Kerala has suffered a setback with the Supreme Court quashing the Kerala Chit Funds Act of 1975 on Tuesday.
A five-member Constitution Bench of the Supreme Court chaired Chief Justice S.H. Kapadia quashed the 1975 Kerala Act in its order dismissing an appeal filed by Kerala against the order of a Single Judge of the Supreme Court.
The court ruled that the Kerala Act had become obsolete in the context of the Central Act of 1982 governing Chitties, the Chit Funds Act.
The Supreme Court also annulled an amendment Kerala had made in the 1975 Act in 2002. The chitty companies operating in Kerala would be governed only by the 1982 Central Act following the verdict of the Constitution Bench. The amendment brought to the 1975 Act in 2002 had stipulated that any chitty company having at least 20 per cent of its subscribers domiciled in Kerala should get itself registered under the Kerala Act.
The 2002 amendment had also excluded Kerala State Financial Enterprises (KSFE), a State public sector chitty company, and cooperative societies from this stipulation. This was successfully challenged in the High Court by 44 chitty companies, who argued that the State could not follow a law that conflicted with the Central law governing the same topic. They also defended their victory successfully before the Single Judge of the Supreme Court.
Finance and Law Minister K.M. Mani, reacting to the development in the Supreme Court, said the State government would consult the Advocate General and senior advocates in the Supreme Court on the measures Kerala could adopt in the context of the verdict of the Constitution Bench.