1981 Supreme(Cal) 83

High Court Of Calcutta
T. K. Basu
SANCHAITA INVESTMENTS - Appellant
Versus
STATE OF WEST BENGAL - Respondent
Matter 2829  Of  1980
Decided On : 03/05/1981

The provisions of Section 165 of the Code of Criminal Procedure, 1973, which govern searches and seizures, are mandatory and not directory, and non-compliance with the provisions renders the searches and seizures illegal.

Headnote:

[CRIMINAL LAW] - [WRIT JURISDICTION] - [SEARCH AND SEIZURE] - [SEARCH AND SEIZURE OF DOCUMENTS AND MONEY BY POLICE WITHOUT COMPLIANCE WITH SECTION 165 OF THE CODE OF CRIMINAL PROCEDURE, 1973] - [WHETHER THE SEARCH AND SEIZURE WAS ILLEGAL] - [WHETHER THE PROVISIONS OF SECTION 165 OF THE CODE OF CRIMINAL PROCEDURE, 1973 ARE MANDATORY OR DIRECTORY] - [WHETHER THE BUSINESS OF THE PETITIONER FIRM COMES WITHIN THE AMBIT OF THE PRIZE CHITS AND MONEY CIRCULATION SCHEMES (BANNING) ACT, 1978] - [WHETHER THE FIRST INFORMATION REPORT DISCLOSED ANY OFFENCE UNDER THE ACT] - [WHETHER THE INVESTIGATION BY THE BUREAU OF INVESTIGATION WAS LEGAL AND VALID] - [WHETHER THE PROCEEDINGS WERE MALA FIDE].

Fact of the Case:

The petitioner firm is a partnership firm engaged in the business of financiers and investors. The firm accepts loans and/or deposits from all kinds of persons for different periods repayable with interest at the rate of 12 per cent per annum. The respondents, acting on a First Information Report (FIR) alleging that the petitioner firm was carrying on business in prize chit and/or money circulation scheme in violation of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (the Act), conducted searches and seizures at the firm's office and the residential premises of its partners. The petitioners challenged the legality of the searches and seizures, contending that the Act did not apply to their business, that the FIR did not disclose any offence under the Act, and that the searches and seizures were conducted in violation of Section 165 of the Code of Criminal Procedure, 1973 (the Code).

Finding of the Court:

The court held that the petitioner firm's business did not fall within the definition of "prize chit" or "money circulation scheme" under the Act, and therefore, the Act did not apply to the firm. The court further held that the FIR did not disclose any offence under the Act. The court also held that the searches and seizures were conducted in violation of Section 165 of the Code, as the police officers failed to comply with the requirements of the section, including recording the grounds for their belief that the things searched for were necessary for the investigation and specifying the things to be searched. The court found that the provisions of Section 165 of the Code were mandatory and not directory, and that the non-compliance with the provisions rendered the searches and seizures illegal. The court also held that the investigation by the Bureau of Investigation was illegal and invalid, as the Bureau did not have jurisdiction to investigate alleged or suspected evasion of sales tax or malpractices connected therewith, which were the only matters it was authorized to investigate under the Bengal Finance (Sales Tax) Act, 1941. The court further held that the proceedings were not mala fide, as there was no evidence of personal malice or an attempt to control the petitioners' business knowing that the Act did not apply to them.

Issues: 1. Whether the petitioner firm's business falls within the definition of "prize chit" or "money circulation scheme" under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978? 2. Whether the First Information Report (FIR) discloses any offence under the Act? 3. Whether the searches and seizures were conducted in violation of Section 165 of the Code of Criminal Procedure, 1973? 4. Whether the provisions of Section 165 of the Code are mandatory or directory? 5. Whether the investigation by the Bureau of Investigation was legal and valid? 6. Whether the proceedings were mala fide?

Ratio Decidendi: 1. The court held that the petitioner firm's business did not fall within the definition of "prize chit" or "money circulation scheme" under the Act, as the firm did not offer prizes or gifts to depositors or conduct drawings or lotteries. The court found that the firm's business was simply that of accepting loans and/or deposits from the public and repaying them with interest at a fixed rate. 2. The court held that the FIR did not disclose any offence under the Act, as it did not allege that the petitioner firm was conducting a prize chit or money circulation scheme or that it was engaging in any of the activities prohibited by the Act. 3. The court held that the searches and seizures were conducted in violation of Section 165 of the Code, as the police officers failed to comply with the requirements of the section, including recording the grounds for their belief that the things searched for were necessary for the investigation and specifying the things to be searched. The court found that the provisions of Section 165 of the Code were mandatory and not directory, and that the non-compliance with the provisions rendered the searches and seizures illegal. 4. The court held that the investigation by the Bureau of Investigation was illegal and invalid, as the Bureau did not have jurisdiction to investigate alleged or suspected evasion of sales tax or malpractices connected therewith, which were the only matters it was authorized to investigate under the Bengal Finance (Sales Tax) Act, 1941. 5. The court held that the proceedings were not mala fide, as there was no evidence of personal malice or an attempt to control the petitioners' business knowing that the Act did not apply to them.

Final Decision: The court allowed the petition and issued a writ of mandamus directing the respondents to recall and cancel the FIR and all proceedings taken on the basis thereof, to return all seized documents and money to the petitioners, to refund the seized amount to the petitioners, and to quash the proceedings before the Chief Metropolitan Magistrate.