Himalaya E-Com Marketing And ... vs Gnct Of Delhi And Ors.
2008 Latest Caselaw 809 Del

JUDGMENT

T.S. Thakur, J.

1. In this petition under Article 226 of the Constitution of India, the petitioners have prayed for a writ of certiorari quashing of FIRs No. 450 dated 21st April, 2006 alleging commission of offences punishable under Sections 3/4/5 of Prize Chits & Money Circulation Scheme (Banning) Act, 1978 (hereinafter referred to as 'the Act') and FIR No. 972/2007 alleging offences punishable under Sections 406, 420, 422 and 120B of the IPC. A mandamus directing the respondents not to prevent the petitioners from carrying on their occupation, trade and business and for a declaration to the effect that the business run by the petitioners does not fall under the mischief of Act has also been prayed for. The controversy arises in the following circumstances:

2. Petitioner No. 1 is a limited company while petitioner No. 2 is its Managing Director. Petitioner No. 3 claims to be an ex director of the said company, all of whom are shown as accused persons in the two FIRs mentioned above. The petitioners' case is that they are carrying on their legitimate business to earn their livelihood which is being snatched away from them by the respondents in the garb of investigations being conducted in the two FIRs mentioned above. The ongoing investigation into the alleged offences committed by the petitioners is, according to the petitioners, a grave violation of their fundamental right to carry on their legitimate business. While the petitioners have not described as to how the business being conducted by them is legitimate and legally permissible, a reading of the FIRs lodged against them, copies whereof have been placed on record, shows that FIR No. 450 dated 21st April, 2006 has been lodged by Smt. Mari Rajpal, Director, Administration of National Amnesty and Redemption Organization. FIR No. 972/2008 has been lodged by one Smt. Pooja Bansal. In the complaint lodged by Smt. Mari Rajpal, the petitioners are alleged to be inducing the general public with brochures and pamphlets to invest a small amount of Rs. 5,500/- in the petitioner No. 1 company which would then enable them to earn lacs of rupees as per the scheme floated by the company. As a part of this inducement, the company offers gifts like mobile phones, C.D. Players, Colour TVs, ACs, Bikes, Cars and even trips to foreign countries. The complainant Ms.Mari Rajpal does not claim herself to be a victim of the inducement. Based on a preliminary investigation, four victims are reported to have come forward and have been examined. From the said depositions, it is seen that the company is making an initial payment to the members as promoters but the schemes floated by the company are alleged to be in total violation of the provisions of Sections 3, 4 and 5 of the Act. On the statement of the victim, Sh. Manish Kumar Singh, a case under Section 3/4/5 of the Act was registered and is presently under investigation. In his statement, Sh.Manish Kumar Singh has inter alia stated as under:

I reached the company officer on 10.12.2005 and met Sh. Madan Gopal and Sh.Anubhav Saini, who told me that they are Directors of the said company after which they explained their scheme to me and told me that if I invest Rs. 5500/- with the company, I will get Rs. 10,000/- in 5 years and payment would be made of after every six months and if I promote further membership then I may get up to Rs. 10,000,00/- in 5 years and will get commission between 10% to 47% apart from this, all this I will also get a Hospital cash policy and a pair of silver glass + a holiday package. I was told by them that there are already 20,000 to 25,000 members with the company and earning lacs of Rupees. Sh. Madan Gopal and Sh. Anubhav Saini also explained another scheme in which I was told that if I invest Rs. 71,500/- that I would get Rs. 11,20000/- in 4 years without doing anything and I would also get commission of Rs. 11,000/- on 25th of the investment month along with it. I was taken by their bluff and became a member of Himalaya E-Com-Marketing Pvt. Ltd. after paying Rs. 5500/- and I was allotted the membership No. as...and also got a receipt of rs.5500/- and a kit of the said company in which there was a booklet explaining its scheme which I have submitted to you. A week back I was thinking of investing Rs. 71,500/-. So I went to Himalaya E-Com-Marketing Pvt. Ltd. office, where I again found Mr.Madan Gopal and Sh.Anubhav Saini so I asked them if I invest Rs. 71500/- with the company would pay back the committed amount, after this Mr. Madan Gopal and Sh. Anubhav Saini replied that "we may pay it from anywhere, if you want to invest fine otherwise do not talk unnecessarily.

3. A copy of the FIR No. 972/2007 registered on the complaint made by Smt.Pooja Bansal is placed on record by the petitioners which reproduces the complaint in the following words:

Sir, the above accused persons are guilty of a Multi level Marketing Networking scam in the name of self-employment Yojna/Sahyog Yojna without any sale or manufacturing of goods or rendering of services with the sole intention to cheat innocent people the above charitable trust, the accused No. 1 to 3 in connivance with each other hatched further conspiracy to cheat proper including those undersigned and accused persons incorporated various other entitles including M/s Himalya E-Com Marketing and Finance Pvt. Ltd. and also M/s Himalya E-com Marketing Ltd. They also launched Correl Jwellers. Accused No. 3 took charge of all these entries as the CEO and Managing Director and made join his other friends, namely accused No. 4 (wife of accused No. 3) and 6 to 10 as per their directors of the above companies. It is emphatically submitted that the above entities did not manufacture any product not did it render any service and they all were launched only to cheat people including the undersigned persons. Accused No. 4 and 5 (daughter and mother) were given the designation of "Executive Directors" who were responsible for direct negotiation and bargains and also for collection of money from public including undersigned persons which used to be under direct command and supervision and direction of accused No. 3 with due force it is submitted that this couple of mother and daughter who showed dreams to the victims including undersigned persons who made believe the victims the truthness of their falsity, and belied all their false promises to cheat and trap lacs of people including undersigned who were already victim of circumstances, social and economical.

Accused No. 6 was assigned the job of being Director Marketing Training whose job was to train young victims to fetch more victims in their respective line in the nature of multi level marketing. Accused No. 7 was given designation Director Networking who was responsible for bringing co-ordination and networking and designing for achieving this illegal purpose who was under the direct charge of accused No. 3. Accused No. 8 was given the title as "Director House Keeping" who worked infact as a private secretary to the accused No. 3 and in the absence of accused No. 3 she used to control everything along with accused No. 1, 2 and 4. Accused No. 9 was 'Director Administration' whereas accused No. 10 was 'Director Finance' who as team looked after accounting, custody of money and investment, siphoning off and diversion thereof under the direct supervision and directions of accused No. 3 and in his absence they took directions from accused No. 1, 2, 4 & 5 who were other family members of accused No. 3.

The accused persons in connivance with each other hatched criminal conspiracy and came out with multiple plans from time to time in the form of multi level marketing and networking. Accused persons deceived the complainants herein and lacs of others and thereby induced to invest a sum of Rs. 5500/- by each of such subscriber and each such subscriber would get Rs. 10,000/- in a span of 5 years (which later on increased to 10 years after hooking innocent people which was to be split in installments) on the one hand and would get gift worth about 30% of the investment instantaneously in the form of silver utensils. In addition one would be entitled to 46% additional commission on the subscription so brought from other persons. Not only this various lucrative services also were offered for which such investors would be entitled once he became member. The accused persons further offered that if a subscriber gets further once subscriber, then the first subscriber who brings in an another one would be entitled to additional 30,000/-. Similarly, if one gets, 3 such subscribers he would be additionally entitled to Rs. 1 lac. If one gets 6 subscribers, he would earn Rs. 3 lacs additionally and if one manages 12 such subscribers, then he would get additional Rs. 10 lacs. It is this offer which makes a person entitled to earn Rs. 10 lacs by investing Rs. 5500/- which by itself is nothing but cheating, criminal conspiracy, deception, criminal misappropriate and breach of trust and what not citizen, they floated the companies as stated above thinking that the law may not be able to stretch its long hands piercing the purported corporate veil.

Trapped by their designs, some of us sold off our valuables, wearing ornaments and immovable properties and said multiple subscription to accused persons to achieve their frivolous targets. Thus some of us individually have given more than one subscriptions. Accused persons though charged TDS, which they have not paid to the Govt., and thereby have cheated not only us, but Govt. also.

It is emphatically submitted that the money against all such receipts which are lacs in numbers was entrusted with the accused persons, who represented to be having their affiliation and approval from lacs of people including the complainants herein, most of whom belongs to low middle class families and some very poor and most of them were poor household ladies and unemployed youth, already being a victim of their special social and economic circumstances were made to believe by the accused person in connivance with each other in their common intention that this may change their life with a clear intention to gulp this money itself without there being any intention at all to pay back such money as promised by the accused persons. The accused persons knowingly falsely misled the public, lacs in numbers including the complainants herein, that they would not be able to pay back Rs. 10 lacs for mere 5500/- rupees which is next to impossible. Taking full benefit of emotional, financial distress of Indian nationalized banks and also the Government of India, who have dishonestly mis-appropriated and converted that hard earned money to their own use, simply by sacrificing the interest we poor victims most of us being household ladies and unemployed youth and also aged retired persons. This has been done by accused persons only by defrauding us to pay back our money in multiples. In this manner the accused persons have committed offence of criminal misappropriation and breach of trust. That the accused persons dishonestly and fraudulently took our money as state above by deceiving us that they would pay us back investing mere Rs. 5500/- to the tune of 10 thousands or Rs. 30 thousand or Rs. one Lac or Rs. 3 Lacs or Rs. 10 Lacs in the manner as stated above which in fact they ever intended from the very inception and thus, they have cheated us. If we had slightest idea of their intention of non-payment of such money, we would not have given the money to accused persons. The money was given by each of us only being influenced by the accused persons making each of us believed the truthfulness of their falsity.

We are denied our money meant for our animal subsistence, whereas,each of the accused persons are still enjoying luxurious life style including fleet of cars of Benz, Toyato and skoda etc. The accused persons firstly started withdrawing their various services one by one and then started delaying the payment. As if this was not sufficient with an intention of committing cheating or cheating and fraud on fraud, they started issuing bogus shares which had no value in the market. Lastly the accused persons have simply raised their hands saying that they have no money anymore.

In view of the above, the accused persons have committed various serious criminal offences for which you may be pleased to register an FIR investigate the matter and bring the accused persons to conviction as per law. In the meantime you may kindly raid premises of accused persons and seize their properties and accounts and see that they do not continue with same crime cheating further persons anymore. You may further do whatever may be necessary in the interest of justice to see that hard earned money of the poor helpless victims is restored back to them. It is heard that the accused persons have arranged to flee away from the jurisdiction of this justice system, therefore they may kindly be arrested at the earlier.

sd. English Pooja Bansal Name 1. Pooja

4. It is evident from the above that the FIRs in question have been registered on the basis of complaints lodged with the jurisdictional police stations and are being investigated by the officers concerned. The question however is whether the ongoing investigation ought to be quashed on the ground that the same interferes with the petitioners' right to carry on their legitimate business. Our answer to that question is in the negative. There is no quarrel with the proposition that a citizen has a fundamental right to carry on any legitimate business, trade or profession, but that right is not unqualified or absolute in the sense that it may be called in aid to prevent investigation into allegations suggesting violation of a validly enacted law including offences punishable under the Indian Penal Code. No one can claim that even when he may be cheating an individual or a group or individuals or the general public, his activities should not be investigated merely because any such investigation would have the effect of hampering his ongoing business activities. The correct position on the contrary is that the right to carry on business is subject to the reasonable restriction of such business being legitimate under the prevailing laws and in no way against morality. No sooner a complaint is lodged against an individual alleging the commission of any office, the investigating agency would be entitled to initiate investigation provided the allegation, if presumed to be factually correct, constitutes the commission of an offence. The legal position as to the circumstances in which courts can and ought to quash ongoing investigation has been settled by a long line of decisions of the Supreme Court, beginning with R.K. Kapur v. State of Punjab where the Court enumerated the following three situations in which a complaint/FIR could be quashed by the Court in exercise of its inherent powers:

(i) Where it manifestly appears that there is a legal bar against the institution or continuance of the criminal proceeding in respect of the offence alleged. Absence of the requisite sanction may, for instance, furnish cases under this category.

(ii) Where the allegations in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety, do not constitute the offence alleged; in such cases no question of appreciating evidence arises; it is a matter merely of looking at the complaint or the First Information Report to decide whether the offence alleged is disclosed or not.

(iii) Where the allegations made against the accused person do constitute an offence alleged but there is either no legal evidence adduced in support of the case or the evidence adduced clearly or manifestly fails to prove the charge. In dealing with this class of cases, it is important to bear in mind the distinction between a case where there is no legal evidence or where there is evidence which is manifestly and clearly inconsistent with the accusation made and cases where there is legal evidence which on its appreciation may or may not support the accusation in question. In exercising its jurisdiction under Section 561-A the High Court would not embark upon an enquiry as to whether the evidence in question is reliable or not. That is the function of the trial magistrate, and ordinarily it would not be open to any party to invoke the High Court's inherent jurisdiction and contend that on a reasonable appreciation of the evidence the accusation made against the accused would not be sustained.

5. The issue whether an ongoing investigation could be quashed by a writ court under Article 226 came up for consideration before the Supreme Court in State of Haryana and Ors. v. Ch. Bhajanlal and Ors. . The Supreme Court summed-up the entire case law on the subject in the following words:

105. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extra-ordinary power under Article 226 or the inherent powers Under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.

1. Where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima-facie constitute any offence or make out a case against the accused.

2. Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers Under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

3. Where the uncontroverter allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

4. Where, the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated Under Section 155(2) of the Code.

5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.

6. Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.

7. Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

106. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the Court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice.

6. Reference may also be made to Mahavir Prasad Gupta v. State of NCT of Delhi , where, in similar circumstances, the legal position stated in the above judgment, was reiterated.

7. In the light of the above authoritative pronouncements of the Supreme Court, all that a writ court is required to see is whether the assertions made in the complaint/FIR constitute an offence if the same are presumed to be correct. Applying that test to the case at hand, we have no manner of doubt that the allegations made against the petitioners justified the registration of the FIRs against them for initiating investigation into the same. We were told by learned Counsel for the respondent in the course of hearing that in FIR No. 450/2006, as many as 19 persons have been examined by the I.O. who have all supported the allegation that they were cheated by the petitioners. So also in FIR No. 972/2007, 49 persons have been examined so far who have all supported the version given in the complaint that the petitioners are responsible for cheating them. Based on the material given by the petitioner company to the I.O. in the course of investigation, the I.O. appears to have referred the matter to Chaudhary Batra Kapoor & Company, Chartered Accountants for examining the financial affairs of the company. The Chartered Accountants are said to have given an interim report on 19th December, 2007, a copy whereof was filed along with the status report presented in the connected writ petition No. 20566/2005. The interim report reads:

1. Analysis and scrutinizing the Profit and Loss account for the financial year 2004-05 (As per Annexure I enclosed.)

a. the amount of Sales is 14.38% of the total turnover of the company. Total turnover includes sales plus other income. (i.e. 81,57,465.00 + 4,85,71,747.00 = 5,67,29,212.00).

b. the amount of other income is 87.53% of the total turnover of the company. Total turnover includes sales plus other income. (i.e. 81,57,465.00 + 4,85,71,747.0 = 5,67,29,212.00)

c. Incentive paid and training expenses are 94.53% of other income or 80.95% of total turnover.

From the above analysis we are of the opinion that the company is involved in money circulation under the shadow of marketing of goods as the amount of sales is 14.38% of the total turnover.

2. Analysis and scrutinizing the Balance Sheet for the financial year 2004-05 (as per Annexure II enclosed)

a. The company's own capital is Rs. 121344.00 only (i.e. share capital of Rs. 100000.00 and reserves and surplus is Rs. 21344.00)

b. Company is having huge cash in hand and balance with DMA aggregating to Rs. 15077436.00.

c. The current ratio of the company is 0.92% (current Asset/Current liabilities) it means the liquidity of the company is poor.

From the above analysis we found that this company is entering in huge transactions in which public money is involved. The company owned capital is negligible, huge cash in hand & balance with DMA shown in the Balance Sheet.

8. In the light of the above developments and the evidence that has been collected by the Investigating agency which incriminates the petitioners, we are not inclined to interfere with the ongoing investigation especially when it was not the case of the petitioners that the averments made in the complaints, even if presumed to be correct, did not make out a case against them for investigation.

9. Learned Counsel for the petitioners argued that since the FIRs have been registered by this Court, no court including the Single Judge of this Court sitting on the criminal side is ready to entertain an application for grant of bail to them. We fail to appreciate that argument for two precise reasons. Firstly because we have not issued any direction either in the present writ petition or in the connected writ petition No. 20566/2005 for registration of any case against the petitioners. The cases, as noticed above, have been registered on the basis of complaints which the police have received from the affected parties. There is, therefore, no reason why the petitioners should feel handicapped in seeking appropriate redress, in appropriate proceedings for grant of bail. There is no impediment for the competent court in examining any request for grant of bail to the petitioners if a case is made out for the same. Secondly, because there is nothing on record before us to suggest that any effort was ever made by the petitioners to seek bail from the competent court and the same was declined on the ground that the matter is being monitored by the High Court. The apprehension of the petitioners that they may not get bail is in that view a mere figment of their imagination and needs to be noticed only to be rejected.

10. In the result, this writ petition fails and is hereby dismissed but in the circumstances without any order as to costs.