Deposit regulation by the Reserve Bank upheld as valid public-interest control that did not violate the right to carry on business.

Section 45-K of the Reserve Bank of India Act, 1934 empowered the Reserve Bank to regulate deposits accepted by non-banking institutions, so the 1973 Directions were valid and were not undermined by the later 1977 definition of deposit. The Directions were treated as permissible public-interest regulation because they controlled the source, categories, and limits of deposits without prohibiting the chit fund business itself, so the Article 19(1)(g) challenge failed. The Deputy Governor could sign the Directions in the name of the Reserve Bank under the governing statutory and regulatory framework, so the mode of issuance was valid and the writ petitions were dismissed on merits.

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Issues: (i) Whether the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1973 were invalid for want of statutory power or because the later 1977 definition of deposit affected the earlier directions; (ii) whether the directions infringed the petitioners' right to carry on business under Article 19(1)(g) of the Constitution of India; (iii) whether the directions issued in the name of the Reserve Bank by the Deputy Governor were authority and invalid.

Issue (i): Whether the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1973 were invalid for want of statutory power or because the later 1977 definition of deposit affected the earlier directions.

Analysis: The statutory scheme under Section 45-K of the Reserve Bank of India Act, 1934 empowered the Reserve Bank to regulate deposits received by non-banking institutions, including by issuing directions and prohibiting acceptance of deposits on non-compliance. The 1973 Directions were framed within that regulatory field and specifically controlled the categories and limits of deposits. The later 1977 Directions did not destroy the validity of the earlier directions; the change in definition of deposit did not alter the basic statutory power or make the 1973 regulatory scheme unlawful.

Conclusion: The 1973 Directions were valid and remained operative.

Issue (ii): Whether the directions infringed the petitioners' right to carry on business under Article 19(1)(g) of the Constitution of India.

Analysis: The directions only regulated the manner and source from which a chit fund company could borrow or receive deposits. They did not prohibit the business itself, but imposed restrictions on accepting deposits from specified persons and beyond specified limits. Such regulatory control was treated as a permissible measure in the public interest and not as an unconstitutional restriction on the business right.

Conclusion: The challenge under Article 19(1)(g) failed.

Issue (iii): Whether the directions issued in the name of the Reserve Bank by the Deputy Governor were without authority and invalid.

Analysis: Section 7 of the Reserve Bank of India Act, 1934 and Regulation 17(1) of the Reserve Bank of India General Regulations, 1949 contemplated exercise of powers by the Governor and, in appropriate circumstances, by the Deputy Governor on behalf of the Bank. The impugned directions were signed by the Deputy Governor in the name of the Reserve Bank, and the regulatory framework authorised such action. No legal infirmity was shown in the mode of issuance.

Conclusion: The directions were validly issued by the Deputy Governor on behalf of the Reserve Bank.

Final Conclusion: The writ petitions were liable to be dismissed because the Reserve Bank Directions, 1973 were upheld on merits and the petitioners' constitutional and vires objections were rejected.

Ratio Decidendi: A statutory regulator empowered to control deposits of non-banking institutions may validly impose deposit restrictions in the public interest, and such directions do not infringe Article 19(1)(g) merely because they regulate the source and extent of borrowing rather than abolish the business itself.

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