JUDGMENT - A.D. TATED, J.:---The two Appeals Nos. 631 of 1981 and 632 of 1981 have been preferred by the complainant Shri B.N. Chikaramane, Deputy Chief Officer, Department of Non-banking Companies, Reserve Bank of India, Bombay Regional Office, against the judgment and order dated 18-8-1980 in Criminal Cases Nos. 298/S of 1979 and 299/S of 1979 passed by the learned Additional Chief Metropolitan Magistrate, 19th Court Esplanade, Bombay and the third Appeal No. 989 of 1981 has been filed by the state of Maharashtra against the judgment and order in Criminal Case No. 298/S of 1979. 2. In Criminal Case No. 298/S of 1979 the accused were charged for the offence punishable under section 58-B(5)(a) and 58-C of the Reserve Bank of India Act for collecting Rs. 43,000/- by way of deposits by the accused 1 to 12 between 1-11-1977 and 28-1-1978 in contravention of prohibitory order dated 1st November, 1977 issued by the Reserve Bank of India. In Criminal Case No. 299/S of 1979 the accused 1 to 12 were prosecuted for the offence punishable under section 58-B(5)(a) and 58-C of the Reserve Bank of India Act for collecting Rs. 5,86,000/- by way of deposits between 1-10-1976 and 31-3-1977 in contravention of Direction No. 4 of 1973 Directions. 3. The accused No. 1 is a company doing its business under the name and style 'Arihant Finance and Chit Fund Pvt. Ltd.' having its office in Bombay and accused Nos. 2 to 12 are the directors of accused No. 1. The accused No. 1 is a miscellaneous non-banking company. The said company has been conducting a prize chit scheme styled as 'Arihant Small Saving Group Scheme' since October 1974 and the subscriptions were accepted in the said scheme by the members of the said scheme. It is alleged by the complainant that the company accepted deposits in contravention of the Directions issued by the Reserve Bank of India and collected huge amounts. It is alleged that the accused in contravention of Direction No. 4 of the Directions issued by the Reserve Bank of India in 1973 between 1-10-1976 and 31-3-1977 accepted Rs. 5,86,000/- by way of deposits and thereby committed an offence punishable under section 58-B(5)(a) and 58-C of the Reserve Bank of India Act. It is alleged that the accused in contravention of Direction No. 4 of the Directions issued by the Reserve Bank of India in 1973 between 1-10-1976 and 31-3-1977 accepted Rs. 5,86,000/- by way of deposits and thereby committed an offence punishable under section 58-B(5)(a) and 58-C of the Reserve Bank of India Act. In the other criminal case it was alleged that the Reserve Bank of India passed prohibitory order dated 1st November, 1977 and the accused 1 to 12 in contravention of the said prohibitory order collected Rs. 43,000/- by way of deposits and thereby committed an offence punishable under section 58-B(5)(a) and 58-C of the Reserve Bank of India Act. 4. The accused were charged for the offences mentioned above. They pleaded not guilty to the charge and claimed to be tried. The defence of the accused in both the cases was that the scheme run by them fell within sub-para (2) of para 2 of the Directions issued by the Reserve Bank of India on 23rd August, 1973 and also on 20th June, 1977 and as such the prohibition for collecting deposits from the subscribers of the scheme was not applicable to them. Their further defence was that they advanced loans and what was found to have been collected by them was the repayment of loans advanced by them and as such they were not liable for the offences alleged against them. 5. The learned Additional Chief Metropolitan Magistrate, 19th Court Esplanade, Bombay (Shri M.H. Jadhav) accepted the defence and acquitted the accused of the offences mentioned above. 6. Feeling aggrieved, as stated earlier, the complainant preferred two appeals and the state preferred one appeal against the acquittal of the accused. 7. The learned Counsel Shri V.G. Pradhan appearing for the complainants submits that the learned trial magistrate did not properly understand the nature of the scheme run by the accused and also did not understand the requirements for the scheme to fall within sub-para (2) of para 2 of 1973 and 1977 Directions issued by the Reserve Bank of India and as such he wrongly held that the accused did not commit the offence alleged against them. He also submits that the learned trial Magistrate was not right in finding that the prosecution did not prove that the amounts alleged to have been collected by the accused were not the repayments made by the persons who had obtained loans from the accused No. 1 company. He submits that the prosecution has proved that the chit fund scheme run by the accused was not a conventional chit fund scheme falling within sub-para (2) of para 2 of the Directions of 1973 and 1977 issued by the Reserve Bank of India and, therefore, the collections made by them from the subscribers were 'deposits' within the term defined in section 45-I-(bb) of the Reserve Bank of India Act, 1934 and sub-clause (d) of para 3 of the Directions issued on 23rd August, 1973 and sub-clause (c) of para 3 of the Directions issued on 20th June, 1977 by the Reserve Bank of India. 8. The evidence of Shri Vasant Dattatray Gore P.W. 1 and Shri Vasant Govind Damle P.W. 2 recorded in both the cases proves the nature of the scheme run by the accused. Their evidence shows that the accused No. 1 was conducting prize chit fund scheme. Subscriptions were received by the accused No. 1 from the members in instalments. As per the scheme if the subscription was not regularly paid the amount already paid by the subscriber was liable to be forfeited. Each subscriber could participate in a lot which was drawn periodically for the prize amount. In case a member got the prize, he was not required to make further subscription and he could not take part in the subsequent lots. No interest was payable to the subscribers. The subscribers could take loan from the company on the subscription, the period of the scheme was 60 months and the subscription was not liable to be repaid back on demand. Shri Vasant Govind Damle P.W. 2 had inspected the books of account of accused No. 1 company and on such inspection he found that the company had accepted deposits after the prohibitory order was served. The evidence of Shri Damle P.W. 2 shows that the accused submitted returns about the deposits received by them and those returns are at Exhibit P-6. These returns show that for the half year ending on 30th September, 1976 the company had collected the amount of Rs. The evidence of Shri Damle P.W. 2 shows that the accused submitted returns about the deposits received by them and those returns are at Exhibit P-6. These returns show that for the half year ending on 30th September, 1976 the company had collected the amount of Rs. 19,69,000/- and by the end of 31st March, 1977 they had received amounts to the tune of Rs. 25,55,000/-. It shows that during the period from 30-9-1976 to 31-3-1977, the company received the amount of Rs. 5,86,000/-. The prohibitory order was passed by the Reserve Bank of India on 1-11-1977. It is at Exhibit P-1 in Criminal Case No. 298/S, of 1979 and as per that order which was received by the Managing Director accused No. 2 on 7th November, 1977, the accused were prohibited from accepting deposits from the public under the scheme run by them. The evidence of Shri Gore P.W. 1 shows that the accused had collected the amount of Rs. 43,000/- after receipt of the prohibitory order during the period from 7th November, 1977 to 28th of January, 1978. 9. It is not disputed that the accused could collect the subscriptions in case their scheme fell within sub-para (2) of para 2 of the Directions issued by the Reserve Bank of India on 23rd August, 1973 and 20th of June, 1977. Para 2 of both the Directions is the same and its reads thus:--- "2. 9. It is not disputed that the accused could collect the subscriptions in case their scheme fell within sub-para (2) of para 2 of the Directions issued by the Reserve Bank of India on 23rd August, 1973 and 20th of June, 1977. Para 2 of both the Directions is the same and its reads thus:--- "2. Extent of the directions.---These 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, certificate 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 that every one of 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 agreement be entitled to the prize amount; Explanation.---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 out of the total amount subscribed at each instalment by all subscribers, (a) the commission charged by the company or service charges as a promoter or a foreman or an agent and (b) 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. (3) conducting any other form of chit or kuri which is different from the type of business referred to in sub-paragraph (2) above; (4) undertaking or carrying on or engaging in or executing any other business similar to the business referred to in sub-paragraphs (1) to (3)." The definition of the terms "deposit" appearing in Directions dated 23rd August, 1973 at Clause (d) of para 3 reads thus :--- "(d) "deposit" means any deposit of money with, and includes any amount borrowed by, a company, but does not include--- (1) any money received or collected under a transaction or arrangement referred to in sub-paragraph (2) of paragraph 2". (Rest not produced as not relevant) The definition of the term "deposit" in Clause (c) of para 3 of Directions dated 20th of June, 1977 reads thus :--- (c) "deposit" shall have the same meaning as assigned to it in section 45-I(bb) of the Reserve Bank of India Act, 1934(2 of 1934)" Clause (bb) of section 45-I of the Reserve Bank of India Act, 1934 reads thus:-- "(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". 10. 10. A company running conventional chit fund which falls within sub-para (2) of para 2 of the Directions of the Reserve Bank dated 23rd August, 1973 and 20th of June, 1977 has been allowed to accept the money from the subscribers and such subscriptions have been excluded from the term "deposit" as per the definitions reproduced above. To appreciate the distinguishing features of the conventional chit fund and the prize chit fund it is necessary to go through the contents of sub-para (2) and put the same in juxtaposition with the contents of sub-para (2) and find out the exact distinction between the two categories. In a similar case instituted on the complaint of the same complainant Shri B.N. Chikarmane, their lordships of the Gujarat High Court in (B.N. Chikarmane v. Modern Savings and Trading Units Pvt. Ltd. and others)1, 1982 Volume 52 Reports of Company Cases 400 at page 411 of the report set out the following table showing the distinguishing features of the two schemes : "Prize chits/benefit scheme. Conventional chits (Para 2(1)) (para 2(2)) 1. Subscriptions for these schemes 1. Subscriptions may be may be collected by periodical collected only by instalments instalments or in one lump sum. during the stipulated period. 2. The number and amount of 2. No such prizes are given prizes/gifts to be awarded in each in conventional chits. The group is decided by the foreman concept of "prize amount" on an ad hoc basis and prizes are offered in conventional chits offered to the holders of lucky is different. Prize amount numbers drawn by lot either by is arrived at by deduction way of cash or articles. from the amount of the total amount subscribed at each instalment by all subscribers : (a) foreman's commission charges or service charges as promoter, fore men or agent, and (b) discount which the subscriber agrees to forgo in consideration of the balance being paid to him. 3. The amount distributed by way 3. The entire amount of the of prizes or representing cost of total subscriptions collected gifts represents only a fraction of at each instalment less the the amount collected from the sub- amount of foreman's commission scriber by foreman/company. 3. The amount distributed by way 3. The entire amount of the of prizes or representing cost of total subscriptions collected gifts represents only a fraction of at each instalment less the the amount collected from the sub- amount of foreman's commission scriber by foreman/company. or service charges, etc., and the discount is given away as prize amount to each of the subscribers in turns, by drawing lots or by auc tion or by tender or in such other manner as may be provided for in the agreement with the results that each and every subscriber gets the prize amount in his turn which is not the case in prize chits. 4. It is not necessary that there 4. A definite and specified should be a specified number of number of subscribers have subscribers at the initial stage though to enter into an agreement a target of the number of subscribers with the foreman at the initial stage. may be set out in the scheme. 5. The winner of the prizes or gifts 5. All the subscribers, even may or may not be required to pay after getting prize amount subscription till maturity of the have to pay the amount of scheme. instalments till the maturit of the scheme. 6. These schemes are neither of a 6. Conventional chits are of self-liquidating nature nor do they self liquidating nature and have characteristics of mutual benefit partake the charcter of a schemes, though they are so called mutual benefit scheme. The in some cases. After payment of the forman/company is entitled prizes or bonus (refund of the sub- only to stipulated scriptions in some cases ) the entire commission for service balance left is appropriated by the charges, etc. and the entire company as its income or profit. balance amount collected at Moreover, every one of the sub- each instalment less dis- scribers does not get prizes. and the entire company as its income or profit. balance amount collected at Moreover, every one of the sub- each instalment less dis- scribers does not get prizes. count, if any, is given as prize amount to every one of the subscribers in turn as determined by lot or auction or by tender or in such other manner as may be provided for in the agreement." Under the scheme run by the accused there were to be 5000 subscribers, but the company started the scheme with 4000 subscribers leaving the number of subscribers as a floating number, as the subscribers could be added in the scheme till the number of subscribers reaches 5000. The prize amount was not being arrived at by deduction from out of the total amount of subscription at each instalment by all subscribes, (a) the commission charged by the company or service charges as promoter, foreman or agent and (b) discount which the subscriber agreed to forgo in consideration of the balance being paid to him. The company had not entered into any agreement with the specified number of subscribers at the initial stage as to what amount was to be deducted from the total subscription, while paying the prize amount to the subscriber who becomes entitled thereto on the drawing of lots. The subscribers who got the prizes were not required to pay the further instalments till the maturity of the scheme. Therefore, taking into consideration all those distinguishing features the chit fund scheme run by the accused company was not a conventional chit fund scheme falling within sub-clause (2) of para 2 of the Directions of the Reserve Bank. Therefore, the collections made by the company were not exempted from the term "deposit". Those collections therefore have been rightly characterised by Shri Gore P.W. 1 and Shri Damle P.W. 2 as the deposits which the accused company could not receive under the chit prize scheme run by them. Therefore, the collections made by the company were not exempted from the term "deposit". Those collections therefore have been rightly characterised by Shri Gore P.W. 1 and Shri Damle P.W. 2 as the deposits which the accused company could not receive under the chit prize scheme run by them. Their lordships of the Gujarat High Court in the case referred to above have fully discussed the relevant provisions of the Reserve Bank of India Act, 1934 and the Directions issued by the Reserve Bank of India in exercise of its powers under sections 45-J and 45-K of the Reserve Bank of India Act and it is not necessary for me to go through the same provisions again in order to demonstrate that the scheme run by the accused was not a conventional chit fund scheme and that under the provisions of the Reserve Bank of India Act and the Directions issued by the Reserve Bank they were not entitled to collect the subscriptions under the scheme. I am in respectful agreement with the reasoning in the Division Bench decision of the Gujarat High Court referred to above. 11. It takes me to consider the defence that the amount collected by the accused were by way of repayment of loans made by them to the subscribes and, therefore, they could not be termed as deposits. The learned Counsel Shri Vashi for the accused contends that Shri Gore P.W. 1 and Shri Damle P.W. 2 have admitted that the company gave loans to the subscribes and the subscribers were repaying the loans. He submits that the prosecution did not prove what amounts were collected by the accused by way of subscription and what amounts were collected by way of repayment of loans, and therefore, the accused were entitled to benefit of doubt on that ground. The learned Counsel for the appellant on the other hand contends that the accused have admitted in their statement submitted to the Reserve Bank of India on 19-1-1979 that they collected subscriptions to the tune of Rs. 4,66,800/- during the period from July 1977 to October 1977 and the amount of Rs. 71,670/- during the period from 1-11-1977 to 28-1-1978. The learned Counsel for the appellant on the other hand contends that the accused have admitted in their statement submitted to the Reserve Bank of India on 19-1-1979 that they collected subscriptions to the tune of Rs. 4,66,800/- during the period from July 1977 to October 1977 and the amount of Rs. 71,670/- during the period from 1-11-1977 to 28-1-1978. He pointed out that the prohibitory order was served on the Managing Director accused No. 2 on 7th of November, 1977 and as per the statement dated 19-1-1977 the amount collected during the period from 7-11-1977 to 28-1-1978 works put to Rs. 43,000/-. He submits that accused have nowhere stated in their statement dated 19-1-1977 Ex. P. 5 that out of the amount of Rs. 43,000/- collected during the aforesaid period any amount was by way of repayment of loans. On the contrary, the statement shows that it was the subscription collected by the accused. He also referred to the statements submitted by the accused to the Reserve Bank of India on 16-2-1977 and 30th June, 1977 Exs. P-3 and D-1 in Criminal Case No. 298/S of 1979 wherein the accused have stated the subscriptions collected by them and there was no mention therein that any of the amounts was by way of repayment of loans. He also pointed out the returns dated 30th of September, 1976 and 31st of March, 1977 Ex. P-6 submitted by the accused to the Reserve Bank of India wherein they have shown their collection by way of subscription only and there is no mention of repayment. According to the learned Counsel it clearly rules out the defence that the amounts alleged to have been collected by the accused in the two cases included the repayment of loans. It is pertinent to note that the accused are in possession of the account books they have maintained. Those account books were inspected by Shri Damle P.W. 2. Shri Damle P.W. 2 has not taken charge of those account books. Had the amounts alleged to have been collected by the accused during the period under consideration been the amounts collected by them by way of repayment of loans, the accused would have produced their account books in support of their defence, but they have not done so. Shri Damle P.W. 2 has not taken charge of those account books. Had the amounts alleged to have been collected by the accused during the period under consideration been the amounts collected by them by way of repayment of loans, the accused would have produced their account books in support of their defence, but they have not done so. The learned Counsel for the accused contends that it is none of the duty of the accused to produce their account books and to prove the defence set up by them. He submits that the prosecution should have proved by cogent evidence that the collections made by the accused did not include the repayment of loans. I am unable to agree with the learned Counsel. The accused have a personal knowledge as to what collections they have made by way of subscriptions from the subscribers and what amount they have recovered by way of repayment of loans advanced by them. When the prosecution has proved even from the statement of the accused that they have collected subscriptions to the tune alleged by the prosecution, it was for the accused to show from their account books that though in their statement they have mentioned that they have collected those amounts by way of subscription, it was a wrong statement and as per their accounts those collections were by way of repayment of loans. From the mere statements appearing in t he evidence of Shri Gore P.W. 1 and Shri Damle P.W. 2 that the accused company had advanced loans and they had received some amount towards repayment, it cannot be inferred that the amounts of subscription which the accused have admitted to have received during the aforesaid period were nothing but the repayment of loans advanced by the accused. It is pertinent to note that the accused had filed a writ petition in this Court being Misc. Petition No. 1797 of 1977. A copy thereof has been produced at Ex. P-8. This copy has been duly used by the defence while cross-examining the prosecution witnesses and it is nowhere suggested by the accused that it is not a true copy of the writ petition they had filed. At para 11 the accused have stated the amounts collected by them by way of subscription and also the amounts they had advanced as loans to the members. At para 11 the accused have stated the amounts collected by them by way of subscription and also the amounts they had advanced as loans to the members. As per that statement they had collected money by way of subscription from the members as follows : "Upto June 1975 - Rs. 3,65,940/- Upto June 1976 - Rs. 12,57,210/- Upto June 1977 - Rs. 12,58,850/- From June 1977 to October 1977 - Rs. 4,66,800/- --------------------- Rs. 33,48,800/- --------------------- As against the above subscriptions they had advanced loans to members as under : Upto June 1975 - Rs. 1,35,400/- Upto June 1976 - Rs. 12,65,400/- Upto June 1977 - Rs. 11,73,200/- From June 1977 to October 1977 - Rs. 4,66,800/- ------------------- Rs. 30,10,500/- ------------------- They have also mentioned therein prizes given to the members during aforesaid period as follows :- 1974-75 - Rs. 15,315/- 1976 - Rs. 58,085/- 1977 - Rs. 92,105/- ---------------- Rs 1,65,505/- ----------------- The writ petition was declared on 16th of December, 1977 and in the writ petition it was nowhere mentioned what amounts they had received by way of repayment of loans during the relevant period. The accused Nos. 1 and 2 filed their written statements dated 14th July, 1980 and accused Nos. 3 to 9 and 12 filed their written statements also dated 14th July 1980 as per the statement made by them during their examination under section 313 Cri.P.C. In those statements also they have not stated what was the amount by way of repayment of loans out of the collections made by them during the period from which they have been charged. They have also not mentioned therein that the statements submitted by them to the Reserve Bank of India regarding the collections made by them and referred to above were in any way wrong. It is pertinent to note that the accused No. 2 was the Managing Director of the accused No. 1. He admitted that the company had collected the total amount of Rs. 43,000/- after the prohibitory order was issued. But he stated that the said amount was accepted by way of repayment of loans and not deposits. It is for the accused to show that the amount collected by them disregarding the prohibitory order of the Reserve Bank of India was only by way of repayment and this they could have very well shown, had the defence been true. But he stated that the said amount was accepted by way of repayment of loans and not deposits. It is for the accused to show that the amount collected by them disregarding the prohibitory order of the Reserve Bank of India was only by way of repayment and this they could have very well shown, had the defence been true. The accused would have produced their account books in their defence and would have shown that the collection made by them were by way of repayment of loans. This has not been done by the accused. On the contrary in the statements referred to above they have clearly admitted that the collections made by them for which they have been indicted were by way of subscription from the members. The learned trial Magistrate regarding the defence that the amounts collected by the accused were by way of repayment of loans observed thus at para 7 of his judgment :- "The books of account are not produced before the Court. Hence we are not in a position to know as to what amounts were recovered by way of repayment of loans. But Shri Damle admits that the company was not prohibited from recovering the loans which were advanced by it. The contention of the defence is that they had accepted certain amounts by way of repayment of loans and that fact is not mentioned in the report. It has to be noted that as mentioned above, the present company accused No. 1 is covered by provisions of sub para (2) of para 2 of the directions and in view of the definition of the term 'deposit' the amount or the amounts recovered by way of subscription or instalments under particular agreement from the subscribers will not come within the ambit of the term deposit. If so, accused No. 1 company or the directors do not commit any offence alleged by the prosecution. Secondly if the amounts were recovered on account of loans these amounts also cannot be treated as deposit. Hence after considering the evidence on record and the provisions of the directions dated 23-8-1973, I have come to the conclusion that the prosecution has not proved the charge in both the cases. Secondly if the amounts were recovered on account of loans these amounts also cannot be treated as deposit. Hence after considering the evidence on record and the provisions of the directions dated 23-8-1973, I have come to the conclusion that the prosecution has not proved the charge in both the cases. It the prosecution had produced the books of account and if it had shown that certain amounts were accepted neither by way of subscription nor by way of repayment of loans, the fate of the case would have been otherwise." I have already indicated that the learned trial Magistrate did not properly understand the difference between the prize chit fund scheme and the conventional chit fund scheme. I have already indicated that the scheme run by the accused was not a conventional scheme falling under sub-para (2) of para 2 of the Directions issued by the Reserve Bank of India. Therefore the amounts collected by the accused by way of subcription were clearly deposits within the meaning of the term used in those Directions and section 45-I (bb) of the Reserve Bank of India Act, 1934. I have also referred to the evidence of Shri Damle P.W. 2 wherein he has stated that he has not seized the books of account of accused. The books of account of the accused are with them and, therefore, it was not for the prosecution to produce those books of account. It was for the accused to produce those books of account in support of their defence. The statements already submitted by the accused to the Reserve Bank of India and referred to above clearly indicated that collections made by them were by way of subscription. There is nothing on record that these were not subscriptions from the subscribers but they were repayment of loans by the members. Therefore, the learned trial magistrate was completely wrong in the reasoning that he has given at para 7 of his judgment reproduced above. The prosecution has proved beyond reasonable doubt that the chit fund scheme run by the accused was not a conventional chit fund scheme but it was nothing but a prize chit fund scheme which is covered by sub-Clause (1) of para 2 of the Directions issued by the Reserve Bank of India and, therefore, the accused were not entitled to recover subscriptions which were nothing but deposits from the members thereof. The accused by recovering large amounts from the subscribers to the prize chit fund run by them have clearly violated the Directions of the Reserve Bank of India appearing in para 4 of their Directions. They have also flagrantly violated the prohibitory order issued by the Reserve Bank of India under Clause (4) of section 45-K of the Reserve Bank of India Act and thereby in both the cases they have committed the offences punishable under section 58-B and 58-C of the Reserve Bank of India Act. Consequently, the acquittal of the accused recorded for the offences mentioned above by the learned trial Magistrate will have to be set aside and the accused will have to be convicted and sentenced of those offences. 12. In the present case as stated b the accused Nos. 2 in his written statement dated 14th of July, 1980 the chit fund scheme was started by them with a very lofty object to infuse and inculcate the habit of saving in the public in the right direction and in the right channed. The accused have collected more than Rs. 33,00,000/- during the period from 1975 to 1977. As compared to the huge amounts they have collected, the prize money they have distributed during the aforesaid period is a paltry sum of rs. 1,65,505. Under the scheme run by them each and every subscriber could not get the prize and what the subscriber used to get after the period of 60 month was the principal amount of Rs. 1800/- which he had subscribed and a paltry amount of Rs. 100/- only. The returns submitted by the accused to the Reserve Bank of India clearly indicate that large sums were distributed amongst 10 directors by way of remuneration and the accused were showing colossal loss in running the scheme. On considering the nature of the scheme run by the accused, it cannot be said that it was in the interest of the public that the accused were running the scheme as professed by them. In this connection it is instructive to reproduce what the Supreme Court observed in (Srinivasa Enterprises and others v. Union of India)2, A.I.R. 1981 S.C. 504. In this connection it is instructive to reproduce what the Supreme Court observed in (Srinivasa Enterprises and others v. Union of India)2, A.I.R. 1981 S.C. 504. At page 505 of the report, his lordships Krishna Iyer, J., observed thus :- "The quintessential aspects of a prize chit are that the organizer collects moneys in lump sum or instalments, pursuant to a scheme or arrangement, and he untilises such moneys as he fancies primarily for his private appetite and for (1) awarding periodically or otherwise to a specified number of subscribers, prizes in cash or kind and (2) refunding to the subscribers the whole or part of the money collected on the termination of the scheme or otherwise. The apparent tenor may not fully bring out the exploitative import lurking beneath the surface of the words which describe the scheme. Small sums are collected from vast number of persons, ordinarily of slender means, in urban and rural areas. They are reduced to believe by the blare of glittering publicity and the dangling of astronomical amounts that they stand a chance in practice, negligible--of getting a huge fortune by making petty periodical payments. The indigent agrestics and the proletarian urbanities, pressured by dire poverty and dopes by the hazy hope of a lucky draw, subscribe to the scheme although they can ill-afford to spare any money. This is not promotion of thrift or wholesome small savings because the poor who pay, are bound to continue to pay for a whole period of a few years over peril of losing what has been paid and, at the end of it the fragile prospects of their getting prizes are next to nil and even the hard-earned money which they have invested hardly carries any interest. They are eligible to get back the money they have paid in driblets, virtually without interest, the expression 'bonus' in section 2(a) being an euphemism for a nominal sum. What is more, the repayable amount being small and the subscribers being scattered all over the country, they find it difficult even to recover the money by expensive dilatory litigative process." The above observations are applicable on all fours to the chit fund scheme run by the accused. The accused had issued pamphlets as per Ex. P-7 and pass books as per Ex. The accused had issued pamphlets as per Ex. P-7 and pass books as per Ex. P-4 which gave a very attractive picture of the scheme and unless the whole thing is considered by an extraordinary brain one cannot find the real profiteering motive of the accused behind the scheme. The people have been lured by the propoganda that they get the prizes far more than the amount they have subscribed and also they are entitled to bonus. By such allurement the accused have been able to collet large amounts and those amounts are said to have been given to the subscribers by way of loans. If we see the list of loans given by the accused appearing in Ex.P-1 one is surprised to see that loans to the extent of Rs. 95,000/-, Rs. 75,000/- and Rs. 35,000/- have been advanced to some of the members. Each member used to subscribe Rs. 1,800/- in 60 instalments and it is surprising to see that the loan to a single subscriber amounts to Rs. 95,000/- and other similar amounts. Such a scheme by shrewd persons can work very well to their great advantage and to the detriment of the public in general. As said by the Supreme Court if a subscriber who subscribes to the scheme to the extent of Rs. 1,800/- only is denied the return of his amount or the prize cannot rush to the Court of law for recovering the amount as the expenses by way of stamp duty, Court fee etc. are likely to deter him from taking legal steps and the promoters of such scheme can benefit to a large extent at the cost of a large number of subscribes. This is the reason why the Central Government in 1978 passed the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. 13. The learned Counsel for the accused Shri Vashi says that the accused Nos. 4, 7 and 9 are dead and the accused No. 6 is bedridden with paralytic attack. Shri Pradhan Advocate appearing for the appellant accepts the statement made by Shri Vashi regarding the death of the accused Nos. 4, 7 and 9 and the crippled condition of the accused No. 6. 4, 7 and 9 are dead and the accused No. 6 is bedridden with paralytic attack. Shri Pradhan Advocate appearing for the appellant accepts the statement made by Shri Vashi regarding the death of the accused Nos. 4, 7 and 9 and the crippled condition of the accused No. 6. The learned Counsel for the appellant and the learned Counsel for the respondents are both unanimous on the point that it is the accused No. 2 who was the Managing Director of the company and was running the scheme and was in charge of the chit fund scheme run by the company as per the evidence on record and, therefore, under section 58-C only the accused No. 1 company and the accused No. 2 who was the Managing Director of the company in charge of the scheme and was conducting the business of the company, are liable to be convicted and punished under section 58-B read with section 58-C of the Reserve Bank of India Act. Consequently, I convict the accused Nos. 1 and 2 of the offence punishable under section 58-B(5)(a)(i) read with section 58-C of the Reserve Bank of India Act, 1934. 14. Before awarding the sentence, it is necessary to hear the accused No. 2 on the sentence. I have heard accused No. 2 about the sentence to be imposed on him section 58-B(5)(a) provides for the sentence of imprisonment extending upto three years and fine which may extend to twice the amount of the deposit received by the accused. The sentence of imprisonment as well as fine are required to be imposed. Taking into consideration that more than 10 years have elapsed from the date of the commission of the offence and also taking into consideration that the company is defunt and the person who is liable to be punished as a Managing Director of the company is merely an Insurance Agent earning about Rs. 2,000/- to Rs. 3,000/- per month having a family of six persons depending on him, I think the sentence of imprisonment till the rising of the Court and fine of Rs. 15,000/- (Rs. 5,000/- in Criminal Appeal No. 631 of 1981 and Rs. 10,000/- in Criminal Appeal No. 632 of 1981 or in default R.I. for six months in each case and fine of Rs. 15,000/- (Rs. 5,000/- in Criminal Appeal No. 631 of 1981 and Rs. 10,000/- in Criminal Appeal No. 632 of 1981 or in default R.I. for six months in each case and fine of Rs. 15,000/- in each case to the accused No. 1 will meet the ends of justice in each of the two cases. Hence the following order: ORDER The Criminal Appeal 631 of 1981 is partly allowed. The acquittal of the accused Nos. 1 and 2 by the trial Magistrate is set aside and the accused No. 1 and 2 are convicted of the offence punishable under section 58-B(5)(a)(i) read with 58-C of the Reserve Bank of India Act, 1934. The accused No. 1 i.e. the company is sentenced to pay a fine of Rs. 15,000/-. The accused No. 2 is sentenced to imprisonment for a day till the rising of the Court and to pay a fine of Rs. 5,000/- or in default to suffer R.I. for six months. The Criminal Appeal No. 631 of 1981 is partly allowed. The acquittal of the accused Nos. 1 and 2 by the trial Magistrate is set aside and the accused Nos. 1 and 2 are convicted of the offence punishable under section 58-B(5)(a)(i) read with 58-C of the Reserve Bank of India Act, 1934. The accused No. 1 i.e. the company is sentenced to pay a fine of Rs. 15,000/-. The accused No. 2 is sentenced to imprisonment for a day till the rising of the Court and to pay a fine of Rs. 10,000/- or in default to suffer R.I. for six months. Both the appeal against the rest of the accused are dismissed. The Criminal Appeals No. 989 of 1981 filed by the State, n view of the decision of the similar appeals referred to above does not survive. The accused No. 2 at his request is granted two months time to pay the fine. The accused No. 2 has undergone a day's imprisonment. Order accordingly. -----