TaxTMI 
TaxTMI 
2021 (5) TMI 359
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....for Resilient Banks and Banking Systems (the Basel III Report), which is regarded as the Basel III Capital Regulations, and its members agreed to implement it in their respective domestic jurisdictions in a phased manner. The Basel III Capital Regulations set out the elements of capital for capital adequacy purposes and specify the different types of equity, preferred capital or debt instruments that would be reckoned and, in what manner, for such purpose. The RBI initiated action to implement the Basel III capital Regulations in 2012. By Master Circular dated 01.07.2015 (the Master Circular), the circulars issued earlier on the subject were consolidated. The Master Circular is the focal point of the present writ petition wherein it is challenged insofar as it permits banks, under its supervisory control, to issue and write-off a form of regulatory capital, which is referred to as Additional Tier 1 (AT1) Capital Bonds. The Master Circular is challenged on the ground that it violates Articles 14, 19, 21, 253 and 300-A of the Constitution of India. In addition, it is challenged on the ground that it is contrary to the provisions of the Companies Act, 2013 (CA 2013), the Indian Contra....
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....re referred to as the Basel III Capital Regulations. As per the Basel III Report, the elements of capital that would be taken into consideration for purposes of capital adequacy are set out, and the term used to describe such capital is regulatory capital. They are broadly: Tier 1 (going-concern) capital and Tier 2 (gone-concern) capital. Tier 1 capital, in turn, consists of the sum of Common Equity Tier 1(CET 1) and Additional Tier 1 (AT 1) capital. CET 1 comprises, as its most important elements, the sum of the equity shares issued by a bank, its reserves and surplus. AT 1 includes instruments, other than common equity, which meet the criteria for inclusion as AT 1. Paragraph 55 of the Basel III Report sets out the criteria for inclusion in AT 1 capital. There are 14 criteria out of which the important criteria are: * Subordinated to depositors, general creditors and subordinated debt of the bank. * Is neither secured nor covered by a guarantee of the issuer or related entity or other arrangement that legally or economically enhances the seniority of the claim vis-a-vis bank creditors. * Is perpetual, i.e. there is no maturity date and there are no stepups or other incentiv....
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....he eligible total capital would consist of CET 1 and AT I capital and this would constitute the numerator for calculation of CRAR. The denominator would consist of Credit Risk Risk Weighted Assets (RWA) + Market Risk RWA + Operational Risk RWA. 7. Paragraph 2.1 of the Master Circular sets out the components of capital and specifies that the total regulatory capital will consist of the sum of the following categories: (1) Tier 1 Capital (going-concern capital) consisting of: (a) Common Equity Tier 1 (b) AT 1 Capital (2) Tier 2 Capital (gone-concern capital) The footnote with regard to going-concern capital specifies that from a regulatory capital perspective, going-concern capital is the capital which can absorb losses without triggering bankruptcy of the bank. Gone-concern capital is the capital which will absorb losses only in a situation of liquidation of the bank. 8. Paragraph 4.2.4 of the Master Circular deals with AT 1 capital and specifies the elements or types thereof. These elements, inter alia, include Perpetual Non-Cumulative Preference Shares (PNCPS), which comply with the regulatory requirements as specified in Annex 3; and debt capital instruments eligible f....
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.... 11. The financial position of Yes Bank deteriorated considerably over a period of time and, consequently, the gross and net non-performing assets and the provisions in respect thereof increased dramatically. Hence, a moratorium notice dated 05.03.2020 (the Moratorium Notice) was issued by the Reserve Bank of India. In terms of the Moratorium Notice, the RBI informed the public at large that the RBI had applied to the Central Government for imposing a moratorium under Section 45 of the BR Act and that the Central Government had imposed a moratorium with effect from 05.03.2020. On the same date, by exercising power under Section 36 ACA of the BR Act, the RBI, in consultation with the Central Government, superseded the Board of Directors of Yes Bank Ltd. for a period of 30 days and appointed an Administrator to take over the assets and affairs of the Bank. Thereafter, a draft scheme of reconstruction was placed in the public domain on 06.03.2020. This draft scheme of reconstruction contained a specific clause to the following effect: "The instruments qualifying as Additional Tier 1 capital, issued by the Yes Bank Ltd., under Basel III framework, shall stand written down permanently....
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.....P.Giridharan, the learned counsel for the RBI; and Mr. Karthik Seshadri, the learned counsel for Yes Bank. THE CONTENTIONS 13. The contentions of Mr. Nithyaesh Natraj and Mr.P.Giridharan were heard on 11.9.2020 and 14.09.2020 and these submissions were captured in orders of even date. They made further submissions thereafter on 21.09.2020 and 23.09.2020, when we also heard the submissions of Mr.Karhik Seshadri, and posted the case on 28.09.2020 for pronouncing the order. A petition to re-open for further hearing was filed by the Petitioners and, on that basis, we re-opened proceedings and heard the parties again on 28.09.2020 and, once again, posted the case on 30.09.2020 for pronouncing the order. PETITIONERS' CONTENTIONS 14. The contentions of Mr. Nithyaesh Natraj are as under: (i) The Master Circular dated 01.07.2015 has been issued without authority or jurisdiction inasmuch as the Basel III Capital Regulations have not been enacted as law as per Article 253 of the Constitution. He dilated upon this contention by pointing out that the Master Circular draws reference to the G-20 Pittsburg summit wherein it was decided to implement the Basel III Capital Regulations. Thu....
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....the Government of Italy is not justiciable or cognizable in the courts of the United Kingdom unless the same forms part of municipal or domestic law. (h) In re Berubari Union, 1960 3 SCR 250 (Berubari Union), wherein, in the context of an agreement between India and Pakistan on the partition of Berubari Union between them, at paragraphs 17,18,32,35,46 and 49, the Supreme Court negatived the contention of the Attorney General and held that the implementation of a treaty can only be effected through Parliamentary legislation and, if it entails an amendment to Part I of the Constitution, Article 368 should be complied with. (ii) The Master Circular is liable to be struck down because it is ultra vires the BR Act and there is clear lack of legislative competence. It is also a manifestly arbitrary and unreasonable exercise of subordinate or delegated legislation. In support of these contentions, he relied upon the following judgments, which are set out along with context and principle: (a) State of TN v. P. Krishnamurthy (2006) 4 SCC 517 (P.Krishnamurthy), wherein, in the context of a challenge to Rule 38A of the Tamil Nadu Minor Mineral Concession Rules, 1959, at paragraphs 15-20....
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.... on paragraph 9 of Padmasundara Rao v. State of Tamil Nadu (2002) 3 SCC 533. (h) Magabhai Ishwarbhai Patel v. Union of India (1970) 3 SCC 400 (Maganbhai Patel), at paragraph 81, wherein the Supreme Court held that an exercise of legislative power whereby a citizen's right to property is infringed should be supported by legislation. (iii) The BR Act confers power on the RBI as regards the issuance of capital under Section 12. Section 12 does not confer the power to issue the AT 1 Capital Bonds and such power cannot be exercised by taking recourse to Section 35 A of the BR Act. In support of this proposition, the following judgment was relied upon: Dharani Sugars v. Union of India (2019) 5 SCC 220 (Dharani Sugars), wherein, in the context of a challenge to the constitutional validity of Sections 35AA and 35 AB of the BR Act and the Circular dated 12.02.2018, at paragraphs 26,40-42,62-63 and 72, the Supreme Court held that general powers under a statute should not be exercised when specific powers are conferred in respect of a particular issue by particular sections of that statute. On the facts of the case at hand, Section 12 deals with issuance of capital; and, in that con....
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....ation of property should be through a non-arbitrary law to pass the test of Article 300 A of the Constitution. vi) The Master Circular violates CA 2013 which defines a debenture in Section 2(30) in an inclusive manner so as to include debentures, bonds and other securities evidencing a debt. As per Section 71(8), a company shall pay interest and redeem the debentures and, as per sub-section (10) and (12) thereof, a debenture holder is entitled to approach the National Company Law Tribunal [NCLT] or sue for specific performance, respectively, if a company fails to redeem the debentures on the date of their maturity. In addition, CA 2013 does not recognize the concept of irredeemable debentures whereas the AT 1 bonds are perpetual in character and, therefore, contrary to Section 71 of CA 2013. In support thereof, the following judgment was relied upon: Dr. S.K. Kacker v. All India Institute of Medical Sciences (1996) 10 SCC 734, wherein, at paragraph 12, the Supreme Court held that resolutions that are contrary to statutory rules have no legal efficacy. vii) In light of the permanent write-off of the AT 1 bonds by communication dated 14.03.2020, the issuance of these AT 1 bon....
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....n is conspicuously absent. Therefore, it is clear that the Central Government rejected the request for a permanent write-down of the AT 1 bonds. THE RESPONDENTS' CONTENTIONS 15. The contentions of Mr.Giridharan, in reply, were as under: (i) The RBI is empowered under Section 35 A of the BR Act to issue directions in respect of banking companies and the power to issue the Master Circular dated 01.07.2015 is traceable to Section 35 A. (ii) In exercise of executive power under Article 53 read with Article 73, the RBI's powers are co-extensive with that of Parliament. (iii) The RBI Master Circular enables the issuance of both PNCPS and debt capital instruments/PDI for inclusion as AT1 capital. (iv) In case of debt capital instruments, it is necessary that they comply with the requirements of Annex-4 and Annex-16 of the Master Circular in order to qualify as AT 1 capital. Annex-4 and 16 mandate that the bond should be: subordinate to deposits; not secured or guaranteed; perpetual; investors should not have a put option; and that the instruments should have loss absorption features either through conversion to common shares or a write-down mechanism which allocates loss....
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....eof, where the Supreme Court considered the membership of the RBI in the BIS, its power under the BR Act, including under Section 35 A, and held at paragraph 167 that the RBI's directives have statutory force and should be read as supplementing the BR Act. 16. Mr. Karthik Seshadri pointed out that the Board of Directors of Yes Bank was reconstituted after the Reconstruction Scheme came into effect and that he represents the Bank under authorization from the Board. He contended that the Petitioners are market players who voluntarily assumed the risk of investing in instruments which may be permanently written-down upon occurrence of pre-specified triggers. In this case, such contingency undoubtedly arose and the decision to write-down the AT 1 bonds and restructure Yes Bank was taken at the highest level in the interest of the financial system, including, primarily, that of depositors. QUESTIONS FOR CONSIDERATION 17. We considered the oral and written submissions of the learned counsel for the respective parties and examined the materials on record. Upon consideration of the rival submissions, keeping in mind the relief requested herein, the following questions arise for dete....
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....es, 1969 (the Treaties Convention), defines a treaty as under: (a) "treaty" means an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation; Although India has not ratified the Treaties Convention, on account of its widespread acceptance, as regards the fundamental concepts and principles contained therein, such as the definition of treaty, it has the status of customary international law. Article 253 of the Constitution of India empowers Parliament to make law to implement a treaty, agreement or convention with other countries or a decision taken at an international conference or association. Thus, if an agreement, treaty or convention had been executed at the Pittsburg Summit or even if a decision governed by international law was taken, there is no denying that the treaty obligations would not be enforceable on the domestic plane until Parliament enacts a law. But we are not dealing with a treaty or convention, which is governed by international law, that was signed at the Pittsburg Summit. Instead, we are dealing wi....
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.... that the power of RBI to give directions, when it comes to the Insolvency Code, cannot be so given. The width of the language used in the provision which only uses general words such as "public interest" and "banking policy", etc. makes it clear that if otherwise available, we cannot interdict the use of Section 35-A as a source of power for the impugned RBI circular on the ground that the Insolvency Code, 2016 could not be said to have been in the contemplation of Parliament in 1956, when Section 35-A was enacted. Dr Singhvi's contention must, therefore, fail." The above conclusion would apply with equal force to the AT 1 instruments that are the subject matter of the Master Circular. The question as to whether the directions under the BR Act are statutory was considered in ICICI Bank Ltd. v. APS Star Industries Ltd. (2010) 10 SCC 1, where it was held as follows in paragraph 35: "35. Section 21 deals with the power of RBI to control advances by banking companies. Section 21 empowers RBI to frame policies in relation to advances to be followed by banking companies. It further says that once such policy is made all banking companies shall be bound to follow them. Section ....
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....effect of the impugned paragraphs (6) and (12) of the directions of 1987, it is also important to note that Reserve Bank of India which is bankers' bank is a creature of statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. It is the duty of the Reserve Bank to safeguard the economy and financial stability of the country...." Upon perusal of the aforesaid, it is clear that the RBI is empowered to issue directions under Section 35 A to secure the proper management of a banking company and we do not find any reason to read any fetters into this power given the statutory role of the RBI as the regulator of banks in India. The Master Circular is a measure to enhance capital adequacy of banks by raising the CRAR and ensuring that it is maintained at levels consistent with the financial stability of a bank not only at times of normalcy but also when the bal....
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.... point of non-viability trigger is reached. 23. In this case, the moratorium was imposed by the Central Government as recommended by the RBI on 05.03.2020. Therefore, there is no doubt that the point of non-viability trigger was reached. Indeed, this is not disputed by the Petitioners. Pursuant thereto, the draft scheme of reconstruction was recommended by the RBI and approved by the Central Government resulting in the Reconstruction Scheme 2020. The final Reconstruction Scheme does not contain the clause dealing with permanent write-down although the said clause was present in the draft scheme of reconstruction. Therefore, the question arises as to whether the permanent write-down by communication dated 21.03.2020 is invalid or whether it is justifiable as per the Master Circular, the Information Memorandum and terms of issue of the AT 1 bonds by Yes Bank, and Clause 6 of the Reconstruction Scheme. However, it needs to be borne in mind that the validity of the communication dated 21.03.2020 is not impugned in this proceeding and separate proceedings were initiated in connection therewith. Therefore, we propose to confine our findings to the validity of the Master Circular. DO AT....
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....capital for purposes of CA 2013. DO THE AT 1 BONDS CONSTITUTE DEBENTURES PER CA 2013? 25. Having concluded that it is not share capital for purposes of CA 2013, is it a debt instrument? In our opinion, it is clear from the Master Circular that PDI are debt instruments. Indeed, they are required to be reflected as borrowings for accounting purposes. Mr.Giridharan contended that Section 129 of CA 2013 does not apply to banking companies and that banking companies are required to prepare and file financial statements as per Schedule III of the BR Act. However, this does not make any difference because even under Schedule III, AT 1 bonds are required to be classified as borrowings. He further contended that AT 1 bonds may be borrowings but they do not constitute a debt. This contention is required to be examined closely. If AT 1 bonds are classified as borrowings, would they qualify as debentures under CA 2013? The term debenture is defined in Section 2(30) of CA 2013 in an inclusive manner so as to cover debentures, bonds and other securities evidencing a debt. Section 71 of CA 2013 mandates that a debenture redemption reserve should be created in respect of debentures. However, it ....
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....cific trigger point. From these features, it is clear that the only reason instruments such as the AT 1 bonds are permitted to be included in Tier I capital is because they are treated like and equated with equity share capital or CET 1 inasmuch as the holders of such AT 1 instruments cannot demand repayment of their investment in the same manner as the CET 1 shareholders cannot demand a buy-back. To put it differently, it is only on account of these features and characteristics that such instruments are permitted to be included as Tier 1 regulatory capital for purposes of enabling a bank to fulfill CRAR requirements. Otherwise, the banks would be required to raise their CET 1 capital to the extent necessary for meeting CRAR requirements. Thus, the above features, and, in particular, loss absorption upon occurrence of a pre-specified trigger event, are the raison d'etre of AT 1 bonds. When all the above aspects are reckoned, we find that there is inconsistency between the provisions of the Master Circular, which qualify as statutory rules, and the provisions relating to debentures in CA 2013. We previously concluded that the RBI is empowered to issue the Master Circular under S....
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....a sui generis borrowing/debt instrument which, inter alia, may be extinguished upon the occurrence of a pre-specified trigger event or a point of non-viability. THE CONSTITUTIONAL CHALLENGE 30. Given the nature and characteristics of AT 1 bonds, it should be examined whether the Master Circular that enables the issuance of such instruments violates the Constitution. Several judgments, such as P. Krishnamurthy, Hindustan Construction Company and Director General, NHAI, were cited to buttress the contention that a subordinate legislation may be struck down on the grounds of legislative incompetence, violation of fundamental or constitutional rights, violation of parent statute or any other law and manifest arbitrariness. These principles are fundamental and unexceptionable. Therefore, the Master Circular should be tested on these standards. The learned counsel for the Petitioners also relied on judgments, such as K.T. Plantations, D.D. Basnett, Bishan Das and Lachham Das, in support of the proposition that the Master Circular violates Article 300 A of the Constitution because it enables the deprivation of property. There can be no quarrel with the proposition laid down in those jud....
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.... the above principle, it is sufficient to set out excerpts from R.K. Garg and Swiss Ribbons. Paragraph 8 of R.K. Garg is set out below: 8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicit ously expressed than in Morey v. Doud [351 US 457 : 1 L Ed 2d 1485 (1957)] where Frankfurter, J., said in his inimitable style: "In the utilities, tax and economic....
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....of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues. Paragraphs 51 and 120 of Swiss Ribbons exemplify the same approach and are as under: "51.Most importantly, financial creditors are, from the very beginning, involved with assessing the viability of the corporate debtor. They can, and therefore do, engage in restructuring of the loan as well as reorganisation of the corporate debtor's business when there is financial stress, which are things operational creditors do not and cannot do. Thus, preserving the corporate debtor as a going concern, while ensuring maximum recovery for all creditors being the objective of the Code, financial creditors are clearly different from operational creditors and therefore, there is obviously an intelligible differentia between the two which has a direct relation to the objects sought to be achieved by the Code." "120. The Insolvency Code is a legislation which deals with economic matters and, i....
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....olicy (section 23 of the Contract Act) and it must be borne in mind that these AT 1 bonds play an important role in ensuring that banks satisfy CRAR requirements. Indeed, from a public interest perspective, the higher the CRAR, the greater the safety and the lower the risk as regards depositors of a bank. 33. From the Petitioners' perspective, there is no doubt that they are put to heavy losses on account of the permanent write-down of these AT 1 bonds. However, all investors in AT 1 bonds were informed about the features of these bonds by way of disclosures in the information memorandum. In spite of such disclosure, the Petitioners and other investors chose to run the risk of investing in an instrument with loss absorption features. Mr.Nithyaesh Natraj contended that the shareholders of Yes Bank Ltd. have been permitted to go scot-free inasmuch as the equity share capital is not written down. This contention is not tenable because one of the features of AT 1 Bonds is that they can be written-down before the equity shares bear losses. Clause 2.3 of Annex 16 of the Master Circular specifies as under: "The write-down of any CET 1 capital shall not be required before a write-do....
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....ts that carry such high risk. In addition, in co-ordination with the Securities and Exchange Board of India, measures may be taken to avert retail participation when the terms of issue do not permit the same. While making these observations, we are conscious that ultimately it is for the RBI to take a calibrated decision on carrying out a risk-benefit analysis. 36. For the reasons set out above, the writ petition fails and the same is dismissed. Consequently, connected miscellaneous petitions are closed. There shall be no order as to costs. THE HON'BLE CHIEF JUSTICE and SENTHILKUMAR RAMAMOORTHY J., W.P.No.12586 of 2020 THE HON'BLE CHIEF JUSTICE Having gone through the exhaustive and point-wise analysis made by my esteemed colleague, Brother Justice Senthilkumar, there is no facet of the dispute that has remained untouched and, therefore, I find myself entirely in agreement with the views expressed therein, but since certain additional arguments have been advanced once again by Mr.Nithyaesh Natraj, learned counsel for the petitioners and replied to by Mr.P.Giridharan on behalf of the Reserve Bank of India, I have attempted a supplement to the conclusions drawn by my esteemed ....
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....ce amongst themselves. Notwithstanding anything to the contrary stipulated herein, the claims of the Bondholders shall be subject to the provisions of "Coupon Discretion", "Loss Absorbency" & "Other Events" mentioned in this Disclosure Document. The Bonds shall not contribute to liabilities exceeding assets of the Bank if such a balance sheet test forms part of a requirement to prove insolvency under any law or otherwise 4. While defining the Objects of the Issue, the Details of Utilization of Funds, the Coupon Rate, Clauses 11, 12 and 13 stipulate as under: Security Name 11 Objects of the Issue Augmenting Additional Tier 1 Capital and overall capital of the Bank for strengthening its capital adequacy and for enhancing its long-term resources in accordance with RBI Guidelines. 12 Details of Utilization of Funds The Bank shall utilize the proceeds of the issue for augmenting Additional Tier 1 Capital and overall capital base and for the purpose of its regular business activities & other associated business objectives. 13 Coupon Rate 9.50% p.a. subject to "Coupon Discretion" and/or "Loss Absorbency" (as the cas....
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....l instrument. The order of writeoff of the Bonds shall be as specified in the order of seniority as per this Information Memorandum and any other regulatory norms as may be stipulated by the RBI from time to time. The Bonds can be converted or written-down multiple times in case the Bank hits the PONV Trigger Level subsequent to the first conversion or write-down. The Bonds which has been written off shall not be written up. Such a decision would invariably imply that the write-off or issuance of any new shares as a result of conversion consequent upon the trigger event must occur prior to any public sector injection of capital so that the capital provided by the public sector is not diluted. The Bondholders shall not have any residual claims on the Bank including any claims which are senior to ordinary shares of the Bank), following any trigger event. In any case it should be noted that following writing-off or conversion of the instruments and claims and demands as noted above neither the Bank, nor any other person on the Bank's behalf shall be required to compensate or provide any relief, whether absolutely or contingently, to the Bondholder or a....
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....heet growth in the case of fresh injection of funds. The trigger at PONV will be evaluated both at consolidated and solo level and breach at either level will trigger write-off. 7. These clauses are being mentioned only for an illustration to indicate the involvement of the Reserve Bank of India and the steps that can be taken by it. 8. One of the salient features of the offer document is Section 3, which describes risk factors, which indicates the options available to the bank itself for taking steps, the terms whereof are categorized. 9. It is in this background that the petitioners are stated to have acquired these bonds. 10. The nature of the issue is based on the Basel III Capital Regulations, and the Reserve Bank of India had released the draft guidelines way back on 30.12.2011, followed by the circular of the same date, and followed by another circular dated 2.5.2012. The Additional Tier I Capital has been described to be an instrument based on global liquidity standards and the details whereof are contained in Basel Committee on Banking Supervision Report issued in December, 2010, published by the Bank for International Settlements. 11. The aforesaid facets are n....
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....a law as envisaged under Article 253 of the Constitution of India. Article 253 is extracted herein under: "Article 253. Legislation for giving effect to international agreements.- Notwithstanding Chapter, Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body." 16. It is urged that the Master Circular is not an outcome of any law in terms of Article 253 of the Constitution of India, in as much as the Basel III Capital Regulations, being an outcome of the Pittsburgh Summit, even if construed to be an international agreement, cannot be enforced by a subordinate legislation in the nature of a circular, unless the Parliament enacts a law to that effect. For this, the learned counsel for the petitioners has cited several decisions, but this Court refers to a couple of them: (i) the judgment in the case of Maganbhai Ishwarbhai Patel etc. v. Union of India and another, (1970) 3 SCC 400, which in turn refers to the other decisions that have been cited at the bar, and (ii) a Divis....
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....cal purposes inasmuch as the determination of the necessity or expediency is taken out of the hands of the Courts and the only ground upon which Courts may interfere is that the authority acted mala fide or never applied his mind to the matter, or applied an irrelevant principle in making a statutory order.' (emphasis supplied) 169. In Jayantilal Amrit Lal Shodhan v. F.N. Rana, AIR 1964 SC 648 the majority pointed out that there can be no assumption that the legislative functions are exclusively performed by the legislature, executive functions by the executive and judicial functions by the judiciary The court indicated that the Constitution has not made an absolute or rigid division of functions between the three agencies of the state and that at times the exercise of legislative or judicial functions are entrusted to the executive. A very important observation made by the Constitution Bench in Jayantilal (supra) was as follows: ".....in addition to these quasi-judicial and quasi- legislative functions, the executive has also been empowered by statute to exercise functions which are legislative and judicial in character and in certain instances, powers are exercised which app....
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....Counsel for the petitioners that all virtual currencies are not fully anonymous. While some, such as Dash and Monero are fully anonymous, others such as Bitcoin are pseudo-anonymous. Therefore, it is contended that banning transactions only in fully anonymous VCs could have been a better and less intrusive measure. An identical argument is advanced by Shri Nakul Dewan learned Senior Counsel for the petitioners, with reference to a report of October 2012 of the European Central Bank on "Virtual Currency Schemes". According to the said Report, Virtual Currency schemes can be classified into three types, depending upon their interaction with traditional real money and real economy. They are (i) closed virtual currency schemes basically used in an online game (ii) virtual currency schemes having a unidirectional flow (usually an inflow), with a conversion rate for purchasing the virtual currency which can subsequently be used to buy virtual goods and services, but exceptionally also to buy real goods and services and (iii) virtual currency schemes having a bidirectional flow, where they act like any other convertible currency with two exchange rates (buy and sell) which can subsequentl....
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....in India of the central government entrusted with it (v) under Section 22(1), to have the sole right to issue bank notes in India and (vi) under Section 38, to get rupees into circulation only through it, to the exclusion of the central government. Therefore, RBI cannot be equated to any other statutory body that merely serves its master. It is specifically empowered to do certain things to the exclusion of even the central government. Therefore, to place its decisions at a pedestal lower than that of even an executive decision, would do violence to the scheme of the Act. 208. On the primary question of switching over to judicial "silent mode" or "hands off mode", qua economic legislation, it is not necessary to catalogue all the decisions of this court such as State of Gujarat v. Shri Ambica Mills Ltd., (1974) 4 SCC 656, G.K. Krishnan v. Tamil Nadu, (1975) 1 SCC 375, R. K. Garg v. Union of India (supra), State of M.P. v. Nandlal Jaiswal, (1986) 4 SCC 566, P.M. Ashwathanarayana Setty v. State of Karnataka, 1989 Supp (1) SCC 696, Peerless General Finance and Co. Ltd. v. Reserve Bank of India T.Velayudhan v. Union of India, (1993) 2 SCC 582, Delhi Science Forum v. Union of In....
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....m the government of the country. To ensure such independence, a fixed tenure is granted to the Board of Governors, so that they are not bogged down by political expediencies. In the United States of America, the Chairman of the Federal Reserve is the second most powerful person next only to the President. Though the President appoints the seven-member Board of Governors of the Federal Reserve, in consultation with the Senate, each of them is appointed for a fixed tenure of fourteen years. Only one among those seven is appointed as Chairman for a period of four years. As a result of the fixed tenure of 14 years, all the members of Board of Governors survive in office more than three governments. Even the European Central Bank headquartered in Frankfurt has a President, Vice-President and four members, appointed for a period of eight years in consultation with the European Parliament. World-wide, central authorities/banks are ensured an independence, but unfortunately Section 8(4) of the RBI Act, 1934 gives a tenure not exceeding five years, as the central government may fix at the time of appointment. Though the shorter tenure and the choice given to the central government to fix th....
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.... but at the same time, the terms and conditions of the risks involved substantially economize the rights of the investors in AI Tier Bonds. The potential nature of the instrument had its inherent risks. It was a composite package that simultaneously offered a substantial rate of interest, but at the same time a status of uncertainty of the principal capital in the event of non-viability. The instrument of offer itself contains clear recitals that the Reserve Bank of India would have the authority to write-off. This is evident from the extracts that have been quoted above. Thus, to raise the argument to the level of the Reserve Bank of India not being possessed of legal authority stands curtailed by the recitals contained in the offer of instrument itself that were accepted by the petitioners without demur. 23. The flip side of the coin is that if the argument on behalf of the petitioners about the legal incapacity of the Reserve Bank of India to issue the Master Circular is accepted, then the entire investment through the offer of instrument would be without authority of law and, therefore, this argument would amount to something like dismembering the same branch of a tree on whic....
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....ay is that the Master Circular suffers from manifest arbitrariness and This Court does not the investor raise an issue of the absence of authority of law, when the bank itself while issuing the instrument of offer had made it clear that the power was available with the Reserve Bank of India to write-off the capital under the instrument, and the investments were made on such conditions existing. To this, the argument of the learned counsel for the petitioners is that the investments are property and, therefore, writing-off the investment will violate Article 300A of the Constitution of India. 29. I entirely agree with my Brother on this issue that this is not an act of expropriation of property so as to attract Article 300A of the Constitution of India. The principal amount invested itself is capable of losing its value on its own even if the Master Circular is not applied. Thus, the challenge to the Master Circular on constitutional grounds is a challenge in vain, and this Court, therefore, finds it necessary to defer all judicial review on such grounds in the light of the principles laid down by the Apex Court in the case of Internet and Mobile Association of India (supra). 30. ....