Delhi District Court
Societies And Chits, Uttar Pradesh vs . Secured Investment Company, on 9 November, 2022
IN THE COURT OF
SIDDHARTHA MALIK
CHIEF METROPOLITAN MAGISTRATE (CENTRAL)
TIS HAZARI COURTS, DELHI
New Case No. 289108/2016
FIR No.: 373/2000
PS: Prasad Nagar
U/s. 420/406/34 IPC,
Sec. 3 Prize Chits & Money Circulation Schemes (Banning) Act
State v. Renu Luthra
(a) S. No. of the case : 289108/2016
(b) Name of complainant : 1. Ms. Kalpana Sippy
W/o. Sh. R K Sippy R/o
6491/9, Block-8, Dev
Nagar, Delhi.
2. Ms. Leena Gupta
W/o Sh. S K Gupta
R/o 6511, Block-8, Dev
Nagar, Delhi.
3. Ms. Archana Gaur
W/o Sh. Pradeep Gaur
R/o 8/6514, Street 9, Dev
Nagar, Delhi.
(c) Date of commission of offence : In the year 1999
(d) Name of the accused : Smt. Renu Luthra
W/o. Sh. Manoj Luthra
R/o H. No. 33/7, West
Patel Nagar, New Delhi.
(e) Offence complained of : U/s. 420/406/34 IPC
r/w Sec. 3 Prize Chits & Money
FIR No. 373/2000, PS: Prasad Nagar Page No. 1 of 15
Circulation Schemes (Banning) Act
Charges framed : U/s. 420/406/34 IPC
r/w sec. 3 Prize Chits & Money
Circulation Schemes (Banning) Act
(f) Plea of accused : Pleaded not guilty
(g) Final arguments heard on : 07.11.2022
(h) Final Order : Acquitted
(i) Date of such order : 09.11.2022
JUDGEMENT:
1. The present charge-sheet was filed against accused Smt. Renu Luthra under section 420/406/34 IPC read with Section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (hereinafter referred to as PCMC Act), with the allegations that in the year 1999, accused had committed the offence of cheating with a large number of persons by unlawfully collecting money from them and running schemes commonly called as "chit-fund transaction" or prize chit.
2. As per the charge-sheet, a number of complaints were received by the police against the accused and the common grievance was that the accused Renu Luthra had initiated scheme of collecting money of Rs. 5,000/- every month from different persons. Under these schemes, some amount of money was collected from specific number of people FIR No. 373/2000, PS: Prasad Nagar Page No. 2 of 15 (members of the committee) every month. Duration of the scheme was for 20 months. A lot of money was collected by the accused by inducing the people of her locality and assuring them of good returns and prizes. But subsequently, after collecting the money, the accused refused to pay back the money or prizes to the investors despite persistent demands. It was alleged that the accused misappropriated the monies and converted the same to her own use by failing the pay back the same.
3. Cognizance of the offences was taken and vide order dated 01.07.2009 charge was framed against the accused for commission of offence punishable under section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, to which she pleaded not guilty and claimed trial.
4. At the trial, prosecution examined nine witnesses in support of its case. PW-1, PW-6, PW-8 and PW-9 are the police officials who were part of the investigation and all other PWs are the public witnesses/victims against whom the offences were allegedly committed by the accused.
5. PW-9 ACP S S Malik was one of the investigating officer (IO) of the case. He deposed that on 24.12.2000, the present case file was marked to him for further investigation. After receiving the case file, he went to the address of the accused persons in West Patel Nagar where he found that accused persons Renu Luthra and her husband FIR No. 373/2000, PS: Prasad Nagar Page No. 3 of 15 Manoj Luthra have already left their addresses. After that, he continued the investigation and met the complainant at Dev Nagar. On 25.01.2001, he met Manoj Luthra, who told him that on 10.01.2001 they have compromised the matter with the complainant persons. He had also recorded one disclosure statement of the accused Renu Luthra Ex. PW1/A. Accused persons had stated that they have given the statement before the Sessions Court regarding their compromise. Accused Renu Luthra was correctly identified by the witness. On 13.09.2021, he was transferred from the Police Station Prasad Nagar to District Line, Paharganj.
6. PW-8 ACP Sh. Umesh Barthwal deposed that on 17.11.2000, one complaint was marked to him. The said complaint was made by Ms. Kalpana Sippi, Archana Gaur and Leena Gupta and after registration of FIR, he started investigation and seized three leaflets containing details of payment made vide seizure memo Ex. PW6/B. Thereafter, he went and examined complainant Kalpana Sippi who handed over to him the cheques issued by accused Renu Luthra. Similarly, he examined complainant Archana Gaur and Leena Gupta who also handed over to him cheques issued by accused Renu Luthra. He recorded statement of some witnesses. He issued notice to Bank of Baroda to get the details of account of accused Renu Luthra. Thereafter, the investigation of the present case was transferred to DIU, Central District. During cross-examination, the witness stated that he was not aware if the accused has paid the entire subscription amount back to the complainants in the present matter.
FIR No. 373/2000, PS: Prasad Nagar Page No. 4 of 15
7. PW-1 Ct. Shiv Narayan deposed that on 31.01.2001, he had joined the investigation and accompanied IO Inspector S S Malik to 33/09, West Patel Nagar. Ct. Pawan Kumar was called by IO at the spot. The accused namely Smt. Renu Luthra was present at the said house. IO had taken her specimen signature and also recorded her disclosure statement. The accused had given the specimen signature voluntarily. Accused was correctly identified by the witness. During cross-examination, he denied that he had not joined the investigation of the present case. He denied that no specimen handwriting of the accused was taken in his presence or that accused had not made any disclosure statement.
8. PW-6 HC Jitender deposed that on 17.11.2000, he had joined the investigation with IO SI Umesh Bharatwal and had collected cheques from victim Kalpana, Smt. Leena Gupta and Archana Gaur. The statement u/s 161 Cr.PC of the witnesses were also recorded by the IO.
9. PW-2 Smt. Leena Gupta deposed that in the month of April 1991, she started depositing Rs. 2,000/- and Rs. 3,000/- respectively in a committee. The committee used to run by accused Renu Luthra and her husband Manoj Luthra. Accused Renu used to reside in the same locality and many other ladies of the locality started investing in the committee. The committees were of 20 months. She alongwith Kalpna and Achana had moved a complaint regarding the incident.
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10. PW-2 stated during her examinatin that she wanted to compromise the matter with the accused. Thereafter, PW-2 was cross- examined on behalf of the State by Ld.APP and she admitted the facts disclosed in the original complaint made by her to the police. During cross-examination on behalf of accused, she stated that she knew the accused prior to the filing of the present complaint as she was living in the same locality. She admitted that accused had given back to her all the amounts of the said dishonored cheques. She admitted that after the registration of the FIR accused had given back to her all the invested amounts.
11. PW-4 Ms. Archana Gaur deposed that in the year 1999, she alongwith Kalpna Sippi, Leena Aggarwal and accused Renu Luthra, was residing in the same locality. She was approached by accused Renu Luthra and Vineeta Jain to start a committee of 20 members. The monthly installment of the same was Rs. 5,000/- per month. The committee was started in April, 1999. She became the member of the said committee which was being run by accused Renu Luthra and Vineeta Luthra on their assurance. They assured them that she will have handsome financial gain by investing money in the committee. Later, on their assurance, she became the member of another committee which was being run by accused Renu Luthra and Vineeta Jain and the monthly installment of the same was Rs. 4,000/- per month. The said committee was started in the month of September, 1999. In January, 2000, the accused persons suddenly stopped the committee started in April 1999 of the subscription amount of Rs.
FIR No. 373/2000, PS: Prasad Nagar Page No. 6 of 15 5,000/- which was supposed to run for 20 months. She requested the accused persons to pay the amount deposited in the committee, but she did not pay any money. In August 2000, the second committee was also suddenly stopped by the accused persons. In the year 2001 the accused had made entire payment to her. Accused Renu Luthra was correctly identified by the witness. During cross-examination on behalf of accused, she admitted that no cheque was presented by her and therefore, none of the said cheques got dishonored. She was not aware what was the reason for stopping/discontinuing the committees.
12. PW-3, PW-5 & PW-7 deposed similar facts regarding seizure of cheques during the investigation and collection of sample signautes of the accused by the IO. The third complainant Smt.Kalpana Sippy could not be examined by the prosecution as she had already shifted out of India.
13. During the proceedings, accused admitted certain documents u/s 294 Cr.PC such as copy of FIR No. 373/2000 Ex. A-1, Endorsement on the rukka Ex. A-2, factum of arrest of accused Ex. A-3, FSL result Ex. A-4 (colly.), factum of filing of chargesheet Ex. A-5 and record of Bank of India and Bank of Baroda Ex. A-6.
14. Thereafter, the prosecution evidence was closed and Statement of accused Renu Luthra was recorded under section 313 CrPC on 07.11.2022, wherein she denied the allegations and pleaded innocence. Accused replied that she has not cheated anybody and the FIR No. 373/2000, PS: Prasad Nagar Page No. 7 of 15 victims/complainants themselves stopped paying the requisite subscription of the scheme and as such the scheme failed to continue further and she has been falsely implicated in the present case.
15. During final arguments, Ld. APP for the State has argued that the prosecution has been able to prove its case against the accused Renu Luthra beyond reasonable doubt as most of the witnesses have supported the prosecution case and there is no material contradictions in their version. On the other hand, Ld. Defence Counsel has argued that no case whatsoever is made out against the accused Renu Luthra. It is pointed out that all the public witnesses have admitted that they have received their money back which shows that the accused had no dishonest intention and did not misappropriate any money.
16. I have considered the submissions made by the Ld. APP for the State and Ld. Defence Counsel and have perused the record.
17. At the outset it is observed that Section 3 of Prize Chits & Money Circulation Schemes (Banning) Act prohibits any person from promoting and conducting any prize chit or money circulation scheme. Section 4 of the Act makes violation of section 3 a punishable offence.
18. As per Section 2(e) of Prize Chits & Money Circulation Schemes (Banning) Act, "prize chit" includes any transaction or arrangement by whatever name called, under which a person collects whether as a promoter, foreman, agent or in any other capacity, FIR No. 373/2000, PS: Prasad Nagar Page No. 8 of 15 monies in one lump sum or in installment 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 to any savings, mutual benefit, thrift, or any other scheme or arrangement by whatever name called, and utilizes the monies so collected or any part thereof or the income accruing from investment or other use of such monies for:
(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, 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 any 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.
19. The aforesaid definition of 'prize chit' specifically states that it does not cover 'conventional chit' which is defined as per section 2(a) of the Act, to mean a transaction whether called chit, chit fund, kuri or by any other name by or under which a person responsible for the conduct of the chit enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money by way of periodical installments for a definite period and that FIR No. 373/2000, PS: Prasad Nagar Page No. 9 of 15 each 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.
20. Thus, the Act clearly prohibits the conduct of prize chits but conventional chits are excluded from the operation of S.3/4/5 of the PCMC Act.
21. Hon'ble Supreme Court has held in Registrar of Firms, Societies and Chits, Uttar Pradesh vs. Secured Investment Company, Lucknow and Anr, 1988 AIR 492, that the conventional chits are not prohibited under the Act as only prize chits are covered under S.3 of the Act. The features of conventional chits have been explained as:
"It was meant for mutual benefit in which some people joined to save and others to borrow. 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. This is generally the features of a FIR No. 373/2000, PS: Prasad Nagar Page No. 10 of 15 conventional chit. It is operated without a professional promoter or manager and without any risk of loss of capital."
22. In the same judgment, the Hon'ble Supreme Court has explained Prize Chit as:
"Leaving aside the verbiage, if we rewrite the definition which reeks of simplicity, it runs like this: Prize chit includes a scheme by which a person in whatever name collects moneys from individuals for the purpose of giving prizes and refunding the balance with or with out premium after the expiry of a specified period."
23. Thus, a conventional chit, as opposed to a prize chit, has a finite numbers of pre-determined members and each member has to contribute the subscription for the entire term, irrespective of the draw of lot in his favour at any stage of the agreed term of the chit. All the members of the conventional chit subscribe the same amount for the entire duration and every member draws the lot in his favour only once during the term of the chit.
24. On the other hand, in a prize chit the members can join/subscribe the chit at an intermediate stage and may still win the prize chit without paying the same subscription amount as other members. A prize chit need not to be drawn in favour of all subscribers at least once, and after one or more draws of prize, the chit can be closed and the subscription money returned to the members. Further, once a members receives the prize chit in his favour he is under no obligation to continue to pay his part of the subscription and FIR No. 373/2000, PS: Prasad Nagar Page No. 11 of 15 may opt out of the chit.
25. In light of the aforesaid distinguishing features between conventional and prize chit, we come to the facts of the present case. Herein, the record shows that the committee/chit allegedly run by the accused had features similar to a conventional chit and did not have the distinct features of a prize chit as highlighted above.
26. Firstly, the chit run by the accused had a finite number of members at the start of the chit and each member had to pay a fixed subscription for the entire duration of the chit. No PW/subscriber of the chit has deposed that the members of the chit could be added any time in between the continuance of one chit. Different chits were run by the accused with different set of members and the said chits were not inducting members in between. One person could subscribe to multiple chits at one time but he had to pay separate subscription for all of the said chits and separate entries were made of each chit.
27. Both the complainants namely Leena/PW-2 and Archana/PW-4 have deposed that the accused was running committees with 20 members each for a tenure of 20 months. During cross-examination the witnesses have admitted that they had received back the money subscribed by them after settlement with the accused pursuant to the FIR.
28. At this stage it is important to note that none of the public FIR No. 373/2000, PS: Prasad Nagar Page No. 12 of 15 persons/PWs has been able to depose the exact amount of money subscribed by them. All the PWs have merely deposed random amounts which they contributed towards various committees. None of the said witness has been able to show any document/receipt to show the exact payment made by them. Similarly, none of the witnesses has been able to depose the exact duration or exact number of members etc. pertaining to any committees. The testimony of public witnesses is very general in nature which only indicates that the accused was running committees in which many persons were subscribers and many persons had no grievance against the accused.
29. The complainants have deposed that they were not aware of the reason for which the committee was discontinued by the accused. A conventional chit runs only on the basis of subscription amount paid by the members and there is no other source of money to pay the committee amount once a name is drawn in the weekly draw. Thus, if the members have failed to pay the subscription amount, the person incharge of the committee cannot pay the amount to the other subscribers.
30. The record does not have any information regarding the first default made by the accused in paying the committee money. There is no evidence to show that all the subscribers were paying timely subscription to the accused and despite that she failed to pay the committee amount. From the testimony of the subscribers/PWs it appears that the committees were abruptly discontinued and the FIR No. 373/2000, PS: Prasad Nagar Page No. 13 of 15 accused has stated during her SA that she was forced to discontinue the committee due to non payment of subscription. There is no evidence on record to show that all 20 members of the committee were making timely payment of the subscription amount. Thus, it is highly likely that the subscribes, except the present three complainants, might have defaulted in making payment of the subscription amount.
31. Once, the subscription amount was not deposited by the members with the accused, there was no likelihood of her paying the same to one selected member after draw of lots. Such failure due to lack of subscription amount resulted in further defaults by other members and as a result the entire structure of the committee crumbled.
32. A conventional chit/committee is based on trust that each member shall pay his subscription timely and the entire amount so collected is to be paid to one person periodically. Once the members themselves defaulted in paying the subscription, the accused could not be faulted for failure of the committee.
33. From the aforesaid discussion it is clear that the committee run by the accused falls in the category of 'convention chit' and not 'prize chit'. The 'conventional chit' is not prohibited under the Act and the accused cannot be convicted for running the same. Further, the default in payment of committee money in favour of few members is on FIR No. 373/2000, PS: Prasad Nagar Page No. 14 of 15 account of non payment of subscription by the members who were duty bound to pay the same regularly.
34. Moreover, there is not evidence on record to show that the accused dishonestly induced the subscribers right from the start of committee business. There is no investigation by the IO regarding the manner in which the collected money was used by the accused for her own use. The mere fact that the subscribers were paying money to the accused and the same was not returned to them on demand does not attract the alleged offences of cheating or misappropriation.
35. The accused is accordingly found not guilty and stands acquitted of the offences punishable under Section 4 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. S.437-A CrPC be complied with.
Digitally signed by SIDDHARTHASIDDHARTHA MALIK Announced in the open Court MALIK Date: 2022.11.09 15:55:59 +0530 this 09th Day of November 2022 (Siddhartha Malik) Chief Metropolitan Magistrate (Central) Tis Hazari Courts, Delhi FIR No. 373/2000, PS: Prasad Nagar Page No. 15 of 15