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Chawla Bank Ltd. Vs. Reserve Bank of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany;Banking
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 1862 of 1969
Judge
Reported in[1970]40CompCas15(All)
ActsIndian Companies Act, 1913 - Sections 153; Companies Act, 1956 - Sections 391; Banking Regulation Act, 1949 - Sections 45
AppellantChawla Bank Ltd.
RespondentReserve Bank of India and ors.
Appellant AdvocateJagdish Prasad and ;Ambika Prasad, Advs.
Respondent AdvocateShanti Bhushan, Adv. General, ;A.P. Misra, ;S.N. Misra, ;S.M. Tewari and ;M.L. Bagi, Advs.
DispositionPetition dismissed
Excerpt:
.....permission from the high court to exercise the powers conferred on it in this respect by section 45 of the banking regulation act. 6. the petition is clearly misconceived and is without..........an order of moratorium issued by the central government under sub-section (2) of section 45 of the banking regulation act, 1949, and an amalgamation scheme prepared by the reserve bank under sub-section (4) of the same section for the amalgamation of the chawla bank with the new bank of india. 2. the sole ground on which the moratorium order and the amalgamation scheme are challenged is that they are in conflict with an order passed by the high court on january 17, 1949, under section 153 of the indian companies act, sanctioning an arrangement agreed to by the shareholders andcreditors of the chawla bank for the continuance of the said bank and for the satisfaction of its liabilities. the suggestion is that section 45 of the banking regulation act cannot operate to nullify orders that.....
Judgment:

W. Broome, J.

1. The Chawla Bank Ltd. of Dehra Dun has filed this writ petition to challenge an order of moratorium issued by the Central Government under Sub-section (2) of Section 45 of the Banking Regulation Act, 1949, and an amalgamation scheme prepared by the Reserve Bank under Sub-section (4) of the same section for the amalgamation of the Chawla Bank with the New Bank of India.

2. The sole ground on which the moratorium order and the amalgamation scheme are challenged is that they are in conflict with an order passed by the High Court on January 17, 1949, under Section 153 of the Indian Companies Act, sanctioning an arrangement agreed to by the shareholders andcreditors of the Chawla Bank for the continuance of the said bank and for the satisfaction of its liabilities. The suggestion is that Section 45 of the Banking Regulation Act cannot operate to nullify orders that have been passed by the High Court in the jurisdiction conferred on it by the Companies Act. I see no force in this contention, however, for the wording of Section 45 makes it clear that this section was meant to override all other laws and agreements. Sub-section (1) of Section 45 runs thus :

'45. (1) Notwithstanding anything contained in the foregoing provisions of this part or in any other law or any agreement or other instrument, for the time being in force, where it appears to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order of moratorium in respect of a banking company.'

3. And Sub-section (14) of Section 45 is in the following terms :

' (14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.'

4. It is clear from the above-quoted provisions that orders of moratorium and amalgamation schemes made under the section are to have effect notwithstanding any other law or any agreement, award or other instrument. Section 45 of the Banking Regulation Act thus expressly overrides Section 153 of the Companies Act, 1913, and the corresponding provision in Section 391 of the Companies Act, 1956; and arrangements or schemes enforced under these sections of the Companies Acts, can obviously not be put on a higher level than the sections of the Acts themselves and must also be deemed to be overridden by the provisions of Section 45 of the Banking Regulation Act. Whether the arrangement sanctioned by the High Court on January 17, 1949, is treated as an agreement between the petitioner-company, its shareholders and its creditors or whether it is treated as an order of the court under Section 153 of the Companies Act, 1913, the provisions of Section 45 of the Banking Regulation Act must nevertheless have effect in spite of such agreement or order.

5. It was suggested by learned counsel for the petitioner that before preparing its amalgamation scheme the Reserve Bank should have approached the High Court in its company jurisdiction for permission to do so, since the High Court had already sanctioned an arrangement in respect of this company under Section 153 of the Companies Act, 1913 ; but he was unable to point to any provision either in the Companies Act or in the Banking Regulation Act under which any such application would lie to the High Court. The question of whether a banking company is to be amalgamated with any other banking institution is clearly a matter solely in the discretion of the Reserve Bank and no question can arise of the Reserve Bank having to seek permission from the High Court to exercise the powers conferred on it in this respect by Section 45 of the Banking Regulation Act.

6. The petition is clearly misconceived and is without force. I may further point out that in any case there would appear to be no justification for interfering with the impugned order and the scheme by way of writ, for neither the shareholders nor the creditors of the Chawla Bank Ltd. can be said to be in any way adversely affected by the said order and scheme--in fact, with the amalgamation of the Chawla Bank Ltd. with the flourishing concern of the New Bank of India, these shareholders and creditors will probably find themselves in a vastly improved position.

7. The writ petition is without force and is accordingly dismissed with costs. The interim order passed by this court on 20th June, 1969, is vacated.


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