Sahara India vs State Of M.P. And Ors. on 20 April, 1983

Madhya Pradesh High Court
Sahara India vs State Of M.P. And Ors. on 20 April, 1983
Author: G Singh
Bench: G Singh, K Adhikari


G.P. Singh, C.J.

1. The petitioner is a partnership firm. The petitioner carries on business which it styles as “Bank Deposit Division”. The features of the scheme ate set out in a printed pamphlet Annexure P-2. The petitioner receives a deposit of Rs. 200/-from every applicant called account holder. The depositor gets from the petitioner a Reinvestment Deposit Plan receipt of a Nationalised/Scheduled Bank in his name which entitles him to receive Rs. 296/- after 120 months, i.e. ten years, from the bank directly. Although not so mentioned in Annexure P-2, it was admitted before us by the learned counsel for the petitioner that out of the amount of Rs. 200/- received by the petitioner from a depositor. Rs. 100/- are retained by the petitioner and the remaining Rs. 100/- are alone deposited in a bank which issues a Reinvestment Deposit Plan receipt entitling the depositor to receive Rs. 296/- after ten years. The amount so

deducted is referred to as deduction of a portion of interest in para 5 of Annex. P-2 but in truth as stated earlier it is a deduction of half of the principal amount which an applicant deposits. No applicant is entitled to claim back the said deducted amount. The amount collected is used by the petitioner for prizes and to cover overheads and profit of the petitioner. After the petitioner enrolls 99.999 account holders the petitioner starts the monthly and bumper draws. Every applicant or account holder is entitled to get a chance in 110 monthly draws and 38 bumper draws for winning the prizes as per the list contained in Annex. P-2. These prizes include scooter, moped, wrist watch, cycle, ceiling fan, sewing machine etc. An account holder of the scheme run by the petitioner gets the benefit of deposit in the bank only in respect of 50% of the money i. e. Rs. 100/- which he hands over to the petitioner. The remaining 50% i.e. Rs. 100/- are retained by the petitioner. After the petitioner has collected about Rs. 1,00,00,000/- (one crore) it starts giving prizes on draws as mentioned above. This scheme, in our opinion, is nothing but a prize chit as defined in Section 2(e) of the Prize Chits and Money Circulation Schemes ((Banning) Act, 1978. Leaving aside those parts of the definition which are not directly applicable, prize chit as defined in Section 2(e) includes an arrangement under which a person collects as a promoter monies in instalments by way of contributions or subscriptions or as a membership fees in respect of a scheme and utilises the monies so collect-ed for giving periodically to a specified number of subscribers as determined by lot, draw or in any other manner prizes in cash or in kind. The scheme is an arrangement between the petitioner and the applicants or account holders which enables the petitioner to receive as contribution Rs. 100/- from eack applicant and the collection so made and the income therefrom are used for giving or awarding periodically to a specified number of persons as determined by lot or draw prizes in kind. The learned counsel for the petitioner referred to us the judgment of the Allahabad High Court in Secured Investment Co. v. Registrar of Firms and Societies & Chits, U, P., Lucknow, W. P. No. 630 of 1982, decided on 20th Feb., 1982. The petitioner in that case used to receive Rs. 220/- from – every member and deposited Rs. 127.75 in a Nationalised Bank for obtaining a deposit receipt in favour of the member entitling him to get from the

bank Rs. 220/-. Rs. 92.25 retained by the petitioner in that case were utilised after it had enrolled 19,999 members for giving prizes on lots or draws. The Allahabad High Court held that there was no contribution or subscription made by the members and, therefore, the scheme operated by the petitioner in that case did not amount to a prize chit under Section 2(e) of the Act. With great respect we are unable to agree with the judgment in that case. The amount of Rs. 100/- out of Rs. 200/- retained by the petitioner is a contribution made by every applicant or account holder who is entitled to participate in the draw. The amount so collected from 99,999 account holders is used by the petitioner for giving prizes. As already stated by us, this is clearly a prize chit as defined in the Act. Learned counsel for the petitioner also relied upon the case of State of W. B. v. Swapan Kumar, AIR 1982 SC 949, but it has not much relevance as the question in that case related to the meaning of Section 2(e) which defines “money circulation scheme”. We may, however, refer to a decision of ours in Bombay Scooters, Chhindwara v. The Collector, Chhindwara, M. P. No. 1350 of 1982, decided today, in which we have held that a scooterette sale promotion scheme was a prize chit as defined in Section 2(e). In our opinion, the petitioner’s business contravened the provisions of the Act and the respondents were entitled to take suitable action to prevent the petitioner from violating the Act.

2. The petition is summarily dismissed.

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