AMRIT BANK LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this writ petition under Article 226 of the Constitution of India the challenge is to a notification of the Government of India in the Ministry of Finance (Department of Economic Affairs), dated the 1st of December, 1967 (copy annexure "e" to the petition), passed in exercise of the power conferred on it by Sub-section (2) of Section 45 of the Banking Regulation Act, 194d (10 of 1949), hereinafter referred to as the Act, whereby an order of moratorium was made in respect of petitioner No. 1, Armit Bank Limited, Amritsar (hereinafter referred to as the bank), for the period from the close of business on the 2nd December, 1967, up to and inclusive of the 2nd of April, 1968.

(2.) BY that order the commencement or continuance of all actions and proceedings against the Bank during the period of moratorium was stayed and further certain conditions were imposed as to the grant of any loan or advance or incurring of liability by the bank except to the extent and in the manner provided by the order. Various other conditions were placed which it is not necessary to detail here. Petitioner No. 1 was the Amrit Bank Limited, Amritsar, through Shri Jaswant Singh Kochhar, its Chairman. Petitioner No. 2 was Bakshi Hardev Singh, a director of petitioner No. 1. Petitioner No. 3 was Shri Hans Raj Mittal, advocate, a shareholder and creditor of petitioner No. 1. Petitioner No. 4 was Shri Khushi Ram Aggarwal, another director of petitioner No. 1, and petitioner No. 5 was Shri Hans Raj, a creditor of petitioner No. 1. The respondents were (1) The Union of India, (2) The Reserve Bank of India, and (3) The State Bank of Patiala, through its General Manager, Patiala.

(3.) THE bank was established in the year 1935 and has a licence under Section 22 of the Banking Companies Act to carry on banking business. Its authorised, issued and subscribed capital is Rs. 5,00,000 and 60 per cent. of the capital has been paid. Thus the paid-up capital is Rs. 3,00,000. Apart from head office and branch office at Amritsar, the bank has two branches, one at Gurdaspur and the other at Khanna in the State of Punjab. It appears that in addition to the chairman and the two directors (respondents Nos. 2 and 4) there is another director, Bakshi Narinder Singh, who is brother of petitioner No. 2. It is stated in the petition that on the 2nd of December, 1967, the reserves of the bank amounted to Rs. 2,64,000 and its deposits to Rs. 37,28,000. Rs. 25,65,000 odd was invested with various parties, out of which 97. 5 per cent. is secured loan, and Rs. 17,21,000 is said to be lying with the bank as cash in hand or invested in scheduled banks or invested in unencumbered Government securities. In 1968, the bank declared a dividend of 10 per cent. and this was with the approval of the Reserve Bank of India. , vide its letter dated the 4th of April, 1967 (copy of annexure "b" to the petition ). An inspection of the bank's affairs was made on the 19th of November, 1965, under the directions of the Reserve Bank of India in pursuance of the powers conferred on it by Section 35 of the Act and it did not disclose anything unfavourable. Another inspection was made on the 7th of October, 1966, and according to the petitioners it disclosed only routine defects which were suitably dealt with by the management of the bank and the only action taken by respondent No. 2 was as follows : "after considering the bank comments on the inspection report it Was decided to watch the progress made by it in the rectification of defects pointed out at the time of the next inspection. "