Shiba Prasad Singh vs State Of Odisha (Opid) on 24 July, 2023

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Orissa High Court

Shiba Prasad Singh vs State Of Odisha (Opid) on 24 July, 2023

Bench: S.K. Sahoo

IN THE HIGH COURT OF ODISHA, CUTTACK

CRLA No.06 of 2023

An appeal under section 13 of the Odisha Protection of Interest
of Depositors (in Financial Establishments) Act, 2011 from the
order dated 05.12.2022 passed by the Presiding Officer,
Designated Court under O.P.I.D. Act, Cuttack in C.T. Case No.12
of 2018.
---------------------

1. Shiba Prasad Singh
2. Chaitanya Kumar Rout ....... Appellants

-Versus-

State of Odisha (OPID) ....... Respondent

For Appellants: - Mr. Soura Chandra Mohapatra
Senior Advocate

For Respondent: - Mr. Bibekananda Bhuyan
Mr. J.P. Patra
Special Counsel (OPID)

CORAM:
THE HONOURABLE MR. JUSTICE S.K. SAHOO
.............................................................................................................................
Date of Hearing: 11.07.2023 Date of Order: 24.07.2023
.............................................................................................................................

S.K. SAHOO, J. The appellants Shiba Prasad Singh and Chaitanya

Kumar Rout have filed this appeal under section 13 of the Odisha

Protection of Interest of Depositors (in Financial Establishments)

Act, 2011 (hereafter >OPID Act?) challenging the order dated

05.12.2022 passed by the learned Presiding Officer, Designated
// 2 //

Court under O.P.I.D. Act, Cuttack in C.T. Case No.12 of 2018 in

rejecting the petition filed by them under section 239 of Cr.P.C.

to discharge them from the case. The said case arises out of

Choudwar P.S. Case No.266 of 2015.

2. On 12.11.2015 one Abakash Swain and others

lodged the first information report before the Inspector in-charge

of Choudwar police station stating therein that the appellants

opened one shop styled as >Maa Sarala Insurance and

Investment? (hereafter >the company?) in the market complex of

Kalinga chhak, Choudwar and by alluring people of higher

returns, they collected huge amount and in lieu of that, issued

cheques of different banks to the depositors and some persons

invested money after executing agreements. It is stated that

when the depositors approached the bank for encashment of the

cheque amount, they found that there was no money in the

account of the appellant no.1 Shiba Prasad Singh to honour the

cheques issued by him. When the depositors, who had executed

agreements, contacted the appellant no.1 to get back the refund

of their money, they were told that he was not in a position to

refund. In the first information report, the name of nineteen

depositors and cheque amount of each of the depositors has

been mentioned.

Page 2 of 29
// 3 //

On the basis of such first information report,

Choudwar P.S. Case No.266 dated 12.11.2015 was registered

under sections 420, 468, 471 read with section 34 of the Indian

Penal Code. The Inspector in-charge directed D.K.M. Bhuyan,

S.I. of Police, TPM OP, Cuttack to investigate the matter.

During course of investigation, the Investigating

Officer visited the spot, examined the informant and other

witnesses, seized cheques of different banks issued by the

appellant no.1 from depositors and left the same in the zima of

the concerned persons. The office of the company was searched

and it was ascertained that the office was closed since 2013 and

the room was under lock and key by the owner Rabinarayan

Sahu. The Investigating Officer verified the issued cheques at all

the banks of Cuttack, Choudwar and Jagatpur and found that no

cash was available in the respective accounts of appellant no.1.

On conclusion of investigation, charge sheet was submitted

under sections 420/468/34 of the Indian Penal Code, sections

4/5/6 of the Prize Chits and Money Circulation Schemes

(Banning) Act, 1978 (hereinafter >1978 Act?) and section 6 of the

OPID Act, 2011 and section 138 of the Negotiable Instruments

Act, 1881 against both the appellants.

Page 3 of 29
// 4 //

3. The appellants filed the petition for discharge under

section 239 of Cr.P.C., however, the learned trial Court has been

pleased to observe that prima facie there is sufficient material to

presume that the appellants have committed the offences under

which the charge sheet has been submitted and accordingly,

rejected the discharge petition.

4. On 14.03.2023, when the matter was taken up, the

learned Special Counsel appearing for the State of Odisha in

OPID Act placed the written instruction received from the

Inspector in-charge of Choudwar police station wherein it is

indicated that the total money collected was Rs.70,14,700/-

(rupees seventy lakhs fourteen thousand and seven hundred)

from twelve investors and though as per the F.I.R., the total

money collected was Rs.97,01,700/- (rupees ninety seven lakhs

one thousand and seven hundred) from nineteen investors, but

the rest investors did not cooperate with the investigation and

therefore, the exact amount of investment by them could not be

ascertained and it is further mentioned that the appellant no.1

was the proprietor of the company.

When on 14.03.2023 a query was made to the

learned Special Counsel for the State as to what amount each of

those twelve investors invested in the company and what are the

Page 4 of 29
// 5 //

documentary proof in respect of such deposits and whether the

same were seized during the course of investigation and whether

any letters of the banks from which instructions were stated to

have been obtained that the appellant no.1 was having no

money in his accounts to honour the cheques issued the

investors have been seized during the course of investigation, he

took time to obtain instruction in that respect.

Letter dated 27.03.2023 of the Inspector in-charge of

Choudwar police station was produced by the learned Special

Counsel for the State on 09.05.2023 in pursuance of the order

dated 14.03.2023 wherein the names of twelve investors and the

amount invested by each of them in the company has been

reflected. It was further mentioned that during course of

investigation, the investors did not submit any documentary

proof in respect of such deposits and they stated that the

appellant no.1 had not issued them any document in lieu of their

deposits. However, they submitted their individual security

cheques issued by the appellant no.1, which were seized from

them. It is further mentioned therein that no letters of the banks

from which the instructions were taken that the appellant no.1

was having no money to honour the issued cheques have been

seized. Learned Special Counsel for the State on 11.07.2023

Page 5 of 29
// 6 //

produced the letter dated 03.07.2023 of the Inspector in-charge

of Choudwar police station, Cuttack wherein the photocopies of

the cheques issued to the depositors were filed along with the

copy of one agreement executed between the investor and the

appellant no.1.

5. Mr. Soura Chandra Mohapatra, learned Senior

Advocate appearing for the appellants submitted that there are

no materials on record that the informant and others were

induced by the appellants to invest money in the Company and

they were deceived and there is no prima facie material that the

so-called invested money were ever given to the appellants by

the informants. Learned counsel further submitted that the

statements recorded during course of investigation would

indicate that the cheques which were issued in favour of the

depositors were never deposited in the banks and thus, the

cheques were not dishonoured and once the cheques are neither

deposited in the banks nor dishonoured, the ingredients of the

offence under section 138 of the N.I. Act are not attracted. It is

further argued that there is also no clinching material on record

to show that the ingredients of the offences under 1978 Act are

made out. It is further argued that so far as the offence under

section 6 of the OPID Act is concerned, one of the ingredients

Page 6 of 29
// 7 //

required is that the financial establishment must default in

returning the deposit or default in payment of interest on the

deposit made and when the appellant no.1 has issued the

cheques to the depositors and the depositors have not deposited

the same in the banks and no bank documents were seized to

show that the appellant no.1 was having no money in his

accounts to honour the cheques either at the time of issuance of

cheque or during its validity period, it cannot be said that he has

defaulted in returning the deposit or defaulted in payment of

interest on the deposit and therefore, it is a fit case where the

appellants should be discharged of all the offences under which

charge sheet has been filed against them. Learned counsel for

the appellants placed reliance in the case of Gajanan Property

Dealer and Construction Pvt. Ltd. and Others -Vrs.- State

of Orissa and another reported in (2018) 72 Orissa

Criminal Reports 69, Amit Kapoor -Vrs.- Ramesh Chander

and another reported in (2012) 9 Supreme Court Cases

460 and Ramesh Chandra Sahu -Vrs.- State of Odisha

(OPID) reported in (2022) 87 Orissa Criminal Reports

818.

Mr. Bibekananda Bhuyan and Mr. J.P. Patra, learned

Special Counsel appearing for the State of Odisha in OPID Act

Page 7 of 29
// 8 //

matters, on the other hand, submitted that at this stage, the

Court is not required to assess the evidence or to have a roving

inquiry as to whether on the basis of available materials on

record, the prosecution would succeed in establishing the guilt of

the appellants. If there are grounds for presuming that the

appellants have committed the offence basing on the oral as well

as documentary evidence on record, the Court should not

discharge the appellants. Reliance was placed in the case of

Prasan Kumar Patra -Vrs.- State of Odisha reported in

(2021) 84 Orissa Criminal Reports 1.

Principle for discharge of an accused under section 239

Cr.P.C.:

6. Section 239 of Cr.P.C., inter alia, provides that if

upon considering the police report and the documents sent with

it under section 173 of Cr.P.C. and making such examination, if

any, of the accused and after giving prosecution and accused an

opportunity 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. The object of

discharge under section 239 of Cr.P.C. is to save the accused

from unnecessary and prolonged harassment. When the

allegations are baseless or without foundation and no prima facie

Page 8 of 29
// 9 //

case are made out, it is just and proper to discharge the accused

to prevent abuse of process of the Court. If there is no ground

for presuming that accused has committed an offence, the

charges must be considered to be groundless. The ground may

be any valid ground including the insufficiency of evidence to

prove the charge. When the materials at the time of

consideration for framing the charge are of such a nature that if

unrebutted, it would make out no case whatsoever, the accused

should be discharged. Appreciation of evidence is an exercise

that a Court is not to undertake at the stage of consideration of

the application for discharge. The truth, veracity and effect of the

materials proposed to be adduced by the prosecution during trial

are not to be meticulously adjudged. The likelihood of the

accused in succeeding to establish his probable defence cannot

be a ground for his discharge. (Ref: Gajanan Property Dealer

and Construction Pvt. Ltd. (supra))

In the case of Arun Vyas and Ors. -Vrs.- Anita

Vyas reported in (1999) 4 Supreme Court Cases 690, the

Hon?ble Supreme Court held that a perusal of section 239 Cr.P.C.

shows that the Magistrate has to discharge the accused, if (1) on

consideration of (a) the police report, (b) the documents filed

under section 173 Cr.P.C.; and (2) making such examination, if

Page 9 of 29
// 10 //

any, of the accused as the Magistrate thinks necessary; and (3)

after giving the prosecution and the accused an opportunity of

being heard, he considers charge against the accused to be

groundless. This section, however, casts an obligation on the

Magistrate to record his reasons for holding that the charge is

groundless and discharging the accused. Section 239 Cr.P.C. has

to be read along with section 240 Cr.P.C. If the Magistrate finds

that there is prima facie evidence or the material against the

accused in support of the charge (allegations), he may frame

charge in accordance with section 240 Cr.P.C., but if he finds

that the charge (the allegations or imputations) made against

the accused do not make out a prima facie case and do not

furnish basis for framing charge, it will be a case of charge being

groundless, so he has no option but to discharge the accused.

In the case of Amit Kapoor (supra), it is held as

follows:-

<25....We have already indicated above that
framing of charge is the first major step in a
criminal trial where the Court is expected to
apply its mind to the entire record and
documents placed therewith before the Court.
Taking cognizance of an offence has been stated
to necessitate an application of mind by the
Court but framing of charge is a major event

Page 10 of 29
// 11 //

where the Court considers the possibility of
discharging the accused of the offence with
which he is charged or requiring the accused to
face trial. There are different categories of cases
where the Court may not proceed with the trial
and may discharge the accused or pass such
other orders as may be necessary keeping in
view the facts of a given case. In a case where,
upon considering the record of the case and
documents submitted before it, the Court finds
that no offence is made out or there is a legal
bar to such prosecution under the provisions of
the Code or any other law for the time being in
force and there is a bar and there exists no
ground to proceed against the accused, the
Court may discharge the accused.=

Thus, in view of the settled position of law, at the

stage of framing of charge, the Court is required to evaluate the

materials and documents on record with a view to finding out if

the facts emerging there from, taken at their face value,

disclosed the existence of all the ingredients constituting the

alleged offences. The Court is not expected to go deep into the

probative value of the materials on record at this stage. What

needs to be considered is whether there is a ground for

presuming that the offence has been committed and not a

ground for convicting the accused has been made out. At that

Page 11 of 29
// 12 //

stage, even strong suspicion founded on material which leads the

Court to form a presumptive opinion as to the existence of the

factual ingredients constituting the offence alleged would justify

the framing of charge against the accused in respect of the

commission of that offence.

Whether police report and the documents filed under

section 173 Cr.P.C. disclose the offences:-

Offence under section 138 of the N.I. Act:

7. Adverting to the contentions raised by the learned

counsel for the respective parties, let me first deal with the

offence under section 138 of the N.I. Act under which charge

sheet has been submitted against the appellants.

The object of bringing section 138 of the N.I. Act on

statute is to inculcate faith in the efficacy of banking operations

and credibility in transacting business on negotiable instruments.

The provision was enacted to punish those unscrupulous persons

who purported to discharge their liability by issuing cheques

without really intending to do so, which was demonstrated by

the fact that there was no sufficient balance in the account to

discharge the liability. With a view to avoid unnecessary

prosecution of an honest drawer of a cheque, or to give an

Page 12 of 29
// 13 //

opportunity to the drawer to make amends, the proviso to

section 138 provides that after dishonour of the cheque, the

payee or the holder of the cheque in due course must give a

written notice to the drawer to make good the payment. Clause

apply unless the drawer of the cheque fails to make the payment

within fifteen days of the receipt of the said notice. The

ingredients, which are to be satisfied for making out a case

under section 138 of the N.I. Act against a person are that (i)

such person must have drawn a cheque on an account

maintained by him in a bank for payment of a certain amount of

money to another person from out of that account for the

discharge of any debt or other liability; (ii) that cheque has been

presented to the bank within a period of three months (the

period has been reduced from six months to three months w.e.f.

01.04.2012) from the date on which it is drawn or within the

period of its validity, whichever is earlier; (iii) that cheque is

returned by the bank unpaid, either because the amount of

money standing to the credit of the account is insufficient to

honour the cheque or that it exceeds the amount arranged to be

paid from that account by an agreement made by the bank; (iv)

the payee or holder in due course of the cheque makes a

demand for the payment of the said amount of money by giving

Page 13 of 29
// 14 //

a notice in writing, to the drawer of the cheque, within thirty

days of the receipt of information by him from the bank

regarding the return of the cheque as unpaid; (v) the drawer of

such cheque fails to make payment of the said amount of money

to the payee or the holder in due course of the cheque within

fifteen days of receipt of the said notice.

In the case in hand, even though the statements of

the investors recorded during investigation by the Investigating

Officer indicate that they deposited certain amount in the

company and the appellant no.1 issued cheques in their favour,

but there is no material on record that the cheques were ever

presented in the bank within the stipulated period for

encashment and the same were dishonoured. Moreover, law is

well settled that the Court can take cognizance of the offence

under section 138 of the N.I. Act and proceed with the same on

the basis of private complaint, if the allegations per se show that

complainant had complied sections 138 and 142 of the N.I. Act.

Section 2(d) of the Code of Criminal Procedure, 1973 defines

'complaint'. According to this definition, >complaint? means any

allegation made orally or in writing to a Magistrate with a view to

taking his action against a person who has committed an

offence, but it does not include a police report. However, in view

Page 14 of 29
// 15 //

of explanation to section section 2(d) of Cr.P.C., a report made

by a police officer in a case which discloses, after investigation,

the commission of a non-cognizable offence shall be deemed to

be a complaint; and the police officer by whom such report is

made shall be deemed to be the complainant. In view of the

offences under which chargesheet has been filed, explanation to

section 2(d) of Cr.P.C. has got no application in this case.

Mr. Bibekananda Bhuyan, learned Special Counsel

also fairly submitted that there is no material to attract the

ingredients of the offence under section 138 of the N.I. Act.

In view of the foregoing discussions, I am of the

humble view that the submission of charge sheet under section

138 of the N.I. Act is unjustified and therefore, the appellants

are discharged from such offence.

Offence under section 6 of the O.P.I.D. Act:

8. In the case of Ramesh Chandra Sahu (supra), it is

held as follows:-

<6. Section 6 of the O.P.I.D. Act deals with
punishment for default in repayment of deposits
and interests honouring the commitment. In
order to attract the ingredients of the offence,
the following aspects are to be proved:-

Page 15 of 29
// 16 //

(i) Default in returning the deposit
by any Financial Establishment; or

(ii) Default in payment of interest on
the deposit or failure to return in any
kind by any Financial Establishment; or

(iii) Failure to render service by any
Financial Establishment for which the
deposits have been made.

In the event any of the aforesaid aspects
is proved, every person responsible for the
management of the affairs of the Financial
Establishment shall be held guilty. >Financial
Establishment? has been defined under section
2(d) of the O.P.I.D. Act and >deposit? has been
defined under section 2(b) of the O.P.I.D. Act.
The word >default? in section 6 of the O.P.I.D. Act
has been used in conjunction with honouring the
commitment and therefore, it depends upon the
reciprocal promises.=

In the case of Prasan Kumar Patra (supra), it is

held that so long as financial establishment fails to render

service for which deposit is accepted, it would be a continuing

offence irrespective of fact that deposit was accepted prior to the

O.P.I.D. Act came into force.

Page 16 of 29
// 17 //

The statements of depositors recorded during

investigation indicate that both the appellants opened the

company and they allured the depositors for investment in the

company with assurance of higher returns and accordingly, they

deposited money in the company. Learned counsel for the

appellants submitted that there are no documentary proof

collected during course of investigation as to whether the

deposits were made by the depositors at one time or on different

dates and if so, by what mode and whether receipts of the

deposits were collected by the depositors in token of their

deposits. When no receipts showing deposit of the money in the

company were issued in favour of the depositors, only signed

cheques of the appellant no.1 were issued as appears from case

records, the question of seizure of deposit receipts does not

arise. One Xerox copy of agreement executed between the

appellant no.1 and one of the depositors along with the cheques

issued in favour of depositors by the appellant no.1 on behalf of

the company has been filed with a memo by the learned Special

Counsel appearing for the State of Odisha during argument. The

list of depositors along with money invested by them has been

submitted before this Court by the learned Special Counsel.

Learned counsel for the appellants submitted that no documents

of the company have been seized to show any advertisements

Page 17 of 29
// 18 //

etc. were issued by the company to allure the depositors. It

cannot be lost sight of the fact that the case was instituted on

12.11.2015 and it was ascertained during investigation that the

office of Company was closed since 2013 and the room was

under lock and key by the owner Rabinarayan Sahu. Therefore,

causing disappearance of documents of the company, if any,

cannot be ruled out.

The witnesses have stated that though they were

issued cheques by the appellant no.1 after depositing money in

the company, but when they enquired in the bank, they came to

know that there was no money available in the accounts of the

appellant no.1 to honour the cheques. Learned counsel for the

appellants argued that no letters from the Bank Managers of the

concerned banks have been seized by the I.O. to that effect.

Learned Special Counsel for the State on the other hand placed

the case diary, where there is mention which banks and which

accounts were verified by the I.O. and when and it was found

that there was no credit/debit in the name of the Company?s

account. Of course, no documents were collected from the

concerned Branch Managers where the appellant no.1 had

accounts.

Page 18 of 29
// 19 //

The learned counsel for the appellants argued that

the bald statements of some depositors indicate that they had

invested some money in the company and cheques were issued

by the appellant no.1 which were never presented in the bank

for encashment and thus, in absence of any clinching material on

record that the appellant no.1 had no such money in his

accounts to honour the cheques, the allegations are baseless and

without foundation and no prima facie case is made out against

the appellants and there is no ground to presume that the

appellants have committed the offences under which charge

sheet has been submitted.

Even though the cheques issued by the appellant

no.1 were not presented by the depositors after they came to

know from inquiry made in the concerned banks that there were

no such amount of money available in the accounts of the

appellant no.1 to honour such cheques, but materials on record

indicate that the appellants have failed to render service for

which deposits were accepted and it would be a continuing

offence irrespective of fact that deposits were accepted prior to

the O.P.I.D. Act came into force as held in the case of Prasan

Kumar Patra (supra) and thus it cannot be said that framing of

charge under section 6 of the O.P.I.D. Act would be groundless.

Page 19 of 29
// 20 //

Offence under section 420 of the Indian Penal Code:

9. Section 415 of the Indian Penal Code defines

>cheating?. To attract the ingredients of cheating, (i) there should

be fraudulent or dishonest inducement of a person by deceiving

him; (ii) (a) the person so induced should be intentionally

induced to deliver any property to any person or to consent that

any person shall retain any property, or (b) the person so

induced should be intentionally induced to do or to omit to do

anything which he would not do or omit if he were not so

deceived; and (iii) in cases covered by (ii) (b) above, the act or

omission should be one which caused or is likely to cause

damage or harm to the person induced in body, mind, reputation

or property. A fraudulent or dishonest inducement is an essential

ingredient of the offence. A person who dishonestly induces

another person to deliver any property is liable for the offence of

cheating.

Similarly, the ingredients to constitute an offence

under section 420 of the Indian Penal Code, which deals with

cheating and dishonestly inducing delivery of property, are as

follows: (i) A person must commit the offence of cheating under

section 415; and (ii) the person cheated must be dishonestly

induced to (a) deliver property to any person; or (b) make, alter

Page 20 of 29
// 21 //

or destroy valuable security or anything signed or sealed and

capable of being converted into valuable security. Cheating is an

essential ingredient for an act to constitute an offence Under

section 420 of the Indian Penal Code.

The statements on record indicate as to how false

promises were made to the depositors that their investment of

money would result in getting higher interest. On good faith,

they being deceived by such false promises, seem to have

invested money in the company for which they suffered wrongful

loss and the company in turn got wrongful gain. Therefore, there

are prima facie materials to attract the ingredients of offence

under section 420 of the Indian Penal Code.

Offence under section 468 of the Indian Penal Code:

10. Section 468 of the Indian Penal Code deals with

forgery for the purpose of cheating. The prosecution must prove

that the document is a forged one and that the accused forged

the document and that he did it for the purpose that the forged

document would be used for the purpose of cheating. One must

be found to have done >forgery? within the meaning of section

463 of Indian Penal Code which again implies that there has to

be the making of a false document in terms of section 464 of

Page 21 of 29
// 22 //

Indian Penal Code. On a conjoint reading of section 463 and 464

of the Indian Penal Code goes to show that two essential

elements of >forgery? contemplated under section 463 of Indian

Penal Code are (i) the making of a false documents or part of it

and (ii) such making is with such intention as is specified in the

section. These aspects are required to be established. The

available materials on record do not indicate which forged

documents the appellants created that they used for the purpose

of cheating of the depositors. In my humble view, there are no

prima facie materials to make out the ingredients of the offence

under section 468 of the Indian Penal Code and thus, submission

of charge sheet under section 468 of the Indian Penal Code is

unjustified and therefore, the appellants stand discharged from

such offence.

Offences under section Sections 4/5/6 of the 1978 Act:

11. The Preamble of 1978 Act declares that it has been

enacted "to ban the promotion or conduct of prize chits and

money circulation schemes and for matters connected therewith

and incidental thereto".

The phrase `money circulation scheme' is defined in

clause (c) of section 2 of 1978 Act which reads as under:

Page 22 of 29
// 23 //

<2(c). =money circulation scheme" means any
scheme, by whatever name called, for the
making of quick or easy money, or for the
receipt of any money or valuable thing as the
consideration for a promise to pay money, on
any event or contingency relative or applicable
to the enrolment of members into the scheme,
whether or not such money or thing is derived
from the entrance money of the members of
such scheme or periodical subscriptions=.

In the case of State of West Bengal -Vrs.-

Swapan Kumar Guha reported in 1982 Criminal Law

Journal 819, Chandrachud, C.J. after taking note of legislative

drafting, reshaped and rearranged section 2(c) thus;

'money circulation scheme' means any scheme, by

whatever name called,

(i) for the making of quick or easy money, or

(ii) for the receipt of any money or valuable thing as

the consideration for a promise to pay money, on any event or

contingency relative or applicable to the enrolment, of members

into the scheme, whether or not such money or thing is derived

from the entrance money of the members of such scheme or

periodical subscriptions;

Page 23 of 29
// 24 //

The phrase `prize chit' is defined in clause (e) of

section 2 of 1978 Act.

<2(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 capacity, monies
in one lump sum or in installments 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, and 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,

Page 24 of 29
// 25 //

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,

but does not include a conventional chit.=

Section 3 bans prize chit and money circulation

schemes or enrolment as member to any such scheme or

participation in such chit or scheme. Sections 4 and 5 are penal

provisions and prescribe punishment. Section 6 deals with

offences committed by Companies.

From the perusal of the above provisions, it is clear

that the 1978 Act prohibits `money circulation scheme'. It is,

therefore, necessary that the activity charged as falling within

the mischief of the Act, must be shown to be a part of the

scheme for making quick or easy money depending upon the

happening or non-happening of an event or contingency relative

or applicable to the enrolment of members into the scheme.

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 promised rate of interest may be in comparison with the

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// 26 //

agreed rate. What that section requires is that such reciprocal

promises, express or implied, must depend for their performance

on the happening of an event or contingency relative or

applicable to the enrolment of members into the scheme. In

other words, there has to be a community of interest in the

happening of such event or contingency.

There is lack of materials on record to show that

there was any >money circulation scheme? floated by the

appellants. Nothing has been seized in that respect.

In the case of Srinivasa Enterprises -Vrs.- Union

of India reported in (1980) 4 Supreme Court Cases 507,

Hon?ble Justice V.R. Krishna Iyer (as His Lordship then was)

while discussing the definition of >prize chit? as per section 2(e) of

1978 Act held as follows:-

<The quintessential aspects of a prize chit are
that the organizer collects moneys in lump sum
or installments, pursuant to a scheme or
arrangement, and he utilises such moneys as he
fancies primarily for his private appetite and for
(1) awarding periodically or otherwise to a
specified number of subscribers, prizes in cash
or kind and (2) refunding to the subscribers the
whole or part of the money collected on the
termination of the scheme or otherwise. The

Page 26 of 29
// 27 //

apparent tenor may not fully bring out the
exploitative import lurking beneath the surface
of the words which describe the scheme. Small
sums are collected from vast numbers of
persons, ordinarily of slender means, in urban
and rural areas. They are reduced to believe by
the blare of glittering publicity and the dangling
of astronomical amounts that they stand a
chance-in practice, negligible-of getting a huge
fortune by making petty periodical payments.
The indigent agrestics and the proletarian
urbanites, pressured by dire poverty and doped
by the hazy hope of a lucky draw, subscribe to
the scheme although they can ill-afford to spare
any money. This is not promotion of thrift or
wholesome small savings because the poor who
pay, are bound to continue to pay for a whole
period of a few years over peril of losing what
has been paid and, at the end of it, the fragile
prospects of their getting prizes are next to nil
and even the hard-earned money which they
have invested hardly carries any interest. They
are eligible to get back the money they have
paid in driblets, virtually without interest, the
expression 'bonus' in Section 2(a) being an
euphemism for a nominal sum. What is more,
the repayable amount being small and the
subscribers being scattered all over the country,
they find it difficult even to recover the money
by expensive, dilatory litigative process.=

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// 28 //

In the factual scenario, I am of the humble view that

it is neither a case of `money circulation scheme' nor a case of

>prize chit? and therefore proceedings against the appellants

sections 4/5/6 of the 1978 Act are liable to be dropped and they

are entitled to be discharged from such offences.

Conclusion:

12. In view of the foregoing discussions, I am of the

considered opinion that on the basis of the available materials on

record, it cannot be said that no prima facie case for the

commission of offences alleged against the appellants is made

out under sections 420/34 of the Indian Penal Code and section

6 of the O.P.I.D. Act and that there is no ground to presume that

they have committed such offences and therefore, if the

proceeding is allowed to continue against the appellants for such

offences, it would result in the miscarriage of justice. The

learned trial Court was partially justified in rejecting the petition

filed by the appellants under section 239 of Cr.P.C. and

therefore, the impugned order dated 05.12.2022 passed by the

learned Presiding Officer, Designated Court under O.P.I.D. Act,

Cuttack in C.T. Case No.12 of 2018 in rejecting the petition for

discharge except for the offences under section 468 of the Indian

Penal Code, sections 4/5/6 of the 1978 Act and section 138 of

Page 28 of 29
// 29 //

the N.I. Act stands confirmed. The learned trial Court shall now

proceed to frame charges under sections 420/34 of the Indian

Penal Code and section 6 of the O.P.I.D. Act against the

appellants and expedite the trial as the F.I.R. was instituted on

12.11.2015 and charge sheet was submitted on 17.05.2018 and

more than five years have passed in the meantime and the

investors are waiting since last so many years after they have

invested their hard earned money in the company to get justice.

Accordingly, the CRLA allowed in part.

A copy of the order be communicated to the learned

trial Court by the Registry.

...............................
S.K. Sahoo, J.

Odisha High Court, Cuttack The 24th July 2023/RKMishra RABINDR Digitally signed by RABINDRA A KUMAR KUMAR MISHRA Date: 2023.07.24 MISHRA 12:19:43 +05'30' Page 29 of 29

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