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PETITIONER: SRINIVASA ENTERPRISES & ORS.

       Vs.

RESPONDENT: UNION OF INDIA ETC.

DATE OF JUDGMENT24/09/1980

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. PATHAK, R.S. REDDY, O. CHINNAPPA (J)

CITATION:  1981 AIR  504            1981 SCR  (1) 801  1980 SCC  (4) 507  CITATOR INFO :  D          1982 SC 949  (62,79)  R          1987 SC1023  (29,40)  RF         1988 SC 492  (8)

ACT:      Prize Chits and Money Circulation Schemes(Banning) Act, 1978 (43  of 1978)  & Constitution  of India 1950, Arts. 14, 19(1) (g)  and List III Entry 7-Parliament whether competent to enact legislation-Act whether constitutionally valid.      Constitution of  India 1950,  Art.  32-Petition  under- Court’s function not to give advisory opinion.

HEADNOTE:      Prize Chits  are one  type of  saving schemes. In Prize Chits the organiser collects subscription in one lump sum or by monthly  instalments spread  over a specified period from the subscribers  to the  schemes. Periodically,  the numbers allotted to the members holding the tickets or units are put to a  draw and  the member 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. In case members  do not  get any  prize,  the  schemes  usually provide for  the return  of subscription paid by the members with or without an additional sum by way of bonus or premium at the end of the stipulated period.      As the flood of funds flowing through these prize chits benefited only the organisers of such schemes, and the total number  of   people  victimised   by  these   projects  were considerable and  injury to  the community  substantial, the Central Government  set up a Study Group which went into the operation of  these schemes.  The Report  of the Study Group demonstrated the  many sinister effects and also exposed the anti-social impact  upon the  community by  the operation of such schemes,  and recommended to the State to intervene and interdict.      The Central  Government thereupon undertook legislation for curbing  the effect of the operation of these schemes by enacting the  Prize  Chits  and  Money  Circulation  Schemes (Banning) Act, 1978.

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    The petitioners  in their  writ petitions under Article 32 of  the Constitution  assailed the aforesaid statute: (1) contending  that   a  package  of  proper  safeguards  would adequately  protect   the  community,   a  total  ban  being recklessly  excessive,   unintelligently   over-broad   and, therefore, unconstitutional,  under  Article  19(1)(g),  (2) conventional chits and prize chits are substantially similar and, therefore,  permission to continue ’conventional chits’ and prohibition  of prize  chits  was  discriminatory  under Article 14, (3) there is a discriminatory exemp- 802 tion from  the operation  of the  prohibition in  regard  to those categories  of prize  chits which  fall within section 11, and  (4) the  legislation being aimed at prize chits and intended to ban lotteries, would fall within the State List, Entry 34  List II  and Parliament  cannot enact  such a  law under Entry 7 of List III.      Dismissing the writ petitions, ^      HELD: (1)  (i) There  is a sufficient justification for undertaking legislation  restricting the  freedom to  fleece through prize chits. [810E].      (ii) The legislation cannot be struck down on the score of Art. 19(1)(g) of the Constitution. [811F]      (iii)  The   requirements  of   Art.  19(6)   are,  the reasonableness of the restriction upon the fundamental right to trade, the measure of reasonableness being the compelling need to promote the interest of the general public. [810H]      2. Conventional  chits and  prize chits  are  different categories with  different financial  features and different damaging effects.  There is, therefore, no force in the plea of violation of Article 14. [812A]      3. A bare reading of section 11 makes it clear that the exempted categories  do not  possess the  vices  of  private prize chits.  What are  exempted are  prize chits  and money circulation schemes  promoted by  or controlled by the State Governments, the  Central Government,  or the  State Bank of India or the Reserve Bank. Even Rural Banks and Cooperatives covered by  s. 11, are subject to public control. Charitable and educational  institutions are  exempted only if they are notified by  the State  Government in  consultation with the Reserve Bank.  There is, therefore, sufficient justification to justify  the different  classification of these items and their exemption  cannot be  called in question on the ground of violation of Art. 14. [812G-H; 813A]      4. In pith and substance the present legislation is not one against  lotteries. It  deals with  a special species of contracts with  sinister features, although one such feature is the  award of prizes to subscribers. While motives cannot validate or invalidate a legislation the core of the subject matter must govern competency. [813 C-D]      5.  In   matters  of  economics,  sociology  and  other specialised subjects, courts should not embark upon views of half-lit infallibility  and reject what economists or social scientists have,  after detailed  studies, commanded  as the correct course  of action.  The final word is with the Court in constitutional  matters but  judges hesitate to ’rush in’ where even specialists ’fear to tread’. If experts fall out, court, perforce,  must guide  itself and  pronounce upon the matter  from  the  constitutional  angle,  since  the  final verdict, where  constitutional contraventions are complained of, belongs to the judicial arm. [811B-C]      6. When  a general evil is sought to be suppressed some martyrs may have to suffer for the legislature cannot easily make meticulous  exceptions and  has  to  proceed  on  broad

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categorisations, not singular individualisations. [811G]      7. Judicial  validation of  a social  legislation  only keeps the  path clear  for enforcement. Spraying legislative socio-moral pesticides  cannot serve  any purpose unless the target area is relentlessly hit. This legislation enacted in 803 response to  expert recommendation and popular clamour is to be implemented by dynamic State Action. [813E-F]      8. The  possible hardship  that bona  fide  prize  chit promoters may  suffer on  account of  the total  prohibition clamped down  by this legislation can be relieved against by the Central Government acting under Section 12. [813F]      9. Under Article 32 the Court’s function is not to give advisory opinion  but to  pronounce  upon  transgression  of fundamental rights by State action. [813H-814A]

JUDGMENT:      ORIGINAL JURISDICTION:  Writ Petition  Nos.  711,  138, 1152 & 1546 of 1979.      (Under Article 32 of the Constitution)      K. K. Venugopal and A. Subha Rao for the Petitioners in WP Nos. 138, 711 of 79.      M. M.  Abdul Khader, M. A. Feroze, M.R.K. Pillai and K. R. Rajasekharan Pillai for the Petitioner in WP No. 1152/79.      B. Kanta  Rao, P. Ram Reddy and G. Narayana Rao for the Petitioner in WP No. 1546/79.      K. Parasaram, Solicitor-Genl and Miss A. Subhashini for the Respondent (Union of India).      P. Ram  Reddy and  G. N.  Rao for the Respondents in WP No. 1546/79.      K. R. Nambiar for Respondent No. 3 in WP No. 1152/79.      P. H.  Parekh, C. B. Singh & Rajian Karanjawala for the Intervener in WP No. 711/79.      The Judgment of the Court was delivered by      KRISHNA IYER,  J.-Section 2(e)  of the  Prize Chits and Money Circulation  Schemes (Banning)  Act. 1978  (Act 43  of 1978)  (for   short,  the   Act)  defines   a  ’Prize  chit’ inclusively:-      2. In this Act, unless the context otherwise requires,-      ***                     ***                       ***           (e)  "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, monies in one lump sum or in      instalments by way of contributions or subscriptions or      by sale of 804      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      benefit, thrift,  or any other scheme or arrangement by      whatever  name  called,  and  utilises  the  monies  so      collected or  any part  thereof or  the income accruing      from investment  or other use of such monies 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 cash or in kind 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

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         them as  have not won any prize or gift, the whole           or part  of the  subscriptions,  contributions  or           other monies collected, with or without 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 quintessential  aspects of  a prize  chit are  that  the organizer  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  urbanites, 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 805 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 s. 2(a) 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.      Since there  are a large number of prize chits all over the country  which have  almost become a pan-Indian epidemic and since  the total  number of  people victimised  by these projects are  considerable the  injury to  the community  is substantial, so  that  a  welfare  state  dedicated  to  the Directive Principles of Part IV has to awake and protect the vulnerable sector.  Another weighty factor which has alerted the State  into action  is that  the flood  of funds flowing through prize  chits benefit  the organisers of such schemes who have  no social responsibility for national productivity and in  their hands  is easy money with little developmental benefits or attractive returns for the poor investors.      The noxious  net cast  by the  prize chit promoters was large and the State moved to stop this menace. Many a little makes a  mickle, and  those  small  sums  collected  from  a substantial number  of  subscribers  accumulated  into  huge resources  which   otherwise  would   ordinarily  have  been available for  national development. The grim picture of the luckless many  who were  losing their  money,  appetized  by gambling  prospects,   and  the  sterilization  of  people’s resources which  were siphoned  off by  private adventurists through prize chits to the detriment of national development ignited the impugned legislation.      Such is  the case  of the  State as  justification  for

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enacting what is contended for as unconstitutional for three reasons which  we will presently examine. The Union of India has  furnished   socio-economic  data   to  help  the  court appreciate how  expert opinion  had  been  collected  before launching on  the prohibitory  legislation.  A  study  group headed by  Dr. J.  S. Raj  made  a  report  to  the  Central Government wherein pointed reference was made to prize chits and allied  schemes. The  report devoted  a whole chapter to prize chits,  savings schemes,  and others  of their ilk and exposed the  modus operandi  of such schemes and their anti- social impact  upon the  community and  recommended  to  the State to intervene and interdict. 806 We may  quote briefly  to  bring  home  tersely  the  trauma inflicted by  lucky draw  schemes on  the host  of  luckless illiterates succumbing (perhaps astrologically) to the prize mania:           ....It  was   observed  that   several   companies      conducting prize  chits, benefits or savings schemes or      lucky draws  claimed themselves  to  be  either  mutual      benefit financial  companies (by  enrolling subscribers      as ’associate’  members under  the directions  as  they      stood prior  to  January  1,  1973)  or  as  chit  fund      companies and  thus contended  that  the  subscriptions      collected by them were not ’deposits’ as defined in the      directions  and   hence  not  subject  to  any  ceiling      restrictions..... Modus Operandi of Prize Chits/Benefit or Savings Schemes or                         Lucky Draws           6.3.  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      Ahmedabad, Bangalore,  Bombay, Calcutta and Delhi. They      have 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 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 member           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 interest           earned on  loans given  to the subscribers against           the security  of the  subscriptions paid  or on an           unsecured basis as also loans 807           to other  parties, service  charges and membership           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

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         schemes, advertisements and publicity expenses and           remuneration  and   other   perquisites   to   the           directors.      The financial  fall-outs of  these  schemes  were  also examined by the Study Group to demonstrate how the promoter- companies  were  gargantuan  and  were  swallowing  up  huge surpluses  from  the  public  who  lost  interest  on  their subscriptions, and,  sometimes, even  the principal  amounts paid :           .... Even if the company offers some amount by way      of bonus  or premium  to the subscribers at the time of      refund  of   their  subscriptions   and  allowing   for      reasonable  expenditure  on  publicity,  commission  to      agents, etc.,  a sizeable  balance will  still be  left      with the  company. This  is exclusive  of  the  amounts      which  the  company  might  be  collecting  by  way  of      membership  fees   and   service   charges   from   the      subscribers and  also of  the amounts which it might be      appropriating  in   respect  of  the  subscriptions  on      forfeited tickets  on which  there will  be  no  future      liability for  refund to  the members at the end of the      scheme. It will thus be obvious from the foregoing that      such schemes  confer monetary  benefit only  on  a  few      members and on the promoter companies.      There is  reference in  the Study Group report to other studies  conducted   by  the   Reserve   Bank   which   also demonstrated the many sinister effects upon the community on account of proliferous prize chits-benefits schemes.           (a) the companies had advanced sizeable amounts to      the directors or their relatives or firms in which they      were interested as partners, directors or as commission      agents and  there were practically no repayments of the      loans;           (b) the  books of  account had not been maintained      satisfactorily;           (c) close  relatives of  the  directors  had  been      employed in the companies as members of the staff or as      agents on high salaries; 808           (d) In  one case,  it was  observed that  a scheme      announced by  a company  in which  collections had been      made was  withdrawn subsequently  without notice to the      subscribers and no refunds of the subscriptions already      received had been made to the subscribers. Prize moneys      had not  been paid  to all  the subscribers who had won      the prizes; and           (e) subscriptions were shown to have been refunded      in the  books of  account of  a company but doubts have      been expressed  by the  Inspecting  Officer  about  the      genuineness  of   the  payments   in  view  of  certain      attendant   circumstances.   There   have   also   been      allegations that some companies had resorted to certain      malpractices in drawing the names of prize winners.           **                     **                     **      ........ in  the absence  of any authoritative judicial      pronouncement on  the subject,  we are not sure whether      the activities  of companies  conducting  price  chits,      etc.,  are   clearly   prohibited   by   the   existing      legislations.           6.10. It has been reported that resources of prize      chits are  used  for  wasteful  spending  and  hoarding      commodities and  that  these  schemes  "enable  certain      persons to  convert tax-evaded  income  into  accounted      money. The  persons concerned  pay  a  premium  to  the      promoters in return for the facility." It has also been

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    stated that  "there are a number of agents who go about      contacting persons  who are  likely to face the problem      of saving  their income  from the  tax authorities. The      prize chit  pass books  issued to  them under different      names become  their passports for travelling from black      money territory to the white money area-the easiest and      surest way  of using  ill gotten  wealth.  Besides,  by      their misleading  names and  companies the  prize  chit      companies divert  private savings  into their  personal      drains, thus disrupting the national economy.           6.11. 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  malpractices  indulged  in  by  the      promoters and  also the  possible exploitation  of such      schemes  by   unscrupulous  elements   to   their   own      advantage. We 809      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 their business in respect      of such schemes and/or switch over to any other type of      business permissible under the law.                                             (emphasis added)      The learned  Solicitor General  drew our  attention  to cases where  the notorious  abuses by  prize  promoters  had attracted  judicial   notice.  In  particular,  he  cited  a decision of  the Gujarat  High  Court  in  Navjivan  Trading Financing Pvt.  Ltd. Thakkar,  J.  while  dealing  with  the social anguish at the exploitative spectacle, said :           The facts  speak for themselves so eloquently that      no  further   discussion  is   called  for  and  it  is      unnecessary to demonstrate any further that the company      is in  such a  precarious condition  and the  financial      condition is  so very ugly that there is no possibility      whatsoever of  the company  ever being in a position to      pay its debts. It is not in a position to-day and, even      in future,  it is  not likely  to be  in a  position to      discharge the debt burden. In fact, the deficit will go      on increasing  and for  aught we  know,  more  innocent      persons would  be trapped  meanwhile. The  contributors      from  whom   collections  are  made  are  persons  with      extremely  limited   financial  means   and  are  petty      subscribers who cannot possibly afford to take recourse      to legal  proceedings. It  would be cheaper for them to      abandon their  claims than  to make  recourse to  legal      proceedings  and  incur  expenses  for  court-fees  and      advocates’ fees,  apart from the inconvenience involved      therein.      With special  reference to  malpractices of prize chits promoters the learned Judge drove home the point;           Where   the    company   is   not   producing   or      manufacturing  any  goods  and  is  not  rendering  any      service useful  to the society, where the whole purpose      of its existence appears to be to provide the directors

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    with an opportunity to enrich themselves at the cost of      petty subscribers  who in  the  hope  of  getting  some      prizes or  rewards and  better returns  on  their  hard      earned 810      savings (sometimes they may even resort to borrowing in      the hope of getting rich quickly) become contributories      to various  schemes floated  by the company, the matter      stands on  a different  footing. In  a  case  like  the      present where the main activity of the company consists      in tempting  and roping  in  innocent  persons  in  the      scheme  by   publishing   tantalizing   advertisements,      greater harm  would ensue  by refusing to pass an order      of winding  up than  by passing an order of winding up.      In fact,  to wind  up such  company would  be an act of      social service,  for, thereby, several innocent persons      would be  saved from being trapped by a company of this      nature. Alas,  as discussed  earlier, the time taken in      affording reasonable  opportunity  to  the  company  in      obeisance to the principles of natural justice has been      utilised by the company to collect lakhs of rupees from      the innocent  subscribers merely in order to enrich the      directors   in    an   unjust    fashion.   Under   the      circumstances, there  is no  scope  for  hesitation  or      reluctance in  winding up  the company  which the court      ordinarily feels  when dealing  with some manufacturing      unit.                                             (emphasis added)      There  is   sufficient  justification  for  undertaking legislation restricting  the freedom to fleece through prize chits. Indeed, Shri Venugopal did not seriously contest this position. The thrust of his argument was that his client was a well-behaved  prize chit  organizer, above  board  in  all respects, and  so, a  package  of  proper  safeguards  would adequately  protect  the  community  and  a  total  ban  was recklessly  excessive,   unintelligently   over-broad   and, therefore, unconstitutional.      Surely, Art.  19(6) permits  reasonable restrictions in the interest  of the  general public  on the exercise of the right conferred  by Art.  19(1)(g). It  is a  constitutional truism restrictions,  in extreme cases, may be pushed to the point of prohibition if any lesser strategy will not achieve the purpose.  Fundamental rights are fundamental, and so, no ban can  be glibly imposed unless effective alternatives are unavailable. Counsel on both sides cited rulings for the two sides of  the proposition but it is an act of supererogation to load  judgments with  or profusion precedential erudition to make out what is plain, profound.      The  twin  requirements  of  Art.  19(6)  are  (a)  the reasonableness of the restriction upon the fundamental right to trade,  and (b)  the measure  of the reasonableness being the compelling  need to  promote the interest of the general public. Public interest, of course, there is. 811 But the  controversy rages round the compulsive necessity to extinguish  the   prize  chit   enterprises  altogether   as distinguished from  hand-cuffing them with severe conditions geared to  protection of  public interest.  We have  already indicated that  the Raj Report does recommend a total ban on prize chits.  In matters  of economics,  sociology and other specialised subjects, courts should not embark upon views of halflit infallibility  and reject  what economists or social scientists have,  after detailed  studies, commended  as the correct course  of action.  True, the final word is with the court in constitutional matters but judges hesitate to ’rush

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in’ where  even specialists ’fear to tread’. If experts fall out, court,  perforce, must  guide itself and pronounce upon the matter  from the  constitutional angle,  since the final verdict, where  constitutional contraventions are complained of, belongs  to the  judicial arm. The alternative proposals to save  the public  from prize  chit  rackets  attractively presented by  Shri Venugopal  do not  impress  us.  In  many situations, the  poor and  unwary have  to be saved from the seducing processes  resorted by  unscrupulous racketeers who glamourize and  prey upon  the gambling instinct to get rich quick through  prizes. So  long as  there is  the resistless spell of  a chance though small, of securing a prize, though on paper,  people chase  the prospect  by subscribing to the speculative scheme  only to lose what they had. Can you save moths from  the fire  except by putting out the fatal glow ? Once this  prize facet  of the  chit scheme  is given up, it becomes substantially  a ’conventional  chit’ and the ban of the law  ceases  to  operate.  We  are  unable  to  persuade ourselves that  the State  is wrong  in its assertion, based upon expert  opinions that  a complete ban of prize chits is an over-kill  or excessive  blow. Therefore,  we decline  to strike down  the legislation  on the  score of Art. 19(1)(f) and (g) of the Constitution.      We may  not be  taken to  mean that  every  prize  chit promoter  is   a  blood-sucker.   Indeed,   Shri   Venugopal persuasively presented  the case  of his  client to  make us feel  that  responsible  business  was  being  done  by  the petitioner. May  be. But when a general evil is sought to be suppressed  some   martyrs  may   have  to  suffer  for  the legislature cannot easily make meticulous exceptions and has to  proceed   on   broad   categorisations,   not   singular individualisations.      We give  short shrift to the next contention based upon Art.  14.   Broadly  presented,   the   argument   is   that conventional chits and prize chits are substantially similar and, therefore,  permission to continue ’conventional chits’ and  prohibition   of  prize   chits   altogether   may   be discriminatory. We do not agree. Not only do the definitions show the  differentiation between  the two  schemes, but the Raj Report 812 also brings  out the  fact  that  ’conventional  chits’  and ’prize  chits’   are  different  categories  with  different financial features and different damaging effects. We see no force in the plea of violation of Art. 14.      Equally untenable  is the  contention that  there is  a discriminatory  exemption   from  the   operation   of   the prohibition in  regard to  those categories  of prize  chits which fall within s. 11. It runs thus:           11. Nothing  contained in  this Act shall apply to      any prize chit or money circulation scheme promoted by-                (a) a  State Government  or  any  officer  or           authority on its behalf; or                (b)  a   company  wholly  owned  by  a  State           Government which  does not  carry on  any business           other than the conducting of a prize chit or money           circulation scheme  whether it is in the nature of           a conventional chit or otherwise; or                (c) a  banking company  as defined  in clause           (c) of  section 5  of the  Banking Regulation Act,           1949, or  a banking  institution notified  by  the           Central Government under section 51 of that Act or           the State  Bank of India constituted under section           3 of  the State  Bank of  India Act,  1955,  or  a           subsidiary bank constituted under section 3 of the

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         State Bank  of India (Subsidiary Banks) Act, 1959,           or a  corresponding  new  bank  constituted  under           Section 3  of the  Banking Companies  (Acquisition           and Transfer  of Undertakings)  Act,  1970,  or  a           Regional Rural Bank established under section 3 of           the Regional  Rural  Banks  Act,  1976  or  a  co-           operative bank  as  defined  in  clause  (bii)  of           section 2  of the Reserve Bank of India Act, 1934;           or                (d) any charitable or educational institution           notified in  this behalf  by the State Government,           in consultation with the Reserve Bank. A bare  reading of  that provision  makes it  clear that the exempted categories  do not  possess the  vices  of  private prize chits.  For one  thing, what  are exempted  are  prize chits  and   money  circulation   schemes  promoted   by  or controlled by  the State Governments, the Central Government or the  State Bank  of India or the Reserve Bank. Even Rural Banks and  Co-operatives covered  by s.  11, are  subject to public  control.   Likewise,  charitable   and   educational institutions are  exempted only  if they are notified by the State Government  in consultation  with  the  Reserve  Bank. There  are   enough  arguments   to  justify  the  different classification of these items 813 and their  exemption cannot  be called  in question  on  the ground of  violation of  Art. 14.  Reasonable classification wins absolution  from the  charge of  discrimination if  the differentia has a nexus with the statutory object.      The final  submission of  Shri Venugopal  was regarding legislative competency.  He urged that legislation regarding lottery falls  within the State List (Entry 34, List II) and Parliament cannot  enact such  a law  under Entry  7 of List III. Relying  upon State  of Bombay  v. R.M.D. Chamarbugwala counsel contended  that the present legislation was aimed at prize chits  and intended  to ban  lotteries. Such  an anti- lottery law could not be sustained under Entry 7 of the List III. We  are not  persuaded that  in pith  and substance the present legislation  is one against lotteries. It deals with a special  species  of  contracts  with  sinister  features, although  one  such  feature  is  the  award  of  prizes  to subscribers. While  motives cannot  validate or invalidate a legislation the  core of  the  subject  matter  must  govern competency. So  viewed, it  is easy to accept the submission of the Union of India that Parliament wanted to restrict and prohibit certain  types of  contracts because of the noxious element of  gambling and lottery implicit therein and apt to entice the  credulous and  uncautious. We  do not  think  it necessary to expand on the subject and the incidental impact on lotteries does not affect the vires of the Act.      Judicial validation  of a social legislation only keeps the path  clear for enforcement. Spraying legislative socio- moral pesticides  cannot serve any purpose unless the target area is  relentlessly hit.  We hope  that  this  legislation enacted in  response to  expert recommendation  and  popular clamour will be implemented by dynamic State action.      We wish  to make  it clear  that the  possible hardship that bona fide prize chit promoters may suffer on account of the total  prohibition clamped  down by this legislation can be relieved  against by  the Central Government acting under s. 12.  The learned Solicitor General assured the court that the Union  of India would take ameliorative measure to avoid unjust hardship,  especially because  it had  power to do so under s. 12.      Mr. M.  M. Abdul  Khader appearing in Writ Petition No.

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1152 of  1979 argued  that in his case ornaments and vessels were given as prizes and if strictly construed, his client’s scheme did  not fall  within the scope of the Act. He wanted the court to declare so but we decline to do so, since under Art. 32 this Court’s function 814 is not  to give  advisory  opinion  to  petitioners  but  to pronounce upon  transgression of fundamental rights by State action. While  there  is  no  merit  in  his  submission  of procedural unreasonableness in the provisions of the Act, it is perfectly  open to  the writ  petitioner to urge his plea that the  Act does  not apply  to  his  scheme  if  he  were prosecuted. We  leave the  matter at  that. Shri  Parekh, as intervener, Shri  Kanta Rao,  appearing in Writ Petition No. 1546/79, Shri  Subba Rao  pressing Writ  Petition No. 138/79 and Shri  K.R.R. Pillai in W.P. No. 1152/79 have adopted the leading arguments  of Shri Venugopal which we have rejected. All of them must share the same fate.      State lotteries escalating year after year and enticing proletarian sections  of the  people across  the States  are dubious in  morality and  ruinous  in  impact.  Moreover,  a detailed study  may disclose  the  diminishing  returns  and increasing establishment  expenses, menace  to peaceful life and a traffic and dubious consequences. So much so, a second look  at  the  propriety  of  these  State-run  schemes  and reversion to  the old  stance of  the State setting an anti- lottery example, is worthwhile from many angles.      For the  reasons given  above, we  dismiss all the Writ Petitions, leaving the parties to bear their own costs. N.V.K.                                  Petitions dismissed. 815