✦ High Court of India · 02 Mar 2007

Mrs.S.Bagavathy v. State of Tamil Nadu

Case Details High Court of India · 02 Mar 2007

Court

High Court of India

Decided

02 Mar 2007

Bench

P D DINAKARAN

Length

40,591 words

Acts & Sections

Amendment Act 2003 Assuming that the powers conferred on the competent authorities andthe Special Court under the provisions of the Tamil Nadu Act already exist withthe appropriate authorities under the Reserve Bank of India Act 1934 Banking Regulation Act 1949 Banking RegulationAct 1949 BankingRegulation Act 1949 Bank of India Act 1934 Chapter IIIB and IIIC of the ReserveBank of India Act 1934 Chapter IIIB of theReserve Bank of India Act 1934 Chapter IIIC ofthe Reserve Bank of India Act 1934 Chit Funds Act 1982 Code of Civil Procedure §3(2)Code of Civil Procedure §7(5)C of the Reserve Bank of India Act 1934 Companies Act 1956 CompaniesAct 1956 Companies incorporated under the Companies Act 1956 Constitution of India Corruption Act 1988 Financial EstablishmentAct 1997 Indian Partnership Act 1932

Cited in this judgment

2. The Competent Authority/Land Commissioner,Ezhilagam, Chennai.3. The District Revenue Officer,Collector Office, Vellore.4. The Deputy Superintendent of Police,EOW II, Vellore District ..Respondents.WP.21405 AND 21406 OF 2006:Mr.S.Ramu..Petitioner in WP.21405/06N.Kandasamy..Petitioner in WP.21406/06-Vs-1.The Secretary,Home Department,Government of Tamil Nadu,Fort St. George,Chennai 9.2. The Competent Authority andDistrict Revenue Officer,Collectorate, Coimbatore.Respondents in both the WPsWP.No.22072/2006 & 22081 of 2006 & 22094/06 & 22103/06U.VellaichamyPetitioner in WP.22072/06, 22103/06P.SrinivasanPetitioner in WP.22081/06 & WP.22094/06vs1. The SecretaryHome Department,Government of Tamil Nadu,Fort St.George, Chennai - 9.2. The Inspector of Police,District Crime BranchEOW.II, Theni District Respondents in WP.22072, 22081, 22094/06, 22103/06 https://hcservices.ecourts.gov.in/hcservices/ WP.22223 of 2006O.A.A.Anantha Padmanaban Chettiar..Petitioner.-Vs-1.The State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.2. The Competent Authority andDistrict Revenue Officer, Collectorate, Coimbatore 641 018.3. Inspector General of Police,EOW.II, Chennai...Respondents.WP.22420 of 2006 and WP.22462/06:S.Bhupathi..Petitioner in both WPs.-Vs-1.The State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.2. The Competent Authority andDistrict Revenue Officer, Collectorate, Coimbatore 641 018...Respondents in both WPs.WP.No.22703 of 2006:Dhanapriya Investments [India] Ltd.,Rep. by its Managing Director, Duraimani...Petitioner.-Vs-1. The Secretary to Government of Tamil Naud,Home [Courts II A Department],Fort St. George, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. Inspector of Police,EOW, Chennai 600 002...Respondents.WP.23132 of 2006 and 23134/20061. S.Lavanya2. A.Sukumar..Petitioners in WP.23132/06.1. P.Ramadevi2. A.Pasupathi..Petitioner in WP.23134/06.-Vs-1. Government of Tamil Nadu,rep. by its Secretary,Home [Court II A] Department,Fort St. George, Chennai 9.2. District Collector, Salem.3. Revenue Divisional Officer,Salem District at Salem.4. Inspector of Police,EOW, Salem...Respondents in both WPs.WP.23186/2006:K.R.Sudarsan..Petitioner.-Vs-1.The State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.2. The Inspector of Police,EOW.II, Madurai...Respondents.WP.23370/2006:M.Palanisamy..Petitioner.-Vs- https://hcservices.ecourts.gov.in/hcservices/

1.The State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.2. The Competent Authority andDistrict Revenue Officer, Coimbatore.3. The Inspector of Police,EOW.II, Coimbatore...Respondents.WP.24306 of 2006R.Balakrishnan..Petitioner.-Vs-1. State of Tamil Nadu,Rep. by its Secretary,Home Department,Fort St. George, Chennai 9.2. The Deputy Superintendent of Police,Economic Offences Wing II,Trichy...RespondentsWP.24323 to 24326 of 2006:S.Kamalam..Petitioner in all WP.-Vs-1. The State of Tamil Nadu,Rep. by its Secretary,Home Department,Fort St. George,Chennai 9.2. The Inspector of Police,Economic Offences Wing II,Salem...Respondents in all WPs. https://hcservices.ecourts.gov.in/hcservices/ WP.No.24392 of 2006:K.Varadarajan..Petitioner.-Vs-1. State of Tamil Nadu,Rep. by the Secretary to Government,Home Department, Chennai 9.2. The Special Judge under the TNPID [INFES]Act 1997,City Civil Court Buildings Annexure,Chennai 600 104. CC.No.100 of 2001.3. The Deputy Superintendent of Police,EOW.II, Kancheepuram.4. M/s.Sri Malola Investment and Finance Corporation,Rep. by its Managing Partner, K.Vasudevan.5. M/s.Malola Finance,Rep. by Managing Partner, K.Vasudevan..Respondents.WP.24482/2006:J.K.Jawarappa @ Selvaraj..Petitioner.-Vs-1.The State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.2. The Inspector of Police,EOW.II, Udhagai, The Nilgiris District...Respondents.WP.No.25191 of 2006:-T. Easwara Murthy....Petitionervs1. State of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. The Competent Authority & The District Revenue officer,Kanyakumari District at Nagarcoil.3. State rep by The Deputy Superintendent ofPolice E.O.W II, Kanyakumari District at Nagercoil.....RespondentsWP.No.25635 of 2006:-M/s. Andavar Finance Company,rep by its Managing Partner V. Ramachandran....Petitionervs1. The State of Tamil Nadu rep by its Secretary,Home (Court II A) Department Fort St George, Chennai 9.2. The Special Court Constituted for the offenceunder T.N, Protection of Interest of Depositors(In Financial establishments) Act,High Court Campus, Chennai 104.3. The Competent Authority & The District Revenue officer,Coimbatore.....RespondentsWP.No.11087 of 2006:-1. Kandasamy2. Kavitha....Petitionervs1. The State of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9.2. The Competent Authority & Spl Commissioner and Commissioner of Land Administration, Chennai.....Respondents https://hcservices.ecourts.gov.in/hcservices/ WP.No.17049 of 2006:-M. Dharmaraj....Petitionervs1. The State of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9.2. The Inspector of Police,EOW.II, Coimbatore.WP.Nos.29282 to 29287 of 2006:-P. Satyanarayanan....Petitioner in all WPsvs1. The State of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9.2. The Inspector of Police,EOW.II, Chennai....Respondents in all WPsWP.No.30746 of 2006:-S. Saravanan....Petitioner vs1. The State of Tamil Nadu rep by its Secretary,Home (Court II A) Department Fort St George, Chennai 9.2. The Inspector of Police,District Crime Branch (EOW.II)Theni....Respondents https://hcservices.ecourts.gov.in/hcservices/ WP.No.41093 of 2006:-1. Sathiadas2. Tmt. Laila Christabel....Petitionersvs1. The State of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9.2. The Competent Authority & The District Revenue officer,Kanyakumari District at Nagarcoil.1.3. State rep by The Inspector of Police E.O.W II, Kanyakumari District.4. M/s. Human Awareness Society(Regn No. 10/2006) rep by its Secretary, Mr. J. blessed Singh,(R4 impleaded as per order dated 23.11.2006 by PDDJ, PPS JJ & KCJ in MP.4/06 in WP.41093/06)...Respondents WP.No.23548 to 23550 of 2006:-1. Mr. A. K. Suresh Kumar2. Mrs. Amsaveni3. Mr. C. Arunsivam4. Mrs. Logammal....Petitionersvs1. The State of Tamil Nadu rep by its Secretary to Government,Law Department, Fort St George, Chennai 9.2. The State of Tamil Nadu rep by its Secretary to GovernmentHome Department, Fort St George, Chennai 9.3. The Competent Authority & The District Revenue officer,Coimbatore District at Coimbatore.....Respondents. https://hcservices.ecourts.gov.in/hcservices/ WP.No.25123 of 2006:-T. Lakshmi....Petitionervs1. State of Tamil Nadu rep by its Secretary Home Department, Fort St George, Chennai 9.2. The Competent Authority/Land Commissioner,Collector Office, Vellore.3.The Inspector of Police E.O.W II, Vellore.....Respondents.WP.No.27055 of 2006:-A. C. Palanisamy....Petitionervs1. The State of Tamil Nadu rep by its Secretary Home Department, Fort St George, Chennai 9.2. The Deputy Superintendent of Police,EOW.II. Coimbatore.3. The Authorised officers,Revenue Divisional Officer,Coimbatore.....Respondents.WP.No.27399 & 27400 of 2006:-Natesan....Petitionervs1. The Secretary to GovernmentHome Department, Fort St George, Chennai 9.2. The Special Court Constituted forOffences Under Tamil Nadu Protection of Interest of Depositors (In Financial Establishments Act) https://hcservices.ecourts.gov.in/hcservices/

3. The Deputy Superintendent of Police,EOW.II. Chennai.4. Thiru. M. Ravindran.....Respondents.WP.No.27471 of 2006:-K. Palanisamy....Petitionervs1. The State of Tamil Nadu,rep by its SecretaryHome Department, Fort St George, Chennai 9.2. The Competent Authority (Under TNPID Act)District Revenue officer,Erode District Erode.3. The Inspector of Police,EOW II, Erode.....Respondents.WP.No.27841 of 2006:-P. Krishnaswamy....Petitionervs1. The State of Tamil Nadu,rep by its SecretaryHome Department, Fort St George, Chennai 9.2. The Competent Authority andDistrict Revenue officer,Collectorate, Coimbatore 641018....Respondents.WP.No.27897 of 2006:-B. Santhi @ Santhi Devi....Petitionervs1. The State of Tamil Nadu,rep by its SecretaryHome Department, Fort St George, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. The Inspector of Police,Economic Office Wing,Manjakuppam, Cuddalore District....Respondents.WP.No.27915 of 2006:-1. Sri Lakshmi Ganpathi Real Estate,2. V. Dhayalamurthy,....Petitionersvs1. The State of Tamil Nadu,rep by its SecretaryLaw Department, Fort St George, Chennai 8.2. The Competent Authority andDistrict Revenue officer, Coimbatore....Respondents.WP.No.29436 of 2006:-K. Sasikumar....Petitionervs1. The State of Tamil Nadu,rep by its SecretaryLaw Department, Fort St George, Chennai 9.2. The Competent Authority andDistrict Revenue officer,Trichy.....Respondents.WP.No.29485 of 2006:-P. Rengasamy....Petitionervs1. State of Tamil Nadu,rep by its SecretaryHome Department, Fort St George, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. The Inpector of Police,EOW.II, Karur.....Respondents.WP.No.31890 to 31893 of 2006:-1. Maruthi Bearing Centre,rep by V. V. Ramamoorthy, ....1st Petitioner in WP.No.31890/062. V. V. Ramamoorthy....2nd Petitioner in WP.No.31890,31891, 31892 /06Jay Marthi Bearing (P) Ltd.,rep by V. V. Ramamoorthy1st Petitioner in WP.31891/06V.V. R. Bearings Rep by V. V. Ramamurthy1st Petitioner in WP.31892/06Maruthi Auto parts,rep by V. V. Ramamorthy1st Petitioner in WP.31893/06vs1. State of Tamil Nadu,rep by its SecretaryLaw Department, Fort St George, Chennai 9.2. The Competent Authority andDistrict Revenue officer,Trichy.....Respondents in all WPs.WP.No.32469 of 2006:-P. Ravindran....Petitionervs1. The Inspector of Police,Economic Offiences Wing II, Chennai 2.2. The Competent Authority andDistrict Revenue officer,Salem District, Salem.3. The Superintenent of Police,Salem District Salem.....Respondents. https://hcservices.ecourts.gov.in/hcservices/ WP.No.33530 & 33531 of 2006:-Smt.R. Geetha....Petitioner in 33530/06M. Ravichandran....Petitioner in 33531/06vs1. State of Tamil Nadu,rep by its Secretary to Government,Home Department, Fort St George, Chennai 9.2. The Spl Judge under the TNPID (INF.ES) Act 1997City Civil Court Buildings Annexe,Chennai 104 - C.C.No. 129 of 2004.3. The Inpector of Police,EOW.II, Vellore District.....Respondents in both WPsWP.No.35425 of 2006 & 36638 of 2006:-Y. Hollis...PetitionerVs1. State of Tamil Nadu,rep by its Secretary to Government,Home Department, Secretraite Chennai 9.2. The Spl Judge under the TNPID (INFSS) Act 1997City Civil Court Buildings Annexe,Chennai 104 - C.C.No. 460 of 2006.3. The Deputy Superintendent of Police,EOW.II, Nagarcoil, Kanyakumari.....Respondents WP.No.36602 of 2006 Mary Gnanathangam ...PetitionerVs1. State of Tamil Nadu,rep by its Secretary,Home Department, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. The Competent Authority andDistrict Revenue officer,Nagercoil, Kanyakumari District.3. The Sub Inspector of Police,EOW.II, Nagaercoil, Kanyakumari....Respondents WP.No.39409 of 2006 & 41939/06 & 42521/06Kalish Prema @ Nalini...Petitioner in WP.39409/06Mary Ivin,...Petitioner in WP.41939/06K. Ragavan...Petitioner in WP.42521/06Vs1. State of Tamil Nadu,rep by its Secretary forHome Department, Fort St George, Chennai 9.2. The Addl Director General of Police,EOW.II, Admiralty House, Govt Estate,Chennai 2.3. The Inspector of Police,EOW.II, Nagaercoil, Kanyakumari District....Respondents in all WPs.WP.No.40182 of 2006 1. A. S. Finance and Investmentsrep by Arumugam2. Arumugam...PetitionersVs1. State of Tamil Nadu,rep by its Secretary,Law Department, Fort St George Chennai 9.2. The Competent Authority andDistrict Revenue officer,Erode District.....Respondents https://hcservices.ecourts.gov.in/hcservices/ WP.No.40185 of 2006 R. John Christopher...PetitionerVs1. The State of Tamil Nadu,rep by its Secretary,Home Department, Fort St George Chennai 9.2. The Competent Authority andDistrict Revenue officer,Kanyakumari District at Nagercoil3. The Inspector of Police,EOW, Nagaercoil, Kanyakumari District....Respondents WP.No.41787 to 41790 of 2006 M. Sekar...Petitioner in all WPsVs1. The State of Tamil Nadu,rep by its Secretary,Home Department, Fort St George Chennai 9.2. The District Superintendentof Police, District Crime Branch,Karur.....Respondents in all WPsWP.No.44427 & 44428 of 2006 Sundararaj...Petitioner in WP.44427/06Sekhar...Petitioner in WP.44428/06Vs1. The State of Tamil Nadu,rep by its Secretary forHome Department, Fort St George Chennai 9.2. The Competent Authority andSpl Commissioner & Commissioner of Land Administration Chepauk, Chennai 5....Respondents both WPs https://hcservices.ecourts.gov.in/hcservices/ WP.No.44487 of 2006 1. R. Subramanian2. Mrs. Anbuselvi...Petitioners VsThe Deputy Superintendent of Police,EOW.II, Trichy.WP.No.14088 of 2003 M/s. Andavar Financerep by its Managing partner,Mr. V. Ramachandran...Petitioner Vs1. The Secretary to the GovernmentHome Department, Fort St George Chennai 9.2. The Competent Authority andSpl Commissioner for Land Administration Chepauk, Chennai 3. The Inspector of Police EOW,II, Govt Estate, Chennai....Respondents WP.No.25767 of 2003 A. Pasupathy...Petitioner Vs1. Government of Tamil Nadu,rep by its SecretaryHome (Courts II A) Department, Fort St George Chennai 9.2. The Addl Commissioner/ Competent Authority (Cinema & Irrigation) Land Administration DepartmentChepauk, Chennai 5.3. The District Collector,Salem District Salem.4. The Revenue Divisional Officer,Salem 636 001....Respondents https://hcservices.ecourts.gov.in/hcservices/ WP.No.23344 & 23345 of 2004 1. Thirumara Chellapandi @ Thirumari Chellapandi2. Murasolimaran3. Manikandan...Petitioners in WP.23344/04R. Mani...Petitioner in WP.23345/04VsState rep by its SecretaryHome (Courts II A) Department, Govt of Tamil Nadu, Chennai 9. ..Respondents in both case.WP.No.26542 of 2004 S. Bhuvaneshwaran...Petitioner Vs1.The Secretary to GovtHome Department, Fort St George Chennai 9.2. The Deputy Superintendent of Police,Office of the Economic Offences,Wing II, head Quarters,Chennai 2.3. The District Registrar,Registration Department,Pondicherry.4. The Sub Registrar,Oulgaret, Pondicherry....Respondents WP.No.17140 of 2005 S. Radhakrishan...Petitioner Vs https://hcservices.ecourts.gov.in/hcservices/

1.The Secretary to GovtHome Department (Courts II A) Fort St George Chennai 9.2. The Competent Authority and the Addl Commissioner(Cinema & Irrigation) of Land Administration,Chepauk, Chennai 5.3. The Deputy Superintendent of Police,EOW II, Nagercoil, KK District4. The District Collector,Kanyakumari District, Nagercoil....Respondents WP.No.3984 & 3985 of 2005 1. S. Rajamanickam2. R. Savithri3. K. Chandrasekaran4. A. Vijayarangan5. S. Gokila6. D. Venkatesan...Petitioners in WP 3984/05 1. M. G. Gunasekaran2. G. Rajeswari3. S,. Sadasivam4. K. N. Kanagasabapathi5. P. Venkataachalam6. K. Ganeshsankar7. G. Rajeswari8. C. Pushpa9. B. Leela10. D. Mallika11. Ms. R. Sindoori (Minor)12. Ms. R. Abinaya (Minor)13. V. Vanithamani14. V. Vasanthi...Petitioners in WP 3985/05 Vs1.The Govt of Tamil Nadu, rep bySecretary Home Department Chennai 9.2. The Competent Authority, the Commissioner of Land Administration, Chepauk,Chennai 5. https://hcservices.ecourts.gov.in/hcservices/

3. The District Revenue Officer,Coimbatore....Respondents WP.No.6988 of 2005:-V. S. Chinnakittusamy....Petitionervs1. The Government of Tamil Nadu rep by its Secretary,Home Department Fort St George, Chennai 9.2. The Competent Authority & District Revenue officer,Coimbatore.3. The Inspector of Police E.O.W II, Coimbatore.....RespondentsWP.No.8538 of 2005:-P. Kannan....Petitionervs1. The State of Tamil nadu,rep by its Secretary to Government,Home Department Fort St George, Chennai 9.2. The Superintendent of Police,EOW Govt Estate,Chepauk Chennai 5.....RespondentsWP.No.11803 of 2005:-R. Jothi....Petitionervs1. The Government of Tamil Nadu rep by Principal Secretary toHome (Court 2A) Department Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

2. The Competent Authority & District Revenue officer,Cuddalore District,Cuddalore.3. The Inspector of Police E.O.W II, Cuddalore.4. M. Rajkumar6. T. Kalidhasan....RespondentsWP.No.26108 of 2005:-K. K. Baskaran....Petitionervs1. The Government of Tamil Nadu rep by its Secretary Home (Courts IIA) Department Fort St George, Chennai 9.2. The Commissioner of Land Administration,Chepauk, Chennai 5.3. The Inspector General of Police E.O.W II, Chennai 2.....RespondentsWP.26981 of 2005N.KanagasabaiPetitionervs1. State of Tamil Nadu,rep. by Secretary to Government,Law Department,Fort St.George, Chennai - 9.2. State of Tamil Nadurep. by Secretary to Government,Home DepartmentFort St.George, Chennai -9. https://hcservices.ecourts.gov.in/hcservices/

3. The Inspector General of Police,E.O.W.II Chennai.4. The District Revenue Officer,(The Competent Authority underTNPID Act 1997) Cuddalore DistrictCuddalore.RespondentsWP.39895 of 2005N.P.Kavunde GounderPetitionervs1. The State of Tamil Nadu,rep by its Secretary to Government,Law Department, Fort St.George, Chennai - 9.2. State of Tamil Nadu rep by its Secretary,Government Home Department, Fort St.Georege, Chennai - 9.3. The Competent Authority andDistrict Revenue Officer,Coimbatore- 18.4. The Inspector of Police,E.O.W.Coimbatore,5. Federation of Investors Associationrep. by its Secretary, Mr.D.Ramamoorthy(R5 impleased as per court dated 13.09.2006in WPMP.17870/06, PDDJ, PPSJJ)RespondentsWP.41008 of 2005Madurai Arasamaram IsaiIlakkiya Sangam rep. by itsSecretary.Petitionervs1. The Secretary to GovernmentHome Department, Fort St.George, Chennai -9. https://hcservices.ecourts.gov.in/hcservices/

2. The District Revenue Officer,Madurai (Competetent Authorityunder T.N.P.I.D Act) Madurai3. The Deputy Superintendent of Police,E.O.W.II, MadruaiRespondentsWA.536 of 2002Maruthi finance rep by itsPartner M.MukundanAppellantvs1. State of Tamil Nadu,rep. by its Secretary to GovernmentLaw Department, Chennai - 9.2. Deputy Superintendent of Police,E.O.W.II, Chengai DistrictChennaiRespondentsCMA.1161 & 1162 of 2004KamalaPetitioner in CMA.1161/2004RathankumarPetitioner in CMA.1162/04vs1. The State of Tamil Nadu,rep by its Secretary,Home Department, Chennai2. The Competent Authority andSpecial Commissioner andCommissioner of Land AdministrationChepauk, Chennai - 5Respondents in both CMA'sMr.M.RavindranFor Petitioner inSenior CounselWP.10683 of 2006For Mr.A.MurugaiyaFor Petitioner inFor Mr.B.ManoharanWP.11087 of 2006 https://hcservices.ecourts.gov.in/hcservices/ V.K.MuthusamyFor Petitioner inSenior CounselWP.12044 & 12075/06For Mr.P.MathivananMr.S.Xavier FelixFor Petitioner inWP.7755/06, 9388/06 to 9396/0612643/06, 16380/06, 16441/0627915/06, 29436/06, 40182/06, 31890/06Mrs.S.AyyathuraiWP.26981/05, 27897/06Sai Bharath IlanWP.39895/05, 14428/06R.LoganathanWP.11679/06R.RajanWP.12427/06P.RajamanickamWP.13209/06, 13465/0613474/06, 14484/06, 15691/0623186/06, 17049/06, 29282/06 to 29287/06, 41008/05V.Meenakshi SundaramWP.13451/06J.PothirajWP.14496/06 to 14499/06, 15893/06 to 15896/06, 16421/06K.KalyanasundaramWP.14559/06, 15877/06, 16490/06 to16495/06 to 16500/06, 17158/06, 17184/06H.RajasekarWP.17089/06, 24323/06 to 24326/06.M.S.RameshWP.17765/06L.P.ShanmugasundramWP.17953/06G.D.VaishnavWP.19652/06R.Bharath KumarWP.19685/06 to 19687/06A.PrabhakaranWP.20290/06 & 20291/06, 27055/06Radha GopalanWP.20363/06D.RajagopalWP.20934/06, 21333/06, 25123/06M.VenkateswaranWP.20944/06, 22420/06, 22462/06T.S.SivagnanamWP.21405/06 & 21406/06, 27841/06K.AnbarasanWP.22072/06, 22081/06, 22094/06,22103/06A.L.GanthimathiWP.22223/06 R.BalasubramanianWP.22703/06 https://hcservices.ecourts.gov.in/hcservices/ N.DamodaranWP.23132/06, 23134/06, 25767/03G.EthirajuluWP.23370/06P.M.DuraiswamyWP.24306/06Sathish ParasaranWP.24392/06G.Sugadev RajaguruWP.24482/06M.Vivekananda MurthiWP.25191/06, 41093/06S.P.L.PalaniappaWP.25635/06V.P.RajuWP.30746/06S.JamesWP.23548/06 to 23550/06L.G.SahadevanWP.27399/06, 27400/06D.SelvarajuWP.27471/06, 29485/06A.K.MylsamyWP.32469/06M.KemprajWP.33530/06 & 33531/06K.PandianWP.36602/06G.SarvanakumarWP.36638/06, 35425/06M.A.R.PragashWP.39409/06, 41939/06K.RavichandrabaabuWP.40185/06K.RajasekaranWP.41787/06 to 41790/06S.Wilfred PrakashWP.42521/06S.N.AmarnathWA.536/02S.BalasubramanianCMA.1161/04 & 1162/04S.KadarkaraiWP.14088/06B.S.GnanadesikanWP.23344 & 23345/04V.ViswanathanWP.26542/06A.N.RajanWP.1714/05K.M.SukaderWP.3984 & 3985/05SU.SrinivasanWP.6988/05 https://hcservices.ecourts.gov.in/hcservices/ M/S.La LawWP.8538/05K.A.RavindranWP.11803/05M/S.Anand & SuryasWP.26108/05Dr.G.KrishnamurthyWP.8448/06P.DeenadayalanWP.13205/06M/S.Sarvabhauman AssociatesWP.44427 & 44428/06F.X.A.F.DennyWP.44487/06FOR RESPONDENTSMr.P.K.RajagopalFor impleadeing Party inWP.39895/05For 6th Respondent in WP.10683/06For 5th Respondent in WP.20934/06For 3rd Respondent in WP.15895/06Mr.S.AyyaduraiWP.27897/06 & 36777/06Mr.M.MuthusamyFor 4th Respondent in WP.41093/04Mrs.S.HemalathaFor 5th Respondent in WP.19672/06Mr.R.ViduthalaiFor State GovernmentAdvocate Generalassisted byMr.D.SrinivasanGovernment AdvocateWrit Petitions presented under Article 226 of the Constitution of India toissue Writs of (I) Certiorari, calling for the records (i) in FIR 1/05 dated 18.03.2005 on thefile of the 4th respondent (in WP.8448/06)(ii) of the 1st respondent and quash the G.O.Ms.No.224 dated 16.03.2006 (in(WP.No.32469/06)(iii) from the file of the respondent in G.O.Ms.No.871, Home (Courts II-A)Department dated 14.06.2004 and quash the same (in WP.Nos.23344 & 23345/04) https://hcservices.ecourts.gov.in/hcservices/ (iv) in G.O.Ms.No.1055 (Home Courts IIA) Department dated 27.08.2004 on thefile of the Secretary to Government, Home Department, the 1st respondent hereinand qaush the same (in WP.No.1714/05)(v) G.O.Ms.No.40(Home Courts IIA) Department dated 13.01.2005 with regard tothe petitioner's property siutate in S.F.No.391/2A, SF.No.391/2B andSF.No.391/2A, SF.No.391/2B and SF.No.719 at Kuanpalayam Village, Coimbatore andquash the same (in WP.6988/05)(v) of G.O.Ms.No.979 dated 05.10.2001 on the file of the first respondent allfurther connection records and quash the same (in WP.No.41008/05)II Declaration :(i) declaring that the Tamilnadu Protection of interest of Depositors inFinancial establishments Act 1997 (TN Act 44/07 as unconstitutional andultravires (in WP.Nos.9388 to 9396, 10683/06, 12044, 12075, 12427/06, 12643/06,13209, 13451, 13465/06, 13474, 14484/06, 14496 to 14499, 14559/06, 15691/06,15877, 15893 to 15896/06, 16380/06, 16421, 16422/2006, 16441/06, 16490 to16495/2006, 16496 to 16500/06, 17089/06, 17158/06, 17184/06, 17765/06,17953/06, 19652/06, 19685 to 19687/06, 20290 & 20291/06, 20363/06, 20934/06,20944/06, 21333/06, 21405 & 21406/06, 22072/06, 22081/06, 22094/06, 22103/06,22223, 22420/2006, 22462/06, 22703/06, 23132/06, 23134, 23186/06, 23370/06,24306/06, 24323 to 24326/06, 24392/06, 24482/06, 25191/06, 25635/06, 11087/06,17049/06, 29282 to 29287/06, 30746/06, 41093/06, 23548 to 23550/06, 25123/06,27055/06, 27399 & 27400/06, 27471/06, 27841/06, 27897/06, 29436/06, 33530 ,33531/06, 36602/06, 41787/09 to 41790/06, 39469/06, 40185/06, 41939/06,42521/06, 44427 & 44428/06 & 39895/05.(ii) declaring that the Tamil Nadu Protection of interest of Depositors inFinancial Establishments Act (TN Act 44/87) 1997 as unconstitutional void andultravires(a) and the consequential attachement proceedings and the act asultravires (in WP.14428/06)(b) and as amended by Tamil Nadu Protection of interest of Depositors inFinancial Establishments Act 2003 (Tamil Nadu Act 30/2003 as ultravires (inWP.Nos.24392, 33530, 33531 of 2006, 35425/06, 36638/2006)(c) and consequently set aside the proceedings in CC.No.47/06 on the fileof the Spl Court constituted under the said Act (in WP.27897/06)(2a) declaring that the TANPID (in Financial establishments) Act 1997 asuncostitutional and consequently declare the Judgment rendered by HonourableTANPID Court Chennai in CC.Nos.26/04 dated 4/2/05 (2) 20/03, 19/03, 18/03 &21/03, respectively dated 06.09.2005 and 125/04 dated 18.08.2005 respectivelyas inoperative and null & void ( in WP.Nos.27915/06, 31890 to 31893 of 2006)and 40182 of 2006. https://hcservices.ecourts.gov.in/hcservices/ (3) declaring the amendment to Tamil Nadu protection of interest onDepositors Act, 2003, Act 30/03 as illegal and ultravires to the provisions ofthe constitution and inconsistant with Section 45Q, 45Q-A, 58-B, 58E of the RBIAct, 1934 and 58A(a) of the companies Act 1956 (in WP.8538/05)(4) declaring the provision of section 3 of the TANPID (in financialestablishment Act 1997 (TN Act 44/97) as ultravires of the constitution andhence unconstitutional and consequently setaside the order of the 2ndrespondent made in G.O.Ms.No.575 Home Courts II A Department dated 08.07.2005(in WP.26981/05)III. Mandamus, forbearing the respondents from taking any further actionrelating to the property concerned in G.O.Ms.554 Home Court II Deparment dated27.08.2002 without therebeing any orders of Special Judge, the Tamil NaduProtection of Interest of Depositors (in the financial establishments) Act44/1977 (in WP.11679/06)(2) directing to remove the lock and handover our said property bearingS.No.175/3, A1A, A1A1A, New S.No.175/619, bearing Old No.44A, New No.20-A, andbearing Old No.45 New No.27, admeasuring 7625 1/4 square feet withsuperstructure measuring 2070 square feet in Vedaranyam Patnam (Third StreetSouth wing) more fully described in the Schedule mentioned hereunder to thepetitioner and (2) direct the respondent to pay to the petitioner a sum ofRs.10,00,000/- as and towards compensation for the said untold suffering andloss caused by the responden to the petitioners and cost of the petitioners (inWP.No.44487/06)Schedule of Property (in WP.44487/06)All that piece and parcel of land with building thereon ground bearing OldNo.44A, New No.28 and bearing Old No.45 and New No.27, admeasuring 7625 1/4Sq.Ft and superstructure measuring 2070 square feet bearing Rs.No.175/A1A1A1A1Ain New S.No.175/619 Vedaranyam Patnam (Third Street South Wing) bounded onnorth by Third Street, South by house side belonging to Gunasekaran and others,East by backyard of house site belonging to Packirisamy Pillai and West bybackyard of house site belonging to Marakittu Desikar and others (inWP.44487/06)directing the 2nd respondent to pursue further action in accordance with theprocedures laid down in Sub Section (3) and (4) of the Section (4) and SubSection (4) of Section (6) of the Tamil Nadu Protection laid down in SubSection (3) and (4) of the Section (4) and Sub Sectin (4) of Section (6) of theTamil Nadu Protection of Interest of Depositors Act 1997 (Tamil Nadu Act 44/97)by prescribing in the frame (in WP.14088/03)(3) forbearig the respondents from interferring from the petitioners peacefulpossession and enjoyment of their respective plots bearing Nos.37 to 45, 85,86, 87, 91, 92, 93, 84 and 83 comprised in Survey NO.200/2, Nulambur Village, https://hcservices.ecourts.gov.in/hcservices/ Palladam Taluk, Coimbatore District totally measuring 46951 Sq.Ft which are notcover under the G.O.Ms.No.182 (Home (Courts IIA) dated 06.03.2002 passed bythe 1st respondent (in WP.No.3984/05)IV Certiorarified Mandamus,(1) calling for the records on the file of the 1st respondent in proceedingsNo.G.O.Ms.No.113 dated 13.03.2006 quash and direct the 1st respondent tocollect the amount from the other partners due to the depositors and passorders (in WP.No.13205/06)(2) Calling for the recrods relating to the proceedings of the DistrictCollector, Salem in ROC.47682/2002 (C-2), dated 12.02.2003 the third respondentherein and quash the same in so far with respect to the property bearing DoorNo.25-A, Sivasamy Street, Salem - 636001 is concerned and consequently forbearthe respondents herein on their Subrodinates from in any manner interferringwith or taking possession or control of the property comprised in Door No.25-A,(T.S.No.1130) Sivasamy Street, Salem - 636001, that exclusively belong to thepetitioner without following the mandatory procedures as contemplated under theprovisions of the Tamil Nadu Protection of Interests of Depositors (inFinancial Establishements) Act 1997 and adjudicating the claim of thepetitioner with respect to the said property (in WP.25767/03)(3) relating to the impugned communication dated 14.07.2003 which was sent bysecond respondent to the 4th respondent and quash the same with a directiondirecting respondents 3 & 4 to register the sale Deeds in respect of the landcomprised in S.Nos.20/2, 20/4, 20/5, 20/6 situated at Kalapet Revenue Village,Pondicherry (in WP.26452/04)(4) Quashing the G.Ms.No.182 (Home) (Courts IIA) dated 06.03.2003 passed by the1st respondent in respect of the plots owned by the petitioners mentioned inItem Nos.9 & 10 of the list of immovable properties in the schedule as it hasbeen passed erroneously and arbitrarily and without any application of mind andthereby exceeding his Jurisdiction and forbearing the 3rd respondent and hisassistants from interferring with the pettioner peaceful possession andenjoyment of theri respective lands based on the G.O.Ms.No.182 Home (CourtsIIA) dated 06.03.2003 passed by the 1st respondent so far as the petitionersare concerned (in WP.3985/05)(5) calling for the entire records of the impugned order made by the 1strespondent herein in G.O.Ms.No.90 Home (Courts IIA) Department dated 03.02.2005followed by letter from the 1st respondent to 3rd respondnet inLr.No.113301/courts 11A/2004-3 dated 03.02.2005 and quash the same and therebyforbear the respondents 1 to 3 herein from in any way proceeding to sell thepetitioners properties in (1) D.No.1/2 Sitankoil Street, Kurinjipadi CuddaloreDistrict (2 two Vacant site at Ellaikal Street, Kurinjipadi and a House inD.No.35/22 with vacant site, Ellaikal Street, Kurinjipadi (in WP.No.11803/05) https://hcservices.ecourts.gov.in/hcservices/ (6) calling for the records relating to the first respondent herein inG.O.Ms.No.10 Home (Courts IIA) Department dated 03.01.2002 and quash the samein so far as attaching the property shown as S.No.20 in the Schedule ofimmovable property i.e., Ground and the building at No.6, Parameswaran Street,S.V.Nagar, Ambattur, Chennai - 53, to an extent of 2000 Sq.ft is concerned andconsequently direct the respondents herein to permit the petitioner to enjoythe properties as per the sale deed dated 07.02.2002 (in WP.No.26108/05)WA.No.536/02 : Appeal preferred to this Court under clause 15 of the letterspatent act against the order of this Court dated 06.02.2002 in WP.No.2667/02presented to this Court to issue a Writ of declaration declaring that theprovisions of Section 2(3), Section 3 and Section 5 of the TANPID Act 1997 (ActXLIV of 1997) are unconstitutional and against the previlages of naturalJustice and ultravires.CMA.Nos.1161 & 1162 of 2004Appeal prefered Under Section 11 of the TANPID (Financial EstablishmentAct 1997 against the order of the Special Judge under TANPID Act 1997 inIA.Nos.58 & 59 of 2003 respectively in OA.Nos.6/01 dated 17.10.2003.O R D E RP.D.DINAKARAN,J.I. CORNERSTONEThe Constitution is the documentation of the founding faiths of a Nationand the fundamental directions of the fulfillment. An organic, but not pedanticapproach in interpreting the constitutional validity of any enactment should bethe guiding principle in the judicial process. Finding of solution for thegruesome evils in economic and social life of the citizens, through the healingart of promoting Rule of Law, blending the whole statute harmoniously, withoutbeing tempted by the game of hair-splitting, to achieve the common object ofthe legislation should be the basic rule of construction while testing theconstitutional validity of a legislation, particularly when it deals witheconomic and social reliefs, because the distance between societal realitiesand constitutional challenge often creates a dilemma while considering thelegislative competency relating to a socio-economic legislation. The Court,therefore, should be more cautious as well as conscious as to its jurisdictionwhile irrationalising the legislative competency of the Legislature orrationalising Court's power to annul the legislation. With this, we propose to experiment, analyze, and render our observationon the constitutional validity of the Tamil Nadu Protection of Interests ofDepositors (in Financial Establishments) Act, 1997 (for brevity, "Tamil NaduAct"), which, in fact, had already been upheld by the learned Single Judge ofthis Court (P.Sathasivam,J.) in Thiru Muruga Finance v. State of Tamil Nadu(2000 (II) CTC 609 = 2000-3-L.W.298), and the same has become final for nothaving been appealed against. https://hcservices.ecourts.gov.in/hcservices/ II. WHY THE FULL BENCH?2.1. Attracted by the fabulous rate of interest on the deposit, which ofcourse is not viable commercially, the depositors, day by day started investingtheir savings in the financial establishments, believing the said promises ofthe financial establishments for higher rate of interest. The depositors, whomostly belong to the poor, lower middle and middle class, are senior citizensabove 80 years, senior citizens between 60 and 80 years, widows, handicapped,driven out by wards, retired Government servants, pensioners, living below thepoverty line, etc. As a result, the financial establishments, which set theirbusiness on motion on false wheels, started growing. Finding no effectiveremedies available, in the existing legal system to safeguard the grievance ofinnocent depositors, the State Government, enacted the Tamil Nadu Act. 2.2. The sole object of the Tamil Nadu Protection of Interests ofDepositors (in Financial Establishments) Act, 1997 is to curb the mushroomgrowth of such financial establishments, which were grabbing money received asdeposits from the public, on false promises for exorbitant and unprecedentedhigh rate of interest, without any obligation to refund the deposits to theinvestors on maturity. The Tamil Nadu Act is also intended to provide a legalmechanism and judicious machinery to attach the properties of the financialestablishments and that of the mala fide transferees, bring them for auctionsale, realize the amount and to distribute the same to the depositors.Therefore, the State had carefully taken into consideration the publicresentment as well as the public interest and safety, as these institutionswent back of their promise not only to pay interest but also to refund theprincipal amount to the innocent depositors on maturity. The State had alsotaken note of the panic and unrest of the public, and the trauma caused to thepoor and middle class people because of the false promises by the financialestablishments, which dragged them to approach various authorities, executivesas well as subordinate judiciary, for realization of the dues. 2.3. The Tamil Nadu Act was challenged by the financial establishmentsbefore this Court in a batch of writ petitions, viz., W.P.No.4157 of 1999 etc.,on the ground that the Tamil Nadu Act is draconian, excessively harsh, moresevere than the existing provisions in the different enactments, such asCompanies Act, 1956, Reserve Bank of India Act, 1934, Banking Regulation Act,1949, as well as the provisions of the Criminal Law Amendment Ordinance, 1944as made applicable by the Criminal Law (Tamil Nadu Amendment) Act, 1997; thatthe same was passed in haste, lacks legislative competency, liable to be struckdown for the unreasonableness of various provisions as well as for violation ofprinciples of natural justice and therefore, ultra vires the Constitution ofIndia. 2.4. However, the learned Single Judge of this Court (P.Sathasivam,J.) inhis common and elaborate order reported in Thiru Muruga Finance v. State ofTamil Nadu (2000 (II) CTC 609 = 2000-3-L.W.298) upheld the constitutionalvalidity of the Tamil Nadu Act on all fours. https://hcservices.ecourts.gov.in/hcservices/

3.1. In the meanwhile, the Reserve Bank of India addressed all the StateGovernments to enact suitable legislation along the lines of the Tamil NaduAct, since existing legislation was found to be inadequate to deal with thefinancial establishments, which have duped large number of depositors andcollected crores of rupees on false promise to repay the same with higher rateof interest, which is not viable commercially.3.2. The Maharashtra Government, therefore, enacted Maharashtra Protectionof Interest of Depositors (in Financial Establishments) Act, 1999 (hereinafterreferred to as 'the Maharashtra Act') and the Pondicherry Government enactedPondicherry Protection of Interests of Depositors in Financial EstablishmentsAct, 2004 (hereinafter referred to as 'the Pondicherry Act'). 3.3. The Pondicherry Act incidentally was challenged before this Court inC.R.P.(PD) No.1352 of 2005 and W.P.No.1897 of 2006, etc. and the learned SingleJudge of this Court (E.Dharma Rao,J.) by a common order dated 23.9.2006reported in Indian Bank v. Chief Judicial Magistrate, Pondicherry & Others,2006-4-LW 535, upheld the constitutional validity of the Pondicherry Act, ofcourse, following the decision of P.Sathasivam,J. reported in Thiru MurugaFinance v. State of Tamil Nadu, referred supra.3.4. On the other hand, the Full Bench of the Bombay High Court struckdown the Maharashtra Act and declared the same to be ultra vires holding thatthe Maharashtra Act directly conflicts with the provisions of the CentralLegislation such as, Companies Act, 1956, Reserve Bank of India Act, 1934 readwith Banking Regulation Act, 1949, of course, following Delhi Cloth and GeneralMills Co. Ltd. v. Union of India, 1983 (4) SCC 166 with reference to theprovisions of the Companies Act, 1956 and the decision of the Delhi High Courtin Kanta Mehta v. Union of India, 1987 (62) Com Cases 771, [the view thereunderwas confirmed by the Apex Court in Velayuidhan Achari, T. v. Union of India,1993 (2) SCC 582], with reference to the provisions of Reserve Bank of IndiaAct, 1934, and observing that the attention of the learned Single Judge(P.Sathasivam,J.) was not adequately drawn to the reasons contained in KantaMehta v. Union of India, referred supra. 3.5. Placing reliance on the decision of the Full Bench of the Bombay HighCourt reported in Vijay C.Puljal v. State of Maharashtra (2005(4) CTC 705), thepresent batch of writ petitions came to be filed challenging the provisions ofthe Tamil Nadu Act once again, both on the ground of legislative competency andunreasonableness, violating Articles 14, 19(1)(g) and 21 of the Constitution ofIndia as well as violation of principles of natural justice. 3.6. When this batch of writ petitions came up before the Division Benchoriginally on 13.11.2006, it was desired by both sides that the matter may beheard by a Full Bench as the Maharashtra Act, a statute in pari materia, wasalready struck down by a Full Bench of Bombay High Court. Hence, the FullBench. https://hcservices.ecourts.gov.in/hcservices/

4. Heard all the parties at length. III. THE GROUNDS OF CHALLENGE5.1.The sheet-anchor of the petitioners' contention is that the StateGovernment lacks legislative competency as the impugned subject matter, viz.,"Banking" falls within the field of legislation of the Union of India underEntry 45 of List 1 of the VII Schedule read with Article 246 of theConstitution of India, as the view taken in the decision of the Division Benchof the Delhi High Court in Kanta Mehta v. Union of India, referred supra, thatthe acceptance of deposits amounts to banking, while upholding theconstitutional validity of Section 45S of Chapter IIIC read with Section 58B(5A) of Reserve Bank of India Act, 1934, has already been confirmed by theApex Court in Velayuidhan Achari, T. v. Union of India, referred supra. 5.2. The other predominant contention is that the impugnedlegislation suffers from want of legislative competency of the State Governmentas the subject matter in question relates either to the regulation of thetrading corporation, including banking, insurance and financial corporation, orrelating to the regulation of corporations, whether trading or not, fallingwithin the field of legislation of the Union of India under Entries 43 or 44 ofthe List I of VII Schedule read with Article 246 of the Constitution of India.In this regard reliance is placed on the decision of the Apex Court in DelhiCloth and General Mills Co. Ltd. v. Union of India, referred supra. 5.3. The impugned Act is liable to be struck down as the field oflegislation is already occupied by the legislations of the Central Government,viz., (i) Reserve Bank of India Act, 1934 and Banking Regulation Act, 1949;(ii) Companies Act, 1956; and (iii) Criminal Law Amendment Ordinance, 1944 asmade applicable by the Criminal Law (Tamil Nadu Amendment) Act, 1997, as thesubject matter deals with (i) the Banking under Entry 45 of List I or; (ii)incorporation, regulation of the trading corporations under Entry 43 orCorporations under Entry 44 of List I; or (iii) offences against laws withrespect to any of the matter under Entry 93 of List I. 5.4. The impugned Act is held to be ultra vires the Constitution as theprovisions of the same are repugnant to the existing provisions of the (i)Reserve Bank of India Act, 1934 read with Banking Regulation Act, 1949; (ii)Companies Act, 1956; and (iii) Criminal Law Amendment Ordinance, 1944 as madeapplicable by the Criminal Law (Tamil Nadu Amendment) Act, 1997, whereinprocedure prescribed for repayment of the dues is more reasonable and incompliance of the principles of natural justice and the penalty prescribed islesser than the one prescribed in the impugned Act.5.5. The provisions of the Tamil Nadu Act are also arbitrary, unreasonableand violative of the principles of natural justice as the competent authorityis provided with unguided powers under Sections 3, 5 and 8 of the Tamil NaduAct for attachment of the properties of the financial establishments as well asthe mala fide transferees, even without pre-decision opportunity to them and https://hcservices.ecourts.gov.in/hcservices/ prosecuting every person responsible for the management of the affairs of thefinancial establishments, in violation of Articles 14, 19(1)(g) and 21 of theConstitution of India.IV. SHIELD OF DEFENCE6.1. Per contra, Mr.R.Viduthalai, learned Advocate General, defends thatthe Tamil Nadu Act is intended to realise the deposits made by the public inthe financial establishments, whether they are incorporated or unincorporated,as the Companies incorporated under the Companies Act, 1956 are also roped inby the Tamil Nadu Protection of Interests of Depositors (In FinancialEstablishments) Amendment Act, 2003, (Tamil Nadu Act 30/2003). 6.2. The learned Advocate General elaborately invited our attention to thesocietal realities that reflected in media - dailies, weeklies and monthlies,exhibiting the untold sufferings of the depositors on account of the organisedcrime by the financial establishments. According to the learned AdvocateGeneral, the impugned enactment is intended to ameliorate thousands ofdepositors from the clutches of financial establishments, who have committed adeliberate and fraudulent default in repayment of the principal and theinterest after maturity, and to provide a machinery for attachment of theproperties of the financial establishments as well as the mala fidetransferees, to bring them for sale for realization of the dues payable to thedepositors, speedy recovery of the matured and defaulted amounts due to them. 6.3. According to the learned Advocate General, the State is competent toenact a suitable legislation to meet the urgent need to protect the interestof the innocent depositors, taking into consideration the public interest inthe matter by providing appropriate mechanism to operate effective control overthe financial establishments and to attach the properties of the financialestablishments as well as that of the mala fide transferees and to realise thedues payable to the depositors. 6.4. It was highlighted that the Government of Tamil Nadu is the first inconstituting a Special Wing for recovering the dues to the depositors, who hadinvested their hard-earned money in the financial establishments, believingfalse promises for higher rate of interest. 6.5. As per the statistics as on July, 2002, about Rs.1945 crores werecollected from over 19 lakhs of depositors. These depositors belong to eitherpoor or middle-class; retired Government servants and pensioners; dependents ordriven out by wards; senior citizens or economically weaker sections; and soon. The above public deposits, however, are either siphoned or diverted malafide in the hands of financial establishments. The commission and omission ofthe financial establishments in this regard is unique, but well-organized. Suchactivities of the financial establishments constitute white-collar crime, whichbelongs to a category by itself, and ruins the safety and interest of thepublic in the society. The hue and cry raised by these huge number ofdepositors, not only leads to public disorder but also creates law and orderproblem in the State often. Hence, the State Government rightly enacted theimpugned legislation to maintain public order. https://hcservices.ecourts.gov.in/hcservices/

6.6. According to him, the Government is within its legislative competencyto bring out an appropriate legislation to find a solution not only to curb theactivities of such financial establishments, but also to find a permanentsolution to the tragedy of the depositors with suitable provisions forattaching the properties of the financial establishments and that of the malafide transferees, and to bring them to sale and realise the amount payable tothe depositors. Therefore, the impugned Act is not focused on the transactionof banking or the acceptance of deposit, but it is more on the delinquency ofcollecting money from a community of depositors, who are part and parcel of thepublic and with a view to protect such public interest.6.7. The learned Advocate General justifies the legislative competency ofthe State in bringing out the impugned legislation, taking recourse to Entries1, 30 and 32 of the State List, based on the doctrine of pith and substance.6.8. It is his contention that the impugned legislation is intended todeal with neither the Banks, which do the business of banking as they are allgoverned by the provisions of the Reserve Bank of India Act, 1934 read withBanking Regulation Act, 1949, nor the non banking financial companiesincorporated under the Companies Act, 1956, as none of the said legislations,said to have occupied the field, provides a solution to wipe the tears ofseveral lakhs of depositors and to realize the dues effectively from thefinancial establishments, which ramped into public disorder. 6.9. Meeting the point of occupied field, the learned Advocate Generalcontends that the State Government never intended to enact any legislation, thesubject matter of which is governed under the existing laws, namely Section 58Aof the Companies Act, 1956, which only regulates the acceptance of the depositsand Section 45S of Reserve Bank of India Act, 1934 which prohibits theacceptance of the deposits, but only intended to protect the interest of thedepositors for realization of the dues, which they are entitled to, withoutdragging them for a legal battle from pillar to post. Therefore, the decisionof the Apex Court in Delhi Cloth and General Mills Co. Ltd. v. Union of India,referred supra, which deals with Section 58A of the Companies Act, 1956 andRule 3A of the Companies (Acceptance of Deposits) Rules, as well as thedecision of the Delhi High Court in Kanta Mehta v. Union of India, referredsupra, which was upheld by the Apex Court in Velayuidhan Achari, T. v. Union ofIndia, referred supra, dealing with Section 45S of the Reserve Bank of IndiaAct, 1934 has no bearing to the impugned enactment.6.10. Assuming that the powers conferred on the competent authorities andthe Special Court under the provisions of the Tamil Nadu Act already exist withthe appropriate authorities under the Reserve Bank of India Act, 1934 andCompanies Act, 1956, it is contended that there is no repugnancy between theTamil Nadu Act and Central Acts which provide lesser or lighter consequences,in view of the objects and reasons of the enactment, in providing speedysolution to the agony of the depositors for realization of the dues and onaccount of the assent given by the President of India for the impugned Act, https://hcservices.ecourts.gov.in/hcservices/ and, in any event, such incidental trenching upon the field of otherlegislature is permissible under law. 6.11. It is further contended that the penal provisions contained in theenactment are only incidental as the main object is to protect the interest ofthe depositors, viz., the money should come back to the depositors and thefraudulent defaults should be rectified by such attachment, auction sale andrealization. 6.12. Alternatively, it is contended that the field of legislation of theimpugned Act is also traceable to Entries 1, 7, and 8 of the Concurrent List(List-III), viz., Entry 1 of the Concurrent list deals with criminal law,including all matters included in the Indian Penal Code, but excluding offencesagainst laws with respect to any of the matters specified in Lists I and II;Entry 7 deals with contracts; and Entry 8 deals with actionable wrongs,respectively, as the assent of the President under Article 254(2) of theConstitution of India removes the embargo of any such lack of legislativecompetency. 6.13. The learned Advocate General also opposes the reliance placed on theCriminal Law Amendment Ordinance, 1944, as made applicable by the Criminal Law(Tamil Nadu Amendment) Act, 1997, as the offences dealt with in the impugnedAct are unique and calculated, causing economic and social disorder in thesociety and not covered under the offences scheduled thereunder. According tothe learned Advocate General, the commission or omission which attracts theprovisions of the Tamil Nadu Act are not governed by any of offences scheduledunder the Criminal Law Amendment Ordinance, which require mens rea to besatisfied; whereas it is not so in the case of the statutory offence chargeableunder Section 5 of the Tamil Nadu Act. The provisions provided under theOrdinance are all subject to the termination of the criminal proceedings of thescheduled offences. But, in the case of the impugned Tamil Nadu Act, theattachment of the properties is intended to provide an effective remedy to theaggrieved depositors, viz., for the realisation of the dues payable to thedepositors equitably.6.14. The learned Advocate General stoutly opposes the contention of thepetitioners that the impugned Act is arbitrary, unreasonable anddiscriminatory, and violative of principles of natural justice, and thereby,offending Articles 14, 19(1)(g) and 21 of the Constitution of India. 6.15. For all these reasons, it is contended that the decision of the FullBench of the Bombay High Court in Vijay C.Puljal v. State of Maharashtra,referred supra, has no bearing to test the constitutional validity of theimpugned enactment.V. NUCLEUS OF THE CONFLICT7. In the light of the above conflicting contentions, the following issuesarise predominantly for our consideration: https://hcservices.ecourts.gov.in/hcservices/ (i)Whether the Tamil Nadu Act stands the test of reasonableness and doesnot violate Articles 14, 19(1)(g) and 21 of the Constitution of India,and the principles of natural justice? and(iii)Whether the Tamil Nadu Government has legislative competence to enactthe impugned Tamil Nadu Act? VI. ANALYSIS & CONSIDERATION8.1. We have given our careful consideration to the submissions of allparties. We propose to legally and logically analyse and scientificallyconsider the above issues (i) and (ii) compartmentalized as hereunder:8.2. Issue No.(i):"Whether the Tamil Nadu Act stands the test ofreasonableness and does not violate Articles 14, 19(1)(g) and 21 of theConstitution of India, and the principles of natural justice?" A)THE TAMIL NADU PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIALESTABLISHMENTS) ACT, 1997. (a)OBJECTS AND REASONS(b)DEFINITIONS UNDER SECTION 2(c)ATTACHMENT OF PROPERTIES BY COMPETENT AUTHORITY UNDER SECTION 3 (d)STATUTORY OFFENCE AND PENALTY UNDER SECTIONS 5 AND 5A(e)SPECIAL COURT AND CONFIRMATION OF INTERIM ATTACHMENT UNDERSECTIONS 6 AND 7(f)ATTACHMENT OF PROPERTIES OF MALA FIDE TRANFEREES UNDER SECTION 8(g)SECURITY AND ADMINISTRATION OF THE PROPERTY ATTACHED AND APPEALUNDER SECTIONS 9 AND 10B)TAMIL NADU PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIALESTABLISHMENTS) RULES, 1997 C)VALIDITY WITH REFERENCE TO THE PRINCIPLES OF NATURAL JUSTICED)VALIDITY WITH REFERENCE TO THE TEST OF REASONABLENESS ANDARBITRARINESS READ WITH ARTICLES 14, 19(1)(g) AND 21 OF THECONSTITUTION OF INDIA8.3. Issue No.(ii): "Whether the Tamil Nadu Government has legislativecompetence to enact the impugned Tamil Nadu Act?" A)VIJAY C.PULJAL V.STATE OF MAHARASHTRA, (2005 (4) CTC 705) - (THEMAHARASHTRA ACT)B)THE PRINCIPLES GOVERNING THE TEST OF LEGISLATIVE COMPETENCY(a) ARTICLES 245 AND 246 OF THE CONSTITUTION OF INDIA https://hcservices.ecourts.gov.in/hcservices/ (b) THE CONCEPT OF OCCUPIED FIELD (c) LIBERAL AND HARMONIOUS CONSTRUCTION(d) APPLICATION OF THE DOCTRINE OF PITH AND SUBSTANCE, THEDOCTRINE OF ANCILLARY AND INCIDENTAL TRENCHING AND THE DOCTRINEOF ECLIPSE(e) THE IMPUGNED TAMIL NADU ACT AND THE RELEVANT ENTRIES INLISTS I, II AND III OF THE VII SCHEDULE TO THE CONSTITUTION OFINDIA (f) THE IMPUGNED TAMIL NADU ACT WITH REFERENCE TO SECTION 58A OFCOMPANIES ACT, 1956 AND SECTIONS 45S AND 58B(5A) AND 58B(5B) OFRESERVE BANK OF INDIA ACT, 1934 (g) THE IMPUGNED TAMIL NADU ACT AND SECTIONS 45S AND 58B(5A) OFRESERVE BANK OF INDIA ACT, WITH REFERENCE TO THE DECISION INKANTA MEHTA V. UNION OF INDIA CASE AND VELAYUIDHAN ACHARI, T. V.UNION OF INDIA CASE(h) THE IMPUGNED TAMIL NADU ACT AND SECTION 58A OF THE COMPANIESACT, 1956 WITH REFERENCE TO THE DELHI CLOTH AND GENERAL MILLSCO. LTD. V. UNION OF INDIA CASE(i) THE IMPUGNED TAMIL NADU ACT WITH REFERENCE TO THE CRIMINALLAW AMENDMENT ORDINANCE, 1944 AS MADE APPLICABLE BY THE CRIMINALLAW (TAMIL NADU AMENDMENT) ACT, 1997(j) THE IMPUGNED TAMIL NADU ACT AND THE RELEVANT ENTRIES, VIZ.,1, 7 AND 8 IN LIST III OF VII SCHEDULE TO THE CONSTITUTION OFINDIA(k) THE IMPUGNED TAMIL NADU ACT AND ENTRY 32 OF LIST II WITHREFERENCE TO THE POWER TO REGULATE(l) THE IMPUGNED TAMIL NADU ACT AND THE CONCEPT OF PUBLIC ORDERAND ENTRY 1 OF LIST II WITH REFERENCE TO THE POWER TO MAINTAINPUBLIC ORDERVII. Issue: (i)Question of reasonableness, violation of principles of natural justice andviolation of Articles 14, 19(1)(g) and 21 of the Constitution of India9. We hereunder analyse each and every provision of the impugned TamilNadu Act independently and also harmoniously, reading the statute as a whole,in the light of the statement of objects and reasons of the impugned https://hcservices.ecourts.gov.in/hcservices/ legislation, as amended by the Tamil Nadu Amendment Act 30 of 2003, to decidewhether the Tamil Nadu Act stands the test of reasonableness and does notviolate Articles 14, 19(1)(g) and 21 of the Constitution of India, and theprinciples of natural justice?VII-A(a). OBJECTS AND REASONS OF THE TAMIL NADU PROTECTION OF INTERESTS OFDEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1997. 10.1. When a law is impugned on the ground that it is ultra vires, it isa settled law that what has to be ascertained is the true character of thelegislation. To do that one must have regard to the enactment as a whole, toits objects and to the scope and effect of its provisions. [vide: A.S.Krishnav. State of Madras (AIR 1957 SC 297)].10.2. We therefore proceed to appreciate how awesome the object and scopeof the impugned Tamil Nadu Act and the magnitude of its provisions. 10.3. 1The statement of objects and reasons of the Tamil Nadu Act reads asfollows:"There is mushroom growth of Financial Establishments not covered bythe Reserve Bank of India Act, 1934 (Central Act II of 1934) in theState in the recent past with the sole object of grabbing moneyreceived as deposits from the public, mostly middle class and poor,on the promise of unprecedented high rates of interest and withoutany obligation to refund the deposits to the investors on maturity.Many of these Financial Establishments have defaulted to return thedeposits on maturity to the public running to crores of rupees andthereby inviting public the resentment, which created law and orderproblems in the State. The Government have, therefore, decided toundertake suitable legislation, in the public interest, in order toregulate the activities of such Financial Establishments, other thanthose covered by the Reserve Bank of India Act, 1934 (Central Act IIof 1934).2. The Bill seeks to give effect to the above decision."(emphasis supplied)10.4. A reading of the statement of objects and reasons of the Tamil NaduAct would go to show that it does not concentrate on incorporation, regulationof banking, but, on the other hand, the Tamil Nadu Act is more concerned withreturning money to the depositors. The words found in the statement of objectsand reasons, viz., "in the public interest, in order to regulate the activitiesof such Financial Establishments" would mean that the Tamil Nadu Act has beenenacted to protect the interests of depositors.VII-A(b). DEFINITIONS UNDER SECTION 211.1. Originally, Sections 2(2) and 2(3) define "deposit" and "financialestablishments" as follows:(2) "deposit" means the deposit of a sum of money made with the financialestablishment for a fixed period, for interest or return in any kind; https://hcservices.ecourts.gov.in/hcservices/ (3)"financial establishment" means an individual, an association ofindividuals, a firm carrying on the business of receiving deposits underany scheme or arrangement or in any other manner but does not include acompany registered under the Companies Act, 1956 (Central Act 1 of 1956)or a corporation or a co-operative society owned or controlled by anyState Government or the Central Government or a banking company asdefined in Section 5(c) of the Banking Regulation Act, 1949 (Central ActX of 1949) or a non-banking financial company as defined in clause (f) ofSection 45-I of the Reserve Bank of India Act, 1934 (Central Act II of1934)"(emphasis supplied)11.2. But, an amendment was brought in by the Protection of Interests ofDepositors (In Financial Establishments) Amendment Act, 2003, Tamil Nadu Act 30of 2003, the object being:"The Tamil Nadu Protection of Interest of Depositors (in financialestablishments) Act, 1997 (Tamil Nadu Act 44 of 1997) was enacted by theGovernment of Tamil Nadu to protect the interest of the depositors whohave lost their hard earned money with the financial institutions. Atpresent, there is no provision in the said Act for attaching theproperties of the persons who borrowed money from the financialestablishments and for the sale of attached property in public actionand for the equitable distribution of the sale proceeds to thedepositors. In order to overcome the shortcomings and to make the saidTamil Nadu Act 44 of 1997 more effective, the Government have decided toamend the said Act so as to-(1)bring a company registered under the Companies Act, 1956 (Central Act1 of 1956) and a non-banking financial company within the purview ofthe Act;(2)make the non-payment of interest and failure to render service forwhich deposit has been made, as offences under the Act;(3)attach the properties of the person who has borrowed money from thefinancial establishments and failed to return the money;(4)appoint more than one competent authority under the Act;(5)constitute Special Courts for different areas and for different casesand to appoint Special Public Prosecutors for each of the SpecialCourts;(6)specify the time limit within which the Special Court shall pass thefinal order;(7)compound the offences punishable under the Act; and(8)to sell the attached properties in public auction and to distributethe sale proceeds among the depositors.2. The Bill seeks to give effect to the above decision."(emphasis supplied) https://hcservices.ecourts.gov.in/hcservices/

11.3. By way of the Tamil Nadu Act 30 of 2003, the definition of "deposit"and "financial establishments" were amended as follows: "Section 2. Definitions:(1) ...(2)"deposit" means the deposit of money either in one lump sum or byinstalments made with the financial establishments for a fixed period,for interest or for return in any kind or for any service;(3)"financial establishment" means an individual, an association ofindividuals, a firm or a company registered under the Companies Act,1956 (Central Act 1 of 1956) carrying on the business of receivingdeposits under any scheme or arrangement or in any other manner butdoes not include a corporation or a co-operative society owned orcontrolled by any State Government or the Central Government or abanking company as defined in Section 5(c) of the Banking RegulationAct, 1949 (Central Act X of 1949)"(emphasis supplied)11.4. Thus, by the Amendment Act 30 of 2003, the companies registeredunder the Companies Act, 1956 and the non banking financial companies, are alsobrought within the purview of the Act. VII-A(c). ATTACHMENT OF PROPERTIES BY COMPETENT AUTHORITYUNDER SECTION 312.1. Section 3 of the Tamil Nadu Act provides for attachment ofproperties on default of return of deposits and reads as follows: "3. Attachment of properties on default of return of deposits:Notwithstanding anything contained in any other law for the timebeing in force - (i) where upon complaints received from a number of depositors,that any Financial Establishment defaults the return of depositsafter maturity, or fails to pay interest on deposit or fails toprovide the service for which deposit has been made, or (ii) where the Government have reason to believe that anyFinancial Establishment is acting in a calculated manner with anintention to defraud the depositors,and if the Government are satisfied that such FinancialEstablishment is not likely to return the deposits, or to makepayment of interest or to provide the service, the Government may, inorder to protect the interests of the depositors of such FinancialEstablishment, pass an ad-interim order attaching the money or otherproperty alleged to have been procured either in the name of theFinancial Establishment or in the name of any other person from andout of the deposits collected by the Financial Establishment, or if https://hcservices.ecourts.gov.in/hcservices/ it transpires that such money or other property is not available forattachment or not sufficient for repayment of the deposits, suchother property of the said Financial Establishment or the promoter,partner, director, manager or member of the said FinancialEstablishment or a person who has borrowed money from the FinancialEstablishment to the extent of his default or, such other propertiesof that person in whose name properties were purchased from and outof the deposits collected by the Financial Establishment, as theGovernment may think fit, and transfer the control over the saidmoney or property to the competent authority.(emphasis supplied)12.2. Pre-amended Section 3 reads as under:"3. Attachment of properties on default of return of deposits:Notwithstanding anything contained in any other law for the timebeing in force - (i) where upon complaints received from a number of depositors,that, any Financial Establishment defaults the return of depositsafter maturity, or (ii) where the Government have reason to believe that anyFinancial Establishment is acting in a calculated manner with anintention to defraud the depositors,and if the Government are satisfied that such FinancialEstablishment is not likely to return the deposits, the Governmentmay, in order to protect the interests of the depositors of suchFinancial Establishment, pass an ad-interim order attaching themoney or other property alleged to have been procured either in thename of the Financial Establishment or in the name of any otherperson from and out of the deposits collected by the FinancialEstablishment, or if it transpires that such money or other propertyis not available for attachment or not sufficient for repayment ofthe deposits, such other property of the said Financial Establishmentor the promoter, manager or member of the said FinancialEstablishment, as the Government may think fit, and transfer thecontrol over the said money or property to the competent authority."(emphasis supplied)12.3. Accordingly, by virtue of the Tamil Nadu Act 30 of 2003, theproperties of the persons who borrowed money from the financial establishmentsare also roped in for attachment and sale in public auction for realization ofdues payable to the depositors by equitable distribution.12.4. Section 4 of the Tamil Nadu Act empowers the Government to notifyone or more competent authorities to exercise control over the propertiesattached and the same reads as follows: https://hcservices.ecourts.gov.in/hcservices/ "4. Competent authority: - (1) The Government may, bynotification, appoint one or more authorities for such area or areasor such case or cases as may be specified in the notificationhereinafter called 'the competent authority' to exercise control overthe properties attached by the Government under section 3.(2) The Competent authority shall have such other powers as maybe necessary for carrying out the purposes of this Act.(3) Upon receipt of the orders of the Government under section3, the Competent authority shall apply within thirty days to theSpecial Court constituted under this Act for making the ad-interimorder of attachment absolute.(4) An application under sub-section (3) shall be accompanied byone or more affidavits, stating the grounds on which the belief thatthe Financial Establishment has committed any default or is likely todefraud, is founded, the amount of money or value of other propertybelieved to have been procured by means of the deposit, and thedetails, if any, of persons in whose name such property is believedto have been invested or purchased out of the deposits or any otherproperty attached under section 3.(5) The Competent authority shall make an application to anycourt having jurisdiction to try similar cases or deal with thesubject matter pertaining to money or property belonging to aFinancial Establishment or any person specified in section 3situated within the territorial jurisdiction of that court forappropriate orders.(6) For the purpose of crediting and dealing with the moneyrealised by the Competent authority, he shall open an account in anyScheduled commercial bank." 12.5. Section 4(3) of the Tamil Nadu Act contemplates that the Competentauthority shall apply within thirty days to the Special Court constituted underthis Act for making the ad-interim order of attachment absolute. Section 4(4)of the Act prescribes the procedure to be followed for making the ad-interimorder of attachment absolute. Accordingly, the application shall beaccompanied by one or more affidavits, stating the grounds on which the beliefthat the Financial Establishment has committed any default or is likely todefraud, is founded. The affidavit should state the amount of money or value ofother property believed to have been procured by means of the deposit. Theapplication should also accompany an affidavit furnishing the details, if any,of persons in whose names such property is believed to have been invested orpurchased out of the deposits or any other property attached under Section 3.Apart from the jurisdiction vested in the Special Court under Section 6 readwith Section 4(3) of the Act, Section 4(5) also empowers the Competentauthority to make an application to any court having jurisdiction to trysimilar cases or deal with the subject matter pertaining to money or propertybelonging to a Financial Establishment or any person specified in section 3situated within the territorial jurisdiction of that court for appropriateorders. By these provisions a comprehensive mechanism has been provided for https://hcservices.ecourts.gov.in/hcservices/ attaching the properties of not only the financial establishments, but alsothat of such other persons mentioned under Section 3 of the Tamil Nadu Act, inorder to plug the loopholes either siphoning or diverting the funds of thedepositors mala fide. VII-A(d). STATUTORY OFFENCE AND PENALTY UNDER SECTIONS 5 AND 5A13.1. Section 5 creates a statutory offence without contemplating any mensrea and prescribes penalty on every person responsible for the management ofaffairs of the financial establishment and the same reads as follows:"Section 5. Default in repayment of deposits and interest honouring thecommitment-Notwithstanding anything contained in Chapter II, where any financialestablishment defaults the return of the deposit or defaults the paymentof interest on the deposit, or fails to return in any kind, or fails torender service for which the deposit has been made, every personresponsible for the management of the affairs of the financialestablishment shall be punished with imprisonment for a term which mayextend to ten years and with fine which may extend to one lakh of rupeesand such financial establishment is also liable for fine which mayextend to one lakh of rupees."13.2. Section 5A inserted by Tamil Nadu Act 30 of 2003, empowers thecompetent authority to compound the offence and the same reads as follows:"Section 5A. Compounding of offence.- (1) An offence punishable underSection 5 may, before the institution of the prosecution, be compoundedby the Competent Authority or after the institution of the prosecution,be compounded by the Competent Authority with the permission of theSpecial Court, on payment of the entire amount due to the depositors withor without interest.(2) Where an offence has been compounded under sub-section (1), noproceeding or further proceeding, as the case may be, shall be taken orcontinued against the offender, in respect of the offence so compoundedand the offender, if in custody, shall be discharged forthwith."13.3. As per Section 5A of the Act, the competent authority may compoundthe offence before the institution of the prosecution; and also after theinstitution of the prosecution, with the permission of the Court, on payment ofthe amount due to the depositors with or without interest.13.4. A harmonious reading of Sections 5 and 5A of the Act make it clearthat the main scope of the enactment is not to punish either the financialestablishments or the persons responsible for the management of the financialestablishments, but primarily to realise the dues payable to the depositorsand incidentally, to regulate and control the activities of the financialestablishments, if necessary, by imposing appropriate punishment, the outerlimit of which is indicated in Section 5 of the Tamil Nadu Act, which, in ourconsidered opinion, cannot be complained of as if unguided powers have beenconferred on the competent authorities. As it is settled that the legislature https://hcservices.ecourts.gov.in/hcservices/ is free to prescribe adequate punishment while dealing with economic and socialoffences, it is not permissible for this Court to interfere with such powers. VII-A(e). SPECIAL COURT AND CONFIRMATION OF INTERIM ATTACHMENT UNDER SECTIONS 6AND 714.1. Section 6(1) of the Act provides for the constitution of the SpecialCourts in the cadre of District and Sessions Judges and their jurisdiction, andthe same reads as follows:"6. Special Court.-- (1) For the purpose of this Act, the Governmentmay, with the concurrence of the Chief Justice of the High Court, bynotification, constitute one or more Special Courts for such area orareas or such case or cases as may be specified in the notification inthe cadre of a District and Sessions Judge." 14.2. Section 6(2) confers exclusive jurisdiction on the Special Courts inrespect of any matter to which the provisions of this Act apply.14.3. Section 6(3) of the Act provides for the transfer of the pendingcases from other Courts to the Special Courts. 14.4. Section 6(2), therefore, clarifies that the power conferred on thecompetent authority under Section 4(5) to move any Court for appropriateorders, apart from applying for making an ad-interim order of attachmentabsolute, is subject to the powers of the Special Court conferred under section6(2) of the Act and as such, we do not see any conflict between Sections 4(5)and 6(2), as the same are also intended to plug the loopholes, viz., permittingthose who have committed a well organised crime to escape from the purview ofthe impugned Tamil Nadu Act, by circumventing the legal proceedings, and toavoid multiplicity of litigation. Therefore, there is no overlapping. 15.1. Section 7 prescribes the procedure to be followed by the SpecialCourt in the matter of attachment, sale, etc. and reads as follows:"7. Powers of Special Court regarding attachment, sale, realisation anddistribution:(1) Upon receipt of an application under Section 4, the Special Courtshall issue to the Financial Establishment or to any other person whoseproperty is attached by the Government under Section 3, a noticeaccompanied by the application and affidavits and of the evidence, ifany, recorded, calling upon him to show cause on a date to be specifiedin the notice why the order of attachment should not be made absolute. (2) The Special Court shall also issue such notice, to all other personsrepresented to it as having or being likely to claim, any interest ortitle in the property of the Financial Establishment or the person towhom the notice is issued calling upon such person to appear on the samedate as that specified in the notice and make objection if he so desiresto the attachment of the property or any portion thereof on the groundthat he has an interest in such property or portion thereof. https://hcservices.ecourts.gov.in/hcservices/ (3) Any person claiming an interest in the property attached or anyportion thereof may, notwithstanding that no notice has been served uponhim under this section, make an objection as aforesaid to the SpecialCourt at any time before an order is passed under Sub-section (4) orSub-section (6). (4) If no cause is shown and no objections are made on or before thespecified date, the Special Court shall forthwith pass an order makingthe ad interim order of attachment absolute. (5) If cause is shown or any objection is made as aforesaid, the SpecialCourt shall proceed to investigate the same, and in so doing, as regardsthe examinations of the parties and in all other respects, the SpecialCourt shall, subject to the provisions of this Act, follow the procedureand exercise all the powers of a Court in hearing a suit under the Codeof Civil Procedure, 1908 (Central Act V of 1908) and any person makingan objection shall be required to adduce evidence to show that at thedate of attachment he had some interest in the property attached. (6) After investigation under Sub-section (5) the Special Court shallpass an order within a period of one hundred and eighty days from thedate of receipt of an application under sub-section (3) of Section 4either making the ad interim order of attachment absolute or varying itby releasing a portion of the property from attachment or cancelling thead interim order attachment. Provided that the Special Court shall not release from attachment anyinterest which it is satisfied that the Financial Establishment or theperson referred to in Sub-section (1) has in the property unless it isalso satisfied that there will remain under attachment an amount orproperty of value not less than the value that is required for repaymentto the depositors of such Financial Establishment.(7) Where the ad-interim order of attachment is made absolute, on anapplication by the Competent authority, the Special Court shall directthe Competent authority to sell the properties attached, by publicauction and realise the sale proceeds.(8) The Special Court shall, on an application by the Competentauthority, pass such order or issue such direction as may be necessaryfor the equitable distribution among the depositors, of the moneyattached or realised out of the sale under sub-section (7)."15.2. Sections 7(1), 7(2), 7(3) and 7(4) provide a post-decisionopportunity to the financial establishments or any other person whose propertywas attached by the Government under Section 3, furnishing them the copy of theapplication and affidavit or any other evidence filed by the competentauthority in this regard to have their say in the matter, before making thead-interim order of attachment absolute. That apart, any person claiming aninterest in the property attached or any portion thereof, is entitled to makean objection at any time before the ad interim order of attachment is made https://hcservices.ecourts.gov.in/hcservices/ absolute, even though such person is not served with notice, thus satisfyingthe principles of natural justice without standing on technicalities.15.3. Section 7(5) enables the Special Court to follow the provisions ofCode of Civil Procedure while considering the objections received in thisregard and also permits the aggrieved parties to adduce evidence to show thaton the date of attachment, he had some interest in the property attached.15.4. Section 7(6) prescribes the period of limitation of 6 months, thatis, 180 days from the date of receipt of application under section 4(3) of theAct, either,(i) to make the ad interim order of attachment absolute, or (ii) to vary it by releasing a portion of the property from theattachment; or(iii) to cancel the attachment order.15.5. Proviso to section 7(6) also provides to release the amount orproperty of the value in excess of the value required for repayment to thedepositors. 15.6. Under section 7(7) of the Act the Special Court is empowered todirect the competent authority to sell the property attached by public auctionand realise by sale, and on such realisation, to equitably distribute among thedepositors, as per section 7(8). VII-A(f). ATTACHMENT OF PROPERTIES OF MALA FIDE TRANFEREESUNDER SECTION 816.1. Section 8 provides for attachment of properties of mala fidetransferees and the same reads as follows:"8. Attachment of property of mala fide transferees.- (1) Where the assets available for attachment of a FinancialEstablishment or other person referred to in section 3 are found to beless than the amount or value which such Financial Establishment isrequired to repay to the depositors and where the Special Court issatisfied by affidavit or otherwise that there is reasonable cause forbelieving that the said Financial Establishment has transferred (whetherafter the commencement of this Act or not) any of the property otherwisethan in good faith and for consideration, the Special Court may, bynotice, require any transferee of such property (whether or not hereceived the property directly from the said Financial Establishment) toappear on a date to be specified in the notice and show cause why somuch of the transferee's property as is equivalent to the proper valueof the property transferred should not be attached.(2) Where the said transferee does not appear and show cause on thespecified date, or where after investigation in the manner provided insub-section (5) of Section 7, the Special Court is satisfied that thetransfer of the property to the said transferee was not in good faith https://hcservices.ecourts.gov.in/hcservices/ and for consideration, the Special Court shall order the attachment ofso much of the said transferee's property as in the opinion of theSpecial Court equivalent to the proper value of the propertytransferred."16.2. Section 8, thus, deals with attachment of properties of mala fidetransferees where financial establishments clandestinely transferred theproperties to third parties with intention to deceit the depositors either withor without proper consideration and thereby rendered the value of theproperties attached not sufficient to repay the amounts to the depositors.Therefore, the State rightly seals such leakage by attaching the properties ofsuch mala fide transferees under section 8 of the Act, which is again, in allfairness, subject to section 7(5) of the Act. 16.3. We shall consider as to the compliance of the principles of naturaljustice in the procedure prescribed under Sections 3, 7 and 8 of the Tamil NaduAct later.VII-A(g). SECURITY AND ADMINISTRATION OF THE PROPERTY ATTACHED AND APPEALSUNDER SECTION 9 AND 1017.1. Section 9 fairly provides for security in lieu of attachment and itreads as follows:"9. Security in lieu of attachment.- Any Financial Establishment orperson whose property has been or is about to be attached under this Actmay, at any time, apply to the Special Court for permission to givesecurity in lieu of such attachment and where the security offered andgiven is in the opinion of the Special Court, satisfactory, andsufficient it may cancel, the ad-interim order of attachment or, as thecase may be, refrain from passing the order of attachment."17.2. Section 10 deals with administration of properties attached whichreads as follows:"10. Administration of the property attached.- The Special Court may, onthe application of any person interested in any property attached underthis Act, and after giving the Competent authority an opportunity ofbeing heard, make such orders as the Special Court considers just andreasonable for - (a) providing from such of the property attached as the applicant claimsan interest in such sums as may be reasonably necessary for themaintenance of the applicant and for his family, and for expensesconnected with the defence of the applicant where criminal proceedingshave been instituted against him in the Special Court under section 5; https://hcservices.ecourts.gov.in/hcservices/ (b) safeguarding so far as may be practicable the interest of anybusiness affected by the attachment and in particular in the interest ofany partners in such business."17.3. Section 9 empowers the Special Court to either cancel or refrainfrom passing any order of attachment after satisfying with the securityfurnished by the financial establishments in lieu of attachment. Section 10empowers the Special Court after hearing the financial establishments or otherpersons interested, to consider the just and reasonable cause to make anappropriate provision for maintenance of the applicants and their family and tosafeguard the interest of any business of the applicants affected by theattachment as well as the interest of any partners of such business.18. Any order passed by the Special Court is appealable in law before theHigh Court within 30 days from the date of order under section 11 of the Act.VII-B. TAMIL NADU PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIALESTABLISHMENTS) RULES, 1997 19. The Rules framed under the Tamil Nadu Act, viz., The Tamil NaduProtection of Interests of depositors (In financial establishments) Rules, 1997empowers the competent authority to require any financial establishment, or itsofficers or any officer or authority of the Government or a local authority orany other person to furnish such information as may be required and suchfinancial establishments or officer or authority of the Government or localauthority or person shall furnish such information to the competent authorityunder Rule 4. Under Rule 5 the competent authority shall make a report to theSpecial Court regarding absconding persons. Rule 6 provides the power tofreeze or seize the properties as well as the documents, and books of accounts,and such power is only supplemental to the power to pass an order of ad interimattachment. Rule 7 and 10 render the transfer of any money or property of thefinancial establishments attached under Section 3 of the Act as null and void,and protect the action of the Government or the competent authority or anyother person done or intended to be done in good faith in carrying out theprovisions of the Act. VII-C. VALIDITY WITH REFERENCE TO THE PRINCIPLES OF NATURAL JUSTICE20. Courts should interpret the constitutional provisions against thesocial setting of the country so as to show a complete consciousness and deepawareness of the growing requirements of the society, the increasing needs ofthe nation, the burning problems of the day and the complex issues facing thepeople which the legislature in its wisdom, through beneficial legislation,seeks to solve. The judicial approach should be dynamic rather than static,pragmatic and not pedantic and elastic rather than rigid. It must take intoconsideration the changing trends of economic thought, the temper of the timesand the living aspirations and feelings of the people. Where the Legislaturefulfills its purpose and enacts laws, which in its wisdom, is considered https://hcservices.ecourts.gov.in/hcservices/ necessary for the solution of what after all is a very human problem the testsof reasonableness have to be viewed in the context of the issues which facedthe Legislature. In the construction of such laws and particularly in judgingof their validity, the Courts have necessarily to approach it from the point ofview of furthering the social interest which it is the purpose of thelegislation to promote, for the Courts are not, in these matters, functioningas it were in vacuo, but as parts of a society which is trying, by enacted law,to solve its problems and achieve social concord and peaceful adjustment andthus furthering the moral and material progress of the community as a whole. Itis for this reason that the Courts have recognised that there is always apresumption in favour of the constitutionality of a statute. The Courts, it isaccepted, must presume that the Legislature understands and correctlyappreciates the needs of its own people, that its laws are directed to problemsmade manifest by experience and that its discriminations are based on adequategrounds [vide: Pathumma v. State of Kerala, (1978) 2 SCC 1].21. The power conferred under Section 3 on the authority to pass adinterim order of attachment of money or any other property alleged to have beenprocured either in the name of the financial establishments or in the name ofany other person, from and out of the deposits collected by the financialestablishments or if it transpires that if such money or other property is notavailable for attachment or not sufficient for repayment of deposits, suchother property of the said financial establishments or the promoter, partner,director, member of the said financial establishments or a person who hasborrowed money from the financial establishments to the extent of his defaultor, such other properties of that person in whose name properties werepurchased from and out of the deposits collected by the financialestablishments, in our considered opinion, is nothing but a power conferred onthe competent authority required to be exercised in an emergent situation,where the financial establishment or any person mentioned in section 3 of theAct attempts clandestinely to siphon of or divert the funds of the depositorsby mala fide transfers. Therefore, the question of giving an opportunitybefore passing such order of ad interim attachment does not arise. 22. What is the reasonable opportunity alleged to have been violated inthe process, as complained by the financial establishments alas the complaintof lack of reasonable opportunity to the financial establishments in courtesyto the principles of natural justice, before attaching the property, in ourconsidered opinion, could, by itself, not be termed as fatal to the principlesof natural justice, as what is sought under such attachment is not to depriveany rights of the financial establishments or the directors, but to prevent anyfurther unjust diversification of the funds of the depositors. Therefore, therecannot be any hesitation or reluctance in exercise of such power of attachmentwithout affording an opportunity to the financial establishments as the Actprovides a post-decision opportunity and also permits the innocent thirdparties to approach the Special Court for variation and modification, and wefind sufficient justification in this regard. https://hcservices.ecourts.gov.in/hcservices/

23. However, the Act, under Section 7, provides a notice being given tothe financial establishments or any other person whose property is attachedunder Section 3, and hence, satisfies the principles of natural justice bygiving post-decision opportunity to the financial establishments or any personwhose property is attached as per Section 3 of the Act.24. It is a settled law that the phrase "natural justice" is not capableof static and precise definition. However, a duty to act fairly, viz., inconsonance with the fundamental principles of substantive justice, isgenerally implied, irrespective of whether the power conferred on a statutorybody or tribunal is administrative or quasi-judicial. But, the rules ofnatural justice operates only in areas not covered by any law validly made.They can supplement the law but cannot supplant it. If a statutory provisioneither specifically or by inevitable implication excludes the application ofrules of natural justice then the court cannot ignore the mandate of thelegislature. The power conferred on the competent authority under section 3 ofthe Act for attaching the property of the financial establishments or that ofsuch person mentioned thereunder, is one of such nature. Whether or not theapplication of principles of natural justice in a given case has been excludedwholly or in part, in exercise of the statutory power, depends upon thelanguage and basic scheme of the provision conferring the power, the nature ofthe power, the purpose for which it is conferred and the effect of the exerciseof that power. The rules of natural justice are not embodied rules. Beingmeans to an end and not an end in themselves, it is not possible to make anexhaustive catalogue of such rules. The audi alteram partem rule has manyfacets, (a) notice of the case to be met; (b) opportunity to the partyaggrieved to explain. Undoubtedly these rules cannot be sacrificed at thealtar of the administrative convenience or celerity. Both these above facets ofaudi alteram partem rules are well safeguarded in the impugned Tamil Nadu Act.Above all, even those who have not been served with notice before making the adinterim order absolute are also permitted to have their say and substantiatetheir interest on the date of adjournment. 25. Distinguishing the very absolute Rule of uniform application of theprinciples of natural justice, the Act under section 3 read with section 7excludes the prior hearing but contemplates a post-decision hearing amountingto a full review of original ad interim order of attachment on merits andsatisfies the principles of natural justice in spirit and substance, by hearingthe persons interested before taking an administrative decision for making thead interim order of attachment absolute. Further, under the scheme of the Act,the offences are compoundable under section 5A of the Act. The competentauthority may compound the offence, before the institution of the prosecution,and after the institution of the prosecution, with the permission of the Court,on payment of the amount due to the depositors with or without interest. 26. Wide option was also provided under the Act for settling the amountwithout payment of interest, thus giving a fair play in the joints. Thatapart, during the course of making the ad interim order of attachment absolute, https://hcservices.ecourts.gov.in/hcservices/ by contemplating notice to the interested parties and permitting them to filetheir objections and also hearing the third parties, who have not even beenserved with notice, but filed their objections, requiring the Special Court topass appropriate orders within 6 months from the date of filing theapplication under Section 4(3) of the Act, and then requiring the Special Courtto pass appropriate orders on merits under section 7(4) of the Act, by which itmay make the ad interim order of attachment absolute, vary it or cancel it andalso by providing the Special Court to release the excess amount of propertyattached, which is more than the amount required for repayment to thedepositors and then empower the Competent authority to bring the property toauction sale and then distribute the sale proceeds equitably, satisfies theprinciples of natural justice.27. The opportunity given to the financial establishments, the personsaggrieved or person interested as mentioned above is not minimal, but, shouldbe viewed pragmatically as the same satisfies the principles of natural justicewith utmost promptitude. The Act therefore provides very flexible hearinggiving opportunity to the financial establishments and persons whose propertieswere attached and procedure provided in this regard is malleable and adaptableto the concept of principles of natural justice. The dispensation of pre-decision opportunity while passing ad interim order of attachment under Section3 of the Act is inevitable, as the very object of the enactment is to control,regulate and curb the activities of malicious transfer of funds by thefinancial establishments and to realise the amount from the financialestablishments and distribute the same to the depositors equitably and thus,protect the interest of the innocent depositors. 28.1. We, therefore, do not see any justification in the complaint for notaffording a reasonable opportunity before attaching the property, as therecannot be any justified reason to fleece the funds that actually belongs to thedepositors. 28.2. If that be so, can't the State rush-in to bring out necessaryenactment in order to provide a stabilised socio-economic justice and toprovide infallibility by unique machinery of attaching the properties tosafeguard the interest of the depositors? 28.3. Can't the State under such circumstances save the moths from thefire except by putting out the fatal glow, by way of the impugned legislation? 28.4. Even on the point that properties of innocent third parties werealso attached without giving any opportunity to them, we do not find any forceas such innocent third parties are entitled to approach the Special Court fornecessary remedy, after satisfying their bona fide. For their any hardship inthe interregnal period, the answer is that when a general evil is sought to besuppressed some martyrs may have to suffer, for the legislature cannot easilymake meticulous exceptions and it has to proceed on broad categorizations andnot singular individualization. https://hcservices.ecourts.gov.in/hcservices/

29. It is a settled law that the principles of natural justice is toconform to achieve the public good, and must conform, grow and be tailored toserve the public interest and should respond to the demands of an evolvingsociety, but, not to safeguard the individual interest, viz., financialestablishments, particularly, when their act of acceptance of deposits from theinnocent public wooing exorbitant rate of interest is illegal and opposed topublic policy, as the same is barred and prohibited both under Companies Act,1956 as well as Reserve Bank of India Act, 1934, which we deal with later.30. We should refrain ourselves to give a narrow view on technicalconsideration without keeping at the back of the mind the constitutionalanimations and the spirit of the provisions and the object which the Act seeksto achieve. Both the construction as well as the operation of the Act is well-structured and provided with inbuilt procedure leaving no escape root.31. In any event, we do not see any prejudice caused to financialestablishments or to the persons whose properties were attached by way of ad-interim orders by the competent authorities and brought under the jurisdictionof the Special Court for passing appropriate orders under section 7 of the Act,after giving reasonable opportunity to the respective parties from whom theproperties were attached. 32. The implication of principles of natural justice is presumptive whichmay be excluded by express words of statute or by necessary intendment wherethe conflict is between public interest and private interest. In the instantcase, the interest of the depositors who are more than 19 Lakhs in numberconstitutes public interest prevailing over the private interest of thefinancial establishments and therefore, the presumption must necessarily be infavour of the public interest. In such case, the urgency requires a preemptiveaction as a strategic necessity. Then, there may be no question of observingpre-decision hearing, as in the case of preemptive action, it is deemedappropriate to postpone the hearing of principles of natural justice byproviding a post-decision opportunity which is rightly satisfied in the instantcase. 33.1. However, where the assets available for attachment of a financialestablishment or other persons referred to in section 3 are found to be lessthan the amount or value which such establishment is required to pay to thedepositors, the competent authority is empowered to make an application to theSpecial Court under Section 8(1) of the Act for attaching the properties ofmala fide transferees. If the Special Court is satisfied by affidavit orotherwise that there is a reasonable cause that the said financialestablishments have transferred any property otherwise than in good faith forconsideration, after necessary notice of hearing given to the transferees ofsuch properties to show cause why so much of the transferees' propertyequivalent to the proper value of the property transferred should not beattached, shall pass an order of attachment so much of the said transferees'property as in its opinion equivalent to the proper value of the property https://hcservices.ecourts.gov.in/hcservices/ transferred. It is, therefore, clear that while exercising such power on malafide transferees, the principles of natural justice are fully satisfied. 33.2. Therefore, the impugned Tamil Nadu Act as a whole inspires theconfidence of the societal realities, magnificently satisfies the principles ofnatural justice and excellently meets the needs of the victims. VII-D. VALIDITY WITH REFERENCE TO THE TEST OF REASONABLENESS AND ARBITRARINESSREAD WITH ARTICLES 14, 19(1)(g) AND 21 OF THE CONSTITUTION OF INDIA34. The petitioners vehemently contend that the procedure prescribed andthe unguided powers conferred on the competent authority, to pass an order ofad interim attachment of the properties of financial establishments undersection 3 of the Act, to initiate prosecution under section 5 of the Act, andto attach the properties of mala fide transferees under Section 8 of the Act,are arbitrary, unreasonable, violative of principles of natural justice andalso offend Articles 14, 19(1)(g) and 21 of the Constitution of India. But, weare unable to accept the same, because what all the Act intends is not tointerfere with the rights of the financial establishments and those responsiblefor the management and affairs of the financial establishments conferred onthem under either of Articles 14, 19(1)(g) and 21 of the Constitution of India,but to protect the interest of the depositors, to find a way for realisationof the dues payable to them, by making ad interim orders of attachment of theproperty of financial establishments, procured either in the name of theFinancial Establishment or in the name of any other person from and out of thedeposits collected by the Financial Establishments, or if it transpires thatsuch money or other property is not available for attachment or not sufficientfor repayment of the deposits, such other property of the said FinancialEstablishment or the promoter, partner, director, manager or member of the saidFinancial Establishment or a person who has borrowed money from the FinancialEstablishment to the extent of his default.35.1. The contention that the inclusion of the words, "fails to providethe service for which deposit has been made" under Section 3 of the Act, andthe words "fails to render service for which the deposit has been made" underSection 5 of the Act is unreasonable, is liable to be rejected, because injudging the reasonableness of such restrictions, the Court must bear in mindthat the legislature is the best judge for what is good for the community, bywhose suffrage it comes into existence (State of Bihar v. Sri Kameshwar Singh,AIR 1952 SC 252). Even though ultimately it is for the Court to test thereasonability, and the Court must not shirk its solemn duty, the test ofreasonableness has to be applied to each individual statute impugned but not onthe basis of abstract standard or general pattern of reasonableness. 35.2. Testing the inclusion of words "fails to provide the service forwhich deposit has been made" under Section 3 of the Act, and the words "failsto render service for which the deposit has been made" under Section 5 of theAct, in the light of legislative intention to protect the interest of thedepositors, who have deposited their hard earned money, wooed by the promise ofhigher rate of interest, there cannot be any second opinion that the State is https://hcservices.ecourts.gov.in/hcservices/ right in including such words. Therefore, what has to be seen is whether bysuch inclusion of words, the legislature has overstepped the permissible limitsof reasonableness.35.3. Is there any plausibility in the contention of the petitioners thatthe aggrieved depositors need the legislation to protect them or is all well inthe world of money? This question can be answered only by the legislature butnot by this Court, particularly when the acceptance of public deposits from anyindividual, much less a firm or company, whether incorporated or unincorporatedis prohibited under the provisions of Reserve Bank of India Act, 1934 read withBanking Regulation Act, 1949, and the court should restrain its hands fromstriking down the impugned legislation as unconstitutional, because it isremembered that in the matter of economics, sociology, and other specialisedsubjects, the Court should not embark upon the views of half-lit infallibilityand reject what economists or social scientists have, after detailed studies,commended as the correct course of action, as held by the Apex Court in DelhiCloth and General Mills Co. Ltd. v. Union of India, referred supra, andtherefore, we do not see any unreasonableness in including the words "fails toprovide the service for which deposit has been made" under Section 3 of theAct, and the words "fails to render service for which the deposit has beenmade" under Section 5 of the Act.36. Piercing through the veil, we are clear that the Act is neverintended to interfere with the rights of the petitioners/financialestablishments or any person managing the affairs of financial establishments. We are, therefore, also not able to appreciate the contention thatsections 3, 5 and 8 of the Tamil Nadu Act offend Articles 14, 19(1)(g) and 21of the Constitution of India, nor we could agree that the punishment prescribedin the Act is more excessive and harsh. The petitioners are not entitled toclaim premium on their illegal act of accepting deposits, promising exorbitantrate of interest which is not commercially viable. The legislature was notunaware of the known malady that the financial establishments were exploitingthe weaker sections of the society. Hence, sections 3, 5 and 8 are intended toassure a checkmate on the abuse of the tactics adopted by the financialestablishments and we do not see any arbitrariness or unreasonableness orviolation of Articles 14, 19(1)(g) and 21 of the Constitution of India. 37.1. We hold,a. The cardinal principles of natural justice are not violated; b. There is no arbitrariness or unreasonableness in the procedureprescribed under Sections 3, 5 and 8 of the Act, nor there is unguidedpower conferred on the competent authority or the Special Court inthis regard; and c. There is no violation to Articles 14, 19(1)(g) and 21 of theConstitution of India.37.2. In view of the above, issue (i) is answered in the affirmative. https://hcservices.ecourts.gov.in/hcservices/ VIII – Issue (ii) – Question of Legislative Competency38. Having discussed in detail the object and reasons for enacting theTamil Nadu Protection of Interests of Depositors (in Financial Establishments)Act, 1997, and the grounds of vires challenged, viz., test of reasonableness,arbitrary exercise of unguided powers conferred, and violation of principles ofnatural justice as well as the infringement of the fundamental rights conferredunder Articles 14, 19(1)(g) and 21 of the Constitution of India, and held thatthe Act stands the test of reasonableness, and does not violate the principlesof natural justice, Articles 14, 19(1)(g) and 21 of the Constitution of India,now, we pass on to the next but, fundamental conflict, viz., whether the TamilNadu Government has legislative competence to enact the impugned Tamil NaduAct? VIII-A. VIJAY C.PULJAL V.STATE OF MAHARASHTRA, (2005 (4) CTC 705) - (THE MAHARASHTRA ACT)39.1 The spinal cord of the contentions made on behalf of thepetitioners/financial establishments is based on the decision of the Full Benchof the Bombay High Court in Vijay C.Puljal v. State of Maharashtra, referredsupra, whereunder Maharashtra Act was dealt with. The objects and reasons ofthe Maharashtra Act are stated as follows: "There is a mushroom growth of Financial Establishments in theState of Maharashtra in the recent past. The sole object of theseestablishments is of grabbing money received as deposits from public,mostly middle class and poor, on the promises of unprecedented highattractive interest, rates of interest or rewards and without anyobligation to refund the deposits to the investors on maturity orwithout any provision for ensuring rendering of the services in kind inreturn, as assured. Many of these Financial Establishments havedefaulted to return the deposits on public. As such, deposits run intocrores of rupees. It has resulted in great public resentment and uproarcreating law and order problem in the State of Maharashtra, specially inthe city like Mumbai which is treated as the financial capital of India.It is, therefore, expedient to make a suitable legislation, in thepublic interest to curb the unscrupulous activities of such FinancialEstablishments in the State of Maharshtra."(emphasis supplied)39.2. The Full Bench of the Bombay High Court in Vijay C.Puljal v. Stateof Maharashtra, referred supra, held the Maharashtra Act as ultra vires forwant of legislative competency of the State of Maharashtra, of course followingthe decisions of the Apex Court in (i) Delhi Cloth and General Mills Co. Ltd.v. Union of India, referred supra, whereunder Section 58A of Companies Act,1956 and Rule 3A of Companies (Acceptance of Deposits) Rules, 1975, were heldconstitutionally valid; and (ii) Velayuidhan Achari, T. v. Union of India,referred supra affirming the reasoning in the decision of the Delhi High Court https://hcservices.ecourts.gov.in/hcservices/ in Kanta Mehta v. Union of India, referred supra, in which Section 45S and 58B(5A) of the Reserve Bank of India Act, 1934 were held as constitutionallyvalid.39.3. Even though there may be some differences between the Tamil NaduProtection of Interests of Depositors (in Financial Establishments) Act, 1997and the Maharashtra Act, in our considered opinion, the same are negligible anddo not matter much for the purpose of testing the legislative competency ofthe State in enacting Tamil Nadu Protection of Interests of Depositors (inFinancial Establishments) Act, 1997, in view of the statement of reasons andobjects and the overall scheme of both the Acts. Therefore, it is appropriateto straight away refer to the decision of the Full Bench of the Bombay HighCourt in Vijay C.Puljal v. State of Maharashtra, referred supra:" 33.This is not a case where a state law is essentially and insubstance with respect to a matter in the State List. Were it to be,an incidental encroachment on a subject reserved for the Union wouldnot have risked attracting the vice of unconstitutionality. Thesubstance of legislation determines constitutionality. An incidentaltrenching on a subject not reserved to the States is permitted whenthe substance still is within the purview of the owner of the State.What is incidental is not of constitutional significance; this is sonot because the incident is an aberration but because the incident isnot of such overarching significance as to be determinative of thetrue character of the law. Subjects of legislative power are notdefined by boundaries constructed with iron fences. The boundariesare open textured and porous; in their peripheries they may possesscommon attributes or characteristics. The vice of the State law inthis case is that its core has transgressed into a field reserved forParliament. The transgression of the core into the Parliamentarydomain is ever clearer when one has regard to legislation enacted byParliament. In relation to corporate entities, the State lawpenalises a species of default - a fraudulent failure to repay -which is clearly within the purview of the sanctions imposed by theCompanies Act, 1956. The State law regulates by imposing penalsanctions on transactions which Parliament has regulated by theimposition of sanctions. The penalties which the State law envisagesare at variance with what Parliament envisaged. Provisions have beenmade in the State law for attachment, realisation and equitabledistribution of assets among depositors. There are provisions fortracing assets and for the avoidance of mala fide transfers. TheState government submits that Parliamentary legislation was deficientand the law had to be armed with teeth to reach out to and penalisewrong doing. This lies outside the competence of the States where thesubject of the legislation is with respect to an entry in the UnionList. The deficiencies that are perceived in ParliamentaryLegislation have to be corrected by Parliament. The State legislaturecannot arrogate to itself the power to supplant, or for that matter,supplement Parliamentary legislation on an area in the Union List.That is what in effect the State Legislature has done here on the https://hcservices.ecourts.gov.in/hcservices/ logic that Parliament has not been adequate in its enactment. Thatlogic is not constitutionally sound in our federal policy. 34.Public order is a subject that is reserved to the States inour constitutional scheme. It may appear tautological to say thatlegislation on public order must in substance be based upon publicorder. The point is of significance because numerous problems of lawenforcement and of maintaining public order have their genesis indiverse and complex societal issues. If the State, in the process ofenacting legislation on public order, were to legislate by regulatingsubstantive areas which fall in the Union List, that would lead tothe destruction of the basic scheme envisaged in the distribution oflegislative powers. Legislation on public order must address publicorder. Otherwise, in the guise of legislating on publicorder,substantive areas which are reserved to Parliament in the UnionList would be subject to regulation by the States. This isimpermissible. A law on public order must truly and essentiallyaddress itself to the preservation and maintenance of public order.That is not what the State law does in the present case. Theessential nature of the State law in the present case is not publicorder, but subjects which fall within the Union List. 35. In these circumstances, we hold that :(i) The provisions of Section 58A of the Companies Act, 1956have been upheld by the Supreme Court in Delhi Cloth and GeneralMills Co. Ltd. vs. Union of India,(1983) 4 SCC 166. Theprovisions of Chapter III-C of the Reserve Bank of India Act,1934 were upheld by the Delhi High Court in Kanta Mehta vs.Union of India, 62 Com. Cases 771. The judgment of the DelhiHigh Court is affirmed by the Supreme Court in T.VelayudhanAchari vs. Union of India, (1993) 2 SCC 582;(ii) The Supreme Court held that Parliament has legislativecompetence to enact Section 58A of the Companies Act, 1956 andthat the provision was relatable to the legislative headscontained in Entries 43 and 44 of List I of the SeventhSchedule. The same principle of law must apply to the subsequentamendments to the Companies Act, 1956 by which the provisions ofSection 58AA and Section 58AAA were introduced; (iii)The legislative competence of Parliament to enact ChapterIII-C of the Reserve Bank of India Act, 1934 was upheld by theDelhi High Court with reference to the provisions of Entry 45 ofList I and at any rate with reference to Entry 97 of List I. Thereasoning of the Delhi High Court has been affirmed by theSupreme Court. Hence, it would not be possible for this Court tohold that legislation regulating deposits in relation tounincorporated entities and individuals, is referable to alegislative head in the State List; https://hcservices.ecourts.gov.in/hcservices/ (iv) The legislation enacted by the State Legislature in thepresent case directly conflicts with the provisions contained inthe Central Legislation. The ingredients of the offence offraudulent default in the repayment of the deposits as createdin Section 3 of the State Act squarely fall within theprovisions of Section 58A and Section 58AA. The StateLegislature has created an offence in respect of the samesubject matter and providing for different punishments;(v) The law enacted by the State Legislature is in pith andsubstance referable to legislative heads contained in List I ofthe Seventh Schedule. The essential character of the legislationis not with reference to public order. (vi) The State Legislature has in the present case enacted a lawwhich it was not competent to enact. 36. The State Legislation in the present case, namely, theMaharashtra Protection of Interests of Depositors (In FinancialEstablishments) Act, 1999, is accordingly declared to be ultravires." (emphasis supplied)39.4. But, with respect, we are not in a position to agree with thereasons that weighed the Full Bench of the Bombay High Court for holding thatthe State Government has no legislative competency to enact the Tamil Nadu Act,in the public interest and in order to regulate the activities of the financialestablishments. VIII-B. THE PRINCIPLES GOVERNING THE TEST OF LEGISLATIVE COMPETENCY40. Before considering the conflicting contentions made on behalf of bothsides, it is the necessity of judicious prudence to refer the well settledprinciples governing the test of legislative competency.41. Undoubtedly, the Indian Constitution provides plenary power oflegislation to the legislatures whether Union or State, in spite of divisionof legislative powers mentioned in the Entries in the Lists conferringrespective powers on the Union and the States. But, such legislative powers ofthe Union and States also often overlap and consequently, create a conflictregarding the legislative competency. It is, under such circumstances, theCourt is shouldered with responsibility to examine the legislation in questionin its pith and substance. 42. It inevitably happens, time and again, that the legislation thoughpurports to deal with a subject in one List, also touches a subject in anotherList when the different provisions of the enactment are so closely intertwined.The blind adherence to a strictly verbal interpretation would result in https://hcservices.ecourts.gov.in/hcservices/ declaring the statutes invalid, because the legislature enacting them mayappear to have legislated in a forbidden sphere [vide. Subramanyam Chettiar v.Muthuswami Gounder (1940) FCR 188 at 201: AIR 1941 FC 47]. Therefore, therule of interpretation requires a closer examination of the nature of thelegislation for the purpose of determining the competency of the power oflegislation. In the process, it is to be remembered that the power tolegislate on a topic of legislation carries with it the power to legislate onan ancillary matter which can be said to be reasonably included in the powergiven. 43. The Constitution of India deserves to be interpreted, languagepermitting, in a manner that it does not whittle down the powers of the StateLegislature and preserves the federalism while also upholding the Centralsupremacy as contemplated by some of its articles [vide: ITC v. AgriculturalProduce Market Committee, (2002) 9 SCC 232]. 44. In the instant case, we are posed with a lis that requiresinterpretation of entries in the mutually exclusive Union and State listsreferred to above. While the petitioners/ financial establishments, contendthat the impugned Tamil Nadu Act falls under Entries 42, 43 and 45 of List-I(Union), the State Government contends that the field of legislation of theimpugned enactment is traceable to Entries 1, 30 and 32 of List II (State),which is dealt with in the latter paragraphs. Such an issue involves adetermination whether a law purporting to be made under one or more entries inan authorised and exclusive list, is, in fact, a legislature under one or moreentries in the forbidden list.VIII-B(a). ARTICLES 245 AND 246 OF THE CONSTITUTION OF INDIA45. At this juncture, it is relevant to quote Articles 245 and 246 of theConstitution of India:"Article 245. Extent of laws made by Parliament and by the Legislatureof States.- (1) Subject to the provisions of this Constitution,Parliament may make laws for the whole or any part of the territory ofIndia, and the Legislature of a State may make laws for the whole or anypart of the State.(2) No law made by Parliament shall be deemed to be invalid on theground that it would have extra-territorial operation.Article 246. Subject-matter of laws made by Parliament and by thelegislatures of States.- (1) Notwithstanding anything in clauses (2) and(3), Parliament has exclusive power to make laws with respect to any ofthe matters enumerated in List I in the Seventh Schedule (in thisConstitution referred to as the "Union List")(2) Notwithstanding anything in clause (3), Parliament and, subject toclause (1), the Legislature of any State also, have power to make lawswith respect to any of the maters enumerated in List III in the SeventhSchedule (in this Constitution referred to as the "Concurrent List") https://hcservices.ecourts.gov.in/hcservices/ (3) Subject to clauses (1) and (2), the Legislature of any State hasexclusive power to make laws for such State or any part thereof withrespect to any of the matters enumerated in List II in the SeventhSchedule (in this Constitution referred to as the "State List")(4) Parliament has power to make laws with respect to any matter for anypart of the territory of India not included in a State notwithstandingthat such matter is a matter enumerated in the State List."46.1. Article 246 sets out the distribution of field of legislationbetween the Union and the States in mutually exclusive lists, List I (Union),List II (State) and List-III (Concurrent). 46.2. Clause (1) of Article 246 of the Constitution does not provide forthe competence of Parliament or the State Legislatures as is ordinarilyunderstood but merely provide for the respective legislative fields. Eachentry in the legislative lists of the Seventh Schedule to the Constitution hasto be interpreted in a broad manner. Both the parliamentary legislation asalso the State legislation must be considered in such a manner as to upholdboth of them and only in a case where it is found that both cannot coexist, theState Act may be declared ultra vires. Furthermore, the courts should proceedto construe a statute with a view to uphold its constitutionality. Only to theextent of conflict, the State law has to be struck down and not otherwise.[vide: State of A.P. v. K.Purushotham Reddy (2003) 9 SCC 564].46.3. Clauses 1 and 3 of Article 246 enact that Parliament and thelegislature of a State have exclusive power to make laws with respect to any ofthe matters enumerated in Lists I and II respectively. Article 246(1) fortifiessuch exclusive legislative power of Parliament (to make laws with respect toany matter enumerated in List I) with a non-obstante provision (a paramountcyprovision), qua clauses (2) and (3) of article 246. Article 246(3) consecratesexclusive legislative power to the Legislature of a State in respect of mattersenumerated in List II, subject to clauses 1 and 2. 47. From the scheme of the distribution of the legislative powers betweenthe Union and the States in the mutually exclusive lists, it is clear that thepower of the Parliament and the legislature of a State to make laws withrespect to any of the matters in List I and List II of the VII Schedule isexclusive. No doubt, the abstinence of Parliament or a legislature of a Statefrom legislating to the full limits of its power would not have the effect oftransferring to the other legislative body the legislative power exclusivelyassigned to a legislature. It is also true that the inherent corollary of suchexclusivity is that if a parliament or legislature of a State fails tolegislate at all or to full limits of its power, such failures does not havethe effect of augmenting the powers of the other level of Government. This isthe true meaning and effect of the exclusivity in the distribution of the https://hcservices.ecourts.gov.in/hcservices/ legislative powers enumerated in List I and II. The constitution does notcountenance the delegation of legislative powers, either expressly or byabstinence in exercise of the legislative powers by appropriate legislature. 48. However, in respect of the matters enumerated in the concurrent List,it is possible that the laws made by the Union and State could co-exist. In thedistribution of legislative powers under the Concurrent List (List III),Article 246(2) enacts that notwithstanding anything in clause (3), Parliamentand subject to clause (1), the Legislature of any State also, have power tomake laws with respect to any of the matters enumerated in the Concurrent list.But, the conflict arose under such circumstance can be resolved by a doctrineof occupied field or repugnancy taking recourse under Article 254 of theConstitution of India, as, Article 254 sets out principles for resolution ofconflicts relating to inconsistency between the laws made by Parliament and thelaws made by the Legislature of a State, with respect to matters enumerated inthe Concurrent list. VIII-B(b). THE CONCEPT OF OCCUPIED FIELD 49.1. The concept of occupied field is relevant in the case of laws madewith reference to entries in List III. The doctrine of covered field has to beapplied only to the entries in List III. The express words employed in an entrywould necessarily include incidental and ancillary matters so as to make thelegislation effective. The scheme of the Act under scrutiny, its object andpurpose, its true nature and character and the pith and substance of thelegislation are to be focused at. [vide:Hindustan Lever v. State ofMaharashtra,(2004) 9 SCC 438].49.2. No doubt, experience of past difficulties has made the provisionsof the Indian Act more exact in some particulars and the existence of theconcurrent List has made it easier to distinguish between those matters whichare essential in determining to which list particular provisions should beattributed and those which are merely incidental. But, the overlapping ofsubject-matter is not avoided by substituting three lists for two or even byarranging for a hierarchy of jurisdictions. Subjects must still overlap; andwhere they do, the question must be asked, what in pith and substance is theeffect of the enactment of which complaint is made and in what list is its truenature and character to be found. If these questions could not be asked, muchbeneficent legislation would be stifled at birth and many of the subjectsentrusted to Provincial Legislation could never effectively be dealt with[Prafulla Kumar v. Bank of Commerce, Khulna, 74 I.A. 23: (1947) FCR 28: (1947) FCJ 34: (1947) 2 MLJ 6: AIR 1947 PC 60 at 65]. https://hcservices.ecourts.gov.in/hcservices/ VIII-B(c). LIBERAL AND HARMONIOUS CONSTRUCTION50. It is a well settled law that the matters enumerated in severalentries in the List in VII Schedule are not powers but fields of legislationand liberal construction must be put on them. 51.1. The other rule of interpretation is that the competing entries mustbe read harmoniously. To avoid conflict, the entries must be read together andinterpreted together having due regard to the fact that the language of oneentry defines the contours of the other.51.2. The overlapping of fields of legislation occurs for variety ofreasons. A subject of legislation of wide scope may be divided between Unionand State fields on account of which it would be impossible to preventoverlapping by a clear cut division. The overlapping also occurs in severalcases where exclusive field is in favour of the State, but the same is madesubject to an exclusive field carved out which is reserved in favour of theUnion. When it appears to the court that there is apparent overlapping betweenthe two entries the doctrine of pith and substance has to be applied to findout the true nature of a legislation and the entry within which it would fall.It is only when an apparent overlapping occurs that the doctrine of pith andsubstance has to be applied to find out the true nature of legislation and theentry within which it would fall. When different entries in the same list cropup for consideration, the usual principle followed is that each particularentry should relate to a separate subject or group of subjects and everyattempt should be made to harmonise different entries and to discard aconstruction which will render any of the entries ineffective. [vide: ITC Ltd.v. Agricultural Produce Market Committee,(2002) 9 SCC 232].VIII-B(d). APPLICATION OF THE DOCTRINE OF PITH AND SUBSTANCE, THE DOCTRINE OFANCILLARY AND INCIDENTAL TRENCHING AND THE DOCTRINE OF ECLIPSE52. The conflicts that arise due to overlapping Entries could be resolvedby application of,(i)the doctrine of pith and substance,(ii)the doctrine of ancillary and incidental trenching, and(iii)the doctrine of eclipse.By the Doctrine of pith and substance the true nature of the legislation couldbe identified and the same aids to classify the legislation for its allocationto a specific field of enumerated legislative powers. The Doctrine of ancillaryand incidental trenching, accords and enables flexibility and pragmatism to thestructure of the division of exclusive powers while providing a check against a https://hcservices.ecourts.gov.in/hcservices/ clear usurpation of power to an extent that disturbs the carefully constructedconstitutional plan of federal balance.53.1. One of the proven methods of examining the legislative competence ofan enactment is therefore, by the application of doctrine of pith andsubstance. Of course, in this process, it is necessary for the courts to gointo and examine the true character of the enactment, its object, its scope andeffect to find out whether the enactment in question is genuinely referable tothe field of legislation allotted to the State under the constitutional scheme.If the objects stated in the enactment were to be the sole criteria for judgingthe true nature of the enactment, then judging by its preamble, the impugnedenactment would satisfy the requirement on application of the doctrine of pithand substance to establish the State's legislative competence; but that is notthe sole criterion. Therefore, the Court will have to examine not only theobject of the Act as stated in the statute but also its scope and effect tofind out whether the enactment in question is genuinely referable to the fieldof legislation allotted to the State [vide: E.V. Chinnaiah v. State of A.P.,(2005) 1 SCC 394].53.2. Of course, it should be assured that the impugned provision does notcross the bounds of relevant entry in List II of Schedule VII and is intravires. So long as the State Act remains within the ambit of List II and doesnot offend the provisions of Article 246 of the Constitution of India or thelaws made thereunder, the State Act's validity is beyond question. [vide: Stateof W.B. v. Purvi Communication (P) Ltd.(2005) 3 SCC 711].54.1. Incidental trenching in exercise of ancillary powers into aforbidden legislative territory is permitted as a matter of privilegedencroachment not amounting to usurpation.54.2. The doctrine of incidental and ancillary powers simply means thateach head of legislative power, whether Union or State, authorises allprovisions that have a rational connection to the exercise of that head ofpower. If the apparent trenching into a prohibited field is not a camouflage,or the trenching is a serious usurpation of the forbidden legislativeterritory, or such trenching does not gravely intrude or derogatorily impactthe effective exercise of legislative power by the other and appropriatelyauthorised level of Government, the trenching would be termed incidental andtherefore, such trenching would not, by itself, invalidate the legislation. 55. It is a settled law that laws made in derogation or in excess of thatpower would be ab initio void wholly or to the extent of the contravention asthe case may be. Of course, the Doctrine of Eclipse can be invoked in the caseof a law valid, but still a shadow is cast on it by supervening constitutionalinconsistency or supervening existing statutory inconsistency; however, whenthe shadow is removed, the impugned Act is freed from all blemish or infirmity. https://hcservices.ecourts.gov.in/hcservices/

56.1. The doctrine of pith and substance, however, is taken recourse towhen examining the constitutionality of an Act with respect to competinglegislative competence of Parliament and the State Legislature qua the subject-matter. Ascertainment of pith and substance is synonymous to ascertainment oftrue nature and character of the legislative competence necessitated for thepurpose of determining whether it is a legislation with respect to one of thematters of the list. Human expression and fallibility of legal draftsmanshipcannot be lost sight of. [vide: State of W.B. v. Kesoram Industries Ltd.(2004)10 SCC 201]56.2. Furthermore, unless there exists any enactment under the rival List,the question of repugnancy and occupied field does not arise. 57. Sharp and distinct lines of demarkation are not always possible andit is almost impossible to prevent certain amount of overlapping. To avoidsuch difficulties, we have to look at the legislation as a whole and to presumethat the legislature has full and exhaustive power to legislate the matters inthe respective list as well as the Concurrent list. The rules generally wouldbe, (a) the Union will have the full and extensive power over the mattersin List I and also have power to legislate with respect to the mattersin List III;(b) the State Legislature has exclusive power to legislate in thematter of List II, minus the matters listing in Lists I and III, ifthere is already an enactment legislated by the Union;(c) the State will have the concurrent power to legislate the subjectmatter in List III, minus matters falling in List I; and(d) therefore, the dominant position of the Union Legislature withrespect to the subject matter in List I and List III is thusestablished, but the rigour of this interpretation is relaxed by theuse of the words "with respect to", which signifies pith and substanceand do not forbid a mere incidental encroachment. Therefore, anincidental encroachment is permissible. [vide I.T.C. Ltd. v. State ofKarnataka, 1985 Supp SCC 476]58. Concededly, the petitioners have not obtained any licence from theReserve Bank of India. The petitioners are governed under the Reserve Bank ofIndia Act, only if they obtain licences from the Reserve Bank of India under https://hcservices.ecourts.gov.in/hcservices/ the provisions of the Banking Regulation Act, 1949 and therefore, it cannot besaid that the field is occupied by the Reserve Bank of India Act, 1934 readwith the provisions of the Banking Regulation Act. On the other hand, theimpugned Act only aids the said Parliamentary Acts, viz., Reserve Bank of IndiaAct, 1934 and Banking Regulation Act, 1949 and does not in any mannerwhatsoever entrench thereupon.59. To identify the dominant feature and the pith and substance of thelaw, all the tests are to be applied. These matters are not a mere technicalor formalistic exercise. The court will look beyond the direct legal effectsof the law to enquire into these factors, particularly in the case of socialand economic legislation, as the one in hand. Because socio economiclegislation must be considered more organic as a whole, but not as a merecollection of sections. It requires a more pragmatic approach rather than apedantic. 60. The Court is also required to consider the effect of the statute.The effect in the sense is merely not legal effect, but the effect of thestatute on the societal realities, more so, when it concerns with economics.Therefore, the Court should always restrain involving too deep into suchsubject matters, as the legislature are better persons to decide the need ofthe public.61. Of course, the contra theory is of colorable legislation which meansthough apparently the legislature enacted the statute purported to act withinthe limits of its power had in substance and reality transgressed the limits ofconstitutional powers, the transgression being a camouflage by what appears onthe appropriate examination to be a mere pretence and disguise. The doctrineagainst a colourable legislation is not concerned with the motive oflegislation. It is in essence a question of vires or power of the legislatureto enact the law in question. 62. The validity of an enactment has to be determined not with referenceto the name and label of the statute, but with reference to the substance ofthe enactment, its true nature and character or its pith and substance, as itis called. The Court must look beyond the names, forms and appearance todiscover the true character and nature of the legislation [vide: DwarkadasShrinivas v. Sholapur Spg. and Wvg. Co., 1954 SCR 674 :AIR 1954 SC 119].63.1. With these guidelines, we shall discuss the Doctrine of Pith andSubstance in detail. We have already seen that in case of conflict betweenentries in List I and List II, the same has to be decided by application of theprinciple of pith and substance. https://hcservices.ecourts.gov.in/hcservices/

63.2. The doctrine of pith and substance means that if an enactmentsubstantially falls within the powers expressly conferred by the Constitutionupon the legislature which enacted it, it cannot be held to be invalid, merelybecause it incidentally encroaches on matters assigned to another legislature.In order to see whether a particular legislative provision falls within thejurisdiction of the legislature which has passed it, the Court must considerwhat constitutes in pith and substance the true subject-matter of thelegislation and whether such subject-matter is covered by the topics enumeratedin the legislative list pertaining to that legislature. 63.3. When a law is impugned as being ultra vires of the legislativecompetence, what is required to be ascertained is the true character of thelegislation. If on such an examination it is found that the legislation is insubstance one on a matter assigned to the legislature then it must be held tobe valid in its entirety even though it might incidentally trench on matterswhich are beyond its competence. In order to examine the true character of theenactment, the entire Act, its object, scope and effect, is required to be goneinto. [vide: Union of India v. Shah Goverdhan L. Kabra Teachers' College,(2002)8 SCC 228].64. The Court has to ascertain the true nature and character of theenactment, i.e.,the result of the investigation, not the form alone. Thelegislation must be scrutinized in its entirety. 65.1. Then the questions that follow are, (i) whether the law claimed tobe within the incidental or ancillary area of the authorised legislative field,substantially impact the essential area or the core of the exclusivelegislative field of the other level of Government?; and (ii) whether theextent and degree of invasion would substantially impair the effective exerciseof an extent or potential legislation by the other level of the Government?65.2. The question of invasion into the territory of another legislaturemust be determined not by the degree but by substance, because the extent ofinvasion though forbidden, but not altogether. If an Act, when viewedsubstantially falls within the power of the legislature which enacted it, thenit cannot be said to be invalid merely because it incidentally encroaches onthe matter which has been assigned to another legislature [vide: State ofBombay v. Narottam Jethabhai AIR 1951 SC 99].66. It is likely to happen from time to time that enactment thoughpurporting to deal with a subject in one list touches also on a subject inanother list and prima facie looks as if one legislature is impinging on thelegislative field of another legislature. This may result in a large number ofstatutes being declared unconstitutional, because the legislature enacting law https://hcservices.ecourts.gov.in/hcservices/ may appear to have legislated in a field reserved for the other legislature.Where the question for determination is whether a particular law relates to aparticular subject mentioned in one list or the other, the courts look into thesubstance of the enactment. To examine whether a legislation has impinged onthe field of other legislatures, in fact or in substance, or is incidental,keeping in view the true nature of the enactment, the courts have evolved thedoctrine of pith and substance for the purpose of determining whether it islegislation with respect to matters in one list or the other. Therefore, forapplying the principle of pith and substance regard is to be had (i) to theenactment as a whole, (ii) to its main objects, and (iii) to the scope andeffect of its provisions [vide:Bharat Hydro Power Corpn. Ltd. v. State ofAssam,(2004) 2 SCC 553].67. Although Parliament cannot legislate on any of the entries in theState List, it may do so incidentally while essentially dealing with thesubject coming within the purview of the entry in the Union List. Conversely,the State Legislature also while making legislation may incidentally trenchupon the subject covered in the Union List. Such incidental encroachment ineither event need not make the legislation ultra vires the Constitution. Whenthere is an irreconcilable conflict between the two legislations, the Centrallegislation shall prevail. However, every attempt would be made to reconcilethe conflict. [vide: Special Reference No. 1 of 2001, In re, (2004) 4 SCC 489]68. If the matter is within the exclusive competence of the StateLegislature i.e. List II, then the Union Legislature is prohibited to make anylaw with regard to the same. Similarly, if any matter is within the exclusivecompetence of the Union, it becomes a prohibited field for the StateLegislatures. 69. In State of U.P. v. Synthetics and Chemicals Ltd. (1991)4 SCC 139,while dealing with the legislative competence of the U.P. Sales of MotorSpirit, Diesel Oil and Alcohol Taxation (Amendment) Act, 1976, as to whether itwould fall under Entry 52 of list-I or under Entry 54 of List II, the ApexCourt held that the control exercised by the Central Government by virtue ofSection 18-G of the Industries (Development and Regulation) Act, 1951 is in afield far removed from the taxing power of the State under Entry 54 of List IIand so long as the impugned legislation falls in pith and substance within thetaxing field of the State, the control of the Central Government in exercise ofits power under the Industries (Development and Regulation) Act, 1951 inrespect of a controlled industry falling under Entry 52 of List I cannot in anymanner prevent the State from imposing taxes on the sale or purchase of goodswhich are the products of such industry and which are referable to Entry 33 ofList III. 70. It is trite that both the Acts can operate in their respective fieldsand there is no repugnancy if both the Acts are considered in the light oftheir respective true nature and character. While giving due weight to https://hcservices.ecourts.gov.in/hcservices/ Centre's supremacy in the matters of legislation, the States' legitimate sphereof legislation should not be unnecessarily whittled down, because that would beunwarranted by the spirit and basic purpose of the constitutional division ofpowers; and all the entries should be construed in harmonious manner so as toavoid any conflict. In other words, only in case of conflict or collision orwhere there is a glaring repugnancy the very doctrine of occupied field will beattracted [vide: Rathinam v. State (2005(1) CTC 516 – in which one of us(P.D.Dinakaran,J.) was a party].71.1. It has been a cardinal principle of construction that the languageof the entries should be given the widest scope of which their meaning isfairly capable and while interpreting an entry of any list it would not bereasonable to import any limitation therein. The rule of widest construction,however, would not enable the legislature to make a law relating to a matterwhich has no rational connection with the subject-matter of an entry.71.2. It is further a well-settled principle that entries in the differentlists should be read together without giving a narrow meaning to any of them.Power of Parliament as well as the State Legislature are expressed in preciseand definite terms. 71.3. When a question arose for consideration before the Punjab & HaryanaCourt in Sant Sadhu Singh and others Vs. The State of Punjab and anothercontending that the Punjab legislature was incompetent to make a law pertainingto banking corporations and cooperative societies doing banking business areall banking corporations within the meaning of banking which comes within theEntry 43 and 45 of List I of VII Schedule, the Punjab & Haryana Court held thatin order to give a harmonious construction to Entry 43 and 45 of List I of VIIschedule, it must be interpreted that only the business of banking as such fellwithin the entry 45, whereas the incorporation, regulation and winding up oftrading corporations including banking corporations fell within the ambit ofentry 43 of List I. Since the cooperative societies were expressly excludedfrom the purview of entry 43 of List I, the law pertaining to the cooperativesocieties doing banking business have fallen under Entry 32 of list II. 72. The touch-stone for application of the doctrine of Pith and Substance,as observed earlier, is that while interpreting the conflicts between the Unionand the State, an organic, but not pedantic approach of interpretation mustguide the judicial process. The healing art of harmonious construction not thetempting game of hair splitting would alone promote the rhythm of rule of law,as every enactment is presumed to be constitutionally valid and it is only forthe legislature to determine the urgent need of the public taking intoconsideration the societal realities and the public interest, and the Courtshould be more cautious in testing the enactment in the teeth of legislativecompetency, particularly, when the respective fields of legislation overlapwith each other. Therefore, while applying the harmonious construction to https://hcservices.ecourts.gov.in/hcservices/ reconcile the relevant entries of the respective Government, every attemptshould be made to harmonise the apparently conflicting entries not only ofdifferent lists but also the same list and to reject the construction whichwould make the legislation nugatory.73. When an entry is to be given its widest meaning but it cannot be sointerpreted as to override another entry or make another entry meaningless andin case of an apparent conflict between different entries, it is the duty ofthe court to reconcile them. 74. In interpreting the scope of various entries in the legislative listsin the VII Schedule, widest-possible amplitude must be given to the words usedand each general word must be held to extend to ancillary or subsidiary matterswhich can fairly be said to be comprehended in it. The entries should, thus begiven a broad and comprehensive interpretation. [vide. State of Gujarat v.Akhil Gujarat Pravasi V.S.Mahamandal (2004) 5 SCC 155]. 75. The primal principles justifying the competency of the respectiveLegislatures with respect to the entries concerned, therefore, are: (i) Entries in each of the List must be given the most liberal andwidest possible interpretation and no attempt should be made to narrowor whittle down the scope of the entries. (ii) The application of the doctrine of pith and substance really meansthat where a legislation falls entirely within the scope of an entrywithin the competence of a State Legislature then this doctrine willapply and the Act will not be struck down. (iii) If the entrenchment is minimal and does not affect the dominantpart of some other entry, which is not within the competence of theState Legislature, the Act may be upheld as constitutionally valid. (iv) The nature and character of the scope of the entries having regardto the touchstone of the provisions of Articles 245 and 246. (v) The doctrine of occupied field has a great place in theinterpretation as to whether or not a particular Legislature iscompetent to legislate on a particular entry. This means that when thefield is completely occupied by List I, as in this case, then the StateLegislature is wholly incompetent to legislate and no entrenchment orencroachment, minimal or otherwise, by a State Legislature is permitted.Where the field is not wholly occupied, then a mere minimal encroachmentor entrenchment would not affect the validity of the State Legislation. These five principles have to be read and construed together and not inisolation. It is also well settled that where two Acts, one passed by theParliament and the other by a State Legislature, collide and there is noquestion of harmonising them, then the Central legislation must prevail. [vide:I.T.C. Ltd. v. State of Karnataka, 1985 Supp SCC 476].76.1. It is also an essential rule that, when the vires of enactment ischallenged, the court primarily presumes the constitutionality of the statute https://hcservices.ecourts.gov.in/hcservices/ by putting the most liberal construction upon the relevant legislative entry sothat it may have the widest amplitude and the substance of the legislation willhave to be looked into. To sustain the presumption of constitutionality,consideration may be had even to the matters of common knowledge; the historyof the times; and every conceivable state of facts existing at the time oflegislation which can be assumed. It is also permissible to look into thehistorical facts and surrounding circumstances for ascertaining the evil soughtto be remedied [vide Shashikant Laxman Kale v. Union of India, (1990) 4 SCC366].76.2. It is settled that in order to sustain the presumption ofconstitutionality, the Court may take into consideration matters of commonreport, the history of the times and may assume every state of facts which canbe conceived existing at the time of legislation, vide Rama Krishna Dalmia v.Justice S.R.Tendolkar, AIR 1958 SC 538. The above principle has to beconstantly borne in mind by the Court when it is called upon to adjudge theconstitutionality of any particular law and the said view was once againexpressed by the Constitution Bench of the Apex Court in C. I. Emden v. Stateof U. P, AIR 1960 SC 548. VIII-B(e). THE IMPUGNED TAMIL NADU ACT AND THE RELEVANTENTRIES IN LISTS I, II AND III OF THE VII SCHEDULE TO THE CONSTITUTION OF INDIA77.1 In this background, let us consider legislative competence of theTamil Nadu Act. 77.2 The Tamil Nadu Act, according to the petitioners, deals with thesubject coming under Entries 43, 44 and 45 of the Union List whereas the claimof the respondent/Government is that the Tamil Nadu Act is traceable to Entries1, 30 and 32 of the State list, or in the alternative, traceable to Entries 1,7 and 8 of the Concurrent List, which, for the sake of convenience, areextracted hereunder:Union List – IEntry 43 Incorporation, regulation and winding up of tradingcorporations, including banking, insurance and financialcorporations but not including co-operative societies.Entry 44 Incorporation, regulation and winding up of tradingcorporations, whether trading or not, with objects not confinedto one State, but not including universities.Entry 45 BankingEntry 93Offences against laws with respect to any of the matters in theList.Entry 97Any other matter not enumerated in List II or List III includingany tax not mentioned in either of those Lists. https://hcservices.ecourts.gov.in/hcservices/ State List – IIEntry 1Public Order (but not including the use of any naval, militaryor Air force or any other armed force of the Union or of anyother force subject to the control of the Union or of anycontingent or unit thereof in aid of the civil power.Entry 30Money-lending and money-lenders; relief of agriculturalindebtedness.Entry 32Incorporation, regulation and winding up of corporation, otherthan those specified in List I, and universities; unincorporatedtrading, literacy, scientific, religious and other societies andassociations; co-operative societies.CONCURRENT LIST – IIIEntry 1Criminal law, including all matters included in the Indian PenalCode at the commencement of the Constitution but excludingoffences against laws with respect to any of the mattersspecified in List I or List II and excluding the use of naval,military or air forces or any other armed forces of the Union inaid of the civil power.Entry 7Contracts, including partnership, agency, contracts of carriage,and other special forms of contracts, but not includingcontracts relating to agricultural land.Entry 8Actionable wrongsVIII-B(f). THE IMPUGNED TAMIL NADU ACT WITH REFERENCE TO SECTION 58A OFCOMPANIES ACT, 1956 AND SECTIONS 45S AND 58B(5A) AND 58B(5B) OF RESERVE BANK OFINDIA ACT, 1934 78. The main plank of argument advanced on behalf of the petitioners isthat the subject matter of the impugned enactment, viz., "to regulate theactivities of the financial establishments" falls within the field oflegislation under Entries 43 and 44 of the Union List, referred to above. Itis further contended that the field is already occupied by Section 58A of theCompanies Act, 1956 and Rule 3A of the Companies (Acceptance of Deposits) Rulesand in this regard reliance is placed on the decision of the Apex Court inDelhi Cloth and General Mills Co. Ltd. v. Union of India, referred supra. https://hcservices.ecourts.gov.in/hcservices/

79. It is also emphasised, based on the decision of the Apex Court inVelayuidhan Achari, T. v. Union of India, referred supra, whereunder the viewof the Delhi High Court in Kanta Mehta v. Union of India, referred supra, thatthe subject matter of legislation impugned therein falls within the meaning of"banking", coming under the provisions of the Section 45S and 58B(5A) and 58B(5B) read with Section 45I of the Reserve Bank of India Act, 1934, and but forthe facility of withdrawing by cheque or draft, the definition of "banking" inthe Banking Regulation Act, 1949 would squarely govern the impugned businessactivities of the financial establishments.80. The existing laws, namely Section 58A of the Companies Act, 1956,regulates the acceptance of the deposits and Section 45S of Reserve Bank ofIndia Act, 1934 prohibits the acceptance of the deposits, and also prescribessuitable punishment and penalties for contravening the same, but, neither ofthe existing laws provide for regulating the activities of the financialestablishments, which not only duped the innocent depositors and accepteddeposits from them, but also siphoned of, diverted or transferred the fundsmala fide. The existing laws do not provide for attachment of the propertiesthat were procured either in the name of the Financial Establishments or inthe name of any other person from and out of the deposits collected by theFinancial Establishments, or if it transpires that such money or other propertyis not available for attachment or not sufficient for repayment of thedeposits, such other property of the said Financial Establishment or thepromoter, partner, director, manager or member of the said FinancialEstablishment or a person who has borrowed money from the FinancialEstablishment to the extent of his default or, such other properties of thatperson in whose name properties were purchased from and out of the depositscollected by the Financial Establishment, nor provide for attachment of theproperties of mala fide transferees, nor provide for sale of those propertiesattached and to distribute the sale proceeds equitably to the depositors.However, the impugned Act, under Sections 3 and 8 provides for attachment ofproperties of the financial establishments and persons mentioned in Section 3and also malafide transferees, sale as well as equitable distribution amongthe depositors, in the interest of the public at large. Therefore, it cannot bestated that the impugned Act attempts to supplant or supplement parliamentarylegislation and seeks to cure the deficiencies in the parliamentarylegislations, viz., Companies Act, 1956 or Reserve Bank of India Act, 1934.Therefore, the contention that the shortfall or the deficiency in theparliamentary legislation cannot be cured by the Tamil Nadu Act is notsustainable.81. Similarly, since the object of the impugned enactment is not the sameas that intended under Section 58A of the Companies Act, 1956 and under Section45S of the Reserve Bank of India Act, 1934, the penalties envisaged under thoseActs for any contravention cannot either be compared or contrasted with thepenalties prescribed in the impugned enactment, because, in substance, theobject of the impugned legislation is, by and large, different from thatintended under Section 58A of the Companies Act, 1956 and Section 45S of theReserve Bank of India Act, 1934. Section 58A of the Companies Act, 1956 is https://hcservices.ecourts.gov.in/hcservices/ intended to regulate the acceptance of public deposits and Section 45S of theReserve Bank of India Act, 1934 is intended to prohibit acceptance of the same.But, the Tamil Nadu Act is intended to regulate the activities of the financialestablishments and to find a solution to the problem of the depositors, by dueprocess of law, so that the dues payable to the depositors can be realised. 82. Superficially, it may appear that the impugned subject matter is insubstance covered under Entries 43, 44 and 45 of List I, but both in realityand in logic, it is not so. Even though it incidentally trenches on thesubjects reserved for the Central legislation, occupied by the Companies Act,1956 and Reserve Bank of India Act, 1934 to certain extent, it cannot be saidthat the State has no legislative competency to enact the impugned Tamil NaduAct, as it is well settled that incidental trenching is permissible in law andthe impugned Act, if understood in pith and substance, is for the recovery ofthe amount due to the depositors in the interest of the public at large, whichwe shall deal with in detail latter.VIII-B(g). THE IMPUGNED TAMIL NADU ACT AND SECTIONS 45S AND 58B(5A) OF RESERVEBANK OF INDIA ACT, WITH REFERENCE TO THE DECISION IN KANTA MEHTA V. UNION OFINDIA CASE AND VELAYUIDHAN ACHARI, T. V. UNION OF INDIA CASE83. According to the petitioners, the impugned subject matter being"banking", falls within the field of legislation of the Union Government underEntry 45 of List I of the VII Schedule. In this regard, the petitioners rely onthe decision of the Delhi High Court in Kanta Mehta v. Union of India, referredsupra, whereunder, while upholding the constitutional validity of Section 45Sread with 58B(5A) of the Reserve Bank of India At, 1934, it was held that thebusiness of accepting the deposits is "banking" and the impugned provision isnot violative of Articles 14 and 19 of the Constitution of India. It was alsobrought to our notice that the view of the Delhi High Court in Kanta Mehta v.Union of India, referred supra, was subsequently confirmed by the Apex Court inVelayuidhan Achari, T. v. Union of India, referred supra. 84. Before analyzing the contentions made on behalf of the petitioners, inthe light of the decisions in Kanta Mehta v. Union of India, referred supra andVelayuidhan Achari, T. v. Union of India, referred supra, in this regard, wepropose to refer Sections 45I, 45MB, 45S, 58B(5A) and 58B(5B) of the ReserveBank of India Act, 1934, which read as follows: " 45-I. Definitions In this chapter, unless the context otherwise requires-(a) "business of a non-banking financial institution" means carrying onof the business of a financial institution referred to in clause (c) andincludes business of a non-banking financial company referred to in https://hcservices.ecourts.gov.in/hcservices/ clause (f);(aa) "company" means a company as defined in section 3 of the CompaniesAct, 1956 (1 of 1956) and includes a foreign company within the meaningof section 591 of that Act;(b) "corporation" means a corporation incorporated by an Act of anyLegislature;(bb) "deposit" includes and shall be deemed always to have included anyreceipt of money by way of deposit or loan or in any other form, butdoes not include,- (i) amounts raised by way of share capital; (ii) amounts contributed as capital by partners of a firm; (iii) amounts received from a scheduled bank or a co-operative bankor any other banking company as defined in clause (c) of section 5 ofthe Banking Regulation Act, 1949 (10 of 1949); (iv) any amount received from,- (a) *** (b) a State Financial Corporation, (c) any financial institution specified in or under section 6A ofthe Industrial Development Bank of India Act, 1964 (18 of 1964), or (d) any other institution that may be specified by the Bankin this behalf; (v) amounts received in the ordinary course of business, by wayof- (a) security deposit, (b) dealership deposit, (c) earnest money, or (d) advance against orders for goods, properties orservices; (vi) any amount received from an individual or a firm or anassociation of individuals not being a body corporate, registered underany enactment relating to money lending which is for the time being inforce in any State; and (vii) any amount received by way of subscriptions in respectof a chit. Explanation I: "Chit" has the meaning assigned to it inclause (b) of section 2 of the Chit Funds Act, 1982 (40 of 1982). Explanation II: Any credit given by a seller to a buyer on https://hcservices.ecourts.gov.in/hcservices/ the sale of any property (whether movable or immovable) shall not bedeemed to be deposit for the purposes of this clause;(c) "financial institution" means any non-banking institution whichcarries on as its business or part of its business any of the followingactivities, namely :-(i) the financing, whether by way of making loans or advances orotherwise, of any activity other than its own; (ii) the acquisition of shares, stock, bonds, debentures orsecurities issued by a government or local authority or other marketablesecurities of a like nature; (iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972 (26 of 1972); (iv) the carrying on of any class of insurance business; (v) managing, conducting or supervising, as foreman, agent or in anyother capacity, of chits or kuries as defined in any law which is forthe time being in force in any State, or any business, which is similarthereto; (vi) collecting, for any purpose or under any scheme or arrangementby whatever name called monies in lump sum or otherwise, by way ofsubscriptions or by sale of units, or other instruments or in any othermanner and awarding prizes or gifts, whether in cash or kind, ordisbursing monies in any other way, to persons from whom monies arecollected or to any other person,but does not include any institution, which carries on as its principalbusiness,- (a) agricultural operations; or (aa) industrial activity; or; (b) the purchase or sale of any goods (other than securities) or theproviding of any services; or (c) the purchase, construction or sale of immovable property, so,however, that no portion of the income of the institution is derivedfrom the financing of purchases, constructions or sales of immovableproperty by other persons; Explanation : For the purposes of this clause, "industrial activity"means any activity specified in sub-clauses (i) to (xviii) of clause (c)of section 2 of the Industrial Development Bank of India Act, 1964 (18of 1964);(d) "firm" means a firm as defined in the Indian Partnership Act, 1932; https://hcservices.ecourts.gov.in/hcservices/ (e) "non-banking institution" means a company, corporation or co-operative society.(f) "non-banking financial company" means- (i) a financial institution which is a company; (ii) a non banking institution which is a company and which has asits principal business the receiving of deposits, under any scheme orarrangement or in any other manner, or lending Tiny manner; (iii) such other non-banking institution or class of suchinstitutions, as the bank may, with the previous approval of the CentralGovernment and by notification in the Official Gazette, specify. 45MB. Power of bank to prohibit acceptance of deposit and alienation ofassets:(1) If any non-banking financial company violates the provisions of anysection or fails to comply with any direction or order given by the bankunder any of the provisions of this Chapter, the bank may prohibit thenon-banking financial company from accepting any deposit.(2) Notwithstanding anything to the contrary contained in any agreementor instrument or any law for the time being in force, the bank, on beingsatisfied that it is necessary so to do in the public interest or in theinterest of the depositors, may direct, the non-banking financialcompany against which an order prohibiting from accepting deposit hasbeen issued, not to sell, transfer, create charge or mortgage or deal inany manner with its property and assets without prior written permissionof the bank for such period not exceeding six months from the date ofthe order45S. Deposits not to be accepted in certain cases (1) No person, being an individual or a firm or an unincorporatedassociation of individuals shall, accept any deposit- (i) if his or its business wholly or partly includes any ofthe activities specified in clause (c) of section 45-I; or (ii) if his or its principal business is that of receiving ofdeposits under any scheme or arrangement or in any other manner, orlending in any manner: PROVIDED that nothing contained in this sub-section shallapply to the receipt of money by an individual by way of loan from any https://hcservices.ecourts.gov.in/hcservices/ of his relatives or to the receipt of money by a firm by way of loanfrom the relative or relatives of any of the partners. (2) Where any person referred to in sub-section (1) holds anydeposit on the lst day of April, 1997 which is not in accordance withsub-section (1), such deposit shall be repaid by that person immediatelyafter such deposit becomes due for repayment or within three years fromthe date of such commencement, whichever is earlier: PROVIDED that if the bank is satisfied on an applicationmade by any person to the bank that such person is unable to pay a partof the deposits for reasons beyond his control or such repayment shallcause extreme hardship to him, it may, by an order in writing, extendsuch period by a period not exceeding one year subject to suchconditions as may be specified in the order. (3) On and from the lst day of April, 1997, no person referred to insub-section (1) shall issue or cause to be issued any advertisement inany form for soliciting deposit.Explanation: For the purposes of this section, a person shall be deemedto be a relative of another if, and only if- (i) they are members of a Hindu undivided family; or (ii) they are husband and wife; or (iii) the one is related to the other in the manner indicated in theList of relatives below:List of relatives 1. Father, 2. Mother (including step-mother), 3. Son(including step-son), 4. Son's wife, 5. Daughter (including step-daughter), 6.Father's father, 7. Father's mother,8. Mother's mother,9.Mother's father,10. Son's son, 11. Son's son's wife, 12. Son's daughter,13. Son's daughter's husband, 14. Daughter's husband, 15. Daughter'sson, 16. Daughter's son's wife, 17. Daughter's daughter, 18.Daughter'sdaughter's husband, 19. Brother (including step-brother), 20. Brother'swife, 21, Sister (including step-sister), 22. Sister's husband. 58B. Penalties: (1) to (4) *** (5) ...... (5A) If any person contravenes any provision of section 45S, he https://hcservices.ecourts.gov.in/hcservices/ shall be punishable with imprisonment for a term which may extend to twoyears, or with fine which may extend to twice the amount of depositreceived by such person in contravention of that section, or twothousand rupees, whichever is more, or with both: PROVIDED that in the absence of special and adequate reasons tothe contrary to be mentioned in the judgment of the court, theimprisonment shall not be less than one year and the fine shall not beless than one thousand rupees. (5B) Notwithstanding anything contained in section 29 of the Codeof Criminal Procedure, 1973 (2 of 1974), it shall be lawfulfor a Metropolitan Magistrate or a Judicial Magistrate of the firstclass to impose a sentence of fine in excess of the limit specified inthat section on any person convicted under sub-section (5A).(emphasis supplied)85. Finding the then existing enactments relating to the Banks did notprovide control over the companies or institutions, which, although they arenot treated as Banks, accept from the general public or carry on any otherbusiness which is allied to banking, the Union of India by Amendment Act 55 of1963, in order to ensure more effective supervision and management of monetaryand credit system of the Reserve Bank of India, as a central bankinginstitution of the country, desired that the Reserve Bank of India should beenabled to regulate the conditions on which the deposits may be accepted bythese non-banking companies and institutions and thus empowered the ReserveBank of India to give necessary directions to any financial institution orinstitutions. Then the activities of the non-banking institutions andunincorporated bodies receiving deposits are by Amendment Act 23 of 1997regulated in terms of the provisions in Chapter IIIB and IIIC of the ReserveBank of India Act, 1934 respectively. While thus regulating the receipt ofdeposits by non-banking financial companies, the Reserve Bank of Indiaprohibited the acceptance of deposits by the non-banking financial companies.Similarly, unincorporated bodies have also been totally prohibited fromaccepting deposits for the purpose other than personal use. Accordingly, theunincorporated bodies have been specifically prohibited from issuing anyadvertisement in any form for the acceptance of deposits. But still, there werereports that several financial companies and unincorporated bodies had failedto comply with such directions and repay the deposits collected fromunsuspecting depositors, who had been tempted by attractive returns andincentives offered. In this backdrop, the above said directions were insertedin Section 45S of the Reserve Bank of India Act, 1934.86.1. Even though the word "bank" is defined under Section 2(aii) of theReserve Bank of India Act, 1934 to mean the Reserve Bank of India constitutedby this Act, there is no definition for "banking" in the Reserve Bank of IndiaAct, 1934. However, "banking" and "banking company" are defined in BankingRegulation Act, 1949 as follows: "Section:5. Interpretation. In this Act, unless there is anything https://hcservices.ecourts.gov.in/hcservices/ repugnant in the subject or context,(a) ...(b) "banking" means the accepting, for the purpose of lending orinvestment, of deposits of money from the public, repayable on demand orotherwise, and withdrawable by cheque, draft, order or otherwise;(c) "banking company" means any company which transacts thebusiness of banking in India."86.2. The Banking Regulation Act, 1949 is intended to consolidate the lawrelating to banking. While the primary object of the Company Law is tosafeguard the interest of the stake holders, that of the Banking RegulationAct, 1949 is to protect the interest of the depositors. The comprehensivedefinition of "banking" defined in the Banking Regulation Act, 1949 is,therefore, intended to bring within the scope of the legislation allinstitutions which receive deposits, repayable on demand or otherwise, forlending or investment; prohibiting non-banking companies from acceptingdeposits repayable on demand; prohibiting trading with a view to eliminate non-banking risks; empowering Central Government to take action against the banksconducting their affairs in a manner detrimental to the interest of thedepositors; widening the powers of the Reserve Bank of India so as to enableit to come to aid to banking companies in times of emergency, etc. 86.3. As per Section 7 of the Banking Regulation Act, 1949 no company,other than a banking company shall use as a part of its name, or in connectionwith its business, any of the words "bank" or "banker" or "banking" and nocompany shall carry on the business of banking in India unless it uses as partof its name at least one of such words, and as per Section 7(2) no firm orindividual or group of individuals shall, for the purpose of carrying on anybusiness, use as part of its or his name any of the words "bank" or "banker" or"banking". 86.4. Section 10BB of the Banking Regulation Act, 1949 empowers theReserve Bank of India to appoint a Chairman of the Board of Directors, on awhole-time or part-time basis, for managing the affairs of banking company. 86.5. Section 21 of the Banking Regulation Act, 1949 empowers the ReserveBank of India to control the advances by banking companies. Section 22 of theBanking Regulation Act, 1949 provides that unless a license is issued by theReserve Bank of India, no company shall carry on the banking business in India.86.6. Section 35 of the Banking Regulation Act, 1949 empowers the ReserveBank of India to cause an inspection of any banking company or its books andaccounts. Section 35A of the Banking Regulation Act, 1949 empowers the ReserveBank of India, if satisfied in the public interest or in the interest of thebanking policy, that the conduct of the banking company is prejudicial to theinterest of the banking company, and if it is necessary to secure propermanagement of the banking company and to issue necessary directions, as it maydeem fit. Under section 36 of the Banking Regulation Act, 1949 the ReserveBank of India is vested with residue powers mentioned therein to have a control https://hcservices.ecourts.gov.in/hcservices/ on the banking companies. Section 36AA empowers the Reserve Bank of India toremove the managerial and other persons from office and Section 36AB empowersthe Reserve Bank of India to appoint the additional directors. 86.7. It is, therefore, clear that by virtue of the provisions of theBanking Regulation Act, 1949 all the banking companies are brought under thedirect control of the Reserve Bank of India and no banking company shallconduct a business in banking without the license of the Reserve Bank of India.The provisions of the Banking Regulation Act, 1949 shall be in addition to, andnot, save as hereinafter expressly provided, in derogation of the CompaniesAct, 1956, and any other law for the time being in force. Therefore, no companywhether incorporated or unincorporated can undertake a business in bankingwithout the license of Reserve Bank of India and concededly, none of thepetitioners have obtained any license from the Reserve Bank of India. 87.1. With this backdrop, we propose to deal with the provisions of theReserve Bank of India Act, 1934, referred to above. Whether the petitionerswould come under the definition of "financial institution" defined underSection 45I(c) or "the firm" under Section 45I(d) or "non-banking institutions"under Section 45I(e) or "non-banking finance company" under Section 45I(f),there is a clear prohibition under Section 45MB of the Reserve Bank of IndiaAct for acceptance of the deposit and alienation of the assets. Even in thecase of unincorporated bodies there is prohibition of acceptance of deposits asper Section 45S of the Reserve Bank of India Act, 1934.87.2. Section 58B of the Reserve Bank of India Act, 1934 prescribespenalties to be imposed and Section 58C of the Reserve Bank of India Act, 1934deals with the offences by the companies and section 58G, deals with finebeing imposed.87.3. A careful reading of all the above provisions of the Act, makes itclear that the provisions of the Reserve Bank of India Act, 1934 prohibit anyperson, whether individual, corporation, incorporated company under theCompanies Act, 1956 from accepting deposits, whereas the provisions of theBanking Regulation Act, 1949 contemplate license to be obtained from ReserveBank of India for conducting the business of banking.87.4. Admittedly, none of the petitioners have obtained any license fromReserve Bank of India. None of the petitioners satisfy the definition of"banking" in the Banking Regulation Act, 1949, as there is no provision intheir business for withdrawal of amount by cheque, draft, order or otherwise.Therefore, the business of accepting the deposits cannot fall within themeaning of "banking" defined under the Banking Regulation Act, 1949. 87.5. The powers conferred on the Reserve Bank of India to give necessarydirection to remove, change or appoint the directors and to give suitabledirections, including the power to take appropriate penal action against thosewho violate the prohibition to accept public deposits are all, in our https://hcservices.ecourts.gov.in/hcservices/ considered opinion, not a remedy to the depositors. Those provisions may be ananswer to check the big black money bosses, but will not in any way be a remedyto the loss of the poor depositors, who deserve the protection of the State byappropriate legislation. Therefore, as there is no effective remedy in theCentral legislation to regulate and control either incorporated orunincorporated companies in the matter of depositors, who have deposited theirhard earned money with the financial establishments, the State Government iscompetent enough to bring out impugned legislation to suit the need of thepublic, to protect the interest of the depositors as well as in the publicinterest. 87.6. Similarly, neither the prohibition, prohibiting the non-bankingcompanies from accepting the deposits, nor the direction not to sell, not totransfer, nor to create a charge or mortgage or deal in any manner with theproperty and assets without prior permission of the Reserve Bank of India for aperiod not exceeding six months from the date of the prohibition order underSection 45MB of the Reserve Bank of India Act, 1934, can be a solution for thegrievance of the aggrieved depositors. 88.1. The introduction of Section 45S read with Section 58B(5A) of theReserve Bank of India Act, 1934 was challenged in Kanta Mehta v. Union ofIndia, referred supra, on the ground of legislative competency and forviolation of Articles 14 and 19 of the Constitution of India before theDivision Bench of the Delhi High Court. It was contended therein that theimpugned provisions would fall under Entry 30 or 32 of List II of VII Schedule,but not within the Entry 45 or 97 of the List I of VII Schedule. But, theDivision Bench of Delhi High Court held that the acceptance of the publicdeposits by any person, whether individual or firm or unincorporatedassociation of individuals would mean "banking" and therefore, the parliamenthas legislative competency to enact Section 45S and 58B(5A) of Chapter IIIC ofthe Reserve Bank of India Act, 1934. 88.2. Accordingly, the Division Bench of the Delhi High Court in KantaMehta v. Union of India, referred supra, held that the business of acceptanceof deposits from public comes within the meaning of "banking", taking intoconsideration the object of the Reserve Bank of India Act, 1934, namely,bringing the activities of the non-banking financial companies andunincorporated corporations within the purview of the Reserve Bank of IndiaAct, 1934. 88.3. It also held that the provision made under Section 45S of theReserve Bank of India Act, 1934 for a reasonable restriction in the matter ofaccepting deposits is not violative of Articles 14 and 19 of the Constitutionof India and the said view of the Division Bench of the Delhi High Court wasaffirmed by the Apex Court in Velayuidhan Achari, T. v. Union of India,referred supra.88.4. The reasons that weighed the Division Bench of the Delhi High Courtin Kanta Mehta v. Union of India, referred supra, to hold that Section 45S of https://hcservices.ecourts.gov.in/hcservices/ the Reserve Bank of India Act, 1934 does not suffer any legislative competencyare that, the courts must presume that the legislature best understands theneeds and complexities of any social evil; the legislature must be allowed freeplay of choice to select the best course it deems fit; the Courts are concernedwith the constitutionality of the legislation; even though the question ofconstitutionality and validity of the legislation are certainly within thedomain of the Court, the Court shall not permit any trespass on a fieldforbidden to the legislation; and in examining the necessity of economiclegislation, the Court should be prepared to accept the reality that weighedthe legislature. 88.5. However, where no license has been obtained from Reserve Bank ofIndia, as in the instant case, the question of applicability as well asviolation of the directions issued under Section 45S of the Reserve Bank ofIndia Act, 1934 by Reserve Bank of India remains silent and unanswered.Further, the power of the Reserve Bank of India to undertake a periodicalinspection in such cases and to proceed further in the matter will not besufficient to safeguard the interest of the depositors, which has assumedgreater importance under a vulnerable situation, where unhealthy features andmalpractices have come to surface in acceptance of deposits from the innocentpublic promising higher rate of interest, even though the same is notcommercially viable, which necessitated the legislature to undertake greatpains to find suitable machinery for the recovery. 88.6. Therefore, even though the Reserve Bank of India Act, 1934 prohibitsacceptance of deposits and prescribes the penalty for any violation of theprovisions of the Act, enabling the Court to pass appropriate punishment,there is no provision or mechanism for attaching the properties of financialestablishments and the properties of the mala fide transferees, bringing thesame for sale and disbursing the sale proceeds among the depositors equitably.88.7. That apart, in GANESH BANK KURUNDWAD LTD. V. THE UNION OF INDIA &OTHERS, JT 2006 (8) SC 132, the Apex Court has held that in order to be a"banking company" within the meaning of Section 45S of the Reserve Bank ofIndia Act, 1934 and to do the business of "banking" defined under Section 5(b)of the Banking Regulation Act, 1949, the deposits accepted from the publicshould be repayable on demand or otherwise, and withdrawable by cheque, draft,order or otherwise; and licence should have been obtained from the Reserve Bankof India. But, in the instant case, none of the above conditions is satisfiedand therefore, the petitioners are not coming within the meaning of "banking"as defined under the Banking Regulation Act, 1949; nor the provisions of theReserve Bank of India Act, 1934 provide any remedy for realization of the duesto the depositors. We are, therefore, of considered opinion that the Sections45S and 58B(5A) of the Reserve Bank of India Act, 1934 cannot be a bar for theState to enact suitable legislation to protect the interest of lakhs of suchaggrieved depositors. https://hcservices.ecourts.gov.in/hcservices/

89. The absence of appropriate provision in the Reserve Bank of India Act,1934 read with Banking Regulation Act, 1949 paves way for a genuine need tobring out the impugned socio economic legislation to find out a solution to thepanic of depositors as the State cannot be a silent spectator to the menace ofthe poor depositors as the malpractice and the fraudulent commissions andomissions on the part of the financial establishments have increased shakingnot only the very economy but also the social life of the middle and poorclasses, or otherwise there would be disastrous consequences both in theeconomy and social life of such depositors who have been exploited on the falsepromise of higher rate of interest. The impugned legislation, therefore, wasbrought to salvage the economy and prevent further perversions. 90. An argument was advanced that the Reserve Bank of India is empoweredto take appropriate action against such defaulted financial establishments andthe inaction on the part of Reserve Bank of India in this regard cannot be aground for the State Government to trespass into the field of legislation, butwe are unable to agree with the same, as the Reserve Bank of India could notpossibly be faulted for not looking into the alleged hardship faced by thedepositors for the simple reason that, concededly, none of the petitioners hadobtained licence from the Reserve Bank of India, nor the business of financialestablishments in accepting deposits can be strictly construed to be banking asdefined under the Banking Regulation Act, 1949. However, any possible attempt of the financial establishments to escape fromthe clutches of Reserve Bank of India Act, 1934 with respect to the acceptanceof the public deposit by not getting licence contemplated under the provisionsof Banking Regulation Act, 1949 cannot be ruled out and therefore, theinsertion of Section 45S or 58B(5A) of the Reserve Bank of India Act, 1934,whereunder there is no provision for realisation, cannot, by itself, be asolution to the aggrieved depositors. 91. The mere absence of exercise of such power conferred under section 58B(5A) or 58G of the Reserve Bank of India Act, 1934 cannot by itself invalidatethe impugned legislation where the Government proposed to protect the interestof depositors, in the public interest and in order to regulate the activitiesof such financial establishments, which can, in our considered opinion, betraced within the field of legislation under Entries 1 and 32 of the List-IIof VII Schedule to the Constitution of India. 92. As long as the field of legislation of the impugned Tamil Nadu Actis traceable to Entries 1 and 32 of the State List as well as Entry 7 of theConcurrent List, which we shall deal with later, the question of consideringthe deficiencies or lapses in the Central Enactments does not arise as thesame is totally irrelevant for testing the legislative competency of theimpugned Tamil Nadu Act enacted to provide a remedy for the vulnerable economicmischief of siphoning and diverting mala fide the funds of the depositors andthe crudities and inequities that prevail in the State. https://hcservices.ecourts.gov.in/hcservices/

93. Equally untenable is the contention that there is discriminatoryexemption in the uniform operation of the Act in question, both in the case ofthe financial establishments which are regular in repayment and those who donot, because the very menace of not acquiring the required licence under theprovisions of the Reserve Bank of India Act and collecting huge deposits fromthe depositors promising higher rate of interest, committing mismanagement andmalpractice, siphoning of the funds, is writ at large receiving the attentionof the State to bring out necessary enactment.94. The very fact that these institutions are not accountable either underthe Reserve Bank of India Act or under the Banking Regulations Act, theseinstitutions have escaped themselves from the public control. Consequently, theState is wise and right in bringing an enactment to remove the mischief. Westrongly find there is sufficient nexus between the action proposed and theobject sought to be achieved, which ultimately boils out to maintain the publicorder.95. On the other hand, by the impugned enactment, the State, not onlyproposed to attach the properties of the financial establishments and thepersons mentioned in Section 3 of the Tamil Nadu Act and that of the mala fidetransferees, but also provides for the sale of such properties under dueprocess of law and then to distribute the sale proceeds equitably among thedepositors. Therefore, neither the Doctrine of occupied field nor that of therepugnancy is attracted.96. Thus, a conscious effort to give remedy to unwary depositors' is thetheme of the Tamil Nadu Protection of Interests of Depositors (in FinancialEstablishments) Act, 1997. The depositors who are vulnerable to the temptationof earning high rate of interest were found victimized by these financialestablishments fraudulently. The Government having seen the acute anddistressing pain of the depositors has rightly come out with the legislation toprotect their interest, so that their dues can be realised by following dueprocess of law under the relevant provisions of the Tamil Nadu Act, asdiscussed above. 97. Of course, the impugned Act may incidentally trench by way of order ofattachment on the powers of Reserve Bank of India conferred under Section 45MBof the Reserve Bank of India Act, 1934 which is permissible in law. In anyevent, such incidental infringement as well as repugnancy alleged is cured bythe assent of the President obtained for the impugned enactment.98. We have already held that the impugned legislation is neitherarbitrary, nor discriminatory nor violative of the principles of naturaljustice, but, it is passed in the public interest and to regulate theactivities of such financial establishments, which we intend to dealseparately. https://hcservices.ecourts.gov.in/hcservices/

99.1. Our attention was also brought to the decision in VelayuidhanAchari, T. v. Union of India, referred supra where the Apex Court confirmingthe view of the Division Bench of Delhi High Court in Kanta Mehta v. Union ofIndia, referred supra, upheld the validity of sections 45S and 58B(5A) of theReserve Bank of India Act, 1934 as that the same are not violative of Articles14, 19(1)(g) and 21 of the of the Constitution of India. 99.2. In Velayuidhan Achari, T. v. Union of India, referred supra, theApex Court placed reliance on the decision of R.K.Garg v. Union of India (1981(4) SCC 675), whereunder it was held as follows: "Another rule of equal importance is that laws relating to economicactivities should be viewed with greater latitude than laws touchingcivil rights such as freedom of speech, religion etc. It has been saidby no less a person than Holmes, J. that the legislature should beallowed some play in the joints, because it has to deal with complexproblems which do not admit of solution through any doctrinaire orstrait-jacket formula and this is particularly true in case oflegislation dealing with economic matters, where, having regard to thenature of the problems required to be dealt with, greater play in thejoints has to be allowed to the legislature. The court should feel moreinclined to give judicial deference to legislative judgment in the fieldof economic regulation than in other areas where fundamental humanrights are involved. Nowhere has this admonition been more felicitouslyexpressed than in Morey v. Doud, 354 US 457; 1L ED 2d 1485(1957), whereFrankfurter, J. said in his inimitable style:‘In the utilities, tax and economic regulation cases, there are goodreasons for judicial self-restraint if not judicial deference tolegislative judgment. The legislature after all has the affirmativeresponsibility. The courts have only the power to destroy, not toreconstruct. When these are added to the complexity of economicregulation, the uncertainty, the liability to error, the bewilderingconflict of the experts, and the number of times the judges have beenoverruled by events — self-limitation can be seen to be the path tojudicial wisdom and institutional prestige and stability.’The Court must always remember that ‘legislation is directed topractical problems, that the economic mechanism is highly sensitive andcomplex, that many problems are singular and contingent, that laws arenot abstract propositions and do not relate to abstract units and arenot to be measured by abstract symmetry’; ‘that exact wisdom and niceadaptation of remedy are not always possible’ and that ‘judgment islargely a prophecy based on meagre and uninterpreted experience’. Everylegislation particularly in economic matters is essentially empiric andit is based on experimentation or what one may call trial and errormethod and therefore it cannot provide for all possible situations oranticipate all possible abuses. There may be crudities and inequities incomplicated experimental economic legislation but on that account alone https://hcservices.ecourts.gov.in/hcservices/ it cannot be struck down as invalid.”At page 706, para 19 it is held:“... That would depend upon diverse fiscal and economic considerationsbased on practical necessity and administrative expediency and wouldalso involve a certain amount of experimentation on which the Courtwould be least fitted to pronounce. The Court would not have thenecessary competence and expertise to adjudicate upon such an economicissue. The Court cannot possibly assess or evaluate what would be theimpact of a particular immunity or exemption and whether it would servethe purpose in view or not. There are so many imponderables that wouldenter into the determination that it would be wise for the Court not tohazard an opinion where even economists may differ. The Court must whileexamining the constitutional validity of a legislation of this kind, ‘beresilient, not rigid, forward looking, not static, liberal, not verbal’and the Court must always bear in mind the constitutional propositionenunciated by the Supreme Court of the United States in Munn v.Illinois, 94 US 113: 24 legislation Ed 77 (1875) namely, ‘that courts donot substitute their social and economic beliefs for the judgment oflegislative bodies’. The Court must defer to legislative judgment inmatters relating to social and economic policies and must not interfere,unless the exercise of legislative judgment appears to be palpablyarbitrary. The Court should constantly remind itself of what the SupremeCourt of the United States said in Metropolis Theater Co. v. City ofChicago, 228 US 61:57 legislation Ed 730 (1912):‘The problems of government are practical ones and may justify, if theydo not require, rough accommodations, illogical it may be, andunscientific. But even such criticism should not be hastily expressed.What is best is not always discernible, the wisdom of any choice may bedisputed or condemned. Mere errors of government are not subject to ourjudicial review’.”(emphasis supplied)99.3. Applying the very same rule of interpretation in testing thelegislative competency of the State in enacting the present enactment, as theimpugned legislation deals with economic and social problems and provides asound mechanism for the recovery of deposits, it may not be proper for thisCourt to hold that the State has erred in bringing out the impugnedlegislation, when there is no effective remedy to cure the mischief under theexisting framework of the Statutes. Moreover, aggrieved depositors aremultiplied in number and they are reduced penniless because of the fraud playedby the financial establishments. Under such circumstances, can't the Statebring out an enactment to evolve a foolproof statute for realisation of thedues payable to the depositors in the public interest and to regulate theactivities of the financial establishments? https://hcservices.ecourts.gov.in/hcservices/ VIII-B(h). THE IMPUGNED TAMIL NADU ACT AND SECTION 58A OF THE COMPANIES ACT,1956 WITH REFERENCE TO THE DELHI CLOTH AND GENERAL MILLS CO. LTD. V. UNION OFINDIA CASE100. The alternative argument advanced on behalf of the petitioners isbased on the decision of Delhi Cloth and General Mills Co. Ltd. v. Union ofIndia, referred supra where the validity of section 58A of the Companies Act,1956 read with Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975was upheld.101. It is contended that if the Tamil Nadu Act is relating to theincorporation of the financial establishments, the same should fall under Entry43 of the List I which deals with incorporation and therefore, the Statelegislature has no competency to enact the impugned Act. According to thepetitioners, there is already an enactment viz., Companies Act, 1956 whichoccupies the field. 102.1. Section 58A of the Companies Act, 1956 prescribes the conditionunder which the deposits may be invited or accepted by the companies eitherfrom the public or from the members, and reads as follows: 58A. Deposits not to be invited without issuing an advertisement.- (1) The Central Government may, in consultation with the ReserveBank of India, prescribe the limits up to which, the manner in which andthe conditions subject to which deposits may be invited or accepted by acompany either from the public or from its members. (2) No company shall invite, or allow any other person toinvite or cause to be invited on its behalf, any deposit unless- (a) such deposit is invited or is caused to be invited inaccordance with the rules made under sub-section (1), (b) an advertisement, including therein a statement showing thefinancial position of the company, has been issued by the company insuch form and in such manner as may be prescribed [ and] (c) the company is not in default in the repayment of anydeposit or part thereof and any interest thereupon in accordance withthe terms and conditions of such deposit. (3)(a) Every deposit accepted by a company at any time before thecommencement of the Companies (Amendment) Act, 1974 in accordance withthe directions made by the Reserve Bank of India under Chapter IIIB ofthe Reserve Bank of India Act, 1934, shall, unless renewed in accordancewith clause (b), be repaid in accordance with the 5[terms and conditionsof such deposit. (b) No deposit referred to in clause (a) shall be renewed bythe company after the expiry of the term thereof unless the deposit is https://hcservices.ecourts.gov.in/hcservices/ such that it could have been accepted if the rules made under sub-section (1) were in force at the time when the deposit was initiallyaccepted by the company. (c) Where, before the commencement of the Companies(Amendment) Act, 1974, any deposit was received by a companyin contravention of any direction made under Chapter IIIB of theReserve Bank of India Act, 1934, repayment of such deposit shall be madein full on or before the 1st day of April, 1975, and such repaymentshall be without prejudice to any action that may be taken under theReserve Bank of India Act, 1934 for the acceptance of such deposit incontravention of such direction.(3A) Every deposit accepted by a company after the commencement ofthe Companies (Amendment) Act, 1988, shall, unless renewed inaccordance with the rules made under sub-section (1), be repaid inaccordance with the terms and conditions of such deposit. (4) Where any deposit is accepted by a company after thecommencement of the Companies (Amendment) Act, 1974, incontravention of the rules made under sub-section (1), repayment ofsuch deposit shall be made by the company within thirty days from thedate of acceptance of such deposit or within such further time, notexceeding thirty days, as the Central Government may, on sufficientcause being shown by the company, allow. (5) Where a company omits or fails to make repayment of adeposit in accordance with the provisions of clause (c) of sub-section (3), or in the case of a deposit referred to in sub-section (4),within the time specified in that sub-section,- (a) the company shall be punishable with fine which shall notbe less than twice the amount in relation to which the repayment of thedeposit has not been made, and out of the fine, if realised, an amountequal to the amount in relation to which the repayment of deposit hasnot been made, shall be paid by the Court, trying the offence, to theperson to whom repayment of the deposit was to be made, and on suchpayment, the liability of the company to make repayment of the depositshall, to the extent of the amount paid by the Court, stand discharged; (b) every officer of the company who is in default shall bepunishable with imprisonment for a term which may extend to five yearsand shall also be liable to fine. (6) Where a company accepts or invites, or allows or causes anyother person to accept or invite on its behalf, any deposit in excessof the limits prescribed under sub-section (1) or in contravention of https://hcservices.ecourts.gov.in/hcservices/ the manner of condition prescribed under that sub-section or incontravention of the provisions of sub-section (2), as the case may be,- (a) the company shall be punishable,- (i) where such contravention relates to the acceptance ofany deposit, with fine which shall not be less than an amount equal tothe amount of the deposit so accepted; (ii) where such contravention relates to the invitation of anydeposit, with fine which may extend to [ten lakh rupees] but shall notbe less than [fifty thousand rupees]; (b) every officer of the company who is in default shall bepunishable with imprisonment for a term which may extend to five yearsand shall also be liable to fine. (7)(a) Nothing contained in this section shall apply to - (i) a banking company, or (ii) such other company as the Central Government may, afterconsultation with the Reserve Bank of India, specify in this behalf. (b) Except the provisions relating to advertisement containedin clause (b) of sub-section (2), nothing in this section shall apply tosuch classes of financial companies as the Central Government may, afterconsultation with the Reserve Bank of India, specify in this behalf. (8) The Central Government may, if it considers it necessary foravoiding any hardship or for any other just and sufficient reason, byorder, issued either prospectively or retrospectively from a date notearlier than the commencement of the Companies (Amendment) Act, 1974,grant extension of time to a company or class of companies to complywith, or exempt any company or class of companies from, all or any ofthe provisions of this section either generally or for any specifiedperiod subject to such conditions as may be specified in the order: Provided that no order under this sub-section shall be issued inrelation to a class of companies except after consultation with theReserve Bank of India. Provided that the [Tribunal] may, before making any order underthis sub-section, give a reasonable opportunity of being heard to thecompany and the other persons interested in the matter. (9) Where a company has failed to repay any deposit or partthereof in accordance with the terms and conditions of such deposit, the[Tribunal] may, if it is satisfied, either on its own motion or on theapplication of the depositor, that it is necessary so to do to safeguardthe interests of the company, the depositors or in the public interest, https://hcservices.ecourts.gov.in/hcservices/ direct, by order, the company to make repayment of such deposit or partthereof forthwith or within such time and subject to such conditions asmay be specified in the order: (10) Whoever fails to comply with any order made by the[Tribunal], under sub-section (9) shall be punishable with imprisonmentwhich may extend to three years and shall also be liable to a fine ofnot less than rupees five hundred for every day during which such non-compliance continues. (11) A depositor may, at any time, make a nomination and theprovisions of sections 109A and 109B shall, as far as may be, apply tothe nomination made under this sub-section. Explanation- For the purposes of this section, "deposit" meansany deposit of money with, and includes any amount borrowed by, acompany but shall not include such categories of amount as may beprescribed in consultation with the Reserve Bank of India."(emphasis supplied)102.2. Rule 3(A) of the Companies (Acceptance of Deposits) Rules, 1975reads as under: “3-A. Maintenance of liquid assets.—(1) Every company shall before the30th day of April of each year deposit or invest, as the case may be, asum which shall not be less than ten per cent of the amount of itsdeposits maturing during the year ending on the 31st day of March nextfollowing, in any one or more of the following methods, namely:(a) in a current or other deposit account with any scheduled bank, freefrom charge of lien;(b) in unencumbered securities of the Central Government or of any StateGovernment;(c) in unencumbered securities mentioned in clauses (a) to (d) and (ee)of Section 20 of the Indian Trusts Act, 1882 (2 of 1882).Provided that with relation to the deposits maturing during the yearending on the 31st day of March, 1979, the sum required to be depositedor invested under this sub-rule shall be deposited or invested beforethe 30th day of September, 1978.Explanation.—For the purpose of this sub-rule, the securities referredto in clause (b) or clause (c) shall be reckoned at their market value.(2) The amount deposited or invested, as the case may be, under sub-rule(1), shall not be utilised for any purpose other than for the repaymentof deposits maturing during the year referred to in that sub-rule,provided that the amount remaining deposited or invested, as the case https://hcservices.ecourts.gov.in/hcservices/ may be, shall not at any time fall below ten per cent of the amount ofdeposits maturing until the 31st day of March of that year.”103.1. When a challenge is made as to section 58A of the Companies Act,1956 as well as Rule 3A of the Companies (Acceptance of Deposits )Rules, 1975(hereinafter referred to 'Deposits Rules'), the Apex Court in Delhi Cloth andGeneral Mills Co. Ltd. v. Union of India, referred supra held that section 58Aof Companies Act, 1956 confers the power on the central Government to prescribethe limits upto which, the manner in which and the conditions subject to whichdeposits may be invited or accepted by non-banking companies and the same isintended to check the abuse by corporate sector and to protect the depositors,and rejected the contention that the State alone is competent to protect thesocially and economically weaker sections of society against exploitation byreceiving deposits from them, and ultimately upheld the legislative competencyof the Parliament to enact Section 58A of the Companies Act, 1956. It isfurther held that as the acceptance of deposits is well within the field oflegislation under Entries 43 and 44 of the Union List, the same cannot bebrought under Entry 30 of List II which deals with money-lending. The ApexCourt also held that neither section 58A Companies Act, 1956 nor Rule 3A of theCompanies (Acceptance of Deposits) Rules 1975, referred to above, violatesArticle 14, 19(1)(g) and 21 of the Constitution of India, because Section 58Aof the Companies Act, 1956 and Rule 3A of the Companies (Acceptance ofDeposits) Rules 1975 are intended to regulate the acceptance of the depositsfrom the public and also to provide liquid finance to the company to enable itto meet its obligation on maturity of deposits. It is further held that theamount deposited to meet the obligation under Rule 3A means and remains theproperty of the company and therefore company neither deprived of theproperty, nor the same is confiscated; and the same is intended to meet theimmediate need of the depositors for repayment of deposits on maturity. TheApex Court thus held that section 58A and Rule 3A are regulatory measures andit may not be within the domain of the Court to test the wisdom and efficacy ofthe legislature and therefore, disagreed with the contention of the petitionersthat the State alone can enact a law to protect the socially and economicallyweaker sections of the society. Then why the impugned enactment?103.2. The straight answer to the question is that none of the petitionersis a company registered under the Companies Act, 1956 and hence the provisionsof the Companies Act, 1956 are not applicable. On the other hand, theimpugned legislation is enacted in the public interest to regulate theactivities of financial establishments which falls under Entry 1 and 32 of theState List. 103.3. It is true when a challenge is made to Section 58A of the CompaniesAct and Rule 3(A) of the Companies (Acceptance of Deposits) Rules in DelhiCloth and General Mills Co. Ltd. v. Union of India, referred supra, the ApexCourt held that the power to regulate the acceptance of the deposits by theCompanies is well within the field of legislation of the Union of India. But,under Entry 32, the State is also competent to make appropriate laws https://hcservices.ecourts.gov.in/hcservices/ incorporating and regulating the corporations other than those specified inList I and to make necessary laws for the unincorporated trading, which wepropose to deal in detail latter.VIII-B(i). THE IMPUGNED TAMIL NADU ACT WITH REFERENCE TO THE CRIMINAL LAWAMENDMENT ORDINANCE, 1944 AS MADE APPLICABLE BY THE CRIMINAL LAW (TAMIL NADUAMENDMENT) ACT, 1997104.1. We also reject the contention that the subject matter of impugnedenactment is already occupied by Criminal Law Amendment Ordinance, 1944, theprovisions of which are made applicable to the State of Tamil Nadu by theCriminal Law (Tamil Nadu Amendment) Act, 1997, which came into force on12.8.1997. 104.2. The Criminal Law Amendment Ordinance is intended to prevent thedisposal or concealment of money or other property procured by means of certainoffences punishable under the Indian Penal Code, which are scheduledthereunder.104.3. Section 3(1) of the Ordinance enables the State Government or theCentral Government, as the case may be, to make an application to attach themoney or other property of any person, to the District Judge, within whosejurisdiction such person commits any of the scheduled offences, if there arereasons to believe that such money or other property is procured by means ofany of the scheduled offences or if such money or other property cannot, forany reason, be attached, to attach other property of the said person of valueas nearly as may be equivalent to that of the aforesaid money or otherproperty. The provisions of Code of Civil Procedure shall apply for executionof such order of attachment as per Section 3(2). Section 3(3) contemplatesthat the application should contain the grounds of reasons to believe forinvoking Section 3(1) and also other details relating to money, property andvalue of the same, the interest and title of such person, etc.104.4. Section 4(1) empowers the District Judge to pass an appropriateorder of ad interim attachment, as stated therein; Section 4(2) provides a postdecision opportunity to such person before making the ad interim order ofattachment absolute; and Sections 4(3) and 4(4) provide similar postdecisional opportunity not only to persons interested in the property but alsoto any other person who is not served with notice of the order of ad interimattachment.104.5. Section 5 of the Ordinance empowers the District Judge toinvestigate into the objections and to pass an order either making the adinterim order of attachment absolute, or varying it by releasing a portion ofthe property from attachment or withdrawing the order of ad interim attachmentas provided thereunder. Section 6 provides for attachment of properties of malafide transferees. As per Section 7 the provisions relating to Code of Civil https://hcservices.ecourts.gov.in/hcservices/ Procedure are applicable for executing the order of attachment. Section 8provides for security in lieu of attachment. Section 9 enables the DistrictJudge to pass an order just and reasonable for maintenance of the family of theperson interested in the property and also to safeguard his business. As perSection 10, such attachment shall be in force for one year and shall berenewable thereafter at the option of the respective applicant who applied forattachment. Section 11 provides an appeal to the High Court. Sections 12 and13 provide for the evaluation and disposal of the property subject to thetermination of the criminal proceedings of the scheduled offences, either torelease the attachment if the person is acquitted or to forfeit the property incase of conviction. If the property is forfeited, after deducting the cost ofattachment, the money or the property shall be distributed in proportiontowards the loss sustained by the Government or local authorities.104.6. The scheduled offences are as under:1.*** 2.An offence punishable under Section 406 or section 408 or 409 ofIndian Penal Code, where the property in respect of which theoffence is committed is property entrusted by His Majesty'sGovernment in the United Kingdom or in any part of His Majesty'sdominions or the Central or a State Government or a department ofany such Government or a local authority or a corporationestablished by or under a Central, Provincial or State Act, or anauthority or a body owned or controlled or aided by Government ora Government company as defined in Section 617 of the CompaniesAct, 1956 or a society aided by such corporation, authority, bodyor Government company or a person acting on behalf of any suchGovernment or department or authority or corporation or body orGovernment company or society.3.An offence punishable under Section 411 or section 414 of theIndian Penal Code, where the stolen property in respect of whichthe offence is committed is property such as is described in thepreceding item and in respect of which an offence punishable underSection 406 or section 408 or section 409 of the said Code hasbeen committed.4.An offence punishable under Section 417 or section 420 of theIndian Penal Code, where the person deceived is His Majesty'sGovernment in the United Kingdom or in any part of His Majesty'sdominions or the Central or a State Government or a department ofany such Government or a local authority or a corporationestablished by or under a Central, Provincial or State Act, or anauthority or a body owned or controlled or aided by Government ora Government company as defined in section 617 of the CompaniesAct, 1956 or a society aided by such corporation, authority, bodyor Government company or a person acting on behalf of any any suchGovernment or department or authority or corporation or body orGovernment company or society.4A.An offence punishable under the Prevention of https://hcservices.ecourts.gov.in/hcservices/ Corruption Act, 1988.5.Any conspiracy to commit or any attempt to commit or any abetmetor any of the offences specified in items 2, 3, 4 and 4-A.104.7. While making the Criminal Law Amendment Ordinance, 1944 applicableto Tamil Nadu by the Criminal Law (Tamil Nadu Amendment) Act, 1997, by virtueof Section 2(1) and 2(2), the wordings beginning with "where the property" andending with "department or authority" in item 2 and beginning with the words"Where the person" and ending with "department or authority" in Item 4 wereomitted. As a result, the money or other properties procured by means of theoffences scheduled thereunder, irrespective of the Governments transactions,are all brought under the purview of the Ordinance. However, there is nocorresponding amendment to Section 13(6) of the Criminal Law AmendmentOrdinance, 1944 in the Criminal Law (Tamil Nadu Amendment) Act, 1997 andconsequently, the provision made under Section 13(6) of the Criminal LawAmendment Ordinance, 1944 for distribution of the money or other propertyattached in proportion towards the loss sustained by the Government of localbodies is not applicable to the agony of the depositors.104.8. In order to invoke the provisions of the Criminal Law AmendmentOrdinance, 1944, as a condition precedent to attract the scheduled offences,there should be mens rea as well as reasons to believe that the money or otherproperty sought to be attached are procured by means of such scheduledoffences; otherwise the provisions of the Criminal Law Amendment Ordinance,1944 are not attracted and in any event, the attachment under the Ordinance issubject to the result of the criminal proceedings, for which the mens rea isthe basic criteria. In a criminal case, in order to prove the guilt of theaccused and to meet the ends of justice, the Rule of Mens rea has to beestablished beyond all reasonable doubts, but all is not so in a case of aneconomic offence. The classical view that "no mens rea, no crime" has long agobeen eroded especially regarding economic crimes, vide R.S.Joshi v. Ajit Mills,AIR 1977 SC 2279. Therefore, in economic offences, the notion that a penalty ora punishment cannot be cast in the form of an absolute or no fault liabilitybut must be preceded by mens rea must be rejected. 104.9. In a developing country with the mass of people illiterate andbelow poverty line, the State should be armed with powers to secure social andeconomic justice. While exercising such power for enacting appropriatelegislation , it is a common knowledge that a rule of strict liability orabsolute liability should be imposed without insisting mens rea to deal withsuch socio-economic crimes. 104.10. An economic offence is committed with cool calculation anddeliberate design with an eye on personal profit regardless of the consequenceto the community. A disregard for the interest of the community can bemanifested only at the cost of forfeiting the trust and faith of the communityin the system to administer justice in an even-handed manner without fear ofcriticism from the quarters which view white-collar crimes with a permissiveeye, unmindful of the damage done to the national economy and national https://hcservices.ecourts.gov.in/hcservices/ interest, [vide State of Gujarat v. Mohanlal Jitamalji Porwal, (1987) 2 SCC364]. The community acting through the State is also entitled to justice. Thecommunity or the State is not a persona non grata whose cause may be treatedwith disdain. Economic offenders who ruin the economy of the State aretherefore to be brought to book unsparingly. 104.11. To attract the statutory offence declared under Section 5 of theTamil Nadu Act, a well organized and white collared economic crime, there isno need to establish mens rea, as it is sufficient to apply the rule of strictliability to misfeasance or nonfeasance committed by the financialestablishments, which are dealt with latter, and this makes all the differencebetween the two enactments. 104.12. We are therefore satisfied that even though the provisions of theCriminal Law Amendment Ordinance, 1944 as made applicable by the Criminal Law(Tamil Nadu Amendment) Act, 1997 provide the power and procedure, whether ornot any Court has taken cognizance of the scheduled offences, for attachment ofthe money or other property that is procured by means of the scheduledoffences, and such power and procedure prescribed is akin to that of theimpugned Tamil Nadu Act, the subject matter of the impugned enactment is notoccupied by the Criminal Law Amendment Ordinance, 1944 for two vital reasons,viz., (i) such attachment under the Criminal Law Amendment Ordinance, 1944 issubject to the result in the criminal prosecution for the scheduled offences;and (ii) for want of provision for realisation and equitable distribution ofthe dues of the victimized depositors.104.13. For all these reasons, the provisions of the Criminal LawAmendment Ordinance as made applicable by the Criminal Law (Tamil NaduAmendment) Act, 1997 is not in any way helpful to the depositors. On theother hand, the offence declared statutorily under Section 5 of the impugnedTamil Nadu Act is unique, well-organised and white-collared in nature, whichshatters the economy and ruins the social status of the middle, lower middleand poor class of community, and therefore, such an offence does not come underthe scheduled offences governed under the Criminal Law Amendment Ordinance,1944 as made applicable by the Criminal Law (Tamil Nadu Amendment) Act, 1997. 105. The Government, having apprehended that the long wait for justice bythe cheated depositors of non-banking financial establishments, whetherincorporated or unincorporated would turn out to be much ado, as money powerand loop holes in the existing legal system are being used for the own benefitof the financial establishments, who have taken crores of rupees that belong tolakhs of people promising higher rate of interest, thought it fit to bring outan appropriate legislation to curb the activities of such financialestablishments, finding solution to the tragedy of these depositors not only byattaching the properties of the financial establishments and the properties ofmala fide transferees, but also realising the sale proceeds and distributingthe same equitably among the depositors and thus, the subject matter of theimpugned Act is not in any way comparable with the Criminal Law AmendmentOrdinance, 1944, as made applicable to the State of Tamil Nadu by the Criminal https://hcservices.ecourts.gov.in/hcservices/ Law (Tamil Nadu Amendment) Act, 1997. In any event, there cannot be any barfor the State legislature to enact a special legislation, viz. the impugnedTamil Nadu Act, which not only deals with the penal offence of the defaulters,but also provides for recovery machinery, akin to that of Civil Code. VIII-B(j). THE IMPUGNED TAMIL NADU ACT AND THE RELEVANT ENTRIES, VIZ., 1, 7 AND8 IN LIST III OF VII SCHEDULE TO THE CONSTITUTION OF INDIA106. The alternative argument advanced by the learned Advocate General isthat the State has the legislative competency under Entries 1, 7 and 8 of theConcurrent List of the VII Schedule to the Constitution of India, viz.,criminal law, contracts or actionable wrongs respectively. According to him,the field of legislation qua the impugned enactment can be traceable eitherunder criminal law, contracts or actionable wrongs. Entry 1 of the Concurrentlist deals with criminal law, including all matters included in the IndianPenal Code, but excluding offences against laws with respect to any of thematters specified in Lists I and II. Entry 7 deals with contracts and Entry 8deals with actionable wrongs. 107.1. Even though the acceptance of deposits is regulated under Section58A of the Companies Act, 1956, in the instant case, the omission andcommission of the financial establishments attracts the doctrine ofmisfeasance, viz., doing in a wrongful manner that which the law authorizes orrequires a public officer to do. 107.2. Similarly, even though Section 45S of the Reserve Bank of IndiaAct, 1934 prohibits the acceptance of the public deposits by the financialestablishments, the omission and commission of the financial establishmentsattracts the doctrine of non-feasance, viz., non performance of some act whicha person is obligated or has responsibility to perform. In either case, thefinancial establishments are chargeable for their commission and omission underSection 5 of the Tamil Nadu Act.108. Section 3 provides for passing ad interim orders of attachment of theproperties of the financial establishments and the persons mentioned therein tosafeguard the interest of the depositors. Section 5 has been inserted in theimpugned Act to punish with imprisonment the financial establishments and thepersons responsible for the management of the affairs of the financialestablishments who have committed default in the payment of deposit or failedto render service for which the deposit has been made. So also, Section 8provides for the attachment of properties of mala fide transferees. Thereforethe field of legislation of the impugned Act is traceable to Entry-1 of theConcurrent List. 109. The impugned Tamil Nadu Act would also fall under Entry 7 of theConcurrent List considering the submission made by the learned AdvocateGeneral that most of the financial establishments are having the practice ofusing pronotes in their transactions, which fact is not denied by thepetitioners. Further, the Act impugned cannot be said in pith and substance tobe one against banking regulation, but it deals with special species of https://hcservices.ecourts.gov.in/hcservices/ contracts with sinister features, wherein the innocent depositors were wooedwith higher rate of interest and ultimately cheated. As can be seen from theprovisions of the Tamil Nadu Act referred to earlier, the Tamil Nadu Act is notintended to regulate the transactions between the depositors and depositmobilisers and borrowers, but it is only intended to recover the amounts dueto the depositors, as agreed to between the parties and in case of default, toenforce the terms of contract between the parties and to recover such amounts,in addition to other machineries available under the law. The impugned TamilNadu Act is therefore referable to Entry 7 of the Concurrent List. 110. As already observed, the Tamil Nadu Act is intended to provide reliefto the middle, lower middle and poor people who form part of the socio-economicweaker sections of the society, by means of attachment of properties of thefinancial establishments or other persons mentioned in section 3 of the Act aswell as attachment of properties of mala fide transferees and hence, thelegislation is also traceable to Entry-8 of the Concurrent List. 111. Next, we proceed to examine the specific plea of the StateGovernment that the impugned enactment is traceable to Entries 1 and 32 of theList II of VII Schedule of the Constitution of India.VIII-B(k) THE IMPUGNED TAMIL NADU ACT AND ENTRY 32 OF LIST II WITH REFERENCE TOTHE POWER TO REGULATE112. Of course, it was also contended that the impugned subject mattercannot be considered under Entry 32 of List II, but, we are unable toappreciate the same as the State intended to regulate the activities of thefinancial establishments inasmuch as the business of the petitioners/financialestablishments is nothing but a trade in finance. The Apex Court inK.Ramanathan v. State of Tamil Nadu, 1985 (2) SCC 116, held that " The power to regulate carries with it full power over the thingsubject to regulation and in absence of restrictive words, the powermust be regarded as plenary over the entire subject. It implies thepower to rule, direct and control, and involves the adoption of a ruleor guiding principle to be followed, or the making of a rule withrespect to the subject to be regulated. The power to regulate impliesthe power to check and may imply the power to prohibit under certaincircumstances, as where the best or only efficacious regulation consistsof suppression. It would, therefore, appear that the word 'regulation'cannot have any inflexible meaning as to exclude 'prohibition'. It hasdifferent shades of meaning and must take its colour from the context inwhich it is used having regard to the purpose and object of thelegislation, and the Court must necessarily keep in view the mischiefwhich the Legislature seeks to remedy."Therefore, the impugned subject matter is traceable to Entry 32 of List II. https://hcservices.ecourts.gov.in/hcservices/

113. The regulatory powers conferred under Entry 32 of List II invoked bythe State in enacting the impugned Act is with a view to avoid fraud on thedepositors either by denying or delaying their dues on maturity and such powercannot be complained of as violative of Article 19(1)(g) of the Constitution ofIndia vide. Shriram Chits and Investment (P) Ltd v. Union of India, 1993 Supp(4) SCC 226.114. The word "trading" used in "unincorporated trading" in Entry 32 ofList II, would mean only the systematic business of lending as understood inthe commercial world and in ordinary meaning. Moreover, trade cannot beconfined to the movement of the goods but may also extend to transactionslinked with merchandise or the flow of goods or the promotion of buying andselling or advances, borrowings, discounting bills and mercantile documents,banking and other forms of supply of funds. Therefore, the business undertakenby the financial establishments herein, accepting the deposits on a promise ofwooing to pay a higher rate of interest, and then circulate the money to thirdparties for higher rate of interest, and thereafter, deceit the depositors, inour considered opinion, be brought under the meaning of "unincorporatedtrading" found in entry 32 of List II.115.1. When a general evil is sought to be suppressed some martyrs mayhave to suffer, for the legislature cannot easily make meticulous exceptionsand it has to proceed on broad categorizations and not singularindividualization, vide. Srinivasa Enterprises v. Union of India, (1980) 4 SCC507.115.2. Quoting again from Srinivasa Enterprises v. Union of India, [(1980)4 SCC 507, at page 516], 'judicial validation of a social legislation onlykeeps the path clear for enforcement. Spraying legislative socio-moralpesticides cannot serve any purpose unless the target area is relentlesslyhit.'115.3. We have already considered the gruesome background of economicinequities, which necessitated the State Government to bring out the impugnedenactment. There was an urgent need for the impugned legislation to find aremedy for the evil caused by the financial establishments exploiting theiranxiety for getting higher rate of interest. Therefore, the State Governmentis right in enacting the impugned Act to curb the gambling in the financetrade. 115.4. The danger of allowing the deposits to be accepted withoutregulation is more acute and urgent. Not to permit a play in the joints wouldbe to totally make it ineffective in meeting the challenge of the social evil.In the ultimate analysis, the mechanics of any economic legislation hasnecessarily to be left to the judgment of the executive and unless it is patentthat there is hostile discrimination against a class, the processual basis ofprice fixation has to be accepted, and one such course alone is permissible,vide Prag Ice and Oil Mills v. Union of India, AIR 1978 SC 1296. https://hcservices.ecourts.gov.in/hcservices/

115.5. The provisions meant to check the evil must be viewed throughsocially constructive, not legally captious, microscope to discover glaringunconstitutional infirmity, and that when laws affecting large chunks of thecommunity are enacted, stray misfortunes are inevitable and that sociallegislation, without tears, affecting vested rights is virtually impossible,vide B.Banerjee v. Smt.Anita Pan, AIR 1975 SC 1146.115.6. It is also well settled that private rights must yield to thepublic need and that any form of regulation is unconstitutional only ifarbitrary, discriminatory or demonstrably irrelevant to the policy thelegislature is free to adopt, vide Leo Nebbia v. People of the State of NewYork [1934] 78 Law Ed 940. 115.7. The problems of the Government is one of practical in nature.Therefore, the State has rightly stepped in by way of this legislation toprotect the great number of depositors under due process of law demonstrativelyas the power of the State to enact appropriate law of regulation for suchpractical problems has got wide connotation, and we do not find any irrelevancyin the choice made by the State Government in bringing out the impugned Act bytaking recourse under Entries 1 and 32 in the List II of the Constitution ofIndia in this matter.116.1. In the instant case, the efforts taken by the State by enacting theimpugned Act seeks to plug the loopholes in the existing socio economicscenario as the prevailing legal system is not able to cure the mischief.There is not even a semblance of conflict, what to talk of direct conflict,between the impugned State Act and the Central Acts, viz., Section 45S and 58B(5A) of Reserve Bank of India Act, 1934 or Section 58A of the Companies Act,1956, as the case may be, to bring about the situation where one cannot beobeyed without disobeying the others. Both the Acts can operate simultaneouslyas they do not occupy the same field. As the enactments operate in twodifferent fields without encroaching upon each others field, there is norepugnancy. That apart, the Court is required to look at the substance bytaking into account the entire enactment as a whole and the main objects andthe scope and effect of the provisions and incidental and superficialencroachments are to be disregarded. The doctrine of occupied field appliesonly when there is clash between the Union and the State List within an areacoming within the competence of both and if the impugned legislationsubstantially falls within the power expressly conferred upon the legislaturewhich enacted the law any incidental encroachment in the field assigned to theother legislature is to be ignored [vide: J.Ameergani, W/o.Jaheer Hussain v.State & another (2005-2-L.W.(Crl.) 606)]. 116.2. In any event, assuming the impugned Tamil Nadu Act incidentallytrenches upon the field of legislation of the Central Acts, referred to above,the attack on the ground of occupied field, much less repugnancy, got cured bythe assent of the President to the impugned Act. https://hcservices.ecourts.gov.in/hcservices/

117. Even though the acceptance of the deposit would fall within themeaning of Banking as the same is akin to banking in essence and therefore, mayalso fall within the field of legislation under Entry 45 (banking) of List I inview of the decision in Kanta Mehta v. Union of India, referred supra, we aresatisfied that it is enacted, in pith and substance, under Entry 1 or 32 ofList II of VII Schedule to the Constitution of India. Because, it may not beproper for this Court to go into the societal realities, and socio-economicdisparities, which are in their entirety left for the consideration of thelegislature while enacting the impugned Act in the public interest and toregulate the business of the financial establishments. Otherwise, when thefinancial establishments fold up their tents or become sick and windup, thedepositors will have to stand in the queue as unsecured creditors with noumbrella of protection.VIII-B(l). THE IMPUGNED TAMIL NADU ACT AND THE CONCEPT OF PUBLIC ORDER ANDENTRY 1 OF LIST II WITH REFERENCE TO THE POWER TO MAINTAINPUBLIC ORDER118. Lastly, we propose to deal with the "public interest" sought to besafeguarded under the impugned enactment, which has a direct bearing on theconcept of "public order".119. The Full Bench of the Bombay High Court in Vijay C.Puljal v. State ofMaharashtra, referred supra, has rejected the contention that the legislativefield for the Maharashtra Act is traceable to Entry 1 of State List-II, viz.,Public order. While so, it is held that while enacting laws on public order anumerous problems of law enforcement and maintenance of public order havetheir genesis. It is further observed that the field of legislation of publicorder must address to the public order and therefore, in the guise oflegislating on "public order", the State had entered into the substantive areawhich was reserved for parliament in Union List. It is also observed that lawon public order must truly and essentially address itself to the preservationand maintenance of public order. 120. In our considered opinion, on the question, whether the impugnedenactment can be sustained under Entry 1, viz. Public Order, it should beremembered that public order is an expression of wide connotation intended totake care of the public safety for the members of the political society.Therefore, the public order need not in every case be traced either to thesecurity of the State or to the law and order. 121. Public Order has a comprehensive meaning so as to include publicsafety in its relation to the maintenance of the public order and themaintenance of the public order involves consideration of the public safety.The Public order, public safety, public tranquility and the public interest areall overlapping terms with each other. The expression public order thereforerequires the very wide connotation. The public order is the basic need in anyorganised society. It implies orderly state of society and community in which https://hcservices.ecourts.gov.in/hcservices/ citizens can peacefully pursue their normal activities of life. Therefore, itmay not be proper to read the public order only with reference to insurrection,riot, turbulence or the crimes of violence. Hence, the public order in Entry 1of List II, must be interpreted to include the public safety in its relation tothe maintenance of the public order. 122. All and every breach of tranquility, whether in social or economicsphere of life of citizens, would involve breach of public order and therefore,the field of the legislation of the State Government to enact appropriatelegislation in the matter affecting economic and social disorders whichultimately shake the public order, unless and otherwise it is traceable to thesecurity of the State, the use of any Naval, Military and Air Force or anyother armed force of the Union of India, cannot be curtailed by the Court onthe ground of legislative competency. 123. While the law and order forms the largest concentric circle and thenext represents the public order, the smallest represents the security of theState. Therefore, every infraction of law must necessarily affect the publicorder. But, an Act affecting the law and order may not necessarily affect thepublic order. Likewise, an Act which may affect the public order need notnecessarily affect the security of the State. Therefore, the true test is notthe kind of disorder but the potentiality of the Act in question. One Act mayaffect only individuals, while the other though of a similar kind may have suchan impact that it would disturb the even tempo of the life of the community[vide Arun Gosh v. State of West Bengal ((1970) 1 SCC 98]. 124. But, this does not mean that there can be no overlapping, in thesense that an act cannot fall under two concepts at the same time. An act forinstance affecting the public order may have an impact that it would affectboth public order and the security of the State. In such a case the power canbe exercised on both grounds viz. disturbance of the public order and danger tothe security of the State [Vide Kishori Mohan Bera v. State of West Bengal,(1972) 3 SCC 845, Nathulal Govindji Jhagada v. State of Gujarat, (1981) 22 GujLR 503]. Therefore, the public order postulates a synonymous with publicsafety and public interest. Hence, the problem of the depositors is theproblem of the public and it cannot be decided numerically.125. A serious contention was raised to the effect that public order isone as stated in the statement of objects and reasons in Act 14 of 1982 andtherefore, public order is totally a different concept; that there should beactual physical force to danger to life and property or there should be threatto life and property; and that since the framers of Constitution originallyincluded preventive detention, but the same was subsequently taken away and inthat context, public order should be looked into. But, we are unable toappreciate such contention, because the Apex Court in State of U.P. v. SanjaiPratap Gupta,(2004) 8 SCC 591, following its earlier decision in Arun Gosh v.State of West Bengal, referred supra, held that Public order, law and order andthe security of the State fictionally draw three concentric circles, thelargest representing law and order, the next representing public order and the https://hcservices.ecourts.gov.in/hcservices/ smallest representing security of the State. Every infraction of law mustnecessarily affect order, but an act affecting law and order may notnecessarily also affect public order. Likewise, an act may affect public order,but not necessarily the security of the State. The true test is not the kind,but the potentiality of the act in question. One act may affect onlyindividuals while the other, though of a similar kind, may have such an impactthat it would disturb the even tempo of the life of the community. This doesnot mean that there can be no overlapping, in the sense that an act cannot fallunder two concepts at the same time. An act, for instance, affecting publicorder may have an impact that it would affect both public order and thesecurity of the State. 126. It can, therefore, be concluded that the Tamil Nadu Act is traceableto Entry 1 of the State List. For this view support can also be had from thedecision of the Apex Court in Romesh Thappar v. State of Madras, AIR 1950 SC124, wherein it is held as under:"Public safety ordinarily means security of the public or their freedomfrom danger. In that sense, anything which tends to prevent dangers topublic health may also be regarded as securing public safety. Themeaning of the expression must, however, vary according to the context.In the classification of offences in the Indian Penal Code, forinstance, Chapter XIV enumerates the offences affecting the publichealth, safety, convenience, decency, and morals and it includes rashdriving or riding on a public way (Section 279) and rash navigation of avessel (Section 280), among others, as offences against public safety,while Chapter VI lists waging war against the Queen (Section 121),sedition (Section 124-A) etc. as offences against the State, becausethey are calculated to undermine or affect the security of the State,and Chapter VIII defines offences against the public tranquillity whichinclude unlawful assembly (Section 141) rioting (Section 146), promotingenmity between classes (Section 153-A), affray (Section 159) etc.Although in the context of a statute relating to law and order securingpublic safety may not include the securing of public health, it may wellmean securing the public against rash driving on a public way and thelike, and not necessarily the security of the State. It was said that anenactment which provided for drastic remedies like preventive detentionand ban on newspapers must be taken to relate to matters affecting thesecurity of the State rather than trivial offences like rash driving, oran affray. But whatever ends the impugned Act may have been intended tosub-serve, and whatever aims its framers may have had in view, itsapplication and scope cannot, in the absence of limiting words in thestatute itself, be restricted to those aggravated forms of prejudicialactivity which are calculated to endanger the security of the State. Noris there any guarantee that those authorised to exercise the powersunder the Act will in using them discriminate between those who actprejudicially to the security of the State and those who do not."(emphasis supplied) https://hcservices.ecourts.gov.in/hcservices/

127. The malady of the thousands and thousands of depositors ramped into apublic disorder on account of the resentment caused by the financialestablishments, who had accepted the deposits on the promise to repay the samewith fabulous, but commercially not viable, rate of interest, however could notkeep up the promise. The fraudulent default of the petitioners forms a uniqueclass of organised and white-collared crime. 128. A systematic conspiracy was attempted by these financialestablishments, which not only committed fraud on the depositors, but alsosiphoned of or diversified the funds of the depositors mala fide. Thecircumstances and the economic and societal realities under which the impugnedenactment was legislated have to be taken into consideration to decide whetherthe legislative field of the State Government is traceable to "public order".The Court must necessarily keep in view the mischief which the legislatureseeks to remedy. As per the statistics as on November, 2006 placed before us,19 Lakhs of depositors were longing for realisation of their dues. Thefollowing details furnished in the Counter affidavit filed by the Secretary toGovernment, Home Department, may give a clear picture: (i)Total No. of cases reported1194(ii)Total No. of depositors preferred complaintswith Police (According to the InvestorsFederation, total depositors cheated above 19Lakhs)10,43,006(iii)Amount involved in Police complaints1925.48 Crores(iv)Amount refunded762.53 Crores(v)Amount yet to be refunded1162.95 Crores(vi)Value of properties identified877.87 Crores(vii)No. of persons benefited(viii)Cases registered under TNPID Act521(ix)Non-TNPID (Schedule Offences)673(a)Senior Citizens above 80 yearsAbout 6 Lakhs(b)Senior Citizens (between 60 and 80 years)10 Lakhs(c)WidowAbout 40,000(d)HandicappedAbout 2,000(e)Driven out by wardsAbout 5,000(f)ExpiredAbout 8,000(g)Below poverty lineAbout 7 Lakhs(h)PensionersAbout 3 Lakhs 129. If that be so, under the facts and circumstances and the societalrealities for enacting the impugned Act, which is intended to safeguard thesocial and economic interest of the innocent depositors, won't the grievance ofthe depositors which rippled violently unset the public order in the societycreating a social and economic disorder? Answering affirmatively, we do findforce in the submissions made on behalf of the State Government that thelegislative competency of the State is traceable to Entry 1 of List II whichdeals with "public order" apart from Entry 32 which regulates the activities of https://hcservices.ecourts.gov.in/hcservices/ the financial establishments, to monitor them to rescue the depositors. 130. Piercing the veil of legalese, the core question is the degree ofsocial control imposed by the State and resisted at every turn by the financialestablishments. In pith and substance, we are also satisfied that the impugnedAct is meant for public safety and public interest and to regulate theunincorporated trading and finance. This leads to the next question whetherpublic order includes public interest and public safety. 131. The sad situation of the depositors is that the high priority promiseof independence laws directed to agrarian reforms rolled out from Statelegislatures in quick succession. Urban elite found it disadvantageous toinvest their savings in agricultural land. It is said that Rent RestrictionActs were a disincentive for investment in urban house property. Gold Controlmeasures dried up gold as a venue of investment of savings. Bank interests werediscouraging. Social security in old age being niggardly or non-existent,there was fascinating attraction for deposits in non-banking companies. 132. On the other hand, the attempt of the financiers exploiting theanguish of the depositors, is nothing but a notorious abuse of the innocentdesire of the depositors for higher rate of interest for the small savings thatthey invested, for which they have been given a small passbook as a token oftheir acknowledgment, which they consider as a passport for their childrenhigher education in some cases, or wedding of daughters in some other, and as apolicy medical insurance in the case of most of the aged retired depositors,but in reality, in all cases, an unsecured promise executed on a waste paper.The senior citizens above 80 years, senior citizens between 60 and 80 years,widows, handicapped, driven out by wards, retired Government servants andpensioners, living below the poverty line, and similarly placed personsconstitute the community of depositors. If their grievance is not taken aspublic interest, or public safety, the words, 'public safety' and 'publicinterest' would be only dead letters. Is it not the duty of the State to curbsuch mismanagement and malpractice indulged by the financial establishmentsadopting unscrupulous attempt?133. Obviously there is a social anguish to curb exploitation of thedepositors by these financial establishments, to prevent and protect theprecarious loss of the depositors and to recover the same as much as possible.The unsecured depositors themselves cannot, without the aid of the State, finda solution for their grief, by taking a recourse under the legal proceedingsordinarily available to them, but for the impugned enactment. Otherwise, itwould only render them to abandon their sugar coated promises and make recourseto conventional legal proceedings, incurring expenses for court fee, advocatefee, apart from the inconvenience involved therein, meeting all technicalobjections, giving way for docket explosive litigations, without tasting thefruits of the same. https://hcservices.ecourts.gov.in/hcservices/

134. Is it possible for those depositors who lost everything in the handsof the financial establishments on the tempting and robing in schemes, to fightagainst these financial establishments on their legs, without any aid of theState? No. In our considered opinion, the State, has rightly come with anenactment to wipe away the tears of the innocent depositors and to protecttheir interest and also to attach the property immediately and to takeeffective steps to recover the amounts diverted and to return as much aspossible to the persons who lost their savings, of course providing adequatemachinery and guidelines for the same, by protecting the innocent depositorsand also genuine third parties, whose properties are also attached.135. The State being the custodian of the welfare of the subjects cannotbe a silent spectator without finding a solution for this gruesome plague. TheState therefore had to awake and protect the vulnerable sector from the evilhands of the financiers, who have no social responsibility, but with a lustfuldesire of easy money making promising attractive returns for the poorinvestors. The noxious net cast by the financial establishments was large andthe State was rightly moved to stop this menace. Many a little makes a mickle,and those small sums collected from a substantial number of subscribersaccumulated into huge resources for the financiers, who ultimately divertedtheir collections and converted the deposited amounts as assets in the names ofthird parties, and finally one day attempted to close the financialestablishments, disappointing the innocent depositors. The grim picture of theentire episode enacted by financiers is nothing but to gamble upon the appetiteof the innocent depositors for higher rate of interest and to steal out theentire sterilized savings of the innocent depositors diplomatically under thebanner of white collar financial establishments, out of their appetite forhigher rate of interest and finally to siphon of them in entirety. In the nameof attractive rate of interest, the financiers adopted unique, modus operandimesmerizing the depositors to deposit their hard earned money under differentschemes, which are nothing but have an anti-social impact on the community atlarge. Then, is it not the responsibility of the welfare State, who have owedto establish/maintain socio-economic justice in the society? 136. If no law could be made to curb such activities of the financialestablishments effectively and to realise the dues payable to the depositors,an anomalous situation would have been created, viz., these financialestablishments would continue their business and divert the funds clandestinelyby mala fide transferring and would siphon of the funds of the depositors, andfinally would be prepared to face the penal action under section 45S or 58B(5A)of the Reserve Bank of India Act, 1934, as the case may be, taking advantage ofthe loopholes in committing such white collar offences. But, the depositorswould be left in lurch, with no remedy. To permit such anomalous situation, inour opinion, would be contrary to the public interest. Therefore, the elementof public order comes into play sustaining the impugned legislation under Entry1 of the List II of VII Schedule. https://hcservices.ecourts.gov.in/hcservices/

137. It is settled law that the Courts are concerned only with theconstitutionality, but not with the wisdom of the legislature or lack of thesame which are essentially for the legislature to determine. The judicialdeference to legislature in the instances of economic regulation is a wellestablished principle borne out of the acceptance of reality and courts,lacking the capacity to inform themselves fully, about the peculiarities of aparticular local situation, should hesitate to dub the legislativeclassification as irrational, because legislative judgment may respond closelyto local needs and courts' familiarity to those needs may be limited, videState of Gujarat v. Shri Ambica Mills Ltd., AIR 1974 SC 1300.138. Statutes made for the public good ought to be liberally construed andin doing so, another principle should not be lost sight, namely, safety of thepeople is the supreme law. Salus Populi est suprema lex (safety of the peopleis the supreme). The Constitution is the documentation of founding faiths ofthe nation and the fundamental direction for the fulfillment. Therefore, it isnot possible to deduce a limitation from something supposed to be inherent inthe constitution itself. The spirit of Constitution therefore cannot prevailas against its letter. [vide: A.K.Gopalan v. State of Madras, AIR 1950 SC 27].The legislative competence should be tested by the spirit of the enactmentwhich vivifies but not by mere letter. The Courts are not at liberty to declarean act void based on elusive and unsafe guide.139. The State, invoking the field of legislation under Public Order,Entry 1, List II, as a parent of the country, applying the doctrine of parenspatriae, is obligated to shoulder with the responsibilities in exercise of itssovereign power and to discharge its duties to protect the public interest. 140. Our constitution makes it imperative to secure for the State tosecure to all its citizens the rights guaranteed by the Constitution. Where thecitizens are not in a position to assert and secure their rights, the Statemust come into picture and to protect and fight for the right of the citizens.Otherwise, the rights conferred on the citizen and the duty on the State wouldremain as dead letters. It is a protective measure to which the social welfarestate is committed. It is therefore necessary for the State to ensure thefundamental rights in conjunction with the Directive Principles of State Policyto effectively discharge their obligation to protect the victims. While theState invoked the doctrine of parens patriae, it may not be proper for thisCourt to stand on the cobweb of technicalities, without properly appreciatingthe scope and object of the impugned Act; nor to put a spoke in the wheel whichwould be detrimental to the public at large. The doctrine of parens patriaemay not be a rule in strict sense but it is an evolution. Therefore, the powerof the State in bringing the legislation applying the doctrine of parenspatriae has to be given a broader appreciation than narrow interpretationwithout measuring the legislative will by the contour of legislative competency[vide: Charan Lal Sahu v. Union of India (1990) 1 SCC 613] . https://hcservices.ecourts.gov.in/hcservices/

141. We are therefore obliged to uphold the emancipation of thesovereignty of the State to enact the impugned law as the State realised itsresponsibility to protect the victims, to provide remedy to the victims and tofind a solution to the disastrous conditions of the victims who wereeconomically ruined by the financial establishments. Hence, we have nohesitation to hold that the legislature is perfectly justified in coming outwith the impugned Act so that the tragedy of the victims who have beenexploited by the white collared, organised crime of the financialestablishments and the persons managing their affairs can be remediedregulating the activities of the financial establishments and to safeguard thepublic interest and thereby to maintain the "public order".142. In the instant case, the noxious net caused by the financialestablishments was large and the State moved to stop this menace. Small sumscollected from the subscribers accumulated into huge resource like many alittle makes a mickle, and then these financial establishments disappear andevade payments, after siphoning of the amounts collected or diverting them bymala fide transfers. As referred to above, about 19 lakhs of people reportedto be suffering by this menace in the State of Tamil Nadu. 143. Reserve Bank of India being a body corporate, constituted under theReserve Bank of India Act, 1934 can only transact its business which isauthorised by the Act to transact. Under the existing provisions of eitherReserve Bank of India Act, 1934 or Companies Act, 1956, there is no provisionto deal with the financial establishments, particularly for the recovery ofamounts due to the depositors, viz., to attach, sell, realise and distributeequitably. 144. In the impugned enactment, the Government has rightly providedspecial machinery and judicious mechanism to attach the properties of thefinancial establishments or the persons mentioned under Section 3 of the Act aswell as that of the mala fide transferees and to bring them for sale andthereafter to distribute the sale proceeds equitably among the depositors, ofcourse, in compliance of the principles of natural justice, as discussed abovein detail, while considering the issue (i).145. Therefore, the State Government rightly in order to protect theinterest of the public and to regulate the activities of the financialestablishments, enacted the impugned Act to meet the urgent need. The StateGovernment has, thus, rightly, in order to plug certain loopholes in theexisting system and in the public interest, tracing the field of legislationunder Entries 1 and 32 of the State List, enacted the impugned Act. 146. What form a regulatory measure must take, is, for the legislatureto decide. The court would not examine its wisdom or efficacy except to theextent that Article 13 of the Constitution is attracted. The State thus keepinga close watch over the situation, has taken steps to eradicate the abuses ofthe economic power by these financial establishments by enacting the impugned https://hcservices.ecourts.gov.in/hcservices/ Act. By the impugned legislation the society at large is sought to beprotected from the ever haunting spectre of the financial establishments. Inpith and substance, we are satisfied that it is coming under Entries 1 and 32of the State List. In that view of the matter, we need not go into thequestion whether the impugned legislation is traceable to Entry 30 of the StateList (List-II), viz., Money-lending.147. The Country is undergoing major socio-economic changes to meet theneeds of the public. Not only the Legislature and the Executive, but also theJudiciary should shoulder the responsibility for the sake of such central andvital socio-economic developments. The Judiciary cannot disown its obligationtowards such societal realities, economic disorders and socio-economicdisasters. Its contribution should be in appreciation of the goals undertakenby the Legislature and the Executive to meet the socio-economic challengesarticulated by appropriate enactments, which are presumed to beconstitutionally valid, but not otherwise. 148. No doubt, the legislation we uphold is an added responsibility on theState. We hope the State shall vigorously enforce the Act with sympathy forthe victim classes and show progressive measure in action. The authoritiesconferred with powers will enforce the law with right orientation, correctgrasp and socio-economic activism. The spirit that exhibited on behalf of theState should be shown in the field of enforcement and yield the fruits to thelonging depositors. Because many a welfare legislation reportedly remainscloistered virtues slumberous in effect. The finest hour of the rule of law iswhen the law disciplines life and matches promise in performance.149.1. To sum up,a. the field of legislation, viz., Tamil Nadu Act, is traceable toEntries 1 and 32 of List II, besides falling under Entries 1, 7 and 8in the Concurrent List, which as already observed needs nodeliberation;b. the impugned Tamil Nadu Act does not fall within the legislativefield of the Union List (List-I); andc. though there is trenching, the same is only incidental, which ispermissible in law. 149.2. Issue (ii) is answered in the affirmative.IX. CHALLENGE AGAINST THE CONSEQUENTIAL PROCEEDINGS UNDER THE TAMIL NADU ACT150. When the competent authority initiated action under Sections 3, 4, 5,6, 7, 8, 9 or 10 of the Act against the financial establishments or any otherperson to achieve the awesome objects of the Tamil Nadu Act, the same werechallenged either by way of Writ Petitions, Civil Miscellaneous Appeals, https://hcservices.ecourts.gov.in/hcservices/ Crl.O.Ps., Crl.R.C., on the ground that the impugned Tamil Nadu Act isunconstitutional, and some of the cases are included in the batch and some ofthem are still pending before this Court. Since we have declared that theTamil Nadu Act does not suffer any legislative competency; nor its provisionsare arbitrary and unreasonable, violative of principles of natural justice; noroffends Articles 14, 19(1)(g) and 21 of the Constitution of India, all theseWrit Petitions and Civil Miscellaneous Appeals stand dismissed andconsequently, the Special Court or the Competent Authority, as the case maybe, shall proceed to enforce the law with right orientation, correct grasp andsocio-economic activism, as indicated above.X. THE RESULTIn fine, (i)we hold that the Tamil Nadu Protection of Interest of Depositors (inFinancial Establishments) Act, 1997 does not suffer any legislativecompetency; nor its provisions are arbitrary and unreasonable,violative of principles of natural justice; nor offends Articles 14,19(1)(g) and 21 of the Constitution of India; (ii)the writ petitions as well as the writ appeal questioning theconstitutional validity of the Tamil Nadu Act are dismissed;(iii)in so far as the writ petitions challenging the consequentialattachment proceedings taken and the criminal action initiated as wellas the civil miscellaneous appeals that arise out of the order ofSpecial Court are concerned, as the provisions of the Tamil Nadu Actare held valid, we do not want to interfere with such proceedings andhence, those writ petitions as well as the civil miscellaneous appealsare also dismissed; (iv)consequently, connected miscellaneous petitions are closed; and(v)however, in the circumstances, there is no order as to costs. na/sasi/kplSd/Asst.Registrar/true copy/Sub Asst.Registrar1.The Competent Authority andCommissioner of Land Administration,Chennai https://hcservices.ecourts.gov.in/hcservices/

2.The District Collector, Dindigul.3.The Revenue Divisional Officer, Dindigul.4.State Rep. ByThe Deputy Superintending of Police,Economic Offences Wing II,Dindigul,5.State of Tamil Nadu,rep. By its Secretary,Law Department, Chennai.6.The Competent Authority,District Revenue Officer,Madurai.7.State of Tamil Nadu,rep. By its Secretary,Home Department,Fort St. George,Chennai 9.8. The Comoetent Authority and Spl Commissioner and Commissioner of Land Acquistion, Chennai 5.9. The Special Court Constituted for the offenceunder T.N, Protection of Interest of Depositors(In Financial establishments) Act,High Court Campus, Chennai 104.10. The Inspector of Police,Central Cirme Branch,O/o Commissioner of POlice,EOW. Government Estate,Chennai 2.11.The Competent Authority andDistrict Revenue Officer,Collectorate, Coimbatore 12.The Sub Inspector of Police,E.O.W. II, Coimbatore.13The Principal Secretary to Government, Secretariate, Home [Courts IIA]Department, Government of Tamil Nadu, Fort St. George, Chennai 9. https://hcservices.ecourts.gov.in/hcservices/

14.The Inspector General of Police,Registration, Economic Offences Wing II, Chennai 2.15.The Competent Authority and District Revenue Officer, Chennai.16The Spl. Public Prosecutor,Special Court of Tamil Nadu,Protection of Interests of Deposits Act 1997 Chennai 104.17.Deputy Superintendent of Police,E.O.W II, Chennai 2.18.The Competent Authority andDistrict Revenue Officer, Dindigul.19.The Inspector of Police,E.O.W.II, Dindigul...Respondents.20.The Inspector of Police,EOW.II, Tiruchi.21.The Competent Authority,District Revenue Officer,Trichy.22.The Inspector of Police,EOW.II, Madurai.23..The Competent Authority and District Revenue Officer,Kancheepuram District, Kancheepuram.24. The Inspector of Police,EOW, Kancheepuram.25.The Competent Authority and District Revenue Officer,Coimbatore.26. The Inspector of Police,EOW.II, Coimbatore.27. The Secretary to the Governmentof Tamil Nadu,Home [Courts II A] Department,Fort St. George,Chennai 9.28. The Inspector of Police,District Crime Branch,[EOW.II], Theni. https://hcservices.ecourts.gov.in/hcservices/

29. The Competent Authority and District Revenue Officer,Cuddalore.30. The Inspector of Police,EOW.II, Cuddalore.31. The Inspector of Police,EOW, Chennai.32. The Inspector General of Police,EOW, Chennai.33. The District Revenue Officer,Collector Office, Chennai.34. The Deputy Superintendent of POlice,EOW.II Chennai.35. The District Revenue Officer,Collector Office Vellore, Vellore.36. The Deputy Superintendent of POlice,EOW.II, Vellore, Vellore District.37. The Inspector of Police,District Crime Branch,EOW.II, Theni District.38.. The District Collector,Salem39. The Revenue Divisional Officer,Salem District at Salem.40. The Inspector of Police,EOW.II, Salem 41. The Deputy Superintendent of POlice,EOW II, Trichy.42. The Spl Judge under the TNPID (INF.ES) Act 1997City Civil Court Buildings Annexe,Chennai 104 - C.C.No. 129 of 2004.43. The Deputy Superintendent of POlice,EOW II, Kancheepuram. https://hcservices.ecourts.gov.in/hcservices/

44. The Inspector of Police,EOW.II, Udhagai the Nilgiris District45. The Competent Authority & The District Revenue officer,Kanyakumari District at Nagarcoil.46. State rep by The Deputy Superintendent ofPolice E.O.W II, Kanyakumari District at Nagercoil.47. The Special Court Constituted for the offenceunder T.N, Protection of Interest of Depositors(In Financial establishments) Act,High Court Campus, Chennai 104.48. The Inspector of Police, State of Tamilnadu,EOW.II, Nagaercoil, Kanyakumari District at Nagarcoil 1.49. The Competent Authority/Land Commissioner,Collector Office, Vellore.50.The Inspector of Police E.O.W II, Vellore.51. The Authorised officers,Revenue Divisional Officer,Coimbatore.52. The Deputy Superintendent of Police,EOW.II. Coimbatore.53. The Deputy Superintendent of Police,EOW.II. Chennai.54. The Competent Authority (Under TNPID Act)District Revenue officer,Erode District Erode.55. The Inspector of Police,EOW II, Erode.56. The Inspector of Police,Economic Office Wing,Manjakuppam, Cuddalore District https://hcservices.ecourts.gov.in/hcservices/

57. The Inpector of Police,EOW.II, Karur.58. The Competent Authority andDistrict Revenue officer,Salem District, Salem.59. The Superintenent of Police,Salem District Salem.60. The Inpector of Police,EOW.II, Chennai 2.61. The Inpector of Police,EOW.II, Vellore District.62. The District Superintendentof Police, District Crime Branch,Karur.63. The Addl Director General of Police,EOW.II, Admisalty House, Govt Estate,Chennai 2.64. The Addl Commissioner/ Competent Authority (Cinema & Irrigation) Land Administration DepartmentChepauk, Chennai 5.65. The District Registrar,Registration Department,Pondicherry.66. The Sub Registrar,Oulgaret, Pondicherry.67. The District Collector,Kanyakumari District, Nagercoil.68. The District Revenue Officer,Coimbatore.69. The Deputy Superintendent of Police,EOW.II, Chengai East District,Chennai 14.70 The Deputy Superintendent of PoliceEOW.II, Madurai. https://hcservices.ecourts.gov.in/hcservices/ + 20 ccs to Mr.S. Xavier Felix, Advocate, SR Nos. 13239 to 13258+ 2 ccs to Mr. P. Mathivanan, Advocate, SR No.12963 & 12965+ 3 ccs to Mr. L. G. Sahadevan, Advocate, SR No.12924+ 3 ccs to Mr. A. Prabhakaran, Advocate, SR No.13228 & 13229, 13230+ 3 ccs to Mr. N. Domadaran, Advocate, SR No.13056 & 13057, 13055+ 2 ccs to Mr. M. Kempraj, Advocate, SR No.13343 & 13344+ 1 cc to Mr. G. Saravanakumar, Advocate, SR No.12893+ 1 cc to Mr. A.K. Mylsamy, Advocate, SR No.12925+ 2 ccs to Mr. S. Ayyathurai, Advocate, SR No.12912, 12913+ 1 cc to Mr. D. Selvaraju, Advocate, SR No.13283+ 3 ccs to Mr. D. Rajagopal, Advocate, SR No.13224, 13226 & 13227+ 2 ccs to M/s. Sarvabhauman Associates, Advocate, SR No.13201+ 1 cc to Mr. M. Muthusamy, Advocate, SR No.13335+ 2 ccs to Mr.R. Bala Subramanian, Advocate, SR No.13181+ 1 cc to M/s. A.L. Ganthimani, Advocate, SR No.13222+ 1 cc to Mr. K. Anbarasan, Advocate, SR No.12964+ 1 cc to Mrs. S. Radha Suindaram, Advocate, SR No.12873+ 1 cc to Mr. L. P. Shanmugasundaram, Advocate, SR No.12954+ 2 ccs to M/s. Sai Bharathi & Ilan , Advocate, SR No.12934+ 1 cc to Mr. P. Rajamanickam, Advocate, SR No.13194+ 1 cc to Mr. R. Loganathan, Advocate, SR No.12905+ 2 ccs to Govt Pleader SR No. 13104 & 13316+ 1 cc to Mr.S. Kadarkarai, Advocate, SR No.13134+ 1 cc to M/s. Anand & Suryas, Advocate, SR No.12906 https://hcservices.ecourts.gov.in/hcservices/ + 1 cc to Mr. P.K. Rajagopal, Advocate, SR No.13131+ 3 ccs to Mr. M. Venkateswaran, Advocate, SR No.13593 & 13594, 13587+ 2 ccs to Mr. M. Vivekanandamurthy, Advocate, SR No.13355 & 13356+ 1 cc to Mr. G. Sngadev Rajaguru, Advocate, SR No.13734+ 1 cc to Mr. T. S. Sivagnanam, Advocate, SR No.13562+ 1 cc to Mr. J. Pothi Raj, Advocate, SR No.13541+ 1 cc to Mr. K. Kalyanasundaram, Advocate, SR No.13773+ 1 cc to Mr. Su. Srinivasan, Advocate, SR No.13351+ 1 cc to Mr. La Law, Advocate, SR No.13551+ 1 cc to Mr. K. Ravichandrababu, Advocate, SR No.13540+ 3 ccs to Mr. A. Murugaiyan , Advocate, SR No.12962, 12961+ 1 cc to Mr. S.PL. Palaniappa, Advocate, SR No.13168SR, GP,RVL 07.03.2006

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