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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE THE CHIEF JUSTICE MR.NAVANITI PRASAD SINGH & THE HONOURABLE MR.JUSTICE ANTONY DOMINIC THURSDAY, THE 23RD DAY OF MARCH 2017/2ND CHAITHRA, 1939 WP(C).No.28770 of 2016 (S) --------------------------------PETITIONERS: ---------------1. SAVE SBT FORUM TKV SMARAKAM,THIRUVANANTHAPURAM-695001,REPRESENTED BY ITS CHAIRMAN,PANNIAN RAVEENDRAN. 2. BALASUBRAMANIAN.K, S/O.LATE.KESAVA NAMBISSAN.P,PUSHPAKATH HOUSE, KALAPETTY.P.O,PALAKKD-678602. 3. GIRIJA BALASUBRAMNIAN, W/O.BALASUBRAMANIAN.K,PUSHPAKATH HOUSE, KALAPETTY.P.O,PALAKKD-678602. 4. M.E.NAJUMUDHEEN, S/O.LATE.K.M.IBRAHIM,1/373,JAMEELA IBRAHIM MANZIL, KOZHIKKADA,TATTAMANGALAM.P.O,PALAKKAD-678102. 5. R.KRISHNADAS, S/O.LATE.NARAYANAN NAIR,SEETHALAYAM,METTUPALAYAM, TATTAMANGALAM,PALAKKAD-678102. 6. A.SURENDRAN, S/O.LATE K.L.ARUMUGHAM,M.C.LALAM,KOLLANGODE, PALAKKD-678506. 7. V.MURUGADAS, S/O.VISWANATHAN,CHERINGAL HOUSE,PARAKKATTUDHALLA, NANNIODE.P.O,PALAKKAD-678534. 8. K.SHANMUGHAM, S/O.LATE KUMARASWAMI.M,RUKMA,5/682(1), RAMANATHAPURAM,PALAKKAD-678001. 9. T.K.VENUGOPALAN, S/O.LATE.KUNHIRAMAN.A,KADAKSHAM,38,HILL VIEW NAGAR, DHONI.P.O,PALAKKAD-678009.
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10. V.BABU, S/O.LATE VISHWANATHAN,VELLAPPANA KALAM,P.O.PERUVEMBA,PALAKKAD-678531. 11. JOSEPH JOBY, S/O.JOBY.V.CHUNGATH,CHUNGATH VILLA,SULTANPET, PALAKKAD-678001. 12. HAMZATH, S/O.LATE SHAHUL HAMEED,SADI MAHAL,CHUNGAM, PERUVEMBA,PALAKKAD DISTRICT-678531. BY ADVS.SRI.THAMPAN THOMAS SRI.B.V.JOY SANKER SRI.SHAFFIE THOMAS SMT.HENA BAHULEYAN RESPONDENTS/RESPONDENTS: -----------------------------------
*
1.
UNION OF INDIA. REPRESENTED BY SECRETARY,MINISTRY OF FINANCE, NEW DELHI-110 001.
2.
THE SECRETARY, DEPARTMENT OF FINANCIAL SERVICES,MINISTRY OF FINANCE,NEW DELHI-110001.
3.
STATE BANK OF INDIA, STATE BANK BHAVAN,MADAME CAMA ROAD,MUMBAI-4000021, REPRESENTED BYT ITS CHAIRMAN.
4.
STATE BANK OF TRAVANCORE, HEAD OFFICE, POOJAPURA, THIRUVANANTHAPURAM - 695012. REP. BY ITS MANAGING DIRECTOR.
5.
RESERVE BANK OF INDIA, CENTRAL OFFICE BUILDING 18TH FLOOR, SHAHID BHAGAT SINGH ROAD MUMBAI - 400 001. REP. BY ITS GOVERNOR.
6.
THE STATE OF KERALA, REP. BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM - 695 001.
ADDL. RESPONDENTS 7 & 8 7.
SRI.SAJEN PETER, S/O LATE V.C. PETER, AGED 63 YEARS, R/A LATE V.C. PETER, VENGASERIL, NCC GARDENS, NCC ROAD, PEROORKADA PO, THIRUVANANTHAPURAM - 695 005.
8.
SRI. M.C. JACOB, S/O M.C. CHACKO, AGED 64 YEARS, R/A 20, AVITTAM ROAD, THIRUVANANTHAPURAM - 695011.
*[ADDL. RESPONDENTS 7 & 8 ARE IMPLEADED AS PER ORDER DATED 14.03.17 IN IA 15902/16]
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R4 BY ADV. SRI.JAWAHAR JOSE, STATE BANK OF TRAVANCORE R4 BY ADV. SRI.T.SETHUMADHAVAN (SR.) R1&2 BY ADV. SRI.S.VAIDYANATHAN, CGC R3 BY ADV. SRI.GEORGE THOMAS (MEVADA)(SR.) R3 BY ADV. SRIN.RAYNOLD FERNANDEZ R3 BY ADV. SRI.MANU GEORGE KURUVILLA R3 BY ADV. SRI.AMAL GEORGE R6 BY ADV. SRI.RANJITH THAMPAN,ADDL.ADVOCATE GENERL R7,R8 BY ADV. SRI.V.G.ARUN R7,R8 BY ADV. SRI.T.R.HARIKUMAR R1 BY SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL R5 BY SRI.MILLU DANDAPANI R6 SR. GOVT. PLEADER SRI.RAVINDRAKUMAR BABU THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23-03-2017, ALONG WITH WPC. 32859/2016 & WPC. 33284/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WWW.LIVELAW.IN WP(C).No. 28770 of 2016 (S) --------------------------------APPENDIX PETITIONER(S)' EXHIBITS ----------------------------EXHIBIT P1
TRUE COPY OF THE DETAIL REPRESENTATION DATED 22.06.2016 BEFORE THE HON'BLE CHIEF MINISTER OF KERALA
EXHIBIT P2
TRUE COPY OF THE DETAILED REPRESENTATION DATED 19.07.2016 BEFORE THE HON'BLE PRIME MINISTER OF INDIA
EXHIBIT P3
TRUE COPY OF THE MEMORANDUM DATED 24.06.2016
EXHIBIT P4
TRUE COPY OF THE DETAILS AVAILABLE FROM THE LEGISLATIVE ASSEMBLY WEB-SITE DATED 18.07.2016
EXHIBIT P5
TRUE COPY OF THE REPLY DATED 10.08.2016
EXHIBIT P6
TRUE COPY OF THE REPORT IN MALAYALA MANORAMA DAILY DATED 23.08.2016
EXHIBIT P6(A) TRUE COPY OF THE ENGLISH TRANSLATION OF EXHIBIT- P6. EXT.P7
TRUE COPY OF THE NEWSPAPER CUTTING APPEARED IN THE HINDU DAILY DATED 16.9.16.
EXT.P8
TRUE COPY OF THE MEMORANDUM OF ASSOCIATION DT. 12.9.1945 OF THE TRAVANCORE BANK LTD.
EXT.P9
TRUE COPY OF THE CIRCULAR NO.CPPD/19/16 DT. 23.8.16.
EXT.P10
TRUE COPY OF THE GAZETTE OF INDIA EXTRAORDINARY, PART II SECTION 3 SUB SECTION (I) DT. 22.02.17.
RESPONDENT(S)' EXHIBITS -----------------------------EXT.R8(a)
A TRUE COPY OF THE NEWS ITEM PUBLISHED IN THE HINDU (BUSINESS LINE) DT. 17.5.16.
EXT.R7(A)
TRUE COPY OF THE AGENDA ITEM AND THE DETAILS OF MEMORANDUM SIGNED BY MANAGING DIRECTOR OF STATE BANK OF INDIA. -------
WWW.LIVELAW.IN NAVANITI PRASAD SINGH, C.J. & ANTONY DOMINIC, J. -----------------------------------------------W. P. (C) Nos.28770, 32859 & 33284 of 2016 -----------------------------------------------Dated this the 23rd day of March, 2017 JUDGMENT Navaniti Prasad Singh, C.J. 1. aThese three writ petitions in the nature of public interest litigations raise a common question with regard to the legality of acquisition of business of the State Bank of Travancore by State Bank of India. The petitioners contend that the acquisition is not in accordance with law. The respondent State of Kerala support the petitioners. State Bank of India and erstwhile State Bank of Travancore opposed the writ petition. In one of the writ petitions, two individuals have been made respondents who are none else than two of the several Directors of the State Bank of Travancore. These two have virtually supported the writ petitioners.
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2. We have heard the parties at length. We must note that initially these writ petitions were to be taken up for urgent interim orders. But with consent of the parties, we heard the parties at length for final disposal of the writ petitions itself, at this stage. 3. To begin with, we would note that we are not involving ourselves in emotional issues which are apparently quite high and significant. A court is concerned only with legal issues leading to legality of the transaction or illegality therein. 4. The
first
contention
has
been
raised
by
Sri.Thampan Thomas, the learned counsel, leading the arguments on behalf of the petitioners in W.P.(C) No.28770 of 2016, who submits that State Bank of Travancore was created by an Act of Parliament, viz. State Bank of India (Subsidiary Banks) Act, 1959. That being so, the banking business of the State Bank of Travancore could not be taken over and/or acquired by State Bank of India. It is only
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Parliament that could have sanctioned the same. 5. We have noted the argument only for the purpose of rejecting the same, for a reading of the State Bank of India (Subsidiary Banks) Act, 1959, shows that this Act was not an Act creating a Bank under Parliamentary control, but was an Act which governs taking over of existing business of existing
banks
by
the
State.
It
was
virtually
Bank
Nationalisation Act. In the process, Travancore Bank Ltd., which was an existing Bank, was taken over and State Bank of Travancore was created as a subsidiary of State Bank of India which itself was created under the State Bank of India Act, 1955. Thus seen, it is wrong to suggest or submit that State Bank of Travancore, as created under the 1959 Act, was a Bank created by the Parliament and was under the control of Parliament and it is only Parliament that could sanction its merger or its acquisition by State Bank of India. 6. The other reason for holding so is Section 35 of the State Bank of India Act, 1955. Section 35 of the State Bank
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of India Act, 1955, clearly envisages and authorises the State Bank of India to acquire business of any other Banks subject to the conditions laid down therein which inter alia is a pre-acquisition negotiation with the sanction of the Central Government and, if so required, in consultation with the Reserve Bank of India. These are the major controls provided by the legislature itself. We have on record the fact that there was consultation amongst the two Banks. Pursuant to consultation, reports were drawn up and reports were placed before Board of Directors of both the Banks. The scheme was approved and the same was placed before the Central Government. The Central Government being satisfied, sanctioned the scheme. Thus, the legal formalities were complete. There being no infraction, therefore, this Court is unable to interfere in the matter. 7. The next contention on behalf of the petitioners was in relation to Section 36AE of the Banking Regulation Act, 1949 (for short, “the Act”). The submission is that the power
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has not been exercised either by the Central Government or by the Reserve Bank of India in accordance with the provisions of Section 36AE of the Act. For ready reference, we quote the relevant provision herein below: “36AE. Power of Central Government to acquire undertakings of banking companies in certain cases.—(1) If, upon receipt of a report from the Reserve Bank, the Central Government is satisfied that a banking company— (a)
has, on more than one occasion, failed to comply with the directions given to it in writing under section 21 or section 35A, in so far as such directions relate to banking policy, or
(b)
is being managed in a manner detrimental to the interests of its depositors, and that— (i)
in the interests of the depositors of such banking company, or
(ii)
in the interest of banking policy, or
(iii) for the better provision of credit generally or of credit to any particular section of the community or in any particular area,
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it is necessary to acquire the undertaking of such banking company, the Central Government may, after such consultation with the Reserve Bank as it thinks fit, by notified order, acquire the undertaking of such company (hereinafter referred to as the acquired bank) with effect from such date as may be specified in this behalf by the Central Government (hereinafter referred to as the appointed day): Provided that no undertaking of any banking company shall be so acquired unless such banking company has been given a reasonable opportunity of showing cause against the proposed action.” 8. A
reading of Section 36AE of the Act shows that
this power is to be exercised by the Central Government for taking over by itself of a defaulting Bank or a defaulting banking institution. It does not deal with a case where State Bank, in exercise of power conferred upon it by Section 35 of the State Bank of India Act, 1955, is acquiring another banking business. Reference to Section 36AE of the Act is therefore, only misconceived. 9. We may now refer to the stand taken by the State of Kerala in support of the petitioners. State of Kerala has
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filed a counter affidavit, being the sixth respondent in W.P. (C) No.28770 of 2016. In paragraphs 8 and 9 read with Ext.R6(b), it is submitted that, as required by Section 35 of the State Bank of India Act, on behalf of State Bank of Travancore, Sri.Adikesavan who was the Chief General Manager (Commercial Banking) of State Bank of Travancore, was appointed as the person who represented State Bank of Travancore. It is then alleged that he had apparently reservations with regard to the said acquisition. He was transferred on 20.08.2016 and no person thereafter was appointed. On the basis of the aforesaid factual situation, it is submitted that the provision of Section 35 of the State Bank of India Act with regard to pre-take over consultation, was thus, not complied with. 10. In response to the above contention, the learned counsel for the State Bank of Travancore submits that the said officer was appointed as a negotiator on 09.08.2016 by the executive committee of the Bank; that negotiations have
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been taken place, draft scheme was prepared and the same was submitted on 18.08.216; and that it was approved by Board of Directors of both the banking institutions on the same day, copy of which is produced as Ext.R6(d) in W.P. (C)
No.28770
of
2016.
He
was
then
transferred
on
20.08.2016. Thus, the factual assertion, as made by the State of Kerala, is not correct. The only objection on behalf of the State of Kerala thus is not valid. 11. On behalf of the two Directors of the erstwhile State Bank of Travancore who have been made parties as respondents 7 and 8 in W.P.(C) No.28770 of 2016, it is submitted that the decision to accept the acquisition was not a unanimous decision of the Board of Directors. There was a dissent by these two directors for various reasons. 12. The law of meeting is well established where a decision of Board of Directors is to be taken. Unless otherwise provided, the decision is by majority, and that is the
ultimate
decision
of
the
Board
of
Directors.
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Notwithstanding the said fact, it is not in dispute that the aforesaid two Directors were in gross minority. Thus, the ultimate decision of the Board of Directors of State Bank of Travancore was in favour of the process of acquisition. Their dissent would not vitiate the ultimate decision of the Board. Thus on the basis of all the arguments as noted above, we are unable to find merit in either of the three writ petitions. They are accordingly, dismissed.
Sd/NAVANITI PRASAD SINGH CHIEF JUSTICE
Sd/ANTONY DOMINIC JUDGE kns///TRUE COPY// P.S. TO JUDGE
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