LexBHAVESH D. PARISH AND ORS. versus UNION OF INDIA AND ANR.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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BHAVESH D. PARISH AND ORS.
A
v.
UNION OF INDIA AND ANR.
MAY 12, 2000
[B.N. KIRPAL AND M.B. SHAH, JJ.]
B
Reserve Bank of India Act, I934:
Section 45-S (as substituted by Amendment Act, I997)-
Constitutionality of-Provisions prohibited non-banking institutions from C
accepting deposits from the public and placed certain restrictions on them-
Held: there can be restriction on utilisation of deposits made by the public-
But there can be no unrestricted fundamental right to accept deposits fi·om
the public-Reserve Bank of India (Amendment) Act, 1997, S.9.
Constitution of India, 1950:
D
Article 32-Policy matters-Economic policy-Judicial review of-
Scope-Held: Court should not lightly interfere with such matters.
Article 226-Stay of legislation-During pendency of its challenge-
Held: High Court must show judicial restraint in staying the applicability E
of a piece of legislation unless the provision is manifestly unjust or glaringly
unconstitutional-This is more sc in the case of legislation pertaining to
economic reform or change.
Petitioners were shroffs engaged in the business of providing credit
to the members of the public. The nature of the services practiced by the
petitioners generally involved maintaining a mutual current account where
the customer either placed deposit on call or withdrew money on call, without
security. The financing activity of shroff firms was through capital
contributions of the partners/proprietor and deposits made by members of
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the public.
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Section 9 of the Reserve Bank of India {Amendment) Act, 1997
incorporated a new Section 45-S in the Reserve Bank of India Act, 1934.
The petitioners filed a writ petition in this Court challenging the
constitutionality of Section 45-S on the ground that as:a result of the
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292
SUPREME COURT REPORTS (2000] SUPP. I S.C.R.
A amendment to Section 45-S the petitioners would not be allowed to accept any
deposit from the public for the purposes of their business; that the flexibility
of deposit or withdrawal of the funds available to cotton farmers, tobacco
farmers, vegetable producers etc. who had a seasonal need for finance and a
periodic surplus of investible funds, would cease; that the impugned provisions
B were violative of Articles 19(1)(g); that the impugned provisions neither met
the test of reasonableness nor public interest and, therefore, violative of Article
19(6); and that the provisions were violative of Article 14 of the Constitution
being arbitrary, discriminatory and unreasonable.
c
Dismissing the petition, this Court
HELD : 1. The impugned Section 45-S substituted by Section 9 of the
Reserve Bank of India (Amendment) Act, 1997 does not in any way prQhibit
or restrict any unincorporated body or individual from carrying on the
business that it likes. It is open to unincorporated bodies to carry on their
financial business either from their own funds or the funds borrowed from
D their relatives or from financial institutions. The restriction, which is placed
by Section 45-S, is on the carrying on of such business by utilising public
deposits. [300-H; 301-A]
2.1. After the introduction of Section 45-S in 1984, several complaints
were received by the Reserve Bank of India (RBI) from various parts of the
E country regarding rampant malpractice being adopted by several persons/
firms especially in the State of Kerala. [303-F-G)
2.2. Whereas in 1987 the daily newspapers and periodicals were filled
with flashy advertisements for attracting business subsequently most of the
F firms had disappeared. Public confidence had been shattered beyond
description and the fate of several depositors stood sealed. Similarly complaints
were also received by the RBI of individuals/firms and unincorporated bodies
accepting deposits in Tamil Nadu. [30'4-B]
3.1. The spread of formal financial agencies such as commercial banks,
G regional rural banks, cooperative banks, development financial institutions
and non-banking financial companies etc. had taken care of the need to
mobilize the domestic saving of the nation and to deploy the same in a proper
manner. Thus, the institutional finance is available far more easily now than
before. (304-E-F; HJ
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3.2. With these facilities now being available and in view of the inherent
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BHAVESH D. PARISH v. U.0.1.
293
risks to the general public at the hands of the unincorporated bodies engaged A
in financial activities and accepting public depExcerpt shown. Read the full judgment & AI analysis in Lexace.