1. The petitioners were tried by the Sadar Sub-Divisional Magistrate of Hooghly, for having committed offences under Section 120-B and Section 420, I. P. C., and on conviction were sentenced to rigorous imprisonment for six months under each of the above provisions of the law. The sentences as passed were to run concurrently in the case of the petitioner Jatindra Nath Sircar, and consecutively in the case of other petitioner Dhirendra Nath Ghose. The conviction of and the sentences passed on the petitioners were upheld on appeal, by the learned Sessions Judge of Hooghly. The charges against the accused persons were: (1) that they were party to a criminal conspiracy to commit the offence of cheating by dishonestly inducing people to deliver money to them, through three other persons, and in pursuance of that conspiracy one Thakimani Dasi and others, were cheated of different sums of money, and (2) that through the agents in pursuance of the conspiracy mentioned above cheated Thakomani Dasi and others by dishonestly inducing them to deliver different sums of moneys to the accused persons and which moneys were the property of the Thakomani Dasi and others. The case for the prosecution, it appears to be clear, was based on the memorandum of association, and the loan rules of a Company started under the name and style of the Bengal Industrial Loan Co., Ltd. The accused Dhirendra Nath Ghose was the Managing Director of the Company, and the other accused Jatindra Nath Sarkar replaced Dhirendra Nath Ghose as such, a position which was accepted by the Registrar of Joint Stock Companies.
2. The loan rules of the Company contemplated different classes of loans and a reference to the scheme launched by the Company in question is necessary for the purpose of forming an idea as to the nature of the offence charged against the petitioner. The applicant for the loan was to pay an admission fee and make a deposit. He was required to secure two co-members or second-arios who were also required to pay admission fee and the deposit called the opening deposit. After payment by the secondaries, the company was to advance loan up to a fixed maximum to the original applicant within a fixed period of 45 to 60 days. After the two comembers had paid admission fees and deposits, the original applicant was to get a refund of his opening deposit; the comembers or secondaries were in the same way to get loans from the company on their securing two co-members or secondaries each. If however the original applicant failed to secure two co-members within a week of his application, he was, on sending a notice to the company, to get a refund of his deposit money with interest at the rate of six per cent per annum within 180 days of the date of receipt of notice by the company. What was sought to be established on the side of the prosecution was that the accused persons engaged agents in villages and realised money from villagers and created confidence by giving loans to a few persons, but that in a large number of cases they put off payment of loans on various pretexts; the position taken up by the prosecution was that the acts of the accused persons in this behalf amounted to cheating.
3. There is no question that the petitioners did not induce any one to be a member or to apply for loan or to pay any money; it was the supervisors and the agents who were alleged to have induced persons to become members after they had complied with the loan rules of the company as has been mentioned already; the offence charged against the accused persons was sought to be established solely with reference to the scheme launched by the company of which they were managing directors in succession. The question therefore is whether the Courts below are right in their decision that those responsible for the framing of the scheme and the loan rules, and for their coming into operation, were guilty of cheating as contemplated by Section 420, I. P. C. The learned Judge's view that it was 'safe to presume' that it was the petitioners who were alone responsible for the rules may be accepted to be correct on the materials on the record; but the question remains whether the scheme evidenced by the loan rules of the company of which the petitioners were the managing directors, and who may be held responsible for the same, was dishonest or fraudulent in the sense that it represented to the public something which was not true or concealed from them something which the company ought to have disclosed. In the words of Broomfield, J., in Emperor v. Durgadas 1934 Bom 48, the scheme in the case before us might be of the 'snow ball' nature but the literature of the scheme, principally the loan rules of which mention has been made above, could not be described as misleading and deceptive. All the conditions of the scheme launched by the company were set out in black and white. There was no room for misunderstanding. On a careful consideration of the scheme floated by the company of which the petitioners were the managing directors, and of the loan rules made available to the public, it is not possible to hold, in the case before us, that the petitioners were responsible for the starting and carrying through a scheme of a fraudulent nature, so as to attract the operation of the penal law against the petitioners. The scheme was a speculative one but could not be said to be dishonest. In the above view of the case, the conviction of the petitioners and the sentences passed on them cannot be affirmed. The rules are made absolute. The conviction of the petitioners and the sentences passed on them are set aside. The petitioners must be discharged from their bail bonds, and set at liberty.