Madras High Court
Soudambika Finance Pvt. Ltd. ... vs Union Of India And Others on 30 April, 1992
Equivalent citations: AIR1993MAD190, [1995]82COMPCAS302(MAD), AIR 1993 MADRAS 190, (1992) WRITLR 820, (1994) 2 COMLJ 492, (1995) 82 COMCAS 302
ORDER
1. Since common and similar as well as overlapping questions of law and facts arise for consideration and submissions have been made by counsel appearing on either side, these writ petitions are considered and dealt with in common.
2. The above writ petitions involve challenge to the constitutional validity of the Chit Funds Act, 1982 (Central Act 40 of 1982), hereinafter referred to as "the Act" and the Tamil Nadu Chit Funds Rules, 1984, hereinafter referred to as "the Rules", on various grounds. As a matter of fact in some of the writ petitions the challenge is confined only to some specific provisions in the Act and the Rules alone. Of the various petitioners, some are either public or private Ltd. companies incorporated under the Companies Act, 1956, or proprietary or partnership concerns or individual organisers themselves. Since different writ petitions have been filed seeking different reliefs in relation to different provisions, 1 consider it enough, instead of referring to them all in the course of the judgment itself, to classify them under different groups with reference to the prayers in the writ petitions and make it as annexure to this judgment.
3. The impugned Act has been brought into force in the State with effect from 13-4-1984. Prior to this, so far as the State of Tamil Nadu is concerned, it had a law in the form of the Tamil Nadu Chit Funds Act, 1961 (Tamil Nadu Act 24 of 1961) and the Tamil Nadu Chit Funds Rules, 1964. So far as the State of Pondicherry is concerned, in respect of which also, there are certain number of writ petitions in this batch of cases, the Central Act 40 of 1982 has been brought into force in the said State with effect from 1-11-1986 the date on which the Chit Funds (Pondieherry) Rules, 1986 was published in the Gazette of Pondieherry. Prior to this, the Pondieherry Chit Funds Act(18/1966) and the Rules made thereunder were in force in the said State. Prior to the Central Act, it is only in some of the States, the subject-matter under consideration was governed by the local was enacted by the Legislatures of the State concerned and to some places by extension of laws of the other States. Be that as it may, it can be safely stated that there was no law regulating to running of Chit Funds in several States and that even in the laws in force in some of the States they had their own variations. Before the contentions raised by the various petitioners are considered, it would be not only necessary, but useful to deal with the history of the legislation and the circumstances which necessitated and the object sought to be achieved as well as the imminent need feit by the Parliament to protect the unwary and innocent subscribers from the scheming machinations and manipulations of those running these conventional chit transactions and unscrupulous organisizers invariably identified by the name of Foreman. The institution carrying on Chit Fund Business is indisputably of more than a century old, and was at no point of time under regulation of a Central enactment. The various aspects and facts of this business the anomalies and unfair methods and unhealthy practices adopted by many of those running this business came to be noticed after a thorough investigation and on the basis of relevant as well as substantial materials gathered by the Reserve Bank of India, memoranda received from various chit fund companies as well as materials submitted by the representatives of some of the leading chit funds to the Banking Commission and the Annual Reports of a new chit funds which were made available. On the basis of the said and such other materials, the report of the Banking Commission prepared in the year 1972, the report of the study group on Non-banking Financial Intermediaries dated 10-8-1971 constituted by the Banking Commission and the Report of the Study Group of Non-Banking Companies headed by its Chairman J. S. Raj identified as 'Raj Committee Report' dated 14-7-1975 submitted from time to time would throw considerable light on the historical development of this institution. Likewise, the report of the Select Committee constituted for considering the Chit Funds Bill, 1980 introduced in the Lok Sabha to provide for the regulation of Chit Funds which culminated in the Central Act 40 of 1982 also throw not only considerable light on some of the aspects raised in these proceedings but also contain an analysis of the various clauses in the Bill, with reference to some of which the challenge has been made in these writ petitions.
4. The first of the reports dated 10-8-1971 submitted by the Study Group of the Non-Banking Financial Intermediaries appointed by the Banking Commission devoted an entire chapter to the subject of Chit Funds. The various aspect of the Chit Fund business meticulously referred to by this report and particularly the origin of this financial institution in India have been dealt with in paragraphs 6.2 and 6.3 in the following terms :--
"Chit Fund is perhaps the oldest indigenous Financial Institution in India. The origin of chitty or kuri or chit fund is traceable beyond more than a century in the rural parts of Southern India. Periodically, a fixed measure of grain could be deposited with a trustee and received back when sufficiently large quantity was collected. The needy person was ascertained through draw of lots. The word 'chit' suggests its origin. Chit means a written note on a small piece of paper. Since the winner of the Chit amount was to be ascertained through draw of lots, it involved writing of names of eligible members on separate chits, as in a lottery. The Scheme thus came to be known as 'chit funds'. It equivalent in Malayalam 'kuri' is derived from 'Kurippu' which is a synonym of chit.
The trustee's reputation for honest attraded more savers to him. In the earlier stages when the idea of modern banking had not reached the people, chit fund institution the people, chit fund institution developed quickly and spontaneously. It was an expression of co-operative efforts of mustering savings through instalments and advancing the pooled savings as loan to the members with facilities of repayment in instalments. With the growing importance of commerce and industry and the consequential rise in the population of towns and cities, chit fund was brought to the urban areas."
5. In paragraphs 6.7 to 6.9, the working method of this Chit business and particularly of the type with which we are concerned has been stated in the following terms :--
"In this case, there is a promoter called foreman who enrolls a number of subscribers and draws up the terms and conditions of the scheme in the form of an agreement. Every subscriber has to pay his subscription in regular instalments. The foreman charges, for his service, a commission on which there is a ceiling fixed by law in some States. He also reserves the right to take the entire chit amount at the first or second instalment as prize. Depending the terms of the agreement, a fixed amount is also sometime set aside for distribution among the non-prized members. After making provision for the above deductions, the balance is put to auction (except at the last instalment) and given as prize to the member who is prepared to forego the highest discount. The amount of discount is distributed as dividend either among all the members or only among the non-prized members. In some States a ceiling has been fixed on the discount that a member can offer. In case more than one person is prepared to offer the same discount or when there are no bidders, lots are drawn to choose the prize winning members. The number of subscribers in a chit series equal the number of instalments so that every member is assured of the opportunity of getting the prize. Sometimes with a view to catering to as many subscribers as possible, a chitty comprises a series expressed in terms of a sub-division or fraction of a full ticket (ticket means the share of a subscriber which entitles the holder thereof to the prize amount at any one instalment). In such cases the number of subscribers can exceed the number of instalments. In some cases only auctions are held to determine the prize winner while there are chit funds in which prize winning tickets are determined both by lots and by auction.
The prize winner can get the prize only on furnishing security acceptable to the foreman for the payment of the remaining instalments. In the event of default by subscribers in payment of instalment on due dates, penalties are imposed in various forms, e.g. forfeiture of dividends or levy of penal interest.
The above are the essential features of a business chit scheme although there are any number of variants. Chit Fund can thus be described as a mutual recurring deposit scheme under which every member is entitled to receive prize amount as loan from the chit fund; for the last prize winner, however, the prize amount cannot be considered as loan. Although no rate of interest is specifically mentioned, the deductions on account of discount and the foreman's commission make the loan in a majority of the cases, an interest-bearing one, the interest rate depending on the specific terms and conditions under which the scheme operates. For the foreman, however, no interest rate is involved on his 'loan'."
6. The type and nature of malpractices, manipulations and abuses by the organizer called the foreman have been dealt with in paragraphs 6.13 to 6.18 in the following terms :--
"At this stage it would be useful to study the foreman's role in the chit transactions. Subject to law, he decides practically eveything about the chit -- the number of members, the amount of instalments, the chit amount, his commission, the instalment at which he himself would retain the prize, the penalties to be imposed on defaulting members, etc. It is easy for him to exercise his powers because the number of subscribers is in many cases large and they are usually scattered over many places.
Some foremen, in addition to carrying on the business of chits, also accept deposits from third parties. These are utilised as working funds and lent at high rates of interest to subscribers and perhaps to others. According to Reserve Bank survey, the amount of deposits of 106 reporting chit fund companies at the end of March, 1968, was about 1.1 crores. In terms of Reserve Bank's directions, a chit fund company cannot accept deposits repayable after a period of less than 12 months from the date of receipt of such deposits nor can the amount of such deposits exceed 25 per cent of its paid up capital and free reserves. It may be noted that the subscriptions received from the members of chit funds in terms of contract are not treated as 'deposits' for the purpose of Reserve Bank's directions. According to available information, one-third of the outstanding loans and advances as on 31st March, 1967, given by the foremen of 100 chit fund companies were personal loans; 27 per cent were meant for the commerce sector and 15 per cent were professional loans. 'Industry' and 'agriculture' got a negligible proportion, these advances accounting respectively for 0.5 per cent and 0.1 per cent of the total.
The foremen derives his income in different ways, both legal and illegal. In the former category can be included items such as admission fee from members, penal interest or penalty fee from defaulting members and forfeiture of their dividend, interest on loans to non-prized chit holders, fees for transfer of shares in the chit, deduction from the subscription paid by a member who wants to resign, dividends on the chit reserves for himself, interest on chit prize taken without deduction, interest on the chit prize which the prize member may not be in a position to collect immediately, and subscriptions paid by members who discontinue in the middle of the scheme but do not care to claim refund.
The unscrupulous among the foremen resort to so many unfair methods to secure illegal gains. A few of these methods are briefly mentioned below :--
(i) Enrolment of fictitious members to complete the required number of members in & chit series. If a real and needy non-prized member is not able to come forward to offer a high discount at the auction, one of these benami members is shown to get the prize thereby depriving the real members of the opportunity,
(ii) Similarly, it is possible to exploit needy non-prized member or a new member so that he gets the prize only at the maximum discount.
(iii) The prized member is supposed to get the amount soon after the draw or auction is over of course of furnishing the security. But the foreman adopts tactics which delay the actual payment for a considerable time, meanwhile he uses the money interest free. If he succeeds in delaying the payment til! the succeeding draw, the earlier prize winner is given the prize out of the collections of the succeeding draw. Thus, one instalment i.e. perpetually in the hands of the foreman to be utilised in any way he likes.
The above are only examples to illustrate the way in which some foremen maximise their profits. They do not take into account the cases where the foreman and his associates disappear from the scene and are untraccable. The police have many such cases on their record. During 1962-66, as many as 255 chitties collapsed in several districts of Kerala on account of such malpractices.
It may be noted that the foreman has to undertake some responsibilities and risks. He is responsible for regular collection of subscriptions from a widely scattered body of members. He has to conduct the draws or the auction and maintain accounts. He is under obligation to pay the prize amount on the due date whether or not all the members have paid their subscriptions. In case of defaults, he has often to make good the deficit out of his own resources. If the prized member defaults in his instalments, litigation follows to recover the amount. If the defaulter is a non-prized member, the foreman has to find out a suitable subslitute or, in the alternative, has to take over the chit himself and continue the business. According to the memoranda submitted by some chit funds to the Banking Commission, the foreman requires finance from banks as well as money-lenders and other private sources. Some companies have also pointed out that their profits are not very large in relation to the risks involved. According to memoranda submitted to the Study Group, 15 to 18 per cent of the subscribers fail to pay their subscriptions after getting the prize amount.
7. After all these, the report noticed certain highlighting points with special emphasis in the following terms in paragraphs 6,30 and 6,31 :--
"As emphasised earlier, the rate of return on the savings of a subscriber to a chit fund and the interest rate that is involved for a subscriber joining the chitty as a borrower, will vary according to the terms and conditions of the chit fund. In fact, examples can be worked out on the basis of certain assumptions where the rate of return to prized subscribers at late stages will be quite high and the interest rate involved for a prize winner will be comparatively low. The essential point is that the rate of interest involved in chit funds is discriminatory and various from person to person so that there is an irrational distribution of gains and tosses. Ordinarily, the more needy a person, the higher will be the discount that he would be prepared to offer for winning a prize. Therefore, the more urgent his need the higher the rate of interest that a borrower has to pay. Another point is that there are institutions which offer savings schemes which are superior to the one involved in a chit fund. The savings and fixed deposits, recurring deposits, monthly income deposits schemes, cash certificate schemes, annuity or retirement scheme, insurance linked deposit schemes, small savings, provident funds and insurance schemes, cash certificate schemes, annuity or retirement schemes, insurance linked deposit schemes, small savings, provident funds and insurance schemes have features which are superior to -those in chit funds. The popularity of chit funds can be explained by the fact that a subscriber is entitled to borrow from it. Also, long standing social habits and the ganning element involved in the scheme, which perhaps provided and added attraction to some subscribers are also factors accounting for popularity of this institution.
So far as the end use of the prize is concerned, there are conflicting views. It would appear that the likelihood of productive use of the prize money is small. A prospective producer would not depend on the uncertainties involved in a chit fund. The rates of interest generally involved for a prize winner in a chit fund are so high that an inference can be drawn that the prize money is mostly used for consumption or speculative purposes. Some persons joint chit funds anil are prepared to pay high rates of interest by way of large discount for the purpose of hoarding certain scarce commodities. They are not only able to recover the interest but also earn a profit on account of the difference between the relatively low price at which they buy the goods and the high price at which they sell them later."
8. The Study Group in its report also dealt with the legislative measures considered in its view to be necessary for eliminating the malpractices usually found in this business and suggested the following measures :--
"We considered the above two suggestions, viz., starting of chit funds in the public sector and the commercial bank entering the chit fund business with a view to eliminating, through competition, the malpractices, usually prevalent in private chit funds. It may be noticed that most of the unhealthy practices arise from the lack of integrity of the foreman. It was, therefore, natural that the regulation of chit fund business assessed high priority in the States where the business is concentrated, i.e., in the Southern States.
At present State legislation regulates the running of chit funds in the areas where such legislation is in force. The Tamil Nadu Chit Funds Act of 1961, seeks to regulate the chit fund business in the State of Tamil Nadu. With appropriate changes, this Act was adopted, with effect from 15th July, 1964, in the Union Territory of Delhi. The Union Territory of Pondicherry has the Pondicherry Chit Funds Act, 1966, which came into force from 1st August, 1967. In Kerala, the Travancore Chitties Act of 1964, and Cochin Kuris Regulations, 1932, are in force in some areas of the State. The question of introducting a Uniform enactment in Kerala has been under the consideration of the Government for some time. Some States are in process amending or enacting laws to regulate chit fund activity. In Andhra Pradesh a bill on the lines of the legislation in the neighbouring State is under consideration. Mysore and certain Other State Government are also contemplating passing of legislation for regulating Chitties. Punjab Government is contemplating the starting of chit funds in the public Sector on the lines of Kerala Government. In Uttar Pradesh, chit funds, lotteries etc., are regulated by the provisions of the Manual of Government Orders. According to these regulations, publication of advertisements in newspapers, of any proposals regarding lotteries not authorised by the Government is an offence under the Indian Penal Code. Also local authorities have been asked not to accord sanction for holding lotteries nor should they authorise advertisements regarding such undertakings.
The object of legislation is to regulate the conduct of chit funds by requiring the foreman to obtain permission of competent authorities before a chit fund can be started, stipulating security to be provided by the foreman to the Registrar, detailing his rights and obligations and providing for punishment for infringement of law. Wherever legislation is in force, no foreman can start a chit fund until the Registrar is satisfied about the bye-laws of the fund and the security offered by the foreman."
(vide : paragraphs : 6.52 to 6.54).
9. The Banking Commission Report of the year 1972 had felt the need for a legislation at national level and commended for the same in the following terms in paragraph 17.33 of its report :--
"A few States have legislation on chit funds, the object of which is to safeguard the interests of the members. The Commission feels that it is essential to have a uniform chit fund legislation applicable to the whole country. Depending upon the constitutional position, whether chit funds come under the Union list, Concurrent list or the State list, either an All-India Chit Fund Act may be enacted or a model law may be adopted by all the States with such modifications as may be necessary. It will be desirable to provide in the legislation that only Public Limited Companies can run chit funds. Pending such uniform legislation, existing State laws regulating chit funds registered within the State should be made applicable to their branches in the States having no legislalion. This will essentially be an interim measure because only the members of those chit funds which are registered in States where chit fund laws have been enacted will get protection."
10. Having regard to the recommendations of the Banking Commission with reference to the regulation of the activities of non-banking financial intermediaries, the Central Government appears to have resolved to formulate a model law to regulate chit business, for being adopted by States which have no legislations of their own and after getting a draft of the Model Bill from the Reserve Bank of India, had the same referred to a study group and the said study group appears to have made the following vital recommendations :--
"(a) Since the legal opinion is that Parliament is competent to enact the chit legislation in view of the provision contained in Entry 7 of List III (Concurrent List) of Schedule VII to the Constitution of India, the proposed Bill should be enacted as a Central legislation. Such a step would, besides ensuring uniformity in the provisions applicable to Chit Fund institutions throughout the Country, also prevent such institutions from taking undue advantage either of the absence of any law governing chit funds in any State or exploit benefits of any lacuna or relaxation in any State law by extending their activities to such States;
(b) While the Bill should be enacted as a Central Act, its administration should be left to the State Governments concerned which, in turn, may seek the advice of the Reserve Bank on policy matters. (For the purpose of tendering advice to the Central or State Governments, the Reserve Bank may have to inspect chit fund institutions on a selective basis to have an idea of their working including their methods of operation. Chit funds arc "financial institutions" as defined in Cl. (c) of S. 451 of the Reserve Bank of India Act, 1934. hence, it would be open to the Reserve Bank to undertake inspections of chit fund institutions whenever deemed necessary in exercise of the powers vested in it under S. 45-N ibid);
(c) as regards the question whether only Public Limited Companies should be allowed to conduct chit funds, the Group is of the view that there should be no objection, in principle, to chits being conducted by Private Limited Companies also, and on a limited scale even by unincorporated bodies such as individuals/sole proprietorships/partnership firms. It might be of relevance to note in this connection that the enactments regulating chit funds in force in certain States do not prohibit chit funds being conducted by unincorporated bodies; and
(d) having regard to the nature of their business, there is no necessity for chit fund institutions to borrow from the public by way of deposits and as such they may be prohibited from accepting deposits except as advance payment of subscription or deposits from prized subscribers by way of security towards payment of their future instalments."
The Study Group has also dealt with about several other issues which arose for consideration and they are as follows :--
(i) Conduct of other business by Chit Fund Institutions : Chit Fund institutions may be prohibited from conducting any other type of business except chit business or granting of loans to subscribers against their paid-up subscriptions.
(ii) Utilisation of funds : Chit Fund Institutions should utilise their surplus funds only for giving loans or advances to non-prized subscribers against the security of the subscriptions paid by them or investing in trustees securities or in deposits with the approved banks.
(iii) Restriction on the opening of new places of business : Chit Fund Companies should obtain the prior approval of the Director of Chits within whose jurisdiction their registered offices are situated. The Director of Chits should take certain criteria into account before granting permission for the opening of offices. Unincorporated bodies should not be allowed to conduct business at more than one place.
(iv) Maximum duration of chits: The duration of chits should not ordinarily exceed five years; but chits of a longer duration up to ten years may be started in very special cases only by chit fund companies/banks with the prior approval of the State Government concerned which should take into account factors such as the financial position and methods of operation of the company in question, interests of the prospective subscribers, requirements as to security, etc. (The security deposit to be kept by the foreman of company in the case of chits of longer duration may be proportionately higher).
(v) Mode of settlement of disputes : The machinery for settlement of disputes arising between the foreman and the subscribers relating to the adequacy of security offered by prized subscribers to the foreman for payment of future instalments, substitution of subscribers in case of default, etc. should be self-contained, cheap and expeditious on the lines of the machinery prescribed under the State Co-operative Laws for settlement of disputes by arbitration.
(vi) Ceilings in respect of the aggregate amount of chits that may be conducted at any point of time : The aggregate amount of chits conducted by a Chit Fund Company at any point of time may not exceed 50 per cent of the net worth of the company, i.e., the paid up capital plus free reserves less the balance of accumulated loss and other intangible assets such as deferred revenue expenditure and goodwill, if any. In the case of commercial banks conducting chit funds, no ceiling on the aggregate amount of chits that may be conducted at any point of time need by prescribed since these chits are subject to the close scrutiny of the Reserve Bank. As regards chit funds conducted by unincorporated bodies such as individuals, sole proprietorships and partnerships, the aggregate amount of chits should not, at any point of time, exceed Rs. 10,000/-.
(vii) Minimum capital requirements and the creation of a reserve fund : The minimum paid up capital of chit fund companies incorporated under the Companies Act, 1956, whether private or public, should be Rs. 1 lakh. Companies having paid-up capital of less than Rs. 1 lakh may be allowed time up to three years to increase their paid-up capital to the minimum referred to above. The State Government concerned may be authorised to grant extension of time for a period not exceeding two years in appropriate cases. These companies should also be required to credit 20 per cent of their annual net profits to a reserve fund."
11. The terms of reference made to the Raj Committee for its consideration and recommendations are as hereunder :--
"I. To examine the relative provisions of the Reserve Bank of India Act, 1934, the Non-Banking Financial Companies (Reserve Bank) Directions, 1966 and the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1973, with a view to assessing their adequacy in regulating the conduct of business by Non-Banking Companies covered by the said directions in the context of the monetary and credit policies laid down by the Reserve Bank from time to time; to suggest measures for further tightening up the provisions so as to ensure that the activities of such companies, in so far as they pertain to the acceptance of deposits, investments, lending operations etc., subserve the national interest and serve more effectively as an adjunct to the regulation of the monetary and credit policies of the country besides affording a degree of protection to the deposits monies. In this connection, the Study Group may examine and make recommendations for regulating the conduct of the business of non-banking companies governed by the above sets of directions generally, and in particular, in regard to-
(a) the norms which may be adopted in respect of the capital structure and debtequity ratio that may be maintained by the various classes of non-banking companies covered by the said directions;
(b) the extent to which and the periods for which such companies may borrow by way of deposits/unsecured loans and the distinctions, if any, to be made between public and private companies;
(c) the maintenance of cash reserves and/ or a percentage of their deposit liabilities in the form of liquid assets by such companies.
(d) the norms which may be adopted in respect the rates of interest payable by such companies on their borrowings by way of deposits/unsecured loans and also those which may be charged on loans and advances made by them;
(e) the extent to which any of the activities carried on by these companies through their subsidiaries can or should be controlled;
(f) the need for the imposition of a ceiling of risk assets to be acquired or loans to be granted by the companies;
(g) the restrictions, if any, on the grant of loans to directors and their friends and relations and companies in which they are interested;
(h) the manner in which the loopholes, if any, in the existing directions taken advantage of by private limited companies in the context of certain concessions enjoyed by such companies under the provisions of the Companies Act, 1986, could be plugged; and
(i) the need to empower the Bank to apply for compulsory winding up of non-banking financial companies under certain circumstances.
(ii) to make recommendations on any other related topic which the Study Group may consider germane to the subject-matter of the enquiry."
The Committee discussed the terms of reference with various individuals of eminence and learned and also the representatives of Companies Associations all over India and in Bangalore."
12. The Raj Committee while referring to the enactment of chit fund legislation only by few States Union Territories and the diversity of such regulatory provisions and the abuse by unscrupulous promotions of chit companies by exploiting the situation by conducting chits in States where there was no regulation highlighted the need for the en-
actment of an uniform legislation applicable throughout the country in respect of chit fund institutions. The draft bill prepared by the Reserve Bank of India referred to and considered by the Study Group and the salient features of the various recommendations noticed in the annexure are as hereunder. The same may be set out in its entirety at this stage and as hereunder :--
ANNEXURE Issues for consideration Views of the Study Group
1. Whether institutions conducting chit funds should be prohibited from doing any other type of business? if so, the period that may be allowed to such companies to divert themselves of non-chit business Companies as also unincorporated bodies suchas individuals/sole proprietorship/partnership firms conducting chits may be prohibited from doing any other type of business except chit business Or granting of loans to subscribers against their paid-up subscriptions. If they are currently conducting non-chit business, they may be allowed time not exceeding three years or such extended period not exceeding three years as may be allowed by the State Government for divesting themselves of non-chit business. During such period, they may be allowed to carry on non-chit business for the benefit winding up of such business as proposed in C1.5 of the Bill. Further, if the institution conducting chits is an incorporated body, it shall use as pan of its name any of the words 'chit', 'chit fund' or 'kuri' and no company shall carry on the business of chit funds unless it uses as part of its name at least one of such words.
2. Utilisation of funds.
Institutions conducting chits may be permitted to utilise their funds only in the manner contemplated in Clause 6 of the Bill. Those holding investments of type other than those mentioned in the said clause may be required to regularise them within a period of three years from the date of coming into operation of the Act or such extended period not exceeding three years as the State Government may allow.
3. Opening of Offices/branches The Group is in agreement with the proposal that Chit Fund Companies may be prohibited from openingnew places of business without obtaining the prior approval of the Director of Chits within whose jurisdiction the registered offices of the companies are situated. Before granting such approval, the Director of Chits may take into account the criteria laid down in Clause 7(2) of the Bill. Unincorporated bodies should not be allowed to conduct business at more than one place.
4. Particulars to be given by chit fund companies in the advertisement to be issued by them inviting/ soliciting subscriptions from the public to theirschemes.
It does not appear necessary that ihe particulars specified in clause 9, should be given in the advertisements issued on each occasion when new schemes are started since it would prove to be very expensive to the companies. Instead, such particulars may be given in the application forms for enlisting members for each chit.
5. Maximum duration of chits.
The duration of chits should not ordinarily exceed five years, but chits of longer duration up to ten years may be started in very special cases only by chit fund companies/ banks with the prior approval of the State Government concerned which should take into account factors such as the financial position of the company in question and its methods of operation, interests of the prospective subscribers, requirements as to security etc. (The security deposit to be kept by foreman in the case of chits of longer duration should be proportionately higher).
6. Period of preservation of chit records.
This may be six years from the date of the termination of chits, as proposed in clause 40 of the Bill.
7. Mode of settlement of disputes.
The machinery for settlement of disputes arising between the foreman and the subscribers relating to adequacy of security offered by prized subscribers to the foreman for payment of future instalments, substitution of subscribers in case of default, etc., should be self-contained, cheap and expeditious on the lines of the machinery prescribed under the State Co-operative laws for settlement of disputes by arbitration. For this purpose, the provisions in Chapters IX and XIII of the Maharashtra State Co-operative Societies Act, I960 may be considered.
8. Uniformity in the presentation of annual accounts by chit fund institutions.
The bill may prescribed a pro forma of the balance sheet and profit and loss account in which chit fund institutions may be required to present their annual accounts.
9. Ceiling in respect of the aggregate amount of chits that may be conducted at any point of time.
The aggregate amount of chits conducted by a chit fund company at any point of time may not exceed 50 per cent of the net worth of the company i.e., the paid-up capital plus free reserves Jess baiance of accumulated loss, andexpenditure, goodwill, etc., if any (vide cl. 8(6). In the case of commercial banks conducting chit funds, no ceiling on the aggregate amount of chits that maybe conducted at any point of time need be prescribed.
Since chits conducted by commercial banks are subject to the close scrutiny of the Reserve Bank.
As regards the chit funds conducted by unincorporated bodies such as individuals, sole proprietorships and partnerships, the aggregate amount of chits should not at any point of time exceed Rs. 10,000/-. They are prohibited from opening branches (vide: Item 3 above).
10. Minimum capital requirements and creation of a reserve fund -
The minimum paid-up capital of chit fund companies incorporated under the Companies Act - whether private or public -- should be Rs. I lakh. Companies having paid-up capital of less than Rs. 1 lakh may be allowed time up to three, years to increase their paid-up capital to the minimum referred to above. The State Government concerned may be authorised to grant extension of time for a period not exceeding two years in appropriate cases. Such companies may also be required to credit 20 per cent of their annual net profits to a reserve fund.
11. Cognizability of offences.
Certain offences of a serious nature under the proposed legislation may be made cognizable.
13. Before further considering the various contentions raised in these cases, it would be necessary to refer to the Report of the Select Committee which considered the Chit Funds Bill, 1980, as found summarised by the learned Judges of the Division Bench of the Karnataka High Court in Sri Visalam Chit Fund Ltd., Bangalore v. Union of India, in the following terms (Para 11):--
"The Committee held as many as 25 sittings after issuing notices to the State Government, Chit Companies, public bodies and organisations, individuals etc., interested in the subject-matter of the Bill and also decided to hear oral evidence on the provisions of the Bill from interested parties. The Committee also issued Press communique fixing 21st February, 1981, as the last date for receipt of memoranda and requests for oral evidence. Wide publicity was given on three successive days by broadcasting the matter from all stations of All India Radio and telecast from all Doordarshan Kendras. Several requests were received from various parties for being heard by the Committee and accordingly several sittings were held at Madras on 28th, 29th and 30th of May, 1981, at Bangalore on 1st and 2nd of June, 1981 and at Trivandrum on 4th and 5th of June, 1981. Oral evidence was taken from the representatives of various Chit Companies, Associates, federations, individual etc. and the Committee also heard the representatives of the State Government of Tamil Nadu, Karnataka, Kerala and the Union Territory of Pondicherry. Since the Committee felt that sufficient number of subscribers were not forthcoming for tendering oral evidence, they decided to extend the time for receiving memoranda and receiving oral evidence up to 30th June, 1981. Further, a series of sittings were held at Ahmedabad, Hyderabad, Calcutta, and New Delhi and the Committee, in all, examined 101 witnesses who appeared before the Committee for giving oral evidence. The Bill was considered clause by clause and the report of the Committee was adopted on 18th November, 1981. The recommendations of the Committee in respect of the following clauses in the Bill are :
Clause 4: The period of 12 months was substituted for the period of six months in the proviso to the said clause since the Committee felt that the period of 6 months was not sufficient for registering the chit from the date of sanction. Under Cl. 6(i)(c) the words 'interest' or penalty' were included for any default in the payment of instalments. Likewise, in Cl. 6(i)(d) amendment was proposed to specify the probable date of commencement of the Chit agreement. Clause 7 (3): The words 'within a period of three months' were incorporated with a view to ensure that the foreman did not take unduly long time to start the chit and did not misappropriate the subscribers' money. Clause 8: Instead of the figure 20 per cent, 10 percent was suggested as the amount to be transferred to the Reserve Fund. Clause 11(2): A period of one year was incorporated for complying with the requirements of Cl. 11(1) to avoid any hardship being caused to such persons carrying on business on the commencement of the proposed legislation. Clause 13: The Committee considered the aggregate amount of chit to be conducted by an individual foreman, partnership foreman and foreman Company. The Committee felt that in order to ensure that the foreman has sufficient stage in the chit business conducted by him, recommended an increase of the amount from Rs. 10,000/- to Rs. 25,000/- in the case of individual formen, from Rs.40,000/- to Rs. 1 lack in case of partnership foreman. As regards the foreman-Company, the Committee recommended for the words 'net assets' the words 'net owned funds' to be substituted and that should be made applicable also to co-operative Societies. This recommendation was because of the fact that the concept of net owned funds will be in tune with the Reserve Bank of India directions to financial companies which would mean that aggregate of the paid-up capital and free reserves reduced by the amount of accumulated balance of loss, deferred revenue expenditure and other intangible assets, if any, as per the latest audited balance sheet of the Company. Clause 14: The representation for extension of the period of 2 years was rejected as the Committee felt that the period of three years was sufficient for securing the money invested by the person carrying on chit business in any other business. The Committee was also of the view that the State Government's power to extend the period of two years should be limited to one year only and proviso to sub-el. (2) was accordingly amended. Clause 15: By substitution of a new clause it was provided that chit agreement shall not be altered, added to or cancelled except with the consent in writing of the foreman and all the subscribers in the chit. The Committee felt that since the foreman was a party to the agreement, his consent must be obtained before altering the agreement. Clause 16 was suitably amended by the Committee in order to ensure that there was no mischief in conducting the chits by making it obligatory for the Chairman to issue notices to all the subscribers and the draw should be held in the presence of at least two subscribers, Clause 18: 21 days' time was granted to the foreman to file the returns instead of 14 days. Clause 19: A new sub-clause (3) was added to enable the subscribers to know the State where the new business is opened by approaching the Registrar of that State instead of the Registrar of the State where the main office is situated for making any complaints with regard to the conduct of chit business at the new place of business. Clause 20: Sub-clause (1) was amended as the Committee was of the view that in order to ensure that the foreman does not utilise the subscriptions so collected for the purpose of depositing the security and also to ensure further that the financial position of the foreman is found to conduct the chit, he should be required to furnish security before he applies for previous sanction of the State Government under Cl. (4) of the Bill. Clause 21: The provisions of sub-cl. (1)(a) was amended since the Committee was of the view that where as foreman has subscribed to more than one ticket, he should be allowed to get more than one chit amount in a chit without discount. Clause 22: Sub-clause (2) was amended since the Committee felt that the existing clause would cause hardship to the foreman and therefore, he may be required to make deposit of the Brize money in respect of the draw only if it remains unpaid before the date of the next succeeding instalment in a separate account in an approved Bank. A new proviso to sub-clause (2) was added to avoid any hardship to the foreman by such contingencies by allowing the foreman to hold another draw in respect of the instalment if the prize amount is not drawn by the prized subscriber for a period of two months from the date of draw. Clause 23: The Committee made the necessary amendment, on the representation that inspection of records of the foreman by the Registrar should be made permissible not only at the registered office of business but also at the place where the foreman is carrying on business, so that the Registrar in such cases will be able to exercise proper control and supervision over the business carried on by the foreman. Clause 40: Clause (b) of this clause was amended by the Committee since the Committee was of the view that termination of a particular chit, as contemplated in part (b) of this clause, should be with the consent of all the non-prized, unpaid prized subscribers and the foreman who is also a party to the chit. Clause 66: The Committee was of the view that allowing the disputes to be taken to the Civil Courts will cause considerable delay in the settlement of dispute because of the long procedure in the Courts and this would particularly go against the interest of the subscribers and hence, sub-clause (3) of the Bill was omitted. Clause 77: The Committee felt that a provision for punishing the commission of second and subsequent offences should be included and the penalty of imprisonment and fine should be provided for. Accordingly, a new Cl. 77 was added. These clauses in the Bill correspond to the respective sections in the Act. The other amendments proposed by the Committee are of a clarificatory nature and are only consequential, therefore, there is no need to refer to them. This Report of the Select Committee but for a lone dissenting member who was totally opposed to the continuance of chit business, was unanimous."
14. The Parliament has, in the above circumstances, enacted the Act in question. Paragraphs 3 and 4 of the Statement of Objects and reasons would disclose the broad purpose, aim and object of the Act in the following terms:--
3. The recommendations of the Banking Commission were examined by Government. The Reserve Bank, at the instance of the Government, drafted a model Bill to regulated the conduct of chit funds for adoption by all the State Government. The Reserve Bank also sent the draft Bill to the Study Group on Non-Banking Companies constituted by it in June, 1974, under the Chairmanship of late Shri James S. Raj, the then Chairman of the Unit Trust of India. The Study Group was unanimously of the view that the Bill should be enacted as a Central legislation, as such a step, besides ensuring uniformity in the provisions applicable to chit fund institutions throughout the country, would also prevent such institutions from taking advantage either of the absence of any law governing chit funds in any State or exploit the benefit of any lacuna or relaxation in any State law by extending their activities in such States. The Group further recommended that the administration of the law should be left to the State Government concerned which in turn could seek the advice and assistance of the Reserve Bank on policy matters. Further, there should be according to the Group, no objection to chits being conducted by private limited companies also and on a limited scale even by unincorporated bodies such as, individuals, sole proprietorship and partnership firms.
4. The Bill has been finalised after taking into account the views of all the State Government to whom a draft Bill was sent for comments. The scheme of the Bill and the provisions made therein largely follow the pattern of chit fund legislations in force in some of the States and includes certain new provisions, such as, minimum capital requirements, for companies conducting chit business, prohibiting chit fund companies from doing any other business, placing a ceiling on the aggregate chit amounts of chits that are being conducted by chit fund institutions, providing for a self contained machinery for the settlement of disputes between a foreman and the subscribers by means of arbitration, etc. The repeal of the existing State legislations on the subject has also been provided for in the Bill."
15. Though some of the writ petitions have been filed challenging the provisions of the Act and the rules made thereunder, as a whole and some confined to some selected provisions of the Act and the rules made under the Act, none except the petitioners in W.P. Nos. 8454 and 8455 of 1984 questioned the legislative competency of the Parliament. Leading arguments were addressed by some of the learned counsel appearing for some of the petitioners who mutually adopted also the submissions made by the other learned counsel and the other counsel merely conveyed the fact that they are simply adopting the submission of the learned counsel who argued the matter to the extent they are relevant and necessary for the case pleaded by them in their writ petitions. Before adverting to consider the various submissions made in support of the relief claimed, I consider it necessary to refer to those submissions made, counselwise, rather then casewise since the counsel were appearing on behalf of the petitioners in more than one case and common submissions have been made. Such submissions generally centered round the alleged violation of Arts. 14 and 19(1)(g) of the Constitution of India.
16. (a) Mr. K. Chandramouli, learned senior counsel for some of the writ petitioners, contended that under Section 4, the foreman has to apply for registration every time, that an embargo is plaved from a chit being commenced and conducted without obtaining the previous sanction of the Government or the Authorised Officer therefor and unless the chit is registered under the Act. Apart from the plea that such a requirement would cause innumerabel problems it is stated that no time limit is stipulated within which the authorities would grant such sanction or registration and the absence of such a provision would render the requirement arbitrary and unresonable. In so far as the provision in S. 4(3)(b) is concerned, it is said to be draconian since it makes even routine or a technical lapse or default in the payment of fees or filing of any statement or record required to be filed under the Act or the rules on par with the conviction for an offence and entitles the refusal of the previous sanction sought. The provisions contained in Section 4(3)(c) are said to be vague and not indicative of as to whether it has application to a company. The provisions in Section 6(1)(f) and Section 6(3) in so far as it has the effect of fixing a ceiling on the discount that it shall not exceed thirty per cent of the chit amount. It is stated that fixation of such a ceiling would dissuade bona fide subscribers from joining the long term chits, Since the long term investor will only get about 12 per cent return and it would not make the Chit Scheme attractive to the subscribers. So far as Section 7 is concerned, the same manner of challenge that has been made against Section 4(3) has been made against this provision also.
(b) While dealing with Section 12, the prohibition to transact any business other than the chit business, is said to be violative of Arts. 14 and 19(1)(g) of the Constitution of India and that there was no justification for the financing or hire purchase or incidental business being allowed to be carried on provided the Articles of Association of the Company so permit and the restriction in this regard is not only unreasonable but runs counter to the provisions of the Companies Act. Redundancy is also attributed to the said provision in so far as it provides for winding up such business even though there is a provision in the Section itself for obtaining general or special permission to carry on other business too. So far as Section 14 is concerned, it is contended that in the light of the provisions to ensure furnishing of sufficient security for each chit by the foreman, the ceiling on aggregate amounts of the chit is contended to be unreasonable, wholly unnecessary and uncalled for. Section 16 is also challenged on the ground that subscribers already knew the date, time and place of the draw and, therefore, the provision relating to notice every time is superfluous. It is also contended that the stipulation to have not less than two subscribers for every draw at times is impossible of performance and the foreman cannot compel any subscriber to be personally present at the time of draw. To the extent, the minutes of the proceedings of every draw is required to furnish the particulars including the presence of the two subscribers. Section 17 is also challenged. Section 20(b) and (c) is also challenged. So far as Section 21(1)(b) is concerned, it is contended that 5 per cent commission allowed is not economically viable and, therefore, the same is arbitrary and unreasonable particularly for carrying out the duties and obligations enjoined under Section 22. Section 24 and Rule 28 made thereunder is said to be arbitrary and unreasonable besides being discriminatory. The penalties contemplated under Section 76 is also said to be harsh and draconian.
(C) The learned counsel next directed his challenge against Section 30 and contended that the stipulations contained therein would result in immobilisation of funds. The provision for arbitration for settling disputes is said to be not a reasonable one particularly since execution has been provided for to be before only the Civil Court. In other respects, while adopting the submissions of the other learned counsel, it has been contended by Mr. Chandramouli learned senior counsel, that many of the provisions ceased to be regulatory in their purport and effect and that they go beyond the purpose and object sought to be achieved. The learned senior counsel also relied upon the decisions in N.B. Khare v. State of Delhi, , State of Madras v. V.G. Row, , Arunachala Nadar v. State of Madras, , C.S.D. Swamy v. The State, , and Superintendent (Tech. I), Central Excise, I.D.D., Jabalpur v. Pratap Rai, .
17. Mr. A.L. Somayji, learned counsel for one of the petitioners, while reiterating the plea regarding the challenging to S. 4(3) also contends that though S. 4 visualises a company being a foreman too, that on the face of S. 50(c) and S. 7(2)(b) those provisions could not be applied to a company or a society. It is contended that the foreman's conviction cannot be used as a ground to refuse sanction or registration to the company or society when it applies and that there is absolutely no nexus whatsoever for these provisions with object sought to be achieved by the legislation. The learned counsel also high-lighted the alleged conflict between S. 12(1) and S. 12(2) of the Act. The learned counsel also contended that there are no guidelines or principles laid down for granting or refusing the permission contemplated and that the State Government has been conferred with absolute and arbitrary powers. The further plea made is that there is no justification or necessity for S. 13 when the provisions of Section 20 provides for sufficient safeguards in the form of security in respect of each chit. The provision in Section 16(2) insisting upon the presence of at least two subscribers at the time of each draw, as well as the alternative method stipulated under sub-section (3) is also challenged as being unworkable and unnecessary. The consequential provisions in Section 17 also to that extent is stated to be bad. Section 21(1)(b) in so far as it fixes a commission not exceeding 5 per cent is stated to be uneconomical and unviable, particularly having regard to the several duties and obligations to be discharged and complied with. Section 21(2) in so far as it provides for a reference to Registrar for Arbitration under Section 64 in case of disputes regarding the sufficiency of the security to be furnished by any prized subscriber for the due payment of future subscriptions, is said to be unworkable and unreasonable since the satisfaction of the sufficiency or otherwise of the security should be that of the Foreman only. Challenge is also directed against Rule 28(2) and the period of time limit stipulated therein as well as Section 24 under which the rule has been made. Section 39(2) and Section 48(1) are challenged on the ground of they being vague and also for allegedly conferring sweeping powers on the authorities. Likewise, Rule 29(2) is said to be ultra vires the rule making power under Section 24 read with Section 31. The rate of interest provided for under Rule 63 is stated to be unreasonable and arbitrary. While contending that column. No. X Violates Section 28 and 29, it is stated that Form Nos. 9 and 10 are said to be unworkable, too. The learned counsel vehemently contended that pursuant to the Interim orders dated 15-10-1984 in W.M.P. Nos. 10305 etc., of 1984 in W.P. Nos. 6611 etc., of 1984 passed by the learned Judge (S. Natarajan, J., as he then was) the system even under the new Act was working well and the reasons assigned in the said order may be adopted as the submission of the petitioners in support of the plea in the main writ petition. It may be stated at this stage that in the above matters, the learned Judge was pleased to stay the operation of Sections 4(3)(b), 6(3), 7(2)(c), 12(2), 13, 16(2), 16(3), 21(1)(b), 21(2), 22(2), 48(c) and 76 and X(1) of Form No. VIII of the Appendix to the rules, pending disposal of the writ petitions.
18. Mrs. Nalini Chidambaram, learned senior counsel, contended that the petitioners themselves are for the legislation in question and that if the rigour of some of the provisions noticed by S. Natarajan, J., as the learned Judge then, was taken away they would have no objection for this legislation since after the interim orders were granted, the scheme of the provisions was also working well. It is the further submission of the petitioners that the fact that even in the absence of the provisions stayed by the learned Judge by means of interim orders the scheme was otherwise working well without any complaints whatsoever from any quarters, it only proved that those provisions are superfluous and unnecessary and that even without then the other provisions of the Act could survive and effectively serve and achieve the purpose and object of the legislation.
19. Mr. O.V. Balusami, learned counsel for the petitioners in W.P. Nos. 8454 and 8455 of 1984, was the only learned counsel who raised and argued the question of the legislative competency of the Parliament to enact the law in question and that no other learned counsel has touched the said issue. As a matter of fact, every other learned counsel specifically stated that they do not challenge the legislative competency of the Parliament to enact the law in question. In support of the challenge made to the legislative competence, the learned counsel relied upon the ratio of the decisions in Mayavaram Financial Corporation Ltd. v. Reserve Bank of India, (1973) 2 Mad LJ 72, K.P. Subbarama Sastri v. K.S. Raghavan, , Angammal v. R. Sankara-nayanan, and Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal, . The submission is that the chit funds partakes the character or money-lending or debt or loan and, therefore, it is pure and simpliciter a subject within the purview and competence of the State Legislature and that, therefore, beyond the competence of the Parliament. The further submission of the learned counsel was that Sec. 20 in so far as it excluded the provision of immovable property as security is arbitrary and unreasonable and the stand taken by the respondent in para 12 of the counter affidavit that it is permissible to give such security runs counter to Section 20 itself. In challenging the provisions contained in Section 12 it has been contended that Section 12 refers to only company and not to any other category of Foreman and consequently constitutes hostile discrimination against only a company and, therefore, is violative of Art. 14 of the Constitution of India. The provisions of Section 5 of the Act in prohibiting invitation for subscriptions unless the previous sanction required under S. 4 of the Act has been obtained is asking for an impossibility and seem to or purport to run into a vicious circle, as to which should precede what?
20. Mr. V. Shanmugham learned counsel for the petitioners in some of the writ petitions, contends that the provisions in Section 16(1) for second notice for every draw was superfluous and unnecessary apart from casting and imposing unnecessary and unreasonable additional burden invoking avoidable expenditure. The requirement relating to the presence of two subscribers at the time of draw is stated to be unreasonable and unenforceable. It is also contended that the agreement contains several clauses which are one sided and unilateral besides being discriminatory. The provisions of Section 24 are also said to be unreasonable.
21. Mr. E. Padmanabhah, learned counsel for the petitioners in W.P. No. 1683 of 1985 contended that the stipulation in Section 8(3) is made applicable only in respect of companies and such a stipulation deprives the Directors and shareholders of the Company, to that extent, their income and percentage of profit and thereby violative Art. 19(1)(g) of the Constitution of India. The absence of guidelines and criteria or norms for the grant of prior approval or refusing the same under S. 8(4) leads to unnecessary reservation of unlimited funds resulting in hostile discrimination, violative of Art. 14 of the Constitution of India. It is also contended for the petitioners that Rules 28(1) and 31(1) and (2) are contrary to the provisions of an existing law of the Parliament enshrined under the Companies Act, 1956. The provision for extension of time contemplated under Section 75 is said to be unreasonable and insufficient. So far as Ss. 76, 77 and 79 are concerned the learned counsel contended that the penalties provided are too harsh and severe and expose the persons concerned to prosecution even in respect of trivial, routine and technical lapses or defaults and irregularities. This, it is stated to be arbitrary and violative of Art, 14 of the Constitution of India.
22. Mr. Raju K. Lukose, learned counsel, as well as the other learned counsel appearing in the batch of cases adopted the submissions of the other learned counsel referred to above, Mr. R. Subbiah, learned counsel appearing for the petitioner, in W.P. No. 8464 of 1985 contended that the order impugned in the writ petition is contrary to law and liable to be set aside since though the relevant Rule viz., Rule 18(4)(ii) and (5) provides for furnishing immovable security, the authority mechanically rejected the offer of immovable security and that there was no proper or due application of mind whatsoever. Though in the affidavits filed in all these batch of cases all possible grounds have been raised, during the course of argument only the points referred to supra, alone have been urged and pursued.
23. Mr. T. Srinivasamurthy, learned Central Government Standing Counsel, elaborately answered the various claims made for the petitioners by referring to the relevant provisions of the Act and the Rules as well as by placing heavy reliance upon the decision of a Division Bench of the Karnataka High Court in Sri Visalam Chit Fund Ltd., Bangalore v. Union of India, . The said decision was extensively referred to and relied upon by the learned counsel for the respondent. It may be stated at this stage that the learned Judges of the Division Bench have taken great pains so analyse the genesis of the legislation in question, the reports and the recommendation which may be stated to have sparked the imminent need, the contents of relevant reports themselves as well as the various points raised before them and dealt with them at considerable length and in many-
respects I find the conclusions arrived at by the learned Judges agreeable to me. The learned counsel contended that the provisions of Section 4 do not suffer any infirmity as alleged and that it obliges the authority to have regard to the various criteria mentioned in passing orders either way and do not mandate a rejection only on such factors and that the State Government has also since amended Rule 4 and added Rule 4A to alleviate the fear expressed. It is also contended that the absence of any time limit within which the order shall be passed, when moved, does not undermine the validity of S. 4 itself and that at any rate the authorities would pass orders always within a reasonable time. The learned counsel also contended that many of those provisions challenged were incorporated in order to prevent exploitation of innocent, meek and needy members of the public and were found to be necessary and also essential on a careful consideration of and on the basis of reports obtained from those expertise concerned and specialised in the field viz., Reserve Bank Authority and the Study Group and Committees constituted therefor, and also after great deal of deliberation by the Select Committee of the Parliament. It is in this context heavy reliance was placed on the decision of the Division Bench of the Karnataka High Court which referred to the contents of these various reports and the recommendations. With reference to some of the provisions imposing certain duties and obligations on certain of Institution which organise chits, it is contended that the object of the law is to impose such restriction or obligation in order to regulate chit business and not with any view to alter the other laws or effect any change in those laws as such. It is also contended that both on the principle of "pith and substance" as also on grounds of relevance, reasonableness and necessity such provisions are very well justified and the objections to the contrary are devoid of merit. The ceiling on the prize amount in a draw or chit and also on the commission and remuneration of the Foreman as well as the prohibition to carry on any other business except with the special permission of the competent Authority were all said to be essential and necessitated in the light of the malpractices and anomalies in vogue in the method of conduct of chit business, as noticed by the specialist and study groups and that they are not only just and reasonable but designed in public interest and in furtherance of a noble and public cause. The learned counsel would also contend that there is no impediment at all in law, fof giving immovable property security and the grievance in this regard is wholly unjustified. So far as the legislative competence of the Parliament is concerned. It is contended that having regard to the earlier decision of this Court in Srinivasa Enterprises v. Union of India (1981) 51 Com Cas 464 (sic) and of the decision of the Apex Court in Srinivasa Enterprises v. Union of India, , the issue stood already concluded against the plea of the petitioners and that is why the same was not pursued by all the others except the petitioners in W.P. Nos. 8454 and 8455 of 1984.
24. Mr. V. Raghupathi, learned Additional Government Pleader for the State Government, while reiterating the stand taken in the counter-affidavit, contended that the provisions in the Act and the Rules complained of in these batch of writ petitions are just and reasonable to effectively achieve the public purpose involved and are not either arbitrary or unreasonable or discriminatory as alleged. Mr. Krishnamurthy, learned Government Pleader for Pondicherry contended that the challenge to the various provisions are not well merited and that the very legislation as well as some of the provisions both in the Act and the Rules which are the subject matter of challenge have been specially devised in the best interests of the subscriber public dictated by reason, prudence and wisdom of policy and in public interest and that the alleged violation of Articles 14 or 19(1)(g) of the Constitution have no merit whatsoever. It is also stated for the State of Pondicherry that they have already notified all Registering Officers discharging duties under the Indian Registration Act, 1908 to discharge the functions of Registrar and so far as the said state concerned, there is no inconvenience in this regard. In other respects, the learned counsel adopted the submissions of the other learned counsel for the respondents.
25. Mr. K. Chandramouli, learned senior counsel, while reiterating the submissions made for the petitioners, submitted, in reply, that the object of the writ petitioners is not to obstruct the introduction of the law itself but only to ensure a proper and reasonable modulation of the law to make it reasonable, practical and really useful. It was also contended that the provisions complained of have the effect of overreaching the very object due to excessive rigour and draconian severity and that they should be made to be reasonable in their implementation. The decisions in Abdul Hakim Quraishi v. State of Bihar, , State of Madras v. Murray and Company, , A. Giridharilai v. State of Tamil Nadu, were also relied upon to reinforce the claim for the petitioners, Mr. A. L. Somayaji, learned counsel submitted that the provisions of S. 8 in so far as it picksup companies alone for such harsh and hostile treatment cannot be justified even if the object is to protect subscribers and relied upon the decision in R. C. Cooper v. Union of India, in support of his claim.
26. I have carefully considered the various submittions of the learned counsel appearing on either side, in the light of the several judicial pronouncements relied upon by them to fortify their submissions. Before proceeding to consider the submissions challenging several provisions of the Act and the rules made, it would be appropriate to deal with the challenge made to the legislative competence of the Parliament to enact the Act in question, raised by one of the learned counsel appearing for two of his petitioners. In my view, this question should be held to have been concluded firmly and finally by the decisions of this Court as well as that of the Apex Court. In Mayavaram Financial Corporation Ltd. v. Reserve Bank of India, (1971) 41 Com Cas 890 and in Chockanathan Chit Fund and Finance (P) Ltd. v. Union Territory of Pondicherry, , the Division Bench of this Court consisting of Veeraswami, C.J., and Raghavan, J., while considering the constitutional validity of the Madras Chit Funds Act, 1961 and the Pondi-cherry Chit Funds Act, 1966 held that the laws under consideration by them are those relating to a special form of contract falling under Entry 7 of List 111 and not referable to or either falling under Entry 26 or 30 of List II of the VII Schedule to the Constitution of India. The Apex Court, in its judgment in Srinivasa Enterprises v. Union of India, has categorically held that these are all special species of contracts and what is sought to be dealt with would squarely fall within Entry 7 of List III of the VII Schedule to the Constitution of India and merely because some of the provisions in the Act may have some incidental impact on some other subject in the State list does not disable the Parliament from enacting the law of the nature in question. The nature, substance, purport and effect as well the objects of the legislation would indicate it to be a law within entry 7 of List III only. Consequently, I see no merit in the plea raised questioning the legislative competence of the Parliament and the objection raised in this regard shall stand rejected.
27. The challenge made in respect of the several provisions of the Act and the rules made thereunder were broadly projected only vis-a-vis the rights guaranteed under Arts. 14 and 19(1)(g) of the Constitution of India. Before adverting to the merits of challenge to the various provisions the extent to which the provisions in an enactment may be challenged on the ground of alleged violation of Arts. 14 and 19(1)(g) of the Constitution of India may be noticed at this stage. The object of Art. 14 is not confined to merely the doctrine of classification but has been held to be wider and meant to ensure fairness and equality of treatment and if an action is arbitrary, it results in denial of equality and consequently Art. 14 of the Constitution of India was held to strike at arbitrariness of State action in any form. When a law is challenged as offending against guarantee under Art. 14 of the Constitution of India, the primary duty of the Court it to examine the purpose and policy of the Act and once held to be within the legislative competence thereafter sec whether the provisions have a reasonable relation and nexus to the object sought to be achieved by the legislature. The policy of law and the expediency of passing it are matters for the legislature to decide and Courts are concerned only with the construction or interpreting the law enacted and adjudicating upon the constitutional validity of the law so made. A Jaw, though nol discriminatory may yet offend the guarantee under An. 14 of the Constitution of India if the executive or some public authority is given an unguided or uncontrolled discretionary power, though discretionary power is nol necessarily discriminatory or arbitrary or unreasonable. So far as Art. 19(1)(g) is concerned, it could be seen that Art. 19(6) permits reasonable restrictions in the interests of the general public on the exercise of the rights secured under Art. 19(1)(g). As observed by the Apex Court, it is a constitutional truism that restrictions or regulatory measures, in extreme cases may be pushed to the point of prohibition, if any lesser strategy will not achieve the purpose. It has been held by the apex Court in Srinivasa Enterprises Case (supra) itself that the twin requirements of Art. 19(6) are (i) the reasonableness of the restriction upon the fundamental right to trade and (ii) the measure of reasonableness being the compelling need to promote the interest of the genera! public and in matters of economics, sociology and other specialised subjects courts should not embark upon views halflit in fallibility and reject what economists or social scientists, have after detailed studies commended as the correct course of action. Though the final word is with the Court in constilutional matters Courts hesitate to 'rush in' where even specialist 'fear to tread' and if experts fall out court, perforce, must guide itself and pronounce upon the matter from the constitutional angle since final verdict where constitutional contraventions are complained of belongs to the judicial aim. So far as the case on hand is concerned, it cannot be disputed that public interest is not only involved and necessitated the enactment in question with the various provisions and safeguards contained therein but is absolutely in it and the only question would be about the extent of severity of the conditions to be imposed to protect the public interest concerned. The Raj Committee report and other materials referred to supra have had the recognition of the Apex Court itself on more than one occasion and the recommendations contained therein squarely justified the need for those regulations and restrictions on the basis of the past experience and the intensive and indepth study of the malpractices adopted in running the chit business.
28. The various decisions relied upon for the petitioners only lay down certain general principles in the matter of testing the reasonableness of aprovision of an order. On the other hand, the decision of the Supreme Court in Srinivasa Enterprise case (supra) and the principles laid down in the decision of the Division Rcnch of the Karnataka High Court in (supra) have direct relevance and application to the case before me and the various issues involved for consideration in those cases and I propose to consider the contentions raised on behalf of the petitioners in the light of the principles laid down therein. The legislation under consideration before me is very peculiar one in that before the legislation in question was drafted as a Bill there had been detailed investigation for the necessity of the legislation in the light of the existing malpractices and anomalies in the field of chit business and the absolute need for eliminating them and protecting the subscribers and depositors public and, therefore, the same require to be considered in the light of such materials. As a matter of fact, the Parliamentary Select Committee also has gone into these aspects at considerable length, clause by clause when the same was at the stage of Bill.
29. So far as the challenge to S. 4 is concerned, the same is aimed at keeping a close vigil both on the credibility and the manner of functioning of the business by the Foreman and the mere fact that S. 20 provides for furnishing security does not preclude the legislature to devise additional securities or safeguards in the interests of the subscribers. The fact that in the State Act which was in force no such provision was available does not mean that the safeguard provided in the form of S. 4 is superfluous or irrelevant, particularly when the need for the same was felt by the study group which submitted its report on the subject and accepted by the Parliament as necessary. The prohibition introduced restraining commencement or conduct of a chit transaction without prior permission and registration cannot be claimed to be unreasonable or arbitrary. Sub-clause (3) of S. 4 is purely directory enjoining consideration of all such material referred to therein and need not be construed as a mandatory provision to refuse permission or registration on such ground alone. Likewise, the challenge to Ss. 6 and 8 also do not merit acceptance since those are specially designed to minimise the risks involved as far as possible, and protect the innocent subscriber public. The decision in R.C. Cooper's case (supra) relied upon particularly the passage in para 77 of the judgment has no application to the case on hand since unlike in that case the necessary materials have been placed before this Court to justify the need or provision of S. 8 of the Act. The prohibition contained in S. 12 has been specially designed on the specific recommendations, of the Raj Committee Report. Even the restriction on the aggregate amount of chits in respect of an individual foreman was considered to be necessary only on the basis of the recommendations of the above expert committee and as a matter of fact, the legislature adopted a liberal attitude in implementing the same. The alleged violation of Arts. 14 and 19(1)(g) of the Constitution, therefore, does not survive or merit acceptance. The provisions in Ss. 15 to 19 were not shown to be in any manner arbitrary or unreasonable. S. 19 as well as S. 20 of the Act have also been designed on the recommendation of the Study Group and that no exception could be taken to the same or the justification for those provisions having regard to the definite object and aim of the legislation. As a matter of fact, the validity of a provision providing for such requirement as now contained in S. 20 was upheld, while considering the challenge to the Pondicherry Chit Funds Act, 1966, by a Division Bench of this Court in (supra). So far as the absence of any provision for payment of interest on the security deposit in cash made by the Foreman it could safely be held that Foreman concerned shall be held entitled to the interest earned by the deposit in cash made by the Foreman under S. 20(1) read with S. 4 in the name of the Registrar, and the interest shall be at the rates offered by the Scheduled Banks and shall be payable to the foreman at the time of termination of the Chit or annually or on substitution of security whichever is earlier.
30. So far as the rights and duties of foreman as stipulated in Ss. 21 and 22, the imposition of ceiling of the percentage of commission and the provisions for notice as contemplated under S. 22(3) are concerned, they have been so devised and provided for on the basis of the recommendations contained in the reports of Expert Committees which studied about the prevailing serious evils and malpractices and suggested measures to eliminate them. The challenge to the provisions contained in S. 24 and the Rules made thereunder by making a comparison with the provisions in the Companies Act, 1956 also does not commend for my acceptance. Those provisions provided only for the purpose of this Act cannot be said to be purposeless or said to interfere with the rights of the petitioners as such in any manner and particularly the provisions in the Companies Act for the purposes of that Act. The vagueness alleged in respect of S. 39(2) as well as S. 48(e) is again purely an imaginary grievance only and on this ground alone, the legislative provision cannot be struck down. The provisions in S. 30 are regulatory in nature and considered to be necessary in order to further the objects of the Act to protect the interests of the subscriber public and I see no invalidity in the same. The challenge to the provisions of the Act providing for arbitration as well as the provisions for creation of offences and penalties cannot be sustained since they are matters of policy and the expediency of providing for them in the enactment under consideration cannot be the subject matter of review in these writ petitions before this Court. The challenge to Rule 63 regarding payment of 12% interest by a defaulting subscriber at 12% for purposes of S. 28(1) of the Act cannot be said to be unreasonable in the context of the very plea for the petitioners that the ceiling on prize amount up to a maximum of 30% of the chit amount works out only to a 12% return on the amounts remitted by the subscriber. The challenge to some of the clauses in the agreement prescribed under the rules also does not merit acceptance since it is not for this Court to review those provisions as if reviewing a judicial or quasi-judicial order.
31. There was a general submission uniformly made by all counsel that this Court granted certain interim orders and the position in vogue in the matter of implementation of the provisions of the Act in the light of and subject to such interim orders was encouraging and the same may be considered as requirements sufficient in law while considering the validity of the provisions vis-a-vis Arts. 14 and 19(1)(g) of the Constitution of India. The interim orders have been granted, as could be seen from the order itself, mainly on account of the position of law emanating from the Tamil Nadu Chit Funds Act and the Rules made thereunder in force, preceding the coming into force of the Central Act and as an interim arrangement, pending final adjudication on the plea of unconstitutionally raised in respect of certain provisions of law in the writ petitions which were admitted and entertained for further consideration, While considering the constitutional validity of a provision in an enactment or a rule made thereunder, it would be inappropriate and to my mind impermissible to make a comparison with an other law, though made on the subject, by a different legislature and decide about its reasonableness or otherwise under Art. 14 and 19(1)(g). The provisions introduced by the Parliament in the Act in question was meant to be an improvement in the law prevailing in some States also to meet the exigencies of the situation and the serious problems and anomalies found to be rampant in the chit business, based on the experiences noticed in the working of the several chit companies in the country and the reports and recommendations of the Expert bodies which have gone into the matter on more than one occasion as well as the views of the State Governments themselves who were consulted before the passing of the Act. The restrictions and prohibitions and regulatory measures, introduced by the Central Act and the Rules made thereunder, in my view, have been carefully designed on the basis of actual experiences gained on the working of these chit organisations and with the only hope and aim of protection of the subscriber public who were invariably the target of exploitation in the hands of those manning the chit organisations. The materials made available in the form of the various reports of Expert bodies, Select Committee report and the consultation had with the State Governments as well as some of the chit organisations and Institutions themselves, in my view, ensured fairness in approach and the reasonableness as well as the relevance and necessity for the impugned provisions in order to strike a proper balance between the need for greater protection of the subscriber public and the right to carry on the business. It should also be kept in view that the report of the Expert Committee, as a matter of fact, did not favour the continuance of the chit funds business in any form having regard to the irregularities found to be rampant in the business but since the legislature as well as the Expert bodies thought that the available Banking facilities are insufficient to cope up with the demands of the class of people in the particular strata of society, it was resolved to permit the conventional chit business to go on subject to certain strict and stringent regulations and restrictions with the object of curbing abuse and misuse of the position by the foreman and those in charge of running the chits.
32. The mere fact that the effect of the provisions under challenge is to make the chit business less lucrative to those who organise and carry on them or that some problems to be faced in adhering to the expectations of the law in day to day practice are by themselves no basis or could be heid to be valid grounds to countenance of plea of unreasonableness of those provisions or to strike down such provisions as being opposed to Arts. 14 and 19(1)(g) of the Constitution of India, ignoring the vital fact the Parliament after great deliberations, about the alarming situation thought fit and necessary to pass the legistation in its present shape and form after careful analysis and examination of the recommendations and the views of the persons and authorities who were concerned with, involved in and affected by the chit business. Inconveniences, if any, cannot be raised to the status of infirmities or illegalities of the nature which go to invalidate the law itself. As observed in M/s. Srinivasa Enterprises case (supra) by the Apex Court, Judicial validation of a social legislation only keeps the path clear for enforcement and spraying of legislative socio-moral pesticides alone cannot serve any purpose unless the target area is relentlessly hit. The impugned legislation and the provisions sought to be challenged by the petitioners were only aimed at eradicating the evils in the running of the chit business and considered necessary in achieving the object mainly of safeguarding the subscriber public and eliminate by stringent measures envisaged the malpractices and avert exploitation of the innocent subscribers by those who run the chit business and that too based upon the recommendations of the Expert Committees which had made an all round and exhaustive in-depth study of the problems afflicting this area of the fiscal economy of the State. Consequently, I am of the view that there is absolutely no merit in the challenge made for the petitioners and the provisions contained in Ss. 4(3), 6(1)(g) and (2) & (3), 7(2)(c), 8, 12, 13, 15, 16(2) and (3), 17(2), 18(4) and (5), 20(1), 21, 22(2), 24, 30, 39(2), 76, 77, 79 of the Act, Rules 28, 31 and 63 and the agreement in form VIII prescribed under the Rules are constitutionally valid and are not violative of Arts. 14 and 19(1)(g) of the Constitution of India. No specific and separate challenge has been made to any of the rules in the Chit Funds (Pondicherry) Rules, 1986.
33. Before parting with this matter, it is necessary and appropriate to refer to some aspects of the grievances expressed by the petitioners which in my view merits serious consideration and deserve proper response and taking of sufficient steps to avoid hardship and inconvenience in the mailer of enforcement of the provisions. In my view many of these problems could be solved even at the instance of the rule making authorities and the authorities entrusted with the enforcement of the provisions of the Act. To highlight some of such problems are :
(i) The delegation of powers under Ss. 4 and 7 of the Act to the Authorities in such a manner that least inconvenience is caused in securing orders or complying with the requirements of those provisions expeditiously and within a time bound schedule, if necessary;
(ii) To specifically provide for interest on the cash deposit of security in the name of the Registrar at rates normally allowed by the Scheduled or Nationalised Banks and their payment periodically to the foreman; and
(iii) Rules laying down the guidelines or criteria for granting the special permission under S. 12 relating to the conduct of other business and the conditions subject to which the same will be granted, and on any other or further genuine working difficulties which requires to be attended to in the opinion of the State Government, in the course of implementation of the provisions of the Act and the Rules made thereunder.
The respondents may do well to consider these aspects and take appropriate action in this regard expcditiously.
34. So far as Writ Petition No. 8464 of 1985 is concerned, the order challenged therein is liable to be set aside since the same is not only opposed to Rule 18(4) which provides for furnishing immovable property security but also betrays total non-application of mind. In the light of the specific provisions in the statutory rules themselves the authorities are obliged to accept immovable property security also, of course after assessing the value as is expected of them and subject to the acceptability of the particular property. W.P. No. 8464 of 1985 is allowed, and the respondents are directed to consider the matter afresh in the light of Rule 18(4) of the Rules. All other writ petitions shall stand rejected. But, in the circumstances, there will be no order as to costs.
ANNEXURE.
(a) Writ petitions in which the Chit Funds Act, 1982 and the Tamil Nadu Chit Funds Rules, 1984 have been challenged :--
1. W.P. No. 6611 of 1984; 2. W.P. No. 6612 of 1984; 3. W.P. No. 6867 of 1984; 4. W.P. No. 6903 of 1984; 5. W.P. No. 7493 of 1984; 6. W.P. No. 12460 of 1984; 7. W. P. No. 12461 of 1984; 8. W. P. No. 12462 of 1984; 9. W.P. No. 12463 of 1984; 10. W.P. No. 7207 of 1984; 11. W.P. No. 13042 of 1989; 12. W. P. No. 8454 of 1984; 13. W.P. No. 8455 of 1984.
(b) Sections 8(3), 76, 77 and 79 and Rules 28(1), 31(1) and (2) of the Tamil Nadu Chit Funds Rules made under Section 24 of the Act.
1. W. P. No. 1683 of 1985; 2. W.P. No. 4158 of 1985; 3. W.P. No. 4245 of 1985; 4. W.P. No. 1735 of 1986.
(c) Sections 76, 77 and 79 and Rules 28 (1), 31(1) and 31(2) made under Section 24 of the Act.
1. W.P. No. 5867 of 1985; 2. W.P. No. 5868 of 1985; 3. W.P. No. 5869 of 1985; 4. W.P. No. 5870 of 1985; 5. W.P. No. 5768 of 1985; 6. W.P. No. 5769 of 1985; 7. W.P. No. 5770 of 1985; 8. W.P. No. 5771 of 1985; 9. W.P. No. 6215 of 1985; 10. W.P. No. 6216 of 1985; 11. W.P. No. 6217 of 1985; 12. W.P. No. 6218 of 1985; 13. W.P. No. 6219 of 1985; 14. W.P. No. 6360 of 1985; 15. W.P. No. 6417 of 1985; 16. W.P. No. 6418 of 1985; 17. W.P. No. 6419 of 1985; 18. W.P. No. 6420 of 1985; 19. W.P. No. 6430 of 1985; 20. W.P. No. 6431 of 1985; 21. W.P. No. 6432 of 1985; 22. W.P. No. 6433 of 1985; 23. W.P. No. 6565 of 1985; 24. W.P. No. 6567 of 1985; 25. W.P. No. 6568 of 1985; 26. W.P. No. 6569 of 1985; 27. W.P. No. 6570 of 1985; 28. W.P. No. 6572 of 1985; 29. W.P. No. 6612of 1985; 30. W.P. No. 6613 of 1985; 31. W.P. No. 6614 of 1985; 32. W.P. No. 6667 of 1985; 33. W.P. No. 6791 of 1985; 34. W.P. No. 7020 of 1985; 35. W.P. No. 7021 of 1985; 36. W.P. No. 7096 of 1985; 37. W.P. No. 7300 of 1985; 38. W.P. No. 7236 of 1985;
39. W.P. No. 121 of 1986; 40. W.P. No. 2562 of 1986; 41. W.P. No. 2563 of 1986; 42. W.P. No. 2564 of 1986; 43. W.P. No. 2565 of 1986; 44. W.P. No. 2566 of 1986; 45. W.P. No. 2567 of 1986; 46. W.P. No. 2568 of 1986; 47. W.P. No. 3549 of 1986; 48. W.P. No. 3860 of 1986; 49. W.P. No. 5572of 1986; 50. W.P. No. 4029 of 1986; 51. W.P. No. 5765 of 1986; 52. W. P. No. 6128 of 1986; 53. W.P. No. 13414 of 1986; 54. W.P. No. 173 of 1987; 55. W.P. No. 2185 of 1987; 56. W. P. No. 6518 of 1987; 57. W.P. No. 9024 of 1987; 58. W.P. No. 9025 of 1987; 59. W.P. No. 9026 of 1987; 60. W. P. No. 9027 of 1987; 61. W.P. No. 11706 of 1987; 62. W.P. No. 8030 of 1986.
(d) Writ Petitions challenging the provisions contained in Articles, 1, 6, 7, 8, 10(g), 13, 14, 15 and 16 of Appendix II of the Tamil Nadu Chit Funds Rules, 1984.
1. W.P. No. 7453 of 1985; 2. W. P. No. 1889 of 1985; 3. W.P. No. 12871 of 1987 -- Rules 28(1), 28(2) and 31 are also challenged.
(e) Writ Petition in which Sections 15, 16, 76(2)(b) and 77 of the Act are being challenged;
1. W.P. No. 4361 of 1987; 2. W.P. No. 7819 of 1987; 3. W.P. No. 13885 of 1989 -- Rule 13 also; 4. W.P. No. 6499 of 1987 --Section 9(1) also.
(f) Writ Petitions in which Sections 6(2) and 6(3) of the Act alone are challenged :
1. W.P. No. 2365 of 1988; 2. W.P. No. 337 of 1991 (Section 6(3) only).
(g) Writ Petition in which Section 13(2) of the Act alone is being challenged :
1. W.P. No. 4754 of 1988.
(h) Writ Petition in which Section 20(1)(b) of the Act alone is being challenged :
W.P. No. 6938 of 1991.
(i) Writ petition in which Sections 6(2), 76 and 77 of the Act and rule 13 of the Rules are challenged :
W.P. No. 9871 of 1990;
(j)Writ Petition in which Sections 6(2), 14(2), 20(1)(b), 22(2), 24 and Sees. 76, 77, 79 of the Act with reference to Sections 6, 14, 20, 22 and 24 Rules 13 read with Form VIII Rules28 (1), 31(1), 31(2) are being challenged :
W.P. No. 6838 of 1985.
(k) Writ Petitions in which Sections 6(1), 6(2), 8(3), 14(2), 20(1)(b), 22(2), 76, 77 and 79 of the Act and Rale 13 of the Rules read with Form VIII are being challenged :
1. W.P. No.5122 of 1986; 2. W.P. No. 8467 of 1986; 3. W.P. No. 16082 of 1988; 4. W.P. No. 11118 of 1989; 5. W.P. No. 7676 of 1991.
(l) Writ Petition No. in which Sections 6(2), 7(2), 20(1)(b), 22(2), 24, 76, 77 and 79 of the Act and Rule 13 of the Rules read with Form VIII Rules 28(1) and 31(2) are being challenged :
W.P. No. 2658 of 1986.
(m) Writ Petition No. in which Sections 6(2), 9(1), 14(2), 20(1)(b), 22(2), 24, 76, 77 and 79 of the Act are being challenged :
W.P. No. 754 of 1987.
(n) Writ Petition No. in which Sections 4(3)(b), 6(3), 7(2)(c), 12(2), 13, 16(2), 16(3), 21(1)(b), 21(2), 22(2), 48(c), 76, 77 and 79 of the Act and Rules 28(1)(2) and 31 and Articles 1, 6, 7, 8, 10(g), 13, 14, 15 and 46 of the Rules are being challenged :
W.P. No. 6324 of 1987.
(o) Writ Petition No. in which Sections 4(3)(b), 6(2), 6(3), 7(2)(c), 9(1), 12(2), 13, 14(2), 15, 16, 16(2), 16(3), 17(2), 21(2), 22(2), 24, 48(c), 76, 77 and 79 of the Act are being challenged :
W.P. No. 7266 of 1989.
35. Order accordingly.