Natural justice in bank amalgamation schemes requires notice and hearing before excluding specific employees from service.

Under section 45 of the Banking Regulation Act, employees proposed for exclusion in an amalgamation scheme had to be specifically named in the draft scheme so the parties could object before finalisation. The Court treated the scheme-making process as administrative rather than purely legislative, so natural justice applied where exclusion from service entailed civil consequences; notice and a meaningful hearing were required, and urgency did not justify dispensing with that safeguard. The conclusive-evidence clause in section 45(7A) was held to be evidentiary only and did not bar judicial scrutiny of non-compliance with the statutory hearing requirement. The exclusion of the employees was therefore set aside.

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Issues: (i) Whether, under section 45 of the Banking Regulation Act, 1949, employees proposed to be excluded from service in an amalgamation scheme had to be specifically named in the draft scheme and given an opportunity to object or be heard before the scheme was finalised; (ii) whether the scheme-making process under section 45 was legislative so as to exclude the application of natural justice, or whether fairness required notice and hearing despite the urgency of the statutory time-frame; (iii) whether the conclusive-evidence clause in section 45(7A) barred judicial examination of the complaint that no hearing was afforded.

Issue (i): Whether, under section 45 of the Banking Regulation Act, 1949, employees proposed to be excluded from service in an amalgamation scheme had to be specifically named in the draft scheme and given an opportunity to object or be heard before the scheme was finalised.

Analysis: Section 45 contemplates a sequence of steps in which the draft scheme is first prepared, circulated, and then modified before sanction. The structure of sub-sections (5) and (6) shows that employees intended to be excluded form part of the subject-matter of the draft scheme itself. Since the banking company and the transferee bank are entitled to receive and respond to the draft, the names of the employees proposed for exclusion must be specifically mentioned at that stage so that objections or suggestions can be made. The omission to name them initially was not treated as a permissible curative step at the finalisation stage.

Conclusion: The proposed excluded employees had to be specifically named in the draft scheme, and the scheme could not validly omit that requirement.

Issue (ii): Whether the scheme-making process under section 45 was legislative so as to exclude the application of natural justice, or whether fairness required notice and hearing despite the urgency of the statutory time-frame.

Analysis: The process under section 45 is not legislative merely because the scheme is placed before Parliament or because it operates generally on a class of persons. The scheme applies to identified banking companies and specific employees and is therefore not a general rule of conduct. Even if the action is administrative, natural justice still applies where civil consequences follow. Exclusion from service deprives employees of livelihood, so fairness required at least a participatory process before their names were excluded. The statutory time-limit did not impliedly exclude hearing; a suitably limited hearing could be afforded before finalisation, and a post-decisional representation after dismissal from service was inadequate.

Conclusion: Natural justice applied, and the exclusion of employees without notice or hearing was invalid.

Issue (iii): Whether the conclusive-evidence clause in section 45(7A) barred judicial examination of the complaint that no hearing was afforded.

Analysis: Section 45(7A) makes the sanctioned scheme conclusive evidence that the requirements of section 45 relating to amalgamation have been complied with, but it is an evidentiary provision only. It does not prevent scrutiny of whether the statutory procedure, including the requirement of notice and hearing, was in fact followed. The dispute here was not about the validity of amalgamation itself, but about non-compliance with the procedural safeguards governing exclusion of employees. That question remained open to adjudication.

Conclusion: Section 45(7A) did not bar examination of the challenge based on lack of hearing.

Final Conclusion: The exclusion of the employees was set aside, the impugned judgments were reversed, and the transferee banks were directed to take the excluded employees back on the pre-moratorium terms with continuity of service and attendant benefits.

Ratio Decidendi: Where administrative action under a statutory scheme determines specific persons and entails adverse civil consequences, natural justice applies unless expressly excluded, and an evidentiary finality clause does not oust judicial review of procedural non-compliance.

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