ER TAXATIONS | TOP STORIES Madras High Court dismisses a plea challenging increase in fee from 3% to 5% under Tamil Nadu Chit Fund Rules

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Madras High Court dismisses a plea challenging increase in fee from 3% to 5% under Tamil Nadu Chit Fund Rules, 1984 [Read Judgment]

December 2, 2020 7:06 pm| By : Team Taxscan
Madras High Court – plea challenging increase – fee – Tamil Nadu Chit Fund Rules – Taxscan

The Madras High Court dismissed a plea challenging increase in fee from 3% to 5% under Tamil Nadu Chit Fund Rules, 1984.

The Appendix II of the Tamil Nadu Chit Fund Rules, 1984 was substituted by an amendment. The petitioner challenged the Clause 12 of the Appendix which deals with disputes before the Arbitrator.

Previously, the fee payable by the Petitioner was Rs.30 for every thousand or part thereof of the amount of claim in dispute. By the impugned amendment, the fee was increased to Rs.50 for every thousand or part thereof of the amount of claim in dispute.

In other words, the fee was increased from 3% of the amount claimed to 5% of the amount claimed.

The petitioner challenged the increase on the ground that it is an exorbitant increase which would cause immense hardship whether the claim is made by the foreman or by the subscribers to a chit fund.

In this regard, it is submitted that the jurisdiction of the civil court has been ousted under the Chit Funds Act. If parties were in a position to approach the civil court, the court fee would be 3% of the amount claimed, whereas, as a result of the amendment, the court fee is 5% of the amount claimed.

 

In fact, if filed in the High Court, the court fee would be only 1% of the amount claimed.

The division bench headed by the Chief Justice A.P. Sahi and Justice Senthilkumar Ramamoorthy said that the Chit Funds Act provides for the speedy resolution of disputes and the nature of services provided under the Chit Funds Act cannot be compared with or equated with that of civil courts.

Similarly, the amendment to Appendix II cannot be said to be arbitrary merely because Schedule IV of the Arbitration and Conciliation Act, 1996 provides for a lower percentage of ad valorem fees.

Therefore, the court said that a comparison of the ad valorem fee percentage as between arbitration under the Arbitration and Conciliation Act, 1996 Act and the Chit Funds Act is invidious and untenable. Hence, it cannot be said that the equality clause of the Constitution is violated.

“We are of the view that the Petitioner has completely failed to make out a case to declare the amendment to Appendix II of the Tamil Nadu Chit Funds Rules as unconstitutional,” the court observed.

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