JUDGMENT

YOGESHWAR DAYAL, J.:—This order will dispose of Civil Appeal No. 448 of 1989 and the batch coupled with Writ Petition No. 1092 of 1991 and the batch. Civil Appeal No. 448 of 1989 arises from the judgment of the Karnataka High Court at Bangalore dated 29th April, 1988 passed in Writ Petitions Nos. 19321/ 86, 17110/ 84, etc. (reported in AIR 1989 Kant 125).

2. The above appeals and writ petitions involve challenge to constitutional validity of the Chit Funds Act, 1982 (Central Act No. 40 of 1982) (hereinafter called as the Act or the impugned Act).

3. The various appellants/petitioners are either Public/Private Limited Companies incorporated under the Companies Act, 1956 or proprietary or partnership concerns or individual organisers. According to Section 1(3) of the Act it will come into force on such date as the Central Government may by Notification in the Official Gazette, appoint and different dates may be appointed for different States. In all these matters, apart from challenge to the vires of various provisions of the Act, the legislative competence of Parliament, which enacted the Act has also been challenged.

4. In Karnataka the impugned Act came into force on 2nd January, 1984. There was no Act in this State for regulating Chit fund business and as a result, some of the Chit Fund Companies in Tamil Nadu, Kerala, Maharashtra and Andhra Pradesh which came under their respective regulatory measures shifted their business to Karnataka State and carried on Chit Fund business in that State without being hampered by the regulatory measures of the respective enactments in such States. When the impugned Act was brought into force, the appellants were asked to comply with a number of requirements under the Act by the State of Karnataka, therefore, complaining of the violation of their constitutional rights to carry on business, they had filed writ petitions challenging the vires of the Act.

5. The competence of the Parliament to enact the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (Act 43 of 1978) came up for consideration before this Court in Srinivasa Enterprises v. Union of India, (1981) 1 SCR 801. This Court in the aforesaid case held that having regard to pith and substance of that Act, it fell within Entry 7 of List III and not in the ambit of Entry 34 of List II within the State List. While dealing with the constitutional validity of banning private prized chits, this Court drew support from the reports of Expert Committees. In the circumstances, before going to the question of legislative competence and reasonableness of the various provisions of the Act, it will be useful to refer to the recommendations of various expert bodies who had occasion to examine the matter - The report of the Banking Commission prepared in the year 1972; report of the Study Group on Non-Banking Financial Intermediaries (dated 10-8-1971) constituted by the Banking Commission; the report of the Study Group of Non-Banking Companies headed of the Chairman J. S. Raj (otherwise known as Raj Committee) dated 14-7-1975 and the report of the Select Committee of Parliament. These reports give us an insight into the origin of Chit fund business in this country, the mechanism of Chit fund transactions, benefits that accrued to the needy public who are not in position to avail themselves of the credit facilities from the financing banks, the evils that flow from such Chit Fund transactions on account of the unscrupulous and unethical methods employed by persons who run and control Chit Fund business and need for the legislation in order to protect the interests of the subscribers to the Chit funds from some of the unscrupulous promoters and foremen.

6. The first report dated 10th August, 1971 was submitted by the Study Group of the Non-Banking Financial Intermediaries appointed by the Banking Commission. Chapter 6 of this report is devoted to Chit Funds. The introduction to this report is quoted in the judgment under appeal and read