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PETITIONER: RAMASWAMY NADAR

       Vs.

RESPONDENT: THE STATE OF MADRAS

DATE OF JUDGMENT: 11/10/1957

BENCH:

ACT:        Criminal law-Misappropriation-Prize Competition-Entry  fees-        No  rule that amount of fees should be reserved for  Payment        to  prize  winners--Failure  to  Pay  prize  winners-Whether        dishonest  misappropriation-Reversal of order of  Acquittal-        Conviction  for  a different  offence-Legality-Indian  Penal        Code  (Act  XLV  of 1860), ss.  403,  420-Code  of  Criminal        Procedure (Act V of 1898),s.  423(1)(a)(b).

HEADNOTE:        The appellant, who used to carry on the business of conduct-        ing prize competitions, was prosecuted on a charge under  S.        420 of the Indian Penal Code.  The case against him was that        though  he  found that his competitions did  not  attract  a        sufficiently  large  number  of  competitors  to  yield  the        guaranteed  prize  money, he advertised the  competition  in        question  and collected a large amount by way of entry  fees        with a dishonest intention, and did not utilize any part  of        the collected amount towards payment of the prizes  offered.        The  Magistrate  found that there was no evidence  that  the        accused had used any part of the entry fees collected in any        of  the competitions for his own use but that, on the  other        hand,  in  order  to meet the heavy  demands  of  the  prize        winners in respect of the previous competitions, the accused        had  spent not only the amounts collected by him but also  a        large  amount of money of his own capital.   He  accordingly        came  to  the conclusion that though the  accused  had  been        utterly  reckless  and irresponsible in his conduct  of  the        competitions and thereby caused loss to certain persons,  he        had  not been guilty of any fraudulent or dishonest  conduct        and so could not impute any criminal liability to him.   The        High  Court  agreed with the Magistrate  in  acquitting  the        appellant  of  the charge under s. 420 of the  Indian  Penal        Code  but held that, though the. appellant did not have  any        dishonest  intention  in the initial stages,  there  was  no        justification  for not having disbursed the amount of  money        collected in respect of the competition in question  Prorate        amongst  the  declared prize winners, and convicted  him  of        misappropriation under S. 403, Indian Penal Code.  On appeal        to the Supreme Court it was contended for the appellant that        (1) the High Court was not authorized by S. 423(1)(a) of the        Code of Criminal Procedure to convert an order of  acquittal        into  an order of conviction in respect of an offence  other        than  that  for  which the accused was tried  by  the  trial        Court, and (2) on the facts and circumstances of the case no        offence under s . 403, Indian Penal Code, had been made out.        94        740        Held:     (1)  that  under  S.  423(1)(a)  of  the  Code  of

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      Criminal Procedure the High Court has, in an appeal from  an        order  of    acquittal, the power  to  reverse the order and        find  the  accused guilty of the offence  disclosed  by  the        evidence.        (2)  that in view of the fact that there was no express pro-        vision  in  the rules and conditions of the  competition  in        question  that  the  money collected by way  of  entry  fees        should be reserved for payment to the prize winners in  that        very competition, the appellant could not be held guilty  of        misappropriation under S. 403 of the Indian Penal Code.

JUDGMENT:        CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 153 of        1957.        Appeal  by special leave from the judgment and  order  dated        the  3rd April, 1957, of the Madras High Court  in  Criminal        Appeal No. 393 of 1956 arising out of the judgment and order        dated  the 10th February, 1956, of the Court of  the  Fourth        Presidency  Magistrate, G. T. Madras in C. C. No.  10027  of        1955.        H.   J.  Umrigar, R. Ganapathy lyer, and G.  Gopalakrishnan,        for the appellant.        P.   Rama Reddy and T. M.. Sen, for the respondent.        1957.   October 11/21.  The following Judgment of the  Court        was delivered by        SINHA  J.-This appeal by special leave is  directed  against        the judgment and order of a Single Judge of the Madras  High        Court,  dated  April  3, 1957, setting aside  the  order  of        acquittal  passed  by the fourth  Presidency  Magistrate  at        Madras,  dated February 10, 1956, on a charge under s.  420,        Indian  Penal  Code.   The  Government  of  Madras  appealed        against the order of acquittal and the appeal was heard by a        Single  Judge of that Court.  The learned Judge allowed  the        appeal,  but  did not convict the appellant  under  s.  420,        Indian Penal Code, which was the original charge against him        in the trial court, but under s. 403, Indian Penal Code, for        misappropriation, and sentenced him to the maximum period of        two years’ rigorous imprisonment.  Hence, this appeal.        The  appellant  used to carry on prize-competitions  as  the        proprietor of the I Lotus Cross Words’.  Certain persons who        had paid moneys in connection with the        741        prize-competition  No.  92,  complained that  they  had  not        received their prize money though it had been announced that        they  had  competed for the prizes’  offered.   The  police,        after  investigation, submitted a charge-sheet  against  the        accused to the effect that he had, between May 20, 1955, and        June  10,  1955, in his capacity as the  proprietor  of  the        ’Lotus  Cross  Words’, dishonestly induced P.Ws. 1 to  3  to        compete  in  his " bumper competition " No.  92,  by  paying        entry  fees to the tune of Rs. 2,640 on  the  representation        that  the prize winners will get a sum of Rs. 3,10,000,  and        that  on that representation, he had collected one  lac  and        fifteen thousand odd rupees from the public, out of which he        had spent about nineteen thousand rupees towards expenses of        advertising and holding the competition.  Though P.Ws. 1  to        3  and others had been declared as the first prize  winners,        the  accused  had not distributed even the  amount  actually        collected  minus the expenses aforesaid, that is to say  Rs.        96,000  odd,  the  amount  of  the  net  collections.   Tile        prosecution  examined  a number of witnesses to  prove  that        the’ appellant had been holding crossword competitions and a        large  number  of persons had paid moneys by  way  of  entry

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      fees; that the competition in question, namely,  competition        No.  92,  had been advertized with a guaranteed sum  of  Rs.        3,10,000  by way of prizes; that as a matter of fact a  much        smaller  sum had been collected by way of entry  fees;  that        the  three  prosecution witnesses aforesaid and  others  had        been, in due course, declared to be the first prize winners,        but  that none of them had been paid any money.  It is  also        in   evidence   that  a  large  number   of   other   bumper        competitions’,  namely,  Nos. 80, 84 and 88,  had  similarly        been  held,  and  large sums were advertised  to  have  been        guaranteed   as  prize  moneys.   None  of   those   ’bumper        competitions’ yielded the sums so guaranteed.  The  gravamen        of  the charge against the accused was that in spite of  his        recent  experience that none of those ’bumper  competitions’        attracted  a  sufficiently large number  of  competitors  to        yield the guaranteed prize money, the accused had advertised        the competition No. 92 with a guaranteed prize money of        742        Rs. 3,10,000 and that in spite of his having collected about        one  lac  and fifteen thousand odd rupees by  way  of  entry        fees,  none  of  the prizes declared to  have  been  won  by        prosecution  witnesses 1 to 3 and others, had actually  been        paid.  It was, therefore, suggested by the prosecution  that        the  recent history of the prize competitions  conducted  by        the  appellant,  would  show  that  he  was  actuated  by  a        dishonest  intention when he collected one lac  and  fifteen        thousand  odd  rupees  by way of entry  fees,  and  did  not        utilize any part of the collected amount towards payment  of        the prizes offered.  A large volume of documentary  evidence        furnished  by the appellant’s registers and  account  books,        was adduced in support of the prosecution case.        In  his  defence,  the  appellant  stated  in  his   written        Statement that he started the ’Lotus Cross Words’ in August,        1953,  with  a  capital  of  twenty  thousand  rupees,   and        conducted   93   competitions,  but  due   to   insufficient        Collections  in the recent competitions, he was not able  to        respect  all his obligations, so much so that he was  forced        to close down the business owing to loss, on June 22,  1955.        And  to show his bona fides, he had disbursed over a lac  of        rupees  even  after  the closure of  the  business  and  had        settled  the  claims of six thousand out of  seven  thousand        prize  winners.   He,  thus,  claimed  that  less  than  one        thousand  persons’ claims had remained unsatisfied in  spite        of his borrowing money lo carry out his obligations.        The  learned magistrate, on an elaborate examination of  the        evidence  led  before him by the parties,  observed  in  his        judgment  that the accused had not denied the truth  of  the        allegations  of fact made by the prosecution, but  had  only        challenged the insinuations against him that he was actuated        by  a dishonest intention in carrying on  the  competitions,        particularly, No. 92.  He found that none of the  statements        made in the advertisements had been shown to be untrue; that        it  was a fact that it the time, the competition No. 92  had        been announced in the papers, the accused owed a total  debt        of  prize moneys amounting to about four lacs of  rupees  in        respect  of the previous competitions; that the accused  had        other debts to the tune of a lac and fifty seven        743        thousand  odd  rupees and that recent competitions  had  not        even  yielded sufficient amounts, collected by way of  entry        fees,  to  cover the guaranteed prize moneys.  But  he  also        found  that the accused had applied his own funds  amounting        to  about  a lac and a half rupees to the payment  of  prize        moneys.   He  found  that  the  prosecution  had  failed  to        substantiate  its allegations that ninety six  thousand  odd

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      rupees, out of the entry fees collected for the  competition        No.  92, had been utilized by him for his own  purposes  and        not  for  carrying on the competitions.   He  observed  that        there was no evidence that the accused had used any part  of        the entry fees collected in any of the competitions, for his        own  use, or that he took any financial benefit out  of  the        moneys  collected in the recent competitions  including  No.        92.   In other words, the court found that in order to  meet        the  heavy  demands of the prize winners in respect  of  the        previous  competitions, the accused had spent not  only  the        amounts collected by him but also about one and t half  lacs        of  rupees of his own capital.  Thus, instead of making  any        gain  for himself, the accused had incurred a total loss  of        about  a lac and a half of rupees, and still he had to  meet        other  prize winners’ demands, including those of the  three        prosecution  witnesses aforesaid.  On those  considerations,        his  finding was that the accused may have  been  absolutely        foolish  and  reckless and far too optimistic  in  expecting        large sums of money by way of collections of entry fees, but        that  he had not been guilty of any fraudulent or  dishonest        conduct.  Ultimately, he came to the following conclusion:        The mere fact that the accused had been utterly reckless and        irresponsible  in his conduct of the Lotus Cross  Words  and        thereby caused loss to certain persons cannot however impute        a  criminal  liability  to  him.   Hence  I  find  that  the        prosecution  has  not proved beyond  reasonable  doubts  the        guilt of the accused."        On  appeal  by the State to the High Court  of  Madras,  the        learned Single Judge (Somasundaram J.) agreed with the trial        court  in  acquitting the appellant of the charge  under  s.        420,   Indian   Penal  Code,  but  he   convicted   him   of        misappropriation, under s. 403,        744        Indian  Penal Code.  He held that dishonesty at the  initial        stages may not have been there, but according to him,  there        was  no justification for the accused not  having  disbursed        the  ninety  six  thousand odd rupees,  the  net  amount  of        collection  in  competition  No. 92  pro  rata  amongst  the        declared  prize winners.  As large amounts were involved  in        the  transaction which was the subject-matter of the  charge        against  the accused, he imposed the maximum  punishment  of        two years’ rigorous imprisonment.        Substantially  two  points  were raised  on  behalf  of  the        appellant  in  support of the appeal, namely, (1)  that  the        High  Court  is  not authorized by  s.  423(1)(a),  Criminal        Procedure  Code,  to convert an order of acquittal  into  an        order of conviction in respect of an offence other than that        for  which  the  accused was tried by the  trial  court  and        acquitted  by it, that is to say, the High Court  could  not        confirm the order of the trial court acquitting the  accused        of  an offence under s. 420, Indian Penal Code, and, at  the        same  time, convict him of an offence under s.  403,  Indian        Penal  Code, and (2) that on the facts and circumstances  of        this  case, no offence under s. 403, Indian Penal Code,  has        been made out.  Before dealing with the appeal on the merits        covered  by  the  second contention,  it  is  convenient  to        dispose  of the first point.  The powers of the High  Court,        while disposing of an appeal against an order of  acquittal,        are  contained  in s. 423 (1)(a), Criminal  Procedure  Code,        which is in these terms:        423(1)(a)  :  "  in an appeal from an  order  of  acquittal,        reverse such order and direct that further inquiry be  made,        or  that the accused be re-tried or committed for trial,  as        the case may be, or find him guilty and pass sentence on him        according to law;"

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      It was argued that the appellate court is authorized (a)  to        reverse  an  order of acquittal, and (b) to  direct  further        inquiry,  or  (c) to direct that the accused be  retried  or        committed  for  trial,  or (d) to find  him  guilty  and  to        sentence him according to law.  It is pointed out that there        is  no power in the High Court to alter the finding  or  the        charge or the nature of the offence,        745        as is specifically conferred on the High Court under  clause        (b)  of  s. 423( 1). This argument is based on  the  absence        from  clause  (a) aforesaid, of the  following  words  which        occur in clause (b):        "...... or (2) alter the finding, maintaining the  sentence,        or  with  or  without  altering  the  finding,  reduce   the        sentence, or (3) with or without such reduction and with  or        without  altering  the  finding  alter  the  nature  of  the        sentence.........        In  our  opinion, the words just quoted out  of  clause  (b)        which  deals  with  an appeal from a  conviction,  were  not        necessary  for the purpose of clause (a) which deal with  an        appeal  from an order of acquittal.  Under both the  clauses        (a)  and  (b),  the  specific power  to  reverse  the  order        appealed  from,  is  there, but because  there  has  been  a        conviction by the trial court or the court immediately below        the High Court, the latter Court is authorized  specifically        to alter the finding or the nature of the sentence in clause        (b).   In  clause (a) after the High Court  has  decided  to        reverse the order of acquittal, it has been given the  power        to find the accused guilty, besides other powers  enumerated        above.’  The  question naturally arises  ’find  the  accused        person guilty of what?’ The answer sought to be given by the        counsel  for the appellant is that the High Court  may  find        him guilty of the offence with which he stood charged in the        court  below and of which he was acquitted; but not  of  the        offence disclosed by the evidence as that would be adding to        the words of clause (a) the words " of the offence disclosed        "  or  words to that effect which would be contrary  to  the        intention  of  the Code as is shown by the words  of  clause        (b).   But  this argument is wholly ineffective  because  in        either view of the matter the court has to supply some words        in  answer  to  the question ’find him  guilty  of  what  ?’        According to the appellant, those additional words should be        "of  such  offence as has been charged and of which  he  had        been  acquitted", and according to the other view,  "of  the        offence disclosed" If, in construing the section, the  court        has to supply some words in order to make the meaning of the        statute   clear,  it  will  naturally  prefer   the   latter        construction        746        which  is more in consonance with reason and   justice.   It        was also argued on behalf of the appellant that this being a        penal  statute,  the  words of the statute  should  be  very        strictly construed, but even so, the necessity for supplying        certain  additional  words is there in either  view  of  the        matter.   It  has not been contended that  the  trial  court        could  not have exercised the powers contained in  ss.  236,        237  and  238  of the Criminal  Procedure  Code.   What  was        contended was that though those powers may be exercised by a        trial  court  or even by a Court of  Appeal  exercising  its        powers under cl. (b) of s. 423(1), the High Court could  not        exercise those powers acting under cl. (a) of that  section.        But  we do not see any sufficient ground for so  restricting        the  powers  of the High Court hearing an  appeal  under  s.        423(1)(a).  No rulings have been placed before us in support        of  the  contention that s. 423(1)(a) does not  authorize  a

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      High Court to find the accused person guilty of any  offence        other  than  that with which he has been  charged.   On  the        other  hand,  there is a ruling of a Division Bench  of  the        Bombay  High Court in Emperor v. Ismail Khadirsab  (1).   In        that  case,  the accused person had been  acquitted  of  the        charge  of murder and on appeal against the  acquittal,  the        Bombay High Court maintained the acquittal in respect of the        charge of murder, but held the accused guilty of the offence        of  fabricating false evidence.  We are not  concerned  with        the  correctness of the actual decision of the  High  Court,        but  only with the fact that the High Court  recognized  and        acted upon the principle that it is open to the High  Court,        while  deciding  an appeal from an order  of  acquittal,  to        convict  the  accused person of an offence other  than  that        with which he had been charged.  It was sought to be  argued        on behalf of the appellant that the High Court purported  to        follow  the  decision  of their Lordships  of  the  Judicial        Committee of the Privy Council in Begu v. Emperor (2) but it        is  contended  that  this was a case of  an  appeal  from  a        conviction  and  not an appeal from an order  of  acquittal.        But it would appear that the        (1)  (1928) I.L. R. 52 Bom. 385.        (2) (1923) L.R.  I. A. 191.        747        decision  of their Lordships of the Judicial Committee,  was        not based on a consideration of the language of s. 423,  but        of  the provisions of ss. 236 and 237 of the Code.   In  our        opinion,  there  is  no warrant either in  principle  or  on        authority, for the first contention raised on behalf of  the        appellant.  This contention is, therefore, overruled.        It  remains  to consider the merits of the decision  of  the        High Court.  The conclusions of the High Court may be stated        in its own words in the last paragraph of its judgment:        "  Before parting with this judgment I am con.  strained  to        observe that the order of acquittal passed by the Magistrate        is a perverse one.  He is aware and finds also that a sum of        Rs. 96,548-2-3 remained with the accused without being  paid        to the prize winners.  The learned Magistrate seems to think        that  the  prosecution  must  let  in  further  evidence  of        misappropriation.   I am unable to understand the  reasoning        of the Magistrate when he says that there is no evidence  of        misappropriation.  Having found that a sum of Rs. 96,548-2-3        has  not  been  distributed  to the  prize  winners  in  the        competition No. 92 and that he utilized the same towards the        debt  incurred in the previous competitions, one would  have        thought that misappropriation is clearly established."        In our opinion, these observations are very much wide of the        mark.   The High Court has not reversed any of the  findings        of fact recorded by the learned magistrate.  It has differed        only  on  the inference to be derived from  those  findings.        The learned trial magistrate refused to draw an inference of        dishonesty from those facts.  The High Court has come to the        contrary  conclusion.  The question is: was the  High  Court        justified    in   coming   to   the   conclusion   that    "        misappropriation is clearly established?  " In our  opinion,        the  High Court has erred in coming to that conclusion.   In        order  to prove an offence under s. 403, Indian Penal  Code,        the  prosecution  has to prove that the  property,  in  this        case, the net amount of ninety six thousand odd rupees,  was        the property of the prosecution witnesses 1 to 3 and others,        and (2) that the accused misappropriated that 95        748        sum  or converted it to his own use, and (3) that he did  so        dishonestly.   In  our opinion, none  of  these  constituent        elements  of  the offence can be categorically  asserted  to

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      have  been made out.  The entry fees rightly came  into  the        coffers of the accused.  No doubt, he had promised to  award        prizes of the total value of Rs. 3,10,000, but there was  no        further  obligation that the prize money had to come  either        wholly  or in part, from out of the sum collected by him  by        way of entry fees.  He was carrying on the business and  was        found  by the courts below to have disbursed lacs of  rupees        to  winners of prizes in the previous competitions,  and  it        was  conceded on behalf of the prosecution that there is  no        express provision in the rules and conditions of the " Lotus        Cross  Words  " exhibited in this case that  there  was  any        obligation  on  the  part  of the  appellant  to  set  apart        specific   sums   collected  by  way  of  entry   fees   for        disbursement  amongst  the prize winners.  As  a  matter  of        contract,  the legal liability of the appellant to  pay  the        prize  winners was there irrespective of  the  consideration        whether  or  riot he made enough money to  provide  for  the        payment   of  the  prizes  declared  as  a  result  of   the        competition.   But  it was sought to be argued  that  though        there was no specific provision in any statute or other  law        that  the  money collected by way of entry fees,  should  be        reserved  for  payment  to the prize winners  in  that  very        competition,  the  appellant was some sort of a  trustee  or        bailer and should have seen to it that the collected  amount        was disbursed amongst the prize winners.  There was no  such        entrustment   nor   was  there  any  rule  laid   down   for        appropriation  of  the sum collected in  a  particular  way.        There  being no duty to make appropriation in  a  particular        way,  the  appellant  could not be  held  guilty  of  having        misappropriated the ninety six thousand odd rupees which was        the total net collection in competition No. 92.  As  already        pointed  out, the learned trial magistrate had come  to  the        finding  that  there is no evidence that any amount  out  of        this  collection had been appropriated by the  appellant  to        his   own  personal  use.   Whatever  amount  he  had   been        collecting,  he had been applying to running  his  business.        It is true that        749        the later competitions were a losing concern, but as rightly        pointed  out by the learned trial magistrate. the  appellant        cannot be criminally liable for being reckless or unwise  in        carrying  on his business.  In our opinion,  therefore,  the        learned Judge below was in error in characterizing the order        of  acquittal  as  a  perverse  one.   The  learned  Judge’s        decision  is  based  on an  erroneous  assumption  that  the        appellant was bound by law to disburse the amounts collected        in  a  particular competition amongst the prize  winners  of        that  competition.  But it has not been pointed out by  what        process  that conclusion was reached.  Nor has  the  learned        counsel  for the respondent brought any statutory  or  other        rule to our notice casting an obligation on the appellant to        appropriate  the  entry fees in a particular  manner.   That        being so, it must be held that misappropriation has not been        made out either on evidence or as a matter of law.        In the result, the appeal is allowed and the order passed by        the  High Court set aside and the order of acquittal  passed        by the trial court is restored.        Appeal allowed.