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Issues Involved:
1. Constitutional Validity of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997. 2. Legislative Competency of the Tamil Nadu Government to Enact the Act. 3. Reasonableness and Violation of Articles 14, 19(1)(g), and 21 of the Constitution of India. 4. Violation of Principles of Natural Justice. 5. Conflict with Central Legislation. Analysis of the Judgment: I. Constitutional Validity of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997 Cornerstone: The court emphasized an organic approach in interpreting the constitutional validity of any enactment, especially those dealing with economic and social reliefs. The guiding principle should be to blend the statute harmoniously to achieve the common object of the legislation. Why the Full Bench?: The Tamil Nadu Act was challenged on various grounds, including being draconian, excessively harsh, and lacking legislative competency. The Reserve Bank of India had also urged other states to enact similar legislation, leading to the Maharashtra and Pondicherry Acts. The Full Bench of the Bombay High Court had struck down the Maharashtra Act, prompting a re-examination of the Tamil Nadu Act. II. Legislative Competency of the Tamil Nadu Government to Enact the Act Grounds of Challenge: The petitioners contended that the State Government lacked legislative competency as the subject matter fell within the Union List, specifically Entries 43, 44, and 45 of List I. They argued that the field was already occupied by Central Legislation such as the Companies Act, 1956, and the Reserve Bank of India Act, 1934. Shield of Defence: The Advocate General argued that the Tamil Nadu Act was intended to protect the interest of depositors and was within the legislative competency of the State under Entries 1, 30, and 32 of the State List. The Act aimed to curb the activities of financial establishments that defrauded depositors and provided a mechanism for attaching properties and distributing the sale proceeds among depositors. III. Reasonableness and Violation of Articles 14, 19(1)(g), and 21 of the Constitution of India Analysis: The court analyzed whether the Tamil Nadu Act stood the test of reasonableness and did not violate Articles 14, 19(1)(g), and 21 of the Constitution. The Act was found to be a regulatory measure aimed at protecting depositors and did not arbitrarily or unreasonably infringe upon the rights of financial establishments. The provisions of the Act were deemed necessary to address the social and economic issues faced by depositors. IV. Violation of Principles of Natural Justice Analysis: The court held that the principles of natural justice were satisfied by providing post-decisional hearings. The Act allowed for the attachment of properties without prior hearing in emergent situations but provided opportunities for affected parties to contest the attachment before the Special Court. The court found that the Act's provisions were fair and reasonable, given the need to protect depositors from fraudulent financial establishments. V. Conflict with Central Legislation Analysis: The court examined whether the Tamil Nadu Act conflicted with Central Legislation such as the Companies Act, 1956, and the Reserve Bank of India Act, 1934. It concluded that while there might be incidental trenching, the Tamil Nadu Act did not supplant or supplement the Central Legislation. The Act was primarily aimed at recovering deposits and protecting depositors, a field not adequately addressed by the Central Legislation. Conclusion: The Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act, 1997, was upheld as constitutionally valid. The court found that the Act did not violate Articles 14, 19(1)(g), and 21 of the Constitution and complied with the principles of natural justice. The State Government had the legislative competency to enact the Act under Entries 1 and 32 of the State List, and there was no significant conflict with Central Legislation. The writ petitions and appeals challenging the Act and its consequential proceedings were dismissed.
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