The Madras High Court has upheld the constitutional validity of an amendment to the Tamil Nadu Chit Fund Rules of 1984 through which the State government increased the arbitration fee from 3% to 5% of the amount claimed.
Chief Justice Amreshwar Pratap Sahi and Justice Senthilkumar Ramamoorthy dismissed a writ petition filed by Incorporated Chit Funds Association which had challenged a Government Order issued in September 2017 for amending the rules.
The judges agreed with Special Government Pleader T.M. Pappaiah that the State government was competent to amend the statutory rules framed by it on the basis of powers conferred under the Chit Funds Act of 1982.
The petitioner association had claimed that it was unreasonable on the part of Registrar of Chit Funds to demand “exorbitant” payment for arbitration when a foreman (person responsible for conduct of chit) or a subscriber would have to pay only 3% as court fee even for filing a civil suit.
The association pointed out that the maximum fees prescribed under the Arbitration and Conciliation Act of 1996 was only 3.5% and so it was not fair on the part of the State Government to demand ad valorem fees of 5% of the amount claimed while referring matters for arbitration.
On the other hand, Mr. Pappaiah told the court that the fee had to be revised considering inflation and other factors. He said that 8,886 arbitration cases were filed in the State in 2017-18. Of them, 8,882 were filed by foremen against subscribers/sureties and only four had been filed by the latter. Since the Registrar had to issue newspaper publications and attach properties, there was a broad correlation between the services offered and the fees charged, he argued.
After recording his submissions, the judges said the Chit Funds Act provides for speedy resolution of disputes and therefore it could not be compared or equated with civil courts. Authoring the verdict, Justice Ramamoorthy said the amendment could not be termed arbitrary merely because the Arbitration and Conciliation Act provides for lower percentage of fees.
“Typically, the amount claimed in arbitration proceedings under the Arbitration and Conciliation Act is much larger than the amount claimed in proceedings under the Chit Funds Act. Therefore, a comparison of the ad valorem fee percentage as between arbitration under the A&C Act and the Chit Funds Act is invidious and untenable,” the Bench ruled.
