Reasonable restriction on public deposit-taking upheld as a depositors' protection measure in larger public interest.

The amended Section 45S of the Reserve Bank of India Act, 1934 regulates the acceptance of public deposits by unincorporated entities as a protective measure for depositors. Its validity was examined mainly under Article 19(1)(g) and the doctrine of reasonable restriction, with the challenge under Articles 21 and 300-A found inapplicable and the equality challenge rejected. The provision was upheld as a reasonable regulatory restriction enacted in larger public interest, and the same amended provision had already been sustained by the Supreme Court. The measure was therefore treated as constitutionally valid and effective to control deposit-taking activity in the public interest.

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Issues: Whether the amended Section 45S of the Reserve Bank of India Act, 1934, inserted by Section 9 of the Reserve Bank of India (Amendment) Act, 1997, was unconstitutional as violating Articles 14, 19(1)(g), 21 and 300-A of the Constitution of India.

Analysis: The amended provision was challenged as an impermissible restraint on the business of accepting deposits and as offending equality, freedom to carry on business, personal liberty and property rights. The Court held that Article 300-A had no application and that Article 21 was not attracted. The challenge was effectively to be tested under Article 19(1)(g), read with the doctrine of reasonable restriction, because the validity of a regulatory measure in the interest of the general public turns on whether the restriction is reasonable. The Court followed the authoritative pronouncement of the Supreme Court upholding the very same amended provision and recognising that the restriction was enacted to protect depositors and to regulate the business of accepting deposits in larger public interest.

Conclusion: The amended Section 45S of the Reserve Bank of India Act, 1934 is constitutionally valid and does not violate Articles 14, 19(1)(g), 21 or 300-A of the Constitution of India.

Ratio Decidendi: A statutory restriction on unincorporated entities accepting public deposits is valid when it is a reasonable regulatory measure enacted in larger public interest to protect depositors.

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