Joseph Kuruvilla Vellukunnel Vs. The Reserve Bank Of India & Ors [1962] INSC 89 (7 March 1962)
07/03/1962 HIDAYATULLAH, M.
HIDAYATULLAH, M.
SINHA, BHUVNESHWAR P.(CJ) KAPUR, J.L.
SHAH, J.C.
MUDHOLKAR, J.R.
CITATION: 1962 AIR 1371 1962 SCR Supl. (3) 632
CITATOR INFO:
R 1963 SC1881 (69,108) R 1964 SC1279 (5) RF 1966 SC1953 (6) RF 1967 SC 295 (62) RF 1969 SC 707 (24,45) RF 1981 SC 818 (22) RF 1992 SC1020 (27) RF 1992 SC1033 (53)
ACT:
Banking Companies-Winding up-Enactment providing for an order for winding up by High Court on the basis of Reserve Bank's opinion-Constitutional validity-Banking Companies Act, 1949 (10 of 1949), ss. 2, 35, 35A, 36, 38 Reserve Bank of India Act, 1934 (2 of 1934), ss 7, 8, 38 Companies Act, 1956 (1 of 1956), ss. 433, 450(2)-Constitution of India, Arts. 14, 19 (1) (f) and (g), 301, 302.
HEADNOTE:
Sub-section (1) of s. 38 of the Banking Companies Act, 1949, provided : "Notwithstanding anything contained in ss. 391, 392, 433 and 583 of the Companies Act, 1956.... the High Court shall order the winding up for a banking company ....
if an application for its winding up has been made by the Reserve Bank under s. 37 of this section." Under s. 38(b) (iii) of the Act "the Reserve Bank may make an application under this section for the winding up of a banking company if in the opinion of the Reserve Bank the continuance of the banking company is prejudicial to the interests of its depositors." In exercise of the powers vested in it by the Banking companies Act, 1949, as well as the Reserve Bank of India Act, 1934, the Reserve Bank had been inspecting the Palai Central Bank Ltd., periodically, and had been warning the Bank that it-, business was being conducted in a manner detrimental to the interest of its depositors. In June 1960, there was a run on several branches of the Bank. The Reserve Bank was of the opinion that the Palai Bank was not in a position to pay its depositors in full and that the 633 continuance of the Bank was prejudicial to the interest of the depositors. On August 8, 1960 the Reserve Bank made an application in the High Court of Kerala under s.
38(3)(b)(iii) of the Banking Companies Act, 1949, read with the Companies Act, 1956, for the winding up of the Palai Central Bank Ltd. After hearing the Reserve Bank, the Palai Bank and the creditors, the High Court passed an order allowing the application of the Reserve Bank, and directing the winding up of the Palai Bank. It was contended for those who opposed the application that ss. 38(1) and 3(b) (iii) of theBanking Companies Act contravened Arts. 14 and 19 (1) (f) and (g) of the Constitution of India and, therefore were void because (a) they permitted discrimination between a banking company and any other company by prescribing different laws for their respective winding up, (b) they created an unreasonable restriction upon the right to carry on banking and (c) the whole procedure was denial of the principles of natural justice chiefly by denying an access to courts, inasmuch as under s. 433 of the Companies Act 1956, when application was made to wind up a company, the High Court had to be satisfied after a fair trial that an order to wind up the company was called for, and the Judge was free to reach a decision after the company had shown cause, and there was a right of appeal against the decision if adverse to the company, while under the procedure laid down in s. 38 of the Banking Companies Act, 1939, the Reserve Bank was made the sole judge to decide whether the affairs of a banking company were being so conducted as to be prejudicial to the interests of the depositors, and the court had no option but to an order windings up the banking company, when the application was made. It was also contended that ss. 38(1) and 3(b)(iii) were ultra vires being in conflict with Art. 301 of the 'Constitution.
Held, (Kapur and Shah, JJ., dissenting), that ss. 33(1) and (3) (b) (iii) of the Banking Companies Act, 1939, did not offend of Arts. 19(1)(f) and (g) of the Constitution of India and were valid.
In view of the history of the establishment of the Reserve Bank as a Central Bank for India, its position as a Banker's Bank, its control over banking companies and banking in India, its position as the issuing bank, its power to license banking companies and cancel their licences and the numerous powers, a law which empowered the Reserve Bank to come to a decision to wind up a tottering or unsafe banking company in the interest of the depositors could not be challenged as 634 unreasonable, because even if the court were called upon to take immediate action it would almost always be guided by the opinion of the Reserve Bank. A law may, with reason, leave the determination of an issue to an expert body, and such law is justified on the ground of expediency arising from the respective opportunities for action. The exclusion of courts is however not to be lightly inferred or conceded.
Held, further (per Sinha, C.J., Hidayatullah and Mudholkar, JJ.), that : (1) while ordinary companies dealt with the money of the stock holders, banking companies were in a different class as they dealt with the money of the depositors and had to be regulated differently ; and the Reserve Bank having been given by the Banking Companies Act the power and invested with the duty of watching the affairs, of every banking company with a view to ensuring the safety of the depositors' money, there was a valid classification ; consequently ss. 38(1) and (3)(b)(iii) of the Banking Companies Act did not offend Art. 14 of the Constitution.
(2) ss. 38(1) and (3)(b)(iii) did not amount to a conversion of a judicial process into an executive action.
The sections only made the court guide itself from the decision of ail outside agency and the judicial process commenced thereafter.
(3) ss. 38(1) and (3)(b)(iii) were not in breach of Art. 301 of the Constitution as they were in public interest and were protected by Art. 302.
Per Kapur and Shah, JJ.-Section 33 of the Banking Companies Act, 1949, was an unreasonable restriction on the right of a banking company to carry on its business and was, therefore, unconstitutional. The vice of the impugned provision lay in (a) the power vested in the Reserve Bank to apply to the High Court for an order winding up a bank exercisable solely on its subjective satisfaction as to the existence of conditions prescribed by the section, and (b) the obligation imposed by law upon the High Court to make the order of winding up without at any time enquiring whether the conditions on which the application was founded did in truth exist. A provision of law providing for the imposition of restrictions on a citizen's fundamental right pursuant to the subjective satisfaction of the Reserve Bank even though it is an expert body, as to the existence of a state of affairs, and thereby permanently depriving the citizen of his right or property, is wholly unreasonable.
A. K. Gopalan v. State, (1950) S.G.R. 88, State of Madras v. Rao, (1952) S.C.R. 597, The Commissioner of Hindu 635 Religious Endowments, Madras v. Sri Lakshmindra Tirtha Swamiar of Sri Shirur Muth, (1954) S.C.R. 1005, Mahant Sri Jagannath Ramanuj Das v. State of Orissa, (1954) S.C.R. 1046 and Virendra v. State of Punjab, (1958) S.C.R. 308, considered.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 487 of 1961.
Appeal by special leave from the judgment and order dated December 5, 1960. of the Kerala High Court in Baking Companies Petition No. 11 of 1960.
WITH Petition No. 167 of 1961 Petition under Art. 32 of the Constitution of India for the enforcement of Fundamental Rights.
M.K. Nambiyar, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant and the petitioner.
M.C. Setalvad, Attorney-General of India, H.N. Sanyal, Additional Solicitor-General of India, R. Ganapathy Iyer and R. H, Dhebar, for respondents No. 1 in C.A. No. 487 of 1961.
G. S. Pathak and K. R. Choudhuri, for respondents Nos. 4-6 in C. A. No. 487 of 1961.
M. C. Setalvad, Attorney-General for India, H.N. Sanyal, Additional Solicitor-General of India, R. Ganapathy Iyer, R. H. Dhebar and T. M. Sen for respondents Nos. 2 and 3 in Petition No. 167 of 1961.
1962, March 7. The Judgment of B. P. Sinha, C.J., M. Hidayatullah and J.R. Mudholkar, JJ., was delivered by Hidayatullah, J. The Judgment of J.L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J.
HIDAYATULLAH, J.-On August 8, 1960, the Reserve Bank of India made an application in the High Court of Kerala under s. 38 of the Banking Companies Act, 1949 (10 of 1949) read with the Companies Act, 1956 (1 of 1956), for the winding up of the Palai Central Bank, Ltd. (having its 636 registered office at Palai in the State of Kerala), for the appointment of the Official Liquidator of the High Court as the Liquidator with all the Powers under the said Acts and for the appointment of the Official Liquidator as the Provisional Liquidater during the pendency of the application. This application was allowed on December 5, 1960, and the present appeal with special leave, has been filed against the order.
The Palai Central Bank, Ltd. (herein referred as the Palai Bank or the Bank) was incorporated in January, 1927 under the Travancore Companies Regulations. Till 1936, it was known as ,The Central Bank, Ltd."'. when the name was changed. In March 1937, the Palai Bank was included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934). According to the balance sheet of the Palai Bank for the year ending December 31, 1959, the paid-up capital was Rs. 24,89,639.53. The nominal capital of the Palai Bank was Rs. 40 lakhs divided into 1,60,000 equity shares of Rs.25/The Palai Bank seems to have greatly extended its business as time passed. In 1928, the deposits were a mere Rs. 77,000/-, but by 1960, they had become almost Rs. 10 crores.
It had, during the years, become the foremost Bank in Kerala State, and its place was 15th in the whole of India. It had 25 branches in and outside the State of Kerala.
When Kerala became a Part B State, the Reserve Bank of India Act was extended to that area, and the Palai Bank came under the supervision of the Reserve Bank, which, in exercise of the powers vested in it by the Banking Companies Act as well as the Reserve Bank of India Act, periodically inspected the Palai Bank. These inspections were made in 1951, July 1953, FebruaryMarch 1956, March 1958 and JanuaryFebruary, 1960. Every time the Reserve Bank found irre637 gularities which were pointed out to the Bank, and special directions were issued. The main defects were that the advances made by the Palai Bank were not sound that the bulk of the advances were either irrecoverable or "'sticky" (which means, not easily recoverable), that the income taken into account represented to a great :extent unrealised interest on these advances, that large advances were made to the Directors, their relations and Companies, in which they were interested, on no security or inadequate security, and that the Bank was declaring dividends on the basis of profits which were computed without making provision for bad and doubtful debt and by issuing up the reserves at an alarming rate, while the deposits were going down. In the, beginning, the Reserve Bank contended itself by prohibiting further advances to Directors, their relations and individuals, firms or companies, in which the Dircetors were interested, advising the Palai Bank to reduce clean advances and to regularise others, warning the Bank that the Reserve, Bank considered that the business of the Bank was being conducted in the manner detrimental to the interests of its depositors, and that if the directions were not carried out, action under the first proviso to sub-s. (2) of s. 22 of the Banking Companies Act would be taken by issuing a notice that a licence could not be granted to the Bank.
From the correspondence which has been filed in this case, it does appear that the Reserve Bank was not satisfied at each following inspection that the position had improved;
rather it apprehended that it had worsened, and that the directions had not been carried out. This was denied on behalf of the Bank, but nothing depends upon who is right and who is wrong, because no charge of mala fide conduct is now made against the Reserve Bank. As a result of the inspection in FebruaryMarch, 1956, the Reserve Bank avers, it was found 638 that on December 31, 1955, the advances stood at Rs. 355.02 lakhs, of which Rs. 171-27 lakhs were irrecoverable, and that the deposits of the Bank had been impaired by Rs. 13913 lakhs. The Reserve Bank also avers that the Bank did not satisfy the requirements of the Banking Companies Act, particularly s. 11, about the minimum paid up capital and reserves, and ss. 22(3) (a) and (b) about the ability of the Bank to pay its depositors, present and future, in full or conducting its affair in a manner not detrimental to the interests of the depositors, and did not satisfy the requirements of ss. 42(6)(a)(i) and (ii) of the Reserve Bank of India Act. The Reserve Bank at this stage deputed an observer, and issued further directions and threatened to remove the name of the Palai Bank from the Second Schedule to the Reserve Bank of India Act, if the directions were not faithfully and punctually carried out. All this time, the Reserve Bank was requiring the Palai Bank to submit statements and returns In the inspection which was made in March-May, 1958, the position as on February 28, 1958, was found to be even worse. Though the deposits had gone up, the advances had raisen to Rs. 421.56 lakhs, of which Rs. 208.05 lakhs were said to be irrecoverable, and in the opinion of the Reserve Bank, after writing off the paid-up capital, reserves etc. of the value of Rs. 41.17 lakhs, deposits to the extent of Rs. 177.24 lakhs were impaired.
More directions in the game key followed, and the Bank was warned that it was conducting its affairs in a way which was detrimental to the interests of the depositors. in the scrutiny in January-February, 1960, the position as on December 31, 1959, was said to be that out of the advances of Rs. 529 lakhs, Rs. 218.51 lakhs were irrecoverable, Rs. 17.71 lakhs were doubtful, and Rs. 111.57 lakbs were frozen or sticky.
639 On July 21, 1960, the Reserve Bank issued a letter containing the warnings to which the Palai Bank appeared to have become indurated, and further gave the Bank 12 month's time to improve matters and 30 days to reply to the inspection report. An Officer of the State Bank of India (Mr. Sivaraman) had already been deputed as the General Manager of the Palai Bank, and had taken charge on July 1, 1960. On June 23, 1960,the balance sheet of the Bank was published showing the position as on December 31, 1959. The balance sheet showed a loss of Rs. 14-1/2 lakhs. The Reserve Bank alleges that even in previous years there were losses, but were hidden. In June 1960, there was a run on several branches of the Palai Bank. Whether this was due to the publication of the balance sheet showing a loss, or whether it was due to the appointment of Mr. Sivaraman, it is hardly possible now to say. Between June 24, 1960 (deposits, Rs. 9.82 crores) and July 22, 1960 (deposits, Rs. 9.32 crores) there was a withdrawal of Rs. 50 lakhs. By August 3, 1960 (deposits, 8.50 crores) there was a withdrawal of Rs. 82 lakhs in 12 days. To meet this run, the Bank had to borrow against Government securities with the result that all its Government securities except those worth Rs. 25 lakhs were pledged. The deposits (Rs. 8.50 crores) consisted of Rs. 4 crores in fixed deposits, Rs. 2.25 crores in current accounts and Rs. 2.25 crores in savings deposits. Against these, the Reserve Bank found that the Palai Bank had cash to the extent of Rs. 50 lakhs and a capacity to borrow Rs.1 crore against its securities.
The appellant, however, urged before us that in the report of the General Manager dated November 8, 1960, the cash in hand was shown to be Rs. 42.18 lakhs and at Banks, Rs. 83.68 lakhs, the marketable securities, Rs. 22.98 lakhs and the estimated surplus from assets specifically pledged, Rs. 142.63 lakhs. These figures do not, of course, show that all this 640 money would have been available immediately to stem the run.
It is thus evident that if the run continued longer there was a likelihood that these depositors who were able to withdraw their money would obtain payment in full, leaving the others with nothing or next to nothing. The Bank alleges in its affidavits in reply that the run was subsiding, while the Reserve Bank maintains that it was going on unabated. Whether it was abating or continuing, the reputation and security of the Bank had been considerably shaken. The learned Company Judge, in his judgment under appeal, estimated that Rs. 158 lakhs (about one-sixth of the deposits) represented the sudden withdrawals. The Directors of the Palai Bank sent Mr. Sivaraman on August 960, to Bombay for urgent consultations, and Mr. Sivaraman on his return, announced on the 8th that in application for the winding up of the Bank had been made that day, and a provisional Liquidator had been appointed.
He accordingly, issued orders to the Branches to stop business and close the doors. The 'Reserve Bank was of the opinion that the Palai Bank was not in a position to pay its depositors in full, and that the continuance of the Bank was prejudicial to the interests of the depositors.
The application, as already stated, was made on August 8, 1960. It was heard by Raman Nayar, J. He dispensed with notice under s. 450(2) of the Companies Act before passing the order appointing the provisional Liquidator.
He, however, issued notice of the main application, and heard the Reserve Bank, the Palai Bank, the creditors supporting the petition and the creditorsopposing it, and read several affidavits filed by the parties. On December 5,1960, he acceptedthe application of the Reserve Bank, and ordered that thePalai Bank be wound up. He was moved for a certificate under Art. 13(1) of the Constitution by the present appellant (Mr. Joseph Kuruvilla Vellukunnel), a 641 former Director of the Palai Bank and also a contributory, but he declined to certify the case. The appellant then obtained special leave of this Court, and filed this appeal.
Some others applied to intervene in the appeal, and were allowed to be heard. One Mr. D. Chacko Kappon (a contributory and also a depositor) filed a petition under Art. 32 of the Constitution. That petition was heard along with this appeal. This judgment will dispose of the appeal as well as the writ petition.
In the High Court, the application of the Reserve Bank was opposed on two grounds. The first was that the action of the Reserve Bank in making the application for the winding up of the Palai Bank was malafide. This ground appears to have been given up in the High Court itself, and has not been raised before us. The second ground was that s. 38(3)(b)(iii) of the Banking Companies Act, 1949, was void, inasmuch as it offends against Arts. 14 and 19 of the Constitution. In the hearing before us Art. 301 was also invoked. The decision of the High Court was against the Bank and other answering respondents, a-rid this ground alone has been urged before us.
Though the facts cease to play an important part in the decision of the question of law which survives, those narrated above were referred to by the learned AttorneyGeneral as showing the background of the action taken by the Reserve Bank. The appellant, in his reply, referred to some other facts in explanation to avoid a possible prejudice to his case, if the facts as presented by the Reserve Bank only were considered. While we are not required to express any opinion upon the correctness or otherwise of the allegations and counter allegations, we think it necessary to set out in brief some of the facts, to which our attention was drawn by the appellant, to show that we have borne in 642 mind the rival contentions in determining the validity of the section.
The appellant contended that enquiries by the Reserve Bank in the past were not thorough; but in the application for winding Up, the Reserve Bank had given specific details of the advances and their realisability. In this connection, we were referred to a reply made by the Reserve Bank in answer to four schemes of compromise between the Bank and its creditors suggested by the Palai Bank. In that reply, the Reserve Bank said that no definite opinion could be expressed on the schemes except "after a detailed examination of the Bank's books of account with a view to assessing the realisability of its assets and the probable pace of recovery of the realisable assets." This, in our opinion, was a proper attitude to take, because by then, the condition of the Bank had materially altered, and all the past data had become out of date. The reply did not show that the Reserve Bank's inspection was not thorough. Next, it was argued that the Reserve Bank's estimate of cash and realisable assets was wrong, if one reads the report of the Provisional Liquidator and the General Manager, dated November 8, 1960. We have already referred in an earlier part of this judgment to the amounts which, in their opinion, constituted the available assets, and have also shown why the Reserve Bank cannot be said to have made mistake. It was then contended that the run was under control, and our attention was drawn to certain statements in which the withdrawals during the months of July and August are shown in a tabular form. The run on the Bank did not follow a uniform course. Sometimes, it was more, and sometimes it was less, but continue, it did; and that is the main point of the matter. It was said that the Reserve Bank itself thought well of the Palai Bank, because in the year 1954, it allowed the opening of a now Branch at Madurai, and even in its last letter of July 21, 1960, 643 it gave the Palai Bank one year to improve matters, and 30 days to show cause against the inspection reports, but took a hasty action before even the 30 days had expired. The action of the Reserve Bank was undoubtedly taken during the period of grace; but after July 21, the situation had altered so radically that delay might have defeated the very purpose of the law, under which action was taken.
Finally, it was contended that the Palai Bank began by being a rural Bank, which was making advances on the security of land, and such security, though "sticky" was capable of being realised. Reference was made to the Report of the Travancore Cochin Banking Enquiry Commission, which was, appointed in 1956, where, in making a survey of banking in Travancore-Cochin State, it was pointed out that the Banks were "spread out into the rural interior of the State", and the main business of these banks was "to finance the rural people engaged in a small business-crop raising, produce processing, transporting, vending, etc." It was argued that to a rural Bank of this kind the standards of a commercial bank could not be applied and that the Reserve Bank should have made allowances in respect of the realisability of the advances, the worse of which belonged to a period prior to the extension of the Reserve Bank of India Act to this area. These advances given time, could have been cleared, and an attempt was, in fact, being earnestly made with the assistance of Mr. J. A. Frost, a retired senior grade Officer of the Imperial Bank of India, who was appointed an adviser. It was pointed out that 3 accounts were closed, 26 were sued upon, and in 13, substantial remittances were received. All this may be true; but it is useless for us to speculate as to what would have happened if the depositors did not take a hand in the affairs by making a run; and the action of the Reserve Bank was precipitated 644 by the exigencies of the situation, which had arisen. Those who made a run for their money, were not going to wait till the Bank acquired sufficient funds to pay them after recovering its advance. Those advances, as conceded, could not so easily be realised as the advance made by a commercial bank on security other than that of land. If this rural bank began to arrange its business like a commercial bank it must necessarily be judged by the same standard, and the affairs of the Palai Bank, in our opinion, had long left behind the rural character, and had emerged into those of a modern commercial bank.
What we have said above is sufficient to show that there was not enough material on which the action of the Reserve Bank could strictly be characterised as mala fide. Indeed, the forbearance with which the Reserve Bank acted (and it proved unwise) has completely demonstrated the futility of granting time, and we are not surprised that the answering respondents in the High Court and the appellant in this Court have not chosen to raise any issue about the honesty of the action.
We are thus concerned with the contention that ss. 38(1) and (3)(b) (iii) are void, being a breach of Arts. 14 and 19 of the Constitution, and ultra vires being in conflict with Art. 301. The arguments anent Arts. 14 and 19 are based on the same reasoning, but that under Art. 19 takes a few more facts into account. Shortly stated, the argument is that ss.38 (1) and (3)(b)(iii) make the Reserve Bank the sole judge to decide Nhether the affairs of a banking company are being so conducted as to be prejudicial to the interests ofthe depositors, and the Court has no option but to pass an order winding tip the banking company, when the application is made Section 38 lays down :
"38(1), Notwithstanding anything contained in section 391, section 392, section 433 and section 645 583 of the Companies Act., 1956, but without prejudice to its powers under sub-section(1) of section 37 of this Act,, the High Court shall order the winding up of a banking company-(a)if the banking company is unable to pay its debts ; or (b)if an application for its winding up has been made by the Reserve Bank under section 37 or this section.
(2)The Reserve Bank shall make an application under this section for the winding up of a banking company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35.
(3)The Reserve Bank may make an application under this section for the Winding up of a banking company(b)if in the opinion of the Reserve Bank (iii)the continuance of the banking company is prejudicial to the interests of its depositors.
It is said that the word "shall" in the first sub-section is mandatory, and compels the High Court to pass an order winding up a banking company whenever the Reserve Bank chooses to make an application. It is further pointed out that these powers exclude the operation of s. 433 of the Companies Act, under which companies arc wound up.
The power conferred on the, Reserve Bank by the section is said to be bad under Art. 14. because it enables a discrimination between a banking company and any other company by prescribing different laws for their respective winding up, and is 646 bad under Arts. 19(1) (f) and (g) as amounting to an unreasonable restriction on the holding of property and the right to carry on business as a banking company. To amplify the first, it is argued that s. 433 of the Companies Act, when an application is made to wind up a company, the High Court has to be satisfied after a fair trial that an order to wind up the company is called for, and the Judge, who is independent of executive control, is completely free to reach a decision after the Company has shown cause, and there is a right of appeal against the decision, if adverse to the company. But under the procedure laid down in s. 38 of the Banking Companies Act, the banking company proceeded against has no opportunity to show cause either before or after the winding up order, the Reserve Bank .records no reasons in writing or communicates them, there is no access to Court and no hearing before the. Court to determine whether the proposed action is justified, and no redress if a mistake were made. Under the exercise of that power, it is said, any banking company can be suppressed by the Reserve Bank or by the Central Government and the Courts are powerless, since the opinion of the Reserve Bank and/or the central Government is not justiciable and there is no appeal against the decision of the Reserve Bank or of the Court acting on the application of the Reserve Bank.
It is said that the unreasonableness of the law arises further from the fact that the Reserve Bank is not an independent or impartial judge, the members of the Central and Local Boards whereof, being all nominees of Government with no security of tenure, such as is enjoyed by the High Court Judges. The Reserve Bank is subject to directions from the Central Government, and even if the Reserve Bank be of a contrary opinion, it has to file an application for the winding up of a banking company, if directed to do so by the Central Government. It is further argued that this drastic power under a law which is 647 characterised as 'Draconic' is `uncanalised', `uncontrolled' and `despotic', and in its exercise, every principle of natural justice is set at nought, and the very fundamental conception of it, namely, resort to Court is completely absent. Such a law, it is said, is so patently, unreasonable as to be a gross violation of all fundamental rights. Lastly, it is contended that in giving the Reserve Bank the power to elect to proceed under the Companies Act or under the Banking Companies Act, there is further room for discrimination. It is thus contended that s. 38(1) of the Banking Companies Act cannot be upheld as a valid law on any principle.
The learned Attorney-General appearing for the answering respondents contends that the action of the Reserve Bank was fully supported and justified by the facts. According to him, the, Palai Bank was inspected frequently for ten years and the reports of the inspecting officers were made available to the Palai Bank not only for information but also for explanation and compliance. The action, says he, drastic though it may seem, was taken after numerous opportunities to the Palai Bank to mend matters, that even as late as 1960 the Reserve Bank gave a year's time for improvement, but immediate action had to be taken in view of the loss of confidence among the depositors, a large number of whom made a run for their money. The learned Attorney-General thus says that there were many person who were of the opinion that the Reserve Bank should have acted earlier and that perhaps the Reserve Bank could be blamed for delaying the action but not for taking a precipitate action. He urgues that the Reserve Bank and not the Court was in a position to take prompt action because the Reserve Bank already possessed all the necessary information. He contends that the position of the Reserve Bank and its statue as a responsible body make it the proper authority to make such an important decision requiring immediate action and 648 that unless the Reserve Bank could be charged with dishonesty (which is not the case) the action of the Reserve Bank not only cannot be questioned, but should not be open to doubt. According to him, banking companies are in a class by themselves, and special law dealing with their winding up cannot be described as discriminatory. He contends that the law is neither discriminatory nor unreasonable, and that a prior judicial determination of an issue of this kind is not a condition precedent to the making of a winding up order against a batik. He therefore, says that the appeal and the petition should be dismissed.
Before we consider the arguments of the two sides in detail, we wish to say a few words about the position of the Reserve Bank in the financial affairs of India and also about its place in the scheme of the law. The Reserve Bank of India was established on April 1, 1935, by the Reserve Bank of India Act, 1934. Even before the establishment of the Reserve Bank, suggestions were made that there should be a central bank in India and the Royal Commission on Indian Currency and Finance had recommended in 1926 that the currency and credit of the country could only be put on a firm foundation, if a central bank was established. The first Bill introduced in 1927 by Sir Basil Blackett was dropped. The Indian Central Banking Inquiry Committee, however, reported in 1931 that there was a need for a central banking institution in India "for securing the development of the Indian banking and credit system on a sound and proper basis." The Committee pointed out that some of the Provincial Committees had also suggested the establishment of the Reserve Bank. The Committee ended by saying:
"We accordingly consider it to be a matter of supreme importance from the point 649 of view of the development of banking facilities in India, and of her economic advancement generally, that a Central or Reserve Bank should be created at the earliest possible date. The establishment of such a bank would by mobilization of the banking and currency reserves of India in one hand tend to increase the volume of credit available for trade, industry and agriculture and to mitigate the evils of fluctuating and high charges for the use of such credit caused by seasonal stringency." (Vol. I, Part I. Chap. XXII, para, 605) The White Paper on Indian Constitutional Reforms also recommended the establishment of a Reserve Bank 'free from political influence'. As a result of these findings when a fresh Bill was introduced by Sir George Schuster on September 8, 1933, it was accepted and received the assent of the Governor General on March 6, 1934.
The functions of the Reserve Bank were generally indicated in the preamble as the regulation of the issue of the Bank notes and the keeping the reserves with t view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.
But to enable the Reserve Bank to function in this manner, it had to be given other powers, so that it may function effectively as a central bank. To this end, the Reserve Bank was given the right to hold the cash balances of important commercial banks, a right to transact Government business in India which was also its obligation, and to enter into agreements with State Governments to transact their business. In addition to these, the Reserve Bank could require all Banks included in the Second Schedule to the Act to maintain with the Reserve Bank a balance not less than 5 per cent, of their demand liabilities and 2 per cent of their time liabilities. The 650 Reserve Bank also performed the normal functions of a central bank as well as an ordinary bank, though the latter functions are not as detailed as those of in ordinary bank.
But the most important function of the Reserve Bank is to regulate the banking system generally. The Reserve Bank has been described as a Bankers' Bank. Under the Reserve Bank of India Act, the scheduled banks maintain certain balances and the Reserve Bank can lend assistance to those banks "as a lender of the last resort". The Reserve Bank has also been given certain advisory and regulatory functions. But its position as a central bank, it acts as an agency for collecting financial information and statistics. It advises Government and of-her banks on financial and banking matters, and for this purpose, it keeps itself informed of the activities and monetary position of scheduled and other banks and inspects the books and accounts of scheduled bank and advises Government after inspection whether a particular bank should be included in the Second Schedule or not.
Every scheduled bank is required to send to the Reserve Bank and to the Central Government a weekly return of its position in a form, which is prescribed. Sometime, however, the Reserve Bank allows a particular bank to send its returns once a month instead of every week. From these returns, the Reserve Bank prepares and publishes consolidated statements showing the monetary position in the country. The inclusion of a bank in the Second Schedule is the function of the Reserve Bank, and under ss. 42(6)(a) (iii) and (b)(ii) it satisfies itself inter alia that the affairs of the particular bank are not being conducted in a manner detrimental to the interests of its depositors. The Reserve Bank has further the power to prohibit any scheduled bank from receiving, after a week, any fresh deposits.
651 The above analysis of some of the provisions of the Reserve Bank of India Act show that the Reserve Bank of India has been created as a central bank with powers of supervision, advice and inspection, over banks, particularly those desiring that they be included in the Second Schedule or those scheduled already. The Reserve Bank thus safeguards the economy and the financial stability of the country. No doubt, the Board is composed of nominated members ; but from the nature of things, it could not be otherwise. Neither election nor competitive examinations can effectively take the place of nominations, if the Board is to be composed of men of proved worth and standing, and there is no other method which can even be contemplated. No doubt, the members of the Board are subject to removal, but neither integrity nor efficiency is secured only by such guarantee, and we have no reason to think that the Reserve Bank acted in this case, or acts in other cases under pressure or from oblique motives. As was pointed out in another connection by this Court in All India Bank Employees' Association v. National Industrial Tribunal (1).
"If it was not the Reserve Bank of India, the only other authority that could be entrusted with the function would be the Finance Ministry of the Government of India and that department would necessarily be guided by the Reserve Bank having regard to the intimate knowledge which the Reserve Bank has of the banking structure of the country as a whole and of the affairs of each bank in particular." The position of the Reserve Bank being such as we have stated from the Reserve Bank of India Act, the next thing to enquire is its powers under (1) [1962] 3 S.C.R. 269, 299.
652 the Banking Companies Act. The Banking Companies Act, in its present form, is the product of many legislative enactments. The Banks' Liquidation Proceedings Committee (1962) correctly described it as "made up of shreds and patches" We were taken through the entire evolutionary process by the learned Attorney-General; but we do not consider it necessary to trace the various steps. We shall content ourselves with a reference to the salient landmarks.
In the Indian Companies Act, 1913, there was no special procedure for banking companies, particularly relating to their winding up. Special provisions were introduced in that Act by the Indian Companies (Amendment) Act, 1936.
Part X-A, which was then introduced, merely enacted certain regulatory provisions, but of winding up of banking companies, it ,said nothing. The amendment hardly met the purpose and the Reserve Bank of India framed a draft bill as far back as 1939 from which has been fashioned the present Banking Companies Act.
During the War years, the Indian Companies Act was amended several times to meet some special exigencies, with which we are not concerned. But by July, 1946, it was realised that certain undesirable features in banking had come to exist.
Banks were then getting control of non-banking companies and by the interlocking of shares, the banking companies were able to manipulate the finances at their disposal. The main features were 'the grant of loans to persons connected with the management of banks without adequate security extensive window-dressing at the time of preparing balance-sheets, and, in general, a tendency to utilise the bank's funds to the detriment of the interests of the depositors." It must not be forgotten that the Indian Companies Act, 1913, was concerned primarily with safeguarding the interests of the stockholders, whereas in a banking company, the interests of the depositors are invariably many times 653 those of the stockholders, if those interests can be said to be represented by the monies invested respectively. In 1946, an Ordinance was promulgated consisting of only six sections of which the operative sections were the last four.
Section 3 enabled the Central Government to direct the Reserve Bank to cause an inspection to be made of any banking company and its books and accounts and to make a report to the Central Government. Section 4 provided the machinery and the procedure to implement s. 3. Section 5 empowered Government to prohibit a bank from receiving fresh deposits or to direct the Reserve Bank not to include a particular bank in the Second Schedule, or to exclude it., if already included. Sub-section (2) provided for certain penalties, and s. 6 authorised the Central Government to publish, after reasonable notice to the banking company concerned, any report or parts thereof This was an attempt to ensure the depositors a certain measure of safety in regard to their money.
This Ordinance was followed by the Banking Companies (Restriction of Branches) Act, 1946, which, is its name shows, put a curb on the indiscriminate opening of branches by some banks. The evil of indiscriminate advancers and loans was then sought to be met by an Ordinance promulgated in 1948 intituled "The Banking Companies Control Ordinance" (XXV of 1948). In that Ordinance, it was provided that the Court shall appoint the Reserve Bank as the Official Liquidator of a banking company on the application of the Reserve Bank in that behalf. The Reserve Bank of India Act was also amended to enable the Reserve Bank to give a loan or loans to a banking company with a first charge on the assets, if wound up. A large number of banking companies had failed during the years, 1947, 1948 and 1949. Between 1926 and 1937, 23 Banks had suspended payment. In 1938 and 1939, 46 Banks 654 failed, from 1940 to 1946, 95 Banks were involved. But, in 1947, 1948 and 1949 there were as many as 123 failures involving outside liabilities of Rs. 82 crores ! The largest number was in Calcutta with 83 Banks. In the winding up proceeding that followed, many unsatisfactory features were noticed. It was noticed that the realisations were insignificant, while the costs were great, and enormous expenditure of time took place. The winding up of any company, be it a banking company or any other, requires an investigation of the affairs, the recovery and realisation of assets and distribution of what is realised. While these matters can,, of course, be carried on without undue hurry, the decision whether there should be a winding up or not, cannot be unduly deferred in the case of a banking company, if the interests of the depositors are to be safeguarded.
To achieve solidarity in banking operations and also to preserve the rights of the depositors while a bank continues and more so when it cannot, the Banking Companies Act was the logical, and indeed, the only answers.
We have seen that the Reserve Bank was already functioning as a central bank with a certain measure of control over the other banks, scheduled or unscheduled. This control was tightened in the Banking Companies Act by making provisions which were intended to protect the interests of the depositors. Differences noticeable between the Banking Companies Act, on the one hand and the Companies Act, on the other, which have been characterised as discriminatory, are thus explainable on the basis of the object to be achieved.
We shall soon illustrate this by a reference to the sections themselves. For the present we only wish to emphasise that banking companies cannot be compared with other companies.
The ordinary companies deal with the money of the stockholders, who own a share in the assets, 655 who appoint their own Directors, for better or for worse, and whose liability is also limited. The banking companies are in an entirely different class, as they deal with the money of the depositors who have no security except the solvency of the banking company and its sound dealings with their money. Ex facie, the banking companies must be regulated somewhat differently, and the interests of the depositors must be paramount and the winding up of such companies depends upon other considerations, chief among which is the desire to pay off the creditors as far as possible in full or at least equitably. The action is thus dictated not from any abstract consideration of a long-range view of the future ability of a bank to pay its creditors but its ability to pay them at any given time. In this connection, the Reserve Bank has been given by the Banking Companies Act the power and invested with the duty of watching the affairs of every banking company with a view to ensuring the safety of the depositors' money. There is thus, at the very start, a reasonable classification, which is also a very just and practical classification, to achieve the avowed purpose.
It is hardly necessary to examine each and every provision of the Banking Companies Act. When the Banking Companies Act was originally enacted, the main objects were to prescrible minimum capital standards, to prohibits the nonbanking companies to accept deposits repayable on demand and to limit dividends payable. But included in the Act was a comprehensive scheme for licensing of banks and a conferral on the Reserve Bank of power to call for periodical returns and balance sheets and to inspect books and accounts of banking companies. The Act also empowered the Central Government to take action against banks conducting their affairs in a mariner detrimental to the interests of the depositors, and 656 provided for a quicker procedure for winding up banking companies.
When the Banking Companies Act was passed in 1919, it was explained in the note on cl. 37, which corresponded to s.
38, that the provisions of the Indian Companies Act in respect of liquidation of companies did not seem to be suitable for banking companies, that a bank's business being of an over-the-counter kind, the bank has to meet immediately its liability and a provision for winding up of the banking company when it refuses to meet a lawful demand within a stated time, was necessary. It was also stated that the Reserve Bank was given authority to apply for the liquidation of the banking company, if its affairs were conducted to the detriment of the interests of the depositors. An examination of the Banking Companies Act reveals two things prominently. The first is that the whole intend and purpose of that Act is to secure the interests of the depositors. The second is that the Reserve Bank is the instrumentality by which this intend is to be achieved. The Act, at every turn, makes the Reserve Bank the authority to sanction, permits, certify, inspect, report, advise, control, direct, license and prohibit. There is hardly any provision where the Reserve Bank's judgment is not made final vis-a-vis a banking company except rarely where an appeal to the Central Government can lie. No useful purpose will be served in referring to these sections in detail.
Nor do the powers of the Reserve Bank end there. The Reserve Bank not only has powers over banking companies while they are functioning, but it has also powers when the banking companies wish or are forced to cease to function.
If a banking company wants to suspend its business and applies to the High Court for a moratorium, the application is not maintainable, unless 657 it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts. When the High Court grants the relief without such report, it has to call for a report from the Reserve Bank. The High Court is also required to have regard to the interests of the depositors, and even during the period of moratorium granted by the High Court, the Reserve Bank can apply for the winding up of the banking company. Sections 39 and 41-A give special powers to the Reserve Bank in winding up proceedings. Even in voluntary winding up of a banking company, the Reserve Bank has to certify that the banking company is able to pay in full all its debts to its creditors, as they accrue. In amalgamation of banking companies, the scheme has to be approved by the Reserve Bank. Similarly, in ;compromises or arrangements between the banking company and its creditors, the Reserve Bank has to be satisfied. In all these matters, the satisfaction inter alia, must be as to the interests of the depositors. In reconstruction of banking company after an application by the Reserve Bank for an order moratorium, the Reserve Bank has to satisfyitself and prepare a scheme, which, inter alia, must be in the interests of the depositors.
This brief survey of some of the other provisions of the Banking Companies Act, in addition to the general provisions earlier noticed, makes it plain that the legislature considers that consistent with its position as a central bank and more so with its duties and obligations, the Reserve Bank must have a decisive voice in certain matters.
It is in this context and setting that the, provisions of ss. 38(1) and (3)(b)(iii) of the Banking Companies Act must be viewed. It must not be overlooked that the legislature, in view of the sad experiences of the past, was anxious to devise a machinery for the supervision, inspection and effective functioning 658 of banking companies in the country. Associated with this was the speedy closure of banking companies, which were harmful to the interests of the depositors. The legislature achieved both these objectives through the Reserve Bank, which, because of its special powers and advantages, was in a position to act promptly and effectively. To aid the Reserve Bank, the Courts were required by law to be guided in certain matters by the opinion and judgment of the Reserve Bank, and in the matter of their disposal of winding up cases relating to banking companies, a special procedure was enacted in Part IIIA of the Banking Companies Act.
We are now in a position to deal with the argument that ss. 38(1) and (3)(b)(iii) of the Banking Companies Act are voidfirstly because they permit discrimination between banking companies on the one hand, and non-banking companies on the other, and also between banking companies inter se, and secondly because they create an unreasonable restriction upon the right to carry on banking, and lastly, because the whole procedure is a denial of the principles of natural justice, chiefly by denying an access to Courts. Though the arguments in this appeal have for their immediate object the declaration that ss. 38(1) and (3)(b) (iii) of the Banking Companies Act are void, they have ranged over a very wide field. In support of the first limb of the argument, Art.
14 is invoked, and in support of the second and third, Arts.
19(1)(f) and (g); and the argument proceeds along lines so well-known now as to need hardly any further amplification.
There being no direct ruling either of this Court or of any High court, assistance is sought to be derived from observations in previous decisions of this Court relating to other laws. In reply, the learned Attorney-General has relied upon the provisions of certain banking laws in America and Japan and decisions of the 659 American Courts, where such American laws were tested under the due process' clause. We shall refer to those laws and briefly rulings in the sequel, As regards the first point, viz., discrimination between banking companies and non-banking companies, we have already sufficiently indicated the wide difference that exists between these two types and the need for special laws dealing with banking companies. We have also pointed out the mischief that was sought to be remedied and how the present law has been evolved after considerable deliberation. A special Committee called the Banks' Liquidation Proceeding Committee was appointed in 1952, and the findings and recommendations of the Committee were implemented, amending the Banking Companies Act and incorporating changes, of which the impugned section in its present form is one. There being a very clear-cut and valid classification, the different procedure cannot be said to be discriminatory, because it is based on differences which are related to the end sought to be achieved. Further, we do not think that the possibility that the procedure under ss.
38(1) and (3)(b)(iii) may be invoked in some cases and the procedure of the Companies Act in others, makes any difference, because the different procedures will be invoked to suit different situations, and it cannot be said that the Reserve Bank would act arbitrarily from case to case. The Reserve Bank, apart from its being a reasonable body, is answerable to the Central Government, and the public opinion is certainly strong and vocal enough for it to heed. If the Reserve Bank were to act mala fide, the Central Government and in the last resort, the Courts, will be there to intervene. In our judgment, the provisions of ss. 38(1) and (3)(6)(iii) cannot be said to be a breach of Art. 14 of the Constitution.
660 That leaves over the second and third arguments, which proceed upon the same materials. In this connection, the main grounds of attack have already been set out in this judgment. Before we deal with the central point, we shall deal with certain others which proceed, so to speak, from the side lines. The objection that the Reserve Bank gives no hearing, records no reasons in writing and does not communicate them is met at least in this case by the admitted facts. 'The numerous inspection reports and directions issued by the Reserve Bank over a period of nearly nine years, together with the application filed in this case, prove amply that there was enough hearing of and enough communication of the grounds of action to, the Palai Bank. The Bank had also sufficient time and opportunity to establish its own point of view before the Reserve Bank. It was impossible that the Reserve Bank, with the run on the Bank, would sit down to decide after hearing whether to take action or not, while withdrawals were being made at the rate of Rs. 7 lakhs per day. The emergency of the situations which may arise, is itself the justification for the procedure open under the Act and taken in this case. In our opinion, these grounds cannot be entertained. It is difficult to imagine that the Reserve Bank would act differently in another case.
The main ground of attack is the way ss. 38(1) and (3)(b)(iii) make it mandatory for the High Court to pass an order winding up a banking company whenever the Reserve Bank under its powers or under an order of the Central Government makes an application for the winding up of a banking company. It is argued that such a power to the Reserve Bank is an uncontrolled and despotic power and to crown all, access to Courts is not possible because the Court itself must pass an order without deciding whether the affairs of the banking 661 company are being conducted in a manner detrimental to the interests of the depositors--a fact capable of being proved like any other fact. It is argued as a matter of principle that any law which bars a decision by the Court is itself unreasonable without more. Mr. Pathak, in supplementing the above contentions of Mr. Nambiar, also contends that by the law in question a judicial process has been converted into an executive action, and subjective determination has taken the place of judicial determination. He also contends that the Reserve Bank accuses a banking company, and then tries the issue to the complete exclusion of Courts.
It must not be overlooked that the winding up of a banking company takes place before the High Court and under the process of law. The judicial process is excluded only in respect of the momentous decision whether a winding up order should be made or not. This opinion is left to the Reserve Bank, and the Court merely passes an order according to the Reserve Bank's opinion, and then proceeds to wind up the banking company according to law. The narrow question is whether in leaving this decision to the Reserve Bank the law offends the principles of natural justice, and becomes so unreasonable, viewed in the light of Art. 19, as to become void. This is the point on which the respective parties joined issue and had much to say, and this is the crucial point in this case.
In support of this contention, reliance on behalf of the appellant is placed upon certain cases of this Court, and we shall begin by noticing them in brief. The first case relied upon is A. K. Gopalan v. The State (1). In that case, the validity of ss. 3, 7, 10-14 of the Preventive Detention Act, 1950, was challenged on a petition under Art.
32 of the Constitution for a writ of habeas corpus. Certain observations of Kania, C.J., and Fazl Ali, J., were (1) [1950] S.C.R. 88.
662 relied upon to show that the right to be heard and tried is the very basis of the rule of law, Fazl Ali,J., observed that there is a fundamental principle that a person whose rights are affected must be heard. The learned Judge referred to several cases in which the maxim, audi alteram partem, has been invoked and applied, particularly the observations of Lord Macnaghten in Lapointe v. L' Association, etc., de Montreal (1), who condemned a procedure which required no hearing as being "contrary to rules of society and above all contrary to the elementary principles of justice." It cannot reasonably be said that there would be no hearing in cases of this type. While we agree that it is obnoxious to the rule of law as it exists among civilized nations, that a person should be condemned, unheard, we cannot say that in this case the Palai Bank was not heard, and this case is really typical of those cases in which such a power would be invoked. The learned Attorney General was justified in saying that there was plenty of hearing before the application was filed. The gist of the objection must thus be taken to be that the Palai Bank was not heard in the High Court before the making of the impugned order. If a valid law could be made leaving to the determination of the Reserve Bank whether a banking company should be wound up and the Court to implement that decision, then this petition must fail ; but if it cannot be made, then it must succeed.
We have thus to see whether there is any inviolable rule that every determination must always be made by the Court and by no other authority.
In dealing with the rulings of this Court cited to us, of which we have already mentioned one, we shall enquire whether such a wide proposition can be said to have been established (1) [1906] A.C.535.
663 before. In A. K. Gopalan's case(1), s.14 of the Preventive Detention Act was held void as contravening Art. 22(5) of the Constitution in so far as it prohibited a person who was detained from disclosing even to the Court the grounds of his detention and the representation made by him. It was said that the right to move an appropriate Court for a writ of habeas corpus and therein to show that the detention was improper, was undeniable and it was held that s. 14, which Stood in the way of this right, was void. No general proposition that the Court must decide whether the person should be detained or not was laid down in that case. The law which allowed a subjective determination of the executive was in fact, upheld, and there are passages in the judgments of the majority to show that a judicial trial in cases of preventive detention was not considered necessary.
In State of Madras v. V. G. Row (2), SS. 15(2)-(b) and 16 of the Indian Criminal Law Amendment Act, 1908 [as amended by the Indian Criminal Law Amendment (Madras) Act, 1950], were called in question, inter alia, on the ground that they empowered the State to declare associations illegal by a notification without a provision for judicial enquiry. It was held by this Court that the conferral of authority on the executive Government to impose restrictions on the right of association without allowing the grounds of such imposition both in their factual and legal aspects to be duly tested in a judicial enquiry was a strong element to be taken into account in judging the reasonableness of the restriction. It was also added :
"The formula of subjective satisfaction of the Government or of its. officers, with an Advisory Board thrown into review the materials on which the Government seeks to override a basic freedom guaranteed to the (1) [1950] S.C.R. 88.
(2) [1952] S.C.R. 597.
664 citizen, may be viewed as reasonable only in very exceptional, circumstances.........
Earlier, in the same judgment it was said ""...the test of reasonableness, wherever prescribed, should be applied to each individual statute, impugned, and no abstract standard, or general pattern, of reasonableness can be laid down as applicable to all cases." V. G. Row's case (1) shows that laws allowing subjective determination by the executive are not to be struck down out of hand, but that their reasonableness must be judged according to the standards appropriate to the circumstances.
It may, however, be mentioned that in V. G, Row case (1) a distinction was made between a law requiring anticipatory action particularly on grounds of suspicion, and a law which authority action based on the factualexistence of certain grounds. A. K. Gopalan's case(2) and Dr. N. B.Khare v. The State of Delhi (3) were distinguished on this narrow ground which appears to have been conceded then by the learned Attorney-General. The factual existence of grounds amenable to an objective determination by the Court in the present case, namely prejudice to the interests of the depositors was said to place this case within the rule in V.
G. Row's case (1). But cases of detention and associations declared unlawful are not in the same class as a banking company on which there is a run by the depositors and whose affairs, on inspection, are found to be mismanaged and conducted in such a way that it is unable to pay all lawful demands upon it. The factual background will not be one of suspicion, and action will be based on concrete facts, which will normally be checked and rechecked before the final decision, and, in our opinion, it is impossible to equate such a case with either A. K. Gopalan's case (2) or V. G. Row's case(1).
(1) [1952] S.C.R. 597. (2) [1950] S.C.R. 88.
(3) [1950] S.C.R. 519, 665 The next case to which reference was made is Thakur Raghubir Singh v. The Court of wards, Ajmer (1). In that case, s. 112 of the Agra Tenancy and Land Records Act (42 of 1950) was declared void. That section allowed the Court of Wards to take over the property of a landlord under the Ajmer Government Wards Regulation (1 of 1888) if the landlord habitually infringed the rights of tenants. Such a landlord was under s. 112 deemed to be "dis
