PUNJAB NATIONAL BANK LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) By this petition under Article 226 of the Constitution of India the Punjab National Bank Ltd., New Delhi and three of its shareholders pray for the issue of a writ, order or direction in the nature of a mandamus to the Union of India, the Reserve Bank of India and the Custodian, Punjab National Bank, New Delhi, to discharge their obligations under Section 5(1) of Act 5 of 1970 and pay the interim dividend declared by and in the resolution dated July 16. 1969 of the Board of Directors of the Punjab National Bank Ltd.

(2.) On July 16. 1969 the Board of Directors of the Punjab National Bank Ltd. passed a resolution declaring an interim dividend for the half year ending on June 30, 1969 at the rate of Rs. 1 .20 gross per share. This resolution was passed by virtue of the authority vested in the Board of Directors under Article 84 of the Articles of Association of the said Bank. The Members' Share Register was directed to be closed for recording any transfer of shares from August 12 to August 23, 1969 and it was decided that the interim dividend declared by the Board of Directors will be paid to those whose names were entered in the Share Register of the said bank as on August 23, 1969. This fact was notified by sending information to the Bombay, Calcutta, Madras and Delhi Stock Exchanges wherein the shares of the Punjab National Bank Ltd. were being quoted. A notice was also published in the Press to this effect in the newspapers of July 17 and July IS, 1969. Action in terms of Section 154 of the Companies Act, 1950 closing the Register of Members could not, however, be taken, possibly due to subsequent developments.

(3.) On July 19, 1969 the President of India promulgated an Ordinance taking over the undertaking of 14 Banks including that of petitoner No. 1. This 0rdinance came into effect immediately. On August 9, 1969 the parliament enacted the Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969. Under the provisions of the said Ordinance and the said Act 22 of 1969 the undertaking of petitioner No. 1 was transferred to the corresponding new bank (Punjab National Bank) with effect from July 19. 1969. The shareholders of Petitioner No. 1 moved respondents for payment of the interim dividend declared by the Board of Directors on July 16, 1969. It was not paid. It is averred that the Central Government and the Reserve Bank advised the third respondent not to pay the interim dividend. Accordingly, on October 17, 1969 an extraordinary general meeting of the members of petitioner No. 1 was convened in which a resolution was passed asking for payment of the aforesaid interim dividend. This was forwarded to the third respondent. By his letter of February 6, 1970 the third respondent wrote that the interim dividend was not payable.