LexJOSEPH KURUVILLA VELLUKUNNEL versus THE RESERVE BANK OF INDIA AND OTHERS
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I96Z
s1;dr;J;;;rd
M tnU}aeturing Co.
. v.
"G'obind
v,;;:;~J;
1962
March 7.
..
632 Sl)'PREl\lE COURT RE;E'ORTS [1962] SUPP.
This being the only'poin~ on whioh the labour
court had refu~ed to give approval, the appeal m~st
suc'ceed. We therefore allow the appeal, .set.aside
the order of the labour court and approve the
action taken by· 'the appellant. In the circums-
tances we pass na order as to costs.
{l.ppool allowed.
JOSEPH KURUVILLA •VELLUKUNNEL
v.
THE RESERVE BANK OF INDIA AND OTHERS
(With connected petition)
Banking Companies-Winding up-Enactment providing
for an order for winding up by High Court on the basis of
Reser11e
Bank's opinion-Constitutional
validity-Banking
Companies Act, 1949 (10 of 1949), ss. 2, 35, 35A, 36, 38-
-Reserve Bank of India Act, 1934 (2 of 1934), ss. 7, 8, 38-
Companies Act, 1956 (I of 1956), ss. 433, 450(2)-Constitution
of Inaia, Arts. U, 19(1)( f) and (g), 301, 302.
·
~
I
Sub·section (l) of s. 38 of the Banking Companies
Act, 1949, provided : '1Notwithstanding anything contained
in ss. 391, 392, 433 and 583 of the Companies Act, 1956 ....
the High Court shall order the win'ding 'up for a banking
company . ... if an application for its winding up has been
made by the Reserve Bank under s. 47 of this .section."
Under s. 38(b)(iii) of the Act .''the Reserve Ban'k may make
an application under this section for
the winding up of a
~
banking company• if in the opinion of the Reserve Bank the
. ·1
continuance of the banking company is prejudicjal to the
interests of its depositors."
· ·rn exercise of, the p9wers vested in it by the Banking
companies Act, 1949, as w'ell -as the Reserve Bank of India
Act, 1934, the Reserve Bank had been inspecting the Palai
Central Bank Ltd., periodically, and had been warning the
Bank that its business was being .conducted in a manner
detrimental to the .interest of its depositoi-s.
In June 1960,
there was ·a run on several branches of the
Bank.
The
R·eserve Bank was of the opnion that the Palai Bank was not
jn a positipn to fay its depositors in
f'lll and ~h11t lhr
3 S.C.R.
SUPREME COURT REPORTS
633
continuance
of
the
Bank
was
prejudicial
to
the
interest of the depositors.
On August 8, 1960 the Reserve
Bank made an application in the High Court of Kerala
under s. 38(3)(b)(iii) of the Banking Companies Act, 1949,
read with the Companies Act, 1956, for the winding up of
the Palai Central Bank Ltd.
After
hearing the Reserve
Bank, the Palai Bank and the
creditors, the High Court
passed an order allowing the application of the Reserve
Bank, and directing the winding up of the Palai Bank.
It
was contended for those who opposed the application that
ss. 38(1) and 3(b) (iii) of the Banking Companies
Act
contravened Arts. 14 and 19 (!) (f) and (g) of the Constitu-
tion of India and, therefore were
void because (a) they
permitted discrimination between a banking company and
any other company by prescribing different laws for their
respective winding up, (b) they created an unreasonable
restriction upon the right lo carry on banking and ( c) the
whole procedure was denial of the principles of natural
justice chiefly by denying an ac~ess to courts,
inasmuch
as under s. 433 of the Compames Act, 1956, when an
application was made to wind up a company, the High Court
had to be satisfied after a fair trial that an order to
wind up the company was called for, and the Judge was
free to reach a decision after the company had sho\vn
cause, and there was a right of appeal against the decision
if adverse to the company,
while under the procedure
laid down in s. 38 of the Banking Companies Act, 1939,
the Reserve Bank was made the sole judge to decide whether
the affairs of a banking company were being so conducted
as to be prejudicial to the interests of the depositors,
and the court had no option but to _an order winding
up the bankh:;g company, when the.application was made.
It
was also contended that ss. 38(1) and 3(b)(iii) were ultra
vires being in conflict with Art. 301 of the Constitutipn.
Held, (Kapur and Shah, JJ;, dissenting), that ss. 38(1)
and (3) (b)(iii) of the Banking Companies Act, 1939, did not
offend of Arts.
19( I) (f)' and (g) of the Constitution of India
and were valid.
In view of the history of the establishment of the Reserve
Bank as a C~ntral Bank for India, its position as a Banker·s
Bank, its control over banking companies and banking· in
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