TMI Blog2005 (5) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... herein for a proper appreciation of the contention raised by the writ petitioners. Articles 245 to 255 of the Constitution of India deal with legislative powers of the Union and the States. Entries in List I of Schedule VII reserve power exclusively to Parliament to make law and List II confines solely to the State Legislature and List III concurrent list in which both Parliament as well as State Legislature have concurrent jurisdiction to make laws in the occupied field. Article 245 stipulates that subject to the provisions of the Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. No law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Articles 246 of the Constitution states that notwithstanding anything contained in Clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule. Legislature of a State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such invitation contains a statement that the previous sanction required under Section 3 has been obtained, together with the particulars of such sanction. Section 5 says that if the chitty amount is less than ₹ 100/-, the provisions of the Act will not be applicable, but a license has to be taken. Sections 6 to 11 deal with the particulars relating the Variola and filing it with the Registrar and endorsement thereof etc. Section 12 states that the drawing of the chitty should be at the time and place mentioned in the variola. Sections 13 and 14 deal with the keeping of the minutes of the proceedings of drawing of chitty and filing of the same with the Registrar. Sections 15 to 22 of the Act relate to the foreman. Sections 15 to 17 deal with the security to be given by the Foreman, his rights and duties. Section 18 and 19 deal with books to be kept by the foreman and punishment for failure to keep such books. Section 220 deals with the preparation and filing of balance sheet. Sections 21 and 22 provide for the liability of the foreman and his withdrawal from the chitty. Section 23 to 25 deal with non-prized subscribers. Sections 23 and 24 deal with the payment of subscribers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of discharging the duties imposed upon the Registrar under the Act and for levy of fees. Chapter XII deals with disputes and arbitration. Chapter XIII provides for miscellaneous provision namely, advisory role of Reserve Bank, appeals, powers of Registrar to give extension of time for filing documents, penalties etc. Section 89 of the Act says that the State Government may in consultation with the Reserve Bank, by notification in the Official Gazette, make rules for giving effect to the provisions of the Act. Section 90 is the repeal and saving clause which says that the Kerala Chitties Act, 1975 stands repealed but the Kerala Act shall continue to apply to chits in operation on the commencement of the Act, in the same manner as they applied to such chits before such commencement. 5. Petitioners submit that they are conducting chitties in various places outside the State of Kerala. Some of them are registered under the Chit Funds Act, 1982 since that Act has been extended to several States in India. Petitioners have got subscribers from various States including State of Kerala. Some of the petitioners have registered their chit funds under the Indian Companies A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he wake of above budget speech was amended as per Finance Act, 2002 (Act 7 of 2002). As per Section 4 of the Finance Act, Sub-section 5 of Section 3 of the Chillies Act was amended by substituting Sub-section (b). As per the said amendment the first two provisos were deleted and the third proviso was substantially retained. The result of the amendment is that except a Banking Company and a Government company, all other Foreman shall be entitled to conduct at a time chitties the aggregate amount of which does not exceed 50% of the net assets of the Foreman. By the amendment, Section 4 of the Kerala Chitties Act was also amended. Sub-section (1)(a) was inserted to Section 4. This amendment is specifically intended to bring in chitties registered outside the State who have 20% or more of the subscribers normally residing in the State of Kerala within the ambit of the Kerala Chitties Act. Bone of contention is with regard to the applicability of Sub-section (1)(a) to Section 4 to the chitties registered outside the State of Kerala. The said sub-section which is extracted below for easy reference: Where a chitty is registered outside the State and twenty percent or more of the subsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose form of contracts described as chitties which are entered into between parties outside the State of Kerala only on the ground that 20% or more of the subscribers are ordinarily residents of the State of Kerala. Counsel submitted the legislative compulsion to require the Foreman to open a branch in the State of Kerala and also to obtain sanction and registration under the Kerala Chitties Act due to the mere fact that some of the subscribers are residing in the State of Kerala is illegal and beyond the State legislative competence. 7. Counsel appearing for some of the writ petitioners Sri. S.V. Balakrishna Iyer as well as P.B. Krishnan submitted by virtue of Section 90 of the Chit Funds Act, 1982 the Kerala Chitties Act, 1975 stands repealed. Counsel submitted the non-issuance of a notification under Section 1(3) does not mean that the Central Act is not in force. Counsel submitted a repeal of a named State enactment by Parliament does not depend on whether the Central Act is notified in the concerned State. Counsel submitted the parliamentary power to enact a law for the entire country requires the repeal of the State enactment so that the field is not longer occupied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered chits . In other words, unregistered chits are not affected by the regulatory measures. 8. Special Government Pleader (Taxes) Sri. Raju Joseph has highlighted the object and purpose of the legislation. Counsel submitted it has become a practice of chitty companies to register chitty outside the State of Kerala in order to escape from the regulatory measures adopted by the Kerala Chitty Act, 1975. By the amendment Government restrict the Chitty Companies from conducting chitty business in Kerala. Counsel submitted Section 4(1)(a) is well within the State legislative competence and enacted to protect the interest of the common public. Counsel submitted State Government have no intention to regulate chitties conducted outside the State. Only when the chitty business is conducted within the State of Kerala, though the chitty is registered outside the State Section 4(1)(a) will come into operation. Counsel submitted the enforcement of Section 4(1)(a) will not affect the petitioners' fundamental right under Article 19(1)(g) of the Constitution and the restriction imposed is only a reasonable restriction to protect the interest of the subscribers residing in the State of Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e void. Under Clause (2) if the Legislature of the State makes the provisions repugnant to the provisions of law made by the Parliament, it would prevail if the legislation of the State received the assent of the President. Even in such case, Parliament may subsequently either amend or vary or repeal the law made by the Legislature of the State. Contention of the counsel for the petitioners that Kerala Chitties Act is void as being repugnant to the provisions of Central Chit Fund Act, 1982 as violative of Article 254 of the Constitution of India cannot be sustained. 11. Counsel for the petitioners further contended that Kerala Chitties Act, 1975 is no more in force in view of Section 90 of the Chit Funds Act, 1982 by the Kerala Chitties Act, 1975 has been repealed and what has been saved is not the Act, but the transactions entered into between the parties prior to the coming into force of the Central Act. Section 90, in our view, cannot be read in isolation. The same has to be read along with Section 1(3) of the Chit Funds Act, 1982. Section 1(3) of the Act states that the Chit Funds Act, 1982 shall come into force on such date as the Central Government may, by notification in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subscribers of the chitties registered outside the State of Kerala are persons normally residing in the State of Kerala. Even if chitties started and conducted outside the State of Kerala under the provisions of the Central Act or other State Act, if 20% or more of the subscribers of those chitties are normally residing in the State of Kerala then Foreman of that chitty has the obligation to open a branch in the State of Kerala and to obtain sanction and registration under the provisions of the Act. In other words, Foreman is bound by the provisions of the two legislations so far as one chitty is concerned, one by Kerala Chitties Act, 1975 and the other by the Chit Funds Act, 1982 (Central Act). If Section 4(1)(a) is given effect to, then the Foreman has to take registration under two legislations, Kerala Chitties Act as well as Chit Fund Act. 13. When we scan through the various provisions of both the legislations it is clear that there is repugnancy between some of the provisions of those legislations. The expression discount in Section 2(g) of the Chit Funds Act gives a different definition compared to Sub-section (4) of Section 2 of the Kerala Chitties Act, 1975. So al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hostile provisions which is repugnant to each other. Suffice to say that if Sub-section (1)(a) of Section 4 is given effect to, a Foreman who has already got the registration under the Central Act and governed by the provisions of that Act would also be subjected to various provisions of the Kerala Act which are inconsistent and repugnant to the Central Act. If Section 4(1)(e) is therefore given effect to it would have extra territorial operation. 16. Article 245 states that Parliament may make laws for the whole or any part of the territory of India. Article 245(2) stipulates that no law made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation. Such law can be extended to persons, things and acts throughout all the States. State Legislature is competent to legislate only within its territory. Article 246 of the Constitution enables the State Legislature to enact a law for the whole or part of the State concerned. Article 254(1) gives overriding effect to the provisions of a law made by Parliament which the Parliament is competent to enact or to any provision of any existing law in respect of one of the matters enumerated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feasance by the Foreman, which in our view, can be dealt with other laws of the country. State Government may be financially benefitted by opening branches in the State of Kerala by way of stamp duty as pointed out in the budget speech but that would not support a legislation. Sub-section (1)(a) of Section 4 is therefore clearly discriminatory, beyond the legislative competence of the State Legislature and violates Article 19(1)(g) of the Constitution of India. 18. Petitioners have also sought for a writ of mandamus directing first respondent to exercise powers under Section 1(3) of the Chit Funds Act, 1982 to notify the said Act within the State of Kerala. This Court in exercise of powers under Article 226 of the Constitution of India cannot issue direction to the Central Government to bring in a legislation for State of Kerala. Section 1(3) of the Act has stated that the Act shall come into force on such date as the Central Government may, by notification, in the Official Gazette, appoint, and different dates may be appointed for different States. It is a power to be exercised by the Central Government under Section 1(3). Parliament in its wisdom conferred power to Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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