1987 (1) TMI 452 - SC - Companies Law

Whether Peerless Company was a miscellaneous Non-Banking Company within the meaning of the expression as defined in the Miscellaneous Non-Banking Companies (Reserve Bank Directions, 1973) or a 'financial institution' which was not such a miscellaneous banking company?

Whether the Endowment Scheme piloted by the Company falls within the definition of prize chit?

Whether these companies are not speculative ventures floated to attract unwary and credulous investors and capture their savings?

Held that:- Appeal dismissed. If the Reserve Bank of India considers the Peerless Company with eight Hundred Crores invested in Government Securities, Fixed Deposits with National Banks etc. unsafe for depositors, one wonders what they have to say about the mushroom non-banking companies which are accepting deposits, promising most unlikely returns and what action is proposed to be taken to protect the investors. It does not require much imagination to realise the adventurous and precarious character of these businesses Urgent action appears to be called for to protect the public. While on the one hand these schemes encourage two vices affecting public economy, the desire to make quick and easy money and the habit of excessive and wasteful consumer spending, on the other hand the investors who generally belong to the gullible and less affluent classes have no security whatsoever. Action appears imperative.