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TMI Blog2004 (2) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... ly set out : On 2nd August, 1985 Sikkim Banking Overseas Corporation Limited got itself registered as a Company in Sikkim. On 22nd October, 1987 its name was changed to Sikkim Banking Limited (for short SBL). On 11th December, 1987 the Banking Regulation Act (for short the Act) became applicable to Sikkim. Section 22 of the Act reads as follows : "Licensing of Banking Companies.-(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject to such conditions as the Reserve Bank may think fit to impose. (2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business in India, shall apply in writing to the Reserve Bank for a licence under this section : Provided that in the case of a banking company in existence on the commencement of this Act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of this section or is by notice in writin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India and that the company complies with all the provisions of this Act applicable to banking companies incorporated outside India. (4) The Reserve Bank may cancel a licence granted to a banking company under this section- (i )if the company ceases to carry on banking business in India; or (ii)if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or (iii)if at any time, any of the conditions referred to in sub-section (3) and sub-section (3A) is not fulfilled : Provided that before cancelling a licence under clause (ii) or clause ( iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the interest of the company's depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such a condition. (5) Any banking company aggrieved by the decision of the Reserve Bank cancelling a licence under this section may, within thirty days from the date on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India passed an Order of Moratorium under section 45(2) of the Act, SBL filed a Writ Petition in the High Court of Sikkim challenging the Order of Moratorium. However, the Petition was dismissed on 2nd September, 1999. The Special Leave Petition filed against the Order has also been dismissed. 9. On 21st December, 1999 the Government of India issued an Order notifying a Scheme of Amalgamation under section 45(7) of the Act. By this scheme SBL was amalgamated with the Union Bank of India (for short UBI). Under the scheme all the depositors were to be paid on pro rata basis. It is an admitted position that the depositors are only getting 9.037% of their deposits and they are required to surrender their fixed deposits receipts in return. 10. The Petitioners filed a Writ Petition in the Delhi High Court challenging the scheme. However, pursuant to an Order of this Court dated 26th April, 2000, wherein it was directed that all matters connected with the amalgamation of SBL with UBI must be filed only in this Court that Petition was withdrawn and this Petition has been filed. 11. Mr. Lalit submitted that under the Act RBI has got wide powers to control banking companies. He submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the Motor Accidents Claims Tribunal. The Tribunal in some of those cases held that the driver of the bus was negligent and passed awards against the owner of the bus and the Insurance Company. The Tribunal dismissed the claims against the Railways on the ground that there was no negligence on the part of the driver of the railway engine or on the part of the Railway Administration. On Appeals, the High Court held that the Railways were also liable. 12. The Union of India then filed Appeals to this Court. This Court framed the following questions for consideration : "(1)What are the common law duties of a motor vehicle driver at a railway level-crossing? Whether, on facts the bus driver was negligent ? (2)Whether, under the 'doctrine of imputation' the negligence of the driver in which the passengers travelled could be imputed to the passengers by the Railways as part of the defence for the purpose of raising a plea of contributory negligence of the passengers ? (3)Whether under the law of torts the claimants in rail-motor collisions can claim that the obligations of the Railway under the statute as well as under common law will run concurrently? What are the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration at places where a railway crosses a public road on the level; (d)persons be employed by a railway administration to open and shut such gates, chains or bars." This Court held that in view of this provision there was no direct obligation on the Railway Administration and there was no statutory duty of the Railway Administration unless a requisition was made by the Government. It was held that the above anomaly has naturally compelled the Courts to fall back upon the common law duties resting on the Railways which would impose special responsibilities on the Railways to keep accidents at the minimum. It was held that these common law duties were enforceable concurrently with the statutory duties of the Union under section 13 or independently of it. This Court then went on to consider what were the common law duties of Railways at level-crossings and held that there was a duty to take care to see that accidents did not occur. This Court therefore confirmed the findings of the High Court that the Railways must be deemed to be negligent in not converting the unmanned level-crossings into manned crossings. This Court then went on to consider whether omission to perform statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'deficiencies and irregularities in the functioning of SBL. He submitted that even though RBI had called upon SBL to raise its share capital and SBL had failed to do so, the license was issued. He submitted that in this case both the conditions, namely, the statutory duty to act and impliedly the requirement to pay compensation to persons who suffer damages by virtue of non-exercise of the power, were present. He submitted that RBI must return all the deposits in full. 15. Mr. Lalit also relied upon the case of Nilabati Behera v. State of Orissa [1993] 2 SCC 746. He submitted that it has been held in this case that the award of compensation in a proceeding under Article 32 or Article 226 is a remedy available in public law, based on strict liability for contravention of fundamental rights to which the principle of sovereign immunity did not apply, even though it may be available as a defence in private law in an action based on tort. Mr. Lalit fairly pointed out the case of Sutherland Shire Council v. Heyman [1985] 60 Australian LR 1. In this case the local authority, whose duty was to inspect buildings was sought to be sued when a house was damaged due to inadequate foundation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 1976. The Commissioner was sought to be made liable for losses incurred by depositors in a Deposit Taking Company which went into liquidation. It was claimed that that Company had been run fraudulently, speculatively and to the detriment of depositors and that even though the Commissioner had reasons to suspect that the Company was being so run he had failed to take any action to protect the depositors. It was claimed that the depositors had relied upon the fact of registration as indicating that the Company was a fit and proper body and that the Company was under the supervision of the Commissioner. It was claimed that the Commissioner knew or ought to have known that the affairs of the Company were being conducted fraudulently, speculatively and to the detriment of the depositors and that he should never have registered the Company or should have revoked its registration. Thus the facts of this case are almost identical to the present case and the submissions are also the same. The High Court of Hong Kong struck out the claim on the basis that it disclosed no cause of action. The Privy Council held that the above mentioned factors were not sufficient to establish duty of care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not such that it would be just and reasonable to impose the liability in negligence for the loss suffered by the Plaintiffs. It was held that the Board and the Treasurer were exercising typical functions of modern Government in the general public interest which included balancing of competing considerations. It was held that the Defendants did not possess sufficient control over the management of the Bank to warrant imposition of liability. The principles laid down in Anns' case (supra) were held not applicable to financial transactions. Mr. Sorabjee also relied upon the case of Three Rivers DC v. Bank of England [2000] 3 All England LR 1 and in [2001] 2 All England LR 513. This again was a case wherein the Bank of England had granted a license to the BCCI to carry on business as a deposit taking institution. BCCI collapsed in 1991 owing to fraud on a vast scale. Several thousand depositors brought proceedings against the Bank of England seeking recovery of their sums when BCCI collapsed. In that case it was pleaded that the Officers of the Bank of England had acted in bad faith by licensing BCCI when they knew that to do so was unlawful and that the Officers had shut their eyes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are a few irregularities. They have to keep in mind the implications of closing a Bank or a financial institution. A closing of a Bank or financial institution has its impact not just on that Bank/financial institution and its customers and debtors but on the future of financial services in that region. Thus, competing interests have to be weighed and balanced. In hindsight it is easy to point fingers. However, at that stage it would not have been an easy decision for RBI to have closed SBL when it was a major Bank in a small State like Sikkim. One may criticize the decision of RBI to grant SBL a licence to open a Branch in Delhi when the licence under section 22 had not yet been granted. But still that will not be sufficient to foist liability on RBI to repay all depositors. What the Petitioners want is to foist on RBI liability for the default of SBL. Such liability will be rarely imposed. RBI did not had day to day management or control on SBL. Also the relationship of RBI with creditors or depositors of SBL is not such that it would be just or reasonable to impose a liability in negligence on RBI. 18. Even otherwise we find that there are no proper averments. There is abso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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