1997 (3) TMI 629 - SC - Companies Law

Summary

Issues:
1. Challenge to orders of moratorium under Banking Regulation Act, 1949.
2. Right to be heard prior to passing of order under Section 45(2).
3. Post-decisional opportunity for objections to draft scheme under Section 45(4).
4. Consideration of objections by Central Government.
5. Submission to continue as non-banking companies after paying dues.
6. Extension of time for Central Government to consider objections.

Analysis:
The petitioners, banking companies governed by the Banking Regulation Act, 1949, challenged orders of moratorium imposed by the Central Government under Section 45(2) of the Act. The Delhi High Court dismissed their writ petitions, and Letters Patent Appeals were also rejected. The Division Bench of the High Court held that petitioners could not claim a right to be heard before the moratorium order but would have a post-decisional opportunity to object to the draft scheme under Section 45(4). The Supreme Court upheld this view, finding no infirmity in the High Court's decision.

The petitioners argued that objections to the draft scheme and moratorium order were submitted to the Reserve Bank of India, but they contended that the Central Government should conduct the post-decisional hearing. However, the Attorney-General and Solicitor-General submitted that objections would be considered by the Central Government under Section 45(7) based on Reserve Bank of India's comments. The Supreme Court agreed that the objections would be appropriately considered by the Central Government, rejecting the petitioners' apprehension.

Furthermore, the petitioners emphasized their willingness to pay off all creditors and depositors, ceasing to function as banking companies and continuing as non-banking entities. The Attorney-General acknowledged this submission, indicating that the Central Government would consider it while evaluating the objections. The Supreme Court directed the Central Government to extend the time for considering objections until April 7, 1997, if an order had not been passed by then, ensuring the moratorium's continuation until that date.

Importantly, the Supreme Court clarified that the petitioners retained the right to challenge any order passed by the Central Government under Section 45(7) on all available legal grounds. Ultimately, the special leave petitions were disposed of in accordance with the directives provided by the Court.