Ashok A.Desaf, J. - (1.) This bunch of petitions by individuals, firms and unincorporated associations of individuals dealing in financing, have challenged the constitutional validity of Section 45-S substituted by the Reserve Bank (Amendment) Act, 1997 (hereinafter referred to tne Impugned provisions), on the ground of absence of legislative competence, as well violatlve of Articles 14 and 19 (1) (g) of the Constitution of India. To appreciate the challenge, it would be appropriate to trace the legislative history.
(2.) In 1934, the Reserve Bank of India Act was Introduced principally to regulate Monetary, Currency and Credit System. Thereafter, in view of the recommendation of the Banking Commission, the Banking Laws (Amendment) Act, 1983 was enacted. The amending Act, inter alia, incorporated to the R.B.I. Act, Chapter III-C under the caption Prohibition of Acceptance of Deposits by unincorporated bodies. Section 45-S (1) under the chapter reads thus : 45-S. Deposits not to be accepted in certain cases.--(1) No persons, being an individual or a firm or an unincorporated association of individuals shall, at any time, have deposits from more than the number of depositors specified against each, in the table below." According to the table, the provision has imposed ceiling on acceptance of the deposit. It has prohibited accepting more than 25 depositors excepting the relation of individuals, partners or Individuals constituting association. This was with a view to protect the interest of depositors. In the course of time, it has been experienced that the existing provision has failed to control the mischief, which continued with extensive proliferation of such non-banking. unincorporated Institute primarily to defeat the law (reference to para 13 of Judgment dated 3.4.98 of the Karnataka High Court in Writ Petition No. 29821 and 30260 of 1997). To overcome the situation. In 1997, the impugned provision under Section 45-S has been substituted. It reads thus : "Section 45-S. Deposits not to be accepted in certain cases.--(1) No person, being an individual or a firm or an unincorporated association of Individuals shall, accept any deposit : (i) If his or its business wholly or partly includes, any of the activities specified in clause (c) of Section 45-I ; or (ii) if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner : Provided that nothing contained in this sub-section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners." As a consequence of the impugned provision deposit, could be accepted by way of loan only from the relatives of individuals or partners of the firm.
(3.) According to Mr. Jain, the learned counsel for the petitioner, the impugned provision imposed complete restriction on lending of money. Entry Nos. 30 and 32 of List II of Schedule VII respectively deal with money-lending and incorporation. The State Legislature alone is, therefore, competent to legislate on the subject. The Parliament has thus no legislative domain. The learned counsel could not carry the submission any further.;