1997 (11) TMI 484 - HC - Companies Law

Issues Involved:
1. Justification for the order of moratorium.
2. Whether the petitioner was granted an effective post-decisional hearing.
3. Legality of the respondents' rejection of the petitioner's request to function as a non-banking company.

Issue-Wise Detailed Analysis:

1. Justification for the Order of Moratorium:

The petitioner challenged the moratorium order dated 30-9-1996. The High Court of Delhi dismissed the writ petition, and the Letters Patent Appeal was also dismissed. The Supreme Court found no infirmity in the High Court's decision, which allowed post-decisional objections to the draft scheme under section 45(4) of the Banking Regulation Act, 1949. The findings included:
- The petitioner was a "family controlled" bank and was "hardly doing any banking business."
- The moratorium aimed to maintain status quo, and principles of natural justice could be relegated to a later stage.
- The Reserve Bank of India (RBI) provided ample details of the bank's financial position, suggesting a merger in the interest of the bank, its depositors, and RBI's policy.
- The reasons for the moratorium were relevant under sections 45(1) and 45(4) of the Act.
- The petitioner had the right to file objections to the reasons set out in the counter-affidavits.

The Supreme Court did not reverse these findings, indicating that there were valid reasons for the moratorium. The petitioner did not raise objections after the Supreme Court's decision, indicating no grounds existed to challenge the moratorium.

2. Effective Post-Decisional Hearing:

The petitioner was entitled to a post-decisional hearing to file objections against the draft scheme prepared by the RBI. Despite this opportunity, the petitioner did not file objections after the Supreme Court's order dated 31-3-1997. The petitioner's letters dated 17-3-1997, 18-3-1997, and 20-3-1997 were sent before the Supreme Court's decision and were considered by the competent authority before passing the impugned orders. The petitioner's failure to file objections post-Supreme Court decision rendered its grievance about the lack of an effective post-decisional hearing unwarranted and unjustified.

3. Rejection of the Request to Function as a Non-Banking Company:

The Central Government considered and declined the petitioner's request to convert into a non-banking financial company (NBFC) or a non-banking company, citing:
- The Reserve Bank of India Act, 1934, as amended in 1997, did not envisage the conversion of a banking company into an NBFC.
- The petitioner's management did not inspire enough confidence to authorize the setting up of an NBFC or a non-banking company.
- The petitioner had previously failed to convert into an NBFC despite being advised by the RBI.

The petitioner had initially resolved to convert into a non-banking company in 1984 but rescinded this resolution in 1992. The request for conversion was dismissed as a "last-ditch effort to hold on to the non-banking assets in the company." The provisions of section 45A of the 1949 Act, introduced by Act No. 23 of 1997, override section 36A, making the petitioner's request untenable.

Miscellaneous:

The court did not delve into the preliminary objection regarding the maintainability of the writ petition before this court, as it was not seriously pressed by the respondents. The court also addressed the depositors' and locker holders' rights, stating that they must satisfy the bank about their claims to operate accounts or lockers.

Conclusion:

The court found no grounds to interfere with the impugned orders and dismissed the writ petition without any order as to costs.

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