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TMI Blog1993 (9) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... it petitions and also the writ appeals, the validity of several provisions of the Chit Funds Act, 1982 (hereinafter referred to as "the Act"), is challenged. In the meanwhile, the Supreme Court has considered the validity of the provisions contained in the very Act in Shriram Chits and Investments ( P. ) Ltd. v. Union of India [1994] 79 Comp. Cas. 298, and held that all the provisions of the Act are valid. Therefore, these writ petitions and the writ appeals are liable to be dismissed in the light of the pronouncement made by the Supreme Court. However, an argument is advanced before us that the validity of section 6(3) of the Act has not been specifically considered and, therefore, the same be considered in these cases. We may only refer to paragraphs 29 and 30 of the judgment of the Supreme Court in Shriram Chits and Investments (P.) Ltd. 's case [1994] 79 Comp. Cas. 298 to meet this contention. Paragraphs 29 and 30 of the judgment of the Supreme Court read as follows (at page 327) : "Section 6(3) of the Act reads thus : 6(3). The amount of discount referred to in clause ( f ) of subsection (1) shall not exceed thirty per cent. of the chit amount. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to ensure that a notice is issued to a subscriber. Sending of notice under certificate of posting is one of the cheapest modes which the rule provides. The fact that the foreman maintains a register for having sent the notice by itself will not be sufficient because there will be no other records to cross-check it. If it is made compulsory to send the notice under certificate of posting, there will be a record to cross-check and ascertain as to whether the notice has in fact been sent. Therefore, we are of the view that sending of notice under certificate of posting is absolutely necessary in the light of the past experience of exploitation and foul play in the matter of conducting chit funds. In addition to this, the Supreme Court has also held that even five per cent. commission provided under the Act itself is on the higher side. While considering section 21 of the Act, it has been observed by the Supreme Court thus (at page 334) : "We find no reason for the appellant/petitioners to have any objection to clause ( a ) or ( c ) of section 21. As regards the maximum commission of five per cent, of the chit amount, the objection does not appear to be legitimate because an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny as per the provisions of the Companies Act. It may be relevant to notice that section 24 of the Act opens with the words "without prejudice to the provisions of the Companies Act, 1956". Therefore, chit fund companies are entitled to file the balance-sheet availing of the longer period that is available to them under section 210 of the Companies Act. That right of companies is not taken away in view of the fact that section 24 of the Act provides that the provisions contained therein are without prejudice to the provisions contained in the Companies Act. Therefore, rule 28(1) of the Rules also has to be read in the light of the provisions contained in section 24 of the Act and also section 210 of the Companies Act. Therefore, rule 28(1) of the Rules specifically provides that the balance-sheet referred to in section 24 shall be prepared within a period of two months from the expiry of the period with reference to which it is prepared. These words would show that if the balance-sheet is that of a chit fund company, under the Companies Act, it has to be filed within a period of two months from the expiry of the period. Therefore, the period available to the chit fund company under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary. Moreover, Form XXI has to be filed once in a year. Therefore, we are of the view that such a requirement cannot be held to be onerous so as to hold that it amounts to an unreasonable restriction on the right of a chit company or a foreman to carry on trade in chit funds. Any procedural requirement ensuring proper conducting of chits and ensuring smooth carrying on of trade in chit funds and elimination of foul play, is always desired. Therefore, we are of the view that rule 28(2) of the Rules, cannot be held to fall outside the scope of the Act inasmuch as the scope of the Act is to provide for the regulation of chit funds and for matters connected therewith. Therefore, Form XXI cannot be held to be unconnected with the regulation of the chit funds. Hence this contention is rejected and rule 28(2) of the Rules is held valid. Rules 31(1) and 31(2) of the Rules are as follows : "31. Time for filing balance-sheet audited by a chit auditor or other auditors. (1) Where the audit is done by the chit auditor the foreman shall file with the Registrar a copy of the balance-sheet and profit and loss account together with the audit certificate and the auditor's report within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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