PROVISION OF BORROWING FACILITIES. 549 



Bub about 1872 it was discovered that the societies were all 

 illegal and had 110 civil status, not having been registered according 

 to the Companies* Act, which, though for many years in force, was 

 unknown to the very companies which should have registered ; it is 

 a very peculiar fact that at the very head-quarters of trade, the 

 existence of the Act under which companies were bound to exercise 

 their trade was even unknown to them. The result of the High 

 Court's judgment was the collapse of many societies ; debtors 

 knowing that the societies could not go into Court refused to pay ; 

 even after registration the societies could not sue for acts done 

 before registration, and the result of course was liquidation. Some 

 were re-established and duly registered, but the loss to the various 

 societies was calculated at 20 lakhs. 



Other abuses also crept into certain societies ; the energetic 

 and honourable men who began the Nidhis died or retired, and in 

 some cases were replaced by unscrupulous, incapable or negligent 

 men ; subscriptions were misappropriated : in one fund many 

 thousands of rupees of profits were devoted to the payment of handsome 

 salaries to directors, promoters and staff ; many bogus societies were 

 started in Madras and in the mofassil for the sole purpose of enriching 

 the promoters by sheer fraud ; splendid promises were made and for 

 a while fulfilled, till confidence produced large subscriptions when the 

 "Fund" closed its doors; impossible profits, such as 2 rupees for every 

 rupee subscribed, were promised ; these sham companies even got the 

 nickname of 'Lubbuck' (literally, gulping or devouring) funds, and 

 were a disgrace to the community, and a source not merely of 

 immediate loss, but of much subsequent distrust of Credit Societies. 

 * A large number were started and closed to the ruin 

 of many investors. The following table gives particulars from 

 1872 :- 



Average number 

 Period. annually 



in existence. 

 1872-77 ... ... ... 37 



1877-82 ... ... ... 68 



'* 1882-87 ... ... ... 157 



1887-92 ... ... ... 186 



In 1872 there were 20 Nidhis; 93 in 1882 ; 269 in 1886-87 ; 

 and 135 in 1891-92. In the five years ending 1892 no less than 

 260 societies disappeared, 181 of which were in Madras town alone. 



