JUDGEMENT AND ITS CRITICAL EVALUATION

The Union of India was only party to the petition, and seven States intervened, presumably

because the question of legislative competence had been raised.

The petition was by a single shareholder and was not a representative petition on behalf of all, or

of a majority of the shareholders of the four banks. No shareholders’ meeting had been called in

any of the Banks, to authorize them to support the petitioner, or to file an independent petition.

No Bank was a party to the petition and none had complained that their fundamental rights had

been violated.

The case was heard by a bench of 11 judges.

The majority judgment delivered, declared the impugned Act void. In the majority

judgment, it was observed that:

The Act is within the legislative competence of the Parliament; 

but it makes hostile discrimination against the named banks from carrying on banking business,

whereas other banks – Indian and Foreign – are permitted to carry on banking business, and even

new banks may be formed which may engage in banking business; 

it, in reality restricts the named banks from carrying on business other than banking as defined in

Section 5(b) of the Act violated the guarantee of compensation under Article 31(2) in that it

provides for giving certain amounts determined according to principles which are not relevant in

the determination of compensation of the undertaking of the named banks and by the method

prescribed amounts so declared cannot be regarded as compensation.

ConclusionA Critical Evaluation of the Judgment: 

It is clear that the rights of the banks were decided in their absence and without hearing them.

The petitioner came to court expressly stating that he did not challenge the Act as violating the

Bank’s fundamental rights but as violating his own, and the court ended up by deciding that the

Act violated the Bank’s fundamental rights under Articles 14, 19 and 31. If the petitioner wanted

to base the violation of the Bank’s fundamental rights, he would have had to join the Banks as

respondents to the petition. But his petition showed that, that was not his case and he did not join

the Banks and parties to the petition. It is submitted that the majority judgment was rendered in

violation of the principles of natural justice. However, it was necessary to hear the Banks before

a final decision, affecting their rights, was arrived at, and the banks were not heard. It is

submitted that the majority judgment is null and void because the Supreme Court has repeatedly

held that any judgment affecting the rights of parties rendered in violation of the principles of

natural justice is void.

The Act impugned in the Bank Nationalization case was a special Act for the acquisition of the

banking business of the 14 banks, but the Act nevertheless expressly authorized the banks, whose

banking business was acquired, to carry on non-banking business which they would be entitled

to do, if necessary, by suitably altering their Memorandum of Association. In other words, unlike

the Acts already considered, the acquisition was partial. If a challenge under erstwhile Article

19(1)(g) was open to the banks, the reasonableness of the provisions of the Act as to the time

within which the compensation was to be paid would have arisen for the first time before the

Supreme Court.