Banking amalgamation scheme upheld where pending licence status, audit findings, and depositor treatment did not justify interference.

Section 22 of the Banking Regulation Act allowed the banking company to continue operations while its licence application remained pending, so the Act continued to apply to it. A full audit was undertaken, recoverable assets and the financial position were considered, and efforts were made to recover dues before framing the amalgamation scheme. Allegations of lack of notice, incorrect valuation, and inadequate recovery efforts did not provide a rational basis to interfere with the scheme. The fact that depositors were to receive only pro-rata payment, in the circumstances assessed by the authorities, was not by itself sufficient to invalidate the scheme, and the challenge to the scheme was rejected.

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Issues: Whether the scheme of amalgamation framed by the Reserve Bank of India and notified by the Government of India under the Banking Regulation Act was liable to be set aside on the grounds that the bank had no licence, the scheme did not protect depositors, and the statutory procedure was not properly followed.

Analysis: Section 22 of the Act permitted the banking company to continue operations pending a decision on its licence application, so the Act remained applicable to it. The record showed that a full audit was carried out, the financial position and recoverable assets were taken into account, and efforts to recover dues had been made. The challenge based on alleged lack of notice, alleged incorrect valuation, and alleged insufficiency of recovery efforts did not disclose any rational ground for interference with the scheme. The fact that the scheme provided only pro-rata payment to depositors, in the circumstances found by the authorities, did not by itself justify invalidation of the scheme.

Conclusion: The challenge to the scheme was rejected and the scheme was upheld.

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