Arijit Pasayat, J. -
(2.)The present appeal is directed against the judgment and order dated 5.4.2006 passed by a Division Bench of the Bombay High Court in Writ Petition No. 337/2006 questioning Notification dated 7th January, 2006 issued by the Government of India, Ministry of Finance imposing a moratorium in respect of the appellant-Ganesh Bank of Kurundwad Ltd. (hereinafter referred to as "Bank") for a period of three months from the date of order upto and inclusive of 6th April, 2006. Amongst others, the said Bank was directed not to grant any loan or advances or incur liability without the permission in writing of the Reserve Bank of India (in short the RBI). Further, withdrawal of sums not exceeding 5,000/- by a Savings Bank or Current Account holder was permitted with a further relaxation of amount not exceeding Rs. 10,000/- or the actual balance whichever is less in the event of certain difficulties such as medical treatment, higher education and obligatory expenses like marriage etc. Challenge was also made to the appointment of two Directors on the Board of Directors of the Bank.
Further Challenge was made to the Notification dated 9.1.2006 proposing a scheme of amalgamation of the Bank with Federal Bank, another private sector commercial bank and to the order dated 24.1.2006 sanctioning amalgamation of Bank with Federal Bank.
It is to be noted that along with the said writ petition filed by the Bank, another writ petition (WP(C) No. 160/2006) was filed by one Mr. Sunil Mahadev Chavan.
(3.)The background facts in which the writ petitions were filed are essentially as follows:
Appellant Bank was founded sometimes in the year 1920 and is having a banking license given by the RBI. It has some 32 branches situated principally in districts of Kolhapur and Sangli of Maharashtra and the adjoining Belgaum District of Karnataka. It has around 1,75,000 depositors in the rural areas of these three districts. It was carrying on its activities smoothly, and it incurred losses only once and that was in the financial year 2004-05. That was also for the reasons which were beyond its control, viz (i) the value of the government securities, wherein it had made deposits, went down, and (ii) the provisioning norms set up by the RBI were made more stringent by it. It was on this background that it was shocked to receive the order of moratorium in the morning of 8th January, 2006. It led to unnecessary long queue at its Dadar branch, Mumbai, though there was no run on the bank any time in the past or even on that day as such. Thereafter, the issuance of the moratorium and the decision of the RBI to take further steps was duly advertised. The RBI appointed two directors of its own on the Board of Directors of the appellant-Bank on 7th January, 2006. The RBI then notified the proposed scheme of amalgamating the appellant-Bank with the Federal Bank on 9th January, 2006. The appellant-Bank objected to it by filing its objections on 23rd January, 2006, yet a decision was taken by the RBI and the Central Government on 24th January, 2006 sanctioning amalgamation of the appellant-Bank with the Federal Bank.