LexT. VELAYUDHAN ACHARI AND ANR. versus UNION OF INDIA AND OTHERS
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B . c . I T. VELA YUDHAN ACHARI AND ANR. v . . UNION OF INDIA AND OTHERS · FEBRUARY 5~ 1993 [LALIT MO~ SHARMA, CJ., S. MOHAN AND N .. VENKATACHALA, JJ.) Constitution of India 1950: Alfie/es 14, 19(1)(g) and 20(1). '~~ -. '. -- . ' . Banking Laws (Amendment) Act, 1983 :_Section 45 S • Reserve Bank of India Act, 1934 : Chapter IIIC, Section 58B (SA). Deposits-rlcceptance of-l'rovisions imposing ceilings in case of in~ dividuals, Jinns and associations-Validity of-Whether violates fundamental D rights-f'rescription of two year period to bring down the deposil$-l'rescribed limas-iwhether reasonable. . · The petitioners In the writ petition challenged the constitution"! validity of chapter 111-C read with Section 588(5A) of the Reserve Bank of India Act, 1934 introduced by the Banking Laws' (Amendment) Act, 1983. E Along with the writ jietitlon were heitril several civil appeals, where the appelfaots. had nusuccessfnlly cfu.11~8ged the aforesaid provisions as violative or Articles 14 and 19 of th~ Constitution,' in the High Court or Delhi, which upheld their validity, and granted a certificate to appeal to . this. Court vlde Kanta Mehta v. Union of India, 1987 (62) Company Cases p.769 •. The newly incorporated Section 4SS of the Res~rve Bank of India Act provided that no individual or firm or an unincorporated association of individuals shall, at any time, have depo~its from more than the num· .. · --her of depositors specified against each In the table mentioned therein. It G .was further pro.ided that where at the ~ommencement or the Act, the deposits held were not in accordance thereof, a period of two years was prescri)).,d for bringing down the number !Ir.depositors within the relative limits s~ifled in the Act, and contravention thereof W..s rendered penal. These provisions were brought into force on February 15, 1984. • H oi. behalf of the petitioners It was submitted that Section 4SB was 832 l - VELAYUDHAN ACHARI v. U.0.1. 833 violative of the fundamental rights under Article 19(1) \g) of the Constitu- A tion as it restricts the number of depositors and the rate of interest under Section 4(2) (iii) of the Kerala Moneylenders Act, 1958, that the two year period prescribed under Section 42 is unreasonable, and that under the Kerala Act with effect from 15/10/85 only 14% interest alone could be charged. It was fnrther submitted that while receiving deposits it was not B an offence and making it a criminal liability and directing payment, would amount to ex-post facto law offending Article 20(1) of the Constitution. The writ petition and appeals were contested by submitting on behalf of the Reserve Bank of India that it was open to the Government to regulate economic activities, and that while examining the validity of such C provisions courts always have regard to the wisdom of the Legislature a5 it alone has the necessary information and expertise pointing to the needs for such a legislation. Attention was also drawn to the provisions of the Non-Banking Financial Companies (Reserve Bank) Directions of 1966 which came into force on January 1, 1969 which specifically provided that deposits shall be reduced to 25% of the paid-up capital for which a two D years period was prescribed and that similar directions knows as Non- Banking Financial Companies Reserve Bank Directions, 1977 came to be issued with effect from 1st of July, 1977. Dismissing the writ petition and the appeals, this Court, E HELD : 1. The impugned 1.!g;slation lio doubt places restrictions on the right of the appellants to carry on business, but what is essential is to safeguard the rights of various depositors anil to see that they are not preyed upon. [844G] 2. The Reserve Bank of India, right from 1966, has been monitoring F and following the functianing of non-banking financial Institutions which invite deposits and utilise those deposits either for trade or for other various industries. A ceiling for acceptance of deposits and to requires maintenance of certain liquidity of funds as well as not to exceed borrow- G ings beyond a particular Jl"reentage of the net-owned funds have been provid_ed in the corporate sector. But for these requirements, the depositors would be left high and dry without any remedy. [8448, 845A] 3. Even the corporate sector was not free from blame. It had done damage to the economy and brought ruination to small depositors. Ex- H 834 SUPREME
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