Reserve Bank of India vs State Bank of India

S.M. Jhunjhunuwala, J.—By Company Petition No. 123 of 1993 the Reserve Bank of India (RBI for short) seeks that the offer of the State bank of India (SBI for short) for purchase of the Bombay branch of Bank of Credit and Commerce International (Overseas) Ltd. (Bombay branch of BCCI for short) on the terms and conditions as contained in the draft agreement, exhibit "G" thereto, be approved by this court and the provisional liquidator of the Bombay branch of BCCI be directed to effect the sale thereof to the SBI and/or its subsidiary to be formed. The provisional liquidator of the Bombay branch of BCCI has submitted the report bearing No. 63, dated March 5, 1993, and has sought that approval of this court be accorded to the said offer of the SBI and the provisional liquidator be authorised to execute the agreement and take necessary steps for completion of sale.

Briefly stated, the relevant facts are as under :

(a) The Bank of Credit and Commerce (Overseas) International Ltd. was incorporated in Grant Cayman Islands on November 25, 1975, and has its registered office at P. O. Box 1359, Ansbacher House, Fort Street, George Town, Grand Cayman, the Cayman Islands BW-I (for short, referred to as "BCCI(O) "). A licence to carry on banking business was granted to it under the Companies Law, 1960 (since revised), as applicable to the Cayman Islands. BCCI(O) had applied for and been granted a licence to carry on banking business in India u/s 22 of the Banking Regulation Act, 1949 (for short referred to as "the said Banking Act").

(b) By an order dated July 5, 1991, the Governor of the Cayman Islands having formed an opinion that BCCI(O) was likely to be unable to meet its obligations and that it was carrying on its business in a manner detrimental to the interests of its depositors and other creditors, appointed Ian Wight to assume control of BCCI(O) with the powers of a receiver appointed u/s 18 of the Banking Law as applicable in the Cayman Islands and to assume control and custody of its affairs, premises, assets, books and records wheresoever situated.

(c) On July 6, 1991, the RBI instructed the Bombay branch of BCCI to suspend its business and on July 15, 1991, the RBI filed Company Petition No. 389 of 1991 in this court for winding up of the Bombay branch of BCCI u/s 38 of the said Banking Act and for appointment of the SBI as provisional liquidator of the Bombay branch of BCCI. On the same day, the RBI also moved an application, being Company Application No. 203 of 1991 in the said Company Petition No. 389 of 1991 for interim and ad interim orders as prayed for therein.

(d) On July 15, 1991, this court accepted the said Company Petition No. 389 of 1991 and appointed the SBI Central Office as provisional liquidator of the Bombay branch of BCCI and directed the provisional liquidator so appointed to take custody, possession and control of the entire assets, properties and affairs of the Bombay branch of BCCI.

(e) Pursuant to the said order dated July 15, 1991, the provisional liquidator so appointed on the same day appointed S. M. Parande, the then Chief General Manager and now Deputy Managing Director of the SBI as the authorised officer to perform the functions of the provisional liquidator.

(f) By an order dated January 14, 1992, passed by the Grand Court of the Cayman Islands, Ian Wight, Robert Axford and Michael Mackey of George Town, Grand Cayman were appointed as official liquidators of BCCI(O) (for short referred to as "the official liquidators"), with powers, inter alia, to take possession, collect and get in all properties and assets to which BCCI(O) was or appeared to be entitled and to do all things as might be necessary or expedient for the protection of BCCI(O) assets and to do all things as might be necessary and expedient for the beneficial realisation of the properties and assets of BCCI(O).

(g) A memorandum of understanding (for short, referred as "MOU") dated January 16, 1992, was entered into by and between the official liquidator and the RBI for disposal of the Bombay branch of BCCI whereunder the Bombay branch of BCCI was agreed to be sold to one of the buyers to be approved by RBI on the terms and conditions mentioned therein. By the said MOU, the purchaser was, inter alia, required to assume full responsibility for meeting 100 per cent. dues of the depositors and other creditors of the Bombay branch of BCCI including the liabilities of the staff of the Bombay branch of BCCI and all liabilities of the Bombay branch of BCCI to BCCI(O) and other BCCI(O) group entitles.

(h) On January 22, 1992, this court admitted the said Company Petition No. 389 of 1991, and confirmed the ad interim order passed on July 15, 1991, appointing the SBI Central Office as provisional liquidator of the Bombay branch of BCCI. The business a the Bombay branch of BCCI has accordingly been suspended and the provisional liquidator so appointed is presently in charge of the Bombay branch of BCCI and is looking after the affairs thereof subject to the final orders to be passed by this court on the said Company Petition No. 389 of 1991 filed by the RBI.

(i) In the month of February, 1992, the provisional liquidator of the Bombay branch of BCCI submitted its report No. 29 to this court, inter alia, seeking directions from this court for approval of the proposal contained in the said MOU. By its order dated February 14, 1992, this court gave directions to the provisional liquidator of the Bombay branch of BCCI approving the said MOU subject to certain conditions and safeguards stipulated therein.

(j) In pursuance of the said MOU as approved by this court, the official liquidator of BCCI(O) invited offers for sale of the Bombay branch of BCCI as a going concern on "as is where is" basis and for a slump consideration. On December 26, 1992, the SBI offered to purchase the business and undertaking of the Bombay branch of BCCI as a going concern for a slump consideration and forwarded a draft agreement for sale containing the terms and conditions on which the SBI intended to purchase the same along therewith.

(k) By an order passed on February 12, 1993, the Grand Court of the Cayman Islands has approved the said offer of the SBI and the said draft agreement and authorised the official liquidators of BCCI(O) to enter into the said agreement. The RBI has recommended to the provisional liquidator of the Bombay branch of BCCI that subject to the permission and orders of this court, the provisional liquidator of the Bombay branch of BCCI may sell the business and undertaking of the Bombay branch of BCCI to the SBI and/or its subsidiary to be formed in accordance with the terms of the said draft agreement.

In these circumstances, the present petition has been filed by the RBI and the provisional liquidator of the Bombay branch of BCCI has submitted its said report for the purchases of getting the said draft agreement approved as aforesaid.

Mr. Andhyarujina, learned counsel appearing for the RBI, the petitioners, has submitted that the said MOU has already been approved by this court as per the order passed on February 14, 1992. He has further submitted that the official liquidators of BCCI(O) have consented to the sale of business and undertaking of the Bombay branch of BCCI to the SBI and/or its subsidiary as provided for in the said draft agreement and the permission of the Grant Court of the Cayman Islands in this respect has already been obtained. He has also submitted that the assets of the Bombay branch of BCCI along with all its liabilities would be taken over under the said draft agreement by the SBI and/or its subsidiary as intending purchaser and that the services of all such employees employed with the Bombay branch of BCCI who would opt to continue in employment with the intending purchaser would be protected. Even such of the employees who shall be unwilling to continue in the employment of the intending purchaser, shall be paid such amounts as may be paid as if termination has been effected if the Bombay branch of BCCI had continued its business. He has also submitted that the intending purchaser has agreed to assume all liabilities of the labour employed with the Bombay branch of BCCI. Mr. Andhyarujina has further submitted that except the current account holders with the Bombay branch of BCCI all other depositors would get interest on the amounts deposited at the contractual rate. He has further submitted that the provisional liquidator of the Bombay branch of BCCI has u/s 450(3) of the Companies Act, 1956, power to complete sale of the business and undertaking of the Bombay branch of BCCI on "as is where is" basis in favour of the SBI and/or its subsidiary. He also submitted that the RBI has opined that the sale of the business and undertaking of the Bombay branch of BCCI on the terms and conditions contained in the said draft agreement is for the public interest and beneficial to the employees employed with the Bombay branch of BCCI. In the submission of Mr. Andhyarujina, the proposed sale of business and undertaking of the Bombay branch of BCCI on the terms and conditions contained in the said draft agreement satisfies basically the depositors, creditors and employees of the Bombay branch of BCCI and as such, approval of this court thereto be accorded.

Mr. Chagla, learned counsel appearing for the SBI and the intending purchaser, has submitted that the Bombay branch of BCCI has not yet been ordered to be wound up and as such, the approval of this court in respect of the proposed sale of the business and undertaking of the Bombay branch of BCCI in favour of the SBI and/or its subsidiary as intending purchaser on the terms and conditions contained in the said draft agreement has been sought as it is in the interest of all parties concerned. Mr. Chagla has further submitted that though the SBI and/or its subsidiary as intending purchaser shall under the terms and conditions of the said draft agreement pay interest on demand deposits, savings and time deposits and also in respect of non-resident (external) accounts and non-resident foreign currency accounts as provided therein, no interest shall be paid to the current account holders with the Bombay branch of BCCI as under the directives issued by the RBI to scheduled commercial banks relating to interest rates on domestic, NRE and FCNR deposits, payment of interest to current account holders is prohibited. Mr. Chagla has further submitted that the list of properties of the Bombay branch of BCCI agreed to be taken over by the SBI and/or its subsidiary as intending purchaser under the said draft agreement includes even the office premises bearing No. 4 at Atlanta Building situated at Nariman Point, Bombay-400 021 (for short, "Atlanta premises") and two residential premises situated at 184 and 222, Twin Star Jupiter Co-operative Housing Society Limited, 41 Cuffe Parade, Bombay-400 005, together with car parking spaces, mentioned in agreements dated May 17, 1989, and January 1, 1991, entered into with the owners thereof (for short, "premises in Jupiter"). The Bombay branch of BCCI had taken the Atlanta premises on lease. The premises in Jupiter were taken on leave and licence basis. Though according to the lessors of the Atlanta premises and the owners of the premises in Jupiter their rights, title and interest therein cannot be assigned in favour of the SBI and/or its subsidiary as intending purchaser and as such have filed separate Company Petitions bearing Nos. 357 of 1992, 222 of 1993 and 206 of 1993, respectively, inter alia, to recover possession thereof from the Bombay branch of BCCI, Mr. Chagla has submitted that despite the contentions of the lessors and owners raised in the said company petitions, the SBI and/or its subsidiary as intending purchaser would be willing to complete the purchase of the business and undertaking of the Bombay branch of BCCI on the terms and conditions contained in the said draft agreement on the approval to the said draft agreement being granted by this court. With intent not to adversely affect the contentions of the lessors of the Atlanta premises in the said Company Petition No. 357 of 1992 pending in this court by reason of this court approving the said draft agreement in this petition, both the RBI and the SBI through their counsel have agreed and undertaken to this court that none of them nor their subsidiary or subsidiaries shall contend or plead that the rights and claims of Vaz Forwarding Ltd. in the Atlanta premises including those taken in the said Company Petition No. 357 of 1992 and the affidavit of one Mario Vaz affirmed on March 11, 1993, filed in this petition and questions pertaining to the power of the provisional liquidator of the Bombay branch of BCCI to assign the Atlanta premises as also the validity of such assignment are affected in any manner by virtue of grant of approval to the said draft agreement in this petition or sale of the Bombay branch of BCCI or the order of this court in this petition. The SBI and/or its subsidiary have further agreed and undertaken that they will not assign, sell or transfer the Atlanta premises without obtaining orders of this court. As regards premises in Jupiter, Mr. Chagla has stated that on the owners thereof refunding the deposit amounts lying deposited with them under the said respective agreements, the SBI and/or its subsidiary as intending purchaser shall hand over by January 14, 1994, possession of the premises under the said agreement dated January 1, 1991, and by April 30, 1994, the possession of the premises mentioned in the said agreement dated May 17, 1989. Mr. Chagla has further stated that even if the possession of the Atlanta premises and/or premises in Jupiter in respect whereof Company Petitions Nos. 357 of 1992, 206 of 1993 and 222 of 1993 have been filed and are pending, shall not for any reason whatsoever be handed over to the SBI and/or its subsidiary as intending purchaser, the quantum of slump consideration of Rs. 40 crores agreed to be paid to the official liquidators of BCCI(O) shall not be adversely affected. In view of the undertakings given and statements made, Mr. Chagla has submitted that the interim order passed in Company Petition No. 357 of 1992 on July 23, 1992, suitably modified and sanction to the said draft agreement be accorded by this court.

Mr. Ashok H. Desai, learned counsel appearing for the said Vaz Forwarding Ltd., who are petitioners in Company Petition No. 357 of 1992, pending in this court and who have also filed an affidavit to oppose the grant of approval to the said draft agreement by this court, has submitted that the Atlanta premises were given on lease to the Bombay branch of BCCI for running its bank and the provisional liquidator of the Bombay branch of BCCI can neither transfer the benefit of the lease to any other party nor permit any other party to use the same more particularly in view of termination of the said lease. In the submission of Mr. Ashok Desai, since under the said draft agreement, the Atlanta premises are intended to be assigned and/or transferred in favour of the SBI and/or its subsidiary as intending purchaser of the business and undertaking of the Bombay branch of BCCI, no approval to the said draft agreement should be granted by this court.

Mr. Dilip Dalal, learned counsel appearing for the owner of the said residential flat bearing No. 222 forming part of the premises in Jupiter, though initially opposed the petition, in view of the undertaking given by the SBI and/or its subsidiary as intending purchaser to the effect that at the expiry date of the said agreement dated January 1, 1991, viz., January 14, 1994, the possession of the said flat along with car parking space would be handed over to the owner thereof who is petitioner in Company Petition No. 206 of 1993, on the owner making payment and/or refunding the deposit amount of Rs. 25 lakhs lying deposited with him under the said agreement to the SBI and/or its subsidiary as intending purchaser, did not press his objection and agreed to obtain orders in the said Company Petition No. 206 of 1993, in terms of the minutes initialled by him and others.

Ms. Rajni Iyer, learned counsel appearing for the owner of the said residential flat bearing No. 184 forming part of the premises in Jupiter, though initially opposed the petition, in view of the undertaking given by the SBI and/or its subsidiary as intending purchaser to the effect that by December 31, 1993, the possession of the said flat along with two car parking spaces would be handed over to the owner thereof who is petitioner in the said Company Petition No. 222 of 1993 on the owner making payment and/or refunding the deposit amount of Rs. 25 lakhs lying deposited with her under the said agreement dated May 17, 1989, to the SBI and/or its subsidiary as intending purchaser, did not press her objection and agreed to obtain orders in the said Company Petition No. 222 of 1993, in terms of the minutes agreed to be filed therein.

Mr. Shah as also Mr. Vyapari, learned counsel appearing for the depositors with the Bombay branch of BCCI, have submitted that in respect of depositors other than current account holders, the rate of interest payable by the SBI and/or its subsidiary as intending purchaser should not be restricted to the contractual rate of interest and that such depositors be paid interest at the prevailing rate. As regards current account holders with the Bombay branch of BCCI, it has been submitted that such current account holders be also paid interest by the SBI and/or its subsidiary as intending purchaser on the amounts lying to their credit with the Bombay branch of BCCI more particularly as such account holders have not been able to operate upon their respective accounts since the month of July, 1991.

Mr. Pungalia, learned counsel appearing for Emirates, an international Airlines of United Arabs Emirates incorporated and having its head office at Dubai, has submitted that for certain reasons part of the money of Emirates lying with the Bombay branch of BCCI was required to be put in its current account with the said bank and if the said bank has derived any income by making investment/s of such amount, the income so derived by the Bombay branch of BCCI be paid over to Emirates.

Mr. Kumar Desai, learned counsel appearing for the employees employed with the Bombay branch of BCCI, has submitted that at present there are 141 employees, 36 officers, 3 trainee officers, 27 clerks, 23 secretaries and 23 peons working with the Bombay branch of BCCI. Mr. Kumar Desai has further submitted that though under the said draft agreement the SBI and/or its subsidiary as intending purchaser shall continue in its employment such of the employees as are still employed with the Bombay branch of BCCI who are willing to continue in such employment, no particulars as to their service conditions including emoluments and benefits to which they would be entitled on their employment being continued have either been given in the said draft agreement or otherwise communicated to such employees and as such, approval of this court to the said draft agreement should not be accorded. Mr. Kumar Desai has also submitted that section 45 of the said Banking Act applies where the RBI prepares a scheme for reconstruction of the banking company or for amalgamation of the banking company with any other banking institution and not to the facts of the instant case. Alternatively, Mr. Kumar Desai has submitted that if the provisions of said section 45 apply, the requirements thereof have not been complied with since the service conditions including emoluments and benefits to which the employees opting to continue with their employment would be entitled to have not been specified. In support of his submissions, Mr. Kumar Desai has put reliance on the case of State Bank of Travancore Vs. Elias Elias and Others, , as also on the case of K. I. Shephard v. Union of India, [1988] 63 Comp Cas 244 (SC).

Mr. Thakker, learned counsel appearing for the provisional liquidator of the Bombay branch of BCCI, has submitted that if the sanction to the said draft agreement is accorded by this court, the provisional liquidator should also be permitted to sign and execute the agreement.

On and from July 6, 1991, the Bombay branch of BCCI suspended its business and the RBI, in the facts of the case, being of its considered opinion that continuance of the Bombay branch of BCCI would be prejudicial to the interests of its depositors, filed Company Petition No. 389 of 1991, for winding up of the Bombay branch of BCCI u/s 38 of the said Banking Act, which is pending in this court. During the pendency of the petition, negotiations had taken place and the said MOU was arrived at which has been approved by this court on February 14, 1992. In pursuance of the MOU, the official liquidators of BCCI(O) did invite offers from various parties to purchase the establishment or undertaking of the Bombay branch of BCCI as a going concern on "as is where is" basis and for a slump consideration. After conclusion of negotiations, the official liquidators of BCCI(O) communicated to the RBI the offer made by SBI for purchase of the undertaking of the Bombay branch of BCCI subject to the terms and conditions as incorporated in the said draft agreement between SBI as provisional liquidator of the Bombay branch of BCCI, the official liquidators of BCCI(O) as confirming parties and the SBI as promoter of the purchaser and forwarded the same to the RBI. The Grand Court of Cayman Islands has granted its approval to the said offer on February 12, 1993. The RBI has examined the said offer of the SBI and has opined that it is in the interest of the depositors, creditors and employees of the Bombay branch of BCCI and has recommended to the provisional liquidator of Bombay branch of BCCI that subject to the permission and orders of this court, the provisional liquidator may sell the undertaking of the Bombay branch of BCCI to the SBI and/or its subsidiary to be formed in accordance with the terms of the said draft agreement.

Under the terms of the said draft agreement, the SBI acting in its capacity as the promoter of a banking company being incorporated by it to take over the Bombay branch of BCCI as a going concern for a slump consideration of Rs. 40 crores has unconditionally and irrevocably undertaken to the provisional liquidator of the Bombay branch of BCCI that it shall take all the steps and shall do such acts, deeds and things as may be required for ensuring that the purchase of undertaking of the Bombay branch of BCCI shall take place not later than 6 p.m. (Indian time) on the date expiring six months from the date of the order of this court approving the said draft agreement (for short, referred as "the end date") and for that purpose procure the incorporation of its subsidiary (for short "purchaser") on or before the expiration of the period of three months from the date of the order of this court approving the said draft agreement (for short, "the last day of the said period of three months is hereinafter referred to as the "interim date") and shall cause the purchaser to discharge all its obligations and liabilities as provided in the said draft agreement. It is also agreed and provided under the said draft agreement that in the event of the SBI acting in its capacity as the promoter of a banking company being incorporated by it to take over the Bombay branch of BCCI as a going concern failing to procure the incorporation of the purchaser on or before the interim date for any reason, the SBI shall forthwith on the interim date sign and enter into the said agreement for sale as itself being the purchaser of the Bombay branch of BCCI, pay the balance consideration payable thereunder and shall complete the purchase of the undertaking of the Bombay branch of BCCI pursuant to the terms of the said agreement at the end date. Under the said draft agreement, the purchaser has agreed to assume all the liabilities and execute such documents as the provisional liquidator of the Bombay branch of BCCI and/or official liquidators of BCCI(O) may reasonably requested from time to time in order to effect the assumption by the purchaser of the liabilities. The purchaser has also agreed and undertaken to pay on the due date for payment all amounts due by the Bombay branch of BCCI to any creditor in respect of the liabilities. Under the said draft agreement, the SBI acting in its capacity as the promoter of a banking company being incorporated by it to take over the Bombay branch of BCCI as a going concern has agreed to guarantee unconditionally and irrevocably to the provisional liquidator of the Bombay branch of BCCI and to the official liquidators of BCCI(O) that the purchaser shall discharge all its obligations and liabilities thereunder and that in the event of the purchaser failing and/or neglecting to discharge all or any of its obligations and liabilities thereunder, the SBI shall discharge and perform the same as if the SBI was the purchaser thereunder. The obligations and liabilities of the SBI as promoter of the purchaser under the said draft agreement are agreed to be in its capacity as principal debtor. The SBI, being a premier bank in India has sufficient assets to discharge the liabilities undertaken under the said draft agreement and is capable of continuing the business of the Bombay branch of BCCI to the benefit of the creditors, depositors and employees and the general public in the event of the banking company to be formed by the SBI being not formed or incorporated.

The liabilities to be assumed by the purchaser under the said draft agreement include demand deposits (including interest), savings and time deposits (including interest), non-resident (external) accounts (including interest), non-resident foreign currency accounts (including interest) and also liabilities to the employees more particularly described therein. By and large, the depositors are not objecting to the approval being accorded to the said draft agreement except that the depositors other than current account holders desire to be paid interest at the prevailing rates rather than at the contractual rates. So far as current account holders are concerned, since payment of interest to them is not provided for under the said agreement, they desire that they be also paid interest on the amounts lying to their credit in the current accounts with the Bombay branch of BCCI. The term for payment of interest on deposit amounts received by the Bombay branch of BCCI other than in current accounts as provided for in the said draft agreement is reasonable and justified and warrants no interference by this court.

Section 35A of the said Banking Act reads as under :

"35A. Power of the Reserve Bank to give directions. - (1) Where the Reserve Bank is satisfied that -

(a) in the public interest; or

(aa) in the interest of banking policy; or

(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

(c) to secure the proper management of any banking company generally;

it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions and it thinks fit, subject to which the modification or cancellation shall have effect."

In exercise of the powers conferred by sections 21 and 35A of the said Banking Act, the RBI has issued directives to scheduled commercial banks relating to interest rates on domestic, NRE and FCNR deposits. These directives being statutory have the force of law. Directive 17 so issued reads as under :

"17. Prohibitions. - No bank shall -

(a) pay interest on current account save as provided in paragraphs 7 and 13(b) above......."

Directive 7 pertains to discretion to pay interest on current accounts maintained by regional rural banks with a commercial bank and directive 13(b) pertains to interest payable on the deposit account of a deceased depositor and as such, does not apply to the facts of the instant case. In the circumstances, though the grievance made by the current account holders with the Bombay branch of BCCI cannot be said to be wholly unjustified, in view of the statutory bar, no interest can be paid to them.

There is one more factor which must also be taken into consideration while weighing the said offer of the SBI on its own merits. Under the said draft agreement, all depositors with the Bombay branch of the BCCI shall be paid 100 per cent. of the amounts lying to their credit in their respective accounts whereas if the said draft agreement is not approved by this court and the depositors are left to participate in the global liquidation faced by BCCI(O), they may not get more than 16 per cent. to 20 per cent. of their deposit amounts, which under no circumstances can be said to be beneficial to the depositors.

The RBI has examined the said offer of the SBI and has opined that it is in the interest of the depositors, creditors and employees of the Bombay branch of BCCI and has recommended to the provisional liquidator of the Bombay branch of BCCI that subject to the permission and orders of this court, the business and undertaking of the Bombay branch of BCCI be sold as a going concern on "as is where is" basis on the terms and conditions contained in the said draft agreement. The Bombay branch of BCCI though a foreign company is a banking company for the purposes of the said Banking Act and as such section 45 of the said Banking Act applies. Section 45(5)(i) of the said Banking Act reads as under :

"(i) the continuance of the services of all the employees of the banking company (excepting such of them as not being workmen within the meaning of the Industrial disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee-bank at the same remuneration and on the same terms and conditions of service, which they were getting or, as the case may be, by which they were being governed, immediately before the date of the order of moratorium :

Provided that the scheme shall contain a provision that -

(i) the banking company shall pay or grant not later than the expiry of the period of three years from the date on which the scheme is sanctioned by the Central Government to the said employees the same remuneration and the same terms and conditions of service as are at the time of such payment or grant, applicable to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the Reserve Bank (whose determination in this respect shall be final);

(ii) the transferee-bank shall pay or grant not later than the expiry of the aforesaid period of three years, to the said employees the same remuneration and the same terms and conditions of service as are, at the time of such payment or grant, applicable to the other employees of corresponding rank or status of the transferee-bank subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee-bank :

Provided further that if in any case under clause (ii) of the first proviso any doubt or difference arises as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee-bank, the doubt or difference shall be referred, before the expiry of a period of three years from the date of the payment or grant mentioned in that clause, to the Reserve Bank whose decision thereon shall be final."

Clause 11 of the said draft agreement deals with the employees of the Bombay branch of BCCI. Under the said term, the SBI and/or its subsidiary as intending purchaser shall continue in its employment as from the completion date such of the employees as are still employed in the Bombay branch of BCCI on the completion date mentioned therein who are willing to continue in such employment. In respect of such employees, the purchaser shall pay or grant the same remuneration and the same terms and conditions of service as are at the time of such payment or grant applicable to the employees of corresponding rank or status of a comparable Indian banking company or if the purchaser were to be a public sector bank as applicable to other employees of corresponding rank or status of the purchaser subject to the qualifications and experience of the employees being the same as or equivalent to those of such of the employees of that purchaser''s bank. It is also provided in the said term that those employees who are engaged in the Bombay branch of BCCI as on the completion date as are unwilling to continue in the employment of the purchaser on the aforesaid terms shall be paid such amount as may be paid as if the termination had been effected if the Bombay branch of BCCI had continued its business. Under the terms of the said draft agreement, the purchaser shall assume all liabilities to the employees which arose during the period of and out of or as a consequence of the employees'' engagement at the Bombay branch of BCCI or which arise as a consequence of those employees who are engaged at the Bombay branch of BCCI on the completion date not continuing with the purchaser on the aforesaid terms and also all liabilities to the employees whenever the same arose and to whatever period the same relate under any provident or any similar fund to which the employees or any of them are or were members. The option has been given to the employees either to continue in the employment or, in the event of not willing to continue, to tender resignation. In the event of employees opting not to continue, the amounts payable on termination of the employment are safeguarded as agreed to be paid by purchaser to such employees. It is correct that in the event of the employees opting to continue with the employment, their service conditions are to correspond with the rank or status of a comparable Indian banking company since on the business and undertaking of the Bombay branch of BCCI being taken over by the purchaser, the Bombay branch of BCCI ceases to be a branch of foreign banking company. Under the terms of the said agreement, the requirements of section 45(5)(i) of the said Banking Act, in the facts of the case, are complied with. In view of the provisions under clause 11 of the said draft agreement inter alia for payment or grant of same remuneration and the same terms and conditions of service as are at the time of such payment or grant applicable to the employees of corresponding rank or status of a comparable Indian banking company or of a public sector bank, as the case may be, there is sufficient compliance with the principles laid down by the apex court in the case of State Bank of Travancore v. Elias Elias [1971] 41 Comp Cas 14, as also on the case of K. I. Shephard v. Union of India [1988] 63 Comp Cas 244. Since there is no exclusion of the employees except that opinion has been given to such of the employees not willing to continue employment to discontinue the same, no names as laid down in the case of K. I. Shephard [1988] 63 Comp Cas 244 (SC), are required to be mentioned in the said draft agreement.

The assets to be taken over by the purchaser under the said draft agreement include the Atlanta premises and the premises in Jupiter. The arrangement arrived at and undertakings given in respect of the said premises as aforesaid protect the rights of all parties concerned and the same are neither decided in this petition nor the order passed herein shall affect the same.

The whole intent and purpose of the said Banking Act is to secure the interests of the depositors and employees. The RBI is the instrumentality by which this intent is to be achieved. In the instant case, the RBI has carefully examined the said offer of the SBI and after having satisfied that the offer is beneficial to the depositors and creditors of the Bombay branch of BCCI as also in the interest of the employees of the Bombay branch of BCCI, approved the same on the terms and conditions mentioned in the said draft agreement.

Taking an overall view of the matter, in my view, the said offer of the SBI on the terms and conditions mentioned in the said draft agreement is in the interests of the depositors, creditors and the employees of the Bombay branch of BCCI and as such, should be accepted. Accordingly, I pass the following orders :

(a) the offer of the SBI for purchase of the Bombay branch of BCCI as a going concern on "as is where is" basis on the terms and conditions as contained in the draft agreement, exhibit "G", to this petition is approved;

(b) the provisional liquidator of the Bombay branch of BCCI appointed by this court is directed to sell the undertaking of the Bombay branch of BCCI to the SBI and/or its subsidiary to be formed as stated in the said draft agreement on the terms and conditions contained therein;

(c) the provisional liquidator of the Bombay branch of BCCI appointed by this court is authorised to execute the agreement in terms of the draft agreement, exhibit "G", to this petition for sale of the undertaking of the Bombay branch of BCCI and to take necessary steps for completion of sale;

(d) the undertakings given by the RBI and the SBI through their counsel as recorded hereinabove are accepted;

(e) ordered that the rights and claims of Vaz Forwarding Ltd. in the Atlanta premises including those taken in Company Petition No. 357 of 1992 and in the affidavit of Mario Vaz affirmed on March 11, 1993, and filed in this petition as also the question of the power of the provisional liquidator of the Bombay branch of BCCI to assign the Atlanta premises and the validity of the assignment are not and will not be affected by this order or any steps taken pursuant thereto and that the same will be determined in Company Petition No. 357 of 1992 pending in this court;

(f) ordered that any new company to be formed by the SBI as per the terms and conditions contained in the draft agreement, exhibit "G", to this petition will also be bound by the undertaking given by the RBI and the SBI through their counsel as recorded hereinabove and accepted by this court and the orders passed herein;

(g) to the extent of the orders passed herein, the undertaking given before Srikrishna J. in Company Petition No. 357 of 1992 and the order passed by Srikrishna J. therein on July 23, 1992, stand modified;

(h) no order as to costs of this petition as well as on the report of the provisional liquidator.

Mr. Vashi, learned counsel appearing for the employees of the Bombay branch of BCCI, applies for stay of the operation of this order. The application is rejected.

CC expedited.