In Re: Chotanagpur Banking Association Ltd.

S. Sarwar Ali, J.—A claim decree was obtained against Raja Kali Prasad Singh of Jharia u/s 14 of the Bihar Land Reforms Act for a sum of Rs. 75,518.24. The Additional Collector, Dhanbad, intimated the bank by his letter dated August 26, 1964, that the aforesaid amount had been deducted out of the compensation money payable to the ex-Raja and that the same was payable in bonds. A letter was written by the official liquidator to the Additional Collector, Dhanbad, explaining the present position of the bank and requesting that payment be made in cash or by cheque instead of bond. The Additional Collector expressed his inability to do so. Thereafter a report dated March 3, 1970, was filed in court by the official liquidator seeking direction if the payments be accepted in bonds. By order No. 337(1) dated August 14, 1970, the official liquidator was directed to take appropriate steps to get whole of the amount payable to the bank from out of the compensation money payable to the Raja of Jharia in one lump sum. Accordingly a letter dated October 27, 1970, was addressed to the Additional Collector, Dhanbad, requesting him to pay the compensation money in cash. A copy of the same was forwarded to the Secretary, Revenue Department, Government of Bihar. By letter dated May 6, 1971, the Revenue Department, Government of Bihar, has intimated that under the provisions of the Bihar Land Reforms Act, payment of compensation cannot be made beyond Rs. 50 in cash. The official liquidator in his report, which is at flag '' 1018 '' has made a request that necessary directions may be issued to the Government of Bihar to pay the entire amount of compensation in one lump sum in cash. Notice was issued to the State of Bihar in this case and I have heard the official liquidator and the learned Government Advocate on this question.

The contention of the official liquidator is that under Sections 45A and 45B of the Banking Companies Act, 1949, the court has power to direct payment of compensation in cash although the relevant provisions in the Bihar Land Reforms Act read with Rules permit payments only in bonds or the payment of substantial amount in bonds only. Reliance in this connection has been placed on the decision of H. Naik, Official Liquidator, Puri Bank Ltd. Vs. Kanhu Charan Das, . and on the case of Thangia alias Thangavelu Onthiriyan v. Hanuman Bank Ltd. [1958] 28 Comp. Cas. 270 ; AIR 1958 Mad 403 .

Part III-A of the Banking Companies Act (hereinafter referred to as "the Act ") relates to special provisions for speedy disposal of winding-up proceedings. Section 45A of the Act is as follows :

" The provisions of this part and the rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in the Companies Act, 1956, or the Code of Civil Procedure, 1908, or the Code of Criminal Procedure, 1898, or any other law for the time being in force or any instrument, having effect by virtue of any such law but the provisions of any such law or instrument in so far as the same are not varied by, or inconsistent with, the provisions of this part or rules made thereunder shall apply to all proceedings under this part. "

Section 45B is in the following terms :

" The High Court shall, save as otherwise expressly provided in Section 45C, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made u/s 391 of the Companies Act, 1956, by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact which may relate to or arise in the course of the winding-up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order for the winning-up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953."

Considering the provisions of Section 45A along with the provisions of Section 45B of the Act it was held in H. Naik, Official Liquidator, Puri Bank Ltd. Vs. Kanhu Charan Das, case that

"The Banking Companies (Amendment) Act, 1953, is a later special enactment made by the Parliament for simplifying and expediting the procedure for winding up of banking companies. The Orissa Estates Abolition Act is a general earlier Act dealing with acquisition of all estates within the State; the determination of compensation payable to the persons whose interests were so acquired and the manner of payment of such compensation. Where there is inconsistency between the two, the special later Act should prevail, especially when Section 45A of the Banking Companies Act expressly declares that the provisions of Part III-A of that Act shall have effect notwithstanding anything inconsistent therewith contained in '' any other law for the time being in force ''. The Orissa Estates Abolition Act is a ''law for the time being in force'' within the meaning of Section 45A of the Banking Companies Act. "

Consequently it was held that " the exclusive jurisdiction conferred on the claims officer by the Orissa Estates Abolition Act must give way in face of the provisions of Sections 45A and 45B of the Banking Companies Act by which the High Court alone has exclusive jurisdiction to determine the claim of a banking company under liquidation for payment out of the compensation money, "

Considering the construction of Section 37(3) of the Orissa Estates Abolition Act, it was observed that:

" The matter did present some difficulty. u/s 45B, Banking Companies Act, the High Court alone has exclusive jurisdiction to determine any question of law or fact relating to the winding-up of a banking company. The question as to whether the amount due to the banking company should be realised in one lump sum or by instalments is a '' question of fact relating to the winding-up of the banking company'' and would thus be within the exclusive jurisdiction of the High Court. But, this jurisdiction would be seriously curtailed if by virtue of Section 37(3) of the Orissa Estates Abolition Act the State Government claim unfettered discretion to pay the sum either in one instalment or in thirty annual equated instalments. If Section 37(3) were to prevail, the result would be that the winding-up proceeding of banking companies which have advanced loans to proprietors of estates and other '' intermediaries '' as defined in the Orissa Estates Abolition Act would be protected for a period of thirty years and the essential purpose for which the Banking Companies (Amendment) Act, 1953, was passed would be frustrated. I would, therefore, take the view that Section 37(3) of the Orissa Estates Abolition Act must give way before Section 45B, Banking Companies Act. "

So far as the first part of the judgment quoted by me is concerned it is not relevant for the purpose of disposal of the question under consideration because the question of liability has already been determined under the provisions of the Bihar Land Reforms Act. But, I must say that I entertain grave doubts about the correctness of the propositions laid down therein. It is only the latter part of the judgment which has to be considered. In the Madras case [1958] 28 Comp Cas 270 ; AIR 1958 Mad 403 it was held that a suit u/s 55 of the Estates Land Act for issue of pattas against the banking company against which liquidation proceedings are in progress in the High Court is not triable by the Deputy Collector by virtue of Sections 45A, 45B and 45C of the Banking Companies Act (as amended) read with Section 11 of the Banking Companies (Amendment) Act, 1950. This case, therefore, is not on all fours or similar to the present case. I shall, therefore, have to consider whether the last observations quoted by me from H. Naik, Official Liquidator, Puri Bank Ltd. Vs. Kanhu Charan Das, can be of any assistance to the official liquidator in this case.

But, before I do so I may refer to some of the relevant provisions of Bihar Land Reforms Act. Chapter VI of the Bihar Land Reforms Act (hereinafter referred to as " B.L.R. Act ") deals with payment of compensation. Section 32 lays down the manner of payment of compensation. Sub-section (2) of Section 32 states that the amount of compensation as determined :

" Shall be paid in cash or in bonds or partly in cash and partly in bonds. The bonds shall be either negotiable or non-negotible and non-transferable and be payable in forty equal annual instalments to the persons named therein and shall carry interest at two and a half per centum per annum with effect from the date of issue. "

The Act does not lay down whether the payment shall be made in cash or bond, That is left to the determination of the rule making body. The Bihar Land Reforms Rules lays down that where the amount of compensation payable to an intermediary does not exceed Rs. 50, it shall be paid in cash and in all other cases the amount payable will be paid in bonds (see Rules 27, 28 and 29 of the Bihar Land Reforms Rules). The net result, therefore, is that only up to Rs. 50, in certain cases, is payable in cash under the provisions of the Bihar Land Reforms Act read with the Rules and any amount in excess of Rs. 50, is to be paid in bonds. These bonds are negotiable and carry an interest of 2 1/2 per centum per annum. The view of Narasimham J., in effect, is that the provisions of Section 45B of the Act which authorises the High Court to decide any question whether of fact or law which may relate to or arise in the course of winding up of a banking company, authorise and empower the court to issue directions or orders which has the effect of changing the method of payment of compensation as laid down in the relevant land reforms legislation. I am unable to subscribe to this view. The expression used in Section 45B cannot be given that width or broad meaning which has been given in that decision. It is to be understood that the Banking Companies Act is a legislation relating to the consolidation and amendment of law relating to a banking company. This could not be the intenion of the Central Legislature that the scheme of the Land Reform Act should be overridden by the High Court while exercising power conferred on it u/s 45B of the Banking Companies Act. I am thus of the view that the Banking Companies Act does not authorise the High Court to pass an order which will virtually have the effect of overriding the provisions of the Bihar Land Reforms Act in respect of mode of payment of compensation.

What appears to have weighed heavily with Narasimham J. (as he then was) is the consideration that the bonds issued under the provisions of the land reforms legislation in Orissa was repayable in thirty years (in Bihar it is in 40 years). The difficulty in Bihar is more theoretical than real. The bonds in Bihar are negotiable, and can be sold at the market rate, whenever it is thought fit and proper to dispose them off.

Even if it be assumed that the High Court has jurisdiction to direct payment of compensation in cash, I am of the view that in the circumstances it would not be right to give such a direction. I do not think that just because a banking company is in liquidation, it should receive preferential treatment, as compared to other banks that are not under liquidation or other intermediaries or the High Court should lightly interfere with the scheme of the Bihar Land Reforms Act in respect of mode of payment of compensation.

For all these reasons I do not think that the request of the official liquidator can be acceded to.

Since the point is of some importance the official liquidator, if he so likes, can go up in Letters Patent Appeal.