Sunday, March 4, 2007

Madras HC upholds depositors protection law

High Court upholds depositors protection law
Sunday March 4 2007 00:00 IST

CHENNAI: A three-judge Bench of the Madras High Court has upheld the constitutional validity of the Tamil Nadu Protection of Interests of Depositors (in financial establishments) Act, 1997, enacted by the then DMK Government.

“The State Government had rightly enacted the legislation to protect the interest of the public and regulate the activities of the financial establishments. We hold that the impugned Act does not suffer from any legislative competency, nor its provisions are arbitrary or unreasonable or violative of principles of natural justice. We hope that the State Government shall vigorously enforce the Act with sympathy for the victim classes and show progressive measures in action,” the Bench, comprising Justice P D Dinakaran, P S S Janarthana Raja and Justice K Chandru observed in its 164-page order.

The Bench gave the ruling while passing orders on a batch of writ petitions, including many financial establishments challenging the constitutional validity of the Act.

The petitioners argued that the Act lacked legislative competency of the State Government as ‘banking’ was a subject coming under the purview of the Central Government.

The provisions of the Act were also arbitrary and violative of principles of natural justice as the ‘competent authority’ was provided with ‘unguided’ powers for attachment of properties of financial establishments, they contended and sought to declare the Act as unconstitutional.

The petitions originally came up for hearing before a two-judge Bench and was later referred to the Full Bench.

On behalf of the State Government, it was submitted that as per the statistics in July 2002, about Rs 1,945 crore was collected by various financial establishments from over 19 lakh depositors, who belonged to poor and middle-income families, retired government servants and pensioners.

The money was either siphoned or diverted mala fide in the hands of the financial establishments.

The deliberate and fraudulent default of the financial institutions in repaying the deposits was unique and well organised and such activities constituted while-collar crime that ruined the safety and interest of the depositors, the government contended.

Stating that such financial establishments had not obtained registration under the Companies Act and also not obtained licence from the Reserve Bank of India, the government said the hue and cry of the depositors also led to the law and order problems and therefore it had rightly enacted the law to meet the urgent public need and provide a permanent solution to such problems.

A special court, constituted under the Act, was already dealing with such cases.

On perusal of the case, the Bench said, “The impugned Act as a whole inspires confidence of the societal realities, magnificently satisfies the principles of natural justice and excellently meets the needs of the victims”.

“The State Government had carefully taken into consideration the public resentment as well as the public interest and safety, as the financial institutions went back from their promise on the interest, but also failed to refund the principal amount to the depositors.”

Holding that there was no repugnancy between the impugned Act and the Central enactments, the Bench said a verdict of the Bombay High Court, quashing a similar enactment of the Maharashtra Government had no bearing to test the constitutional validity of the Tamil Nadu Act.

Courtesy_
The New Indian Express

http://www.newindpress.com/NewsItems.asp?ID=IE920070303115806&Title=Chennai&rLink=0


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