Case: Bhavesh D. Parish Vs. Union of India

be carried on unchecked and unregulatory was ample justification for the impugned legislation, keeping in mind the experience of the public which had been dealing with such unincorporated bodies in Kerala and Tamil Nadu. It is open to the appellants to organise their business within the permissible legal set up by forming non-banking financial corporations and functioning in accordance with Chapter III-B of the Act and the directives issued by the Bank from time to time. The prohibition on partnership firms to carry on their business like that of shroffs cannot be regarded as being an unreasonable restriction on the fundamental right of the appellants to carry on their trade. They can continue lending money as long as they do not borrow from the public. 16. The services rendered by certain informal sectors of the Indian economy could not be belittled. However, in the path of economic progress, if the informal system was sought to be replaced by a more organised system, capable of better regulation and discipline, then this was an economic philosophy reflected by the legislation in question. Such a philosophy might have its merits and demerits. But these were matters of economic policy. They are best left to the wisdom of the legislature and in policy matters the accepted principle is that the Courts should not interfere. Moreover, in the context of the changed economic scenario the expertise of people dealing with the subject should not be lightly interfered with. The consequences of such interdiction can have large-scale ramifications and can put the clock back for a number of years. The process of rationalisation of the infirmities in the economy can be put in serious jeopardy and therefore, it is necessary that while dealing with economic legislations, this Court, while not jettisoning its jurisdiction to curb arbitrary action or unconstitutional legislation, should interfere only in those few cases where the view reflected in the legislation is not possible to be taken at allExamining the validity of the amended s. 45-S of the Act by applying the principles enunciated over the years by this Court, and as encapsuled in the passage quoted in the earlier part of this judgment from this Courts decision in Papnasan Labour Unions case (supra) we find that the said section is in noway illegal or bad in law. Sec. 45-S no doubt prohibits the conduct of banking business by an unincorporated non-banking entity like a shroff, but this prohibition has come about, inter alia, in the interest of unwary depositors and borrowers (from shroffs) and with a view to prevent them from committing financial suicide. Earlier attempts to adequately regulate the non-banking institutions not having achieved the desired result of protecting large number of depositors from unincorporated financial institutions which would suddenly mushroom overnight and then vanish without a trace but taking with it depositors money, left the RBI with no alternative but to prohibit such unincorporated entities from conducting financial business which was more than akin to banking. 17. The restrictions imposed against acceptance of deposits by unincorporated bodies carrying on financial activity or the business of deposit acceptance or lending in any manner are in the larger interest of general public vis-a-vis few persons accepting such deposits. The need for such restrictions had become acute and imperative in view of large scale mismanagement of public funds by such unincorporated bodies. 18. Accordingly, we hold that the provisions of s. 45-S of the Act are valid. 19. Before we conclude there is another matter to which we must advert to. It has been brought to our notice that s. 45-S of the Act has been challenged in various High Courts and few of them have granted the stay of provisions of s. 45-S. When considering an application for staying the operation of a piece of legislation, and that too pertaining to economic reform or change then the Courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the Courts must show judicial restrain in staying the applicability of the same. Merely because a statute comes up for examination and some arguable point is raised, which persuades the Courts to consider the controversy, the legislative will should not normally be put under suspension pending such consideration. It is now well-settled that there is always a presumption in favour of the constitutional validity of any legislation, unless the same is set aside after final hearing and, therefore, the tendency to grant stay of legislation relating to economic reform, at the interim stage, cannot be understood. The system of checks and balances has to be utilised in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itselfWhile the Courts should not abrogate its duty of granting interim injunctions where necessary, equally important is the need to ensure that the judicial discretion does not abrogate from the function of weighing the overwhelming public interest in favour of the continuing operation of a fiscal statute or a piece of economic reform legislation, till on a mature consideration at the final hearing, it is found to be unconstitutional. It is, therefore, necessary to sound a word of caution against intervening at the interlocutory stage in matters of economic reforms and fiscal statutes. 20. A number of petitions had been filed in this Court seeking transfer of writ petitions pending in different High Courts. By order dt. 17th February, 2000, those transfer petitions were dismissed as not pressed. Besides the writ petitions, in respect of which, those transfer petitions had been filed, a number of other petitions are pending disposal in various High Courts. In quite a few of them the High Courts have granted an interim injunction staying the operation of the implementation of the amended s. 45-S of the Act. For the view we have taken now, it is imperative that these petitions, pending in the different High Courts, are formally disposed of at an early date.

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

Explanation:
0[ds]8.25 We, therefore, suggest that the Reserve Banks control may be extended to finance corporations and necessary enabling legislation be passed to that effect. We recognise that the administrative task of watching and regulating the operations of a large number of small firms will be difficult. We, therefore, suggest that if the law permits, only companies may be allowed to do the banking business in the sense of accepting deposits from the public for the purpose of lending or investment. In that case, the Banking Regulation Act would govern the operations of the Bangalore type finance corporations. If, however, the law does not permit it, any scheme of regulation may have as one of its objections the reduction in the number of finance corporations besides, of course, the safeguarding of depositors interestit is a constitutional truism that restrictions in extreme cases should be pushed to the point of prohibition, if any lesser strategy will not achieve the purpose." It cannot be denied that shroffs have played an important role in providing finance in the rural sector and in small towns. But, despite the services which they may have rendered, it is difficult to accept the contention that the RBI was not justified in imposing ban on unincorporated bodies accepting deposits from public while carrying on financing business. The inherent danger to the public especially in small towns and villages in permitting such business to be carried on unchecked and unregulatory was ample justification for the impugned legislation, keeping in mind the experience of the public which had been dealing with such unincorporated bodies in Kerala and Tamil Nadu. It is open to the appellants to organise their business within the permissible legal set up by formingg financial corporations and functioning in accordance with ChapterB of the Act and the directives issued by the Bank from time to time. The prohibition on partnership firms to carry on their business like that of shroffs cannot be regarded as being an unreasonable restriction on the fundamental right of the appellants to carry on their trade. They can continue lending money as long as they do not borrow from the publicThe services rendered by certain informal sectors of the Indian economy could not be belittled. However, in the path of economic progress, if the informal system was sought to be replaced by a more organised system, capable of better regulation and discipline, then this was an economic philosophy reflected by the legislation in question. Such a philosophy might have its merits and demerits. But these were matters of economic policy. They are best left to the wisdom of the legislature and in policy matters the accepted principle is that the Courts should not interfere. Moreover, in the context of the changed economic scenario the expertise of people dealing with the subject should not be lightly interfered with. The consequences of such interdiction can havee ramifications and can put the clock back for a number of years. The process of rationalisation of the infirmities in the economy can be put in serious jeopardy and therefore, it is necessary that while dealing with economic legislations, this Court, while not jettisoning its jurisdiction to curb arbitrary action or unconstitutional legislation, should interfere only in those few cases where the view reflected in the legislation is not possible to be taken at allExamining the validity of the amended s.S of the Act by applying the principles enunciated over the years by this Court, and as encapsuled in the passage quoted in the earlier part of this judgment from this Courts decision in Papnasan Labour Unions case (supra) we find that the said section is in noway illegal or bad in law. Sec.S no doubt prohibits the conduct of banking business by an unincorporatedg entity like a shroff, but this prohibition has come about, inter alia, in the interest of unwary depositors and borrowers (from shroffs) and with a view to prevent them from committing financial suicide. Earlier attempts to adequately regulate theg institutions not having achieved the desired result of protecting large number of depositors from unincorporated financial institutions which would suddenly mushroom overnight and then vanish without a trace but taking with it depositors money, left the RBI with no alternative but to prohibit such unincorporated entities from conducting financial business which was more than akin to bankingThe restrictions imposed against acceptance of deposits by unincorporated bodies carrying on financial activity or the business of deposit acceptance or lending in any manner are in the larger interest of general publics few persons accepting such deposits. The need for such restrictions had become acute and imperative in view of large scale mismanagement of public funds by such unincorporated bodiesAccordingly, we hold that the provisions of s.S of the Act are validBefore we conclude there is another matter to which we must advert to. It has been brought to our notice that s.S of the Act has been challenged in various High Courts and few of them have granted the stay of provisions of s.. Whenconsidering an application for staying the operation of a piece of legislation, and that too pertaining to economic reform or change then the Courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the Courts must show judicial restrain in staying the applicability of the same. Merely because a statute comes up for examination and some arguable point is raised, which persuades the Courts to consider the controversy, the legislative will should not normally be put under suspension pending such consideration. It is nowd that there is always a presumption in favour of the constitutional validity of any legislation, unless the same is set aside after final hearing and, therefore, the tendency to grant stay of legislation relating to economic reform, at the interim stage, cannot be understood. The system of checks and balances has to be utilised in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itselfWhile the Courts should not abrogate its duty of granting interim injunctions where necessary, equally important is the need to ensure that the judicial discretion does not abrogate from the function of weighing the overwhelming public interest in favour of the continuing operation of a fiscal statute or a piece of economic reform legislation, till on a mature consideration at the final hearing, it is found to be unconstitutional. It is, therefore, necessary to sound a word of caution against intervening at the interlocutory stage in matters of economic reforms and fiscal statutesA number of petitions had been filed in this Court seeking transfer of writ petitions pending in different High Courts. By order dt. 17th February, 2000, those transfer petitions were dismissed as not pressed. Besides the writ petitions, in respect of which, those transfer petitions had been filed, a number of other petitions are pending disposal in various High Courts. In quite a few of them the High Courts have granted an interim injunction staying the operation of the implementation of the amended s.S of the Act. For the view we have taken now, it is imperative that these petitions, pending in the different High Courts, are formally disposed of at an early date