Bari Doab Bank Ltd. vs Union of India and others Punjab Co-operative Bank Ltd. Vs Union of India and others

M. Jagannadha Rao, C.J.—These two Letters Patent Appeals Nos. 56 of 1997 and 57 of 1997 are filed by the Punjab Co-operative Bank Ltd. and Bari Doab Bank Ltd., respectively. L.P.A. No. 56 of 1997 is against the judgment of the learned single judge in Civil Writ Petition No. 4046 of 1996 filed by the Punjab Co-operative Bank Ltd., while L.P.A. No. 57 of 1997 is against the judgment of the learned single judge in Civil Writ Petition No. 3885 of 1996 filed by the Bari Doab Bank Ltd. The learned single judge dismissed the writ petition after considering the common questions of law arising in the cases (see p. 292 supra).

In both the writ petitions, the proceedings have been initiated by the Reserve Bank of India (hereinafter called "the RBI") u/s 45(1) of the Banking Regulation Act, 1949 (hereinafter called "the Act"), before the Government of India seeking an amalgamation of the Punjab Co-operative Bank with the Oriental Bank of Commerce (a nationalised bank,) and the Bari Doab Bank, and these proceedings are question.

In both the cases, the Government of India had issued a moratorium u/s 45(1) of the Act. The banks filed writ petitions. On the date when the writ petitions were dismissed, namely, March 5, 1997, a draft scheme in each case has been served on the respective banks.

On the first day when these appeals were heard, i.e., on March 12, 1997, we passed an order that the objections to the scheme could be filed by the appellants on or before March 17, 1997, subject to such orders as may be passed by this court later. By our order dated March 14, 1997, the time for filing objections was extended up to March 20, 1997.

The facts in the case of Bari Doab Bank Ltd. are that the bank was established in 1915. According to the appellant, it was fully capable and entitled to continue its business u/s 11(3) of the Act, but that the Reserve Bank of India filed an application u/s 45(1) of the Act on the basis that there was good reason for the said bank to apply to the Government of India for an order of moratorium. After considering the said application of the RBI, the Government of India passed an order of September 30, 1996, stating that there would be a moratorium from September 30, 1996, up to December 31, 1996, and during that period there would be a stay of commencement and continuance of all actions and proceedings against the bank, subject to the condition that such stay would not in any manner prejudice the exercise by the Central Government of its powers under clause (b) of sub-section (4) of section 35 of the Act or the exercise by the RBI of its powers u/s 38 of the Act. The order of the Central Government dated September 30, 1996, further stated that during the period of moratorium, the bank would not, without the permission of the RBI in writing, grant any loan or advance, incur any liability, make any investment, etc. Various other conditions were imposed by the said order.

In the case of the Punjab Co-operative Bank Ltd. also the order of the Central Government is dated September 30, 1996, and identical conditions were imposed by the order.

The above orders were challenged in two writ petitions. Replies were filed in the writ petitions by the Central Government contending that the RBI in its application to the Central Government had explained the shortcomings in the functioning of the above said banks, that the said shortcomings were based upon various inspections conducted by the RBI, from time to time, that on the basis of the material submitted by the RBI, it was decided by the Ministry of Finance that an order of moratorium was necessary in the interest of the public, the depositors and the banking system and, Therefore, the order of moratorium was passed u/s 45(2) of the Act on September 30, 1996. It was also stated that, while considering the application moved by the RBI u/s 45(1), public interest, and the interests of the depositors were kept in mind as of paramount consideration. Keeping in view all these factors and after going through the statutory provisions of the Act, the application of the RBI was allowed by the Central Government and an order of moratorium was passed.

A counter was also filed by the RBI referring to the provisions of the Act stating that the powers of the RBI under the Banking Regulation Act, 1949, were conceived in the public interest and in the interest of the banking policy, that clause (ca) of the definition in the said Act defines "banking policy" as a policy which is laid down by the RBI from time to time in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the efficient use of these deposits and resources. The counter then set out the financial position of the respective banks as indicated from the inspection reports of the years 1993, 1994 and 1995, and then stated that the orders of moratorium were validly passed. Similar replies were filed in the case of Punjab Co-operative Bank Ltd. by the Union of India and the RBI.

The learned single judge considered the pleadings of the case and the contentions raised before him in great detail. The learned single judge also referred to the various rulings cited before him, and also referred to the contention of the respondents that the two banks were family controlled banks and were hardly doing any banking business. After referring to the financial position as set out in the replies filed by the Union of India and the RBI, the learned single judge posed the question as follows (at page 337 supra) :

"The question now arises as to whether it was open to this court to review the decisions which have been taken by a specialised body like the Reserve Bank of India and arrive at different conclusions."

Then the learned single judge referred to the judgment of the Supreme Court in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India [1962] 32 Comp Cas 514; [1962] Sup. 3 SCR 632 and referred to the role of the RBI. He then referred to the judgment of the Supreme Court in Union of India and Another Vs. Tulsiram Patel and Others, for the proposition that in certain cases where immediate action is necessary, the right to prior notice or opportunity can be dispensed with. A reference was also made to the judgment of the Supreme court in Peerless General Finance and Investment Co. Limited and Another Vs. Reserve Bank of India, in regard to the role of the RBI. The learned single judge then noted that it was well settled that the RBI was a banker''s bank, that it was entitled to regulate the banking system and it had other regulatory functions assigned to it under the Act, that the Central Government had duly considered the application of the RBI and passed orders u/s 45(2) of the Act, that the record produced and submissions made at the Bar clearly established that the RBI had carefully determined the matter and applied to the Central Government to accept its opinion on the necessity for a moratorium, that the RBI possessed the necessary expertise to arrive at its own findings which cannot be questioned under article 226 of the Constitution of India. The learned judge also held that there was no evidence of non-application of mind either by the RBI or by the Central Government. The plea that the figures as given by the petitioner banks reflect a sound financial position of the banks he held, cannot be accepted in view of the opinion of the RBI, which is based on cogent evidence on record. The submission that the banks ought to have been heard before the moratorium was issued could not be sustained in law inasmuch as such a measure would be defeating the very purpose of the moratorium, and such a plea is not permissible in matters of urgent nature in view of the judgment of the Supreme Court in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India [1962] 32 Comp Cas 514 . The learned judge then distinguished the judgment of the Supreme Court in K.I. Shephard and Others Vs. Union of India (UOI) and Others, holding that it was a case where the court was dealing with the scheme of amalgamation with regard to the status of employees of the amalgamated bank who were excluded from service of the transferee bank while retaining other similarly situated employees. The learned judge then stated that the records of the case were produced before the court and observed that the same indicated that the matter was examined by the RBI and it was found that there was good reason for it to file the application before the Government of India for ordering a moratorium and that then the Central Government duly considered and passed orders which were not liable to be interfered with under article 226 of the Constitution of India.

For the aforesaid reasons, the writ petitions were dismissed.

On behalf of the appellants Mr. Arun Jaitley and Mr. Salman Khursheed made elaborate submissions. Mr. T.R. Andhyarujina, the learned Solicitor-General of India made submissions on behalf of the Reserve Bank of India. Mr. P.N. Misra addressed arguments on behalf of the Union of India. We shall refer to the submissions at the appropriate stage.

Learned senior counsel for the petitioners, Sri Arun Jaitley for the Bari Doab Bank and Sri Salman Khursheed for the Punjab Co-operative Bank contended that at the stage of ordering moratorium, u/s 45(2), the appellant banks were entitled to reasonable opportunity to show cause as to why the moratorium should not be imposed. They argued that the opportunity that may be granted u/s 45(4) is different, that a moratorium is not a step leading to a scheme but is a condition precedent for a scheme and hence the principles of natural justice are to be implied at the section 45(2) stage. There cannot, according to them, be a scheme unless there is a moratorium but the grounds for a moratorium could be different or in addition to those mentioned in section 45(4). A moratorium is not a means to an end in itself in the sense that it is a different proceeding. There was no good reason for the Reserve Bank to file the application before the Government of India. Counsel also contended that u/s 11(5)(b) "value" was real or exchangeable value and not the nominal value and the computation by the Reserve Bank in these two cases was not correct in law. It was permissible to compute the present market value of the assets, both immovable and movable, and on that basis the Punjab Co-operative Bank cannot be said to be running at a loss. The Bari Doab Bank could not be put under a scheme merely because it was a small bank. It is argued that section 45(2) does not permit suspending the provisions of the Act and only section 53 permits such an exemption and there is no such order u/s 53.

On the other hand, the learned Solicitor-General, Sri Andhyarujina, has contended that the two banks were being run as family banks that the valuation of the assets of the bank as determined by the Reserve Bank u/s 11(6) is final, that there was good reason for filing the application u/s 45(1) and that at the stage of section 45(2), there is no question of observing the principles of natural justice. He contended that section 45(2) order is in the nature of a stay order intended to protect the interests of the depositors, etc., that if the reasons are made public and opportunity is given, that would be detrimental to the banks and may result in a "run" on the bank and then interests of the depositors and the bank would be seriously jeopardised. In the very nature of things, the principles of natural justice are not attracted to section 45(2) stage, he contended.

The learned Additional Solicitor-General also contended that this is a situation where there is a post-decisional opportunity at the stage of the approval of the scheme. Such an opportunity is provided before the Reserve Bank of India. The objection that could be filed u/s 45(6) before the RBI would include an objection that the scheme was liable to be totally withdrawn because there was no good ground for the Reserve Bank to file an application and also because the grounds stated in section 45(4) did not exist. He also contended that the Reserve Bank is an expert body and its decision cannot be the subject matter of judicial review under article 226 of the Constitution of India.

In reply, it was contended for the petitioners that the moratorium was passed by the Government of India while the objections to the draft scheme are to be considered by the Reserve Bank and that the said bank cannot deal with the correctness of grounds which prevailed with the Government of India for declaring a moratorium. It was also contended for the petitioners that the contention of the learned Solicitor-General that the objections to the scheme could include objections that the scheme itself could be withdrawn or that the conditions stated in section 45(2) and section 45(4) did not exist, is no correct.

The following points arise for consideration in these appeals :

(1) Whether before the Union Government ordered a moratorium u/s 45(2), the petitioners were entitled to a notice to show cause why moratorium should not be imposed inasmuch as a pre-decisional opportunity is wholly impracticable as it may lead to a "run" on the banks, etc. ?

(2) Whether the moratorium is a condition precedent for bringing in a draft scheme and not merely a step leading to a scheme and whether the grounds for moratorium could be different from the grounds for bringing in a draft scheme ?

(3) Whether by an order u/s 45(2) certain provisions of the Act could be suspended or a separate order is necessary u/s 53 ?

(4) Whether "modification" in section 45(6) could include withdrawing the scheme ?

(5) Whether the method of "valuation" adopted by the Reserve Bank u/s 11(5) can be said to be illegal or amenable to judicial review in the face of section 11(6) ?

(6) Whether it is open to the High Court under article 226 to sit in judgment over the reasons assigned by the Reserve Bank in its section 45(1) application or the satisfaction of the bank for bringing in a draft scheme u/s 45(4) or to its final decision, or whether the High Court can go into the correctness of the sanction to the scheme, with or without modifications, made by the Government of India u/s 45(7) in view of section 45(7A) ?

Points 1 and 2 :

At the outset, it is necessary to extract the relevant portions of section 45 of the Act which read as under :

"45. Power of Reserve Bank to apply to Central Government for suspension of business of 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 proceedings against the company for a fixed period of time on such terms 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 made any payment to any depositors or discharge any liabilities or obligations to any other creditors.

(4) During the period of moratorium, if the Reserve Bank is satisfied that -

(a) in the public interest; or

(b) in the interests of the depositors; or

(c) in order to secure the proper management of the banking company; or

(d) in the interests of the banking system of the country as a whole, -

it is necessary so to do, the Reserve Bank may prepare a scheme -

(i) for the reconstruction of the banking company, or

(ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as the ''transferee bank'')...

(6)(a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the Reserve Bank may specify for this purpose.

(b) The Reserve Bank may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank.

(7) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modifications or with such modifications as it may consider necessary; and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf :...

(7A) The sanction accorded by the Central Government under sub-section (7), whether before or after the commencement of section 21 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (5 of 1963), shall be conclusive evidence that all the requirements of this section relating to reconstruction, or, as the case may be, amalgamation have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of said section 21), be admitted as evidence to the same extent as the original scheme...

(14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force..."

For the purpose of deciding these two points, it is necessary to analyze the scheme of section 45 of the Act. Section 45 deals with the power of the Reserve Bank to apply to the Central Government for suspension of business by a banking company and to prepare a scheme of reconstitution or amalgamation. Sub-clause (1) enables the Reserve Bank of India to submit an application to the Central Government for ordering a moratorium on the bank, provided "there is good reason so to do". The Central Government under sub-clause (2) "may" make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may, from time to time, extend the period. However the total period of moratorium shall not exceed six months. Section 45(3) says that during the moratorium, the company shall not make any payment to any depositors or discharge any liabilities or obligations to any creditors. Section 45(4) says that during the period of moratorium, if the Reserve Bank is satisfied that :

(a) in the public interest, or

(b) in the interests of the depositors, or

(c) in order to secure the proper management of the banking company or

(d) in the interests of the banking system of the country,

the Reserve Bank may prepare a draft scheme. Such a scheme may provide for the matters stated in section 45(5). u/s 45(6)(a) the company as well as the transferee bank concerned in the amalgamation, can offer their suggestions or objections, before the Reserve Bank. The Reserve Bank may make "such modifications" as "it may consider necessary". Section 45(7) provides that the scheme so finalised by the Reserve Bank should be filed before the Central Government which may sanction the scheme with or without such "modifications as it may consider necessary".

In our view, the purpose of a moratorium by the Central Government followed by a scheme for amalgamation or reconstruction by the Reserve Bank is that, a proper atmosphere or situation is to be brought into being - for a short period not exceeding six months - so that a draft scheme could be brought in by the Reserve Bank, finalised after hearing objections or suggestions and laid before the Central Government for its sanction. This is why the moratorium imposes a stay of commencement/continuation of all actions and proceedings against the company u/s 45(2). The banking company is also not to make any payment to depositors or discharge any liability or obligation to the creditors. The stay or statutory injunctions stated above are intended to subserve the main purpose of the Reserve Bank to examine the financial or other status of the bank and consider whether a draft scheme is necessary (a) in public interest, or (b) interests of depositors, or (c) in order to secure proper management of the banking company, or (d) in the interest of the banking system of the country as a whole.

In other words, the moratorium for a maximum period of six months is to help in considering whether the bank is to be put under a scheme of reconstruction or amalgamation. Therefore, in our view, the moratorium is a step which subserves the main purpose of introduction of a scheme. While it is true that section 45(4) considers the introduction of a scheme during the pendency of the period of a moratorium, the existence of a moratorium is, in our view, the first stage wherein conditions suitable for formulation of a scheme are introduced. In that sense, the existence of a moratorium is not an independent stage which is an end in itself. It is a means leading to an end. Therefore, the moratorium application u/s 45(1) and a moratorium order u/s 45(2) are, to describe by analogy - an interlocutory stage anterior to but yet dependent on the result of the draft scheme and its finalisation. In the event the scheme is finalised as per section 45(6) and approved by the Government u/s 45(7), the scheme starts operating under its own mechanism and the moratorium simply lapses because it was intended only to create the necessary atmosphere for considering the introduction of a scheme. In case the scheme is withdrawn, the moratorium also lapses automatically. If, Therefore, the moratorium is to act a interim to maintain a particular status quo, the position, in our opinion, is that no principles of natural justice can at all be attracted at that stage. Natural justice can be relegated to a later stage, namely, the stage of finalisation of the scheme.

Yet another reason - as to why there can be no rule of natural justice at the pre-moratorium stage - is that if the financial stringency of the bank is given publicity by the Reserve Bank by a show-cause notice to the bank as to why moratorium should not be imposed, there could be a "run" on the bank, or the directors might fritter away or remove the assets of the bank or unduly prefer one creditor over another etc. Prior notice at that stage would Therefore render the introduction of the scheme nugatory. A precedent approach to the situation is the one K. Infants, In re [1965] AC 201 at page 238 as follows :

"But a principle of judicial inquiry, whether fundamental or not, is only a means to an end. If it can be shown in any particular class of case that the observance of a principle of this sort does not serve the ends of justice, it must be dismissed."

It is stated further as follows :

"Otherwise it (natural justice) would become the master instead of the servant of justice."

(See also Malak Singh and Others Vs. State of P and H and Others, ), where the above decision has been applied.

Further, the "good reasons" required by section 45(1) in the application by the Reserve Bank of India would, in our view, necessarily be concerned with (a) public interest (b) interests of depositors, (c) securing proper management of the banking company or (d) interest of banking system of the country as a whole (see section 45(4)) being the grounds for introduction of a draft scheme. What is relevant for the main purpose - namely, introduction of a scheme - is necessarily relevant to the moratorium as well, which, in our opinion is, as already stated, a means or tool to an end, namely, the finalisation of the scheme itself.

Learned counsel for the petitioner contended that the grounds for filing an application u/s 45(1) could be different or in addition to the grounds stated in section 45(4). In our opinion, the moratorium being of an interlocutory nature, the "good reasons" in section 45(1) would necessarily be within the scope and range of the grounds mentioned in section 45(4). If that be so, the section 45(2) stage is not an independent stage which is an end in itself. In fact, the grounds for introducing a scheme set out in section 45(4) and referred to above, cover the entire gamut - namely, interests of general public, depositors, of the bank and the banking system in the country. Learned counsel tried to give some examples where the reasons for imposing a moratorium could be alien to the grounds mentioned in section 45(4) but, in our view, the plausible contingencies for imposing a moratorium could not be outside the four reasons mentioned in section 45(4). We have already stated that the section 45(2) order of moratorium is to subserve a superior purpose, namely, considering whether a scheme could be introduced. The moratorium order is intended to make the scheme when finalised efficacious and not rendered otiose. In the two appeals, an examination of the "good reasons" mentioned by the Reserve Bank in the applications made u/s 45(2), makes it clear that the two applications clearly fall under one or other of the four broad reasons mentioned in section 45(4).

Learned counsel for the petitioner contended that the fact that u/s 45(2), the Central Government "may" order moratorium is an indication that, at that stage, notice is contemplated. We are unable to agree. Merely because the sub-section uses the word "may", it does not necessarily follow that natural justice principles are implied at that stage.

It is then argued that civil consequences flow from an order of moratorium. The bank is disabled from performing various functions mentioned in section 45(3). It is said that the protection granted by section 45(2) for action against the bank is not the sole consequence of the moratorium. It is true that certain civil consequences do flow. But, in our view, they are of a temporary or transitory in nature, with an upper limit of six months. Even where civil consequences flow, the very purpose of the action proposed is likely to be defeated if a notice is given. Therefore, it is a situation where the principles of natural justice are excluded by implication. Alternatively, even where civil consequences flow, there could be a post-decisional opportunity, if a pre-decisional opportunity is impracticable.

For the aforesaid reasons, we hold that at the stage of section 45(2), no prior opportunity is contemplated nor practicable and that a moratorium is only a step leading towards consideration of introduction of a scheme and it is not an end in itself and the grounds for the moratorium are to be within the scope of the grounds relevant for introduction of a scheme, namely, the grounds enumerated u/s 45(4). Points Nos. 1 and 2 are decided accordingly.

Point No. 3 :

The contention of the petitioner is that the order passed u/s 45(2) cannot permit suspension of action under other provisions of the Act and that such suspension is possible only u/s 53 which deals with exemption. It is argued, Therefore, that when the section 45(2) order relating to moratorium passed by the Central Government permits only section 35(4) powers of the Central Government and section 38 powers of the Reserve Bank to be in force, a suspension of the provisions of the Act cannot be granted as such suspension of provisions does not fall within the scope of "terms and conditions" that may be imposed as per section 45(2). It is also argued that if only section 35(4) and section 38 are available, section 45(4) powers of introduction of a draft scheme are not available.

In our view, when the Central Government passes an order u/s 45(2) staying the commencement or continuance of all actions and proceedings against the 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 section 35 of the said Act or the exercise by the Reserve Bank of India of its powers u/s 38 of the said Act," what is actually done is that the stay of action or proceedings against the bank will not deter the Government exercising powers u/s 35(4) or the Reserve Bank of India u/s 38. The words subject to such "terms and conditions" "as it thinks fit", in our view, permit staying of all actions and proceedings against the bank. Such stay orders would very much come within the words used in section 45(4). In any event, the exercise of statutory power u/s 45(4) is not "an action or proceeding against the banking company" as stated in the order passed u/s 45(2) inasmuch it is the exercise of power to bring in a draft scheme. When the Government of India is proposing to bring in a draft scheme, surely, the exercise of such a statutory power does not fall within the words "staying all actions and proceedings against the company". The power to frame a draft scheme u/s 45(4) is an independent power which can be exercised notwithstanding the fact that there is a stay of all actions and proceedings against the company by third parties except those covered by section 35(4) and section 38. Therefore, during the moratorium when an order u/s 45(2) is passed subject to terms and conditions, the said order does not preclude exercise of statutory power u/s 45(4).

Point No. 4 :

We next come to the submissions of counsel relating to the stage of section 45(6). It is the appellants'' contention that the objection at the stage of section 45(6) to the draft scheme could only be for a "modification" of the terms of the draft scheme but not for requesting its revocation.

The learned Solicitor-General submitted that the petitioners will have a real post-decisional opportunity, that at the stage of filing objections to the draft scheme u/s 45(4), the Reserve Bank of India can also consider objections for withdrawal of the scheme-namely, that none of the grounds (a) to (d) mentioned in section 45 (4) are in existence. He submitted that the word "modification" is not to be understood in a narrow sense. The post-decisional opportunity, according to him, can be not only for "modification" of the draft scheme but also for its "withdrawal". He has submitted that the petitioners can contend in their objections to the draft scheme that there were no "good reasons" for filing an application u/s 45(1) and also that there were no grounds for introduction of a draft scheme inasmuch as reasons (a) to (d) mentioned in section 45(4) did not exist.

In view of the above interpretation of section 45(6) by the respondents, we do not find any reason as to why the appellants should still contend that the post-decisional opportunity does not extend to the grounds for section 45(1) application or for section 45(4) decision to introduce a draft scheme. The respondents are prepared to permit at the section 45(6) stage, the appellants to contend that neither section 45(1) grounds not section 45(4) grounds exist. We record the above submission and hold that the appellants can, in that event, have no real grievance at all. If a pre-decisional hearing at the stage of section 45(1) is not practicable and if the said grounds for a section 45(1) are within the scope of the grounds for introduction of a draft scheme u/s 45(4), then the objections to be filed by the appellants to the scheme can include objections to the section 45(1) and section 45(2) stages also. The appellants need not deny to themselves the benefits of the submission of the respondents'' counsel which is favourable to them and which removes their grievance in regard to violation of the principles of natural justice. Point No. 4 is decided accordingly against the appellants.

Point No. 5 :

We next come to a different aspect of the matter. The Inspectors of the Reserve Bank of India have evaluated the "value" of its paid-up capital, reserves, profits and losses in a particular fashion. The point is whether the appellant can question the method adopted by the respondents as being contrary to section 11(5)(b).

In this behalf, the respondents contend that the Reserve Bank is an expert body, that the inspection report and the correspondence relating to compliance with the defects pointed out therein, showed that the voluminous figures relating to the petitioner banks'' performance have been fully analysed by the Reserve Bank. It is argued that it is not permissible for the petitioner to seek review thereof by filing a writ petition under article 226 of the Constitution of India.

The figures relating to the performance and financial position of the capital and reserves have been set out in the inspection reports and in the replies filed by the respondent. They have been extracted in the order of the learned single judge. We do not want to burden our judgment with those figures once again. Suffice it to say that it is not open for us under article 226 of the Constitution of India to question the evaluation done by the Reserve Bank of India.

In addition, section 11(6) says : "if any dispute arises in computing the aggregate value of the paid-up capital and reserves of any banking company, a determination thereof by the Reserve Bank shall be final for the purposes of this section". The words "determination and computing the aggregate value", in our opinion, are not merely confined to the market rates applicable but also cover the mode in which the computation is to be made. We, Therefore, refrain from going into the correctness of the Inspection Reports or the valuation mentioned in the counter-affidavits. Point No. 5 is decided accordingly.

Point No. 6 :

The last question is whether the petitioner can challenge the grounds mentioned by the Reserve bank in its application filed u/s 45(1) and the satisfaction of the Reserve Bank u/s 45(2) mentioned in its proceedings for formulating the draft scheme. So far as these two banks, Punjab Co-operative Bank and the Bari Doab Bank are concerned, different reasons are mentioned in the respective applications filed by the Reserve Bank. They have been set out in the order of the learned single judge as also in the counters filed by the respondents.

In this behalf, it must be stated again that the Reserve Bank of India is an expert body and it supervises and regulates the banking services in the entire country. The unique position of the Reserve Bank has been recognised by the Supreme Court and the High Courts in several judgments. It is not necessary to refer to the passages in those judgments once again as the same are set out in the judgment of the learned single judge. Nor do we propose to extract the grounds contained in the moratorium applications filed u/s 45(1) of the Act. We are of the view that inasmuch as the said applications give ample details of the financial position of the Punjab Co-operative Bank and of the Bari Doab Bank and say that they are being run as family concerns and further that so far as Bari Doab Bank is concerned, it is a small bank which, in the interests of the bank, its depositors and the policy of the Reserve Bank, be merged with a bigger bank - it is not for us to go into the correctness of the expert opinion of the bank.

In fact, the reasons specified in the files by the Government of India for preparing draft schemes for the two banks which we have perused are also based upon facts and figures as evaluated by the Reserve Bank of India and its inspectors from time to time and we are satisfied that the reasons are relevant for purposes of section 45(1) as well as section 45(4).

As the reasons are now set out substantially in the counter-affidavits and as it has been fairly stated by the learned Solicitor-General of India that the appellants can file objection to the reasons so set out in the counter-affidavit, it will be for the appellants to include in their objections their response to the said reasons referred to in the counter-affidavits. As the reasons are certainly relevant to the passing of an order of moratorium and for preparing a draft scheme, it is not for this court to go into their sufficiency.

For the aforesaid reasons, we hold on Point No. 6 against the appellant.

The letters patent appeals are, Therefore, dismissed.