PADMANABHAN J.

In these writ petitions, the petitioners have challenged the provisions of the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1973 (for short "the Reserve Bank Directions, 1973"). The petitioners are partners of the Palghat Credit Corporation, a partnership firm, registered under the Indian Partnership Act. They are also shareholders and directors of the Palghat Chit Funds (P.) Ltd., a company registered under the Companies Act, 1956 (referred to as "the company"). The partnership firm receives deposits from the members of the public and lends money to the members of the public. During financial crisis of the company, the partnership firm helps it by paying money to it to discharge its obligations or undertakes and discharges obligations of the company directly and gets a credit in the books of the company and in other ways. As on December 31, 1976, the company owed to the partnership firm a sum of Rs. 24, 43, 601.87, which was reduced to Rs. 6, 40, 000 as on March 31, 1979. The money advanced by the partnership firm to the company was the money deposited with the partnership firm by the members of the public. While so, the Reserve Bank Directions, 1973, placed certain restrictions on non-banking institutions including chit fund companies receiving deposits from the public. The deposits accepted by the non-banking institutions from its shareholders will be exempted only if a declaration was given by the shareholder to the effect that such money has not been given by him by borrowing or accepting deposit from another person. The said Directions also specified a limit beyond which the non-banking institutions could not accept deposits from the public. Since the company received deposits from the partnership firm which had acquired the money deposited from the public and since the amount of deposit also exceeded the limit specified in the Reserve Bank Directions, 1973, the second respondent filed C. C. No. 2320 of 1979 on the file of the learned 16th Metropolitan Magistrate, Madras, against the petitioners on the ground that they have violated the provisions of the Reserve Bank Directions, 1973. It is in these circumstances these writ petitions have been filed. Mr. K. Radhakrishnan, the learned counsel for the petitioners, challenged the validity of the provisions of the Reserve Bank Directions, 1973. In order to appreciate the arguments advanced by the learned counsel, it is necessary to refer to the relevant statutory provisions. Section 45K of the Reserve Bank of India Act, 1934, provides as follows :

"45K. (1) The Bank may at any time direct that every non-banking institution shall furnish to the Bank, in such form, 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 the Bank by general or special order.

(2) Without prejudice to the generality of the power vested in the Bank under sub-section (1), the statements, information or particulars to be furnished under sub-section (1) may relate to all or any of the following matters, namely, the amount of the deposits, the purposes and periods for which, and the rates of interest and other terms and conditions on which, they are received.

(3) The Bank may, if it considers necessary in the public interest so to do, give directions to non-banking institutions either generally or to any non-banking institution or group of non-banking institutions in particular, in respect of any matters 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.

(4) If any non-banking institution fails to comply with any direction given by the Bank under sub-section (3), the Bank may prohibit the acceptance of deposits by that non-banking institution......

(6) Every non-banking institution receiving deposits shall, if so required