The Supreme Court of India heard the historic case of rc cooper vs union of india in 1970. The question in the case concerned whether the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, which the Indian President had issued in 1969, was constitutional.
rc cooper vs union of india Case Facts
- Many industries that were essential to the growth of the state were nationalized after India gained its independence. To further the development of the country and the well-being of society, the Reserve Bank of India, Air India, Insurance Companies, Coal Industry, and Oil and Gas Industry were all nationalized.
- R.C. Cooper, the petitioner in this case, had shares in the Central Bank of India and served as its director. In addition, he owned stock in Union Bank of India, Bank of India, and Bank of Baroda.
- The decree to nationalize 14 banks in India was produced by the Indian National Congress government, led by Prime Minister Mrs. Indira Gandhi, and approved by the acting president of India on July 19, 1969. These banks were chosen based on the idea that nationalization will occur for any bank with deposits surpassing Rs. 50 crores.
- 14 banks were to be nationalized in accordance with the Banking Companies (Acquisition and Transfer of Property) Ordinance of 1969.
- All bank directors are required to resign from their positions, although bank staff are still able to work for the Indian government. The ordinance gives the banks compensation based on the agreed upon amount, or, in the absence of an agreement, the Tribunal will determine the amount within a three-month period.
- Following that, R.C. Cooper filed a writ petition in the Supreme Court based on the Constitution’s Article 32 (Fundamental Right). He contested the ordinance, arguing that it infringed upon his fundamental rights as guaranteed by Articles 14, 19, and 21. On July 22, 1969, the Supreme Court issued a temporary injunction prohibiting the government from removing the chairman from every bank.
rc cooper vs union of india Issues
- Is it possible for a shareholder to file a writ petition alleging that their basic rights were violated when the government buys the company they own?
- Whether or not the relevant Ordinance had been made correctly?
- Was the Act’s formulation under the purview of the Parliament or not?
- Was there a violation of article 19(1)(g) of the indian constitution and article 31(2) of the indian constitution by the contested Act?
- if the process used to determine the compensation was legitimate or not?
- Was the rationale behind Schedule II of the Ordinance sound?
Contentions by the Parties
Petitioner:
- The requirements necessary for the exercise of provision 123 of the Indian Constitution had not been met, rendering the ordinance enacted under that provision void.
- The Act transgresses the Article 301 guarantee of free commerce.
- Because the Act violated the subjects listed in Entry 42, List III of the State List, it is not within the Parliament’s authority to pass such a law.
- Some rights guaranteed by Articles 14, 19(1)(f)(g), and 31(2) of the Indian Constitution were infringed by the Act.
- Because there was no legitimate ordinance and the provisions that violate fundamental rights do not fall under the purview of the Act 22 of 1969, the retrospective action granted to it would be unconstitutional.
Respondent:
- The respondent’s initial allegation was that the writ petition was unmaintainable because the petitioner sought to assert rights under the company’s name and the corporation did not meet the requirements of the Indian Citizenship Act of 1955 for citizenship.
- The second point of contention is whether or not the President had the authority to promulgate the ordinance. Article 74 (1) and (2) states that the President may act on the advice of Ministers in charge of the Parliament, and that no court may inquire into such advice.
rc cooper vs union of india Judgment
- Justice A.N. Ray dissented from the majority decision in this historic case, which was rendered by a vote of 10 to 1. According to the ruling, the shareholder has the right to file a claim for the Fundamental Rights in the name of the business with the Supreme Court. When the government’s behavior in this case violates the shareholder’s rights, they have the right to take legal action.
- A majority ruling invalidated the Banking Companies (Acquisition and Transfer of Undertakings) Act. The court established the “Effect” Test and invalidated the “Object” Test, according to which any legislative act’s impact will be considered before its goal.
- Regarding whether or not the ordinance’s promulgation was appropriate, the Court ruled that since the Parliament had previously approved the ordinance for it to become law, the Supreme Court’s intervention was neither required nor appropriate.
- According to the Court, the Act violates Articles 14 and 31. article 14 of the indian consitution deals with equality; in this case, the government only forbids the 14 banks from conducting banking operations; Article 31 deals with compensation; in this case, fair and reasonable compensation was not going to be given. Thus, the Act was overturned.
- Regarding Article 19 (1) (f), the Court determined that the Act complies with the provision because the State is authorized to hold an absolute monopoly.
- In his dissenting opinion, Justice A.N. Ray maintained that the Legislature’s set compensation cannot be challenged in court. Additionally, he says that the law can only be contested if the President intends something dishonest and fraudulent. He therefore rejected the Petitions.
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