1. Bank amalgamation under Section 45, Banking Companies Regulation Act, 1949 — Dispute regarding takeover of services and arrears of pay for a former employee. (Para 2 , 3 , 4 )
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1996 Supreme(SC) 412
1996(4) Supreme 707
SUPREME COURT OF INDIA
K. Ramaswamy and G.B. Pattanaik, JJ.
Bank of Baroda -Appellant
versus
Rajender Pal Soni -Respondent
Civil Appeal No. 4390 of 1996
(Arising out of SLP(C) No. 20829 of 1995)
Decided on 19-2-1996
IMPORTANT POINT
In case of amalgamation of two banks, the liability to pay arrears of salary which became payable to a former employee prior to the taking over of the transferor bank is of the transferor bank.
Headnote:Banking Companies Regulation Act, 1949-Section 45-Amalgamation of transferor bank with appellant bank w.e.f. May 13, 1988-Respondent, an employee of transferor bank tendered his resignation in July 1986-Resignation accepted-Civil suit for recovery of arrears of salary filed in 1989-Arrears of salary is a liability to be discharged by transferor Bank and not of appellant Bank-Suit held not maintainable.
Held : As far as service conditions are concerned, in view of the specific provision in the Scheme contained in paras 3 and 10 of the notification arrears of salary is a liability to be discharged by the transferor-Bank and not of the appellant-Bank. Under these circumstances, the suits are clearly not maintainable. (Para 6)
Act Referred
BANKING COMPANIES REGULATION ACT: S.45
BANKING REGULATIONS ACT: S.45(5), S.45(1)(2), S.45(7)
BANKING REGULATIONS ACT: S.45(5), S.45(1)(2), S.45(7)
Legal Category Hierarchy
Table of Contents
2. Whether the transferee bank is liable to take over services and liabilities of a former employee of the transferor bank under the amalgamation scheme. (Para 4 , 6 )
3. The amalgamation scheme only covers employees in service on the specified date; liabilities for former employees remain with the transferor bank. (Para 5 , 6 )
4. Transferee banks are not liable for employees or liabilities of transferor banks unless specifically provided for in the sanctioned amalgamation scheme. (Para 5 , 6 )
5. Appeal allowed and the suits dismissed. (Para 7 )
6. Does a transferee bank automatically take over all employees of a transferor bank during amalgamation under the Banking Companies Regulation Act?
No. The continuance of services depends on the specific provisions of the sanctioned scheme. If the scheme specifies a cutoff date, only employees in service as of that date are deemed appointed by the transferee bank. (Para 2 , 5 )
7. Are pending legal proceedings against a transferor bank automatically transferred to the transferee bank?
Yes, if the notification under Section 45 of the Banking Companies Regulation Act provides that pending suits, appeals, or legal proceedings shall not abate but be prosecuted by or against the transferee bank. (Para 3 )
8. Is a transferee bank liable for salary arrears of a former employee of the transferor bank?
No. If the amalgamation scheme specifies that only employees in service on a certain date are taken over, arrears of salary for those not in service on that date remain liabilities of the transferor bank. (Para 5 , 6 )
ORDER
Leave granted.
We have heard learned counsel on both sides.
2. It is not necessary to preface the antecedent enquiry conducted against the respondent for misconduct by the Traders Bank which was amalgamated with the appellant-Bank. Suffice it to state that on June 25, 1986 the respondent s service was sought to be terminated by issuance of an order on offering three months pay in lieu of the requisite notice. Instead, the respondent on even date had tendered his resignation (Ex. P-5) to Traders Bank; transferor-Bank of the appellant had accepted the resignation on July 2, 1986. Consequently, the respondent had returned the cheque of salary offered to him in lieu of notice on the even date. Under Section 45 of the BANKING COMPANIES REGULATION ACT , 1949 (for short, the Act ), the scheme of amalgamation of transferor bank with the appellant bank, with effect from November 20, 1987 (Ex. P-8) was initiated. The Central Government had accepted the amalgamation under sub-section (7) of Section 45 of the Act with effect from the appointed date viz. May 13, 1988. A scheme in that behalf was approved by the Central Government. Clause 10 of the scheme provides as under :
"All the employees of the transferor bank shall continue in service and be deemed to have been appointed by the transferee bank at the same remuneration and on the same terms and conditions of service as were applicable to such employees immediately before the close of business on 20th November, 1987."
3. Para 2 of the notification dated May 12, 1988 issued under Section 45 (1) read with sub-section (2) of Section 45 of the Act envisages, among other things, undertaking of the liabilities with respect to the pending suits, appeal or other legal proceedings of whatever nature by or against the transferor bank arising as on the prescribed date were allowed to continue on the appellant-Bank thus :
"If on the prescribed date any suit, appeal or other legal proceedings of whatever nature by or against the transferor bank is pending, the same shall not abate, or be discontinued or be in any way prejudicially affected, but shall subject to the other provisions of this scheme, be prosecuted and enforced by or against the transferee bank."
4. Admittedly, the respondent had filed the Civil Suit No. 123 of 1989 which is now re-numbered as Suit No. 61 of 1993 to recover a sum of Rs. 69,680/- as the arrears of his pay etc. and also filed Civil Suit No. 122 of 1989 which is now re-numbered as Suit No. 63 of 1993, on June 3, 1989 for declaration that the acceptance of resignation by the Traders Bank, viz., the transferor Bank was illegal. Relying upon the notification, the appellant raised preliminary objection after filing written statement to the maintainability of the suit which was rejected by the trial Court. In revision No. 595/94 by order dated March 21, 1995, the Delhi High Court dismissed the revision summarily.
5. Even in this appeal the only question is : whether the appellant is liable to takeover the services of the appellant ? If that finding is recorded in favour of the respondent, necessarily the suit of the respondent would stand maintainable. Section 45 of the Act envisages the power of the Reserve Bank to apply to the Central Government for suspension of the business of a Banking Company and prepare a scheme for re-constitution or amalgamation. Admittedly, the Traders Bank was amalgamated with the appellant-Bank by exercise of the power under sub-section (1) read with sub-section (2) of Section 45 the Act. The sanction in that behalf has been accorded by the Central Government in the scheme under sub-section (7). As seen, clause (10) of the scheme envisages that employees existing as on November 20, 1987 in the transferor bank, viz., the Traders Bank so taken over, shall become employees of the appellant-Bank. Admittedly, the respondent was not in service as on that date. Even no suit or proceedings was pending against the Traders Bank as on the date. Under
