TMI Blog1987 (9) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... the Division Bench of the Kerala High Court in writ appeals have a common set of facts as also law for consideration. These matters have been heard together and are disposed of by this common judgment. Hindustan Commercial Bank ( Hindustan for short). The Bank of Cochin Ltd. (hereafter referred to as Cochin Bank ) and Lakshmi Commercial Bank ( Lakshmi for short) were private banks. Action was initiated under section 45 of the Banking Regulation Act, 1949 ( Act for short) for amalgamation of these three banks with Punjab National Bank, Canara Bank and State Bank of India respectively in terms of separate schemes drawn under that provision of the Act. Amalgamation has been made. Pursuant to the schemes, 28 employees of Hindustan, 21 employees of Cochin Bank and 76 employees of Lakshmi were excluded from employment and their services were not taken over by the respective transferee banks. Some of these excluded employees of the Cochin Bank went before the Kerala High Court for relief under Article 226 of the Constitution. A learned Single Judge gave them partial relief but on an appeal to the Division Bench by the transferee bank concerned the writ petitions have been dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e draft scheme should contain the names of the employees to be excluded; (2) The incorporation of the names finalised on the basis of scrutiny of the records before the schemes were placed before the RBI was sufficient compliance of the requirements of the law; (3) the provisions of the Act did not confer any right on the employees of being heard; (4) the scheme-making process was legislative in character and therefore did not come within the ambit of natural justice. Alternately the action not being judicial or quasi-judicial and at the most being administrative or executive was also not open to challenge on allegations of violation of rules of natural justice; (5) moratorium under the statutory provisions could not be beyond six months and in view of the fact that the entire operation had to be finalised within a brief time frame, the requirement of an enquiry by notice to all the officers intended to be excluded could not have been intended to be implanted into the provisions of section 45; and (6) Provision of compensation has been made for those who were excluded from the respective scheme. Each of the transferee banks generally adopted the stand taken by RBI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date of the order of moratorium: Provided......................................... (j) notwithstanding anything contained in clause (i) where any of the employees of the banking company not being workmen within the meaning of the Industrial Disputes Act, 1947 are specifically mentioned in the scheme under clause (i), or where any employees of the banking company have by notice in writing given to the banking company or, as the case may be, the transferee bank at any time before the expiry of one month next following the date on which the scheme is sanctioned by the Central Government, intimated their intention of not becoming employees of the banking company on its reconstruction or, as the case may be, of the transferee bank, the payment to such employees of compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned in the amalgamation and also on all the members, depositors and other creditors and employees of each of those companies and of the transferee bank, and on any other person having any right or liability in relation to any of those companies or the transferee bank............. (9)............................................... (10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government may by order do anything not inconsistent with such provisions which appear to it necessary or expedient for the purpose of removing the difficulty. (11) Copies of the scheme or of any order made under sub-section (10) shall be laid before both Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government or, as the case may be, the order has been made. (12).............................................. (13).............................................. (14).............................................. (15).............................................. Allegations advanced on behalf of the excluded employees is that the draft scheme contemplated under sub-section 6(a) did not specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention advanced on behalf of RBI that since it is open to it under sub-section (6)(b) of section 45 to make modifications of the draft scheme, even if the names were not included earlier, at the stage of finalising the scheme for placing it before the Central Government as required under sub-section (7), the earlier non-inclusion is not a contravention is not acceptable. We are of the view that in case some employees of the banking company are intended to be excluded, their names have to be specifically mentioned in the scheme at the draft stage. The requirement of specific mention is significant and the legislature must be taken to have intended compliance of the requirement at that stage. Mr. Salve for the RBI adopted the stand that the provisions of section 45 did not specifically concede a right of objection or making of suggestions to employees and in sub-section (6)(b) mention was made only of members, depositors or other creditors. For the reasons we have indicated above, this aspect of the contention does not impress us. It is the common case of RBI as also the transferee banks that the records of service of each of the employees had been scrutinised and the names for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees have neither been put to notice that their services were not being continued under the transferee banks nor had they been given an opportunity of being heard with reference to the allegations now levelled against them. Learned counsel for RBI and the transferee banks have taken the stand that the scheme-making process under section 45 is legislative in character and, therefore, outside the purview of the ambit of natural justice under the protective umbrella whereof the need to put the excluded employees to notice or enquiry arose. It is well-settled that natural justice will not be employed in the exercise of legislative power and Mr. Salve has rightly relied upon a recent decision of this Court being Union of India H Anr. v. Cynamide India Ltd. Anr., [ 1987] 2 SCC 720 in support of such a position. But is the scheme-making process legislative? Power has been conferred on the RBI in certain situations to take steps for applying to the Central Government for an order of moratorium and during the period of moratorium to propose either reconstruction or amalgamation of the banking company. A scheme for the purposes contemplated has to be framed by RBI and placed before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso to be placed before the two Houses of Parliament makes it abundantly clear that the placing of the scheme before the two Houses is not a relevant test for making the scheme framing process legislative. We accordingly hold that there is no force in the contention of Mr. Salve that the process being legislative, rules of natural justice were not applicable. The alternate contention on this score is that the scheme-making process being an executive activity or alternately an administrative matter, rules of natural justice have no application. This contention has again to be rejected. Neither in Privy Council, Natural Justice and Certiorari has indicated:- Formerly the presumption had been that there WAS obligation to give a hearing unless the statute itself indicated such an obligation; now the presumption is that there is such an obligation unless the statute clearly excludes it, notwithstanding the vesting of a power, in subjective terms, in a minister responsible to Parliament. As has beer. pointed out by Wells J. in Perre Brothers v. Citrus organisation Committee, [1975] 10 SASR 555:- It is now well established-and there is no need for me to canvass the innume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd after giving an opportunity to the first respondent of being heard and meeting or explaining the evidence. No such steps were admittedly taken; the High Court was, in our judgment, right in setting aside the order of the State. ln A.K Kraipak ors. v. Union of India ors., [ 1970] 1 SCR 457 a Constitution Bench quoted with approval the observations of Lord Parker in Re: (H) K (an infant) (supra). Hegde, J. speaking for the Court stated: Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonablly. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is now questioned. If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one is held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet. Natural justice has various facets and acting fairly is one of them. RBI which monitored the three amalgamations was required to act fairly in the facts of the case. The situation necessitated a participatory enquiry in regard to the excluded employees. Since the decision to exclude them from service under the transferee banks is grounded upon a set of facts the correctness whereof they deny, if an opportunity to know the allegations and to have their say had been afforded, they could have no grievance on this score. The action deprives them of their livelihood and brings adverse civil consequences and could obviously not be taken on the ipse dixit of RBI officers without verification of facts. It is quite possible that a manoeuvring officer of the banking company adversely disposed of towards a particular employee of such bank could make a report against such employee and have him excluded from further service under the transferee bank. The possibility of exclusion on the basis of some mistake such as to identity cannot also be ruled out. There is all the more apprehen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural justice to conceptually enter into the field of social activities. We do not think in the facts of the case there is any justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame. On the other hand we are of the view that the time limited by statute provides scope for an opportunity to be extended to the intended excluded employees before the scheme is finalised so that a hearing commensurate to the situation is afforded before a section of the employees is thrown out of employment. We may now point out that the learned Single Judge of the Kerala High Court had proposed a post-amalgamation hearing to meet the situation but that has been vacated by the Division Bench. For the reasons we have indicated, there is no justification to think of a post-decisional heading. On the other hand the normal rule should apply. It was also contended on behalf of the respondents that the excluded employees could now represent and their cases could be examined. We do not think that would meet the ends of justice. They have already been thrown out of employment and having been deprived of livelihood they must be facing serious ..... 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