STATE Vs. UNION OF INDIA

JUDGEMENT

(1.) The instant writ application, which has been moved as a public interest litigation, is unique in the history of public interest litigation in this Court or perhaps in the entire country. Unlike the other public interest litigations, where normally any public spirited person or organisation comes before the Court for obtaining relief in favour of persons economically or socially oppressed and unable to approach the Court for vindication of their fundamental or legal right complaining against State action or inaction, in the instant case, the State itself has come up before this Court by way of public interest litigation championing the cause of the numerous small depositors of the three different residuary non-banking companies (hereinafter referred to as R.N.B.C.) and for vindication of their legal and constitutional rights. Its uniqueness, however, does not end 6 with the fact that here the petitioner is the State itself. It is also unique as in the instant application, State, being the petitioner complains against certains actions of the three R.N.B.Cs. and praying for reliefs against them which are admittedly not State or instrumentality of State or even authorities within the meaning of Art. 12 of the Constitution, but companies incorporated under the Companies Act. Such uniqueness of this petition provoked a legal debate as to the maintainability of the writ petition which continued for days, in which all the learned counsel whether for the writ petitioner or for the respondents participated with great ability rendering invaluable assistance to the Court and in which the finest quality of the learned counsel came out.

(2.) It is the case of the petitioner, State of West Bengal that it seeks to move the instant writ application on behalf of the countless small depositors of the respondent No. 2, M/s. Overland Investments Co. Ltd., respondent No. 6, Verona Commercial Credit and Investments Co. Ltd., and respondent No. 10, Sanchayani Savings (P) Investments Co. Ltd. all of which are residuary non-banking companies and incorporated under the Companies Act. It is contended by the petitioner that since the time of the case of Sanchaita Investments (State of West Bengal v. Swapan Kumar Guha, AIR 1982 SC 949) the Supreme Court from time to time in its different judgments has been commenting on the mushrooming of different non-banking financial institutions including R.N.B.Cs. and in their alarming function in receiving large deposits from the members of the public and specially from ignorant small depositors having little capital of their own and the probability of syphoning of funds rendering the small depositors penniless depriving them of their live's savings and has been expressing hopes that the State and the Reserve Bank of India should take appropriate steps in public interest to safeguard the interest of such countless small depositors. Ultimately, the Reserve Bank of India in exercise of power under S. 45(3) of the Reserve Bank of India Act, 1934, issued the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 (hereinafter referred to as 1987 Directions) in public interest and specially for safeguarding the interest of the small depositors. Under the said 1987 Directions the Reserve Bank of India introduced a number of restrictions and requirements which the R.N.B.Cs. are required to follow, for the specific purpose of safeguarding interest of the small depositors and for their security. But now, from the Inspection Report of the Reserve Bank of India as also from the other Audit Report and also from Police Investigations Report, it appears that the aforesaid R.N.B.Cs. being the present respondents herein have been functioning in utter disregard and in violation of the various provisions of the aforesaid 1987 Directions and are also diverting crores of rupees to their subsidiary companies and to their directors jeopardising the interest of the small depositors and said R.N.B.Cs. have now reached such a situation that they are on the brink of a financial disaster and are unable to meet their total deposit liability and to pay back the small depositors their money taken by the said R.N.B.Cs. The details of such lapses on the part of the respondent No. 2, respondent No. 6 and respondent No. 10 have been set out in the writ petition, in the supplementary affidavit and in the additional supplementary affidavit and annexures thereto.

(3.) It is contended, on the basis of specific complaints, the police has started cases against the respondents Nos. 2 and 6 and their directors in which reports have been submitted.