Deposit regulation power extends to preventing disguised charges; Paragraph 4A was upheld as a reasonable depositor-protection measure.

Section 45K(3) was construed as conferring a wide regulatory power over matters relating to or connected with the receipt of deposits, including ancillary authority to prevent evasion of the deposit-control scheme. Paragraph 4A, which stopped residuary non-banking companies from disguising instalment components as processing or maintenance charges, was therefore held intra vires. The measure was also found consistent with Articles 14 and 19(1)(g) because it had a rational depositor-protection objective, imposed a uniform and reasonable regulatory ceiling, and was not shown to be arbitrary or discriminatory. The amendment introducing Paragraph 4A was upheld.

---

---

Issues: (i) Whether Paragraph 4A inserted in the 1987 Directions by notification dated 19-4-1993 was within the Reserve Bank's power under section 45K(3) of the Reserve Bank of India Act, 1934. (ii) Whether Paragraph 4A violated Articles 14 and 19(1)(g) of the Constitution of India.

Issue (i): Whether Paragraph 4A inserted in the 1987 Directions by notification dated 19-4-1993 was within the Reserve Bank's power under section 45K(3) of the Reserve Bank of India Act, 1934.

Analysis: Section 45K(3) confers a wide enabling power on the Reserve Bank to issue directions in respect of matters relating to or connected with the receipt of deposits. The expression is of wide amplitude and is not confined merely to the receipt of deposits in a narrow sense. Paragraph 4A was intended to prevent residuary non-banking companies from defeating the regulatory scheme by renaming part of the instalments as processing or maintenance charges. A power to regulate deposits necessarily includes ancillary and incidental power to prevent evasion and make the main directions effective and workable.

Conclusion: Paragraph 4A was validly issued under section 45K(3) and is intra vires; the conclusion is in favour of the appellant.

Issue (ii): Whether Paragraph 4A violated Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: The restriction imposed by Paragraph 4A was designed to protect depositors and ensure that working capital is not generated from depositors' money for revenue expenditure. The uniform ceiling of Rs. 10 for brochure, application form and servicing expenses was found to have a rational basis, and no material was shown to establish that it was arbitrary or unreasonable. The prohibition against recovering processing or maintenance charges from subscribers was held to be a reasonable regulatory measure and not a discriminatory one merely because similar control was not shown in respect of commercial banks on the facts placed before the Court. The measure did not amount to an unconstitutional restriction on carrying on business.

Conclusion: Paragraph 4A does not offend Articles 14 or 19(1)(g); the challenge fails and the conclusion is in favour of the appellant.

Final Conclusion: The amendment introducing Paragraph 4A was upheld, and the writ petition challenging it failed.

Ratio Decidendi: A statutory power to regulate the receipt of deposits includes the ancillary authority to prevent regulatory evasion by prohibiting disguised charges connected with deposit-taking, and a depositor-protection measure based on a rational regulatory objective will ordinarily withstand challenge under Articles 14 and 19(1)(g).

---