STATE OF WEST BENGAL & ORS. versus SWAPAN KUMAR GUHA & ORS.

Citation: [1982] 3 S.C.R. 121 · Decided: 02-02-1982 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Dismissed

Cited by 9 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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121 
A 
'STATE OF WEST BENGAL & ORS. 
v. 
_SWAPAN KUMAR GUHA & ORS. 
February 2, 1982 
[ Y.V. CHANDRACHUD, C.J. A. VARADARAJAN, AND 
AMARBNDRA NATH SBN, JJ.] 
Prize Chits and Money Circulation Scheme1 (Banning) Act 1978 (43of1978) 
Ss. 2(c), 2(e), 3, 7 and 13-'Money Circulation Scheme'-What is-Firm Accept-
ing deposits from public-Payment of interest at 48% per annnm though deposit 
receipt indiCate only 12%-ll'hether promotion of'money circulation scheme'-
'Whethe~ 'offence' committed under the Act. 
B 
c 
· Criminal Procedure Code 1973, S.154, 156, 157-F.l,R.-Cognlzable offence-
D 
Necessity of disclosure-No cognizable offence disclosed-Court justified in quash-
ing the investigation. 
Cri-fninal Trial-F.I.R.-Condition precedent to com~ncement cf investiga. 
lion-Police have no unfettered discretion to commence investigation-Power to 
investig'!le to be exercised as-provided in Cr. P.C. 
Interpretation of Statutes-Rule of strict interpretation of penal statutes-
Whether affects primary test that language used in enactment when clear and plain 
to apply. 
Words & Phrases-' Money circulation scheme'-What is-Meaning of. 
The firm 'Sanchaita Investments', commenced its busines·s on July 1,1975, 
its three partners, the three respondents in the appeal contributii;ig a total capital 
of Rs. 7,000/-. The firm carried on business as financers and investors and in 
its business the firm accepted loans or deposits from the general public for 
different periods repayable with interest af 12% per annum. 
Under the terms 
of deposits, the depositors had a right to withdraw the deposit with the firm at 
any time. In case of premature withdrawal the depositors were to Jose interest 
of 1 %. 
Under the terms and conditions -of the Cli;:posit the firm had also the 
liberty to repay the amount with interest to any depositor at any time before the 
expiry of the stipulated period of deposit without giving any reason. The firm 
was carrying on its business on a very extensive scale. 
E 
F 
G 
In the year 1978 Parliament passed the Prize Chits and Money Circulation 
Schemes (Banning) Act 1978. The Act !came info force on December 13, 1978 
H 
and section 12 provided a two years period ~for winding up ~verr k~nd. o~ bu.sin~~~ 
relating to prize chits and money circulat(Q!\ ~cb_emes •. 
A 
B 
c. 
D 
E 
F 
G 
H 
122 
SUPREME COURT REPORTS 
[1982) 3 S.C-R. 
Oo 13th December, 1980 the Commercial Tax Officer lodged a complaint 
of violation of the Act by the firm with the police. The FIR stated that the firm 
bad been offering fabulous interest at 48% per ~annum to its members, later 
reduced to 36% though the loan certificate receipts showed the rate of interest 
to be 12% only. The amount In excess of 12% clearly indicated that the 
1Money 
Circulation Scheme' was being promoted and conducted for the making of 
quick and/or easy money and that prizes and for gifts in cash were also awarded 
to agents, promoters and members, and that the firm and its three partners in 
conducting such ~oney circulation schemes had violated section 3 of the Act and 
were therefore punishable under section 4. On the ·same day tbJ office of the 
firm was searched by the police and a sum of Rs. 42 1akhs was recovered. The 
residences of the partners were also searched and large amounts of cash as well 
· as documents were seized. Certain lists of agents seized during the investigation 
showed that code numbers were a~signed to many of the agents and that the 
agents had acquired large properties at various places and had also started; new 
business activities. The partners were arrested and enlarged on bail. 
The firm and its partners filed a writ petition in the High Court challeng-
ing the validity of the F.l.R. and the proceedings arising out of it including the 
Validity· of the searches and seizure of docuinents, papers and cash. It was 
contended that the F.I.R. does~not disclose any offence under the Act which does 
not apply to the firm and that there was no violation of any provisions of the 
Act. The petition was contested by the State Government contending that the 
payment of interest .by the fir 1n and its partners at the clandestine rate of 36% 
against the bank rate of. 12% in the context of the scheme promoted and conduc-
ted by the firm was tantamount to arr activity which was banned under tb.e Act. 
and that in the process of its working, the scheme of the firm generated quick 
and easy money so as to render such scheme ilr ar

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