Holding

Sections 7‑A, 7‑B of the Karnataka Money Lenders Act and 4‑A, 4‑B of the Karnataka Pawn Brokers Act are constitutionally valid, but the retrospective effect of the 1998 amendments is illegal and invalid.

Summary

The Supreme Court examined the constitutionality of the 1998 amendments to the Karnataka Money Lenders Act and Karnataka Pawn Brokers Act that barred payment of interest on security deposits required of licence‑holders. The Court held that the provisions themselves (sections 7‑A, 7‑B of the Money Lenders Act and 4‑A, 4‑B of the Pawn Brokers Act) are valid, as the legislature may impose onerous conditions on the usurious trades of money‑lending and pawn‑broking. However, making those amendments retrospective to 1985 was held to be illegal because it attempted to nullify a mandamus issued in the earlier Manakchand Motilal case, violating the doctrine of separation of powers. Consequently, the validation Acts were partially struck down, but the substantive provisions remained in force. The appeal was therefore partly allowed.

Issues considered

The scope and effect of the Manakchand Motilal judgment regarding interest on security deposits
Whether the 1998 amendments prohibiting interest on security deposits are contrary to that judgment and within the State's legislative competence
Whether a provision barring interest on security deposits is arbitrary and violative of Article 14 of the Constitution, and whether its retrospective operation is valid

Legislation cited

Karnataka Money Lenders Act, 1961s. 7-A, s. 7-B
Karnataka Money Lenders (Amendment) Act, 1998
Karnataka Pawn Brokers Act, 1961s. 4-A, s. 4-B
Karnataka Pawn Brokers (Amendment) Act, 1998

Subjects

Constitutional lawArticle 14UsuryMoney lendersPawn brokersSecurity depositInterest prohibitionRetrospective legislationSeparation of powersValidation ActLegislative competence

Judgment

[2018] 10 S.C.R. 409 409

THE STATE OF KARNATAKA & ORS. A
v.
THE KARNATAKA PAWN BROKERS ASSN. & ORS.
(Civil Appeal No. 5793 of 2008)
MARCH 15, 2018 B
[MADAN B. LOKUR AND DEEPAK GUPTA, JJ.]
Karnataka Money Lenders Act, 1961 – s.7-A and 7-B –
Karnataka Pawn Brokers Act, 1961 – s. 4-A and 4-B – Whether the
amendments made to the Karnataka Money Lenders Act (M.L. Act)
C
and Karnataka Pawn Brokers Act (P.B. Act) in 1998 providing that
the security deposit furnished by the money lenders and pawn
brokers in terms of ss. 7-A and 4-A of the Acts respectively shall not
carry interest, is constitutional, legal and valid – Held: Legal and
valid – Businesses of money lending and pawn broking are usurious
businesses and the Government may rightly impose onerous D
conditions to restrict or even discourage people from entering into
such businesses – Legislature in its wisdom can decide whether it
should make it more difficult for people to engage in the business
of money lending and pawn broking – A money lender or a pawn
broker applies for licence to do this business knowing fully well
E
that the security that he shall deposit shall not earn any interest –
Nobody forces a person to engage in the trade of money lending or
pawn broking – Therefore, the impugned provisions cannot be held
to be unreasonable – Insofar as constitutionality of payment of
interest on security is concerned, arbitrariness must be writ large to
make it unconstitutional – Whether the interest should be paid or F
not is a matter which parties decide amongst themselves – Contract
providing that no interest will be paid on the amount advanced,
such clause cannot be said to be so arbitrary that the contract
becomes void – Contracts providing for non-payment of interest on
earnest money and security deposits have been considered in the
G
context of the Arbitration Acts – In arbitration cases, the Court has
not construed the provision of the contract providing for non-
payment of interest to be void – The said provision has, in fact,
been legally enforced – Therefore, the impugned provisions
prohibiting payment of interest on the amount of security deposits
H
409
410 SUPREME COURT REPORTS [2018] 10 S.C.R.

A cannot be said to be arbitrary or violative of Art.14 of the
Constitution – Constitution of India – Art.14.
Karnataka Money Lenders Act, 1961 – s.7-A and 7-B –
Karnataka Pawn Brokers Act, 1961 – s. 4-A and 4-B – In 1985,
amendments were made to the Karnataka Money Lenders Act (M.L.
B Act) and Karnataka Pawn Brokers Act (P.B. Act) providing that the
security deposit to be furnished by the money lenders and pawn
brokers in relation to the extent of business carried on by the licensee
– Amendments challenged – High Court in case of Manakchand
Motilal upheld the validity of ss.7-A and 7-B of M.L. Act and ss.4-
A & 4-B of the P.B. Act, however, also held that money lenders/
C pawn brokers were entitled to interest on security deposits – In 1998,
another amendment made by the State in s.7-A of M.L. Act and s.4-
A of P.B. Act providing for non-payment of interest on security
deposits – Writ petitions – Constitutional validity of the amendments
challenged – Single judge dismissed the writ petitions, however,
D Division Bench allowed the writ petitions and held provisions
providing for non-payment of interest on security deposits
unconstitutional – Division Bench further held that the State could
not nullify the judgment of the High Court in Manakchand Motilal
by way of subsequent amendment – On appeal, held: High Court in
Manakchand Motilal itself observed, that there was no provision
E prohibiting the payment of interest – Court had observed that even
if such a provision prohibiting payment of interest had been there
in the statute such provision would be illegal – Therefore, there was
no error pointed out by the Court which could have been corrected
by the State Legislature – State first tried to implement the judgment
F by framing rules providing for payment of interest – Later, it
incorporated the contentious provisions prohibiting payment of
interest – These amendments did not in any way alter the basis of
the judgment – The State, insofar as it has made the amended
provisions retrospective, has attempted to nullify the writ of
mandamus issued by the Court in favour of the respondents – This
G mandamus could not have been set at naught by making the
provisions retrospective – The State could not have nullified the
judgment passed in Manakchand Motilal’s case by retrospectively
amending the acts – Therefore, the validating Acts insofar as they
are retrospective, are held to be illegal.
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 411
BROKERS ASSN.

Partly allowing the appeals, the Court A
HELD: 1. The observations by the High Court that if there
was a provision prohibiting payment of interest, the same would
be arbitrary and hence illegal, were not necessary in the fact
situation of Manakchand Motilal’s case. As observed by the High
Court itself, there was no provision prohibiting the payment of B
interest. Therefore, the observations in this behalf were not called
for and were hypothetical and in the nature of obiter. There was
no discussion on the issue as to whether a provision providing
that no interest would be payable on the security deposit would
be legally valid or not? A passing observation has no doubt been
made that there would have been force in the contention of the C
money-lenders and pawn brokers that the provisions would be
violative of Article 14 of the Constitution but this, was not the
ratio decidendi of the case. [Para 14] [422-B-D]
2. It would also be apposite to mention that after making
the aforesaid observation, the Division Bench again noted that D
in the absence of any prohibition in the provisions of the Acts,
regarding payment of interest, in view of Article 14, the
Government while making rules must provide for payment of
interest. This itself was a clear indicator that the Court decided
the issue in Manakchand Motilal’s case mainly on the ground E
that there was no provision prohibiting the payment of interest.
Therefore, the observation made in Manakchand Motilal’s case
that a provision prohibiting payment of interest would be arbitrary
and violative of Article 14 of the Constitution of India was a
passing observation in the nature of obiter not arising for decision
in the said case. [Para 15] [422-E-F] F

3. The Legislature has the power to enact validating laws
including the power to amend laws with retrospective effect.
However, this can be done to remove causes of invalidity. When
such a law is passed the Legislature basically corrects the errors
which have been pointed out in a judicial pronouncement. G
Resultantly, it amends the law, by removing the mistakes
committed in the earlier legislation, the effect of which is to
remove the basis and foundation of the judgment. If this is done,
the same does not amount to statutory overruling. [Para 22]
[425-F-G] H
412 SUPREME COURT REPORTS [2018] 10 S.C.R.

A 4. However, the Legislature cannot set at naught the
judgments which have been pronounced by amending the law not
for the purpose of making corrections or removing anomalies
but to bring in new provisions which did not exist earlier. The
Legislature may have the power to remove the basis or foundation
of the judicial pronouncement but the Legislature cannot overturn
B
or set aside the judgment, that too retrospectively by introducing
a new provision. The legislature is bound by the mandamus issued
by the Court. A judicial pronouncement is always binding unless
the very fundamentals on which it is based are altered and the
decision could not have been given in the altered circumstances.
C The Legislature cannot, by way of introducing an amendment,
overturn a judicial pronouncement and declare it to be wrong or
a nullity. What the Legislature can do is to amend the provisions
of the statute to remove the basis of the judgment. [Para 23]
[426-A-C]
D 5. Applying these principles to the present case it is
apparent that when the decision was rendered in Manakchand
Motilal’s case there was no provision providing for payment of
interest or prohibiting payment of interest. The Court had
observed that even if such a provision prohibiting payment of
interest had been there in the statute such provision would be
E illegal. Therefore, there was no error pointed out by the Court
which could have been corrected by the State Legislature. As
pointed out above, the State, in fact, first tried to implement the
judgment by framing rules providing for payment of interest.
Later, it incorporated the contentious provisions prohibiting
F payment of interest. These amendments did not in any way alter
the basis of the judgment. [Para 24] [426-D-E]
6. Therefore, the State, in so far as it has made the amended
provisions retrospective, has attempted to nullify the writ of
mandamus issued by the Court in favour of the respondents. This
G mandamus could not have been set at naught by making the
provisions retrospective. This would be a direct breach of the
doctrine of separation of powers as laid down in State of Tamil
Nadu. The State Legislature could not have nullified the judgment
passed in Manakchand Motilal’s case by retrospectively amending
the Acts. Therefore, the validating Acts in so far as they are
H retrospective, are held to be illegal. [Para 25] [426-F-G]
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 413
BROKERS ASSN.

7. The businesses of money lending and pawn broking are A
usurious businesses and the Government may rightly impose
onerous conditions to restrict or even discourage people from
entering into such businesses. [Para 39] [431-F]
8. It is thus apparent that the courts have frowned upon
the “trade” of money lending. The profession of money lending, B
may be a trade, but onerous restrictions may be placed on such
trade which is definitely usurious. These onerous restrictions
would be reasonable keeping in view the nature of the trade.
The Legislature in its wisdom can decide whether it should make
it more difficult for people to engage in the business of money
lending and pawn broking. [Para 40] [432-C] C

9. A money lender or a pawn broker applies for licence to
do this business knowing fully well that the security that he shall
deposit shall not earn any interest. He with open eyes accepts
the condition which is part of the Acts. Nobody forces a person
to engage in the trade of money lending or pawn broking. D
Therefore, the impugned provisions cannot be held to be
unreasonable. [Para 41] [432-D]
10.1 Lastly, the submission to be considered is whether a
provision providing that no interest is payable on the security
deposit is so arbitrary, as to make it unconstitutional. In E
Independent Thought vs. Union of India and Anr. this Court held
that arbitrariness must be writ large to make it un-constitutional.
Whether the interest should be paid or not is a matter which
parties decide amongst themselves. Supposing, there is a
contract providing that no interest will be paid on the amount F
advanced; it cannot be said that such a clause in the contract is
so arbitrary that the contract becomes void or becomes
inoperative. [Paras 42 and 43] [432-E-F]
10.2 Supposing, a person’s money lies in the current
account for 3-4 years he cannot claim interest only on the ground G
that the bank would have utilized this money for commercial
purposes. There are various instances where schools, other
educational institutions, clubs, societies ask for refundable
deposits on which no interest is payable. These are accepted to
be normal routine practices because these bodies are not
H
414 SUPREME COURT REPORTS [2018] 10 S.C.R.

A engaged in commercial activities. Even a pawn broker pays no
interest on the value of the security pledged with him. [Para 43]
[432-G-H; 433-A]
10.3 Contracts providing for non-payment of interest on
earnest money and security deposits have been considered in
B the context of the Arbitration Acts. The Courts have held that in
view of the agreement entered into between the parties, the
arbitrator cannot award interest prior to the date of passing of
the award. In fact, this Court has clearly held that the arbitrator
cannot award pendente lite interest. Though these authorities do
not directly deal with the issue in hand, it is obvious that in all
C these cases, the Court has not construed the provision of the
contract providing for non-payment of interest to be void. The
said provision has, in fact, been legally enforced. However, under
the Arbitration Act of 1940, this Court held that the arbitrator
could award pendente lite interest but under the Arbitration and
D Conciliation Act, 1996 the arbitrator cannot award interest prior
to the date of award. The clause for non-payment of interest has
not been held void in any case. Therefore, the impugned
provisions prohibiting payment of interest on the amount of
security deposits cannot be said to be arbitrary or violative of
Article 14 of the Constitution of India. [Para 44] [433-B-D]
E
State of Tamil Nadu v. State of Kerala and Another
(2014) 12 SCC 696 : [2014] 12 SCR 875; Cheviti
Venkanna Yadav v. State of Telangana and Others (2017)
1 SCC 283 : [2016] 7 SCR 689; Independent Thought
v. Union of India and Anr. (2017) 10 SCC 800 – relied
F on.
Manakchand Motilal v. State of Karnataka I.L.R
1991 KAR 1928; Jagdamba Paper Industries (P) Ltd.
v. Haryana State Electricity Board (1983) 4 SCC 508 :
[1984] 1 SCR 165; Shri Prithvi Cotton Mills Ltd. and
G Another v. Broach Borough Municipality and Others
(1969) 2 SCC 283 : [1970] 1 SCR 388; Cauvery Water
Disputes Tribunal, Re (1993) Supp. 1 SCC 96(II) :
[1991] 2 Suppl. SCR 497; S.R. Bhagwat and Others
v. State of Mysore (1995) 6 SCC 16 : [1995] 3 Suppl.
H SCR 545; Sheikh Mehtab S/o Sheikh Farid Mussalman
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 415
BROKERS ASSN.

v. Dharamrao Bhujangrao AIR (31) 1944 Nagpur 330; A
Ferro Alloys Corpn. Ltd. v. A.P. State Electricity Board
(1993) Supp 4 SCC 136 : [1993] 3 SCR 199; M/s
Fatehchand Himmatlal and Others v. State of
Maharashtra (1977) 2 SCC 670 : [1977] 2 SCR 828;
Monarch Investments St. Thomas Road, Trichur and Ors.
B
v. State of Kerala & Ors. AIR (1989) KER.177; Sri
Chittaranjan Maity v. Union of India, (2017) 9 SCC
611; Secretary, Irrigation Department, Government of
Orissa & Ors. v. G.C. Roy, (1992) 1 SCC 508 : [1991]
3 Suppl. SCR 417; Sayeed Ahmed & Company v. State
of Uttar Pradesh & Ors., (2009) 12 SCC 26 : [2009] C
10 SCR 841; Sree Kamatchi Amman Constructions v.
Divisional Railway Manager (Works), Palghat & Ors.,
(2010) 8 SCC 767 : [2010] 10 SCR 487; Union of
India v. Bright Power Projects (India) Pvt. Ltd., (2015)
9 SCC 695 : [2015] 6 SCR 488 – referred to.
D
Halsbury’s Laws of England, Fourth Edition, Volume
32; Law Lexicon, by P. Ramanathan Aiyar 3rd Edition
(2005) (page 2402) Vol 2; Words And Phrases
permanent editions, Vol 22-page 148; Black’s Law
Dictionary, Sixth Edition (page 812) – referred to.
E
Case Law Reference
I.L.R 1991 KAR 1928 referred to Para 6
[1984] 1 SCR 165 referred to Para 6
[1993] 3 SCR 199 referred to Para 9 F
[1970] 1 SCR 388 referred to Para 17
[1991] 2 Suppl. SCR 497 referred to Para 18
[1995] 3 Suppl. SCR 545 referred to Para 19
[2014] 12 SCR 875 relied on Para 20 G
[2016] 7 SCR 689 relied on Para 21
AIR (31) 1944 Nagpur 330 referred to Para 29
[1977] 2 SCR 828 referred to Para 37
AIR (1989) KER.177 referred to Para 39 H
416 SUPREME COURT REPORTS [2018] 10 S.C.R.

A (2017) 10 SCC 800 relied on Para 43
(2017) 9 SCC 611 referred to Para 44
[1991] 3 Suppl. SCR 417 referred to Para 44
[2009] 10 SCR 841 referred to Para 44
B [2010] 10 SCR 487 referred to Para 44
[2015] 6 SCR 488 referred to Para 44
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5793
of 2008
C From the Judgment and Order dated 10.02.2006 of the High Court
of Karnataka at Bangalore in Writ Appeal No. 4084 of 2001, c/w. W. A.
No. 3372 of 2001 and W. A. No. 4918 of 2001(GM, ML/PB)
WITH
C. A. No. 2874-2878 of 2018.
D
Devadatt Kamat, AAG, V. N. Raghupathy, Rajesh Inamdar,
Parikshit P. Angadi, Aditya Bhat, Md. Apzal Ansari, Advs. for the
Appellants.
Gurukrishna Kumar, Sr. Adv., S. R. Setia, H. Chandra Sekhar,
E Ms. Rekha Chandra Sekhar, Advs. for the Respondents.
The Judgment of the Court was delivered by
DEEPAK GUPTA J. 1. Leave granted in SLP(C) Nos. 8652-
8656 of 2012.
2. The main issue raised in these appeals is whether the
F
amendments made to the Karnataka Money Lenders Act, 1961 and the
Karnataka Pawn Brokers Act, 1961 in the year 1998 providing that the
security deposit furnished by the money lenders and pawn brokers in
terms of Sections 7-A and 4-A of the Acts respectively shall not carry
interest, is constitutional, legal and valid.
G Background
3. The State of Karnataka enacted the Karnataka Money Lenders
Act, 1961 (for short the M.L. Act) with a view to regulate and control
the transactions of money lending in the State. Section 5 of the M.L. Act
makes it obligatory for any person carrying on the business of money
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 417
BROKERS ASSN. [DEEPAK GUPTA, J.]

lending to procure licence before carrying on the business of money A
lending.
4. The State of Karnataka simultaneously enacted the Karnataka
Pawn Brokers Act, 1961 (for short the P.B Act) to regulate and control
the business of pawn brokers. Section 3 of the P.B. Act makes it
obligatory for every person desirous of carrying on the business as a B
pawn broker to conduct his business only after he obtains a licence in
accordance with the provisions of the Act.
5. The main business of both money lenders and pawn brokers is
to advance or lend money to individuals who approach them for loans.
The only difference is that a pawn broker is authorized to accept valuable C
articles like gold, gold ornaments etc. as pledge for security of the
payment.
6. In the year 1985, amendments were brought out to both the
Acts. Section 7-A & 7-B were introduced in the M.L. Act and
corresponding Sections 4-A & 4-B were introduced in the P.B. Act. D
These amendments provided that the persons desirous of obtaining a
licence had to deposit a security and the rate of security was fixed slab-
wise in relation to the extent of business carried on by the licensee.
These amendments were challenged by a large number of pawn brokers
and money lenders. A Division Bench of the Karnataka High Court in
Manakchand Motilal vs. State of Karnataka1 upheld the validity of E
Sections 7-A & 7-B of the M.L. Act and Sections 4-A & 4-B of the P.B.
Act. It would be pertinent to mention that in this case one of the grounds
raised to challenge the validity of the aforesaid provisions was that there
is no provision for payment of interest on the security amount. The
Division Bench relying upon the judgment of this Court in Jagdamba F
Paper Industries (P) Ltd. vs. Haryana State Electricity Board2 held
that the money lenders / pawn brokers were entitled to interest on the
security deposits at the prevailing rate of interest payable by the scheduled
banks on a fixed deposit for a period of one year. The State Government
was also directed to make proper rules in this behalf. The relevant portion
of the judgment reads as follows :- G
“16.…..It is true that the Sections do not make a provision for
giving interest but at the same time the Sections do not prohibit
1
I.L.R 1991 KAR 1928
2
(1983) 4 SCC 508
H
418 SUPREME COURT REPORTS [2018] 10 S.C.R.

A the payment of interest. If the Sections prohibited the payment of
interest, such a provision would be arbitrary and therefore there
would have been force in the contention of the petitioners that the
provisions were violative of Article 14 on the ground that it is
arbitrary, for, Article 14 strikes at arbitrariness in State action.
(See: E.P. ROYAPPA v. STATE OF TAMIL NADU, and
B
MANEKA GANDHI v. UNION OF INDIA). Further, there
would have been also force in the contention of the petitioners
that such a provision which compelled them to deposit considerable
amount in cash with the Government without any provision for
payment of interest was an unreasonable restriction on their
C fundamental right to carry on business guaranteed under Article
19(1)(g) of the Constitution, It is indisputable that by such deposit
not only the petitioners lose the opportunity of earning profit on
the said amount but the value of the money also goes down as
years pass and thereby the petitioners would be forced to incur
losses instead of earning profit out of the money, which they would
D
have invested in their business, but for the compulsion to deposit a
portion of it in the Government. Therefore, it appears to us that in
the absence of any prohibition in the provisions of the Act regarding
payment of interest, in view of Article 14, the Government while
making Rules for the purposes of the Act under Section 44 of the
E Money Lenders Act and Section 22 of the Pawn Brokers Act has
not only the power but also a duty to provide for payment of
interest. As far as the rate of interest is concerned, in our opinion,
as the deposit prescribed under Section 7A of the Money Lenders
Act and Section 4A of the Pawn Brokers Act is for a period of
one year, as the duration of the licence on, each occasion being
F
one year, the Government should pay interest on the amount of
security deposit made by a licensee at the rate at which the interest
is paid by any Scheduled Bank on a fixed deposit for one year.”
No appeal was filed by the State of Karnataka against this
judgment. However, the money lenders and pawn brokers filed an SLP
G which was dismissed. It appears that thereafter the State framed certain
rules pursuant to the directions of the Division Bench of the Karnataka
High Court. These Rules were also challenged by the money lenders/
pawn brokers. It appears that the High Court of Karnataka approved
some portions of the Rules but, at the same time, directed that the Rules
H be reframed in compliance with the earlier judgment.
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 419
BROKERS ASSN. [DEEPAK GUPTA, J.]

7. Thereafter, the State of Karnataka enacted the Karnataka A
Money Lenders (Amendment) Act, 1998 and a similar amendment was
also made to the P.B. Act. In this case we are not concerned with the
other amendments. We are restricting our discussion only to sub-section
3 of Section 7-A and 4-A of the M.L. Act and the P.B. Act respectively.
Sub-section 3 of Section 7-A and 4-A of the M.L. and the P.B. Acts,
B
after amendment, read as follows:
“Section 7-A. Conditions of licence.-
xxx xxx xxx
xxx xxx xxx
C
(3) For the purposes of sub-section(2), the amount of the security
payable in a year by a licensee shall be determined on the basis of
the [the amount invested by him in the business during the previous
year [and such security deposit shall not carry any
interest:]”3
D
“Section 4-A. Conditions of licence.-
xxx xxx xxx
xxx xxx xxx
(3) For the purposes of sub-section(2), the amount of the security
payable by a licensee in a year shall be determined on the basis of E
the [the amount invested by him in the business during the previous
year] [and such security deposit shall not carry any
interest]:” 4
The highlighted parts of the above Sections were introduced by the
amendments of 1998 but were deemed to be inserted from 31.05.1985 F
making it retrospective in application.
8. The association of pawn brokers and money lenders filed writ
petitions in the High Court of Karnataka challenging the constitutional
validity of these amendments. The learned Single Judge dismissed the
writ petitions. However, the Division Bench allowed the writ petitions G
and held that though all other amendments made to Sections 7-A and 7-
B of the M.L. Act and Sections 4-A and 4-B of the P.B. Act are

3
Introduced vide Act No.14 of 1998
4
Introduced vide Act No.9 of 1998 H
420 SUPREME COURT REPORTS [2018] 10 S.C.R.

A constitutionally valid and legal, the provisions providing for non-payment
of interest on security deposits were held to be constitutionally bad and
were accordingly set aside.
9. The Division Bench held that as far as interest is concerned, in
the earlier judgment in Manakchand Motilal’s case, the Karnataka
B High Court had held that the money lenders and pawn brokers were
entitled to interest on the amount of deposit and the said judgment had
become final since the SLP against the same was dismissed. The Division
Bench further held that the judgment of the Apex Court in Ferro Alloys
Corpn. Ltd. vs. A.P. State Electricity Board5 was not applicable and
was wrongly relied upon by the learned Single Judge. It was also observed
C that the High Court in Manakchand Motilal’s case (supra) had clearly
held that in case there was a provision for non-payment of interest then
such provision would be un-constitutional. It was further held that the
State Government could not nullify the judgment of the High Court in
Manakchand Motilal’s case by way of subsequent amendment.
D 10. In the appeal filed by the State of Karnataka , Shri Devadatt
Kamath, learned AAG, has raised the following issues :-
(i) Business of money lending or pawn broking is an usurious
business and, therefore, the State wanted to frame a policy to
discourage the business of money lending and pawn broking and
E hence stringent conditions have been laid down including the
condition that no interest would be payable on the security. He
also contends that nobody is forced to do the business of money
lending or pawn broking and if persons want to obtain licence
then they will have to submit the security deposits in terms of the
F Acts.
(ii) The amendments of 1998 are in the nature of validating Acts.
He submits that the State of Karnataka is fully competent to enact
such a provision and, therefore, the State was within its powers to
make the amendments to effectively negate the judgment in
G Manakchand Motilal’s case (supra).
(iii) The observations made in Manakchand Motilal’s case
(supra) were in the nature of obiter and were not called for in the
facts of the said case.
5
1993 Supp (4) SCC 136
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 421
BROKERS ASSN. [DEEPAK GUPTA, J.]

(iv) Lastly, that there is no fundamental right or legal right to claim A
interest and the State is legally competent to enact a provision
that no interest shall be paid on the amount of security deposited.
11. On the other hand Mr. Gurukrishna Kumar, learned senior
counsel appearing for the respondents contended that the matter inter-
se parties was settled by the judgment rendered in Manakchand B
Motilal’s case (supra). He also contended that the statute cannot nullify
the mandamus issued in the earlier judgment without removing the basis
of the judgment. He further contended that the judicial decisions which
have become final, cannot be set at naught by the legislature. The main
contention was that both under law and equity a person whose money,
which is property, is kept by another, is entitled to compensation by way C
of interest for the period for which the money has been retained by the
other party. He, therefore, submitted that the provisions prohibiting the
payment of interest are arbitrary and liable to be set aside.
12. The following points arise for decision:-
D
(i) What is the scope, ambit and effect of the judgment of the
Karnataka High Court in Manakchand Motilal’s case (supra)?;
(ii) Whether the amendments brought into Section 7-A and 4-A of
the M.L. Act and the P.B. Act respectively providing that security deposit
would not carry any interest is contrary to the judgment in Manakchand E
Motilal’s case (supra) and the State was not competent to introduce
such amendments; and
(iii) Whether the provisions providing that no interest is payable
are arbitrary and hence violative of Article 14 of the Constitution of
India. F
Issue No.1
13. As far as the first issue is concerned, at the outset, we may
note that the main issue raised in Manakchand Motilal’s case (supra)
was with regard to the validity of Section 7-A and 4-A of the M.L. Act
and the P.B. Act respectively, in so far as they made a provision for G
deposit of security as a pre-requisite to the grant of licence. At that time,
there was no provision with regard to the payment of interest. The Court
held that the State Government was entitled to introduce a condition for
payment of deposit. The Court, however, felt that for the provision to be
H
422 SUPREME COURT REPORTS [2018] 10 S.C.R.

A constitutionally valid, the deposit must carry interest. We have quoted
the relevant portion of the judgment in Manakchand Motilial’s case
in the earlier part of this judgment. The Division Bench noticed that the
Acts do not have any provision for payment of interest and observed
that, at the same time, there was also no prohibition for the payment of
interest.
B
14. In our view, the observations that if there was a provision
prohibiting payment of interest, the same would be arbitrary and hence
illegal, were not necessary in the fact situation of Manakchand Motilal’s
case (supra). As observed by the High Court itself, there was no provision
prohibiting the payment of interest. Therefore, the observations in this
C behalf were not called for and were hypothetical and in the nature of
obiter. We may also point out that there was no discussion on the issue
as to whether a provision providing that no interest would be payable on
the security deposit would be legally valid or not? A passing observation
has no doubt been made that there would have been force in the
D contention of the money-lenders and pawn brokers that the provisions
would be violative of Article 14 of the Constitution but this, in our opinion,
was not the ratio decidendi of the case.
15. It would also be apposite to mention that after making the
aforesaid observation, the Division Bench again noted that in the absence
E of any prohibition in the provisions of the Acts, regarding payment of
interest, in view of Article 14, the Government while making rules must
provide for payment of interest. This itself was a clear indicator that the
Court decided the issue in Manakchand Motilal’s case (supra) mainly
on the ground that there was no provision prohibiting the payment of
interest. We are, therefore, of the considered view that the observation
F made in Manakchand Motilal’s case (supra) that a provision prohibiting
payment of interest would be arbitrary and violative of Article 14 of the
Constitution of India was a passing observation in the nature of obiter
not arising for decision in the said case.
Issue No.2
G
16. The second issue is whether the effect of the judgment in
Manakchand Motilal’s case (supra) can be undone by bringing out
amendments in question. A large number of authorities have been cited
in this regard. We may refer to a few of them.

H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 423
BROKERS ASSN. [DEEPAK GUPTA, J.]

17. In Shri Prithvi Cotton Mills Ltd. and Another vs. Broach A
Borough Municipality and Others 6, a Constitution Bench of this Court,
dealing with the question of validity of a validation Act passed with a
view to get over the judgment of this Court, held that even it has
competence, the Legislature cannot merely pass a law that a decision of
this Court shall not bind. This Court held as follows :-
B
“4.…….Granted legislative competence, it is not sufficient to
declare merely that the decision of the Court shall not bind for
that is tantamount to reversing the decision in exercise of judicial
power which the Legislature does not possess or exercise. A
court’s decision must always bind unless the conditions on which
it is based are so fundamentally altered that the decision could not C
have been given in the altered circumstances…….”
18. In the matter of Cauvery Water Disputes Tribunal, Re7 a
Constitution Bench of this Court after referring to a large number of
authorities held as follows :-
D
“76.The principle which emerges from these authorities is that
the legislature can change the basis on which a decision is given
by the Court and thus change the law in general, which will affect
a class of persons and events at large. It cannot, however, set
aside an individual decision inter parties and affect their rights
and liabilities alone. Such an act on the part of the legislature E
amounts to exercising the judicial power of the State and to
functioning as an appellate court or tribunal.”
19. In S.R. Bhagwat and Others vs. State of Mysore 8, a three-
Judge Bench was dealing with a case where the petitioners were held
entitled to certain promotions and service benefits from a particular date. F
Even though these benefits were given to them the State did not give
them the monetary benefits and, in fact, passed a law which had the
effect of denying the monetary benefits due to the petitioners, in terms
of the judgments earlier passed in their favour. After dealing with the
entire law on the subject this Court held as follows :- G
“12. It is now well settled by a catena of decisions of this Court
that a binding judicial pronouncement between the parties cannot
6
1969(2) SCC 283
7
1993 Supp.(1) SCC 96(II)
8
(1995) 6 SCC 16 H
424 SUPREME COURT REPORTS [2018] 10 S.C.R.

A be made ineffective with the aid of any legislative power by
enacting a provision which in substance overrules such judgment
and is not in the realm of a legislative enactment which displaces
the basis or foundation of the judgment and uniformly applies to a
class of persons concerned with the entire subject sought to be
covered by such an enactment having retrospective effect………
B
xxx xxx xxx
xxx xxx xxx
15. We may note at the very outset that in the present case the
High Court had not struck down any legislation which was sought
C to be re-enacted after removing any defect retrospectively by the
impugned provisions. This is a case where on interpretation of
existing law, the High Court had given certain benefits to the
petitioners. That order of mandamus was sought to be nullified by
the enactment of the impugned provisions in a new statute. This
D in our view would be clearly impermissible legislative exercise.”
20. In State of Tamil Nadu vs. State of Kerala and Another 9,
the Constitution Bench of this Court again dealt with the question as to
whether the Legislature could set at naught the decision of the superior
courts. After referring to a large number of judgments, this Court laid
E down the following principles:-
(i) that the doctrine of separation of powers is an entrenched
principle in the Constitution of India even though there is no specific
provision in the Constitution;
(ii) Independence of Courts from Executive and Legislature is
F fundamental to the rule of law and one of the basic tenets of the
Indian Constitution;
(iii) the doctrine of separation of powers between the three organs
of the State – Legislature, Executive and the Judiciary is a
consequence of principles of equality enshrined in Article 14 of
G the Constitution of India. Consequently, a law can be set aside on
the ground that it breaches the doctrine of separation of powers
since that would amount to negation of equality under Article 14
of the Constitution of India;

9
(2014) 12 SCC 696
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 425
BROKERS ASSN. [DEEPAK GUPTA, J.]

(iv) the High Courts and the Supreme Court are empowered by A
the Constitution of India to determine whether a law made by the
Parliament or State Legislature is void;
(v) the doctrine of separation of powers applies to the final
judgments of the courts. The Legislature cannot declare any
decision of a court of law to be void or of no effect. It can, however, B
pass an amending Act to remedy the defects pointed out by a
court of law or on coming to know of it aliunde;
(vi) if the Legislature has the power and competence to make a
validating law it can make the law retrospective;
(vii) even where the law is enacted by the Legislature appears C
within its competence but if in substance it is shown as an attempt
to interfere with the judicial process, such law can be invalidated
being in breach of the doctrine of separation of powers.
21. The same principle has been reiterated in Cheviti Venkanna
Yadav vs. State of Telangana and Others10 in the following terms:- D
“30.……The legislature has the power to enact laws including
the power to retrospectively amend laws and thereby remove
causes of ineffectiveness or invalidity. When a law is enacted
with retrospective effect, it is not considered as an encroachment
upon judicial power when the legislature does not directly overrule E
or reverse a judicial dictum. The legislature cannot, by way of an
enactment, declare a decision of the court as erroneous or a nullity,
but can amend the statute or the provision so as to make it
applicable to the past……”
22. On analysis of the aforesaid judgments it can be said that the F
Legislature has the power to enact validating laws including the power
to amend laws with retrospective effect. However, this can be done to
remove causes of invalidity. When such a law is passed the Legislature
basically corrects the errors which have been pointed out in a judicial
pronouncement. Resultantly, it amends the law, by removing the mistakes
G
committed in the earlier legislation, the effect of which is to remove the
basis and foundation of the judgment. If this is done, the same does not
amount to statutory overruling.

10
(2017) 1 SCC 283
H
426 SUPREME COURT REPORTS [2018] 10 S.C.R.

A 23. However, the Legislature cannot set at naught the judgments
which have been pronounced by amending the law not for the purpose
of making corrections or removing anomalies but to bring in new provisions
which did not exist earlier. The Legislature may have the power to remove
the basis or foundation of the judicial pronouncement but the Legislature
cannot overturn or set aside the judgment, that too retrospectively by
B
introducing a new provision. The legislature is bound by the mandamus
issued by the Court. A judicial pronouncement is always binding unless
the very fundamentals on which it is based are altered and the decision
could not have been given in the altered circumstances. The Legislature
cannot, by way of introducing an amendment, overturn a judicial
C pronouncement and declare it to be wrong or a nullity. What the Legislature
can do is to amend the provisions of the statute to remove the basis of
the judgment.
24. Applying these principles to the present case it is apparent
that when the decision was rendered in Manakchand Motilal’s case
D (supra) there was no provision providing for payment of interest or
prohibiting payment of interest. The Court had observed that even if
such a provision prohibiting payment of interest had been there in the
statute such provision would be illegal. Therefore, there was no error
pointed out by the Court which could have been corrected by the State
Legislature. As pointed out above, the State, in fact, first tried to implement
E the judgment by framing rules providing for payment of interest. Later, it
incorporated the contentious provisions prohibiting payment of interest.
These amendments did not in any way alter the basis of the judgment.
25. Therefore, the State, in so far as it has made the amended
provisions retrospective, has attempted to nullify the writ of mandamus
F issued by the Court in favour of the respondents. This mandamus could
not have been set at naught by making the provisions retrospective. This
would be a direct breach of the doctrine of separation of powers as laid
down in State of Tamil Nadu (supra). We are clearly of the view that
the State Legislature could not have nullified the judgment passed in
G Manakchand Motilal’s case (supra) by retrospectively amending the
Acts. Therefore, the validating Acts in so far as they are retrospective,
are held to be illegal.
26. However, since we have clearly held that the observations
made in Manakchand Motilal’s case (supra) that if the provision prohibits
H payment of interest then such a provision would be violative of Article
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 427
BROKERS ASSN. [DEEPAK GUPTA, J.]

14 of the Constitution, is obiter, the issue whether such an amendment A
is valid or not will have to be decided on its own merits.
Issue No. 3
27. To decide this issue we must first understand the concept of
interest. It has been repeatedly held that interest is basically compensation
for the use or retention of money. In Halsbury’s Laws of England, B
Fourth Edition, Volume 32, interest has been defined as follows:-
“127. Interest in general. Interest is the return or compensation
for the use or retention by one person of a sum of money belonging
to or owed to another. Interest accrues from day to day even if
payable only at intervals, and is, therefore, apportionable in respect C
of time between persons entitled in succession to the principal.”
According to Law Lexicon, by P. Ramanathan Aiyar 3 rd Edition
(2005) (page 2402) Vol 2:
“Interest” means the time value of the funds or money involved, D
which, unless otherwise agreed, is calculated at the rate and on
the basis customarily accepted by the banking community for the
funds of money involved.”
In WORDS AND PHRASES permanent editions, Vol 22-page 148,
Interest means :-
E
i) “Interest” is compensation for loss of use of principal. Jersey
City v. Zink, 44 A.2d 825, 828, 133 N.J. Law 437"
ii) “Interest” means compensation for the use or forbearance of
money. Commissioner of Internal Revenue v. Meyer, CCA, 139
F.2d 256,259" F
Black’s Law Dictionary, Sixth Edition (page 812) defines ‘Interest’
as:-
“For use of money. Interest is the compensation allowed by law
or fixed by the parties for the use or forbearance of borrowed
money. Jones V. Kansas Gas & Electric Co.222 Kan. 390, 565, G
P.2d 597, 604.”
28. There is no manner of doubt that normally a person would be
entitled to interest for the period he is deprived of the use of money and
the same is used by the person with whom the money is lying. The issue
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428 SUPREME COURT REPORTS [2018] 10 S.C.R.

A that arises for determination is whether a provision providing for non-
payment of interest is so inequitable that it can be termed to be arbitrary
and held to be violative of Article 14 of the Constitution of India.
29. The respondents have referred to the recommendations made
by the Law Commission of India in its 63rd Report. In Para 7.9 of the
B Report it was noted that in case of security deposits, if a demand for
interest is not made, interest is not recoverable. This observation is based
on the decision of the Nagpur High Court in Sheikh Mehtab S/o Sheikh
Farid Mussalman vs. Dharamrao Bhujangrao 11. The Law
Commission felt that in view of the fact that deposits are often taken for
performance of contractual or statutory obligations it would be fair that
C interest from the date of deposit should be allowed on such deposits.
Despite the recommendation of the Law Commission no statutory
provision was introduced making it obligatory on the part of any authority
to pay interest on deposits.
30. Though various judgments have been cited, we are of the
D view that only two are required to be considered. The first is the judgment
relied upon by the Division Bench of the Karnataka High Court in
Jagdamba Paper Industries (P) Ltd. (supra). We may note that the
said judgment does not lay down any proposition of law because the
direction for payment of interest has been issued with the agreement of
E the parties. This Court in the above judgment had observed that the
respondent should pay interest and the respondent agreed to do so. This
cannot be termed as a judgment laying down law that in every case of
deposit, interest must be paid.
31. The second important judgment is Ferro Alloys Corpn. Ltd.
F (supra). Various issues were raised in this case but we are concerned
only with that portion of the judgment which deals with the payment of
interest on the security deposits, deposited by the consumers. In this
case, this Court dealt with the regulations framed by various electricity
boards.

G 32. There were two types of cases before the Supreme Court.
The regulation of some boards provided for payment of very low rate of
interest. The regulation of some boards did not provide for payment of
interest on security deposit at all. The issue before the Apex Court was
whether the consumers were entitled to interest on the security deposit.
11
AIR (31) 1944 Nagpur 330
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 429
BROKERS ASSN. [DEEPAK GUPTA, J.]

33. Dealing with the question whether the interest on the security A
deposits is payable in equity or under common law, this Court observed
as follows :-
“129. Strictly speaking, the word “interest” would apply only to
two cases where there is a relationship of debtor and creditor. A
lender of money who allows the borrower to use certain funds B
deprives himself of the use of those funds. He does so because
he charges interest which may be described as a kind of rent for
the use of the funds. For example, a bank or a lender lending out
money on payment of interest. In this case, as already noted,
there is no relationship of debtor and creditor.”
C
Thereafter, the Court also held as follows :-
“132. The argument of Mr. G. Ramaswamy, learned counsel, that
the deposit does not contemplate appropriation is not correct
because in the nature of contract it is liable to be appropriated for
the satisfaction of any amount liable to be paid by the consumer D
to the Board for violation of any conditions of supply in the context
of wide-scale theft of energy, tampering with the meters and such
other methods adopted by the consumers. Therefore, the said
consumption security deposit serves not only to secure the interest
of the Board for any such violation but should serve as a deterrent
on the consumer in discharging his obligations towards the Board.” E

The Court clearly held that there was no equitable right to claim interest.
34. This Court also considered the question as to whether the
stipulation that no interest is payable on the securities furnished would
be un-constitutional and arbitrary, and held as follows:- F
“143. In the light of the above discussion, we hold that the clause
not providing for interest is neither arbitrary nor palpably
unreasonable, nor even unconscionable. In holding so we have
regard to the following:
1. The consumer made the security deposit in consideration of G
the performance of his obligation for obtaining the service which
is essential to him.
2. The electricity supply is made to the consumers on credit as
has been noted above.
H
430 SUPREME COURT REPORTS [2018] 10 S.C.R.

A 3. The billing time taken by the Board is to the advantage of the
consumer.
4. Public revenues are blocked in generation, transmission and
distribution of electricity for the purpose of supply. The Board
pays interest on the loans borrowed by the Board. This is in order
B to perform public service. On those payments made by the Board
it gets no interest from the consumers.
5. The Board needs back its blocked money to carry out public
service with reasonable recompense.
6. The Board is not essentially a commercial organisation to which
C the consumer has furnished the security to earn interest thereon.”
35. It would also be pertinent to notice that in Ferro Alloys Corpn.
Ltd. (supra) after referring to the judgment in Jagdamba Paper
Industries (P) Ltd. (supra), it was observed by this Court that
Jagdamba’s case did not decide the issue of payment of interest.
D
36. After going through the judgments in Jagdamba’s and Ferro
Alloys’s case, we are of the view that the High Court erred in relying
upon the judgment in Jagdamba’s case which, in fact, had not decided
this issue at all. In Ferro Alloys’s case this Court had clearly held that
the provision providing that no interest is payable was neither arbitrary
E nor unreasonable.
37. We may now deal with the contention whether a condition
providing that no interest is payable for security amount deposited by the
money lenders or pawn brokers is unreasonable. This Court in M/s
Fatehchand Himmatlal and Others vs. State of Maharashtra12 held
F that even if it be accepted that money lending is a trade then also
restrictions can be placed upon it. The following observations are
relevant :-
“29……..Money-lending and trade financing are indubitably
“trade” in the broad rubric, but our concern here is blinkered by a
G specific pattern of tragic operations with no heroes but only anti-
heroes and victims.
xxx xxx xxx
xxx xxx xxx
12
(1977) 2 SCC 670
H
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 431
BROKERS ASSN. [DEEPAK GUPTA, J.]

38.…….These are weaker sections for whom constitutional A
concern is shown because institutional credit instrumentalities have
ignored them. Money lending may be ancillary to commercial
activity and benignant in its effects, but money-lending may also
be ghastly when it facilitates no flow of trade, no movement of
commerce, no promotion of intercourse, no servicing of business,
B
but merely stagnates rural economy, strangulates the borrowing
community and turns malignant in its repercussions. The former
may surely be trade, but the latter — the law may well say — is
not trade. In this view, we are more inclined to the view that this
narrow, deleterious pattern of money- lending cannot be classed
as “trade”….” C
38. Thereafter this Court observed as follows :_
“42.Maybe, some stray money-lenders may be good souls and to
stigmatise the lovely and unlovely is simplistic betise. But the
legislature cannot easily make meticulous exceptions and has to
proceed on broad categorisations, not singular individualisations. D
So viewed, pragmatics overrule punctilious and unconscionable
money-lenders fall into a defined group…..
xxx xxx xxx
44. Every cause claims its martyr and if the law, necessitated by
practical considerations, makes generalisations which hurt a few, E
it cannot be helped by the Court……”
39. We must also remember that the businesses of money lending
and pawn broking are usurious businesses and the Government may
rightly impose onerous conditions to restrict or even discourage people
from entering into such businesses. We are not comparing these
businesses with the liquor business but the observations of the Kerala F
High Court in Monarch Investments St. Thomas Road, Trichur and
Ors. vs. State of Kerala & Ors.13 are relevant:-
“8. Broadly stated, money lending is business. But it has to be
remembered that money lenders usually charged heavy interest,
impose very onerous conditions for the grant of loans, and the G
poor debtor may, in almost all cases be compelled to sell his produce
or part with his land. Money lending as a business thus forms part
of a pernicious trade requiring greater monetary regulation and
control than those imposed on the normal trade or business……..”
13
AIR (1989) KER.177 H
432 SUPREME COURT REPORTS [2018] 10 S.C.R.

A “9. Money-lenders whether described as belonging to a “narrow
noxious category” or “as oppressive and back breaking”, whether
there are honest money lenders or unscrupulous money-lenders
form a special class whose business require greater statutory
control and supervision and whose “freedom to fleece” has to be
restrained in public interest………”
B
40. It is thus apparent that the courts have frowned upon the
“trade” of money lending. The profession of money lending, may be a
trade, but onerous restrictions may be placed on such trade which is
definitely usurious. These onerous restrictions would be reasonable
keeping in view the nature of the trade. The Legislature in its wisdom
C can decide whether it should make it more difficult for people to engage
in the business of money lending and pawn broking.
41. A money lender or a pawn broker applies for licence to do this
business knowing fully well that the security that he shall deposit shall
not earn any interest. He with open eyes accepts the condition which is
D part of the Acts. Nobody forces a person to engage in the trade of
money lending or pawn broking. Therefore, the impugned provisions
cannot be held to be unreasonable.
42. Lastly, we have to consider the submission as to whether a
provision providing that no interest is payable on the security deposit is
so arbitrary, as to make it unconstitutional.
E
43. In Independent Thought vs. Union of India and Anr.14 this
Court held that arbitrariness must be writ large to make it un-constitutional.
Whether the interest should be paid or not is a matter which parties
decide amongst themselves. Supposing, there is a contract providing
that no interest will be paid on the amount advanced; can it be said that
F such a clause in the contract is so arbitrary that the contract becomes
void or becomes inoperative. We do not think so. If we make reference
to every day transactions, banks do not pay interest on current account.
Supposing, a person’s money lies in the current account for 3-4 years he
cannot claim interest only on the ground that the bank would have utilized
this money for commercial purposes. There are various instances where
G
schools, other educational institutions, clubs, societies ask for refundable
deposits on which no interest is payable. These are accepted to be normal
routine practices because these bodies are not engaged in commercial
activities. Even a pawn broker pays no interest on the value of the security
pledged with him.
H 14
(2017) 10 SCC 800
THE STATE OF KARNATAKA v. THE KARNATAKA PAWN 433
BROKERS ASSN. [DEEPAK GUPTA, J.]

44. Contracts providing for non-payment of interest on earnest A
money and security deposits have been considered in the context of the
Arbitration Acts. The Courts have held that in view of the agreement
entered into between the parties, the arbitrator cannot award interest
prior to the date of passing of the award. In fact, this Court has clearly
held that the arbitrator cannot award pendente lite interest15. Though
B
these authorities do not directly deal with the issue with which we are
concerned, it is obvious that in all these cases, the Court has not construed
the provision of the contract providing for non-payment of interest to be
void. The said provision has, in fact, been legally enforced. We may,
however, note that under the Arbitration Act of 1940, this Court held that
the arbitrator could award pendente lite interest16 but under the Arbitration C
and Conciliation Act, 1996 the arbitrator cannot award interest prior to
the date of award17. The clause for non-payment of interest has not
been held void in any case. Therefore, we are clearly of the view that
the impugned provisions prohibiting payment of interest on the amount
of security deposits cannot be said to be arbitrary or violative of Article
D
14 of the Constitution of India.
45. In view of the above discussion it is held as follows :-
(i) Section 7-A & 7-B of the M.L. Act and 4-A & 4-B of the P.B.
Act are valid from the date of their enactment;
(ii) That the provisions making these amendments retrospective E
from 1985 are illegal and invalid.
46. In view of the above discussion the appeals are partly allowed
and the judgment of the High Court of the Karnataka is set aside in the
aforesaid terms. Pending application(s), if any, stand(s) disposed of.
F

Ankit Gyan Appeals partly allowed.

15
G
Sri Chittaranjan Maity v. Union of India, (2017) 9 SCC 611
16
Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy, (1992)
1 SCC 508
17
Sayeed Ahmed & Company v. State of Uttar Pradesh & Ors., (2009) 12 SCC 26, Sree
Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat &
Ors., (2010) 8 SCC 767, Union of India v. Bright Power Projects (India) Pvt. Ltd.,
(2015) 9 SCC 695 H