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Indian Express
20 hours ago
- Business
- Indian Express
Radio news & a dinner party: When bank nationalisation was ruled ‘unconstitutional' over unfair compensation method
During an intimate dinner party hosted by Rustom Cavasjee Cooper, 47, in July 1969, a news development crackled over the radio: the government had nationalised 14 of India's largest private commercial banks having deposits of over Rs 50 crore. Recalling that dinner party in an article for Himmat, a weekly magazine, Cooper, a shareholder in several of these banks and a Swatantra Party leader, remembers spending the rest of the evening pacing and feeling agitated. Sensing his turmoil, a senior government official at the party remarked casually, 'Why don't you contest it in the Supreme Court?' That casual suggestion would ignite one of the most important legal battles in India's constitutional history, ending with the Supreme Court emphasising that actions made for public interest must ensure just compensation and reaffirming that Directive Principles of State Policy, the guiding principles in making policies that aim to create a welfare state, cannot override fundamental rights. After the dinner party The very next morning, Cooper boarded the first flight to Delhi. Fate, it seemed, had conspired in his favour. Nani Palkhivala, one of India's brightest legal minds, happened to be in Delhi too. By that evening, the preparations for a constitutional challenge were underway. Six months later, on February 10, 1970, an 11-judge Bench of the Supreme Court led by Justice J C Shah, while holding the Bank Nationalization Act, 1969, as 'unconstitutional' since it violated the right to property, clarified that nationalisation of banks itself was not unconstitutional. Striking down the law, the SC said the method of calculating compensation to the shareholders undervalued the banks' assets by ignoring their goodwill and key properties. Born on August 18, 1922, in a Mumbai-based Parsi family, Cooper, a chartered accountant, had completed his PhD in economics from the London School of Economics (LSE). He was also president of the Institute of Chartered Accountants of India (1963-64), the president of the Indian Merchants' Chamber (IMC), and the treasurer and general-secretary of Swatantra Party. The ordinance enabling bank nationalisation was promulgated on July 19, 1969, a few days before the Parliament session was to begin. Three days prior to the ordinance, then Prime Minister Indira Gandhi had divested Morarji Desai of his finance portfolio. Cooper's opposition to bank nationalisation was not about personal financial loss. Besides holding shares in the Central Bank of India Ltd (of which he was a director), Bank of Baroda Ltd, Union Bank of India Ltd and Bank of India Ltd, he also had current and fixed deposit accounts in these banks. His shareholdings were modest, entitling him to cash compensation in any event. Instead, Cooper's grievance was rooted in principle: he believed the ordinance, promulgated in haste and without parliamentary debate, had trampled upon the Constitution's sanctity since it violated his right to property under Articles 19 (1)(f) and 31 over the unfair compensation method. Cooper challenged the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 8 of 1969. The ordinance transferred and vested the undertaking of 14 commercial banks that held over 80% of India's bank deposits and had deposits of not less than Rs 50 crore, in the corresponding new nationalised banks set up under the decree. Though pleas challenging the ordinance were lodged before the Supreme Court, before they were heard, Parliament enacted the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, replacing the ordinance with modifications. The objective of the Act was to enable acquisition and transfer of the undertakings of certain banking companies so as to 'better serve the needs of development of the economy, in conformity with national policy' and connected matters. Filed under Article 32 (right to move to Supreme Court to enforce fundamental rights), Cooper, through Palkhivala, argued that the law impaired his rights guaranteed under Articles 14, 19 and 31 (right to property). In his February 20, 1970, article for Himmat, Cooper wrote, 'I thought that it (bank nationalisation) was done with unreasonable haste…a clear violation of the sanctity of the Constitution…I felt that not only political parties but individuals in the highest places had started regarding the Constitution as something which could easily be played with.' While accusations later surfaced that big business interests were backing Cooper's case, he steadfastly denied such claims. 'Insinuations were made to this effect before the Supreme Court during the hearings too. I would like to clarify that not only was there no interest in financing this petition, but every single person (lawyers, accountants and experts)…who assisted Mr Palkhivala and me in these proceedings, did …not charge any fees,…including a large amount of travelling expenses,' his article states, adding that 'none of the Chairmen or members of the old boards of Directors of the nationalised banks or eminent businessmen and industrialists came forward to join us in this fight for democracy'. Besides stating that the method of calculating compensation undervalued the banks' assets by ignoring their goodwill and key properties, the Supreme Court's February 10, 1970, verdict also held that forcing nationalised banks to cease both banking and non-banking activities was discriminatory and especially violative of equality before law under Article 14. Denying the government's submission that banks — and not the shareholders — were directly affected by the decision, the SC held that shareholders could independently move the top court if their fundamental rights were infringed upon. This approach would later become the bedrock of public interest litigation (PILs) in the country, empowering citizens to seek justice not just for themselves, but for broader public causes. The Supreme Court clarified that nationalisation of banks itself was not unconstitutional, while emphasising that actions made for public interest must ensure just compensation. The court also reaffirmed that Directive Principles of State Policy cannot override fundamental rights. Justice A N Ray, who became the Chief Justice of India (CJI) in April 1973, superseding three of his Bench colleagues, Justices J M Shelat, A N Grover and K S Hegde, however, took a dissenting view. Upholding the Act, Justice Ray said it was 'for development of the national economy with the aid of banks'. Then CJI Mohammad Hidayatullah had recused himself from hearing the matter as he had given assent to the impugned law in capacity as then acting President of India. Before 1970, constitutional law was still shaped by the judgment in the A K Gopalan v State of Madras (1950), where the Supreme Court had held that each fundamental right operated in isolation and that as long as a law adhered to one specific constitutional provision, its effects on other rights were irrelevant. However, R C Cooper v Union of India shattered this view. The Supreme Court held that the impact of state action on individual rights determined constitutionality. 'Impairment of the right of the individual and not the object of the State in taking the impugned action, is the measure of protection. To concentrate merely on power of the State and the object of the State action in exercising that power is therefore to ignore the true intent of the Constitution…,' stated the majority opinion, authored by Justice Shah on behalf of the nine other judges and him. In his article, Cooper opined that the SC judgment was important for shareholders of nationalised banks, as well those of any industries that may be nationalised in future. 'Parliament certainly has a right to legislate for nationalisation of certain aspects of economic activity…The second important principle which has emerged is that for assets which are taken over by the State there should be fair and reasonable compensation. And the third is that there should be no hostile discrimination against any particular concern or concerns in an industry,' he wrote. Four days after the judgment, on February 14, 1970, then President V V Giri issued a new ordinance that stipulated compensation to shareholders of the 14 nationalised banks. Cooper felt the new decree 'was an improvement over the previous one' and sought to 'undo illegalities' pointed out by the Constitution Bench. He added that the compensation offered to shareholders under the new ordinance was 'more realistic' and 'payable wholly in cash if so desired…in three years …, together with interest'. The judgment paved the way for the apex court's decision in the 1973 Kesavananda Bharati case, in which it laid down the 'basic structure' doctrine that put limits on Parliament's powers to amend the Constitution, along the verdict in the 1978 Maneka Gandhi vs Union of India. Cooper's case is remembered not merely for challenging bank nationalisation, but for establishing that constitutional rights must be protected against the real impact of state action, not just its stated aims. While the right to property ceased to be a fundamental right in 1978, it is protected under Article 300A, which provides protection to citizens against arbitrary deprivation of their property by the state. With the Swatantra Party dissolving in 1974 and Indira Gandhi imposing an Emergency in the country ini 1975, Cooper relocated to Singapore. where he set up a financial consultancy and also wrote two books, Job Sharing in Singapore (1986) and War on Waste (1991). He died at the age of 90 while on a visit to London in June 2013. Nearly 55 years after the judgment, Cooper's spirit — demanding fairness, reasonableness and accountability from the state — continues to guide judicial review.
Indian Express
27-05-2025
- Politics
- Indian Express
Much need not be read into recent defections from AAP. Every political party goes through such churn
Written by Saumya Gupta On May 17, as many as 13 MCD Aam Aadmi Party (AAP) councillors left the party to start a new organisation: Indraprastha Vikas Party (IVP). This political blow comes right in the wake of AAP's defeat in the Delhi assembly elections. This again raised a crucial question: Is AAP a post-ideological party? Many scholars attribute its defeat and defection to the absence of ideology. However, one must go beyond such a limited understanding to unpack AAP's politics. My argument here rests primarily on three ideas that shape its politics. First, its commitment to Directive Principles of State Policy (DPSP); second, the party stands for welfare, rooted not in the structural inequalities; and finally, the party attempts to be principally against any form of political violence. The provision of DPSP in the Indian Constitution reflects socialist, Gandhian, and liberal ideals, guiding the vision of a just, welfare-oriented state. AAP's governance, as evidenced in its mohalla clinics, legal aid drives, public schooling, and free bus services for women, embodies these principles. Critics argue this focus on efficient public service lacks ideological depth. Yet, when viewed through the DPSP lens, AAP's model aligns with a form of 'actionable ideology' rooted in addressing material needs. Its politics of citizen-centric delivery gained popular support, though some feared it would become merely transactional. Its weakness lies not in the absence of ideology, but in the lack of a language that could articulate it. Drawing from Antoine Destutt de Tracy's notion of ideology as a 'science of ideas' tied to material conditions, AAP's actions can be seen as ideological. Since coming to power in Delhi, AAP has focused exceedingly on economics and public finance. However, a lack of a deeper understanding of structural inequalities in India, predominantly caste, has been a consistent lack in its politics. Arvind Kejriwal's emphasis on state efficiency was a recalibration of politics, implying that administrative push is enough to fight inequality, without resorting to caste politics or social engineering. AAP achieved 'national party' status in the shortest time. Notably, it is also one of the very few national parties without any history of political violence. It breached the conventional political space of identity-based, caste/class-based or regional rhetoric-based politics and found a new space to redefine conventional understandings. Scholars like Sacha Kapoor and Arvind Magesan have stated that if there is a regional party rule, the chance of political violence increases. This argument, however, doesn't hold for AAP, which started its journey through satyagraha and has remained aligned with Gandhian philosophy, at least on the question of violence. Kejriwal's rise reshaped opposition politics in India, pushing traditional left-of-centre parties to reassess their approaches in light of AAP's tangible public service delivery. While critics accused him of 'soft Hindutva', his appeal lies in effective governance and bold political manoeuvres. His instincts for timely political action have made his political performance different from that of other political parties. Defeats and defections are part of the political game. So, discarding it as a non-ideological party amounts to a misreading of its political trajectory. The writer is a political consultant who was earlier with Centre for Legislative Research and Education, FLAME University
The Print
17-05-2025
- Politics
- The Print
Will do my best to uphold rule of law, Constitution: CJI Gavai
'The only thing I can say is that whatever short period that I have, I will do my best to stand by my oath to uphold the rule of law, to uphold the Constitution of India,' he said. Speaking at a felicitation ceremony organized in his honour by the Bar Council of India (BCI), Justice Gavai, who took oath as the 52nd CJI on May 14, emphasized his dedication to ensure that constitutional promises reach the broad spectrum of Indian society. New Delhi, May 17 (PTI) Chief Justice of India B R Gavai on Saturday affirmed his unwavering commitment to upholding the Constitution and the rule of law. Justice Gavai said that he will make an attempt to reach the commonest mind of this country, the vast majority of its citizens, so that the vision and promise of the Constitution — social and economic equality along with political equality — is brought into reality. Highlighting the enduring significance of the Kesavananda Bharati judgment, the CJI called it a cornerstone for resolving constitutional tensions. 'Wherever there is a conflict between Fundamental Rights and Directive Principles of State Policy, the Kesavananda Bharati case has been our guiding light. It teaches us that both are together the soul of our Constitution,' he said. The CJI reflected on his four-decade journey in the legal field, sharing personal anecdotes that underscored his connection with the legal community. 'From 1985 to 2023, I was a member of the Bar, and after my retirement in November 2025, I will be one again. This is like a family celebration for me,' he said. He spoke about his initial ambition to become an architect, and how his father's admiration for Dr B R Ambedkar steered him toward law. 'My father couldn't fulfil his dream of becoming a lawyer due to imprisonment during his youth, but he hoped one of his sons would. As the eldest, I chose to honour his wish,' he said. Justice Gavai also shared a pivotal moment in his career when he debated whether to accept the role of Government Pleader, citing financial concerns. Encouraged by then-Justice Sharad Bobde, who advised that the post could accelerate his path to judgeship, Gavai accepted the role, and was offered a high court judgeship within six months. Recalling his transition from the high court to the Supreme Court, he said the learning curve was steep. He credited Justice Rohinton Nariman for encouraging him to master new domains, such as the Insolvency and Bankruptcy Code (IBC), and for pushing him to author judgments in these complex areas. A strong advocate for representation and inclusivity, CJI Gavai urged high courts to recommend more women and candidates from Scheduled Castes, Scheduled Tribes, and Other Backward Classes for judicial appointments. 'If there are no suitable women candidates in the high courts, I have suggested they look to the Supreme Court Bar where many capable women advocates practise,' he said. He also candidly expressed his reluctance to give media interviews, humorously noting that promises made in such interactions often become points of criticism. 'I avoid interviews because I don't want to make promises I can't keep.' Justice Gavai also described the event as a reflection of India's unity in diversity. 'Today's function is a true function of diversity in India which we always believe. Our Constitution has been so drafted so as to suit the various in our country: we have geographical diversities, we have regional diversities, we have people from different religions, different castes, we have diversity in economic status of people,' he said. BCI Chairman Manan Kumar Mishra, addressing the gathering, echoed sentiments of hope and trust from the legal fraternity. 'Those without godfathers, those not related to judges but who are deserving, must also get the opportunity to become senior advocates and judges. The legal community expects that under CJI Gavai's leadership, merit and social representation will be the benchmarks,' he said. PTI SJK KVK KVK This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
Indian Express
17-05-2025
- Politics
- Indian Express
Will do my best to uphold rule of law, Constitution: CJI Gavai
CHIEF JUSTICE of India B R Gavai on Saturday said he will try to do his best to uphold the rule of law and Constitution. He was speaking at a felicitation ceremony organised in his honour by the Bar Council of India (BCI). Addressing the gathering, CJI Gavai said, 'The only thing I can say is that whatever short period that I have, I will do my best to stand by my oath to uphold the rule of law, to uphold the Constitution of India, and make an attempt to reach the commonest mind of this country, the vast majority of its citizens, so that the vision and promise of the Constitution of social and economic equality along with political equality, is brought into reality.' He said, 'Wherever there is conflict between Fundamental Rights and Directive Principles of State Policy, Kesavananda Bharati has been our guiding light. It was the Kesavananda Bharati judgment which said Fundamental Rights and Directive Principles of State Policy together are the soul of the Constitution of India.' CJI Gavai, who took over as the country's 52nd Chief Justice on May 14, said that in his years as an HC judge and SC judge, he did his best to uphold social and economic justice. 'I have done my best… wherever an opportunity came, to ensure that the social justice and economic justice within the four corners of the Constitution is attempted to be achieved.' He called for cooperation between the judiciary and executive to fill vacancies and resolve the issue of pendency. 'I would request the learned Solicitor to convey our request to the executive that, by a cooperative approach, we must ensure to minimise the vacancies as much as we can so that to some extent the issue of pendency is resolved,' he said. Regarding appointing more women as judges, the CJI said he had 'spoken to many of the Chief Justices that if they do not have a woman candidate in their High Courts, they should take from a very good pool of women advocates who are practicing in the Supreme Court, and to some extent, we have been successful in that'. On why he had not given one-to-one interviews at the time of taking over as CJI, he said though he was shy of giving interviews, he is of the view that judges should remain engaged with society to better understand its issues. He added that he did not want to make promises he could not fulfill.
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Business Standard
17-05-2025
- Politics
- Business Standard
Will do my best to uphold rule of law, Constitution: CJI BR Gavai
Chief Justice of India BR Gavai on Saturday affirmed his unwavering commitment to upholding the Constitution and the rule of law. Speaking at a felicitation ceremony organized in his honour by the Bar Council of India (BCI), Justice Gavai, who took oath as the 52nd CJI on May 14, emphasized his dedication to ensure that constitutional promises reach the broad spectrum of Indian society. "The only thing I can say is that whatever short period that I have, I will do my best to stand by my oath to uphold the rule of law, to uphold the Constitution of India," he said. Justice Gavai said that he will make an attempt to reach the commonest mind of this country, the vast majority of its citizens, so that the vision and promise of the Constitution -- ?social and economic equality along with political equality -- ?is brought into reality. Highlighting the enduring significance of the Kesavananda Bharati judgment, the CJI called it a cornerstone for resolving constitutional tensions. "Wherever there is a conflict between Fundamental Rights and Directive Principles of State Policy, the Kesavananda Bharati case has been our guiding light. It teaches us that both are together the soul of our Constitution," he said. The CJI reflected on his four-decade journey in the legal field, sharing personal anecdotes that underscored his connection with the legal community. "From 1985 to 2023, I was a member of the Bar, and after my retirement in November 2025, I will be one again. This is like a family celebration for me," he said. He spoke about his initial ambition to become an architect, and how his father's admiration for Dr BR Ambedkar steered him toward law. "My father couldn't fulfil his dream of becoming a lawyer due to imprisonment during his youth, but he hoped one of his sons would. As the eldest, I chose to honour his wish," he said. Justice Gavai also shared a pivotal moment in his career when he debated whether to accept the role of Government Pleader, citing financial concerns. Encouraged by then-Justice Sharad Bobde, who advised that the post could accelerate his path to judgeship, Gavai accepted the role,? and was offered a high court judgeship within six months. Recalling his transition from the high court to the Supreme Court, he said the learning curve was steep. He credited Justice Rohinton Nariman for encouraging him to master new domains, such as the Insolvency and Bankruptcy Code (IBC), and for pushing him to author judgments in these complex areas. A strong advocate for representation and inclusivity, CJI Gavai urged high courts to recommend more women and candidates from Scheduled Castes, Scheduled Tribes, and Other Backward Classes for judicial appointments. "If there are no suitable women candidates in the high courts, I have suggested they look to the Supreme Court Bar where many capable women advocates practise," he said. He also candidly expressed his reluctance to give media interviews, humorously noting that promises made in such interactions often become points of criticism. "I avoid interviews because I don't want to make promises I can't keep." Justice Gavai also described the event as a reflection of India's unity in diversity. "Today's function is a true function of diversity in India which we always believe. Our Constitution has been so drafted so as to suit the various in our country: we have geographical diversities, we have regional diversities, we have people from different religions, different castes, we have diversity in economic status of people," he said. BCI Chairman Manan Kumar Mishra, addressing the gathering, echoed sentiments of hope and trust from the legal fraternity. "Those without godfathers, those not related to judges but who are deserving, must also get the opportunity to become senior advocates and judges. The legal community expects that under CJI Gavai's leadership, merit and social representation will be the benchmarks," he said.
