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2012 DIGILAW 949 (KER)

Reserve Bank of India v. Nedungadi Bank Ltd.

2012-10-18

S.S.SATHEESACHANDRAN

body2012
JUDGMENT 1. A Short but interesting question emerges for consideration in the above petition filed under Section 482 of the Code of Criminal Procedure, for short, the ‘Code’, over the continuation and sustainability of a criminal proceeding against a bank after its amalgamation with another bank. 2. Petitioner is the Reserve Bank of India, hereinafter referred to as ‘complainant’, which filed a complaint against two persons, a Scheduled bank and its Chairman, imputing against them offences punishable under Section 46 of the Banking Regulation Act, 1949, hereinafter referred to as the ‘Act’. 3. The 1st accused, a Banking company, and the 2nd accused, its Chairman are liable to be punished for the gross irregularities in the business operations carried out by the bank flouting the provisions of the Act and directions issued by the complainant, which were detected in the annual inspection over the bank by the complainant form January to March, 2001, was its case to prosecute them. 4. Cognizance of the offences punishable under Section 46(1) and (4) of the Act taken against the accused and process issued, both accused entered appearance, and an enquiry under Section 244 of the Code recording the evidence of the complainant followed. On the evidence recorded in such enquiry, the magistrate being satisfied there is ground for presuming that the accused have committed the offences imputed, charges were framed against them, to which both pleaded not guilty. 5. Pending the proceedings in the complaint before the magistrate, on the recommendation made by the complainant, the Government passed an order of moratorium against the 1st accused bank and later ordered amalgamation of that bank with another bank, namely, Punjab National Bank, for short, the ‘PN Bank’ approving the scheme prepared by the complainant. Annexures A and A1 are the two notifications issued by the Government over the amalgamation of the 1st accused bank on the basis of the scheme prepared by the complainant/R.B.I. 6. Meanwhile, against the order framing charge, the 2nd accused, Chairman of the 1st accused bank, preferred a revision before the Sessions Judge. In that proceeding, he applied for impleading the PN Bank as an additional respondent. Sessions Judge allowed the implement. That order was challenged by the PN Bank filing a revision before this Court, numbered as Crl.R.P.No.225 of 2004. Meanwhile, against the order framing charge, the 2nd accused, Chairman of the 1st accused bank, preferred a revision before the Sessions Judge. In that proceeding, he applied for impleading the PN Bank as an additional respondent. Sessions Judge allowed the implement. That order was challenged by the PN Bank filing a revision before this Court, numbered as Crl.R.P.No.225 of 2004. In the revision filed by the 2nd accused against the order framing charge against him in the case, the PN Bank is not to be impleaded as an additional respondent, and the question whether such bank because of amalgamation is a necessary party has to be decided separately by the magistrate, was the view taken by this Court to set aside the order of impleadment of additional respondent in the revision pending before the Sessions Judge. Pursuant there to, the learned Sessions Judge dismissed the revision of the 2nd accused challenging the order framing charge against him. 7. Subsequently, Annexure B petition was moved before the magistrate styling it as under Section 246 and 273 of the Code contending that since the 1st accused is not in existence prosecution cannot be continued against it as an accused. That petition was filed by the advocate who represented the 1st accused. To that petition, complainant filed objections, in which, among others locus standi of the counsel for the 1st accused to move such a petition was also impeached, and that too after framing of charge against the accused. Learned magistrate upholding the contention canvassed for in Annexure B petition passed Annexure C order holding that further proceeding against the 1st accused shall stand dropped as abated. Against Annexure C order, complainant preferred a revision before the Sessions Court, which was turned down affirming the order of the magistrate vide Annexure D order. Annexure C order passed by the magistrate and Annexure D order of the Sessions Judge affirming such order are challenged in the petitionby the complainant invoking the inherent powers of this Court contending that such orders are patently illegal, unsustainable and passed without jurisdiction flouting the provisions of the Code and, thus, amounting to an abuse of process of the court. 8. Notice to 1st and 2nd respondents in person and also to the respective counsel appearing for them was ordered. 8. Notice to 1st and 2nd respondents in person and also to the respective counsel appearing for them was ordered. To such notice, appearance was made only on behalf of the 1st respondent with the counsel making a clarification that he is entering appearance for the PN Bank, to which the 1st accused bank was amalgamated. No appearance was made on behalf of the 2nd accused though notice was served on his counsel appearing in the court below as directed. 9. I heard the learned senior counsel Sri.P.Jacob Varghese, who appeared for the complainant and the learned senior counsel Sri.G.Shrikumar who appeared for the 1st respondent, with the latter subject to reservation made that his appearance is only on behalf of PN Bank. 10. Though some reservation has been made by the learned senior counsel appearing for the PN Bank, as to its competency, and also, continuance of any proceeding against it as the bank to which the 1st accused bank was amalgamated, for disposal of the present petition, I find a detailed deliberation over such question is not at all necessary, nor even called for. However, I may refer to the plea so made in the course of considering the question raised in the petition. 11. Learned senior counsel Sri.P.Jacob Varghese, appearing for the complainant raised two fold challenges against Annexures C and D orders, the former by the magistrate and the latter its affirmation in revision by the Sessions Judge. Once the charge is framed against the accused dropping of the proceedings on the premise that proceedings have abated on the amalgamation of the 1st accused bank with PN Bank is erroneous and unsustainable under law, submits the counsel. There is no question on any abatement of the proceedings where the 1st accused bank on amalgamation has merged with PN Bank. That bank is then liable for whatever proceedings continuing, whether it be civil or criminal, against the former bank amalgamated with it, except where the scheme prepared by the R.B.I. and approved by the G9overnment for amalgamation provides its exoneration thereof, submits the counsel. No such provision exonerating the PN Bank us provided is the further submission of the learned senior counsel to contend that the order dropping the proceedings against the 1st accused bank was totally incorrect. No such provision exonerating the PN Bank us provided is the further submission of the learned senior counsel to contend that the order dropping the proceedings against the 1st accused bank was totally incorrect. Learned Session Judge in revision has wrongly applied the provisions covered by Section 44A of the Act over the effect of amalgamation of the 1st accused bank with PN Bank, is the submission of the counsel pointing out that the amalgamation of the1st accused bank was under the provisions covered by Section 45 of the Act. Where the provisions of Section 45 of the Act applies on passing of an order of moratorium with suspension of the operation of the bank during the period of moratorium, the consequences of the order of moratorium will depend upon the orders of the Central Government it terms of the provisions covered by the aforesaid Section of the Act, submits the counsel. Applying the provisions covered by Section 44A of the Act to the facts of the case the Sessions Judge has passed Annexure D order affirming Annexure C order of the magistrate, and that is patently erroneous, submits the counsel. Per contra, learned senior counsel appearing for the PN Bank Sri.G.Shrikumar assailed the maintainability of the petition filed to challenge by sub section (2) of Section 399 of the Code. Annexure D order passed in the revision filed by the petitioner/complainant as against it has to be treated as final, and no further challenge at its instance invoking the inherent powers of this Court under Section 482 of the Code is entertainable, is the submission of the counsel. Where the 1st accused bank is no longer in existence the mere fact that its name continues with the Registrar of Companies, even if that be so, cannot sustain further criminal proceedings against that bank, leave along against the bank with which it had been amalgamated, is the submission of the counsel to contend that no interference with Annexure D order affirming Annexure C order is called for. 12. Entertainability of the present petition has been challenged banking upon sub section (3) of Section 399 of the Code, which states that the decision of the Sessions Judge in revision shall be final on the party who had moved such revision, interdicting him from taking any further proceeding before the High Court or any other court. 12. Entertainability of the present petition has been challenged banking upon sub section (3) of Section 399 of the Code, which states that the decision of the Sessions Judge in revision shall be final on the party who had moved such revision, interdicting him from taking any further proceeding before the High Court or any other court. That bar is against the entertaining of a second revision form the party who had moved the Session Judge for revision and a decision rendered thereof. Of course that interdiction applicable to such a party where he seeks to invoke the inherent jurisdiction of this Court against the orders passed in his revision by the Sessions Judge has to be taken note of in considering among other things whether it is a fit case for exercise of inherent powers by this Court. But, by no stretch of imagination, it can be said that the bar so applicable to a party who had exercise his right of revision before the Sessions Judge places restriction over the exercise of inherent powers of this court, nor in its entertaining of any petition even from such a party under Section 482 of the Code. Section 482 of the Code opens with an emphatic affirmation that “Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court” in its exercise of criminal jurisdiction “to make such orders as may be necessary of give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.” High Court can exercise such jurisdiction even suo motu or at the instance of any of the party to a proceedings. It can exercise such inherent power while exercising other jurisdiction such as appellate or Revisional jurisdiction. Such inherent jurisdiction can be exercised in respect to substantive as well as procedural matters. Irrespective of the nature of the proceedings it can be exercised even in respect of incider matters, to secure the ends of justice or to prevent abuse of process of the court. Such inherent jurisdiction can be exercised in respect to substantive as well as procedural matters. Irrespective of the nature of the proceedings it can be exercised even in respect of incider matters, to secure the ends of justice or to prevent abuse of process of the court. If an order without jurisdiction has been passed by the magistrate and the challenge thereof at the instance of the aggrieved party has been turned down in revision by the Sessions Judge, the bar under Section 399 (2) of the Code interdicting him from having a further challenge by a second revision before this Court cannot be stretched to such an extent as foreclosing his right to assail such order under Section 482 of the Code seeking exercise of its inherent jurisdiction to do so. So much so, the legality and sustainability of the order challenged with reference to the facts and circumstances involved in the case has to be examined, but, within the scope and ambit covered by Section 482 of the Code to consider whether exercise of inherent power is called for or not. 13. In the present case, on the facts presented, it has to be stated that the petition filed by the counsel appearing for the 1st accused (Annexure B) before the magistrate was not entertainable. That petition filed under Section 246 and 273 of the Code setting forth a plea that the 1st accused was not in existence was totally misconceived. If the accused is not more, abatement of the proceedings will follow. A counsel who represented him earlier at best can report his death but no longer file any petition and prosecute it to have a decision whether an abatement has taken place or not. Strengely enough, ignoring the in competency of the advocate to file the petition, that too under the provisions quoted, which are totally inapplicable, the magistrate has entered a decision on the disputed question over the abatement of the proceedings against the 1st accused consequent to its amalgamation with another bank under the scheme prepared by the R.B.I. and approved by the Government. Annexure C order passed by the magistrate on Annexure B petition moved by the counsel of the 1st accused with the case can accused as to its non-existence, to hold that there is an abatement of the proceedings against the 1st accused, is thoroughly vitiated, and patently illegal. Annexure C order passed by the magistrate on Annexure B petition moved by the counsel of the 1st accused with the case can accused as to its non-existence, to hold that there is an abatement of the proceedings against the 1st accused, is thoroughly vitiated, and patently illegal. Annexure D order passed by the Sessions Judge affirming Annexure C order, in the circumstance, needless to state, is erroneous and unsustainable. 14. So far as the reservation made by the senior counsel appearing for the PN Bank that his appearance is only on its behalf, taking note of the amalgamation of the 1st accused bank with the PN Bank, I need only point out that whether prosecution can be continued against the 1st accused bank and also count it be represented by the PN Bank is essentially a matter that has to be gone into by the magistrate if only a challenge thereof is raised and canvassed by the PN Bank appearing before the magistrate. In a criminal proceedings against a company, provision covered by Section 305 of the Code is applicable. No one can insist that the complainant when he prosecutes a company for any offence should also include in the array of the accused some other person competent to represent that company. A company being a legal entity it can sue or be sued in its name, and similarly in criminal proceedings it can prosecute or be prosecuted. Sub section (2) of Section 305 of the Code clearly spells out that where a corporation is the accused person, it may appoint a representative for the purpose of the enquiry or trial. A Criminal court before which a company is proceeded as an accused can direct the complainant to furnished particulars for service on the company. Where notice is served on the company it shall be the outlook of the company, a legal entity, to appoint a representative to defend it in the proceedings. A Criminal court before which a company is proceeded as an accused can direct the complainant to furnished particulars for service on the company. Where notice is served on the company it shall be the outlook of the company, a legal entity, to appoint a representative to defend it in the proceedings. In the present case where the 1st accused bank has engaged a counsel to represent it in the proceedings and after recording the evidence of the complainant, charge has been framed against both accused in the case, whether on amalgamation of the 1st accused bank with another bank has it ceased to exist or not, if at all such a plea is raised or made out from the materials tendered, has to be examined with reference to the provisions of the Act and also the scheme prepared by the R.B.I. and approved by the Government for the amalgamation of that bank. 15. Learned senior counsel appearing for the petitioner taking exception to the reasoning followed by the Sessions Judge in revision for affirming Annexure C order passed by the magistrate has contended that the relevant section under that Act applicable over the amalgamation of the 1st accused bank is not Section 45A but Section 46 of the Act. Submission made by the learned senior counsel is unassailable. Amalgamation of a bank resorting the provisions under Section 44A of the Act comes into vogue when a scheme containing the terms of such amalgamation placed in draft form is approved by a resolution passed by a majority in number representing two-thirds in value of the shareholders of both the Banking companies at a meeting called for the purpose. Whereas amalgamation of a bank with another bank under Section 44A is based on the approval of the required majority of the shareholders of both banks what is covered under Section 45 of the Act is a compulsory order of amalgamation of one bank with another under certain circumstances at the instance of the R.B.I. That takes place after an order of moratorium is made by the Government over a bank on the application made by the R.B.I where it has good reason so to do. What will be the effect to that order of moratorium and what is the position of the bank during the continuance of the period of moratorium and what are the consequences that may ensure once an order of moratorium is passed are governed by the provisions covered by that Section. Sub sections (2) and (4) of Section 45 of the Act, which alone in the present case is relevant, read thus: 45. Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamations:- (1) ……………………………………………………………………. (2) The Central Government, after considering the application made by the Reserve Bank under sub section (1), may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months. (3) ……………………………………………………………. (4) During the period of moratorium, if the Reserve Bank is satisfied that- (a) in the public interest; or (b) in the interests of the depositors; or (c) in order to secure the proper management of the banking company; or (d) in the interests of the banking system of the country as a whole, it is necessary so to do, the Reserve Bank may prepare a scheme- (i) for the reconstruction of the banking company, or (ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as “the transference bank”). Provisions made in the aforesaid section delineate the empowerment of the Reserve Bank on satisfaction of any of the grounds covered by clauses (a) to (d) of sub section (4) of Section 45 of the Act to Prepare a scheme for the reconstruction of the Banking company or for its amalgamation with any other banking institution. So, once a moratorium is declared and a scheme prepared by the R.B.I. is approved and notified by the Government, how far the proceedings, whether it be civil or criminal, pending against on the bank amalgamated can be continued or binding on the bank with which the former was amalgamated, necessarily, has to be examined with reference to the terms of the scheme and also the provisions of the Act. If at all the PN Bank has any case that under the terms of the scheme of amalgamation or by virtue of any of the provisions of the Act, it cannot be prosecuted in relation to the criminal proceedings already initiated against 1st accused bank, that has to be canvassed before the magistrate for cessation of the criminal proceedings against the 1st accused bank. Having been given notice of the criminal proceedings pending against the 1st accused bank which had been amalgamated with the PN Bank, it cannot insist for its impleadment by the complainant to make it as an additional accused in the proceedings. Now that the charge had been framed against the 1st accused, admittedly, a legal entity at the time of filing of the complaint, on its amalgamation with another bank in proceedings under Section 45 of the Act, no question of impleadment of the bank with which it was amalgamated as an additional accused at the instance of the complainant arise. The bank with which the 1st accused bank has been amalgamated, with reference to the terms of the scheme pf amalgamation or the provisions of the Act or under any other law is able to show that the proceedings initiated against the 1st accused bank cannot be continued for one reason or other it can definitely set forth such a challenge against the proceedings before the magistrate. That bank after amalgamation of the 1st accused bank with it in the absence of any exclusion under the terms of the scheme prepared by the R.B.I. and approved by the government, normally, has to prosecute and defend all proceedings, civil or criminal, before a court of law whether it has been proceeded and continued before or after the declaration of an order of moratorium against the 1st accused bank. 16. A complaint filed more than a decade ago by the premier Bank of the nation, R.B.I., which controls and regulates all other banking companies, that too against a bank and its chairman over alleged irregularities and violations of the provisions of the Act and directions given by it, still awaits for further steps for its completion after framing of charge against the accused. Such delay evidently is on account of orders passed on a petition filed and challenges made to the orders passed thereof, without even taking notice that such petition by the counsel for one of the accused was itself not entertainable. In the circumstance, there will be direction to the magistrate to complete the proceedings in the case as expeditiously as possible, at any rate, within a period of six months from the date of receipt/production of a copy of this order. Annexure C order of the magistrate and Annexure D order affirming it by the Sessions Judge, both of them, are set aside. Petition filed by the counsel for the 1st accused shall stand rejected. Crl.M.C. is allowed.