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The primary question in the present case is whether the Endowment Scheme piloted by the Company falls within the definition of prize chit? Section 3 bans prize chit and money circulation schemes and is in the following terms:

"No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or par- ticipate in it otherwise, or receive or remit any money in pursuance of such chit or scheme. ' ' It is important to notice here that 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 punish- able 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 imprison- ment etc. So also the printing, publication or distribution of any advertisement of the prize chit or money circulation scheme. The use of any premises for purposes connected with the promotion or conduct of the scheme is also punishable. Section 6 deals with offences by companies. Section 7 deals with the powers of entry, search and seizure. Section 8 provides for the forfeiture of newspapers or other publica- tions containing any material connected with any prize chit or money circulation scheme. Section 11 exempts from the operation of the Act prize chits or money circulation schemes promoted by a State Government or any officer or authority on its behalf, 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, a banking institution notified by the Central Government under Section 51 of the Banking Regulation Act, the State Bank of India or a subsidiary bank of the State Bank of India or a corresponding new bank, Regional Rural Bank, a co-operative bank and any charitable or educational institu- tion notified in that behalf by the State Government in consultation with the Reserve Bank of India. There is no general provision which empowers the Central Government or the Reserve Bank of India to exempt any other prize chit or money circulation scheme from the applicability of the Act. Section 12 contains transitional provisions relating to the winding up of the business relat- ing to a prize chit or money circulation scheme which is being conducted at the commencement of the Act. The person conducting the prize chit or money circulation scheme is required to furnish to the State Government or the autho- rised officer and to the Reserve Bank in the prescribed form full information regarding the chit or scheme along with a winding up plan prepared in accordance with the provisions of rules made by the State Government. The State Government, in consultation with the Reserve Bank, is invested with the power to permit such person to continue to conduct the business relating to the chit or scheme for such further period as may be necessary in the circumstances of the case and in the interests of the members of the chit or the scheme. The State Government in consultation with the Re- serve Bank may approve the winding up plan furnished by the person conducting the scheme with or without modifications or reject the same. Section 13 empowers the State Government to make rules for the purpose of carrying out the provisions of the Act. The Government of West Bengal has made the Prize Chits and Money Circulation Schemes (Banning) (West Bengal) Rules, 1979 in exercise of its powers under Section 13 of the Act.

In the meanwhile on September 3, 1979, the Company filed a writ petition in the Calcutta High Court for a declaration that the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 did not apply to the business carried on by the company. A Rule was issued and an Interim Order was made in favour of the company, first for a limited period and, later, till the disposal of the writ petition. A similar writ petition was filed questioning a notice issued by the Madhya Pradesh Government on the same lines as that issued by the West Bengal Government. A Rule and Interim Order were issued. A learned single Judge of the High Court dismissed both the writ petitions but appeals preferred by the company under the Letters Patent against the judgment of the learned single Judge were allowed by a Division Bench of the Calcut- ta High Court. It was declared that the business carried on by the company did not come within the mischief of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Against the judgment of the Division Bench of the Calcutta High Court the Reserve Bank of India, the Union of India and the State of West Bengal have preferred Civil Appeal Nos. 3562, 3563, 3564, 3565 and 4459 of 1986. In the course of the judgment, the Division Bench of the Calcutta High Court had observed that the company was a financial institution within the meaning of paragraph 11 of the Non-Banking Finan- cial Companies (Reserve Bank) directions, 1977 and there- fore, the Directions contained therein applied to the business carried on by the company. Against this observation of the Division Bench, the Company has also preferred Civil Appeal Nos. 3566 and 3557 of 1986. We may also mention here that after the judgment of the Division Bench of the Calcutta High Court, the Company, pursuant to the observation of the Division Bench that it was a financial institution within the meaning of paragraph 11 of the Non-Banking Financial Companies Directions, applied afresh to the Reserve Bank of India for exemption from complying with the Directions. The Reserve Bank of India by its order dated August 22, 1986 refused to grant the exemption sought. It appears that the Company has filed another writ petition in the Calcutta High Court against the refusal of the Reserve Bank of India to grant exemption. In view of the pendency of the writ peti- tion in the Calcutta High Court we do not desire to say anything on the merits of the claim of the Company for exemption or on the question whether the Company is a finan- cial institution within the meaning of paragraph 11 of the Non-Banking Financial Companies (Reserve Bank) Directions. We leave that question open as we consider that the appeals preferred by the Reserve Bank of India, the Union of India and the State of West Bengal may be decided without express- ing any opinion on the question. Appeals preferred by the Company are disposed of with these observations. The question for our consideration is, "Is the Endowment Scheme of the Peerless Company a prize chit within the meaning of Section 2(e) of the Prize Chits and Money Circu- lation Schemes (Banning) Act?" The particulars of the scheme are not in dispute. What is its nature? It is not a gambling scheme. It is not a lottery scheme. There are no prizes, no gifts, no elements of chance. It is just a plain Recurring Deposit Scheme such as the many schemes floated by Commer- cial Banks and National Savings Organisation. This is admit- ted in the Inspection Report of the Reserve Bank of India. But, says the Counsel for the Reserve Bank, if money is received in a lumpsum or in instalments and money is uti- lised either for payment of prizes or for refund of the whole or part of the amount of subscription, the scheme is a prize chit as defined. Prize or gift is not an essential element and refund of the amount of subscription is suffi- cient to bring it within the mischief of s.2(e). He says clauses (i) and (ii) of the definition are disjunctive. He emphasises the words "for all or any of the following pur- poses". And, he stresses the fact that the definition is an 'inclusive' one. He says that if Commercial Banks, the National Savings Organisation and others are permitted to receive deposits And to run Recurring Deposit Schemes, they do so under special statutes.

Our attention was also invited to Ardeshir Bhiwandiwala v. State of Bombay, [1961] 3 SCR 592; C.I.T. Andhra Pradesh v. Taj Mahal Hotel, [1972] 1 SCR 168 and S. K. Guptav. K.P. Jain, [1979] 4 SCC 54.

We do not think it necessary to launch into a discussion of either Dilworth's case or any of the other cases cited. All that is necessary for us to say is this: Legislatures resort to inclusive definitions 1) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it, 2) to include meanings about which there might be some dispute, or, (3) to bring under one nomenclature all transactions possessing certain similar features but going under different names. Depending on the context, in the process of enlarging, the definition may even become exhaustive. We do not think that by using the word 'includes' in the definition in s.2(a) of the Act, the Parliament intended to so expand the meaning of prize chit as to take in every scheme involving subscribing and refunding of money. The word 'includes', the context shows, was intended not to expand the meaning of 'prize chit' but to cover all transactions or arrangements of the nature of prize chits but under different names. The expression 'Prize Chit' had nowhere been statutorily defined before. The Bhahatosh Datta Study Group and the Raj Study Group had identified the schemes popularly called 'Prize Chits'. The Study Groups also recognised that 'Prize Chits' were also variously called benefit/savings schemes and lucky draws and that the basic common features of the schemes were the giving of a prize and the ultimate refund of the amount of subscriptions (Vide Para 6.3 of the report of the Raj Study Group). It was recommended that prize chit and the like by whatever name called should be banned. Since prize chits were called differently, 'prize chits', 'benefit/savings schemes', 'lucky draws', etc. it became necessary for the Parliament to resort to an inclu- sive definitions so as to bring in all transactions or arrangements containing these two elements. We do not think that in defining the expression 'Prize Chit', the Parliament intended to depart from the meaning which the expression had come to acquire in the world of finance, the meaning which the Datta and the Raj Study Groups had given it. That this is the only permissible interpretation will also be further evident from the text Chit and the context as we shall presently see.

Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpreta- tion is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statutemaker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court con- strued the expression 'Prize Chit' in Srinivasa and we find no reason to depart from the Court's construction. We have already referred to the Bhabatosh and Raj Study Groups' Reports and recommendations. In para 6.3 of the latter report the two common and basic features of prize chits by whatever name known were identified as the giving of prizes to the lucky ones and the refunding of subscrip- tion to every one. These prize chits by whatever name known were recommended to be banned. It was this recommendation that was accepted by the Parliament in enacting the Prize Chits and Money Circulation Schemes (Banning) Act. If this much is borne in mind it becomes evident that the two re- quirements mentioned in the two clauses (i) and (ii) of the definition are not to be read disjunctively; they are two distinct attributes of 'Prize Chits', each of which has to be satisfied. It is important to notice here that the Conventional Chit satisfies both the requirements of the definition of 'Prize Chit', since, as we have already point- ed out, it involves both the 'certain' and the 'chance' elements, the certain element being the refund of the amount of subscriptions less the deductions and the chance element being the time of such payment, dependent on the result of the draw or auction. Yet the definition of 'Prize Chit' expressly excludes the Conventional Chit obviously for the reason that the 'chance' element is overshadowed by the 'certain' element. If so, why should any construction be placed on the definition so as to bring in all Recurring Deposit Schemes, even if they do not involve a chance ele- ment? Such a construction would reduce the definition to a near absurdity and render the reference to the giving or awarding of a prize or gift, a meaningless superfluity. If a conventional chit is not a 'prize chit' by definition, there appears to be no logic in construing the definition to include a Recurring Deposit Scheme. The argument is that the two clauses (i) and (ii) are to be read disjunctively and that they should not be read as if they are joined by the conjunction 'and'. We do not agree. There is no need to introduce the word 'or' either. How clauses (i) and (ii) of s.2(e) have to be read depends on the context. The context requires the definition to be read as if both clauses have to be satisfied. There is nothing in the text which makes it imperative that it be read otherwise. The learned counsel urges that the expression "all or any of the following purposes" indicates that the purpose may be either the one mentioned in (i) or the one mentioned in (ii). We do not agree with this submission. Each of the clauses (i) and (ii) contains a number of alternatives and it is to those several alternatives that the expression "all or any of the follow- ing purposes" refers and not to (i) or (ii) which are not alternatives at all. In fact, a prize chit, by whatever name it may be called, does not contemplate the exhaustion of the entire fund by the giving of prizes; it invariably provides for a refund of the amount of subscription, less the deduc- tions, to all the subscribers or to those who have not won prizes, depending on the nature of the scheme. Clauses (i) and (ii) refer to the twin attributes of a prize chit or like scheme and not to two alternate attributes. Our construction of s.2(e) is further reinforced by a reference to the other provisions of the Act. Section 3 prescribes, "No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise or receive or remit any money in pursuance of such chit or scheme." Section 4 makes a contravention of s.3 punishable with imprisonment extending to three years or fine extending to five thousand rupees subject to a minimum sentence of one year's imprison- ment and fine of one thousand rupees. It is clear that even a subscriber is guilty of an offence punishable with an obligatory minimum sentence. While it is possible to say that Parliament desired to root out prize chits and schemes of like nature involving the vicious element of gambling, it is inconceivable that Parliament intended to visit even subscribers to Recurring Deposit Schemes involving no such vice with such dire consequence. 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, the printing, publication or distribution of any advertisement of the Prize Chit or Money Circulation Scheme, the use of any premises for purposes connected with the promotion or conduct of the scheme etc. punishable with imprisonment extending to two years or fine extending to three thousand rupees subject to a minimum sentence of one year's imprison- ment and fine of one thousand rupees. Section 8 provides for forfeiture of newspapers or other publications connected with any Prize Chit or Money Circulation Schemes. Surely these provisions are far too draconian to be applied to schemes which are but Recurring Deposit Schemes. However we look at it, we arrive at the conclusion that s.2(e) does not contemplate a scheme without a prize and, therefore, the Endowment Certificate Scheme of the Peerless Company is outside the Prize Chits and Money Circulation Schemes (Banning) Act. The conclusion appears to us to be irresistable. The appeals filed by the Reserve Bank of India, the Union of India and the State of West Bangal are accordingly dismissed. It is open to them to take such steps as are open to them in law to regulate schemes such as those run by the Peerless Company to prevent exploitation of ignorant subscribers. Care must also be taken to protect the thousands of employees. We must also record our dissatisfac- tion with some of the schemes of the Life Insurance Corpora- tion which appear to us to be even less advantageous to the subscribers than the Peerless Scheme. We suggest that there should be a complete ban on forfeiture clauses in all sav- ings schemes, including Life Insurance Policies, since these clauses hit hardest the classes of people who need security and protection most. We have explained this earlier and we do wonder whether the weaker sections of the people are not being made to pay the more affluent sections Robbing Peter to pay Paul?