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2012 (11) TMI 206 - SC - Indian LawsAttachment of properties acquired by Pondicherry Nidhi Ltd - challenge powers conferred under the Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 - Held that:- Clause (1) of Article 254 provides that when there are two laws enacted by the Parliament and the State Legislature in which certain inconsistencies occur, then subject to the provisions of clause (2), the law made by the Parliament would prevail and the law made by the State Legislature to the extent it is repugnant to the Central law, shall be void. Clause (2), however, also provides that in a given situation where a law of a State is in conflict with the law made by Parliament, the law so made by the State Legislature shall, if it has received the assent of the President, prevail in that State. In the instant case, the Pondicherry Act had received the assent of the President attracting the provisions of Article 254(2) of the Constitution. The power to enact the Pondicherry Act could be traced to Entries 1, 8, 13 and 21 of the Concurrent List. Although, it has been argued by Mr. Ganguli (Advocate for Appellant) that the provisions of the Companies Act would not be attracted, cannot be overlooked that the amendment to the definition of "financial establishment" included in the Tamil Nadu Act and as defined in the Pondicherry Act. The definition of the expression "financial establishment" in Section 2(d) of the Pondicherry Act includes any person or group of individuals or a firm carrying on business of accepting deposits under any scheme or arrangement or in any other manner, but does not include a Corporation or a cooperative society owned or controlled by either the Central Government or the State Government or a banking company as defined under Section 5 of the Banking Regulation Act, 1949. Thus the expression "any person" is wide enough to cover both a natural person as also a juristic person, which would also include a Company incorporated under the Companies Act, 1956. In that view of the matter, the definition in Section 2(d) of the Pondicherry Act would also include a Company such as the Appellant Mill, which accepts deposits from investors, not as shareholders of such Company, but merely as investors for the purpose of making profit. In this regard, reference may also be made to Section 11 of the Indian Penal Code which defines a "person" to include a Company or Association or body of persons, whether incorporated or not. Accordingly, we are inclined to accept Mr. Venkataramani's submissions that the expression "person" in the Pondicherry Act includes both incorporated as well as unincorporated companies. As observed that in the instant case although an attempt has been made on behalf of the Appellant to state that it was not the Appellant Company which had accepted the deposits, but M/s PNL Nidhi Ltd., which had changed its name five times, such an argument is one of desperation and cannot prima facie be accepted. This appears to be one of such cases where funds have been collected from the gullible public to invest in projects other than those indicated by the front company. It is in fact the specific case of the Respondents that the funds collected by way of deposits were diverted to create the assets of the Appellant Mill. In such circumstances, the submissions made by Mr. Ganguli cannot be accepted as there is little difference between the provisions of the Tamil Nadu Act and the Pondicherry Act, which is to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by M/s PNL Nidhi Ltd. for the benefit of the Appellant Mill, which is privately owned by Shri V. Kannan and Shri V. Baskaran, who are also Directors of M/s PNL Nidhi Ltd - appeals dismissed with costs assessed at ₹ 1,00,000/-.
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