The provisions of the Chit Funds Act, 1982 (Central Act 40 of 1982) and the Tamil Nadu Chit Funds Rules, 1984, were not violative of Articles 14 and 19(1)(g) of the Constitution of India as they were not arbitrary, unreasonable, or discriminatory, and were necessary to protect the interests of the subscriber public.

RAJU, J.

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. 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 limited companies incorporated under the Companies Act, 1956, or proprietory or partnership concerns or individual organisers themselves. Since different writ petitions have been filed seeking different reliefs in relation to different provisions, I 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.

The impugned Act has been brought into force in this State with effect from April 13, 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 November 1, 1986, the date on which the Chit Funds (Pondicherry) Rules, 1986, was published in the Gazette of Pondicherry. Prior to this, the Pondicherry Chit Funds Act (18 of 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 laws enacted by the Legislatures of the States 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 the 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 felt by Parliament to protect the unwary and innocent subscribers from the scheming machinations and manipulations of those running these conventional chit transactions and unscrupulous organizers invariably identified by the name of foreman. The institution of carrying on chit fund business is indisputably of more than a century old, and was at no point of time under the 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 few 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 August 10, 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 the "Raj Com