Deposit-taking restrictions upheld as valid economic regulation; prospective compliance duties were not treated as unconstitutional ex post facto liability.

Restrictions on deposit-taking by individuals, firms and unincorporated associations under the Reserve Bank of India framework were upheld as a valid economic regulation. The Court treated the deposit ceiling and related penal consequences as measures designed to protect depositors and prevent abuse in the deposit market, and found no violation of Articles 14 or 19(1)(g) because the scheme was neither arbitrary nor discriminatory. The requirement to bring existing deposits within statutory limits within the prescribed period was held to be prospective, so the associated penalty did not amount to ex post facto criminal liability and did not offend Article 20(1).

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Issues: (i) Whether the restrictions imposed by Section 45S of the Reserve Bank of India Act, 1934, and the penal consequence under Section 58B(5A) were unconstitutional as violating Articles 14 and 19(1)(g) of the Constitution of India. (ii) Whether the obligation to bring existing deposits within the statutory limits within the prescribed period, and the penalty for non-compliance, offended Article 20(1) of the Constitution of India as being ex post facto in operation.

Issue (i): Whether the restrictions imposed by Section 45S of the Reserve Bank of India Act, 1934, and the penal consequence under Section 58B(5A) were unconstitutional as violating Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: The provisions were treated as part of a regulatory framework governing acceptance of deposits by non-banking financial entities. In economic legislation, greater latitude is afforded to the legislature, and judicial review is limited unless the measure is palpably arbitrary, discriminatory, or demonstrably irrelevant. The restrictions were directed to protecting depositors and preventing abuse in the deposit market. The ceiling on depositors and the attached sanction were held to be justified by the public interest in safeguarding vulnerable investors.

Conclusion: The challenge under Articles 14 and 19(1)(g) failed; the provisions were upheld as constitutionally valid.

Issue (ii): Whether the obligation to bring existing deposits within the statutory limits within the prescribed period, and the penalty for non-compliance, offended Article 20(1) of the Constitution of India as being ex post facto in operation.

Analysis: The requirement to reduce deposits within the stipulated period was held to be prospective in character and part of a regulatory scheme, not a retrospective penalisation of completed conduct. The sanction attached to non-compliance operated only after the law came into force and did not convert prior lawful receipt of deposits into an offence. The Court rejected the contention that the measure created unconstitutional retroactive criminal liability.

Conclusion: The challenge under Article 20(1) failed; the provision was not invalid as ex post facto legislation.

Final Conclusion: The statutory restrictions on deposit-taking by individuals, firms and unincorporated associations were sustained, and the appeals and connected petitions did not succeed.

Ratio Decidendi: In economic regulatory legislation, restrictions and penal consequences designed to protect the public and regulate deposit-taking will be upheld if they are neither arbitrary nor discriminatory, and a prospective compliance requirement with future penal consequences is not rendered unconstitutional merely because it affects pre-existing arrangements.

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