etition Civil No 508 of 1988
Under Article 32 of the Constitution of India
With WPC Nos 53488 CA
551385 567985 568685 18386 192 235 3686 36386 44786 510 1586 52986 64686 64786 119986 120086 125086 WP
C Nos
143 269 43486 TP C Nos 76 77 78 7986 8886 139 4986 15486 15586 CA
Nos 81 8386 TC C No 8186 IA Nos 1  292 in CA
No 5513185 WITH CA
No 17486 Manipal Finance Crop
vs UOL and Anr
With CA
19386 62486 50986 WP C No 150687 CA
6969986 949 5086 54186 WP C No 60289 DN Dwivedi Additional Solicitor General G Viswanatha Iyer KN Bhat Anil B Diwan EMS Anam PH Parekh CN Sree Kumar R Mohan section Balakrishnan MKD Namboodiri MS Ganesh SS Khanduja YP Dhingra BK Satija Kuldeep section Paribar
HS Parihar Ms A Sub hashini CV Subba Rao KR Nambiar MP Shorawala DK Garg SK NandyRandhir Jain Ms
Malini PoduvalMAKrishna Moorthy KJJohn Ms section Vaidyalingam AK Sanghi PN Puri Ms Abha Jain Ms Madhu Moolchandani and AG Ratnaparkhi for the Appearing Parties
The Judgment of the Court was delivered by MOHAN J
All these civil appeals arise by certificate granted by the 836 High Court of Delhi against the decision reported in Kanta Mehta vs Union of India and others Company Cases Vol
62 1987 page 769
All these civil appeals and writ petitions challenge the constitutional validity of Chapter 111 C read with section 58B 5A of the  introduced by the Banking Laws Amendment Act 1983 Act 1 of 1984
Hence they are dealt with under a common judgment
In order to appreciate the challenge the necessary legal background may be set out
In the year 1949 the Banking Regulation Act of 1949 was enacted
That contained regulatory provisions in regard to banking under the surveillance of the Reserve Bank of India as to what would constitute banking as defined under Section 5b of the 1949 Act
In the year 1959 the Banking Companies Amendment Act 1959 was passed
Sections 17 and 18 were substituted which required banking companies to create reserve fund and maintain cash reserve
In the year 1963 Banking Laws Miscellaneous Provisions Act 1963 inserted Chapter III B in the 
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 Sections 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 of 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 the Madras high Court as seen from the case reported in Mayavaram Financial Corporation vs Reserve Bank of India
In 1968 by Banking Laws Amendment Act 1968 Sections 10A to 10D were introduced
Section 10A provided that the Board of Directors shall include persons with professional or special knowledge
Section 10A5 empowered the Reserve Bank of India to vary the composition of the Board
837 When a report of the Study Group of non banking financial intermediaries was submitted in the year 1971 that was studied
Thereafter in 1973 the Reserve Bank of India issued Miscellaneous Non Banking Companies Reserve Bank Directions 1973 placing certain restrictions on companies carrying on prize chit and chit business from receiving deposits from the public
In 1974 Section 58A of the Companies Act was inserted by the Companies Amendment Act of 1974 which came into force from 1st of 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 
Therefore they were exempted under Section 58A 7 from the purview of that Section
Since the non banking non financial companies came within the purview of Section 58A the earlier directions issued by the to non banking nonfinancial companies in the year 1966 Were withdrawn
By an amendment of 1977 Section 58A was further enlarged and the Central Government was empowered to grant extensions
In June 1974 another Study Group was constituted which is popularly known as James Raj Committee
In July 1975 the above Study Group gave its report
In accordance with the recommendations of the Study Group elaborate rules were issued by the Central Government under Section 58A called Banking Companies Acceptance of Deposits Rules 1975 with a view of regulate the various activities of the companies to accept deposits from public
The validity of the section and the deposit rules were questioned
This Court in DCM Ltd vs U OL  upheld the same
In 1977 directions were issued by the Reserve Bank of India superseding earlier directions of 1966 and 1973
In 1978 Bill 183 of 1978 called Banking Laws Amendment Bill 1978 was introduced in the Parliament
The said Bill provided limits on depositors which were lower than the current provisions
However the Bill lapsed on dissolution of Parliament
Thereafter prize chits and Money Circulation Schemes Banning Act 1978 was enacted
This was also challenged
But that challenge was thrown out by this Court in Srinivasa Enterprises vs Union of India  838 In 1981 several new regulatory directions were given by the Reserve Bank of India
Inter alia they included restrictions on accepting or renewing deposits from shareholders Directors etc
which exceeded 15 per cent of the net owned funds of the companies as also restricted payment of interest on deposits at a rate of interest exceeding 15 per cent per annum
The validity of the amendment was upheld by the Madras High Court in the case reported in AIR 1983 Madras 330 ASP Ayar vs Reserve Bank of India
In State of West Bengal vs Swapan Kumar Guha known as Sanchaita case reported in   this Court while quashing the FIR launched against the firm Sanchaita Investments directed that the Government and Reserve Bank of India should look into the matter deeply
It is in this background the Banking Laws Amendment Act 1983 came to be enacted
Section 45S states thus 45 S  Deposits not be accepted in certain cases 1 No person being an individual or a firm or an unincorporated association of individuals
shall at any time have deposits from more than the number of depositors specified against each in the table below
TABLE i Individual Not more than twenty five depositors excluding depositors who are relatives of the individual
ii Firm Not more than twenty five depositors per partner and not more than two hundred and fifty depositors in all excluding in either case depositors who are relatives of any of the partners
iii Unincorporated Not more than twenty five depositors per Association of individual and not more than two hundred and individualsfifty depositors in all excluding in either case depositors who are relatives of any of the individuals constituting the association
2 Where at the commencement of Section 10 of the Banking Laws Amendment Act 1983 the deposits her by any such person are not in accordance with sub section 839 1 he shall before the expiry of a period of two years from the date of such commencement repay such of the deposits as are necessary for bringing the number of depositors within the relative limits specified in that sub section
Explanation  For the purposes of this section a a person shall be deemed to 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 the list of relatives below List of Relatives 1
Father
Mother including step mother
Son including Stepson
Son s wife
Daughter including step daughter
Father s father
Father s mother
Mother s mother
Mother s father
Son s son
Son s son s wife
Son s daughter
Son s daughter s husband
Daughter s husband
Daughter s son
Daughter s son s wife
Daughters daughter
Daughter s daughter s husband
Brother including step brother 
Brother s wife
Sister including step sister
Sister s husband b a person in whose favour a credit balance in outstanding for a period not exceeding six months in any account relating to mutual dealings in the ordinary course of trade or business shall not on account of such balance alone be deemed to be a depositor Thus the number of depositors has come to be limited
As to the penalty for contravention of Section 45S it is provided for under Section 58B 5A
It runs thus 5A
If any person contravenes any provision of Section 45S he shall be punishable with imprisonment for a terms which may extend to two years or with fine which may extend to twice the amount of deposit received by 840 such person in contravention of that section or rupees two thousand whichever is more or with both These provisions were challenged by the appellants in the various civil appeals as violative of Articles 14 and 19 of the Constitution
A Division Bench of the High Court of Delhi in Kanta Mehta s case supra Section 45S read with section 58B 5A of chapter III C of the  as introduced by section 10 of the Banking laws Amendment Act 1983 is not violative of articles 14 and 19 of the Constitution
There is nothing demonstrably irrelevant or perverse in limiting in section 45S the number of depositors that an individual firm or association could accept
Nor is there any element of compulsion on individuals and firms or associations which are not incorporated to incorporate themselves as a company and article 191c is not violated by the provisions of section 45S limiting the number of depositors whom individuals firms and unincorporated associations could accept
Chapter III C of the  imposes reasonable restrictions on the right of individuals firms and unincorporated associations to carry on the business of acceptance of deposits and advancing or giving loans to the public
There is also a further safeguard that Chapter 111 C is being operated under the supervision and control of the Reserve Bank of India
The business of acceptance of deposits from the public does not fall within entry 30 or entry 32 of List II
of Schedule VII of the Constitution
It falls within entry 45 or in any case under entry 97 of List I of Schedule VII under which only Parliament has power to pass the impugned legislation
Parliament had full competence and power to pass Chapter III C of the  Mr G Viswanatha Iyer learned counsel for the writ petitioners in 841 WP
508 and 534 of 1988 submits that Section 45B is violative of the fundamental right under Article 191g of the Constitution as it restricts the number of depositors and the rate of interest under Section 42iii of the Kerala Money Lenders Act 1958 hereinafter referred to as the Kerala Act
The two years  period prescribed under Section 42 is unreasonable
Under Kerala Act with effect from 151085 only 14 per cent interest alone could be charged
In any event while receiving deposits it was not an offence making it a criminal liability and directing payment would amount to ex post facto law offending Article 201 of the Constitution
In support of this submission reliance is placed on Chinoy Bottling Co Pvt Ltd vs Assistant Registrar of Companies Madras page 770 and Oudh Sugar Mills Ltd vs Union of India AIR 1970 SC 1070
The other learned counsel seriously pressed the point relating to criminal liability and prayed for time to comply with the provisions of Section 45S
Mr Anil B Diwan learned counsel appearing for Respondent 2 in CA No 447 of 1986 after referring us to the development of law would submit that it is open to the Government to regulate the economic activities
While examining the validity of such provisions the courts always have regard to the wisdom of the Legislature because that alone has the necessary information and expertise pointing to the need of such a legislation
In RK Garg vs Union of India  at 969 70 this aspect of the matter was highlighted
It was in this view this Court upheld Maharashtra Debt Relief Act 1976 in Fatehchand Himmatlal and others vs State of Maharashtra  If properly analysed it can be seen that these provisions constitute
a regulatory scheme and not a penal liability
Much is made of the penal provisions under Section 58B 5A
It is submitted that imprisonment of a recalcitrant debtor is permissible in law
If one goes by the facts of these cases even after 1986 they collect deposits 842 when law required them not to do so
Under Section 451bb deposit has been defined
If as per the definition there are enough sources of deposit there is no reason why the appellants cannot reduce the deposits
If therefore the package is reasonable there is no justification to dilute the effect of Section 58B 5A
While examining the scope of the Section it might be contrasted with Section 125 3 of the Criminal Procedure Code wherein a sufficient cause is provided
In Reserve Bank of India vs Peerless General Finance and Investment Co Ltd  this Court had occasion to consider the adventures indulged by the persons like appellants
It criticised the fraud played by such financial vultures
This approach was approved in Peerless General Finance and Investment Co Ltd vs Reserve Bank of India   354
The learned counsel also draws our attention to the Non banking Financial Companies Reserve Bank Directions of 1966
They came into force on January 1 1967
Clause 4 sub clause 3 specifically provides that the deposit shall be reduced to 25 per cent of the paid up capital for which two year period was provided
Similar directions of 1977 known as Non Banking Financial Companies Reserve Bank Directions 1977 came to be issued with effect from 1st of July 1977
There were complaints even then that the financial companies were not paying interest regularly and the Reserve Bank was requested to help the depositor
Therefore in the teeth of this provision to say that suddenly the appellants and the writ petitioners are called upon to reduce would work hardship and they should not be penalised is incorrect
They took a calculated risk and therefore they had to suffer for their own fault
In examining the various submissions addressed on behalf of the appellants and the petitioners we propose to examine the same in the following background since it is a law relating to regulation of economic activities
In RK Garg s case supra it is held at pages 969 70 
Another rule of equal importance is that laws relating 843 to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech religion etc
It has been said by no less a person than Holmes J that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or straight jacket formula and this is par ticularly true in case of legislation dealing with economic matters where having regard to the nature of the problems required to be dealt with greater play in the joints has to be allowed to the legislature
The greater play in the joints has to be allowed to the legislature
The court should feel more inclined to give judicial deference to legislature judgment in the field of economic regulation than in other areas where fundamental human rights are involved
Nowhere has this admonition been more felicitously expressed than in Morey vs Dond  where Frank further J said in his inimitable style In the utilities tax and economic regulation cases there are good reasons for judicial self restraint if not judicial deference to legislative judgment
The legislature after all has the affirmative responsibility
The courts have only the power to destroy not to reconstruct
When these are added to the complexity of economic regulation the uncertainty the liability to error the bewildering conflict of the experts and the number of times the judges have been overruled by events self limitation can be seen to be the path to judicial wisdom and institutional prestige and stability
 The court must always remember that legislation is directed to practical problems that the economic mechanism is highly sensitive and complex that many problems are singular and contingent that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry  that exact wisdom and nice adaptation of remedy are not always possible and that Judgment is largely a prophecy 844 based on meagre and uninterpreted experience
Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses
There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid
 At page 988 it is held That would depend upon diverse fiscal and economic considerations based on practical necessity and administrative expediency and would also involve a certain amount of experimentation on which the Court would be least fitted to pronounce
The court would not have the necessary competence and expertise to adjudicate upon such an economic issue
The court cannot possibly assess or evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not
There are so many imponderable that would enter into the determination that it would be wise for the court not to hazard an opinion where even economists may differ The court must while examining the constitutional validity of a legislation of this kind be resilient not rigid forward looking not static liberal not verbal and the court must always bear in mind the constitutional proposition enunciated by the Supreme Court of the United States in Munn vs Illinois namely that courts do not substitute their social and economic beliefs for the judgment of legislative bodies
The court must defer to legislative judgment in matters relating to social and economic policies and must not interfere unless the exercise of legislative judgment appears to the palpably arbitrary
The court should constantly remind itself of what the Supreme Court of the United States said in Metropolis Theater Co vs City of Chicago 57 Lawyers  Edition 730
The problems of 845 government are practical ones and may justify if they do not require rough accommodations illogical it maybe and unscientific
But even such criticism should not be hastily expressed
What is best is not always discernible the wisdom of any choice may be disputed or condemned
Mere errors of government are not subject to our judicial review
No doubt the impugned legislation places restrictions on the right of the appellants to carry on business but what is essential is to safeguard the rights of various depositors and to see that they are not preyed upon
From the earlier narration it would be clear that the Reserve Bank of India right from 1966 has been monitoring and following the functioning of non banking financial institutions which invite deposits and then utilise those deposits either for trade or for other various industries
A ceiling for acceptance of deposits and to require maintenance of certain liquidity of funds as well as not to exceed borrowings beyond a particular percentage of the net owned funds have been provided in the corporate sector
But for these requirements the depositors would be left high and dry without any remedy
Even the corporate sector was not free from blame
It had done damage to the economy and brought ruination to small depositors
This was why Section 58A in the Companies Act of 1956 came to be introduced
It is worthwhile to quote the notes on clauses concerning this provision It has been the practice of the companies to take deposits from the public at high rates of interest
Experience had shown that in many cases deposits taken by the companies have not been refunded on the due dates either the companies have gone in liquidation or funds are depleted to such an extent that the companies are not in a position to refund the deposits it was accordingly considered necessary to control the activities of the companies when accepting deposits from the the public
We approve of the reasoning of the Delhi High Court in Kanta Mehta s case supra
At pages 798 99 it runs as follows The danger of allowing deposits to be accepted without regulation is so acute and urgent that to bind the 846 hands of the Legislature that only one course alone is permissible and not to permit a play of joints would be to totally make it ineffective in meeting the challenge of the social evil
For it must be remembered that in the ultimate analysis the mechanics of any economic legislation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class the processual basis of price fixation has to be accepted in the generality of cases as valid
 See Prag Ice and Oil Mills vs Union of India   para 50
Also such provisions meant to check such evil must be viewed as Krishna Iyer J said through a socially constructive not legally captious microscope to discover glaring unconstitutional infirmity that when laws affecting large chunks of the community are enacted stray misfortunes are inevitable and that social legislation without tears affecting vested rights is virtually impossible
See B Banerjee vs Smt
Anita Pan   at pages 1150 51
The stress by learned counsel for the petitioners on the private right of the petitioners to have unrestricted deposits and make advances in any manner they like must receive short shrift for by now it is too well settled to be doubted that private rights must yield to be public need and that any form of regulation is unconstitutional only if arbitrary discriminatory or demonstrably irrelevant to the policy the Legislature is free to adopt
 May be Kerala Act restricts the rates of interest under Section 42iii but that cannot enable the writ petitioners in WP Nos 508 and 534 of 1988 to disregard these provisions being the non banking financial institutions
Hence we reject the first of the arguments
As regards the reasonableness of two year period Section 451bb of the Reserve Bank Act defines deposit as follows bb deposit includes and shall be deemed always to have 847 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 any amount received from iv any amount received from a the Development Bank b a State Financial Corporation established under the  c any financial institution specified in or under section 6A of the  or d any other financial institution that may be specified by the Bank in this behalf v amounts received in the ordinary course of business by way of security deposit or dealership deposit vi any amount received from an individual or a firm or an association of individuals not being a body corporate registered under any enactment relating to money lending which is for the time being in force in any State and viiany amount received by way of subscriptions in respect of a conventional chit
 Therefore as rightly argued by Mr Anil Diwan as per this definition if there are enough sources of deposit there is no reason why the appellants and the writ petitioners cannot reduce the deposits
Further non banking financial companies are required under clause 4 sub clause 3 as follows 3 Every non banking financial company not being a hire purchase finance company or a holding finance company which on the date of commencement of these 848 directions holds deposits in excess of twenty five per cent of its paid up capital and free reserves shall secure before the expiry of a period of two years from the date of such commencement by taking such steps as may be necessary for this purpose that the deposits received by the company and outstanding on its books are not in excess of the aforesaid limit
 These directions came into force from 1st of January 1967
Similar directions came to be issued as Miscellaneous Non Banking Companies Reserve Bank Directions
Clause 5 dealing with acceptance of deposits states as under Acceptance of deposits by miscellaneous non banking companies On and from 1st of July 1977 no miscellaneous nonbanking company shall a receive any deposit repayable on demand or on notice or repayable after a period of less than six months and more than thirty six months from the date of receipt of such deposit or renew any deposit received by it whether before or after the aforesaid date unless such deposit on renewal is repayable not earlier than six months and not later than thirty six months from the date of such renewal Provided that where a miscellaneous non banking company has before the 1st July 1977 accepted deposits repayable after a period of more than thrity six months such deposits shall unless renewed in accordance with these directions be repaid in accordance with the terms of such deposits Provided further that nothing contained in this clause shall apply to monies raised by the issue of debentures or bonds
b receive or renew 849 i any deposit against an unsecured debenture or any deposit from a shareholder not being a deposit received by a private company from its shares holders as is referred to in clause vi or paragraph 4 or any deposit guaranteed by any person who at the time of giving such guarantee was or is a director to the company if the amount of any such deposits together with the amount of such other deposits of all or any of the kinds referred to in this sub clause and outstanding in the books of the company as on the date of acceptance or renewal of such deposits exceeds fifteen per cent of its net owned funds
ii any other deposit if the amount of such deposit together with the amount of such other deposits not being deposits of the kind referred to in sub clause i of this clause already received and outstanding in the books of the company as on the date of acceptance of such deposits exceeds twenty five per cent of its net owned funds
 If therefore this was the position it cannot be contended that suddenly the companies like the appellant and the petitioners arc called upon to reduce deposits
Even otherwise the interests of the depositors is the prime concern
Coming to the last point as to whether Section 58B 5A is violative of Article 201 of the Constitution we find when a similar argument was raised against Section 58A of the Companies Act that was repelled by this Court in Delhi Cloth and General Mills vs Union of India  at page 468 which runs thus Mr GA Shah canvassed one more contention
After stating that Rule 3A became operative from April 1 19 8 he specifically drew attention to the proviso to Rule 3A 1 which required that with relation to the deposits maturing during the year ending on the 31st day of March 1979 the sum required to be deposited or invested under sub rule 3A 1 shall be deposited or invested before the 30th day of September 1978
It was then contended that this provision would necessitate depositing 10 of the 850 deposits maturing during the year ending 31st March 1979 which may have been accepted prior to the coming into force of rule 3A and to this extent the rule has been made retrospective and as there was no power conferred by sec
58A to prescribe conditions subject to which deposits can be accepted retrospectively Rule 3A is ultra vires sec
58A Unquestionably Rule 3A is to deposit 10 of the deposits maturing during the year in the manner prescribed in Rule 3
Some deposits would be maturing between April 1 1978 and March 31 1979
To provide for such marginal situation a proviso is inserted
Does it to make the rule retroactive Of course not
In DS Nakara vs Union of India  a Constitution Bench of this Court has in this context observed as under A statute is not properly called a retroactive statute because a part of the requisites for its action is drawn from a time antecedent to its passing Viewed form this angle the provision can be properly called prospective and not retroactive
Therefore the contention does not commend to us
 In the light of this we should hold that the ruling of the Madras High Court in Chinoy Bottling Co Pvt
Ltd supra is incorrect
As to the plight of these depositors we need only to quote the case in Peerless General Finance and Investment Co Ltd  At paragraph 37 it is held We would also like to query what action the Reserve Bank of India and the Union of India are taking or proposing to take against the mushroom growth of finance and investment companies  offering staggeringly high rates of interest to depositors leading us to suspect whether these companies are not speculative ventures floated to attract unwary and credulous investors and capture their savings
One has only to look at the morning s newspaper to be greeted by advertisements inviting deposits and offering interest at astronomic rates
851 On January 1 1987 one of the national newspapers published from Hyderabad where one of in happened to be spending the vacation carried as many as ten advertisements with banner headlines  covering the whole of the last page a quarter of the first page and conspicuous spaces in other pages offering fabulous rates of interest
At least two of the advertisers offered to double the deposit in 30 months
2000 for 1000 10000 for 5000 they said
Another advertiser offered interes t ranging between 30 per cent to 38 per cent for periods ranging between six months to five years
Almost all the advertisers offered extra interest ranging between 3 per cent to 6 per cent deposits were made during the Christmas Pongal season
Several of them offered gifts and prizes
If the Reserve Bank of India considers the Peerless Company with eight hundred crores invested in government securities fixed deposits with National Banks etc
unsafe for depositors one wonders what they have to say about the mushroom non banking companies which are accepting deposits promising most unlikely returns and what action is proposed to be taken to protect the investors
It does not require much imagination to realise the adventurous and precarious character of these businesses
Urgent action appears to be called for to protect the public
While on the one hand these schemes encourage two vices affecting public economy the desire to take quick and easy money and the habit of excessive and wasteful consumer spending on the other hand the investors who generally belong to the gullible and less affluent classes have no security whatsoever
Action appears imperative And paragraph 42 also requires to be quoted I share my brother s concern about the mushroom growth of financial companies all over the country
Such companies have proliferated
The victims of the schemes that the attractively put forward in public media are mostly middle class and lower middle class people
Instances are legion where such needy people have been 852 reduced penniless because of the fraud played by such financial vultures
It is necessary for the authorities to evolve fool proof schemes to see that fraud is not allowed to be placed upon persons who are not conversant with the practice of such financial enterprises who pose themselves as benefactors of people
 We may also add that this has been reaffirmed in Reserve Bank of India vs Timex Finance and Investment Co Ltd at page 354
Therefore we are in entire agreement with the Delhi High Court
Since as we have stated above all the appellants and writ petitioners were praying for time to comply with these provisions the matter was adjourned from time to time
Though some of them have complied with the requirements of law yet a few others have not done so
We make it clear that in spite of this indulgence their failure to comply cannot be countenanced
We dismiss the appeals and the petitions along with 1ANos1 and 2 in CA No5513 of 1985
However there shall be no orders as to cost
NVK Petitions and appeals dismissed


Summary:
The present Contempt Petition has been filed complaining that the Respondents had allotted certain flats in favour of third parties in violation of this Court s order dated 1891
The Petitioners  interest has been in respect of two flats on the 8th floor
They claimed that the said flats had been allotted to third parties in January 1992 long after this Court s order dated 1891
It was also contended that the agreement to sell was a fabricated document
The Respondents contended that the said flats were allotted on 26491 itself though possession of the flats was handed over on 1781991 and sale deeds were executed and registered in March 1992
It was further contended that inasmuch as the agreement for sale was entered into long before the orders of this Court were issued there was no question of disobedience of the orders of this Court
Finding the Respondent guilty of Contempt of Court this Court HELD  11
Even assuming that the agreement of sale dated 2641991 is true the respondents have committed gross contempt of this Court by their brazen violation of the order dated 181991
By the said order this Court directed the respondents 1 and 2 not to make any further allotment of any other flats in the building in dispute with effect 751 from today
The word allotment must be understood reasonably and having regard to the context The first respondent is not like a Government Department or Public Corporation where an allotment order or allotment letter is issued from the office in pursuance of which other steps are taken
There is no such thing as allotment in this case
According to the Respondents there was first an agreement of sale then delivery of possession and finally a registered sale deed
In the context and circumstances of the case the word allotment in the said order means making over of the flats it means delivery of possession and registration of the sale deeds
An agreement of sale that too unregistered has no significance in the context difficult as it is to verify its truth and correctness
This court could not be presumed to have interdicted such an uncertain thing
Admittedly the respondents had represented to this Court at the time the said order was passed that they have already entered into agreements of sale in respect of the flats and yet this Court chose to pass the said order
In the circumstances it cannot mean anything else than delivery of possession of flats and their sale
It may also mean an agreement of sale but its meaning is certainly not confined to an agreement of sale
To say so is to rob the order of any meaning or content
There could not have been any doubt in the mind of the Second Respondent with respect to the meaning of the order
In case of any doubt the least he could have done was to ask for a clarification of the said Order
He could well have represented that be had already entered into an agreement of sale on 2641991 in respect of these flats and that he may be permitted to deliver possession andor execute sale deeds in respect of the said flats in favour of third parties
He did nothing of the sort Having placed a highly restrictive and unwarranted interpretation upon the order of this Court he went ahead and not only delivered possession of the flats to third parties subsequent to the said order but also registered sale deeds in their favour
He thus rendered the said order nugaptory
755E H 756A E 12The conduct of the second respondent as evidenced from the material on record establishes beyond doubt that he was trying to play with this Court and was consistently flouting its orders
758H 759A 2
So far as the apology tendered by the second respondent is concerned it is not really an unconditional apology
While tendering apology the second respondent has tried to defend his action
Even if it is 752 considered as unconditional apology this Court is not inclined to accept the same having regard to the conduct of the respondent Accordingly the apology tendered by Respondent No2 is rejected
759E G 3
The second respondent is guilty of Contempt of this Court Having regard to the facts and circumstances of this case a sentence of one month s imprisonment in addition to a fine of Rs 2000 is imposed upon him
The fine shall be paid into this Court within two weeks and in default thereof the second respondent shall undergo a further imprisonment of two weeks
760A B