LexREGISTRAR OF FIRMS, SOCIETIES AND CHITS, UTTAR PRADESH versus SECURED INVESTMENT COMPANY, LUCKNOW AND ANOTHER.
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I
REGISTRAR OF FIRMS, SOCIETIES AND CHITS,
)..._,
A
UTTAR PRADESH
>\
v.
SECURED INVESTMENT COMPANY, LUCKNOW AND
ANOTHER.
l.l
DECEMBER 17, 1987
[B.C. RAY AND JAGANNATHA SHETTY, JJ.]
Prize Chits-Prohibited category under section 2(e) of the Prize
c Chits and Money Circulation Scheme (Banking) Act, 1978-Prohibi-
tion of Participation therein.
The respondent, a partnership firm, carried on business termed
as a "Scheme for Investment". The Registrar of Firms, Societies and
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Chits, the appellant, holding the view that the investment scheme of the
D respondent company fell within the prohibited category of prize chits as
defined in section 2( e) of the Prize Chits and Money Circulation Scheme
(Banking) Act, 1978, seized all the documents of the company and
directed the concerned banks not to have accounts in relation thereto.
The respondent challenged the action of the appellant by a writ petition
in the High Court. The High Court allowed the Writ Petition, quashing
E the orders of the appellant. The appellant appealed to this Court by
special leave.
Allowing the appeal, the Court,
~·
,-
HELD: The prize chit, by a simple definition, includes a scheme
-fl
F by which a person in whatever name _collects moneys from individuals
"'
for the purpose of giving prizes and refunding the balance with or
without premium after the expiry of a specified period. The reach and
range of the definition of 'Prize Chit' is sweeping. The participation of
any personiri such chit or scheme has been prohibited, the object being -
that people should not be attracted to invest their moneys in the hope of
G getting prizes or gifts. [468A-B, CJ
y
There is no doubt that the scheme of the company is primarily for
-A -
the benefit of the promoter or the company at the cost of the subscrib-
ers. Section 2(e)ofthe Act was intended to cover all such arrangements
or schemes. It is emphasized that the Act was intended to ban all kinds
H of prize chits where people part with their money and risk the chance of
456
REGISTRAROFF.S.C. U.P. v.SECUREDINVESTMENTCO. [SHETIY,J.I
457
. I
.... ' getting prizes and gifts, and to protect the people from exploitation. A
~
Any scheme or arrangement in which a person agrees to lose or is make
,.
to part with a portion of his payment against the chance of getting any
prize or gift, should be considered as prize chit falling within the inclu-
sive definition under Section 2(e). The scheme of the company is
nothing but prize Chit as defined under Section .2(e) of the Act.
The conclusion of the High Court is patently erroneous and is unsus-
B
tainable both on facts and law. The action of the Registrar, appellant,
upheld. [473E-H; 473A-B]
OBSERVATION: The Registrar of the firms will, while faking action
·against the persons or firms under the Act, take care to see that the
members of the scheme are not denied, their contributions or prizes C
which they are legitimately entitled to, if the prize chit is allowed to be
run for the full term. [473B-C]
~
Srinivasa Enterprises and others v. Union of India etc., [198111
-t
'r
.,
~
..
..,.
. *'
SCR 801 at 804 and Rese111e Bank of India v. Peerless General Insur-
ance and Investment Co. Ltd., A.I.R. 1987 SC 1023, referred to.
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1988
of 1982.
From the Judgment and order dated 20.4.1982 of the High Court
of Allahabad in Writ Petition No. 630 of 1982.
Anil Dev Singh and Mrs. Shobha Dikshit for the Appellant.
L.M. Singhvi and C.L. Sahu for the Respondent.
The following Judgment of the Court was delivered by
JAGANNATHA SHETTY, J. This appeal by special leave, is by
the Registrar of Firms, societies and chits of the State of Uttar Pradesh
and directed against the judgment and order passed by the High Court
of Allahabad in writ petition No. 630 of 1982.
The said writ petition was filed by the responde!'t which is a
partnership firm called as "M/s. Secured Investment Company" ("The
Company"). The company mainly carries on business at Lucknow. It
has branch offices at Kanpur and Bareilly. The nature of business of
the company is termed as "a .~cheme for investment". The question
raised in this appeal is whether that scheme for investment falls within
E
F
G
H
A
B
c
D
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458
SUPREME COURT REPORTS
[1988] 2 S.C.R.
the category of 'prize chit' as defined under the Prize Chits and ~
Money Circulation Scheme (Banning) Act, 1978 (for short "The I
Act"). The RExcerpt shown. Read the full judgment & AI analysis in Lexace.