Calcutta Ready snd Forward Market Association vs State

N.C. Talukdar, J.—This appeal being Cr. App. No. 192 of 1964 arising out of case No. P.R. 2865 of 1958 and the connected Rule, being Cr. Rev. No. 355 of 1964, arising out of case No. P.R. 2424 of 1958, involve the same points and evidence and so they are taken up together. In the Court below also the two cases were tried together and disposed of by the same learned Magistrate. The appeal is by the company, the Calcutta Ready and Forward Market Association Ltd., represented by Gangadhar Chamaria, and is against the order dated January 17, 1964, passed by Sri M. B. Mukherjee, Presidency Magistrate, Fourth Court, Calcutta, convicting the company u/s 3 of the West Bengal Gambling and Prize Competitions Act, 1957 (XXXII of 1957), and sentencing it to pay a fine of Rs. 250, in default to suffer S.I. for 12 days. The Revision case is at the instance of, the 13 directors of the said company and is against, the same order dated January 17, 1964, passed by the learned Presidency Magistrate, Fourth Court, Calcutta, convicting them u/s 3 of the West Bengal Gambling and Prize Competitions Act, 1957, and sentencing them to pay a fine of Rs. 200 each, in default to suffer S.I. for 10 days each.

The case has had a chequered history but the facts leading on to the Appeal and the Revision may be put in a short compass. The Calcutta Ready and Forward. Market Association Ltd., which has its office and the principal place of business at 149 Cotton Street, Calcutta, is a company limited by guarantee without any share capital and registered under the Indian Companies Act on November 14, 1955. There is a board consisting of 13 directors and the Association has its printed bye-laws relating to transactions in silver bar, passed by the Board of Directors for regulating the transactions of the Association as per its articles. The prosecution case briefly is that on the receipt of certain information the Police raided the premises No. 149 Cotton Street, Calcutta, on October 29, 1958, and arrested some persons found gambling there, in contravention, of the provisions of the West Bengal Gambling and Prize Competitions Act, 1957. Some documents, papers, cash memos., share scrips etc. were seized and an investigation followed. Several cases were started thereafter and the facts thereof are rather involved. Case No. P.R. 2865.of 1958, out of which the present Appeal arose, is against the company, represented by Sri Gangadhar Chamaria, the president of the Association, while cases Nos. P.R. 2424-1 and P.R. 2424-11 of 1958, relating to the directors, were subsequently rolled up into one as case No. P.R. 2424 of 1958 under the direction of the High Court. The connected Rule No. 355 of 1964 arises out of this case. Another case, being case No. 2428 of 1958, was instituted against some of the directors while case No. 2423 of 1958 was still pending at the time u/s 4 of the West Bengal Gambling and Prize Competitions Act, 1957, against some of the persons alleged to have been found gambling in the premises referred to above. Case No. 263 of 1959, which was against 19 accused persons who were found gambling at the premises, was ultimately quashed. As a result of the investigation, the accused persons as also the company were placed on trial before the learned Presidency Magistrate, Fourth Court, Calcutta, to answer charges u/s 3 of the West Bengal Gambling and Prize Competitions Act, 1957 (XXXII of 1957). The defence case, inter alia, is that the accused persons are not guilty; that the Association is a company limited by guarantee and registered under the Indian Companies Act, authorised by its memorandum to, inter alia, conduct and regulate forward trading, building, stocks and shares etc. for promoting business; that the company has its own bye-laws under the articles and memorandum of association and forward trading in silver and stocks in terms of the transactions and are entered into by and between the members of the. Association, pursuant to the orders received therefore by them from third parties and/or their clients and customers; that such bye-laws have received the approval of the Central Government u/s 11 of the Forward Contracts (Regulation) Act, 1952; that the delivery of silver is intended and is actually effected on due date ; that the transactions that take place are not in the nature of wagering contract or gambling transactions in imaginary silver bars, violating any of the provisions of the West Bengal Gambling and Prize Competitions Act, 1957 ; and that the transactions conform to the provisions of a Central Act, viz. Act LXXIV of 1952, whereunder specific penalties are provided for contraventions, but no such penalty was incurred and prosecution started. Fifteen witnesses were examined on behalf of the prosecution while two witnesses were examined on behalf of the defence and several documents were proved by both the parties. As a result of the trial, Sri M. B. Mukherjee, Presidency Magistrate, Fourth Court, Calcutta, by his order dated January 17, 1964, convicted and sentenced the company as also the directors as mentioned above. The said orders passed in the same judgment have been impugned and form the subject-matter of the present Appeal as well as the Revision.

Mr. Ajit Kumar Dutt, Advocate (with Mr. Prasun Chandra Ghosh, Advocate), appearing on behalf of the accused in both the cases made a nine-fold submission. The first contention of Mr. Dutt relates to procedure and refers to the fact that the learned Presidency Magistrate''s refusal to grant a reasonable time to the defence for producing the witnesses on its behalf, resulted ultimately in their being not available for cross-examination before arguments were heard. Mr. Dutt in this context submitted that although the said failure was due to no fault on the part of the defence, the learned trying Magistrate, nonetheless, referred to the same in his judgment as a default on the part of the accused persons. The second contention of Mr. Dutt & that the company is not liable u/s 3 of Act XXXII of 1957 in the facts and circumstances of the case arid that the prosecution of the company as also of its directors for a contravention of Section 3 of W.B. Act XXXII of 1957 is bad. Mr. Dutt next contended that the directors of the Association are not in any event liable in any way, as alleged or at all, under the provisions of Section 29 of the West Bengal Gambling and Prize Competitions Act, 1957, as they were neither in charge of nor responsible for the conduct of the business of the company, nor even can they be deemed to be in occupation of the premises in question on the mere footing of being directors of a company, which is in occupation of the same place and further that the directors under the W.B. Act XXXII of 1957 are not saddled with the liability as enjoined under the Companies Act, 1956. The fourth contention of Mr. Dutt is that the entire prosecution under the West Bengal Gambling and Prize Competitions Act XXXII of 1957 is unwarranted and untenable because the Association is registered under the Forward Contracts (Regulation) Act, 1952, and the bye-laws thereof are approved of u/s 11 of the said Act and because the Forward Trading in silver is not prohibited under the said Central Act LXXIV of 1952. The fifth submission of Mr. Dutt is that the Forward Trading in question being neither a wagering contract nor a gambling transaction, the same does not offend the provisions of the W.B. Act XXXII of 1957 but on the other hand is authorised under the Central Act LXXIV of 1952. The sixth submission advanced on behalf of the accused is that the transactions in silver bars at the Association premises are not imaginary, being followed by actual delivery, negativing thereby the" allegations of a wagering contract. The seventh contention of Mr. Dutt is that even if the Forward Trading concerned be deemed to be a wagering contract, that by itself will not establish the elements of an offence u/s 3 of the West Bengal Act XXXII of 1957, the sine qua non whereof is that the premises in question must be a common gaming house within the meaning of Section 2(1)(a) of the West Bengal Gambling and Prize Competitions Act, 1957. The eighth contention of Mr. Dutt is on merits and relates to the evidence on record which on a proper appraisal would not establish the Offence charged as alleged or at all. The ninth and the last submission of Mr. Dutt relates to the nature of the findings, arrived at and the order passed by the learned trying Magistrate and in this context he described as unwarranted the findings made about the rules and bye-laws of the Association, presupposing the absence of any delivery; the failure by the learned Magistrate to consider whether the ingredients of a common gaming house are present before finding an offence to be proved u/s 3 of the West Bengal Gambling and Prize Competitions Act, 1957, resulting in prejudice to the accused ; and the ultimate sentence passed by him against the company inasmuch as the same is clearly bad and repugnant.

Mr. Amiyalal Chatterjee, Advocate, appearing on behalf of the State, joined issue. He contended in the first place that the objection raised by Mr. Dutt as to the procedure adopted by the learned Presidency Magistrate in the Court below is more technical than real and upon ultimate analysis it will be found that the same is due to the laches of the defence and the accused have not been prejudiced in any way thereby. He next contended that the company as well as its directors can certainly be prosecuted u/s 3 of the West Bengal Act XXXII of 1957, in view of the provisions of Section 29 of the said Act. Mr. Chatterjee further contended in this connection that the directors of the Association were in charge of and responsible to the company for the conduct of its business and the same was established by the evidence on record. Mr. Chatterjee next submitted that the Calcutta Ready and Forward Market Association Ltd. has not been recognised as provided for u/s 6 of the Forward Contracts (Regulation) Act, 1952, and the same has not been published in the Gazette of India and the Official Gazette of the State in, which the principal office of the said Association is situated. Mr. Chatterjee submitted in this context that, in any event, there is no evidence to establish the same. With regard to the fifth and the sixth submissions of Mr. Dutt that the Forward Trading resorted to by the members of the Association is not in the nature of a wagering contract, offending in any way the provisions of the West Bengal Gambling and Prize Competitions Act, 1957, and that the transactions in question in silver bars at the Association premises are not over imaginary silver bars but are followed by actual delivery, Mr. Chatterjee contended that it is not so. As has been borne out by the evidence of P. Ws. 13 and 15 that there is no actual delivery but that the said transactions are mere fictions bringing the same within the ambit of a wagering contract. Mr. Chatterjee next contended that the submissions of Mr. Dutt relating to the present prosecution being not maintainable as the premises in question has not been proved to be a common gaming house within the meaning of Section 2(1)(a) of the West Bengal Act XXXII of 1957 is unwarranted and untenable in view of the material provisions of Section 6 of the said Act, whereunder the mere find of any instrument of gaming in the place in question, entered into or searched u/s 5 of the said Act, shall be evidence, until the contrary be proved that such a place is used as a common gaming house. Mr. Chatterjee contended that such onus has not been discharged by the defence in this case. Mr. Chatterjee next made his submission on merits and joined issue with Mr. Dutt that the evidence on record, both oral and documentary, did not establish- the offence charged beyond reasonable doubt. As to the nature of the findings arrived at by the learned Presidency Magistrate, objection whereto was taken by Mr. Dutt, Mr. Chatterjee contended that when the Association was not recognised u/s 6 of the Forward Contracts (Regulation) Act, 1952, the question of any approval of the bye-laws thereof u/s 11 of the said Act does not arise and, in that view, the ultimate findings arrived at by the learned trying Magistrate holding that the same revealed the intention of the parties to gamble in margin and not to deal in actual delivery of silver bars, are justifiable. With regard to the sentence passed in relation to the company Mr. Chatterjee conceded that the same is bad in law and improper and a company cannot be sent to jail for default of payment of the fine imposed.

Having heard the learned Advocates appearing on behalf of the respective parties "and on going through the evidence on record, both oral and documentary, I will now proceed to determine tin; points at issue. The first point raised by Mr. Dutt relating to procedure is unwarranted and untenable and has not ultimately prejudiced the defence in any way whatsoever. Sufficient time was granted by the learned trying Magistrate for producing the defence witnesses for cross-examination and the order-sheet shows that the delay is also due to the laches on the part of the defence and that the learned Magistrate waited for about three months for the said witnesses. I accordingly overrule this contention of Mr. Dutt. The second contention raised by Mr. Dutt as to the non-maintainability of the prosecution against both the company and its directors, is not tenable. A reference to Section 29 of the West Bengal Gambling and Prize Competitions Act, 1957, would establish that

if any person guilty of any offence under this chapter is a company, every person, at the time the offence was committed was in charge of, and was responsible to the company, as well as the company, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

In view of the said provisions, it cannot be urged that there is any bar in limine to the prosecution of a company as well as its directors under the West Bengal Act XXXII of 1957. Mr. Dutt drew the analogy of the provisions of Section 17 of the Prevention of Food Adulteration Act, 1954. In this connection he referred to the unreported decision of Roshanlal v. Corporation of Calcutta (Unreported) Cr. Rev. case No. 802 of 1962 decided on January 2, 1963, by S.K. Sen and S. K. Niyogi JJ. wherein it has been held that the prosecution of a proprietory firm and also of its proprietor is not maintainable and in that view the order of conviction and sentence of the firm was set aside. The facts in this case are distinguishable and the Calcutta Ready and Forward Market Association Ltd. is not a firm owned by a proprietor. This contention of Mr. Dutt, accordingly, fails. The third submission made by Mr. Dutt stands, however, on a better footing. No evidence has been adduced by the prosecution establishing beyond reasonable doubt that the directors of the company were at the time when the offence was committed in charge of, and were responsible to the company and as such the prosecution of the directors is not maintainable u/s 29 of the West Bengal Gambling and Prize Competitions Act, 1957. I, accordingly, uphold this contention raised on behalf of the accused.

The next three contentions as also the eighth one of Mr. Dutt are material ones going to the root of the case and for the sake of convenience are taken up together. The evidence on record, both oral and documentary, establishes that the Association is registered under the Forward Contracts (Regulation) Act, 1952, and its bye-laws are approved of by the Central Government u/s 11 of the said Act. Forward Trading in silver at the Association is not a wagering contract, without any physical delivery, and as such is not prohibited under Act LXXIV of 1952. It is neither a wagering contract nor a gambling transaction offending the provisions of W.B. Act XXXII of 1957. The concept of a wagering contract is a mixed concept depending upon law as also on facts. I would, therefore, first refer to the evidence and pinpoint the evidence of P.W. 9, D.W.s 1 and 2 and to Exs. D and E. Mr. Chatterjee contended, however, that the Association having not been recognised as enjoined u/s 6 of the Forward Contracts (Regulation) Act, 1952, and the same has not been published in the Gazette of India and the Official Gazette of the State wherein the principal office of the Association is situated. Mr. Chatterjee, in this context, further referred to the evidence of P.W.s 13 and 15 to establish that no actual delivery has been proved on behalf of the defence and that the transactions are mere fictions coming within the ambit of a wagering contract. In view of the clear and cogent evidence referred to above by P. Ws. 1 and 2 and by P.W. 9 as also the documentary evidence of Exs, D and E, it is not possible for me to agree with the said contention and the benefit that arises out of the same must go to the accused. In the second place, I will refer to the Statute and the case law laying down what a wagering contract indeed is Section 2(c) of Act LXXIV of 1952 defines Forward Contract as

a contract for the delivery of goods at a future date and which is not a ready delivery contract.

Physical delivery, therefore, is provided for on a future date and, when it is not so, it will be a wagering contract. In this connection a reference was made by Mr. Dutt to the provisions of Section 30 of the Indian Contract Act which lays down that--

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or forward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards to be awarded to the winner of winners of any horse-race. Nothing in this section shall be deemed to legalise any transaction connected with horse-racing, to which the provisions of Section 294A of the Indian Penal Code apply.

Mr. Dutt referred to some cases in this connection. The same as well as some others will now be considered for ascertaining the principles laid down. A reference may be made in the first instance" to the case of Lockwood v. Cooper (1903) 2 K.B. 428 (431). Lord Alverstone C.J. observed that--

To amount to gaming the game played must involve the element of wagering--that is to say, each of the players must have a chance of losing as well as of winning. To hold otherwise would be an unjustifiable straining of the Act.

I may further refer to the decision by the Judicial Committee in the case of Ismail Lebbe Marikar Ebrahim Lebbe Marikar v. Bartleet and Company AIR 1942 P.C. 19 (21) wherein Lord Atkin delivering the judgment observed:

Where the documents show an ordinary commercial transaction, and, in conformity with them, one of the parties incurs personal obligations on a genuine transaction with third parties so that he himself is not a winner or loser by the alteration of price, but can only benefit by his commission, the inference of betting is irresistibly destroyed. In such cases the fact that no delivery is required or tendered is of practically no value.

Mr. Dutt referred to the case of Balvant Vishnu Vs. Mishrilal Shivnarayan, wherein Shah A.C.J, held that the contract in the case for decision was not a wagering transaction. The fact that the parties had unnecessarily provided for the consequences of a breach, namely that if the market price on the due date fell and the purchaser did not take delivery, then he was to pay the loss, and that if the market went up and the vendor failed to give delivery then the vendor was to pay the loss did not make difference. The next case cited is the case of Chimanlal Purshottamdas Shah Vs. Nyamatrai Madhavlal, . Rangnekar J. delivering the judgment of the Court observed:

In order to constitute a wagering contract neither party should intend to perform the contract itself but only to pay the differences. In order words, the common intention of both parties at the time of entering into the contract must be not to call for or give delivery from or to each other. Such intention is a question of fact.

In a Calcutta case, viz. in the case of Shewkissen Mohata and Others Vs. Mangalchand Maloo and Others, . Mitter and Khundkar JJ. held that forward contracts for the purchase and sale of goods are recognized forms of commercial transaction. They may be perfectly legitimate and genuine trade transactions though of a speculative character or simply gambling or wagering contracts. To be a wagering contract there must be a bargain for differences. Mr. Dutt further referred to the case of Sitaram v. Chamanlal AIR 1952 Hyd. 95 wherein it was held that there must be proof that the contracts were entered into upon the terms that performance of the contract should not be demanded but the difference only should become payable. Even if one party to a contract were a speculator who never intended to give delivery and that fact was known to the other party, yet in the absence of any bargain or understanding, express or implied, that the goods were not to be delivered, that would not convert a contract, otherwise innocent, into a wager. In support of his contention Mr. Dutt further referred to the case of G. Sirur Vs. A.M. Bhamia, wherein Spencer Off.C.J. and Beasley J. held that where the Plaintiff and the Defendant are both members of the Stock Exchange, the onus of proving that there was a mutual understanding that shares should not be delivered lies upon the Defendant who asserts the same. When, as here, both parties themselves are stock-brokers, that onus is greatly increased. In this context, a reference may also be made to the observations of Sir Lawrence Jenkins in the case of Bhagwandas Parasram and Burjorji Ruttonji Bomanji 65 I.A. 29 (33) that--

Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. No such intention has been proved.

A further reference may be made to the case of Sukdevdoss Ramprasad and Govindoss Chaturbhujdoss and Company 55 I.A. 32 wherein Lord Darling observed that the contract was not a wagering contract, since it was not proved to have been entered into upon the terms that only differences should be paid; but that the Appellants could not recover the goods sold and delivered, as there had been no actual delivery, and the documents did not give the buyers the right to require delivery by a third person. I may further refer to the case of Duni Chand Rataria and Bhuwalka Brothers Ltd. (1955) S.C.A..599 wherein Bhagwati J. delivering the judgment of the Court has held that the expression ''actual delivery of possession'' in Section 2(1)(b)(i) of the West Bengal Jute Goods Future Ordinance, 1948, mean actual delivery as contrasted with mere dealing in differences and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession. I respectfully agree with the principles laid down in the above-mentioned cases, and I hold in favour of the contentions raised by Mr. Dutt that the Forward Trading referred to at the premises of the Association is neither in the nature of a wagering contract nor a gambling transaction and, as such, the same does not offend the provisions of the W.B. Act XXXII of 1957, and I hold further that the same is authorised under a Central Act, viz. Act LXXIV of 1952. Mr. Chatterjee appearing on behalf of the State relied upon the case of Shewkissen Mohata v. Mangalchand Maloo ( Supra) decided by R. C. Mitter and Khundkar JJ, I have already discussed the principles laid down therein and I do not agree with the submission of Mr. Chatterjee that the same supports his contention. Mr. Chatterjee further referred to the case of Thakurdas Mundra v. Emperor 32 Cri.L.J. 134 (135). Sir George Claus Rankin observed therein that--

The sole question in the case is whether or not the transactions which were entered into or arranged by members of the Association were wagering transactions or were in truth, as they purported to be in form, transactions for the purchase and sale of jute for future delivery. This question is one of fact and it is for the prosecution to show that in these transactions the intention of the parties was in no circumstances either to take or1 give delivery.

I respectfully agree with the said observations which do not ultimately support the contention of Mr. Chatterjee but merely pinpoint that the question whether the transaction is a wagering one "or not is one of fact. Having given my anxious consideration to the facts of the case, as established by the evidence on record, I hold that the same does not make out a case of a wagering contract bringing it within the penalty of W.B. Act XXXII of 1957. Mr. Dutt submitted that not only the facts of those cases and the principles laid down therein are distinguishable but also that the above-mentioned decisions cited by Mr. Chatterjee are decisions before Act LXXIV of 1952 and as such not applicable to the present case. The principles laid down therein as already found by me do not also render the transaction in the present case wagering transactions. I, accordingly, hold in favour of the first contention raised by Mr. Dutt.

7 The second contention of Mr. Dutt, that even if the transactions are wagering contracts, the present prosecution u/s 3 of W.B. Act XXXII of 1957 is not maintainable because the elements of Section 2(1)(a) of the said Act are non ect, is however not tenable upon ultimate analysis. The said argument overlooks the provision of Section 6 of the Act, whereunder the mere find of any instrument of gaming in the place, entered into and searched u/s 5 of the Act, shall be evidence, until the contrary is proved, that such place is used as a common gaming house. I agree with the submissions of Mr. Chatterjee in this behalf and this contention of Mr. Dutt, accordingly, fails.

The last submission of Mr. Dutt is that the findings arrived at by the learned Presidency Magistrate relating to the rules and bye-laws of the Association as also the non-consideration of the effect of the ingredients of Section 2(1)(a) of the West Bengal Gambling and Prize Competitions Act, 1957, upon an offence u/s 3 of the said Act, are bad and repugnant. In view of the clear and cogent evidence that the rules and bye-laws of the Association were approved of by the Central Government u/s 11 of the Forward Contract (Regulation) Act, 1952, the ultimate findings arrived at by the learned trying Magistrate that

the above rules amongst others clearly indicate the intention of the parties to gamble in margin and not to deal in actual delivery of silver bars

are wholly unwarranted, untenable and repugnant. There is again no consideration on the part of the learned Magistrate as to whether the elements of Section 2(1)(a) which are the sine qua non of a prosecution u/s 3 of the West Bengal Act XXXII of 1957, were satisfied or not. In the absence thereof, the ultimate order of conviction and sentence has been bad in law and improper. To make confusion worse confounded, the learned Magistrate has passed on the company a sentence, in default of fine, which is neither warranted by law nor executable in fact. Mr. Chatterjee in his fairness has conceded that the sentence passed in default is apparently a mistake and should be corrected by this Court but that, on the said ground alone, the conviction and sentence passed on the company should not be set aside. The ninth and the last submission of Mr. Dutt therefore succeeds.

In the result, I allow the appeal and make the connected Rule absolute, set aside the order dated January 17, 1964, passed by Sri M. B. Mukherjee, Presidency Magistrate, Fourth Court, Calcutta, in cases Nos. P.R. 2865 and P.R. 2424 of 1958, convicting all the accused u/s 3 of the West Bengal Gambling and Prize Competitions Act, 1957, and sentencing the accused-Appellant, the Calcutta'' Ready and Forward Market Association Ltd., represented by Sri Gangadhar Chamaria, to pay a fine of Rs. 250, in default, to suffer S.I. for 12 days and the 13 accused-Petitioners, who are the directors of the said company, to pay a fine of Rs. 200 each, in default, to suffer S.I. for 10 days each, and I direct that the fines, if paid, are to be refunded.