A special Bench of the Supreme Court, by a majority of ten to one, to-day [February 10] struck down as unconstitutional the Banking Companies (Acquisition and Transfer of Undertakings) Act 1969, in its entirety. This Act replaced the Ordinance under which the Government had nationalised 14 scheduled banks. The majority judgment, however, upheld the competence of Parliament to legislate on nationalisation of banks. The majority struck down the Act on the ground that it made hostile discrimination against the taken-over banks in that it prohibited these banks from carrying on “banking business” whereas other banks, Indian and foreign, were permitted to carry on banking business and even new banks may be formed, which may engage in banking business. The majority also held that the Act had violated the guarantee of compensation under Article 31 (2) in that it provided for giving certain amounts determined according to principles which were not relevant to the determination of compensation. The amounts so declared “cannot be regarded as compensation”, the Court said.
