{"id":69346,"date":"1962-03-07T00:00:00","date_gmt":"1962-03-06T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/joseph-kuruvilla-vellukunnel-vs-the-reserve-bank-of-india-and-on-7-march-1962"},"modified":"2017-07-11T17:15:57","modified_gmt":"2017-07-11T11:45:57","slug":"joseph-kuruvilla-vellukunnel-vs-the-reserve-bank-of-india-and-on-7-march-1962","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/joseph-kuruvilla-vellukunnel-vs-the-reserve-bank-of-india-and-on-7-march-1962","title":{"rendered":"Joseph Kuruvilla Vellukunnel vs The Reserve Bank Of India And … on 7 March, 1962"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Joseph Kuruvilla Vellukunnel vs The Reserve Bank Of India And … on 7 March, 1962<\/div>\n
Equivalent citations: 1962 AIR 1371, \t\t 1962 SCR Supl. (3) 632<\/div>\n
Author: Hidayatullah<\/div>\n
Bench: Sinha, Bhuvneshwar P.(Cj), Kapur, J.L., Hidayatullah, M., Shah, J.C., Mudholkar, J.R.<\/div>\n
           PETITIONER:\nJOSEPH KURUVILLA VELLUKUNNEL\n\n\tVs.\n\nRESPONDENT:\nTHE RESERVE BANK OF INDIA AND OTHERS(With connected petition\n\nDATE OF JUDGMENT:\n07\/03\/1962\n\nBENCH:\nHIDAYATULLAH, M.\nBENCH:\nHIDAYATULLAH, M.\nSINHA, BHUVNESHWAR P.(CJ)\nKAPUR, J.L.\nSHAH, J.C.\nMUDHOLKAR, J.R.\n\nCITATION:\n 1962 AIR 1371\t\t  1962 SCR  Supl. (3) 632\n CITATOR INFO :\n R\t    1963 SC1881\t (69,108)\n R\t    1964 SC1279\t (5)\n RF\t    1966 SC1953\t (6)\n RF\t    1967 SC 295\t (62)\n RF\t    1969 SC 707\t (24,45)\n RF\t    1981 SC 818\t (22)\n RF\t    1992 SC1020\t (27)\n RF\t    1992 SC1033\t (53)\n\n\nACT:\nBanking\t Companies-Winding  up-Enactment  providing  for  an\norder  for winding up by High Court on the basis of  Reserve\nBank's\topinion-Constitutional\tvalidity-Banking   Companies\nAct, 1949 (10 of 1949), ss. 2, 35, 35A, 36, 38 Reserve\tBank\nof  India Act, 1934 (2 of 1934), ss 7, 8, 38 Companies\tAct,\n1956  (1  of 1956), ss. 433, 450(2)-Constitution  of  India,\nArts. 14, 19 (1) (f) and (g), 301, 302.\n\n\n\nHEADNOTE:\nSub-section (1) of s. 38 of the Banking Companies Act, 1949,\nprovided  : \"Notwithstanding anything contained in ss.\t391,\n392,  433  and 583 of the Companies Act, 1956....  the\tHigh\nCourt shall order the winding up for a banking company\t....\nif  an application for its winding up has been made  by\t the\nReserve\t Bank under s. 37 of this section.\" Under  s.  38(b)\n(iii)  of the Act \"the Reserve Bank may make an\t application\nunder  this section for the winding up of a banking  company\nif in the opinion of the Reserve Bank the continuance of the\nbanking\t company  is  prejudicial to the  interests  of\t its\ndepositors.\"\n   In  exercise\t of the powers vested in it by\tthe  Banking\ncompanies  Act, 1949, as well as the Reserve Bank  of  India\nAct,  1934, the Reserve Bank had been inspecting  the  Palai\nCentral\t Bank Ltd., periodically, and had been\twarning\t the\nBank  that  it-, business was being conducted  in  a  manner\ndetrimental  to\t the interest of its  depositors.   In\tJune\n1960, there was a run on several branches of the Bank.\t The\nReserve Bank was of the opinion that the Palai Bank was\t not\nin a position to pay its depositors in full and that the\n\t\t\t    633\ncontinuance  of the Bank was prejudicial to the interest  of\nthe depositors.\t On August 8, 1960 the Reserve Bank made  an\napplication   in   the\tHigh  Court  of\t Kerala\t  under\t  s.\n38(3)(b)(iii) of the Banking Companies Act, 1949, read\twith\nthe  Companies\tAct, 1956, for the winding up of  the  Palai\nCentral Bank Ltd.  After hearing the Reserve Bank, the Palai\nBank  and  the\tcreditors, the High Court  passed  an  order\nallowing the application of the Reserve Bank, and  directing\nthe  winding  up of the Palai Bank.  It\t was  contended\t for\nthose  who opposed the application that ss. 38(1)  and\t3(b)\n(iii) of the- Banking Companies Act contravened Arts. 14 and\n19  (1)\t (f)  and  (g) of the  Constitution  of\t India\tand,\ntherefore    were   void   because   (a)   they\t   permitted\ndiscrimination\tbetween\t a  banking company  and  any  other\ncompany\t by prescribing different laws for their  respective\nwinding\t up,  (b) they created an  unreasonable\t restriction\nupon  the  right  to  carry on banking\tand  (c)  the  whole\nprocedure  was denial of the principles of  natural  justice\nchiefly by denying an access to courts, inasmuch as under s.\n433 of the Companies Act 1956, when application was made  to\nwind up a company, the High Court had to be satisfied  after\na fair trial that an order to wind up the company was called\nfor,  and the Judge was free to reach a decision  after\t the\ncompany\t had  shown cause, and there was a right  of  appeal\nagainst the decision if adverse to the company, while  under\nthe  procedure laid down in s. 38 of the  Banking  Companies\nAct,  1939,  the  Reserve Bank was made the  sole  judge  to\ndecide\twhether the affairs of a banking company were  being\nso  conducted as to be prejudicial to the interests  of\t the\ndepositors,  and  the court had no option but  to  an  order\nwindings  up the banking company, when the  application\t was\nmade.\tIt was also contended that ss. 38(1)  and  3(b)(iii)\nwere  ultra  vires being in conflict with Art.\t301  of\t the\n'Constitution.\n   Held,  (Kapur and Shah, JJ., dissenting), that ss.  33(1)\nand  (3) (b) (iii) of the Banking Companies Act,  1939,\t did\nnot offend of Arts. 19(1)(f) and (g) of the Constitution  of\nIndia and were valid.\n   In  view  of\t the history of\t the  establishment  of\t the\nReserve Bank as a Central Bank for India, its position as  a\nBanker's  Bank,\t its  control  over  banking  companies\t and\nbanking\t in  India, its position as the\t issuing  bank,\t its\npower to license banking companies and cancel their licences\nand  the numerous powers, a law which empowered the  Reserve\nBank to come to a decision to wind up a tottering or  unsafe\nbanking company in the interest of the depositors could\t not\nbe challenged as\n634\nunreasonable, because even if the court were called upon  to\ntake  immediate action it would almost always be  guided  by\nthe  opinion of the Reserve Bank.  A law may,  with  reason,\nleave  the determination of an issue to an expert body,\t and\nsuch  law is justified on the ground of\t expediency  arising\nfrom the respective opportunities for action.  The exclusion\nof courts is however not to be lightly inferred or conceded.\n   Held,   further  (per  Sinha,  C.J.,\t  Hidayatullah\t and\nMudholkar,  JJ.), that : (1) while ordinary companies  dealt\nwith the money of the stock holders, banking companies\twere\nin  a  different class as they dealt with the money  of\t the\ndepositors  and\t had to be regulated differently ;  and\t the\nReserve Bank having been given by the Banking Companies\t Act\nthe  power  and\t invested  with the  duty  of  watching\t the\naffairs,  of every banking company with a view\tto  ensuring\nthe  safety  of\t the depositors' money, there  was  a  valid\nclassification\t; consequently ss. 38(1) and (3)(b)(iii)  of\nthe  Banking  Companies Act did not offend Art.\t 14  of\t the\nConstitution.\n   (2)\t  ss.  38(1)  and (3)(b)(iii) did not  amount  to  a\nconversion  of a judicial process into an executive  action.\nThe  sections  only  made the court guide  itself  from\t the\ndecision  of  ail outside agency and  the  judicial  process\ncommenced thereafter.\n   (3)\t  ss.  38(1) and (3)(b)(iii) were not in  breach  of\nArt. 301 of the Constitution as they were in public interest\nand were protected by Art. 302.\n   Per\tKapur  and  Shah,  JJ.-Section\t33  of\tthe  Banking\nCompanies Act, 1949, was an unreasonable restriction on\t the\nright of a banking company to carry on its business and was,\ntherefore,  unconstitutional.\tThe  vice  of  the  impugned\nprovision lay in (a) the power vested in the Reserve Bank to\napply  to  the\tHigh Court for an order winding\t up  a\tbank\nexercisable solely on its subjective satisfaction as to\t the\nexistence  of conditions prescribed by the section, and\t (b)\nthe  obligation imposed by law upon the High Court  to\tmake\nthe  order  of\twinding up without  at\tany  time  enquiring\nwhether the conditions on which the application was  founded\ndid  in truth exist.  A provision of law providing  for\t the\nimposition of restrictions on a citizen's fundamental  right\npursuant to the subjective satisfaction of the Reserve\tBank\neven  though it is an expert body, as to the existence of  a\nstate  of  affairs, and thereby\t permanently  depriving\t the\ncitizen of his right or property, is wholly unreasonable.\n   A.\t  K.  Gopalan v. State, (1950) S.G.R. 88,  State  of\nMadras v.  Rao, (1952) S.C.R. 597, The Commissioner of Hindu\n635\nReligious  Endowments,\tMadras\tv.  Sri\t Lakshmindra  Tirtha\nSwamiar\t of Sri Shirur Muth,<\/a> (1954) S.C.R. 1005, Mahant\t Sri\nJagannath Ramanuj Das v. State of Orissa,<\/a> (1954) S.C.R. 1046\nand  Virendra  v.  State  of  Punjab,<\/a>  (1958)  S.C.R.\t308,\nconsidered.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 487 of 1961.
\n   Appeal by special leave from the judgment and order dated
\nDecember  5,  1960.  of\t the Kerala  High  Court  in  Baking
\nCompanies Petition No. 11 of 1960.\n<\/p>\n
\t\t\t    WITH
\n\t\tPetition No. 167 of 1961
\n    Petition under Art. 32 of the Constitution of India\t for
\nthe enforcement of Fundamental Rights.\n<\/p>\n
    M.K. Nambiyar, J.B. Dadachanji, O.C. Mathur and Ravinder
\nNarain, for the appellant and the petitioner.
\n   M.C.\t Setalvad, Attorney-General of India,  H.N.  Sanyal,
\nAdditional Solicitor-General of India, R. Ganapathy Iyer and
\nR. H, Dhebar, for respondents No. 1 in C.A. No. 487 of 1961.
\nG.   S. Pathak and K. R. Choudhuri, for respondents    Nos.
\n4-6 in C. A. No. 487 of 1961.\n<\/p>\n
    M.\t  C.  Setalvad,\t Attorney-General  for\tIndia,\tH.N.
\nSanyal, Additional Solicitor-General of India, R.  Ganapathy
\nIyer, R. H. Dhebar and T. M. Sen for respondents Nos. 2\t and
\n3 in Petition No. 167 of 1961.<\/span>
\n    1962,  March  7. The Judgment of B. P. Sinha,  C.J.,  M.
\nHidayatullah  and  J.R.\t Mudholkar, JJ.,  was  delivered  by
\nHidayatullah, J. The Judgment of J.L. Kapur and J. C.  Shah,
\nJJ., was delivered by Kapur, J.\n<\/p>\n
    HIDAYATULLAH, J.-On August 8, 1960, the Reserve Bank  of
\nIndia made an application in the High Court of Kerala  under
\ns.  38 of the Banking Companies Act, 1949 (10 of 1949)\tread
\nwith the Companies Act, 1956 (1 of 1956), for the winding up
\nof the Palai Central Bank, Ltd. (having its
\n636<\/span>
\nregistered office at Palai in the State of Kerala), for\t the
\nappointment of the Official Liquidator of the High Court  as
\nthe  Liquidator with all the Powers under the said Acts\t and
\nfor  the  appointment  of the  Official\t Liquidator  as\t the
\nProvisional   Liquidater   during  the\t pendency   of\t the
\napplication.   This application was allowed on\tDecember  5,
\n1960,  and the present appeal with special leave,  has\tbeen
\nfiled against the order.\n<\/p>\n
   The\tPalai  Central Bank, Ltd. (herein  referred  as\t the
\nPalai  Bank or the Bank) was incorporated in  January,\t1927
\nunder  the Travancore Companies Regulations.  Till 1936,  it
\nwas  known as ,The Central Bank, Ltd.”‘. when the  name\t was
\nchanged.  In March 1937, the Palai Bank was included in\t the
\nSecond Schedule to the Reserve Bank of India Act, 1934 (2 of
\n1934).\tAccording to the balance sheet of the Palai Bank for
\nthe  year ending December 31, 1959, the paid-up capital\t was
\nRs. 24,89,639.53. The nominal capital of the Palai Bank\t was
\nRs. 40 lakhs divided into 1,60,000 equity shares of  Rs.25\/-
\nThe  Palai Bank seems to have greatly extended its  business
\nas  time  passed.   In 1928, the deposits were\ta  mere\t Rs.
\n77,000\/-, but by 1960, they had become almost Rs. 10 crores.
\nIt had, during the years, become the foremost Bank in Kerala
\nState, and its place was 15th in the whole of India.  It had
\n25 branches in and outside the State of Kerala.
\n    When  Kerala became a Part B State, the Reserve Bank  of
\nIndia Act was extended to that area, and the Palai Bank came
\nunder  the  supervision\t of  the  Reserve  Bank,  which,  in
\nexercise of the powers vested in it by the Banking Companies
\nAct  as well as the Reserve Bank of India Act,\tperiodically
\ninspected  the Palai Bank.  These inspections were  made  in
\n1951, July 1953, FebruaryMarch 1956, March 1958 and January-
\nFebruary,  1960. Every time the Reserve Bank found irre-\n<\/p>\n
\t\t\t    637<\/span><\/p>\n
gularities  which were pointed out to the Bank, and  special
\ndirections  were  issued.  The main defects  were  that\t the
\nadvances made by the Palai Bank were not sound that the bulk
\nof  the\t advances  were either\tirrecoverable  or  “‘sticky”
\n(which means, not easily recoverable), that the income taken
\ninto  account  represented  to a  great\t :extent  unrealised
\ninterest on these advances, that large advances were made to
\nthe Directors, their relations and Companies, in which\tthey
\nwere interested, on no security or inadequate security,\t and
\nthat  the  Bank\t was declaring dividends  on  the  basis  of
\nprofits which were computed without making provision for bad
\nand  doubtful  debt  and by issuing up the  reserves  at  an
\nalarming rate, while the deposits were going down.  In\tthe,
\nbeginning, the Reserve Bank contended itself by\t prohibiting
\nfurther\t  advances   to\t Directors,  their   relations\t and
\nindividuals, firms or companies, in which the Dircetors were
\ninterested, advising the Palai Bank to reduce clean advances
\nand to regularise others, warning the Bank that the Reserve,
\nBank  considered  that the business of the  Bank  was  being
\nconducted in the manner detrimental to the interests of\t its
\ndepositors, and that if the directions were not carried out,
\naction under the first proviso to sub-s. (2) of s. 22 of the
\nBanking\t Companies  Act would be taken by issuing  a  notice
\nthat a licence could not be granted to the Bank.
\n    From  the  correspondence which has been filed  in\tthis
\ncase, it does appear that the Reserve Bank was not satisfied
\nat each following inspection that the position had improved;
\nrather\tit  apprehended that it had worsened, and  that\t the
\ndirections  had\t not been carried out.\tThis was  denied  on
\nbehalf\tof the Bank, but nothing depends upon who  is  right
\nand who is wrong, because no charge of mala fide conduct  is
\nnow  made  against  the Reserve Bank.  As a  result  of\t the
\ninspection  in FebruaryMarch, 1956, the Reserve Bank  avers,
\nit was found
\n638<\/span>
\nthat on December 31, 1955, the advances stood at Rs.  355.02
\nlakhs,\tof  which Rs. 171-27 lakhs were\t irrecoverable,\t and
\nthat the deposits of the Bank had been impaired by Rs.\t139-
\n13 lakhs.  The Reserve Bank also avers that the Bank did not
\nsatisfy\t the  requirements  of the  Banking  Companies\tAct,
\nparticularly  s. 11, about the minimum paid up\tcapital\t and
\nreserves, and ss. 22(3) (a) and (b) about the ability of the
\nBank  to pay its depositors, present and future, in full  or
\nconducting  its\t affair in a manner not detrimental  to\t the
\ninterests  of  the  depositors,\t and  did  not\tsatisfy\t the
\nrequirements of ss. 42(6)(a)(i) and (ii) of the Reserve Bank
\nof  India  Act.\t The Reserve Bank at this stage\t deputed  an
\nobserver,  and issued further directions and  threatened  to
\nremove\tthe name of the Palai Bank from the Second  Schedule
\nto the Reserve Bank of India Act, if the directions were not
\nfaithfully  and punctually carried out.\t All this time,\t the
\nReserve\t Bank  was  requiring  the  Palai  Bank\t to   submit
\nstatements  and returns In the inspection which was made  in
\nMarch-May,  1958, the position as on February 28, 1958,\t was
\nfound  to be even worse.  Though the deposits had  gone\t up,
\nthe  advances had raisen to Rs. 421.56 lakhs, of  which\t Rs.
\n208.05\tlakhs  were  said to be irrecoverable,\tand  in\t the
\nopinion\t of the Reserve Bank, after writing off the  paid-up
\ncapital,  reserves  etc. of the value of  Rs.  41.17  lakhs,
\ndeposits  to the extent of Rs. 177.24 lakhs  were  impaired.
\nMore  directions in the game key followed, and the Bank\t was
\nwarned that it was conducting its affairs in a way which was
\ndetrimental  to\t the  interests of the\tdepositors.  in\t the
\nscrutiny  in  January-February,\t 1960, the  position  as  on
\nDecember  31, 1959, was said to be that out of the  advances
\nof  Rs. 529 lakhs, Rs. 218.51 lakhs were irrecoverable,\t Rs.
\n17.71 lakhs were doubtful, and Rs. 111.57 lakbs were  frozen
\nor sticky.\n<\/p>\n
\t\t\t    639<\/span><\/p>\n
   On  July  21,  1960, the Reserve  Bank  issued  a  letter
\ncontaining the warnings to which the Palai Bank appeared  to
\nhave become indurated, and further gave the Bank 12  month’s
\ntime  to  improve  matters  and 30  days  to  reply  to\t the
\ninspection  report.  An Officer of the State Bank  of  India
\n(Mr.   Sivaraman)  had already been deputed as\tthe  General
\nManager\t of the Palai Bank, and had taken charge on July  1,
\n1960.\tOn June 23, 1960,the balance sheet of the  Bank\t was
\npublished showing the position as on December 31, 1959.\t The
\nbalance\t sheet\tshowed\ta loss of  Rs.\t14-1\/2\tlakhs.\t The
\nReserve Bank alleges that even in previous years there\twere
\nlosses,\t but were hidden.  In June 1960, there was a run  on
\nseveral branches of the Palai Bank.  Whether this was due to
\nthe  publication  of the balance sheet showing\ta  loss,  or
\nwhether\t it was due to the appointment of Mr. Sivaraman,  it
\nis  hardly  possible  now to say.   Between  June  24,\t1960
\n(deposits, Rs. 9.82 crores) and July 22, 1960 (deposits, Rs.
\n9.32  crores)  there was a withdrawal of Rs. 50\t lakhs.\t  By
\nAugust\t 3,  1960  (deposits,  8.50  crores)  there  was   a
\nwithdrawal  of Rs. 82 lakhs in 12 days.\t To meet  this\trun,
\nthe  Bank had to borrow against Government  securities\twith
\nthe  result that all its Government securities except  those
\nworth  Rs.  25 lakhs were pledged.  The deposits  (Rs.\t8.50
\ncrores)\t consisted  of Rs. 4 crores in fixed  deposits,\t Rs.
\n2.25  crores  in  current accounts and Rs.  2.25  crores  in
\nsavings\t deposits.   Against these, the Reserve\t Bank  found
\nthat  the Palai Bank had cash to the extent of Rs. 50  lakhs
\nand a capacity to borrow Rs.1 crore against its\t securities.
\nThe  appellant, however, urged before us that in the  report
\nof  the General Manager dated November 8, 1960, the cash  in
\nhand was shown to be Rs. 42.18 lakhs and at Banks, Rs. 83.68
\nlakhs,\tthe marketable securities, Rs. 22.98 lakhs  and\t the
\nestimated  surplus  from assets\t specifically  pledged,\t Rs.
\n142.63\tlakhs.\tThese figures do not, of course,  show\tthat
\nall this
\n640<\/span>
\nmoney would have been available immediately to stem the run.
\nIt  is thus evident that if the run continued  longer  there
\nwas  a\tlikelihood that these depositors who  were  able  to
\nwithdraw  their money would obtain payment in full,  leaving
\nthe  others  with  nothing or next  to\tnothing.   The\tBank
\nalleges\t in  its  affidavits  in  reply\t that  the  run\t was
\nsubsiding,  while  the Reserve Bank maintains  that  it\t was
\ngoing  on unabated.  Whether it was abating  or\t continuing,
\nthe   reputation   and\tsecurity  of  the  Bank\t  had\tbeen
\nconsiderably  shaken.\tThe learned Company  Judge,  in\t his
\njudgment  under appeal, estimated that Rs. 158 lakhs  (about
\none-sixth   of\t the  deposits)\t  represented\tthe   sudden
\nwithdrawals.   The  Directors  of the Palai  Bank  sent\t Mr.
\nSivaraman on August 960, to Bombay for urgent consultations,
\nand  Mr. Sivaraman on his return, announced on the 8th\tthat
\nin application for the winding up of the Bank had been\tmade
\nthat  day, and a provisional Liquidator had been  appointed.
\nHe  accordingly,  issued  orders to  the  Branches  to\tstop
\nbusiness and close the doors.  The ‘Reserve Bank was of\t the
\nopinion that the Palai Bank was not in a position to pay its
\ndepositors in full, and that the continuance of the Bank was
\nprejudicial to the interests of the depositors.
\n    The application, as already stated, was made on    August
\n8, 1960.  It was heard by Raman Nayar, J.    He\t   dispensed
\nwith  notice  under s. 450(2) of the  Companies\t Act  before
\npassing\t the  order appointing the  provisional\t Liquidator.
\nHe,  however,  issued notice of the  main  application,\t and
\nheard  the  Reserve  Bank, the\tPalai  Bank,  the  creditors
\nsupporting the petition and the creditorsopposing    it,
\nand read several affidavits filed by the parties.     On
\nDecember 5,1960, he acceptedthe application of the Reserve
\nBank, and ordered that thePalai\t Bank be wound\tup.   He
\nwas  moved  for\t a  certificate\t under\tArt.  13(1)  of\t the
\nConstitution by the present appellant (Mr.  Joseph Kuruvilla
\nVellukunnel), a
\n\t\t\t    641<\/span>
\nformer\tDirector of the Palai Bank and also a  contributory,
\nbut  he\t declined to certify the case.\tThe  appellant\tthen
\nobtained special leave of this Court, and filed this appeal.
\nSome  others  applied to intervene in the appeal,  and\twere
\nallowed\t  to  be  heard.   One\tMr.  D.\t Chacko\t Kappon\t  (a
\ncontributory  and also a depositor) filed a  petition  under
\nArt. 32 of the Constitution.  That petition was heard  along
\nwith this appeal.  This judgment will dispose of the  appeal
\nas well as the writ petition.\n<\/p>\n
   In  the High Court, the application of the  Reserve\tBank
\nwas  opposed on two grounds.  The first was that the  action
\nof  the\t Reserve  Bank in making  the  application  for\t the
\nwinding\t up  of the Palai Bank was  malafide.\tThis  ground
\nappears to have been given up in the High Court itself,\t and
\nhas  not been raised before us.\t The second ground was\tthat
\ns.  38(3)(b)(iii)  of the Banking Companies Act,  1949,\t was
\nvoid, inasmuch as it offends against Arts. 14 and 19 of\t the
\nConstitution.\tIn the hearing before us Art. 301  was\talso
\ninvoked.   The\tdecision of the High Court was\tagainst\t the
\nBank  and  other answering respondents,\t a-rid\tthis  ground
\nalone has been urged before us.\n<\/p>\n
    Though the facts cease to play an important part in\t the
\ndecision  of  the  question of\tlaw  which  survives,  those
\nnarrated  above\t were referred to by the  learned  Attorney-
\nGeneral as showing the background of the action taken by the
\nReserve Bank.  The appellant, in his reply, referred to some
\nother facts in explanation to avoid a possible prejudice  to
\nhis case, if the facts as presented by the Reserve Bank only
\nwere  considered.  While we are not required to express\t any
\nopinion upon the correctness or otherwise of the allegations
\nand counterallegations, we think it necessary to set out  in
\nbrief some of the facts, to which our attention was drawn by
\nthe appellant, to show that we have borne in
\n642<\/span>
\nmind  the rival contentions in determining the\tvalidity  of
\nthe section.\n<\/p>\n
   The\tappellant  contended that enquiries by\tthe  Reserve
\nBank  in the past were not thorough; but in the\t application
\nfor winding Up, the Reserve Bank had given specific  details
\nof   the   advances  and  their\t realisability.\t   In\tthis
\nconnection, we were referred to a reply made by the  Reserve
\nBank  in  answer to four schemes of compromise\tbetween\t the
\nBank and its creditors suggested by the Palai Bank.  In that
\nreply, the Reserve Bank said that no definite opinion  could
\nbe  expressed  on  the\tschemes\t except\t “after\t a  detailed
\nexamination  of the Bank’s books of account with a  view  to
\nassessing  the realisability of its assets and the  probable
\npace  of  recovery of the realisable assets.” This,  in\t our
\nopinion, was a proper attitude to take, because by then, the
\ncondition  of the Bank had materially altered, and  all\t the
\npast  data had become out of date.  The reply did  not\tshow
\nthat the Reserve Bank’s inspection was not thorough.   Next,
\nit  was argued that the Reserve Bank’s estimate of cash\t and
\nrealisable assets was wrong, if one reads the report of\t the
\nProvisional  Liquidator\t and  the  General  Manager,   dated
\nNovember  8, 1960.  We have already referred in\t an  earlier
\npart  of  this\tjudgment  to the  amounts  which,  in  their
\nopinion,  constituted  the available assets, and  have\talso
\nshown  why  the\t Reserve Bank cannot be said  to  have\tmade
\nmistake.   It  was  then contended that the  run  was  under
\ncontrol,  and our attention was drawn to certain  statements
\nin  which  the\twithdrawals during the months  of  July\t and
\nAugust are shown in a tabular form.  The run on the Bank did
\nnot  follow a uniform course.  Sometimes, it was  more,\t and
\nsometimes it was less, but continue, it did; and that is the
\nmain point of the matter.  It was said that the Reserve Bank
\nitself\tthought well of the Palai Bank, because in the\tyear
\n1954, it allowed the opening of a now Branch at Madurai, and
\neven in its last letter of July 21, 1960,
\n643<\/span>
\nit  gave the Palai Bank one year to improve matters, and  30
\ndays to show cause against the inspection reports, but\ttook
\na  hasty  action before even the 30 days had  expired.\t The
\naction of the Reserve Bank was undoubtedly taken during\t the
\nperiod\tof  grace;  but after July  21,\t the  situation\t had
\naltered so radically that delay might have defeated the very
\npurpose of the law, under which action was taken.
\n   Finally,  it was contended that the Palai Bank  began  by
\nbeing  a  rural\t Bank,\twhich was  making  advances  on\t the
\nsecurity  of  land, and such security, though  “sticky”\t was
\ncapable of being realised.  Reference was made to the Report
\nof  the Travancore Cochin Banking Enquiry Commission,  which
\nwas, appointed in 1956, where, in making a survey of banking
\nin  Travancore-Cochin  State, it was pointed  out  that\t the
\nBanks  were  “spread  out into the  rural  interior  of\t the
\nState”, and the main business of these banks was “to finance
\nthe  rural people engaged in a small business-crop  raising,
\nproduce\t processing,  transporting, vending,  etc.”  It\t was
\nargued that to a rural Bank of this kind the standards of  a
\ncommercial  bank could not be applied and that\tthe  Reserve
\nBank   should  have  made  allowances  in  respect  of\t the
\nrealisability  of the advances, the worse of which  belonged
\nto  a period prior to the extension of the Reserve  Bank  of
\nIndia  Act to this area.  These advances given\ttime,  could
\nhave  been  cleared,  and an attempt  was,  in\tfact,  being
\nearnestly  made\t with the assistance of Mr. J. A.  Frost,  a
\nretired senior grade Officer of the Imperial Bank of  India,
\nwho  was  appointed an adviser.\t It was pointed out  that  3
\naccounts  were\tclosed,\t 26  were  sued\t upon,\tand  in\t 13,
\nsubstantial  remittances  were received.  All  this  may  be
\ntrue; but it is useless for us to speculate as to what would
\nhave  happened if the depositors did not take a hand in\t the
\naffairs by making a run; and the action of the Reserve\tBank
\nwas precipitated
\n644<\/span>
\nby the exigencies of the situation, which had arisen.  Those
\nwho made a run for their money, were not going to wait\ttill
\nthe  Bank  acquired  sufficient\t funds\tto  pay\t them  after
\nrecovering its advance.\t Those advances, as conceded,  could
\nnot  so\t easily\t be  realised  as  the\tadvance\t made  by  a
\ncommercial  bank  on security other than that of  land.\t  If
\nthis  rural  bank  began  to arrange  its  business  like  a
\ncommercial  bank it must necessarily be judged by  the\tsame
\nstandard, and the affairs of the Palai Bank, in our opinion,
\nhad  long left behind the rural character, and\thad  emerged
\ninto those of a modern commercial bank.\n<\/p>\n
   What we have said above is sufficient to show that  there
\nwas  not enough material on which the action of the  Reserve
\nBank could strictly be characterised as mala fide.   Indeed,
\nthe  forbearance with which the Reserve Bank acted  (and  it
\nproved\tunwise) has completely demonstrated the futility  of
\ngranting  time, and we are not surprised that the  answering
\nrespondents  in\t the High Court and the\t appellant  in\tthis
\nCourt  have not chosen to raise any issue about the  honesty
\nof the action.\n<\/p>\n
   We are thus concerned with the contention that ss.  38(1)
\nand (3)(b) (iii) are void, being a breach of Arts. 14 and 19
\nof the Constitution, and ultra vires being in conflict\twith
\nArt. 301.  The arguments anent Arts. 14 and 19 are based  on
\nthe same reasoning, but that under Art. 19 takes a few\tmore
\nfacts  into account.  Shortly stated, the argument  is\tthat
\nss.38  (1)  and (3)(b)(iii) make the Reserve Bank  the\tsole
\njudge to decide Nhether the affairs of a banking company are
\nbeing so conducted as to be prejudicial to the interests of-
\nthe  depositors, and the Court has no option but to pass  an
\norder winding tip the banking company, when the\t application
\nis made Section 38 lays down :\n<\/p>\n
\t      “38(1), Notwithstanding anything contained  in
\n\t      section  391,  section 392,  section  433\t and
\n\t      section
\n\t\t\t\t   645<\/span>
\n\t      583  of the Companies Act., 1956, but  without
\n\t      prejudice\t to its powers under  sub-section(1)
\n\t      of  section  37 of this Act,, the\t High  Court
\n\t      shall  order  the\t winding  up  of  a  banking
\n\t      company–\n<\/p><\/blockquote>\n
\t      (a)if the banking company is unable to pay its
\n\t      debts ; or\n<\/p><\/blockquote>\n
\t      (b)if an application for its winding up has
\n\t      been made by the Reserve Bank under section 37
\n\t      or this section.\n<\/p><\/blockquote>\n
\t      (2)The Reserve Bank shall make an\t application
\n\t      under  this  section for the winding up  of  a
\n\t      banking company if it is directed so to do  by
\n\t      an order under clause (b) of sub-section
\n\t      (4)   of section 35.\n<\/p><\/blockquote>\n
\t      (3)The  Reserve Bank may make  an\t application
\n\t      under  this  section for the Winding up  of  a
\n\t      banking company-\n<\/p><\/blockquote>\n
\t      (b)if in the opinion of the Reserve Bank\n<\/p><\/blockquote>\n
\t      (iii)the continuance of the banking company is
\n\t      prejudicial   to\t the   interests   of\t its
\n\t      depositors.\n<\/p><\/blockquote>\n
    It\tis said that the word “shall” in the first  sub-sec-\n<\/p><\/blockquote>\n
tion  is  mandatory, and compels the High Court to  pass  an
\norder  winding\tup a banking company when ever\tthe  Reserve
\nBank chooses to make an application.  It is further  pointed
\nout that these powers exclude the operation of s. 433 of the
\nCompanies Act, under which companies arc wound up.
\n   The\tpower conferred on the, Reserve Bank by the  section
\nis  said  to  be bad under Art. 14.  because  it  enables  a
\ndiscrimination\tbetween\t a  banking company  and  any  other
\ncompany\t by prescribing different laws for their  respective
\nwinding up, and is
\n646<\/span>
\nbad  under  Arts.  19(1)  (f) and (g)  as  amounting  to  an
\nunreasonable restriction on the holding of property and\t the
\nright to carry on business as a banking company.  To amplify
\nthe  first, it is argued that s. 433 of the  Companies\tAct,
\nwhen  an application is made to wind up a company, the\tHigh
\nCourt  has to be satisfied after a fair trial that an  order
\nto wind up the company is called for, and the Judge, who  is
\nindependent  of\t executive control, is\tcompletely  free  to
\nreach  a  decision after the Company has  shown\t cause,\t and
\nthere is a right of appeal against the decision, if  adverse
\nto the company.\t But under the procedure laid down in s.  38
\nof the Banking Companies Act, the banking company  proceeded
\nagainst\t has no opportunity to show cause either  before  or
\nafter  the  winding up order, the Reserve Bank\t.records  no
\nreasons in writing or communicates them, there is no  access
\nto  Court  and no hearing before the.\tCourt  to  determine
\nwhether the proposed action is justified, and no redress  if
\na  mistake were made.  Under the exercise of that power,  it
\nis  said,  any\tbanking company can  be\t suppressed  by\t the
\nReserve Bank or by the Central Government and the Courts are
\npowerless, since the opinion of the Reserve Bank and\/or\t the
\ncentral Government is not justiciable and there is no appeal
\nagainst\t the  decision of the Reserve Bank or of  the  Court
\nacting on the application of the Reserve Bank.
\n   It  is said that the unreasonableness of the\t law  arises
\nfurther\t from  the  fact that the Reserve  Bank\t is  not  an
\nindependent  or impartial judge, the members of the  Central
\nand  Local Boards whereof, being all nominees of  Government
\nwith  no security of tenure, such as is enjoyed by the\tHigh
\nCourt  Judges.\t The Reserve Bank is subject  to  directions
\nfrom the Central Government, and even if the Reserve Bank be
\nof a contrary opinion, it has to file an application for the
\nwinding up of a banking company, if directed to do so by the
\nCentral Government.  It is further argued that this  drastic
\npower under a law which is
\n 647<\/span>
\ncharacterised as ‘Draconic’ is `uncanalised’, `uncontrolled’
\nand  `despotic’,  and in its exercise,\tevery  principle  of
\nnatural\t justice is set at nought, and the very\t fundamental
\nconception  of\tit, namely, resort to  Court  is  completely
\nabsent.\t   Such\t a  law,  it  is  said,\t is   so   patently,
\nunreasonable  as to be a gross violation of all\t fundamental
\nrights.\t Lastly, it is contended that in giving the  Reserve
\nBank  the power to elect to proceed under the Companies\t Act
\nor  under the Banking Companies Act, there is  further\troom
\nfor  discrimination.  It is thus contended that s. 38(1)  of
\nthe Banking Companies Act cannot be upheld as a valid law on
\nany principle.\n<\/p>\n
The  learned  Attorney-General appearing for  the  answering
\nrespondents contends that the action of the Reserve Bank was
\nfully  supported and justified by the facts.   According  to
\nhim, the, Palai Bank was inspected frequently for ten  years
\nand the reports of the inspecting officers were made availa-
\nble to the Palai Bank not only for information but also\t for
\nexplanation  and compliance.  The action, says\the,  drastic
\nthough\tit may seem, was taken after numerous  opportunities
\nto the Palai Bank to mend matters, that even as late as 1960
\nthe  Reserve  Bank gave a year’s time for  improvement,\t but
\nimmediate  action  had to be taken in view of  the  loss  of
\nconfidence among the depositors, a large number of whom made
\na  run for their money.\t The learned  Attorney-General\tthus
\nsays  that  there were many person who were of\tthe  opinion
\nthat  the  Reserve Bank should have acted earlier  and\tthat
\nperhaps\t the Reserve Bank could be blamed for  delaying\t the
\naction\tbut not for taking a precipitate action.  He  urgues
\nthat the Reserve Bank and not the Court was in a position to
\ntake  prompt  action  be  cause\t the  Reserve  Bank  already
\npossessed  all the necessary information.  He contends\tthat
\nthe  position  of  the\tReserve Bank and  its  statue  as  a
\nresponsible  body make it the proper authority to make\tsuch
\nan important decision requiring immediate action and
\n648<\/span>
\nthat   unless  the  Reserve  Bank  could  be  charged\twith
\ndishonesty (which is not the case) the action of the Reserve
\nBank  not only cannot be questioned, but should not be\topen
\nto  doubt.   According to him, banking companies  are  in  a
\nclass  by  themselves, and special law\tdealing\t with  their
\nwinding\t up cannot be described as discriminatory.  He\tcon-
\ntends  that  the  law  is  neither  discriminatory  nor\t un-
\nreasonable,  and that a prior judicial determination  of  an
\nissue  of  this\t kind is not a condition  precedent  to\t the
\nmaking of a winding up order against a batik.  He therefore,
\nsays that the appeal and the petition should be dismissed.
\nBefore we consider the arguments of the two sides in detail,
\nwe wish to say a few words about the position of the Reserve
\nBank  in the financial affairs of India and also  about\t its
\nplace  in the scheme of the law.  The Reserve Bank of  India
\nwas  established  on April 1, 1935, by the Reserve  Bank  of
\nIndia  Act,  1934.   Even before the  establishment  of\t the
\nReserve\t Bank, suggestions were made that there should be  a
\ncentral\t bank  in India and the Royal Commission  on  Indian
\nCurrency  and  Finance\thad recommended\t in  1926  that\t the
\ncurrency  and credit of the country could only be put  on  a
\nfirm  foundation,  if a central bank was  established.\t The
\nfirst  Bill  introduced in 1927 by Sir\tBasil  Blackett\t was
\ndropped.   The\tIndian Central\tBanking\t Inquiry  Committee,
\nhowever,  reported  in\t1931 that there was  a\tneed  for  a
\ncentral\t banking  institution  in India\t “for  securing\t the
\ndevelopment  of\t the Indian banking and credit system  on  a
\nsound and proper basis.” The Committee pointed out that some
\nof   the  Provincial  Committees  had  also  suggested\t the
\nestablishment  of the Reserve Bank.  The Committee ended  by
\nsaying:\n<\/p>\n
\t      “We accordingly consider it to be a matter  of
\n\t      supreme importance from the point
\n\t\t\t\t   649<\/span>
\n\t      of view of the development of banking  facili-<\/p><\/blockquote>\n
\t      ties in India, and of her economic advancement
\n\t      generally,  that\ta Central  or  Reserve\tBank
\n\t      should  be  created at the  earliest  possible
\n\t      date.  The establishment of such a bank  would
\n\t      by  mobilization of the banking  and  currency
\n\t      reserves of India in one hand tend to increase
\n\t      the  volume  of credit  available\t for  trade,
\n\t      industry\tand agriculture and to mitigate\t the
\n\t      evils of fluctuating and high charges for\t the
\n\t      use   of\tsuch  credit  caused   by   seasonal
\n\t      stringency.”  (Vol.  I, Part I.  Chap.   XXII,
\n\t      para, 605)
\nThe  White  Paper  on  Indian  Constitutional  Reforms\talso
\nrecommended  the establishment of a Reserve Bank ‘free\tfrom
\npolitical influence’.  As a result of these findings when  a
\nfresh  Bill  was  introduced  by  Sir  George  Schuster\t  on
\nSeptember  8, 1933, it was accepted and received the  assent
\nof the Governor General on March 6, 1934.\n<\/p>\n
The  functions of the Reserve Bank were generally  indicated
\nin  the preamble as the regulation of the issue of the\tBank
\nnotes  and the keeping the reserves with t view to  securing
\nmonetary  stability  in India and generally to\toperate\t the
\ncurrency and credit system of the country to its  advantage.
\nBut  to enable the Reserve Bank to function in this  manner,
\nit  had\t to be given other powers, so that it  may  function
\neffectively  as\t a central bank.  To this end,\tthe  Reserve
\nBank  was  given  the right to hold  the  cash\tbalances  of
\nimportant  commercial banks, a right to transact  Government
\nbusiness  in  India which was also its\tobligation,  and  to
\nenter  into  agreements with State Governments\tto  transact
\ntheir business. In addition to these, the Reserve Bank could
\nrequire all Banks included in the Second Schedule to the Act
\nto maintain with the Reserve  Bank a balance not less then 5
\nper  cent,  of their demand liabilities and 2  per  cent  of
\ntheir time liabilities.\t The
\n650<\/span>
\nReserve\t Bank  also  performed the  normal  functions  of  a
\ncentral bank as well as an ordinary bank, though the  latter
\nfunctions are not as detailed as those of in ordinary bank.
\nBut  the most important function of the Reserve Bank  is  to
\nregulate the banking system generally.\tThe Reserve Bank has
\nbeen  described as a Bankers’ Bank.  Under the Reserve\tBank
\nof India Act, the scheduled banks maintain certain  balances
\nand the Reserve Bank can lend assistance to those banks\t “as
\na  lender  of the last resort”.\t The Reserve Bank  has\talso
\nbeen  given certain advisory and regulatory functions.\t But
\nits  position  as a central bank, it acts as an\t agency\t for
\ncollecting financial information and statistics.  It advises
\nGovernment  and\t of-her\t banks\ton  financial  and   banking
\nmatters,  and for this purpose, it keeps itself informed  of
\nthe activities and monetary position of scheduled and  other
\nbanks and inspects the books and accounts of scheduled\tbank
\nand advises Government after inspection whether a particular
\nbank  should  be  included in the Second  Schedule  or\tnot.
\nEvery scheduled bank is required to send to the Reserve Bank
\nand  to\t the  Central  Government a  weekly  return  of\t its
\nposition in a form, which is prescribed.  Sometime, however,
\nthe  Reserve  Bank  allows a particular\t bank  to  send\t its
\nreturns\t once  a month instead of every\t week.\t From  these
\nreturns,   the\t Reserve   Bank\t  prepares   and   publishes
\nconsolidated statements showing the monetary position in the
\ncountry.  The inclusion of a bank in the Second Schedule  is
\nthe  function  of the Reserve Bank, and under  ss.  42(6)(a)\n<\/p>\n
(iii)  and (b)(ii) it satisfies itself inter alia  that\t the
\naffairs of the particular bank are not being conducted in  a
\nmanner detrimental to the interests of its depositors.\t The
\nReserve Bank has further the power to prohibit any scheduled
\nbank from receiving, after a week, any fresh deposits.\n<\/p>\n
\t\t\t    651<\/span><\/p>\n
The above analysis of some of the provisions of the  Reserve
\nBank  of India Act show that the Reserve Bank of  India\t has
\nbeen  created as a central bank with powers of\tsupervision,
\nadvice\tand  inspection,  over\tbanks,\tparticularly   those
\ndesiring  that\tthey be included in the Second\tSchedule  or
\nthose  scheduled already.  The Reserve Bank thus  safeguards
\nthe economy and the financial stability of the country.\t  No
\ndoubt, the Board is composed of nominated members ; but from
\nthe  nature of things, it could not be\totherwise.   Neither
\nelection  nor competitive examinations can effectively\ttake
\nthe place of nominations, if the Board is to be composed  of
\nmen  of\t proved worth and standing, and there  is  no  other
\nmethod\twhich  can  even be  contemplated.   No\t doubt,\t the
\nmembers\t of  the Board are subject to removal,\tbut  neither
\nintegrity nor efficiency is secured only by such  guarantee,
\nand  we have no reason to think that the Reserve Bank  acted
\nin this case, or acts in other cases under pressure or\tfrom
\noblique\t motives.  As was pointed out in another  connection
\nby  this Court in All India Bank Employees’  Association  v.
\nNational Industrial Tribunal<\/a> (1).\n<\/p>\n
\t      “If it was not the Reserve Bank of India,\t the
\n\t      only  other authority that could be  entrusted
\n\t      with   the  function  would  be  the   Finance
\n\t      Ministry\tof the Government of India and\tthat
\n\t      department would necessarily be guided by\t the
\n\t      Reserve  Bank  having regard to  the  intimate
\n\t      knowledge\t which the Reserve Bank has  of\t the
\n\t      banking  structure of the country as  a  whole
\n\t      and   of\t the  affairs  of   each   bank\t  in
\n\t      particular.”\n<\/p><\/blockquote>\n
The  position  of  the Reserve Bank being such\tas  we\thave
\nstated from the Reserve Bank of India Act, the next thing to
\nenquire is its powers under
\n(1)  [1962] 3 S.C.R. 269, 299.\n<\/p>\n
652<\/span><\/p>\n
the  Banking Companies Act.  The Banking Companies  Act,  in
\nits  present  form,  is\t the  product  of  many\t legislative
\nenactments.   The Banks’ Liquidation  Proceedings  Committee
\n(1962)\tcorrectly  described it as “made up  of\t shreds\t and
\npatches”  We  were  taken through  the\tentire\tevolutionary
\nprocess\t by  the  learned Attorney-General; but\t we  do\t not
\nconsider it necessary to trace the various steps.  We  shall
\ncontent ourselves with a reference to the salient landmarks.
\nIn  the\t Indian Companies Act, 1913, there  was\t no  special
\nprocedure  for banking companies, particularly\trelating  to
\ntheir  winding\tup.  Special provisions were  introduced  in
\nthat  Act  by the Indian Companies  (Amendment)\t Act,  1936.
\nPart X-A, which was then introduced, merely enacted  certain
\nregulatory   provisions,  but  of  winding  up\tof   banking
\ncompanies,  it ,said nothing.  The amendment hardly met\t the
\npurpose and the Reserve Bank of India framed a draft bill as
\nfar  back as 1939 from which has been fashioned the  present
\nBanking Companies Act.\n<\/p>\n
During\tthe War years, the Indian Companies Act was  amended
\nseveral times to meet some special exigencies, with which we
\nare not concerned.  But by July, 1946, it was realised\tthat
\ncertain\t undesirable features in banking had come to  exist.
\nBanks were then getting control of non-banking companies and
\nby  the interlocking of shares, the banking  companies\twere
\nable to manipulate the finances at their disposal.  The main
\nfeatures were ‘the grant of loans to persons connected\twith
\nthe management of banks without adequate security  extensive
\nwindow-dressing\t at  the time of  preparing  balance-sheets,
\nand,  in general, a tendency to utilise the bank’s funds  to
\nthe  detriment of the interests of the depositors.” It\tmust
\nnot  be forgotten that the Indian Companies Act,  1913,\t was
\nconcerned  primarily with safeguarding the interests of\t the
\nstockholders, whereas in a banking company, the interests of
\nthe depositors are invariably many times
\n 653<\/span>
\nthose of the stockholders, if those interests can be said to
\nbe  represented\t by the monies\tinvested  respectively.\t  In
\n1946,  an Ordinance was promulgated consisting of  only\t six
\nsections of which the operative sections were the last four.
\nSection\t 3  enabled  the Central Government  to\t direct\t the
\nReserve\t Bank  to  cause an inspection to  be  made  of\t any
\nbanking\t company  and its books and accounts and to  make  a
\nreport\tto the Central Government.  Section 4  provided\t the
\nmachinery  and\tthe procedure to implement s. 3.  Section  5
\nempowered Government to prohibit a bank from receiving fresh
\ndeposits  or  to direct the Reserve Bank not  to  include  a
\nparticular  bank in the Second Schedule, or to exclude\tit.,
\nif  already included.  Sub-section (2) provided for  certain
\npenalties,  and\t s. 6 authorised the Central  Government  to
\npublish,  after\t reasonable notice to  the  banking  company
\nconcerned,  any report or parts thereof This was an  attempt
\nto  ensure  the depositors a certain measure  of  safety  in
\nregard to their money.\n<\/p>\n
This  Ordinance\t was  followed\tby  the\t Banking   Companies
\n(Restriction  of  Branches) Act, 1946, which,  is  its\tname
\nshows, put a curb on the indiscriminate opening of  branches
\nby  some  banks.  The evil of indiscriminate  advancers\t and
\nloans was then sought to be met by an Ordinance\t promulgated
\nin 1948 intituled “The Banking Companies Control  Ordinance”
\n(XXV of 1948).\tIn that Ordinance, it was provided that\t the
\nCourt shall appoint the Reserve Bank as the Official  Liqui-
\ndator of a banking company on the application of the Reserve
\nBank in that behalf.  The Reserve Bank of India Act was also
\namended\t to enable the Reserve Bank to give a loan or  loans
\nto  a banking company with a first charge on the assets,  if
\nwound  up.  A large number of banking companies\t had  failed
\nduring\tthe  years, 1947, 1948 and 1949.  Between  1926\t and
\n1937, 23 Banks had suspended payment.  In 1938 and 1939,  46
\nBanks
\n654<\/span>
\nfailed, from 1940 to 1946, 95 Banks were involved.  But,  in
\n1947,  1948  and  1949 there were as many  as  123  failures
\ninvolving outside liabilities of Rs. 82 crores ! The largest
\nnumber\twas  in Calcutta with 83 Banks.\t In the\t winding  up
\nproceeding that\t    followed,  many unsatisfactory  features
\nwere noticed.\tIt  was noticed that the  realisations\twere
\ninsignificant,\twhile  the costs were  great,  and  enormous
\nexpenditure  of\t time  took place.  The winding\t up  of\t any
\ncompany,  be it a banking company or any other, requires  an
\ninvestigation  of the affairs, the recovery and\t realisation
\nof assets and distribution of what is realised.\t While these
\nmatters can,, of course, be carried on without undue  hurry,
\nthe  decision whether there should be a winding up  or\tnot,
\ncannot be unduly deferred in the case of a banking  company,
\nif  the interests of the depositors are to  be\tsafeguarded.
\nTo  achieve  solidarity in banking operations  and  also  to
\npreserve the rights of the depositors while a bank continues
\nand  more so when it cannot, the Banking Companies  Act\t was
\nthe logical, and indeed, the only answers.
\nWe  have seen that the Reserve Bank was already\t functioning
\nas a central bank with a certain measure of control over the
\nother  banks,  scheduled or unscheduled.  This\tcontrol\t was
\ntightened in the Banking Companies Act by making  provisions
\nwhich  were  intended  to  protect  the\t interests  of\t the
\ndepositors.   Differences  noticeable  between\tthe  Banking
\nCompanies Act, on the one hand and the Companies Act, on the
\nother, which have been characterised as discriminatory,\t are
\nthus explainable on the basis of the object to be  achieved.
\nWe shall soon illustrate this by a reference to the sections
\nthemselves.  For the present we only wish to emphasise\tthat
\nbanking\t companies cannot be compared with other  companies.
\nThe   ordinary\tcompanies  deal\t with  the  money   of\t the
\nstockholders, who own a share in the assets,
\n\t\t\t    655<\/span>
\nwho  appoint their own Directors, for better or\t for  worse,
\nand whose liability is also limited.  The banking  companies
\nare  in an entirely different class, as they deal  with\t the
\nmoney  of  the depositors who have no  security\t except\t the
\nsolvency of the banking company and its sound dealings\twith
\ntheir  money.\tEx  facie, the\tbanking\t companies  must  be
\nregulated  somewhat  differently, and the interests  of\t the
\ndepositors  must  be paramount and the winding\tup  of\tsuch
\ncompanies  depends  upon other considerations,\tchief  among
\nwhich  is  the\tdesire to pay off the creditors\t as  far  as
\npossible in full or at least equitably.\t The action is\tthus
\ndictated not from any abstract consideration of a long-range
\nview  of the future ability of a bank to pay  its  creditors
\nbut  its  ability to pay them at any given  time.   In\tthis
\nconnection,  the Reserve Bank has been given by the  Banking
\nCompanies  Act\tthe  power and invested\t with  the  duty  of
\nwatching the affairs of every banking company with a view to
\nensuring  the  safety of the depositors’  money.   There  is
\nthus, at the very start, a reasonable classification,  which
\nis also a very just and practical classification, to achieve
\nthe avowed purpose.\n<\/p>\n
It  is hardly necessary to examine each and every  provision
\nof  the Banking Companies Act.\tWhen the  Banking  Companies
\nAct  was  originally  enacted,\tthe  main  objects  were  to
\nprescrible minimum capital standards, to prohibits the\tnon-
\nbanking companies to accept deposits repayable on demand and
\nto  limit dividends payable.  But included in the Act was  a
\ncomprehensive scheme for licensing of banks and a  conferral
\non the Reserve Bank of power to call for periodical  returns
\nand  balance  sheets and to inspect books  and\taccounts  of
\nbanking\t companies.   The  Act also  empowered\tthe  Central
\nGovernment  to\ttake action against banks  conducting  their
\naffairs\t in  a mariner detrimental to the interests  of\t the
\ndepositors, and
\n656<\/span>
\nprovided  for  a quicker procedure for\twinding\t up  banking
\ncompanies.\n<\/p>\n
When  the Banking Companies Act was passed in 1919,  it\t was
\nexplained  in the note on cl. 37, which corresponded  to  s.
\n38,  that  the\tprovisions of the Indian  Companies  Act  in
\nrespect\t of  liquidation  of companies did not\tseem  to  be
\nsuitable for banking companies, that a bank’s business being
\nof   an\t over-the-counter  kind,  the  bank  has   to\tmeet
\nimmediately its liability and a provision for winding up  of
\nthe banking company when it refuses to meet a lawful  demand
\nwithin\ta  stated time, was necessary.\tIt was\talso  stated
\nthat  the Reserve Bank was given authority to apply for\t the
\nliquidation  of\t the banking company, if  its  affairs\twere
\nconducted   to\tthe  detriment\tof  the\t interests  of\t the
\ndepositors.   An  examination of the Banking  Companies\t Act
\nreveals two things prominently.\t The first is that the whole
\nintend and purpose of that Act is to secure the interests of
\nthe depositors.\t The second is that the Reserve Bank is\t the
\ninstrumentality by which this intend is to be achieved.\t The
\nAct, at every turn, makes the Reserve Bank the authority  to
\nsanction,   permits,  certify,\tinspect,   report,   advise,
\ncontrol, direct, license and prohibit.\tThere is hardly\t any
\nprovision  where  the Reserve Bank’s judgment  is  not\tmade
\nfinal  vis-a-vis  a banking company except rarely  where  an
\nappeal to the Central Government can lie.  No useful purpose
\nwill be served in referring to these sections in detail.
\nNor  do\t the  powers of the Reserve  Bank  end\tthere.\t The
\nReserve\t Bank  not only has powers  over  banking  companies
\nwhile they are functioning, but it has also powers when\t the
\nbanking\t companies wish or are forced to cease to  function.
\nIf  a  banking\tcompany wants to suspend  its  business\t and
\napplies to the High Court for a moratorium, the\t application
\nis not maintainable, unless
\n\t\t\t    657<\/span>
\nit is accompanied by a report of the Reserve Bank indicating
\nthat in the opinion of the Reserve Bank the banking  company
\nwill  be able to pay its debts.\t When the High Court  grants
\nthe relief without such report, it has to call for a  report
\nfrom  the Reserve Bank.\t The High Court is also required  to
\nhave  regard  to the interests of the depositors,  and\teven
\nduring\tthe period of moratorium granted by the High  Court,
\nthe Reserve Bank can apply for the winding up of the banking
\ncompany.   Sections 39 and 41-A give special powers  to\t the
\nReserve\t Bank in winding up proceedings.  Even in  voluntary
\nwinding\t up  of a banking company, the Reserve Bank  has  to
\ncertify that the banking company is able to pay in full\t all
\nits debts to its creditors, as they accrue.  In amalgamation
\nof  banking companies, the scheme has to be approved by\t the
\nReserve\t Bank.\tSimilarly, in ;compromises  or\tarrangements
\nbetween\t the banking company and its creditors, the  Reserve
\nBank  has  to  be  satisfied.  In  all\tthese  matters,\t the
\nsatisfaction inter alia, must be as to the interests of\t the
\ndepositors.   In reconstruction of banking company after  an
\napplication by the Reserve Bank for an order moratorium, the
\nReserve\t Bank has to satisfy- itself and prepare  a  scheme,
\nwhich,\tinter  alia,  must  be\tin  the\t interests  of\t the
\ndepositors.\n<\/p>\n
This  brief  survey of some of the other provisions  of\t the
\nBanking Companies Act, in addition to the general provisions
\nearlier\t noticed,  makes  it  plain  that  the\t legislature
\nconsiders  that\t consistent with its position as  a  central
\nbank  and  more\t so with its  duties  and  obligations,\t the
\nReserve Bank must have a decisive voice in certain  matters.
\nIt  is in this context and setting that the,  provisions  of
\nss. 38(1) and (3)(b)(iii) of the Banking Companies Act\tmust
\nbe viewed.  It must not be overlooked that the\tlegislature,
\nin  view of the sad experiences of the past, was anxious  to
\ndevise\ta  machinery  for the  supervision,  inspection\t and
\neffective functioning
\n658<\/span>
\nof  banking companies in the country.  Associated with\tthis
\nwas  the  speedy closure of banking  companies,\t which\twere
\nharmful to the interests of the depositors.  The legislature
\nachieved  both\tthese objectives through the  Reserve  Bank,
\nwhich, because of its special powers and advantages, was  in
\na  position  to act promptly and effectively.\tTo  aid\t the
\nReserve\t Bank, the Courts were required by law to be  guided
\nin  certain  matters  by the opinion  and  judgment  of\t the
\nReserve Bank, and in the matter of their disposal of winding
\nup cases relating to banking companies, a special  procedure
\nwas enacted in Part IIIA of the Banking Companies Act.
\nWe are now in a position to deal with the argument that\t ss.
\n38(1) and (3)(b)(iii) of the Banking Companies Act are void-
\nfirstly\t because they permit discrimination between  banking
\ncompanies on the one hand, and non-banking companies on\t the
\nother,\tand  also between banking companies  inter  se,\t and
\nsecondly  because  they create an  unreasonable\t restriction
\nupon the right to carry on banking, and lastly, because\t the
\nwhole  procedure  is a denial of the principles\t of  natural
\njustice, chiefly by denying an access to Courts.  Though the
\narguments in this appeal have for their immediate object the
\ndeclaration  that ss. 38(1) and (3)(b) (iii) of the  Banking
\nCompanies  Act are void, they have ranged over a  very\twide
\nfield.\t In support of the first limb of the argument,\tArt.
\n14 is invoked, and in support of the second and third, Arts.
\n19(1)(f)  and (g); and the argument proceeds along lines  so
\nwell-known now as to need hardly any further  amplification.
\nThere being no direct ruling either of this Court or of\t any
\nHigh  court,  assistance  is  sought  to  be  derived\tfrom
\nobservations in previous decisions of this Court relating to
\nother  laws.   In reply, the  learned  Attorney-General\t has
\nrelied\tupon  the  provisions of  certain  banking  laws  in
\nAmerica and Japan and decisions of the
\n\t\t\t    659<\/span>
\nAmerican Courts, where such American laws were tested  under
\nthe  due process’ clause.  We shall refer to those laws\t and
\nbriefly rulings in the sequel,
\nAs  regards  the first point, viz.,  discrimination  between
\nbanking companies and non-banking companies, we have already
\nsufficiently  indicated\t the  wide  difference\tthat  exists
\nbetween\t these\ttwo  types and the  need  for  special\tlaws
\ndealing\t with banking companies.  We have also\tpointed\t out
\nthe  mischief  that was sought to be remedied  and  how\t the
\npresent\t  law\thas   been   evolved   after\tconsiderable
\ndeliberation.\t A  special  Committee\tcalled\tthe   Banks’
\nLiquidation Proceeding Committee was appointed in 1952,\t and
\nthe  findings  and  recommendations of\tthe  Committee\twere
\nimplemented,  amending the Banking Companies Act and  incor-
\nporating  changes,  of\twhich the impugned  section  in\t its
\npresent form is one.  There being a very clear-cut and valid
\nclassification, the different procedure cannot be said to be
\ndiscriminatory, because it is based on differences which are
\nrelated\t to the end sought to be achieved.  Further,  we  do
\nnot think that the possibility that the procedure under\t ss.
\n38(1)  and (3)(b)(iii) may be invoked in some cases and\t the
\nprocedure  of  the  Companies  Act  in\tothers,\t makes\t any
\ndifference, because the different procedures will be invoked
\nto suit different situations, and it cannot be said that the
\nReserve\t Bank would act arbitrarily from case to case.\t The
\nReserve\t Bank,\tapart from its being a reasonable  body,  is
\nanswerable to the Central Government, and the public opinion
\nis certainly strong and vocal enough for it to heed.  If the
\nReserve\t Bank were to act mala fide, the Central  Government
\nand  in\t the  last  resort, the Courts,\t will  be  there  to
\nintervene.  In our judgment, the provisions of ss. 38(1) and
\n(3)(6)(iii) cannot be said to be a breach of Art. 14 of\t the
\nConstitution.\n<\/p>\n
660<\/span><\/p>\n
That  leaves  over  the second and  third  arguments,  which
\nproceed\t upon the same materials.  In this  connection,\t the
\nmain  grounds  of attack have already been set out  in\tthis
\njudgment.   Before we deal with the central point, we  shall
\ndeal  with certain others which proceed, so to\tspeak,\tfrom
\nthe  side lines.  The objection that the Reserve Bank  gives
\nno  hearing,  records  no reasons in writing  and  does\t not
\ncommunicate  them  is  met  at least in\t this  case  by\t the
\nadmitted  facts.   ‘The\t numerous  inspection  reports\t and
\ndirections  issued  by\tthe Reserve Bank over  a  period  of
\nnearly\tnine years, together with the application  filed  in
\nthis case, prove amply that there was enough hearing of\t and
\nenough communication of the grounds of action to, the  Palai
\nBank.  The Bank had also sufficient time and opportunity  to
\nestablish its own point of view before the Reserve Bank.  It
\nwas  impossible that the Reserve Bank, with the run  on\t the
\nBank, would sit down to decide after hearing whether to take
\naction or not, while withdrawals were being made at the rate
\nof  Rs.\t 7 lakhs per day.  The emergency of  the  situations
\nwhich  may  arise,  is\titself\tthe  justification  for\t the
\nprocedure open under the Act and taken in this case.  In our
\nopinion,  these\t grounds  cannot  be  entertained.   It\t  is
\ndifficult  to  imagine\tthat  the  Reserve  Bank  would\t act
\ndifferently in another case.\n<\/p>\n
The  main  ground  of  attack  is  the\tway  ss.  38(1)\t and
\n(3)(b)(iii) make it mandatory for the High Court to pass  an
\norder winding up a banking company whenever the Reserve Bank
\nunder its powers or under an order of the Central Government
\nmakes  an  application\tfor  the winding  up  of  a  banking
\ncompany.  It is argued that such a power to the Reserve Bank
\nis  an\tuncontrolled and despotic power and  to\t crown\tall,
\naccess\tto Courts is not possible because the  Court  itself
\nmust  pass an order without deciding whether the affairs  of
\nthe banking
\n 661<\/span>
\ncompany\t are being conducted in a manner detrimental to\t the
\ninterests of the depositors–a fact capable of being  proved
\nlike any other fact.  It is argued as a matter of  principle
\nthat  any law which bars a decision by the Court  is  itself
\nunreasonable without more.  Mr. Pathak, in supplementing the
\nabove contentions of Mr. Nambiar, also contends that by\t the
\nlaw  in question a judicial process has been converted\tinto
\nan executive action, and subjective determination has  taken
\nthe place of judicial determination.  He also contends\tthat
\nthe  Reserve Bank accuses a banking company, and then  tries
\nthe issue to the complete exclusion of Courts.
\nIt  must not be overlooked that the winding up of a  banking
\ncompany\t takes\tplace before the High Court  and  under\t the
\nprocess\t of law.  The judicial process is excluded  only  in
\nrespect of the momentous decision whether a winding up order
\nshould be made or not.\tThis opinion is left to the  Reserve
\nBank, and the Court merely passes an order according to\t the
\nReserve\t Bank’s\t opinion, and then proceeds to wind  up\t the
\nbanking\t company according to law.  The narrow\tquestion  is
\nwhether in leaving this decision to the Reserve Bank the law
\noffends\t the principles of natural justice, and\t becomes  so
\nunreasonable,  viewed in the light of Art. 19, as to  become
\nvoid.\tThis  is the point on which the\t respective  parties
\njoined\tissue and had much to say, and this is\tthe  crucial
\npoint in this case.\n<\/p>\n
In  support  of this contention, reliance on behalf  of\t the
\nappellant is placed upon certain cases of this Court, and we
\nshall  begin  by  noticing them in brief.   The\t first\tcase
\nrelied\tupon  is A. K. Gopalan v. The State  (1).   In\tthat
\ncase,  the  validity of ss. 3, 7, 10-14\t of  the  Preventive
\nDetention Act, 1950, was challenged on a petition under Art.
\n32 of the Constitution for a writ of habeas corpus.  Certain
\nobservations of Kania, C.J., and Fazl Ali, J., were
\n(1)  [1950] S.C.R. 88.\n<\/p>\n
662<\/span><\/p>\n
relied upon to show that the right to be heard and tried  is
\nthe  very  basis of the rule of law, Fazl  Ali,J.,  observed
\nthat there is a fundamental principle\tthat a person  whose
\nrights\tare  affected  must be\theard.\t The  learned  Judge
\nreferred  to several cases in which the maxim, audi  alteram
\npartem,\t has  been  invoked and\t applied,  particularly\t the
\nobservations  of  Lord Macnaghten in Lapointe  v.  L’  Asso-
\nciation,  etc., de Montreal (1), who condemned\ta  procedure
\nwhich  required\t no hearing as being “contrary to  rules  of
\nsociety and above all contrary to the elementary  principles
\nof justice.”\n<\/p>\n
It cannot reasonably be said that there would be no  hearing
\nin cases of this type.\tWhile we agree that it is  obnoxious
\nto  the\t rule of law as it exists among\t civilized  nations,
\nthat  a person should be condemned, unheard, we\t cannot\t say
\nthat  in  this case the Palai Bank was not heard,  and\tthis
\ncase is really typical of those cases in which such a  power
\nwould\tbe  invoked.   The  learned  Attorney  General\t was
\njustified in saying that there was plenty of hearing  before
\nthe  application was filed.  The gist of the objection\tmust
\nthus be taken to be that the Palai Bank was not heard in the
\nHigh  Court before the making of the impugned order.   If  a
\nvalid law could be made leaving to the determination of\t the
\nReserve\t Bank whether a banking company should be  wound  up
\nand the Court to implement that decision, then this petition
\nmust fail ; but if it cannot be made, then it must  succeed.
\nWe  have  thus to see whether there is any  inviolable\trule
\nthat  every determination must always be made by  the  Court
\nand by no other authority.\n<\/p>\n
In  dealing with the rulings of this Court cited to us,\t  of
\nwhich  we  have\t already mentioned  one,  we  shall  enquire
\nwhether\t such  a wide proposition can be said to  have\tbeen
\nestablished
\n(1)  [1906] A.C.535.\n<\/p>\n
\t\t\t    663<\/span><\/p>\n
before.\t In A. K. Gopalan’s case(1), s.14 of the  Preventive
\nDetention  Act was held void as contravening Art.  22(5)  of
\nthe Constitution in so far as it prohibited a person who was
\ndetained  from disclosing even to the Court the\t grounds  of
\nhis  detention and the representation made by him.   It\t was
\nsaid that the right to move an appropriate Court for a\twrit
\nof habeas corpus and therein to show that the detention\t was
\nimproper,  was undeniable and it was held that s. 14,  which
\nStood  in  the\tway of this right,  was\t void.\t No  general
\nproposition  that the Court must decide whether\t the  person
\nshould\tbe detained or not was laid down in that case.\t The
\nlaw   which  allowed  a\t subjective  determination  of\t the
\nexecutive was in fact, upheld, and there are passages in the
\njudgments  of the majority to show that a judicial trial  in
\ncases of preventive detention was  not considered necessary.
\n   In State of Madras v. V. G. Row<\/a> (2), SS. 15(2)-(b)  and
\n16  of\tthe  Indian Criminal Law  Amendment  Act,  1908\t [as
\namended\t by the Indian Criminal Law Amendment (Madras)\tAct,
\n1950],\twere called in question, inter alia, on\t the  ground
\nthat  they  empowered  the  State  to  declare\tassociations
\nillegal\t by a notification without a provision for  judicial
\nenquiry.   It was held by this Court that the  conferral  of
\nauthority on the executive Government to impose restrictions
\non the right of association without allowing the grounds  of
\nsuch  imposition both in their factual and legal aspects  to
\nbe duly tested in a judicial enquiry was a strong element to
\nbe  taken into account in judging the reasonableness of\t the
\nrestriction.  It was also added :\n<\/p>\n
\t      “The formula of subjective satisfaction of the
\n\t      Government  or  of  its.\tofficers,  with\t  an
\n\t      Advisory\t Board\t thrown\t into\treview\t the
\n\t      materials\t on  which the Government  seeks  to
\n\t      override a basic freedom guaranteed to the
\n(1) [1950] S.C.R. 88.\n<\/p><\/blockquote>\n
(2) [1952] S.C.R. 597.\n<\/p>\n
664<\/span><\/p>\n
citizen,   may\tbe  viewed  as\treasonable  only   in\tvery
\nexceptional, circumstances………\n<\/p>\n
Earlier, in the same judgment it was said
\n\t      “”…the\ttest  of  reasonableness,   wherever
\n\t      prescribed, should be applied to each  indivi-
\n\t      dual statute, impugned, and no abstract  stan-
\n\t      dard,  or general pattern,  of  reasonableness
\n\t      can be laid down as applicable to all cases.”
\nV.   G.\t Row’s case (1) shows that laws allowing  subjective
\ndetermination by the executive are not to be struck down out
\nof  hand,  but\tthat their  reasonableness  must  be  judged
\naccording to the standards appropriate to the circumstances.
\nIt  may, however, be mentioned that in V. G, Row case (1)  a
\ndistinction  was made between a law  requiring\tanticipatory
\naction particularly on grounds of suspicion, and a law which
\nauthority action based on the factualexistence of certain
\ngrounds.  A. K. Gopalan’s case(2) and Dr. N. B.Khare v.
\nThe  State  of Delhi<\/a> (3) were distinguished on\tthis  narrow
\nground\twhich  appears\tto have been conceded  then  by\t the
\nlearned Attorney-General.  The factual existence of grounds-
\namenable  to an objective determination by the Court in\t the
\npresent\t case,\tnamely\tprejudice to the  interests  of\t the
\ndepositors was said to place this case within the rule in V.
\nG. Row’s case (1).  But cases of detention and\tassociations
\ndeclared  unlawful  are not in the same class as  a  banking
\ncompany on which there is a run by the depositors and  whose
\naffairs,  on  inspection,  are found to\t be  mismanaged\t and
\nconducted in such a way that it is unable to pay all  lawful
\ndemands upon it.  The factual background will not be one  of
\nsuspicion, and action will be based on concrete facts, which
\nwill  normally\tbe checked and rechecked  before  the  final
\ndecision,  and, in our opinion, it is impossible  to  equate
\nsuch  a case with either A. K. Gopalan’s case (2) or  V.  G.
\nRow’s case(1).\n<\/p>\n
(1) [1952] S.C.R. 597.\t    (2) [1950] S.C.R. 88.
\n(3) [1950] S.C.R. 519,
\n665<\/span>
\nThe next case to which reference was made is Thakur Raghubir
\nSingh  v. The Court of<\/a> wards, Ajmer (1).  In that  case,  s.
\n112  of the Agra Tenancy and Land Records Act (42  of  1950)
\nwas declared void.  That section allowed the Court of  Wards
\nto  take  over the property of a landlord  under  the  Ajmer
\nGovernment  Wards  Regulation (1 of 1888)  if  the  landlord
\nhabitually infringed the rights of tenants.  Such a landlord
\nwas  under s. 112 deemed to be “disqualified to\t manage\t his
\nproperty.” The reason for striking down the section was that
\nit  completely\tnegatived the fundamental right\t under\tArt.
\n19(1)(f)by  making the enjoyment of the right to  depend  on
\nthe  mere discretion of the executive.\tThe absence  of\t any
\nprovision  which  would\t enable the landlord held  to  be  a
\nhabitual  infringer  of the rights of his tenants,  to\thave
\nrecourse  to  a Civil Court to test the correctness  of\t the
\ndetermination against him was held to create the invalidity.
\nIt  is\tto be noticed that the learned\tAttorney-General  in
\nthat case conceded the point, but the reason behind the rule
\nappears to be that the law there prescribed a punishment  or
\npenalty for the bad behaviour of the landlord, and no person
\nshould\tbe  punished without having an opportunity  to\tshow
\ncause.. The question, therefore, is, can the ruling be\tmade
\napplicable  ?  It does not lay down  any  general  principle
\napplicable  to all cases beyond the one we  have  mentioned.
\nThe action to wind up a banking company cannot be said to be
\na  punishment  for  mismanagement  but\taction\tdesigned  to
\npreserve   the\trights\tof  the\t depositors,  and  the\t two
\nsituations are hardly similar.\n<\/p>\n
The next two cases relied upon were The Commissioner,  Hindu
\nReligious  Endowments,\tMadras\tv.  Sri\t Lakshmindra  Tirtha
\nSwamiar\t of  Sri Shirur Mutt<\/a> (2) and  Mahant  Sri  Jagannath
\nRamanuj Das v.The State of Orissa it was
\n(1)  [1953] S.C. R. 1049.\n<\/p>\n
(2)  [1954] S.C.R. 1005.\n<\/p>\n
(3)  [1954] S.C.R. 1046.\n<\/p>\n
666<\/span><\/p>\n
conceded by the counsel for the State that certain  sections
\nof  the Madras Religious and Charitable Endowments Act\t(XIX
\nof 1951) and of the Orissa   Hindu Religious Endowments Act,
\n1939 (as amended in 1952), were ultra vires Arts.  19(1)(f),
\n25 and 26 of the Constitution.\tThis Court also found in the
\nformer\tcase that the provisions were extremely\t drastic  in
\ntheir character and the worst feature ,Was that there was no
\naccess\tto  Courts.   The Act  in  question  was  considered
\ndrastic\t because under it a religious institution  could  be
\nnotified  and taken over and vested in an executive  officer
\nmerely by stating that the Board “was satisfied that in\t the
\ninterests  of  proper  administration of the  Math  and\t its
\nendowments,  the settlement of a scheme was  necessary.”  In
\nthe latter case, it was observed as follows
\n\t      “‘Sections 38 and 39 relate to the framing  of
\n\t      a\t scheme.  A scheme can certainly be  settled
\n\t      to  ensure due administration of\tthe  endowed
\n\t      property\tbut the objection seems to  be\tthat
\n\t      the  Act provides for the framing of a  scheme
\n\t      not by a civil court or under its\t supervision
\n\t      but   by\t a  Commissioner  who  is   a\tmere
\n\t      administrative or executive officer.  There is
\n\t      also  no\tprovision for  appeal  againsts\t his
\n\t      order to the court.”\n<\/p>\n
After commenting upon the amendment of sub-s. (4) of s.\t 39,
\nwhich took away the right of suit and made the order of\t the
\nCommissioner final and conclusive, this Court concluded
\n\t      “We  think  that the settling of a  scheme  in
\n\t      regard  to  a  religious\tinstitution  by\t  an
\n\t      executive officer without the intervention  of
\n\t      any  judicial  tribunal  amounts\tto  an\t un-\n<\/p>\n
\t      reasonable restriction upon the right of\tpro-
\n\t      perty   of  the  superior\t of  the   religious
\n\t      institution which is blended with his  office.
\n\t      Sections
\n\t\t\t\t   667<\/span>
\n\t      38 and 39 of the Act must, therefore, be\theld
\n\t      to be invalid.”\n<\/p>\n
These  words would seem to show that the `intervention of  a
\n‘judicial  tribunal  is\t the  sine  qua\t non  of  reasonable
\ndetermination  of any issue,.  But these cases must be\tread
\nwith the case reported in Sri Sadasib Prakash Brahmachari v.
\nThe  State of Orissa<\/a> (1).  After the judgment of this  Court
\nin  the\t case  from Orissa, the\t Orissa\t Legislature  passed
\nOrissa\tAct XVII of 1954 purporting to amend not the Act  of
\n1939 but Orissa Act II of 1952 which had been passed but not
\nbrought\t into  force.\tThe Orissa Act\tXVIII`\tof  1954  on
\nreceiving  the\tassent of the President came into  force  at
\nonce,  and Act II of 1952 became amended and modified.\t The
\n1952  Act was then brought into force from January 1,  1955,
\nby a notification.\n<\/p>\n
By  the new Act, which provided for the same  subject-matter
\nas  the Act of 1939, the right of suit still remained  taken
\naway,  but  a right of appeal direct to the High  Court\t was
\nprovided.  It was contended again that the Act continued  to
\nbe  bad for the reasons given in the earlier case  of  1951.
\nThis Court then observed :\n<\/p>\n
\t      “It is further urged that the initial decision
\n\t      in  a scheme-proceeding is still on the  basis
\n\t      of  an  executive\t enquiry  by  an   executive
\n\t      officer and that\tin any case a direct  appeal
\n\t      to    the\t  High\t Court\t as   against\t the
\n\t      Commissioner’s  order cannot be as adequate  a
\n\t      safeguard regarding the rights of Mahants as a
\n\t      suit  and a right of’ appeal therefrom in\t the
\n\t      ordinary course to the higher courts would be.
\n\t      It is undoubtedly true that from a  litigant’s
\n\t      point of view an appeal to the High Court from
\n\t      the  Commissioner’s order is not the same\t as,
\n\t      an independent right of suit and an appeal  to
\n\t      the  higher  courts from the  result  of\tthat
\n\t      suit.  But in order to judge
\n\t      (1)   [1956] S.C.R. 43,
\n\t      668<\/span>
\n\t      whether  the  provisions in- the\tpresent\t Act
\n\t      operate by way of unreasonable restriction for
\n\t      constitutional purposes what is to be seen  is
\n\t      whether the person affected gets a  reasonable
\n\t      chance  of presenting his entire\tcase  before
\n\t      the  original tribunal which has to  determine
\n\t      judicially the questions raised and whether he
\n\t      has a regular appeal to the ordinarily consti-
\n\t      tuted  court or courts to correct the  errors,
\n\t      if  any,\tof the tribunal of  first  instance.
\n\t      For that purpose it is relevant to notice that
\n\t      in  the  present\tAct,  the  Commissioner\t  of
\n\t      Endowments   has,\t by  virtue  of\t section   4
\n\t      thereof,\tto  be\ta  member  of  the  Judicial
\n\t      Service  (of the State) not being\t below,\t the
\n\t      rank  of\ta  Subordinate\tJudge,\twhile  under
\n\t      section  7 of Act IV of 1939, Commissioner  of
\n\t      Endowments  could\t be a person of\t either\t the
\n\t      judicial\tor  the executive service  and\tthat
\n\t      even where a member of the judicial service is
\n\t      appointed he may be a person below the rank of
\n\t      a\t  Subordinate  Judge.\t Another   important
\n\t      difference has also to be noticed, viz.,\tthat
\n\t      while under section 38 of the previous Act the
\n\t      enquiry has to be conducted in such manner  as
\n\t      may  be prescribed’ which means as  prescribed
\n\t      by  the  Provincial Government by\t rules\tmade
\n\t      under  the  Act and hence\t changeable  by\t the
\n\t      Government,  under  the present  Act,  Section
\n\t      42(1)(b)\t specifically\tenjoins\t  that\t the
\n\t      ‘Commissioner  shall  bold an enquiry  in\t the
\n\t      manner  prescribed  and so far as\t may  be  in
\n\t      accordance with the provisions of the Code  of
\n\t      Civil  Procedure\trelating  to  the  trial  of
\n\t      suits”.\n<\/p><\/blockquote>\n
This  Court, therefore, held that the scheme framed was\t not
\nunreasonable.  At p. 59 of the Report, a summary of the four
\nsteps which made. for reasonableness was given as follows
\n\t      “(1) The scheme is to be framed by
\n\t\t\t\t   669<\/span>
\n\t      a\t Commissioner,\twho  is,  by  appointment  a
\n\t      judicial officer.\n<\/p>\n
\t      (2)The  procedure is far as  may be, the\tsame
\n\t      its that in the trial of suits.\n<\/p>\n
\t      (3)There\tis  a preliminary_  enquiry  by\t the
\n\t      Assistant Commissioner.\n<\/p>\n
\t      (4)There is an appeal to the High Court.”\n<\/p>\n
This was a departure from the insistence on the intervention
\nof  a  judicial tribunal.  It was considered enough  if\t the
\nperson was a judicial officer and the procedure was that  of
\nthe  trial  of suits, as laid down in  the  Civil  Procedure
\nCode.\tThe Court still went further when it dealt with\t the
\nearlier\t schemes  which\t might have been framed\t by  (a)  an
\nexecutive   officer  and  (b)  in  pursuance  of   procedure
\nprescribed by the Executive Government.\t The Court said that
\n“this was merely a theoretical possibility”.  The absence of
\na  preliminary\tenquiry\t in No. (3)  was  not  considered  a
\nserious\t point.\t The order of the executive officer  in\t No.
\n(1)  was held not of importance, as the Commissioner  was  a
\nSubordinate  Judge  of\tthe Orissa  Judicial  Service.\t The
\nquestion of procedure (No. 2) was also not considered impor-
\ntant,  because the procedure prescribed by  rules  resembled
\nthat of trial of suits.\t As regards the right of appeal,  s.
\n79A  gave  a  right  in all  decided  cases,  and  that\t was
\nconsidered enough; but whether it was invoked or not in\t all
\ncases does not appear to have been ascertained.
\nIt would appear from these three decisions that the gist  of
\nreasonableness\twas held to be not so much in the  label  of
\nthe officer as in a judicial approach to the question to  be
\ndecided\t according  to a procedure which  gave\tan  adequate
\nhearing.   That the Commissioner was a judicial\t officer  of
\nthe rank ‘of
\n670<\/span>
\na  Subordinate Judge was considered enough for\tup   holding
\nhis action as reasonable.  That every decision should be  by
\nthe Court was thus not the proposition laid down.  In  fact,
\nthe case shows that it is not the sine qua non so long as  a
\nperson trained to the task of deciding controversies does it
\naccording  to  a procedure in which parties can be  said  to
\nhave been heard fully.\n<\/p>\n
We  need  not consider in detail the case of  Ebrahim  Vazir
\nMavat  v.  The\tState of Bombay<\/a> (1), in which s.  7  of\t the
\nInflux\tfrom  Pakistan (Control) Act, 1949, was\t held  void.
\nSection ‘7 authorised the Central Government to remove\tfrom
\nIndia,\tany  person  “who has committed or  against  whom  a
\nreasonable  suspicion  exists  that  he\t has  committed,  an
\noffence under this Act…” In dealing with the section, this
\nCourt said :\n<\/p>\n
\t      “……  section\t7  imposes  the\t penalty  of
\n\t      removal  not  only  upon\ta  conviction  under
\n\t      ,section\t5 but goes further and brings  about
\n\t      the same result even where there is a  reason-
\n\t      able  suspicion  entertained  by\tthe  Central
\n\t      Government  that\tsuch  an  offence  has\tbeen
\n\t      committed.   The question whether\t an  offence
\n\t      has  been\t committed is left entirely  to\t the
\n\t      subjective determination of Government.”\n<\/p><\/blockquote>\n
This Court pointed out that there was no opportunity to\t the
\noffender  to  clear  his conduct, and  held  that  this\t was
\n“nothing  short of a travesty of the right of  citizenship”.
\nThe case is explainable on the ground that an Indian citizen
\nhas a fundamental right to stay in India and if he is to  be
\nremoved for committing an offence or under suspicion that he
\nhas  committed\tan offence, the removal is a  penalty  which
\ncannot\tbe inflicted without an opportunity to the  offender
\nto  clear his conduct.\tAs pointed out by us already,  while
\ndealing\t with Thakur Raghubir Singh’s Case (2), there is  no
\nquestion of a
\n(1) [1954]S.C.R. 933.\t(2) [1953] S.C.R. 1049.\n<\/p>\n
 671<\/span><\/p>\n
punishment  here, and there is, in fact, a  hearing,  though
\nnot  before  a Court.  There is nothing in the\tInflux\tfrom
\nPakistan (Control) Act to show that the opportunity to clear
\nhis conduct of the alleged offence must be by resort to\t the
\nCourt.\n<\/p>\n
The appellant also relied upon K. T. Moopil Nair v. State of
\nKerala\t(1), where a taxing statute was struck down  on\t the
\nground\tthat it provided no procedure for assessment of\t the
\ntax, Abdul Hakim v. State  of Bihar (2) and State of  Madhya
\nPradesh v.     Baldeo Prasad<\/a> (3), but they do not deal\twith
\nthe  point now raised, and were decided on facts which\twere
\nentirely  different.   It will thus be seen  that  the\twide
\nproposition,  that  every Determination\t affecting  liberty,
\nrights\tor  property  must  always be  made  by\t a  judicial
\ntribunal and none else, does not find support from the cases
\nabove considered.  It is enough to say that the Reserve Bank
\nin  its\t dealings  with banking companies does\tnot  act  on
\nsuspicion but on proved facts.\tThese facts are\t statutorily
\nrequired  to  be  submitted to the  Reserve  Bank,  and\t the
\nReserve\t Bank  further inspects the banking  companies.\t  It
\nlicenses such banking companies as conduct their affairs  in
\nthe  interests\tof  the depositors,  and  can  withdraw\t the
\nlicence if they do not.\t With such a statutory access to the
\naffairs\t of a banking company, there is sufficient  guidance
\nin the words detrimental to the interests of the depositors’
\nto show to the Reserve Bank when and how the power is to  be
\nexercised.   Indeed, in this case itself, the  Reserve\tBank
\nhas  given  an easily understandable view  of  the  monetary
\nposition  of the Palai Bank.  By comparing the total  demand
\nand  time  liabilities\tof the Palai Bank  with\t the  liquid
\nassets, borrowing power and realisable advances, the Reserve
\nBank  has  shown  the inability of the Palai  Bank  to\tmeet
\nlawful\tdemands, and a state of affairs is disclosed,  which
\nis certainly not beneficial to the
\n(1) [1961] 3 S.C.R.77.\t (2) [1961] 2 S.C.R. 610.
\n(3)  [1961] 1 S.C.R. 1970.\n<\/p>\n
672<\/span><\/p>\n
interest  of  those unfortunate depositors, whose  money  is
\nstill  involved.  The Reserve Bank has not yet told  us\t all
\nthat  it has found.  It will all be found in the winding  up
\nproceedings.   But this seems certain that the action  would
\nnot  be\t taken\twithout scrutinising all  the  evidence\t and
\nchecking and rechecking all the findings.  It is  impossible
\nto  say that observations in the cases discussed  above\t can
\napply to the facts here.\n<\/p>\n
The  learned Attorney-General, on the other side,  drew\t our
\nattention  to Virendra v. The State of Punjab<\/a> (1), where  it
\nhas  been pointed out that in judging the reasonableness  of
\nany  particular law “the surrounding circumstances in  which
\nthe impugned law came to be enacted, the underlying  purpose
\nof  the\t enactment and the extent and urgency  of  the\tevil
\nsought\tto be remedied” must also be considered.  That\tcase
\nconcerned the freedom of speech and its alleged\t curtailment
\nby the Punjab Special Powers (Press) Act, 1956.\t In  judging
\nthe  reasonableness  of\t the  law  from\t the  angle  of\t the
\nexclusion of Courts, this Court observed:\n<\/p>\n
\t      “Legislature had to ask itself the question  :
\n\t      who  will\t be  the  appropriate  authority  to
\n\t      determine\t at  any given point of time  as  to
\n\t      whether  the prevailing circumstances  require
\n\t      some restriction to be placed on the right  to
\n\t      freedom of speech and expression and the right
\n\t      to carry on any occupation, trade or  business
\n\t      and  to what extent ? The answer was  obvious,
\n\t      namely,  that  as\t the  State  Government\t was
\n\t      charged with the preservation of law an  order
\n\t      in the State, as it alone was in possession of
\n\t      all  material  facts  it\twould  be  the\tbeat
\n\t      authority to investigate the circumstances and
\n\t      assess the urgency of the situation that might
\n\t      arise and to make up its mind whether any and,
\n\t      if so, what anticipatory action must
\n\t      (1) [1958] S.C.R. 308.\n<\/p><\/blockquote>\n
\t\t\t\t   673<\/span><\/p>\n
\t      be taken for the prevention of the  threatened
\n\t      or anticipated breach of the peace.  The court
\n\t      is wholly unsuited to gauge the seriousness of
\n\t      the situation, for it cannot be in  possession
\n\t      of  materials which are available only to\t the
\n\t      executive\t Government.  Therefore, the  deter-
\n\t      mination\tof the time when and the  extent  to
\n\t      which  restrictions should be imposed  on\t the
\n\t      Press  must of necessity be left to the  judg-
\n\t      ment  and discretion of the  State  Government
\n\t      and  that is exactly what the legislature\t did
\n\t      by passing the statute……… Quick decision
\n\t      and swift and effective ‘action must be of the
\n\t      essence of these powers and the exercise of it
\n\t      must,  therefore,\t be left to  the  subjective
\n\t      satisfaction  of the Government…… To\tmake
\n\t      the  exercise of these powers justiciable\t and
\n\t      subject  to the judicial scrutiny will  defeat
\n\t      the very purpose of the enactment.”\n<\/p><\/blockquote>\n
These  observations  lay  down clearly\tthat  there  may  be
\noccasions and situations in which the legislature may,\twith
\nreason, think that the determination of an issue may be left
\nto an expert executive like the Reserve Bank rather than  to
\nCourts\twithout\t incurring  the penalty of  having  the\t law
\ndeclared void.\tThe law thus made is justified on the ground
\nof expediency arising from the respective opportunities\t for
\naction.\t  Of course, the exclusion of Courts is not  lightly
\nto   be\t  inferred  nor\t lightly  to   be   conceded.\t The
\nreasonableness\tof  such a law in  the\ttotal  circumstances
\nwill,  if  challenged, have to be made out to  the  ultimate
\nsatisfaction  of this Court, and it is only when this  Court
\nconsiders   that   it  is  reasonable  in   the\t  individual
\ncircumstance that the law will be upheld.\n<\/p>\n
In  the\t present  case,\t in  view  of  the  history  of\t the
\nestablishment  of  the Reserve Bank as a  central  bank\t for
\nIndia, its position as a Banker’s Bank, its
\n674<\/span>
\ncontrol\t over  banking companies and banking in\t India,\t its
\nposition  as the issuing bank, its power to license  banking
\ncompanies  and cancel their licences and the numerous  other
\npowers,\t it is unanswerable that between the Court  and\t the
\nReserve Bank, the momentous decision to wind up a  tottering
\nor  unsafe banking company in the interests of\tthe  deposi-
\ntors, may reasonably be left to the Reserve Bank.  No doubt,
\nthe Court can also, given the time, perform this task.\t But
\nthe decision has to be taken without delay, and the  Reserve
\nBank  already  knows  intimately  the  affairs\tof   banking
\ncompanies  and has had access to their\tbooks and  accounts.
\nIf  the Court were called upon to take immediate action,  it
\nwould almost always be guided by the opinion of the  Reserve
\nBank.\tIt  would  be impossible for the Court\tto  reach  a
\nconclusion unguided by the Reserve Bank if immediate  action
\nwas  demanded. But the law which gives the same position  to
\nthe   opinion\tof  the\t Reserve  Bank\tis   challenged\t  as
\nunreasonable.\tIn  our\t opinion, such a  challenge  has  no
\nforce.\tThe situation that arose in this case is typical  of
\nthe  occasions\ton  which  this\t extraordinary\tpower  would
\nnormally be exercised, and, as we have said already, if\t the
\npower  is  abused by the Reserve Bank, what will  be  struck
\ndown  would  be the action of the Reserve Bank but  not\t the
\nlaw.   An  appeal  against the Reserve Bank’s  action  or  a
\nprovision  for\tan  ex post facto finding by  the  Court  is
\nhardly necessary.  An appeal to the Central Government\twill
\nbe only an appeal from Caesar to Caesar, because the Reserve
\nBank would hardly act without the concurrence of the Central
\nGovernment  and\t the  finding by the Court  would  mean,  to
\nborrow\tthe macabre phrase of Raman Nayar, J., a  postmortem
\nexamination of the corpse of the banking company.
\nIt is a matter of not a little interest that a procedure for
\nwinding up other banks and institutions to the exclusion  of
\nthe Companies Act is to be
\n\t\t\t    675<\/span>
\nfound  in other statutes.  The co-operative  Societies,\t the
\nState  Financial Corporations, the State Bank of India,\t the
\nIndustrial   Finance   Corporation,   the   Life   Insurance
\nCorporation  and finally, the Reserve Bank itself are to  be
\nliquidated  under  special  laws to  the  exclusion  of\t the
\nCompanies Act, under the statutes creating them.
\n   In  view of what we have said above, it is not  necessary
\nto  refer to American and Japanese precedents.\tHowever,  if
\nthese  laws are examined, they show that even in the  United
\nStates\tof America and Japan, the closure of banks and\talso
\ntheir liquidation proceed from executive action.  Under\t the
\nBanking\t Law of Japan(Law No. 21, March 30,1929), Arts.\t 22,
\n23,  24\t and 27 provide that the  competent  Minister  would
\ndecide\tsuch  issues.\tArticle\t 22  may  be  read  in\tthis
\nconnection :\n<\/p>\n
\t      “If the competent Minister finds it  necessary
\n\t      to do in view of the affairs of a bank  or the
\n\t      conditions of its property, he may order it to
\n\t      suspend\tbusiness,  deposit   property\twith
\n\t      official\tdepository, or issue any such  order
\n\t      as may be necessary.” (Japanese Laws  Relating
\n\t      to  Banks-Eibun-Horei-Sha, Inc.  Tokyo  Japan,
\n\t      p. VI (BA 4).\n<\/p><\/blockquote>\n
It  is also interesting to note that Arts. 22 and 29 of\t the
\nJapanese Constitution guarantee to the people the freedom to
\nown  property and choose occupations, much as has been\tdone
\nunder our Constitution.\n<\/p>\n
In  the\t United\t States of America, Banks  are\tregarded  as
\nproper\tsubject of legislative regulation under\t the  police
\npower  (Corpus Juris Secundum, Vol.  IX. paras 4 and  5,  p.\n<\/p>\n
32),  and  this\t power is not  subject\tto  the\t limitations
\narising\t from the Fourteenth Amendment, except that it\tmust
\nbe  reasonably\texercised.  The Banks in the  United  States
\nbeing
\n676<\/span>
\neither\tNational  or State Banks, different laws  have\tbeen
\nframed\tto deal with the winding up of insolvent Banks.\t  In
\nalmost\tall the States statutes provide special\t proceedings
\nfor  the      affairs  of  insolvent  State  Banks  and\t the
\nNational Bank Act also makes special provision in respect of
\nNational Banks.\t The closing of the doors of a National Bank
\nby the Comptroller of Currency on account of its insolvency_
\nand the appointment of a receiver do not amount to a  breach
\nof  the\t due  process clause.  As  stated  in  Corpus  Juris
\nSecundum, Vol.\tIX, par a 419, p. 835 :\n<\/p>\n
\t      “The   courts  have  generally   upheld\tthe,
\n\t      validity\t of  statutes  providing   for\t the
\n\t      liquidation  of  state’ banks,  including\t the
\n\t      control  and administration of the  assets  by
\n\t      state officials or by receivers or liquidators
\n\t      appointed\t by them, the determination of\tthe,
\n\t      bank’s solvency, claims against the bank……\n<\/p><\/blockquote>\n
The  power is thus conferred on the Comptroller of  Currency
\nby  the\t National  Bank Act and by the State  law  upon\t the
\nsuperintendents of Banks Under some statutes of the  States,
\nbanking officials have no power to liquidate insolvent Banks
\nindependently  of the judiciary.  But in others, this  power
\nis specifically conferred.  These propositions were cited to
\nus  from American Jurisprudence Vol. 7, Vols.  IX, XIII\t and
\nXVIA  of  Corpus Juris Secundum and from  the  Law  Reports,
\nparticularly  Title Guaranty and Surety Co. v. Idaho Ex\t Rd.
\nAllen(1), Bushnell v. Leland (2), Ex  parte Chetwood (3) and
\nsome others.\n<\/p>\n
Mr.  Nambiar,  however,\t joined\t issue on  the\tuse  of\t the
\nAmerican  precedents on the grounds that banking in  America
\nis  by grace of legislature, and is either a franchise or  a
\nprivilege, which has no place in our Constitution.  He added
\nthat the
\n(1)  (1916) 240) U.S. 130 : 60 L. ad. 566.\n<\/p>\n
(2)  (1897) 164 U. S. 684, 41 L. ad. 598.\n<\/p>\n
(3)  (1897) 165 U.S. 443,41 L. ad. 782.\n<\/p>\n
 677<\/span><\/p>\n
carrying on of business is not one of the provisions of\t the
\nAmerican  Bill\tof Rights, nor a fundamental  right,  as  we
\nunderstand   it,   though  by  judicial\t  construction\t the
\nindividual  right  has been brought  within  the  Fourteenth
\nAmendment.  He, therefore, contended that American cases and
\nAmerican laws should not be used.  ID our opinion, no useful
\npurpose\t  will\tbe  served  by\ttrying\tto   establish\t the
\nsimilarities   or   discrepancies   between   the   American
\nConstitution  and  banking laws, on the one  hand,  and\t our
\nConstitution  and our banking laws, on the other, and we  do
\nnot  wish to rest our decision on the American and  Japanese
\nanalogies.\n<\/p>\n
We do not also agree that the impugned section amounts to an
\nencroachment on the judicial power by the legislature.\t The
\nstatute\t book  is full of instances in which the  Courts  of
\nCivil  Judicature  guide themselves by the  decision  of  an
\noutside\t agency.   The\tArbitration  Act  itself  affords  a
\nreadily available instance.  Under that Act the Court passes
\nits  decree  on an award of almost any one the\tparties\t may
\nchoose.\t Nor is the possibility of a mistake by the  Reserve
\nBank of such vital consequence.\t If the Reserve Bank acts in
\ngood  faith and with circumspection, there is as much or  as
\nlittle chance of error as before a Court of law.
\nLastly\twe do not think that this was a case in\t which\tsome
\nlesser\t action\t  like\t moratorium   or   amalgamation\t  or
\nreconstruction would have been feasible.  The difficulty  of
\nthe  Palai Bank was the nature of its advances,\t which\twere
\neither\tnot  recoverable  or  not  easily  recoverable.\t   A
\nmoratorium with the limitation of time involved in it  would
\nnot  have  been an adequate measure,  and  amalgamation\t and
\nreconstruction\twere out of question at the stage which\t had
\nbeen reached.\n<\/p>\n
We are thus satisfied that ss. 38(1) and (3)(b)(iii) of\t the
\nBanking Companies Act are neither
\n678<\/span>
\ndiscriminatory nor unreasonable, and cannot be declared void
\nunder  Arts.  14  and 19 of  the  Constitution.\t  Since\t the
\nprovisions  are\t manifestly  in the  public  interest,\tthey
\ncannot also be declared ultra vires under Art. 301,  because
\nthey are protected by Art. 302 of the Constitution.
\nThe  appeal  and the petition thus fail, and  are  dismissed
\nwith costs one set only.\n<\/p>\n
KAPUR,\tJ.-The facts of this case have been set-out  in\t the
\njudgment of our learned brother Hidayatullah, J., and it  is
\nnot necessary to restate them.\n<\/p>\n
The main question for decision is whether the provisions  of
\ns.  38(3)(b)(iii)  of the Banking Companies Act\t (Act  X  of
\n1948)\tare  ultra  vires  of  the  Constitution  as   being
\nunreasonable  restriction  which  infringe  the\t petitioners
\nright  under  Art.  14 and Art. 19 (1)(f)  and\t(g)  of\t the
\nConstitution.\t Under\ts.  38(3)(b)(iii)  of  the   Banking
\nCompanies  Act\tthe  winding up petition was  filed  by\t the
\nReserve\t Bank of India against the Palai Bank Ltd.,  in\t the
\nKerala\tHigh  Court on August 8,1960.  On the  same  day  an
\napplication for the appointment of a Provisional  Liquidator
\nwas  also made and a Provisional Liquidator  was  appointed.
\nOn  behalf  of the Directors an objection was taken  in\t the
\nHigh  Court  that  s.  38(3)  (b)  (iii)  was  invalid\t and
\nunconstitutional  because it contravenes Arts. 14 and 19  of
\nthe Constitution and that the petition was mala fide.
\nAfter  the  appointment\t of the liquidator  four  scheme  of
\narrangement  under s. 44B of the Banking Companies Act\twere
\npresented  to  the  Court.  On October 6,  1960,  the  Court
\nordered\t the  Reserve Bank to examine the work\tability\t and
\nefficacy  of the schemes.  The Reserve Bank of\tIndia  filed
\nits  report  on October 22, 1960, to the effect\t that  prima
\nfacie the schemes were not workable.  The order
\n\t\t\t    679<\/span>
\nof winding up was then passed on December 5, 1960.  The plea
\nof  mala fides was not pressed and the High Court hold\tthat
\nthere  was no infringement of the petitioners’\tright  under
\nArts.  14  and\t19.   The  Court  also\theld  that  although
\naccording  to the, language used in the\t impugned  provision
\nthe  Reserve  Bank  of India need  not\thave  disclosed\t the
\nmaterial  on  which it arrived at the  conclusion  that\t the
\ncontinuance  of\t the  Palai  Bank  was\tprejudicial  to\t the
\ninterest  of the depositors, it had chosen to place all\t the
\nmaterials before the Court which showed that ever since 1952
\nthe  Reserve Bank of India was drawing the attention of\t the
\nPalai Bank to the grave defects in its working and had given
\nit  opportunities to explain the defects or to remedy  them.
\nThe Palai Bank chose to do neither and “the Reserve Bank far
\nfrom  having acted without material or in a hasty  and\till-
\nconsidered   manner,   had,   doubtless\t  alive\t  to   grave
\nresponsibility\tplaced\tupon  it  to  preserve\tthe  banking
\nstructure  of the country, acted with a degree of  care\t and
\ncircumspection which has drawn to it adverse criticism\tfrom
\nthose  who do not share its responsibility.  Faced with\t the
\nrun  it would have failed in its duty by the depositors\t had
\nit not acted as it did.”\n<\/p>\n
The history of the Banking Companies Act and how it came  to
\nbe  enacted is this.  The Government of India appointed\t the
\nIndian\tCentral\t Banking Enquiry Committee  which  made\t its
\nreport\ton  June 2, 1931.  In para. 674 it pointed  out\t the
\nprincipal causes of failures of Banks.\tBy Act 2 of 1936  Part
\nXA was introduced into the Indian  Companies Act of 1913 and
\nthat  part dealt with Banking Companies but no separate\t and
\nspecial\t provision  was made for the winding up\t of  banking
\ncompanies.  In 1934 the Reserve Bank of India Act (Act II of
\n1934)  was  enacted.   There were minor\t amendments  in\t the
\nIndian Companies Act in regard to Banking Companies by\tActs
\n21<\/span>
\n680<\/span>
\nof  1942  and  4  of 1944.   On\t January  15,  1946  Banking
\nCompanies  Ordinance  (4  of  1946)  Was  promulgated  which
\nenabled the Central Government to direct the Reserve Bank to
\ncause  inspection to be made of any banking company and\t its
\nbooks and accounts.  It empowered the Central Government, on
\nthe  receipt  of  a report that the  affairs  of  a  banking
\ncompany\t were  being  conducted\t to  the  detriment  of\t the
\ninterest of the depositors, to prohibit the banking  company
\nfrom  receiving fresh deposits or to refuse it to be  placed
\nin  the schedule of the Reserve Bank of India Act or to\t de-
\nschedule  it. On March 10, 1949, the Banking  Companies\t Act
\n(Act  X\t of  1949) was passed.\tOn December  31,  1952,\t the
\nBanks’\tLiquidation Proceedings committee of 1952  made\t its
\nreport.\t  According to that report the number of bank  which
\nsuspended  payments  during the year 1926 to 1952  was\t851.
\nThe  total liabilities of these banks were Rs. 96.86  lakhs.
\nOf these banks 123 were in Travancore-Cochin which were\t the
\nmost  numerous.\t  Then it was stated how many  banks  failed
\nduring\tdifferent  periods and it was pointed out  that\t the
\nslow  progress\tof liquidation proceedings was\tdue  to\t the
\nfacts  that the advances were mostly unsecured and  recovery
\ninvolved  litigation, so much so that there were not  enough
\nfunds to take legal proceedings ; many claims were barred by
\nlimitation  :  contributories could not be  traced  and\t the
\nunpaid\tcapital could not be recovered.\t In cases  of  small
\nbanks advances were small and legal expenses for realisation
\nwere  out  of  proportion to the amounts  involved  and\t the
\nclaims\thad  therefore\tto be given  up\t and  the  Directors
\ninvariably delayed the submission of their statements  under
\ns. 177A of the Companies Act and this hampered the  progress
\nof  the liquidation proceedings.  The Banking Companies\t Act
\nwas then amended from time to time and by s. 26 of Act 33 of
\n1959 the present s. 38
\n 681<\/span>
\nproviding  for\twinding up was substituted in place  of\t the
\nold. s. 38.\n<\/p>\n
In order to determine the constitutionality of the  impugned
\nprovision  it will be helpful to examine the scheme  of\t the
\nReserve Bank of India Act and of the, Banking Companies Act.
\nThe preamble of the Reserve Bank of India Act is that it has
\nbeen constituted with a view to ensure monetary stability in
\nIndia  and to operate the currency and credit system of\t the
\ncountry.   By s.3 the Reserve Bank has been established\t for
\nthe  purpose of taking over the management of  the  currency
\nfrom the Central Government and of carrying on the  business
\nof banking in accordance with the provisions of the  Reserve
\nBank  Act.  Section 7 deals with management and it gives  to
\nthe Central Government the power to give such directions  to
\nthe  Bank after consultation with the Governor of  the\tBank
\nwhich are considered necessary in the public interest.\t The
\nCentral\t Board of the Bank is constituted under s. 8 and  it
\nconsists  of  the Governor four Directors nominated  by\t the
\nCentral\t Government  from  amongst  the\t local\tBoards,\t six
\nDirectors  nominated  by  the  Central\tGovernment  and\t one
\nGovernment   official  to  be  nominated  by   the   Central
\nGovernment.   In other words all the Directors are  nominees
\nof the Central Government.  By s. 11 tile Central Government
\nhas  the power of removing the Governor or any Director\t and
\ncasual\tvacancies  are\talso to be  filled  by\tthe  Central
\nGovernment under s. 12.\t Section 17 deals with the  business
\nwhich  the  bank  may transact and Chapter  III\t relates  to
\nCentral banking functions.  Under s. 30 the Central  Govern-
\nment  has  the power to supersede the Central Board  and  to
\nentrust\t it to such agency as it may determine It will\tthus
\nbe seen that the Reserve Bank is an institution\t established
\nfor the purpose of carrying on central banking functions and
\nits  management\t is  entirely in the hands  of\tthe  Central
\nGovernment or its nominees.\n<\/p>\n
682<\/span><\/p>\n
Section\t 2  of the Banking Companies Act provides  that\t the
\nprovisions  of that Act are in addition to and\tnot,  unless
\nexpressly  so provided, in derogation of the Companies\tAct,
\n1956,  and  any\t other\tlaw for the  time  being  in  force.
\nSection 4 gives the Central Government the power to  suspend
\nthe  operation\tof  the Act on\tthe  representation  of\t the
\nReserve Bank. Section 5 is the interpretation clause.  Part
\nII  deals with “Business of the Banking Companies”.  Section
\nII in that Part deals with requirement as to minimum paid up
\nCapital\t and  reserve  of  banking  companies.\t Section  22
\nempowers  the Reserve Bank to give licences to banking\tcom-
\npanies\tand  prohibits the carrying on of  banking  business
\nwithout\t a licence issued by the Reserve Bank which  may  be
\nissued subject to such conditions as the Reserve Bank thinks
\nfit.  Every banking company in existence at the commencement
\nof  this  Act  had to apply for such a\tlicence\t within\t six
\nmonths\tof  the\t commencement of the  Act  and\tevery  other
\ncompany had to apply before commencing banking business\t but
\ncompanies  which  were\tin existence  could  continue  their
\nbanking\t business  until the licence was granted or  it\t was
\nrefused.   But it could not be refused before the expiry  of
\nthree  years referred to in sub-s. (1) of s. 11\t Sub-section
\n(3)  of\t that section entities the Reserve Bank\t to  inspect
\nbooks of the Banking company to satisfy itself in regard  to
\nmatters contained in that sub-section.\tUnder sub-s. (4) the
\nReserve\t Bank  can  cancel a licence granted  to  a  banking
\ncompany provided that before cancelling the licence it gives
\nan opportunity to the Banking Company to show cause why\t its
\nlicence\t should\t not  be cancelled.  Under  sub-s.  (5)\t any
\nbanking\t company aggrieved by the order of the Reserve\tBank
\ncancelling its licence can appeal to the Central  Government
\nwhose decision is final.\n<\/p>\n
Under  s.  24  every  banking  company\thas  to\t maintain  a
\npercentage of its assets in cash gold or
\n\t\t\t    683<\/span>
\nunencumbered approved securities and an amount which is\t not
\nless  than  20%\t of  the  total\t of  its  time\tand   demand
\nliabilities   and  return  to  that  has  to  be   furnished
\nperiodically  to  the Reserve Bank. Section  25\t deals\twith
\nassets\tof  every banking company in India,  s.27  with\t the
\nmaking\tof monthly returns by the banking companies  to\t the
\nReserve\t Bank and s. 30 with audit.  The Reserve Bank  under
\ns.  35 may at any time and on being directed by the  Central
\nGovernment  shall  cause  an inspection to be  made  of\t any
\nbanking company.  Sub-section (4) of that section reads:-\n<\/p>\n
\t      “The  Reserve  Bank  shall,  if  it  has\tbeen
\n\t      directed\tby the Central Government  to  cause
\n\t      inspection  to be made, and may, in any  other
\n\t      case  report to the Central Government on\t any
\n\t      inspection  made under this section,  and\t the
\n\t      Central Government, if it is of opinion  after
\n\t      considering the report that the affairs of the
\n\t      banking  Company\tare being conducted  to\t the
\n\t      detriment\t of the interests of its  depositors
\n\t      may,  after  giving such\topportunity  to\t the
\n\t      banking  company to make a  representation  in
\n\t      connection with the report as, in the  opinion
\n\t      of the Central Government, seems reasonable by
\n\t      order in writing.\n<\/p><\/blockquote>\n
\t      (a)prohibit the banking company from receiving
\n\t      fresh deposits;\n<\/p><\/blockquote>\n
\t      (b)direct\t the  Reserve Bank  to\tapply  under
\n\t      section  38 for the winding up of the  banking
\n\t      company:\n<\/p><\/blockquote>\n
\t      Provided\tthat  the  Central  Government\t may
\n\t      defer,  for such period as it may\t think\tfit,
\n\t      the  passing  of\tan  order  under  this\tsub-
\n\t      section,\tor cancel or modify any such  order,
\n\t      upon such terms and conditions as it may think
\n\t      fit to impose.”\n<\/p><\/blockquote>\n
684<\/span><\/p>\n
Under  s.  35A power is given to the Reserve  Bank  to\tgive
\ndirections.  When quoted it reads:\n<\/p>\n
\t\tS.35A(1)   “Where   the\t Reserve   Bank\t  is
\n\t      satisfied that-<\/p><\/blockquote>\n
\t      (a)   in the public interest; or\n<\/p><\/blockquote>\n
\t      (b)   to\tprevent the affairs of\tany  banking
\n\t      company\tbeing\tconducted   in\t a    manner
\n\t      detrimental to the interests of the depositors
\n\t      or in a manner prejudicial to the interests of
\n\t      the banking company; or\n<\/p><\/blockquote>\n
\t      (c)to  secure  the proper\t management  of\t any
\n\t      banking  company generally
\n\t      it is necessary to issue directions to banking
\n\t      companies generally or to any banking  company
\n\t      in particular, it may, from time to time issue
\n\t      such  directions\tas  it deems  fit,  and\t the
\n\t      banking  companies or the banking company,  as
\n\t      the  case\t may be, shall be  bound  to  comply
\n\t      with such directions.\n<\/p><\/blockquote>\n
\t      (2)The  Reserve Bank may on  representation
\n\t      made  to\tit or on its own motion,  modify  or
\n\t      cancel  any direction issued under  subsection
\n\t      (1)  and\tin so modifying\t or  cancelling\t any
\n\t      direction\t may  impose such conditions  as  it
\n\t      thinks fit, subject to which the\tmodification
\n\t      or cancellation shall have effect.”\n<\/p><\/blockquote>\n
Section\t 36  defines  further powers and  functions  of\t the
\nReserve\t Bank.\t It has power to caution or  to\t prohibit  a
\nbanking\t  company   from  entering   into   any\t  particular
\ntransaction or class of transactions, to assist any proposal
\nfor  amalgamation  of companies, to give  loans\t to  banking
\ncompanies, to require banking companies to call a meeting of
\nthe  directors\tfor the purpose of  considering\t any  matter
\nrelating  to  or arising out of the affairs of\tthe  banking
\ncompany
\n\t\t\t    685<\/span>
\nto depute one or more of its officers, to watch\t proceedings
\nat any meeting of the board of directors, to appoint one  or
\nmore  of  its officers to observe the manner  in  which\t the
\naffairs\t of the banking company are conducted or to  require
\nthe  banking company to make such changes in the  management
\nas Reserve bank may consider necessary.\n<\/p>\n
Part III deals with suspension of business and winding up of
\nbanking\t  companies.   Section\t37  provides  that  on\t the
\napplication  of\t a banking company the High Court  may\tstay
\ncommencement or continuance of all actions against a banking
\ncompany and may impose a moratorium; but the application  is
\nnot maintainable unless it is accompanied by a report of the
\nReserve\t Bank indicating that in the opinion of the  Reserve
\nBank  the banking company will be able to pay its  debts  if
\nthe application is granted, provided that the High Court may
\nfor  sufficient reason grant relief under this section\teven
\nif  the application is not accompanied by such\treport.\t  In
\nthat  case the High Court shall call for a report  from\t the
\nReserve Bank on the affairs of the banking company and\tpass
\nsuch  order  as may be proper in the  circumstances.   Under
\nsub-section  3 the High Court can appoint a special  officer
\nto  take  into\tcustody or control  all\t assets,  books\t and
\ndocuments  of  the banking company and shall  exercise\tsuch
\nother powers as it thinks fit having regard to the interests
\nof the depositors of the banking company.  Under sub-s. 4 if
\nthe  Reserve  Bank is satisfied that a\tbanking\t company  in
\nrespect\t of  which an order has been so\t made  conducts\t its
\naffairs\t in  a manner detrimental to the  interests  of\t its
\ndepositors it can make an application to the High Court\t for
\nthe winding up of the company and where such an\t application
\nis  made the High Court shall not make any  order  extending
\nthe
\n686<\/span>
\nperiod. The impugned provision of section 38 which   deals
\nwith winding up reads: –\n<\/p>\n
\t\t    S.38   (1)\t “Notwithstanding   anything
\n\t      contained in section 391, section 392, section
\n\t      433 and section 583 of the Companies Act, 1956
\n\t      but without prejudice to its powers under sub-
\n\t      section (1) of section 37 of this Act the High
\n\t      Court shall order the winding up of a  banking
\n\t      company –\n<\/p><\/blockquote>\n
\t      (a)if the banking company is unable to pay its
\n\t      debts ; or\n<\/p><\/blockquote>\n
\t      (b)if an application for its winding up has
\n\t      been made by the Reserve Bank under section 37
\n\t      or this section.\n<\/p><\/blockquote>\n
\t      (2)The Reserve Bank shall make, an application
\n\t      under  this  section for the winding  up-of  a
\n\t      banking company if it is directed so to do  by
\n\t      an  order under clause (b) of sub-section\t (4)
\n\t      of section 35.\n<\/p><\/blockquote>\n
\t      (3)The  Reserve Bank may make  an\t application
\n\t      under  this  section for the winding up  of  a
\n\t      banking company –\n<\/p><\/blockquote>\n
\t      (a)   if the banking company –\n<\/p><\/blockquote>\n
\t      (i)has failed to comply with the\trequirements
\n\t      specified in section 11 ; or\n<\/p><\/blockquote>\n
\t      (ii)has by reason of the provisions of section
\n\t      22  become  disentitled to  carry\t on  banking
\n\t      business in India ; or\n<\/p><\/blockquote>\n
\t      (iii)has been prohibited from receiving  fresh
\n\t      deposits by an order Under clause. (1) of sub-
\n\t      section (4) of section 35 or under clause\t (b)
\n\t      of  sub-section  3(A)  of section\t 42  of\t the
\n\t      Reserve Bank of India Act, 1934 or;\n<\/p><\/blockquote>\n
\t       687<\/span><\/p>\n
\t      (iv)having   failed   to\t comply\t  with\t any
\n\t      requirement   of\tthis  Act  other  than\t the
\n\t      requirements  laid  down in  section  11,\t has
\n\t      continued such failure, or having\t contravened
\n\t      any  provision of this Act has continued\tsuch
\n\t      contravention beyond such period or periods as
\n\t      I\t may  be  specified in that  behalf  by\t the
\n\t      Reserve Bank from time to time after notice in
\n\t      writing  of such failure or contravention\t has
\n\t      been conveyed to the banking company ; or\n<\/p><\/blockquote>\n
\t      (b)if in the opinion of the Reserve
\n\t      Bank- (i)\t  a   compromise   or\t arrangement
\n\t      sanctioned  by  a\t Court\tin  respect  of\t the
\n\t      banking\t  company    cannot    be     worked
\n\t      satisfactorily  with or without  modifications
\n\t      or\n<\/p><\/blockquote>\n
\t      (ii)the  returns,\t statements  or\t information
\n\t      furnished\t to it under or in Pursuance of\t the
\n\t      provisions  of  this  Act\t disclose  that\t the
\n\t      banking company is unable to pay its debts or\n<\/p><\/blockquote>\n
\t      (iii)the\t‘Continuance of the banking  company
\n\t      is   prejudicial\tto  the\t interests  of\t its
\n\t      depositors.\n<\/p><\/blockquote>\n
\t      (4)Without   prejudice   to   the\t  provisions
\n\t      contained in section 434 of the Companies\t Act
\n\t      1956, a banking company shall be deemed to  be
\n\t      unable  to pay its debts if it has refused  to
\n\t      meet  any\t lawful demand made at\tany  of\t its
\n\t      offices or branches within two working days if
\n\t      such demand is made at a place where there  is
\n\t      an  office,  branch or agency of\tthe  Reserve
\n\t      Bank  or\twithin five working  days,  if\tsuch
\n\t      demand is made elsewhere, and if the Reserve
\n\t      688<\/span>
\n\t      Bank  certifies  in writing that\tthe  banking
\n\t      company is unable to pay its debts.
\n\t      (5)A  copy  of every application made  by\t the
\n\t      Reserve  Bank under sub-section (1)  shall  be
\n\t      sent by- the Reserve Bank to the registrar.”\n<\/p><\/blockquote>\n
Section\t 44A  lays down the procedure  for  amalgamation  of
\nbanking\t companies and s. 44B for restriction on the  powers
\nof  the\t High Court to sanction\t compromise  or\t arrangement
\nbetween\t  a  banking  company  and  its\t  creditors   unless
\ncompromise  or arrangement is certified by the Reserve\tBank
\nas being capable of being worked as not being detrimental to
\nthe  interest  of  the depositors Section 45  gives  to\t the
\nReserve\t Bank the power to apply to the\t Central  Government
\nfor  an\t order of moratorium in respect of  banking  company
\nwhich the Central Government may order and it also gives  to
\nthe  Reserve  Bank  the\t power\tto  prepare  a\tscheme\t for
\nreconstitution or amalgamation.\t Sub-section (1) and (2)   of
\ns. 45 are as follows –\n<\/p>\n
\t\t S.45(1)  “Notwithstanding  anything   con-
\n\t      tained  in  the foregoing provisions  of\tthis
\n\t      Part  or in any other law or any agreement  or
\n\t      other instrument for the time being in  force,
\n\t      where  it\t appears to the\t Reserve  Bank\tthat
\n\t      there is good reason so to do the Reserve Bank
\n\t      may  apply  to the Central Government  for  an
\n\t      order  of moratorium in respect of  a  banking
\n\t      company.\n<\/p><\/blockquote>\n
\t      (2)The  Central  Government,  after  consi-
\n\t      dering  the  application made by\tthe  Reserve
\n\t      Bank  under sub-section (1) may make an  order
\n\t      of  moratorium  staying  the  commencement  or
\n\t      continuance  of  all  action  and\t proceedings
\n\t      against the company for a fixed period of time
\n\t      on  such terms and conditions as it think\t fit
\n\t      and proper and may from time to time
\n\t       689<\/span>
\n\t      extend  the period so however that  the  total
\n\t      period  of  moratorium shall  not\t exceed\t six
\n\t      months.”\n<\/p><\/blockquote>\n
It  will thus be seen that the Banking Companies  Act  gives
\nvery  extensive\t powers\t to the Reserve Bank  in  regard  to
\nbanking\t companies.  It gives to the Reserve Bank the  power
\nto  license  existing  banking\tcompanies  or  the   banking
\ncompanies,  which  want to commence business, and  for\tthat
\npurpose\t it can inspect the books of the banking company  in
\norder to determine whether it is or will be able to pay\t its
\ndepositors.    It   can\t  cancel  a   licence\tin   certain
\ncircumstances  but after giving to the banking\tcompany,  an
\nopportunity to be heard.  A banking companies is required to
\nkeep  a portion of its assets in a liquid form\tthe  Reserve
\nBank can order inspection of any banking company at any time
\nit  thinks  proper  and Central\t Government  can  order\t the
\nReserve\t Bank to make an inspection of any  banking  company
\nand  on\t that report drastic steps against the\tcompany\t may
\nfollow.\t The Reserve Bank can give directions as to how\t the
\nbusiness  of a banking company shall be conducted.   It\t can
\nappoint observers and give directions to the directors of  a
\nbanking company as to what they should do or should not\t do.
\nMoratorium can be imposed by the High Court at the  instance
\nof  a  banking company but the Reserve Bank  may  have\tthat
\norder  varied  and  set aside if the order  is\tnot  in\t the
\ninterest  of the depositors and if the Reserve\tBank  thinks
\nthat  the  continuance of a banking company is\tnot  in\t the
\ninterest  of the depositors it may apply to the\t High  Court
\nfor  winding  up  of  the banking  company.   In  regard  to
\namalgamation   of  banking  companies  through\t scheme\t  of
\ncompromise and arrangement the Reserve Bank has a great deal
\nof  control  and power.\t The Reserve Bank may apply  to\t the
\nGovernment to impose a moratorium on any banking company and
\nif an application is so made the
\n690<\/span>
\nGovernment  may make such an order.  But where it  comes  to
\nwinding\t up  provisions\t the Reserve  Bank  has\t pre-emptory
\npowers,\t in  that  if it applies for the winding  up  of’  a
\nbanking\t company  the  Court is bound to  order\t winding  up
\nbecause the words used are “the High Court shall” order\t the
\nwinding\t up. Moreover the Government can direct the  Reserve
\nBank  to  make\tsuch an application so\tthat  the  Executive
\nGovernment  can take any banking company  into\tliquidation.
\nThe  power  given in sub-s. (3)(b)(iii) of s. 38  it;  still
\nmore  drastic because if the Reserve Bank is of the  opinion
\nthat the continuance of a banking company is prejudicial  to
\nthe interest of the depositors it may apply for winding\t up;
\nin  other words on its subjective satisfaction it may  apply
\nand if it does so the High Court has no option but to  order
\nthe  winding  up  it  is  this\tprovision  to  which  strong
\nobjection has been taken by the appellant and is assailed by
\nhim.\n<\/p>\n
This  provision was sought to be supported on behalf of\t the
\nReserve Bank by the learned Attorney-General who first\tdrew
\nour  attention to the facts of the present case and  to\t the
\nvarious\t opportunities\twhich were given to the\t Palai\tBank
\nsince 1952 to carry out certain directions and on  different
\noccasions  the Palai Bank had made representations  and\t its
\nDirectors  had interviewed the officers of the Reserve\tBank
\nand had given explanations till ultimately on July 21, 1960,
\nthe  Reserve  Bank called upon the Palai Bank to  carry\t out
\ncertain directions which were enclosed with the letter.\t The
\nReserve Bank there wrote as follows :\n<\/p>\n
\t      “The bank should therefore, in the interest of
\n\t      its  depositors remedy within a period  of  12
\n\t      months the features observed in its working.”\n<\/p><\/blockquote>\n
It was also stated therein that if the Palai Bank desired to
\nmake  any  representation  in  regard  to  contents  of\t the
\ninspection report it could make its
\n 691<\/span>
\nrepresentation\twithin 30 days of the receipt of the  letter
\nand  the  complaint of the appellant is\t that  before  these
\nthirty\tdays  were over winding up application was  made  on
\nAugust\t8.1960, which the Reserve Bank submits was for\tvery
\ngood  reasons,\tthe  protection\t of  the  interest  of\t the
\ndepositors.\n<\/p>\n
The  test  of  reasonableness  has to  be  applied  to\teach
\nindividual  statute  and  no abstract  standard\t or  general
\npattern\t can  be laid down which will be applicable  to\t all
\ncases : Patanjali Sastri, C.J., in State of Madras v. V.  O.
\nRow<\/a> (1) observed :\n<\/p>\n
\t      “The formula of subjective satisfaction of the
\n\t      Government  or  of  its  officers,  which\t  an
\n\t      advisory\tBoard thrown in to review the  mate-
\n\t      rials  on which the Government seeks to  over-
\n\t      ride   a\tbasic  freedom\tguaranteed  to\t the
\n\t      citizen,\tmay be viewed as reasonable only  in
\n\t      very exceptional circumstances and within\t the
\n\t      narrowest limits, and cannot receive  judicial
\n\t      approval\tas a general pattern  of  reasonable
\n\t      restrictions on fundamental rights.”\n<\/p><\/blockquote>\n
See  also  Abdul Hakim v. State of Bihar  (2)  Although\t the
\nlegislature  is\t the  best judge of what  is  good  for\t the
\ncommunity  ;  State  of\t Bihar\tv.  Kameshwar  Singh<\/a>(3)\t the
\nultimate responsibility for determining the validity of\t the
\nlaw  must, rest with the Court and the Court must not  shirk
\nthat  final  duty  cast on it by  the  Constitution.   Abdul
\nHakim’s case (2).\n<\/p>\n
It  was submitted by the learned Attorney-General  that\t (1)
\nreasonableness of the impugned legislation has to be  judged
\nin its own setting and not on any abstract test and (2) that
\nthe absence of judicial scrutiny is not an inviolable  rule.
\nIt  can be dispensed within certain circumstances  as  being
\nunsuitable  or\tdefeating the purpose for which\t an  Act  is
\npassed.\t  In  support  of  the former  he  relied  upon\t the
\nobservations of Patanjali Sastri, C. J., in
\n(1) [1952] S. C. R. 597,60 7,608.  (2) [1961] 2 S.C.R. 610.
\n(3) [19S2] S.C.R. 889.\n<\/p>\n
692<\/span><\/p>\n
State\tof Madras v. V. G. Row<\/a> (1) where the  learned  Chief
\nJustice observed
\n\t      “The nature of the right alleged to have\tbeen
\n\t      infringed, the underlying purpose of the\tres-
\n\t      trictions\t imposed, the extent and urgency  of
\n\t      the  evil sought to be remedied  thereby,\t the
\n\t      disproportion    of   the\t  imposition,\t the
\n\t      prevailing conditions at the time, should\t all
\n\t      enter into the judicial verdict.\n<\/p>\n
and  also to the following observation at  p.\n<\/p>\n
\t      608 :\n<\/p>\n
\t      “As  pointed  out by Kania, C. J.,at   p.\t 121
\n\t      quoting Lord Finlay in Rex  v. Halliday (1917)
\n\t      A. C. 260, 269, the courtwas    the     least
\n\t      appropriate   tribunal  to  investigate\tinto
\n\t      circumstances  of\t suspicion  on\twhich\tsuch
\n\t      anticipatory action must be largely based.”
\nBut in that very case the learned Chief Justice pointed\t out
\nthat   the  formula  of\t subjective  satisfaction   of\t the
\nGovernment  with an Advisory Board thrown in to\t review\t the
\nmaterials on which the Government seeks to override a  basic
\nguaranteed freedom can be viewed as reasonable only in\tvery
\nexceptional  circumstances and within the  narrowest  limits
\nand cannot receive judicial approval as a general pattern of
\nreasonable restriction.\t In that case the court did not find
\nany  reasonableness in the claim of the Government  to\tshut
\nout judicial enquiry into the underlying facts.
\n   In support of the second submission reference was made to
\nVirendra v. The State of Punjab<\/a> (2) where the constitutional
\nvalidity of a Punjab Act which prohibited the publication by
\nthe  Editor and Printer of any matter relating to the  “Save
\nHindi” agitation was challenged.  The question raised  there
\nwas, are the restrictions imposed
\n(1)  [1952] S.C.R. 597, 607, 608.\n<\/p>\n
(2)  [1958] S.C.R. 308
\n 693<\/span>
\nreasonable in view of all the surrounding circumstances.  In
\nother  words were they reasonably necessary in the  interest
\nof  public  order  under Art. 19(2) or in  the\tinterest  of
\ngeneral public under Art. 19(6).  Das, C.J., there  observed
\nthat  the legislature had to ask itself the question  as  to
\nwho would be the proper authority to determine at any  given
\ntime  as  to whether the prevailing  circumstances  required
\nsome  restrictions  on the right to freedom  of\t speech\t and
\nexpression  and\t the  answer  was  obvious  that  the  State
\nGovernment  was\t charged with the preservation\tof  law\t and
\norder  ; it alone had in possession all the  material  facts
\nand  it\t would\tbe the best authority’\tto  investigate\t the
\ncircumstances  and assess the urgency of the  situation\t and
\nmake  up  its minde as to what anticipatory action  must  be
\ntaken for prevention of the threatened or anticipated breach
\nof peace :\n<\/p>\n
\t      “The  court  is wholly unsuited to  gauge\t the
\n\t      seriousness of the situation, for it cannot be
\n\t      in possession of material which are  available
\n\t      only  to the executive Government.   Therefore
\n\t      the  determination  of the time when  and\t the
\n\t      extent to which restrictions should be imposed
\n\t      on the Press must of necessity be left to\t the
\n\t      judgment\t and   discretion   of\t the   State
\n\t      Government  and  that  is\t exactly  what\t the
\n\t      Legislature did by passing the statute.”\n<\/p><\/blockquote>\n
This passage from the judgment of Das, C.J., and the passage
\nfrom  the  judgment of Patanjali Sastri, C.J., in  State  of
\nMadras\tv.  V.G.  Row<\/a> (1) where reference was  made  to\t the
\nobservations of Kania, C.J. were strongly relied upon by the
\nAttorney-General in support of his contention that the power
\ngiven  to the Reserve Bank in regard to winding up  and\t the
\nmandatory  provision  for the order for winding\t up  by\t the
\ncourt were reasonable restrictions; because the judge of the
\nurgency and of the measures to meet the urgency could be the
\nReserve Bank or the court;\n<\/p>\n
(1)  [1952] S.C.R. 597,607, 608.\n<\/p>\n
694<\/span><\/p>\n
and  the  legislature  had rightly given the  power  to\t the
\nReserve\t Bank,\tbecause\t it was in  possession\tof  all\t the
\nmaterial facts and was the best authority to investigate the
\ncircumstances and assess the urgency of the situation.\t The
\nanalogy between Virendra’s case(1) and the present case\t is,
\nin our opinion, wholly in apt.\tIn Virendra’s case(1)  there
\nwas an agitation by a section of the Punjab public which was
\nlikely to have serious consequences on the public order\t and
\nthe tranquility of the state.  It required quick measures to
\ncontrol\t it.  The order was to meet an emergency, the  order
\nCould at the most remain applicable for two months and there
\nwas   a\t provision  for\t making\t a  representation  to\t the
\nGovernment.  In the case of a banking company, assuming that
\nan  urgency  like that which existed in\t Virendra’s  case(1)
\narises and a proper case is made out the Court will act with
\npromptitude  make  such interim orders as the facts  of\t the
\ncase  may  require  e.g. the appointment  of  a\t provisional
\nliquidator.  There is one essential difference between V. G.
\nRow’s case(2) and Virendra’s case (1) and the one before us.
\nIn the former two cases executive action of State Government
\nwas challenged.\t The Court there had not to give a  judicial
\nverdict in accordance with the opinions of the executive but
\nhad  to\t determine the constitutionality of  action  already
\ntaken.\t It  did not pass an order, judgment  or  decree  in
\naccordance   with  the\tsubjective  determination   of\t the
\nExecutive   but\t  expressed   the  opinion   that   in\t the
\ncircumstances  there was no infringement  of  constitutional
\nrights.\t  In  the present case the Court  is  debarred\tfrom
\ndeciding  the adequacy of the acts of mismanagement and\t the
\nparlous\t state\tof its finances alleged\t against  the  Palai
\nBank.\tBesides\t the  complaint before us is  not  that\t the
\nReserve\t Bank should not have filed an application but\tthat
\nthe  court  could not order liquidation till  after  it\t had
\nheard the Palai
\n(1) [1958] S.C.R. 308.\n<\/p>\n
(2) [1952] S.C.R. 597, 607, 608.\n<\/p>\n
695<\/span><\/p>\n
Bank  in its defence and had afforded it an  opportunity  of
\nmeeting\t the  allegations in the winding  up  petition.\t  In
\nother  words a law which authorises a banking company to  be
\ncondemned  unheard merely on the subjective satisfaction  of
\none  of the suitors even though it was the Reserve  Bank  is
\nunconstitutional.\n<\/p>\n
It  was\t next contended that the provision of  s.38  of\t the
\nBanking Companies Act were not so unusual and that in  other
\ncountries  in  similar circumstances much wider\t powers\t had
\nbeen given in regard to the winding up of banking companies.
\nReference  was made to the National Bank Act in\t the  United
\nStates Code, s.191 of which deals, with general grounds\t for
\nappointment  of\t receivers.   It provides  inter  alia\tthat
\nwhenever   the\tComptroller  shall  be\tsatisfied   of\t the
\ninsolvency  of a national banking association he may,  after
\ndue examination of its affairs appoint a receiver who  shall
\nproceed\t to  close  up\tsuch  association  and\tenforce\t the
\npersonal liability of the shareholder.\tIt also empowers the
\nComptroller  to\t appoint receivers  for\t insolvent  national
\nbanks and to make rateable assessments upon the stockholders
\nbut  do not vest judicial power in him in violation  of\t the
\nConstitution.  The power of the Comptroller is exclusive and
\nnot  subject  to review of all matters properly\t within\t his
\ndiscretion.   A\t national  bank\t in  America  is  a  banking
\ncorporation  organised by private persons and  operated\t for
\nprivate gain, the power and duties of which are defined\t and
\nlimited\t by  Acts of Congress, providing  for  creation\t and
\nliquidation  of such institutions and being  established  to
\naid or promote governmental purpose and to provide  national
\ncurrency  they are often regarded as public or\tquasi-public
\ninstitutions.\n<\/p>\n
Reference  was\tnext made to 92 American  L.R,\t(Annotated),
\npp.1257-58,  which deals with the constitutionality  of\t the
\npower given under the
\n696<\/span>
\nstatute\t conferring authority upon the Bank Commissioner  to
\nwind  up the affairs of the Bank.  It is there\tstated\tthat
\nthe  fact of insolvency having been discovered\tthe  statute
\ndirects\t the Bank Commissioner’s course and the\t designation
\nby him of a person to wind up the affairs of the Bank  which
\nis  no\tmore a judicial act than his order to the  Board  of
\nDirectors  to remove a dishonest cashier.  “His\t powers\t are
\npurely\tadministrative,\t and  in no way\t infringe  upon\t the
\nancient\t authority of courts determine rights of person\t and
\nproperty in specific controversies pending before them”
\nReference was also made to Corpus Juris Secundum, Vol.\t IX,
\np.844, para 425, where it is stated that under some statutes
\nbanking officials liquidating a Bank are not subject to\t the
\ndirections of a court.\n<\/p>\n
Again reference was made to Corpus Juris Secundum, Vol. 16A,
\npp.1219-1220, para. 711, where similar statement is made  in
\nregard to the same statutes.  But the following passage from
\nthat paragraph is significant:\n<\/p>\n
\t      “Legislation   is\t in  contravention  of\t the
\n\t      guaranty\twhere it takes away  one’s  property
\n\t      and leaves him no remedy whatever by which  he
\n\t      can regain it or obtain redress.”\n<\/p><\/blockquote>\n
In  Corpus Juris Secundum, Vol. 16, p.506, para. 117, it  is
\nstated that appointment of a receiver, in certain instances,
\ndoes  not  perforce violate constitutional  provisions\twith
\nregard to separation of legislative and judicial powers.  So
\nthe  appointment of a receiver by the legislature to  settle
\nthe  affairs of an insolvent bank has been held not to be  a
\njudicial act but where the cause is properly before a  court
\nthe  appointment  of  a\t receiver  constitutes\ta   judicial
\nfunction without the scope of legislative control.\n<\/p>\n
 697<\/span><\/p>\n
It was then submitted that in America closing the doors of a
\nbank without awaiting court’s orders is not, a violation  of
\ndue process of law.  See Title ‘Guaranty & Surety Company of
\nScranton  v. State of Idaho (1) where it was held  that\t the
\nState’s\t power to put upon a Bank Commissioner the  duty  of
\nclosing\t the doors of State Bank if, on examination,  it  is
\nfound to be insolvent without awaiting judicial\t proceedings
\nis not a violation of the due process of law, but it appears
\nthat  the proposition that such a power was a  violation  of
\nthe  14th Amendment had not been argued in the State  Court.
\nThe  following\tobservations of Mr. Chief Justice  White  at
\np.569 are significant.\n<\/p>\n
\t      “We  say\tthis because, in  its  opinion,\t the
\n\t      court  observed that if that was\tthe  conten-
\n\t      tion,  it was irrelevant, as the\tstatute\t did
\n\t      not  authorise liquidation except as a  result
\n\t      of  judicial  proceedings\t although  they\t did
\n\t      impose  upon the bank commissioner  the  duty,
\n\t      after  he\t found a bank to  be  insolvent,  to
\n\t      close  its  doors\t and  prevent  the   further
\n\t      transaction of business until, in the  orderly
\n\t      course  of procedure, a  judicial\t liquidation
\n\t      might be accomplished.”\n<\/p><\/blockquote>\n
The only question there was whether the State could  empower
\nthe Commissioner to close the doors of a bank.\tIt was not a
\ncase where the statute authorised any liquidation except  as
\na  result of judicial proceedings.  Therefore it was  not  a
\ncase of liquidation being ordered by an authority other than
\na court.\n<\/p>\n
Another\t case relied upon was Bushnell v. Leland  (2)  where
\nthe  assessment made upon stockholder of a national bank  by
\nthe  Comptroller of Currency was held to be evidence  in  an
\naction\tbrought by the receiver of a bank against  a  stock-
\nholder to enforce payment of double liability imposed
\n(1)  (1916] 240 U.S. 136. 60 L. Ed. 566.\n<\/p>\n
(2)  (1897) 164 U.S., 684. 41 L. Ed 598.\n<\/p>\n
698<\/span><\/p>\n
by  law.  It was also held that the giving of  authority  on
\nthe Comptroller empowering him to make a rateable call\tupon
\nstockholder was not tantamount to vesting that officer\twith
\njudicial power.\t In Ex parte Johan Chetwood (1) it was\theld
\nthat  the  receiver  of a national  bank  appointed  by\t the
\nComptroller  of Currency is not an officer of any court\t but
\nagent and officer of the United States.\n<\/p>\n
The  aid  of American concepts, laws and precedents  in\t the
\ninterpretation of our laws is not always without its dangers
\nand they have therefore to be relied upon with some  caution
\nif  not\t with hesitation because of the\t difference  in\t the
\nnature\tof those laws and of the institutions to which\tthey
\napply.\t Mr. Nambiyar relied upon these\t different  concepts
\nand submitted that in U.S.A. the right to carry on  business
\nis not a fundamental right but is a “franchise”, though,  it
\nhas  by\t legal\tinterpretation,\t been  brought\twithin\t the
\nfourteenth amendment arid the doctrine of “franchise” has no
\nplace  in the Indian Constitution : C.S.S. Motor Service  v.
\nState  of  Madras (2) approved in Saghir Ahmad v.  State  of
\nU.P.<\/a>  (3)  Similarly the right to form a corporation  is  in
\nU.S.A.\t a  “franchise”\t or  a\t“privilege”  which  can\t  be
\nwithdrawn.  To apply the analogy of Banks in U.S.A. to those
\nin India or the mode of exercise by and extent of the powers
\nof  a Controller of Currency or some similar authority\twill
\nmore likely than not lead to erroneous conclusions.
\nTo support the submission that this procedure for winding up
\nin  the case of banking companies was not  unreasonable,  it
\nwas  submitted\tthat there are many other  corporations\t and
\nsocieties  which are not wound under the Companies  Act\t but
\nunder  a  different procedure-by the orders of\tthe  Central
\nGovernment—e.g. the Life Insurance Corporation, the  State
\nFinance Corporation, the State Bank of
\n(1)  [1897] 165 U.S. 413 41 L.\tEd. 782
\n(2) I.L.R. [1933] Mad. 304.\n<\/p>\n
(3) [1955] 1 S.C.R. 707, 718.\n<\/p>\n
 699<\/span><\/p>\n
India  and some others.\t They are all owned by\tthe  Central
\nGovernment  and\t are  therefore\t not  comparable  with\t the
\nrespondent  company.   Besides\tmerely\tbecause\t some  other
\ncorporations  or societies of a different kind can be  wound
\nup  in\ta different manner or under a special  procedure  is
\nhardly\t a   ground   for   holding   in   favour   of\t the
\nconstitutionality  of  the impugned provision.\t To  further
\nsupport the reasonableness of the impugned provision it\t was
\nargued\tthat because of the special knowledge  of  financial
\nmatters\t possessed  by\tthe  Reserve  Bank  and\t to  protect
\nfinancial structure of the country special powers have\tbeen
\nconferred  on  the Reserve Bank and  the  learned  Attorney-
\nGeneral\t relied on the observations of Rajagopala  Ayyangar,
\nJ.,  All  India\t Bank  Employees’  Association\tv.  National
\nIndustrial Tribunal<\/a> (1) :\n<\/p>\n
\t      “From  what  we  have stated  earlier  as\t the
\n\t      genesis  of  the legislation now\timpugned  it
\n\t      would  be\t apparent  that\t Government  bad  to
\n\t      effect a reconciliation between two  conflict-
\n\t      ing  interests ; one was the need to  preserve
\n\t      and maintain the delicate fabric of the credit
\n\t      structure of the country by strengthening\t the
\n\t      real as well as the apparent credit-worthiness
\n\t      of banks operating in the country.”\n<\/p><\/blockquote>\n
But  that was in a different context.  That was a matter  in
\nregard to the provisions s.34A of the Banking Companies Act,
\nsub-s.\t (1)   of  which  gives\t  immunity   under   certain
\ncircumstances  to  books and accounts of a  banking  company
\nagainst production and inspection in a proceeding before the
\nIndustrial  Tribunal and sub-section (2) of  which  provides
\nthat if in any proceedings in relation to any company  other
\nthan the Reserve Bank any question arises whether the amount
\nof  reserves should be taken into account by  the  authority
\nbefore\twhich such proceeding is pending the  authority\t may
\nrefer the question to
\n(1)  [1962] 3 S.C.R. 269, 298.\n<\/p>\n
700<\/span><\/p>\n
the  Reserve Bank and the Reserve Bank shall,  after  taking
\ninto  account,\tthe  principle of sound\t banking  and  other
\ncircumstances  furnish\tto  the\t authority  a\tcertificate,
\nstating\t that the authority shall not take into account\t any
\namount as such reserve and such certificate shall be  final.
\nAll  that  this\t case laid down was that  such\ta  provision
\nbalanced  the  interests  of the parties  and  the  delicate
\nfabric of the credit structure of the country.\tBesides that
\nprovision relates to production and inspection of  documents
\nand relates to what facts can be taken into consideration by
\nan Industrial Tribunal or whether a certificate by the\tbank
\nis  proof  of  a  particular fact or  not.   Again  what  is
\napplicable to a quasi-judicial authority like an  Industrial
\nTribunal adjudicating upon industrial disputes seeking to do
\nsocial\tjustice\t may  be  inapplicable\tto  Courts  of\t law
\nadjudicating  upon the rights of a citizen to carry  on\t his
\ntrade and avocation or not.\n<\/p>\n
   Next\t case  cited was Sajjan Bank v.\t Reserve  Bank\t(1).
\nThat was a case where the validity of  s.    22\t   of\t the
\nBanking Companies Act was challenged on the  ground of\tArt.
\n19(1) of the Constitution and it   was held not to be  ultra
\nvires  on the ground that power of licensing is\t not  vested
\nwith  a\t mere  officer\tof the bank  and  the  standard\t for
\nexercise of power has been laid down in the section  it-self
\nand  the  power\t granted  to the  Reserve  Bank\t is  not  an
\narbitrary one.\n<\/p>\n
The  vital  question  for decision is whether  a  law  which
\nrequires  the  High Court to order winding  up\tbecause\t the
\nReserve Bank is of the opinion that a banking company should
\nbe wound up is constitutional.\tIn other words can a statute
\nwhich  takes  away the power of the Court to  proceed  in  a
\nnormal judicial manner to determine a question submitted  to
\nit for its decision on the
\n(1)  [1959] 2 M L.J. 455.\n<\/p>\n
\t\t\t    701<\/span><\/p>\n
materials  proved  before it and requires it  to  decide  it
\nmerely in accordance with the subjective satisfaction of one
\nparty to the dispute ‘and without giving the other party the
\nright  to be heard at any stage of the proceeding and  prove
\nits  defence be called a reasonable restriction\t under\tArt.
\n19(1)(f)  and  (g)of the Constitution.\tWill the  law  which
\nexcludes  the  application  of\tthe  judicial  process,\t and
\ncompels the Court to merely carry out the behests of one  of
\nthe  parties  by giving effect to  that\t party’s  subjective
\nsatisfaction  and  thus\t to abdicate  its  judgment  to\t the
\nopinion\t of  a suitor be valid.\t Dealing with  emergence  of
\njudicial   power  Griffith,  C.J.,  in\tWaterside   Workers’
\nFederation  of\tAustralia v. J. W. Alexander Ltd.  (1)\tsaid
\nthat as soon as man emerged from the savage state and formed
\nsettled\t communities  it became necessary to have  rules  to
\nregulate conduct for the enforcement of which provision\t was
\nmade  and  this ‘power vested in some  person  or  authority
\nrepresenting  the  community.  Hence arose  law\t givers\t and
\nJudges and as civilisation advanced distinction began to  be
\ndrawn  between\tthe diverse functions of the  community\t and
\nthese functions were called “the judicial power” as  distin-
\nguished\t from  the legislative and  executive  powers.\t The
\nlearned Chief Justice then defined what ,Judicial power” is.
\nHe said :\n<\/p>\n
\t      “Without\tattempting an exhaustive  definition
\n\t      of the term ‘,judicial power,” it may be\tsaid
\n\t      that  it\tincludes  the power  to\t compel\t the
\n\t      appearance  of person before the\ttribunal  in
\n\t      which  it\t is vested,  to\t adjudicate  between
\n\t      adverse  parties as to legal  claims,  rights,
\n\t      and  obligations whether their origin, and  to
\n\t      order right to be done in the matter.”\n<\/p><\/blockquote>\n
Lord   Macnaghten   in\tLapointe  v.   L’   Association\t  de
\nBienfaisance  et  de  Retraite\tde  la\tPolice\tde  Montrial
\n(2)condemned  in  the case of persons,\tother  than,  judges
\nperforming judicial functions,
\n(1) (1918) 25 C.L.R. 434, 442.\n<\/p>\n
(2) [1906] A.C. 535, 539.\n<\/p>\n
702<\/span><\/p>\n
following a procedure “contrary to the rules of the ,society
\nand  above  all\t contrary to the  elementary  principles  of
\njustices.”\n<\/p>\n
The  importance of the judicial process, was  emphasised  by
\nPatanjali  Sastri,  C. J. in Ram Prasad Narain Sahi  v.\t The
\nState of Bihar (1), a case where the dispute was between the
\nState of Bihar and a private individual about the settlement
\nof lands belonging to Bettiah Raj :\n<\/p>\n
\t      “This  is\t purely a  dispute  between  private
\n\t      parties and a matter for determination by duly
\n\t      constituted  courts to which is entrusted,  in
\n\t      every  free and civilised society, the  impor-
\n\t      tant  function  of  adjudicating\ton  disputed
\n\t      legal   rights   after  observing\t  the\twell
\n\t      established   procedural\t safeguards    which
\n\t      include  the rights to be heard, the right  to
\n\t      produce  witness\tand so forth.  This  is\t the
\n\t      protection which the law guarantees equally to
\n\t      all persons and our Constitution prohibits
\n\t      by  Article 14: every State from denying\tsuch
\n\t      protection to anyone.”\n<\/p><\/blockquote>\n
No  doubt there the question was raised under Art. 14 ;\t but
\nit  is\tthe importance of the judicial process\tin  disputes
\nbetween\t the  State  and  a  private  individual  that\t was
\nemphasised.   At p. 1133 the learned Chief  Justice  pointed
\nout  the dangers inherent in special enactments in a  system
\nof  Government\tby political  parties  depriving  particular
\nnamed persons of their liberty or property.  In Mahant\tSri,
\nJagannath Ramanuj Das v. The State of Orissa<\/a> (2),  objection
\nwas  taken  to\tcertain\t provisions  in\t the  Orissa   Hindu
\nReligious  Endowments Act which related to the framing of  a
\nscheme.\t Under those provisions a scheme could be settled to
\nensure due administration of the endowed properties but\t the
\nobjection
\n(1) [1953] S.C.R. 1129, 1134.\n<\/p>\n
(2) [1954] S.C.R. 1046, 1052.\n<\/p>\n
 703<\/span><\/p>\n
was that the Act provided for the framing of a scheme not by
\nthe Civil Courts nor under provisions of the Civil Procedure
\nCode but by a ‘Commissioner who was merely an administrative
\nofficer.   There  was no provision for\tappeal\tagainst\t his
\norder.\t Mukherjea, J. (as he then was), said at p. 1052  as
\nfollows
\n\t\t  “We think that the settling of a scheme in
\n\t      regard  to  a  religious\tinstitution  by\t  an
\n\t      executive officer without intervention of\t any
\n\t      judicial\ttribunal amounts to an\tunreasonable
\n\t      restriction upon the right of property of\t the
\n\t      superior of the religious institution which is
\n\t      blended  with his office.\t Sections 38 and  39
\n\t      of   Act\tmust,  therefore,  be  held  to\t  be
\n\t      invalid.”\n<\/p>\n
See  also The Commissioner of Hindu Religious Endowments  v.
\nSri Lakshmindra<\/a> (1).  In Sri Sadasib Prakash Brahmachari  v.
\nThe  State of Orissa<\/a> (2) which was a decision in  regard  to
\nthe  same  Act after its amendment after ss. 38 and  39\t had
\nbeen   declared\t to  unconstitutional.\t By  the   amendment
\nalthough the scheme was to be prepared by the Commissioner a
\nright  of appeal direct to the High Court was given  against
\nthe  determination of the Commissioner settling the  scheme.
\nIt was held that although from the litigant’s point of\tview
\nan appeal to the High Court from the Commissioner’s order is
\nnot  the same as an independent right of suit and an  appeal
\nto  the\t higher\t court but in order  to\t judge\twhether\t the
\noperation  of the provision was or was not  an\tunreasonable
\nrestriction  what  had\tto be seen was\twhether\t the  person
\naffected  got a reasonable chance of presenting\t his  entire
\ncase  before  the original tribunal which has  to  determine
\njudicially the question raised and whether he has a right to
\nregular. appeal to the ordinary constitution court or courts
\nto  correct  the  errors if any of  the\t tribunal  of  first
\ninstance.  It was also
\n(1) [1954] S.C.R. 1005, 1037.\n<\/p>\n
(2) [1956] S.C.R. 43.\n<\/p>\n
704<\/span><\/p>\n
emphasised  in that case that the Commissioner had to  be  a
\nmember\tof the judicial service and the enquiry\t before\t the
\nCommissioner  was  assimilated to and was  governed  by\t the
\nprovisions relating to the trial of suits by enjoining\tthat
\nas  far as it might be it was to be in accordance  with\t the
\nprovisions of the Code of Civil Procedure relating to  trial
\nof  suits.  The framing of a scheme in this manner was\theld
\nnot  to be an unreasonable restriction on the rights of\t the
\nMahant under Art. 19(1) (f ). It is important to notice that
\nthere the right of appeal was in very wide and general terms
\nboth  on facts and on law and it could relate not merely  to
\nthe  merits of the scheme but also to all basic matters\t the
\ndetermination  of which was implicit in the very framing  of
\nthe scheme.\n<\/p>\n
The importance of the judicial power was pointed out by\t the
\nPrivy Council in Attorney-General for Australia v. The Queen
\nand the, Boilermakers’ Society of Australia (1) where it was
\nheld  that  the\t function of  an  industrial  arbitrator  is
\ncompletely outside the realms of judicial power and is of  a
\ndifferent  order.   At p. 315 Viscount Simonds\tobserved  as
\nfollows :-\n<\/p>\n
\t      “On  the other hand, in a federal\t system\t the
\n\t      absolute independence of the judiciary is\t the
\n\t      bulwark\t of   the    constitution    against
\n\t      encroachment whether by the legislature or  by
\n\t      the-executive.  To vest in the same body\texe-
\n\t      cutive and judicial power is to remove a vital
\n\t      constitutional safeguard”.\n<\/p><\/blockquote>\n
A  great deal of emphasis was laid by the learned  Attorney-
\nGeneral\t on  the  fact that the Reserve Bank is\t a  body  of
\nexpert\tbankers which could more appropriately determine  as
\nto when the continuance of a banking company is\t prejudicial
\nto the interests
\n(1) [1957] A.C. 288.\n<\/p>\n
705<\/span><\/p>\n
the  depositors than a judicial tribunal.  This argument  is
\nin our opinion fallacious because the liquidation of banking
\ncompanies  in  this  country as of any other  company  is  a
\njudicial  function and therefore within the jurisdiction  of
\nCourts\tand it has never been seriously suggested  that\t the
\nCourts\thave found or will in future find any difficulty  in
\nadjudicating  on  any  technical  matter  dealing  with\t the
\npeculiar  nature of banking companies.\tIt cannot  with\t any
\njustification  be argued that in dealing with  such  matters
\nthe  exercise  of jurisdiction by Courts is  less  desirable
\nthan  any  other matters which are  litigated  before  them.
\nIndeed\tit  would be a negation of the rule of\tlaw  if\t the
\ncitizen were to be denied to have his rights adjudicated  by
\nan independent tribunal like a Court of law and it will\t not
\nsubserve  the  interests  of  the Rule\tof  Law\t in  a\tfree
\ndemocratic  society, if adjudication of the question of\t the
\nsolvency  of  banking  houses’ was left\t to  the  subjective
\nopinion\t of  an executive body like the\t Reserve  Bank\teven
\nthough\t it  may  be  expert  in  banking.   The   following
\nobservations  of  Lord\tMorton, of  Henryton  in  Baldwin  &
\nFrancis Ltd. v. Patents Appeal Tribunal (1) which was a case
\nrelating to patents are very relevant :-\n<\/p>\n
\t       “It would, indeed, be regrettable in. present
\n\t      times,   when  certiorari\t lies  to  so\tmany
\n\t      tribunals dealing with scientific matters,  if
\n\t      the  courts  were precluded  from\t considering
\n\t      whether there was an errors of law on the face
\n\t      of  the record because they did not  know\t the
\n\t      meaning of certain technical terms.”\n<\/p><\/blockquote>\n
In  an American case Ohio Valley Water Company v.  Ben\tAvon
\nBorough 2) it was held that withholding from courts power to
\ndetermine  question of confiscation according to  their\t own
\nindependent  judgment must be deemed to deny due process  of
\nlaw.\n<\/p>\n
(1) [1959] A.C 663, 679.\n<\/p>\n
(2)  (1920) 253 U.S. 287, 64 L Ed. 908.\n<\/p>\n
706<\/span><\/p>\n
In Halsbury’s Laws of England, Vol. 7, (Simonds Edition), at
\np. 198 it has been stated that it is the right of a  subject
\nto have any dispute affecting him brought before a  judicial
\ntribunal  and  tried in accordance with\t the  principles  of
\nnatural\t justice  and that no party ought  to  be  condemned
\nunheard\t or to have a decision given against him  unless  he
\nhas  been given a reasonable opportunity of putting  forward
\nhis case.\n<\/p>\n
It  was further submitted by the appellant that the  Reserve
\nBank  is  entirely  an\texecutive  body,  and  therefore   a
\nmandatory  provision  like  s.\t38  (1)\t and   38(3)(b)(iii)
\npractically  leaves the question of liquidation\t of  banking
\ncompanies  in  the hands of the Executive.  By s. 7  of\t the
\nReserve\t Bank  Act  the\t Reserve Bank  is  required  to\t act
\naccording to the orders of the Government.  The directors of
\nthe Reserve Bank, according to s. 8 are all nominated by the
\nGovernment.  Under s. 38(2) the Reserve Bank is enjoined  to
\napply for the liquidation of a bank if it is so directed  by
\nthe  Central Government and therefore any opinion formed  by
\nthe Reserve Bank in regard to the insolvency or otherwise of
\na bank must necessarily be the determination of an important
\nbranch of the Executive and when s.38(1) requires the  court
\nto  order  the\twinding\t up  of\t a  banking  company  if  an
\napplication in that behalf is made by the Reserve Bank\tthen
\nit  is\tthe  substitution of executive\tpower  in  place  of
\njudicial  determination and judicial decision is one of\t the
\nmain  features of the rule of law.  To quote from  Stephen’s
\nCommentaries on the Laws of England, Vol.  III, p. 565 :\n<\/p>\n
\t      “The importance of the judicial element in our
\n\t      Constitution can hardly be exaggerated, for it
\n\t      rests with the Courts to ensure the conformity
\n\t      of  Government with law………………\t The
\n\t      ,Rule of Law’ which Dicey held to be a leading
\n\t      principle of our Constitution, does not
\n\t\t\t\t   707<\/span>
\n\t      involve  the  decision  of  every\t dispute  by
\n\t      Courts  of  law.\tBut it does imply  that\t all
\n\t      authorities in the State act under the eye  of
\n\t      the  Courts,  and\t are  liable  to  have\t the
\n\t      legality of their conduct inquired into.”\n<\/p><\/blockquote>\n
What  then  is\tthe position in the  present  case.   It  is
\nclaimed\t on behalf of the Reserve Bank that the position  of
\nthe Palai Bank was very precarious and that its assets\twere
\nnot  sufficient\t for  the  purpose of  the  payment  to\t its
\ndepositors in full or to meet its liabilities.\tIt was\talso
\nalleged that on several occasions directions had been  given
\nto  the\t Palai\tBank to conduct its affairs  in\t the  manner
\nrequired by the Reserve Bank and that many opportunities had
\nbeen  given to it to give its explanation as to the  defects
\nand  irregularities  in\t its working and to  carry  out\t the
\ndirections  of the Reserve Bank and it had failed to  comply
\nwith them.  The allegation that the bank was in a precarious
\nposition,  unable to meet its demands and it had  no  liquid
\nassets\tto pay off it’s depositors, has been  challenged  by
\nthe  appellant.\t The High Court would have adjudicated\tupon
\nthat question if it had been competent to do into it.\tThat
\nis exactly what is required in a judicial determination\t and
\nthat is what the Palai Bank, has been deprived of and it  is
\nthat  which  affects the constitutionality of  the  impugned
\nstatute.  The position under s. 38 of the Banking  Companies
\nAct  is that if the Reserve Bank is of the opinion that\t the
\ncontinuation  of  a banking company is deterimental  to\t the
\ninterests of the depositors and it makes an application\t for
\nwinding\t up,  the  Court  is  bound  to\t order\twinding\t  up
\nirrespective of whether the banking company has or has not a
\ngood  defence.\tTherefore the Court has to put its  judicial
\nseal on the opinion of another which is absolute negation of
\nthe  exercise of the judicial process.\tIt was\targued\tthat
\nthe  Reserve Bank, before it takes action,  inspects,  gives
\ninstructions,  takes  explanations  and\t hears\tthe  banking
\ncompany but it is not bound to do so.\n<\/p>\n
708<\/span><\/p>\n
The  vice  of the impugned provision lies in (a)  the  power
\nvested in the Reserve Bank to apply to the High Court for an
\norder winding up a bank\t      exercisable   solely  on\t its
\nsubjective  satisfaction as to the existence  of  conditions
\nprescribed  by s. 38, and (b) the obligation imposed by\t law
\nupon the High Court to make the order of winding up  without
\nat  any time enquiring whether the conditions on  which\t the
\napplication is founded do in truth exist.  In adjudging\t the
\nreasonableness\tof the restriction imposed by a statute\t the
\nCourt  has to consider its purpose, the evil it\t intends  to
\nremedy and it tries to strike a balance between the interest
\nof  the\t aggrieved citizen and the  larger  public  interest
\nsought to be served by the statute ; the Court in each\tcase
\nconsiders  whether the restriction imposed  is\tappropriate,
\nfair  and  reasonable.\t The Court will not  uphold  a\tres-
\ntriction which is not necessary for achieving the purpose of
\nthe  statute  or is a arbitrary.  Are the  circumstances  so
\ncompelling  in\tthe present case that unless  the  provision
\nrequiring  a Court to order winding up of a banking  company
\nbecause\t the Reserve Bank feels satisfied that it should  be
\nwound  up to protect the interests of the depositors is\t up-
\nheld the interests of the public cannot be safeguarded ?  In
\nconsidering  this question it may be legitimate\t to  enquire
\nwhether the High Court which normally exercises jurisdiction
\nin  the\t matter\t of  ordering winding  up  of  companies  is
\nincompetent  or\t its procedure inadequate  to,\texamine\t the
\ncharges against a banking company.  The credit of a  banking
\ninstitution is undoubtedly very sensitive.  It thrives\tupon
\nthe  confidence\t of  the  public  in  the  honesty  of\t its
\nmanagement,  and  its  reputation  of  solvency.   There  is
\nhowever\t nothing  peculiar  in the  business  of  a  banking
\ncompany\t that  it  must be ordered to be  wound\t up  on\t the
\nsubjective satisfaction of the Reserve Bank.
\nThe  Reserve  Bank is undoubtedly an expert body  with\tvast
\nfacilities for making enquiries into
\n\t\t\t    709<\/span>
\nthe  affairs  of banking companies in India.   But  on\tthat
\naccount\t it cannot be presumed that the view of the  Reserve
\nBank that any banking institution should be liquidated\tmust
\nalways be correct.  It cannot be said that the Reserve\tBank
\ncan  never act mistakenly or even negligently.\tThe  Reserve
\nBank  may  even be directed by the  Central  Government\t for
\nreasons\t of  its  own to apply for liquidation\tof  a  Bank.
\nUnder the Constitution the Courts are the custodians of\t the
\nfundamental rights of citizens ; but by this  extra-ordinary
\npiece  of  legislation these Very custodians  are  made\t the
\ninstruments of the Reserve Bank for imposing an order  which
\nprima  facie  is  destructive of  a  guaranteed\t fundamental
\nfreedom.    Under  our\tConstitution  the  legislative\t and
\nexecutive  actions  are subject to  judicial  review  within
\ncertain\t well defined limits.  But by s. 38(1)(b) read\twith
\nol.   (iii)   the  Court  is  not  only\t deprived   of\t its
\nConstitutional functions but is commanded to lend its aid in
\ndefeating  a fundamental freedom of banking companies.\t The
\nimpugned  provision makes the Reserve Bank  the\t complainant
\nand Judge in its own cause ; it authorises the Reserve\tBank
\non it subjective satisfaction as to the existence of a state
\nof affairs prescribed by the statute even without an enquiry
\nif it deems, fit, to demand that the High Court shall  order
\nliquidation of a banking company without making any  enquiry
\nas to the sufficiency or even the existence of the  material
\non  which its satisfaction depends.  The provision making  a
\nlitigant the Judge in his own cause is an absolute  negation
\nof the rule of law.  It is the foundation of the edifice  of
\nour judicial system that no one shall be condemned  unheard,
\nhowever\t strong the circumstances against him may appear  to
\nbe.   He is entitled to be told., if the freedom of  citizen
\nis to have any reality, what he has done to merit punishment
\nor  penalty, be must be afforded an opportunity to deny\t the
\ncorrectness of the charge
\n710<\/span>
\nand to set up his plea in denial or extenuation, and also be
\nafforded  an opportunity to persuade the authority  imposing
\npenalty or punishment that the appropriate order is not\t the
\none   proposed\tagainst\t him.\tBut  by\t a  stroke  of\t the
\nlegislative   pen  all\tthese  protections  which  are\t the
\nfoundation  of\tthe  rule  of  law  are\t destroyed  and\t the
\nsatisfaction  of  the Reserve Bank is  made  conclusive\t for
\nentering  a  verdict  for determination of the\tright  of  a
\nbanking company to continue to exist.\n<\/p>\n
In  our\t view it would be a tragedy if by this\tand  similar
\nlegislation  citizens  are  to\tbe  convicted  of  offences,
\npenalties  are\tto  be imposed\tupon  them,  their  property
\nsequestered, and their rights trampled upon without  enquiry
\nby  the\t courts\t by the simple expedient  of  requiring\t the
\ncourts\tto  lend their aid in imposing their  authority\t and
\nthereby\t creating  a  judicial facade to what  is  in  truth
\nexercise  of purely executive authority.  It is a matter  of
\nno  moment  that the executive authority invested  with\t the
\npower  to call upon the court to lend its aid, is an  expert
\nbody  which  performs  an  important  function\tdirectly  or
\nindirectly  in the governance of the State.  However  august
\nthe body so set up may be, a provision of law providing\t for
\nimposition of restrictions on a citizen’s fundamental  right
\npursuant to its subjective satisfaction as to the  existence
\nof a state of affairs, and thereby permanently depriving the
\ncitizen\t of his right or property is in our judgment  wholly
\nunreasonable.\n<\/p>\n
The  plea  of constitutionality of a  statute  infringing  a
\nfundamental right cannot be negatived on the assumption that
\nthe  autocratic power of imposing penalty or  punishment  is
\nentrusted to the executive authority which will exercise  it
\nonly  in proper cases and there will be no abuse  of  power.
\nIn  the larger interest, our Constitution makers  have\tbeen
\naverse to conferral of auto cratic power
\n\t\t\t    711<\/span>
\nand  have tried to protect the citizen against the  exercise
\nof  such power by guaranteeing him the fundamental  freedoms
\nand  have also provided protection against  infringement  or
\nthose freedoms by legislative or executive action.
\nWe are prepared to assume, though counsel for the Palai Bank
\nvery  vehemently  challenged the truth of the  case  of\t the
\nReserve\t Bank,\tthat  the affairs of  the  Palai  Bank\twere
\nmismanaged and that there was a mounting run on the bank and
\nit was practically in an insolvent condition.  The  validity
\nof  a  statute\tis  not to be judged in\t the  light  of\t the
\npropriety   or\totherwise  of  executive  action,   or\t its
\nbeneficient  effects,  in a given ease.\t The  invalidity  of
\nthis  statute  arises  because\tof  the\t exclusion  of\t any
\nopportunity  of\t judicial investigation into  the  fairness,
\npropriety  and reasonableness of executive action  involving
\ndeprivation of a fundamental rights.  It if; unnecessary  to
\nconsider the steps which it is claimed the Reserve Bank\t had
\ntaken  from time to time to obtain information and  to\tgive
\nadvice\tand  direction\tand also  the  allegation  that\t the
\napplication  to wind up was submitted because the  condition
\nof the Bank was deteriorating as each day passed.  These are
\nit  must be observed, matters in dispute.  Normally, ‘it  is
\nthe function of the judicial power to investigate whether  a
\nbanking\t company  should continue to function or  should  be
\nliquidated.  By the impugned provision the exercise of\tthat
\njudicial  power\t is  excluded.\tThat exclusion\tis,  in\t our
\nopinion,  not based on any inappropriateness of exercise  of
\nthe  judicial  power,  or  existence  of  other\t  compelling
\ncircumstances in the public interest, and is invalid because
\nthe  statute, examined in the light of its  repercussion  on
\nthe fundamental right of the citizen is unreasonable.
\nAs  we have shown above, under the Constitution\t the  courts
\nare the bulwark for the protection
\n712<\/span>
\nof  the\t right of the citizens and they are a check  on\t the
\nvagaries, negligence and mistakes of the executive or on the
\nhigh-handedness\t of  one party before  it  against  another.
\nThis Court has emphasised that the deprivation of the  right
\nto  resort to court is an unreasonable restriction.   It  is
\ntrue  that in the present case an appeal to this  Court\t has
\nnot been taken away but what is left is a wholly ineffective
\nright of appeal because if the law is constitution then\t all
\nthat  a court can do is to act according to the\t opinion  of
\nthe  Reserve  Bank  and abdicate its  judicial\tfunction  in
\nfavour of the opinion of an executive body.
\nWe   are  therefore  of\t the  opinion  that  s.\t 38  is\t  an
\nunreasonable  restriction on the right of the Palai Bank  to
\ncarry on its business and is therefore unconstitutional.  We
\nneed   express\tno  opinion  on\t the  question\tof   hostile
\ndiscrimination\tby the adoption of the procedure  prescribed
\nbut  the statute, if it be found unreasonable, is liable  to
\nbe  declared invalid.  For these reasons the appeal must  be
\nallowed and the order of the High Court set aside.
\nBY COURT-In accordance with the opinion of the majority, the
\nappeal\tand the writ petition fail, and are  dismissed\twith
\ncosts, one set only.\n<\/p>\n
\t\t     Appeal and petition dismissed.\n<\/p>\n
\t\t_____________________
\n\t\t\t    713<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Joseph Kuruvilla Vellukunnel vs The Reserve Bank Of India And … on 7 March, 1962 Equivalent citations: 1962 AIR 1371, 1962 SCR Supl. (3) 632 Author: Hidayatullah Bench: Sinha, Bhuvneshwar P.(Cj), Kapur, J.L., Hidayatullah, M., Shah, J.C., Mudholkar, J.R. PETITIONER: JOSEPH KURUVILLA VELLUKUNNEL Vs. RESPONDENT: THE RESERVE BANK OF INDIA AND […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-69346","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nJoseph Kuruvilla Vellukunnel vs The Reserve Bank Of India And ... on 7 March, 1962 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/joseph-kuruvilla-vellukunnel-vs-the-reserve-bank-of-india-and-on-7-march-1962\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Joseph Kuruvilla Vellukunnel vs The Reserve Bank Of India And ... on 7 March, 1962 - 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