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PETITIONER: SHIVNARAYAN KABRA

       Vs.

RESPONDENT: THE STATE OF MADRAS

DATE OF JUDGMENT: 23/08/1966

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. BHARGAVA, VISHISHTHA DAYAL, RAGHUBAR

CITATION:  1967 AIR  986            1967 SCR  (1) 138  CITATOR INFO :  F          1975 SC1223  (18)  RF         1980 SC2047  (13)

ACT: Indian   Penal   Code,   1860,   s.   420-Forward   Contract (Regulation) Act, 1952 (74 of 1952), ss. 2(c), 15,  21-Pucca adatia not a member of any association recognised under  the Act-Representing  that he would carry out  business  through such associations-Constituent parting with money to him  for such transaction -Offence of cheating whether  committed--S. 15 of the Act of 1952 whether contravened.

HEADNOTE: The  appellant who held out as a pucca adatia made a  public advertisement   inviting  people  to  enter   into   forward transactions   through   him.   He  further  said   in   his advertisement   that  he  undertook  forward   business   in accordance  with  pucca adatia system and according  to  the usual  practice  and  usage  of  the  various   associations concerned.  One of his constituents made a complaint against him on e allegation that by his false representation that he was  entitled  to lawfully conduct forward business  he  had induced  the complainant to part with money.  The  appellant was not a member of any of the recognised associations whose members  were  entitled to carry on forward  business.   The prosecution of the appellant was under s. 420 of the  Indian Penal  Code and s. 21 of the Forward Contracts  (Regulation) Act,  1952 (74 of 1952).  In his defence the appellant  said that  he  carried out the transactions in  question  through members  of the recognised associations as an agent  of  the complainant.    The  trial  court  convicted  him  and   the conviction  was  upheld by the Session Judge  and  the  High Court,  whereupon with special leave an appeal was filed  in this Court. HELD  :  (i)  From  the  evidence  it  was  clear  that  the complainant would not have parted with his money but for the inducement  contained in the appeals advertisement  and  his false representation that he could lawfully carry on forward contract  business.    The offence under  s.  420  I.P.C.was therefore proved. [141 C-D] It was not necessary that a false pretence should be made in

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express words for s. 420 I.P.C. to be applicable.  It may be inferred  from all the circumstances including the;  conduct of the person charged. [141 B-C) (ii) The speculative contracts entered into by the appellant with the complainant fell within the definition of  ’forward contracts’  within  the  meaning of  the  Forward  Contracts (Regulation) Act, 1962.  If such contracts were not included within  the definition of ’forward contract’ in s.  2(c)  of the Act the very object of the Act which was passed in order to put a stop to undesirable forms of speculation in forward trading  and  to  correct the abuses  of  certain  forms  of forward  trading in the wide interests of the community  and in particular of the consumers would be defeated. [144 F-H] Heydons  case,  (1584)  3 W. Rep.  16  and  Bengal  Immunity Company  Ltd. v. State of Bihar and others, [1955] 2  S.C.R. 603, referred to. (iii)     There  was no evidence on record to show that  the appellant  placed  the order for the notified  good  with  a member of a recognized 139 association.  But even on the assumption that the  appellant placed an order for the notified goods through a member of a recognised association there was a breach of the  provisions of  the  Act.   The appellant  was  doing  forward  contract business as a pucca adatia.  It is well established that the pucca  adatia has no authority to pledge the credit  of  the upcountry constituent to the Bombay merchant and there is no privity  of contract between the upcountry  constituent  and the  Bombay  merchant.   The pucca  adatia  is  entitled  to substitute  his own goods towards the contract made for  the principal  and  buy the principal’s goods  in  his  personal account.   In  other words the pucca adatia is acting  as  a principal   as  regards  his  constituent  and  not   as   a disinterested   middleman  to  bring  the   two   principals together.    The  appellant  was  acting  as  principal   to principal  so far as the complainant was concerned  and  the contracts were hit by s. 15 of the 1952 Act. [145 B-F] Bhagwandas Narotwndas v. Kanji Deoji, I.L.R. 30 Bom. 205 and Bhagwandas  Parasram v. Burjorio Ruttonji Bomanji,  45  I.A. 29, referred to. (iv)  The appellant was represented at the trial by  eminent counsel and there was no prejudice caused to him by the fact that  the trial was conducted in Tamil and English  both  of which  he  did  not know.  The breach  of  S.  361  Criminal Procedure Code was only an irregularity curable under  s.537 of the Code. [146 C-D]

JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 20  of 1964. Appeal  by special leave from the judgment and  order  dated July 16, 1963 of the Madras High Court in Criminal  Revision Case  No. 1139 of 1961 (Criminal Revision Petition No.  1095 of 1961). Naunit Lal, for the appellant. A. V. Rangam, for the respondent. The Judgment of the Court was delivered by Ramnswami, J. This appeal is brought, by special leave, from the judgment of the Madras High Court dated July 16, 1963 in Criminal Revision Case No. 1139 of 1961. The  appellant  was charged for  having  committed  offences under s. 420, Indian Penal Code and s. 21(d) and (e) of  the Forward  Contracts (Regulation) Act, 1952 (Act 74 of  1952),

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hereinafter  called  the  "Act",  with  regard  to   certain transactions  between the appellant and P.W. 2, Rajam.   The appellant was convicted of all the charges and was sentenced to  rigorous  imprisonment for one year and a  fine  of  Rs. 1,000/-  under S. 420, Indian Penal Code and a fine  of  Rs. 100/- under each of clauses (d) and (e) of s. 21 of the  Act by the District Magistrate, Kumbakonam.  He further directed that  a  sum of Rs. 1,000/- out of the said fine  should  be paid  to  P.W. 2. On appeal, the convictions  and  sentences were affirmed by the Sessions Judge, West Thanjavur. 140 The appellant took the matter in revision to the Madras High Court but the revision application was dismissed. The  appellant was the proprietor of a firm in Bombay  known as "Jawarmal Gulab Chand".  He advertised that people  could invest  capital in cotton, oil-seeds and  other  commodities and that J. G. Market reports issued by him could help  them in  the  matter.  P.W. 2, a whole-sale merchant  dealing  in cotton  seed, ground nut cakes etc. at Kumbakonam  bacame  a subscriber  to the reports.  P.W. 2 asked the appellant  for his  business  terms.   The appellant  sent  him  Ex.   P-30 wherein  he stated that he undertook export,  import,  ready and  forward business in various commodities  in  accordance with Pucca Adatia system and according to the usual practice and  usage of the various associations  concerned.   Neither the  appellant nor his firm was a member of  any  recognised association  within the meaning of the Act.  P.W.  2  placed orders with the appellant and correspondence and  statements of accounts were exchanged between the appellant and P.W.  2 who paid a sum of Rs. 12,000/- as margin.  Subsequent to the demand of P. W. 2 the appellant sent Rs. 1,000/- and also  a final statement showing loss in the transaction and claiming that  a  sum  of Rs. 398 - 52 P was due  to  the  appellant. According  to  the prosecution case, the  appellant  induced P.W. 2 to send him Rs. 12,000/- between May 1, 1958 and June 15,   1958   for  forward  contract  business   in   cotton, castorseeds  and  ground nut by a  fradulent  representation that  the appellant conducted such business even  though  he was  not  actually  entitled to do  any  such  business  and thereby cheated P.W. 2).  The case of the appellant was that he  could  do business under the Pucca  Adatia  system  with members of recognised associations like the Bombay  Oil-Seed and  Oil  Exchange, and the East India  Cotton  Association, Bombay,  though  he himself was not a member  of  either  of these  associations.  The appellant denied that he made  any false representation or that he induced P.W. 2 to part  with his  money.  The case of the appellant was rejected  by  the District   Magistrate   of  Kumbakonam  who   accepted   the prosecution  case  as true and convicted and  sentenced  the appellant on all the charges.  The decision of the  District Magistrate   was  affirmed  by  the  Sessions  Judge,   West Thanjavur in appeal. It  was  argued,  in  the first  place,  on  behalf  of  the appellant  that on the admitted or proved facts no  case  of cheating  has  been  made  out  against  the  appellant  and therefore his conviction under s. 420, Indian Penal Code was illegal.  We are unable to accept this argument as  correct. It has been found that the appellant sent a letter, Ex.   P- 34  along with a copy of the business terms, Ex.  34(a)  "on which  we  undertake  business of  our  clients".   In  this document the appellant has made the representation that he 141 could  do business in forward contracts in  cotton,  grains, seeds,  bullion,  black pepper etc. in accordance  with  the pucca  adatia  system  and "in  accordance  with  the  usual

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practice  and usage of the various associations  concerned". In  Ex.   P-33  the  appellant sent a  telegram  to  P.W.  2 intimating  that  "buying is advisable for  quick  profits". The  appellant  knew fully well that he had no right  to  do forward  business  and  that  he was not  a  member  of  any recognised  association and that he could not  lawfully  ad- vertise to P. W. 2 for investment in forward contracts.   It is  not  necessary that a false pretence should be  made  in express words by the appellant.  It may be inferred from all the circumstances including the conduct of the appellant  in obtaining  the  property and in Ex.  P-34(a)  the  appellant stated something which was not true and concealed from P. W. 2  the  fact  that he was not a  member  or  any  recognised association  and that he was not entitled to carry A on  the forward  contract business.  It is clear that P. W. 2  would not  have  parted with the sum of Rs. 12,000/- but  for  the inducement contained in Ex.  P-34 and the representation  of the  appellant  that  he could  lawfully  carry  on  forward contract business. It  was then submitted on behalf of the appellant  that  the forward contract in the present case was a wagering contract and  fell outside the purview of the Act and the  provisions of  s. 15 of that Act were therefore not attracted  to  this case.   In our opinion, there is no justification  for  this argument.  Before setting out the statutory provisions it is desirable  to indicate briefly the economic implications  of forward trading in commodities, the need for the  regulation of such trading and the mischief which the Act was  intended to  remedy.   The expert committee to which the  Bill  which became  the Act was referred, explained in their report  the meaning of forward trading as follows :               "Forward  trading involves  speculation  about               the  future,  but  not all  forms  of  forward               trading   could   be  considered   as   either               unnecessary  or undesirable for the  efficient               functioning of anything but the most primitive               economy............  To  the extent  to  which               forward     trading     enables     producers,               manufacturers    and   traders   to    protect               themselves  against the uncertainties  of  the               future, and enables all the relevant  factors,               whether   actual  or  anticipated,  local   or               international, to exercise their due influence               on    prices,  it confers a definite  boon  on               the community,  because,  to that  extent,  it               minimises the risks of    production       and               distribution  and makes for greater  stability               of  prices  and  supplies.  It  thus  plays  a               useful  role in modern business.  At the  same               time,  it  must be admitted that  this  is  an               activity  in  which a great  many  individuals               with small means and inadequate               142               knowledge of the market often participate,  in               the   hope   of  quick  or  easy   gains   and               consequently,  forward trading  often  assumes               unhealthy   dimensions,  thereby   increasing,               instead of minimising, the risks of  business.               There   arc  forms  of  forward  trading   for               example,     options,     which     facilitate               participation by persons with small means  and               inadequate    knowledge..........    It    is,               therefore,  necessary  to  eliminate   certain               forms  of forward trading, and  permit  others               under carefully regulated conditions, in order

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             to ensure that, while producers, manufacturers               and traders will have the facilities they need               for the satisfactory conduct of their business               the  wider  interests of  the  community,  and               particularly,  the interest,-,  of  consumers,               will  be  adequately safeguarded  against  any               abuse of such facilities by others." It  was  with these objects that the provisions of  the  Act were enacted. It  is  necessary  at this stage to  set  out  the  relevant provisions  of the Act.  The object of the Act as stated  in the  preamble is ’to provide for the regulation  of  certain matters  relating to forward contracts, the  prohibition  of options  in  goods and for  matters  ,connected  therewith’. Section  2(c) of the Act defines a "forward ,contract" as  a contract  for  the delivery of goods at a  future  date  and which  is  not  a ready  delivery  contract.   Section  2(i) defines  a  "ready delivery contract" as  a  contract  which provides  for  the delivery of goods and the  payment  of  a price therefor, either immediately or within such period not exceeding  eleven days after the date of the contract.   The statute   therefore  makes  a  distinction  between   "ready delivery   contracts"  and  "forward  contracts".    Forward contracts  are again divided into two  categories  ’specific delivery contracts’ and ’non-transferable specific  delivery contracts’.   ’Specific  delivery  contracts’  mean  forward contracts  which  provide for actual  delivery  of  specific goods  at  the price fixed during specified  future  period. ’Non-transferable specific delivery contracts’ are  specific delivery contracts the rights or liabilities under which are not  transferable.  Section 15 of the Act confers  power  on the  Government  to issue  notifications  declaring  illegal forward  contracts with reference to such goods or class  of goods  and  in such areas as may be specified.   Section  15 states               "15.  (1) The Central Government may by  noti-               fication in the Official Gazette, declare this               section  to  apply to such goods or  class  of               goods and in such areas as may be specified in               the  notification, and thereupon,  subject  to               the provisions contained in section 18,  every               forward  contract for the sale or purchase  of               any goods specified in the notification  which               is entered into in the               143               area specified therein otherwise than  between               members of a recognized association or through               or with any such member shall be illegal.               (2) Any forward contract in goods entered into               in  pursuance of sub-section (1) which  is  in               contravention of any of the bye-laws specified               in this behalf under-clause (a) of sub-section               (3) of section II shall be void-               (i)   as respects the rights of any member  of               the  recognised  association who  has  entered               into  such  contract in contravention  of  any               such bye law, and also               (ii)  as  respects  the rights  of  any  other               person  who has knowingly participated in  the               transaction entailing such contravention. Section   17  authorises  the  Government  to  prohibit   by notification  any forward contract for the sale or  purchase of any goods or class of goods to which the provisions of s. 15  have not been made applicable.  Section 18 exempts  non- transferable specific delivery contracts from the  operation

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of  these  sections.  Section 21 relates  to  penalties  and reads as follows:               "21.  Any person who-               (a) .....................               (b) .....................               (C) .....................               (d)  not  being  a  member  of  a   recognised               association,   wilfully  represents   to,   or               induces,  any person to believe that he  is  a               member  of  a recognised association  or  that               forward contracts can be entered into or  made               or performed, whether wholly or in part, under               this Act through him, or               (e)  not  being  a  member  of  a   recognised               association  or his agent authorised  as  such               under   the   rules  or   bye-laws   of   such               association, canvasses, advertises or touts in               any manner, either for himself or on behalf of               any  other person, for any business  connected               with forward contracts in contravention of any               of the provisions of this Act, or               shall, on conviction, be punishable-               (i)  for  a first offence,  with  imprisonment               which may extend to two years, or with a  fine               of not less than one thousand rupees, or  with               both;               144               (ii) for a second or subsequent offence,  with               imprisonment which may extend to two years and               also  with fine; provided that in the  absence               of   special  and  adequate  reasons  to   the               contrary  to be mentioned in the  judgment  of               the court, the imprisonment shall be not  less               than one month and the fine shall be not  less               than one thousand rupees." It was argued on behalf of the appellant that the  contracts in this case were not really meant for delivery of goods but were  speculative in character.  It was contended that to  a contract  of  this description the Act has  no  application. Mr.  Naunit  Lal argued that the words of s.  2(c)  must  be literally  construed and must be taken to cover  only  those contracts  in which the parties intended actual delivery  of goods at a future date.  In our opinion, the  interpretation for  which  Mr.  Naunit Lal contends is  against  the  whole scheme  and purpose of the Act.  If the expression  "forward contracts" in s. 2(c) is not construed so as to include spe- culative  contracts  which ostensibly are  for  delivery  of goods the provisions of the Act would be rendered  nugatory. It  is a sound rule of interpretation that a statute  should be  so construed as to prevent the mischief and  to  advance remedy according to the true intention of the makers of  the statute.  In construing therefore s. 2(c) of the Act and  in determining its true scope it is permissible to have  regard to  all  such  factors as can  legitimately  be  taken  into account  in ascertaining the intention of  the  legislature, such as the history of the statute, the reason which led  to its being passed, the mischief which it intended to suppress and  the  remedy  provided by the  statute  for  curing  the mischief.   That was the rule laid down in Heydon’s  case(1) which  was  accepted by this Court in  The  Bengal  Immunity Company Limited v. The State of Bihar and others(2). As we have already pointed out, the Act was passed in  order to put a stop to undesirable forms of speculation in forward trading  and  to  correct the abuses  of  certain  forms  of forward trading in the wide interests of the community  and,

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in  particular,  the  interests of the  consumers  for  whom adequate   safeguards  were  essential.   In  our   opinion, speculative  contracts  of the type covered in  the  present case are included within the purview of the Act.  One of the contracts in the present case is Ex.  P-42 in which P. W.  2 placed an order for supply of 100 bales of cotton Jarilla to be  delivered  in August, 1958 at Rs. 654/- per  Candy.   We think  that a contract of this description falls within  the definition of "forward contract" within the meaning of  this Act and the provisions of that Act are therefore  applicable to  this  case.  We consider that Mr. Naunit  Lal  has  been unable  to  make good his submission on this aspect  of  the case. (1)  [1584] 3 W. Rep, 16: 76 E.R. 637 (2) [1955] 2 S.C.R. 603. 145 It was then contended for the appellant that even if the Act was applicable there is no breach of the provisions of s. 15 because the appellant placed his order for the goods covered by  the  contract  through  "a  member  of  the   recognised association"  as  contemplated  in s. 15 of  the  Act.   The argument  was stressed that the appellant was merely  acting as  an  agent  of P. W. 2 and had placed an  order  for  the notified   goods   through  a  member  of   the   recognised association and there was no breach of any of the provisions of  the  Act.   We are unable to  accept  this  argument  as correct.   In the first place, there is no evidence  on  the record  of  the case to show that the appellant  placed  the order for the notified goods with a member of the recognised association.  But even on the assumption that the  appellant placed  an order for the notified goods through a member  of the  recognised  association  there is, in  our  opinion,  a breach of the provisions of the Act.  The reason is that the appellant  was  doing forward contract business as  a  Pucca adatia.  It is well-established that the pucca adatia has no authority to pledge the credit of the upcountry  constituent to  the Bombay merchant and there is no privity of  contract as   between  the  upcountry  constituent  and  the   Bombay merchant.   The pucca adatia is entitled to  substitute  his own  goods towards the contract made for the  principal  and buy  the  principal’s goods on his  personal  accounts.   In other  words,  the  pucca adatia is not  the  agent  of  his constituent  but he is acting as a principal as regards  his constituent  and not as a disinterested middleman  to  bring two  principals  together.   The  legal  position  has  been explained   by  the  Bombay  High  Court  in  Bhagwandas   A Tarotamdas  v. Kanji Deoji(l) and affirmed by  the  Judicial Committee  in  Bhagwandas  Parasram  v.  Burjorji   Ruttonji Bomanji(2).   In the present case, therefore, the  appellant was acting as principal to principal, so far as P. W. 2  was concerned and the contracts are hit by the provisions of  s. 15 of the Act. We pass on to consider the next contention of the  appellant that  there was a breach of s. 361, Criminal Procedure  Code which states:               "361. (1) Whenever any evidence is given in  a               language not understood by the accused, and he               is  presentin person, it shall be  interpreted               to him in open Court in a language  understood               by him.               (2) If he appears by pleader and the  evidence               is given in a language other than the language               of  the  Court,  and  not  understood  by  the               pleader,  it  shall  be  interpreted  to  such               pleader in that language.

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   ..............................................." (1) I.L.R. 30 Bom. 205.           (2) 45 I.A. 29. 146 It  was said that the evidence of the prosecution  witnesses was given either in Tamil or in the English language and the appellant did not know either of the languages and so he was not  able  to  take  part in  the  trial.   Mr.  Naunit  Lal contended  that there was a breach of the requirement of  s. 361 (1), Criminal Procedure Code and the trial was vitiated. We  do  not think there is any substance in  this  argument. Even  if  it  is assumed that the  appellant  did  not  know English  or  Tamil  the  violation, if  any  of  s.  361(1), Criminal Procedure Code was merely an irregularity and it is not shown in this case that there is any prejudice caused to the  appellant  on this account.  It is pointed out  by  the Sessions Judge that the appellant did not make any objection at  the time the evidence was given and it appears  that  he was   represented  by  two  eminent  advocates-Sri   V.   T. Rangaswami  Iyenger  and Sri R. Krishnamoorthy  Iyer-in  the trial court who knew both these languages and who would  not have allowed the interest of the appellant to be jeopardised even   to  the  smallest  extent.   In  our   opinion,   the irregularity  has  not  resulted in any  injustice  and  the provisions of s. 537, Criminal Procedure Code are applicable to ,cure the defect. Lastly, it was submitted that the 6 items of allged cheatin- were  combined together in one charge and the conviction  of the  appellant is therefore illegal.  There is no  merit  in this  argument because the lower courts have found that  all the  six  items  of cheating were part  and  parcel  of  one transaction  and  the  trial of the appellant  on  a  single charge  was  therefore permissible under  s.  239,  Criminal Procedure Code. For  the reasons expressed we hold that the decision of  the High  Court should be affirmed, and this. appeal  should  be dismissed. G.C.                 Appeal dismissed. 147