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TMI Blog1992 (4) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... its judgment dated 20.3.1985 has struck down as invalid the impugned amendments. The Tamil Nadu Chit Funds Act, 1961 (The Act) provides for the regulation of chit funds in the State of Tamil Nadu. chit is a transaction by which its foreman enters into an agreement with a number of subscribers that every one of them shall subscribe certain sum by installments for a definite period and that each subscriber in his turn as determined by lot or by auction, shall be entitled to a prize amount. The sum total of the subscription payable by all the subscribers for any installment of a chit without any deduction for discount or otherwise is chit amount. It is useful to summarise the scheme of the Act and the rules. The Registrar of chit funds is appointed by the Government under section 51. No person can start or conduct any chit unless he registers with the Registrar the proposed bye-laws of the chit. Section 7 provides that the Registrar, on being satisfied that the bye-laws have been registered, the chit agreement has been filed, and the security required under section 12 has been furnished by the foreman, grants certificate of commencement . The auction or drawing of any chit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate, copy of or extract of documents under section 52; (f) the audit of accounts of the foreman and the issue of an audit certificate; (g) such other matters as may appear necessary to give effect to the purposes of this Act. (2) A table of fees payable under sub-section (1) shall be published in the Fort St. George Gazette. (Now the Tamil Nadu Government Gazette). The Rules have been framed under section 63. Rule 3 states that the bye-laws shall provide for the matters specified thereunder. If the Registrar refuses to the register the bye-laws of a chit, he shall record his reasons for such refusal in writing and communicate a copy of the order to the applicant. Rule 11 prescribes the particulars to be contained in the chit agreement, rule 14 prescribes the form of minute of the proceedings and rules 15 to 22 regulate the acceptance and release of security. In the case of cash deposited in an approved bank and transferred in favour of Registrar, intimation has to be given by the Registrar to the bank. Under rule 22 the Registrar before releasing the security may call upon the foreman to produce register and books of accounts maintained and issue a notice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) after Article 8, as so amended, the following Article and entries shall be inserted, namely:- 8A. For filing Balance-sheets audited and certified by Charted Accountant. (a) When the chit amount does not exceed ₹ 500-Rs.10.00 (b) When the chit amount exceeds ₹ 500 for the first ₹ 500 as under sub-clause (a) and for every ₹ 500 or part thereof in excess of ₹ 500 subject to the maximum of ₹ 250. The fee leviable under this clause shall not exceed ₹ 250 . The challenge was mainly on the ground that the rates of fees fixed in article 1 and Article 8-A in Appendix II to the Rules were disproportionately high having no nexus to the nature of services rendered and intended to augment revenue and partake character of tax and as such the levy suffered from the vice of arbitrariness, hostile discrimination and unreasonable restriction on trade. The High Court came to the conclusion that the necessary element of quid pro quo was absent and as such struck down the amendment on the said ground. The High Court declared the amendment by which the registration fee was enhanced, as ultra vires, on the following reasoning:- When a Forem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be rendered. Therefore as rightly pleaded by the petitioners, the necessary element of quid pro quo is not existing and furthermore this is an unreasonable restriction on right of trade and the rate fixed is aimed at increasing general revenues. The High Court relied upon the judgment of this Court in Kewal Krishan Puri v. State of Punjab, [1979] 3 SCR 1217 wherein it was observed that a substantial portion of the amount collected on account of fees, must be shown with reasonable certainty as being spent for rendering services to justify the quid pro quo which is a distinguishing feature of fee from tax . This Court in sreenivasa General Traders others v. State of Andhra Pradesh others [1983] 4 SCC 353 considered Kewal Krishan Puri s case and observed as under:- The decision in Kewal Krishan Puri case does not lay down any legal principle of general applicability. The observation made therein seeking to quan tify the extent of correlation between the amount of fee collected and the cost of rendition of service, namely, At least a good and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or threefourths, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. against the amount of fees collected so as to evenly balance the two. A broad correlationship is all that is necessary. Quid Pro Quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax. In Mohd. Yaseen s case the Municipal Corporation of Delhi enhanced the slaughtering fee is respect of two categories of animals by eight fold. Some Butchers of the city questioned the revision of rates on the ground that the proposed enhanced fee was wholly disproportionate to the cost of services and supervision and was in fact not a fee, but a tax. During the pendency of the writ petitions in the High Court, by virtue of an interim arrangement, the Municipal Corporation of Delhi was permitted to collect slaughter fee at double the rates (instead of 8 times) and as a result thereof the Corporation realised a sum of ₹ 4,24,494. The budget of the Corporation showed a sum of ₹ 2,56,000 as the expenditure involved in connection with the slaughter house. The High Court came to the conclusion that even if the original fee was doubled the amount realised would be more than sufficient to meet the expenditure involved and, therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration fee inter alia on the following grounds:- .....Considering that in respect of chits of longer duration and larger number of instalments, greater amount of service had to be rendered in that, more minutes etc., were filed, it is equitable and fair to fix the fees for registration of bye-laws with regard to number of instalments of duration of chits. The fees were revised taking these facts into consideration. It has also to be verified whether the foreman has taken proper security for future payment of subscription from the prized subscriber, whether proper receipts were obtained for the payment of prize monies and on due dates, if not whether the prize amount has been deposited in a Bank as required by the Act by verifying receipts of deposit etc. The extracts filed in respect of removal, substitution and assignment etc. have also to be verified and in respect of higher chit amounts in long term chits for longer duration these transactions will be more and they impose greater responsibility on the Chit Registrar. The work connected with watching the filing of various documents by the Foreman on the due dates and in proper form also takes considerable time..... We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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