1987 (11) TMI 381 - SC - Companies Law

Summary

Issues Involved:
1. Applicability of the Madras Agriculturists Relief Act IV of 1938 to the Bank of India.
2. Interpretation of the term "special Indian law" in section 4(e) of the Act.
3. Validity of the latter part of section 4(e) of the Act under Article 14 of the Constitution.

Summary:

1. Applicability of the Madras Agriculturists Relief Act IV of 1938 to the Bank of India:
The appellant, Bank of India, contended that the provisions of the Madras Agriculturists Relief Act IV of 1938 (referred to as 'the Act') were not applicable to it due to section 4(e) of the Act. The High Court had decreed that the Bank could recover the amounts claimed only after scaling down the debt in accordance with the Act. The Supreme Court examined whether the Bank, being a nationalized entity, fell within the exceptions provided in section 4(e) of the Act.

2. Interpretation of the term "special Indian law" in section 4(e) of the Act:
The Supreme Court analyzed the interpretation of the term "special Indian law" within section 4(e) of the Act. The respondents argued that "special Indian law" referred to laws enacted by the British Parliament for India. The Court rejected this interpretation, stating that "special Indian law" clearly referred to laws enacted by the Indian Legislature. The Court emphasized that the Banking Companies Act, under which the Bank was nationalized, is a special Indian law.

3. Validity of the latter part of section 4(e) of the Act under Article 14 of the Constitution:
The respondents contended that the latter part of section 4(e) of the Act was void as it offended Article 14 of the Constitution, based on a Division Bench decision in Krishna Murthy's case. The Supreme Court disagreed, stating that the provision did not make invidious discrimination in favor of British corporations but applied to corporations formed under any special Indian law, including the Banking Companies Act. The Court held that the Banking Companies Act is legal and valid.

Conclusion:
The Supreme Court concluded that the provisions of the Act were not applicable to the Bank of India. Consequently, the Bank was entitled to recover the amount decreed in its favor by the High Court without any scaling down under the Act. The appeal was allowed, and the judgment and decree of the High Court directing the scaling down of the debts were set aside. There was no order as to costs in the Supreme Court.