M. K. SHAH, J. ( 1 ) THE original complainant who filed a complaint on behalf of the Reserve Bank of India against the accused charging them for the offences under sec. 450 and 58b read with sec. 58-C of the Reserve Bank of India Act 1934 (the Act) being aggrieved by an order of acquittal passed by the learned Metropolitan Magistrate 9 Court Ahmedabad on 17 March 1977 in criminal case No. 1370 of 1975 has preferred this appeal. . . . . . . . . . . . . . . . . . . . . . . . . . . ( 2 ) IT was the prosecution case that accused No. 1 is a miscellaneous non-banking company within the meaning of clause (b) of para 3 of the Miscellaneous Non-Banking Companies (Reserve Bank) Directions 1973 (the Directions) which were issued by the Reserve Bank of India on 23rd August 1973 in exercise of the powers conferred on it by sec. 45-J read with sec. 45-K of the Act. The company is a private limited company registered under the Companies Act having its registered office at Ahmedabad and it is promoting and running schemes in the natrue of prize chits which chits are generally operated by enrolling members who are required to pay subscription of a specific amount for a specified period. Periodically lots are drawn and prizes are awarded to the holders of lucky numbers. In most of the schemes the prize-winning members are not required to pay further subscription but the subscription already paid till then is not refundable while in some schemes the prize winning members continue as numbers and they are also entitled to refund of the subscription on maturity of the scheme. Some schemes contain provisions for granting loans to the members by the company at the stipulated rate of interest which loans are repayable by monthly instalments. ( 3 ) WE are concerned with seven such schemes floated by the accused company which are at Exs. 9 to 15. By para 4 of the said directions a copy whereof is at Ex. 3 the company was precluded from accepting deposits in excess of the limit prescribed in that para which would be 25 of the aggregate of the paid up capital and free reserves of the company. The company had paid up capital of Rs. 9 to 15. By para 4 of the said directions a copy whereof is at Ex. 3 the company was precluded from accepting deposits in excess of the limit prescribed in that para which would be 25 of the aggregate of the paid up capital and free reserves of the company. The company had paid up capital of Rs. 2 0 only with no free reserves and the return which are at Exs. 4 to 8 showed that between 30 and 33-9-1974 though the deposits had already exceeded the prescribed limit the company continued to accept deposits to the extent of Rs. 31. 7 lacs and on 31-3-1975 the figure rose to Rs. 67. 44 lacs. On coming to know about the contravention of the directions and finding that the company had continued to receive deposits in excess of the prescribed limit even after the issuance of the said directions which came into force from 1-12-1973 and that the mandate contained in the directions to reduce the deposits by a phased programme was not carried out a complaint was lodged against the accused before the learned Magistrate on 22nd October 1975 ( 4 ) IT was the defence of the accused that what they received was subscription and not deposit and that their case fell under sub-para (2)of para 2 read with para 3 (1) (b) of the directions; that the company was not giving any interest to any subscriber and that the directions were therefore not applicable to the company. ( 5 ) ON the evidence led the learned Magistrate came to the conclusion that the case of the accused company was covered by para 2 (2) of the directions because was collected was subscription under the schemes in which prizes had to be given. He therefore recorded a finding of not guilty against all the accused and acquitted them by his impugned order dated 7 March 1977 which order of acquittal is the subject matter of challenge in this appeal filed by the original complainant. ( 6 ) IN order to appreciate the rival contentions raised on behalf of both the sides it would be first of all necessary to have some idea about the legislative history and the provisions applicable in the instant case. The directions were issued on 23rd August 1973 in exercise of the powers conferred on the Reserve Bank of India by sec. The directions were issued on 23rd August 1973 in exercise of the powers conferred on the Reserve Bank of India by sec. 45-J read with sec. 45-K of the Act. The directions came into force on and from 1st September 1973 At that time the penal section on the statute book providing penalties inter alia for receiving deposits in contravention of the directions given under Chapter III-B which includes the said sections and for failure to comply inter alia with the directions issued under sub-sec. (3) of sec. 45-K was sec. 45-0. Sub-sec. (3) there of is material for our purpose the material portion whereof reads thus:-" (3) If any non-banking institution (a) receives any deposits in contravention of any direction given to it under this Chapter; or (b) x x x x (c) fails to comply with the provisions of sub-se. (6) of sec. 45k or with the directions issued under sub-sec. (3) of that section or clause (b) of sub-sec. (1) of sec. 45l. EVERY director or member of any committee or other body for the time being vested with the management of the affairs of the non-banking institution unless he proves that the contravention took place without his knowledge or that he exercised all due diligenee to prevent it shall be punishable with fine which may extend (a) in the case of a contravention falling under clause (a) to twice the amount of the deposits received; (b) x x x x x (c) in any other case to two thousand rupees. By Act 51 of 1974 which came into force on 13th December 1974 sec. 45 was deleted and Chapter V dealing with penalties was inserted inter alia containing sec. 58b which substituted sec. 45-0. The material portion of sec. 58b reads thus:-"58 (1) x x x (2) x x x (3) x x x (4) x x x (5) If any person (A) receives any deposit in contravention of any direction given or order made under chapter III-B; or (B) issues any prospectus or advertisement otherwise than in accordance with sec. 45na or any order made under sec. 58b reads thus:-"58 (1) x x x (2) x x x (3) x x x (4) x x x (5) If any person (A) receives any deposit in contravention of any direction given or order made under chapter III-B; or (B) issues any prospectus or advertisement otherwise than in accordance with sec. 45na or any order made under sec. 45j as the case may be he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which may extend (i) in the case of a contravention falling under clause (a) to twice the amount of the deposit received; and (ii) x x x. (6) If any other provision of this Act is contravened or if any default is made in complying with any other requirement of this Act or of any order regulation or direction made or given or condition imposed there under any person guilty of such contravention or default shall be punishable with fine which may extend to two thousand rupees and where a contravention or default is a continuing one with further fine which may extend to one hundred rupees for every day after the first during which the contravention or default continues. ( 7 ) BY the very Act that is Act No51 of 1974 clause (bb) is added to sec. 45-1 and the said clause defines deposit in the following terms. " (BB) deposit shall include and shall be deemed always to have included any money received by a non-banking institution by way of deposit or loan or in any other form but shall not include amounts raised by way of share capital or contributed as capital by partners of a firm. It may be noted that the word deposit had remained undefined till then so far as Chapter III B is concerned and it was for the first time that by clause (bb) inserted in sec. 45-I the word deposit as it appears in Chapter III-B has been defined. ( 8 ) NOW turning to the Directions in part 1 clause 2 there are provisions concerning the extent of the Directions. This clause is important and requires to be set out. 45-I the word deposit as it appears in Chapter III-B has been defined. ( 8 ) NOW turning to the Directions in part 1 clause 2 there are provisions concerning the extent of the Directions. This clause is important and requires to be set out. It reads thus:-2 Extent of Directionsthese directions shall apply to every non-banking institution which is a company not being a banking or an insurance company and which carries on any of the following types of business:- (1) Collecting whether as a promoter foreman agent or in any other capacity monies in one lump sum or in instalments by way of contributions or subscriptions or by sale of units certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings mutual benefit thrift or any other scheme or arrangement by whatever name called and utilising the monies so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes (A) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot draw or in any other manner prizes or gifts in cash or in kind whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement; (B) refunding to the subscribers or such of them as have not won any prize or gift the whole or part of the subscriptions contributions or other monies collected with or without any bonus premium interest or other advantage howsoever called on the termination of the scheme or arrangement or on or after the expiry of the period stipulated therein; (2) managing conducting or supervising as a promoter foreman or agent of any transaction or arrangement by which the company enters into an agreement with a specified number of subscribers that every one of them shall subscribe a certain sum in instalments over a definite period and that every one of such subsciber 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 agreement be entitled to the prize amount";this is followed by Explanation which runs thus:-"for the purposes of this sub paragraph the expression prize amount shall mean the amount by whatever name it be called arrived at by deduction from put of the total amount subscribed at each instalment by all subscribers (a) the commission charge by the company as service charges as a promoter or a foreman or an agent and (b) any sum which a subscriber agrees to forgo from out of the total subscription of each instalment in consideration of the balance being paid to him". Sub-paras 3 and 4 are not relevant for our purpose. In para 3 by subpara 1 (d) the word `deposit is defined and it reads thus:-"1 (D) "deposit" means any deposit of money with and includes any amount borrowed by a company but does not include (i) any money received or collected under a transaction or arrangement referred to in sub-paragraph (2) of paragraph 2";rest of the clauses of this sub-para are not important for our purpose except clause (f) which defines foreman as meaning a person who under the chit or kuri agreement or any other scheme or arrangement is responsible for the conduct of the chit or kuri or such scheme or arrangement. ( 9 ) THAT will take us to part 11 para 4 the relevant portion whereof reads thus:- "on and from the 1st September 1973 (a) x x x (a) no miscellaneous non-banking company shall receive any deposit which together with any other deposits falling under the same category (as specified hereinafter) already received and outstanding on tire books of the company is in excess of the limits hereinafter specified in respect of each of the following categories of deposits namely (I) x x x (II) in the case on any other deposit twenty five per cent of the aggregate of the paid up capital and free reserves of the company". The rest of the provisions of this para are not relevant for our purpose. 11 A note may then be made of para 5 the relevant portion whereof reads thus:- (1) Where as at the commencement of the business on the 1st September 1973 the aggregate of deposits of a miscellaneous non-banking company of the kinds referred to in sub-clause (i) and (ii) respectively of clause (b) of paragraph 4 is in excess of twentyfive per cent of the aggregate of paid up capital and free reserves such company shall secure that (A) at least one-third of the said excess shall be reduced before the 1st October 1974 (B) at least another one-third of the said excess shall be reduced before the 1st October 1915 and (C) the balance if any of the said excess shall be reduced before the 1st October 1976by the repaymeet of the deposits as and when they mature for payment or in such other manner as may be necessary for complying with this provision". THE rest of the provisions contained in the said para and also the rest the paras in part II are not relevant for our purpose. . . . . . . . . . . . . . . ( 10 ) IN order to get an idea of the schemes we may look at one of the sehemes viz. the Diamond group scheme which was introduced on 25 February 1974 This group limited the membership upto a maximum of 1000/members and fixed up subscription of Rs. 50/every month payable for a period of 30 months with a provision that benefit of loans and prizes would be continued upto 60 months. It also provides for giving loans to members on certain conditions by following a particular procedure. It limits giving of loans every month restricted to particular members only. It then provides that every fifth month one lucky prize of Rs. 7 500 would be drawn on 25th every month and the prizeswinner will thereafter cease to be a member and the subscription paid by him will not be refunded to him while the loan if any taken by him will be adjusted against the prize. It also provides that on completion of the scheme the total subscription amount of Rs. 1 500 together with dividend of Rs. 250/will be refunded to those members whose loans are repaid while the same will be so refunded to the remaining members when their loans are repaid. It may be significant to note that in all these groups except Modern scheme the name of accused No. 3 Rameshbhai Pujara appears as the Administrative Director while the name of accused No. 2 Manubhai K. Vora appears as the Managing Director; while in the Modern group which was opened on 25 April 1972 Rameshbhai Pujaras name is shown as the Director while the name of accused No. 2 Manubhai Vora is shown as the Managing Director. ( 11 ) A look may now be had to the returns which are at Exs. 4 to 8 which were filed by the accused company in the form as per the schedule to the Directions. The said returns were filed between 14-10-1974 and 11 while in the last return which is in respect of the period from 1 1975 to 30-9-1975 the date is not mentioned. 4 to 8 which were filed by the accused company in the form as per the schedule to the Directions. The said returns were filed between 14-10-1974 and 11 while in the last return which is in respect of the period from 1 1975 to 30-9-1975 the date is not mentioned. These returns are with regard to the deposits with the company as the form itself shows. The form also shows that the company was incorporated on 25th January 1972; that the financial year of the company was ending on 31st December each year; and in sec. (1) with regard to the deposits etc. outstanding in clause (ee) are set out any other deposits such as deposits collected in one lump sum or in installments by way of contributions or subscriptions or by sale of units certificates or other instruments or as membership fees or admission fees or service charges to or in respect of any scheme or arrangement floated by the company which would mean that the same would fall within para 2 sub-para (1) of the directions. The paid up capital of the company is shown at Rs. 2000/while the free reserves are shown at Nil. The position of deposits as per the return dated 30-9-1973 is shown Rs. 16 60 465 as it emerges from the return filed at Ex. 4. Ex. 5 is the return for two period upto 31-3-1974 and the deposits are shown at Rs. 27 68 0 In the next return that isex. 6 which is for the period ending 30-9-1974 the deposits are shown at Rs. 4 767 and as per the next return that is Ex. 7 which is in respect of the period upto 31-3-1975 the same are shown at Rs. 67 44 0 and the last one that is Ex. 8 which covers the period upto 30-9-1975 in the column against deposits in part II nothing is shown and the column is kept blank. ( 12 ) IT would be most significant to note that in sec. (1) of part I at Sr. No. IV there is a specific column entitled Exempted borrowings and receipts not counting as deposits (vide paragraph 3 (1) (d) (1) to (viii) of the Directions) and sub column (h) there of is entitled Moneys received or collected under a transaction or arrangement referred to in paragraph 2 of the Directions. (1) of part I at Sr. No. IV there is a specific column entitled Exempted borrowings and receipts not counting as deposits (vide paragraph 3 (1) (d) (1) to (viii) of the Directions) and sub column (h) there of is entitled Moneys received or collected under a transaction or arrangement referred to in paragraph 2 of the Directions. Now against this column in none of the returns we find any of the deposits collected under the various schemes except Ex. 8 which is futile attempt of transferring from col. III (ee) to IV (a ). All the deposits collected under the schemes an earlier stated are shown in the column III (ee) entitled Any other deposits such as deposits contracted in one lunch sum etc. as earlier set out which would be covered by para 2 (1) of the Directions and as rightly submitted by Mr. Desai the learned Advocate appearing for the appellant on their own admission as it emerges from the contents of Exs. 4 to 7 which are admittedly returns submitted on behalf or the first accused company by their Managing Director accused No. 2 and their director accused No. 3 various deposits as earlier referred to have been shown as deposits which would fall within para 2 (2) of the Directions and in this view of the matter paras 4 and 5 would apply to such deposits ( 13 ) IT is also significant to note that this is not a case of any inadvertence or mistake as would be evident from the fact that whenever any such amount is claimed to have been received under the exempted borrowings and receipts not counting as deposits the same has been shown under column IV (a) which sub-column is in respect of moneys received or collected under a transaction or arrangement referred to in para 2 (2) of the Directions. To illustrate in Ex. 8 which is in respect of the period from 1 to 30-9-1975 an amount of Rs. 8 315 has been shown in column 1 (a) under the exempted category as falling within para 2 (2) of the Directions and therefore not counted as deposits and in the remaining returns Exs. 4 to 7 against exempted category column 1v the word NIL is shown. 8 315 has been shown in column 1 (a) under the exempted category as falling within para 2 (2) of the Directions and therefore not counted as deposits and in the remaining returns Exs. 4 to 7 against exempted category column 1v the word NIL is shown. It therefore cannot be said that the company or its Directors were not conscious of the distinction between the deposits or moneys received which would fall within para 2 (1) and those which would fall under para 2 (2) of the Directions. Admittedly as the paid up capital was Rs. 2 0 and there were no free reserves these deposits which ran into lacs of rupees exceeded the limit of 25% of paid up capital and free reserves and therefore they would be covered by the provisions contained in para 4 (b) (ii) as well as para 5 (1) (a) and (b ). . . . . . . . . . . . ( 14 ) THE only thing which is required to be seen before Holding that the transaction is covered by the provisions contained in para 4 (b) (ii) is to see whether the deposits fall within the excluded category as per the definition of deposits contained in para 3 (1) (d) (i) that is to find out if it amounts to any money received or collected under a transaction or arrangement referred to in sub-para (2) of para 2. Broadly speaking sub-para (1) is in respect of transactions which are referred to in common parlance as a prize chit fund; while the transactions referred to in sub-para (2) are called conventional chit funds. To appreciate the distinguishing features of these two categories one has to carefully go through the contents of sub-para (1) and put the same in juxta position with the contents of sub-para (2) and find out the exact distinction between the two categories. On carefully going through the contents of the said two sub-paras of para 2 the distinguishing features of the two categories viz. prize chits benefit schemes and the conventional chits may be set out in juxta position in a table as set out below:- prize chit benefit schemes. Conventional chits. (Para 2 (2) ). (Para 2 (1) ). --1 Subscriptions may be collected only by 1 Subscriptions for these schemes may be installments during the Stipulated collected by periodical instalments or period. prize chits benefit schemes and the conventional chits may be set out in juxta position in a table as set out below:- prize chit benefit schemes. Conventional chits. (Para 2 (2) ). (Para 2 (1) ). --1 Subscriptions may be collected only by 1 Subscriptions for these schemes may be installments during the Stipulated collected by periodical instalments or period. in one lump sum. No such prizes are given in conventional chits. The concept of prize amo2 The number and amount of prizes gifts unt offered in conventional chits is to be awarded in each group is deci different. Prize amount is arrived at ded by the foreman on an ad-hoc basis by deduction from the amount of the and prizes are offered to the holders total amount subscribed at each Instalof lucky numbers drawn by lot either ment by all subscribers by way of cash or articles 1 2 -3 The amount distributed by way of (a) foremans commission chases or prizes or representing costs of gifts service charges as promoter foreman represents only a fraction of the amo or agent and (b) discount which the unt collated. from the subscriber by subscriber agrees to forego it consiforeman company. deration of the balance being paid to him. 4 It is not necessary that there should be 4. 3. The entire amount of the total subscripa specified number of subscribers at tions collected at each installment less the initial stage though target of max the amount of foremans commission imum number of subscribers may be or services charges etc. and the discoset out in the scheme. unt is even away as prize amount to each of the subscriber in terms by 5 The winners of the prizes or gifts may drawing lots or by auction or by tender or may not be required to pay subsc or in such other manners may be ription till maturity of the scheme. provided for in the agreement with the result that each and every subscr6 These schemes are neither of a self riber gets prize amount in his turn liquidating nature nor do they have which is not the case in prize chits. characteristics of mutual benefits schemes though they are so called in some 4. A definite and specified number of cases. characteristics of mutual benefits schemes though they are so called in some 4. A definite and specified number of cases. After payment of the prizes or subscribers have to enter into an agrebonus (refund of the subscriptions in ement with the foreman at the initial some cases) the entire balance left is stage. appropriated by the company as its income or profit. More ever every one 5. All the subscribers even after getting of the subscribers does not get prizes. the prize amount have to pay the amount of installments till maturity of the scheme. 6 Conventional chits are of self liquidating nature and partake the character of mutual benefit scheme. The foreman company is entitled only to stipulated commission for service charges etc and the entire balance amount collected at each installment less discount if any is given as prize amount to every one of the subscribers in turn as determined by lot or auction or by tenter or in such other manner as may be provided for in the agreement. 20 Now bearing this distinction in mind as they emerge from the reading of the contacts of para 2 (1) as compared to the contains of para 2 of the directions it would be clear that by no stretch of imagination any of the schemes which were floated by the company would fall within the category of the conventional chits funds scheme covered by para 2 (2) but they would squarely fall within the category of prize chits fund schemes covered by para 2 (1 ). 21 learned Magistrate it seems was carried away by mention of the word prize in the schemes and equated the said word prize with the word prize amount as it appears in sub-para (2) of para 2 ignoring the real content of that word which is clearly different from a prize which would be awarded in a prize chit. None of the schemes shows that the company has entered into an agreement with a specified number of subsrcibers. Only a target is fixed of a particular number of subscribers buts the target may be reached or may not be reached The number may very from month to Month. In the first month of the floating of the scheme are number of subscribers may join and till the scheme is completed manyothers may join. Only a target is fixed of a particular number of subscribers buts the target may be reached or may not be reached The number may very from month to Month. In the first month of the floating of the scheme are number of subscribers may join and till the scheme is completed manyothers may join. But there is no guarantee that the target in every case will be reached The number of subscribers therefore in the scheme floated by the accused company remains Floating It is neither specified nor fixed. Can it be said that the company has entered into an Agreement with a specified number of subscribers ? 22 Mr. Shelat the learned Advocate Appearing for the accused submitted that the maximum fixed under the scheme may be golden as a specified number. There is a fall by apparent on the face of this argument. When the number is not fixed how can it be said that the company has entered into an oral agreement. As submitted by Mr. Shell with a specified number. The company enters into an agreement with a few subscribers from time to time till the target is reached. There is no agreement entered into at the initial stage or at any given time between the company on one side and a specified number of subscribers on the other side. The schemes therefore floated by the company would not answer the description of a conventional it by is contemplated under sub-para (2) of para 2 of the Directions. 23 Again there is no provision in the schemes that every one of the subscribers was subscribing certain sum in installments for a definite period because in most of the schemes on the subscriber getting the prize he ceases to subscribe the remaining installments. Thirdly there is no provision in the schemes that any one of the subscribers was in his turn in the manner provided in sub-para (2) entitled to the prize amount. The schemes provide for drawing of lots for prizes periodically in which only some subscribers will get the prize and therefor it would not be correct to say that every one of the subscribers will get the prize. The schemes provide for drawing of lots for prizes periodically in which only some subscribers will get the prize and therefor it would not be correct to say that every one of the subscribers will get the prize. Again what is contemplated in sub-para (2) is not the prize or gift as is contemplated in sub-para (1) but what is contemplated is a prize amount which is an entirely different concept from the concrete of a prize or gift. The prize amount has to be arrived at by education from out of file total amount of subscription at each installment by 11 the subscribers? of the commission and the discount; if any. There is owner shall provision of granting the prize emirate to each one of the subscribers in any of the schemes floated by the accused company. It is thus only demonstrated that the deposits collected by the company under the various schemes floated by it are not deposits collected by floating conventional schemes of the description as are referred to in sub-para (2) of para 2 of the Directions but they are schemes answering the description of prize chit fund schemes covered by the provisions contained in is para (1) of para 2 of the Directions as would be evident by going through the contents of the schemes relevant portion whereof has been earlier set out. ( 15 ) MR. Shelat then urged that in order to be liable under the Directions for breach thereof the prosecution has to show that what was collected was by way of deposits and not subscription. In the submission of Mr. Shelat and he relied on the evidence of the prosecution witnesses in this behalf subscriptions were collected from the subscribers and not deposits as such. We do not find any substance in this contention of Mr. Shelat. It is absolutely irrelevant as to whether the amount collected is by way of subscriptions deposit or contribution or by any other name What is relevant is whether they are movies collected in one lump sum or in installments by way of contributions or subscriptions or by sale of units certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings mutual benefit thrift or any other scheme or arrangement as is referred to in sub-para (1 ). It specifically includes subscriptions. Moneys if called subscriptions therefore would not make any difference; but would be included in the same attracting provisions of sub-para (1 ). They would amount to deposits if they fall within the purview of sub-para (1) of para 2 of the Directions that means if moneys are collected by schemes which are in the nature of prize chit fund scheme. By referring to the contents of the schemes we have shown earlier that they would be covered by para 2 (1) and not para 2 (2 ). Calling them subscriptions would not matter because essentially what is to be seen is whether they are moneys collected for a particular purpose in a particular manner as set out in sub-para (1) irrespective of the fact whether they are deposits or subscription or collections of any other nature as are set out in subpara (1 ). ( 16 ) MR. Shelat next argued that in order to fall within category (1) as covered by sub-para (1) the prosecution has to establish that moneys were collected by the company either as a promoter foreman or agent or in any other similar capacity which not being established the prosecution must fail. It is admitted by the company that they collected moneys. The schemes issued do show that they were acting as promoters or foreman. The company was to conduct the schemes and the argument therefore that the fact that they were promoters foremen or agents or collectors in any other capacity of the moneys is not established by the prosecution has no substance. No such defence was taken. The returns were filled in on behalf of the company and signed by accused Nos. 2 and 3 in their capacity as Managing Director and Director respectively of the accused company. 25a In answer to questions put to accused No. 1 in his examination under sec. 313 of the Code of Criminal Procedure he did admit that under the various schemes they were not collecting deposits but were collecting subscriptions from members. He also admitted that the company was doing the business of prize chit fund. He also admitted that 7 schemes were floated and from their customers subscription was taken. 313 of the Code of Criminal Procedure he did admit that under the various schemes they were not collecting deposits but were collecting subscriptions from members. He also admitted that the company was doing the business of prize chit fund. He also admitted that 7 schemes were floated and from their customers subscription was taken. ( 17 ) IN view of the material on record including literature in respect of the seven schemes there can be hardly any doubt that moneys were collected by accused No. 1 company as promoter or foreman or agent or in any other capacity. ( 18 ) MR. Shelat then submitted that these directions were issued in exercise of the powers conferred on the Reserve Bank of India by sec. 45 and sec. 45-K. Sec. 45-J as pointed out by Mr. Shelat contains provisions with regard to regulation or prohibiting the issue by any nonbanking institution of any prospectus or advertisement soliciting deposits of money etc. ; while sec. 45-K contains provision with regard to the power of the bank to collect information from non-banking institutions as to deposits and to give directions. In the submission of Mr. Shelat sec. 45-K does not authorise the Reserve Bank of India to issue any direction with regard to the reduction of amount of deposit already collected by the company at the time when the directions came into force. Sec. 45-K (3) provides that the bank may if it considers necessary in the public interest so to do give directions to non-barking institutions either generally or to any non-banking institution or group of non-banking institutions in particular in respect of any matters relating to or connected with the receipt of deposits including the rates of interest payable on such deposals and the period for which deposits may be received. The directions given in para 5 with regard to reduction of deposits contends Mr. Shelat cannot be said to be directions in respect of any matters relating to or connected with the receipt of deposits because the deposits had already been received and the directions for reduction therefore would cover a subject in relation to reduction of the amount of deposit which would have nothing to do with receipt of deposits. We cannot persuade ourselves to accept the submission of Mr. We cannot persuade ourselves to accept the submission of Mr. Shelat because the clause is wide enough to take within its sweep not only the direction with regard to the amount which the company may receive but the direction with regard to the amount which the company has already received. Such directions as are contained in para 5 (1) enjoining upon the companies holding deposits in excess of 25 of the aggregate of paid up capital and free reserves to reduce the same by atleast one-third by 1st October 1974 and another atleast onethird before 1st October 1975 and the balance before 1st October 1976 are in our opinion directions in respect of a matter relating to receipt of deposits. The said para does not refer to and is not restricted merely to matters connected with physical receipt of deposits but refers to matters relating to or connected with receipt of deposits. Can it be said that giving directions to reduce the deposits by following a phased programme is a matter in no way relating to or connected with the receipt of deposits ? The answer is obviously No. There is nexus between the directions with regard to reduction in deposits already received and the receipt of deposits. It cannot be said that the directions with regard to reduction of deposits is not at all related to or connected with the receipt of deposits. ( 19 ) MR. Shelat also urged that if two interpretations are possible the one that would help the accused in a criminal trial should be preferred preference to the one which would jeopardise his liberty. In our opinion two interpretations are not possible in this case. only one interpretation as per the view taken by us is possible. It has also to be borne in mind that the directions are given in public interest and even if two interpretations were possible one that promotes the public interest will have to predominate over the one which subserves it. ( 20 ) IT was lastly urged by Mr. Shelat that in any event so far as accused Nos. 2 and 3 are concerned there are no overt acts alleged in the complaint personally against them and there are no allegations that they knowingly and willfully committed breaches of the said Directions given by the Reserve Bank. They are therefore not liable to any conviction. . Shelat that in any event so far as accused Nos. 2 and 3 are concerned there are no overt acts alleged in the complaint personally against them and there are no allegations that they knowingly and willfully committed breaches of the said Directions given by the Reserve Bank. They are therefore not liable to any conviction. . ( 21 ) NOW if we look to sec. 45-0 which held the field till it was replaced by Act 51 of 1974 on and from 13th December 1974 it contains provisions in sub-sec. (3) inter alia to the effect that every director or member of any committee or other body for the time being vested with the management of the affairs of the non-banking institution unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it shall be punishable with penalties provided therein. Admittedly accused No. 2 was the Managing Director and accused No. 3 the Director of the company. both of them were in charge of the business of the company as is clear from the fact that both of them had signed the returns; that their names are shown as such in the schemes (in most of the schemes except one the name of accused No. 3 is shown as the Administrative Director) and that it has been admitted that they have been doing this business and that they were the only persons whose names were shown as subscribers and who were the holders of shares in the memorandum of Association of the accused company filed as per ex. 22 and that they were the signatories to all the returns filed under the Companies Act as also to the returns filed as per the directions given by the Reserve Bank. There is no returns that they in their capacity as directors vested with the management of the affairs of the company would be liable under sec. 454 (3) unless they proved that the contravention took place without their knowledge or that they exercised all the diligence to prevent it. This would be the position till sec. 45-0 remained on the statute book i. e. upto 13th December 1974 on which date by Act 51 of 1974 sec. 45-0 was repealed and in its place was enacted sec. 58b and 58c. This would be the position till sec. 45-0 remained on the statute book i. e. upto 13th December 1974 on which date by Act 51 of 1974 sec. 45-0 was repealed and in its place was enacted sec. 58b and 58c. Sec. 58-C provided thus :- (1) Where a person committing a contravention or default referred to in section 58 is a company every person who at the time the contravention or default was committed was in charge of and was responsible to the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly;provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention or default was committed without his knowledge or that he had exercised all due diligence to prevent the contravention or default"thus by virtue of the fact that these two accused were in charge of and were responsible to the company for the conduct of the business of the company they also be guilty of the contravention along with the company as provided in sec. 58c (1) unless they prove the facts required to be proved under the proviso. Mr. Shelat argued that beyond mentioning their names as accused Nos. 2 and 3 in the complaint and stating that summons of accused No. 1 company be served on accused No 2 who was the companys Managing Director or the Principal Officer there is nothing in the complaint showing that the said two accused were in charge of and were responsible to the company for the conduct of the business of the company and that therefore the connect be held guilty for any such offence as the prosecution alleges to have been committed by the company. ( 22 ) WE do not find any substance in this contention of Mr. Shelat. It is true in order that accused Nos. 2 and 3 may be held responsible the prosecution should show that they were in charge of and were responsible to the company for the conduct of the business of the company There is ample material on record to justify such a conclusion. The memorandum of Association at Ex. Shelat. It is true in order that accused Nos. 2 and 3 may be held responsible the prosecution should show that they were in charge of and were responsible to the company for the conduct of the business of the company There is ample material on record to justify such a conclusion. The memorandum of Association at Ex. 22 various returns filed which are signed by the two accused their names shows as Managing Director and Administrative Director or Director respectively on the folders of the schemes issued at Exs9 to 15 and their having signed in that capacity on the returns filed before the Reserve Bank at Exs. 4 to 8 and the admission that these schemes were floated by them and moneys collected as subscriptions (though denying that they were deposits) and the evidence of the prosecution witnesses also in this behalf clearly establish that there were in charge of and responsible to the company for the conduct of the business. It is true the complaint in so many words does not mention this. But if we look to the charge which is at Ex. 18 in clear terms it mentions that accused Nos. 2 and 3 at the relevant time mere responsible officers of accused No. 1 company and that they were responsible for the business of accused No. 1 company and that therefore all the three accused committed the offence under sec. 58-C. they therefore knew when the charge was framed very clearly that they had to meet the charge under sec. 58c also. . . . . . . . . . . . . . . . ( 23 ) THE learned Magistrate did not apply his mind properly to the relevant provisions of law as also to the meaning purport and content of the directions issued. In his Opinion the schemes floated by the accused company would be covered by para 2 (2) of the direction. He has it seems equated the words prize amount appearing in sub-para (2) with the word prize appearing in sub-para (1) without consciously applying his mind to the two different concepts projected by these words. In terms in his judgment he has referred to prizes being given by lots to subscribers as per the agreement and he has thereby crept into an error in holding that this would the prize amount. In terms in his judgment he has referred to prizes being given by lots to subscribers as per the agreement and he has thereby crept into an error in holding that this would the prize amount. He was also led any by the fit that the company was taking subscriptions from its cause by monthly installments and that therefore also they would not be deposits. We have demonstrated earlier the unworthiness of this conclusion and the fallacy in the reasoning adopted by the learned Magistrate in arising at this conclusion. The third reasons which weighed with the learned Magistrate as that no interest was being paid to the subscribers on their subscriptions and that the amount of the subscription was not refunded on demand as a deposit would be refunded and that therefore also the transaction will be covered by para 2 (2) of the Directions. This reasoning of the learned Magistrate is also based on misconception and misreading of the contents of sub-para (2) of para 2 of the directions. Because no interest is paid on the subscription and because the deposit is not repayable on demand it would not amount to a transaction under sub-para (2) of para 2. It seems the learned Magistrate has gone on general notions about deposits losing sight if the special concept of deposits under the directions. We have elaborately dealt with that respect of the Concept arising under the relevant provisions of the Directions and shown the main features of distinction between the two concepts as are embodied in sub-para (1) and sub-para (2) of para 2 of the directions. ( 24 ) APPEAL will have to be allowed setting aside the order of acquittal passed against the accused and substituting the same by an order of conviction against them on two counts for the offence under sec. 45-0 for contravention of the directions contained in para 4 (a) (ii) and para 5 (a) of tine derections as also under sec. 58-B (5) (8) for contravention of the directions contained In para 4 (a) (ii) and under sub-sec. (6) of sec. 58 for default made in complying with the directions contained in para 5 (1) (a ). . . . . . . . . . . . . . . . 58-B (5) (8) for contravention of the directions contained In para 4 (a) (ii) and under sub-sec. (6) of sec. 58 for default made in complying with the directions contained in para 5 (1) (a ). . . . . . . . . . . . . . . . ( 25 ) IN our opinion looking to the nature of the offence and the gravity thereof as also the special circular stance to which our attention has been drawn by accused No. 2 by his affidavit filed today ends of justice will be met if a fine of Rs. 25 0 in respect of contravention of the direction s lot to accept deposits beyond the prescribed limit is concerned and fine of Rs 2 0 for contravention of the direction it connection with reduction of the deposits is concerned is imposed and a token substantive sentence of one week is awarded to accused Nos. 2 and 3 for the offence punishable under sec. 58-B. Appeal allowed:- Leave to appeal refused. .