IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE R.BASANT THURSDAY, THE 19TH JULY 2007 / 28TH ASHADHA 1929 Crl.Rev.Pet.No. 4126 of 2006(A) ------------------------------- AGAINST THE ORDER DATED 14/11/2006 IN CMP.NO.4577/2006 IN CC.219/2006 of CHIEF JUDL.MAGISTRATE, ERNAKULAM .................... REVN. PETITIONER: PETITIONERS/ACCUSED ------------------------------------- 1. KURIACHAN CHACKO, S/O.P.V.CHACKO, PALAKKAL HOUSE, G-258, PANAMPILLY NAGAR, ERNAKULAM, COCHIN-682 036. 2. ACHAMMA CHACKO, W/O.P.V.CHACKO, PALAKKAL HOUSE, G-258, PANAMPILLY NAGAR, ERNAKULAM, COCHIN-682 036, (THE 2ND PETITIONER'S NAME IS WRONGLY TYPED AS ANNAMMA CHACKO IN THE ORDER PASSED BY THE COURT BELOW). 3. LINU JOY, W/O.JOY JOHN, POWATHIL HOUSE, ASSUMPTION CHURCH ROAD, CHANGANACHERRY, PIN-686101, KOTTAYAM DISTRICT. BY ADV. SRI.O.V.MANIPRASAD SRI.M.K.DAMODARAN (SR.) SRI.O.V.MANIPRASAD RESPONDENTS: COMPLAINANT ------------------------ STATE OF KERALA, (DEPUTY SUPERINTENDENT OF POLICE, NARCOTIC CELL, CRIME NO.672/2006 OF CENTRAL POLICE STATION, ERNAKULAM), REP. BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM, COCHIN-682 031. BY SPL. P.P. SRI. VENGANOOR K. CHANDRASEKHARAN NAIR THIS CRIMINAL REVISION PETITION HAVING BEEN FINALLY HEARD ON 13/06/2007 ALONG WITH CRRP NO. 4132 OF 2006 AND OTHER CONNECTED CASES, THE COURT ON 19/7/2007 PASSED THE FOLLOWING: R. BASANT, J. ------------------------------------------------------ CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 ------------------------------------------------------ Dated this the 19th day of July, 2007 ORDER Man's quest to make quick and easy money – to live not by the sweat of his brow, has been the cause of his fall from the halo of virtue on this planet. The yearning to make quick and easy money by means fair or foul has been central to the concepts of unfairness and criminality in all societies at all times. Exploiting his own superior faculties – physical , mental, intellectual or spiritual, man has always attempted to arrogate to himself what belongs legitimately to his brother beings. Individuals, families, communities, nations, races and generations have attempted to do this. Visionaries and sublime societies have always attempted to avoid and eliminate such exploitation of man by man. But, unfortunately the story of human civilisation is the tragic tale of such unsuccessful attempts. The result is the inequitable CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 2 :- and unjust world order that we are left to face. I have said so much as I am called upon to interpret the Statute – 'The Prize, Chits & Money Circulation Scheme (Banning) Act, 1978' (hereinafter referred to as `the Act') which in its core is an attempt by the Indian Parliament to curb and control this basic instinct of the beastly man to make quick and easy money by exploiting the same yearning of his own gullible, stupid and foolish brotheren. 2. The State and the accused are before me with these six revision petitions – all challenging the same common order and the task before me is to decide whether the revisional powers of superintendence and correction deserve to be invoked to interfere with the impugned order under which the learned Chief Judicial Magistrate, Ernakulam (i) directed the framing of charges against all the accused persons under Sec.2(c) read with Secs.3, 4 and 5 of the Act and Sec.420 of the IPC; (ii) refused to frame charges against the accused under Sec.2(e) read with Secs.3, 4 and 5 of the Act. 3. Though the State has challenged the refusal to frame CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 3 :- charges under the provisions of the Reserve Bank of India Act also, after discussions at the Bar, in the course of the arguments before me, the learned Special Public Prosecutor/Additional Advocate General has not chosen to seriously challenge the said aspect. I am hence not proceeding to consider that aspect in detail. 4. The basic facts are simple. The petitioners are persons – partners of a firm and employees, who conduct a Scheme by name “LIS Deepasthambham Scheme”. The scheme is apparently simple in its conception. A person has to pay Rs.625/- and purchase one unit from the promoter. The promoter will make use of Rs.350/- to purchase 35 lottery tickets of the Kerala State Government lotteries each for Rs.10/- for the unit holder for the next 35 weeks. If the unit holder wins any prize upto Rs.5,000/- in the 35 draws in respect of the tickets, the promoter shall collect the same and pay the same to the unit holder. If he wins any prize above Rs.5,000/-, the ticket shall be handed over to the unit holder for collection. The balance of Rs.275/- will be used to make the unit holder a subscriber of a magazine by name “Thrikalam” for one year. The said magazine CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 4 :- will reproduce relevant and important materials from other magazines. It will also furnish information about the lottery tickets which have won prizes. 5. The unit holder will be returned not only Rs.625/- which he has initially invested, but twice his investment i.e., Rs.1,250/- (less Rs.100/- as service charges for the promoter and legal deduction for tax etc.,) on an early date. 6. Very attractive! The gullible would flock on hearing the proposal. What easy and quick money! How do you do this? A few at least may ask. If their queries are not satisfied, there will be no takers. The law does not oblige the promoter of a business venture to explain. But the promoter indulgently offers an explanation. To be credible, explain he must. Hence there is an explanation and this is the explanation that is offered. 7. When 35 tickets of Rs.10/- each are purchased, the Government pays a commission of 28% of which the promoter is indulgently prepared to share 25% with the unit holders. The publisher of the magazine gives a commission of 30% to the promoter. The promoter indulgently shares 25% with the unit holder. These amounts are available with the promoter. In the CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 5 :- order of strict seniority, the senior most unit holder will be paid Rs.1,250/- as soon as the requisite amounts are available as commission with the promoter. The promoter in addition to the 28% commission for the lottery ticket and 30% commission for the magazine, may also get commission for the prizes won by tickets sold through the promoter. These amounts will also be entirely made available to be paid to the unit holders. If a unit holder is paid Rs.1,250/- before the expiry of the period of 35 weeks, no lottery tickets will be purchased on his behalf thereafter. Similarly, if Rs.1,250/- is paid to the subscriber before the expiry of the period of one year, Thrikalam magazine will not be sent to the subscriber thereafter. The prize of such unpurchased lottery tickets and unissued magazines will also be available to the promoter to pay this amount of Rs.1,250/-. Therefore the scheme is viable and workable. All persons will double their investment at the earliest. No specific time limit is given. But it is assured that the amount will be doubled at the earliest. There are veiled suggestions that the return will be made before the expiry of 35 weeks and as soon as 14 more members are enrolled. Payment shall be made strictly in CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 6 :- accordance with seniority. The advantage of technology is also borrowed. Passwords can be chosen. There is a web site for the promoter. The unit holder can have access using his password and the site would reveal all details about the tickets purchased on behalf of the unit holder by the promoter. The unit holders shall thus know the details of the tickets purchased for them by the promoter and shall also be able to ascertain whether any prizes have been won by any ticket purchased on their behalf by the promoter. 8. The idea appears to have caught the imagination of many and the membership collection during a short period of time had exceeded Rs.450 Crores admittedly. The amounts were being paid to the unit holders promptly – on many occasions even before the expiry of 35 weeks. More and more subscribers joined the queue. There was aggressive publicity and marketing. The scheme was proceeding very happily. More and more amounts were coming into the kitty of the promoter from the unit holders. 9. The applecart was upset when the Inspector General of Police registered a crime alleging the commission of the offences CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 7 :- punishable under the Act and Sec.420 of the IPC. Investigation commenced. An attempt was made to preempt the investigation by a request to quash the crime registered by invoking the powers under Sec.482 of the Cr.P.C. A Division Bench of this Court headed by the Hon'ble Chief Justice V.K. Bali rejected the said prayer by the common judgment in W.P.(c) Nos.12775 and 13152/2006 & Crl.M.C.No.1377/06 dated 5/7/2006. Thereafter, after completing the investigation, final report was filed by the Investigating Officer. 10. Before the learned Chief Judicial Magistrate, who entertained the final report and took cognizance, a contention was raised at the stage of Sec.239/240 of the Cr.P.C. that charges are not liable to be framed under Sec.2(c) and 2(e) read with Secs.3, 4 and 5 of the Act and Sec.420 of the IPC. As stated earlier, I am not referring to the charges under the provisions of the R.B.I. Act. The learned Magistrate proceeded to hold that the charges are liable to be framed for the offences punishable under Sec.2(c) read with Secs.3, 4 and 5 of the Act and Sec.420 of the IPC. The charges are not liable to be framed under Sec.2(e) read with Secs.3, 4 and 5 of the Act, it was CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 8 :- further held. 11. The anxiety of the State to properly defend the charges is evident from the fact that the learned Additional Advocate General has been specially appointed as the Special Public Prosecutor for the conduct of this case. Detailed arguments have been advanced. Following questions do arise for determination: (i) Is the questions concluded by any earlier decision of this Court? (ii) Are the charges which are directed to be framed groundless as to warrant discharge under Sec.239 of the Cr.P.C.? (iii) Did the learned Magistrate err in coming to the conclusion that the charges levelled against the petitioners under Sec.2 (e) read with Sec.3, 4 and 5 of the Act are groundless as to justify discharge? (iv) Is the Investigating Officer prompted by mala fides? 12. Before proceeding to consider these contentions CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 9 :- specifically it will only be apposite to refer to the quality of consideration of materials by a criminal court at the stage of Sec.239/240 of the Cr.P.C. In a warrant case instituted on a police report, the Magistrate is obliged to consider the police report and the documents sent with it under Sec.173 of the Cr.P.C. and come to a conclusion as to whether the charge against the accused is groundless. In that event, the accused has to be discharged. In all other cases it will have to be held that there is ground to presume that the accused has committed the offence and charges must be framed under Sec.240 of the Cr.P.C. I extract below Secs.239 and 240 of the Cr.P.C: “239. When accused shall be discharged.-- If, upon considering the police report and the documents sent with it under section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused, and record his reasons for so doing. CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 10 :- 240. Framing of charge.-- (1) If, upon such consideration, examination, if any, and hearing, the Magistrate is of opinion that there is ground for presuming that the accused has committed an offence triable under this Chapter, which such Magistrate is competent to try and which, in his opinion, could be adequately punished by him, he shall frame in writing a charge against the accused. (2) The charge shall then be read and explained to the accused, and he shall be asked whether he pleads guilty of the offence charged or claims to be tried.” (emphasis supplied) 13. It is important that there can be no third category of cases. All cases must either fall under Sec.239 or Sec.240 of the Cr.P.C. Once it is found that the charges are groundless, it will have to be presumed that there is sufficient ground at that stage to show that the accused has committed an offence triable under the law. The quality of consideration under Secs.239 and 240 of the Cr.P.C. has often been referred to loosely as verifying whether there is a prima facie case. The question of framing CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 11 :- charges does arise in three different situations in the Code depending on the nature of the offence alleged and the manner in which the proceedings are initiated. Sections 227/228 (sessions trial), 239/240 (warrant trial – police charge) and 245(1)/246 (warrant trial – private complaint) are the situations. I extract the relevant provisions. “227. Discharge.-- If, upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the Judge considers that there is not sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for so doing. 228. Framing of charge.-- (1) If, after such consideration and hearing as aforesaid, the Judge is of opinion that there is ground for presuming that the accused has committed an offence which . . . . . . . . . . . .” 245(1) When accused shall be CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 12 :- discharged.-- (1) If, upon taking all the evidence referred to in section 244, the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction, the Magistrate shall discharge him. (2) x x x x x x x x 246. Procedure where accused is not discharged.-- (1) If, when such evidence has been taken, or at any previous stage of the case, the Magistrate is of opinion that there is ground for presuming that the accused has committed an offence triable under this Chapter, which such Magistrate is competent to try and which, in his opinion, could be adequately punished by him, he shall frame in writing a charge against the accused.” 14. It is important to note that the consideration under Secs.227 and 228, 239 and 240 and 245(1) and 246 of the Cr.P.C. are identical; in the sense that it will first have to be decided whether the proceedings are liable to brought to CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 13 :- termination at that stage and if not, the court is to presume guilt and proceed to the next stage of the proceedings. There can be no third category of cases which do not fall within either of the two Sections in these pairs. 15. A careful consideration of Secs.227 and 228, 239 and 240 and 245(1) and 246 of the Cr.P.C. must show that in all these three instances if the cases do not fall under the former of the pairs it has got to fall within the latter of the pairs. Though loosely the requisite satisfaction is referred to as a prima facie case, to me, it appears that it would be idle to assume that the quality of consideration of the materials at these stages are identical in all respects. When it comes to a police charge, discharge under Sec.239 of the Cr.P.C. is possible only if the court entertains the satisfaction that the charge is groundless. This is evidently a shade different from the satisfaction which must be entertained under Sec.245(1) of the Cr.P.C. Both would come under the generic description of a prima facie case. The legislature appears to have realistically taken note of the fact that a police charge comes before the court after it is vetted by the instrumentality of the police which is an indispensable part CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 14 :- of the criminal justice delivery system. 16. To sum up, I do note that a discharge under Sec.239 of the Cr.P.C. is possible only when the court entertains the satisfaction that the allegations/charge against the accused is groundless. No detailed evaluation of the materials or meticulous consideration of the possible defences need be undertaken at this stage. The exercise of weighing materials in golden scales is certainly not to be undertaken at this stage and has to be postponed to a later date. Is the allegation/charge groundless? That alone need be considered at the stage of Sec.239/240 of the Cr.P.C. 17. It will be apposite straightaway to deal with the first contention that two earlier decisions of this Court have held that the LIS Deepasthambham Scheme/Project does not fall within the mischief which is sought to be remedied under the Act. Reliance is placed on the decisions of a single Judge in Crl.M.C.No.2912/05 and a Division Bench of this Court in W.P. (c) No.33743/05. To my mind, these decisions cannot at all deliver any advantage to the accused as the relevance of those decisions and the bearing of those decisions on the present CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 15 :- prosecution have been considered by a subsequent Division Bench ruling of this Court in W.P.(c) Nos.12775 & 13152/06 dated 5/7/06. I am bound by the said findings of the Division Bench (see para-18 in particular) which has dealt with both decisions. 18. The observations in the two earlier decisions cannot, in these circumstances, have any bearing on the question raised before me in the light of the subsequent decision of the Division Bench in which both those earlier decisions have been referred to in para-18 and it has been held categorically that those observations/decision can have no bearing on the present prosecution. In these circumstances, it is unnecessary for me to delve deeper into that contention. 19. The contentions are raised as to what exactly is the LIS Deepasthambham Scheme/Project. I have already extracted above what that Scheme means. That is the prosecution case about the Scheme. I am not proceeding to analyse the materials available in detail. Suffice it to say that I have gone through all the relevant documents to ascertain the prosecution case about the Scheme. In particular, I may mention that I have taken note CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 16 :- of the minutes of the partners dated 16/11/02 and the literature about the Scheme and the advertisements made about the Scheme. It will certainly be for the contestants in the course of trial to establish if there be such a contention that the Scheme really is not what it purports to be as revealed from these documents. 20. I shall now consider the second question whether the charge under Sec.420 of the IPC and Sec.2(c) read with Secs.3, 4 and 5 of the Act are groundless. 21. The prosecution has built up its case on the plea that the Scheme is a mathematical impossibility and the promoters of the Scheme know for certain that this Scheme cannot function properly. It is the case of the prosecution that an unworkable Scheme making tall promises which the makers of the promise know fully well cannot work successfully has been offered for the public for their consumption. The very contention is that the Scheme is so grossly untenable that the makers of the promise know fully well that these promises are false. Such CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 17 :- promises are made to induce persons to part with money on the lure of doubling the same. The Scheme would work for some period as Paul can be robbed to pay Peter and ultimately when there is a large mass of Peters they will be left in the lurch without any remedy as they would by then have been deceived and deprived of their money. 22. The question therefore is very important as to whether the Scheme is a possibility or is only a tall false claim made to fraudulently induce persons to part with their money. In this context, it has to be seen that the profitable working of the Scheme is impossible from the very nature of the Scheme offered. Simple arithmetics reveal that utilising the amount of Rs.625/-, only an amount of Rs.180.50 will be available as commission of which Rs.24.25 is claimed by the promoter and Rs.156.25 is offered for payment to the unit holders. The details of the same are given below: CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 18 :- Head Amount Commission Total Percentage Amount For the Promoter Percentage/Amount For the Subscriber Percentage/Amount Lottery Tickets Rs.350/- 28% (Rs.98/-) 3% (Rs. 10.50) 25% Rs.87.50 Magazine Rs.275/- 30% (Rs.82.50) 5% (Rs.13.95) 25% Rs.68.75 Total Rs.625/- Rs.180.50 Rs.24.25 Rs.156.25 Deficit in each If Rs.625/- were to be returned = 625 - 156.25 = Rs.468.75 Deficit in each If Rs.1250/- were to be returned = 1250 - 156.25 = Rs.1093.75 If the amount of Rs.625/- were to be returned, there will be a deficit of Rs.468.75. If double the amount i.e., Rs.1,250/- were to be returned, there will be a deficit of Rs.1,093.75. Therefore for every person for whom double payment is made, the promoter will have to make Rs.1,093.75 and this obviously is paid to him from the money which subsequent subscribers pay as the price of the unit. Of course, I have not taken note of the uncertain commission which would be receivable by the promoter for prizes won by the unit holders through them. I have also not taken specific note of the savings in respect of unpurchased tickets and non-supplied magazines after the subscriber receives the double amount and closes the transaction before elapse of the period of 35 months. It must be CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 19 :- evident for any discerning mind that this Scheme cannot work unless more and more subscribers join and the amount paid by them as unit price is made use of to pay the previous subscribers. The system is an inherently fragile system which is unworkable. Foolish, gullible and stupid persons alone may fall for the Scheme without carefully analysing the stipulations of the Scheme. It would be totally erroneous to assume that the offence of cheating would not lie if the persons deceived are gullible, unintelligent and stupid persons. The system and the law has a duty to protect such victims of crime also. According to me, there is no reason to assume that the promoters had no contumacious intention and they embarked on the venture without any culpable motive on the honest assumption that the tickets sold through them will win prizes and sufficient commission will be available to pay double the amount to all the unit holders. 23. I take note of the fact that inherently there is merit in the allegation of the prosecution that the Scheme is so grossly unworkable that the persons who made representations to that effect and induced persons to part with money did entertain the CRL.R.P.NOs.4126, 4132 4133/2006 & 1290, 1291 & 1292/07 -: 20 :- contumacious intention. They knew fully well that unworkable false representations were being made. The obvious attempt, it can be presumed at this stage, was to induce persons by such false unworkable representations to part with money. Initially some subscribers can be kept satisfied to induce them