Sengupta, J.: This appeal has been preferred by the Reserve Bank of India against an interim order dated 7th October, 1988 passed by a learned Single Judge of this Court on the writ petition filed by the first respondent challenging, inter alia, the constitutional validity of the Residuary Non-Banking Companies (Reserve Book) Directions, 1987 framed by the Reserve Bank of India in exercise of powers conferred by sections 45J and 45K of the Reserve Bank of India Act, 1934 as also a purported show cause notice dated 23rd September, 1988. By the said interim order, the learned Single Judge bad granted an interim order in terms of the prayers (g) and (h) of the writ petition. It was however, provided that the interim order would not prevent the Reserve Bank of India to have regular inspection of the writ petitioners business in accordance with law. By the said order liberty was given to the Reserve Bank of India to apply for variation of the interim order on notice to the writ petitioners. Prayers (g) and (h) for the sake of convenience, are set out herein-below :-

"(g) Injunction restraining the respondents and each of them, their servants, agents or assigns from giving any effect and/or further effect to the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 and the said purported show cause notice dated 23rd September, 1988 and from taking any steps pursuant thereto or acting in terms thereof and from taking any penal action against the petitioners on the allegation of violation of the provisions of the said 1987 Direction.

(h) Stay of the operation of the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 and the said purported show cause notice dated 23rd September, 1988 and all proceedings therein and in respect thereof."

2. As already stated, the Reserve Bank of India has preferred of an appeal against the said interim order. A stay petition was also moved on behalf of the Reserve Bank of India for stay of operation of the order dated 7th October, 1988. Affidavits were filed in the stay petition. After the stay petition was heard for some time, the appeal as well as the stay petition were assigned for final disposal before this Bench. During the course of hearing of the stay petition, an interim order was made on 23rd March, 1989.

3. The first respondent is a Company incorporated under the Companies Act, 1956. The Company is engaged inter alia, in the business of offering various saving schemes to the public at large which are known as endowment schemes. The Company's schemes range from 1 year to 10 years. Under the said scheme, moneys are paid by the subscribers in lumpsum or in instalments and the subscriber after the stipulated maturity period in respect of a particular scheme gets refund of his subscription along with some accretion which is known as 'interest' or 'bonus'. A certificate is issued to the subscriber which constitutes a bilateral contract between the individual certificate holder and the Company.

4. The Company follows the actuarial principle of accounting whereunder the whole of the first year's subscription is appropriated Jo the Profit & Loss Account of the Company and the said appropriated amount provides its working capital. The renewal subscription of a certificate holder from the second year onwards is invested in interest bearing investments. By the process of such investment the Company is stated to be in a position to pay the guaranteed amount to a certificate holder at the end of the stipulated maturity period. According to the Company at all points of time it is in a position to meet its contractual liabilities.

5. In or about 1978 an Act known as the Prize Chits and Money Circulation Schemes (banning) Act was enacted by the Union parliament, whereby and where under all business which amounted to a "Prize Chit" or a "Money Circulation Scheme" was banned. Pursuant to the enactment of the said Act, notices were sent by the State of West Bengal to the Company to submit