9911796707
TMI Blog2000 (9) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... the adverse trend in finance market, the depositors of the petitioner Company started demanding repayment and therefore they could not utilise the funds for developing the property as originally planned. Therefore, the petitioner decided to pay back the amount with interest even if no profit is earned by the firm. With the short period a sum of ₹ 180 crores were returned to the public leaving a balance of about ₹ 94, 44, 250.00. Out of this amount, about 40 per cent matured for payment and others not matured for payment. It is further stated that the value of asset in the form of immovable properties of the petitioner firm and the sister concern Thiru Muruga Real Estate run about 13.80 crores. Their intention is not to cheat anybody. All the properties were purchased out of own funds long before accepting deposits from public. The balance payable to depositors for entire group of concerns is only ₹ 94, 44, 250.00. Majority of the depositors have faith in the petitioner and in fact given letters, accepting to take their funds in instalments. But, few persons who are highly mischievous have given complaints to the second respondent, who threatened to take action un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions after collection of huge amounts from the public. They have defaulted to return the deposits on its maturity to the public and this amount running to 195 crores of rupees and thereby inviting the public resentment, which created law and order problems in the State. Therefore, the Government have decided to undertake suitable Legislation, in the public interest, in order to regulate the activities of such Financial Establishments other than those covered by the Reserve Bank of India Act, 1934. Accordingly, the Government enacted Tamil Nadu Act 44 of 1997, which has come into force with effect from 8.8.1997. With regard to the claim of the petitioner in Writ Petition No.4157 of 1998 it is stated that the petitioner's firm was started on 14.4.1995 and against this firm number of complaints started cropping up. Cases in Crime No.916 of 1997 and 158 of 1998 were registered for the complaints from aggrieved persons and in Crime No.916 of 1997 there were specific allegations that the petitioner collected deposits besides the name Thiru Muruga Finance in the names Thiru Muruga Enterprises , Thiru Muruga Advertisers , Thirumuruga Coating Division , Thiru Muruga Fibre Glass Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is intended only to punish those who deprive the public of their lawful claim and when the public invest at large is to be safeguarded and that the individual can not lay claim that his business is affected. By virtue of the special enactment, a Special Court is constituted for implementing the provisions of the Act in its letter and spirit and the procedural law is not given a go by. The Act only points out that there shall be a Special Court and Special Public Prosecutor for the conduct of prosecution, appointed in the cadre of District and Sessions Judge and Advocate with 10 years standing in the bar respectively. There is no violation by presenting the mode of conduct of cases under the Special enactment. Complaints have been registered only when the petitioner failed to return the matured deposits. If the properties are sold away, then the interest of the depositors will be defeated. With these averments they prayed for dismissal of all the writ petitions. 5. In the light of the above pleadings, I have heard Mr. C. Chinnasamy, learned senior counsel and Mr. P. Rajamanickam for the petitioners and learned Additional Advocate General for the State Government. In one wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are covered under the impugned Act are all un-incorporated trading establishments, and therefore they fall under Entry 32 of the Stale List in Seventh Schedule of the Constitution. The impugned law Is made only in relation to such un-incorporated trading establishments, and therefore the State of Tamil Nadu is competent to Legislate in respect of those Establishments. Mere trenching upon the other enactments cannot take away the power of legislature considering the scheme of the Act Further, the State of Tamil Nadu had obtained the assent of the President under Article 254 sub clause (2) of the Constitution of India The statute in question is within the competence of the State Legislature; (ii) Reserve Bank of India Act is only to regulate the monetary stability in India and deals with various monetary systems and the Banking business nave to be carried out in accordance with the said Act, whereas the Tamil Nadu Act is intended to safeguard and the interest of depositors by providing stringent measures against those who deprive the depositors of their dues: (iii) There is no hostile discrimination between depositors in the individual financial establishments, firms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manner but does not include a company registered under the Companies Act, 1956 or a corporation or a co-operative society owned or controlled by any State Government or the Central Government, or a banking company as defined under Section 5(c) of the Banking Regulation Act, 1949 or a non-banking financial company as defined in clause (f) of Section 45-I of the Reserve Bank of India Act, 1934. (4).............. 3. Attachment of properties on default of return of deposits. Notwithstanding anything contained in any other law for the time being in forcep2 (i) where, upon complaints received from a number of depositors, that any Financial Establishment defaults the return of deposits after maturity, or (ii) where the Government have reason to believe that any Financial Establishment is acting in a calculated manner with an intention to defraud the depositors, and if the Government are satisfied that such Financial Establishment is not likely to return the deposits, the Government may, in order to protect the interests of the depositors of such Financial Establishment, pass an adinterim order attaching the money or other property alleged to have been procured eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and Sessions Judge. (2) No Court including the Court constituted under the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, other than the Special Court shall have jurisdiction in respect of any matter to which the provisions of this Act apply. (3) Any pending case in any other court to which the provisions of this Act apply shall stand transferred to the Special Court. (4) The Special Court shall, on an application by the competent authority, pass such order or issue such direction as may be necessary for the equitable distribution among the depositors of the money realised from out of the property attached. 7. Powers of Special Court regarding attachment. (1) Upon receipt of an application under Section 4, the Special Court shall issue to the Financial Establishment or to any other person whose property is attached by the Government under Section 3, a notice accompanied by the application and affidavits and of the evidence, if any, recorded, calling upon him to show cause on a date to be specified in the notice why the order of attachment should not be made absolute. (2) The Special Court shall also issue such notice, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government may make rules for carrying out the provisions of this Act. (2) (a) All rules made under mis Act shall be published in the Tamil Nadu Government Gazette and unless they are expressed to come into force on a particular day, shall come into force on the day on which they are so published. (b) All notifications issued under this Act shall, unless they are expressed to come into force on a particular day, shall come into force on the day on which they are published. (3) Every rule made or notification issued under this Act, shall, as soon as possible after it is made or issued be placed on the Table of the Legislative Assembly, and if before the expiry of the session in which it is so placed or the next session, the Legislative Assembly agrees in making any modification in any such rule or notification or the Legislative Assembly agrees that the rule or notification should not be made or issued the rule or notification shall, thereafter have effect only in such modified form or be of no effect as the case may be so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial company as defined under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934. 13. Before considering other Sections, particularly Section 3 and 5, I shall consider whether the State Legislature is competent to enact the subject referred to therein. In order to show that the Act is within the Legislative competency of the State, falling within the Entries of the Slate and Concurrent List in Seventh Schedule to the Constitution the deposits furnished in the counter affidavit of the Government, are as follows: STATE LIST Entry 32:- Incorporation, regulation and winding up of Corporation, other than those specified in List I, and Universities, unincorporated trading, literacy, scientific, religious and other societies and associations; co-operative societies. Entry 64:- Offence against laws with respect to any of the matters in this List. Entry 65:- Jurisdiction and powers of all courts, except Supreme Court, with respect to any of the matters in this List. CONCURRENT LIST Entry 1:- Criminal Law, including all matters included in the Indian Penal Code at the commencement of this Constitution but excluding offences against laws with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1963 inserted Chapter III-B in the Reserve Bank of India Act. This Chapter conferred extensive powers on the Reserve Bank of India to issue suitable instructions, to regulate and monitor diverse activities of non-banking companies. The powers to control and regulate these non-banking institutions are set out in Section 45-I to 45-L. While exercising these powers, the Reserve Bank of India was issuing various directions to these non-banking financial institutions. One Such important direction was issued on 1st January, 1967 to the effect that the non-banking financial companies were not to hold deposits in excess of 25 per cent of its paid-up capital and the reserves as also to non-banking, non-financial companies. They were also required to take steps to keep the deposits within the limits. This direction was challenged unsuccessfully before this Court. In 1974, Section 58A of the Companies Act was inserted by the Companies (Amendment) Act of 1974, which came into force from 1st February, 1975. The object was to regulate deposits received by non-banking non-financial companies. The financial companies were already covered by Reserve Bank of India directions under the Reserve Bank o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful to cases. It is also contended that the said judgment of the Supreme Court conclusively holds that receipt of deposits from the public falls under Entry 45 List 1. 16. No doubt, Entry 45 in List 1 deals with Banking business. It is the case of the petitioners that, acceptance of deposits, payment of interest on the same is Banking business, hence according to them Parliament alone can legislate on those subject and the State Government is incompetent to legislate in respect of Banking business. In this regard learned Additional Advocate General would contend that, among other entries. Entry 32 in List 2 alone is applicable. Entry 32 in List 2 deals with un-incorporated trading bodies The petitioners are un-incorporated trading bodies. While so, acceptance of deposit is not Banking business as per Banking Regulation Act, accordingly State Government has got power to legislate in respect of un-incorporated trading establishments. Several other entries in List 3 empowers the State Government to enact the Act 44 of 1997. In so far as the subjects falling in the Concurrent List, there is no dispute that assent of the President has been obtained. In the above said decision, the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution. Therefore, the power to make the Amendment Act is derived not from the respective entries but under Article 246 of the Constitution. The language of the respective entries should DC given the widest scope of their meaning, fairly capable to meet the machinery of the Government settled by the Constitution. Bach general word should extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. When the vires of an enactment is impugned, there is an initial presumption of its constitutionality and if there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved, as far as possible in favour of the legislature putting the most liberal construction upon the legislative entry so that it may have the widest amplitude. Burden is on the appellants to prove affirmatively of its invalidity. It must be remembered that we are interpreting the Constitution and when the court is called upon to interpret the Constitution, it must not be construed in any narrow or pedantic sense and adopt such construction which must be beneficial to the amplitude of legislative powers. The broad and liberal spirit shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act falls within the competence of the particular legislature. Blind adherence to strict interpretation which would lead to invalidation of statutes as being legislated in the forbidden sphere should be avoided, lest all beneficial legislations would be stifled at birth and many a subject entrusted to the State legislature rendered ineffectual divesting the State legislature of its power to deal with particular subject of entry or topic. ......... 13. It is not the requirement of law under Article 254 that the State Government should seek assent of the President in respect of each and every specified provisions of the Central Act or Acts in respect of which there would be inconsistency or repugnancy in the operation of the Central provisions and the State enactment. It is enough that once the assent of the President is sought and given to the State amendment, though to some extent inconsistency or repugnancy exists between any provision, part or parts of any Act or Acts of any Central statutes, the repugnancy or inconsistency ceases to operate in relation to the State in which the assented State enactment operates. 18. In Kerala State Electricity Board vs. The Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpret the Constitution to find whether the impugned Act is relatable to any entry in the relevant list. Their Lordships have also held that the power to legislate on a particular topic includes the powers to legislate on subjects which are ancillary to or incidental thereof or for the purposes necessary to give full effect to the power conferred by the entry. In determining whether the impugned Act is a law with respect to a given power, the Court has to consider whether the Act, in its pith and substance is a law on the subject in question. If the statute relates in pith and substance to a topic assigned to a particular Legislature, the Act will not be invalidated even if it incidentally trenches on topics coming within another Legislative list. The fact of incidental encroachment does not affect the vires of the law even as regards the area of encroachment. The Court has to ascertain the true nature and character of the subject of the Act or its pith and substance to find whether the impugned Act falls within the competence of the particular Legislature. As observed by their Lordships, blind adhering to strict interpretation which would lead to invalidation of statutes as bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners contention. 21. The other decision referred to by the learned Additional Advocate General is reported in Virendra Pal Singh v. District Assistant Registrar, Co-operative Societies, Etah, . In the above case the Supreme Court has held that, in pith and substance the U.P. Co-operative Societies Act deals with Co-operative Societies and that it trenches upon banking incidentally does not take it beyond the competence of the State Legislature. The Hon'ble Supreme Court held that, for proper financing and effective functioning of cooperative societies there must also be co-operative societies which do banking business to facilitate the working of other co-operative societies. Following the decisions of the Privy Council reported in Prafulla Kumar Mukherjee v. Bank of Commerce Ltd., 74 IA 23, Nagpur District Central Co-operative Bank Ltd. v. Divisional Joint Registrar, Co-operative Societies, and Sant Sadhu Singh v. State of Punjab, held that the legislation by the State of Uttarpradesh is competent (para 10 of the judgment). The said Act also falls under Entry 32 of the List 2 of the 7th Schedule as in the present case. 22. The following observation in the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found that the topics enumerated in the two sections overlapped, and the Privy Council had time and again to pass on the constitutionality of laws made by the Dominion and Provincial legislatures. It was in this situation that the Privy Council evolved the doctrine, that for deciding whether an impugned legislation was intra vires, regard must be had to Us pith and substance. That is to say, if a statute is found in substance to relate to a topic within the competence of the legislature, it should be held to be intra vires, even though it might incidentally trench on topics not within its legislative competence. The extent of the encroachment on matters beyond its competence may be an element in determining whether the legislation is colourable, that is, whether in the guise of making a law on a matter within its competence, the legislature is, in truth, making a law on a subject beyond its competence. But where that is not the position, then the fact of encroachment does not affect the vires of the law even as regards the area of encroachment. Same view has been reiterated in Ram Krishna Dalmia v. Justice Tendolkar, ; C.I. Emenden v. State of Uttar Pradesh, and Kerala St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks) Act, 1959 (38 of 1959), any corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any other financial institution notified by the Central Government in this behalf; Chapter III-B speaks about the Provisions relating to non-baking institutions receiving deposits and financial institutions. Section 45-I reads thus, 45-1 Definitions In this chapter, unless the context otherwise requires- (a) business of a non-banking financial institution means carrying on of the business of a financial institution referred to in clause (c) and includes business of a non-banking financial company referred to in clause (f); (bb) deposit includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does 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 bank or any other banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (iv) any am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom monies are collected or to any other person, (but, does not include any institution, which carries on as its principal business,- (a) agricultural operations; or (aa) industrial activity; or (b) the purchase or sale of any goods (other than securities) or the providing 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 derived from the financing of purchases, constructions or sales of immovable property by other persons; (Explanation: For the purposes of this clause, industrial activity means any activity specified in sub-clause (i) to (xviii) of clause (c) of Section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (d) firm means a firm as defined in the Indian Partnership Act, 1932 (9 of 1932); (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 as its principal business the receiving of deposits, under any scheme or arrangement or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees. 58B-(5B): Notwithstanding anything contained in section 29 of the Code of Criminal Procedure, 1973 (2 of 1974), it shall be lawful for a Metropolitan Magistrate or a Judicial Magistrate of the first class to impose a sentence of fine in excess of the limit specified in that section on any person convicted under sub-section (5A). We are not concerned with other Sections in the Act. 27. It is the contention of the learned senior counsel for the petitioners that the Parliament have already enacted an Act, viz., Reserve Bank of India Act 2 of 1934, covering all the aspects as stipulated in the Tamil Nadu Act, and therefore there is no necessity to enact Tamil Nadu Act. According to them Reserve Bank of India Act provides for prohibition of acceptance of deposits. Section 45S in the Reserve Bank of India Act prohibits among others, individuals from accepting any deposit making an exception only with regard to receipt of money by way of loan from any of his re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. By pointing out this, it is very much stressed that. Section 45S(I)(i)(ii) prohibits any person or a firm or an unincorporated association of individuals to accept any deposit not only under any scheme or arrangement, but also in any other manner. Thus, according to them, the prohibition contained in Section 45S squarely applies to cases of individuals. They also pointed out the notice issued to the petitioner by the Reserve Bank of India. If such deposit is not in accordance with sub- section (1), there is a provision in sub-section (2) of Section 45S for repayment of the deposit immediately after such deposit becomes due for repayment. It is true that while Section 45S(1) prohibits acceptance of deposit Section 45S(2) provides for repayment of the same if it is not in accordance with the business activities specified in the Act. Thus, Section 45S of the Reserve Bank of India Act lays down not only prohibition for acceptance of deposits' but also return of the deposits if the same were not in the manner specified therein. But in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trument for prevention of smuggling would be entirely frustrated if a condition were to be read with Section 8(1) and or Section 23(1-A) of the Act qualifying the plain words of the enactment that the accused should be proved to have knowledge that he was contravening the law before he could be held to be contravening the provisions. In Dineshchandra v. State of Gujarat, as well as in State of Madhya Pradesh v. Narayan Singh, the Hon'ble Supreme Court has held that mensria is irrelevant. When there is a prohibition against the business being carried on by the un-incorporated trading establishments, the carrying on of the business is illegal. It is clear that the Tamil Nadu Act was passed in order to see that crores of deposits deposited with such establishments are recovered and distributed to the general public., To drive the public to institute action individually with be harmful to the society. The submission of the counsel for petitioners that the Establishments in question are carrying on banking business and therefore the Legislation in respect of such banking business is not within the competence of the State Legislature is not correct. Mere receipt of deposit and paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is absent and merely the power of granting loans is retained and exercised that, in my view does not make the company a banking company. Lending of money may be one phase of a banking business but it is not the main phase or the distinguishing phase. Accordingly I hold that mere receipt of deposits and payment of Interest cannot be termed as Banking business as defined under the Banking Regulation Act, 1949. I also hold that, even in the light of certain provisions in the Reserve Bank of India Act, in the absence of effective machinery from the said Act, the State Government, is competent to enact the impugned Act in the interest of the General Public. The State has got the best machinery to enforce the provisions of the Act and in order to protect the interest of the depositors the Act has provided all safeguards for the Financial. Establishments also. Accordingly:- I am unable to accept the contra argument made by the learned senior counsel for the petitioners. 30. Regarding violation of Article 14 of the Constitution of India, it is stated on the side of the petitioners that Article 14 does not merely deal with discrimination, but also arbitrariness. They also referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/firms, accordingly it is unnecessary to refer the same once again. 32. It is also the case of the petitioners that, the impugned Act makes a distinction between individual and firms on the one hand and Companies and Corporations on the other hand. If the object of the Act is to protect the depositors - public, according to the petitioners, then there need not be any discrimination beating the depositors who make the deposits in the limited Company on a different footing does not speak well of the object of the Legislation. It is also stated that the depositors who deposits their savings in a firm or with an individual is well protected, whereas the depositors who made deposits in a company is discriminated. This is a hostile discrimination. It is also the claim that the petitioner however honest in his banking business is subjected to harassment even on a frivolous complaint for a very small amount. The Tamil Nadu Act cannot reach big Nidhi company and other company even if they defraud crores of rupees. Accordingly, it is stated that there cannot be two different stand in dealing with the financial establishments and the discrimination in the impugned Act between an individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall first refer the decision reported in Ameerunnissa v. Mahaboob Begum, . The following observations of their Lordships are relevant. 11. The nature and scope of the guarantee that is implied in the equal protection clause of the Constitution have been explained and discussed in more than one decision of this Court and do not require repetition. It is well settled that a legislature which has to deal with diverse problems arising out of an infinite variety of human relations must, of necessity, have the power of making special laws to attain particular objects; and for that purpose it must have large powers of selection or classification of persons and things upon which such laws are to operate. Mere differentiation or inequality of treatment does not 'per se' amount discrimination within the inhibition of the equal protection clause. To attract the operation of the clause, it is necessary to show that the selection or differentiation is unreasonable or arbitrary; that it does not rest on any rational basis having regard to the object which the legislature has in view. Hence, it is clear that mere differentiation or inequality of treatment does not per se amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of the times and may assume every state, of facts which can be conceived existing at the time of legislation; and (f) that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation. The above principles will have to be constantly borne in mind by the Court when it is called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws. The view expressed by the Constitutional Bench has been once again stated in C.I.Emden v. State of U.P., . 36. In C.I.Emden v. State of U.P., , it has been held, the basis adopted by the Legislature in classifying one class of public servants who are brought within the mischief of Section 4(1) is a perfectl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a non-banking financial company as defined in clause (f) of Section 45-I of the R.B.I. Act are excluded from the definition of Financial Establishment . Since the excluded categories are covered by statutory provisions and only un-incorporated trading establishments like the petitioners who are not having statutory control, particularly for recovery, the State Government has rightly passed the impugned Legislation. 38. With regard to Section 3 which speaks about attachment of properties on default of return of deposits, it is stated that the said Section contemplates civil action for attachment of the property. Section 3(i) contemplates receipt of complaints from a number of depositors, that any Financial Establishment defaults the return of deposits after maturity or the Government have reason to believe that any Financial Establishment is acting in a calculated manner with an intention to defraud the depositors and after satisfaction that the said Financial Establishment is not likely to return the deposits, the Government, may in order to protect the interests of the depositors of such Financial Establishments pass an ad-interim order attaching the money or the other prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or the promoter, manager or member of the said Financial Establishment and transfer the control over the said money or property to the competent authority. As rightly contended by the respondents, the word in a calculated manner in sub-section (ii) in Section 3 is very exhaustive and comprehensive, so as to bring within its clutches the dealings of the concerns, if they turn to the detrimental to the interest of depositors. 39. In order to exercise the control over the properties attached by the Government under Section 3, Government is empowered to appoint a Competent authority under Section 4. Sub-section (2) of Section 4 enables the Competent authority to exercise all required powers as may be necessary for carrying out the object of the Act. As per sub-section (3), on receipt of orders of the Government under Section 3, the Competent authority is to apply within 15 days to the Special Court constituted under Section 6 of the Act for making the ad-interim order of attachment absolute. Sub-section (4) authorises the Competent authority to make an application under sob-section (3) supported by affidavits stating the grounds on which the belief that the Financial Establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of attachment he had some interest in the property attached. Sub-section (6) enables the special court, after investigation under sub-section (5), to pass an order either making the ad-interim order of attachment absolute or modifying the same by releasing a portion of the property from attachment. If it is satisfied it is open to the special court to cancel the ad-interim order of attachment subject to the condition prescribed in the proviso to sub-section (6). The reading of sub-sections (1) to (6) of Section 7 show that elaborate procedure is prescribed and it is open to the person affected or to be affected to make his/her submission to explain their case. It is also clear that, if the special court is satisfied it has power to make the interim order of attachment absolute or modify the said order by releasing a portion of the property or even cancel the interim order of attachment Hence, I agree with the contention of the learned Additional Advocate General that, elaborate procedure has been prescribed under Section 7 of the Act. 41. Apart from this, as per Section 9, any Financial Establishment or a person whose property has been or is about to be attached at any tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional Advocate General, the 10 years period of imprisonment is only a maximum period prescribed in the Act and there may not be any apprehension that the maximum period of imprisonment will be imposed in all cases. Further such apprehension is misconceived. Only when Financial Establishment defaults the return of the deposit or defaults the payment of interest on the deposits, the person responsible for the management shall be punished with imprisonment as stated in Section 5. Hence, if the Financial Establishment or person dealing with the deposits makes proper repayment on maturity or pays interest on the deposit on due dates, there is no chance of implementing Section 5 at all. Further, the imprisonment of 10 years and fine of ₹ 1 lakh prescribed in Section 5 are the maximum and there is no need to apprehend that in each and every case the maximum punishment will be awarded. Hereagain, elaborate procedure has been prescribed in Section 13. As per sub-section (1) of Section 13, it is open to the special court to take cognizance of the offence without the accused being committed to it for trial and in trying the accused person, it shall follow the procedure prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also brought to my notice certain observations and directions made by Reserve Bank of India. He also placed a Report of the Task Force on Non-banking Finance Companies dated 28.10.1998. All those particulars have been compiled in the common typed set of papers filed by the respondents. In the letter dated 29.1.1998 addressed to the Principal/Chief Secretary/Secretary to the Government of various States, Reserve Bank of India, after highlighting the Reserve Bank of India Amendment Act, 1997 has given, the following suggestion:- 3. Keeping in view the interest of depositors of unincorporated bodies in the context of the recent amendment to the Reserve Bank of India Act, as mentioned above, we suggest that a similar enactment may be passed by the Government of your State also. A copy of the Tamil Nadu Act is enclosed for your perusal. The steps so taken in your State would help in restoration of confidence amongst the innocent depositors as also serve as a deterrent to such establishments engaged in acceptance of public deposits. (Italics Supplied) In the report of Task Force on Non-banking Financial Companies, the following recommendations/observations are relevant, Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igour in that Act is lesser when compared to the Tamil Nadu Act. When the Legislature is competent to legislate the enactments, I am of the view that the Legislature is free to prescribe adequate punishment, hence the same cannot be compared with other enactments. However the fact remains that except the fact that the punishment prescribed in Maharashtra Ordinance is lesser than that prescribed in the Tamil Nadu Act, the other provisions are there; accordingly I am unable to countenance the argument of the learned counsel for the petitioners in this score also. 45. In view of Entry 32 in State List in the VII Schedule to the Constitution, I am satisfied that the State Legislature is competent to enact Tamil Nadu Act 44 of 1997. As observed earlier, even though the Tamil Nadu State Act trenches certain other enactments upon which the State Legislature is not competent, in view of the law laid down by the Supreme Court in various decisions, taking note of the object of the Act and in view of the fact that the Legislature have obtained the consent of the President, I hold that the State Legislature are competent in passing the impugned Act and the same is valid in all respects. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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