LexK.K. BASKARAN versus STATE REP. BY ITS SECRETARY, TAMIL NADU & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2011] 3 S.C.R. 527
K.K. BASKARAN
i
v.
.
STATE REP. BY ITS SECRETARY, TAMIL NADU & ORS.
(Civil Appeal No. 2341 of 2011)
MARCH 04, 2011
[MARKANDEY KAT JU AND GYAN SUDHA MISRA, JJ.]
Tamil Nadu Protection of Interests of Depositors (in
Financial Establishments) Act, 1997 - Constitutional Validit:I
A
B
of - Held: Is constitutionally valid -
The Act does not C
roncentrate on the transaction of banking or acceptance of
deposits - It has been enacted to provide a speedy remedy
to depositors who were deceived by fraudulent financial
establishments - Activities of these financial companies do
not come within the term 'banking' as defined in the Banking
D
Regulation Act, 1949 or Reserve Bank of India Act, 1934 -
Reserve Bank of India Act, Banking Regulation Act and
Companies Act which are the legislations of the Parliament
do not occupy the field occupied by the Tamil Nadu Act,
though the latter may incidentally trench upon the former -
E
Thus, the Act is in pith and substance relatable to Entries 1,
· 30 and 32 of the State List (LisfJJ):ptJl?.tt: S,fl,Y,e[Jfh Schedu{e.
- It empowers th~ .$,late. Govemfuent •to a~tacli ~nd sell, the .
properties of the fraudulent establishments to recover the
money of the depositors - There Is no violation of Articles 14,
F
19(1)(g) or 21 - Constitution of India, 1950 - Seventh
Schedule List I and List II; Articles 14, 19(1)(g) and 21.
Doctrines/Principles - Doctrine of pith and substance -
Appllculion of - Held: Doctrine of pith and substance is
applied w, ,cm a legislation overlaps both List I as well as List G
II of the Seventh Schedule in the Constitution - Constitution
of India, 1950- Seventh Schedule List land List II.
The respondents filed a writ petition challenging tl,le
527
H
528
SUPREME COURT REPORTS
(2011] 3 S.C.R.
A constitutional validity of the Tamil Nadu Protection of
Interest of Depositors (in Financial. Establishments) Act,
1977. The High Court upheld the constitutional validity of
the Act. Therefore, the appellant filed the instant appeal.
8
The appellant contended that the Tamil Nadu Act is
beyond the legislative competence of the State
Legislature as it falls within entries 43, 44 and 45 of List I
of the Seventh Schedule to the Constitution; that the Act
is liable to be struck down as the field of legislation is
C already occupied by legislation of Parliament being the
Reserve Bank of India Act, 1934, Banking Regulation Act,
1949, Companies Act, 1956 and the Criminal Law
Amendment Ordinance, 1944; and that the Tamil Nadu Act
was arbitrary, unreasonable and violative of Article ... 14,
0 19(1)(g) and 21 of the Constitution.
Dismissing the appeal, the Court
HELD: 1.1 There is no merit in the petition. The Tamil
Nadu Protection of Interests of Depositors (in Financial
E Establishments) Act, 1997 is constitutionally valid. The
Act was not focused on the transaction of banking or
acceptance of deposits, but it is designed to protect the
public from fraudulent financial establishments who
defraud the public by offering lucrative returns on
F deposits and then disappear with the depositors' money
or refuse to return the same with interest. The words
found in the Statement of Objects and Reasons, viz., 'in
the public interest, in order to regulate the activities of
such Financial Establishments', would mean that the
G Tamil Nadu Act has been enacted to protect the interests
of depositors. The Tamil Nadu Act is ir; pith and
substance relatable to Entries 1, 30 and 32 of the State
List (List II ) of the Seventh Schedule and not Entries 43,
44 and 45 of List I of the Seventh Schedule to the
H Constitution though there may be some overlapping.
-.....
K.K. BASKARAN v. STATE REP. BY ITS SECRETARY, 529
TAMIL NADU & ORS.
[Paras 12, 14, 22, 23 and 44] [536-C-D; 540-B-D; 537-C;
A
545-E]
Vijay C. Punja/ vs. State of Maharashtra (2005) 4 CTC
705 - disapproved.
2.1 It often happens that a legislation overlaps both
6
Lists I as well as List II of the Seventh Schedule. In such
circumstances, the doctrine of pith and substance is
applied. The doctrine of pith and substance means that
an enactment which substantially falls within the powers
C
expressly conferred by the Constitution upon a
Legislature which enacted it cannot be held to be invalid
merely because it incidentally encroaches on matters
assigned to another legislature. The Court must consider
what constitutes in pith and substance the true suExcerpt shown. Read the full judgment & AI analysis in Lexace.