Chit fund security requirement upheld as a reasonable regulatory restriction; fresh Presidential sanction was not needed for the amendment.

The amended Section 12 of the Tamil Nadu Chit Funds Act, 1961 substituted a cash security requirement for an earlier mortgage condition, and was treated as a regulatory safeguard designed to protect subscribers and regulate chit fund business in public interest. The provision was regarded as a reasonable restriction on trade and not an excessive or unconstitutional burden under Article 301 read with Article 304. The amendment was also viewed as merely altering the form of an existing restriction already contained in the principal Act, so fresh Presidential sanction under Article 304(b) was not required. The constitutional challenge to the amendment therefore failed.

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Issues: (i) whether the amended Section 12 of the Tamil Nadu Chit Funds Act, 1961 was invalid as imposing unreasonable restrictions on trade under Article 301 read with Article 304 of the Constitution of India; (ii) whether previous Presidential sanction under Article 304(b) of the Constitution of India was necessary for the amending Act.

Issue (i): whether the amended Section 12 of the Tamil Nadu Chit Funds Act, 1961 was invalid as imposing unreasonable restrictions on trade under Article 301 read with Article 304 of the Constitution of India.

Analysis: The amended provision substituted the earlier requirement of mortgaging property with a requirement of depositing cash security in the prescribed manner. The measure was treated as a regulatory safeguard intended to protect subscribers in chit fund transactions and to regulate the trade in public interest. The Court found no infirmity in the High Court's view that the restriction was not excessive or unreasonable.

Conclusion: The amended Section 12 was upheld as a valid regulatory measure and not as an unconstitutional restriction on trade.

Issue (ii): whether previous Presidential sanction under Article 304(b) of the Constitution of India was necessary for the amending Act.

Analysis: The Court accepted the High Court's reasoning that the amendment only altered the form of an existing restriction inherent in the principal Act. Since the principal Act had already received Presidential assent, fresh sanction was not required for the amendment.

Conclusion: Fresh Presidential sanction was not necessary, and the challenge on that ground failed.

Final Conclusion: The constitutional challenge to the amended chit fund provision failed in full, and the validity of the amendment was maintained.

Ratio Decidendi: A statutory provision imposing enhanced security requirements for regulating a chit fund business will be upheld where it operates as a reasonable restriction in public interest, and if an amendment merely varies the form of an already sanctioned restriction, fresh Presidential sanction is not required.

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