Holding

The amalgamation scheme does not make the transferee bank liable for the employee's arrears, rendering the suits against it non‑maintainable.

Summary

The respondent, an employee of Traders Bank, tendered his resignation on the same day the bank sought to terminate his service by offering three months' pay in lieu of notice and returned the cheque. Traders Bank was later amalgamated with Bank of Baroda under Section 45 of the Banking Companies Regulation Act, 1949, with a scheme stating that employees of the transferor would continue in service at the same terms. The respondent filed suits for arrears of salary and a declaration that his resignation was illegal, claiming the transferee bank was liable for his dues. The Supreme Court examined the scheme’s specific provisions, noting that continuation of service is not automatic and that the respondent was not in service on the prescribed amalgamation date. Relying on precedents, the Court held that the liability for arrears rested with the transferor bank, not the transferee, and therefore the suits were not maintainable. The appeal was allowed and the suits dismissed.

Issues considered

Whether the transferee bank (Bank of Baroda) is liable to take over the services of an employee who had resigned before the amalgamation date.
Whether suits for arrears of pay and declaration of illegal resignation are maintainable against the transferee bank under the amalgamation scheme and Section 45 of the Banking Companies Regulation Act.
Interpretation of clause 10 of the amalgamation scheme and the notification regarding the transfer of liabilities.

Legislation cited

Electricity Acts. 6(1)(ii)

Subjects

service lawamalgamationbankingemployee resignationliability for arrearsSection 45transfer of liabilitiesmaintainability of suit

Judgment

BANK OF BARODA A
v.
RAJENDER PAL SONI

FEBRUARY 19, 1996

[K. RAMASWAMY AND G.B. PATTANAIK, JJ.] B

Service Law :

Temiination of Service by payment of three months' pay in lieu of
requisite notice-Same day employee tendering resignation and retuming the C
cheque issued to him--Amalgamation of bank-Employee's services trans-
ferred-Transferor Bank accepting the resignation-Employee filing a suit
against the transferee- Bank for arrears of pay-Maintainability of-Held: In
view of the specific provision in the Amalgamation Scheme in paras 3 and
JO of the notification mrears of salary is liability to be discharged by the
transferor-Bank and not of transferee- Bank-Hence the suits are clearly not D
maintainable-Banking Companies Regulation Act, 1949--S.45.

Chainnan, Canara Bank, Bangalore v. M.S. Jasra & Ors., AIR (1992)
SC 1100 and U.P. Electricity Board, Lucknow through it Chainnan and Anr.
v. Radhey Mohan Venna, Supp.2 SCC 356, referred to.
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4390 of
1996.

Form the Judgment and Order dated 21.3.95 of the Delhi High Court
in C.R.P. No. 595 of 1994.
F
AK. Chitale T.C. Sharma and Attar Singh for the Appellants.

B. Bhattacharjee and K. Bhattacharjee for the Respondents.

The following Order of the- Court was delivered :
G
Leave granted.

We have heard learned counsel on both sides.

It is not necessary to preface the antecedent enquiry conducted
against the respondent for misconduct by the Traders Bank which. was H
837
838 SUPREME COURT REPORTS . (1996] 2 S.C.R.

A amalgamated with the appellant-Bank. Suffice it to state that on June 25,
1986 the respondent's service was sought to be terminated by issuance of
an order on offering three months' pay in lieu of the requisite notice.
Instead, the respondent on even date had tendered his resignation (Ex.P-5)
to Traders Bank; transferor-Bank of the appellant had accepted the resig-
nation on July 2, 1986. Consequently, the respondent had returned the
B cheque of salary offered to him in lieu of notice on the even date. Under
Section 45 of the Banking Companies Regulation Act, 1949 (for short, the
'Act'), the scheme of amalgamation of transferor bank with the appellant
bank, with effect from November 20, 1987 (Ex.P-8) was initiated. The
Central Government had accepted the amalgamation under sub-section (7)
C of Section 45 of the Act with effect from the appointed date viz. May 13,
1988. A scheme in that behalf was approved by Central Government.
Clause 10 of the scheme provides as under :

"All the employees of the transferor bank shall continue in service
and be deemed to have been appointed by the transferee bank at
D the same remuneration and on the same terms and conditions of
service as were applicable to such employees immediately before
the close of business on 20th November, 1987."

Para 2 of the notification dated May 12, 1988 issued under Section
E 45(1) read with sub-section (2) ·of Section 45 of the Act envisages, among
other things undertaking of the liabilities with respect to the pending suits,
appeal or other legal proceedings of whatever nature by or against the
transferor bank arising as on the prescribed date were allowed to continue
on the appellant-Bank· thus :

F "If on the prescribed date any suit, appeal or other legal proceed-
ings of whatever nature by or against the transferor bank is pend-
ing, the same shall not abate, or be discontinued or be in any way
prejudicially affected, but shall subject to the other provisions of
this scheme, be prosecuted and enforced by or against the trans-
feree bank."
G (

Admittedly, the respondent had filed the CiVil suit No. 123 of 1989
which is now re-numbered as Suit No. 61 of 1993 to recover a sum of Rs.
69,680 as the arrears of his pay etc. and also filed Civil Suit No. 122 of 1989
which is now re-numbered as Suit No. 63 of 1993, on June 3, 1989 for
H declaration that the acceptance of resignation by the Traders Bank, viz.,
l
.~

\..

BANKOFBARODAv. RP.SONI 839

the transferor Bank was illegal. Relying upon the notification, the appellant A
raised preliminary objection after filing written statement ·to the main-
tainability of the suit which was rejected by the trial Court. In revision No.
595/94 by order dated March 21, 1995, the Delhi High Court dismissed the
revision summarily.

Even in this appeal the only question is : whether the appellant is B
liable to takeover the services of the appellant ? If that finding is recorded
in favour of the respondent, necessarily the suit of the respondent would
stand maintainable. Section 45 of the Act envisages the power of the
Reserve Bank to apply to the Central Government for suspension of the
business of a Banking Company and prepare a scheme for re-constitution C
or amalgamation. Admittedly, the Traders Bank was amalgamated with the
appellant- Bank by exercise of the power under sub-section (1) read with
sub-section (2) of Section 45 of the Act. The section in that behalf has
been accorded by the Central Government in the scheme under sub-section
(7). As seen, clause (10) of the scheme envisages that employees existing D
as on November 20, 1987 in the transferor bank, viz., the. Traders Bank so
taken over, shall become employees of the appellant-Bank. Admittedly, the
respondent was not in service as on that date. Even no suit or proceedings
was pending against the Traders Bank as on the date. Under those cir-
cumstances, the question arises : whether the suit is maintainable ? This
Court in Chaimian, Canara Bank, Bangalore v. M.S. Jasra & Ors., AIR E
(1992) SC 1100 on paragraph 9, has considered the effect of sub-sections
(4) & (5) of Section 45 of the Act and of the scheme framed thereunder
which reads and held as under :

"9. Sub-section (5) then specifies the provisions which may be made p
in such scheme. It is Cl.(1) and the provisos thereunder of sub-sec.
(5) with which we are concerned. The opening words in sub-sec.
(5) are : 'The scheme aforesaid may contain provisions for all or
any of the following matters .... .' It is clear that the scheme so
framed under sub-section (4) may contain provisions for all or any
the matters specified in sub- sec. (5) so that it enables all or any G
or the specified matters to be provided in the scheme prepared
under sub-sec. (4) and the matters specified in the several clauses
in sub-sec. (5) do not automatically get incorporated in such
scheme unless the scheme specifically i:qtludes any such matter. It
means that the matter specified in CL(i) of sub-sec. (5) is not an H
J_
840 SUPREME COURT REPORTS [1996] 2 S.C.R.

A invariable term to be read in such a sche~e framed under sub-sec.
(4) for amalgamation of the banking company unless it is incor-
porated specifically in the scheme so prepared. Thus, such a
scheme may or may not contain provisions for the continuance of
the services of all employees of the banking company in the
transferee bank as is specified in Cl. (i). However, if the scheme
B does provide for this matter, then the continuance of the services
of the employees of the banking company in the transferee bank
as provided in Cl. (i) is subject to the requirement of the proviso
thereunder. In other words, it is not necessary that every scheme
of amalgamation framed under sub-sec. (4) must provide for con-
c tinuance of services of all the employees of the banking company
in the transferee bank, but where such a provision is made, it must
contain a provision as required by the provisos in Cl. (i). This is
clear from the use of the word 'may' in the opening words of
sub-sec. (5) and the word 'shall' in the proviso. In effect it means
that where the scheme provides for continuance of the services of
D
all the employees of the banking company 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, then the scheme must contain a provision that the
E transferee bank shall pay or grant not later then the expiry of the
period of three years from the date on which the scheme is
s.anctioned by the Central Government same remuneration and the
same terms and conditions of service as are applicable to other
employees of corresponding rank or status of the transferee bank
F 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."

In U.P. Electricity Board, Lucknow through its Chainnan and Anr. v.
G Radhey Mohan Venna, [1994) Supp. 2 SCC 356, similar question had arisen
under the Electricity Act. It was held that the Board and amalgamated
Company are entitled under that Act to enter into an agreement.
Employees existing as on that date and against whom disciplinary
proceedings were pending on that date could not be deemed to be
employees of the Board. In the absence of any such agreement, it was held
H that by operation of Section 6(1)(ii) of the Electricity Act, the Board was
BANKOFBARODAv. R.P.SONI 841

not bound to take such an employee into the service. A
In Rashtriya Mill Mazdoor Sangh v. National Textiles Corporation,
South Maharashtra Ltd. and Ors., [1996) 1 SCC 313 similar question had
arisen for consideration. This Court held that the liability to pay gratuity
which became payable to a former empfoyee prior to the taking over of the
textile Company was of the textile company and not of the Custodian. B
It is contended by the learned counsel for the respondent that under
the Scheme, the assets and liabilities are to be taken over by the appellant-
Bank and, therefore, the employment of the appellant is one of the
liabilities. Judicial review being one of the basic features of the Constitu-
tion, he cannot be prevented to avail of the judicial review against the C
appellant-Bank. We find no force in the contention. As far as service
conditions are concerned, in view of the specific provision in the Scheme
contained in paras 3 and 10 of the notification arrears of salary is a liability
to be discharged by the transferor-Bank and not of the appellant-Bank.
Under these circumstances, the suits are clearly not maintainable. D
The appeal is accordingly allowed, the suit stand dismissed. No costs.

G.N. Appeal allowed.

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