Judgment

DESAI, J. :- In this group of writ petitions under Art. 32 and appeals by special leave under Art. 136 of the Constitution, constitutional validity of Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975 (Deposits Rules for short) introduced by Companies (Acceptance of Deposits) Amendment Rules, 1978 which became operative from April 1, 1978 and incidentally of Section 58A of the Companies Act, 1956 (Act for short) inserted by Companies (Amendment) Act, 1974 which came into force on February 1, 1975 is challenged. The challenge proceeds on diverse grounds which may be briefly summarised.

2. At the very outset, it must be noticed that the factual matrix has little or practically no relevance in this case.

3. The contention put in the forefront was that in the absence of guidelines both S. 58A and the R. 3A of the Deposits Rules enacted in exercise of the power conferred by S. 58A confer arbitrary and uncanalised powers and hence are violative of Art. 14. Contravention of Art. 14 was canvassed for the additional reason that the power to exempt from the application of the rule confers wide discretion so that it can be used arbitrarily to pick and choose with the result that equality before law is denied. Further the obligation to deposit 10 of the deposits maturing during the year ending 31st March next following has no rational nexus to the object sought to be achieved by the provisions and is either in excess of the requirement or irrelevant and in any case arbitrary. The next in order of priority came the challenge that having regard to the numerous inbuilt safeguards provided in Section 58A, the imposition of a liability to deposit 10 of the total deposits maturing in a year in the manner as required by the impugned rule, if it was enacted for the protection of the depositors, the protection is illusory and does not subserve the purpose for which it is enacted and therefore, requirement is wholly unreasonable and imposes an unreasonable restriction on the freedom to carry on business conferred by Art. 19 (1) (g). As a corrolary, it was submitted that if Rule 3A is enacted not for the limited purpose of protecting depositors, but has a wider aim particularly with regard to the regulation of credit system of the country, control of circulation of money in Indias economy and imposing financial discipline, it is clearly ultra vires Section 58A. As a second string to the bow, it was contended that if Section 58A enacts a legislative policy, a rule framed to carry out the policy must be relevant to the implementation of the policy so laid down, but the provision contained in Rule 3A is neither relevant nor capable of being regarded as relevant for implementation of the policy and therefore, it is ultra vires Section 58A.

4. Mr. S. T. Desai, who appeared in some matters further contended that if Section 58A is widely construed to encompass the mode or manner of utilisation of the funds of the company which will include the deposits made with the company, obviously Section 58A itself will be rendered unconstitutional as transgressing the permissible limits of delegated legislation and it would appear that the Legislature was guilty of abdication of its essential legislative functions. It was said that Rule 3A cannot be saved as a regulatory measure because the regulatory measure must subserve some purpose which Rule 3A fails to achieve, namely, protection of depositors and in examining the matter, the Court should eschew a dogmatic or doctrinaire approach.

5. Mr. O. P. Malhotra, learned counsel appearing in some matters raised an additional contention that Parliament did not have legislative competence to enact Section 58A and ipso facto Rule 3A because the legislation is referable to Entry 30 in the State List : Money lending and money lenders; relief to agricultural indebtedness and not to Entries 43 and 44 of the Union List.

6. Mr. G.A. Shah, appearing in some matters raised an additional contention that to the exte