PEERLESS GENERAL FINANCE AND INVESTMENT CO. LTD. AND ANR .. v. RESER VE BANK OF INDIA

The contention on behalf of the Reserve Bank is that the directions have been made in. public interest of safeguarding the interest of millions of depositors and the Reserve Bank is not concerned and while doing so it was rightly thought necessary by the Reserve Bank that the companies cannot be permitted to incur the expenses out of the corpus of the deposi- C tors money. Tfie business carried on by the companies is that of only a middleman or of commission ag~nts and it is for the companies to restruc-

• ture their organization by curtailing its expenses. If ~uch middlemen or brokers are not able to earn a large profit as was done before the enforce- ment of the impugned directions, it lies with the companies to ·sontinue or not such business when the margin of profit is curtailed. These companies · D want to do the business without having any stake of their own. The companies doing such business cannot be subjected to the scheme of control applied to other financial and non-financial companies for the simple reason that they have no capital and their schemes are for a period much longer than three years. After the decision of !he Supreme Court in Peerless case these directions of 1987 were issued after mature considera- E tion with the help and advice of experts.

Paragraph 6 of the impugned directions according to the Reserve Bank lays down provisions for security of depositors. It prescribes the mode of investment of funds collected by the companies. It cannot be disputed that while collecting deposits the companies 'clearly hold out to the members of the public that the moneys so collected by them shall be invested in Government securities or kept deposited with the banks and they also assure the dep~sitors that their moneys are safe and secure. On the basis of such representations and on the strength of exaggerated and misleading advertisements these companies collect huge amounts of de- ' posits from a large number of small, poor and uninformed depositors and that too in such investment spread over a long period. The contention on behalf of the Reserve Bank of India is that in the above context these companies carry on their activities wholly with the funds provided by the public by way of deposits and hardly have any capital of their own. In these circumstances it has been urged on behalf of the Reserve Bank that the provisions made in paragraph 6 of, the impugned dirfftions are abso- H

444 SUPREME COURT REPORTS [1992] I S.C.R.

A lutely reasonable and are for ensuring repayment of deposits. It has been submitted that it is common knowledge that small depositors cannot have recourse to courts for recovering their amounts if the companies do not · repay the deposits. The direction in paragraph 6 enjoins on these compa- nies to deposit in fixed deposits with public sector banks or unencumbered approved securities or in other investments, a sum which shall not, at the -~ B closir of business on 3 lst December, 1987 and thereafter at the end of each half year i.e. 30th June and 31st December not less than the aggre- gate amounts of the liabilities to the depositors whether or not such amounts have become payable. Thus according to the above provision whole of the aggregate amounts of the liabilities to the depositors whether or not such amounts have become repayable, is required to be deposited or invested. C I 0%.of such amount is required to be deposited in public sector banks and 70% in approved securities and 20% has been allowed to be invested by the company according to its own choice.

In order to understand the rigour of the directions laid down in paragraph '6', it would be necessary tb understand the scope of other directions as well. Paragraph 4 of the directions lays down that the deposit shall not be accepted for a period of less than 12 months or more. than 120 months i.e. one year to ten years from the date of receipt of such deposits. The normal standard applied to non financial and financial companies is that they crumot accept deposits for a period of more than 36 months (except housing finance company). Thus the companies before us have been pennitted to conduct their schemes extending over to a long period upto 120 months. This is a special kind of concession provided to the companies of the kind before us.

Paragraph 5 of the directions relates to the minimum rate of return fixed at 10% per annum for a deposit with a maturity of IO years. It is a F matter of common knowledge that in the present times even the public sector corporations and banks and other financial and non-financial com- panies pay interest at much more higher rates ranging from 14 to 18%. llrns accordi11g to the above scheme the respondent companies and the others doing such business can easily earn a profit of 4 to 5% on their investments. In case of a request of the depositors for repayment of the G deposit befo.re maturity then the amount payable by the compru1y by way of interest etc., shall be 2% less than what could have been ordinarily paid by the company by way of interest if the deposit had run the full contrac- tual period. However, the question of repayment before maturity or after how many years will depend entirely on the terms and conditions of the contract of such d_eposit. Paragraph t2 of the directions of 1987 enjoins 1-1 upon the company to disclose as liabilities in its books of accounts and

, PEERLESS CO. v. R.B.l.[KASLIWAL, J.] 445

balance sheets the total amount of deposits received together with interest, bonus, premium or other advantage, accrued or payable to the depositors. Under Clause (a) to the explanation to clause 3 of paragraph '6' "Aggre- gate Amounts of Liabilities" shall mean total amount of deposits received together with interest, premium, bonus or other advantage by whatever name called, accrued on the amount of deposits according to the terms of contract. Thus the company is required to deposit or invest the aggregate amounts of its liabilities having accrued on the amount of deposits accord- ing to the terms of contract. Without going into the figures shown in the various charts, it is clear that if the directions contained in paragraphs 6 and. 12 of the directions of 1987 are to be carried out, the companies are not left to utilise any amount out of the deposits as working capital to meet the expenses. In our view the Reserve Bank is right in taking the stand that if these companies want to do their.business, they should invest their own working capital and find such resources elsewhere with which the Reserve Bank has no concern. If we look at the Annual Report and Accounts of Peerless for the years 1988, 1989 and 1990 it.is clear that it had conducted its business following the impugned directions of 1987 and still had earned substantial profits in these years. It is clear that Peerless D is a company having established as back as in 1932 and had substantial funds to invest the entire amount of deposits and had met the expenses out of its accumulated profits of the past years. This shows that the business can be run and profit can be earned even after complying with the im- pugned directions of 1987 issued by the Reserve Bank. It is not the concern of this court to find out as. to whether actuarial method of E accounting or any other method would be feasible or possible to adopt by the companies while carrying out the conditions contained in para- graphs 6 and 12 of the directions of 1987. The companies are free to adopt any mode of accounting permissible under the law but it is certain that they will have to follow the entire terms and conditions contained in the impugned directions of 1987 including those contained in para- F graphs 6 ·and 12. It is not the function of the Court to amend and lay down some other directions and the High Court was totally wrong in doing so. The function of the Court is not to advise in matters relating to financial and economic policies for which bodies like Reserve Bank are fully competent: The Court can only strike down some or entire direc- tions issued by the Reserve Bank in case the Court is satisfied that the G directions were wholly unreasonable or violative of any provisions of the Constitution or any Statute. It would be hazardous and .risky for the courts to tread an unknown path and should leave such task to the expert bodies. This court has repeatedly said that matters of economic policy ought to be left to the Government. While dealing with the validity of an order passed on September 30, 1977 fixing a retail price of mustard oil not H

446 SUPREME COURT REPORTS [1992] I S.C.R.

A exceeding Rs. I 0 per kilogram in exercise of powers conferred by Section 3 of the Essential Commodities Act, a Bench of 7 Judges of this Court in Mis Prag Ice & Oil Mills and another v. Union of India and Nav Bharat Oil Mills and another v. Union of India, [1978] 3 SCC 459 observed as under:

"Another rule of equal importance is that laws relating to eco- nomic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, be-

PEERLESS CO. v. R.Bl.[KASLIWAL, J.] 447

cause ithas to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with eco- nomic matters, where, having regard to- the nature of the prob- . lems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud where Frankfurter, J. said in his Inimitable style: f "In the utilities, tax and economic regulation cases, there are c good reasons for judicial self-restraint if not judicial deference to legislative Judgment. The legislature after all has the af- firmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the com- plexity of economic regulation, the uncertainty, the liability to error the bewildering conflict of the experts, and the number D of times the judges have been overruled by events--self limi- tation can be seen to be the path to judicial wisdom and insti- tutional prestige and stability". It may also be noted that it is not possible. for the Court to determine as to how much percentage of deposit of first instalment should be al- lowed towards expenses which may consist of commission to agents, of- E fice expenses etc. Even amongst the three companies--viz. Peerless, Timex and Favourite, there is a difference in this regard. According to the Peerless 25%, Timex 50% and Favorite 60% of the deposits of the first instalment would be necessary for generating the working capita] for 1neeting the geniune expenses. Thus it would depend from company to company based on various factors such as paid-up-capital, percentage of commis- F sion paid to the agents, rate of interest paid to the depositors, period of maturity for repayment, office expenses and various other factors neces- sary to mop up working capital out of the depositors money. We camwt ignore the possibility of persons having no stake of their own starting such business and after collecting huge deposits from the investors belonging to the poor and weaker sections of the society residing in rural areas, and to G stop such business after a few years and thus devouring the hard earned money of the small investors. It cannot be lost sight that in such kind of business, the agents always take interest in finding new depositors be- cause they get a high rate of commission out of the first instalment, but they do not have same enthusiasm in respect of deposit of subsequent instalments. In these circumstances, if the Reserve Bank has issued the H

448 SUPREME COURT REPORTS [1992] 1 S.C.R.

A directions of 1987 to safeguard the larger interest of the public and small depositors it cannot be said that the directions are so unreasonable as to be declared constitutionally invalid.

It has been vehemently contended before us on behalf of the Peer- less employees and field agents that in case the impugned directions are B not struck down, the Peerless will have to close down its business and several thousands of employees and their family and several lakhs of field agents would be thrown on the street and left with no employment. We do not find any force in the above contention. So far as Peerless is con- cerned there is no possibility of its closing down ·Such business. It has already large accumulated funds collected by making profits ;n the past "'1 c several years. Thus it has enough working capital in order to meet the expenses. We are not impressed with the argument of Mr. Somnath Chatterjee, Learned Senior Advocate for the Peerless that after some years the Peerless will have to close down its business if directions contained in paragraphs 6 and 12 are to be followed. The w.orking capital is not needed every year as it can be rotated after having invested once. If the entire amount of the subscribers is deposited or invested in the proportion of 10% in public sector banks, 70% in approved securities and 20% in other investments, such amounts will also start earning interest which can be added and adjusted while depositing or investing .the subsequent years of deposits of the subscribers. In any case it .lies with the new entrepre- neurs while entering such field of business to make arrangement of their own resources for working capital and for meeting the expenses and they cannot insist in utilising the money of the depositors for this purpose. So flfr as the companies already in this field they must have earned profits in the past years which can be utilised as their working capital. It is impor- tant to note that the impugned directions of 1987 have been made applica- ble from 15th May, 1987 prospectively and not retrospectively. Thus F m1der these directions the question of depositing the entire amount of subscriptions would only apply to the deposits made after .15th May, 1987.

We may also observe that the impugned directions of 1987 as well as any other directions issued from time to time by the Reserve Bank G relating to economic or financial policy are never so sacrosanct that the same cannot be changed. Even the financial budget for every year de- pends on the economic and financial policy of the Govemment existing at the relevant time. So far as the impugned directions are concemed if it is found in future that the same are not workable or working against the public interest, the Reserve Bank is always free to change its policy and scrap or amend the directions as and when necessary. We have no doubt

PEERLESS CO. v. R.B.l.[RAMASWAMY, J.j 449

,.---r that if in times to come the Reserve Bank feels that business of the kind run at present by the Peerless and other companies, in terms of the direc- tions of 1987 are not yielding the result as envisaged by the Reserve Bank, it will always be prepared to consider any new proposals which may be conducive both in the interest of the large multitude of the inves- tors as well as the employees of such companies. Mr. Shanti Bhushan, Learned Senior Counsel appearing on behalf of the Reserve Bank.made a B candid statement on behalf of the Reserve Bank that the Reserve Bank would always be prepared to consider any new proposal which would subserve the public interest.

In the result I set aside the orders of the High Court and allow the appeals arising out of SLP Nos. 6930-30A of 1991, 7140 of 1991 and C 3676 of 1991 filed by the Reserve Bank of India and dismiss the writ petition No.677of1991. No order as to costs.

K. RAMASWAMY, J. While respectfully agreeing with my learned brother since the issues· bear far reaching seminal importance, I propose to express my views as well. D

This Court in Reserve Bank qf India etc. v.. Peerless General Fi- nance and Investment Co. Ltd. & Ors. etc., [ 1987] 2 SCR 1 for short 'first Peerless case' while holding that Prize Chits and Money Circulation Schemes (Banning) Act, 1978 does not attract "Recurring Deposits Schemes", pointed out that the schemes harshly operate against the poor sections of E the society who require security and protection; urgent action appeared to be called for and was imperative to protect the public. and emphasized to evolve fool proof scheme to prevent fraud being played upon persons not conversant with practices of the financial enterprises who pose themselves as benefactors of the people. In pursuance thereof the appellant, Reserve Bank of India, for short 'RBI' issued Residuary Non-Banking Companies F (Reserve Bank) Directions, 1987 for short 'the Directions'. The short sift with avid eye into the relevant provisions of the Reserve Bank of India Act 2 of 1934 for short 'the Act' and "the directions" would enable us to come to grips with the scope of the scheme of the directions, its purpose and operation. Chapter lll(B) of the Act deals with the power of RBI to regulate non-banking institutions receiving deposits. Section 45(1) (bb) G defines deposit includes and shall be deemed always to have included "any receipt or money by way of deposit or loan or in any other form but ' does not include ... " exception~ are not relevant" and hence are omitted. Section 45( l)(c) defines 'financial institution' to mean any non-banking institution \\lhich carries on its business, or part of its business, in any of the following activities; clauses (i) to (v) are m;..itted, clause (vi) collect- H

450 SUPREME COURT REPORTS [1992] 1 S.C.R.

A ing for any purpose of any scheme or arrangement by whatever name called, monies in lump-sum or otherwise by way of subscription ... or in any other manner by awarding prizes or gifts .. , whether in cash or kind or disbursing monies in any other way to persons from whom monies are collected or to any other persons but does not include ... the exclusions are not relevant and hence omitted. Section 451 empowers that RBI may, if it considers necessary in the public interest so to do, by general or speci.al order, (a) regulate or prohibit the issue by any non-banking institution of any prospectus or advertisement soliciting deposits of money from the public; and (b) specify the conditions, subject to which any such prospec- tus or advertisement, if not prohibited, may be issued. Section 45K em- powers the RBI to collect information from non-banking institution as to deposit and to give directions that every non-banking institution shall furnish to the Bank, in such fonn, at such intervals and within such time, such statements, information or particulars relating to or connected with deposits received by the non-banking institution, as may be specified by RBI by general or special order including the rates of interest and other terms and conditions on which they are received. Under sub-section (3) D thereof the RBI is entitled to issue in the public interest directions to non- banking institution in respect of any matter relating to or connected with the receipt of deposits including the rates of interest payable on such deposits and the periods for which deposits may be received. The use of the adjective 'any' matter relating to or connected with the receipt of deposits is wide and comprehensive to empower the RBI to issue direc- , E tions in cormection therewith or relating to the receipt of deposits. But exercise of power is hedged with and should be "in the public interest."

Section 45L provides that if the RBI is satisfied that for the purpose of enabling it "to regulate the credit system of the country to its advantage it is necessary so to .do"; it may give to such institutions either genetally F or to any such institution, in particular, "directions relating to the conduct of business" by them or by it as financial institution or institutions includ- ing furnishing of information of particulars "relating to paid up capital, reserves or other liabilities", the "invest1nents" whether "in the Govern- ment securities" or "otherwise", the persons to whom, and the purposes and periods for which; finance is provided "the terms and conditions". G including "the rates of interest", on which it is provided. Section 45Q -provides that the provisions of this chapter shall have effect "notwith- standing anything inconsistent therewith contained in any other law" for J• the time being in force or any instrument having effect by virtue of any such Jaw.

H The directions became operative from May 15, 1987. They would ~

apply to every Residuary Non-Banking Company for short 'R.N.B.C.'

PEERLESS CO. v. R.B.l.[RAMASWAMY, J.] 451

which receive any deposit scheme in lump-sum or in instalment by way of contribution or subscription or by sale of units of certificates or other instruments or "in any other manner" vide Clause JI of the definit.ion. Clause III(A) defines deposits as defined in s.45(1) (bb) of the Act. Para- graph 4 regulates receipt of deposits for a period not less than 12 months and not more than 120 months from the first day of the receipt of the deposit. Paragraph 5 prescribes minimum rate of return of IO per cent per annum (to be compounded annually) on the amount deposited. The pro- viso empowers R.N.B.C. at the request of the depositor to make repay" ment of the deposit, after the expiry of a period ofone year from the date of the deposit but before the expiry of the period the deposit with two per cent reduced rate of interest from I 0% interest. Paragraph 6, the heart of the directions consists of three sub-paragraphs with explanations. The C marginal note expresses "security for depositors". Sub-paragraph (I) thereof provides that on and from May 15,1987 every R.N.B.C. shall deposit and keep deposited in fixed deposits with public sector banks or invest and keep invested in unencumbered approved securities (such securities being valued at their market value for the time being), or in other investments, which in the opinion of the company are safe, a sum which shall not, at D. the close of business on 31st December, 1987 and thereafter at the end of each half year that is, 30th June and 31st December be less than the aggregate amounts of the liabilities to the depositors whether or not such amounts have become payable. The proviso specifies that the sum so deposited or invested (a) not less than IO per cent shall be in fixed depos- its with any of the public sector banks (b) not less than 70 per cent shall be in approved securities; and ( c) not more than 20 per cent or I 0 times the net owned funds of the company, whicheve,r amount is less, shall be in other ·investl)lents.. Provided that such investments shall be with the ap- proval of the Board of Directors of the Company, the explanation "Net Owned funds" shall mean the aggregate of the paid-up-capital and free reserves as appearing in the latest audited balance sheet of the company as reduced by the amount of accumulated balance of loss, deferred revenue expenditure and other intangible assets, if any, as disclosed in the said balance sheet. Sub-paragraph (2) enjoins the R.N.B.C. to entrust to one of the public sectbrbanks designated in that behalf. Deposits and securities referred to in clauses (a) and (b) of the proviso to sub-paragraph (I) to be · held by such designated bank is for the benefit of the depositors. Such G securities and depositors shall not be withdrawn by the R.N.B.C. or otherwise dealt with, except for repayment to the depositors. Sub-para- graph (3) obligates it to furnish to the R.B.I. within 30 days from the close of business on 3 Ist December, I987 and thereafter at the end of each half year i.e., as on 30th June and 3 lst December, a certificate from its audi- tors, being member of institute of Chartered Accountants, to the effect H

452 SUPREME COURT REPORTS [1992] 1 S.C.R.

y •. A that the amounts deposited in fixed deposits and the investments made are not less than "the aggregate amounts of liabilities to the depositors" as 011 30th June and 3 lst December of that year. Explanation thereto makes explicit what the "aggregate amount of liabilities"; "approved securities": and "public sector banks" and "unencumbered approved securities" are meant to be. the details of which are not necessary for the purpose of this B case. Paragraph 7 abolishes the power of the R.N.B.C. of forfeiture of deposits; paragraph 8 prescribes particulars to be mentioned in the fonn soliciting deposits; paragraph 9 enjoins issuance of the receipts to the depositors and paragraph I 0 obligates to maintain the register with par- ticulars of depositors mentioned therein. Paragraph 11 enjoins its Board of Directors to furnish the infonnation in their report as envisaged therein. c Paragraph 12 which is also material for the purpose of this case provides that every R.N.B.C. shall disclose as liabilities in its books of accounts and balance sheets. the total an1ount of deposits received together with interest, bonus, pre1nium or other advantage, accrued or payable 10 the depositors. Paragraph 13 enjoins to supply to R.B.I. copies of the balance sheets and accounts together with Directors' report. Paragraph 14 obli- D gates the co1npany to sub1nit returns to the R.B.I. in the 1nanner envisaged thereunder. R.N.B .. C has to submit balance sheet. returns etc. to the depart1nent of the Financial Co1npanies as per paragraph 15. Paragraph 16 obligates R.N.B.C. to comply with the requirement of the non-banking financial co1npanies and 1niscellaneous non-banking con1panies (Adver- tisement) Rules, 1977 etc. and actual rate of interest etc. to the depositor. E Paragraph 17 applies to the prospective R.N.B.C. to furnish infonnation in Schedule C. Paragraph 18 accords transitory power and paragraph 19 e1npowers the R.B.I., if it considers necessary to avoid any hardship or for any other just and sufficient reasons, to grant extensions of titne to co111- ply with or exempt , any company or class of companies, from all or a1;y of the provisions of the directions either generally or for ai1y specified period, subject to such conditions as the RBI may impose and paragraph 20 excludes the applicability of paragraph 19 of the Non-Banking Finan- cial Companies (Reserve Bank) Directions, 1977.

The High Court declared paragraphs 6 and 12 to be 11/tru vires of Art.19( 1)(g) and 14 of the Constitution holding that though the directions do not expressly prohibit the business of receiving any deposit under any sche1ne or arrange1nent in lun1p-su1n or in installnent by way of contribu- tion or subscription by R.N.B.C.in effect the operation of the directions inhibit the existing business and prohibits the future con1panies to corne into being. As seen the public purpose of the directions is to secure for the depositors, return of the amounts payable at maturity together with interest, bonus. pren1iu1n or any other advantage accrued or payable to the

PEERLESS CO. v. R.B.l.[RAMASWAMY, J.] 453

depoiitors. To achieve that object every R.N.B.C. is enjomed to deposit and keep deposited in fixed deposit and invest and keep invested in unencumbered approved securities a sum which shall not, at the close of each half year, be less than the aggregate amount of the liability to the depositors whether or not such amount has become payable. The .object, thereby, is to prohibit deployment of funds by R.N.B.C. in any other maimer which would work detrimental to the interest of the depositors. B The question emerges whether paragraphs 6 and 12 are 11/1ra vires of Articles 19(1)(g) and 14 of the Constitution. Article l9(1)(g) provides fundamental rights to all citizens to carry on·miy occupation. trade ·or business. Cl. 6 thereof empowers the State to make any law imposing, in the interest of the general public, reasonable restrictions on the ex.ercise of the said rights. Wherever a statute is challenged as violative the funda- c mental rights, its real effect or operation on th~ Junifamental rights is of primary importance. It is the duty of the cciurt to be watchful to protect the constitutional rights of a citizen as against any encroachn1ent gradu- ally or stealtl1ily thereon. When a law has imposed restrictions on the fundamental rights, what the court has to examine is the substance of the D legislation without being beguiled by the mere appearance of the legisla- tion. The Legislature cannot disobey the constitutional 1nandate by e111-

ploying an indirect method. The court must consider not merely the >-. purpose of the law but also the means how it is sought to be secured or how it is to be administered. The object of the legislation is not conclu- sive as to the validity of the legislation. This does not mean the constitu- E tionality of the law shall be detennined with reference to the manner in which it has actually been administered or operated or probably been administered or operated by those wl10 are charged with its implementa- tion. The court cannot question the wisdom, the need or desirability of the regulation. The state can regulate the exercise of the fundamental right to save the public from a substantive evil. The existence of the evil F .. as well as the 1neans adopted to check it are the matters for the legislative judgment. But the court is entitled to consider whether the degree and 1node of the regulation whether is in excess of the require1nent or is ilnposed in any arbitrary 1nanner. The court has to see \vhether the 1neas- ure adopted is relevant or appropriate 10 the power exercised by the au- thority or whether over stepped the limits of social legislation. Smaller G inroads 1nay lead to larger inroads and ultitnately result in total prohibi- tion by indirect method. If it directly transgresses or substantially and inevitably effects the fundamental right, it becomes unconstitutional, but not where the i1npact is only re1notely possibly or incidental. The court 1nust lift the veil of the fonn and appearance to discover the true character -~. .and the nature of the legislation. and every endeavour should be n1ade to H have the efficacy of funda1nental right 1naintained and the legislature is

454 SUPREME COURT REPORTS [1992] I S.C.R.

A not invested with unbounded power. The court has, therefore, always to guard against the gradual encroachments and strike down a restriction as soon as it reaches that magnitude of total annihilation of the right.

However, there is presumption of constitutionality of every statute

- and its validity is not to be determined by artificial standards. The court has to examine with some strictness the substance of the legislation to fincl what actually and really the legislature has done. The court would not be over persuaded by the mere presence of the legislation. In adjudging the reasonableness of the law, the court will necessarily ask the question ' whether the measure or scheme is just, fair, reasonable and appropriate or is it unreasonable, unnecessary and arbitrarily interferes with the exercise of the right guaranteed in Part III of the Constitution.

Once it is established that the statut.e is prima .facie unconstitutional, the state has·to establish that the restrictions imposed are reasonable and the objective test which the court to employ is whether the restriction bears reasonable relation to the authorized purpose or an arbitrary en- D croachment under the garb of any of the exceptions envisaged in Part III. The reasonableness is to the necessity to impose restriction; the means adopted to secure that end as well as the procedure to be adopted to that end.

The court has to maintain delicate balance between the public inter- E est envisaged in the impugned provision and the individual's right; taking into account, the nature of his right said to be infringed; the underlying purpose of the impugned restriction; the extent and urgency of the evil sought to be remedied thereby; the disproportion of the restriction im- posed, the prevailing conditions at the time, the surrounding circumstances; th~ larger public interest which the law seeks to achieve and all other relevant factors germane for the purpose. All. these factors should enter into the zone of consideration to find the reasonableness of the impugned restriction. The court weighs in each case which of the two conflicting public or private interest demands greater protection and if it finds that the restriction imposed is appropriate, fair and reasonable, it would uphold the restriction. The court would not uphold a restriction which is not germane to achieve the purpose of the statute or is arbitrary or out of its limits.

This Court in Joseph K1m1villu Vel/11k1mnel v. Reserve Hank o(India & Ors.,[1962] Suppl. 3 SCR 632, held that the RBI is "a bankers' bank and lender of the last resort." Its objective is to ensure monetary stability in India and to operate and regulate the credit system of the country. It

PEERLESS CO. v. R.B.I.[RAMASWAMY, J.] 455

'"'· has, therefore, to perfonn a delicate balance between the need to preserve and maintain the credit structure of the country by strengthening the rule A

as well as apparent credit worthiness of the banks operating in the country and the interest of the depositors. Jn under developed country like ours, where majority population are .illiterate and poor and are not conversant with banking operations and in under-developed money and capital mar- ket with mixed economy, !he constitution charges the state to prevent B exploitation and so the RBI would play both promotional and regulatory roles. Thus the R.B.I. occupies place of "pre-eminence" to ensure mon- etary discipline apd to regulate the economy or the credit system of the country as an expert body. It also advices the Government in public -{° finance and monetary regulations. The banks or non-banking institutions shall have to regulate their operations in accordance with, not only as per c the provisions of the Act but also the rules and directions or instructions issued by the RBI in exercise of the power thereunder. Chapter 3B expressly deals with regulations of deposit and finance received by the R.N.B.Cs·. The directions, therefore, are statutory regulations.

In State of U.P. v. Babu Ram, [1961] 2 SCR 679, this Court held D that rules made under a statute must be treated, for all purposes of con- struction or obligations, exactly as if they were in that Act and are to the .J.- same effect as if they contained in the Act and are to be judicially noticed . for all purposes of construction or obligations. The statutory rules cannot be destribed or equated with administrative directions. In D. V.K.Prasada Rao v. Govt. of A.P.• AIR 1984 AP 75, the same view was laid. Therefore, E the directions are incorporated and become part of the Act itself. They must be governed by the same principles as the statute itself. The statu- tory presumption that the legislature inserted every part thereof for a purpose and the legislative intention should be given effect to, would be applicable to. the impugned directions. · F The R.B.I. issued the direct.ions to regulate the operations of the R.N.B.Cs., to safeguard the interest of the depositors. Payment of interest, bonus, premium or other advantage, in whatever name it may be called is reward for waiting or parting with liquidity. It is paid "'°cause of positive time preference (one rupee today is preferred to one rupee tomorrow) on the part of the depositor. Therefore, the directions avowed to preserve the G right of the depositors to receive back the lfmount depos.ited with the contracted rate ·of interest; h aims to prevent depletion of the deposits collected from the weaker segments of the society and also tends to effect free flow of the business of the R.N.B.Cs. who would desire to operate in their own way. The question, therefore, emerges whether the directions in ~-- paras 5 and 12 violate Arts. 14 and l 9(l)(g) of the Constitution. H

456 SUPREME COURT REPORTS [1992] 1 S.C.R.

A The solidarity of political freedom hinges upon socio-economic de- mocracy. The right to development is one of the most important facets of basic human rights. The right to self interest is inherent in right to life. Mahatma Gandhiji, the Father of the Nation, said that "Every human being has a right to live and therefore to find the wherewithal to feed himself, and where necessary, to clothe and house himself'. Article 25 B of the Universal Declaration of Human Rights provides that "everyone has a right to a standard of living adequate for the health and well being of himself and of his family, including food, clothing, housing and medical care." Right to life includes the right to live with basic human dignity with _necessities of life such as nutrition, clothing, food, shelter over the head, facilities for cultural and socio-economic well being of every indi- c vidual. Art. 21 protects right to life. It guarantees and derives therefrom the minimum of the needs of existence including better tomorrow.

Poverty is not always an economic problem alone. Very often it is a social as well as human problem. An agricultllfist, an industrial worker. the daily wage earner, rickshaw puller and small self-employed teacher, artisan, etc. 1nay have an earning but 1nay be proi1e to spend his/her entire earnings, apart from on daily necessities of life, on socio-rel.igious occa- sions, fairs. festivals etc. The urge for better tomorrow and prosperous future; the clamour for freedom from want of any kind and social security, make the vulnerable segments of the society to sacrifice today's comforts to save for better tomorrow. The habit of saving has an educative value for thrift. It endeavors to bring an attitudinal change in life. It enables individuals to assess future specific needs and to build up a financial provision for the purpose. The habit of saving becomes a way of life and harnesses the meagre resources to build up better future. During the days of rising prices, small savings serve as instrument to mop up the extra purchasing power. In additio1\ to wage a war against. poverty, waste, unwise spending, hoarding and other activities, habit of saving also ena- bles family budgeting and postponing expenditure which can be deferred ~ in· favour of better utilisation in future. To strengthen the urge for thrift and streamline the social security, the disadvantaged need fre~dom from exploitation and Art.46 of the constitution enjoins the State to protect the poor from all forms of exploitation and social injustice. G Investment agencies on commercial banks are intermediaries be- tween savers and investors. They embark upon deposit mobilisation cam- paign to mop up the limited resources. Commercial banks or financial investment agencies, be it public sector or private sector, are vying with one another to scale new heights in deposit growth each year, devising ,J,..C-

PEERLESS CO. 1•. R.B.1.[RAMASWAMY, J.] 457

different deposit schemes to suit the individual needs of the depositors or savers. Mushroom growth of non-banking agencies put afloat diverse schemes with alluring offers of staggering high rate of interest and other catchy advantages which would generate suspicion of the bona fides of the offer. But gullible depositors are lured to make deposits. It is not unconunon that after collecting fabulous deposits, some unscrupulous people surreptiously close the company and decamp with the collections keeping the depositors at bay. Therefore, the need to regulate the deposits/sub- scriptions, .in particular, in private sector became imperative to prevent exploitation or mismanagement as social justice stratagem.

The directions are, therefore, a social control measure over the R.N.B.Cs., in matters connected with the operation of the schemes or c incidental thereto. The direction to investment in the channelised schemes at the given percentage in clauses (a) and (bl of proviso to para 6( I) was intended to deposit or keep deposited the collections in fixed deposit in the public sector banks or invest or keep invested in unencumbered approved securities so as to ensure safety. steady growth and due payment to the subscribers at maturity of the principal amount and the interest, D bonus. premium or other advantage accrued thereon. The amounts depos- ited shall not be less than the total aggregate amounts of liabilities to the subscribers . The deposits or securities shall not be withdrawn or other- wise be dealt with except for a repay1'ient to the subscribers. It should always be shown to be a liability rm date of the repayment. E This court in /Ja1isi11Rh MfR. Co. Ltd. & Anr. v. l!nio11 o/ India & Ors .. [ 1960) 3 SCR 528, held that freedom to carry on trade or business is not an absolute one. In the interest of the general public. the law may impose restrictions on the freedom of the citizen to start. or carry on his business, whether an irnpugned provision i1nposing a fetter on the exercise of the fundamental right guaranteed by Art. 19( I )(g) amounts to a reason- able restriction imposed in the interest of general public, must be ad- judged not in the background of any theoretical standard or pre-detenni- nate patterns, but in the light of the uature and the incidence of the right, the interest of the general public sought to be secured by imposing restric- tions and the reasonableness of the quality and the extent of the fetters imposed by the directions. The credit worthiness of R.N.B.Cs. undoubt- edly would be sensitive. It thrives upon the confidence of the public, on the honesty of its management and its reputation of solvency. The direc- tions intended to promote "freedom" and "facility" which are required to be regulated in the interest of all concerned. The directions as a part of the scl1eme of the Act would be protected from the attack. Yide Latq/at H Ali Khan & Ors. v. Stale of'U.!'.. (1971] Supp. SCR 719.

458 ' SUPREME COURT REPORTS (1992] I S.C.R.

A The R.N.B.C. is required to conducf its business activities in the interest of the depositors or 'sub~cribers who are unorganised, ignorant, gullible and ignorant of the banking operations. If, however, the acts of R.N.B.C. is detrimental to the interest of the depositors, etc. the R.B.I. has power in Chapter 3B to issue directions and the R.N.B.C. is bound to comply with the directions and ·non-compliance thereof visits with penal B action.

Admittedly except Peerless General Insurance, the other companies do not have either paid-up capital or reserve fund worth the name. Peer- less was established in the year 1932 and over the years it built up reserve fund. R.N.B.Cs. are carrying their business by crediting the entire first c year's collections as a capital receipt under actuarial accounting method. In the affidavit of Sri S.S. K;trmic, the Chief Officer of the RBI filed on August 13, 1991, it was stated that prior to the directions, 747 R.N.B.Cs. were doing the business. As on that date only 392 R.N.B.Cs. were noti- fied to be existing. Out of them 178 are in West Bengal, 15 in Assam, 26 in Orissa, 6 in Manipur and Meghalaya, 26 in Punjab, 64 in U.P., 22 in D Delhi, etc. As on March 31, 1990 out of 185, 35 R.N.B.Cs. alone submit- ted annual returns, and out of them only 30 have filed the\r balance- sheets. 28 R.N.B.Cs. in the northern region filed their annual returns and 23 filed their balance-sheets with incomplete date. 35 of them have negative net-worth (loss for exceeding their share capital and reserve). Apart from Peerless, the aggregate capital investment of 15 companies E accounted to Rs.158 lacs. The negative net-worth of the 35 companies referred to above would aggregate to Rs.³.6 crores. They raised, apart from Peerless, deposits to the tune of Rs.86 crores. Many of them have not even designated their banks as required under para 6 of the direction. The amount invested in bank deposits and approved securities fell much short of their deposit liabilities. Verona Commercial Credit and Invest- F ment Company, .one of the respondent³, have accumulated losses to the tune of Rs.³. 8 crores. As per balance-sheet their assets are inadequate to ,_ meet the liability. Favourite Small Scale Investment, one of the respond- ents as on December 12, 1989, even their provisional balance-sheet shows that total lial>ility towards depositors is Rs.44.62 crores while its invest- ment in banks and Government security is only Rs.13 crores. The cash on G hand was Rs.1.74 crores. Rs.8 crores were shown to be loans and ad- vances. The accumulated losses are Rs.22.19 crores as against total share capital and reserve ofRs.20.73 lacs. It is, thus, clear on its face that while total liabilities are Rs.49.09 crores, the assets including doubtful loans and advances aggregate to Rs.26 crores. An inspection into the affairs of the said company conducted in February, 1990 disclosed that upto the end of H 1989 the deposit liabilities including ·interest would be in the region of

PEERLESS CO. v. R.B.l.[RAMASW AMY, J.) 459

over Rs. 132 crores. The difference between the. inspection and the bal- A- ance-sheet would be due to actuarial principle. It had committed default to pay to its depositors to the tune of Rs.5.⁴ crores,.which is a gross under-estimate.

Sri Somnath Chatterjee, the learned Senior Counsel for the Peerless and adopted by other counsel, contended that paragraphs 6 and 12 are totally unworkable. Its compliance would jeopardise not only the existing companies but also the very interest of the depositors and large workmen. No new company would be set up. The direction given in the first Peer- less case was to keep in view the interest of the workmen as well; in effect _it was given a go-bye. At least 25% of collections would be left over as working capital of the company, io carry on its business in a manner indicated by the impugned judgment, so that no depositor would lose his money and no workman would lose his livelihood and it will be in conso- nance with public interest. Shri G. L. Sanghi, the learned Senior Counsel for Timex, contended that 50% of collection would be necessary to com- ply with the impuged directions and another company pleaded for 40% . Further contention of Shri Chatterji was that the actuarial accounting nei- D ther violates any law, nor objected to by the Income-tax Department. Crediting the first year's subscription in the accounts as capital receipt would generate company's working capital for its successful business by meeting the expenditure towards establishment, the commission and a part of profits. Forfeiture clause was already deleted before the directions were issued. Interest at 10% with annual compounding would be reason- E able return to the subscribers which is being ensured to the depositors. The directions issued by the High Court~ subject to the above modifica- tions, would subse1"Ve the above purpose. Paras 6 and 12, otherwise, are arbitrary and prohibitive violating their fundamental right to do business assured by Arts. 19(l)(g) and 14. Sri Harish Salve resisted the conten- tions with ability. F

Para 12 is myocardium and para 6' is the heart of the directions without which the directions would·be purified corpse. On the respond·· ents own showing, for the first two years, by actuarial accounting; the liabilities, as against depo1its, are inadequate. The regulation intends to preserve the corpus of the deposits and the interest payable thereon as on G date to be a tangible and unencwnbered asset at all times, though not repayable. Indisputably ihe depositors/subscribers stand as unsecured credi- tors. Undoubtedly every measure cannot.be viewed or interpreted in the event of'catastrophe overtaking the company. The catchy afid alluring but beguiled le1'111S of offer atiract the vulnerable segments of the society to subscribe a1i'd keep subscribing the small savings for better tomorrow. ,H

460 SUPREME COi JRT REPORTS [I 992] I S.C.R.

A But many a time, by the date of maturity, their hopes are belied and aspirations are frustrated or dashed to ground. They remain to be helpless spectators with all disabilities to recover the amounts. Pathetic financial position of some of the companies enunierated herein before would amply demonstrate the agony 'to which the poor subscribers would be subjected to. The fixed deposits and unencumbered securities as per Clauses (a) and B (b) of the proviso to paragraph 6( I) would be 80% of the collections of the year of subscription and Shri Chatterji contends to reduce it to 75% and to allow free play to use the residue in their own way. The difference is only 5% and others at vagary. The objects of the direction are to preserve the ability of the R.N.B.C. to pay back to the subscribers/deposi- to"rs at any given time; safety of the subscribers' money and his right to c ~nencu1nbered repayn1ent are thus of paratnount public interest and the directions aimed to protect them. The directions cannot and would not be adjudged to be 11/rru 1•ires or arbitrary by reason of successful financial 1nanage1n·ent of an individual co1npany. An over all view of the working syste1n of the schen1e is relevant and gennane.

D The oblightion in paragraph 12 of periodical disclosure in the ac- counts of a company of the deposits together with the interest accrued thereon. whether or not payable but admittedly due as a liability. is to monitor the discipline of the operation of the schemes and any infraction, would be dealt with as per law. The certificate by a qualified Chartered Accountant is to vouchsafe the correctness and authenticity of accounts E and would and should adhere to the statutory compliance.

The settled accounting practice is that a loan or deposit received from a creditor has to be shown as a liability together with accrued inter- est whether due or deferred. The actuarial accounting applies to revenues and costs to which the concept of the "going concern" can be adopted. F Therefore, in providing the costs of the company it can set apart its costs on the basis that liability is created for interest, bonus etc. payable in foreseeable future. Undoubtedly the actuarial principle applied by the L.l.C. or the gratuity schemes are linked with life of the assured or the premature death before retirement of an employee, but R.N.B.C. in its contract does not undertake any such risk. The deposit or loan is a capital G receipt but not a revenue receipt and its full value shall be shown in the account books or balance-sheet as liability of the company. It cannot be credited to the profit and loss account. Para II of Schedule VI of the Companies Act, 1956 requires that the amount shown in the profit and loss account should be confined to the income and expenditure of the company. Para 12 of the directions is, thus." in consonance with the H Companies Act. Moreover, in its advertisement and the application fonns,

PEERLESS CO. 1-. R.B.l.[RAMASWAMY, J.) 461

the R.N.B.C. expressly hold out to the public that their monies are safe A with the bank and in the Government securities. Paragraph 6(1) of the directions only mandates compliance of the promise held out by an R.N.B.C. for repayment at maturity. Sub-para (3) of para 6 keeps the deposits unencumbered and to be utilised by the company only for repayment. In other words, paragraph 6 only elongates the contract in the public interest to safeguard the interest of the vulnerable sections of the depositors. The B R.B.I. cannot be expected to constantly monitor the working of the R.N.B.C. in its day-io-day function. The actuarial basis cannot be adopted by the R.N.B.Cs and the liability must always be reflected in its balance-sheet at its full value. Compliance ofthe direction in para 12, dehors any method of accountancy adopted by a company, intended to discipline its opera- tiou. C No-one can have funda1nental right to do any i..1nregulated business with the subscribers/depositors' money. Even the banks or the financial , companies are regulated by ceiling on public deposits fixing nexus be- tween deposits and net-worth of the company at the ratio of 3: I, i.e. 25% of the capital net-worth. No one would legitimately be expected to get D immediate profits or dividend without capital invesnnent. The concept of profit or interest pre-supposes capital investment. The effect of the clause (a) and (b) of the proviso to paragraph 6(1) of the .direction, no doubt, freezes the right to profit for a short ti1ne, an~ fa.Stens an incidental and consequential obligation to mop up paid up capital or investment towards establishment and commission charges to tide over teething trouble. But E that is no ground to say that it is impossible fo compliance, nor could it be said that the directions are palpably arbitrary or unreasonable. Anyone may venture to do business without any stake of his own but is subject to the regulations. A new company without any paid up capital, no doubt, cannot be expected to come into existence nor would operate its business at initial existence with profits. Clause (cl of the proviso to paragraph F 6( I) of the directions gives freedom. on leeway to invest or rotate, not n1ore thail. 20 per cent of collections etc. in any profitable inanner at its choice as a pn1dent businessn1an to generate its resources to tide over the teething troubles till it is put on rails to receive succour to its existence, without inhibiting the co1npany's capacity to 1nop up sn~all savings, and the directions do not control its operation. The only rider is the approval G of the Board of Directors which is inherent. Absence of imposition of any limit on quantum of deposits with reference to paid up capital or reserve fund like non-banking financ.ial co111panies . et.c. is a pointer in this regard. Thus there· is a reasonable nexus between the regulation and the public purpose. namely, security to the depositors' money and the right to repay- ment without any impediment, which undoubtedly is in the public interest. H

462 SUPREME COURT REPORTS [ 1992] I S.C.R.

A Looking from operational pragmatism, the restrictions though appar- ently appears to be harsh in form, in its systematic working, it would· inculcate discipline in the business management, silbserve public confi- dence in the ability of the company to honour the contractual liability and assure due repayment at maturity of the amount deposited together with interest, etc. without any impediment. In other words, the restrictions in paragraph 6 of the directions intended to alongate the twin purposes, viz. habit of thrift among the needy without unduly jeopardising the interest of the employees of the companies and the R.N.B.Cs. working system itself in addition to safety and due payment of depositors' money. True, as contended by Shri Chatterji that there arises corresponding obligation to pay higher amount of commission to its agents and the commitment should be kept perfonned and the confidence enthused in the agents. But it is the look out of the businessman. The· absence of ceiling on the rate of commission would give choice between the company and its agents to a contract in this regard and has freedom to manage its business. The R.N.B.Cs. are free to incur such expenses and organize their business as they desire including payment of commission as they think expedient. D But the subscribers/depositors' liability, under no circumstances, would be in jeopardy and the directions were designed to en.sure that the interest of the subscribers/depositors is secured at all times, prescribing investment of an equal sum to the total liability to the subscribers/depositors. Paragraph 12 is only a bridge between the depositors and the promise held out and the contract executed in furtherance thereof as a monitoring myocardium to keep the heart in paragraph 6 functioning without any hiatus. It is settled law that regulation includes total prohibition in a given case where the mischief to be remedied warrants total prohibition. Vide Narendra Kumar v. Union '!f India, [1960] 2 SCR 375. But the directions do not do that but act as a siphon between the subscriber/ · depositor and the business itself. Therefore, they are neither palpably arbitrary nor unjust nor unfair. The mechanism evolved in the directions is fool-proof, as directed by this court in first Peerless case, to secure the interest of the depositors, as well is capable to monitor the business man- agement of every R.N.B.C. It also, thereby, protects interest of the em- ployees/field staff/commission agent etc. as on pennanent basis overcom- ing initial convulsions. It was intended, in the best possible manner, to subserve the interest of all without putting any prohibition in the ability of a company to raise the deposit, even in the absence of any adequate paid up capital or reserve fund or such pre'commitment of the owner, to secure such deposits.

Thus the directions impose only partial control in the public interest of the depositors. The deposits invested or keep invested qua the com-

PEERLESS CO. v: R.B.l.[RAMASWAMY, J.J 463

pany always remained its fund till date of payment at maturity or prema- A ture withdrawal in terms of the contract. The effect of the impugned judgment of the Calcutta High Court namely redefinition of the aggregate liabilities as contractual liabilities due and payable would have the effect of requiring the R.N.B.Cs. to deposit an amount equal to the sum payable only in the year of maturity allowing free play to the R.N.B.Cs. to use the subscriptions/deposits in its own manner during the entire earlier period, B jeopardise the security of the subscribers/depositors and are self-defeating. The Sagging mismanagement prefaced hereinabove would be perpetrated and the depositor is always at the mercy of the company with all disabili- ties, killing the very goose namely the thrust to save for prosperous future or to tide over future needs. c It is well settled that the court is not a Tribunal from the crudities and inequities of complil:ated experimental economic legislation. The discretion in evolving an economic measures, rests with the policy makers and not with the judiciary. Indian social order is beset with social and economic inequalities and of status, and in our socialist secular demo- cratic Republic, inequality is an anethema to social and economic justice. D The constitution of India charges the state to reduce inequalities and ensure decent standard of life and economic equality. The Act assigns the power to the RBI to regulate monitory system and the experimentation of the economic legislation, can best be left to the executive unless it is found to be umealistic or manifestly arbitrary. Even if a law is found wanting on trial, it is better that its defects should be demonstrated and E removed than that the law should be aborted by judicial fiat. Such an assertion of judicial power deflects responsibilities from those on whom a democratic society ultimately rests. The court has to see whether the scheme, 111easure or regulation adopted is relevant or appropriate to the power exercised by the authority. Prejudice to the interest of depositors is a relevant factor. Mismanagement or inability to pay the accrued lia.bili- F ties are evils sought to be rernedied. The directions designed to preserve the right of the depositors and the ability of R.N.B.C. to pay. back the contracted liability. It also intended to prevent mismanagement of the deposits collected from vulnerable social segments who have no knowl- edge of banking operations or credit system and repose unfounded blind faith on the company with fond hope of its ability to pay back the con- G tracted a1nount. Thus the directions Jnaintain the thrift for saving and stream!ine and strengthen the monetary.operations ofR.N.B.Cs.

The problems of Government are practical and do require rough acconunodation. Illogical it 1nay be and unscientific it n1ay seen1 to be, H left to its working and if need be. can be remedied by the R.B.I. by

464 SUPREME COURT REPORTS [1992] I S.C.R.

A pragmatic adjustment that may be called for by particular circumstances. The impugned directions may at first blush seem unjust or arbitrary but when broached in pragmatic perspective the mist is cleared and that the experimental economic measure is manifested to be free from the taints of unconstitutionality.

B Para 19 of the directions empowers the RBI to extend time for compliance or to exempt a particular company or a class thereof from all or any of the provisions, either generally or for a specified period subject to such conditions as may be imposed. Power to exempt would include the power to be exercised from time to time as exigencies warrant. An individual company or the class thereof has to place necessary and rel- c evant material facts before the R.B.I. of the hardship and the· need for relief A criticis1n of arbitrariness of unreasonableness n1ay not be ground to undo what was conceived best in the public interest. What is best is not always discernable. The wisdom of any choice may be disputed or con- demned. Mere errors of Government are not subject to judicial review. The legislative remedy may be ineffective to' mitigate the evil or fail to achieve its purpose. but it is the price to be paid for the trial and error inherent in the economic legislative efforts to grapple with obstinate so- cial issues. It is proper for interference in judicial review, only. when the directions, regulations or restrictions are palpably arbitrary, demonstrably irrelevant or discriminatory. Exercise of power then can be declared to be void under Art. 13 of the Constitution. So long as the exercise of power is broadly within the zone of reasonableness. the court would not substitute its judgment for that of legislature or its agent as to matters within their prudence and power. The court does not supplement the feel of the experts by its own values.

It is settled law that so long as the power is traceable to the statute. F rn·ere 01nission to recite the provision does not denude the power of the legislature or rule 1naking authority to 1nake the regulations. nor consid- ered without authority of law. Section 114 (h) of the Evidence Act draws a statutory presumption that official acts are regularly perfom1ed and reached satisfactorily on consideration of ~elevant facts. The absence of reiteration of objective satisfriction in the prea1nble as of one under s.45L G does not denude the powers. the R.B.I. admittedly has under s.45L to justify the actions. Though s.45L was neither expressly stated nor men- tioned in the Preamble of the directions of the required recitation of satisfaction of objective facts to issue the directions from the facts and circun1stances it is de1nonstrated that the R_R_I. hnd such satisfaction 111 its consideration of its po\ver undt•r ~- 451.. \~hL'll the directions v.:ere issued H Even otherv.:i~e s.-l5 K ()) it:--L·lfh sufliL-lt'nl 1t1 uplll)ld the dirt'L'l11-rh

PEERLESS CO. v. R.B.1.[RAMASWAMY, J.[ 465

The impugned directions are thus within the power Of the R.B.I. to A provide tardy, stable, identifiable and monitorable method of operations by each R.N.B.C. and its compliance of the directions. This will ensure security to tl1e depositors at all times and also make the accounts of the con1pany accurate. accountable and easy to 1nonitor the woiking syste1n of the company itself and continuance of its workmen. The directions in paragraphs 6 and 12 are just, fair and reasonable not only to the deposi- B tors, but in the long run to the very existence of the company and its continued business itself. Therefore, they are legal, valid and constitu- tionally pennissible. •

The Writ Petition is dismissed and the appeals are allowed. The Writ Petitions tiled in the High Court stand dismissed. No costs in this C Court.

G.N. Petition dismissed Appeals allowed .