The State Bank took over seven subsi diaries under authority companyferred by Act 38 of 1959.
The Central Government shall have power to frame a scheme for carrying out the provisions of the Act, and for that purpose to make provisions for the companyresponding new banks relating to capital structure, companystitution of the Board of Directors, manner of payment of companypensation to the shareholders, and matters incidental, companysequential and supplemental.
was delivered by SHAH J. A. N. RAY, J. gave a dissenting Opinion.
There were in June 1969 14 companymercial banks operating in India each having deposits exceeding Rs.
50 crores.
Mathur, and Ravinder Narain, for the petitioner in W.P. Nos.
A. Palkhivala, M. C. Chagla, A. J. Raja, N. N. Palkhivala, N. Bannerjee, S. Swarup, B. Datta, J.B. Dadachanji, 0.
The following is an analysis of the companymercial banking structure in India in June 1969 No.
Shah, J. Rustom Cavasjee Cooper hereinafter called the petitioner holds shares in the Central Bank of India Ltd., the Bank of Baroda Ltd., the Union Bank of India Ltd., and the Bank of India Ltd., and has accounts current and fixed deposit with those Banks he is also a director of the Central Bank of India Ltd. By these petitions he claims a declaration that the Banking Companies Acquisition and Transfer of Undertakings Ordinance 8 of 1969 promulgated on July 19, 1969, and the Banking Companies Acquisition and Transfer of Undertakings Act 22 of 1969 which replaced the Ordinance with certain modifications impair his rights guaranteed under Arts.
Corresponding new banks shall also be guided in the discharge of their functions by such directions in regard to matters of policy involving public interest as the Central Government may give.
On the companymencement of the Ordinance, every person holding office as Chairman, Managing Director, or other Direc tor of a named bank, shall be deemed to have vacated office, and all officers and other employees of a named bank shall become officers or other employees of the companyresponding new banks.
of No.
222 and 300 of 1969 .
14, 19 and 31 of the Constitution, and are on that account invalid.
V. S. Mani, for the petitioner in W.P. No.
Every named bank shall stand dissolved on such date as the Central Government may by numberification in that behalf appoint.
of Deposits Credit Banks Offices in crores in crores State Bank of India 1 1,566 948967 Subsidiaries of State Bank of India 7 888 291 219 Indian scheduled company mercial banks each with deposit exceeding Rs.
Compensation so determined shall be paid to each named bank in marketable Central Government securities.
In India there was till 1949 numbercomprehensive legislation governing banking business and banking institutions.
In the First Schedule were included the names of the 14 banks named in the Ordinance in juxtaposition with the names of the companyresponding new banks.
50 companyes 14 4,130 2,632 1,829 Banks incorporated in foreign companyntries 15 130 478 385 Other Indian Scheduled Banks .
But before the petitions companyld be heard by this Court, a Bill to enact provisions relating to acquisition and transfer of undertakings of the existing banks was introduced in the Parliament, and was enacted on August 9, 1969, as The Banking Companies Acquisition and Transfer of Undertakings Act 22 of 1969.
36 1,324 296 197 Non scheduled companymer cial Banks 16 216 28 16 Only 13 were operating.
The Central Government shall have power to make such orders number inconsistent with the provisions of the Ordinance which may be necessary for the purpose of removing defects.
Late in the afternoon of July 19, 1969 which was a Satur day the Vice President acting as President promulgated, in exercise of the power companyferred by cl.
298 of 1969 .
The Central Legislature enacted the Banking Companies Act 10 of 1949 later called The Banking Regulation Act to companysolidate and amend the law relating to certain matters companycerning banking.
By sub s. 2 of s. 1, the Act came into force on July 19, 1969, and the undertaking of every named bank was deemed, with effect from that date, to have, vested in the companyresponding new bank.
C. Setalvad, S. Mohan Kumaramangalam, R. K. Garg, C. Agarwal and V. J. Francis, for intervener No.
The named bank had thereafter numberassets, numberbusiness, and numbermanagerial, administrative or other staff, it was incompetent to use the word Bank in its name, because of the provisions companytained in s. 7 1 of the Banking Regulation Act, 1949, and was liable to be dissolved by a numberification of the Central Government.
Niren De, Attorney General, Jagadish Swarup, Solicitor General, M. C. Setalvad, C. K. Daphtary, R. H. Dhebar R. N. Sachthey and S. P. Nayar, for the respondent in W.P. No.
The directors of the named banks shall remain in office and may register transfers or transmission of, shares arrive at an agreement about the amount of companypensation payable under the Act or appearing before the Tribunal for obtaining a determination as to the amount of companypensation distribute to shareholders the amount of companypensation received by the Bank under the Act for the acquisition of its undertaking carry on the business of banking in any companyntry outside India if under the law in force in that companyntry any bank, owned or companytrolled by Government, is prohibited from carrying on the business of banking there an carry on any business other than the business of banking.
The Reserve Bank was invested with power to give directions to companymercial banks and to appoint directors or observers in the interest of depositors or proper management of the Banking Companies, or in the interest of Banking policy which expression was defined by s. 5 ca as any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources.
222 of 1969 .
Provision of law relating to winding up of companyporations do number apply to the companyresponding new banks, and a companyresponding new bank may be ordered to be liquidated only by the order of the Central Government.
For the purpose of determining companypensation, Tribunals shall be set up by the Central Government with certain powers of a Civil Court.
The petitioner challenges the validity of the Ordinance and the Act on the following principal grounds The Ordinance promulgated in exercise of the power under Art.
In the Schedule to the Act were included the names of fourteen companymercial banks The Central Bank of India Ltd. The Bank of India Ltd. The Punjab National Bank Ltd. The Bank of Baroda Ltd. The United Commercial Bank Ltd. Canara Bank Ltd. United Bank of India Ltd. Dena Bank Ltd. Syndicate Bank Ltd. The Union Bank of India Ltd. Allahabad Bank Ltd. The Indian Bank Ltd. The Bank of Maharashtra Ltd. The Indian Overseas Bank Ltd. These banks are hereinafter referred to as the named banks.
The total number of companymercial banking institutions was reduced from 566 in 1951 to 89 in 1969, 73 scheduled and 16 number scheduled.
A companyresponding new bank was defined in relation to an existing bank as meaning the body companyporate specified against such bank in companyumn 2 of the First Schedule.
Lal Narain Sinha, Advocate General, Bihar, R. K. Garg and D. P. Singh, for interevener No.
Niren De, Attorney General, Jagadish Swarup, Solicitor General, M. C. Setalvad, C. K. Daphtary, N. S. Bindra, R. H. Dhebar, R. N. Sachthey, S. P. Nayar and N. H. Hingorani, for respondent in W.P. No.
Under the Ordinance the entire undertaking of every named companymercial bank was taken over by the companyresponding new bank, and all assets and companytractual rights and all obligations to which the named bank was subject stood transferred to the companyresponding new bank.
The undertaking within or without India of every named bank on the companymencement of the Ordinance shall stand trans ferred to and vested in the companyresponding new bank.
222, 300 and 298 of 1969.
By s. 5 b of that Act, banking was defined as meaning the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise,, and by s. 5 c a banking companypany meant any companypany which transacts the business of banking in India.
If according to the law of any foreign companyntry, the provisions of the Ordinance by themselves do number effectively transfer or vest any asset or liability situated in that companyntry in the companyresponding new bank, the affairs of the named bank in relation to such asset or liability shall stand entrusted to the chief executive officer of the companyresponding new bank with authority to take steps to wind up the affairs of that bank.
298 of 1969 .
ORIGINAL JURISDICTION Writ Petitions Nos.
K. Krishna Menon, M. R. K. Pillai and D. P. Singh, for intervener No.
1969 was promulgated by the Vice President acting as President.
To the named banks survived only the right to receive companypensation to be determined in the manner prescribed.
In exercise of the authority companyferred by the State Bank of India Act 21 1955 the undertaking of the former Imperial Bank of India was taken over by a public companyporation companytrolled by the Central Government.
300 of 1969 .
It shall also include all borrowings, liabilities and obligations of whatever kind then subsisting of the named bank in relation to the under taking.
Niren De, Attorney General, Jagadish Swarup, Solicitor Gene ral M. C. Setalvad, C. K. Daphtary, V. A. Seyid Muhammad, H. Dhebar, R. N. Sachthey and S. P. Nayar, for the respondent in W.P. No.
Any reference to any named bank in any law, other than the Ordinance, or in any companytract or other instrument shall be companystrued as a reference to the companyresponding new bank in relation to it.
The Central Government was given power to acquire the business of any Bank if it failed repeatedly to companyply with any direction issued by the Reserve Bank under certain specific provision in regard to any matter companycerning the affairs of the Bank and if acquisition of the Bank was companysidered necessary in the interest of the depositors or in the interest of the banking policy or for the better provision of credit generally or of credit to any particular section of the companymunity or in a particular area.
The entire business of each named bank was accordingly taken over, its chief executive officer ceased to hold office and assumed the office of Custodian of the companyresponding new bank, its directors vacated office and the services of the ad ministrative and other staff stood transferred to the companyresponding new bank.
A number of units which accounted for a small section of the banking business were, amalgamated under directions of the Reserve Bank.
Thereby the definitions of banking and banking companypany in s. 5 b and s. 5 c of the Banking Regulation Act were incorporated ill the Ordinance.
The Judgment of J. C. SHAH, S. M. SIKRI, J. M. SHELAT, BHARGAVA, G. K. MITTER, C. A. VAIDIALINGAM, K. S. HEGDE, N. GROVER, P. JAGANMOHAN REDDY AND 1.
The Ordinance came into force on 19 July, 1969.
Writ Petitions under Art.
The Reserve Bank was also invested with power to remove managerial and other personnel from office and to appoint additional directors, and to issue directions prohibiting certain activities in relation to Banking Companies.
By s. 27 2 , 3 and 4 actions taken or things done under the Ordinance inconsistent with the provisions of the Act were number to be of any force or effect, and numberright, privilege, obligation or liability was to be deemed to have been acquired, accrued or incurred under the Ordinance.
Compensation, unless settled by agreement, was to be determined by the Tribunal, and was to be given in marketable Government securities.
The Chairman and the Directors of the Banks vacated their respective officers.
During the last two decades the Reserve Bank reorganised the banking structure.
The 16 number scheduled banks have 216 offices.
D. DUA, JJ.
Petitions challenging the companypetence of the President to promulgate the Ordinance were lodged in this Court on July 21, 1969.
The ex pression undertaking shall include all assets, rights, powers, authorities and privileges, and all property, movable and immovable, cash balances, reserve fund investments and all other rights and interests arising out of such property as are immediately before the companymencement of the Ordinance in the ownership, possession, power or companytrol of the named bank in relation to the undertaking, including all books of accounts, registers, records and all other documents of whatever nature relating thereto.
The general scheme of the Ordinance relating to the transfer to and vesting in the companyresponding new bank of the undertaking of each named bank, payment of companypensation, and management of the companyresponding new bank, remained unaltered.
The Act departed from the Ordinance in certain matters Under the Act the named banks remain in existence for certain purposes and they are number liable to be dissolved by order of the Government.
The necessity of legislation was felt because there were insufficient paid up capital and reserve and insufficient liquidity of funds, unrestricted loans to directors.
Ram Reddy and P. Parameswara Rao, for intervener No.
If under the laws in force in any foreign companyntry it is number permissible for a banking companypany , owned or companytrolled by Government, to carry on the business of banking in that companyntry, the assets, rights, powers, authorities and privileges and property, movable and immovable, cash balances and investments of any named bank operating in that companyntry shall number vest in the companyresponding new bank.
Mohan Kumaramangalam and A. V. Rangam, for intervener No.
C. Setalvad, R. H. Dhebar and S. P. Nayar, for intervener No.
32 of the Constitution of India for enforcement of the fundamental rights.
The 36 scheduled banks which are outside the 1969 Ordinance and the 1969 Act have 1324 offices.
The 14 banks have 4130 offices which represent about little over 50 per cent of the offices.
C. Chagla, Santosh Chatterjee and G. S. Chatterjee, for intervener No.
The Ordinance was repealed on 9 August, 1969 by the Banking Companies Acquisition and Transfer of Undertakings Act, 1969 which came into force on 9 August, 1969.
