IMPORTANT POINT
The court established that the Chit Funds Act and the Revenue Recovery Act serve different purposes, allowing recovery of dues under the latter despite arbitration provisions in the former.

JUDGMENT :

The petitioners are persons against whom the Kerala State Financial Enterprises Limited has issued notice under the Kerala Revenue Recovery Act, 1968 for recovery of alleged dues from the petitioners. The petitioners seek to declare that the KSFE Limited is not entitled to take recourse to the provisions of the Kerala Revenue Recovery Act, 1968 for recovering amounts covered under Exts.P1 and P2 notices through the machinery of respondents 2 and 3 as it is hit by the provisions of the Chit Funds Act, 1982.

2. The petitioner in W.P.(C) No.35389/2023 has been issued with notice of attachment under Section 36 of the Kerala Revenue Recovery Act, 1968. The notice indicated that an amount of Rs.40,77,403/-along with interest of 12%, and 5% processing fee / collection fee is payable by the petitioner. The KSFE is the Requisitioning Authority under the Revenue Recovery Act. The petitioners in W.P.(C) Nos.17839 and 17840 of 2024 are also persons upon whom notices have been issued by the KSFE Limited invoking the provisions of the Kerala Revenue Recovery Act, 1968.

3. The petitioners state that the notice issued at the instance of the KSFE Limited under Section 36 of the Kerala Revenue Recovery Act is not legally maintainable. According to the petitioners, the 4th respondent being engaged in the business of chitty, is governed by the Chit Funds Act, 1982. Chapter 12 of the Chit Funds Act deals with the disputes and arbitration. Section 64 of the Chit Funds Act states that notwithstanding anything contained in any other law for the time being in force, any dispute touching the management of a chit business shall be referred by any of the parties to the dispute, to the Registrar for arbitration. Section 64(3) provides that no Civil Court shall have jurisdiction to entertain any suit or other proceedings in respect of any dispute referred to in sub-section (1).

4. According to the petitioners, it is clear from Section 64 that the remedy available for the 4th respondent is to approach the Registrar and refer the matter for arbitration. An adjudication with respect to any dispute relating to chit fund business can only be done by the Registrar through arbitration and not by the District Collector under the Revenue Recovery Act.

5. Relying on the judgment of the Hon’ble Apex Court in M/s. Sriram Chits and Investments Private Limited v. Union of India and others [1993 Supp (4) SCC 226], the counsel for the petitioners pointed out that the Chit Fund Act in pith and substance deals with special contract and consequently falls within Entry 7 of List III of Schedule 7 to the Constitution of India.

6. According to the petitioners, this Court has held in the judgment in State of Kerala and others v. M/s. Mar Appraem Kuri Company Limited and another [(2012) 7 SCC 106] that the intention of the Parliament in enacting Chit Funds Act was clearly to occupy the entire field falling in Entry 7 of List III. The 1982 Act was enacted as a Central Legislation to ensure uniformity in the provisions applicable to chit fund institutions throughout the country.

7. The Kerala State Financial Enterprises Limited filed counter affidavits in the writ petitions. The KSFE Limited stated that when the petitioners failed to repay the amounts due to the KSFE Limited, the matter was referred to the Special Deputy Tahsildar under Section 69(2) of the Revenue Recovery Act. The petitioners were served with Sections 7 and 34 notices. The petitioners did not raise any grievance then. It is much later when the Section 36 notice was issued that the petitioners have challenged the proceedings.

8. The Kerala State Financial Enterprises Limited stated that Section 64 of the Chit Funds Act only prescribes the method of resolving disputes relating to conduct of chit business. If the subscriber or anyone claiming under him has got any grievance regarding the conduct of the chit, he / she can make a reference to the Arbitrator for resolving the dispute by arbitration. Though the dues