9911796707
TMI Blog1932 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... gued on behalf of the respondents that the articles of association disclose purposes far beyond those appearing in the memorandum of association. It is contended that the articles disclose that the object of the company was to conduct a lottery. The appellants, on the other hand, contend that the object of the company was to benefit charity and that there was nothing illegal in the conduct of the company. Reference must be made at this stage to the memorandum of association. There we find that, amongst other objects, one object is to raise general donation funds to carry out charitable objects. Of the special donation fund raised, not less than 30 per cent, is to be invested entirely and permanently in Government securities and not more than 70 per cent, on the security of immoveable properly. Of the interest from the before mentioned investments, not less than 75 per cent, is to be utilised in granting personal loans to the donors in paying relief bonuses to their heirs. At the extraordinary general meetings of the company held on the 25th November and the 17th December, 1930, in lieu of certain existing articles certain new articles were incorporated after sanction by the shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of lottery is found in Webster's Dictionary viz ., a distribution of prizes by lot or chance. In the present case is there anything which is determined by lot or chance ? It is con tended by the respondents that there is in the case of the loans because the loan is dependent upon whether a certificate is drawn or not, and the benefit is, therefore, dependent upon chance. It clearly is dependent upon chance. Here the drawing is the chance and it cannot seriously be contended that the certificate-holder is dependent for his benefit upon anything else than chance. Suppose a certificate-holder has only one certificate. If he is lucky, he may get his benefit during the first year itself ; If he is not lucky, he may not get it, we are told, for at least sixty years. He may hold 12 certificates in which case he has 12 chances in every yearly drawing and under the cash bonus scheme he may be entitled to a cash bonus from Rs. 6,000 to Rs. 1,20,000 if all of them are drawn. The question is whether this necessarily leads to the conclusion that the scheme is a lottery and, in considering the question, English decisions upon the point may be more usefully considered since there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by subscriptions from the general public and each subscriber obtained a 'share warrant,' which conferred no interest in the company but entitled the holder to participate in the ballots. The ballots were drawn in the ordinary way and the drawers of the winning number won the right to loans of sums varying from 5 to 1000 without interest for 50 years subject to a deduction of 10 percent, for expenses and if no security was given for the repayment of the loans, to a further deduction of 20 per cent. This latter sum was allowed to accumulate in the hands of the company or invested to provide a fund for the repayment of the subscriptions during the 50 years to subscribers who presented their share warrant: Held, this was a distribution of prizes by lot or chance and therefore a lottery." [Ed.] According to the head-note there is unfortunately no report available in Madras the facts were very similar to those in the present case. The head-note is set out in the judgment of the trial Court and it is, therefore, not necessary to repeat it here. In that case on the facts it was held that there was a distribution of prizes by lot or chance and, therefore, a lottery. It was argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion." In this Order of Reference to the Full Bench, Waller, J., stated that the two questions which arose were (1) whether the fund was a lottery and (2) if it was, whether the subscriptions were recoverable. When the case came before the Full Bench, as it was then constituted, a finding was called for as to whether an offence as defined by section 294-A of the Indian Penal Code was committed when the transaction was formed. The District Munsif found as follows : "The plea was raised by the defendants. The onus is on them. Nothing is placed before me by them wherefrom I could determine how the chit fund was organised and advertised and whether any one who liked could join by merely paying subscriptions, points considered to be essential for a satisfactory solution of the question whether the chit fund was a lottery. As observed in the order of remand, the rules of the fund as given in the printed book filed with the plaint are not sufficient to make this clear. In spite of facilities having been afforded to defendants, they have not chosen to appear before me and let in evidence though I waited till this day. I must, therefore, answer the question in the negative." When the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is determined by chance, but not if the winner is determined by skill. In the present case none of the parties are betting against each other. There are no two sides unless the sub scribers on the one hand and the company on the other can be said to be sides. The scheme under consideration seems to me to have none of the elements of a wager but to possess all of those of a lottery as defined. It was also argued for the appellants that it was essential to a lottery that there should be a money prize. This is clearly not necessary as the case of Taylor v. Smetten ( supra ) shows. Nor can it affect the question that the subscriber receives the whole of the amount subscribed by him back again on some future date. What constitutes a lottery is that some gain is to come to the subscriber dependant upon pure chance, any element of skill being absent. In my view, the learned trial Judge was right in holding that the conduct of the appellant company was illegal under section 294-A of the Indian Penal Code. It was further contended that, as the company was formed for the purpose of benefitting charities and the lottery was merely an annexe to the original business, no offence can be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was formed and that the objectionable features of it can be removed. It seems to me, however, that by the removal of its obnoxious features the substratum of the company goes. Under these circumstances, the learned trial Judge was quite right in ordering it to be compulsorily wound up. This appeal must therefore be dismissed with costs. Cornish, J. I am of the same opinion. I think it is impossible to regard the scheme of interest-free loans or the cash-bonus scheme which supplanted It, as anything but a lottery. According to the scheme as adumbrated in the articles of association and in the prospectus issued by the company a donation of Rs. 100 to a fund called the Poor Houses Special Donation Fund gives the donor a certificate and the chance of that certificate wining one of the 200 prizes ranging in amount from Rs. 500 to Rs. 10,000 (?) at the annual drawing of certificates for these cash bonuses. The articles and the prospectus expressly provide that the price-winners, as also the amount of the prize won by each, shall be determined only by means of drawings. The scheme purports to ensure a certificate-holder receiving at least Rs. 500 in respect of his certificate, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers embarked their money in the company for the purpose of participating chances of drawing these big money prizes. In my judgment the cash-bonus scheme was clearly a lottery. The learned Advocate for the appellant laid great stress on the Full Bench ruling in Narayana Ayyangar v. Vellachami Ambalam ( supra ) in aid of his contention that there was no substantial difference between a chit fund scheme and the present scheme. The Full Bench, however, did not rule that a chit-fund was not a lottery. There was no occasion for it so to decide in view of the finding, called for from the lower Court, that the necessary elements of an offence under section 294-A, Indian Penal Code, were absent. The decision was confined to the question whether the subscribers to the chit fund could enforce the contract against the promoter, and it was held that they could because the contract was not a wagering and consequently a void contract. But a lottery does not mean the same thing as a wagering contract, and Ramesarn, J., who delivered the judgment of the Full Bench, was careful to point this out in criticizing the use of the word ' lottery ' by Spencer, J., in Veerannan Ambalam v. Ayyachi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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