Back
1985 Supreme(Ker) 176
Judges : K.BHASKARAN,BHASKARAN NAMBIAR
BISHOP OF KOTTAYAM - Appellant
Versus
UNION OF INDIA - Respondent
Case No : O.P. No. 4123. 4217. 4395. 4457 of 1985
Decided On : 07/06/1985
Advocates Appeared :
M.I. Joseph; Abdul Sammad; For Petitioner V.O. John; C.K.S. Panicker; K. Karthikeya Panicker; For Respondents
The moratorium under S.45(1) of the Banking Regulation Act suspends all activities of the banking company, including transactions related to foreign exchange, and can override authorizations granted under other acts. Additionally, the interpretation of fundamental rights must be in accordance with the law and cannot be based on baseless contentions.
Headnote:
Banking Regulation Act - Moratorium - S.45(1) - S.6 of the Foreign Contribution (Regulation) Act - S.45(1), (2) and (3) of the Banking Regulation Act - S.2(h) of the Foreign Exchange Regulation Act - S.5(c) of the Banking Regulation Act - S.5(b) of the Banking Regulation Act - Art.26(d) of the Constitution
Fact of the Case:
The Government of India imposed a moratorium on the Bank of Cochin, preventing the petitioners from operating accounts and withdrawing funds. The petitioners challenged this through writ petitions.
Finding of the Court:
The court rejected the petitioners' contentions that the moratorium could not affect the authorization granted to the bank under the Foreign Exchange Regulation Act and that it violated the fundamental right guaranteed under Art.26(d) of the Constitution.
Issues: The issues involved the impact of the moratorium on the bank's authorization to deal in foreign exchange and the alleged violation of the fundamental right under Art.26(d) of the Constitution.
Ratio Decidendi: The court held that the moratorium under S.45(1) of the Banking Regulation Act suspended all activities of the banking company, including transactions related to foreign exchange. It also ruled that the petitioners' interpretation of Art.26(d) was baseless.
Final Decision: The court dismissed the petitions and declined leave to appeal to the Supreme Court.
1. In exercise of the powers conferred under S.45(1) of the Banking Regulation Act. 1949 (Act 10 of 1949). the Government of India clamped moratorium on the Bank of Cochin from the close of business on the 27th of April. 1985 till 28th August. 1985.
2. The petitioners receive foreign contribution through some of the branches of the Bank of Cochin and have registered themselves under S.6 of the Foreign Contribution (Regulation) Act. 1976. They thus maintain accounts in some specified branches of the Bank The petitioners are however. prevented from operating these accounts and withdrawing any amounts while the moratorium is in force. They have therefore filed these writ petitions for appropriate reliefs.
3. The learned counsel appearing for the petitioners in all these cases. Shri M.I. Joseph. raised only two contentions:
(1) The moratorium ordered under S.45(1) of the Banking Regulation Act cannot affect the authorisation granted to the Bank under the Foreign Exchange Regulation Act. 1973 to deal in foreign exchange.
(2) Assuming the power under the Banking Regulation Act extends to transactions and activities carried on by the authorised dealers of foreign exchange. the fundamental right guaranteed under Art.26(d) of the Constitution is violated.
4. We shall consider these points with reference to the relevant statutory provisions.
5. S.45(1). (2) and (3) of the Banking Regulation Act read thus:-"45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation. (1) Notwithstanding anything contained in the foregoing provisions of this part or in any other law or any agreement or other instrument for the time being in force. where it appears to the Reserve Bank that there is good reason so to do. the Reserve Bank may apply to the Central Government for an order of moratorium in respect of a banking company.
(2) The Central Government. after considering the application made by the Reserve Bank under sub-section (1) may make an order of moratorium staying the commencement or continuance of all actions and conditions as it thinks fit and proper and may from time to time extend the period. so however that the total period of moratorium shall not exceed six months.
(3) Except as otherwise provided by any directions given by the Central Government in the order made by it under sub-section (2) or at any time thereafter. the banking company shall not during the period of moratorium make any payment to any depositors or discharge any liabilities or obligations to any other creditors.
xxx xxx xxx".
6. The notification ordering moratorium. in so far as it is relevant. for our purpose. is extracted below:-"GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
(BANKING DIVISION) .................
New Delhi. the 27th April. 1985.
Vaisakha 7.1907 (Saka)
NOTIFICATION
In exercise of the powers conferred by sub-section (2) of S.45 of the Banking Regulation Act. 1949. (10 of 1949). the Central Government. after considering an application made by the Reserve Bank of India under sub-section (1) of that section. hereby makes an order of moratorium in respect of the Bank of Cochin Ltd.. Cochin for the period from the close of business on the 27th April. 1985 upto and inclusive of the 28th August. 1985 and hereby stays the commencement or continuance of all actions and proceedings against that banking company during the period of moratorium. subject to the condition that such stay shall not in any manner prejudice the exercise by the Central Government of its powers under clause (b) of sub-section (4) of S.35 of the said Act or the exercise by the Reserve Bank of India of its powers under S.38 of the said Act.
2. The Central Government hereby also directs that during the period of moratorium granted to the Bank of Cochin Ltd.. Cochin. that Bank shall not. without the permission in writing of the Reserve Bank of India.
(a) grant any loan or advanc
