Case: T. Velayudhan Achari &amp; Another Vs. Union of India &amp; Others

of its net owned funds." 38. If, therefore, this was the position, it cannot be contended that suddenly the companies like the appellants and the petitioners are called upon to reduce deposits. Even otherwise, the interests of the depositors is the prime concern 39. Coming to the last point, as to whether Section 58-B(5-A) is violative of Article 20(1) of the Constitution, we find, when a similar argument was raised against Section 58-A of the Companies Act, that was repelled by this Court in Delhi Cloth and General Mills Co. Ltd. v. Union of India thus "Mr. G. A. shah canvassed one more contention, After stating that Rule 3-A became operative from April 1, 1978, he specifically drew attention to the proviso to Rule 3-A(1) which required that with relation to the deposits maturing during the year ending on March 31, 1979, the sum required to be deposited or invested under sub-rule (1) of Rule 3-A shall be deposited or invested before September 30, 1978. It was then contended that this provision would necessitate depositing 10% of the deposits maturing during the year ending with March 31, 1979 which may have been accepted prior to the coming into force of Rue 3-A and to this extent the rule has been made retrospective and as there was no power conferred by Section 58-A to prescribe conditions subject to which deposits can be accepted retrospectively Rule 3-A is ultra vires Section 58-A. Unquestionably, Rule 3-A became operative from April 1, 1978. The obligation cast by Rule 3-A 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 D. S. Nakara v. Union of India a Constitution Bench of this Court has, in this context observed as underA 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 from this angle, the provisions can be properly called prospective and not retroactive. Therefore, the contention does not commend to us." 40. In the light of this, we should hold that the ruling of the Madras High Court in Chennai Bottling Co. Pvt. Ltd. is incorrect 41. 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 : (SCC pp. 452-53) "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 mornings newspaper to be greeted by advertisements inviting deposits and offering interest at astronomic rates. On January 1, 1987 one of the national newspapers published from Hyderabad, where one of us 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, 10, 000 for 5000, they said. Another advertiser offered interest 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 6 per cent if 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 vice affecting public economy, the desire to make quick and easy money and the habit of excessive and wasteful consumer spending, on the other hand of 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 : (SCC p. 454) "I share my brothers concern about the mushroom growth of financial companies all over the country, Such companies have proliferated. The victims of the Schemes, that are attractively put forward in public media, are mostly middle class and lower middle class people. Instances are legion where such needy people have been 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 played upon persons who are not conversant with the practice of such financial enterprises who pose themselves as benefactors of people." * 42. We may also add that this has been reaffirmed in Peerless General Finance and Investment Co. Ltd. v. RBI 43. Therefore, we are in entire agreement with the Delhi High Court44. 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

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]39. Coming to the last point, as to whether Section 58-B(5-A) is violative of Article 20(1) of the Constitution, we find, when a similar argument was raised against Section 58-A of the Companies Act, that was repelled by this Court in Delhi Cloth and General Mills Co. Ltd. v. Union of IndiaG. A. shah canvassed one more contention, After stating that Rule 3-A became operative from April 1, 1978, he specifically drew attention to the proviso to Rule 3-A(1) which required that with relation to the deposits maturing during the year ending on March 31, 1979, the sum required to be deposited or invested under sub-rule (1) of Rule 3-A shall be deposited or invested before September 30, 1978. It was then contended that this provision would necessitate depositing 10% of the deposits maturing during the year ending with March 31, 1979 which may have been accepted prior to the coming into force of Rue 3-A and to this extent the rule has been made retrospective and as there was no power conferred by Section 58-A to prescribe conditions subject to which deposits can be accepted retrospectively Rule 3-A is ultra vires Section 58-A. Unquestionably, Rule 3-A became operative from April 1, 1978. The obligation cast by Rule 3-A 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 D. S. Nakara v. Union of India a Constitution Bench of this Court has, in this context observed as underA 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 from this angle, the provisions 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 Chennai Bottling Co. Pvt. Ltd. isTherefore, we are in entire agreement with the Delhi High Court44. 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