Law to protect depositors valid: SC

The Supreme Court (SC) has upheld a law passed by Pondicherry assembly to attach the property of a private firm for duping investors, observing that innocent public ends up losing hard earned money on account of unscrupulous financial companies.

A bench of justices Altamas Kabir and J Chelameshar also ruled that even if the state enacts a law which is in conflict with a legislation passed by Parliament, it would still have validity if the statute has obtained Presidential assent.

"We have to keep in mind the beneficial nature of the three legislations which is to protect the interests of small depositors who invest their life's earnings and savings in schemes for making profit floated by unscrupulous individuals and companies, both incorporated and unincorporated.

"More often than not, the investors end up losing their entire deposits," Justice Kabir, writing the judgement, said.

The apex court passed the judgement while dismissing the appeal of M/s New Horizon Sugar Mills Ltd, challenging the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 (Act 1 of 2005), ordering attachment of properties acquired by Pondicherry Nidhi Ltd said to be one of its own companies.

The bench said similar legislations passed by the Maharashtra and Tamil Nadu to protect their people were also valid.

The apex court rejected the argument of the company that the state was not competent to enact the statute as the power was vested with Parliament under the Constitution.

"Even if it is to be accepted that the Pondicherry Act is relatable to Entries 43, 44 and 45 of List I, (Union) it can be equally said that the said enactment is also relatable to Entries 1, 30 and 32 of List II,(state) thereby leaving the field of legislation open, both to the central legislature as well as the state legislature," the bench said.

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