Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969 Sections 4, 5, 6, 15(2) and Schedule II-Fundamental rights, infringement of Legislative competence Constitution of India, Arts. 14, 19 and 31 (2), Entries 43, 44, 45 List 1, Entry 42 List III Seventh Schedule.

Constitution of India, 1950, Art. 14 Equality Banking Companies (Acquisition and Transfer of Undertakings) Act 1969, s. 15(2) Statute permitting Banks to do business other than Banking but practically preventing them from doing non-banking business-If discriminatory.

Constitution of India, 1950, Art. 19(1) (f) cl. (6) (ii) and 19(1) (g)--Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969-Carrying on of business by the State to the exclusion of citizens-If could be challenged under Art. 19(1)(g)-Restrictions on the right to do non-banking business--If unreasonable.

Constitution of India, 1950, Arts. 19(1) (f) and 31(2)-If mutually exclusive.

Constitution of India, 1950, Art. 31(2)-Compensation-Meaning of compensation-Undertaking-Acquisition as a unit-Principles of valuation-Justiciability of compensation.

Constitution of India, 1950, Art. 123-Ordinance-Promulgation of-Nature of power conferred by Article.

Constitution of India, 1950, Art. 32-Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969-When share-holder can move petition for infringement of the rights of the Company.

Legislative competence-Entry 45 List 1, Entry 42, List III Seventh meaning of "Property" meaning of Banking Schedule "Banking", and Transfer of Undertakings) Act, 1969- Section 4-"Undertaking", meaning of--Validity of law acquiring undertaking.

On July 19, 1969 the Acting President promulgated, in exercise of the power conferred by cl. (1) of Article 123 of the Constitution, Ordinance 8 of 1969, transferring to and vesting the undertaking of 14 named Commercial Banks, which held deposits of not less than rupees fifty crores, in the corresponding new Banks set up under the Ordinance. Petitions challenging the constitutionality of the Ordinance were lodged in this Court, but before they were heard Parliament enacted the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969. The object of the Act was to provide for the acquisition and transfer of the Undertakings of certain banking companies in order to serve better the needs of development of the economy in conformity with the national policy and objectives and for matters connected therewith or incidental thereto. The Act repealed the Ordinance and came into force on July 19, 1969, i.e., the day on which the Ordinance was promulgated, and the Undertaking of every named Bank with all its rights, liabilities and assets was deemed, with effect from that date, to have vested in the corresponding ding new bank. By s. 15(2) (e) the named Banks were entitled to engage in business other than banking which by virtue of s. 6(1) of the Banking Regulation carrying on. Section 6 read with Schedule II provided for and prescribed the method of determining compensation for acquisition of the undertaking. Compensation to be determined was for the acquisition of the undertaking as a unit and by section 6(2), though separate valuation had to be made in respect of the several matters specified in Schedule II of the Act, the amount of compensation was to be deemed to be a single compensation. Under Schedule II the compensation payable was to be the sum total of the value of the assets under the heads (a) to (h), calculated in accordance with the provisions of Part I less the sum total of the liabilities and obligations calculated in accordance with the provisions of Part II. The corresponding new Banks took over vacant possession of the lands and buildings of the named Banks. By Explanation 1 to cl. (e) of Part I of Schedule II the value of any land or building to be taken into account in valuing the assets was to be the market value or the ascertained value whichever was less; by Explanation 2 cl. (1) "ascertained value" in respect of buildings wholly occupied on the date of the commencement of the Act was to be twelve times the amount of annual rent or the rent for which the building could reasonably be expected to be let out from year to year, reduced by certain deductions for maintenance, repairs etc.; under cl. (3) of Explanation 2 the value of open land with no building thereon or which was not appurtenant to any building was to be determined with reference to the price at which sale or purchase of comparable lands were made during the period of three years immediately preceding the commencement of the Act. The compensation was to be determined, in the absence of agreement, by a tribunal and paid in securities which would mature not before ten years.

The petitioner held shares in some of the named Banks, had accounts, current and fixed deposit, in these Banks and was also a Director of one of the Banks. In petitions under Article 32 of the Constitution he challenged the validity of the Ordinance and the Act on the following principal grounds:

(i) the Ordinance was invalid because the condition precedent to the exercise of the power under Article 123 did not exist;

(ii) the Act was not within the legislative competence of Parliament, because, (a) to the extent to which the Act vested in the corresponding new Banks the assets of business other than Banking the Act trenched upon the authority of the State Legislature and (b) the power to legislate for acquisition of property in entry 42 List III did not include the power to legislate for acquisition of an undertaking;

(iii) Articles 19(1)(f) and 31(2) are not mutually exclusive and a law providing for acquisition of property for a public purpose could be tested for its validity on the ground that it imposed limitations on the right to property which were not reasonable; so tested, the provisions of the Act which transferred the Undertaking of the named Banks and prohibited those Banks from carrying on business of Banking and practically prohibited them from carrying on non-banking business impaired the freedoms guaranteed by Articles 19(1)(f) and (g);

(iv) the provisions of the Act which prohibited the named Banks from carrying on banking business and practically prohibited them from carrying on non-banking business violated the. guarantee of equal protection and were, therefore, discriminatory;

(v) the Act violated the guarantee of compensation under Article 31(2);

(vi) the Act impaired the guarantee of freedom of trade under Article 301; and

(vii) retrospective operation given to Act 22 of 1969 was ineffective since there was no valid Ordinance in existence and the provision in the Act retrospectively validating infringement of the fundamental rights of citizens was not within the competence of Parliament.

On behalf of the Union of India a preliminary objection was raised that the petitions were not maintainable because, no fundamental right of the petitioner was directly impaired as he was not the owner of the property of the undertaking taken over.