Case: Prabhakar Dattatraya Gune & Others Vs. Vishnukant Bapurao Urankar & Others

S.C. Dharmadhikari, J.1 In all these matters, the contention that is raised by Mr. Pradhan, learned counsel appearing for the Petitioners, is that the judgment of the Honourable Supreme Court reported in (2011) 3 SCC 793 (K.K. Baskaran v/s State represented by its Secretary, Tamil Nadu and others) overruling that of a Full Bench of this Court [Vijay C. Puljal v. State of Maharashtra, reported in (2005) 4 CTC 705 (Bom.)], will not conclude the matter and particularly the question that the Maharashtra Enactment, namely, the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 (for short MPID Act, 1999) cannot encroach or usurp the field occupied by the laws of Parliament. In his submission, the field in this case is occupied by the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the Indian Companies Act, 1956.2 The present cases deal with non banking financial company. When such company invites deposits and the depositors invest their monies in them, the grievance of such depositors and investors can be taken note of by the Redressal Mechanism provided in the Indian Companies Act, 1956. They cannot approach the authorities under the State Act and particularly alleging offences punishable thereunder because the Parliament Statute enacts penal provisions as well. Mr. Pradhan submits that this question and issue has not been answered and dealt with by the Honourable Supreme Court in the judgment in Baskarans case (supra).3 Mr. Pradhan submits that now the Petitioners have obtained a clarification from the Honourable Supreme Court on this point and therefore, after being shown the Supreme Court order, we have allowed Mr. Pradhan to elaborate his contentions and have heard him at length.4 Hence, RULE. The Respondents waive service. By consent, Rule made returnable forthwith.5 We have taken the facts in Writ Petition No.3801/2012. The Petitioner has approached this Court for quashing of the proceedings initiated under the MPID Act, 1999 being MPID Special Case No.1/2004 pending on the file of the learned Special Judge (designated court under the MPID Act, 1999), Pune on the ground that he was the Director of Kirloskar Investment & Finance Ltd. (for short KIFL) which was a Non Banking Financial Company (for short NBFC) regulated and controlled under Chapter IIIB of the Reserve Bank of India Act 1934 and the same is under liquidation at the instance of the Reserve Bank of India in exercise of powers under Section 45MC of the Reserve Bank of India Act 1934 by the order of the High Court of Karnataka.6 It is stated that on 06th April, 1999, the Petitioner resigned from the KIFL. On 01st September, 1998 and 31st January, 1998, the Complainant invested amounts in KIFL which were due on 26.09.2000 and 27.02.2000 respectively. The Petitioner not being an Executive Director on the date of maturity of the said amounts, cannot be held liable for the default thereof. Further the Reserve Bank of India had preferred Company Petition No.2 of 2000 before the Karnataka High Court for winding up of KIFL. By the judgment and order dated 24.12.2010, the KIFL was declared to be wound up and the Official Liquidator was appointed.7 It is stated that earlier the Petitioner had preferred Writ Petition No.1427 of 2004 inter alia challenging the constitutional validity of the MPID Act, 1999. The Full Bench of this Court by the judgment and order dated 05.09.2005 declared the MPID Act, 1999 as ultra vires the Constitution. The State had challenged the said judgment before the Honourable Supreme Court in Appeal Nos.1382-1446 of 2005. Similarly, the Constitutional validity of the Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Act, 1997 was challenged before the Madras High Court which upheld it and observed that it is Constitutionally valid. The same was challenged before the Honourable Supreme Court by K.K.Baskaran. The Honourable Supreme Court by the judgment and order dated 04.03.2011 was pleased to dismiss the said Appeal. In view of the judgment and order passed in K.K.BaskaranVs. State of TamilNadu, reported in (2011)3 SCC 793 , the Honourable Supreme Court was pleased to uphold the Constitutional validity of Tamil Nadu Protection of Interest of Depositors (in Financial Establishments) Act, 1997. It was, however, observed that if any party wishes to submit that it is not covered by the said Act, it is open to him to take independent proceeding before the forum concerned.8 It is stated that in K.K. Baskarans case (supra) the companies under dispute were those which were neither registered under the Reserve Bank of India Act, 1934 or the Indian Companies Act, 1956 nor governed by the Banking Regulation Act, 1949 or the Criminal Law Amendment Ordinance. As against the same, the KIFL was a NBFC registered under the Indian Companies Act, 1956 and governed by the Reserve Bank of India Act, 1934. The distinction being glaring, the Petitioner preferred Review Petition before the Honourable Supreme Court. The Honourable Supreme Court, by the order dated 18th July, 2012, was pleased to observe that no reason for interference was called for.9 It is stated that on 25.10.2012, the Petitioner has received summons from the Court of the learned Designated Judge, Pune in MPID Case No.1 of 2004. The Petitioner not being a Director of KIFL on the day on which the deposits matured could by no stretch of imagination be roped in as an Accused. It is stated that the Petitioner was the Vice Chairman and Managing Director of Kirloskar Pneumatics Ltd., having its registered and corporate office at Pune. The Petitioner is now a retired, senior citizen and does not actively participate in any business dealings.10 It is stated that the Petitioner was appointed as Non-Executive Director on the Board of KIFL. Being Non-Executive Director, the Petitioner had nothing whatsoever to do with the day to day administration and management of KIFL. The Petitioner used to attend its Board Meetings at Bangalore, however not for providing any administrative guidance to its managerial set up. One Mr. Mundewadi and thereafter, Mr. P.M.S. Mallik were appointed as a whole time Directors and In-charge of Administrative affairs of KIFL and under their guidance and direction the Company carried out its business and maintained the discipline. The said Mr. Mallik was also Officer-in-default within the meaning of Section 5 of the Indian Companies Act, 1999.11 It is stated that sometime in July, 1998, in the Board meeting of KIFL, the Petitioner found that it was not being run in the desired manner. The reporting by the management was inadequate in as much as the Petitioner could not get any insight into its working. Being dissatisfied by the functioning and the working of the KIFL, the Petitioner decided to resign and accordingly tendered his resignation with effect from 06.04.1999. The resignation of the Petitioner was accepted by the Board by passing the Resolution and notifying in the Minutes of the Board as having accepted the resignation. Thus after due acceptance of his resignation, the Petitioner had no concern whatsoever with KIFL. The KIFL has intimated the Registrar of Companies as regards his resignation and Form 32 has accordingly been issued.12 It is stated in the petition that it appears that in exercise of the powers vested in the Reserve Bank of India under Section 45B of the Reserve Bank of India Act, 1934, the Bank conducted an inspection of the books of accounts of KIFL, for the period from May 25, 1999 to July 1, 1999 with reference to its financial position as on March 31, 1999 as a routine exercise. The inspection revealed that KIFL had failed to comply with various directions issued by the Reserve Bank of India and the provisions of the Reserve Bank of India Act, 1934. The Bank in order to protect the interest of the Depositors and in the public interest, found it necessary to prohibit the KIFL forthwith from accepting deposits from the public. The Bank felt that if any delay was caused in doing so it would prejudicially affect the public interest and interest of the Depositors.13 It is stated that in view of the above, on 13.08.1999 the Reserve Bank of India in exercise of the powers conferred on it under Section 45K (4) r.w. Section 45 MB (1) of the Reserve Bank of India Act, 1934 issued a Notice of Injunction to KIFL thereby(a) Prohibiting with immediate effect, the said Company from accepting public deposits from any person in any form, whether by way of fresh deposits or renewals or otherwise, until further orders.(b) Further in exercise of the powers conferred under the provision of Section 45 MB (2) of the Reserve Bank of India Act, 1934, imposed injunction to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the Reserve Bank of India.(c) KIFLs attention was also invited to the provisions of Section 58 B (5) r.w. Section 58C of the Reserve Bank of India Act, 1934, in terms of which, receiving any deposits in contravention of the order or alienation of any assets would render every Director of the Company liable to penalties provided in the Reserve Bank of India Act, 1934.(d) A show cause notice was issued by the Reserve Bank of India on 09.08.1999 to KIFL asking the Company to show cause as to why the Certificate of Registration as Non Banking Financial Company should not be terminated.(e) KIFL was asked to submit to the Reserve Bank of India, within 15 days, from the receipt of the order, a Resolution passed by its Board of Directors of KIFL confirming that it will not accept fresh public deposits / renew existing public deposits, until further order by the Reserve Bank of India and shall not alienate any assets of the Company without the previous permission of the Bank. A certificate from the Companys Auditor had to be submitted to the effect that it has not accepted any fresh deposits and not alienated any assets of the Company.(f) KIFL was also ordered not to default in repayment of deposits on maturity and for the same if any assets of the Company was required to be sold, the Company had to approach the Reserve Bank of India with full details of such a proposal for permission.Annexure-B to the petition is a copy of the order issued by the Reserve Bank of India on 13.08.1999. 14 It is stated that the KIFL, sometime in the month of September 1998 had circulated a Deposit Scheme of monthly, quarterly, half yearly and cumulative income plans inviting money deposits from the public at large. After the said Scheme was circulated it appears that till August 1999 there were no defaults committed by KIFL while making payment of interest as well as return of Deposits. As per the policy of the Reserve Bank of India, various restrictions and directions were given under the Reserve Bank of India Act, 1934, which however, disturbed the entire financial discipline and administration not only of the KIFL but of other Non Banking Financial Companies also. At times the Non Banking Financial Companies were directed to comply with the Reserve Bank of India directives over night which is otherwise impossible for any Financial Institution of that size to maneuver appropriately.15 It is stated that due to the consequent defaults, several Applications were moved by the Depositors before the Company Law Board seeking its intervention in terms of Section 45 QA of the Reserve Bank of India Act, 1934. The said provision inter alia empowers the Company Law Board to direct repayment of any deposit or part thereof in accordance with the terms and conditions of such deposit if it is satisfied that it is necessary to do so to safeguard the interest of the Company, the depositors or the public in general and, also can frame the scheme for repayment in a time bound programme.16 It is stated by the Petitioner that upon considering the Applications received by the Company Law Board, Chennai, it has, in terms of an order dated 21st March 2000, issued directions to KIFL for repayment of the deposits in accordance with the guidelines and the scheme formulated by it. A specific time frame was fixed by the Board for repayment of the Deposits. A fixed rate of interest had been stipulated by the Board and moreover priorities were determined in the matter of refund of deposits and classification was made of different categories of deposits. The Board had directed refunds to be made by way of Bank draft to be sent by post. The said directions or mode of repayment was decided by the Board to ensure that the Depositors, who have already waited for a sufficiently long period do not have to face the prospects of the cheques issued by the Company getting dishonoured or delivered to persons other than the Depositors. Annexure-C to the petition is a copy of the order dated 21.03.2000 passed by the Company Law Board. 17 It is stated that the Reserve Bank of India had approached the Karnataka High Court by way of Company Petition No.2 of 2000 praying for winding up of KIFL under Section 45 MC (i) of the Reserve Bank of India Act, 1934. In the said Petition, Application No.3 of 2000 came to be preferred by the Reserve Bank of India praying for appointment of the Provisional Liquidator. Application No.307 of 2000 came to be filed by the Reserve Bank of India seeking stay of proceedings in Company Petition No.2 of 2000 in view of the pendency of proceedings before the Company Law Board with a liberty to file memo for resumption of proceedings after the Appellate Authority and Company Law Board disposed off the matters pending before them. The Honourable Judge of Karnataka High Court after hearing the concerned parties by order dated 14.06.2000 was pleased to stay the winding up proceedings in Company Petition No.2 of 2000 and disposed of C.A.No.3 of 2000.18 It is stated that the United Western Bank Ltd., one of the Secured Creditors of KIFL being aggrieved by order dated 21.03.2000 passed by the Company Law Board thereby directing repayment of Deposits in accordance with the Scheme formulated, approached the Karnakata High Court by way of M.F.A.No.1530 of 2000. KIFL also preferred M.F.A.No.2030 of 2000 assailing the order dated 21.03.2000 passed by Company Law Board and prayed for modification of the said order. O.S.A.No.2 of 2000 was preferred by the Reserve Bank of India assailing the correctness of order dated 13.06.2000 passed by the Company Judge. M.F.A.No.1530 of 2000 of the United Western Bank Ltd., M.F.A.No.2030 of 2000 of KIFL, and O.S.A.No.2 of 2000 of the Reserve Bank of India were heard together by the Division Bench of Karnataka High Court. Their Lordships after hearing all the parties concerned by their judgment and order dated 29.06.2001 were pleased to dismiss M.F.A.No.1530 of 2000 and 2030 of 2000. O.S.A.No.2 of 2000 preferred by the Reserve Bank of India was allowed thereby vacating the order dated 14.06.2000 passed by the Company Judge staying the proceedings in Company Petition No.2 of 2000 in view of the fact that the proceedings before the Company Law Board and the Appellate Authority declining registration of the Company under Section 451A had been dismissed and hence there was no impediment in pursuing Company Petition No.2 of 2000. It was directed that the Company Petition No.2 of 2000 be proceeded in accordance with law. It was further directed that pending the disposal of an application which the Reserve Bank of India may move before the Company Judge, within the next four weeks, for interim direction, KIFL shall not pay any amount without obtaining the prior written permission from the Special Officers of the Reserve Bank of India except payment of salaries and other establishment expenses. It was further directed that a report regarding expenditure incurred on salaries and establishment expenses shall be submitted to the Officer on a weekly basis. Annexure D is a copy of the judgment and order dated 29.06.2001 passed by the Karnataka High Court in M.F.A.No.1530 of 2000, and M.F.A.No.2030 of 2000 and O.S.A.No.2 of 2000.19 It is stated that the Company Petition No.2 of 2000 for winding up was placed before His Lordship Mr. Justice Kumar Rajaratnam for hearing. The said Petition was filed under the provision of Section 45 MC of the Reserve Bank of India Act, 1934 read with Part-VII of the Companies Act, 1956 reason being that KIFL incorporated on 21.09.1983 had accepted deposits from the public at large under Section 45 (1) (A) of the Reserve Bank of India Act, 1934. In the said Petition it was averred that KIFL had on 04.07.1997 applied before the Reserve Bank of India for issuance of a certificate of registration under Chapter IIIB of the Reserve Bank of India Act, 1934 to carry on business of Non Banking Financial Institution. During an inspection by the Reserve Bank of India of the books of account maintained by KIFL, it was revealed that KIFL was in a bad shape and it had defaulted repayment of matured deposits and thus violated the public deposits directions issued by the Reserve Bank of India under the Reserve Bank of India Act, 1934. The Honble Company Judge on 09.08.1999 issued a show cause notice to KIFL. As the explanation submitted by KIFL was not satisfactory, by order dated 21.09.1999 the Application for issuance of a Certificate of Registration came to be cancelled.20 It is stated that His Lordship Mr. Justice Kumar Rajaratnam, after hearing all the concerned parties and finding that KIFLs management was improper as it was unable to pay its debts, by judgment and order dated 8th August 2001 was pleased to appoint a Committee of eminent persons viz. the Honble Mr. Justice K.A.Swamy, (Retd) Former Chief Justice of the Madras High Court and Dr. K. Srinivasan I.P.S. (Retd) Former Director General and Inspector General of Police, Karnataka, as Chairman and Member of the Committee respectively, to look after the affairs of KIFL. By the said Order inter alia the Committee was granted liberty to formulate a Scheme for payment to Depositors, negotiate with the Banks (Secured Creditors) for arriving at an out of Court settlement. The Committee was also permitted wherever possible to carry on the business of the Company and was entitled to incur all expenditure in pursuance of their task. The Committee was also directed to engage Lawyers with respect to recovery of the outstanding amounts owing to KIFL and as such other legal work that may be necessary to run the Company. The Committee was permitted to engage Accountants, Chartered Accountants and to employ a Manager and staff on an Adhoc basis to run the day to day functioning of KIFL. The Committee was also granted liberty to take all decisions at their discretion in the interest and the welfare of KIFL and prosecute all litigation for and against KIFL with the help of their own Lawyers to safeguard the interest of KIFL. The Bank accounts had to be operated either by the Chairman or by the Member of the Committee. The Committee was directed to immediately take steps to prune the expenditure and remove the dead wood staff so that some money could be generated for repayment of deposits made by the Depositors.21 By the said order the first task to be undertaken was to make payments to all the Depositors on a prorate basis out of the S.L.R. amount that was standing in the name of KIFL with the leave of the Reserve Bank of India. It was observed that the Reserve Bank of India had agreed to give permission. It was also directed that the Depositors shall be paid as expeditiously as possible. In the event of any difficulty the Committee was granted liberty to approach the Court for further directions. It was also directed that the Depositors, Secured Creditors and Unsecured Creditors were at liberty to make representation to the Committee which should be considered by the Committee and determine whether the requests of the Depositors and the Creditors could be acceded to, keeping in mind the financial position of KIFL. The Committee was further requested to submit its Report once in three months. Annexure E to the petition is a copy of the order dated 8th August 2001 passed by His Lordship Mr. Justice Kumar Rajratnam in Company Petition No.2 of 2000.22 It is stated that pursuant to the order dated 8th August 2001, the Committee issued a Notification dated 23.08.2001 which came to be published in The Times of India, Pune Edition on 05.09.2001, wherein it was stated that the Honble High Court of Karnataka by order dated 8th August 2001 in the Company Petition No.2 of 2000 has appointed a Committee of Management comprising of Justice K.A. Swamy (Retired) Former Chief Justice of Madras High Court as Chairman and Dr .K. Srinivasan I.P.S. (Retired) Former Director General and Inspector General of Police, Karnataka, as Member to manage the entire affairs of KIFL and that the Committee had taken charge on 17th August 2001. Attention of the persons having dealings with KIFL was also drawn towards the Notification. It was stated that the Debtors of KIFL had to deal only with the members of the Committee for settlement of their dues and that the Management would not be responsible for settlement made with any other person and further that no person had been authorized on this behalf to deal with the Debtors. Annexure F to the petition is a copy of the Notification dated 23.08.2001 published in the issue of The Times of India, Pune Edition on 5th September 2001.23 It is stated that on or about November 17, 2001 i.e. after the appointment of the Committee of Management by the High Court of Karnataka by the judgement and order dated August 8, 2001, the Respondent No.2 Company through the Member of Committee of Management Shri K. Sreenivasan (I.P.S. Retd.) informed the depositors of the Company about their appointment and their intention to disburse the first installment towards the repayment deposits to the extent of maximum 20%. In the said letter, the Committee also assured that as and when the recovery and liquidity of funds of the Company improves the Committee will take a decision for the further payment. By the said letter, the intention of the Company and the purpose for which the Committee of Management appointed by the Karnataka High Court clearly reflected in unequivocal terms about the intention for repayment of the deposits to the Depositors. The said Committee of Management under the directions of the Karnataka High Court has taken into account the best of the interest of all concerned including the depositors, the Company and the governmental agencies such as Reserve Bank of India and other secured and unsecured creditors. The repayment process has also begun and the said process is continuing under the guidance of the Karnataka High Court. Annexure G is a copy of the said Order dated November 17, 2001 addressed to the depositors of KIFL signed by Dr. K. Sreenivasan as Member, Committee of Management.24 Pursuant to the directions given by the Company Law Board, Chennai and the mandate of Honble High Court, the Committee of Management formulated the Scheme for repayment of deposits from time to time, depending on liquidity of assets of KIFL. Annexure H are copies of the Schemes formulated by the said Committee.25 It is stated that on 29th June, 2004, the Petitioner was served with summons in MPID Case No.1 of 2004 filed in the Court of the Designated Judge, under MPID Act, 1999, Pune at Pune. A copy of the Complaint was annexed along with the said summons. The allegation made in the said Complaint is that the Respondent No.1/Complainant had invested the following sums of money jointly in the name of his wife, daughter and son:-Sr.No.Fixed Deposit Receipt No.DateMaturity DateIncome PlanA.109048 Monthly01.09.199850,000/26.09.2000B.096012 Cumulative31.01.199815,000/27.02.2000 Total Amount Rs.65,000/- 26 It is stated that with effect from August 1999, the KIFL stopped paying interest on the said deposits. Even after the maturity of the said deposits, the KIFL did not pay the principal amount of the said deposit. It is alleged that the Respondent No.1 along with other investors of the said Deposit Scheme formed an Association called as MAKKS at Pune and through this Association, as well as individually sent letters to the Petitioner and 2 others who were also the Non-Executive Directors, requesting repayment of the said amount and deposit. It is alleged that on 02.03.2001 and 12.03.2001 the Complainant through the said Association allegedly sent complaints to the District Collector, Pune under the MPID Act, 1999 against the Petitioner and 2 other Non-Executive Directors. The said Complaint appears to have been referred to the Commissioner of Police, Pune for action. It is alleged that, however, no action was taken against the Accused. The Complainant, therefore, issued Legal Notice dated 16.12.2003 upon the Petitioner and 2 other Non-Executive Directors. The Petitioner along with the other two Non-Executive Directors by reply dated 20.12.2003 pointed out the factual position as well as the fact that in a Petition filed by the Reserve Bank of India, the Karnataka High Court, by order dated 08.08.2001 admitted the Petition and appointed a Committee for managing the affairs of the Company.27 It is stated that after the Complaint was lodged with the Collector, Pune, who forwarded the same to the Commissioner of Police, Pune, the Petitioner approached this Court by filing Writ Petition No.669 of 2003. In the said Writ Petition, this Court was pleased to issue Rule Nisi and further directed the Commissioner of Police, Pune, to not to take any coercive action against the Petitioner pertaining to the said case disposed off by this Court by virtue of the Full Bench judgment delivered with respect to MPID Act. Annexure I is a copy of the interim order passed by this Honble Court in Writ Petition No.669 of 2003. After the said Petition was admitted, the Petitioner and other Ex-Non-Executive Directors were called for interrogation by Sahakar Nagar Police Station, Pune. The Petitioner responded to their summons and attended the interrogation by providing all material evidence and information to his knowledge.28 It is stated that in the C.C.No.1 of 2004, it is also alleged that the liquidation proceedings pertained to the repayment of deposit money and, MPID Act, 1999 pertained to an offence. That, the Petitioner and the two other Non-Executive Directors have committed the offence much prior to the appointment of the said Committee and that the Petitioner and two other Non-Executive Directors are not entitled to take benefit of the said proceedings and liquidation and programme fixed by the said Committee for repayment of the deposit money to the Depositors. Hence, an offence under Section 3 of the MPID Act, 1999 was committed by the Petitioner and 2 other Non-Executive Directors. Annexure J to the petition is a copy of the C.C.No.1 of 2004 filed in the Court of the learned Designated Judge under MPID Act, Pune at Pune.29 It is stated in the petition that from the above allegations one fact is abundantly clear and that is, that a regular Complaint had been referred to the Collector under MPID Act, 1999 and the same was forwarded to the Commissioner of Police, Pune for inquiry. It also appears that the Commissioner of Police not having found any substance in the Complaint did not proceed with the same any further.30 It is stated that this very Complainant along with 200 investors through its Association MAKKS had also lodged C.R.No.33 of 2001 at Sahakar Nagar Police Station, Pune for offences punishable under Section 120B, 406, 420 r.w. 34 Indian Penal Code and under Section 3 of MPID Act, 1999. The said Complaint had been taken up for investigation in the year 2003, particularly after the initial payments were to be made to the Depositors by the Committee of Management appointed by the High Court of Karnataka in November, 2001. In the said regard on 25.03.2003, summons was issued to the Petitioner requesting to attend the interrogation at Sahakar Nagar Police Station. The Police having investigated into the same had not found any substance and hence did not proceed with the same.31 It is stated that in the meanwhile on 24th December, 2010, the Company Petition No.2 of 2000 filed by the Reserve Bank of India for winding up of KIFL came to be finally heard by the High Court of Karnataka at Bangalore. While allowing the Company Petition for winding up, an Official Liquidator came to be appointed to discharge the statutory duties under the Indian Companies Act, 1956. Annexure P to the petition is a copy of the judgment and order dated 24th December, 2010, passed by the High Court of Karnataka, Bangalore, under Company Petition No.2 of 2000.32 We have set out the facts in Criminal Writ Petition No.3801/2012 in details, but the only difference as far as other petitions are concerned is that the names and designations of the Petitioners would differ. The Petitioner in Writ Petition Nos.3801 to 3804/2012 is the same i.e. Mr. Prabhakar Dattatraya Gune. However, it appears that there are different complainants and distinct cases and that is how the Petitioners are required to file separate Writ Petitions.33 The Petitioner (Sanjay Chandrakant Kirloskar) in Criminal Writ Petition No.4039/2012 also claims similar reliefs. He has also filed Criminal Writ Petition Nos.4040, 4041 and 4042/2012.34 The Criminal Writ Petition No.4043/2012 has been filed by Mr. M.V. Patwardhan and he has been associated with the said KIFL as a Director. He has also filed Criminal Writ Petition Nos.4044, 4045 and 4046/2012.35 Thus, these Writ Petitions were heard together as they involve a common question of law. In all these Writ Petitions, Mr. Pradhan, learned counsel appearing for the Petitioners, has taken us through the complaints and has submitted that the matter was before the Company Law Board as well. The Reserve Bank of India has treated the KIFL as Non Banking Finance Corporation, but registered and incorporated as Company under the Indian Companies Act, 1956. Our attention has been invited to the orders and directions of the Company Law Board and equally to Section 45QA of the Reserve Bank of India Act, 1934, which provision reads thus:-45QA. Power of Company Law Board to offer repayment of deposit:1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.(2) Where a nonbanking financial company has failed to repay and deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under Section 10E of the Companies Act, 1956 (1 of 1956), may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the nonbanking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order:Provided that the Company Law Board may, before making any order under this subsection, give a reasonable opportunity of being heard to the nonbanking financial company and the other persons interested in the matter.36 Mr. Pradhan, therefore, submits that the Company Law Board has taken care of interest of depositors who are aggrieved by failure of the KIFL to redeem the deposits. A comprehensive scheme of the Company Law Board provides for all eventualities. It sets out consequences of default in complying with the scheme. The Reserve Bank of India Act, 1934 is, thus, a complete code. It also provides for criminal prosecution and in that behalf, Mr. Pradhan invites our attention to Section 58B of the Reserve Bank of India Act, 1934 falling under Chapter-V entitled Penalties. It is submitted that by virtue of subsections (4A) and (4AA), all those who are contravening the provisions of this Act or any order, regulation and direction made or given thereunder, shall be punishable with imprisonment and fine. The Company Law Board order has been challenged in the Karnataka High Court and in that behalf, our attention has been invited to the said order, copy of which has been annexed to the petition at Annexure-D. Mr. Pradhan submits that once this KIFL is covered by the Reserve Bank of India Act, 1934 and the Indian Companies Act, 1956, then, all that the complaint alleges is that an offence has been committed and which is of not redeeming the deposits and paying the sums with accrued interest to the depositors. Such an act, according to the Complainant, amounts to an offence punishable under the MPID Act, 1999.37 Mr. Pradhan submits that in the complaint the Complainant has alleged as under:-12. The Complainant says that the Accused Nos.1 to 4 failed to repay the said deposit amounts and interest as assured on account of impracticable situation of liquidation of the Accused No.1 and failed to comply with the promises made while accepting the said deposits from the complainant. The fact that the Accused No.1 Company was required to be liquidated through RBI, itself shows that the money deposited by the Complainant and other depositors was not deployed or invested by the Accused No.1 in proper manner so as to avoid inherent risk. Thus, the Accused Nos.1 to 4 have committed fraudulent default in repayment of the said deposits as contemplated under Section 3 of the said MPID Act, 1999.13. The Complainant says that he made complaints to the Honble Collector, Pune and Police Commissioner, Pune, as stated above, but no action was taken by them as contemplated under Sections 4, 9, 10 etc. under the MPID Act, 1999. Hence, the Complainant is constrained to file the present complaint under Section 13 of the MPID Act, 1999.38 Inviting our attention to the Prevention of Corruption Act, 1988 and particularly Section 4(3) thereof, what has been emphasized by Mr. Pradhan is that a Special Judge appointed as such to try the cases under the Prevention of Corruption Act, 1988 is empowered to try any offence with which the accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial. There is no such provision in the MPID Act, 1999. Therefore, the complaint alleging offences punishable under Sections 406 and 420 of the Indian Penal Code besides violation of the MPID Act, 1999, cannot be tried by the MPID Special Court. Thus, the IPC offences cannot be tried by the Special Judge along with the MPID Special Case. Mr. Pradhan has invited our attention to Sections 5 and 7 of the MPID Act, 1999 and submitted that these sections are in direct conflict with the Indian Companies Act, 1956. He has also invited our attention to Rule 8 of the MPID Rules, 1999 to submit that same is conflicting with Section 456 of the Indian Companies Act, 1956. In other words, his submission is that the power to attach the property which is conferred in the Special Judge under the MPID Act, 1999 is being exercised in relation to the Company which is under liquidation. That liquidation of the Company is a proceeding contemplated by the Indian Companies Act, 1956 so as to enable winding up of such company. The powers of the Liquidator in that behalf are enumerated in the Indian Companies Act, 1956 under which he is empowered to take possession of the properties which appear to be belonging to the Company. The assets and properties are, therefore, held by the Liquidator and he acts under the orders and directions of the Company Court. The attachment of the same property by the MPID Court amounts to usurpation of the powers of the High Court under the Indian Companies Act, 1956.39 Mr. Pradhan also invites our attention to the Reserve Bank of India Act, 1934 and he submits that Chapter-III-B has been inserted by Act 55 of 1963 w.e.f. 01.12.1964 in the Reserve Bank of India Act, 1934. This chapter is applicable to financial institution and which is defined in Section 45I clause (c) and which reads as under:-45-I clause (c) financial institution means any nonbanking institution which carries on as its business or part of its business any of the following activities, namely:(i)the financing, whether by way of making loans or advances or otherwise, of any activity other than its own;(ii) the acquisition of shares, stock, bonds, debentures or securities issued by a Government or local authority or other marketable securities 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 any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;(vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, monies in lump sum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from 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-clauses (i) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964);]40 Mr. Pradhan submits that sub clause (aa) appearing in Section 45-I defines the term company to mean a company as defined in Section 3 of the Indian Companies Act, 1956. Therefore, when such are the provisions enacted and particularly to protect interest of the depositors as would be evident by Section 45NB of the Reserve Bank of India Act, 1934, then, such powers can be exercised in terms of the said Act by the authority prescribed therein. The authorities are empowered to hold an inquiry into affairs of the Non Banking Financial Company. Thus, the area and field is covered by the Reserve Bank of India Act, 1934. Our attention has been invited to Chapter-V of the Reserve Bank of India Act, 1934 entitled penalties. Once the area and field is occupied by this Act, then, according to Mr. Pradhan, the MPID Act, 1999 cannot usurp and take over such powers as the MPID Act, 1999 is a State Legislation. There is Parliamentary Legislation in the field and covering all aspects and matters and when on same subject a law is made by the State Legislature, then, the act of the Parliament will prevail. In other words, Articles 246 and 254 of the Constitution of India enact the doctrine of occupied field. That doctrine envisages that the State Legislation must giveway or yield to the Parliamentary/ Central Legislation. Both cannot stand together. Mr. Pradhan, therefore, submits that the proceedings under Sections 3 and 4 of the MPID Act, 1999 cannot go on.41 Mr. Pradhan submits that each of the Petitioners have disassociated themselves with the Company prior to the prohibitory order dated 13.08.1999. Thereafter, final orders in winding up proceedings have been passed by the competent court. That is dated 24.12.2010, a copy of the same is at page 253 of the paper book. Our attention is invited to paragraph 56 at page 303 of the said order. Mr. Pradhan submits that once the field is occupied by the Reserve Bank of India Act, 1934 and the Indian Companies Act, 1956, then, the proceedings under the MPID Act, 1999 are wholly untenable being governed by the State Act. Once the State Act itself is inapplicable and in the teeth of the Parliamentary Statute, then, allowing parallel proceedings to go on would be an abuse of the process of the Court.42 Mr. Pradhan was at pains to point out that this aspect has not been dealt with by the Honourable Supreme Court in the case of Baskaran (supra). If it is not then the same can be examined by this Court despite the Supreme Court holding that the Maharashtra State Legislature is competent to legislate and enact the Maharashtra Act. For all these reasons, Mr.Pradhan submits that the Writ Petitions be allowed.43 On the other hand, the learned APP appearing for the State, would submit that this Courts writ jurisdiction and inherent jurisdiction cannot be now invoked. The investigations are complete and the charge sheet is filed in the year 2008. The MPID Special Case is of the year 2004. The clarification by the Honourable Supreme Court does not mean that same issues and points which are argued and covered by the judgment delivered in Baskarans case (supra) can be raised once again. The learned APP would submit that each and every point and aspect has been dealt with by the Honourable Supreme Court and nothing remains for decision and consideration now. If the Petitioners are raising factual pleas and attempting to point out that they were not responsible for the day to day affairs nor were in control thereof on the relevant date, then, they can approach the Special Court and seek discharge from the proceedings by filing appropriate proceedings. The Writ Petitions should not be entertained once the cognizance has been taken by the Special Court. The learned APP submits that the order passed by the Karnataka High Court of winding up of the KIFL, cannot be of any relevance in this case because the proceedings are alleging commission of offence punishable under the MPID Act, 1999. The proceedings under the Indian Companies Act, 1956 are distinct in nature and particularly in relation to the winding up. Therefore, there is no inconsistency. Similarly, as far as the offence punishable under the MPID Act, 1999 is concerned, that is for acts of omission and commission as set out in the MPID Act, 1999. For the acts as enumerated in the Reserve Bank of India Act, 1934, there are penalties provided for default. The imposition of those penalties by the competent court under that Act ipso facto does not mean that the MPID Special Case cannot proceed. More so when it is clarified that the Act is not a derogatory statute. There is no conflict between the Reserve Bank of India Act, 1934 and the Indian Companies Act, 1956 and the MPID Act, 1999. In these circumstances, there is no merit in any of these petitions and they must fail and consequently, they be dismissed.44 With the assistance of Mr. Pradhan and the learned APP, we have gone through each petitions, their annexures and equally relevant statutory provisions.45 The MPID Act, 1999 came into force on the date specified and it is an Act to protect the interest of depositors of the financial establishments and matters relating thereto. The statement of objects and reasons of the MPID Act, 1999 and the Ordinance preceding the same, reads as under:-There is a mushroom growth of Financial Establishments in the State of Maharashtra in the recent past. The sole object of these Establishments is of grabbing money received as deposits from public, mostly middle class and poor on the promises of unprecedented high attractive interest rates of interest or rewards and without any obligation to refund the deposit to the investors on maturity or without any provision for ensuring rendering of the services in kind in return, as assured. Many of these Financial Establishments have defaulted to return the deposits on public. As such deposits run into crores of rupees it has resulted in great public resentment and uproar, creating law and order problem in the State of Maharashtra, specially in the city like Mumbai which is treated as the financial capital of India. It is, therefore, expedient to make a suitable legislation in the public interest to curb the unscrupulous activities of such Financial Establishments in the State of Maharashtra.As both the Houses of the State Legislature are not in Session and the Governor of Maharashtra is satisfied that the circumstances exist which render it necessary for him to take immediate action to make a law, for the purposes aforesaid, this Ordinance is promulgated.46 Section 2 contains definitions and the term deposit appearing in clause (c) therein reads as under:-(c) deposit includes and shall be deemed always to have included any receipt of money or acceptance of any valuable commodity by any Financial Establishment to be returned after a specified period or otherwise, either in cash or in kind or in the form of a specified service with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include-(i) amount raised by way of share capital or by any way of debenture, bond or any other instrument covered under the guidelines given, and regulations made, by the SEBI, established under the Securities and Exchange Board of India Act, 1992 (15 of 1992);(ii) amounts contributed as capital by partners of a firm;(iii) amounts received from a Scheduled bank or Cooperative 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 amount received froma) the Industrial Development Bank of India,(b) a State Financial Institution,(c) any financial institution specified in or under section 6A of Industrial Development Bank of India Act, 1964 (18 of 1964), or(d) any other institution that may be specified by the Government in this behalf;(v) amounts received in the ordinary course of business by way of,a) security deposit,(b) dealership deposit,(c) earnest money,(d) advance against order for goods or services;(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 the state; and(vii) any amount received by way of subscriptions in receipt of a Chit.Explanation-I- Chit" has the meaning as assigned to in clause (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 the sale of any property (whether movable or immovable) shall not be deemed to be a deposit for the purposes of this clause;Further Section 2(d) defines financial establishment and reads as under:d) "Financial Establishment" means any person accepting deposit under any scheme or arrangement or in any other manner but does not include a corporation or a cooperative society owned or controlled by any State Government or the Central Government or a banking company defined under clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949).Section-3 is relevant provision for our consideration and it reads as under:-Section-3. Fraudulent default by Financial Establishment: Any Financial Establishment, which fraudulently defaults any repayment of deposit on maturity along with any benefit in the form of interest, bonus, profit or in any other form as promised or fraudulently fails to render service as assured against the deposit, every person including the promoter partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or affairs of such Financial Establishment shall, on conviction, be punished with imprisonment for a term which may extend to six years and with fine which may extend to one lac of rupees and such Financial Establishment also shall be liable for a fine which may extend to one lac of rupees.Explanation.-For the purpose of this Section, a Financial Establishment, which commits defaults in repayment of such deposit with such benefits in the form of interest, bonus, profit or any other form as promised or fails to render any specified service promised against such deposit, or fails to render any specific service agreed against the deposit with an intention of causing wrongful gain to one person or wrongful loss to another person or commits such default due to its inability arising out of impracticable or commercially not viable promises made while accepting such deposit or arising out of deployment of money or assets acquired out of deposits in such a manner as it involves inherent risk in recovering the same when needed shall be deemed to have committed a default or failed to render the specific service, fraudulently.47 The attachment of properties on default of return of deposits is dealt with by Section 4 and by Sections 5, 6 and 7, the appointment of Competent Authority, Designated Court and powers of designated court regarding attachment are the matters covered. Section 8 empowers attachment of property of malafide transferee and thereafter, there are provisions enabling providing security in lieu of attachment, administration of property attached and appeal against the order of the designated court. The appointment of Special Public Prosecutor, procedure and powers of Designated Court regarding offences, over riding effect given by the MPID Act, 1999 over other laws and powers to make rules are matters dealt with by further sections.48 The Reserve Bank of India Act, 1934 is an Act constituting the Reserve Bank of India. Its object and purpose is to constitute a Reserve Bank for India to regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage. For providing permanent basis for the Indian Monetary System and to make provisions for monetary standard best suited to India that the Act was enacted. The Act contains several provisions and devided so also spread over Chapters so as to enable the establishment and incorporation of a Reserve Bank, providing for its banking function, collection and furnishing credit information and provisions relating to non banking financial institutions. Chapter-III-B has been brought on the statute book so that a non banking financial company can commence or carry on business after obtaining a certificate of registration issued under this Chapter and on fulfillment of the criteria and requirement prescribed by the Statute. That is an aspect dealt with by Section 45-IA. Section 45-IB provides for maintenance of percentage of assets and thereafter, there are further provisions enabling the Bank, namely, Reserve Bank of India constituted by the Reserve Bank of India Act, 1934 to monitor, regulate and determine the policy and other matters in relation to non banking financial company and functions of such company. That the Reserve Bank of India is empowered to collect information and give directions not only to non banking institutions, but financial institutions as well and there is an obligation of such institutions to furnish statements and particulars called for and to comply with any direction given to them. The power of the Reserve Bank of India to file a winding up petition against the non banking financial company, cause an inspection into its affairs to be carried out, would mean that the banking business or business in relation thereto by a non banking financial company or financial institution can be carried out only after compliance with and subject to these provisions.49 That penalties for non compliance with the provisions in relation to the filing of a declaration, return, statement, giving information or particulars and any order and direction in relation thereto or otherwise, is made punishable offence in terms of Section 58B of the Reserve Bank of India Act, 1934, by itself and without anything more would not mean that the prosecution launched under the State Act, namely, MPID Act, 1999 is ex-facie not maintainable.50 The area and field covered by the Reserve Bank of India Act, 1934 in relation to giving permission or granting certificates to commence the non banking financial business are not wide enough or encompassing all the matters dealt with and covered by the MPID Act, 1999. Though there is a similarity in some definitions and by virtue of Section 45Q overriding effect is given to Chapter IIIB, yet the sweep of the MPID Act, 1999 in relation to the State is covering not just receipt of money, but valuable commodity to be returned. (See Section 2(c) of the MPID Act, 1999).51 In so far as the Indian Companies Act, 1956 is concerned, thereunder a Non Banking Financial Company is a company registered under the Indian Companies Act, 1956. Section 58A of the Indian Companies Act, 1956, to which our attention has been invited, deals with deposits and they cannot be invited without issuing an advertisement. That Company omits or fails to make repayment of a deposit in accordance with Clause (c) of subsection (3) or in the case of a deposit referred to in subsection (4), shall visit the Company with punishment of fine and every officer who is in default of the Company can be imprisoned, does not mean that in relation to the deposits and protection of interest of depositors of a financial establishment in the State, the State Legislature cannot make any enactment. All the more when the State is making provisions so as to protect the interest of depositors in a financial establishment which is defined to mean a person accepting deposit under any scheme or arrangement or in any other manner excluding the corporation and cooperative society owned and controlled by any State Government or Central Government or Banking Company defined under clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949). Further the term deposit is defined in an inclusive manner in Section 2(c) of the MPID Act, 1999. It shall be deemed to have always included any receipt of money or acceptance of valuable commodity by any financial establishment to be returned after a specified period or otherwise either in cash or kind or in the form of specified service with or without any benefit in the form of interest, bonus, profit or in any other form. What is excluded from the definition of deposit as appearing in Section 2 clause (c) of the MPID Act, 1999 are the amounts set out in clauses (i) to (vii).52 In the aforementioned circumstances we are of the opinion that the provisions to which our attention is invited by Mr. Pradhan will not enable us to hold that the entire field is occupied by the Indian Companies Act, 1956 either. In other words, the field is not occupied by the Reserve Bank of India Act, 1934 and equally the Indian Companies Act, 1956.53 A faint attempt is then made by Mr. Pradhan to convince us by referring to the provisions of the Indian Companies Act, 1956 insofar as winding up of a company is concerned. Mr.Pradhan heavily relied upon the provisions of Chapter-VI dealing with prevention of oppression and mismanagement and the provisions of Part-VII regarding winding up. Therein, the provisions enable the winding up of a company by the Court or voluntary winding up. Insofar as the winding up order passed by the Court is concerned, consequences following the same are enumerated from Section 444 onwards. Reliance placed on Section 456 of the Indian Companies Act, 1956 is also misplaced. The custody of companys property, post order of winding up is a matter dealt with by this provision. Following this provision are the powers of the liquidator and they are enumerated by Section 457. Merely because the Petitioners claim that KIFL is wound up and the Official Liquidator attached to the Karnataka High Court is appointed as Liquidator, that does not mean that the prosecution under the State Act cannot be initiated or if initiated, cannot continue. The proceedings under the State Act, namely, MPID Act, 1999 would continue, if initiated, or even can be initiated and wherever an order of attachment or custody of property of the depositor is being made, the designated court will have to bear in mind the consequences flowing from the winding up order against a company in winding up which is covered by the definition of the term financial establishment. Therefore, for the field to be occupied there has to be a specific provision in both the Acts referred to above by which the interest of depositors is protected and to the extent provided in the MPID Act, 1999. There is a provision in the State Act for appointment of the competent authority for the purpose of giving effect to attachment of properties on default of return of deposit and thereafter, there is a provision setting up and establishing a designated court. The powers of designated court regarding attachment are enumerated in Section 7 of the MPID Act, 1999. Thereafter, Section 8 enables attachment of property of malafide transferee. Thus, a fraudulent default by the financial establishments is a punishable offence in terms of Section 3 and there is an independent power enabling the Government to attach properties on default of return of deposits by the financial establishments after it records its satisfaction in terms of Section 4(1) of the MPID Act, 1999.54 The provisions, therefore, cover a financial establishment and which is meant to be any person accepting a deposit under any scheme or arrangement or in any other manner. Section 3 of the MPID Act, 1999 enables the Court to convict and punish a person accepting a deposit including the promoter, partner, director, manager or any other person or an employee responsible for the management of or conducting of the business or affairs of such financial establishments. This coupled with he definitions of terms financial establishment and deposit leaves us in no manner of doubt that neither the Reserve Bank of India Act, 1934 nor the Indian Companies Act, 1956 would be covering the entire field occupied by the MPID Act, 1999.55 It is not necessary to clarify that in order to avoid conflicting orders and directions, in appropriate cases and depending upon the facts and circumstances therein, the authorities under the MPID Act, 1999 will have to take into consideration the orders of the competent court or authorities under the above enactments. In other words, nothing should be done in relation to the property of a company accepting deposits if that company is facing winding up proceedings. Therefore, the orders under the MPID Act, 1999 would necessarily then depend upon the pendency or otherwise of the proceedings in relation to winding up a company incorporated and registered under the Indian Companies Act, 1956. Similarly, in relation to the acceptance of deposits by the company, at appropriate stage, the provisions contained in the Indian Companies Act, 1956 and the Reserve Bank of India Act, 1934 will have to be referred to so that the powers of the said authority are in no way usurped or overreached in any manner. However, only on that basis it will not be possible to hold that the field is occupied as suggested by Mr. Pradhan by these two Acts.56 We have referred to all this material and in somewhat details because Mr. Pradhan strenuously urged that the question of the MPID Act, 1999 not occupying the entire field is still open and not covered by the Judgment of the Honourable Supreme Court in Baskarans case (supra). It is not possible to accept this contention and by reading only paragraph 20 of that judgment.57 There were identical definitions in Tamil Nadu Act which was under consideration of the Honourable Supreme Court. One of the argument was that the State Legislature, namely, the Tamil Nadu Legislative Assembly is incompetent to enact the Act. This argument was specifically canvassed before the Honourable Supreme Court and noted in paragraph 6 of the judgment in Baskarans case (supra). It was dealt with by the Honourable Supreme Court from paragraphs 7 onwards and in paragraph 14, the Honourable Supreme Court overrules the Full Bench Judgment of this Court in Vijay C. Puljal (supra). From paragraph 15 onwards, the Honourable Supreme Court considered the argument of legislative competence. Mr. Pradhan would read paragraph 20 of this judgment in isolation. It is not as if the Honourable Supreme Court was not answering the question of occupied field as raised by Mr. Pradhan and in cases of financial companies which had not obtained any licence from the Reserve Bank of India. Merely because such licence was not obtained or the Banking Regulation Act, 1949 was inapplicable, does not mean that the Honourable Supreme Court has not considered both questions, namely, legislative competence and doctrine of occupied field. Paragraphs 21 to 26 would make this aspect very clear and therefore, we would reproduce paragraphs 21 to 30 of the judgment in Baskarans case (supra):-21. The doctrine of pith and substance means that an enactment which substantially falls within the powers expressly conferred by the Constitution upon a Legislature which enacted it cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another legislature. The Court must consider what constitutes in pith and substance the true subject matter of the legislation. If on such examination it is found that the legislation is in substance one on a matter assigned to the legislature then it must be held to be valid even though it incidentally trenches on matters beyond its legislative competence vide Union of India vs. Shah Goverdhan L. Kabra Teachers College (SCC para 7).22. For applying the doctrine of pith and substance regard is to be had to the enactment as a whole, its main objects and the scope and effect of its provisions vide Special Reference No.1 of 2001, In re (SCC para 15). For this purpose the language of the Entries in the Seventh Schedule should be given the widest scope of which the meaning is fairly capable vide State of West Bengal vs. Kesoram Industries Ltd. [SCC para 31(4)], Union of India vs. Shah Goverdhan L. Kabra Teachers College (SCC para 6) and ITC Ltd. vs. State of Karnataka (SCC para 17).23. The learned counsel for the appellant submitted that the subject-matter of the Tamil Nadu Act being banking, falls within the legislative competence of Parliament under Entry 45 of List I. We do not agree. Admittedly, none of the financial companies in question obtained any licence from Reserve Bank of India. Hence they are not governed by the Reserve Bank of India Act or the Banking Regulation Act. The activities of these financial companies do not, in our opinion, come within the meaning of the term banking as defined in the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934.24. The Tamil Nadu Act was enacted to find out a solution for the problem of the depositors who were deceived on a large scale by the fraudulent activities of certain financial establishments. There was a disastrous consequence both in the economic as well as social life of such depositors who were exploited by false promise of high return of interest. These financial institutions/establishments did not come either under the Reserve Bank of India Act or the Banking Regulation act, and hence they escaped from public control. By the impugned Act the State not only proposed to attach the properties of such fraudulent establishments and the malafide transferees, but also provided for the sale of such properties and for distribution of the sale proceeds amongst the innocent depositors. Hence, in our opinion, the doctrine of occupied field or repugnancy, has no application in the present case.25. The object of the Tamil Nadu Act was to give a speedy remedy to the innocent depositors who were vulnerable to the temptation of earning high rates of interest and were victimized by the financial establishments fraudulently. As regards Section 58A of the Companies Act, this prescribes the conditions under which the deposits may be invited or accepted by the companies. On the other hand, the aim and object of the Tamil Nadu Act is totally different.26. The Tamil Nadu Act was enacted to ameliorate the conditions of thousands of depositors who had fallen into the clutches of fraudulent financial establishments who had raised hopes of high rate of interest and thus duped the depositors. Thus the Tamil Nadu Act is not focused on the transaction of banking or the acceptance of deposit, but is focused on remedying the situation of the depositors who were deceived by the fraudulent financial establishments. The impugned Tamil Nadu Act was intended to deal with neither the banks which do the business or banking and are governed by the Reserve Bank of India Act and the Banking Regulation Act, nor the nonbanking financial companies enacted under the Companies Act, 1956.27. The Reserve Bank of India Act, the Banking Regulation Act and the Companies Act do not occupy the field which the impugned Tamil Nadu Act occupies, though the latter may incidentally trench upon the former. The main object of the Tamil Nadu Act is to provide a solution to wipe out the tears of several lakhs of depositors to realize their dues effectively and speedily from the fraudulent financial establishments which duped them or their vendees, without dragging them in a legal battle from pillar to post. Hence, the decision of this Court in Delhi Cloth Mills has no bearing on the constitutional validity of the Tamil Nadu Act.28. In the case of the Tamil Nadu Act, the attachment of properties is intended to provide an effective and speedy remedy to the aggrieved depositors for the realization of their dues. The offences dealt with in the impugned Act are unique and have been enacted to deal with the economic and social disorder in society, caused by the fraudulent activities of such financial establishments.29. Under Sections 3 & 4 of the Tamil Nadu Act, certain properties can be attached, and there is also provision for interim orders for attachment after which a post decisional hearing is provided for. In our opinion this is valid in view of the prevailing realities.30. The Court should interpret the constitutional provisions against the social setting of the country and not in the abstract. The Court must take into consideration the economic realities and aspirations of the people and must further the social interest which is the purpose of legislation, as held by Holmes, Brandeis and Frankfurter, JJ of the US Supreme Court in a series of decisions. Hence the Courts cannot function in a vacuum. It is for this reason that Courts presume in favour of constitutionality of the statute because there is always a presumption that the legislature understands and correctly appreciates the needs of its own people, vide Govt. of A.P. vs. P. Laxmi Devi.58 A careful perusal of these paragraphs would leave us in no manner of doubt that the Tamil Nadu Act may not be dealing with the deposit or amount received from the scheduled bank or cooperative bank or any other banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949, but what we find as important is the principle laid down. It is clear that non banking financial companies are not excluded from the purview of the MPID Act, 1999. Equally, as noted by the Honourable Supreme Court, by Amendment Act 30 of 2003 the companies registered under the Indian Companies Act, 1956 and non banking financial companies were also brought within the purview of the Tamil Nadu Act. Hence, the stray observation in paragraphs 20 and 26 of this judgment would not assist Mr.Pradhan or the Petitioners in any manner. Mr. Pradhan was vehement in his contention with regard to the provisions of the Banking Regulation Act, 1949 and relied upon the definition of the term banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949. However, what we find therein is that the definition is inserted so as to consolidate and amend the law relating to banking. The Banking Regulation Act, 1949 has been amended from time to time and Section 5(c) has been inserted so as to enable the Legislature to apply the regulatory provisions even to a banking company. Thus, the business of banking carried on by the banking companies or banks as understood ordinarily and normally would be covered by the provisions of the Banking Regulation Act, 1949.59 Hence, we are of the view that the judgment in Baskarans case (supra) covers the entire controversy including on raised before us.60 The judgment of the Honourable Supreme Court which is binding upon us cannot be read in the manner suggested by Mr. Pradhan. That there is a clarification given by the Honourable Supreme Court and which is relied upon by Mr. Pradhan would not carry the matter any further. He relies upon the order dated 11.01.2013 passed by the Honourable Supreme Court in Criminal Miscellaneous Petition No.27050/2012 and connected matters. However, this clarification does not mean that the judgment of the Honourable Supreme Court in the case of Baskaran (supra) is not binding upon us. The order passed by the Honourable Supreme Court giving permission to withdraw the criminal miscellaneous petitions by virtue of the judgment in Baskarans case (supra) does not mean that the said judgment is not binding on this Court. Thus, the order passed by the Honourable Supreme Court on 11.01.2013 may permit the Petitioners and parties like them to take independent proceedings before the forum concerned, but that is referable to paragraph 34 of the judgment in Baskarans case (supra). That paragraph 34 reads as under:34. The learned counsel for the appellant submitted that the appellant was only a bona fide purchaser of some plots of land from one Arun Kumar and Smt.Sulochana, and not from any financial establishment. We are not going into this question as it can be raised in appropriate proceedings. In this case we are only concerned with the constitutional validity of the Tamil Nadu Act.61 The binding force of the judgment of Baskaran (supra) is, therefore, in no way diluted. The judgment of the Honourable Supreme Court and which lays down the law, binds everybody by virtue of Article 141 of the Constitution of India. When the Honourable Supreme Court has considered pari materia provisions in the Tamil Nadu Act and has held that to be constitutional and valid, then, such judgment of the Honourable Supreme Court cannot be ignored or brushed aside by us on the spacious plea that some argument or a facet of that argument has not been noticed or dealt with. In the judgment of the Honourable Supreme Court on the point of binding precedent, this is what is held in AIR 2002 SC 1598 (Director of Settlements, A.P. and others v/s M.R.Apparao and another):-7. So far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has declared law it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An obiter dictum as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind (binding) effect as a precedent, ut it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of (on) points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see AIR 1970 SC 1002 and AIR 1973 SC 794). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court. A judgment of the High Court which refuses to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity. (See 1984(2) SCC 402 and 1984 (2) SCC 324).........62 In the above circumstances we do not see any merit in the submissions of Mr. Pradhan and rather they fail to notice the doctrine of occupied field in its correct perspective. That doctrine has been explained in a Constitution Bench Decision of the Honourable Supreme Court reported in (1977) 2 SCC 670(M/s Fatehchand Himmatlal and others v/s State of Maharashtra) in the following words:-62. In the Canadian Constitution, the question of conflict and coincidence in the domain in which provincial and Dominion legislation overlap has been considered. If both may overlap and coexist without conflict, neither legislation is ultra vires. But if there is confrontation and conflict the question of paramountcy and occupied field may crop up. It has been held that the rule as to predominance of Dominion legislation can only be invoked in case of absolutely conflicting legislation in pari materia when it will be an impossibility to give effect to both the Dominion and provincial enactments. There must be a real conflict between the two Acts i.e. the two enactments must come into collision. The doctrine of Dominion paramountcy does not operate merely because the Dominion has legislated on the same subject matter. The doctrine of occupied field applies only where there is a clash between Dominion Legislation and Provincial Legislation within an area common to both. Where both can coexist peacefully, both reap their respective harvests (Please see: Canadian Constitutional Law by Laskinpp. 5254, 1951 Edn).63. We may sum up the legal position to the extent necessary for our case. Where Parliament has made a law under Entry 52 of List I and in the course of it framed incidental provisions affecting gold loans and money-lending business involving gold ornaments, the State, making a law on a different topic but covering in part the same area of gold loans, must not go into irreconcilable conflicts. Of course, if Article 254(2) can be invoked we will presently examine it then the State law may still prevail since the assent of the President has been obtained for the Debt Act. Thirdly, the doctrine of occupied field does not totally deprive the State Legislature from making any law incidentally referrable to gold. In the event of a plain conflict, the State law must step down unless, as pointed out earlier in the previous passage, Article 254(2) comes to the rescue.63 The above discussion is enough to dispose of the main plea canvassed before us. As far as factual aspects and noted by us in paragraphs 38 and 41, so also, the narration in relation thereto in the preceding paragraphs, it will be open for the Petitioners to raise and substantiate them at an appropriate stage in the pending Special Case. We clarify that all contentions of parties on facts, merits and particularly in relation to attachment of properties of KIFL by the Designated Court and powers of the same visavis the winding up proceedings, are kept open.

Decision:
0[ds]59 Hence, we are of the view that the judgment in Baskarans case (supra) covers the entire controversy including on raised before us.60 The judgment of the Honourable Supreme Court which is binding upon us cannot be read in the manner suggested by Mr. Pradhan. That there is a clarification given by the Honourable Supreme Court and which is relied upon by Mr. Pradhan would not carry the matter any further. He relies upon the order dated 11.01.2013 passed by the Honourable Supreme Court in Criminal Miscellaneous Petition No.27050/2012 and connected matters. However, this clarification does not mean that the judgment of the Honourable Supreme Court in the case of Baskaran (supra) is not binding upon us. The order passed by the Honourable Supreme Court giving permission to withdraw the criminal miscellaneous petitions by virtue of the judgment in Baskarans case (supra) does not mean that the said judgment is not binding on this Court. Thus, the order passed by the Honourable Supreme Court on 11.01.2013 may permit the Petitioners and parties like them to take independent proceedings before the forum concerned, but that is referable to paragraph 34 of the judgment in Baskarans case (supra). That paragraph 34 reads as under:34. The learned counsel for the appellant submitted that the appellant was only a bona fide purchaser of some plots of land from one Arun Kumar and Smt.Sulochana, and not from any financial establishment. We are not going into this question as it can be raised in appropriate proceedings. In this case we are only concerned with the constitutional validity of the Tamil Nadu Act.61 The binding force of the judgment of Baskaran (supra) is, therefore, in no way diluted. The judgment of the Honourable Supreme Court and which lays down the law, binds everybody by virtue of Article 141 of the Constitution of India. When the Honourable Supreme Court has considered pari materia provisions in the Tamil Nadu Act and has held that to be constitutional and valid, then, such judgment of the Honourable Supreme Court cannot be ignored or brushed aside by us on the spacious plea that some argument or a facet of that argument has not been noticed or dealt with. In the judgment of the Honourable Supreme Court on the point of binding precedent, this is what is held in AIR 2002 SC 1598   (Director of Settlements, A.P. and others v/s M.R.Apparao andSo far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has declared law it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An obiter dictum as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind (binding) effect as a precedent, ut it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of (on) points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see AIR 1970 SC 1002   and AIR 1973 SC 794). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court. A judgment of the High Court which refuses to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity. (See 1984(2) SCC 402 and 1984 (2) SCC 324).........62 In the above circumstances we do not see any merit in the submissions of Mr. Pradhan and rather they fail to notice the doctrine of occupied field in its correct perspective. That doctrine has been explained in a Constitution Bench Decision of the Honourable Supreme Court reported in (1977) 2 SCC 670(M/s Fatehchand Himmatlal and others v/s State of Maharashtra) in the followingIn the Canadian Constitution, the question of conflict and coincidence in the domain in which provincial and Dominion legislation overlap has been considered. If both may overlap and coexist without conflict, neither legislation is ultra vires. But if there is confrontation and conflict the question of paramountcy and occupied field may crop up. It has been held that the rule as to predominance of Dominion legislation can only be invoked in case of absolutely conflicting legislation in pari materia when it will be an impossibility to give effect to both the Dominion and provincial enactments. There must be a real conflict between the two Acts i.e. the two enactments must come into collision. The doctrine of Dominion paramountcy does not operate merely because the Dominion has legislated on the same subject matter. The doctrine of occupied field applies only where there is a clash between Dominion Legislation and Provincial Legislation within an area common to both. Where both can coexist peacefully, both reap their respective harvests (Please see: Canadian Constitutional Law by Laskinpp. 5254, 1951 Edn).63. We may sum up the legal position to the extent necessary for our case. Where Parliament has made a law under Entry 52 of List I and in the course of it framed incidental provisions affecting gold loans andbusiness involving gold ornaments, the State, making a law on a different topic but covering in part the same area of gold loans, must not go into irreconcilable conflicts. Of course, if Article 254(2) can be invokedwe will presently examine itthen the State law may still prevail since the assent of the President has been obtained for the Debt Act. Thirdly, the doctrine of occupied field does not totally deprive the State Legislature from making any law incidentally referrable to gold. In the event of a plain conflict, the State law must step down unless, as pointed out earlier in the previous passage, Article 254(2) comes to the rescue.63 The above discussion is enough to dispose of the main plea canvassed before us. As far as factual aspects and noted by us in paragraphs 38 and 41, so also, the narration in relation thereto in the preceding paragraphs, it will be open for the Petitioners to raise and substantiate them at an appropriate stage in the pending Special Case. We clarify that all contentions of parties on facts, merits and particularly in relation to attachment of properties of KIFL by the Designated Court and powers of the same visavis the winding up proceedings, are kept open.