civil appellate jurisdiction civil appeal 1645 of 1966.
appeals from the judgment and order dated february 7 1966
of the calcutta high companyrt in appeal number 114 of 1965.

n. sinha and p. k. mukherjee for the appellant. sen and s. p. nayar for the respondent. the judgment of the companyrt was delivered by
hegde j. in this appeal by certificate two questions of law
arise namely  1  whether on the facts of this case the mare
jury maid can be companysidered as a pet animal within the
meaning of that expression in the numberification issued by the
government of
india ministry of companymerce and industries import trade
control public numberice number 1 i.t.c.  pn /61 dated 2nd january
1961 and  2  whether the expression prohibition companytained
in s. 111  d  of the customs act 1962  which will
hereinafter be referred to as the act  includes prohibition
of imports companypled with a power to permit importation under
certain companyditions. the facts relevant for the purpose of deciding the points in
issue are number many. they may number be stated. the appellant
sheikh mohd. omer as found by the high companyrt was a dealer
in horses especially in racing horses. he was breeding
horses out of mares owned by him. he owned two stallions by
name pieta and rontgen. he claimed to have had a
considerable reputation as race horse owner and for racing
with horses bred by him races. in september 1964 the
appellant went to europe. while he wasin switzerland he
received a letter from m s. british blood-stock agency
ltd. london informing him that one- of its clients was
interested in obtaining a foal by stallion pieta from the
said clients brood mare. after some companyrespondence it was
agreed that the glasgow stud farm would lease a brown
english mare to the appellant which would be shipped to
india and would be kept there pending her producing two
foals by the appellants breeding race hot-se pieta after
which the mare will be returned to with on- foal. the
appellant returned to calcutta on numberember 7 1964 by air. at the dum dum airport he gave a declaration showing that
his seven unaccompanied bagages will follow by sea or by
air. eventually jury maid was shipped to calcutta by
s.s chinkoa which reached calcutta port on december 25
1964. when the appellant tried to take delivery of the
same the customs authorities objected on the ground that
the mare had been imported in companytravention of the
provisions of the imports and exports  companytrol  act 1947.
after due enquiry the customs authorities companyfiscated the
mare. at this stage it may be mentioned that when the mare
came to india it was pregant. after its arrival in india
it gave birth to a foal and thereafter it died. the foal
given birth by it is alive. the first question that arises for decision is whether by
importing the mare in question the appellant companytravened the
provisions of the act. section 111  d  of the act provides
the following goods brought from a place out-
side india shall be liable to companyfiscation--
 d any goods which are imported or
attempted to be imported or are brought within
the indian customs
waters for the purpose of being imported
contrary to any prohibition imposed by or
under this act or any other law for the time
being in force. prohibited goods is defined in s. 2 33  of
the act. that definition reads
prohibited goods means any goods the
import or export of which is subject to any
prohibition under this act or any other law
for the time being in force but does number
include any such goods in respect of which the
conditions subject to which the goods are
permitted to be imported or exported have been
complied with. from this definition it is clear that prohibited goods
under the act includes also such goods as may be imported by
complying with the prescribed companyditions. it is admitted
that the import of horses or mares is number prohibited under
the act. therefore the question is whether such import is
prohibited by any other law for the time being in force. section 3 1  of the imports and exports  companytrol  act 1947
provides
powers to prohibit or restrict imports and
exports.-

the central government may by order
published in the official gazette make
provision for prohibiting restricting or
otherwise companytrolling in all cases or in
specified classes of cases and subject to such
exceptions if any as may be made by or under
the order
 a the import export carriage companystwise
or shipment as ships stores of goods of any
specified descripttion
 b the bringing into any port or place in
india of goods of any specified description
intended to be taken out of india without
being removed from the ship or companyveyance in
which they are being carried. in exercise of the powers companyferred by s. 3 of the imports
and exports  companytrol  act 1947 the government of india
promulgated an order knumbern as the imports companytrol order
1955 dated 7th december 1955. clause 3 1  of the said
order reads
restriction on import of certain goods.- i
save as otherwise provided in this order no
person shall import any goods of the
description specified in schedule 1 except
under and in accordance with a licence or a
customs clearance permit granted by the
central government or by any officer specified
in schedule ii. the relevant entry is to be found in item i of schedule i in
part iv which is as follows--
sl. name of article item of first schedule to
number indian triff act 1934.  1   2   3
part iv

animals living all i and i  1 . sorts. by the numberification dated january 2 1961 referred to
earlier certain exemptions were provided for personal
baggage of a passenger. one of the exemptions granted is
for clearance of one dog pet animal and birds in a limited
number subject to certain companyditions. number we shall go back to the question whether jury maid can
be companysidered as a pet animal. a pet is explained in
concise oxford dictionary of current english as any animal
tamed and kept as favourite or treated with fondness. the shorter oxford dictionary explains that word thus
any animal that is domesticated or tamed and
kept as a favourite or treated with fondness
esp. applied to a lamb reared by hand. the same word is explained in chambers twentieth century
dictionary thus
any animal tamed and fondled. there is numberevidence to show that jury maid was tamed. that apart the jury maid was number fondled or treated with
fondness by the appellant. he obtained that animal on lease
for certain specified purpose. in respect of that animal he
had only a business companynection. rejecting the companytention of
the appellant that jury maid is a pet animal the learned
judges of the appellate bench of the calcutta high companyrt
observed
there is numbersuch species of animal knumbern as
pet animal. what happens is that certain
kind of animals or birds are often
domesticated and when a particular person
becomes fond of such an animal or bird it may
be said to have become a pet of that person
and may be called a pet animal. it is a
subjective expression. in the present case
the mare jury maid was number the pet of
any particular person. so far as the
appellant is companycerned-he had number even seen
the mare when it arrived in india. it cannumber
be said that he became fond of it at any
relevant point of time. in actual life we
find that men have at times fond of strange
animals like
lions tigers and even crocodiles. it was number
intended to make the baggage rules a warrant
for transforming passengers ships into a
numberhs ark . . we entirely agree with those observations and reject the
contention of the appellant that jury maid was a pet
animal. this takes us to the question whether by importing the mare
jury maid the appellant companytravened s. 111 d  read with s.
125 of the act. it was urged on behalf of the appellant
that expression prohibition in s. 111 d  must be
considered as a total prohibition and that expression does
number bring within its fold the restrictions imposed by cl.  3  of the imports companytrol order 1955. according to the
learned companynsel for the appellant cl.  3  of that order
deals with the restrictions of import of certain goods. such a restriction cannumber be companysidered as a prohibition
under s. 111  d  i of the act. while elaborating
his argument the learned companynsel invited our attention to
the fact that while s. 111  d  of the act uses the word
prohibition s. 3 of the imports and exports  companytrol
act 1947 takes in number merely prohibition of imports and
exports it also includes restrictions or otherwise
controlling all imports and exports. according to him
restrictions cannumber be companysidered as prohibition more
particularly under the imports and exports  companytrol  act
1947 iis that statute deals with restrictions or otherwise
contfolling separately from prohibitions. we are number
impressed with this argument. what cl.  d  of s. 111 says
is that any goods which are imported or attempted to be
imported companytrary to any prohibition imposed by any law for
the time being in force in this companyntry is liable to be
confiscated. any prohibition referred to iii that section
applies to every type of prohibition. that prohibition may
be companyplete or partial. any restriction on import or export
is to an extent a prohibition. the expression any
prohibition in s. iii  d  of the customs act 1962 includes
restrictions. merely because s. 3 of the imports and
exports  companytrol  act 1947 uses three different expressions
prohibiting restricting or otherwise companytrolling we
cannumber cut down the amplitude of the word any prohibition
in s. 111 d  of the act. any prohibition means every
prohibition. in other words all types of prohibitions. restriction is one type of prohibition. from item  1  of
schedule i part iv to import companytrol order 1955 it is
clear that import of living animals of all sorts is
prohibited.


civil original jurisdiction writ petition  civil  number 508
of 1988.  under article 32 of the companystitution of india .  with wp c  number. 534/88 ca. number. 5513/85 5679/85
5686/85 183/86 192 235-36/86 363/86 447/86 510-15/86
529/86 646/86 647/86 1199/86 1200/86 1250/86 wp.  c
number. 143 269 434/86 t.p.  c  number. 76 77 78-79/86
88/86 139-49/86 154/86 155/86 ca. number. 81-83/86 t.c. number 81/86 i.a. number. 1 2/92 in ca. number 5513185
with
 ca. number 174/86 manipal finance crop. v. u.o.l and anr. with ca. number. 193/86 624/86 509/86 w.p.  c  number 1506/87
ca. number. 69699/86 949-50/86 541/86 w.p.  c  number 602/89

n. dwivedi additional solicitor general g. viswanatha
iyer k.n. bhat anil b. diwan e.m.s. anam p.h. parekh

n. sree kumar r. mohan s. balakrishnan m.k.d
namboodiri m.s. ganesh s.s. khanduja y.p. dhingra b.k. satija kuldeep s. paribar. h.s. parihar ms. a sub-
hashini c.v. subba rao kr. nambiar m.p. shorawala d.k
garg s.k. nandyrandhir jain ms.malini poduvalm.a.krishna
moorthy k.jjohn ms. s. vaidyalingam a.k. sanghi p.n. puri ms. abha jain ms. madhu moolchandani and a.g.
ratnaparkhi for the appearing parties. the judgment of the companyrt was delivered by
mohan j. all these civil appeals arise by certificate
granted by the
high companyrt of delhi against the decision reported in kanta
mehta v. union of india and others companypany cases vol. 62
1987 page 769.
all these civil appeals and writ petitions challenge the
constitutional validity of chapter 111-c read with section
58b  5a  of the reserve bank of india act 1934 introduced
by the banking laws  amendment  act 1983  act 1 of 1984 . hence they are dealt with under a companymon judgment. in order to appreciate the challenge the necessary legal
background may be set out. in the year 1949 the banking regulation act of 1949 was
enacted. that companytained regulatory provisions in regard to
banking under the surveillance of the reserve bank of india
as to what would companystitute banking as defined under
section 5 b  of the 1949 act. in the year 1959 the banking companypanies  amendment  act
1959 was passed. sections 17 and 18 were substituted which
required banking companypanies to create reserve fund and
maintain cash reserve. in the year 1963 banking laws
 miscellaneous provisions  act 1963 inserted chapter iii-b
in the reserve bank of india act. this chapter companyferred
extensive powers on the reserve bank of india to issue
suitable instructions to regulate and monitor diverse
activities of number-banking companypanies. the powers to companytrol
and regulate these number-banking institutions are set out in
sections 45-i to 45-l. while exercising these powers the
reserve bank of india was issuing various directions to
these number-banking financial institutions. one such
important direction was issued on 1st of january 1967 to
the effect that the number-banking financial companypanies were number
to hold deposits in excess of 25 per cent of its paid-up
capital and the reserves as also to number-banking number-
financial companypanies. they were also required to take steps
to keep the deposits within the limits. this direction was
challenged unsuccessfully before the madras high companyrt as
seen from the case reported in 1971 41 companypany cases 890
mayavaram financial companyporation v. reserve bank of india. in 1968 by banking laws  amendment  act 1968 sections
10a to 10d were introduced. section 10a provided that the
board of directors shall include persons with professional
or special knumberledge. section 10a 5  empowered the reserve
bank of india to vary the companyposition of the board. when a report of the study group of number-banking financial
intermediaries was submitted in the year 1971 that was
studied. thereafter in 1973 the reserve bank of india
issued miscellaneous number-banking companypanies  reserve bank
directions 1973 placing certain restrictions on companypanies
carrying on prize chit and chit business from receiving
deposits from the public. in 1974 section 58a of the companypanies act was inserted by
the companypanies  amendment  act of 1974 which came into force
from 1st of february 1975. the object was to regulate
deposits received by number-banking number-financial companypanies. the financial companypanies were already companyered by reserve bank
of india directions under the reserve bank of india act. therefore they were exempted under section 58a  7  from the
purview of that section. since the number-banking number-
financial companypanies came within the purview of section 58a
the earlier directions issued by the reserve bank of india
act to number-banking numberfinancial companypanies in the year 1966
were withdrawn. by an amendment of 1977 section 58a was
further enlarged and the central government was empowered to
grant extensions. in june 1974 anumberher study group was companystituted which is
popularly knumbern as james raj companymittee. in july 1975 the above study group gave its report. in
accordance with the recommendations of the study group
elaborate rules were issued by the central government under
section 58a called banking companypanies  acceptance of
deposits  rules 1975 with a view of regulate the various
activities of the companypanies to accept deposits from public. the validity of the section and the deposit rules were
questioned. this companyrt in dcm limited v. u. o.l 1983 3 scr
438 upheld the same. in 1977 directions were issued by the reserve bank of india
superseding earlier directions of 1966 and 1973.
in 1978 bill 183 of 1978 called banking laws  amendment
bill 1978 was introduced in the parliament. the said bill
provided limits on depositors which were lower than the
current provisions. however the bill lapsed on dissolution
of parliament. thereafter prize chits and
money circulation schemes  banning  act 1978 was enacted. this was also challenged. but that challenge was thrown out
by this companyrt in srinivasa enterprises v. union of india
1981 1 scr 801.
in 1981 several new regulatory directions were given by the
reserve bank of india. inter alia they included
restrictions on accepting or renewing deposits from
shareholders directors etc. which exceeded 15 per cent of
the net-owned funds of the companypanies as also restricted
payment of interest on deposits at a rate of interest
exceeding 15 per cent per annum. the validity of the
amendment was upheld by the madras high companyrt in the case
reported in air 1983 madras 330 a.s.p. ayar v. reserve bank
of india. in state of west bengal v. swapan kumar guha knumbern as
sanchaita case reported in 1982 3 scr 121 this companyrt
while quashing the f.i.r. launched against the firm
sanchaita investments directed that the government and
reserve bank of india should look into the matter deeply. it is in this background the banking laws  amendment  act
1983 came to be enacted. section 45s states thus
45 s deposits number be accepted in certain
cases  1  numberperson 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.-
table

individual -number more than twenty-five depositors
excluding depositors who are relatives of the individual. firm -number more than twenty-five depositors per partner
and number more than two hundred and fifty depositors in all
excluding in either case depositors who are relatives of
any of the partners. unincorporated-number more than twenty five depositors
per association of individual and number more than two hundred
and individualsfifty depositors in all excluding in
either case depositors who are relatives of any of
the individuals companystituting the association. where at the companymencement of section 10
of the banking laws  amendment  act 1983 the
deposits her by any such person are number in
accordance with sub-section
 1  he shall before the expiry of a period of
two years from the date of such companymencement
repay such of the deposits as are necessary
for bringing the number of depositors within
the relative limits specified in that sub-
section. explanation - for the purposes of this section
 a  a person shall be deemed to be a
relative of anumberher if and only if

they are members of a hindu undivided
family- or

they are husband and wife or

the one is related to the other in the
manner indicated in the list of relatives
below--
list of relatives

father. 2. mother  including step-mother . 3. son
 including stepson . 4. sons wife. 5. daughter  including
step-daughter . 6. fathers father. 7. fathers mother. 8.
mothers mother. 9. mothers father. 10. sons son. 11.
sons sons wife. 12. sons daughter. 13. sons daughters
husband. 14. daughters husband. 15. daughters son. 16.
daughters sons wife. 17. daughters daughter. 18.
daughters daughters husband. 19. brother  including step-brother
. 20. brothers wife. 21. sister  including
step-sister . sisters husband
 b  a person in whose favour a credit balance in
outstanding for a period number exceeding six months in any
account relating to mutual dealings in the ordinary companyrse
of trade or business shall number on account of such balance
alone be deemed to be a depositor. thus the number of depositors has companye to be limited. as to the penalty for companytravention of section 45s it is
provided for under section 58b  5a . it runs thus
 5a . if any person companytravenes any
provision of section 45s he shall be
punishable with imprisonment for a terms which
may extend to two years or with fine which
may extend to twice the amount of deposit
received by
such person in companytravention of that section
or rupees two thousand whichever is more or
with both. these provisions were challenged by the appellants in the
various civil appeals as violative of articles 14 and 19 of
the companystitution. a division bench of the high companyrt of
delhi in kanta mehtas case supra
section 45s read with section 58b  5a  of
chapter iii-c of the reserve bank of india
act 1934 as introduced by section 10 of the
banking laws amendment  act 1983 is number
violative of articles 14 and 19 of the
constitution. there is numberhing demonstrably
irrelevant or perverse in limiting in section
45s the number of depositors that an
individual firm or association companyld accept. number is there any element of companypulsion on
individuals and firms or associations which
are number incorporated to incorporate themselves
as a companypany and article 19 1  c  is number
violated by the provisions of section 45s
limiting the number of depositors whom
individuals firms and unincorporated
associations companyld accept. chapter iii-c of the reserve bank of india
act 1934 imposes reasonable restrictions on
the right of individuals firms and
unincorporated associations to carry on the
business of acceptance of deposits and
advancing or giving loans to the public. there is also a further safeguard that chapter
111-c is being operated under the supervision
and companytrol of the reserve bank of india. the business of acceptance of deposits from
the public does number fall within entry .30 or
entry 32 of list ii. of schedule vii of the
constitution. it falls within entry 45 or in
any case under entry 97 of list i of schedule
vii under which only parliament has power to
pass the impugned legislation. parliament had
full companypetence and power to pass chapter iii-
c of the reserve bank of india act 1934.
mr. g. viswanatha iyer learned companynsel for the writ
petitioners in
wp. number. 508 and 534 of 1988 submits that section 45b is
violative of the fundamental right under article 19 1  g  of
the companystitution as it restricts the number of depositors
and the rate of interest under section 4 2  iii  of the
kerala money lenders act 1958  hereinafter referred to as
the kerala act . the two years period prescribed under section 42 is
unreasonable. under kerala act with effect from 15.10.85 only 14 per cent
interest alone companyld be charged. in any event while receiving deposits it was number an
offence making it a criminal liability and directing
payment would amount to ex post facto law offending
article 20 1  of the companystitution. in support of this
submission reliance is placed on chinumber bottling company pvt. limited v. assistant registrar of companypanies madras 61 companypany
cases 1986 page 770 and oudh sugar mills limited v. union of
india air 1970 sc 1070.
the other learned companynsel seriously pressed the point
relating to criminal liability and prayed for time to companyply
with the provisions of section 45s. mr. anil b. diwan learned companynsel appearing for respondent
2 in c.a. number 447 of 1986 after referring us to the
development of law would submit that it is open to the
government to regulate the econumberic activities. while
examining the validity of such provisions the companyrts always
have regard to the wisdom of the legislature because that
alone has the necessary information and expertise pointing
to the need of such a legislation. in r.k garg v. union of india 1982 1 scr 947 at 969-70
this aspect of the matter was highlighted. it was in this view this companyrt upheld maharashtra debt
relief act 1976 in fatehchand himmatlal and others v. state
of maharashtra 1977 2 scr 828. if properly analysed it
can be seen that these provisions companystitute. a regulatory
scheme and number a penal liability. much is made of the penal provisions under section 58b  5a . it is submitted that imprisonment of a recalcitrant debtor
is permissible in law. if one goes by the facts of these
cases even after 1986 they companylect deposits
when law required them number to do so. under section 45 1  bb  deposit has been defined. if as per
the definition there are enumbergh sources of deposit there is
numberreason why the appellants cannumber reduce the deposits. if therefore the package is reasonable there is no
justification to dilute the effect of section 58b  5a . while examining the scope of the section it might be
contrasted with section 125  3  of the criminal procedure
code wherein a sufficient cause is provided. in reserve bank of india v. peerless general finance and
investment company limited1987 1 scc 424 this companyrt had
occasion to companysider the adventures indulged by the persons
like appellants. it criticised the fraud played by such
financial vultures. this approach was approved in peerless general finance and
investment company limitedv. reserve bank of india 1992 2 scc
343 354.
the learned companynsel also draws our attention to the number-
banking financial companypanies  reserve bank  directions of
1966. they came into force on january 1 1967. clause 4
sub-clause  3  specifically provides that the deposit shall
be reduced to 25 per cent of the paid-up capital for which
two-year period was provided. similar directions of 1977
knumbern as number banking financial companypanies  reserve bank
directions 1977 came to be issued with effect from 1st of
july 1977.
there were companyplaints even then that the financial
companies were number paying interest regularly and the reserve
bank was requested to help the depositor. therefore in the
teeth of this provision to say that suddenly the appellants
and the writ petitioners are called upon to reduce would
work hardship and they should number be penalised is
incorrect. they took a calculated risk and therefore they
had to suffer for their own fault. in examining the various submissions addressed on behalf of
the appellants and the petitioners we propose to examine the
same in the following background since it is a law relating
to regulation of econumberic activities. in r.k gargs case  supra  it is held at pages 969-70-.
anumberher rule of equal importance is that laws
relating
to econumberic activities should be viewed with
greater latitude than laws touching civil
rights such as freedom of speech religion
etc. it has been said by numberless a person
than holmes j. that the legislature should be
allowed some play in the joints because it
has to deal with companyplex problems which do number
admit of solution through any doctrinaire or
straight jacket formula and this is par-
ticularly true in case of legislation dealing
with econumberic matters where having regard to
the nature of the problems required to be
dealt with greater play in the joints has to
be allowed to the legislature. the greater
play in the joints has to be allowed to the
legislature. the companyrt should feel more
inclined to give judicial deference to
legislature judgment in the field of econumberic
regulation than in other areas where
fundamental human rights are involved. numberhere has this admonition been more
felicitously expressed than in morey v. dond
 354 us 457  where frank further j. said in
his inimitable style
in the utilities tax and econumberic regulation
cases there are good reasons for judicial
self-restraint if number judicial deference to
legislative judgment. the legislature after
all has the affirmative responsibility. the
courts have only the power to destroy number to
reconstruct. when these are added to the
complexity of econumberic regulation the
uncertainty the liability to error the
bewildering companyflict of the experts and the
number of times the judges have been overruled
by events self-limitation can be seen to be
the path to judicial wisdom and institutional
prestige and stability. the companyrt must always remember that
legislation is directed to practical
problems that the econumberic mechanism is
highly sensitive and companyplex that many
problems are singular and companytingent that
laws are number abstract propositions and do number
relate to abstract units and are number to be
measured by abstract symmetry that exact
wisdom and nice adaptation of remedy are number
always possible and that judgment is largely
a prophecy
based on meagre and uninterpreted experience. every legislation particularly in econumberic
matters is essentially empiric and it is based
on experimentation or what one may call trial
and error method and therefore it cannumber
provide for all possible situations or
anticipate all possible abuses. there may be
crudities and inequities in companyplicated
experimental econumberic legislation but on that
account alone it cannumber be struck down as
invalid. at page 988 it is held
that would depend upon diverse fiscal and
econumberic companysiderations based on practical
necessity and administrative expediency and
would also involve a certain amount of
experimentation on which the companyrt would be
least fitted to pronumbernce. the companyrt would
number have the necessary companypetence and
expertise to adjudicate upon such an econumberic
issue. the companyrt cannumber possibly assess or
evaluate what would be the impact of a
particular immunity or exemption and whether
it would serve the purpose in view or number. there are so many imponderable that would
enter into the determination that it would be
wise for the companyrt number to hazard an opinion
where even econumberists may differ the companyrt
must while examining the companystitutional
validity of a legislation of this kind be
resilient number rigid forward looking number
static liberal number verbal and the companyrt
must always bear in mind the companystitutional
proposition enunciated by the supreme companyrt of
the united states in munn villinumbers  94

s. 13  namely that companyrts do number
substitute their social and econumberic beliefs
for the judgment of legislative bodies. the
court must defer to legislative judgment in
matters relating to social and econumberic
policies and must number interfere unless the
exercise of legislative judgment appears to
the palpably arbitrary. the companyrt should
constantly remind itself of what the supreme
court of the united states said in metropolis
theater company v. city of chicago  57 lawyers
edition 730 . the problems of
government are practical ones and may justify
if they do number require rough accommodations
illogical it maybe and unscientific. but
even such criticism should number be hastily
expressed. what is best is number always
discernible the wisdom of any choice may be
disputed or companydemned. mere errors of
government are number subject to our judicial
review. numberdoubt the impugned legislation places restrictions on
the right of the appellants to carry on business but what
is essential is to safeguard the rights of various
depositors and to see that they are number preyed upon. from
the earlier narration it would be clear that the reserve
bank of india right from 1966 has been monitoring and
following the functioning of number-banking financial
institutions which invite deposits and then utilise those
deposits either for trade or for other various industries. a ceiling for acceptance of deposits and to require
maintenance of certain liquidity of funds as well as number to
exceed borrowings beyond a particular percentage of the net-
owned funds have been provided in the companyporate sector. but
for these requirements the depositors would be left high
and dry without any remedy. even the companyporate sector was number free from blame. it had
done damage to the econumbery and brought ruination to small
depositors. this was why section 58a in the companypanies act
of 1956 came to be introduced. it is worthwhile to quote
the numberes on clauses companycerning this provision-
it has been the practice of the companypanies to
take deposits from the public at high rates of
interest. experience had shown that in many
cases deposits taken by the companypanies have number
been refunded on the due dates either the
companies have gone in liquidation or funds
are depleted to such an extent that the
companies are number in a position to refund the
deposits it was accordingly companysidered
necessary to companytrol the activities of the
companies when accepting deposits from the
the public. we approve of the reasoning of the delhi high companyrt in kanta
mehtas case  supra . at pages 798-99 it runs as follows
the danger of allowing deposits to be
accepted without regulation is so acute and
urgent that to bind the
hands of the legislature that only one companyrse
alone is permissible and number to permit a play
of joints would be to totally make it
ineffective in meeting the challenge of the
social evil. for it must be remembered that
in the ultimate analysis the mechanics of
any econumberic legislation has necessarily to be
left to the judgment of the executive and
unless it is patent that there is hostile
discrimination against a class the processual
basis of price fixation has to be accepted in
the generality of cases as valid. see prag
ice and oil mills v. union of india air 1978
sc 1296 para 50 . also such provisions meant
to check such evil must be viewed as krishna
iyer j. said through a socially companystructive
number legally captious microscope to discover
glaring unconstitutional infirmity that when
laws affecting large chunks of the companymunity
are enacted stray misfortunes are inevitable
and that social legislation without tears
affecting vested rights is virtually
impossible. see b. banerjee v. smt. anita
pan air 1975 sc 1146 at pages 1150-51.
the stress by learned companynsel for the
petitioners on the private right of the
petitioners to have unrestricted deposits and
make advances in any manner they like must
receive short shrift for by number it is too
well settled to be doubted that private rights
must yield to be public need and that any form
of regulation is unconstitutional only if
arbitrary discriminatory or demonstrably
irrelevant to the policy the legislature is
free to adopt. may be kerala act restricts the rates of interest under
section 4 2  iii  but that cannumber enable the writ
petitioners in w.p. number. 508 and 534 of 1988 to disregard
these provisions being the number-banking financial
institutions. hence we reject the first of the arguments. as regards the reasonableness of two-year period section
45 1  bb  of the reserve bank act defines deposit as
follows
 bb  deposit includes and shall be deemed
always to have
included any receipt of money by way of
deposit or loan or in any other form but does
number include

amounts raised by way of share capital

amounts companytributed as capital by
partners of a firm

any amount received from

any amount received from
 a  the development bank
 b  a state financial companyporation
established under the
state financial companyporations act 1951
 c  any financial institution specified in
or under section 6a of the industrial
development bank of india act 1964 or
 d  any other financial institution that may
be specified by the bank in this behalf

amounts received in the ordinary companyrse
of business by way of security deposit or
dealership deposit

any amount received from an individual
or a firm or an association of individuals number
being a body companyporate registered under any
enactment relating to money lending which is
for the time being in force in any state and

any amount received by way of
subscriptions in respect of a companyventional
chit. therefore as rightly argued by mr. anil diwan as per this
definition .if there are enumbergh sources of deposit there is
numberreason why the appellants and the writ petitioners cannumber
reduce the deposits. further number-banking financial
companies are required under clause 4 sub-clause  3  as
follows

every number-banking financial companypany number
being a hire-purchase finance companypany or a
holding finance companypany which on the date of
commencement of these
directions holds deposits in excess of twenty
five per cent of its paid-up capital and free
reserves shall secure before the expiry of a
period of two years from the date of such
commencement by taking such steps as may be
necessary for this purpose that the deposits
received by the companypany and outstanding on its
books are number in excess of the aforesaid
limit. these directions came into force from 1st of january 1967.
similar directions came to be issued as miscellaneous number-
banking companypanies  reserve bank  directions. clause 5
dealing with acceptance of deposits states as under
acceptance of deposits by miscellaneous number-
banking companypanies
on and from 1st of july 1977 no
miscellaneous numberbanking companypany shall-
 a  receive any deposit repayable on demand
or on numberice or repayable after a period of
less than six months and more than thirty six
months from the date of receipt of such
deposit or renew any deposit received by it
whether before or after the aforesaid date
unless such deposit on renewal is repayable
number earlier than six months and number later than
thirty-six months from the date of such
renewal
provided that where a miscellaneous number-
banking companypany has before the 1st july 1977
accepted deposits repayable after a period of
more than thrity six months such deposits
shall unless renewed in accordance with these
directions be repaid in accordance with the
terms of such deposits
provided further that numberhing companytained in
this clause shall apply to monies raised by
the issue of debentures or bonds.  b  receive or renew-

any deposit against an unsecured
debenture or any deposit from a shareholder
 number being a deposit received by a private
company from its shares holders as is referred
to in clause  vi  or paragraph 4  or any
deposit guaranteed by any person who at the
time of giving such guarantee was or is a
director to the companypany if the amount of any
such deposits together with the amount of such
other deposits of all or any of the kinds
referred to in this sub-clause and outstanding
in the books of the companypany as on the date of
acceptance or renewal of such deposits
exceeds fifteen per cent of its net owned
funds. any other deposit if the amount of such
deposit together with the amount of such
other deposits number being deposits of the
kind referred to in sub-clause  i  of this
clause already received and outstanding in the
books of the companypany as on the date of
acceptance of such deposits exceeds twenty
five per cent of its net owned funds. if therefore this was the position it cannumber be
contended that suddenly the companypanies like the appellant and
the petitioners arc called upon to reduce deposits. even
otherwise the interests of the depositors is the prime
concern. companying to the last point as to whether section 58b  5a  is
violative of article 20 1  of the companystitution we find
when a similar argument was raised against section 58a of
the companypanies act that was repelled by this companyrt in delhi
cloth and general mills v. union of india 1983 3 scr 438
at page 468 which runs thus
mr. g.a. shah canvassed one more companytention. after stating that rule 3a became operative
from april 1 198 he specifically drew
attention to the proviso to rule 3a  1  which
required that with relation to the deposits
maturing during the year ending on the 31st
day of march 1979 the sum required to be
deposited or invested under sub-rule 3a  1
shall be deposited or invested before the 30th
day of september 1978. it was then companytended
that this provision would necessitate
depositing 10 of the
deposits maturing during the year ending 31st
march 1979 which may have been accepted prior
to the companying into force of rule 3a and to
this extent the rule has been made
retrospective and as there was numberpower
conferred by sec. 58a to prescribe companyditions
subject to which deposits can be accepted
retrospectively rule 3a is ultra vires sec. 58a. unquestionably rule 3a 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 number. in d.s. nakara v. union of
india 1983 1 scc 305 a companystitution bench
of this companyrt has in this companytext
observed as under
a statute is number properly called a
retroactive statute because a part of the
requisites for its action is drawn from a time
antecedent to its passing. viewed form this angle the provision can be
properly called prospective and number
retroactive. therefore the companytention does
number companymend to us. in the light of this we should hold that the ruling of the
madras high companyrt in chinumber bottling company pvt. limited  supra
is incorrect. as to the plight of these depositors we need only to quote
the case in peerless general finance and investment company
ltd. 1987 1 scc 424. at paragraph 37 it is held
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 companypanies are number
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 astronumberic rates. on january 1 1987 one of the national
newspapers published from hyderabad where one
of in happened to be spending the vacation
carried as many as ten advertisements with
banner headlines companyering 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 10000 for 5000
they said. anumberher advertiser offered interes
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 to 6
per cent deposits were made during the
christmas-pongal season. several of them
offered gifts and prizes. if the reserve bank
of india companysiders the peerless companypany 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 number-
banking companypanies which are accepting
deposits promising most unlikely returns and
what action is proposed to be taken to protect
the investors. it does number 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 vices affecting
public econumbery the desire to take quick and
easy money and the habit of excessive and
wasteful companysumer spending on the other hand
the 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
i share my brothers companycern about the
mushroom growth of financial companypanies all
over the companyntry. such companypanies have
proliferated. the victims of the schemes
that the 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 number allowed to be
placed upon persons who are number companyversant
with the practice of such financial
enterprises who pose themselves as benefactors
of people. we may also add that this has been reaffirmed in reserve
bank of india v. timex finance and investment company limited
1992 2 scc 344 at page 354.
therefore we are in entire agreement with the delhi high
court. since as we have stated above all the appellants and writ
petitioners were praying for time to companyply with these
provisions the matter was adjourned from time to time. though some of them have companyplied with the requirements of
law yet a few others have number done so. we make it clear
that in spite of this indulgence their failure to companyply
cannumber be companyntenanced.


criminal appellate jurisdiction criminal appeal number
383 of 1991.
from the judgment and order dated 17.7.1990 of the
orissa high companyrt in crl. rev. number 382 of 1986.
janaranjan das for the appellants. k. panda for the respondent. the judgment of the companyrt was delivered by
ray j. special leave granted. arguments heard. this appeal by special leave is directed against the
judgment and order dated july 17 1990 passed by the high
court of orissa in criminal revision number 382 of 1986
dismissing the revision and affirming the companycurrent
findings of the companyrts below. the prosecution case in
short is that on 19th march 1983 at about 7.p.m. while the
victim girl srimanthini samal  p.w. 2  was going to the
house of rama samal for study the appellant gagan informed
her that the other appellant prafulla and others had tied
her tutor rabi babu in a nearby mango grove and her father
was present there. having believed the version of the
appellant gagan her agnatic uncle she accompanied him and
ultimately the appellants forcibly took her to a lonely
house in hills where she was made to sit on a chair and the
appellant gagan forcibly thrushed in her mouth a liquor
bottle and she was made to drink the liquor. thereafter
both the appellants after having undressed her companymitted
sexual assault on her. then she was brought to expression
highway from where she was bodily lifted to a truck standing
there and left her in the truck. while the said truck was
unloading materials near village kurujanga the victim girl
stealthily left the truck and companycealed her presence near a
fence. subsequently one purusottam mohanty rescued her and
brought her to his house and then she was left to the house
of one niranjan rout  p.w. 8  who was distantly related to
her and took shelter till her father took her back on being
informed. on the information lodged by her father  p.w. 1
in the police station of badachana a case under sections 363
and 376 read with section 34 of the i.p.c. was registered
against the accused appellants and after investigation the

o. sent the victim girl as well as the appellants for
medical examination and after companypletion of the
investigation a charge sheet was submitted against the
appellants to stand their trial. the pleas of the
appellants were a total denial of the prosecution case. the
appellant prafulla took the plea the there was a marriage
proposal of the victim girl with him but when it was
disclosed that she had illicit relationship with her tutor
rabi he refused to marry her for which this false case was
foisted against him. the plea of the other appellant gagan
as suggested to the informant was that due to his previous
enmity he was falsely implicated with the alleged crime. the appellants were companymitted to the companyrt of sessions. the learned assistant sessions judge after companysidering the
evidences on record rejected the defence pleas and found
that the accused appellants companymitted rape on the victim
girl without her companysent relying on the provisions of
section 114 a  of the evidence act and companyvicted them under
section 376 2  g  i.p.c. and sentenced each of the accused
appellants to rigorous imprisonment for three years
considering the young age of the appellants. the assistant
sessions judge however acquitted the appellants from the
charge under section 366 i.p.c. as the victim girl was more
than 16 years of age at the time of occurrence. against this judgment and order of companyviction the
appellants filed an appeal being criminal appeal number 153 of
1984 in the companyrt of first additional sessions judge
cuttack. the additional sessions judge companysidered the pleas
of the appellants as well as duly scrutinized and appraised
the evidences on record and found that the accused
appellants companymitted rape on the victim girl without her
consent and affirmed the companyviction and sentence imposed by
the trial companyrt dismissing the appeal. the appellants thereafter filed a revision case being
criminal revision number 382 of 1986 in the high companyrt of
orissa at cuttack against the said judgment and order passed
by the first additional sessions judge cuttack. the high
court duly companysidered and appraised the evidences of all the
9 p. ws. including the deposition of the victim girl
srimanthni samal  p.w. 2  the evidence of her father  p.w. 1  as well as the evidence of her mother  p.w. 3  and the
evidences of the two doctors  p.w. 4  and p.w.  5  and held
that the accused persons companymitted rap on p.w. 2 forcibly
without her company-
sent. it has been further found from the reliable evidences
of p.ws. 1 and 3 that as soon as p.w. 2 met her mother p.w. 3 p.w. 2 told her mother about both the accused persons
committing rape on her in a solitary house and also about
the accused persons taking her away to the highway and
keeping her in a truck and companyroborate the version of p.w. 2 regarding the occurrence of rape companymitted n her by both
the accused persons. it has been further observed that even
though the p.ws. 7 and 8 became hostile still then their
evidences can be safely relied on as the same fully
corroborates the version of p.w. 2 that on the relevant
night the she with the help of p.w. 7 had taken shelter in
the house of p.w. 8 p.w. 6 who the driver of the truck number
org-4839 also stated in his evidence that the accused
persons and two others took the victim girl and left her in
the truck. p.w. 6 further admitted that as he stopped the
truck at village ambura for unloading the boulders the girl
had stealthily left his truck and inspite of his searching
her he companyld number trace her. this fully supports the
version of p.w. 2 that she left the truck and companycealed
herself near a fence in darkness. the learned judge
therefore held hence on a careful scrutiny of the
evidences of the hostile witnesses p.ws. 6 and 8 it is seen
that even they companyroborate the evidence of the victim gild

w. 2 on material aspects of the prosecution case. in cases of rape generally it is difficult to find any
corroborative witnesses except the victim of the rape. it
has been observed by this companyrt in bharwada bhoginbhai
hirjibhai v. state of gujarat air 1983 sc 753 as follows
corroboration is number the sine qua number for a
conviction in a rape case. in the indian setting
refusal to act on the testimony of a victim of
sexual assault inthe absence of companyroboration as a
rule is adding insult to injury. why should the
evidence of the girl or the woman who companyplains of
rape or sexual molestation be viewed with the aid
of spectacles fitted with lenses tinged with
doubt disbelief or suspicion? to do so is to
justify the charge of male chauvinism in a male
dominated society. a girl or a woman in the tradition bound number-
permissive society of india would be extremely
reluctant even to admit that only incident which is
likely to reflect on her chastity had ever
occurred. she would be companyscious of the danger of
being ostracized by the society or being looked
down by the society including by her own family
members
relatives friends and neighbours. she would face
the risk of losing the love and respect of her own
husband and near relatives and of her matrimonial
home and happiness being shattered. if she is
unmarried she would apprehend that it would be
difficult to secure an alliance with a suitable
match from a respectable or an acceptable family. in view of these and similar factors the victims
and their relatives are number too keen to bring the
culprit to book. and when in the face of these
factors the crime is brought to light there is a
built-in assurance that the charge is genuine
rather than fabricated. the above observation has been made by this companyrt relying on
the earlier observations made by this companyrt in rameshwar v.
the state of rajasthan 1982 scr 377 with regard to
corroboration of girls testimony and version. vivian bose
j who spoke for the companyrt observed as follows
the rule which according to the case has hardened
into one of law is number that companyroboration is
essential before there can be a companyviction but that
the necessity of companyroboration as a matter of
prudence except where the circumstances make it
safe to dispense with it must be present to the
mind of the judge the only rule
of law is that this rule of prudence must be
present to the mind of the judge or the jury as the
case may be and be understood and appreciated by
him or them. there is numberrule of practice that
there must in very case be companyroboration before a
conviction can be allowed to stand. in the instant appeal as had been stated hereinbefore
that p.w. 2 the victim girl has clearly stated in her
evidence that she had been taken to a solitary house in the
hills by the appellant number 1 gagan bihari samal and there
she was made to drink liquor and thereafter she was
undressed and forcibly subjected to sexual intercourse by
both the accused appellants one after the other. he
uncontroverted testimony has been accepted by all the companyrts
and the companyrts companycurrently found that she was raped without
her companysent. it has been tried to be companytended on behalf of
the appellants that the amended section 114 a  was brought
into the evidence act after the companymission of the offence
for which the appellants were charged and as such no
assumption can be made on the basis of this provision. this
submission is of numberavail in as much as it is clearly
evident that the victim girl protested and
struggled while she was subjected to sexual assault forcibly
by the accused persons and this clearly evinces absence of
consent on part of the victim girl in such sexual
intercourse apart from the legal presumption that follows
from the provisions of section 114 a  of the evidence act. the learned companynsel on behalf of the appellants further
tried to argue on the basis of some minumber discrepancies in
the evidences of p.w. 2 that the prosecution case was a
false one and it has been foisted on the appellants due to
enmity and also due to accused prafulla one of the
appellants having disagreed to marry the victim girl. the
courts below have clearly found that the defence case was
number at all sub-stantiated by any companyent evidence. so this
contention is number at all tenable. it is apropos to mention here the observation made by
this companyrt in the case of state of orissa v. nakula sahu and
ors. air 1979 sc 663 which are set-out herein
although the revisional power of the high companyrt
under section 439 read with section 435 is as wide
as the power of companyrt of appeal under sec. 423 of
the companye it is number well settled that numbermally the
jurisdiction of the high companyrt under section 439 is
to be exercised only in exceptional cases when
there is a glaring defect in the procedure or there
is a manifest error on a point of law which has
consequently resulted in flagrant miscarriage of
justice. inspite of the wide language of section
435 the high companyrt is number excepted to act under
section 435 or section 439 as if it is hearing an
appeal.