High Court of KeralaSingle Judge2021-02-16Crl.MC dismissed; order to expedite trial

M/S K-LINK HEALTHCARE (INDIA) PVT. LTD. v. State of Kerala and The Superintendent of Police, Crime Branch CID, Economic Offence Wing-III, Kozhikode

Case / Petition Number:Crl.MC.No.5080 OF 2017(D)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P. SOMARAJAN
Judgment Date: 2021-02-16
Court Decision / Holding: The Crl.M.C. is dismissed accordingly. The court directed the trial court to expedite disposal of the case within six months from receipt of a copy of this order.
Final Disposition: Crl.MC dismissed; order to expedite trial

Parties to the Case

Appellants / Petitioners

M/S K-LINK HEALTHCARE (INDIA) PVT.LTD.

Respondents

State of Kerala represented by the Public Prosecutor, High Court of Kerala, Ernakulam
The Superintendent of Police, Crime Branch CID, Economic Offences Wing III, Kozhikode

Legal Representation & Advocates

Counsels for Petitioners

• Sri.T.M.Sreedharan (Sr.)
• Sri.V.P.Narayanan
• Ms. Nisha John

Counsels for Respondents

• Public Prosecutor (Sri M.R. Dhanil)
• Sri Sursh Babu Thomas for ADGP

Case Synopsis & Summary

This Kerala High Court criminal miscellaneous case challenges the registration of an FIR under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and the final report in Crime No.24/2013 (CB-CID, EOW-III Kozhikode). The petitioner alleges that the accused engaged in manufacturing ayurvedic medicines and promoted a business by enrolling about 12,000 persons through a money-chain linkage, purportedly paying commissions at multiple levels to secure quick, easy money. The core contention is that there is no Money Circulation Scheme; only a portion of employees were used for canvassing, and offering commissions to some individuals for promotion cannot, by itself, constitute a Money Circulation Scheme. The court recalls the principle laid down by a three-judge bench in State of West Bengal v. Swapan Kumar Guha, which requires (i) active promotion or conduct of a scheme for quick or easy money and (ii) a demonstrable link between enrollment and the opportunity for quick money. While prima facie the allegations suggest a money-chain model, the court stresses that evidence is decisive and that the matter is not appropriate for exercise of jurisdiction under Section 482 Cr.P.C. Ultimately, the court dismisses the Crl.M.C. but directs the trial court to expedite disposal within six months, indicating that the authenticity of the charge will depend on admissible evidence.

Provisions of Law Cited

Prize Chits and Money Circulation Schemes (Banning) Act, 1978 - Section 2(c)Prize Chits and Money Circulation Schemes (Banning) Act, 1978 - Sections 3, 4, 5 and 6Code of Criminal Procedure, 1973 - Section 482(Cr.P.C.)

Legal Doctrines & Maxims

Prima facie

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that there is no money circulation scheme within the meaning of the Act; merely offering commissions to a few persons for canvassing business does not establish a money circulation scheme. It relies on the tests laid down by the Supreme Court in State of West Bengal v. Swapan Kumar Guha, particularly that a money circulation scheme must promote or conduct a scheme for quick money and that enrollment into the scheme must affect the possibility of obtaining quick money; the alleged enrollment of 12,000 people and the distribution of a couple of medicines is not decisively proven as a Money Circulation Scheme; hence the FIR should be quashed under Section 482 Cr.P.C. Respondents’ arguments are that the chain-like enrollment and large-scale collection of money indicate a money-chain enterprise under the Act; the prima facie case warrants inquiry, and the court should not discharge or quash at this stage, as evidence will determine the exact charge and scope under the Act.

Contentions of Respondents

The state contends that a Money Circulation Scheme existed, evidenced by enrollment of around 12,000 persons with a chain-like linkage and payment of commissions, which constitutes a prohibited scheme under the Act; the matter is not fit for quashing under 482 Cr.P.C. and the appropriate forum is trial with expeditious disposal. The State relies on established jurisprudence defining Money Circulation Schemes and argues that the allegations merit continued investigation and prosecution.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
State of West Bengal and Others v. Swapan Kumar Guha and Others	(1982 KHC 419 : AIR 1982 SC 949)	Positive	The judgment cites this decision to define the Money Circulation Scheme under the Act, outlining the two-fold test: promotion of a scheme for quick money and enrollment-dependent prospect of quick money.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE P.SOMARAJAN** **TUESDAY, THE 16TH DAY OF FEBRUARY 2021 / 27TH MAGHA,1942** ## **Crl.MC.No.5080 OF 2017(D)** **AGAINST THE ORDER/JUDGMENT IN CC 100/2017 OF CHIEF JUDICIAL MAGISTRATE, KOZHIKODE** **CRIME NO.24/2013 OF CB-CID, ECONOMIC OFFENCES WING -III, KOZHIKODE** ## **PETITIONER/1ST ACCUSED:** **M/S K-LINK HEALTHCARE (INDIA) PVT.LTED. DOOR NO. 103/A, 7TH FLOOR, NAVIN'S PRESIDIUM, NELSON MANICKAM ROAD, AMINJIKARAI, CHENNAI - 600 029, REPRESENTED BY ITS BRANCH MANAGER AND AUTHORIZED SIGNATORY MR. SUNIL G.P., S/O. MR. K.G. PURUSHOTHAMAN.** **BY ADVS. SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.NISHA JOHN** ## **RESPONDENTS/STATE & COMPLAINANT:** - **1 STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM - 682 031.** - **2 THE SUPERINTENDENT OF POLICE CRIME BRANCH CID, ECONOMIC OFFENCE WING III, KOZHIKODE - 673 001.** ## **R1 BY ADDL.DIRECTOR GENERAL OF PROSECUTION** ## **PUBLIC PROSECUTOR.SRI.M.R.DHANIL, SRI.SURSH BABU THOMAS FOR ADGP** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 16.02.2021, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **Crl.MC.No.5080 OF 2017(D) 2** ## **ORDER** The challenge is against the registration of FIR under Sections 3,4,5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and the submission of a final report. 2. The allegation is that the accused who was engaged in the manufacture of some ayurvedic medicine and its sale under the guise of promoting his business adopted a money circulation scheme enrolling around 12000 persons offering and giving commission at the various level of the chain and linkage in order to obtain quick and easy money. It was challenged on the ground that there is no Money Circulation Scheme and only some of their employees were deputed for business canvass. _Inter_ _alia_ , it was contended that mere offering of commission to some other person in promoting the business cannot be termed as a Money Circulation Scheme. 3. A three Judge Bench of the Apex Court in ## **Crl.MC.No.5080 OF 2017(D) 3** **State of West Bengal and Others v. Swapan Kumar Guha and Others (1982 KHC 419 : AIR 1982 SC 949)** had the occasion to consider what actually amounts to a Money Circulation Scheme comprehended within the statutory meaning of Section 2(c) of the Act and laid down that it must be proved that he is promoting or conducting a scheme for the making of quick or easy money and secondly the chance or opportunity of making quick or easy money must be shown to depend upon an event or contingency relative or applicable to the enrollment of members into that scheme. 4. The allegation is that around 12000 persons were enrolled by offering commission at the various level of linkage by making a chain/linkage, by which huge amounts were collected rather than selling the items or promoting their business by adopting a Money Circulation Scheme. Amounts were given at the various level of linkage starting from the top to the last person. _Prima facie,_ it appears that it will attract the offence alleged since the allegation is against the conduct of a ## **Crl.MC.No.5080 OF 2017(D) 4** money chain business by collecting quick and easy money depending upon the enrollment of members into a money chain scheme, for which, two or three items of ayurvedic medicines were distributed under that guise. The allegation of enrollment of 12000 persons would prima facie show its seriousness and the nature of enrollment for making easy and quick money in large scale under the guise of sale of two or three items of ayurvedic medicine. Then it is a matter of evidence. Hence, it is not fit and proper to exercise the power under Section 482 Cr.P.C. But the Trial Court shall expedite the disposal of the case within a period of six months from the date of receipt of a copy of this order and shall report compliance. The Crl.M.C. is dismissed accordingly. ## **Sd/-** ## **P.SOMARAJAN** ## **JUDGE** msp **Crl.MC.No.5080 OF 2017(D) 5** ## **APPENDIX** **PETITIONER'S/S ANNEXURES:** - **ANNEXURE I A TRUE COPY OF CERTIFICATE OF INCORPORATION OF THE PETITIONER COMPANY.** **ANNEXURE II A TRUE COPY OF THE APPROVAL ACCORDED BY THE DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, MINISTRY OF COMMERCE AND INDUSTRY, DATED 19.07.2002.** - **ANNEXURE III COPIES OF TAX INVOICES SHOWING THE MODALITIES ADOPTED BY THE PETITIONER.** - **ANNEXURE IV A TRUE COPY OF LETTER DATED 15.02.2005 ISSUED BY THE UNDER SECRETARY TO GOVT. OF INDIA TO CLARIFY THE PETITIONER HAS PERMISSION TO IMPORT HEALTH CARE PRODUCTS.** - **ANNEXURE V COPIES OF VARIOUS BILLS OF ENTRIES EVIDENCING SAMPLE OF GOODS IMPORTED BY THE PETITIONER COMPANY.** - **ANNEXURE VI A COPY OF THE LICENSE ISSUED BY THE OFFICE OF THE ASST.DIRECTOR OF DRUGS CONTROL ZONE - II TO SELL, STOCK OR EXHIBIT (OR OFFER) FOR SALE, OR DISTRIBUTE BY WHOLESALE, DRUGS, OTHER THAN THOSE SPECIFIED IN SCHEDULE C, C(1) AND X.** - **ANNEXURE VII A COPY OF ORIGINAL PACKING OF ONE OF THE PRODUCTS OF PETITIONER-COMPANY.** - **ANNEXURE VIII A COPY OF SCHEDULE SHOWING THE TAXES PAID BY THE PETITIONER COMPANY FOR THE PAST 12 YEARS INCLUDING SALES TAX, CUSTOMS DUTY AND INCOME TAX.** - **ANNEXURE IX A COPY OF THE GUIDELINES DATED 12.09.2011 ISSUED BY RESPONDENT NO. 1.** - **ANNEXURE IX (A) A TRUE TYPES COPY OF CIRCULAR NO. 21/2016 DATED 14.10.2016 ISSUED BY THE RESPONDENT NO. 1.** **ANNEXURE X A COPY OF OFFICE MEMORANDUM NO. F.NO. 21/18/2014 - IT(VOL-II) DATED 09.09.2016.** ## **Crl.MC.No.5080 OF 2017(D) 6** - **ANNEXURE XI** - **A TRUE COPY OF DIRECT SELLING PLAN OF THE PETITIONER COMPANY.** - **ANNEXURE XII** **A TRUE COPY OF COMPARISON CHART SHOWING THE DIFFERENCE BETWEEN A DIRECT SELLING BUSINESS AND AN ILLEGAL PYRAMID SCHEME PREPARED BY THE INDIAN DIRECT SELLING ASSOCIATION.** ## **ANNEXURE XIII** - **A TRUE COPY OF THE ANNUAL SURVEY (20122013) OF THE INDIAN DIRECT SELLING INDUSTRY PUBLISHED BY THE PHD CHAMBER.** - **ANNEXURE XIV** - **A TRUE COPY OF AN ANALYSIS OF THE PRODUCT PORTFOLIO OF M/S K-LINK HEALTH CARE (INDIA) PVT.LIMITED.** - **ANNEXURE XV A TRUE COPY OF THE STOCK ANALYSIS OF THE PETITIONER COMPANY AS ON 31.03.2015 (ALSO SHOWING THE LOSS ACCRUING TO THE PETITIONER DUE TO EXPIRY DATES ATTACHED TO THE PRODUCTS)** - **ANNEXURE XVI A COPY OF THE STATEMENT OF THE BRANCH MANAGER, COCHIN OF THE PETITIONER COMPANY DATED 01.01.2013.** - **ANNEXURE XVII CERTIFIED COPY OF THE FIRST INFORMATION REPORT (FIR) DATED 05.01.2013 BEING CRIME NO. 15 OF 2013 AT KASABA POLICE STATION, KOZHIKODE CITY, KOZHIKODE, KERALA.** ## **ANNEXURE XVIII** - **A COPY OF THE WRIT PETITION (C) NO. 1451 OF 2013 DATED 13.01.2013 (WITHOUT EXHIBITS) FILED IN THIS HON'BLE COURT.** - **ANNEXURE XIX A COPY OF THE I.A.NO. 2614 OF 2013 FILED IN WRIT PETITION (C) NO. 1451 OF 2013 BY THE PETITIONER HEREIN SEEKING DEFREEZING OF THE ACCOUNTS.** - **ANNEXURE XX A COPY OF THE COUNTER AFFIDAVIT FILED IN I.A.NO. 2614 OF 2013 IN W.P.(C) 1451/13.** - **ANNEXURE XXI A COPY OF THE ORDER DATED 19.03.2013 IN I.A.NO. 2614 IN W.P(C) NO. 1451 OF 2013 IN THIS HON'BLE COURT.** - **ANNEXURE XXII** - **A COPY OF THE CMP NO. 1163 OF 2013 FILED BY THE PETITIONER HEREIN BEFORE THE CHIEF JUDICIAL MAGISTRATE, KOZHIKODE.** ## **Crl.MC.No.5080 OF 2017(D) 7** - **ANNEXURE XXIII A TRUE COPY OF THE REPLY OF THE RESPONDENTS TO THE CMP NO. 1163 OF 2013.** - **ANNEXURE XXIV A COPY OF THE ORDER DATED 17.06.2013 PASSED IN CMP NO. 1163 OF 2013 BY THE CHIEF JUDICIAL MAGISTRATE, KOZHIKODE.** - **ANNEXURE XXV A TRUE COPY OF THE PETITION BEING CRL.M.C.NO. 2773 OF 2013 IN THIS HON'BLE COURT.** - **ANNEXURE XXVI A TRUE COPY OF THE REPLY STATEMENT FILED IN CRL.M.C. NO. 2773 OF 2013.** - **ANNEXURE XXVII A TRUE COPY OF THE ORDER DATED 02.08.2013 WHEREBY THE HON'BLE SUPREME COURT WAS PLEASED TO GRANT BAIL TO THE DIRECTOR OF THE PETITIONER COMPANY.** - **ANNEXURE XXVIII A TRUE COPY OF COMMON ORDER OF THIS HON'BLE COURT IN CRL.M.C.NO. 2773 OF 2013 AND W.P.(C)NO. 1451 OF 2013.** - **ANNEXURE XXIX A TRUE COPY OF THE PETITION IN SLP(C)NO. 14919/2015 (WITHOUT ANNEXURES) FILED BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXX A TRUE COPY OF THE COUNTER AFFIDAVIT (WITHOUT ANNEXURES) FILED IN S.L.P.(C) 14919/15 BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXXI A TRUE COPY OF THE REJOINDER (WITHOUT ANNEXURES) FILED TO THE COUNTER AFFIDAVIT IN S.L.P.(C) 14919/15 BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXXII A TRUE COPY OF THE PETITION IN SLP (CRL.) NO. 4371 (WITHOUT ANNEXURES) FILED BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXXIII A TRUE COPY OF THE COUNTER AFFIDAVIT (WITHOUT ANNEXURES) FILED IN SLP.(CRL.) 4371/2015 FILED BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXXIV** - **A TRUE COPY OF THE REJOINDER (WITHOUT ANNEXURES) FILED TO THE COUNTER AFFIDAVIT IN SLP.(CRL.)NO. 4371/2015 FILED BEFORE THE HON'BLE SUPREME COURT.** - **ANNEXURE XXXV** - **CERTIFIED COPY OF THE FINAL REPORT/CHARGE SHEET DATED 27.12.2017** **Crl.MC.No.5080 OF 2017(D) 8** **TAKEN COGNIZANCE BY CHIEF JUDICIAL MAGISTRATE KOZHIKODE AS C.C.NO. 11/2017.** **ANNEXURE XXXVI CERTIFIED OF COPY OF THE STATEMENTS RECORDED UNDER SECTION 161 OF THE CRIMINAL PROCEDURE CODE IN CRIME NO. 15/13 OF KASABA POLICE STATION. ANNEXURE XXXVII CERTIFIED COPY OF THE COMMON JUDGMENT DATED 03.05.2017 PASSED BY HON'BLE SUPREME COURT IN CIVIL APPEAL NO. 6314 OF 2017 AND CRIMINAL APPEAL NO. 892 OF 2017.** **RESPONDENTS ANNEXURES: NIL** **//TRUE COPY//** **P.A. TO JUDGE**