PARASHURAM DETARAM SHAMDASANI Vs. TATA INDUSTRIAL BANK, LIMITED

JUDGEMENT

(1.) The Tata Industrial Bank, Limited, was in the year 1917 incorporated under the Indian Companies Act, 1918, for the purpose of carrying on the business of banking in all its branches. It had a nominal capital of twelve crores of rupees, divided into 1,600,000 shares of 75 rupees each. In July, 1923, 1,000,893 of its shares were in issue, and on each of them the sum of Us. 22-8 had been paid up. There was therefore an uncalled liability of Rs. 52-8 on every issued share, In July, 1923, the first appellant was the holder of one hundred of these 1,000,893 shares, and the second appellant was the holder of live. The relatively trifling amount of these holdings constitutes a circumstance of relevance at many stages of this case.

(2.) It seems to be accepted on all hands that for some years prior to July, 1923, the Tata Bank had been losing ground. It is in evidence that its deposits had in two and a half years sunk from twelve crores to three and a half crorers. Its industrial banking business had been so unprofitable that about a year before it had been given up, leaving the bank in possession of a considerable block of industrial securities largely depreciated and difficult to realise. There had been an agitation against the bank partly patriotic a bank built up with Indian money should be run by Indians partly carried on by persons who had grievances, real or supposed, against the board, Amongst the disaffected was the first appellant, who, having been in the service of the bank, had had his employment terminated by the general manager without due cause, as ha alleged. In consequence, so it was rightly or wrongly suggested, ha adopted an attitude of hostility to the board. He had appeared at the general meeting of the shareholders on May 1, 1923, and having as ha complained been then denied a bearing he instituted, with his brother, the second appellant, a suit against the bank for redress on that score a suit which had been dismissed by Pratt J. in Juno (use 47 Bom. 915), in a judgment which gravely questioned the bona fides of the appellants in bringing it. It was stated in evidence that in July the bank was moribund : that it would have had to close in a few months if something drastic had not been done to save the situation. This may be, probably wag, an exaggeration. Bat public confidence in the bank had been, it would seam, weakened if not destroyed, Some form of reorganisation was necessary. So much seems to be conceded on all ban Is. The choice lay between liquidation, reconstruction and amalgamation. Here there was a difference of opinion. The first appellant in a long open letter to the shareholders, on July 14, 1923, a letter to which reference must again be made in another connection advocated reconstruction, with liquidation as a second alternative. The views of the directors were not at first at one. But, after withdrawal from the board of two of them embarrassed it would seem by divided interests the remaining directors unanimously resolved that amalgamation with the Central Bank of India, Limited, upon terms which the directors of that bank had previously either proposed or provisionally agreed to, was the solution of the troubles of the Tata Bank most to be favoured. Accordingly, having caused to be entered into a conditional agreement for amalgamation with the Central Bank, the directors of the Tata Bank decided to submit it for the approval of their shareholders as a scheme of amalgamation under Section 213 1928 of the Indian Companies Act.

(3.) The Central Bank had been incorporated in 1911 under the Act. of 1882 it had been established with a Head Office at Tata Bombay for the purpose of carrying on the business of banking Bank in all its branches. Its capital was much Jess than that of the Tata Bank, consisting of three crores only, divided into 600.000 shares of 50 each. Of these shares, in July, 1923, 200,000 had been issued and each was paid up to the extent of Its. 25. The Central Bank was vigorous, and its business was profitable. In July, 1923, it had a reserve of thirty lakhs of rupees a circumstance the significance of which, as it seemed to their Lordships, was somewhat missed by the appellant in his argument before the Board. In the Central Bank the first appellant was the holder of five shares. There were many persons, apparently, who like him had shares in both banks.