BARI DOAB BANK LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) IS the action of the Central Government in ordering the amalgamation of the petitioner-bank with the Oriental Bank of Commerce and in rejecting its request for conversion into a non-banking company illegal ? This is the primary question that arises for consideration in this case. A few facts may be noticed.

(2.) THE petitioner-bank was established in the year 1915. While it was continuing its business, the Reserve Bank of India filed an application under Section 45 (1) of the Banking Regulation Act, 1949, for an order of moratorium. On September 30, 1996, the Government of India imposed a moratorium on the petitioner up to December 31, 1996. It was, inter alia, ordered that during the period of moratorium, the bank would not, without the permission of the Reserve Bank of India in writing, grant any loan or advance, incur any liability or make any investment, etc. The petitioner challenged this order through a petition in the Delhi High Court. The Central Government as well as the Reserve Bank of India contested the petition. It was pleaded that various inspections had been conducted and that the impugned order had been passed in public interest. The writ petition was dismissed (see [1997] 89 Comp Cas 292 (Delhi) ). The Letters Patent Appeal filed by the petitioner having been dismissed, vide order dated March 20, 1997 (see [1997] 89 Comp Cas 438 (Delhi)), it approached the apex court through a petition for Special Leave to Appeal (Civil) No. 6900 of 1997. This petition was disposed of, vide order dated March 31, 1997 (see [1997] 89 Comp Cas 462 (SC) ). Their Lordships found no "infirmity" in the view taken by the High Court that (page 463) "the petitioner will have post decisional opportunity at the stage of filing objections to the draft scheme framed under Section 45 (4) when forwarded by the Reserve Bank of India under Section 45 (6) of the Act". In view of the statement made on behalf of the Reserve Bank of India that (page 464) "the objections submitted by the petitioner against the order of moratorium dated September 30, 1996, as well as the draft scheme framed by the Reserve Bank of India under Section 45 (4) have to be considered by the Central Government under Section 45 (7) of the Act in the light of the comments that are made by the Reserve Bank of India on the said objections", their Lordships were pleased to observe that (page 464) "the apprehension of the petitioner that the said objections will not be considered by the Central Government is unfounded. . . " and that (page 464) "no fault can be found in the matter of post-decisional hearing in respect of the order of moratorium passed under Section 45 (2) of the Act". Their Lordships were also pleased to observe that (page 464) "while considering the objections submitted by the petitioner, the Central Government should give due consideration to the submission made by counsel for the petitioner about being allowed to continue" as non-banking company after it has "paid off the dues of all depositors and creditors". Lastly, it was also held that the order (page 465) "would not preclude the petitioner from challenging the validity of the order passed by the Central Government under Section 45 (7) of the Act on all the grounds available under the law". Their Lordships were also pleased to extend the moratorium imposed, vide order dated September 30, 1996, "till April 7, 1997". Thereafter, the Central Government passed three orders on April 7, 1997. By the first order, a copy of which has been produced as annexure P-2 with the writ petition, it was held that "there is no merit in the contentions. . . regarding the moratorium, the merger and the request for conversion of the banking institution into a non-banking financial company and/or a non-banking company". By another order of date, the Central Government notified the "bari Doab Bank Limited (Amalgamation with Oriental Bank of Commerce) Scheme, 1997". A copy of this order is at annexure P-9 with the writ petition. The Central Government issued another notification on the same day by which it specified the dates with effect from which various paragraphs of the scheme shall come into force. A copy of this notification is at annexure P-10 with the writ petition. The petitioner alleges that the order of moratorium passed on September 30, 1996 (annexure P-1 with the writ petition) and the three orders passed on April 7, 1997, copies of which are at annexures P-2, P-9 and P-10, respectively, are illegal and, thus, liable to be set aside.

(3.) COUNSEL for the parties have been heard.