Sri Ravindra Vs. State By J P Nagar P S - Court Judgment

Excerpt:
® in the high court of karnataka at bengaluru dated this the20h day of august2020before the hon’ble dr. justice h.b.prabhakara sastry criminal revision petition no.1180 of2010between:1. sri ravindra s/o jayaraj, aged 67 years, 2. smt.devamani, w/o ravindra, aged 53 years both are r/at no.1391, south end `a’ cross, 9th stage, bangalore. .. petitioners ( by sri hasmath pasha, sr.counsel for petitioner no.2; petitioner no.1 is reported to be dead vide order dated 13.7.2017) and: state by j.p.nagar p.s. represented by public prosecutor, city civil court complex, bangalore. .. respondent ( by sri vinayaka v.s., hcgp ) crl.r.p.no.1180/2010 2 this criminal revision petition is filed under section 397 and section 401 of cr.p.c. praying to call for the records of the criminal appeal no.1041/2007 from the file of the city fast tract-vi (sessions) judge, at bangalore and examine the legality, propriety, correctness and also regularity of proceedings of the lower court and to set aside the impugned judgment of conviction in c.c.no.5032/1999 dated 4.8.2007, passed by the v addl.cmm at bangalore and acquit the petitioners. this criminal revision petition having been heard through physical hearing/video conferencing hearing and reserved for orders on 13.08.2020, coming on for pronouncement this day, the court made the following: order this revision petition was initially filed by the two petitioners, however, due to the death of petitioner no.1 – sri ravindra, by the order of this court dated 13.7.2017, the revision petition of the said petitioner no.1 in so far as sentence of imprisonment is concerned stood abated. the memorandum of petition was amended accordingly.2. the summary of the case of the prosecution is that the revision petitioners were conducting the prize chit activity, in which, pws.1 to 6 were members and crl.r.p.no.1180/2010 3 had invested some money. the petitioners with an intention to deceive the said investors, wound up their prize chit activity and did not repay the investment made or subscription paid by the investors and thereby have committed an offence under section 3, which is punishable under section 4 of the prize chits and money circulation schemes (banning) act, 1978 (hereinafter for brevity referred to as `prize chits act’), and also an offence punishable under section 420 of indian penal code, 1860 (hereinafter for brevity referred to as `ipc’). since the accused pleaded not guilty, the trial was held by the learned v addl.chief metropolitan magistrate, bengaluru (hereinafter for brevity referred to as `trial court’), in c.c.no.5032/1999, wherein from the side of the prosecution, seven witnesses from pw-1 to pw-7 were examined and documents from exs.p-1 to p-12 were marked. from the accused side, neither any crl.r.p.no.1180/2010 4 witness was examined nor any documents were marked as exhibits.3. after hearing both side, the trial court by its impugned judgment dated 4.8.2007, convicted both the petitioners/accused for the offence punishable under section 420 of ipc and under sections 3 and 4 of prize chits act and sentenced them accordingly.4. being aggrieved by the judgment of conviction and order on sentence passed by the trial court, the accused preferred an appeal before the learned city fast track (sessions) judge, bengaluru city, (ftc-vi), (hereinafter for brevity referred to as `session judge’s court), in criminal appeal no.1041/2007, which court after hearing both side, by its impugned judgment dated 7.8.2010, dismissed the appeal filed by the accused, confirming the judgment of conviction and order on sentence passed by the trial court. it is against the said crl.r.p.no.1180/2010 5 judgments of the trial court and session judge’s court, the accused have preferred this petition. however, as already observed, the accused no.1/petitioner no.1 died during the pendency of this revision petition. the petitioner no.2 is prosecuting this revision petition through her counsel.5. trial court and session judge’s courts’ records were called for and the same are placed before this court.6. heard the arguments of learned senior counsel for the petitioner and the learned high court government pleader for the respondent and perused the materials placed before this court.7. for the sake of convenience, the parties would be referred to as per their ranks before the trial court.8. after hearing, the points that arise for my consideration are : crl.r.p.no.1180/2010 6 (1) whether the impugned judgments of conviction and order on sentence passed by the trial court and the session judge’s court suffers with any illegality, impropriety or perversity?. (2) whether the impugned judgments of conviction and order on sentence deserves any interference at the hands of this court?.9. learned senior counsel appearing for the petitioner in his argument fairly submitted that he would not dispute the concurrent finding of the trial court and the session judge’s court on the fact that the accused were conducting the chit business and the complainant had subscribed to some of the chits with them by investing money. however, he strongly disputes the findings of the courts below that the accused were conducting any prize chit activity falling within the purview of section 3 of prize chits act and that the accused have committed any act of cheating which is punishable under section 420 of ipc. learned senior counsel submits crl.r.p.no.1180/2010 7 that in the absence of any chances to the subscribers of the chit of winning any prize in the alleged chit, the said act cannot be considered as a prize chit under section 3 of the prize chits act. he further submitted that the prosecution has failed to prove that the accused had any deceptive intention to defraud the investors at the stage of origin of the chit business, as such, section 420 of ipc is also not attracted. in his support, he relied upon few judgments of the hon’ble apex court which will be referred to at the relevant stage hereafterwards.10. learned high court government pleader in his brief arguments submitted that though the evidence of pws.1 to 4 and 6 give an impression that the accused were conducting conventional chit, however, the evidence of pw-5 makes it clear that they were conducting prize chit, as such, the prosecution has proved the offences committed by the accused under crl.r.p.no.1180/2010 8 section 3 of the prize chits act. he further submitted that the very act of the accused in not repaying the chit amount to the subscribers/investors and fleeing away without honouring their commitment towards the investors itself proves their malicious intention to deceive the investors, as such, the offence punishable under section 420 of ipc has also stood proved beyond reasonable doubt.11. pw-1 – sathyan is the complainant in the case, whose evidence in its summary is that, he was acquainted with the accused since about twentytwo years as on the date of his evidence. the accused no.2 was running chit business since 1988. he joined their chit fund in the year 1997 at the request of both the accused and subscribed for two chits for `1 lakh each and other two chits of `50,000/- each. towards those four chits, he had contributed a sum of `75,000/- + crl.r.p.no.1180/2010 9 `40,000/- = `1,15,000/- through monthly contribution. in addition to this, at the request of both the accused, he also lent a loan of `95,000/- to them to enable them to build their house. the said loan was also repayable to him within three months from the date of loan, which is in december 1997. the accused issued him a cheque for a sum of `95,000/- as a guarantee for the repayment of the loan. that being the position, on 12th february 1998, the accused declared that they have incurred loss in the chit business, as such, they were closing it. however, at the objection raised by all the contributors who demanded for repayment of their contribution, the accused promised to repay their entire contribution amount by selling their house. in that regard, the accused made an agreement on a stamp paper. they also executed on demand promissory notes individually to all the contributors for the amount due to each of the contributors. within three days crl.r.p.no.1180/2010 10 thereafter, the accused vacated their house and left the premises. this made the complainant to lodge a complaint with the respondent-police. the witness got marked a copy of his complaint at ex.p-1, the dishonour of cheque said to have been issued by the accused at ex.p-2, two receipts said to have been issued by the accused towards the contribution at exs.p-3 and p-4, on demand promissory note said to have been executed by the accused at ex.p-5, and an agreement said to have been executed by accused at ex.p-6. the complainant stated that the accused have cheated him to the tune of `2,95,400/-. he was cross-examined in detail from the accused side. he denied a suggestion that the sale agreement was got written by the complainant and other people by making galata. crl.r.p.no.1180/2010 11 12. pws.2 to 6 who have claimed themselves to be some of other contributors to the chit said to have been run by the accused, too have given their evidence in line with pw-1 and stated that they too have invested considerable amount in the chit that was being run by the accused, however, the accused abruptly stopped their chit business activity and failed to repay the contributions made by the investors. though they executed on demand promissory notes promising that they would repay the said amount by selling their house, still they failed to honour their commitment and appears to have sold their house and fled away. they also stated that they were cheated by the accused. through them, four on demand promissory notes at exs.p-7 to p-10 came to be marked. nothing favourable to the accused could be elicited in the cross-examination of pws.2 to 6. crl.r.p.no.1180/2010 12 13. pw-7 is the investigating officer in the matter, who has given the details of the investigation said to have been conducted by him in the case.14. a careful study of the evidence of pws.1 to 6 clearly go to establish that the accused who were husband and wife were conducting a chit, in which, among others, pws.1 to 6 were also the subscribers who have invested considerable amount in their chit. in this background, the question which crops up is whether the said chit which was being conducted by the accused was a prize chit falling within the definition of section 2 (e) and within the ambit of section 3 of prize chits act.15. section 2(a) and 2(e) of the prize chits act defines `conventional chit’ and `prize chit’ as below : “ section 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 crl.r.p.no.1180/2010 13 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 of 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 or 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; section (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 crl.r.p.no.1180/2010 14 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, an 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 bonus, premium, interest or other advantage by whatever name called, on the termination of crl.r.p.no.1180/2010 15 the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit.” section 3 of the prize chits act which bans prize chits and money circulation schemes reads as below : “ section 3 .banning of prize chits and money circulation schemes or enrolment as members or participation therein.- no person shall promote or conduct any prize chit or money circulation scheme, or enroll 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 of the said act is a punitive section for contravening the provisions of section 3 of the prize chits act.16. learned senior counsel for the petitioner in support of his arguments that though the accused can said to have conducting a chit, but, the said activity crl.r.p.no.1180/2010 16 cannot be called as a `prize chit’, has relied upon two judgments of hon’ble apex court. in state of west bengal and others –vs- swapan kumar guha and others, reported in [ (1982) 1 supreme court cases 561]., the hon’ble apex court was pleased to observe that, two conditions must be satisfied before a person can be held guilty of an offence under section 4 read with section 3 and 2(c) of the prize chits act. in the first place, it must be proved that he is promoting or conducting a scheme for the making of quick or easy money and secondly, the chance or opportunity of making quick or easy money must be shown to depend upon an event or contingency relative or applicable to the enrolment of members into that scheme. in other words, there has to be a community of interest in the happening of such event or contingency. crl.r.p.no.1180/2010 17 the hon’ble apex court also analysied as to what is meant by `scheme’ under the prize chits act in para-8 of the same judgment. the relevant portion of which is extracted here below : “ a “scheme” is a carefully arranged and systematic program of action. the systematic programme has to be a consensual arrangement between two or more persons under which, the subscriber agrees to advance or lend money on promise of being paid more money on the happening of any event or contingency relative or applicable to the enrolment of members into the programme. reciprocally, the person who promotes or conducts the programme promises, on receipt of an advance or loan, to pay more money on the happening of such event or contingency. therefore, a transaction under which, one party deposits with the other or lends to that other a sum of money on promise of being paid interest at a rate higher than the agreed rate of interest cannot, without more, be a “money circulation scheme” within the meaning of section 2(c) of the act, howsoever high the crl.r.p.no.1180/2010 18 promised rate of interest may be in comparison with the agreed rate. he who conducts or promotes a money-spinning project may have manifold resources from which to pay fanciful interest by luring the unwary customer. but, unless the project envisages a mutual arrangement under which, the happening or non-happening of an event or contingency relative or applicable to the enrolment of members into that arrangement is of the essence, there can be no “money circulation scheme” within the meaning of section 2 (c) of the act.” in registrar of firms, societies and chits, uttara pradesh –vs- m/s.secured investment co., lucknow and another, reported in [ 1988 (supp) supreme court cases 248]., the hon’ble apex court has explained as to what is a `chit’ and nature and scope of `prize chits’ and `money circulation scheme’. in para-6 of its judgment, the hon’ble apex court explained the meaning of `chit’ and `conventional chit’ in the following terms : crl.r.p.no.1180/2010 19 “ the words `chit’, `chit fund’, `chitty’, `kuri’ are synonymous or common words which mean a written piece of paper. what distinguishes the chit fund, however, from other financial transactions is that it connects the borrowing class directly with the lending class. the pooled saving is lent out to the same group of contributors. a chit fund collects the savings of the members by periodical subscriptions for a definite period. at the same time, it makes available the pooled savings to each member by turn as agreed by them. the collected fund may be given either by drawing lots or by bidding. lots are drawn periodically and the member whose name appears on the winning chit gets the collection without any deductions. he, however, continues to pay his subscriptions but his name is removed from subsequent lots. thus every member gets a chance to receive the whole amount of the chit. these are generally the features of a conventional chit.” with respect to `prize chits’ and `money circulation scheme’, in paras-18, 20 and 21 of its crl.r.p.no.1180/2010 20 judgment, the hon’ble apex court was pleased to observe as below: “ leaving aside the verbiage, section 2(e) of the act simply says that prize chit includes a scheme by which a person in whatever name collects monies from individuals for the purpose of giving prizes and refunding the balance with or without premium after the expiry of a specified period. there must be collection of monies from persons. the monies may be collected in one lump sum or in instalments, by way of contributions, subscriptions or as membership fees, admission fees or service charges, by sale of units, certificates or other instruments. the collection may be in respect of any savings, mutual benefits, thrift or any other scheme or arrangement, no matter by what name. the collection may be made by a promoter, foreman, agent or in any other capacity. clauses (i) and (ii) of section 2 (e) are the two distinct attributes of prize chit, each of which has to be satisfied. the amount collected as such need not be utilised for any crl.r.p.no.1180/2010 21 of the purposes under clauses (i) and (ii). it may be sufficient to attract the definition if the amount accrued from investment of such collection is used for all or any of the purposes under clauses (i) and (ii). thus the reach and range of the definition of `prize chit’ is sweeping. the generality of the language appears to have been deliberately used so that the transaction, arrangement or scheme in which subscribers or contributors agree to forgo a portion of their contributions in the hope of getting any prize or gift should not escape from the net of the definition. even the participation of any person in such chit of scheme has been prohibited.17. from the above judgments, it is clear that in order to constitute a `chit’ to be a `prize chit’, apart from the collection of money from the subscribers by the promoter or his agent, there must also be utilisation of the money so collected or any part thereof or the income accruing from investment or other use of such monies either for (i) giving or awarding periodically or crl.r.p.no.1180/2010 22 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 and/or (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 bonus, 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.18. in the above background, it has to be seen whether the evidence of pws.1 to 6 has proved that the conducting of chit by the accused was a prize chit. a careful study of the evidence of pws.1 to 6 would go to show that none of the witnesses have spoken in clear terms that the accused were running the prize chit. they have only used the word that accused crl.r.p.no.1180/2010 23 were running the chit business. according to pw-1 – the complainant, he was the subscriber for four chits, which includes two chits of `1 lakh each and two chits of `50,000/- each. he was required to pay monthly contribution of `10,000/- each towards chit fund of `1 lakh and a contribution of `5,000/- each towards chit fund of `50,000/-. except stating this, he has not whispered anything about the accused giving or awarding periodically or otherwise to any specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind or about the accused utilising money so collected or any part thereof for refunding 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 bonus, premium, interest or other advantage by whatever name called, on the crl.r.p.no.1180/2010 24 termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein.19. similarly, pws.2, 3, 4 and 6 have also not whispered anything about any prize or gift being the part of the alleged scheme of the chit that was run by the accused. though pw-5 in her evidence has stated that she was also a subscriber for a cracker chit fund run by the same accused, wherein the monthly installment payable by the subscriber was `250/- and that the accused were telling that they would also give one silver chembu (silver pot like item) with the crackers, but, her grievance against the accused is not with respect to she not getting silver chembu, but, it is about she not getting her investment back in the chit fund of `80,000/- which she claims to have subscribed with the accused. with respect to the said chit of `80,000/-, this witness also has not given any details as to whether it was a prize chit. however, a careful crl.r.p.no.1180/2010 25 reading of evidence of pws.1 to 6 makes it very clear that they were subscribers to the alleged chit fund said to have been conducted by the accused where each of the subscriber was required to contribute a particular sum of money corresponding to the scheme amount for a definite period and that each subscriber shall in his turn by bidding was entitled to the scheme amount. therefore, in the absence of fulfilling the essentials of a `prize chit’, more particularly, as defined under section 2(e)(i) and 2(e)(ii) of the prize chits act, the activity of the accused though was proved to be conducting a chit, cannot be considered as running a `prize chit’ or a `money circulation scheme’ as defined under section 3 of the prize chits act. however, both the trial court, as well the sessions judge’s court without looking for the existence of the ingredients of section 2(e) and section 3 of the prize chits act, have blindly proceeded on the belief that the chit conducted by the crl.r.p.no.1180/2010 26 accused was a `prize chit’. thus, the finding of both those courts is not based on the evidence placed before it. as such, the said finding of the courts holding the accused guilty of the offence under section 3, which is punishable under section 4 of the prize chits act appears to be an erroneous finding, as such, the same requires interference at the hands of this court.20. the second offence for which the accused are convicted by the trial court and confirmed by the sessions judge’s court is for the offence punishable under section 420 of ipc.21. section 415 of ipc defines cheating as below : 415. cheating.- whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so crl.r.p.no.1180/2010 27 deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”. explanation.- a dishonest concealment of facts is a deception within the meaning of this section. section 420 of ipc is a punitive section for cheating and dishonestly inducing delivery of property.22. learned senior counsel for the petitioner in his arguments vehemently submitted that the definition of cheating under indian penal code requires the proof of intention to be in existence at the time of making of the inducement, otherwise, the act of the accused cannot be termed as cheating. he submitted that even though it is held that accused had collected money from the subscribers and failed to return the same, but, the said act falls short of the existence of any malicious crl.r.p.no.1180/2010 28 dishonest intention on the part of the accused at the time of alleged inducement. as such, it cannot be called an act of cheating and at the maximum, the remedy available to the victims to approach the civil court to redress their grievance.23. in his support, he relied upon two judgments of hon’ble apex court. in s.w.palanitkar and others – vs- state of bihar and another, reported in [ (2002) 1 supreme court cases 241]., the hon’ble apex court was pleased to observe with respect to section 415 and section 420 of ipc that, in order to make out an offence of cheating, the dishonest intention on the part of the accused must be shown to be in existence at the time of making of the inducement. otherwise, mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating. crl.r.p.no.1180/2010 29 24. similarly, in international advanced research centre for powder metallurgy and new materials (arci) and others –vs- nimra cerglass technics private limited and another, reported in [ (2016) 1 supreme court cases 348]., the hon’ble apex court was pleased to hold that, in order to bring a case for offence of cheating under section 420 of ipc, it is not merely sufficient to prove that a false representation was made, but, it is further necessary to prove that the representation was false to the knowledge of accused and was made in order to deceive complainant. it was further held in the same case that where an act of the accused cheating or breach of contract depends upon the intention of the accused at the time of alleged inducement, if it is established that intention of the accused was dishonest at the very time when he made promises and entered into transaction with complainant to part with his property or money, then, crl.r.p.no.1180/2010 30 the liability is criminal and accused is guilty of offence of cheating. however, if all that is established is that a representation made by the accused was subsequently not kept, criminal liability cannot be foisted on accused and only right which complainant acquires is remedy for breach of contract in civil court. the hon’ble apex court also observed that mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of transaction.25. in the instant case, among all the material witnesses from pws.1 to 6, none of them have any where whispered that the accused had any intention to deceive them when these witnesses/subscribers were made to subscribe to the chits being conducted by the accused. on the other hand, a careful reading of evidence of pws.1 to 6 would only go to show that the accused were conducting a chit on different fixed crl.r.p.no.1180/2010 31 amounts to which the subscribers were required to pay monthly installment of fixed sum depending upon the scheme amount. the evidence of pw-6 alone would go to show that there was a concept of bidding by the subscriber and the successful bidder was getting the entire scheme amount in advance, however, he had to continue to pay the balance installments as and when they were becoming due. thus, no witnesses have any where stated that at the time they became member to the scheme or subscribe to the chit conducted by the accused, either they were misrepresented or induced by the accused with any false promises knowing that the promises being made by them were not intended to be fulfilled by them. on the other hand, the evidence of all these witnesses uniformly go to show that it is only during the currency of the alleged scheme either they suspected the intention of the accused or, as stated by the complainant (pw-1), it is only after the accused crl.r.p.no.1180/2010 32 declared that they have closed the chit due to they incurring loss, they came to know that it is difficult for them to get refund of their money from the accused. it is at that point of time, they insisted for some security from the accused and said to have obtained on demand promissory notes executed in their favour by the accused, including the on demand promissory notes at exs.p-5, p-7 to p-10 and also an agreement as per ex.p-6.26. there is no material placed by the prosecution to show that any of these subscribers to the chit have initiated any civil action against the accused for recovery of money. they are also not quite sure whether the accused have truly sold the house. in that regard, the prosecution has not come up with any evidence either oral or documentary to show to whom and for what sum the alleged house of the accused was sold by them. as such, in the absence of any cogent evidence either crl.r.p.no.1180/2010 33 oral or documentary, merely because the accused are said to have failed to honour their alleged promise under on demand promissory notes, by that itself it cannot be called that they had a dishonest intention to deceive all the investors/subscribers at that time itself when those subscribers or investors subscribed/joined the chit scheme run by the accused. thus, in the absence of existence of any dishonest intention on the part of the accused at the time of making the inducement, their alleged act of failure to keep up their subsequent promise to honour the on demand promissory notes executed by them, for which act also no malice is attributed, or to repay the subscription amount paid by the subscribers by selling the house property is not sufficient to hold that the essential ingredients of dishonest intention at the time of alleged inducement has been proved or established. thus, the alleged act on the part of the accused also would not constitute an offence of cheating and dishonestly inducing the crl.r.p.no.1180/2010 34 subscribers to part with their money as the subscription amount to the chit, thereby resulting into an offence punishable under section 420 of ipc. however, both the trial court, as well the sessions judge’s court without appreciating the evidence in its proper perspective and without noticing the absence of proof of existence of dishonest intention on the part of the accused at the time of investment by the subscribers, have carried away by the word used by pws.1 to 6 that they were cheated and concluded that prosecution has proved the guilt of the accused even under section 420 of ipc also. since the said finding also now proves to be an erroneous finding, the same requires interference at the hands of this court.27. consequently, the impugned judgments of conviction and order on sentence passed by both the trial court, as well the session judge’s court deserves crl.r.p.no.1180/2010 35 to be set aside and the revision petitioners/accused deserve to be acquitted of the alleged offences.28. accordingly, i proceed to pass the following order: order the criminal revision petition is allowed. the judgment of conviction and order on sentence dated 4.8.2007, passed by the learned v addl.chief metropolitan magistrate, bengaluru, in c.c.no.5032/1999, which is confirmed by the learned city fast track (sessions) judge, (f.t.c.no.vi), bengaluru, in criminal appeal no.1041/2007, dated 7.8.2010, are set aside. the accused are acquitted of the offence under section 3, punishable under section 4 of the prize chits act and also from the offence punishable under section 420 of ipc. the bail bonds executed by the accused stands cancelled. crl.r.p.no.1180/2010 36 registry to transmit a copy of this judgment along with trial court and session judge’s court records to the concerned courts without delay. sd/- judge bk/

Judgment:

® IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE20H DAY OF AUGUST2020BEFORE THE HON’BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY CRIMINAL REVISION PETITION No.1180 OF2010BETWEEN:

1. Sri Ravindra S/o Jayaraj, Aged 67 years, 2. Smt.Devamani, W/o Ravindra, Aged 53 years Both are R/at No.1391, South End `A’ Cross, 9th Stage, Bangalore. .. Petitioners ( By Sri Hasmath Pasha, Sr.Counsel for Petitioner No.2; Petitioner No.1 is reported to be dead vide Order dated 13.7.2017) AND: State by J.P.Nagar P.S. Represented by Public Prosecutor, City Civil Court Complex, Bangalore. .. Respondent ( By Sri Vinayaka V.S., HCGP ) Crl.R.P.No.1180/2010 2 This Criminal Revision Petition is filed under Section 397 and Section 401 of Cr.P.C. praying to call for the records of the Criminal Appeal No.1041/2007 from the file of the City Fast Tract-VI (Sessions) Judge, at Bangalore and examine the legality, propriety, correctness and also regularity of proceedings of the lower Court and to set aside the impugned judgment of conviction in C.C.No.5032/1999 dated 4.8.2007, passed by the V Addl.CMM at Bangalore and acquit the petitioners. This Criminal Revision Petition having been heard through Physical Hearing/Video Conferencing Hearing and reserved for Orders on 13.08.2020, coming on for pronouncement this day, the Court made the following:

ORDER

This Revision Petition was initially filed by the two petitioners, however, due to the death of petitioner No.1 – Sri Ravindra, by the order of this Court dated 13.7.2017, the Revision Petition of the said petitioner No.1 in so far as sentence of imprisonment is concerned stood abated. The memorandum of petition was amended accordingly.

2. The summary of the case of the prosecution is that the revision petitioners were conducting the Prize Chit activity, in which, PWs.1 to 6 were members and Crl.R.P.No.1180/2010 3 had invested some money. The petitioners with an intention to deceive the said investors, wound up their Prize Chit activity and did not repay the investment made or subscription paid by the investors and thereby have committed an offence under Section 3, which is punishable under Section 4 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (hereinafter for brevity referred to as `Prize Chits Act’), and also an offence punishable under Section 420 of Indian Penal Code, 1860 (hereinafter for brevity referred to as `IPC’). Since the accused pleaded not guilty, the trial was held by the learned V Addl.Chief Metropolitan Magistrate, Bengaluru (hereinafter for brevity referred to as `trial Court’), in C.C.No.5032/1999, wherein from the side of the prosecution, seven witnesses from PW-1 to PW-7 were examined and documents from Exs.P-1 to P-12 were marked. From the accused side, neither any Crl.R.P.No.1180/2010 4 witness was examined nor any documents were marked as exhibits.

3. After hearing both side, the trial Court by its impugned judgment dated 4.8.2007, convicted both the petitioners/accused for the offence punishable under Section 420 of IPC and under Sections 3 and 4 of Prize Chits Act and sentenced them accordingly.

4. Being aggrieved by the judgment of conviction and order on sentence passed by the trial Court, the accused preferred an appeal before the learned City Fast Track (Sessions) Judge, Bengaluru City, (FTC-VI), (hereinafter for brevity referred to as `Session Judge’s Court), in Criminal Appeal No.1041/2007, which Court after hearing both side, by its impugned judgment dated 7.8.2010, dismissed the appeal filed by the accused, confirming the judgment of conviction and order on sentence passed by the trial Court. It is against the said Crl.R.P.No.1180/2010 5 judgments of the trial Court and Session Judge’s Court, the accused have preferred this petition. However, as already observed, the accused No.1/petitioner No.1 died during the pendency of this Revision Petition. The petitioner No.2 is prosecuting this Revision Petition through her counsel.

5. Trial Court and Session Judge’s Courts’ records were called for and the same are placed before this Court.

6. Heard the arguments of learned Senior Counsel for the petitioner and the learned High Court Government Pleader for the respondent and perused the materials placed before this Court.

7. For the sake of convenience, the parties would be referred to as per their ranks before the trial Court.

8. After hearing, the points that arise for my consideration are : Crl.R.P.No.1180/2010 6 (1) Whether the impugned judgments of conviction and order on sentence passed by the trial Court and the Session Judge’s Court suffers with any illegality, impropriety or perversity?. (2) Whether the impugned judgments of conviction and order on sentence deserves any interference at the hands of this Court?.

9. Learned Senior Counsel appearing for the petitioner in his argument fairly submitted that he would not dispute the concurrent finding of the trial Court and the Session Judge’s Court on the fact that the accused were conducting the chit business and the complainant had subscribed to some of the chits with them by investing money. However, he strongly disputes the findings of the Courts below that the accused were conducting any Prize Chit activity falling within the purview of Section 3 of Prize Chits Act and that the accused have committed any act of cheating which is punishable under Section 420 of IPC. Learned Senior Counsel submits Crl.R.P.No.1180/2010 7 that in the absence of any chances to the subscribers of the chit of winning any prize in the alleged chit, the said act cannot be considered as a prize chit under Section 3 of the Prize Chits Act. He further submitted that the prosecution has failed to prove that the accused had any deceptive intention to defraud the investors at the stage of origin of the chit business, as such, Section 420 of IPC is also not attracted. In his support, he relied upon few judgments of the Hon’ble Apex Court which will be referred to at the relevant stage hereafterwards.

10. Learned High Court Government Pleader in his brief arguments submitted that though the evidence of PWs.1 to 4 and 6 give an impression that the accused were conducting conventional chit, however, the evidence of PW-5 makes it clear that they were conducting prize chit, as such, the prosecution has proved the offences committed by the accused under Crl.R.P.No.1180/2010 8 Section 3 of the Prize Chits Act. He further submitted that the very act of the accused in not repaying the chit amount to the subscribers/investors and fleeing away without honouring their commitment towards the investors itself proves their malicious intention to deceive the investors, as such, the offence punishable under Section 420 of IPC has also stood proved beyond reasonable doubt.

11. PW-1 – Sathyan is the complainant in the case, whose evidence in its summary is that, he was acquainted with the accused since about twentytwo years as on the date of his evidence. The accused No.2 was running chit business since 1988. He joined their chit fund in the year 1997 at the request of both the accused and subscribed for two chits for `1 lakh each and other two chits of `50,000/- each. Towards those four chits, he had contributed a sum of `75,000/- + Crl.R.P.No.1180/2010 9 `40,000/- = `1,15,000/- through monthly contribution. In addition to this, at the request of both the accused, he also lent a loan of `95,000/- to them to enable them to build their house. The said loan was also repayable to him within three months from the date of loan, which is in December 1997. The accused issued him a cheque for a sum of `95,000/- as a guarantee for the repayment of the loan. That being the position, on 12th February 1998, the accused declared that they have incurred loss in the chit business, as such, they were closing it. However, at the objection raised by all the contributors who demanded for repayment of their contribution, the accused promised to repay their entire contribution amount by selling their house. In that regard, the accused made an agreement on a stamp paper. They also executed on demand Promissory Notes individually to all the contributors for the amount due to each of the contributors. Within three days Crl.R.P.No.1180/2010 10 thereafter, the accused vacated their house and left the premises. This made the complainant to lodge a complaint with the respondent-police. The witness got marked a copy of his complaint at Ex.P-1, the dishonour of cheque said to have been issued by the accused at Ex.P-2, two receipts said to have been issued by the accused towards the contribution at Exs.P-3 and P-4, on demand Promissory Note said to have been executed by the accused at Ex.P-5, and an Agreement said to have been executed by accused at Ex.P-6. The complainant stated that the accused have cheated him to the tune of `2,95,400/-. He was cross-examined in detail from the accused side. He denied a suggestion that the Sale Agreement was got written by the complainant and other people by making galata. Crl.R.P.No.1180/2010 11 12. PWs.2 to 6 who have claimed themselves to be some of other contributors to the chit said to have been run by the accused, too have given their evidence in line with PW-1 and stated that they too have invested considerable amount in the chit that was being run by the accused, however, the accused abruptly stopped their chit business activity and failed to repay the contributions made by the investors. Though they executed on demand Promissory Notes promising that they would repay the said amount by selling their house, still they failed to honour their commitment and appears to have sold their house and fled away. They also stated that they were cheated by the accused. Through them, four on demand Promissory Notes at Exs.P-7 to P-10 came to be marked. Nothing favourable to the accused could be elicited in the cross-examination of PWs.2 to 6. Crl.R.P.No.1180/2010 12 13. PW-7 is the Investigating Officer in the matter, who has given the details of the investigation said to have been conducted by him in the case.

14. A careful study of the evidence of PWs.1 to 6 clearly go to establish that the accused who were husband and wife were conducting a chit, in which, among others, PWs.1 to 6 were also the subscribers who have invested considerable amount in their chit. In this background, the question which crops up is whether the said chit which was being conducted by the accused was a Prize Chit falling within the definition of Section 2 (e) and within the ambit of Section 3 of Prize Chits Act.

15. Section 2(a) and 2(e) of the Prize Chits Act defines `conventional chit’ and `prize chit’ as below : “ Section 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 Crl.R.P.No.1180/2010 13 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 of 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 or 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; Section (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 Crl.R.P.No.1180/2010 14 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, an 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 bonus, premium, interest or other advantage by whatever name called, on the termination of Crl.R.P.No.1180/2010 15 the scheme or arrangement, or on or after the expiry of the period stipulated therein, But does not include a conventional chit.” Section 3 of the Prize Chits Act which bans prize chits and money circulation schemes reads as below : “ Section 3 .Banning of prize chits and money circulation schemes or enrolment as members or participation therein.- No person shall promote or conduct any prize chit or money circulation scheme, or enroll 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 of the said Act is a punitive Section for contravening the provisions of Section 3 of the Prize Chits Act.

16. Learned Senior Counsel for the petitioner in support of his arguments that though the accused can said to have conducting a chit, but, the said activity Crl.R.P.No.1180/2010 16 cannot be called as a `prize chit’, has relied upon two judgments of Hon’ble Apex Court. In State of West Bengal and others –vs- Swapan Kumar Guha and others, reported in [ (1982) 1 Supreme Court Cases 561]., the Hon’ble Apex Court was pleased to observe that, two conditions must be satisfied before a person can be held guilty of an offence under Section 4 read with Section 3 and 2(c) of the Prize Chits Act. In the first place, it must be proved that he is promoting or conducting a scheme for the making of quick or easy money and secondly, the chance or opportunity of making quick or easy money must be shown to depend upon an event or contingency relative or applicable to the enrolment of members into that scheme. In other words, there has to be a community of interest in the happening of such event or contingency. Crl.R.P.No.1180/2010 17 The Hon’ble Apex Court also analysied as to what is meant by `Scheme’ under the Prize Chits Act in Para-8 of the same judgment. The relevant portion of which is extracted here below : “ A “scheme” is a carefully arranged and systematic program of action. The systematic programme has to be a consensual arrangement between two or more persons under which, the subscriber agrees to advance or lend money on promise of being paid more money on the happening of any event or contingency relative or applicable to the enrolment of members into the programme. Reciprocally, the person who promotes or conducts the programme promises, on receipt of an advance or loan, to pay more money on the happening of such event or contingency. Therefore, a transaction under which, one party deposits with the other or lends to that other a sum of money on promise of being paid interest at a rate higher than the agreed rate of interest cannot, without more, be a “money circulation scheme” within the meaning of Section 2(c) of the Act, howsoever high the Crl.R.P.No.1180/2010 18 promised rate of interest may be in comparison with the agreed rate. He who conducts or promotes a money-spinning project may have manifold resources from which to pay fanciful interest by luring the unwary customer. But, unless the project envisages a mutual arrangement under which, the happening or non-happening of an event or contingency relative or applicable to the enrolment of members into that arrangement is of the essence, there can be no “money circulation scheme” within the meaning of Section 2 (c) of the Act.” In Registrar of Firms, Societies and Chits, Uttara Pradesh –vs- M/s.Secured Investment Co., Lucknow and another, reported in [ 1988 (Supp) Supreme Court Cases 248]., the Hon’ble Apex Court has explained as to what is a `Chit’ and nature and scope of `Prize Chits’ and `Money Circulation Scheme’. In para-6 of its judgment, the Hon’ble Apex Court explained the meaning of `Chit’ and `Conventional chit’ in the following terms : Crl.R.P.No.1180/2010 19 “ The words `chit’, `chit fund’, `chitty’, `kuri’ are synonymous or common words which mean a written piece of paper. What distinguishes the chit fund, however, from other financial transactions is that it connects the borrowing class directly with the lending class. The pooled saving is lent out to the same group of contributors. A chit fund collects the savings of the members by periodical subscriptions for a definite period. At the same time, it makes available the pooled savings to each member by turn as agreed by them. The collected fund may be given either by drawing lots or by bidding. Lots are drawn periodically and the member whose name appears on the winning chit gets the collection without any deductions. He, however, continues to pay his subscriptions but his name is removed from subsequent lots. Thus every member gets a chance to receive the whole amount of the chit. These are generally the features of a conventional chit.” With respect to `Prize Chits’ and `Money Circulation Scheme’, in Paras-18, 20 and 21 of its Crl.R.P.No.1180/2010 20 judgment, the Hon’ble Apex Court was pleased to observe as below: “ Leaving aside the verbiage, Section 2(e) of the Act simply says that prize chit includes a scheme by which a person in whatever name collects monies from individuals for the purpose of giving prizes and refunding the balance with or without premium after the expiry of a specified period. There must be collection of monies from persons. The monies may be collected in one lump sum or in instalments, by way of contributions, subscriptions or as membership fees, admission fees or service charges, by sale of units, certificates or other instruments. The collection may be in respect of any savings, mutual benefits, thrift or any other scheme or arrangement, no matter by what name. The collection may be made by a promoter, foreman, agent or in any other capacity. Clauses (i) and (ii) of Section 2 (e) are the two distinct attributes of prize chit, each of which has to be satisfied. The amount collected as such need not be utilised for any Crl.R.P.No.1180/2010 21 of the purposes under clauses (i) and (ii). It may be sufficient to attract the definition if the amount accrued from investment of such collection is used for all or any of the purposes under clauses (i) and (ii). Thus the reach and range of the definition of `prize chit’ is sweeping. The generality of the language appears to have been deliberately used so that the transaction, arrangement or scheme in which subscribers or contributors agree to forgo a portion of their contributions in the hope of getting any prize or gift should not escape from the net of the definition. Even the participation of any person in such chit of scheme has been prohibited.

17. From the above judgments, it is clear that in order to constitute a `chit’ to be a `prize chit’, apart from the collection of money from the subscribers by the promoter or his agent, there must also be utilisation of the money so collected or any part thereof or the income accruing from investment or other use of such monies either for (i) giving or awarding periodically or Crl.R.P.No.1180/2010 22 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 and/or (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 bonus, 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.

18. In the above background, it has to be seen whether the evidence of PWs.1 to 6 has proved that the conducting of chit by the accused was a prize chit. A careful study of the evidence of PWs.1 to 6 would go to show that none of the witnesses have spoken in clear terms that the accused were running the prize chit. They have only used the word that accused Crl.R.P.No.1180/2010 23 were running the chit business. According to PW-1 – the complainant, he was the subscriber for four chits, which includes two chits of `1 lakh each and two chits of `50,000/- each. He was required to pay monthly contribution of `10,000/- each towards chit fund of `1 lakh and a contribution of `5,000/- each towards chit fund of `50,000/-. Except stating this, he has not whispered anything about the accused giving or awarding periodically or otherwise to any specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind or about the accused utilising money so collected or any part thereof for refunding 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 bonus, premium, interest or other advantage by whatever name called, on the Crl.R.P.No.1180/2010 24 termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein.

19. Similarly, PWs.2, 3, 4 and 6 have also not whispered anything about any prize or gift being the part of the alleged scheme of the chit that was run by the accused. Though PW-5 in her evidence has stated that she was also a subscriber for a cracker chit fund run by the same accused, wherein the monthly installment payable by the subscriber was `250/- and that the accused were telling that they would also give one silver chembu (silver pot like item) with the crackers, but, her grievance against the accused is not with respect to she not getting silver chembu, but, it is about she not getting her investment back in the chit fund of `80,000/- which she claims to have subscribed with the accused. With respect to the said chit of `80,000/-, this witness also has not given any details as to whether it was a prize chit. However, a careful Crl.R.P.No.1180/2010 25 reading of evidence of PWs.1 to 6 makes it very clear that they were subscribers to the alleged chit fund said to have been conducted by the accused where each of the subscriber was required to contribute a particular sum of money corresponding to the scheme amount for a definite period and that each subscriber shall in his turn by bidding was entitled to the scheme amount. Therefore, in the absence of fulfilling the essentials of a `Prize Chit’, more particularly, as defined under Section 2(e)(i) and 2(e)(ii) of the Prize Chits Act, the activity of the accused though was proved to be conducting a chit, cannot be considered as running a `Prize Chit’ or a `Money Circulation Scheme’ as defined under Section 3 of the Prize Chits Act. However, both the trial Court, as well the Sessions Judge’s Court without looking for the existence of the ingredients of Section 2(e) and Section 3 of the Prize Chits Act, have blindly proceeded on the belief that the chit conducted by the Crl.R.P.No.1180/2010 26 accused was a `Prize Chit’. Thus, the finding of both those Courts is not based on the evidence placed before it. As such, the said finding of the Courts holding the accused guilty of the offence under Section 3, which is punishable under Section 4 of the Prize Chits Act appears to be an erroneous finding, as such, the same requires interference at the hands of this Court.

20. The second offence for which the accused are convicted by the trial Court and confirmed by the Sessions Judge’s Court is for the offence punishable under Section 420 of IPC.

21. Section 415 of IPC defines cheating as below :

415. Cheating.- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so Crl.R.P.No.1180/2010 27 deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”. Explanation.- A dishonest concealment of facts is a deception within the meaning of this section. Section 420 of IPC is a punitive Section for cheating and dishonestly inducing delivery of property.

22. Learned Senior Counsel for the petitioner in his arguments vehemently submitted that the definition of cheating under Indian Penal Code requires the proof of intention to be in existence at the time of making of the inducement, otherwise, the act of the accused cannot be termed as cheating. He submitted that even though it is held that accused had collected money from the subscribers and failed to return the same, but, the said act falls short of the existence of any malicious Crl.R.P.No.1180/2010 28 dishonest intention on the part of the accused at the time of alleged inducement. As such, it cannot be called an act of cheating and at the maximum, the remedy available to the victims to approach the Civil Court to redress their grievance.

23. In his support, he relied upon two judgments of Hon’ble Apex Court. In S.W.Palanitkar and others – vs- State of Bihar and another, reported in [ (2002) 1 Supreme Court Cases 241]., the Hon’ble Apex Court was pleased to observe with respect to Section 415 and Section 420 of IPC that, in order to make out an offence of cheating, the dishonest intention on the part of the accused must be shown to be in existence at the time of making of the inducement. Otherwise, mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating. Crl.R.P.No.1180/2010 29 24. Similarly, in International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) and others –vs- NIMRA Cerglass Technics Private Limited and another, reported in [ (2016) 1 Supreme Court Cases 348]., the Hon’ble Apex Court was pleased to hold that, in order to bring a case for offence of cheating under Section 420 of IPC, it is not merely sufficient to prove that a false representation was made, but, it is further necessary to prove that the representation was false to the knowledge of accused and was made in order to deceive complainant. It was further held in the same case that where an act of the accused cheating or breach of contract depends upon the intention of the accused at the time of alleged inducement, if it is established that intention of the accused was dishonest at the very time when he made promises and entered into transaction with complainant to part with his property or money, then, Crl.R.P.No.1180/2010 30 the liability is criminal and accused is guilty of offence of cheating. However, if all that is established is that a representation made by the accused was subsequently not kept, criminal liability cannot be foisted on accused and only right which complainant acquires is remedy for breach of contract in Civil Court. The Hon’ble Apex Court also observed that mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of transaction.

25. In the instant case, among all the material witnesses from PWs.1 to 6, none of them have any where whispered that the accused had any intention to deceive them when these witnesses/subscribers were made to subscribe to the chits being conducted by the accused. On the other hand, a careful reading of evidence of PWs.1 to 6 would only go to show that the accused were conducting a chit on different fixed Crl.R.P.No.1180/2010 31 amounts to which the subscribers were required to pay monthly installment of fixed sum depending upon the scheme amount. The evidence of PW-6 alone would go to show that there was a concept of bidding by the subscriber and the successful bidder was getting the entire scheme amount in advance, however, he had to continue to pay the balance installments as and when they were becoming due. Thus, no witnesses have any where stated that at the time they became member to the scheme or subscribe to the chit conducted by the accused, either they were misrepresented or induced by the accused with any false promises knowing that the promises being made by them were not intended to be fulfilled by them. On the other hand, the evidence of all these witnesses uniformly go to show that it is only during the currency of the alleged scheme either they suspected the intention of the accused or, as stated by the complainant (PW-1), it is only after the accused Crl.R.P.No.1180/2010 32 declared that they have closed the chit due to they incurring loss, they came to know that it is difficult for them to get refund of their money from the accused. It is at that point of time, they insisted for some security from the accused and said to have obtained on demand Promissory Notes executed in their favour by the accused, including the on demand Promissory Notes at Exs.P-5, P-7 to P-10 and also an Agreement as per Ex.P-6.

26. There is no material placed by the prosecution to show that any of these subscribers to the chit have initiated any civil action against the accused for recovery of money. They are also not quite sure whether the accused have truly sold the house. In that regard, the prosecution has not come up with any evidence either oral or documentary to show to whom and for what sum the alleged house of the accused was sold by them. As such, in the absence of any cogent evidence either Crl.R.P.No.1180/2010 33 oral or documentary, merely because the accused are said to have failed to honour their alleged promise under on demand Promissory Notes, by that itself it cannot be called that they had a dishonest intention to deceive all the investors/subscribers at that time itself when those subscribers or investors subscribed/joined the chit scheme run by the accused. Thus, in the absence of existence of any dishonest intention on the part of the accused at the time of making the inducement, their alleged act of failure to keep up their subsequent promise to honour the on demand Promissory Notes executed by them, for which act also no malice is attributed, or to repay the subscription amount paid by the subscribers by selling the house property is not sufficient to hold that the essential ingredients of dishonest intention at the time of alleged inducement has been proved or established. Thus, the alleged act on the part of the accused also would not constitute an offence of cheating and dishonestly inducing the Crl.R.P.No.1180/2010 34 subscribers to part with their money as the subscription amount to the chit, thereby resulting into an offence punishable under Section 420 of IPC. However, both the trial Court, as well the Sessions Judge’s Court without appreciating the evidence in its proper perspective and without noticing the absence of proof of existence of dishonest intention on the part of the accused at the time of investment by the subscribers, have carried away by the word used by PWs.1 to 6 that they were cheated and concluded that prosecution has proved the guilt of the accused even under Section 420 of IPC also. Since the said finding also now proves to be an erroneous finding, the same requires interference at the hands of this Court.

27. Consequently, the impugned judgments of conviction and order on sentence passed by both the trial Court, as well the Session Judge’s Court deserves Crl.R.P.No.1180/2010 35 to be set aside and the revision petitioners/accused deserve to be acquitted of the alleged offences.

28. Accordingly, I proceed to pass the following order:

ORDER

The Criminal Revision Petition is allowed. The judgment of conviction and order on sentence dated 4.8.2007, passed by the learned V Addl.Chief Metropolitan Magistrate, Bengaluru, in C.C.No.5032/1999, which is confirmed by the learned City Fast Track (Sessions) Judge, (F.T.C.No.VI), Bengaluru, in Criminal Appeal No.1041/2007, dated 7.8.2010, are set aside. The accused are acquitted of the offence under Section 3, punishable under Section 4 of the Prize Chits Act and also from the offence punishable under Section 420 of IPC. The bail bonds executed by the accused stands cancelled. Crl.R.P.No.1180/2010 36 Registry to transmit a copy of this judgment along with trial Court and Session Judge’s Court records to the concerned Courts without delay. Sd/- JUDGE bk/