Civil Appeal No 1988 of 1982
From the Judgment and order dated 2041982 of the High Court of Allahabad in Writ Petition No 630 of 1982
E Anil Dev Singh and Mrs Shobha Dikshit for the Appellant
LM Singhvi and CL Sahu for the Respondent
The following Judgment of the Court was delivered by F 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 respondent which is a partnership firm called as Ms 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 scheme for investment
The question raised in this appeal is whether that scheme for investment falls within H 458 the category of prize chit  as defined under the Prize Chits and money circulation Scheme Banning Act 1978 for short The Act
The Registrar of Firms Societies and Chits was of the opinion that the scheme of the company falls within the prohibited category of prize chits as defined under the Act
So he seized all the documents of the company and also directed the concerned banks not to have accounts in relation thereto
Challenging the action of the Registrar the company moved the High Court with a writ petition under Art 226 of the Constitution
The High Court allowed the writ petition and quashed the orders made by the Registrar
In order to correctly appreciate the question raised in this appeal it is better to have first the clear picture of the law governing the question
Section 3 of the Act imposes a ban not merely on promoting or conducting any prize chit or money circulation scheme but also on participation in such chit or schemes
Section 4 makes a contravention of the provisions of Section 3 punishable with imprisonment which may extend to three years or with fine which may extend to Rs5000 or with both
Section 5 provides penalty for other offences like printing or publishing any ticket coupon or other document for use in the prize chit or money circulation scheme with a view to promote such scheme in contravention of the Act
Section 6 deals with offences by companies
Section 7 confers power on the police officers not below the rank of an officer in charge of a police station to enter search and seize
Section 8 provides for the forfeiture of newspapers or other publications containing prize chit or money circulation scheme
Section 11 provides exemption to certain categories of prize chits or money circulation schemes
The prize chits or money circulation schemes promoted by the State Government or any officer or authority on its behalf or by a Company wholly owned by a State Government are exempted from the provisions of the Act Conventional Chit  has been defined under Section 2a and Prize Chit has been defined under Section 2e of the Act
Conventional Chit stands excluded from the definition of prize chit and so much so the Conventional Chit remains untouched by provisions of the Act
The definition of the conventional chit is as follows Section 2a
Conventional Chit means a transaction whether called chit chit fund kuri or by any other name or under which a person responsible for the conduct of the chit enters into an agreement with a specified number of persons that every one of them shall subscribe a 459 certain sum of money or certain quantity of grain instead by way of periodical instalments for a definite period and that each such subscriber shall in his turn as determined by lot or by auction or by tender or in such other manner as may be provided for in the chit agreement be entitled to a prize chit
 We may presently refer to the definition of prize chit  and before that it is better to have a little bit of history of chit transactions
The words Chitty  or kuri  Chit or Chit Fund appear to be the common words but with regional variations
Although there is no clear evidence to show the exact place of origin of chit fund the available text i Chit Finance  by CP Somanath Nayar 1973 ii Chit Funds and Finance Corporation by section Radha Krishan an 1974 indicate that it has spread from the Southern most parts of India
In the Travancore area of the State of Kerala it is generally called chitty 
Within the same State in Cochin and Malabar areas it is popularly called kuri 
In other parts of the country it is ordinarily called chit  or chit fund 
In Tamil it is termed as chit 
In Malayalam it is called as chitti  or kuri 
These terms appear to be synonymous meaning thereby a written piece of paper
These transactions were purely indigenous institution
They originated in village life originated by a small group of people well know to each other
They agreed to contribute periodically a certain amount of grain or money and to distribute the entire collection which was termed as fund  to one of the subscribers
It was carried on with some mutually agreed basis
In the nineteenth century if not earlier it was very popular in central Travancore and Trichur areas probably among Church congregations
The chit funds appear to have originated from two legitimate demands of the rural people i a necessity for a lump sum amount to meet some unusual expenditure and ii to provide a form of accumulated saving when people had no banking facilities
It was considered as a source of credit and mode of saving
It was meant for mutual benefit in which some people joined to save and others to borrow
What distinguishes the chit fund however from other financial transactions is that it connects the borrowing class directly with the lending class
The pooled saving is lent out to the same group of contributors
A chit fund collects the savings of the members by periodical subscriptions for a definite period
At the same time it makes available the pooled savings to each member by turn as agreed by them The collected fund may be given either by drawing lots or by bidding
Lots are drawn periodically and the member whose name appears on the win 460 ning chit gets the collection without any deductions
He however continues to pay his subscriptions but his name is removed from subsequent lots
Thus every member gets a chance to receive the whole amount of the chit
This is generally the features of a conventional chit
It is operated without a professional promoter or manager and without any risk of loss of capital
During the course of years the chit funds became more and more popular and attractive
In the usual process of social growth the chitties crossed boundaries of its birth place
It assumed new institutional forms with emergence of new types of interpreneurs
The partnership firms private or public limited companies took over the chit business in various forms
They gave different names such as price chit lucky draw benefit scheme or money circulation scheme
They offered prizes to attract subscribers
The basic features however remained the same in all such schemes
Periodically the names of the subscribers were put to draw and the lucky member was given a prize either in cash or in kind like articles of utility
The subscribers were also given refund of a portion of their contributions
This became regular business in ever so many people
Undoubtedly this rapid growth of chit funds has carried with it some unhealthy features of exploitation
That has been graphically described by Krishna Iyer J in Srinivasa Enterprises  ors
vs Union of India etc
 1 at 804 as follows The quintessential aspects of a prize chit are that the organiser collects moneys in lump sum or instalments pursuant to a scheme or arrangement and he utilises such moneys as he fancies primarily for his private appetite and for 1 awarding periodically or otherwise to a specified number of subscribers prizes in cash or kind and 2 refunding to the subscribers the whole or part of the money collected on the termination of the scheme or otherwise
The apparent tenor may not fully bring out the exploitative import lurking beneath the surface of the words which describe the scheme
Small sums are collected from vast numbers of persons ordinarily of slender means in urban and rural areas
They are reduced to believe by the blare of glittering publicity and the dangling of astronomical amounts that they stand a chance in practice negligible of getting a huge fortune by making petty periodical payments
The indigent agrestics and the proletarian urbani 461 tes pressured by dire poverty and doped by the hazy hope of a lucky draw subscribe to the scheme although they can ill afford to spare any money
This is not promotion of thrift or wholesome small savings because the poor who pay are bound to continue to pay for a whole period of a few years over peril of losing what has been paid and at the end of it the fragile prospects of their getting prizes are next to nil and even the hard earned money which they have invested hardly carries any interest
They are eligible to get back the money they have paid in driblets virtually without interest the expression bonus  in section 2a being an euphemism for a nominal sum
What is more the repayable amount being small and the subscribers being scattered all over the country they find it difficult even to recover the money by expensive dilatory litigative process In 1974 the Reserve Bank of India intervened
The Reserve Bank constituted a Study Group headed by Dr JS Raj to examine the adequacy of existing statutory provisions in regulating the conduct of business by non banking companies
The Study Group was also asked to suggest remedial measures so as to ensure that the activities of such companies in so for as they pertained to the acceptance of deposits investment lending operations etc
subserved the national interest The Study Group went into the matter in some depth
Chapter VI of their report was devoted to Miscellaneous Non Banking Companies which were conducting prize chits benefitsavings scheme or lucky draws etc
Paragraph 63 of the report contains interesting informations and it reads as follows 63 Companies conducting the above types of schemes are comparatively of a recent origin and of late there has been a mushroom growth of such companies which are doing brisk business in several parts of the country especially in big cities like Ahemdabad Bangalore Bombay Calcutta and Delhi
They had also established branches in various States
These companies float schemes for collecting money from the public and the modus operandi of such schemes is generally as described below The company acts as the foreman or promoter and 462 collects subscriptions in one lump sum or by monthly instalments spread over a specified period from the subscribers to the schemes
Periodically the numbers allotted to members holding the tickets or units are put to a draw and the number holding the lucky ticket gets the prize either in cash or in the form of an article of utility such as a motor car scooter etc
Once a person gets the prize he is very often not required to pay further instalments and his name is deleted from further draws
The schemes usually provide for the return of subscriptions paid by the members with or without an additional sum by way of bonus or premium at the end of the stipulated period in case they do not get any prize
The principal items of income of these companies are interests earned on loans given to the subscribers against the security of the subscriptions paid or on unsecured basis as also loans to other parties service charges and member ship fees collected from the subscribers at the time of admission to the membership of the schemes
The major heads of expenditure are prizes given in accordance with the rules and regulations of the schemes advertisements and publicity expenses and remuneration and other perquisites to the directors
 The Study Group recorded its conclusions in paragraph 611 as follows From the foregoing discussion it would be obvious that prize chits or benefit schemes benefit primarily the promoters and do not serve any social purpose
On the contrary they are prejudicial to the public interest and also adversely affect the efficacy of fiscal and monetary policy
There has also been a public clamour for banning of such schemes this stems largely from the mal practices indulged in by the promoters and also the possible exploitation of such schemes by unscrupulous elements to their own advantage
We are therefore of the view that the conduct of prize chits or benefit schemes by whatever name called should be totally banned in the larger interests of the public and that suitable legislative measures should be taken for the purpose if the provisions of the existing enactments are considered inadequate
Companies conducting prize chits benefit schemes etc may be allowed a period of three years which may be extended by one more year to wind up 463 their business in respect of such schemes andor switch over to any other type of business permissible under the law
 It will be seen that the Study Group was of the opinion that prize chits or benefit schemes primarily benefit the promoters and do not serve any social purpose
They are prejudicial to the public interest
They adversely affect the fiscal and monetary policies of the Government
The Study Group was firmly of the view that the conduct of prize chits or benefit schemes by whatever name called should be totally banned in the larger interests of the public
The Government of India accepted that report and decided to implement the above recommendations of the Study Group
In 1978 the Act with which we are concerned was passed in the Parliament
The Act provides for banning the promotion or conduct of money circulation scheme  or prize chit  which have been defined as follows Section 2c money circulation scheme  means any scheme by whatever name called for the making of quick or easy money or for the receipt of any money or valuable thing as the consideration for a promise to pay money on any event or contingency relative or applicable to the enrolment of members into the scheme whether or not such money or thing is derived from the entrance money of the member of such scheme or periodical subscription section 2e prize chit  includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter foreman agent or in any other capacity moneys in one lump sum or in instalments by way of contributions or subscriptions or by sale of units certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings mutual benefits thrift or any other scheme or arrangement by whatever name called and utilises the moneys so collected or any part thereof or the income accruing from investment or other use of such moneys for all or any of the following purposes namely i giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot draw or in any other manner prizes or gifts in c 464 whether or not the recipient of the prize or gift is under a liability to make any further payment in respect of such scheme or arrangement
ii refunding to the subscribers or such of them as have not won any prize or gift the whole or part of the subscription contributions or other moneys collected with or with out any bonus premium interest or other advantage by whatever name called on the termination of the scheme or arrangement or on or after the expiry of the period stipulated therein but does not include a conventional chit
 The scheme for investment with which the company has been carrying on its business is neither a conventional chit not a money circulation scheme 
That is not disputed by the Registrar of Firms
According to him the scheme is a prize chit  as defined under Section 2e of the Act
To understand the correct scope of the definition we must first try to ascertain the purpose of the legislation
The legal interpretation is not an activity sui generis
Under the view now widely held the purpose of the enactment is the touchstone of interpretation
The first step in interpretation therefore is to gather all informations about the purpose of the Act
If the Act was meant for the public good then every provision thereof must receive fair and liberal construction
It must be construed with vision to ensure the achievement of the object of the Act
The purpose of the Act could be gathered by having recourse to the Statement of objects and Reasons accompanying the Bill and in long title of the enactment
The Statement of objects and Reasons reads as follows In June 1974 the Reserve Bank of India had con stituted a Study Group under the Chairmanship of Shri James section Raj the then Chairman Unit Trust of India for examining in depth the provisions of Chapter III B of the  and the directions issued thereunder to non banking companies in order to assess their adequacy in the context of ensuring the efficacy of the monetary and credit policies of the country and affording a degree of protection to the interests of the depositors who place their savings with such companies
In its report submitted to the Reserve Bank in July 1975 the Group ob 465 served that the prize chitbenefitsavings schemes benefit primarily the promoters and do not serve any social purpose
On the contrary the Group have stated that they are prejudicial to the public interest and affect the afficacy of the fiscal and monetary policies of the country
prize chits would cover any kind of arrangement under which moneys are collected by way of subscriptions contributions etc
and prizes gifts etc are awarded
The prize chit is really a form of lottery
Its basic feature is that the foreman or promoter who ostensibly charges no commission collects regular subscriptions from the members
once the member gets the prize he is very often not required to pay further instalments and his name is dropped from further lots
The institutions conducting prize chits are private limited companies with a very low capital base contributed by the promoters directors or their close relatives
Such schemes confer monetary benefit only on a few members and on the promoter companies
The Group had therefore recommended that prize chits or money circulation schemes by whatever name called should be totally banned in the larger interests of the public and suitable legislative measures should be undertaken for the purpose
The Bill proposes to implement the above recommendations of the Group by providing for the banning of the promotion or conduct of any prize chit or money circulation scheme by whatever name called and of the participation of any person in such chit or scheme
The Bill provides for a period of two years within which the existing units carrying on the business of prize chits or money circulation schemes may be wound up and provides for penalties and other incidental matters
The repeal of the existing State Legislations on the subject has also been provided for in the Bill
 The long title of the Act reads An Act to ban the promotion or conduct of prize chits and money circulation scheme and for matters connected therewith or incidental thereto
 It will be clear from these recitals that the Parliament intended to ban all prize chits and money circulation scheme
Some of the aspects of the definition of prize chit has been considered by this Court
In Reserve Bank of India vs Peerless 466 General Insurance and Investment
Co Ltd  Chinnappa Reddy J speaking for this Court observed p 1041 We do not think that by using the word includes in the definition in section 2e of the Act the Parliament in tended to so expand the meaning of prize chit as to take in every scheme involving subscribing and refunding of money
The word includes the context shows was intended not to expand the meaning of prize chit but to cover all transactions or arrangements of the nature of prize chits but under different names
The expression Prize Chit had no where been statutorily defined before
The Bhabatosh Datta Study Group and the Raj Study Group had identified the schemes popularly called Prize Chits
The Study Group also recognised that Prize Chits were also variously called benefitsavings schemes and lucky draws and that the basic common features of the schemes were the giving of a prize and the ultimate refund of the amount of subscriptions vide Para 63 of the report of the Raj Study Group
It was recommended that prize chits and the like by whatever name called differently prize chits  benefitsavings schemes  lucky draws  etc
It became necessary for the Parliament to resort to an inclusive definitions so as to bring in all transactions or arrangements containing these two elements
We do not think that in defining the expression Prize Chit  the Parliament intended to depart from the meaning which the expression had come to acquire in the world of finance the meaning which the Datta and the Raj Study Group had The learned judge while examining the scope of two clauses i and ii of sec
2e observed p 1042 43 The argument is that the two clauses i and ii are to be read disjunctively and that they should not be read as if they are joined by the conjunction and 
We do not agree
There is no need to introduce the word or  either
How clauses i and ii of sec
2e have to be read depends on the context
The context requires the definition to be read as if both clauses have to be satisfied
There is nothing in the text which makes it imperative that it be read otherwise
The learned counsel urges that the expression 467  all or any of the following purposes indicates that the purpose may be either the one mentioned in i or the one mentioned in ii
We do not agree with this submission
Each of the clauses i and ii contains a number of alternatives and it is to those several alternatives that the expression all or any of the following purposes refer and not to i or ii which are not alternatives at all
In fact a prize chit by whatever name it may be called does not contemplate exhaustion of the entire fund by the giving of prizes it invariably provides for a refund of the amount of subscription less the deductions to all the subscribers or to those who have not won prizes depending on the nature of the scheme
Clauses i and ii refer to the twin attributes of a prize chit or like scheme and not to two alternative attributes 
 In the light of these principles we may now have a close look at the definition of prize chit  under sec
We may cull out the following attributes There must be collection of moneys from persons
The moneys may be collected in one lumpsum or in instalments
The moneys may be collected by way of contributions subscriptions or as membership fees admission fees or service charges
It may be collected by sale of units certificates or other instruments
The collection may be in respect of any savings mutual benefits thrift or any other scheme or arrangement no matter by what name
The Collection may be made by a promoter foreman
agent or in any other capacity
The collection of moneys or any part thereof is utilised for all or any of the purposes set out in clauses i and ii
They are the two distinct attributes of prize chit each of which has to be satisfied
The definition goes a step further
The amount collected as such need not be utilised for any of the purposes under clauses i and ii
It may be sufficient to attract the definition if the amount accrued from investment of such collection is used for all or any of the purposes under clauses i and ii
Clauses i and ii provide for giving or awarding prize or gift to subscribers
It may be periodical or otherwise
The prize or gift may be awarded by lot draw or in any other manner
Then there may be refund of the whole or part of the collection
The refund may be made to all or such of them who have not won any prize or gift
The refund may be made with or without any bonus premium interest or other advantage
468 Leaving aside the verbiage if we rewrite the definition which reeks of simplicity it runs like this Prize chit includes a scheme by which a person in whatever name collects moneys from individuals for the purpose of giving prizes and refunding the balance with or with out premium after the expiry of a specified period
From the above analysis it will be clear that the reach and range of the definition of prize chit  is sweeping
The generality of the language appears to have been deliberately used so that the transaction arrangement or scheme in which subscribers or contributors agree to forego a portion of their contributions in the hope of getting any prize or gift should not escape from the net of the definition
Even the participation of any person in such chit or scheme has been prohibited
The object being that the people should not be attracted to invest their moneys in the hope of getting prizes or gifts
The reason being that it has been found by the Study Group of Dr section Raj that all such prize chits or schemes are in the form of lottery and they do not serve any social purpose
They are prejudicial to the public interest
They affect the monetary policies of the country
They benefit only the promoters
So much is about the law
Let us now have the fact of the case
The terms and conditions of the scheme offered by the company are as follows 1
Secured Investment Company will be known as COMPANY
Every member will deposit with the company Rs220 only once in return he will get a Reinvestment Deposit Plan ReceiptBank Cash Certificate a type of Fixed Deposit receipt of a Government Nationalised Bank 3
No interest will be given to the member thus the maturity value of the Bank s RDP will be Rs220
After a member deposits Rs220 he will get his Bank s RDP within 7 days
For members from Lucknow Kanpur and Bareilly every effort will be made to give them the RDP Receipt the very next day
The duration of the scheme is for 66 months
469 Therefore the duration of the bank s RDP Receipt is also for 66 month
Lucky draws for articles totalling Rs15000 per month will be given every month for 60 months
Thus the total value of prizes for 60 months will be Rs9 lakhs
Totally 60 lucky draws will be held one every month after the recruitment of 19999 members per group
Every month 21 1ucky prizes will be given
The Ist Prize will be a Vijay Scooter the 2nd Prize will be a Kelvinator refrigerator lO Its or a TV and 19 other consolidation prizes consisting of articles like transistor sewing machine cycle pressure cooker stainless steel thali sets alarm clocks etc
If there is any price increase later in the period of the scheme of the value of the prize articles which are detailed below the winning member shall pay for the actual price increase
Cash in lieu of the articles will not be given
One Vijay Super Scooter Rs8000 2
One Kelvinator Fridge 10 Its or one TV Plus one Mixi Rs3900 3
One cycle Rs400 4
One table fan Rs350 section One Sewing Machine Rs325 6
2 Nos
Philips Transistors Rs 230 each Rs460 7
3 Nos
Pressure Cookers Rs175 each Rs525 8
S Nos
Steel thali sets Rs lOO each set Rs500 9
6 Nos
Alarm Clocks Rs90 each Rs540 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
If a member withdraws during the duration of the scheme he can encash his Bank s RDP directly the H 470 entire amount of Rs200 but will lose interest for the ba lance months as per Reserve Bank of India rules governing from time to time
For example if a member withdraws immediately after he gets his RDP Receipt he loses up to a maximum of Rs92
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 RDP
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 gained also this interest gained has to cover the company 
overheads and profit
However a customer s refund of his Rs220 is 100 per cent secured because at the end of the scheme he can go directly to the Bank and encash the RDP without any consent from the Company
Out station members can encash the RDP by presenting it to any Bank
The procedure is the same as one normally encashes an outstation cheque
The Company reserves the right to accept or reject any membership without assigning any reasons
In case the total membership is not fully sub scribed to members can still be scruited 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
The lucky draws will take place in rotation at Lucknow Kanpur and Bareilly on the Ist Sunday of every month
The lucky draws will be taken out by members themselves to ensure fairness and honesty in the draw
 There are as many as 19999 subscribers in each scheme
All of them do not get prizes and indeed they could not get since there are only 60 draws with 2 1 prizes each
The members are not told that the company deducts Rs92 for its own use
They are only informed that they are assured of the money deposited in the Bank and in the event of premature withdrawal they will lose interest upto Rs92 only
471 In spite of all these glaring attributes of exploitive nature of the scheme the High Court appears to have been carried away with the Reinvestment Deposit Plan Receipt for Rs220
The High Court was of the view that the scheme could not be considered as prize chit
The High Court said  It is thus clear from a reading of the document annexure 1 that the so called member  deposits the amount with the petitioners for the purpose of obtaining a Reinvestment Deposit Plan Receipt which is promised to him by the petitioners
He may have been having an idea in the background that by depositing the amount of Rs220 with the petitioners and obtaining the Reinvestment Deposit Plan Receipt he would also be considered for the distribution of Lucky Prizes 
But that is not enough inasmuch as the amount which he had deposited with the petitioners was to be invested in a nationalised bank and he was to get a Reinvestment Deposit Plan Receipt
If the person from whom the money has been collected has not deposited it with the petitioners as contributions   or subscription it is difficult to hold that it is collected by the petitioners as his contribution or subscription
The High Court appears to have proceeded on the basis that the members of the scheme do not pay subscription to the company
Nor do they pay the amount as contribution
The High Court was also of the view that payment of money to the company for the purpose of obtaining RDP receipt with the hope of getting any prize is not sufficient to attract the definition of prize chit
In our view the conclusion of the High Court is patently erroneous
It is unsustainable both on facts and law
The High Court has failed to consider that the company undisputedly takes away Rs92 out of Rs220 paid by each member
The High Court has further failed to note that the company utilises the deducted amount of Rs92 for the purpose of giving prizes to members
Dr LM Singhvi learned counsel for the company did not and indeed could not dispute that the company is deducting Rs92 out of the payment of Rs220
The counsel however urged that since the member gets the full amount of Rs220 from the bank at the instance of the company the scheme is an investment scheme and not prize chit
We are unable to accept this submission
The fact that the member receives Rs220 from the bank after the maturity period of his deposit makes little difference in the nature of 472 the transaction of the company
The fact remains that the company collects in one lumpsum Rs220 from every member
It is only by payment of that amount the individual becomes a member of the scheme and eligible to get monthly prizes
The company instead of returning the balance of Rs 128 directly to the member takes him to a nearby branch of the nationalised bank
There Rs 128 would be deposited in the name of the member who gets the same with interest after maturity
But it should not be forgotten that the member does not get back Rs92 deducted by the company
Nor he gets any interest on this amount
He foregoes his amount of Rs92 with the hope of getting prizes offered by the company
There is no guarantee that he will get any prize
He however takes chance month after month
If he is unlucky he waits in vain for 60 months
The apparent tenor of the scheme may not bring out the exploitative nature of the scheme
But it is there if anybody wants to know it
The company undisputedly collects Rs92 from every subscriber and utilises a portion of it for giving prizes and to meet overhead charges
The company in all collects an amount of Rs 184490775 at the rate of Rs92 per head from 19999 subscribers
The company distributes monthly prizes of the value of Rs 15000
The total value of all the prizes for 60 months works out to Rs9 Iakhs
The balance of about 95 Iakhs with interest thereon would be utilised by the company
Is this a promotion of thrift investment or saving At whose costs and for whose benefit We are however glad to note that Madhya Pradesh High Court while considering a similar scheme in Sahara India vs State of MP  others  1983 MP 2 128 has held that it is prize chit falling within the scope of Section 2e of the Act
We have no doubt that the scheme of the company with which we are concerned is primarily for the benefit of the promoter or the Company at the costs of the subscribers
This is the kind of transactions or arrangements which Dr JS Raj Study Group said that it should be banned altogether
Section 2e was intended to cover all such arrangements or schemes
The interpretation given by the Court should not be stultifying the underlying principle in the definition which was meant to protect people from exploitation
We would like to emphasise that the Act was intended to ban all kinds of prize chits where persons part with their money and risk the chance of getting prizes or gifts
Therefore any scheme or arrangement in which a person agrees to lose or made to part a portion of his payment against the chance of getting any prize or gift should be considered as prize chit falling within the inclusive definition under Section 2e
473 From the above discussion and in the light of the principles to which we have called attention the scheme of the company is nothing but prize chit as defined under Section 2e of the Act and the action of the Registrar of firms deserves to be upheld
In the result we allow the appeal with costs and set aside the L judgment and order of the High Court
Before parting with the case we may however observe that the Registrar of the Firms while taking action against the persons or firms under the Act will take care to see that the members of the scheme are not denied of their contributions or prizes which they are legitimately entitled to if the prize chit is allowed to run for the full term 
SL Appeal allowed


Summary:
 Words and Phrases Timer  Fire  wood  Meaning of
The Forest Department of Madhya Pradesh sold to the appellants who are dealers in timber stacks of eucalyptus wood after separating the Ballies and poles
Sales tax at the rate of 16 ad valorem leviable on the sale of timber  under Entry 32A of part II of Schedule Il of the Madhya Pradesh General Sales Tax Act 1958 was sought to be recovered from the appellants on the grounds that what was sold was timber 
The levy was challenged by the appellants in the High Court of Madhya Pradesh
The High Court rejected the appellants  contention that what was sold being left overs after the extraction of poles and Ballies was merely fire wood  within the meaning of and attracting entry No 12 of Part V of Schedule II of the Act and thus liable to sales tax only at the rate of 3
The High Court upheld the levy on the view that the goods were Timber  and attracted entry 32A of Part II
The High Court took the view that where the wood was not in the normally accepted commercial practice fire wood and more especially where the wood was sold and purchased subject to specifications which conduce the wood to particular purposes other than fuel the goods sold cannot be regarded as firewood
The appellants  contentions reiterated before this Court were t that what was sold were the left overs and remnants 2 that the forest department had itself described the goods in the tender notice as fire wood heaps  3 that the wood stacks could by no stretch of imagination be held to answer the well known concept of Timber  and 4 that the wood sold was fire wood  or at all events plain wood  not amounting to Timber  or firewood  in which case it fell within the residuary entry
502 The respondents on the other hand urged that the wood  sold did not admit of being described as fire wood  because nobody used eucalyptus wood as fire wood due to its very high cost
Allowing the appeal in part and remitting the matter to the High Court it was  HELD I The finding of the High Court that the goods was Timber  appears to have been reached as necessary consequence and logical corollory of the goods not being fire wood 
If the wood is pot fire wood it need not necessarily and for that reason alone be Timber 
All wood is not timber as indeed all wood is not fire wood  either though perhaps it may not be incorrect to say that both firewood  and Timber  are wood  in its generic sense508C 2 All parts of portions of even a timber tree need not necessarily be Timber 
Some parts are timber some parts merely fire wood  and yet others merely wood 
509F 3 In a taxing statute words which are not technical expressions or words of art but are words of everyday use must be understood and given a meaning not in their technical or scientific sense but in a sense as understood in common parlance ie that sense which people conversant with the subject matter with which the statute is dealing would attribute to it
 Such words must be understood in their popular sense
505B C 4 The use to which the goods  are capable of being put is not determinative of the nature of the goods nor even the nomenclature of the goods as given by till theoretic is determinative
The fact that the purchasers were dealers in timber is also not conclusive
508G 5 The expression Timber  has an accepted and well recognised legal connotation and is nomen juris
It has also a popular meaning as a word of everyday use
In its popular sense timber  is understood to be imarathi Lakdi 
In a popular sense Timber  has certain association of ideas as to its size stability utility durability the unit of measure of quantity and of valuation etc
505D 507A 6 Having regard
to the size nature and description of the wood in the present case the wood heaps  were not susceptible to be or did not admit of being called Timber  with all the concomitants and associations of that idea
509F 503 7 No tests of general validity applicable to or governing all A cases can at all be laid down
Perhaps different considerations might apply if say the pieces of eucalyptus wood are of a longer length or of a higher girth
Differences of degree can bring about differences of kind
509E G Shantabai vs State of Bombay   referred to