RESERVE BANK OF INDIA versus PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. ORS. AND VICE VERSA

Citation: [1987] 2 S.C.R. 1 · Decided: 22-01-1987 · Supreme Court of India · Bench: O. CHINNAPPA REDDY · Disposal: Dismissed

Cited by 29 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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RESERVE BANK OF INDIA 
v. 
PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. 
'i 
ORS. AND VICE VERSA 
JANUARY 22, 1987 
[O. CHINNAPPA REDDY AND V. KHALID, JJ.] 
A 
B 
Interpretation of statute-Text and Context bases value of, 
explained-Whether the two clauses (i) and (ii) in section 2(e) of the 
definition of "Prize chit" in Prize Chits and Money Circulation Scheme 
(Banning) Act, 1978 are to be read disjunctively-Phrase "for all or any C 
of the following purposes", construction of. 
Prize Chits and Money Circulation Scheme (Banning) Act, I978 
section 2(e)-Definition of "prize chit"-Whether the Endowment 
Certificate Scheme of the Peerless Company attracts the provisions of 
~~ 
D 
Constitution of India, I950, Articles 38, 39, 41 and 43-Goal of 
minimising inequalities of income-Failure of the Life Insurance Cor-
poration in this regard deprecated-Need to improve their efforts to 
devise several methods to serve the poorer. sections of the people, 
stressed. 
E 
The Peerless General Insurance and Investment Co. Ltd. was 
incorporated in 1932. After the nationalisation of the business of life 
insurance, the name of the company was changed to "the Peerless 
General Finance and Investment Co. Ltd." For over a quarter of a 
century now, the business of the company has been that of finance and F 
investment. The company offers three schemes, the principal of which 
is the Endowment Certificate Scheme. Under this scheme, a subscriber 
is required to pay a fixed annual subscription for a fixed number of 
years varying between the minimum of 10 years an!' the maximum of 30 
years. On the expiry of the period, the subscriber will be paid by the 
company a sum of money called the Endowment Sum which is the face G 
value of the Certificate. The subscriber is also entitled to be paid a 
guaranteed fixed bonus. If any instalment, that is, any amount of an-
nual subscription is not paid within the stipulated period and period of 
grace, the Certificate lapses unless it has acquired a surrender value. A 
Certificate acquires surrender value after the expiry of three years from 
the date of commencement if the subscription for two full years has H 
I 
2 
SUPREME COURT REPORTS 
[1987] 2 S.C.R. 
A been paid. A Certificate which has not acquired surrender value lapses 
on non-payment of instalments and the amounts paid become forfeit to 
the company. A lapsed certificate may, however, be revived at any time 
before the expiry date of maturity on payment of all dues together with 
interest at one paisa per rupee per month. There is also provision in the 
8 
scheme for conversion of the Certificate into a paid up Certificate, the 
paid up amount to be paid at the end of the period, but without bonus. 
A person purchasing a CertiticatE' automatically becomes entitled to a 
free accident insurance policy under a group insurance scheme. 
A noticeable feature of the scheme is the remarkably low yield to 
the subscriber on his investment. Not only that, the subscriber is always 
C at the losing end. Despite the same, the message of Peerless is made to 
penetrate the rural areas to tap tbe small savings of the poor ignorant 
villagers through a special structure of agents, special agents, sub-
organizers, special organizers and so on chosen from amongst those 
noted for their social political or official connections. The agents' Com-
o mission was 30% (now 35%) of the first year's subscription and 5% only 
of subsequent years' subscription. The incentive of 30% of the collection 
of the subscription of the first year automatically operates as a disincen-
tive for collecting subscriptions of subsequent years resulting in heavy 
default in paymenf and forfeiture of subscriptions earlier paid. The first 
subscription is literally shared between the company and its agents 
E 
F 
G 
H 
under the method of accountancy adopted by the company treating the 
entire amount as income and not liability of the company. The company 
adopted the "actuarial system" of accountancy followed by the Life 
Insurance Corporation, though the company itself does not and cannot 
do insurance business. However, the company has now deleted the 
"forfeiture clause''. and everyone is entitled to payment after the 
maturity period of the certificate. 
Section 45K of the Reserv" Bank of India Act empowers the 
Reserve Bank to collect informatfon from Non-Banking Institutions as 
to deposits and to give directions iI1 the public interest, in particular "in 
respect of any

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