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Issues Involved:
1. Constitutional validity of Karnataka Pawn Brokers (Amendment) Act, 1985 and Karnataka Money Lenders (Amendment) Act, 1985. 2. Validity of Section 4(2)(c) and Section 23(2) of the Karnataka Pawn Brokers Act, 1961. 3. Reasonableness of security deposit requirements under Section 7A of the Money Lenders Act and Section 4A of the Pawn Brokers Act. 4. Forfeiture provisions under Section 7B of the Money Lenders Act and Section 4B of the Pawn Brokers Act. 5. Requirement of interest on security deposits. 6. Requirement for pawn brokers to obtain a licence under the Money Lenders Act. Detailed Analysis: 1. Constitutional Validity of Amendments: The petitioners challenged the amendments on the grounds of violation of Articles 14 and 19(1)(g) of the Constitution. They argued that the amendments imposed discriminatory and unreasonable restrictions on their right to carry on business. The court held that the classification of money lenders and pawn brokers was reasonable and had a rational nexus to the object sought to be achieved by the legislation, which was to safeguard the interests of borrowers, mostly from poorer sections of society. The court found the impugned provisions neither arbitrary nor unreasonable, thus not violating Articles 14 or 19(1)(g). 2. Validity of Section 4(2)(c) and Section 23(2) of the Pawn Brokers Act: Petitioners argued that requiring pawn brokers to obtain a licence under the Money Lenders Act was unnecessary and violative of Articles 14 and 19(1)(g). The court noted that every pawn broker is also a money lender, and thus, requiring a money lender's licence was justified. The court found no violation of Articles 14 or 19(1)(g) in these provisions. 3. Reasonableness of Security Deposit Requirements: Petitioners contended that the security deposit requirements were arbitrary and imposed unreasonable restrictions. The court held that the slab system for security deposits was rational and not arbitrary. However, the court clarified that the deposit should be based on the actual amount invested in the business, not the aggregate amount of loans advanced multiple times in a year. This interpretation ensures the provisions are not violative of Articles 14 and 19(1)(g). 4. Forfeiture Provisions: Petitioners challenged the forfeiture provisions as arbitrary. The court distinguished the case from the Kerala High Court judgment, noting that the Karnataka provisions included safeguards and allowed for the compensation of affected borrowers. Thus, the court found the forfeiture provisions not violative of Articles 14 and 19(1)(g). 5. Requirement of Interest on Security Deposits: Petitioners argued that the absence of a provision for interest on security deposits was unreasonable. The court agreed, citing the principle that security deposits should bear interest. The court directed the respondents to pay interest at the prevailing rate for fixed deposits of one year in scheduled banks on the security deposits. 6. Requirement for Pawn Brokers to Obtain a Licence under the Money Lenders Act: The court found that requiring pawn brokers to obtain a money lender's licence was justified, given that pawn brokers also engage in money lending activities. The court noted that the licence fees were structured to reflect the dual licensing requirement and found no violation of Articles 14 or 19(1)(g). Order: 1. Dismissed the challenge to the constitutional validity of Sections 7A and 7B of the Karnataka Money Lenders Act, 1961, and Sections 4A and 4B of the Karnataka Pawn Brokers Act, 1961, as well as Sections 4(2)(c) and 23(2) of the Karnataka Pawn Brokers Act, 1961. 2. Directed respondents to collect deposits based on the amount invested in the business, not the aggregate of loans advanced. 3. Directed respondents to pay interest on security deposits at the prevailing rate for one-year fixed deposits in scheduled banks. 4. Directed respondents to adjust deposits made in any year towards the required deposit for the succeeding year. 5. Directed respondents to refund deposits in the event of discontinuation of business or refusal of licence. 6. No order as to costs.
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