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MaharashtraNBFClaw:SCrulesagainst
BombayHC
BSReporter|NewDelhiMarch09,2011LastUpdatedat00:58IST
TheSupremeCourthasruledthattheBombayHighCourtjudgmentquashingtheMaharashtralaw
forprotectingdepositorsinthenonbankingfinancialcompanieswaswrong,andtheMadrasHigh
Courtsviewwasthecorrectone.
Inbothcases,thestategovernmentspassedlegislationstoprotect
depositorsinthesecompanieswhoarevictimsofPonzischemes.
AfullbenchoftheBombayHighCourtruledthattheMaharashtra
ProtectionofInterestsofDepositors(inFinancialEstablishments)Actwas
unconstitutional,asonlyParliamentcanpasssuchalaw.TheMadrasHigh
Court,ontheotherhand,upheldtheTamilNadulaw,whichwasalmost
identicaltothatofMaharashtra.TheSupremeCourtdismissedtheappealagainsttheMadrasHigh
Courtdecision.
ThebenchconsistingofJusticeMarkandeyKatjuandJusticeGyanSudhaMisrastatedthatthelaw
wasasalutarymeasurewhichwaslongoverduetodealwithscamsterswhohavebeenthrivinglike
locustsinthiscountry.
RejectingtheargumentthatonlyParliamenthasthepowertopasssuchlawsaccordingtothe
scheduleintheConstitutionempoweringtheCentreandstatestopasslegislationsondifferent
subjects,thejudgesstatedthatsharpanddistinctlinesofdemarcationarenotalwayspossibleandit
isoftenimpossibletopreventacertainamountofoverlapping.
Itisthepithandsubstanceofthelawanditsobjectivewhichshouldbelookedinto.TheReserve
BankofIndiaActandtheBankingRegulationActdonotcoverthefieldofoperationofthenon
bankingfinancialcompanies.
TheCompaniesActalsodoesnotdirectlydealwiththeproblemposedbylargescalecheatingof
middleclassdepositorswhoareluredbypromisesofhighinterestrates.
Therefore,thelawstoprotectsmalldepositors,byattachmentofthepropertyofthecompaniesand
othersteps,wasasalutarystepandcouldnotbesetasideasunconstitutional,thejudgmentsaid.

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