Bail Petition - 439

S.B.Cr.Misc. Bail Application No. /2012 Arun Kumar & Ors. Vs. State of Rajasthan.
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. ... S.B. CR. MISC. BAIL APPLICATION NO._____/2012. ... PETITIONERS : 1. Arun Kumar S/o Shri Shanker
Shrivastava, resident of D-294, Azad Nagar, Bhilwara, Tehsil & District Bhilwara. 2. Ashok Kumar S/o Shri Shiv Kumar Dixit, resident of E-419, Azad Nagar, Bhilwara, Tehsil & District Bhilwara. 3. Vinay Kumar S/o Shri Jugal Dev Mishra, resident of 52-I Bapu Nagar, Bhilwara, Tehsil & District Bhilwara. 4. Raj Kumar S/o Shri Bhagwan Sahai Mali, resident of Azad Nagar, Bhilwara, Tehsil &
District Bhilwara. [at present lodged in Central Jail, Bhilwara] Versus RESPONDENT :
The State of Rajasthan. ... S. B. CRIMINAL MISC. BAIL
APPLICATION UNDER SECTION 439 Cr.P.C. AGAINST THE ORDER BY SH. RHJS, JUDGE, MISC.
DATED 24.12.2011 PASSED VINOD LEARNED BHILWARA CASE NO. KUMAR ARYA,
SESSIONS IN CRIMINAL
1265/2011
REJECTING
BAIL APPLICATION UNDER SECTION 439 CR.P.C. ARISING OUT OF F.I.R. NO. 188/2011 FOR P.S. HAMIRGARH, OFFENCES 420 AND
BHILWARA UNDER
THE 406,
SECTIONS
120B of IPC AND SECTIONS 3,4,5 AND 6 OF THE PRIZE CHITS AND MONEY CIRCULATION SCHEMES
(BANNING ACT), 1978 ... TO, HONBLE THE CHIEF JUSTICE AND HIS LORDSHIPS OTHER COMPANION JUSTICES OF THE HONBLE
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. ... MAY IT PLEASE YOUR HONOUR : Your Lordships humble petitioners most
respectfully submit as under :-
1.
That
on
10.12.2011,
F.I.R.
alleging
offences under section 3, 4, and 5 of the Prize Chits and Money Circulation Schemes (Banning Act), 1978 and section 420, 120-B of IPC came to be registered by SHO, Police Station, Hamirgarh, District Bhilwara stating inter alia that on the basis of information received by Special Mukhbir that on 9.12.2011 the police party proceeded to the premises owned by the company. The F.I.R.
states that RCM Business Company is multi level marketing company and is offering lucrative
schemes to people so as to make them members. In the premises the employees of the said
company wrongly mentioned as RCM Business company on the basis of internet search informed the police party that a person who becomes a
member of the scheme is entitled to bonus of Rs.10/- to Rs.25/- on every person he enrolls as a member from 5000 business volume (BV) to 9999 business volume (BV). Here BV denotes the
incentive given to the distributor for total sales of company products affected by him. It is further mentioned therein that if more members are enrolled then royalty bonus, leadership bonus and technical bonus is also offered to customers and that the company has 1127 branches in India and as per list of commissions distributed in Nov., 2011 one Seema W/o Kailash Chhabra got Rs.5,97,431/- and Indra Devi W/o Bhag Chand Chhabra was paid Rs.2,28,351/-. One blank stamp paper purchased by one Shri Trilok Chand in his own name for Rs.10 was also found which as per the F.I.R. was likely to be used in future for cheating purposes. company is It was also found that the since 1988-89 and is
registered
having bank accounts in various cities in India including Bhilwara but since the company does not have any registration with the Reserved Bank of India. On these allegations, a case
aforementioned was registered. In the said F.I.R. it was also recorded that in the premises which is a registered address of the company, a huge stock of various itself articles seized was found and a the
godown
was
including
truck
bearing the name RCM Business. servers and other hardware
The computer closed and
were
seized at the spot and all the accounts and papers of the company were taken away and the petitioners employees who were present in the premises at the time of visit by the police were arrested.
2.
That it is submitted at the outset that the Act of 1978 pre-supposes agreement with a
person or number of persons for subscription of a certain amount of money by way of periodical installments for a definite period in consideration of a prize amount. For the purpose of ready
reference, the relevant provisions of Sections 2, 3,4 and 5 of the Act of 1978 are reproduced as under: " 2. Definitions: In this Act, unless the context otherwise requires,-
(a) "conventional chit" means 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 (or certain quantity of grain instead) by way of periodical instalments for a definite period and that each such 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. Explanation.-In this clause "prize amount" shall mean the amount, by whatever name called, arrived at by deducting from out of the total amount paid or payable at each instalment by all the subscribers, (i) the commission charged as service charges as a promoter or a foreman or an agent; and (ii) any sum which a subscriber agrees to forego, from out of the total subscriptions of each instalment, in consideration of the balance being paid to him; (b) **** **** **** *** *** ***
(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; (d) **** (e) (f) **** **** **** **** **** **** **** **** *** *** *** *** ***; *** *** *** ***
3. Banning of prize chit and money circulation schemes or enrolment as members or participation therein: No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme. 4. Penalty for contravening the provisions of section 3: Whoever contravenes the provisions of section 3 shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both: Provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees. 5. Penalty for other offences in connection with prize chits or money circulation schemes. Whoever, with a view to the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of this Act or in
connection with any chit or scheme promoted or conducted as aforesaid,(a) prints or publishes any ticket, coupon or other document for use in the prize chit or money circulation scheme; or (b) sells or distributes or offers or advertises for sale or distribution, or has in his possession for the purpose of sale or distribution any ticket, coupon or other document for use in the prize chit or money circulation scheme; or (c) prints, publishes or distributes, or has in his possession for the purpose of publication or distribution(i) any advertisement of the price chit or money circulation scheme; or (ii) any list, whether complete or not, of members in the price chit or money circulation scheme; (iii) any such matter descriptive of, or otherwise relating to the prize chit or money circulation scheme, as is calculated to act as an inducement to persons to participate in that prize chit or money circulation scheme or any other prize chit or money circulation scheme; or (d) brings, or invites any person to send, for the purpose of sale or distribution, any ticket, coupon or other document for use in a prize chit or money circulation scheme or any advertisement of such prize chit or money circulation scheme; or
(e) uses any premises, or causes or knowingly permits any premises to be used, for purposes connected with the promotion or conduct of the prize chit or money circulation scheme; or (f) causes or procures or attempts to procure any person to do any of the above-mentioned acts, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to three thousand rupees, or with both: Provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees." In the present case as shall be narrated hereinafter the Company M/s. Fashion
Suiting Pvt. Ltd. undertakes manufacturing, sourcing and quality check of various and sale
products from all over the country
of those products directly to the consumer with a view to provide quality product at affordable prices. There is no element of
money in cash or cheque except by way sale consideration being taken from any
10
consumer or distributor of the company. It is further submitted that the functioning of the company is similar to a well known company called AMWAY; however, there is no element of cash or any other form of money that is ever offered by the company.
3.
That in order to elucidate the functioning of the company, it is worthwhile to mention here that RCM business is the brand name owned by M/s. Fashion Suiting Pvt. Ltd. and is not a
separate company as wrongly assumed. success behind the huge turn over of
The RCM
business lies in marketing of products in such a manner that monopoly of any one person is
avoided and opportunity is given to unlimited number of persons to carry out the business. There is no competition in this business. No capital, shop, staff or experience is required to do this business because the products are either manufactured by the company or sourced from all over India and quality checked for which a large number of depots/warehouses have been established by the company and the sale of the
11
products is done through RCM Retail shops which are available in numerous cities of Rajasthan and all over India. A person who hears about quality
of the products by word of mouth and on being satisfied about the said quality chooses to
purchase the product can do so by buying the same from any RCM shop where the price (MRP) is fixed. The same person then if satisfied with
the product spreads the goodwill of the company by inviting other persons and in this manner, the company sells products directly to the consumers by cutting costs for intermediatories and saving on marketing expenditure so as to make the product affordable while keeping the quality in check. To put it by way of a simple illustration if
"A" purchases a commodity from RCM and feel satisfied with quality and usefulness he is
expected to tell this to others so that others would follow despite the fact that "A" is not under any obligation to do so and chances are that he may choose not to talk about the product with anyone. Now in order to encourage people for sharing their views on the product with others
12
if they so desire, RCM has devised a method by which it is provided that if it is found that some people have purchased the goods due to sharing of views about the goods by "A" then "A" gets a portion company of the profit way being a earned by chain the is
and
this
marketing
formed on its own and the goodwill of the product is carried forward by word of mouth and profits are generated for those persons who end up disclosing their names by filling up a simple form sample where of shall be produced at the time of arguments. There is absolutely no amount of money i.e., given by the company to "A" for filling up the form or for advertising for the companies products yet if another applicant
approaches the company because he wants to purchase the product on account of
advertisement by "A" then "A" is given a share from out of profits of the company. There is no
involvement of receipt of cash as deposit and the only receipts are those against sale of products by the company. There is no sale without bill and all products are sold directly to the consumer at
13
a fixed price. The company has been paying huge amount of revenue both in terms of income tax as well as VAT and other statutory levies. Thus as on date as many are as approximately from been 10 sale used Lakh of by The
distributors companys
benefitting that 1 have
products over
approximately
crore
consumers.
petitioners crave leave to refer to and rely upon all pertinent documents including the
memorandum and articles of association of the company, the past and present directors of the company, a model application form, income tax returns, VAT returns, company law compliances, RCM brochures/list of RCM products etc. at the time of arguments. It is further submitted that BV stands for business volume as stated herein
above and the same is different from Retail Price or MRP in as much as BV is the price of the product fixed for calculating the allocation of incentives. It may be equal to retail price or lower than the same but either ways does not effect the retail price of the product and is calculated in a scientific manner for allocation of
14
share in profits of the company. The Royalty Bonus, Performance Commission and Technical Bonus were the incentives offered to the
distributors at a given point of time so as to boost sales of the companys products and for achieving the pre-set sales targets.
4.
That the said company has been undertaking the business of direct marketing in the name of RCM business since the year 2000 and has not been involved in any complaint, case or litigation since then at the instance of any person
whatsoever.
The activities of company result in
generation and payment of revenue to the tune of approximately Rs. 125 crores every year
including central excise, service tax, income tax, VAT to the Government in addition to
contribution by the company for its employees for provident fund, E.S.I., gratuity etc. and is similar to another well known multi level
marketing company called AMWAY and the names of both these companies were being cited in the past as examples of multi level marketing in text
15
book of 11 t h standard by the Rajasthan Board of Secondary Education.

5.
That for the aforementioned purposes, the company also procures various food articles
including wheat grain, wheat floor etc. and the same is done from dealers licensed by the local agricultural produce market committees. There is absolutely no allegation or complaint against the petitioners or the said company of having taken money by way of deposit or otherwise from any person except for sale of its products nor there is any complaint against the petitioners or the
company of having cheated or defrauded any person yet by the petitioners are being taken unduly by the
harassed
coercive
action
investigation agency despite the fact that the basic ingredients of Section 3, 4 and 5 of the Act of 1978 are missing in the F.I.R. itself.
6.
That it is further submitted that the police authorities have not only closed down the server of the petitioner but have also seized the papers and accounts from the said premises with the result that the 10 years old business of the
16
company has virtually come to stand still as because the entire working of the company is computer based and all data, records, transaction are duly stored in the said computer, its hard drive etc which can be copied and saved by the investigating agency without further detailing the same. In fact, the petitioners are required to
submit income tax for payment of advance tax but are unable to do so on account of illegal action of the respondents. That till date despite
some of the co accused already having been arrested for whom the petitioners shall take
remedies separately the investigating agency has been unable to make out the offences alleged yet being desperate to do so the police have
registered 2 more FIRs just to harass and brow beat the petitioners. FIR No. 253/2011 P.S.
Mandal, district Bhilwara has been lodged only on 15.12.2011 at the instance of one
Rajendra Birla and offences alleged are under section 420, 120-B IPC and section 4,5, and 6 of the Act of 1978. The same had been filed only to strengthen the present F.I.R. and ultimately the
17
complainant
vide
communication
dated
23.12.2011 has chosen to withdraw the said F.I.R. The other FIR No. 189/2011, P.S. Hamirgarh,
district Bhilwara has been filed on 10.12.2011 for offences alleged under sections Act 3/7 of the EC
and the same has been filed because the IO
has been unable to find any material to make a case under the offences alleged.
7.
That
the
petitioners
are
nothing
but
employees of the company since last more than 5 years. It is also worthwhile to mention here that
in SB Cr. Misc. Petition No.________/2011 filed by other co-accused before this Hon'ble Court on 22.12.2011, this Hon'ble Court has been pleased to stay arrest of the petitioners therein.
Consequently, the petitioners who arenothing but the employees of the company and have
remained in custody for more than 20 days were entitled to be released on bail under Section 439 Cr.P.C. However, the bail application filed by the petitioners came to be rejected by the learned trial court vide order dated 24.12.2011.
18
8.
That in such circumstances, the present bail application being preferred on the following
grounds amongst other but without prejudice to each other: G R O U N D S (a) an That the petitioners have not committed offence whatsoever and are being wrongly
implicated in this case.

(b)
The learned trial court has erred in law in rejecting petitioners the petitioners' application. The
are employees of the company and
have been working in the company since last 5 - 10 years. It is further submitted that the petitioners
are not connected with the company as distributors or business associates otherwise and are
employed on fixed monthly salary. when the as petitioners well as have judicial
Consequently, police and all
undergone custody
custody
necessary interrogation has been undertaken by the investigating agency, then it is wholly unfair to keep the petitioners in jail pending trial which itself is going to take a long time on account of the
19
fact
the
offences
as
alleged
are
tribal
by
magistrate and therefore, the trial of the case is likely to take a long time.
(c)
That
the
learned
trial
court
failed
to
appreciate that even the F.I.R. does not contain the basic ingredients required to constitute the
offences under Section 3, 4 and 5 of the Act of 1978. It is submitted at the outset that the said company is a company duly incorporated under the companies Act and is filing annual returns as
provided in Section 159 of the Companies Act every year as and when requirements of the Act make it necessary. It is further submitted that the said
company is also filing VAT every year in addition to income tax, service tax etc and the company
stands registered under various enactments having TIN No. 08461005171. The company's annual
accounts have been audited by the certified CA every year and is having a PAN No. AAACF3294L and the company has been complying requirements of Company's Act by etc holding in order AGMs, to Board of its
Directors'
meeting
conduct
business. Consequently, there is no element of
20
uncertainty, fraud, cheating or ambiguity towards existence of the company and its functioning within the four corners of law. None of the acts of the
petitioner company can be said to fall within the purview of the Act 1978. In fact unlike in a typical chit-fund company, the present company and its functioning are not hidden for public view and are duly reflected on paper in accordance with the statutory requirements. The activities of company result in generation and payment of revenue to the tune of approximately Rs. 125 crores every year including central excise, service tax, income tax, VAT to the Government as submitted hereinabove. More ever, there has been no sudden rise and fall in the profits of the company and the company continues to grow consistently. To further
reiterate it is worthwhile to mention here that the company has 6 depots/ware house and 225 pickup centers (bigger version of retail shop) and 25 retail shops (RCM Bazaar) in Rajasthan and 90
Depots/warehouse and 4500 pickup centers and 400 retail shops (RCM Bazaar) all over India
including Rajasthan. Similarly, the company has 4
21
pickup centers and 1 depot/warehouse in Jodhpur. The company effects direct sale to the consumers for as many as approximately 500 number of
products spanning from textile to food grains to electronics and consumer goods, all of which are sold on the basis of goodwill earned by consistent quality and spread by word of mouth. For this
purpose, the company has adequate quality control arrangements which ensure that every product that is manufactured or sourced from external source is subjected to a rigorous quality checking so that the spread of goodwill by the consumers continues in order to fuel the growth of company and its the
distributors.
Consequently,
merely
because
petitioners are directors of the said company or connected to the family promoting the same
company, no offence can be made out against the petitioners or the company since no amount of money is aver offered or distributed to any of its consumers except the commission that is paid to a consumer for having advertised about products of the company after having use the same personally.
22
(d)
That it is submitted that under the Act of 1978 the mischief that was sought to be eradicated was money circulation schemes where a hapless investor being lured by high interest returns would end up depositing cash, gold etc. into a company anticipating a wind fall return. The present
company however, does not accept cash or gold or any of the commodity except by way of
consideration from sale of its products and merely because a person is offered incentive in
accordance with the amount of goodwill spread by him it does not bring the company within the purview of mischief sought to be eradicated by the Act of 1978. In fact, soon after the enactment of
the Act of 1978 in various cases, the Hon'ble Supreme Court has time and again interpreted the provisions of the Act of 1978 including Section 2(c) which is also mentioned in the F.I.R. and has consistently held that even in cases where the company is involved in transaction of accepting money deposits from public for investing them in high risks investments so as to earn huge and unaccounted profits or to promise to pay the
23
depositors interest at a much higher rate but in a clandestine manner, still the company and its
business does not falls within the definition of "money circulation scheme" as mentioned in
Section 2(c) and hence, does not constitute an offence under Section 3,4 or 5 of the Act of 1978 and the F.I.R. against the company and its
Directors was quashed. Similarly, in case involving the Peer company, the Hon'ble Supreme Court held that even where a company scheme to pay that under a fix offered which a
endowment subscriber
certification was required
annual
subscription (money) for a fixed number of years varying between 10 to 30 years so as to be entitled to receiving the total sum on expiry of period in addition to guaranteed fixed bonus, 30%
commission to agents etc., the same does not fall within the meaning of prize chit under the Act of 1978. In fact, in writ petition No.15615/2005 filed
by one Samarpan Products Pvt Ltd. the question was as to whether even the company like the present one that is not involving money deposit but only in sale of goods can be subjected to the Act of
24
1978 and the Honble Madras High Court has been pleased to grant interim order. In fact, after
commencement of the Act of 1978 the question whether every multi level marking company is
likely to fall within
the ambit of the Act of 1978
was raised before the Government of India and vide communication dated 9.4.2003 the Under Secretary to the Government of India under the instructions of the then Prime Minister and Home Minister
informed the Chief Secretaries of all the States and Union Territories that the agencies involved in sale of goods through direct/multi level marketing do not come under the provisions of the Act of 1978. This letter itself was based on above mentioned Supreme Court judgments. In fact subsequently while the states were pressing for a separate
legislation in this regard the Honble minister of state while answering a question in the Parliament stated that there was no need for a separate enactment. The petitioners carve leave to produce the same at the time of arguments. It is therefore, submitted that the petitioners are being unduly harassed to the extent that not only the petitioners
25
liberty is at stake but the petitioners are suffering immensely on account of virtual closure of the business because of closure of the computer sever and seizure of all computer machinery etc. and it shall be necessary in order to secure the ends of justice that the petitioners may be released on bail.
(e)
That the learned trial court has failed to appreciate the misconception about the Act of
1978 that has prevailed in the minds of prosecution agency as a result of which the present F.I.R. has been lodged against the petitioners and other coaccused. There is no allegation whatsoever in the
F.I.R. about wrongful loss being caused to anyone by the company or the petitioners and the sale of kits to the distributors and offering of incentive for promoting sale of the same with or without to
other persons after his satisfaction does not fall within the ambit of the Act of 1978 so as to warrant any action or to deny a bail much after It is
investigation from the petitioners got over.
worthwhile to mention here that the F.I.R. itself notices existence of around 13157666 distributors
26
as on Nov., 2011 all over India.
The learned trial
court on the other hand has misinterpreted the said figure so as to record a finding that the petitioners are defrauding crores of people
whereas there is no such allegation in the F.I.R. nor to the knowledge has of the able petitioners to find out the any
investigation
been
evidence in this regard.

(f)
That without prejudice to above and in addition thereto it is submitted that even if the allegations in the F.I.R. are taken to be as it is the petitioners Nos. 1 to 3 are managers of the said company while the petitioner no.4 is the accounts head of the company and the investigating agency after arresting the petitioners on 10.12.2011 has kept the petitioners in police custody for almost ten days and therefore, there remains no
investigation pending against the petitioners so as to justify refusal of bail. Moreover, it is not the
allegation in the F.I.R. that the petitioners are responsible for day to day affairs of the company and assuming while denying that any offence is made out against the company, then also,
27
petitioners employees cannot be held vicariously liable for the same and the petitioners deserves to be released on bail forthwith. (g) That the petitioners are residents of their addresses mentioned above and is not likely to abscond. (h) That the petitioners, if released on bail, will not temper with the prosecution evidence. (i) That the petitioners are ready to abide
by the conditions imposed by this Honble Court. (j) That the petitioners are ready and willing to furnish the required bail bonds and surety bonds for the entire satisfaction, for their appearance. (k) That the other grounds shall be urged at
the time of arguments with the prior permission of this Honble Court. PRAYER: It is, therefore, most respectfully prayed that this bail petition may kindly be allowed and the petitioner may kindly be ordered to be released
28
on bail Bhilwara
in
F.I.R.
no.188/2011
P.S. Hamirgarh,
(Manish Shishodia) Counsel for the petitioners. Settled by [M.S. Singhvi] Sr.Advocate. NOTES : 1. 2. 3. 4. 5. No such bail application has been filed previously, in this matter. Copy of this bail application has been served to the learned P.P. Due to non availability of pie papers, this bail application has been typed on these stout papers. This bail application has been typed by my private Steno. It is certified that titling of top of pages, so also internal and external pagination has been done in all the sets of the pleadings (filed in court, copy which may be supplied to opposite counsel and copy retained by counsel for the petitioner).
COUNSEL FOR THE PETITIONER.

Bail Petition - 439

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S.B.Cr.Misc. Bail Application No. /2012 Arun Kumar & Ors. Vs. State of Rajasthan.

The State of Rajasthan. ... S. B. CRIMINAL MISC. BAIL

respectfully submit as under :-

bearing the name RCM Business. servers and other hardware

The computer closed and

products from all over the country

approaches the company because he wants to purchase the product on account of

benefitting that 1 have

The activities of company result in

book of 11 t h standard by the Rajasthan Board of Secondary Education.

and the same has been filed because the IO

implicated in this case.

are employees of the company and

Consequently, police and all

business. Consequently, there is no element of

including Rajasthan. Similarly, the company has 4

certification was required

likely to fall within

the ambit of the Act of 1978

investigation from the petitioners got over.

as on Nov., 2011 all over India.

The learned trial

evidence in this regard.

COUNSEL FOR THE PETITIONER.

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