Case: M/S. New Horizon Sugar Mills Vs. Gov.Of Pondicherry Tr.Addl.Sec

repealing the law so made by the Legislature of the State.” 44. As will be evident from the above, clause (1) of Article 254 provides that when there are two laws enacted by the Parliament and the State Legislature in which certain inconsistencies occur, then subject to the provisions of clause (2), the law made by the Parliament would prevail and the law made by the State Legislature to the extent it is repugnant to the Central law, shall be void. Clause (2), however, also provides that in a given situation where a law of a State is in conflict with the law made by Parliament, the law so made by the State Legislature shall, if it has received the assent of the President, prevail in that State. In the instant case, the Pondicherry Act had received the assent of the President attracting the provisions of Article 254(2) of the Constitution. 45. At this stage, it may also be worthwhile to consider Mr. Venkataramani’s submissions that the power to enact the Pondicherry Act could be traced to Entries 1, 8, 13 and 21 of the Concurrent List. Entry 1 of List III deals with criminal law, including all matters included in the Indian Penal Code at the commencement of this Constitution, but excluding offences against laws with respect to any of the matters specified in List I or List II and excluding the use of naval, military or air forces or any other armed forces of the Union in aid of the civil power. Entry 8 deals with actionable wrongs. Entry 13 deals with civil procedure while Entry 21 deals with Commercial and Industrial monopolies, combines and trusts. Such submission has been advanced by Mr. Venkataramani in view of the provisions of Section 58A, 58AA and 58AAA of the Companies Act, 1956, which all deal with deposits invited and accepted by Companies. The said submission is, however, subject to the condition that the provisions of the Companies Act are also attracted to the provisions of the Pondicherry Act. Although, it has been argued by Mr. Ganguli that the provisions of the Companies Act would not be attracted, we cannot overlook the amendment to the definition of “financial establishment” included in the Tamil Nadu Act and as defined in the Pondicherry Act. The definition of the expression “financial establishment” in Section 2(d) of the Pondicherry Act, which has been extracted in paragraph 14 hereinbefore, includes any person or group of individuals or a firm carrying on business of accepting deposits under any scheme or arrangement or in any other manner, but does not include a Corporation or a cooperative society owned or controlled by either the Central Government or the State Government or a banking company as defined under Section 5 of the Banking Regulation Act, 1949. In our view, the expression “any person” is wide enough to cover both a natural person as also a juristic person, which would also include a Company incorporated under the Companies Act, 1956. In that view of the matter, the definition in Section 2(d) of the Pondicherry Act would also include a Company such as the Appellant Mill, which accepts deposits from investors, not as shareholders of such Company, but merely as investors for the purpose of making profit. In this regard, reference may also be made to Section 11 of the Indian Penal Code which defines a “person” to include a Company or Association or body of persons, whether incorporated or not. Accordingly, we are inclined to accept Mr. Venkataramani’s submissions that the expression “person” in the Pondicherry Act includes both incorporated as well as unincorporated companies.46. The decision in K.K. Baskaran’s case (supra) so far as it relates to protection of interests of depositors, cannot be ignored. In our view the decision rendered by the Madras High Court in K.K. Baskaran’s case (supra) would be equally applicable to the facts of this case. We have to bear in mind that the validity of the Tamil Nadu Act and the Maharashtra Act have been upheld by the Madras High Court and this Court. The objects of the Tamil Nadu Act, the Maharashtra Act and the Pondicherry Act being the same and/or similar in nature, and since the validity of the Tamil Nadu Act and the Maharashtra Act have been upheld, the decision of the Madras High Court in upholding the validity of the Pondicherry Act must also be affirmed. We have to keep in mind the beneficial nature of the three legislations which is to protect the interests of small depositors, who invest their life’s earnings and savings in schemes for making profit floated by unscrupulous individuals and companies, both incorporated and unincorporated. More often than not, the investors end up losing their entire deposits. We cannot help but observe that in the instant case although an attempt has been made on behalf of the Appellant to state that it was not the Appellant Company which had accepted the deposits, but M/s PNL Nidhi Ltd., which had changed its name five times, such an argument is one of desperation and cannot prima facie be accepted. This appears to be one of such cases where funds have been collected from the gullible public to invest in projects other than those indicated by the front company. It is in fact the specific case of the Respondents that the funds collected by way of deposits were diverted to create the assets of the Appellant Mill.47. In such circumstances, we are not inclined to accept the submissions made by Mr. Ganguli, since in our view there is little difference between the provisions of the Tamil Nadu Act and the Pondicherry Act, which is to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by M/s PNL Nidhi Ltd. for the benefit of the Appellant Mill, which is privately owned by Shri V. Kannan and Shri V. Baskaran, who are also Directors of M/s PNL Nidhi Ltd.

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

Explanation:
0[ds]45. At this stage, it may also be worthwhile to consider Mr.submissions that the power to enact the Pondicherry Act could be traced to Entries 1, 8, 13 and 21 of the Concurrent List. Entry 1 of List III deals with criminal law, including all matters included in the Indian Penal Code at the commencement of this Constitution, but excluding offences against laws with respect to any of the matters specified in List I or List II and excluding the use of naval, military or air forces or any other armed forces of the Union in aid of the civil power. Entry 8 deals with actionable wrongs. Entry 13 deals with civil procedure while Entry 21 deals with Commercial and Industrial monopolies, combines and trusts. Such submission has been advanced by Mr. Venkataramani in view of the provisions of Section 58A, 58AA and 58AAA of the Companies Act, 1956, which all deal with deposits invited and accepted by Companies. The said submission is, however, subject to the condition that the provisions of the Companies Act are also attracted to the provisions of the Pondicherry Act. Although, it has been argued by Mr. Ganguli that the provisions of the Companies Act would not be attracted, we cannot overlook the amendment to the definition ofed in the Tamil Nadu Act and as defined in the Pondicherry Act. The definition of the expressionin Section 2(d) of the Pondicherry Act, which has been extracted in paragraph 14 hereinbefore, includes any person or group of individuals or a firm carrying on business of accepting deposits under any scheme or arrangement or in any other manner, but does not include a Corporation or a cooperative society owned or controlled by either the Central Government or the State Government or a banking company as defined under Section 5 of the Banking Regulation Act, 1949. In our view, the expressionis wide enough to cover both a natural person as also a juristic person, which would also include a Company incorporated under the Companies Act, 1956. In that view of the matter, the definition in Section 2(d) of the Pondicherry Act would also include a Company such as the Appellant Mill, which accepts deposits from investors, not as shareholders of such Company, but merely as investors for the purpose of making profit. In this regard, reference may also be made to Section 11 of the Indian Penal Code which defines ato include a Company or Association or body of persons, whether incorporated or not. Accordingly, we are inclined to accept Mr.submissions that the expressionin the Pondicherry Act includes both incorporated as well as unincorporated companies.46. The decision in K.K.case (supra) so far as it relates to protection of interests of depositors, cannot be ignored. In our view the decision rendered by the Madras High Court in K.K.case (supra) would be equally applicable to the facts of this case. We have to bear in mind that the validity of the Tamil Nadu Act and the Maharashtra Act have been upheld by the Madras High Court and this Court. The objects of the Tamil Nadu Act, the Maharashtra Act and the Pondicherry Act being the same and/or similar in nature, and since the validity of the Tamil Nadu Act and the Maharashtra Act have been upheld, the decision of the Madras High Court in upholding the validity of the Pondicherry Act must also be affirmed. We have to keep in mind the beneficial nature of the three legislations which is to protect the interests of small depositors, who invest theirearnings and savings in schemes for making profit floated by unscrupulous individuals and companies, both incorporated and unincorporated. More often than not, the investors end up losing their entire deposits. We cannot help but observe that in the instant case although an attempt has been made on behalf of the Appellant to state that it was not the Appellant Company which had accepted the deposits, but M/s PNL Nidhi Ltd., which had changed its name five times, such an argument is one of desperation and cannot prima facie be accepted. This appears to be one of such cases where funds have been collected from the gullible public to invest in projects other than those indicated by the front company. It is in fact the specific case of the Respondents that the funds collected by way of deposits were diverted to create the assets of the Appellant Mill.47. In such circumstances, we are not inclined to accept the submissions made by Mr. Ganguli, since in our view there is little difference between the provisions of the Tamil Nadu Act and the Pondicherry Act, which is to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by M/s PNL Nidhi Ltd. for the benefit of the Appellant Mill, which is privately owned by Shri V. Kannan and Shri V. Baskaran, who are also Directors of M/s PNL Nidhi Ltd.