Back
IN THE HIGH COURT OF ALLAHABAD
Sudhir Narain, J.
NARENDRA KUMAR JAIN - Appellant
Versus
DISTRICT JUDGE, MORDABAD - Respondents
C. M. W. P. 17526 Of 2001
Decided On : 05/24/2001
Insolvency - Exemption of Banking Company from Insolvency Proceedings - The court held that the Punjab National Bank, being a government company under Section 617 of the Companies Act, 1956, is exempted from insolvency proceedings under Section 8 of the Provincial Insolvency Act, 1920.
Fact of the Case:
The petitioner filed an insolvency petition against Punjab National Bank for recovery of amount, which was rejected by the respondent No. 2 and the appellate court.
Finding of the Court:
The court found that the Punjab National Bank, being a government company, is exempted from insolvency proceedings under Section 8 of the Provincial Insolvency Act, 1920.
Issues: The issue was whether the bank can claim exemption from insolvency proceedings under Section 8 of the Act.
Ratio Decidendi: The court relied on the provisions of the Banking Regulation Act, 1949, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, to determine the status of Punjab National Bank as a government company and its exemption from insolvency proceedings.
Final Decision: The writ petition was dismissed, affirming the rejection of the insolvency petition against Punjab National Bank.
Certainly. Based on the provided legal document, here are the key points summarized:
The case involves a dispute over the insolvency petition filed against Punjab National Bank, which was rejected by the lower courts, affirming the bank's exemption from insolvency proceedings (!) (!) .
The petitioner sought to declare the bank insolvent due to an outstanding debt, but the bank objected, citing legal provisions that exempted it from insolvency proceedings (!) (!) .
The core legal issue was whether the bank could claim exemption from insolvency proceedings under Section 8 of the Provincial Insolvency Act, considering its status as a registered company under relevant laws (!) .
The court found that Punjab National Bank qualifies as a government company under Section 617 of the Companies Act, 1956, primarily because it was nationalized and its undertaking was transferred to a government-controlled body (!) (!) .
The legal framework, including the Banking Regulation Act, 1949, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, supports the conclusion that banking companies, especially those under government control, are exempt from insolvency proceedings under Section 8 of the Provincial Insolvency Act (!) (!) .
The courts below correctly held that the bank's registration and statutory status exempt it from insolvency procedures, and the writ petition was dismissed accordingly (!) (!) .
Overall, the legal reasoning affirms that banking companies, particularly those that are government-controlled, are protected from insolvency proceedings under the relevant statutes and legal provisions.
( 1 ) THIS writ petition is directed against the order dated 7. 9. 2000 passed by respondent No. 2 rejecting the Insolvency petition filed by the petitioner and the order of the appellate court dated 1. 3. 2001 affirming the said order in appeal.
( 2 ) BRIEFLY stated, the facts are that Punjab National Bank, Branch Station Road, Moradabad, respondent No. 3, (in short the bank) filed suit No. 717 of 1991 for recovery of amount against the petitioner as well as M/s. Shivalik International and others. The suit was decreed on 10. 2. 1992 for Rs. 20,72. 000.
( 3 ) THE petitioner filed an insolvency petition before respondent No. 2 for declaring insolvent with the allegation that Rs. 20,72. 000 is due to Punjab National Bank. He has 1/72 share in the house situate in Seohara Town, district Bijnor, the value of which is hardly Rs. 1,000 and his wearing clothes and other assets are valued at Rs. 2,000. The bank raised an objection that insolvency petition is not maintainable against the bank in view of Section 8 of the Provincial insolvency Act, 1920, which reads as under :
"8. Exemption of corporations, etc. from insolvency proceedings.--No insolvency petition shall be presented against any corporation or against any association or company registered under any enactment for the time being in force. "
( 4 ) THE objection of the bank was accepted by the respondent No. 1 and insolvency petition was rejected by order dated 7. 1. 2001. The petitioner filed appeal against this order and the appellate court dismissed the appeal vide order dated 1. 3. 2001.
( 5 ) THE question is whether the bank can claim exemption from Insolvency proceedings under section 8 of the Act. Any company registered under any enactment is exempted from the insolvency proceedings. The bank was registered as a banking company as defined under Section 5 (c) of the Banking Regulation Act, 1949 (Act No. 10 of 1949) which reads as under :
"5. (c) "banking company means any company which transacts the business of banking in India ;"
( 6 ) CLAUSE (d) of Section 5 of Act No. 10 of 1949 defines "company" means any company as defined in Section 3 of the Companies Act, 1956 ; and includes a foreign company within the meaning of Section 591 of that Act. Section 2 of the Act No. 10 of 1949 provides that the provisions of Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the Companies Act, 1956, and any other law for the time being in force.
( 7 ) AFTER the enforcement of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970), all the banking companies including the foreign companies registered under the Companies Act, 1956, were nationalised and more than 51% shares were taken over by the Government of India and the banking companies became the body corporate under Section 2 (d) of Act No. 5 of 1970. Clause (d) defines "corresponding new bank in relation to existing bank" means a body corporate specified against such bank in column 2 of I Schedule. In the first schedule "punjab National Bank Ltd. " is in the first column and in the second column it has been referred to as "punjab National Bank". Section 4 of 1970 Act provides that on commencement of the Act. undertaking of every existing bank shall be transferred to and shall vest in the corresponding new bank.
( 8 ) IN view of the aforesaid provision of law, the Punjab National Bank is a Government company under Section 617 of Companies Act. 1956. The view taken by the courts below that the Bank is registered company and, therefore, it is exempted from insolvency proceedings does not suffer from any illegality.
( 9 ) THE writ petition is accordingly dismissed.
.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
