JUDGMENT
Bhaskaran Nambiar, J.
1. The suspension of banking business by the Bank of Cochin, pursuant to a moratorium, ordered by the Central Government and its consequent amalgamation with the State Bank of India, under a scheme prepared by the Reserve Bank of India, have given rise to these writ proceedings and the present appeals.
2. On an application made by the Reserve Bank of India under Section 45 of the Banking Regulation Act (for short, “the Act”), the Central Government made an order of moratorium in respect of the Bank of Cochin in April, 1985, and the banking business stood suspended Thereafter, when the Reserve Bank was satisfied that in public interest and in the interest of depositors, it was necessary to prepare a scheme for the amalgamation of this banking company, the Bank of Cochin, with some other banking institution, a draft scheme was prepared proposing to amalgamate the Bank of Cochin with the State Bank of India. The draft scheme with certain modifications suggested by the Reserve Bank was sanctioned by the Central Government under Section 45(7) of the Act, by notification dated August 23, 1985. The schedule attached to the scheme and forming part of the scheme included the names of twenty-one officers of the Bank of Cochin (the transferor-bank) who ceased to be the employees of that bank and who were entitled only to pension, gratuity, provident fund and such other benefits ordinarily admissible to them before the close of the business on April 27, 1985. They were thus denied employment in the transferee bank, the State Bank of India.
3. Aggrieved by this “humiliating” inclusion in the “offending” schedule, the employees filed writ petitions in this court challenging the validity of the schedule attached to this scheme contending mainly that it was unfair, unjust, arbitrary and discriminatory and opposed to the principles of natural justice.
4. A learned single judge of this court practically rejecting all their contentions, held that there was no discrimination, no arbitrariness and no violation of any principle of natural justice. But the learned judge observed and directed as follows in the concluding paragraph :
“In view of my finding that the petitioners are not entitled to avoid their inclusion in the Schedule, only due to absence of previous notice, since they had not sought any such opportunity and in view of my further finding that the principles of natural justice will be sufficiently satisfied if a post-decisional opportunity is given to them to urge their case for benefits of continuance in service, notwithstanding their inclusion in the Schedule, I think it is only necessary for me to direct that representations, if any, submitted by any of the petitioners, seeking continuance in service, will be considered on merits and disposed of by the transferee-bank within a period not exceeding three months from today. The disciplinary proceedings against the other transferred employees including the 14 persons whose names are specifically mentioned by the transferee-bank will also be
completed within the above period of three months.”
5. Aggrieved by the directions for a “post-decisional opportunity” to be afforded to the petitioners, the Reserve Bank of India and the-State Bank of India filed the main appeals. Some of the employees have filed cross-objections challenging the decision of the learned judge upholding the schedule to the scheme. Three employees have filed independent appeals against the judgment in their writ petitions.
6. The short question, therefore, is whether the denial of employment to the petitioners in the transferee-bank, the State Bank of India, under the scheme can be set at naught in these proceedings under Article 226 of the Constitution and whether the petitioners are entitled to any positive directions for a post-decisional enquiry or for appointment in the State Bank of India.
7. Under Section 45(4) of the Act, the Reserve Bank of India is empowered to prepare a scheme for the amalgamation of a banking company with any other banking institution if the Reserve Bank is satisfied during the period of moratorium that it is necessary (a) in the public interest, or (b) in the interests of the depositors, or (c) in order to secure the proper management of the banking company, or (d) in the interests of the banking system in the country as a whole. The authority of the Reserve Bank, in the present case, to prepare a scheme for the amalgamation of the Bank of Cochin is not denied and there is no dispute that the conditions necessary for preparing a scheme were also satisfied. The scheme as such is not challenged and the validity of the statutory provisions is also not in challenge.
8. Clause (5) of Section 45 of the Act provides that the scheme may contain all or any of the matters mentioned in Sub-clauses (a) to (1).
9. The provisions in the Act for the continuance of the service of the employees are contained in Sub-clause (i) of Section 45(5) which reads thus :
“(i) the continuance of the services of all the employees of the banking company (excepting such of them as are not workmen within the meaning of the Industrial Disputes Act, 1947, are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee-bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date of the order of moratorium :
Provided that the scheme shall contain a provision that–
(i) the banking company shall pay or grant not later than the expiry of the period of three years from the date on which the scheme is sanctioned by the Central Government, to the said employees the same remuneration and the same terms and conditions of service as to payment or grant, applicable to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the Reserve Bank (whose determination in this respect shall be final) ;
(ii) the transferee-bank shall pay or grant not later than the expiry of the aforesaid period of three years, to the said employees the same remuneration and the same terms and conditions of service as are applicable to the other employees of corresponding rank or status of the transferee-bank subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee-bank:
Provided further that if in any case under Clause (ii) of the first proviso any doubt or difference arises as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee-bank, the doubt or difference shall be referred to the Reserve Bank whose decision thereon shall be final:…”
10. The procedure for preparing the scheme and obtaining the sanction of the Central Government is contained in Sub-sections (6) and (7) of Section 45 of the Act which reads thus :
“(6) (a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee-bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the Reserve Bank may specify for this purpose.
(b) The Reserve Bank may make such modifications if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee-bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee-bank.
(7) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modifications or with such modifications as it may consider necessary; and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf :
Provided that different dates may be specified for different provisions of the scheme.”
11. The sanction accorded by the Central Government is conclusive evidence as provided in Sub-section (7A) of Section 45 which reads thus :
“(7A) The sanction accorded by the Central Government under Sub-section (7), whether before or after the commencement of Section 21 of the Banking Laws (Miscellaneous Provisions) Act, 1963, shall be conclusive evidence that all the requirements of this section relating to reconstruction, OK, as the case may be, amalgamation, have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of the said Section 21), be admitted as evidence to the same extent as the original scheme.”
12. Section 45 of the Act and any scheme made under it have overriding effect as provided in Sub-section (14) thus :
“(14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in, any other law or any agreement, award or other instrument for the time being in force”.
13. In the present case, the Reserve Bank prepared a draft scheme and sent copies of the scheme to the Bank of Cochin and also to the transferee-bank, the State Bank of India, for suggestions and objections. The draft scheme was placed on the notice board of the transferor-bank. Regarding the continuance of officers of the transferor-bank, the draft scheme provided thus :
“All the employees of the transfer or bank other than those specified in the schedule referred to in the succeeding paragraph shall continue in service and be deemed to have been appointed by the transferee-bank at the same remuneration and on the same terms and conditions of service as were applicable to such employees immediately before the close of business on 27th April, 1985 :
Provided that the employees of the transferor-bank who have, by notice in writing given to the transferor or the transferee-bank at any time before the expiry of one month next following the date on which this scheme has been sanctioned by the Central Government, intimated their intention of not becoming employees of the transferee-bank, shall be entitled to the payment of such compensation, if any, under the provisions of the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund and other retirement benefits as may be ordinarily admissible under the rules of authorisation of the transferor-bank immediately before the close of business on 27th April, 1985 :
Provided further that the transferee-bank shall in respect of the employees of the transfer or bank who are deemed to have been appointed as employees of the transferee-bank be deemed also to have taken over the liability for the payment of retrenchment compensation in the event of their being retrenched while in the service of the transferee-bank on the basis that their service has been continuous and has not been interrupted by their transfer to the transferee-bank.
The persons specified in the schedule annexed to this scheme, shall on the prescribed date cease to be the employees of the transferor-bank and notwithstanding anything contained in any law for the time being in force or any agreement or contract, the persons so specified shall be entitled to only to such pension, gratuity, provident fund and other retirement benefits as may be ordinarily admissible to them under the rules or authorisations of the transferor-bank immediately before the close of business on 27th April, 1985.
Provided that the compensation, if any, for the loss of employment, so far as it relates to the unexpired portion of any contract of service, shall be such and only such as may be determined by the Reserve Bank (whose determination in this respect shall be final and binding) :
Provided further that nothing herein shall be deemed to prevent the transferee-bank from re-employing any person whose name has been specified in the schedule annexed to this scheme in such capacity and on such terms and conditions as the transferee-bank may deem fit.
Note : The schedule will be appended to the scheme at the time it is sanctioned by the Central Government.”
14. This clause, while, therefore, clarifying that there was no schedule to the draft scheme, drew the attention of all concerned to the fact that the scheme as sanctioned is to have a schedule listing persons who may not be taken in the service of the transferee-bank. The transferor-bank did not raise any objections, while the transferee-bank, the State Bank of India, expressed their unwillingness to take over 35 officers and 3 workmen. The Reserve Bank considered the objections and suggestions and then came to the conclusion that the number of employees to be included in the schedule has to be reduced to 21. With this modification, the Reserve Bank submitted the draft scheme for the sanction of the Central Government and the Central Government sanctioned the scheme as per the notification dated 23rd August, 1985, in which Clause (11) reads thus :
“The persons specified in the schedule annexed to this scheme shall on the prescribed date cease to be the employees of the transferor-bank and notwithstanding anything contained in any law for the time being in force or any agreement or contract, the persons so specified shall be entitied to and only to such pension, gratuity, provident fund and other
retirement benefits as may be ordinarily admissible to them under the
rules or authorisation of the transferor-bank immediately before the close
of business on 27th April, 1985:
Provided that the compensation, if any, for the loss of employment, so far as it relates to the uhexpired portion of any contract of service, shall be such and only such as may be determined by the Reserve Bank (whose determination in this respect shall be final and binding):-
Provided further that nothing herein shall be deemed to prevent the transferee-bank, from re-employing any person whose name has been specified in the schedule annexed to this scheme in such capacity and on such terms and conditions as the transferee bank may deem fit.”
15. The schedule “attached to and forming part of the scheme” contained, as already stated, the names of twenty-one employees and their designation in the transfer or-bank.
16. The main contention of the petitioners against their inclusion in the schedule to the scheme is that they were not given an opportunity of hearing before their names were so included and that, while persons with worse record of service have been offered employment in the State Bank of India, the petitioners have been discriminated against and thus there is violation of Article 14 of the Constitution.
17. The claim of the petitioners, was met by the Central Government and the Reserve Bank of India contending that the scheme made under Section 45 of the Act is “law” protected under Article 31A(1)(c) of the Constitution and, therefore, not amenable to challenge as violating Article 14 or article 19 of the Constitution. It was also contended that the sanction accorded by the Central Government is conclusive proof that all the requirements relating to amalgamation have been complied with, and there was, therefore, no longer any justiciable issue. Alternatively, it was contended that there was in fact, no violation of any principle of natural justice and there was no discrimination when the petitioners’ names alone were included in the schedule.
18. On these contentions, the following questions mainly arise for determination in these appeals.
(A) Whether the scheme made under Section 45 of the Act amalgamating the Bank of Cochin with the State Bank of India is saved, under Article 31A(1)(c) of the Constitution, from attack under articles 14 and 19?
(B) Whether the conclusive evidence declared under Section 45(7A) precludes any judicial investigation regarding compliance with the statutory requirements under Section 45(6) of the Act ?
If these questions are answered in favour of the petitioners, the further questions that would arise for determination are :
(C) Whether there was any violation of the principles of natural justice affecting the rights of the petitioners in the preparation of the schedule to the scheme ?
(D) Whether the petitioners have been discriminated against when they alone were included in the schedule ?
(E) Are the petitioners, in any case, entitled to a “post-decisional enquiry” after sanction has been accorded by. the Central Government under Section 45(7) of the Act ?
Article 31A and the scheme under the Banking Regulation Act:
Article 3lA(1)(c) of the Constitution saves laws “providing for the amalgamation of two or more corporations, either in the public interest or in order to secure the proper management of any of the corporations”, from being challenged on the ground that they are inconsistent with, or take away or abridge any of the rights conferred by Article 14 or Article 19. Law under Article 13(3) includes any ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law. A scheme framed under Section 68C of the Motor Vehicles Act has been held to be law by the Supreme Court in H. C. Narayanappa v. State of Mysore, AIR 1960 SC 1073 thus (headnote) :
“In any event, the expression ‘law’ as defined in Article 13(3)(a) includes any ordinance, order, bye-law, rule, regulation, notification, custom, etc., and the scheme framed under Section 68C may properly be regarded as ‘law’ within the meaning of Article 19(6) made by the State excluding private operators from notified routes or notified areas, and immune from the attack that it infringes the fundamental rights guaranteed by Article 19 (1)(g).”
19. This decision of the Supreme Court applies with added force to the scheme framed and sanction obtained under the Act, in view of the specific provision in Clause (14) of Section 45 which enacts that the provisions of Section 45 and the scheme made under it “shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force”. The scheme under the Act is supreme in its field. It has statutory pre-eminence and prevails over other laws in force. The scheme cannot, therefore, be treated as a mere executive or administrative act, but has the character and colour of a statutory instrument. The copies of the scheme have to be placed before both Houses of Parliament for legislative scrutiny in appropriate cases. The scheme in essence is a part of the Act itself. We have, therefore, no hesitation in holding in the light of the Supreme Court decision above referred to and the factors now highlighted that the scheme under the Banking Regulation Act is “law” providing for amalgamation of two corporations in the public interest and, therefore, protected under Article 31A(1)(c) of the Constitution. The scheme or any part of the scheme is, therefore, immune from challenge as violating Articles 14 and 19 of the Constitution.
20. The learned single judge has also rightly held that the scheme is statutory ; it has the force of law and necessarily it is “law” for the purpose of Article 31A of the Constitution. But it was also observed thus :
“The protective umbrella of Article 31A of the Constitution of India saves the law from invalidation, but does not provide any immunity to executive action. I am clear in my mind that Article 31A of the Constitution does not preclude challenge against executive action under a law providing for amalgamation of two or more corporations in public interest or to secure proper management of any of the corporations”.
21. The inclusion of the names of the petitioners in the schedule is not something which followed after the scheme was sanctioned but the schedule existed as part and parcel of the scheme itself. If the scheme is beyond challenge, the schedule which is its integral part is also immune from challenge. The inclusion of the names of the petitioners in the schedule was thus not “an executive action” taken pursuant to a law, but was part of the law itself. The immunity granted under Article 31A extended to the scheme and all the provisions contained therein. With respeet to the learned single judge, we do not find it possible to agree that the schedule is open to challenge, as violating the fundamental rights under articles 14 and 19 of the Constitution,
Conclusive evidence and sanction of the scheme :
The Act provides expressly that the sanction accorded by the Central Government shall be conclusive evidence that all the requirements of the section relating to amalgamation have been complied with. The expression “conclusive evidence” has a precise legal connotation. The evidence is conclusive when it remains irrefutable and unchallengeable. Further evidence is not possible or permissible and conclusive evidence cannot thus be displaced by any other evidence; nor can any further evidence detract from the collusiveness. The court has no discretion or option to accept or reject that evidence. The court is, therefore, bound to accept the conclusive evidence as conclusive proof of that fact The law indisputably makes conclusive evidence the final or decisive evidence tin a particular fact or matter and that fact of matter is thereafter by necessary implication non-justiciable except where it is “inaccurate on the fade of it or where fraud is shown”. When, therefore, Section 45(7A) states that the sanction accorded by the Central Government is conclusive that the requirements of Section 45 have been complied with, ic statutorily forbids any further enquiry whether the requirements of the section have been complied with. This, in essence, is the principle stated by the Supreme Court and in the statement of the law in Halsbury’s Laws of England.
22. In Chettiam Veettil Ammad v. Taluk Land Board, AIR 1979 SC 1573, the Supreme Court was considering the provisions of Section 72K of the Kerala Land Reforms Act which provided that the certificate of purchase issued under the Act shall be conclusive proof of the assignment to the tenant of the right, title and interest of the landowner and the inter-veners. Adverting to this provision, the Supreme Court held thus (at page 1579) :
“It would thus appear that even though the certificate of purchase issued under Sub-section (1) of Section 72K is conclusive proof of the assignment of the right, title and interest of the landowner in favour of the holder in respect of the holding concerned under Sub-section (2), that only means that no contrary evidence shall be effective to displace it, unless the so called conclusive evidence is inaccurate on its face, or fraud can be shown (Halsbury’s Laws of England, fourth edition, volume 17, page 22, para 28). It may be stated that ‘inaccuracy on the face’ of the certificate is not as wide in its connotation as an ‘error apparent on the face of the record’. It will not, therefore, be permissible for the Board to disregard the evidentiary value of the certificate of purchase merely on the ground that it has not been issued on a proper appreciation or consideration of the evidence on record, or that the Tribunal’s finding suffers from any” procedural error. What Sub-section (2) of Section 72K provides is an irrebuttable presumption of law, and it may well be regarded as a rule of substantive law. But even so, for reasons already stated, it does not thereby take away the jurisdiction of the Taluk Land Board to make an order under Section 85(5) after taking into consideration the ‘conclusive’ evidentiary value of the certificate of purchase according to Section 72K(2) as far as it goes”.
23. The question also arose before the Supreme Court under the Land Acquisition Act and the Supreme Court was considering the effect of Section 6 of the Land Acquisition Act which stated that a declaration shall be conclusive evidence that the land is needed for a public purpose or for a company. It was held thus in Somawanti v. State of Punjab, AIR 1963 SC 151 (at page 159):
“Since evidence means and includes all statements which the court permits or requires to be made, when the law says that a particular kind of evidence would be conclusive as to the existence of a particular fact it implies that that fact can be proved either by that evidence or by some other evidence which the court permits or requires to be advanced. Where such other evidence is adduced it would be open to the court to consider whether, upon that evidence, the fact exists or not. Where, on the other hand, evidence which is made conclusive is adduced, the court has no option but to hold that the fact exists. If that were not so, it would be meaningless to call a particular piece of evidence as conclusive evidence. Once the law says that certain evidence is conclusive, it shuts out any other evidence which would detract from the collusiveness of that evidence. In substance, therefore, there is no difference between conclusive evidence and conclusive proof. Statutes may use the expression conclusive proof where the object is to make a fact non-justiciable. But the Legislature may use some other expression such as ‘conclusive evidence’ for achieving the same result. There is thus no difference between the effect of the expression ‘conclusive evidence’ from that of ‘conclusive proof’, the aim of both being to give finality to the establishment of the existence of a fact from the proof of another.”
24. Halsbury’s Laws of England, third edition, volume 15, page 278, states thus :
“Prima facie, sufficient and conclusive evidence. — Statutes sometimes provide that a fact or document shall be prima facie or sufficient or conclusive evidence of another fact. In this context, prima facie evidence is evidence which, if accepted by the tribunal, establishes a fact in the absence of acceptable evidence to the contrary. Unless a particular enactment otherwise provides, sufficient evidence usually means prima facie evidence, which, if there is no contradictory evidence, may establish a fact Like estoppels and so-called conclusive presumptions, the tendering of evidence which by statute or by agreement of the parties is declared to be conclusive precludes evidence to the contrary, which is inadmissible, unless the evidence adduced is inaccurate on the face of it or fraud is shown.”
it is, therefore, not possible to accept the reasoning of the learned judge that notwithstanding the conclusive evidence regarding the requirements of the scheme provided under Section 45(7A) of the Act, the court can still embark on an enquiry whether the requirements of the section have been complied with or not. It is allowed only in those limited cases where it is inaccurate on the face of it or where it was obtained by fraud.
25. Judicial scrutiny under Article 226 has a constitutional base. The power so conferred transcends all laws. No law, can therefore, affect the jurisdiction so conferred on the High Courts. An abridgement of the constitutional remedy under Article 226 can thus be left to a constitutional machinery and not to the ordinary laws made by Parliament or the State Legislatures. This right under Article 226 is in no way affected when the law declares that a sanction, decision or declaration shall be conclusive evidence that the statutory requirements are satisfied or that the procedure prescribed by law has been followed. Judicial investigation is not warranted to reopen facts already concluded or settled. The sanction accorded by the Central Government for amalgamating the Bank of Cochin cannot be challenged on the ground that there has been violation of the procedure prescribed under Section 45(6) of the Act.
26. The combined effect of Sub-clauses (7A) and (14) of Section 45 of the Act and Article 31A(1)(c) of the Constitution, when the sanction accorded is made conclusive evidence, when the scheme is given statutory status overriding other laws, and when any challenge under Articles 14 and 19 of the Constitution is not permissible, is that the petitioners cannot contend that there has been violation of any requirement, statutory or otherwise, in making the scheme under the Act.
27. Section 45(6) does not in terms direct that the employees of the transferor-bank should be heard or that notice should have been given to them before the scheme was approved or the sanction was accorded. Assuming, as contended by counsel for the writ petitioners, that the principles of natural justice, namely, of an opportunity of hearing, can be read into the statute, even when it becomes part of the requirement of Section 45(6) itself. This requirement is no longer a justiciable issue as the accord of sanction by the Central Government forecloses any further enquiry in this matter in view of Section 45(7A). The question, therefore, as to whether there has been any violation of principles of natural justice, does not arise in view of our decision on the first two points against the writ petitioners.
28. Violation of the principles of natural justice :
However, we shall advert to the contention based on the principles of natural justice, at least for one good reason. The learned judge has held that the writ petitioners would have been entitled to a hearing if they had made a demand before the scheme was sanctioned and, therefore, at least now, after the scheme is operative, they are entitled to a post-decisional hearing. If a “pre-sanction” hearing was not contemplated or implied under the statute, the question of a post-decisional enquiry did not arise.
29. We have to remember that it is the mismanagement of the Bank of Cochin that precipitated the moratorium under the Act. A scheme is framed when the moratorium is in, force. The framing of a scheme is entrusted to the Reserve Bank of India. The draft is prepared by the Reserve Bank. Copies of the draft are sent to the transferor-bank and transferee-bank. Objections and suggestions are invited. The Reserve Bank considers the objections and suggestions and makes modification to the draft, as it seems necessary. In these matters regarding amalgamation of banking business, the views of the Reserve Bank are entitled to very great weight. The Reserve Bank then sends the draft so modified to the Central Government which may also make modifications, if they so choose. Thereafter, sanction is accorded to the scheme. The scheme becomes law and overrides even the other provisions of the Banking Regulation Act itself and any other law for the time being in force and all agreements, awards, instruments, etc,
30. The entrustment of the function of amalgamation of a banking company to the Reserve Bank is itself an assurance of fair play and justice. This would be evident from the observations of the Supreme Court in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India [1962] 32 Comp Cas 514, 526, 531 ; AIR 1962 SC 1371, 1379, 1382:
“But the most important function of the Reserve Bank is to regulate
the banking system generally. The Reserve Bank has been described as a
bankers’ bank. Under the Reserve Bank of India Act, the scheduled banks
maintain certain balances and the Reserve Bank can lend assistance to
those banks ‘as a lender of the last resort’. The Reserve Bank has also been
given certain advisory and regulatory functions. By its position as a Central
bank, it acts as an agency for collecting financial information and statistics.
It advises Government and other banks on financial and banking matters,
and for this purpose, it keeps itself informed of the activities and monetary”
position of. scheduled and other banks, and inspects the books and
accounts of scheduled banks, and advises Government after inspection
whether a particular bank should be included in the Second Schedule or
not. Every scheduled bank is required to send to the Reserve Bank and to
the Central Government a weekly return of its position in a form which is
prescribed. Sometimes, however, the Reserve Bank allows a particular bank
to send its returns once a month instead of every week. From these
returns, the Reserve Bank prepares and publishes consolidated statements
showing the monetary position in the country. The inclusion of a bank in
the Second Schedule is the function of the Reserve Bank, and under Section 42(6)(a)(iii) and (b)(ii), it satisfies itself, inter alia, that the affairs of
the particular bank are not being conducted in a manner detrimental to
the interests of its depositors. The Reserve Bank has further the power to
prohibit any scheduled bank from receiving, after a week, any fresh depo
sits.”
“The Reserve Bank riot only has powers over banking companies while they are functioning, but it has also powers when the banking companies wish or are forced to cease to function. If a banking company wants to suspend its business and applies to the High Court for a moratorium, the application is not maintainable; unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank, the banking company will be able to pay its debts. When the High Court grants the relief without such report, it has to call for a report from the Reserve Bank. The High Court is also required to have regard to the interests of the depositors and even during the period of moratorium granted by the High Court, the Reserve Bank can apply for the winding up of the banking company. Sections 39 and 41A give special powers to the Reserve Bank in winding up proceedings. Even in voluntary winding up of a banking company, the Reserve Bank has to certify that the banking company is able to pay in full all debts to its creditors, as they accrue. In amalgamation of banking companies, the scheme has to be approved by the Reserve Bank. Similarly, in compromises or arrangements between the banking company and its creditors, the Reserve Bank has to be satisfied. In all these matters, the satisfaction, inter alia, must be as to the interests of the depositors. In reconstruction of a banking company after an application by the Reserve Bank for an order of moratorium, the Reserve Bank has to satisfy itself and prepare a scheme which, inter alia, must be in the interests of the depositors”.
31. The employees of the transferor bank transacting no banking business during the moratorium cannot pretend ignorance of the draft scheme when the same was sent to their bank and when, as stated in the counter-affidavit, they were pasted on the notice board of their bank. They cannot assert that they were entitled to individual notice and contend that there has been a failure of the principles of natural justice. The Act does not contemplate and the circumstances do not warrant that in such case of amalgamation of a bank under a moratorium, the employees of the transferor bank are entitled to separate notices.
32. It is also relevant to note that the employees of the transferor-bank did not have any right to be appointed in the transferee-bank. Their right to continue in the transferor bank ended when that bank ceased to function. They could not claim to be reappointed in the new bank as of right. In those circumstances, when the Reserve Bank, with its rich and varied experience and wide knowledge of banking business in this country, takes note of all the relevant facts, considers the suggestions of the State Bank of India and then decides that most of the employees or at least some of them who were responsible for mismanagement of a banking company, should not be allowed to continue in the State Bank of India on amalgamation, it is not for this court to sit in judgment over that decision and hold that there has been a violation of the principles of natural justice, in that the employees were not given any reasonable opportunity of hearing. In any case, on facts also, there was no violation of any principle of natural justice. There is no case that the petitioners were not aware of the draft scheme or that they did not have any opportunity to make a representation. Their only contention was, that, as their names were included only later, after the draft was published, after considering the objections of the State Bank, they should have been given an opportunity, then, to make a representation. The petitioners and the employees of the transferor-bank were alerted even in the draft scheme that a schedule would be attached including names of persons who would not be appointed in the transferee bank. The Bank of Cochin Officers’ Association submitted a representation (exhibit P-15) produced in W. A. No. 352 of 1986. The transferor bank did not raise aay objection. Under these circumstances, the petitioners cannot contend that when objections are received, the Reserve Bank was bound to give a further notice on those objections as well and then only settle the scheme. It will then be an unending process for which there is no warrant either in law or in practice.
33. Natural justice is not rigid justice. It has no set pattern to suit all needs and circumstances. It is flexible and elastic. While a statute may, expressly or by necessary implication, exclude the application of the principles of natural justice in certain cases, it may also define the parameters of those principles in given circumstances. Referring to the Supreme Court decision and the authorities on the subject, this court in Mary Teresa Dias v. Acting Chief Justice [ 1985] KLT 435 held thus (headnote) :
“Natural justice is not a static concept. It is part of a judicial vocabulary in the administration of justice. It is not ‘extra legal’ though it may be ‘extra legislative’. It is recognised as a guiding factor in administrative law and forms the constitutional basis for judicial scrutiny of legislative and executive actions. It is the sense of justice that represents the ethics of judicial conscience. While a statute may expressly abrogate the principles of natural justice, these principles may also have to yield to the ‘demands of necessity’ where the ‘jurisdiction is exclusive and there is no legal provision for calling a substitute’. ” (An appeal against this decision was .dismissed by the Supreme Court).
34. The learned single judge referred to the decision in National Textile Workers’ Union v. P. R. Ramakrishnan [1983] 53 Comp Cas 184, 204, 207 ; AIR 1982 SC 75, 86, 88 and relied on the following observations :
“In deciding whether the court should wind up a company or change its management, the court must take into consideration not only the interest of the shareholders and creditors, but also public interest in the shape of the need of the community and the interest of the employees. This, in my opinion, is the requirement of Sections 397 and 398 of the Companies Act. If in deciding whether the court should wind up a company or change its management, the court must take into consideration not only the interest of the shareholders and creditors, but also, amongst other things, the interest of the workers, it is axiomatic that the workers must have an opportunity of being heard for projecting and safeguarding their interest before a winding-up order is made by the court…..
We are, therefore, of the view that the workers are entitled to appear at the hearing of the winding-up petition either to support or to oppose it so long as no winding-up order is made by the court The workers have locus standi to appear and be heard in the winding-up petition both before the winding-up petition is admitted and an order for advertisement is made as also after the admission and advertisement of the winding-up petition until an order is made for winding up the company. If a winding-up order is made and the workers are aggrieved by it, they would also be entitled to prefer an appeal and contend in the appeal that no winding-up order should have been made by the company judge. But when a winding-up order is made and it has become final, the workers ordinarily would not have any right to participate in any proceeding in the course of winding up the company though there may be rare cases where in a proceeding in the course of winding up, the interest of the workers may be involved and in such a case, it may be possible to contend that the workers must be heard before an order is made by the court. We think that even when an application for appointment of a provisional liquidator is made by the petitioner in a winding-up petition, the workers would have a right to be heard if they so wish because the appointment of a provisional liquidator may adversely affect the interest of the workers. But we may make it clear that neither the petitioner nor the court would be under any obligation to give notice of such application to the workers. It would be for the workers to apply for being heard, and if they dp so, they would be entitled to appear and be heard on the application for appointment of provisional liquidator.”
35. In the present case, as the counter-affidavits of the Reserve Bank and the Central Government show the interest of the shareholders and the public interest involved were taken into consideration when amalgamation was decided and draft scheme was prepared and eventually sanction was accorded under the Act. The workers did have an opportunity to make representations when the draft notice was published on the notice board of their own bank and its branches. The affidavits show that the interests of the employees were also taken note of, a classification was made based on the confidential records and other service particulars available, and an earnest and serious attempt was made to absorb the maximum number of persons in the transferee bank, the State Bank. In fact, out of more than three hundred employees, only twenty-one have been included in the schedule, even though the State Bank insisted that thirty-five names should have been included. This is, therefore, a case where the Reserve Bank had applied its mind in all seriousness to all relevant facts when the petitioners were included in the schedule. The facts of these cases are thus different from the facts and circumstances disclosed in the Supreme Court case.
Discrimination : We have already held that the plea of discrimination is not available in view of the constitutional protection under Article 31A(1)(c). Even otherwise, we have no hesitation to hold that there was no discrimination when the petitioners were included in the schedule. The counter-affidavits filed disclose the detailed steps taken, comparative assessments made, rational analysis and verification of records done and consideration of relevant facts when only a minimum number of persons were included in the schedule, even overruling in part the objections of the State Bank. The learned judge has given good reasons for rejecting this plea and we are in entire agreement with that reasoning.
Post-decisional hearing : The learned judge has held that inasmuch as no hearing was given to the petitioners before the scheme was prepared, they should be given a hearing at least now after the scheme was prepared. The post-decisional opportunity as contemplated by the learned judge will be opposed to the very provisions of Section 45 of the Act. This court cannot direct the amendment of the scheme and include or delete the names of the persons in the schedule and in the scheme. When the scheme itself is law, as held by the learned judge himself, this court cannot direct an amendment of that law. The scheme itself is not in challenge and the Act also is not challenged. We have also held that the petitioners were not entitled to any hearing before the scheme was finalised and sanction was given. A post-decisional opportunity does not, therefore, arise in any case. We cannot, therefore, agree with the learned single judge that the petitioners are entitled to any post-decisional opportunity. The direction so issued cannot, therefore, be sustained.
Re-employment and compensation : The scheme provides for re-employment under the second proviso to Clause 11 of the scheme. On our suggestion, counsel for the State Bank agreed before us that the claims for re-employment under this provision will be considered objectively and orders passed separately in each case.
36. The persons included in the schedule to the scheme are entitled to compensation to be fixed by the Reserve Bank. This also is provided in Clause 11 of the scheme. What has been done under this provision is to fix an insignificant flat rate of one month’s salary without taking into consideration the unexpired portion of the contract of service and other relevant factors. It has also to be noted that the inclusion of the names in the schedule is not by way of punishment. It does not cast any stigma on the petitioners. In fact, the petitioner in O. P. No. 10382 of 1985, Shri U. P. Varghese, was included in the schedule only because he had only a very short term to serve the State Bank before he attained the superannuation age under the State Bank rules. Similarly, the petitioner in 0. P. No. 9768 of 1985, Shrimathy Marykutty Tharian, was included in the schedule because there was no corresponding post in the State Bank in which she could be absorbed as she was working as a programme co-ordinator in the Bank of Cochin and no such post was sanctioned for the State Bank. The claim to compensation is a human problem. We, therefore, thought that while implementing the scheme, an ad hoc fixation of one month’s salary as compensation would do scant justice and we suggested to counsel for the Reserve Bank the bank reconsider the issue of compensation afresh. A fresh decision regarding compensation does not affect the scheme including the schedule. It is only a decision to be taken in the implementation of the scheme. Counsel took time to consult and then reported that the Reserve Bank would consider the case of all the writ petitioners objectively, individually, and separately and refix the compensation due to them under the scheme, as expeditiously as possible. We record this statement. The petitioners may, therefore, file an application before the Reserve Bank of India, within one month from today, urging their claims to compensation due to them under clause 11 of the scheme and to the State Bank of, India, Cochin, the transferee bank, making their claim for reemployment; and the Reserve Bank and the State Bank of India will pass orders on these matters within four months from today.
37. In the result, the writ appeals filed by the Reserve Bank and the State Bank of India, W. A. Nos. 279, 298, 299, 301, 319, 352 and 356 of 1986, are allowed and the cross-objections and the writ appeals filed by the employees of the Bank of Cochin, W. A. Nos. 417, 429 and 525 of 1986, are dismissed. The judgment of the learned single judge is set aside and the original petitions are dismissed subject to the directions given above. In the circumstances of the case, the parties shall bear their own costs.