of the propounders of the scheme. If the scheme was not proper or the money entrusted to the accused or the Syndicate was not disposed of in accordance with the express or implied terras of the agreement or was disposed of contrary to the rules of the scheme, then definitely it was open to Court to have drawn inference about the dishonest intention of the accused. However, though from the beginning it was the case of the prosecution that the whole scheme was a camouflage one and was based on misrepresentation and fraud and the accused was also prosecuted for the offence u/s 420 of the Indian Penal Code, the State has not chosen to file an appeal against the acquittal of the accused for the said offence. The whole investigation and the conduct of the case, in my opinion, is most unsatisfactory. Because of this unsatisfactory and perfunctory investigation, in my opinion, no useful purpose will be served even if the case is remanded back to the trial Court at this stage. In the result, therefore, the appeal fails and is dismissed.

I am informed that the property attached from the accused is not acquired in any other case now. in view of the acquittal of the accused on both counts the seized property will now be returned to him.