K.S.VARMA, J. - (1.) THIS writ petition is directed against certain orders passed by the Registrar of Firms. Societies and Chits. Uttar Pradesh. Lucknow. The action, which purports to have been taken against the petitioners under the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act. 1978 (hereinafter referred to as the Act) is sought to be challenged.
(2.) PETITIONERS Nos. 1 and 2 are partners of an unregistered partnership firm M/s. Secured Investment Company (petitioner No. 1). It is claimed that petitioner No. 1 deals in the business of acting as an agent for Retting money deposited in nationalised or scheduled banks only and also for promotion of sales of certain commodities. The petitioners are carrying on their business mainly in Lucknow with branches at Kanpur and Bareilly. It is further claimed in the writ petition that the petitioner's firm started a scheme for investment in which persons who were interested were required to pay a sum of Rs. 220 only once. Then a sum was deposited in a Nationalised or Scheduled Bank in the Reinvestment Deposits Plan certificate and person concerned was given a Fixed Deposit Receipt which has maturity value of Rs. 220. The receipt is given directly by the Bank in the name of the depositor. The petitioner firm acts only as a motivator for making deposits in the nationalised or scheduled banks. The petitioners firm acts like an agent for the bank and also helps such depositors in making the deposits and obtaining the receipt from the bank. The petitioner does not get any commission either from the bank or from the depositor but under the scheme he gets a small interest which the depositor would earn in 66 months. Out of this profit, the petitioner provides for the item? of utility and household effects which a Person can set in accordance with the draw in which he would be able to participate for a period of 60 months. The petitioners further say that the person participating in the scheme is fully secured for his money because he gets a Fixed Deposit Receipt from a nationalised or scheduled bank with the maturity value of Rs. 220. The depositor voluntarily foregoes to accept any interest on the amount for a term of 66 months. The depositor gets the Reinvestment Deposit Plan Receipt of the bank which he can encash from the bank directly whenever he desires. In short, the depositor is not likely to lose the amount deposited and he voluntarily agrees to forego interest. Thus a small spare money of the depositor is available to nationalised or scheduled bank which can be utilised, according to the plans of the Government for development and other welfare work for the benefit of the society at large. The deposit of 66 months allows considerable scope for the bank and consequently to the Government to utilise the small thrift of such deposits for great purposes. The petitioner is only able to earn the interest that this small amount would have yielded in lieu of his commission or for services rendered. In addition to it the petitioners provide for articles ranging from a Scooter or Refrigerator to other household effects to be made available to the depositors up to a total sum of Rs. 15.000 every month. Thus, it is clear that the depositor foregoes the interest with a view to get any of the items mentioned in Clause 8 of the agreement in accordance with the draw. It is significant that no cash prize or cash in lieu of the article is given to any of the depositor. Thus, a depositor has 60 chances of getting any of the consumer goods mentioned therein for the petty amount of interest that he foregoes. The terms and conditions of the agreement are contained in the document which has been filed as annexure 1 to the writ petition. Those terms and conditions are being reproduced below: - - '1. Secured Investment Co. will be known as Company. 2. Every member will deposit with the Co. Rs. 220 only once : in return he will get a Reinvestment Deposit Plan Receipt/Bank Cash Certificate (a type of Fixed Deposit Receipt) of a Govt. Nationalised Bank. 3. No interest will be given to the member, thus the maturity value of the Bank's R. D. P. will be Rs. 220. 4. After a member deposits Rs. 220, he will set his Bank's R. D. P. within 7 days. For members from Lucknow. Kan -Pur and Bareilly every effort will be made to give them the R. D. P. Receipt the very next day. 5. The duration of the scheme is for 66 months therefore, the duration of the Bank's R. D. P. Receipt is also for 66 months. 6. Lucky draws for articles totalling Rs. 15,000 per month will be given every month for 60 months. Thus, the total value of prizes for 60 months will be Rs. 9 lacs. Totally 60 lucky draws will be held, one every month, after the recruitment of 19.990 member per group. 7. Every month. 21 lucky prizes will be given. The 1st prize will be a Vijai Scooter, the 2nd prize will be a Kulvinator Refrigerator (90 lits). or a T.V.. and 19 other consolation prizes consisting of articles like Transistor. Sewinff Machine. Cycle. Pressure Cooker. Stainless Steel Thali Sets. Alarm Clocks etc. 8. If there is any price increase, latter in the period of the scheme on the value of the price articles which are derailed below, the winning member shall pay for the actual price increase Cash In Lieu Of Articles Will Not Be Given. 1. One Vijai Super Scooter Rs. 8000 2. One Kelvinator Fridge (90 Lits.)or one C. V. Plus one Mixi Rs. 3900 3. One Cycle Rs. 400 4. One Table Fan Rs. 350 5. One Sewing Machine Rs. 325 6. 2 Nos. Philps Transistors Rs. 230/ - each Rs.460 7. 3 Nos. Pressure Cookers (3L(s.) Rs. 1751 - each Hs.525 8. 5 Nos. Steel Thali Sets. Rs. 100; - each Rs.500 set 9. 6 Nos. Alarm Clocks. Rs. 90/ - each Rs.540 Total 21 Total Rs. 15000 9. A winning member will be entitled to participate in subsequent draws. Thus a member can win prizes over and over again. 10. If a member withdraws during the duration of the scheme, he can encash his Bank's R. D. P. directly from the Bank. However, he will not be entitled for the entire amount of Rs. 220, but, will lose interest for the balance months as per Reserve Bank of India rules governing from time to time. For example, if a member withdraws immediately after he gets his R. D. P. Receipt he loses up to a maximum of Rs. 92. This is the maximum amount a member can lose if he withdraws from the scheme immediately after he becomes a member and after getting his Bank R. D. P. Of course, he will also not be entitled for the balance lucky draws. 11. The reason for deduction of interest is that the company gives these fantastic prizes through the interest thus Rained, also, this interest gained has to cover the Company's overheads and profit. However, a customer's refund of his Rs. 220 is 100 per cent secured because at the end of the scheme he can go directly to the Bank and encash the R. D. P. without any consent from the Company. 12. Outstation members can encash thy R.D.P. by presenting it to any Bank. The procedure is the same as one normally encashes an outstation cheque. 13. The company reserves the right to accept or reject any membership without assigning any reasons. 14. In case the total membership is not fully subscribed to members can still be recruited after the start, of the draws. However, the company will at no stage keep memberships reserved in its own name, thus winner of every draw will go to an actual member. 15. The lucky draws will take place in rotation at Lucknow. Kanpur and Bareilly on the 1st Sunday of every month. The lucky draws will be taken out by members themselves to ensure fairness and honesty in the draw. 16. No Shareholder. Partner. Director and staff member of the company is entitled to enrol himself as a member in the scheme. 17. Legal dispute, if any, will be subject to the jurisdiction of Lucknow Courts only. Before signing on the agreement I have read/understood the Rules and Regulations of the Scheme. Signature of member......... Name and Address............ Date...............
(3.) THE petitioners claim that the scheme envisaged by the document (annexure 1) does not fall within the ambit of the Act and as such it cannot be stopped. It is alleged in the writ petition that the Registrar of the Firms (hereinafter referred to as the opposite party) sent a letter dated 3 -11 -1981 (annexure 2 to the writ petition) requiring the petitioner No. 1 to explain their scheme. The petitioners sent a detailed reply dt. 10 -11 -1981 in which they explained the scheme and maintained that the scheme was neither a 'money circulation scheme' nor a 'prize chit' as defined in the Act. They prayed that the notice issued to them may be withdrawn. On 3rd February, 1982, the petitioner received an order from the opposite party in which it was said that the opposite party was not satisfied with the explanation given by the petitioners. The petitioners were required to submit for inspection certain documents relating to their business. A copy of this letter has been filed as annexure 3 to the writ petition. The petitioners submitted the required documents before the opposite party who took those documents into his custody and gave a receipt copy of which has been filed as annexure 4 to the writ petition. The opposite party is further said to have written a letter dt. 3rd February. 1962 to the Indian Bank instructing them that no transactions En the petitioner's account may be permitted to be made. Similar letters were written to other banks also where the petitioners had their accounts. A copy of the letter dt. 3rd February. 1982 from opposite party to the Indian Bank is annexure 6 to the writ petition. The petitioners pray that a writ, direction or order in the nature of certiorari may be issued quashing the order No. 13148 -49 dated 3rd February, 1982 contained in annexure 3 as also his order No, 13188 (1) dated 3rd February. 1982 contained in annexure G. They have further prayed that the opposite party may be commanded to return all the documents seized by him and he may be further directed not to interfere with the business of the petitioners which they are carrying on in terms of the scheme.;