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Issues: (i) Whether prior notice and hearing were required before the Central Government imposed a moratorium under section 45(2) of the Banking Regulation Act, 1949, and whether the moratorium was only a step leading to a scheme of reconstruction or amalgamation. (ii) Whether an order under section 45(2) could keep in operation the statutory powers contemplated by section 45(4) and whether a separate order under section 53 was necessary to suspend other provisions. (iii) Whether objections under section 45(6) could extend to withdrawal of the draft scheme. (iv) Whether the Reserve Bank's valuation under section 11(5)(b) and section 11(6) was open to challenge in judicial review. (v) Whether the High Court could review the Reserve Bank's reasons and satisfaction underlying the section 45(1) application and the decision to proceed with a draft scheme.
Issue (i): Whether prior notice and hearing were required before the Central Government imposed a moratorium under section 45(2) of the Banking Regulation Act, 1949, and whether the moratorium was only a step leading to a scheme of reconstruction or amalgamation.
Analysis: The moratorium was treated as an interim measure intended to create conditions suitable for consideration of reconstruction or amalgamation. It was not an independent end in itself. Since advance notice at that stage could defeat the purpose by triggering adverse consequences for the bank and depositors, the rules of natural justice were held to be inapplicable at the pre-moratorium stage. The Court also held that the grounds for the moratorium must lie within the scope of the grounds relevant to a draft scheme under section 45(4).
Conclusion: No prior notice or pre-decisional hearing was required before issuing the moratorium, and the moratorium was only a step towards consideration of a scheme.
Issue (ii): Whether an order under section 45(2) could keep in operation the statutory powers contemplated by section 45(4) and whether a separate order under section 53 was necessary to suspend other provisions.
Analysis: The stay of actions and proceedings against the banking company under section 45(2) was held not to prevent the exercise of the statutory power to consider and frame a draft scheme under section 45(4). The Court reasoned that the scheme-making power is not an action or proceeding against the company and therefore remains available during moratorium. The order under section 45(2) was treated as sufficient for the statutory arrangement in question, and section 53 was not required for that purpose.
Conclusion: The section 45(2) order did not bar action under section 45(4), and no separate order under section 53 was necessary.
Issue (iii): Whether objections under section 45(6) could extend to withdrawal of the draft scheme.
Analysis: The Court recorded the respondents' stand that objections at the section 45(6) stage could include a challenge to the existence of the very grounds for the moratorium and draft scheme. In light of that concession, the Court held that the appellants had no surviving grievance on this aspect because the post-decisional stage afforded them a meaningful opportunity to contest the basis of the scheme process.
Conclusion: The objections process under section 45(6) was treated as broad enough to cover challenges going to the basis of the scheme, including withdrawal.
Issue (iv): Whether the Reserve Bank's valuation under section 11(5)(b) and section 11(6) was open to challenge in judicial review.
Analysis: The Court held that the Reserve Bank functioned as an expert body and that the valuation and computation of paid-up capital and reserves were covered by the statutory finality in section 11(6). The method of computation, including the manner of evaluation, was not to be re-examined under Article 226. The inspection reports and valuation exercise were therefore treated as beyond interference.
Conclusion: The valuation adopted by the Reserve Bank was not open to judicial review and was treated as final for the statutory purpose.
Issue (v): Whether the High Court could review the Reserve Bank's reasons and satisfaction underlying the section 45(1) application and the decision to proceed with a draft scheme.
Analysis: The Court held that the Reserve Bank's reasons and satisfaction were founded on financial material and expert assessment and were relevant to both the moratorium and the scheme-making process. Since the material showed a rational basis for the action taken, the High Court would not sit in judgment over the sufficiency or correctness of the expert opinion. The Court declined to interfere with the administrative and statutory satisfaction recorded by the banking regulator and the Central Government.
Conclusion: The Reserve Bank's reasons and satisfaction were not open to substantive interference under Article 226.
Final Conclusion: The statutory moratorium and the connected scheme process were upheld, the challenges based on natural justice and valuation failed, and the appeals were dismissed.
Ratio Decidendi: In the statutory scheme governing banking-company moratoriums and reconstruction, pre-decisional hearing may be excluded where it would frustrate the purpose of the measure, and expert valuation and regulatory satisfaction are not ordinarily amenable to judicial review when the statute accords finality.
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