Madras High Court
Voice (Consumer Care Council) Rep. By ... vs The Commissioner Of Police, Chennai-8 ... on 13 January, 1999
Equivalent citations: 1999(1)CTC151
ORDER
1. The petitioner who is a voluntary consumer organisation has filed this writ petition in public interest, seeking for a writ of mandamus directing the respondent No.1 herein to take appropriate legal measures against some of the Tamil Dailies and Weekly Magazines viz., respondents 3 to 8 herein, inter alia contending that they have developed a deplorable conduct in selling their 'Deepavali' issues and for improving the circulation by announcing huge prizes, and also for a further direction preventing such activities to put a quietus to their unjust enrichment in the process of sale.
2. The petitioner has stated that the provisions of the Prize Competition Act, 1955, and the Prize Chits and Money Circulation (Banning) Act, 1978 (hereinafter referred to as 'The Acts' in short) prohibit any Scheme by which money is collected announcing huge prizes. Amongst both the Acts, in the former Act, the contravention is non-cognisable and in the latter Act, it is cognisable. Apart from the aforesaid legal prohibitions, even under the Contract Act, such practice is declared illegal and opposed to public policy. In fact, Section 36 of the MRTP Act describes it as a restrictive trade practice. It is his contention that in the recent years, particularly, this year, Tamil Dailies, like Dinaboomi, Dinamalar and weeklies like Kungumam and Devi have announced huge prizes starting from couple of Honda Cars, Maruthi Cars and ending with thousands of consumer items for purchasing 'Deepavali' Malars at the cost of Rs.65/- and Magazines like kumudam and Vikatan paper announced prizes for improving circulation. Though Section 3 of the Prize Competitions Act, 1955 contemplates licence to carry out any such activity within the scope of that Act, no such licence was obtained by any of the prompters and there was no proof that a subscriber will be assured of prize so announced as regulated in the case of lottery tickets.
3. It is the grievance of the petitioner that by collecting huge sums of money worth crores of rupees on the promise of giving prizes, these Dailies and Magazines have induced innocent and greedy public to become the victims of such advertisements. As a consequence of publicity in the Television and other media for more than three months at huge cost, these promoters have accumulated large sums of public money, promising prizes. In order to prevent such instinct or inducement in the mind of the public, to be swayed by the prizes offered in these Malars, the petitioner sent a registered notice on 10.9.1998 to the respondent No.1 herein, bringing to their notice the Act, consequences and the nature of contravention committed by the Tamil Dailies and Weeklies and to prevent the same by the aforesaid provisions of law. Since no action was taken and the action of the promoters was against public policy, he has approached this Court to term such Malars as 'contagious social disease'.
4. Respondents 1 and 2 are Commissioner of Police and Home Secretary respectively, and respondents 3 to 8 are the promoters. Respondent No. 1 at para 3 of the counter has stated that the notice issued by the petitioner dated 10.9.1998 though was received by the office of the respondent No.1 earlier, it was placed before him later and he came to know of it only on 12.10.1998. For non-placing of the notice, he found fault with the office and later directed the Additional Deputy Commissioner of Police, General Section to conduct a preliminary enquiry into the abovesaid facts and after getting the legal opinion, to take action against them in accordance with law. Respondent No.2 stated in his counter that apart form the two Acts referred to earlier, there is yet another enactment, viz., Tamil Nadu Prize Schemes Prohibition Act, 1979, (hereinafter referred to as "The Act' in short), which prohibits the prize schemes whereby any prize or gift is offered or is proposed to be given to persons to be determined by lot, draw or any other manner from among persons who purchase or have purchased goods or other articles from shops, centres etc. It is also stated that in pursuance of the action taken by respondent No.1, all the schemes were banned on 12.10.1998. An official press release was also issued by Government on 12.10.1998 directing the police to take appropriate action. It is further stated at para 4 of the counter that the individual cases are being scrutinised through preliminary enquiry conducted by the officers attached to the Commissioner of Police. Chennai and that suitable action will be taken if it is prima facie found that the magazines had intended to select winners of prizes not substantially of skill, but through lots which mainly depend on their individual luck or fortune. If the schemes announced by the Tamil Dailies and magazines attract the offences under the provisions of the above Acts, suitable investigation will be conducted for collection of evidence and thereafter, action will be taken in accordance with law.
5. In substance, respondents 3 to 8 have taken uniform stand in the counter affidavits filed by them on the following issues, viz., a) Prize Chits and Money Circulation Schemes (Banning) Act, 1978 as well as the Tamil Nadu Act is not applicable to the case on hand; b) the prizes given are sponsored by other persons and no money is spent by the newspapers from the amount received for the issue; c) the petitioner could have given a notice to the concerned newspapers explaining how they are violating the law provided under the Acts referred to earlier; d) the respondents have been doing this for the past three or four years and on other festival occasions as well without any dispute; and e) since the prizes are given for answering certain questions, there is no element of chance and only skill is involved and hence there is no betting or gambling involved in this case which is prohibited under the Prize Competitions Act.
6. The questions for consideration in this writ petition are: a) whether the publications of the Deepavali Malars are in violation of the provisions of the two Acts referred to earlier and also The Tamil Nadu Price Schemes (Prohibition) Act, 1979?. b) whether such publications resorted to as Deepavali Malars are to be banned, if so, what consequences should follow for the acts so far done by the promoters 3 to 8, in other words, is there any justification in the publication of these Malars and announcement of prizes in those Malars and its advertisement in the Newspapers, Magazines and Television?
7. Under Section 2(c) of the Price Chits and Money Circulation Schemes (Banning) Act, 1978, "money circulation scheme" means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrollment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions. Under Section 2(e), "prize chit" includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter, foreman, agent or in any other capacity, monies in one lumpsum or in instalments by way of contributions or subscriptions or by sale of units, certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings, mutual benefit, thrift or any other scheme or arrangement by whatever name called, and utilises the monies so collected or any part thereof or the income accruing from investment or other use of such monies for all or any of the following purposes, namely:-
i) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in kind, whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement;
ii) refunding to the subscribers or such of them as have not won any prize or gift, the whole or part of the subscriptions, contributions or other monies collected, with or without any bonus, premium, interest or other advantage by whatever name called on the termination of the scheme or arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit.
Section 4 contemplates penalty for contravening the provisions of Section 3. Section 5 contemplates penalty for other offences in connection with prize chits or money circulation schemes. Section 8 contemplates forfeiture of newspaper and publication containing prize chit or money circulation scheme conducted in contravention of the provisions of the Act or any advertisement in relation thereto, the State Government may, by notification in the Official Gazette, declare every copy of the newspaper and every copy of the publication containing such material or the advertisement to be forfeited to the State Government. Section 10 makes all offences under this Act, cognisable.
8. Section 2(b) of the Tamil Nadu Prize Schemes (Prohibition) Act, 1979, defines "Prize Scheme" thus:-
"Prize Scheme" means any scheme by whatever name called whereby any prize or gift (whether by way of money or by way of movable or immovable property) is offered, or is proposed to be given or delivered to one or more persons to be determined by lot, draw or in any other manner from among persons who purchase or have purchased goods or other articles from shops, centres or any other place whatsoever specified by the sponsors of the scheme or on any event or contingency, relative or applicable to the drawing of any ticket, lot number or figure in relation to such purchases.
Explanation:- For the purpose of this clause:-
(i) "Purchase" may be by way of payment in one lump or in instalments;
(ii) "money" includes a cheque, postal order, demand draft, telegraphic transfer or money order."
Section 4 contemplates penalty for contravening the provisions of Section 3. Under Section 5, whoever with a view to the promotion or conduct of any prize scheme in contravention of the provisions of this Act or in connection with any such prize scheme promoted or conducted:-
(a) prints or publishes any ticket, coupon or other document for use in the prize scheme; or
(b) distributes or offers or advertises for distribution, or has in his possession for the purpose of distribution of any ticket, coupon or other document for use in the prize scheme; or
(c) prints, publishes or distributes, or has in his possession for the purposes of publication or distribution:-
(i) any advertisement of the prize scheme, or
(ii) any list, whether complete or not, of purchasers in the prizescheme; or
(iii) any such matter descriptive of, or otherwise relating to the prize scheme as is calculated to act as an inducement to persons to participate in that prize scheme or any other prize scheme; or
d) brings or invites any person to send, for the purpose of distribution, any ticket, coupon or other document for use in, or any advertisement of, the prize scheme; or
e) uses any premises, or causes or knowingly permits any premises to be used, for purposes connected with the promotion or conduct of the prize scheme; or
(f) causes or procures or attempts to procure any such person to do any of the above mentioned acts., shall be punished with rigorous imprisonment for a term which may extend to three years Provided that such rigorous imprisonment shall not be less than three months."
9. Section 8 enables the police to enter, search and seize, if necessary by force, whether by day or night, with such assistants as he considers necessary, any premises, which he has reason to suspect, are being used for purposes connected with the promotion or conduct of any prize scheme in contravention of the provisions of this Act. Section 9 contemplates forfeiture of newspapers and publication containing prize schemes. Thus, in spirit, this Act is not inconsistent with the provisions of the other two Acts.
10. Under Section 2(a) of the Prize Competitions Act, 1955, "licensing authority" means any officer or authority appointed by the State Government, by notification in the Official Gazette, for the purpose of granting licenses under this Act. Under Section 2(b) "money" includes a cheque, postal order or money order. Where the total value of the prize or prizes (whether in cash or otherwise) to be offered in any month exceeds one thousand rupees and the number of entries exceeds two thousand rupees, such prize competitions are prohibited under Section 4 of this Act. Section 5 imposes a condition that no person shall promote or conduct any prize competition or competitions in which the total value of the prize or prizes (whether in cash or otherwise) to be offered in any month does not exceed one thousand rupees unless he has obtained in this behalf a licence granted in accordance with the provisions of this Act and the rules made thereunder. Under Section 6(1), every person desiring to obtain a licence referred to in Section 5 shall make an application in writing to the licensing authority in such form and manner as may be prescribed and on receipt of such application, the authority, after making such inquiry as it considers necessary, shall, by order in writing, either grant the licence or even refuse to grant it. In the event of refusing to grant licence, it has to record a brief statement of the reasons for such refusal and furnish a copy thereof to the applicant disclosing the conditions subject to which the licence is not granted. Under Section 7, every promoter who conducts prize competitions in accordance with the provisions of this Act and the rules made thereunder, shall keep accounts relating to such competitions and submit the same to the licensing authority. Under Section 9, if any person contravenes the provisions of Section 4 or 5, such contravention is punishable with imprisonment for a term which may extend to three months, or with fine which may extend to one thousand rupees, or with both. In view of these provisions, the authority vested with the powers under the Act have to take appropriate action to prevent inducement to the public and also to see that violations of the provisions of this Act are not committed through advertisement, and even if there is any licence, such licensees have to conduct such competitions subject to the conditions and to submit their accounts periodically to the authority during the license period.
11. In the instant case, it is the allegation of the petitioner that lakhs of people have purchased these "Deepavali Malars" and the promoters have unjustly enriched themselves and even in the Television, advertisement was given for three minutes and the cost of the advertisement was paid by the promoters. There are no schemes evolved by them nor license to conduct such prize competitions. The petitioner has taken all precautions by issuing notice, which relates back to 10.9.1998, in pursuance of which, no action was taken. This inaction, he viewed it as an act promoting the promoters to contravene the provisions of the Act, Lastly he contended that refunding the money may be an onerous task and instead, the entire amount may be ordered to be brought to the public exchequer, so that it may be used for a laudable object of benefiting the general public.
12. The grievance of the petitioner is that respondents No.1 and 2 failed to take any action knowing fully well that such schemes are banned and even the notice issued on 10.9.1998 addressed to respondent No.1, received by them on 12.10.1998 and failure to take action as contemplated under Section 8 impliedly amounts to promoting the act which has the effect of unjust enrichment on the part of the promoters.
13. The petitioner further contended that the sponsors have received the consideration otherwise they would not have sponsored. Consideration received directly or impliedly towards the prize is the amount paid by the respondents as there is no privity of contract. Even when a portion of the money goes for prize purchase as per Prize Chits and Money Circulation Banning Act, 1978 (Act 43 of 1978), read with the Tamil Nadu Prize Schemes (Prohibition) Act, 1979 (Act 56 of 1979), the provisions of the Acts are attracted.
14. It is admitted by all the senior counsel appearing for the respondents 3 to 8 that no scheme, as such, has been published before starting the sale of Malars.
15. Relying on the decision in Srinivasa Enterprises v. Union of India, , the learned counsel for the petitioner contended that "Prize chit" includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter, or in any other capacity, monies in one lumpsum by way of contribution or subscription or by sale of units or other instruments in any other manner. The Apex Court in that case at paras 2 and 3 held thus:-
"Since there are a large number of prize chits all over the country which have almost become a pan-Indian epidemic and since the total number of people victimised by these projects are considerable, the injury to the community is substantial, so that a welfare state dedicated to the directive principles of Part IV has to awake and protect the vulnerable sector. Another weighty factor which has alerted the State into action is that the flood of funds flowing through prize chits benefit the organizers of such schemes who have no social responsibility for national productivity and in their hands is easy money with little developmental benefits or attractive returns for the poor investors. The noxious net cast by the prize chit promoters was large and the State moved to stop this menace. Many a little makes a mickle, and those small sums collected from a substantial number of subscribers accumulated into huge resources which otherwise would ordinarily have been available for national development. The grim picture of the luckless many who were losing their money, appetized by gambling prospects and the sterilization of people's resources which were siphoned off by private adventurists through prize chits to the detriment of national development ignited the impugned legislation."
The financial fallouts of these schemes were also examined by a Study Group to demonstrate how the promoters were swallowing up huge surpluses from the public who lost interest on their subscriptions, and, sometimes, even the principal amounts paid (Report of the Study Group, P.82):
"Even if the company offers some amount by way or bonus or premium to the subscribers at the time of refund of their subscriptions and allowing for reasonable expenditure on publicity, commission to agents, etc., a sizeable balance will still be left with the company. This is exclusive of the amounts which the company might be collecting by way of membership fees and service charges from the subscribers and also of the amounts which it might be appropriating in respect of the subscriptions on forfeited tickets on which there will be no future liability for refund to the members at the end of the scheme. It will thus be obvious from the foregoing that such schemes confer monetary benefit only on a few members and on the promoter companies."
It was further held thus:-
"There is reference in the Study Group report to other studies conducted by the Reserve Bank which also demonstrated the many sinister effects upon the community on account of proliferous prize chits-benefits schemes (Report of the Study Group, P.82-83, 84-85):
(a) the companies had advanced sizeable amounts to the directors or their relatives or firms in which they were interested as partners, directors or as commission agents and there were practically no repayments of the loans;
(b) the books of account had not been maintained satisfactorily;
(c) close relatives of the directors had been employed in the companies as members of the staff or as agents on high salaries;
(d) In one case, it was observed that a scheme announced by a company in which collections had been made was withdrawn subsequently without notice to the subscribers and no refunds of the subscriptions already received had been made to the subscribers. Prize moneys had not been paid to all the subscribers who had won the prizes; and
(e) subscriptions were shown to have been refunded in the books of account of a company but doubts have been expressed by the Inspecting Officer about the genuineness of the payments in view of certain attendant circumstances. There have also been allegations that some companies had resorted to certain malpractices in drawing the names of prize winners....In the absence of any authoritative judicial pronouncement on the subject we are not sure whether the activities of companies conducting prize chits, etc. are clearly prohibited by the existing legislations.
6.10. It has been reported that the resources of prize chits are used for wasteful spending and hoarding commodities and that these schemes "enable certain persons to convert tax-evaded income into accounted money. The persons concerned pay a premium to the promoters in return for the facility." It has also been stated that "there are a number of agents who go about contacting persons who are likely to face the problem of saving their income from the tax authorities. The prize chit pass books issued to them under different names become their passports for travelling from black money territory to the white money area the easiest and surest way of using ill gotten wealth. Besides, by their misleading names and companies the prize chit companies divert private savings into their personal drains, thus disrupting the national economy.
6.11 From the foregoing discussion, it would be obvious that prize chits or benefit schemes benefit primarily the promoters and do not serve any social purpose. On the contrary, they are prejudicial to the public interest and also adversely affect the efficacy of fiscal and monetary policy. There has also been a public clamour for banning of such schemes; this stems largely from the malpractices indulged in by the promoters and also the possible exploitation of such schemes by unscrupulous elements to their own advantage. We are, therefore, of the view that the conduct of prize chits or benefit schemes by whatever name called should be totally banned in the larger interests of the public and that suitable legislative measures should be taken for the purpose if the provisions of the existing enactments are considered inadequate. Companies conducting prize chits, benefit schemes, etc. may be allowed a period of three years which may be extended by one more year to wind up their business in respect of such schemes and/or switch over to any other type of business permissible under the law."
16. The learned Solicitor General drew our attention to cases where the notorious abuses by prize chit promoters had attracted judicial notice. In particular, he cited a decision of the Gujarat High Court in Navjivan Trading Financing Pvt. Ltd. 1978 (48) Com. Cas 402. Thakkar, J. while dealing with the social anguish at the exploitative spectacle, said "The facts speak for themselves so eloquently that no further discussion is called for and it is unnecessary to demonstrate any further that the company is in such a precarious condition and the financial condition is so very ugly that there is no possibility whatsoever of the company ever being in a position to pay its debts. It is not in a position today and even in future, it is not likely to be in a position to discharge the debt burden. In fact, the deficit will go on increasing and for aught we know, more innocent persons would be trapped meanwhile. The contributors from whom collections are made are persons with extremely limited financial means and are petty subscribers who cannot possibly afford to take recourse to legal proceedings. It would be cheaper for them to abandon their claims than to make recourse to legal proceedings and incur expenses for court-fees and advocates fees, apart from the inconvenience involved therein."
17. The petitioner herein is seeking for a direction to respondent No.1 to take necessary action under the Acts. These Acts being social legislations, dynamic state action is required to achieve the object of the Act. Incidental impact of promoting or not taking timely action is such that it frustrates the very legislation for which it was enacted. By its constant increase year by year, it will have a ruinous impact, in other words, it will be a menace to peaceful life.
18. In Reserve Bank of India-v. Peerless G.F.& I.Co. Ltd., AIR 1987 SC 1023, the Apex Court held that the word 'Prize chit' includes and covers all transactions or arrangements of the nature of prize chits but under different names. They mainly serve or benefit the promoters and do not serve any social purpose, on the contrary, they are prejudicial to public interest and also adversely affect the efficacy of fiscal and monetary policy. There is also a public clamour for banning such schemes; this stems largely from the malpractices indulged in by the promoters and also the possible exploitation of such schemes by unscrupulous elements to their own advantage. The primary question in the present case is whether the Endowment Scheme piloted by the promoters, respondents 3 to 8, falls within the definition of prize chit? Section 3 bans prize chit and money circulation schemes and the ban is not merely on promoting or conducting any prize chit or money circulation scheme but also on participation in the Scheme. Section 4 makes a contravention of the provisions of Section 3 punishable with imprisonment for a term which may extend to three years or with fine which may extend to five thousand rupees or with both. Section 5 makes printing, publishing of any ticket, coupon or other document for use in the prize chit or money circulation scheme with a view to promotion of such scheme in contravention of the Act punishable with imprisonment etc. So also, the printing, publication or distribution of any advertisement of the prize chit or money circulation scheme.
19. Section 11 of Act 43 of 1978 exempts any prize chit or money circulation schemes promoted by (a) State Government or any officer or authority on its behalf; or (b) a company wholly owned by a State Government which does not carry on any business other than the conducting of a prize chit or money circulation scheme; or (c) banking institution notified by the Central Government under Section 51 of the Banking Regulation Act, 1949 or the State Bank of India or a Subsidiary Bank of the State Bank of India or a corresponding new Bank or a Regional Rural Bank or a Co- operative Bank; and (d) any charitable or educational institution notified in this behalf by the State Government in consultation with the Reserve Bank. There is no general provision which empowers the Central Government to exempt any other prize chit or money circulation scheme from the applicability of the Act. Respondents 3 to 8 are not covered under the exemption and their activities are clearly barred under the provisions of the Acts. Promoting the Scheme at the hands of those who are not covered under exemption, certainly amounts to enriching them at the cost of weaker sections of the people. Inducing the gambling instinct in them, impressing on them by way of a promise to make easy money in the form of prizes, virtually amounts to robbing Peter to pay Paul. The object of the Act is to prevent exploitation of ignorant subscribers. Care must be taken to protect these innocent, poor, middleclass subscribers being swayed by promises.
20. This Court on an earlier occasion in W.P.No.5062 of 1979 and other connected cases decided on 4.12.1981, elaborately discussed the object and validity of the Acts and that aspect is not the question involved in the present Writ Petition, nor is it necessary to go into that aspect.
21. The learned Additional Advocate General appearing for respondents 1 and 2 invited our attention to a judgment of the division Bench of this Court in W.P.No.5062 of 1979 and batch, dated 4.12.1981, wherein this Court upheld the validity of the Act, but at page 39, held that the fact whether the Scheme evolved for promoting sales is a lottery or not, is a matter to be decided only on evidence adduced in appropriate proceedings, and declined to decide such question in those writ petitions, because what was required to be decided in those writ petitions is whether the prize scheme as defined in Section 2(b) of the Act is a lottery or not and its validity. As earlier extracted, Section 2(e) of the Act, 1978 contemplates that 'prize chit' includes any transaction or arrangement by whatever name it is called, wherein the money so collected or any part thereof or the income accruing from investment, is utilised only for the following purposes, namely, not to give prizes, in other words, no pan of the money spent towards prizes and prizes not offered by the Malars. They are given by sponsors and the entire action of release of Malars will not come within the purview of both these Acts.
22. The learned Additional Advocate General submitted that some of the Dailies and Weekly Magazines announced prizes for purchasing Deepavali Malars and that individual cases are being scrutinised through preliminary enquiry conducted by the officers attached to the Commissioner of Police. Chennai, and that suitable action will be taken if it is prima facie found that the magazines had intended to select winners of prizes not substantially of skill, but through lots which mainly depend on their individual luck or fortune. It is also stated that if the schemes announced by the Tamil dailies and magazines attract the offences under the provisions of the Acts, suitable investigation will be conducted for collection of evidence and thereafter action will be taken in accordance with law.
23. The learned counsel for the respondents invited our attention to a decision in R.M.D.C. v. Union of India, and contended that the competitions which are sought to be controlled and regulated by the Act are only those competitions, in which success does not depend on any substantial extent of skill. Where the competition depends of skill, then, the Act does not apply. In support of his contention, he further contended that a questionnaire is annexed to each of the Deepavali Malars and only on answering such questions, in a lot, where transparency is assured, the prizes are given as announced by the sponsors, for which these Malars have no connection. Thus, there is no contravention of any provisions of the Act.
24. The learned counsel Mr. Krishnamoorthy invited our attention to averments made in Paragraphs 5, 6 and 7 of the counter which reads thus:-
"5. This respondent respectfully submits that for the ensuing Deepavali festival, also this respondent had proposed to release the Thina Boomi Deepavali Malar, and in fact released a Deepavali Malar, called Thina Boomi Deepavali Malar hereinafter called Deepavali Malar. While releasing the Deepavali Malar, this respondent has clearly stated that this respondent would be giving gifts of various items which are being sponsored by the various firms and persons. The price of the Thina Boomi Deepavali Malar is Rs.75 and not even a single paise from the said amount is being utilised for the purpose of giving various gifts which are proposed to be given to the readers of the Deepavali Malar.
6. This respondent respectfully submits that from the receipts issued by this respondent, it could be seen that there are three detachable slips. One detachable receipt is given to the purchaser of Deepavali Malar, in which it is clearly stated that the purchaser can fill in the questionnaire form. The second slip is taken by the Agent to identify the person who has booked the Deepavali Malar. As far as the third slip is concerned, the same is signed by the Agent and it is the office copy. In the office copy, it could be seen that there is a questionnaire form to be filled in by the person who books the Deepavali Malar at the time of his booking. If there is only one person, and that person gives the correct answer, he will be given the prize in the order.
7. This respondent respectfully submits that if there are more than one person who gives the correct answer, they will be chosen by draw of lots. Before drawing the lots, all the office copies of the receipts would be put in a box and from that box the receipts will be drawn. This will be done in the presence of the general public, and a V.I.P. will be asked to pick up a receipt from the box at a time. This procedure will be adopted till the last of prizes which are to be given by the sponsors. Therefore, it is very clear that there is no contravention of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, hereinafter referred to as Act. On a perusal of the said Act as well as the definition of Section 2(e) namely, "Prize Chit", it could be seen that the procedure adopted by this respondent does not contravene the said provisions. Moreover, not even a single paise from the sale of the Deepavali Malar is being spent for the purpose of purchase or otherwise of the gifts to be given to the purchaser. This respondent reiterates that all the items mentioned are being given only by the sponsors. The sponsors, in turn get the benefit of their company products being known to the readers. This is turn saves a lot of money on advertisement for the sponsors' products."
25. In the rejoinder filed by the third respondent at para 4, he reiterated his contention that the Prize Chits and Money Circulation (Banning) Act, 1975 as well as the Tamil Nadu Act are not applicable to the facts of this case, but the petitioner sought to rely upon the Prize Chits and Money Circulation (Banning) Act, 1975, especially Section 2(c) and 3 of the said Act. He also contended that the decision of the Supreme Court in Srinivasa Enterprises v. Union of India, followed in Registrar of Firms, Societies and Chits, Uttarpradesh v. M/s. Secured Investment co. Lucknow and another, , is not applicable to the facts of this case. The distinction he makes is that the articles offered by sponsors through this respondent will not come within the scope of Prize Chits and Money Circulation (Banning) Act 1979. What is prevented is only betting and gambling and not the skill involved in it.
26. In Registrar of Firms, Societies and Chits, Uttarpradesh v. M/s. Secured Investment co. Lucknow and another, , the Apex Court at para 22 held thus:-
"From the above analysis, it will be clear that the reach and range of the definition of 'prize chit' is sweeping. The generality of the language appears to have been deliberately used so that the transaction, arrangement or scheme in which subscribers or contributors agree to forgo a portion of their contributions in the hope of getting any prize or gift should not escape from the net of the definition. Even the participation of any person in such chit or scheme has been prohibited: The object being that the people should not be attracted to invest their monies in the hope of getting prizes or gifts. The reason being that it has been found by the Study Group of Dr. S. Raj that all such prize chits or schemes are in the form of lottery and they do not serve any social purpose. They are prejudicial to the public interest. They affect the monetary policies of the country. They benefit only the promoters."
There, the High Court held that payment of money to the company for the purpose of obtaining R.D.P. Receipts with the hope of getting any prize is not sufficient to attract the definition of prize chit. This view was found fault with by the Supreme Court.
27. The question is whether the promotion of these Deepavali Malars, whether it is an investment or a saving, at whose cost, and for whose benefit, if all these things are examined, this investment is not a saving. It is at the cost of the public, the benefit of the magazine goes to newspaper people and also to the sponsors.
28. Where it is for the benefit of the promoters and in the absence of any such measured transparency and such scheme not earlier publicised and where it is not one of the conditions of the advertisers that the sponsors will give the prize and not reward in the form of the entrance to amusing parks or giving things to the value of the cost of the magazine, will not absolve that the money collected is not with an object to enrich the promoters, because anything offered is also a reward. In a family where 10 coupons are taken, the incentive given is so negligible and it is not the case that incentive is exceeding the cost of purchase by each family irrespective of the coupons. So, therefore, the object of preventing banning of these competitions is with an economic policy behind it, as has been held in Registrar of Firms, Societies and Chits, Uttarpradesh v. M/s. Secured Investment co. Lucknow and another, , that the Study Group constituted by Dr.S.Raj that too, on such prize chits or schemes, are in the form of lottery and they do not serve any social purpose and are prejudicial to the public interest and also affect the monetary policies of the country and benefit only the promoters. If on one side the contravention and on the other side, non-transparency, further the benefit goes to the public and gain to the promoters, in the process, the sponsors getting the monopoly of advertisement, enriching their sales irrespective of the qualities, also creates quarrels among the competitors who serves to the advantage of the consumer, namely, the general public. Therefore, promoting in the guise of putting the prizes were given by sponsors also has an evil consequence on the monetary system and on the economy and spoils the competition and creates monopoly of certain goods by the public who have participated or purchased the Malars.
29. The respondents 3 to 8 though have filed separate counter affidavits, the sum and substance of their contentions is that the petition is not bona fide, since no action was taken at the initial stage and only few of the respondents are selected, therefore, discriminatory. Magazines contained questionnaire, which requires skill. The provisions of the Acts are not attracted. No part of the subscription money is utilised towards purchase of prizes. There is no violation of any right or public injury. The persons affected are subscribers. Not a person has come forward complaining irregularity.
30. The undisputed facts are that there is no material on record to show that prior implied contract between the sponsors and the promoters, to evidence that sponsors have agreed to pay the prizes without taking any consideration from the promoters. That fact was not notified prior to launching of the Scheme. How and in what manner skill has to be determined? and by whom? are also not indicated, so also, the method of draw and if the subscriber is a non-recipient of the prize, what is the alternative, are also not Indicated. There is an element of chance involved, so also not indicated. There is an element of chance involved, so also, the transparency in drawing the prize and its mode are not indicated. There is no proper scheme for the conduct of the whole prize chit starting from the sale of Malars till drawing of the lots. The manner of advertisement itself shows the inducement to lure the innocent man by a blare of publicity of fabulous prizes. It is to ban such inducement, the Act is promulgated. If the whole advertisement is read cautiously, an impression could be gathered that poor and unwary are seduced by unscrupulous racketeers, glamourising the prize scheme and play upon the gambling instinct to get rich quick through prizes. So long as there is resistless spell of a chance, though small of securing a prize, though on paper, people chase the prospect by subscribing to the speculative scheme only to lose what they had. Even, the documents filed are incomplete and do not give the full picture of the scheme they have advertised. When? how much money accurately collected? how it has been spent? how the prizes were thought of at the initial stage? the whole thing is in a mess and they have not placed the entire relevant material required by the Court.
31. There is no agreement between the sponsors and the promoters about the prize component in accordance with law contemplating full contribution with reference to their Company's decision with documents. A reading of some of the letters shows that they are co-sponsors or co-promoters and in some cases, the nature of participation, if so, on what consideration, whether it was on payment of the money by the promoters and the conditions contemplated by sponsors are vague and not clear.
32. The justification for enactment is not the subject-matter. It is only the implementation of the enactment. In the absence of any rules or regulations for the Scheme, there will be no transparency in selecting the winners. Whether the sponsors had any contract with the promoter? if so, in what manner? and whether it is by accepting consideration? are also matters to be probed. On the declaration of sale of the magazine by the respective promoters, the authority may collect all the information and the data regarding the actual sales in each Centre through the respective agents and work out the actual sale of the Malars by examining the books of account and to take appropriate action in the event of not being properly maintaining the accounts. The authority should also concentrate on the aspect whether the prize chit as is, has been benefited primarily by the promoters and does not serve any social purpose. Whether on the contrary, they are prejudicial to public interest and adversely affect the subscribers? The examination has to be done as to whether actually the skill is involved? if so, how? and what is the degree of skill required? or whether it is a matter just for exploitation by unscrupulous elements to their own advantage. The authority to probe into the contract between the promoters and the sponsors regarding the proposed prizes to examine the financial features and the evasion of the taxes, if any, and to furnish such materials to the tax authorities to probe into that aspect, so as to prevent unlawful gain and to prevent the tax evasion on the quantum of income derived by the promoters. To probe whether there is any transgression of the procedural aspects contemplated under the Act while resorting to the sale of Malars in question, if the promoters are not coming within the permissible limits of the Act, the authority to take appropriate steps against such promoters for the violation of the law as contemplated under the relevant acts.
33. The authority to take such steps in future, so that any promoter shall not make an attempt to penetrate the urban or rural areas to tap the small savings of the poor ignorant villagers through a special structure of agents, special agents, sub-organisers, organisers, special organisers and so on. An appropriate announcement has to be made to educate the public through media, not to subscribe to such magazines and the consequences on the subscribers and the promoters as contemplated in law, to take stringent action not to permit hereafter such prize chits, prohibited under the Act.
34. But it is stated by all the learned senior counsel appearing for respondents 3 to 8 on behalf of their clients on instruction that they will not resort to this kind of activity in future and this will be the last. Their submissions are taken with a good gesture and they are placed on record.
35. Even otherwise, when the State concedes to take action, and when the Act also contemplates penal consequences, whether any portion of the money is utilised for prizes? whether it involves substantial degree of skill? whether it is a joint venture? whether there is an implied contract? what is the nature of contravention? are all questions of fact to be investigated which cannot be done under Article 226 of the Constitution.
36. With these observations, we direct that no person shall promote or conduct any prize chit or money circulation scheme or participate or receive any money in pursuance of such chit or scheme in contravention of the provision of the Acts. If an element of substantial degree of skill actually exists, steps may be taken to draw the chit prizes in the presence of top officials, such as, Secretaries, heads of Department, respective District Collectors and the Superintendent of police to ensure transparency in the draw of prizes, after determining how the substantial degree of skill involved. With these observations and directions, the writ petition is ordered accordingly. Parties to bear their own costs. Consequently, the connected miscellaneous petitions are closed.