C.B.(II) No. *14

LOK SABHA

SELECT COMMITTEE ON THE BANKING LAWS (AMENDMENT) BILL, 1967

EVIDENCE

L O K SABHA SECRETARIAT NEW DELHI May, i^68jVaitakhay 1890 (S«*«) Price : Rs. i.55 SELECT COMMITTEE ON THE BANKING LAWS (AMENDMENT) BILL, 1967

COMPOSITION OF THE COMMITTEE

Shri G. S. Dhillon—Chairman.

M em bers 2. Shri Frank Anthony 3. Shri Kamalnayan Bajaj 4. Shri S. S. Kothari 5. Shri N. Dandeker 6. Shri C. T. Dhandapani 7. Shri Madhu Limaye ' 8. Shri C. M. Kedaria | 9. Shrimati Sucheta Kripalani 10. Shri Samarendra Kundu 11. Shri Lalit Sen 12. Shri Indrajit Gupta 13. Chaudhary Nitiraj Singh *14. Shri Hem Raj 15. Shri Krishna Chandra Pant 16. Shri S. R. Rane 1 17. Shri M. Thirumala Rao 18. Shri Dwaipayan Sen 19. Shri K. N. Tewari 20. Shri Jyotirmoy Bosu 21. Chawdhury Sadhu Ram 22. Shri Morarji R. Desai.

Lerislative Council

Shri 9. K. Maitra, Joint Secretary and Legislative Counsel, Ministry of Law.

’ Appointed on the 22nd April, 1968 vice Shrimati Vijaya Lakshmi Pandit resigned. 702 (All) LS—1. ' (a) ■ ■ 1 :

R epresentatives o f t h e M in is t r i e s 1. Shri S. S. Shiralkar, Additional Secretary, Department of Economic Affairs, Ministry of Finance. 2. Shri B. N. Adarkar, Deputy Governor, Reserve Bank of India. 3. Shri R. K. Seshadri, Executive Director. Reserve Bank of India. 4. Dr. V. A. Pai Panandiker, 5. Shri D. N. Ghosh, Deputy Secretary, Department of Economic Affairs, Ministry of Finance. 6. Shri B. N. Mehta, Legal Adviser, Reserve Bank of India.

Secretariat Shri M. C. Chawla—Deputy Secretary. TO Evidence given before the Select Committee on the Bwiftiflg Lavs (Amendment) B ill. 1967.

Page ( i) . line 3 from bottom, for 'LERISLATIVE COUNCIL1 read 'LEGISLATIVE COUNSEL' Page (ii). S .No .4 add at the end 'O.S.D., Ministry of Finance .V Page 2, c o l.l, line 16 to 18, for 'to be published •...... specifically' read *to the witnesses that their evidence shall be treated a? public and liable to be published unless they speci­ fically' • •. Page 25, Col.2, line 26, for kre' read 'as' Page 27, col.2, line 33, delete 'Shri Jvotiroy Bosu' Page 30, col.2. line 23, for 'componds' read ' compounds' Page 34, c o l.l, line.9 from bottom for 'clause 1 reac^ 'clause 5' Page 38, col J. line 20 from bottom for 'Desaid' read 'Desai' Page 39, col.2, line 13.from bottom for 'deirse' read 'desire' ’ Page 40, c o l.l, line 11, for 'e s ffl' read 'res-' Page 46, col.2, line 37, for 'ad' read 'and' Page 50, c o l.l, line *10, for 'somegody' read 'somebody' Page 61, col.2, line 23, for 'oly' read 'only' Page 76, c o l.l, line 17 from bottom for 'postion' read 'position' ' Page 83, col.2, line 28, the word 'sector' may be transferred to lijae 20 Page 88, c o l.l. line 5 from bottom for 'apoJ read 'appo-* Page 93, c o l.l, line 15from bottom for 'Deseai* reaj, 'Desai' Page 95, col.l, line 17, omit 'not’ Page 98, fenl.l, line 2, for 'Indutrial' read 'Industrial' .. . . . 2 / - - 2 -

Page 98, Col.2, line 20 from bottom for 'an induction restraining the defend-' read, 'on .notice, boards of the defendants-* Page 114, col*2, line 1 from bottom for 'idustry' read 'industry' Page 116, cqI .1 , line 4, for 'indifinitely1 read 'indefinitely' . . Page 117, col .2, line 20, for ’accessation' read 'cessation' Page 117, col.2. line 7 from bottom for 'tota' read 'total' • Page 118, e o l.l, line 26, for 'laces' read 'places' for and 10 Page 118, col. 1, /lines‘9/from bottom read 'made by branches to agriculturists as well as •. to cooperatives depending on' Page 119. col .a, line 26, for 'whetehr1 rea,d 'whether' . Page 119, col .2, line 24, for 'dva,nces' read 'advances' . Page 120, col .2, line 1 from bottom for 'lendig 1 read 'lending' ,

'rks * W itn e sse s E x a m in e d

Name of Witness Date of Page No. hearing

i. All India Bank Employees Federation, Kanpur. 15.4.1968 2 Spokesmen :

1. Shri V. N. Sekhri, General Secretary. 2. Shri G. K. Awasthi, Joint Secretary. 3* Shri M. R. Sud, Organising Secretary. 4. Shri T. C. Gupta, Assistant Secretary. 2. Indian Banks Association, Bombay. 16.4.196& 17 Spokesmen : 1. Shri Krishnaraj M. D. Thackersey Chairman, Indian Banks Association. 2. Shri V. G. Patel, Chairman, Central Bank of India Ltd. 3. Shri R. B. Shah, Chairman, United Commercial Bank Ltd. 4. Shri S. C. Trikha, Chairman, Punjab National 'Bank Ltd. 5. Shri F. K. F. Nariman, Chairman, Union Bank of India Ltd. 6. Shri S. G. Shah, Secretary, Indian Banks Assoc'atioa.

3- Shri V. T. Dehejia, Chairman, State Bank of India, Bombay. 16.4.1968 31

4* Shri L. K. Jha, Governor, Reserve Bank of India, Bombay. 16.4.1968 39

5- The All India Overseas Bank Employees* Union* Madras. ( 17.4.1968 5a Spokesmen : 1. Shri C. R. Chandrasekharan, President. ~ 2. Shri P. Balagopala Menon, General Secretary. 3. Shri D. Jayasuryan, Asstt. General Secretary.

6. The All India Bank Employees’ Asso:.ation, jjslhi. 17.4.1963 65 Spokesmen : 1. Shri A. C. Kakar, President. ,

i Si. Name of Witness Date o f Page No. hearing

2. Shri Prbhat Kar, General Secretary. 3. Shri H. L. Parvana, Secretary.

7. All India State Bank of India Staff Federation, Calcutta. 17.4-1968 65 Spokesmen : 1. Shri S. N. Duber, General Secretary, 2. Shri Amrit Lai Airi, Asstt. Genl. Secretary. 3. Shri J. N. Kapur, Circle Welfare Secretary.

8. Indian Banks Association, Bombay. 18.4.1968 75

Spokesman : 1. Shri F. K. F. Nariman, Chairman, Union Bank of India Ltd. 2. Shri S. C. Trikha, Chairman, Punjab National Bank Ltd. 3. Shri R. B. Shah, Chairman, United Commercial Bank Ltd. 4. Shri S.G. Shah, Secretary, Indian Baiks Association. 9. The All India Banks Employees* Association, Delhi. 18.4.1968 86 Spokesmen : 1. Shri A. C. Kakar, President. 2. Shri Prabhat Kar, General Secretary. 3. Shri H. L. Parvana, Secretary. 4. Shri P. L. Syal, Member, Central Committee.

10. The All India State Bank of India SFederation, Calcutta. 18.4.1968 86

Spokesmen : 1. Shri S.N. Duber, General Secretary. 2. Shri J.N. Kapur, Circle Welfare Secy. 3. Shri Amrit Lai Airie, Asstt. Genl. Secretary.

11. The Indian Merchants’ Chamber, Bombay. 19.4.1968 105 Spokesman : 1. Shri Pratap Bhogilal, President. 2. Shri J. H. Doshi, Vice-President. 3. Shri C. L. Gheevala, Secretary. 12. Shri V. T. Deheiia, Chairman, Statt Bank of India, Bombay. 19.41968 116 dELECT COMMITTEE ON THE BANKING LAWS (AMENDMENT) BILL, 1967

MINUTES OF THE SELECT COMMITTEE 01^ THE BANKING LAWS (AMENDMENT) BILL, 1967 *

Monday, the 15th April, 1968 at 14.30 hour*.

PRESENT

Shri G. S. Dhillon—Chairman.

Members 2. Shri Kamalnayan Bajaj 3. Shri S. S. Kothari 4. Shri N. Dandeker t 5. Shri Samarendra Kuhdu \ 6. Shri Indrajit Gupta t » , 7. Chaudhary Nitiraj Singh , 8. Shri Krishna Chandra Pant. 9. Shri S. R. Rane I 10. Shri Dwaipayan Sen 11. Shri Jyotirmoy Bosu i ! 12. Chawdhury Sadhu Ram , | 13. Shri Morarji R. Desai. '

Legislative Council Shri S. K. MaitfQ, Joint Secretary and Legislative Counsel, Ministry of Law. v

Representatives of the Ministries 1. Shri S, S. Shiralkar, Additional Secretary% Department of Economic Affairs, Ministry of Finance. ‘ 2. Shri R. K. Seshadri, Executive Director, Reserve Bank of India, Bombay . 3. Shri D. N. Ghosh, Deputy Secretary, Deptt. of Economic Affairs, Minic- try of Finance. ' " -i, 4. Dr. V. A. Pai Panandiker, O.S.D. Ministry of Finance.

S e c r e t a r ia t • Shri M. C. Chawla—Deputy Secretary. i

Witnesses Examined All India Bank Employees3 Federation, Kanpur. Spokesmen: 1. Shri V. N. Sekhri—General Secretary. 2. Shri G. K. Awasthi—Joimt Secretary. 3. Shri M. R. Sud—Organising Secretary. 4* Shri T. C. Gupta—Assistant Secretary.

{The witnesses were called in and Deputy Prime Minister and Finance they took their seats) Minister when we led our deputation, Mr. Chairman: Kindly introduce. copies of which have already been sent to your honour as directed. Com­ Shrf Morarji R, Desai: You are re­ ing specifically to Section 36A(d) we presenting All India . . . have stated, Sir, that in para 4 of our Memorandum—while the All India Shri Sekhri: I am representing Bank Employees Federation has al­ All India Bank Employees’ Federation ways condemned the acts of indisci­ with Central Office at Kanpur. pline, hooliganism, intimidation, work Shri Morarji R. Desai: Their Head­ to rule movement, gheraos, etc., reite­ quarter is at Kanpur. They do not sim­ rates to continue to work on peaceful, ply represent Kanpur. democratic lines and proceed on Cons­ titutional methods in respect of dis­ Mr. Chairman: 1 read before you putes. Beginning with this, Sir, our the Directive by the Speaker: When humble submission to this Hon'bie witnesses appear before the Commit­ Committee is that the provisions as tee, the Chairman shall make it clear contained in the new Section 36AD to be published unless they specifically which is introduced in the Bill viz,, no shall be treated as public and liable person shall obstruct any person from to be published unless they specifically entering any office or place of business desire that all or any part of the evi­ of a Banking Company or from carry­ dence given by them is to be treated ing on any business there, then hold as confidential. It shall, however, be any demonstration including any explained to the witnesses that even slogan which is indecent. Sir, first though they might desire their evi­ of all this all relates to the mainten­ dence to be treated as confidential, ance of industrial peace and for which feuch evidence is liable to be made separate Act is already there—Indus­ available to the Members of Parlia­ trial Disputes Act. ment. Shri Morarji R. Desai: It is inside Shri Morarji R. Desai: That m ea n s the premises. Is it the right of any that would not remain confidential. Trade Union to create rowdyism with­ . Shri Sekhri Our evidence may be in the office? When did you get that? treated as public and not confidential. Sir, we welcome the move of the Cen­ Shri Sekhri: We straightway con­ tral Government as far as the social demn that. We are opposed to inside measures are concerned and we have demonstration. said so in a unanimous resolution pas­ sed by the special session of our Gen­ Shri Morarji R. Desai: There is eral Council—the highest body which nothing else. assembled at Kanpur. At the same time, Sir, our submission to the Com­ Shri Sekhri: Holding of any demo­ mittee and the Government is, which nstration which is indecent, which we have already placed in our Memo­ amounts to commissioning of any randum submitted to the Hon’ble offence within the premises or any 3

building or place of business in which a Bill to stop such illegal activities bank is situated— upto 10 metres take within the precincts of the banks as the case of Bombay or Delhi, * even gheraoV and all that. Unfortunately verandahs and doors are covered up. a section of employees have done it. Shri Morarji R. I>esai: Verandahs But I think if a tripartite meeting is have to be covered up. Verandah is convened and some court is deputed not outside. How is it the right of to go into such cases, they will go any person to create rowdyism? away and solution can be found. Show me where that right belongs to union. Shri Morarji R. Desai: There can­ not be a court for illegal acts. This is Shri Sekhri: Sir, there are provi­ an illegal thing and that is why it is sions in Criminal Procedure Code provided. Nobody wants to take away to check such activities. the legitimate rights of the trade unions. I will be the last person to do Shri Morarji R. Desai: I do not that. think there is any provision like that. Unless there is specific provision, it Shri Sekhri: There is another clause is not going to help that sfcing: “....act in any manner ca’cu- way. I do not know whether it is lated to undermine the creditworthi­ the right which is provided. Is it any ness. If for example in a parti­ right of any workman or any official cular bank some of the Directors go to create rowdyism inside the office to the extent of advancing or doing in which he is working? something which is not in the interest of the bank or Community etc. Shri Sekhri: We condemn this. Shri Morarji R. Desai: That is all Shri Morarji R. Desai: It is nQt the right. ‘ business Qf the workers in that1 tank to do that. If they do that, the^ are Shri Sekhri: Our peaceful demons­ not loyal servants of the bank. tration may be obstructed even- at the gate of the Institution. Shri Jyotirmoy Bosu: Loyal to un­ lawful things? They are loyal to law­ Shri Morarji R. Desai: That is 'a ful things. matter which can be considered if it is outside the premises. Slid Morarji R. Desai: How is it unlawful? You have to prove that. Shri Sekhri: Sir, the word ‘indecent’ Before a man is condemned, you have is a very vague term. Who is going to prove th’at he deserves condemna­ to decide? Here powers are given to tion. Otherwise, how can you take the Reserve Bank, who is an emp­ away the reputation of an institution? loyer. Shri Indrajit Gupta: I think we Shri Morarji it- Desai: Reserve should first heat the witness, instead Bank has to prescribe. I think there of cross-examining him? can be an amendment of this that it Shri Morarji R. Desai: I thirtk we should be every bank which should do are entitled to cross-examine him. it and not the Reserve Bank. Why should it be given to the Reserve Shri Sekhri: My submission is that Bank? That can be considered. there is no need for a separate enact­ ment of this type. This is to regulate Shri Kamalnayan Bajaj: Do you the service conditions of the bank suggest that the word ‘indecent’ should employees on the lines gt the Act in be dropped? J|| respect of working journalists. This will only curb the genuine, peaceful Shri Sekhri: My submission is this: activities of those who have beerfjeon- I can understand Parliament enacting tinulng their activities under odd 4 times. This situation is due to the lati­ to regulate such bad elements this is tude given by certain bankers, maybe made. They may indulge in intimida­ in view of competition, and Parlia­ tion and this will affect not only the ment has thought to include these pro­ management of the bank but also the visions which we honestly feel will clients who come ’and go. They also take away the genuine rights of the will be harassed if they are not allow­ trade unions. ed to go in or come out of the bank. Banks have to cater to their needs. Shri Morarji R. Desai: How? Which Social control is not for management is the legitimate right which is taken alone. Management includes employ­ away by this legislation? ees, staff and workers. They together should create an atmosphere in which Shr| Sekhri: Right to demonstrate. alone banking business will prove to be a service to the society. Shr| Morarji R. Desai: Where is the right of the trade union to demons­ Shri Sekhri: Who has been respon­ trate inside the premises? I want to sible for all that? There is the Shas- know that. tri Award and several other settle­ ments and agreements. Have the Shri Sekhri: I have already stated banks taken recourse to these agree­ that our organisation is not in favour ments? If they have not, even after of inside demonstration. this enactment is passed, how can you guarantee that there will be no com­ Shii Morarji R. Desai: That is all plaints? right. Shri Morarji R. Desai: When there Shri Sekhri: This will stop demons­ is a definite enactment, they can be trations even outside the premises. prosecuted under it.

Shri Morarji R. Desai: That may be Shri Sekhri: Can the employees go considered by the Committee. to the .court and prosecute a manager of a bank who sides with such acti­ Shri S. S. Kothari: Do you agree vities? with ten metre conditions? Shri Morarji R. Desai: If anybody sides, he is an abettor. Shri Sekhri: No, Sir. My agreeing has no meaning because whatever may Shri Sekhri: There are provisions be the clause my submission is that in the I.D. Act. They have not been this should be in the form of an am end­ enforced. ment of the I.D. Act. Subject to this submission, I agree for demonstrations Mr. Chairman: You are not oppos­ inside Banks. ed to this. Shri Kamalnayan Bajaj: Your Shri Sekhri: But it should not be organisation may pe pledged to peace­ in this form. ful and legitimate manner of agitation. Then there is this clause saying"... When a law is made, it is not to cover act in any manner calculated to under­ all the classes of people. All the 100 mine the credit-worthiness of any or 50 per cent of the people are. not banking company.... ** This is such thieves. Thieve9 may be only one per a vague term that any employer who cent. But even to cover that one per , does not like genuine trade union acti- cent, laws have to be made. Even * vity in his office can misuse it against if your association is peaceful, there workers. may be one Union which may create troubles and you have also admitted i Shri Morarji R. Desai: How? I do that they have created troubles. It is I not quite follow. J Shri Sekhri: For instance, you can length. These items which you have say that any resolution, any letter or lister in paragraph 7(1) have been any demonstration is against credit­ acts of misconduct under the existing worthiness. standing orders of the banks. Are these uniform in all banks? Shri Morarji R. Desai: How? How can you prove that unless it really Shri Siekhri: Yes, except in the affects? State Bank and the Reserve Bank.

Shri Sekhri: This in fact is snatch­ Shri indrajit Gupta: According to ing away the right of showing resent­ what you have quoted, almost all pos­ ment to certain actions and policies of sible offences that one can imagine are the management because the strikes, covered here. even after due notice is given, resolu­ tions or demonstrations will lead to Shri Morarji R. Desai: That is only various interpretations and Your Hon­ by agreement. That does not become our won’t be there at that time. an offence.

Shri Morarji IL Desai: rrhey will be Shri Indrajit Gupta: What happens interpreted by the court and not by to a bank employee or employees if anybody. • there is gross misconduct? Shri Sekhri: There are various in­ Shri Sekhri: They are liable to be terpretations right from the lowest prosecuted under a certain section of court and the trade unions will be the I.D. Act. The bank can punish instruments of litigation from the them amounting to dismissal. And the smallest court to the highest court. Court may levy a fine or even impri­ son them. Shri Morarji R. Desai: Why? Trade Union is not going to be prosecuted. Shri Indrajit Gupta: Then, what is Only its members will be prosecuted, the need for 36AD? if the organisation supports illegal activities. ,Shri Sekhri: That is why I say these are not necessary , Shri Sekhri: If they support legal activities? ' Shri Morarji R. Desai: He says that these are not necessary. Shri Morarji R. Desai: Then no­ body will be punished. Shri Indrajit Gupta: You mean that there is distinction between something Shri Sekhri: That might be Parlia­ oeing done inside and outside the pre­ ment’s pious view. We have to see mises. And this act of misconduct etc. the implementation part of it. in the standing orders covers many things which can happen inside the Shri Morarji R. Desai: Show me any premises too. instance where there has been punish­ ment which is against law or unjust Shri Morarji R. DeaaA: He is oppos­ in that sense. I would like to have ing it. one instance of that kind. Then you Shri Indrajit Gupta: Why is be will be justified in drawing this con­ apposing it? clusion. Shri Morarji R. Desai: He says Shri Indrajit Gupta: In the memo­ xhat these are provided for already in randum, paragraphs 6 and 7(1), you another Act. have said that the provisions of Clause 36A (d) go counter to the terms of the Shri Indrajit Gupta: Some suspi­ tripartite agreement of 19.10.1966. In cion has arisen. That is why you want para 7(1) you have quoted at f^eat something of that kind on top of it. 6

Shri Sekhri: if I may draw your the bank or to those who are govern­ kind attention to this, holding of ed by the association. Before the peaceful demonstration or peaceful banks, anybody1 who comvmits nuisance agitations is a legitimate weapon of a of the nature which is envisaged has democratic trade union movement. to be stopped-whether here the em­ This has been guaranteed under the ployee of the bank is also included is Constitution and in various enactments a different thing. & so I request the deletion of this sec­ tion present legislation and awards Shri Sekhri: That also is covered covers among other, ’acts of indisci­ under the provisions of the I.D. Act. pline and many other gross miscon­ Under that Act, penalties are also duct. We have quoted from (a) to (1) provided for such offences. for which the punishment provided is dismissal. Under the I.D. Act, anybody Shri Kamalnayan Bajaj: Then, why who contravenes certain sections is are you afraid of? punishable with imprisonment or fine or both. Then we say that there are Shri Sekhri: Any person who has many acts which can be termed as committed a nuisance is covered by ‘misconduct’. Then, refer on to other the penalties provided for in the Act. sections in chapter VI of I.D, Act Those are provisions for the penalties dealing with offences. They are all against the workers as also against covered under the Indian Penal Code. the employers. I have explained at length various Shri Morarji R. Desai: offences in my memorandum. But, he is against this clause. Shri Indrajit Gupta: That means Shri Sekhri: But, there is no pro­ these are more exhaustive. vision if an employer commits a breach of in settlement of the awards. Shri Sekhri: That is why I say that all these acts of misconduct and Mr. Chairman: Anyway We have offences etc. have been already cover­ heard you. And we can consider ed in the Indian Penal Code. & I. D. your views. Act 1ST Shri Samar endra Kundu: Mr. Shri Morarji R. Desai: Then, why Sekhri, you would kindly see 36AD are you objecting to this? If there and also your •memorandum in which be one more section provided for, why you have stated that you want these are you objecting? sections to be withdrawn for various reasons. I would like to have your Shri Sekhri: No, Sir. There is , a views on this. In para I of your difference in any rule-making powers memorandum this is what you say:— between the agencies. & their misuse. “ (a) No person shall obstruct Shri Morarji R. Desai: Here that any person from entering any relates to a particular offence. office or place of business" of a banking company or from carrying Shri Kamalnayan Bajaj: You are on any business there.” arguing only for the employees. But here, it is said ‘any person’. He may Suppose obstruction in the form of a be an employee or he may not be an satyagraha is there. What do you employee. The restrictions are not say to this? If obstruction is in the on the employees but on any person— form of a satyagraha, that is with a not only the employee of the bank or view to furthering the legitimate de­ association but on anybody. There mands of the workers. You resort to ar^ restrictions imposed or penalty a certain satyagraha. Such an Imposed. Whatever you have quoted obstruction is not defined. Of course, may be applicable to the employees or there are general laws in the country. Thbfie ^vho obstruct or detain any Mr. Chairman: It is a hypothetical person will be taken care of and cer­ case which you have put in. tain punishments are provided for. Here, a specific reference has been Shri Morarji R. Desai: It is a matter made. Do you feel that this can be for the Court to decide as to what is made use of widely against the work­ iadecent. ers on flimsy grounds? Also when there is *a question of slowing down of Shri Samarendra Kundu: In the the work, that is also considered as initial stage, if a worker has behaved one of the legitimate weapons of the in such an indecent way, a complaint workers, this provision can be made can be filed. use of widely? Shri Morarji R. Desai: He is object­ ing to that. Shri Morarji R. Desai: Here I do not agree with you. Slowing down Shri Samarendra Kundu: He has is not a legitimate weapon. And all not said so. over the world, they are punished. ' But, if this cannot be proved, then Shri Morarji R. Desai: He has said nothing can be done. earlier that the word ‘indecent’ will involve anybody on anything,

Shri Samarendra Kundu: I would Shri Sekhri: I have specifically like to have your opinion on this. said so. Are you think that this cannot be widely used against the workers if Shri Samarendra Kundu: This they resort to satyagraha? could be used against peaceful satya­ graha also. Shri Sekhri: I have already said so. I will not agree that go-slow Shri Sekhri: This can be exploited tactics will be one of the legitimate by certain quarters against legitimate weapons of the trade union movement. trade union activities also.

Shri Samarendra Kundu: What Mr. Chairman: Who is to judge about the other clause? what is decent and what is indecent? The Court will decide that. Shri Morarji R. Desai: He is oppos­ ed to this section. Shri Samarendra Kundu: This is a very important question. As Mr. Shri Sekhri: I am opposed to this Morarji Desai and Mr. Chairman say, section. Satyagraha or peaceful de­ the Court will decide that and so you monstration *may be curbed. need not worry. But what I am put­ ting to you is, the Court also will be Shri Samarendra Kundu: Please guided by certain facts and circums­ look to clause (b) of 36AD: tances. When it has not been cate­ gorically defined, the first initial filing “ (a) hold any demonstration of prosecution can be done wildly on (including shouting any slogan) the ground that the man behaved in­ which is indecent or which decently— he shouted loudly and that amounts to the commission, or can also be an indecent act when it incitement to the commission, of is not defined. In such circumstances, any offence, within the precincts after filing of the complaint in the of, or inside, any building...... 99 court, the litigation might go on for years. Would you conclude from this Shri Sekhri, what is-indecent has not that in a way some sort of a garb been defined. And on any grounds, to curb the legitimate activities of a complaint, can be filed by the Re­ trade union workers and in an indirect serve Bank. way this clause has been introduced. 8

Shri Sekhri: I have already stated made— instances which are minor and in my submissions that it will curb which are major, one way or the the legitimate trade union activities. other. These three clauses are covered In the light of my submissions already made before I pointed out the various Shri Samarendra Kundu: Should I offences either under the standing understand you to mean that the orders or under different enactments. punishment suggested is excessive as I l’eel that they are bound to be mis­ compared to the nature of offences? used. Shri Sekhri: Yes. Shri Samarendra Kundu: I will Shri Samarendra Kundu: In the also draw your attention to Clause 3. beginning you said that you are gene­ Shri Morarji R. Desai: He is rally happy with this social control. objecting to that. Why do you want Shri Sekhri: We welcome, I said. him to repeat it?

Shri Samarendra Kundu: I am Shri Samarendra Kundu: You wel­ t’.orry. It is clause 2. What do you come and you are happy. Should I take it that you are happy because think about the punishment which has been suggested here? Do you think this Bill according to you speaks of complete nationalisation of the banks it very much as compared to the de­ gree of the offences? In a legisla­ or you are happy because it has not just touched the question of complete tion for the kind of offence mentioned there should be a corresponding nationalisation of the banks, but just qualifying punishment. If it is not touched the fringe, the first step to­ there then that legislation is a bad wards the end? legislation. My personal opinion is this. When the legislation says that Shri Sekhri: To my mind and to shouting of slogans is an offence, then my organisation the present slogan the punishment should be correspond­ of nationalisation is a political slogan. ing to that, and not maximum punish­ In view of the experience which we ment for this offence. have gained from the public sector undertakings and with the existing machinery and environment it will be Shri Mbrarji R. Desai: Which Judge against the interests of the country has given the maximum punishment? as well as the banking industry to nationalise it. This (social control Shri Samarendra Kundu: At that Bill) is a step forward— to control the time you may not be there. banking institutions— for better eco­ Shri Morarji R. Desai: I was also nomic development and to have a a judge. I had never done that On socialistic pattern of society in what­ the contrary even the minimum is ever manner it is possible to achieve. not given. This is a step in the right direction— by suggesting measures for having Shri Samarendra Kundu: You might effective control so that the backing have been liberal then. Don’t you, institutions can give economic help to Mr. Sikri, think that the punishment those sections of our economy like is very high and excessive for the agriculture, cooperative sector etc. offence which has been mentioned in where such advances are not forth­ "sub-c’ause (b)? coming from any other quarter, as needed. ShH Sekhri: I have already stated that these are already covered by Shri N. Dandeker: Last year there various enactments. It will be very was awful lot of trouble in the various difficult unless specific instances are branches of Punjab National Bank 9

*nd year group of Unions scrupulous­ genuine, constructive and health, ly avoided participating in those trade union movement. But at the things. I presume you did not parti­ same time we honestly and urgently cipate because you objected, fo T ins­ feel that in view of the past experience tance, to obstructing any person from of certain banking encouragements *»nd entering any office or place of busi­ certain officers of the Reserve Bank ness of a banking company or from and Govt, who have not cared to carrying on any business there. You implement certain provisions which thought that this was wrong. led the Government of India today to bring such sections (36AD) in a Bill Shri Sekhri: That is correct. which is meant for social control, of banks. So we &re strongly of the Shri N. Dandeker: You did not like opinion that this will be used against to participate in those things because those who have so far been working you objected to holding any demons­ on Constitutional lines. tration (including shouting any slo­ gan) which is indecent or which amounts to the commission or incite­ Shri N. Dandeker: I don’t under­ ment to the commission of any offence stand the precise usage to which you as mentioned in sub-clause (b). object.

Shri Sekhri: Yes. My unions Shri Sekhri: Well, precisely, there throughout the country have been is a competition between two banks. objecting to certain things in a very There is one bank which is financing peaceful manner and way, as shown a particular organisation—giving to us by Mahatma Gandhi. money, giving typewriter, giving everything— so that it may come up against another bank which is num­ Shri N. Dandeker: You did not ber one or number two. There is a participate in these demonstrations section of banks who are financing because you thought that they were wrong: i.e. obstructing any person some sections. They are against these social control measures. They are from entering any office or place oi m financing certain elements whom they business of a banking company or want to come up. If you look up, from carrying on any business there or holding any demonstration you will find so many people not do­ ing any work and getting salaries for (including shouting any slogan) which doing the work of a political party. is indecent or which amounts to the commission, or incitement to the com­ Shri Morarji R. Desai: Does it not mission of any offence within the pre­ follow from this iJhat there is the cincts of or inside any building in necessity of a provision? which the office or place of business of any banking company is situated. What Shri Sekhri: Respectfully, Sir, no; I want to ask you is, when your uni­ because even during the last few ons scrupulously refrained from parti­ years, even when the provisions were cipating in acts which you considered there, but these were not applied. were offensive, why do you object to the law stating that these are offences Shri Morarji R. Desai: It is not in and what is wrong in the law stating the Banking Act. them as such? Shrf Sekhri: They were under the Shri Jyotirmoy Bosu: Did you I.D. Act, they were in the Desai Tri­ bunal, Shastri Tribunal, Sen Tribunal follow the question? and Bipartite Settlement. Shri Sekhri: I have got 23 years experience in this; 23 years of trade Shri Morarji R. Desai: I can very unionist career at my back. We sub­ well understand that no Trade union mit that many actions are part of can ever support this measure. r- » „

Shri N. Dandeker: I want to have Shri Indrajit Gupta: You have sug­ your comments on the procedure sug­ gested that because of that you want gested sub-clause (3)—“N0 court this c ause to be abolished? ' shall take cognizance of any offence punishable under s-ub-section (2) ex­ Shri Sekhri: Yes. cept on a complaint in writing made to it by the Reserve Bank or by* any Shri Morarji R. Desai: He wants it person authorised by it in this be­ to be provided elsewhere. half.” Shri Indrajit Gupta: In other Shri Sekhri: The Reserve Bank is places—I do not like to quote the exact fen employer. And the Reserve Bank wording—you have said that the pro­ officials cannot keep their house in visions which already exist under the order. If ypu !ook there are instances Standing orders or in the I.D. Act in the Reserve Bank which were n^ever have not been effectively implement checked. So any employer can misuse or enforced by the management, and the provisions against us. by the Government, because they have been afraid of being pressurized Shri N. Dandeker: What would you or intimidated by some people. suggest as an alternative? Shri Sekhri: Yes. Some of them, Shri Sekhri: It is for the Govern­ not everybody. ment.

Shri Morarji R. Desai: Make it a Shri Indrajit Gupta: If that is so, cognizable offence?—Is that what you do you think that a management which would suggest? is so weak and so cowardly and panicky that it cannot enforce its own standing orders, can do that? Shri Sekhri: That can be talked over, in a Bipartite or Tripartite Shri Morarji R. Desai: That is a meeting. fact. Shri Samarendra Kundu: Six* months cannot be made a cognizable Shri Sekhri; You have put it in a offence. different way. I said that the attempt of the bankers has so far been to go Shri Sekhri: There may be a sepa­ on increasing profits, never minding if rate law for labour relations. there is an agitation fend even if they have to pay a few lakhs by way Shri Morarji R. Desai: There is a of fringe benefit, etc. They are n o t provision for legitimate labour pur­ very serious to implement all such* poses. There is a safeguard for labour things. So that will be the answer, activities. Shri Indrajit Gupta: Is it a fact Shri Indrajit Gupta: I am just lo o k , that in big cities—not in all cities— ing up your memorandum. Does y o u r like Calcutta or Bombay and so on, organisation hold that these provisions many of these banks are situated in a of 36AD fere violative of the rights pfcace where a large number of other guaranteed in the Constitution? This commercial firms and so on are also is what you have written in para 6 situated—in the same building? of your, letter. Shri Sekhri: Yes. Shri Sekhri: Not in the context in which you have put the question. Shri Indrajit Gupta: The entrance What I mear is peaceful agitations, for the building may be common? peaceful demonstrations and peaceful satyagraha. Shri Sekhri: Yes. In most case*. Shri Indrajit Gupta: What happens f ! Shri Kamalnayan Bajaj: You know when the employees of some other there are hundreds and hundreds of firm or company which is situated in branches of many banks and the Re­ the same building, hold demonstrations serve Bank’s branches are very few. for ventilating some of their grievan­ In remote place where the Reserve ces? Then, do you think that 30-AD Bank is not there if something of thb can be applied? nature happens and if the Reserve Bank alone is to take steps then the Shri Sekhri: Yes. It is bound to be incident may go by default. Moreover, misused. if an individual person comes to a bang and if he is abused and so on, the fun­ Shri S. S. Kothari: We have noted damental right of that individual to your objection to the sections; that take action—whether it is man or they should be dropped, and so on. woman—whether we should prohibit Can you suggest any amendments to or limit his right or whether we can these sub-sections (1), (2), (3) and do that that he should be in a position (4)? There are so many words used, to take action against the other group like “indecent,” “credit-worthiness”, of people or the individual who abuses “within ten metres from any entrance or restrict his/her free movement to or exit”, etc. etc. Can you suggest from going in or coming out of the any amendments to these clauses? bank’s premises. If this is enlarged— You can send something. instead of banks taking any action—if it is made a cognisable offence, will it Shri Sekhri: we did not consider satisfy you. ' and were hopeful that the Govt/Select Committee would drop Section 36AD. I will surely send something, if so Shri Sekhri: The banks have al­ required. ready applied; in the Syndicate Bank, in the Indian Overseas Bank, etc. The Shri S. S. Kothari: You just want bank had applied the existing provi­ them to dropped? sions. Not only that they checked the demonstrations within the premises Shri Sekhri: Yes. In all the Acts— but also got injunctions. Demonstra­ even in the I.P.C.—different offences tions were checked and existing nrovi- have different punishments. If you look into the memorandum, even in sions were applied and results were the Bank Award, as modified, there there. are certain instances which are gross, which are minor, and all that. Shri Kamalnayan Bajaj: In the case Shri s. S. Kothari: You have n ot of Punjab National Bank—in small imagined this aspect of the matter? branches—where the officers are one or two but the workers are many they Shri Kamalnayan Bajaj: If the have intimidated the officers. Some­ word ‘indecent* is dropped, is your times they have gheraod them. Not problem solved? only that, even without having worked for the overtime and so on with com­ Shri Sekhari: If demonstrations pulsion they have taken the overtime within the premises are checked, I signature from the Manager and so think; it is a step forward. Giving on. These things have happened in powers to employers—the Reserve Punjab National Bank, in some of Bank—will mean giving powers to one their branches. It may happen side only. So, if at all any power is in other banks also. Sp to say that to be vested it should be vested with banks alone should be able to take the Government or an independent action is not sufficient. It may be committee having representation from necessary some time that police—if both the employers and the workers, they find that Jaw Js being broken &nd 12

it is necessary to take action— should Shri Jyottrmoy Bosu: You are not be in a position to take action. Do you giving the workers a higher position in think so? your list.

Shri Sekhri: Sir, my straightway Shri Sekhri: I have said that the answer will be that in those case* worker should be a partner. where bogus overtime is asked for or somebody is gheraod punishment is Shri Jyotirmoy Bosu: When you already provided. Now gherao, on talk about bank and its premises you which the Government of India has include the workers also. They are taken the legal opinion, is not a not outsiders. weapon of trade union movement a'- though a particular party may not Shri Sekhari: They are the part and agree to it, that is a different affair. parcel of the institution. But the country as a whole has said so that gherao is not a trade union Shri Jyotirmoy Bosu: How would weapon at all. It is not a peaceful you differentiate between peaceful weapon, So that can be taken, care of obstructions, satyagrah and picketing by the existing enactments and as far from such satyagrah and picketing as as other things like overtime elc. are was devised and brought by late Shri concerned in some cases suspensions Mahatma Gandhi. have been there and even in some cases the workers have been dismiss­ Shri Sekhri: I will not use the word ed. So applying any other remedy than ‘obstruction*. By Satyagrah we mean existing when other remedies are, I 'voicing a voice and a legitimate voice’. think, will only create industrial dis­ harmony and if the law is there, the Shri Jyotirmoy Bosu: Let us call law is for everybody and showed not spade a spade. Satyagrah and picket­ before one party. ing to my mind and to the minds of Shri Jyottrmoy Bosu: Mr. Sekhri, many others who would like to call spade a spade was a peaceful obstruc­ I shall ask you a few questions and tion. Do you agree? I request you to be very brief. Give me your impressions or reading about Shri Sekhri: I do not qualify the the word ‘bank*. Whether it means a use of the word ‘obstruction’. building; whether it means the con­ trolling interests holding 1% shares; whether it involves the share-holders Shri Jyotirmoy Bosu: shri Sekhri, with 10% shares; whether it includes would you agree with me. Let us be the workers, depositors who have frank and fearless. I am not talking dumped their money getting the re­ as a politician nor I am asking as a politician. Would you not say peace­ turn at the mercy of the people in ful obstruction is the same as satya­ control of the banks. How do you graha and picketing. Take your mind define it? to the pages of Newspaper of thir- Shri Sekhri: In that larger context tees— Mr. Desai burning Manchester. I will define that the bank has the in­ ’ terest of everybody, the depositors, Shri Sekhri: Even if Mr. Desai share-holders, workers, the Govern­ would or would not have (/one that, I ment and the community. would say that Satyagraya is not Shri Jyottrmoy Bosu: Does Gov­ obstruction. ernment come in the picture of pri­ vate banks? Shri Morarji B. Desai: Mahatma Gandhi has described this in his own Shri Sekhri: Yes, because Govern­ words when he was asked about pic­ ment has to implement its policies and keting, etc. He said this must be pre­ ^ live Yaer Plans. vented at all costs. IB

Shri Jyotirmoy Bora: Mr. Sekhri, Shri Jyotirmoy 9ora: You are you arc an intelligent man, know- handling one set of employees. I am ledgable man. You have a fair and trying to ask whether they have the open mind. You have read that tea­ same passion in their mind. chers or professors of this country, without being divided, have raised & Next question: Mr. Sekhri, have voice against entry of policemen to you read the French Bank Nationali­ educational institutions. What is your sation Rules of 1945? re-action? Shri Sekhri: I have gone through Shri Morarji R. Desai: It has nothing it but at the moment I am not very to do with the Bank. I am objecting. conversant.

Mr. Chairman; Mr. Basu, your Shri Jyotirmoy Bobu : Do you feel questions should be to the point. that this Bank has tried to take only a part which is convenient to them? Shri Jyotinnoy Bosu: A Bank em­ ployee, according to me, is part and Shri Morarji R. Desai: I have not ptercel of Bank Association. You are seen this.' ‘ trying to treat him as a foreigner. You are trying to give him a groove which Shri jyotirmoy Bora: Next ques­ is undesirable. What are the senti­ tion: Do you approve of the idea that ments of others should be known to in each and every set of Board of us? I am within my right. Give me Directors!, there should be at least the chance to help this Committee fcs two representatives from the em­ best as I can. ployees?

Shri Morarji R. Desai: I object. Shri Sekhri: Yes. I will not say one, two or four but our Federation Shri Kamalnajan Bajaj: I raise a has already passed a Resolution re­ point of order. When we are examin­ garding representation in the Ma­ ing a witness, what the other members nagement. of the Committee talk, should not be Shri Jyotirmoy Bora: In the Board discussed in the presence of the wit­ of Directors—my question is clear. ness.

Shri Jyotirmoy Bosu: Is it in the Shri Sekhri: At all levels. terms of reference? I feel, in my Shri Jyotirmoy Bosu: Now I come opinion, this will help the proceedings to Sub Section (c) ‘act in the manner of the Committee. calculated to undermine the credit­ worthiness of any Banking Com­ I am going to do this with very pany*. Let us be frank about it open mind. Have we certain, inten­ Would you not think that more of tions in our mind that we are going this has been done by persons who to allow this &nd not others? had been in the Directoral posts or QpstairB as we have jeen in the case Mr. Chairman: 1 think it is not of former Chairman—Shri Shanti relevant. Prasad Jain. Shri Jyotirmoy Bosu: To my mind Shri Sekhri: I will submit, Sir, it is permissible tu one set of work­ that all the reports on this point go ers and not to another set. Let it to show that it was the Board of come on record that way. directors who had been responsible.

Mr. Chairman; l >o not stress it too Shri Jyotirmoy Bora: Board of much. Directors have been more fetpanidble 702 (Aii) LS—2. 14 lor this. Next question: What are deliberately absented themselves the weapons in your opinion a work­ from bipartite and tripartite con­ er in this country has to get speedy ferences and in how many cases they justice without spending any money did not implement the various against his employers if he feels that awards? he had been given injustice. Mr. Chairman: This is also not on Shri Sekhri: Are we talking of the Bill as such. I have allowed Bank Industry? you to put a number of questions which have no relevance. You can Shri Jyotirmo/ Bora: Each and certainly ask any question on the every work in this country. Banking Bill. is certainly included in that. Shri Jyotirmoy Bosu: I expected Shri Sekhri: After the various the Chairman to be a little kind to decisions of the Indian Labour Con­ me. ference and thfe Standing Labour Committees, in any organised in­ Shri Morarji E. Desai: There are dustries, forums have been created other Members also. where disputes are settled either under bipartite tripartite machi­ Shri Jyotirmoy Bosu: These are nery or, if any, where employers in serious matters. a paticular industry have not so far agreed to arbitration. There is ad­ Shri Morarji R. Desai: Who says judication* In many cases the delay they are not? has been there and the Ttade Union movement has been asking all con­ Shri Jyotirmoy Bosu: Do you feel cerned that the delay should be or do you not feel that this Bill is minimised and arbitration may be going to interfere with the trade forced at all levels. Coming to the union rights? You cao be quite Banking industry, right from 1964 frank and fearless. August, we—my organisation as well as others—experimented for two Shri Sekhri: I have already re­ years and negotiated. We are en­ plied that it is so and refer to what gaged to arrive at a successful I have said in paragraph 6, subject settlement for 3 years which was the to para 4 and others. first in the entire industry in India and which is still operative. It was Shri Jyotirmoy Bosu: You have signed in October 1966 and after that said that it does interfere. major questions are being negotiated. It may be, the employers may not Shri Samarendra Kundu: Don’t you agree on various issues. But, by and think (hat the provision of 36(d) large, the question of bonus, promo­ will go against the Constitutional tion policy and other questions are provision which guarantees the right being talked to, and agreements and of assembly and formation of unionT being arrived also iii the Banking ‘Strike’ which is a legitimate weapon industry. The situation needs im­ may be interpreted as ‘obstruction* provement. Arbitration or Trade and may militate against fundamen­ Union actions is the alternative, tal rights to form assembly or form when there are no agreements in union. What is your view on this? disputes Shri Morarji R, Desai: How is he Mr. Chairman: You can ask him qualified to give an opinion on the about particular clauses. Constitutional provision? Shri Jyotirmoy Bosu: Do you know Shri Samarendra Kundu: He can In how many cases the employers give his view. 15 Shri Morarji K, Decal; How? It 1> seme that I have put the question. something which we have to consl- I have no more questions. der among ourselves. He is not a lawyer. Are you a lawyer? Mr, Chairman: Thank you very Shri Sekhri: No. much. Shri Samarendra Kundu; He may Shri Sekhri: Thank you. not have a degree in law. But he (The witnesmt then withdrew) would have consulted some lawyer* before coming here. It is in that (The Committee then adjourned) MINUTES OF EVIDENCE GIVEN BEFORE THE SELECT COMMITTEE ON THE BANKING LAWS (AMENDMENT) BILL, 1967

Tuesday, the 16th April, 1968 at 14.30 hours.

PRESENT Shri G. S. Dhillon—Chairman.

Members 2. Shri Kamalnayan Bajaj 3. Shri S. S. Kothari 4. Shri N. Dandeker 5. Shri C. T. Dhandapani 6. Shri C. M. Kedaria 7. Shri Samarendra Kundu 6. Shri Indrajit Gupta 9. Chaudhary Nitiraj Singh ^ 10. Shri Krishna Chandra Pant x 11. Shri S. R. Rane 12. Shri M. Thirumala Rao 13. Shri Dwaipayan Sen 14. Shri Jyotirmoy Bosu 15. Chawdhury Sadhu Ram 16. Shri Morarji R. Desai.

Legislative Counsel Shri S. K. Maitra, Joint Secretary and Legislative Counsel, Ministry of Law.

Representatives of the Ministry 1. Shri S. S. Shiralkar, Additional Secretary, Department of Economic Affairs, Ministry of Finance. 2. Shri R. K. Seshadri, Executive Director, Reserve Bank of India, Bombay . 3. Shri D. N. Ghosh, Deputy Secretary, Deptt. of Economic Affairs, Minis­ try of Finance. 4. Shri B. N. Mehta, Legal Adviser, Reserve Bank of India, Bombay. 5. Dr. V. A. Pai Panandiker, O.SJD., Ministry of Finance.

Secretariat Sftrl M. C. Chawla—Deputy Secretary.

16 17

Witnesses Examined I. India Banks’ Association, Bombay . Spokesmen: — 1. Mr. Krishnaraj M. D. Thackersey— Chairman, Indian Banks9 Associa­ tion. 2. Mr. V. C. Patel—Chairman# Central Bank of India Ltd. 3. Mr. R. B. Shah—Chairman, United Commercial Bank Ltd. 4. Mr. S. C. Trikha—Chaimarij, Punjab National Bank Ltd . 5. Mr. T. K. F. Nariman—Chairman Union Bank of India Ltd. 6. Mr. S. G. Shah—Secretary, Indian Banks* Association. Ji. tthri V. T. Dehejia, Chairman, State Bank of India, Bombay. ill. Shri L. K. Jha, Governor, Reserve Bank of India, Bombay .

I. Indian Banks9 Association Bombay . S p o k e s m e n j 1. Mr. Krishnaraj M. D. Thackersey— Chairman, Indian Banks Associa­ tion. 1 2. Mr. V. C. Patel—Chairman, Central Bank of India Ltd. 3. Mr. R. B. Shah—Chairman, United Commercial Bank Ltd, 4. Mr. S. C. Trikha—Chairman, Punjab National Bank Ltd. 5. Mr. F. K. F. Nariman—Chairman, Union Bank of India Ltd. 6. Mr. S. G. Shah—Secretary— Indian Banks* Association.

(The witnesses were called in and Shri Morarji E. Desai: Do you they took their seats) want anything to be treated as confi­ Mr, Chairman: Before we start dential? our proceedings, I would like to read before you the relevant rule lor Shri Krishnaraj N. D. Thackersey: the benefit of the witnesses. Direct Mr. Chairman and gentlemen, on k tion No. 58 of the Speaker says:— behalf of the Indian Banks' Associa- 1 “Where witnesses appear before tiorf and on my own behalf, I wish a Committee to give evidence, to express our sincere thanks for the the Chairman shall make it dear opportunity which this Committee to the witnesses that their evi- . has given us for explaining our dence shall be treated as public views on the Banking law Bill. In and is liable to be published un­ fact, as we have already shown in less they specifically desire that both our memoranda, the banks have all or any part of the evidence voluntarily implemented many o? given by them is to be treated the main provisions of the Bill. Fur* as confidential. It shall, however, ther, the banks have also shown toy be explained to the witnesses their ready and willing action that , that even though they might they are aware of a responsive mind * desire their evidence to be to their social obligations and the treated as confidential, such evi­ needs of the weaker and vulnerable dence is liable to be made avail­ sections of the community. Thejr able to the Members of Parlia­ have promptly taken up the chal* ment/* lejige of financing agriculture ‘ i8 have taken various measures to the point of view of these organisa­ enlarge the scope of assistance to tions as well as from the batiks’ small-scale industries and exports. point of view the present arrange­ ment may continue. Our submissions are, therefore, concerned mainly with the language Then there is the point in relation and the drafting of the Bill whether to substantial interest of the Bank's they are likely to cause hardships Chairman. There must be a distinc­ in genuine cases or practical diffi­ tion made as far as the Chairman culties in the working of the banks and other Directors are concerned, and in the fulfilment of the objec­ because the ether Directors may be tives of the Bill. technocrats or professionals. Here, the Chairman or his family mem­ Mr. Chairman, after sending our bers may hold a certain percentage memorandum, we have made a small of shares in n small scale industrial note and a summary of the recom­ concern. This should not be added to mendations. We have also deleted or regarded as his own interest. some parts of our memorandum and We request that specially the interests how this has been placed before the of his spouse or his minor son in a Committee. If you do not mind, we small scale industry may not be consi­ can begin from that memorandum. dered as his contribution. Mr. Chairman: If that suits you, it is all right. Shri Morarji R. Desai: I* not the interest of the minor son the interest Shri Morarji B. Deeai: They have of the one who manages it? Who given their case. looks after the interests of the minor son—the father—and therefore it in Shri Nariman: In the memorandum his interest. that we have submitted we have made certain suggestions and this abridged note deals with each item Shri Nariman: The major son of which has been mentioned in the the Chairman might have started a small-scale unit and the chairman's memorandum. We have after due spouse and his minor son may have deliberation decided that the defini­ some interest in that unit. This should tion of small-scale industrial con­ not be considered as Chairman’s in­ cern does not need any change, nor terest. We are making the suggestion do we think that there is any change that the first four lines of the propos­ required in the definition of substan­ ed amendment may be omitted. * tial interest We have made certain suggestions in the original memo­ randum, but now we are withdraw­ Shri S. S. Kotharf: Where is this , ing the proposed amendments. point in your explanatory memoran­ dum? * Then there is this item about which we would like to make cer­ Shri Nariman: On page 2—item 6. • tain submissions. ~ The Chairman of I am sorry; this is in the note. Page a Bank who is a wholetime execu­ 20 in the Explanatory Memorandum. tive is precluded from having any other interest. We humbly submit that there are various institutions Shri N. Dandeker: The explanatory like the IFC, IDBI, Unit Trust, LIC memorandum in of 46 pages, and it and also the proposed. Agricultural is dated today. V Refinance Corporation and similar Other organisations where the direc­ Shri Jyottrmoy Boeu: This has torships are in public interest and been given today and we are expect­ are held in furtherance of public ed to read it, digest it and come pre­ policy. We think that both from pared for today’s meeting. 19

Shri Nariman: We apologise that Shri Nariman: Station 10-B, i.e. there has been some delay on our part. about the appointment of the Chair­ man as a whole-time executive. When Shri Jyotirmoy Bosu: Mr. Chair­ the Chairman or a Director is elected, man, somebody seems to be intent in in some cases the Chairman and the sabotaging the whole thing. This is Managing Director may be one and very unusual. the same person. It is, therefore, necessary that this sub-section shall Shri Samarendra Kundu: Mr. not apply in such cases where both Chairman you will realise that this the offices are jointly held by the is a very important matter. Things same person. should not be hustled in such a fashion. Sometime should be given for ub to Shri Morarji R. Desai: There is no­ study the memoranda circulated to us. thing of substance about it. It is only The witnesses have departed so much a question of drafting. from their original memorandum we want some time to study it. Shri Jyotirmoy Bora: Mr. Chair­ man, are you allowing members to put questions now? Yesterday I was Shri Morarji E. Desai: That means forbidden to do so. you have studied the original memo­ randum. Mr. Naraiman, you could Shri Morarji R. Desai: I have not confine also to the original memoran­ put any questions. dum. Shri Samarendra Kundu: I would Shri Jyotirmoy Bosu: With the suggest that it is better that they very limited resources I have in my finish their evidence, and on the basis upstairs, I pm not able to digest of their evidence the members may everything at a time. We must have make small notes and then put ques­ some time to go through the memo­ tions and cross-questions. randum etc. Shri Morarji R. Desai: I think it is Shri M. Thirumala Eao: I think the better that questions are put after­ witnesses can make a reference to the wards; otherwise it will create a kiad orginal memorandum. of confusion.

Shri Jyotirmoy Bosu: Mr. Thiru­ Mr. Chairman: Your case is fully mala Rao, your job is a little easier stated in your memorandum; Snd if than ours. Your point of view will you have nothing else to say then I be expressed by a group of people. will ask the members to ask We are the lone fighters, two, three questions. of us. Shri Samarendra Kundu: It will Shri Morarji R. Desai: Are we here not be proper to suggest like that. to fight or to consider the issues in­ Mr. Chairman: t have asked them volved? a simple question that if their memo­ Shri Jyotirmoy Beau: 1 am a very randum states their case fully they need not repeat and let the mem­ peaceful man. bers ask questions. Shri Morarji E. Desai: We are Shri Saauurondra Kiradn; Let them aware of that. explain something, which they would Mr. Chatman: Let us proceed now. like.

Shri Morarji R. D*»al: What par­ Shri Morarji R. Desai: It w o u l < ticular point do you want to empha­ be better if you mention every time, sise? the clause. ao Shri Nariman: Clause 5, section 20 provision that is sought to be made, (b). It is our suggestion that the viz. about the change that is being prohibition against giving loans, ad­ made for the first time in the Banking vances or guarantees to directors Regulation Act stipulating that the should not apply where facilities are Chairman should be a whole-time exe­ ordinary, normal and genuine and cutive. As I have understood from where the interest of bank directors in your memorandum and from your such conoerns islnot substantial and remarks just now, you are suggesting where banks have applied usual that in the case of such concerns like credit appraisal standards; in other the LIC or the NIPC and so on, the words, where directors have only a position should be different, that nominal interest in the borrowing con­ exemption should be made in the case cerns, the facilities should not be.de­ of these concerns. Don’t you think nied to them. In order to give effect that that would be defeating the very to the above suggestion it would be purpose of ensuring that the Chair­ sufficient if the word ‘director’ occur­ men are whole-time executives? ring second time in sub-section 2(1) (b) (iii) in clause 5 of the Bill is de­ Shri Nariman: Well, Sir, the posi- leted, tioh is that even the present cheif executives are appointed, and the ShU Morarji Rt Desai: You will be present chairman is to be the chief more quick in your presentation. executive. So from that point of view, I do not think there is going to be any Shri Nariman: There are a couple difference in the way he is going to of clarifications which we want to attend to his duties. Certain organi­ seek; The definition of the word sations, financial organisations, have “employee” which is occurring in an important bearing on the economy section 10A(2) does not include per­ of the country and the commercial sons who are paid fees or retainers by banks also have a lot in common with business or industrial houses. these financial institutions. If the ' The requirement for the resignation Managing Directors are debarred of the managing director on the ap- from performing a useful function, it pdintment of a chairman under section would only be depriving some of them 10B (3) should not be necessitated of the expertise enjoyed by the com­ upon where both the offices are held mercial banks. by the same person. Shri Indrajit Gupta: But they can Shri Morarji R. Desai: That you contribute expertise and knowledge have made already. without necessarily being directors of Shri Nariman: That is our case. that organisation. We would now be prepared to answer Shri Nariman: Usually as Directors any questions. they are more closfcly in touch with An hon. Member: What about the development Wid ^working of those 36AD? organisations. Shri Nariman: We have already ghrl Indrajit Ctepta; In any case stated bur case. We have no further you do not think this prejudices. his comments to make. role as a wholetime executive. Mr. Chairman: Mr. Dandeker. Shri Nariman: I do not think so. "• *' * . . Shri N. Dandeker: I would like to Shri Indrajit Gupta: About sec­ come last, because I had the least time tion 36 AD—so far as I am able to for study. make out from the several memoran­ da—4s it not a fact that the type . of ShU Indrajit Guptas It would first activity or offence which Is visualised like to ask with regard to the new 21 as being worthy of being penalised Shri Nariman: We do not want to under this section are already cover­ put anybody in the jail. We want that ed very elaborately under the exist­ they should be prevented from doing ing orders of the bank—that is, stand­ what they are doing about ing orders which are incorporated in the bipartite agreement between your Shri Indrajit Gupta: Do you think association and the bankmen associa­ this present clause will do your pur­ tion—and why do you feel it necessay pose? to have some additional powers like this? Shri Nariman: Yes. Shri Nariman; Provisions of that Award cover only individual actB of indiscipline and would not be avail­ Shri Indrajit Gupta; Is it not a able to the management to remedy, a fact that in some of the banks where concerted action on the part of a the managements take to negotiate or large number of employees. In fact, discuss matters with the union which the standing orders in banking indus­ is representing the majority of the try do not provide for any remedy employees, there this kind of trouble against mass action of employees. The does not take place generally. If Mr. Nariman is here he can tell me his clause suggested would, I feel, remove that lacuna. experience of his own bank in Bom­ bay. Shri indrajit Gupta: Would it still not be necessary to file complaints in Shri Nariman; I cannot speak of the name of individual employees my bank. If I may be permitted to even though the action may be maiss &y of the industry as a whole, we action? had entered into bipartite settlement for the first time in the history of Shri Nariman: Even under the bi­ any industry on an all-India basis. partite settlement and various awards After two years of negotiations we there are a number of povisions to take arrived at a settlement. We have action. But the difficulty with the paid them handsomely during the bank management has been that even settlement and after the settlement. when we try to take action in indivi­ All that we ask for is a promise that dual cases it results in mass distur­ we will have peace in the Industry. bance which makes it impossible for Only if we have peace in the industry us even to. exercise the rights which we can concentrate on the top on vari­ we have been granted under these ous things which are confronting us awards. and which we have to face under the changed conditions. At the moment in Shri Indrajit Gupta: How will this most of the banks—this being an all- save it? India problem—it is the chief execu­ tive whose time more or less is taken ' Shri Nariman; It will have a lot of up by these labour problems. I, for salutary effect because then it be­ onef would be the last person to see comes a cognisable offence. any employee being put behind the bars. But after doing everything, Shr| Indrajit Gupta: Do you think after persuading the banks to sit across this provision will bring about peace­ the table, I do feel, the banking indus­ ful relations or conditions in the indus­ try has not got what it bargained for. try? Under the standing orders the On the one side they have paid and maximum penalty ihat could be given have carried out their obligations and to an employee guilty of mis-conduct on the otherside, I do not think, there ?is that he loses his job. You want has been much that we can see as an that in addition to his losing his job achievement from the banker’s point he should be pUt la the jail of view. 22

Shri Indrajit Gupta: Mr. Nariman, the customers have created such a dis­ many other employers also complain turbance. about this problem. Do you think a special legal provision should >b* made Shri Indrajit Gupta: If that happens, only in the case of banks to deal with not only customers, but anybody can this question because that is what it be put in the jail. amounts to. Shri Morarji R. Desai: If he creates Shr* Nariman: If it can be ex­ rowdyism there, not otherwise. tended to other industries it will be welcome. My feeling is that bank­ Shri Indrajit Gupta: Questioning ing has a special part to play. It is credit-worthiness will also be inter­ a credit institution; a financial insti­ preted as rowdyism. tution; it is the one on which the whole economy moves round. Shri Nariman: The emphasis is on indecent behaviour. Shri Indrajit Gupta: This clause does not relate to employees as such. Shri Indrajit Gupta: Do you know This refers to any person who may any case where any bank employee be indulging in these activities. Is has lost his job for having lodged it not a fact—I myself have been wit­ complaint against certain doings of ness to it—that in a bank sometimes the management though later when a the customers, say when your bank­ Government—appointed commission ing hours are from 10 to 2 p.m. and went into them they found that those there are some customers waiting in­ allegations were quite correct? But side for some transactions which are he never got his job again. not completed by 2 p.m., the clients of the bank started shouting and creat­ Shri Nariman: I know of *a case. ing a scene inside the bank, They said: But. I do not know how it has rele­ Since we have entered here before vance to this. 2 o’clock, we should be dealt with. Then they insisted on going to the Shri Indrajit Gupta: If it comes to Manager’s office. In such a case if the bona fide knowledge of a bank you complain against them you do employee that the management is in­ not mind this provision being applied dulging in certain actions or activities to them? which are detrimental to the bank or the public, he is not in a position to Mr. Chairman: This is a question ventilate that or bring it to anybody’s of opinion. notice. He cannot do it because he will be accused of damaging the credit-worthiness of the bank. One Shri Indrajit Gupta: This whole prominent leader of bank employees ream of papers contains only opinions. lost his job though his allegations were proved to the hilt by the Vivian Mr. Chairman: You may ask for Bose Commiaion. But (he lost his 101 opinions. But kindly put a ques­ job because he ventilated those things. tion which is directly relevant. Will not this provision cover such thihgs? Shri Indrajit Gupta: This is rele­ vant because any person can be Shri Nariman: I think it will cover guilty of causing disturbance. Do you everything. visualise a situation in which the clients can also come within the mis­ Shri Kamalnayan Bajaj: The Bill chief of this Bill? provides for policy making in Chap­ ter II which says thatt the banking Shri Nariman: I do not think we policy means any policy which is have come across such a case where specified from time to time by the *3 Reserve Bank, etc. If you recall, ih .* view—it is so in most of the coun­ Reserve Bank had issued a directive tries—that we should be answerable that 80 per cent of the advances ought or look for guidance only from Re­ to be given to either industry or for serve Bank particularly now when we import and exoprt and 20 per cent are having social control. should be restricted to the trade and this was done specially at the time of Shri Kamalnayan Bajaj: By and the busy season and trade suffered 'a large you are right. In some cases great handicap at that time and that there may be very harsh cases—may disturbed the economy of agricultur­ be knowingly and unknowingly— ists because the traders were not able where they may take too technical a to buy the cultivators’ stuff as much as view or legalistic view even against they would have liked to. Simultane­ the assurance given by the Finance ously the banks’ funds remained un­ Minister in the Parliament.... employed. Under such circumstances, do you feel that the banking industry Shri Morarji R. Desai: Is it not a should have a right to appeal to the mutter for us to discuss? Finance Ministry over and above the directive of the Reserve Bank? Shri Kamalnayan Bajaj: I was only trying to get experience. Shri Nariman: The banking indus­ try should qftly look to one master and that is the Reserve Bank. Mr. Chairman: He has already replied to your question. Shri Kamalnayan Bajaj; If this one Master, namely the Reserve Bank, Shri Kamalnayan Bajaj: A Bill has which administers the policy initiated been brought forward for social con­ by themselves are unable to see the trol with the objective that certain reasoning because of some mistake, sectors should get encouragement. In should be there not be a provision for the case of small-scale industry the appeal to the Finance Ministry in the limit was 7J lakhs—which later be­ interests of the country? I will give came 15 Lakhs. Though it has started you another example. There was a as small-scale industry it can become directive by the Reserve Bank that on a large industry. In that case would a particular day without giving notice it be possible to help it because it to the clients the banks should freeze started as a small-scale industry the limit to whatever it was at the or do you think that the banks. In many cases the hardships classification should be changed? were such that the clients were not If the classification is to be able to fulfil their commitments in changed, then the banking industry the market. To safeguard against suffers because they are not in a posi­ such harassment to the clients, should tion to say that they have encourag­ there not be some provision for appeal ed small-scale industry. If I remem­ to the Finance Ministry? ber correctly, even the Finance Minis­ ter while addressing the members of Shri Nariman: It is for the people the Indian Bank’s Association gave who suffer from hardship to appeal or example of Son! of Japan how he to bring their case before them. But grew from small-scale industry to a my opinion is that if there is to be big one . . . discipline in banking industry it must be under one master. There may be Shri Morarji R. Desai: How does some mistake or they may not carry all this arise? out something both in the spirit and letter. But the aggrieved party has a right to bring this matter before Mr. Chairman: Kindly confine your­ the highest authorities. It Is my self to the clauses of the BUI. 24 Shri Kamalnayan Bajaj: There is a Shri Morarji R. Desai: Parliament clause where restriction is made on will be sanctioning this Act. Then the small-sca'e industries with Rs. 7i it will happen and not otherwise. lakhs as the highest limit The power is given to the Reserve Bank that that Shri Kamalnayan Bajaj: That ia limit can go up to Rs. 15 lakhs and true. But the power is given to the so on. But, to-day, if a bank starts Reserve Bank. As it is, they will be giving assistance to small-scale indus­ in a position to discriminate. tries, say upto Rs. 7} lakhs, in course Shri Morarji R. Desai: It cannot of time, it may become Rs. 20 or 25 be given to the executive authority. lakhs. To Parliament, there can be an Shri Morarji R. Desai: But, how appeal. does this make a difference? Shri Kamalnayan Bajaj: I am just trying to get their opinion about that Shri Kamalnayan Bajaj: Because, they win be classified as small-scale Shri Morarji R. Desai: That is the industries. I think this would be a need of getting the opinion frkom them. good point to know. It is your opinion which is recorded, Shri Kamalnayan Bajaj: But, we, as Shri Morarji R. Desai: Then others Members of the Select Committee; also will be there. That does not should have a right to know and then make any .difference at all in this. to come to our judgment in the light of their experience. Shri Kamalnayan Bajaj: The diffe­ rence is only this that you fix a Shri Morarji R. Desai: If you are ratio for the small-scale industries and to come to judgment by that, certain­ so on. At any time it may go up. ly you can go on. I have no objec­ tion.

. - . .. j Shri Morarji R. Desai: That will Shri Kamalnayan Bajaj: You have •apply at that time, when this is given also mentioned that where there is to the small-scale industry, how does an expertise! knowledge which is this arise? I think there is some involved, a director of the bank very confusion in your mind. often should also be a director of another company. Sometimes before Shri Patel: In a small-scale indus­ he becomes a director of a banking try, when we start it, that does not company already the relation of a require any financing. client and the bank ia established* He comes as a director of the company Shri Morarji R. Desai: It has no much later with a very keen interest relation with advancing of money. In those circumstances, whether the expertise is available to the bank or Shri Kamalnayan Bajaj: All right, not, the director concerned if he is In Part II, there is a provision about not substantially interested, do you taking over of the bank if it (fails to) think he should be barred? comply with persistently the directive of the Reserve Bank. Do you feel Shri Nariman: I have already ex­ that before the taking over of the pressed our view on this. individual banks by the Reserve Bank Shri Patel: As regards taking over even after giving a hearing to them of the banks, there is already a pro­ and even if the bank concerned is not vision. satisfied, it should have right of appeal to the Finance Ministry? And whe­ Shri Mtorarjl R. Desai: He wants ther you feel that such a thing should to go to Parliament And he wants be done without taking the permission that a provision is to be made in the of Parliament Constitution itself. *5 Shri Kamalnayan Bajaj: In a clause Shri Nariman: Foreign companies as there is a phrase starting with ‘where well as subsidiaries of the State Bank an employee or any person, if they of India are also members of our create a disturbance within the build* Association. ing etc*, etc.’ There the word used is 4 indecent’. Do you feel that the Shri Jyotirmoy Bosu: Do you feel word 'indecent’ should be continued whether the present banking laws re­ or deleted? gulations alre sufficient for banking operations or not? Shri Patel: We have made a repre­ sentation that it should not apply to Shri Nariman: You mean the present the demonstration. ones. Well, I think that change is contemplated in the Bill itself. Shri Morarji R. Desai: They have suggested another wording. Shri jyotirmoy Bosu: I am asking your opinion as to whether the exist­ In the list Shri Kamalnayan Bajaj: ing Jaws/regulations are sufficient for of the expertise knowledge for the the banking operations? directors, there is a mention about his qualification in agriculture, audit­ Shri Narimasi: Yes, Sir, But, for the ing, labour, economics and so on. Do new changes, I say ‘no’. you think that in the experties, management and administration too should be included? Shri Jyotirmoy Bosu: How do you define the peaceful obstruction? How Shri Nariman: Banking finances do you differentiate between satya- are also included. graha and picketing? Do you think th£t if you prohibit the peaceful obs­ Shri Kamalnayan Bajaj: That may truction of certain persons which not necessarily be an experience in result in hampering of work, that management and administration. They will amount to denying the fundamen­ have special knowledge of finance, tal rights are enshrined in the Con­ auditing of accounts and things of stitution and also the rights of the . . . that nature* There may also be peo­ ple in other fields. Management has Shri Morarji R. Desai: Is there any come to stay. And without that, you thing which can be termed ‘peaceful cannot expand considerably. That is obstruction’? why I ask you whether in-that list, knowledge in management and ad­ Shri Jyotirmoy Bosu: Yes, Sir. ministration should also be included? Shri Morarji R. Desai: Peaceful demonstration is a term which is some­ Shri Nariman: I don’t think it will thing new to me. I have to learn the serve a useful purpose. The Chief language from you! Executive or Chairman is the one who looks after the management. This is Shri Jyotirmoy Bosu:Now what you number one. There are a large num­ are doing is a peaceful obstruction to ber c l officers who have got to be me. trained in the management. I do not think that any individual sitting in the Shri Morarji R. Desai: I am not obs­ Board can contribute very much in this tructing at all. I am only helping you respect. ' to ask further questions. Shri Jyotirmoy Bosu: I want to ask Shri Jyotirmoy Bosu: May I repeat brief questions. There may be a dozen my question? How do you define the questions or more. My first ques­ word ‘peaceful* obstruction’? Would tion is: Are you purely a b o d y of em­ you differentiate as between a peace­ ployers in the private sector banking ful obstruction and the satyagraha industries? and picketing? Suppose a man sits down near your Shri Jyotirmoy Bosu:Coming to sub. bank’s counter with folded hands and clause (c) of Section 36 (AD)—act in says, “we are in distress; Mr. Client, be any manner calculated to undermine kind to us.” the creditworthiness of any banking company, how many cases you have Shri Nariman: That will come under come across in which the Bank Direc­ the standing order. tors and the managerial executives acted in this manner and what did Shri jyotirmoy Bosu: They are con­ you precisely do when you detected templating to make it an offence which such cases? will send the poor fellow behind the bars. Shri Nariman: This proviso was not there at that time, when these things Shri Narimain: I don’t think that is might have occurred. But I don't have contemplated. We are not taking personal knowledge of such cases. away any of the rights which are already there in the trade union move­ Shri Jyotirmoy Bosu: You have not ment. If you don’t permit people to heard of the ex-Chairman of the Pun­ work, whether it is peaceful or other­ jab National Bank who had committed wise, it. amounts to coercion. Whenever some offences. there is any demonstration, one thing leads to the other at the heat of the Shri Kamalnayan Bajaj: Who was moment. Though Satyagraha is diffe­ that, may I know? rent, it does not last very long. This is the general experience. You may Shri Jyotirmoy Bosu: The Chairman have a case where there is complete of the Punjab National Bank who was peaceful obstruction. But that is rare. involved in a case which amounted to violation of foreign exchange regu­ lations. ’ Shri Jyotirmoy Bosu: You are only n’arrating your apprehensions. I am Shri Morarji R. I>esai: He was ac­ asking you how you would differentiate quitted by the Supreme Court. There­ between peaceful obstruction and fore there was no offence. That is satyagraha and picketting? what decides ultimately.

Shri Morarji R. Desai: I am afraid Shri indrajit Gupta: In the case of we are exceeding the purpose of exa­ employees even after he is acquitted mination of witnesses. We are not by the Coilrt, action can still be taken here to take their interpretation of against him under the standing order. things. We want their opinion on these clauses. Shri Kamalnayan BftJaJ: He was acquitted by the Court. Mr. Chairman: Mr. Basu, instead of Shr« Jyottrmoy Bosu:From the date asking his interpretation on these deli­ of commissioning of this offence and cate questions, you may msk a brief the date of acquittal what did the question about this point. bank authorities do? Shri FaM: So fir we have not come across peaceful obstruction. Shri Morarji R. Desai: They could not do anything. Shri Jyotirmoy Bosu: I am unable to Shri Jyotirmoy Bosu: Mr. Chairman, have uninterrupted opinion from the the King* can do no wrong in this witnesses. country. Mr. Chairman: Please try to be Shri Morarji R. Dcaal: As long a* brief. there is a King Tie can do no wrong. *7 Shri Jyotirmoy Boon: Do you know Shri Nariman: I am sorry. at way other Banking Regulation Act of any country where provisions con­ Shri Jyotirmoy Bosu: Would you K trolling the trade union rights of e m ­ approve of the idea that there might ployees have been incorporated? be a Member of Parliament on the Board of Directors? Shri Nariman: I have not studied all the Banking Regulations Acts. Shri Nariman: I am afraid I am not in a position to express any opinion on Shri Jyotirmoy Bosu: You are the this. spokesman of the premier Banking association in this country. You must Shri Jyotirmoy Bosu: Would you be aware of this. approve of the idea that the Govern­ ment must have a nominee on the £ *Shri patel: 1 don’t know in which Board of Directors—Mr, Desai may not ' country it has been found necessary dislike this one. to introduce this type of legislation. Shri Morarji R. Desai: I don’t dis­ We are concerned with l®ws in this country. like this.

Shri Jyotirmoy Bosu: Do you know Shri Natiman: The Reserve Bank or do you not know whether there is has the right to appoint or nominate such a provision in any of the Bank­ Directors. I think it will be only to ing Regulations Act in the wor’d any­ the credit of the Bank if they behave where? You say yes or no. in the manner in which they are ex­ pected and this proviso is not attrac­ f Shri Patel: No. ted.

Shri Jyotirmoy Bosu: Do you think Shri Morarji R. Desai: Even now it that it will be fair and proper to have is in the existing Act. The provision certain number of employees* repre­ is there already. sentative on the Board of Directors? You have talked about the changing Shri Jyotirmoy Bosu: The point is conditions. You talked about the pro­ whether they would like and welcome gress and development. Under these this step. circumstances is this necessary or not? Shri NbJriman: We will not prefer Shri Nanman: I don’t think the time to have nominated membert. - ^ is ripe for that, because the general Attitude has to change. I don’t think Shri Jyotirmoy Bosu: They want to ro will be desirable to do this now. fiddle with others’ money. Shri Jyotirmoy Bo9u: Nor did I ex­ Shri Jyotlroy Bosu: Don*t you agree pect you to agree. that in all the banks the standing orders should be the same? Shr| Nariman: I started my career an apprentice, 35 years ago, and Shri Nariman: They are no diffe­ *ven now I am an employee, i can rent standing orders. They are all the talk about this. same.

Shri Indarjlt Gupta: That is why Shri Jyotirmoy Bosu: Mr. Desai has jyou don’t have any trouble in youT stated in his statement that “It has Bank. been clearly admitted that the resour­ ces of the banking system are not Shri Jyotirmoy Bosu: You said in being aquitably distributed in confor­ the beginning that you would not give mity with the developmental require­ personal experience. ments and the private sectors are not 28 receiving their due share and that As far a* I can see, the main provi­ particular clients or groups of clients sions of this Bill can be grouped in four are only being favoured in the matter groups: firut, provisions concerning the of distribution fend growth” definition of banking policy and its implementation; secondly, provisions Shri Nariman: Probably, we have to concerned with bank management— change the set-up in which we are Chairman, Directors, auditors, emplo­ working today...... yees; thirdly, those concerned with banking loans; and fourthly, an im­ Shri Jyotirmoy Bosu: What I want portant provision, about nationalisation to know is that according to you what of banks in certain circumstances. Mr. Desai has stated is true and cor­ rect? Now, I want to deal, to begin with, with the first group. I invite your at­ Shri Morarji K. Desai: According to tention to the definition of "Banking him, it is &o. policy” on pa>ge 2 of the Bill. To the merits of the definition I will come Shri Jyotirmoy Bosu: Next. “The later on but I invite your attention banks have been functioning las very to it. I see that the present section 21 convenient links solely for the benefit of the Banking Regulation Act is Also of big monopolists who have closely concerned with the powers of the Re­ kept their rigid control and influence serve Bank in regard to banking in in all respects.” certain directions. Section 21 reads: “Where the Reserve Bank is satisfied Shri Mosarji R. Desai: This is your that it is necessary or expedient in statement. the public interest or in the interests of depositors so to do, it may deter­ Shri Narlmani The answer to this mine the policy in relation to advances is the s^me which I have given to Mr. to be followed by banking companies Desai’g contention. generally or by any banking company in particular, and when the policy has? Shri Jyotirmoy Bosu: The term been so determined, all banking com­ ‘Social control1 has to be clearly de­ panies or the banking company con­ fined. Change of a few provisions of cerned, as the case may be, shall be the existing law and introduction of a bound to follow the policy as so few new items and rules will not and determined.0 Then sub-section (2) cannot alter the basic structure of the of section 21 says: “Without prejudice present banking system. Would you to the generality of the power vested agree with this statement? in the Reserve Bank under sub-section ( (1), the Reserve Bank may give dir­ Shri Nariman: I do not know whe­ ections___Then follow a number ther I will be competent to give a of thinks which the Reserve Bank reply to that question. But whatever can direct banking companies to do. is required and expected of the bank­ ing system in this country in the Now, the question is: Have you any­ changed circumstances we will certain­ thing in mind as regards what pre­ ly carry out. cisely additional to this, the Reserve Bank can do under the new definition Shri Jyotirmoy Bosu: Do you agree of Banking Policy which it cannot do that the chief executive of a bank already under section 21? must be someone from outside? Shri Nariman: I think the powers Shri Nariman: No, Sir. vested in the Reserve Bank are wider*

Shri N. Dandeker: I want to make Shri N. Dandekar: But what else do two or three preliminary comments aft> you envisage by this definition of that you may follow my questions. Banking Policy under the propoaed insertion of the phrase ‘banking policy9 6d this new banking policy doei in sub-section (1) of section 21, which neither add nor does it detract any­ the Reserve Bank could do which it thing. cannot do now? Shri Nariman: I am not in a posi­ Shri Nariman: I think, Sir, the tion to say anything. reference is to the duties of the Reserve Bank rather than to its powers. Shri N. Dandeker: There is an­ other provision concerning banking policy. I would refer to clause 15 Shri N. Dandeker: I am asking a spe­ of the Bill and the proposed inser­ cific question. I m'ay draw your atten­ tion of a new section 36AE. The tion to another aspect of it. Section point really is this. Ordinarily, if 35A of the present Banking Regulation anything is to be nationalised it can­ Act says: “Whether the Reserve Bank not be done by an executive order, is satisfied that—(a) in the public neither by the opinion of any parti­ interest; or (b) to prevent the affairs cular officer nor the particular of any banking company being con­ Ministry nor any particular Deptt ducted in a manner detrimental to the But here under this new section interests of the depositors or in a 36AE it is possible, upon the report manner prejudicial to the interests of of the Reserve Bank, for the Central the banking company ...... ” What Govt, by an executive order to exactly can now be done which, under nationalise banks wholesale one this existing provision cannot after the other. Now the question be done? Is there anything else that I want to ask is this: How do which necessitates the insertion of you contemplate the nationalisation “banking policy” here; if so, what is of anything,—in this case banks,— that? What is absent here, which by executive orders. should be provided for? There is another existing provision .section, section 36 (1) (a) .— Shri Nariman: This is a matter which we have not discussed. So, I “The Reserve Bank may—(a) cannot speak on behalf of the Indian caution Or prohibit banking com­ Banks Association. But I feel this panies generally or any banking interpretation is correct. An execu­ company in particular against tive order should not ordinarily entering into any particular take over institutions—whether bank­ transaction or class of transac­ ing or any other industry. tions, and generally give advice to any banking company.” Shri N. Dandeker: Let me take you Now, the point I am trying to make further. In this connection a deci­ is this: whether this definition of sion of the Central Govt, on policy “banking policy” is redundant or would mean a decision of the Cabi­

Sfert (N. Dandeker: That is a,frank answer. Ai far as yortf are coiicerfi- specific enactment. 1702(Aii)LS—3. 30

Start N. Dandeker: TMff is an enabl­ from table to table, they did not ing (power. This is an Act which gives permit the officers to work, they the executive the power to nationalise. did not permit the customers to com* in or go out, did not allow the cashier Now, I go over to the second to make payments. They, in a sense, *roup of matters concerning manage­ paralysed the whole business of th& ment, the chairman, directors, various bank. They also went on hunger ,ther elements in the managerial strike before the bank premises. All structure. First of all take the new this went on for three months until section 36 AD concerning punish­ we had to approach the police and ment for certain activities in relation the law and order authorities to to banking companies. Here, I maintain order. It is against this merely want to seek clarification of type of activity that we need some the answers you gave earlier. I provision. It is not only a question take it that your point is this that of indecency. Even if the demons­ where organised activities of the tration is not indecent it can cause kind here referred to are concerned obstruction. Nobody should be per­ the banks are helpless in the matter mitted to stage demonstrations in of taking action under standing front of the bank premises. The Bill orders and that if organised activi­ talks of 10 meters. This should be ties regarding the actions referred to at least 100 yards from the boundary in this new section are not to be of the premises of the bank. Some of allowed, then there must be a deter­ the banks have their own componds. rent of this kind which makes it a If these people are permitted to criminal offence? come inside the boundary and raise slogans and abuse the officers and Shri Nariman: What we want is other members of the staff, that dis­ peace in the industry to enable it to rupts the business of the bank. That make its contribution to the various brings the bank into disrepute. The purposes which have been laid down business of the bank suffers. Not by the Bill. In what manner it is only that, the public may not like achieved it is for the Parliament to come to that bank and may divert and people like you to decide. their business to other banks.

Shri N. Dandeker: Will Mr. Trikha Shri Kamalnayan Bajaj: One small please give a brief account of the clarification. You just said that you kind of things that went on in his promoted some of the employees. Bank for nearly three months, so Was it compulsory or voluntary? that the Members of the Select Com­ Shri Trikha: This was quite volun­ mittee may get a vivid picture of tary. We gave them offers saying; the same. that those who had put in a certain number of years of service and who Shri Trikha: The agitation started wanted to become officers could sometime in August 1967 on a very accept the offers. This was not minor point. Certain promotions compulsory. About 500 opted to were made from the posts of clerks, become officers. Yet the Union will not assistants, etc. to officers. By these permit them to become officers. promotions some of the members of the Union were promoted as officers. Shri Kamalnayan Bajaj: Is it a Thus, the memberships of the Union fact that on the one hand the unions was depletd to that extent. Out of were insisting that you should not 12,000 employees of the bank 500 enrol officers from outside and on the were promoted as officers. The Union other when you offered promotion to staged demonstrations. They went some of the employees they objected from office to office Inside the bank to it on the ground that their num­ premises, raised slogans, they went ber wil T>e depleted? It is strange* 31 COtrl N. Dandeker: I said earlier I management and loans. Let them would come back to the definition of come on the 18th. •banking policy*. The definition of the term is like this: Shri Samarendra Knndu: We will request you to give us enough time. “banking policy means any policy which is specified from Shri Trlkha: Some of us can come time to time by the Reserve on the 18th. Some of these gentle­ Bank in the interests of the de­ men come from Bombay and Cal­ positors or of the banking system cutta. I only am from Delhi. or in the interests of monetary Shri N. Dandeker: I hope Mr. stability or sound economic Nariman will be able to come. All growth, having regard to the of you, if possible, or at least as many volume of deposits..” of you as can come. I wonder whether you interpret it as Mr. Chairman: You will please I do that if any of the other considera­ come on the 18th at 14.30 hours. tions were to be operative, bank­ (The witnesses then withdrew). ing policy could well be against the interests of the depositors as well because ‘or’ is used in the definition. n. Shri V. T. Dehejia, Chairman, Shri Trlkha: I agree that it should State Bank of India, Bombay be ‘subject to the interest of the (The witness was called in and he depositors’. It should also be subject took his seat). to the interests of the depositors. Mr. Chairman: I am glad to wel­ Shri N. Dandeker: Now I come to come you. We have a practice under the provision relating to mqg£ge- which I have to read out Direction ment. 58 from the Directions of the Speak­ er: Mr. Chairman: How much time will you take? “Where witnesses appear before a Committee to give evidence, the Shri N. Dandeker: I said yesterday Chairman shall make it clear to that I would take more time. the witnesses that theiT evidence shall be treated as public and it Mr. Chairman: My difficulty is that is liable to be published, unless we have given definite time to the they specifically desire that all or witnesses. any part of the evidence given by them is to be treated as confi­ Shri N. Dandeker: I do not mind dential. It shall, however, be ex­ if you call them again. plained to the witnesses that even though they might desire their evidence to be treated as confi­ Shri Samarendra Kuntfu: You will dential such evidence is liable to realise that very pertinent questions be made available to the members are being put of Parliament” Mr. Chairman: I realise that. You Would you first like to state your will also realise that the State Banks case? and Reserve Bank people are waiting outside. Shri V. T. Dehejia: If you permit me, I shall state my case quickly. And Shri N Dandeker: I have a great if there are any points, I can clarify many questions to ask on bank them. 3? Mr. Chairman: But be brief. per ppnt of it will be too smalL Whether it would be possible to con­ ,Shri V. T. Detaejia: I have only a sider for a higher limit for a subs­ few points to make. Claire 29 of the tantial interest in respect of small Bill amends Sec. 33 of the State Bank industries is one point. of India Act. The amendment of Sub­ clause (XlXb) of the parent Act, that Stori Morarji B. Desai: How much is, the State Bank of India Act, says should that be? that the period of six months may be changed to 12 months. This is all Shri V. T. Dehejia: In respect of a right. The maximum period permissi­ small industry 5 per cent comes to ble under the parent Act is ten years. only Rs. 37,500. In respect of Rs. SO I may mention that some of the in­ lakhs, that comes to Rs. 40,000 which dustries which would require a large is a small amount. capital and whose repaying capacity Shri Morarji R. Desai; The amount starts later, ten year period is not will not be the same. sufficient for repaying the medium- term credit. I would therefore sug­ Shri V. T. Dehejia: But, the propor­ gest that the maximum period may tion is same. The question is to what be taken from ten to fifteen years. extent, the Interest may be substan­ The original phrase says ‘in excess of tially more. Rs. 50,000 will not be such six months but less than ten years’. as to influence the person’s views on The phrase may be ‘in excess of lending. So, I want to know whether it twelve months but less than 15 years would be possible to have some ex­ in section 33\ An amendment is made emption in favour of medium indus­ to sub-clause (ii) of clause (b) of tries. Whether the limit can be be­ sub-section 3 of section 34. But, a con- yond the limit prescribed in the defi­ sequencial change in the proviso to nition is my point. It can be done by that sub-clause has not been included. saying *whichever is less but upto Rs. It seems to me that that change is also 1 lakh.’. necessary because the proviso also has the same phrase, that is, ‘where Shri N. Dandeker: Suppose, in this the instrument is for less than six definition ‘substantial interest’ ins­ months’. These are the two minor tead of ‘whichever is less’ it was said points which are in relation to the ‘whichever is more’ would that be all State Bank of India Act right? I will now deal with the general Shri V. T. Dehejia: I thought of points which have been made concer­ the phrase ‘whichever is more’ at one ning the Banking as a whole in the stage. But, some industries employ a Bill. Under Section 5 of the Banking much larger capital. There are three Regulations Act, there are definitions different limits. and some new definitions are being inserted. One is about the substantial Shri Morarji R. Desai: Could* the interest. So far as I can make out, maximum be Rs. 1 lakh? this definition is mainly an applica­ ble to industries where the interest is Shri V. T. Dehejia: I want that sort of Rs. 5 lakhs or 5 per cent which­ of thing so that at least the medium ever is less. In respect of most of group will not be affected by the t^e industries, this is all right. But, in limits. The whole purpose behind this respect of marginal by small industr­ Bill, so far as I can make out is to ies, this 5 per cent becomes a very low sever the ties between banking com­ l|mit. Rs. 7:5 lakhs is laid down as panies and industrial houses. When * minimjum limit for small industries, we talk of industrial houses, we do of Ha, 15 lakjn the ipaximum limit not think in terms of numerous in- permissible by notification. But five ing the spirit. I also wonder whe­ to provide under Section 16 also that ther an exemption should not be such a person will not be eligible to made in favour of a small-scale in­ become a Director. For a person dustrial concern. I quite realise that may cease to be a Director under one the Director who has substantial section for a day and immediately interest in a small-scale unit can on the next day he may be co-opted borrow from other banks. But it is if there is no bar to it. That will not easy for a small man to change defeat the purpose of the Section his bank. The State Bank has itself. It seems necessary to provide 18000 small-scale units on its books. that so long as the borrower com­ We have nursed them over years. We pany has any loan to bt repaid to a know their handicaps; we also know bank, the Director of that company wh’at they will achieve. It might be cannot become the D-Tec tor of the difficult for them to go to other banks Bank. This can be amended suitably. for the purpose of borrowing. I think it is necessary to see that the small in­ dustries are not seriously affected. If Then, under clause about restric­ you will no tic a, in Section 10A(2)(b) tions on loans and advances, the we have referred to employee, mana­ draft as it stands would debar money ger or managing agent, but we do not being given by the State Bank of refer to a Director there, even though India to its subsidiaries or money the Director does not have substantial being given by its subsidiary banks interest. I wonder whether a Director to the State Bank, because there is without substantial interest or having no exemption given for this purpose. only a nominal interest could not be It will be desirable to provide for exempted in section 20 also. 35

Now about Section 30 (AD) which is of it; you do not deserve it; so cloae proposed to be introduced on which my account’. Will that be a decent the Bank employees in the country demonstration or bn indecent demon­ went on a token strike on 28th Feb­ stration? ruary, I am ol the view that a pro­ vision on these lines is essential. But Shri Morarji E. Demi: It will not the clause as it stands requires some even be a* demonstration. changes. Sub-clause (a) says “obs­ Shri V. 1'. Dehejia: Even that would tructs any person from entering any not be a demonstration if you only office or place of business of a bank­ shout ing company or from earring on any business there ...... ”, There Shri Jyottrmoy Bosu: I have done is an ofrious lacuna. There is it a number of times. no provision about leaving the place. There should be provision on Shri V. 1. Dehejia: That cannot be this—no person shall obstruct any per­ a demonstration. But when any client son from leaving---- Then, it is per­ becomes very hard on them, the Bank haps proper to mention as follows would .be glad to get rid of him* here: “ ---- from carrying on any legi­ Shri Morarji B. Desai: Withdrawing timate business”. If it is net mention­ an account does not mean demonstra­ ed specifically it might be used against tion. the management on frivolous grounds In (b) it is said “hold any demonstra­ Shri V. T. Dehejia: About punish­ tion which Is indecent within the pre­ ment, there are numerous instances cincts of inside..”. We may say here, given in the Penal Code where trifling any demonstration inside and acts do not amount to an offence. not restrict demonstrations inside only Take, for example, embazzlement The when they are indecent. Then the punishment may extend to six months word ‘indecent’ is a very indefinite or with fine or both. The punishment term. The employees will say that will depend on the circumstances in there can be decent demonstration in­ which the o ffice is committed. side the premises, which is not pro­ per. This should be properly amend­ Shri Indrajit Gupta: In addition to ed. Demonstrations inside the bank dismissal. should not be allowed, particularly demonstrations which are likely to Shri Morarji R. Desai: If a man em­ disturb the working. bezzles money, then he will be dis­ missed and prosecuted also. Shri Jyotirmoy Bo9n: Demonstra­ tions, decent or indecent? Shri Indrajit Gupta: How you put this embezzlement on par with that? Shri Morirji R. Desai: Demonstra­ tion itself he objects to. Shri Morarji Desai: It is worse than that Shri V. T. Dehejia: At the moment^ I am talking of demonstrations per se Shri V. T. Dehejia: I would suggest within the precincts, any demonstra­ that these offences may be tried by a tion or any rowdy demonstration or First-class magistrate only; so it would demonstration affecting the work. not be lightly done.

Shri Jyotirmoy Bam: Supposing I Secondly, the complaint may be by bave to wait for half-fen-hour for en­ any person. It need not be by the cashing a Whether the demonstration is outside Shri Indrajit Gupta: What percen­ the law and order will t$ke c&re of it* tage does that constitute bf the total bank employees in the country? Shri Kamalnayan Bajaj; What about the distance? * Shri V. T. Dehejia: Of roundabout 2 to 2i lakhs or s o .. - 1 Shri V, . Dehejia: Well, I may say that within IP metres of my place there is the Bank of Baroda. Or, Shri Indrajit Gupta: State Bank i& within 12 metres there is the Bank the largest single employer? of Allahabad. Now, a variety of things can happen in the area. I per­ Shri V. T„ Dehejia: Yes, beyond a sonally think that we have to. depend shadow of doubt. . on the place. The question is that it should not be a reasonable obstruc­ Shri Indrajit Gnptft: Then, in your tion. relations with the trade unions, have you ever had such a type of experi­ Shri Kamalnayan Bajaj: The Elec­ ence that leads to support that s&ctioo tion Commission generally provides 36AD is necessary? 100 metres from the polling stations on the polling day. Shri V. T. Dehejia: I think so. I will give an illustration. In July 1905 Shri V. T. Dehejia: I think I have we were holding a celebration on the finished my major remarks. Now, I occasion of the first decade of State would like to make two small points. Bank and just before that the Bom­ bay Union thought they would h'ave In clause 6, on page 9, section 21 demonstrations. They were shouting, being amended by inserting the words slogans and I was sitting in my room. “or banking policy” after the words Then they started coming up the stairs. “In the interests of depositors”. When They entered the office. I came out we take the banking policy, we also and told them that they would not take the interests of the depositors as proceed further to this limit. They included in the banking policy. So, in will not come inside the office. So at my opinion, that is not j-cvessary. that time with the help of other offi­ cers I was able to prevent their entry. Similarly, when we come to banking I had talks with their representatives. policy, in the last two lines it says: They said they had a right of demon­ stration inside the office. One of them “ ...for equitable allocation or ffi- toM that in 1964 they had gone round cient use of---- ” So far as I think, what is really meant is what the shouting slogans when the Board was phrase “economic growth” has already meeting. provided for. So, here equitable allo­ cation probably is the implication of Shri Indrajit Gupta: What was their balanced economic growth, i.e., agri­ reaction when you explained that culture, industry, and planned pro­ they had no right? duction etc. So, the use of these two would not be better. Shri V. T. Dehejia: They accepted that they would riot demonstrate with­ I have finished. in the premises. It was because of the good relations between me and the Shri Indrajit Gupta: What is the Union. number of employees of the State Bank of India? Shri Indrajit Gupta: Is it your opinion that the standing orders are Shri V. T. Dehejia: 48,000 as on 31st inadequate to deal with the stray in­ December. cidents like this7 *7

Shri V. T. Dehejia: My predecessor Shri S. S. Kothari: Would you agree* could not deal with them. That shows to the deletion of the word imprison­ the present provisions are not suffi­ ment or penalty of imprisonment for cient. Further there are a number of employees. unions, some recognised and some not. Some are unions only in name. These Shri V. T. Dehejia: Actually it is unions often behave in an irrespon­ a question of the existence of a deter­ sible manner. rent punishment. It may be that no­ body may have to go to jail but if Shri S. S. Kothari: Mr. Dehejia in there is some deterrent like this it will {accordance with this clause regarding be good. definition of banking policy it is stated that “The Reserve Bank may give Shri N. Dandeker: Mr. Dehejia I directions to you in accordance with was interested in what you said about equitable allocation of resources...”, clause 5 of the Bill inserting a new sec­ i.e., the Reserve Bank may direct a tion 20 concerning the grant of loans specified percentage of loans to be or rather prohibition of loans to cer­ given to a particular sector, say, small tain categories in which certain in­ scale industries and if you do not find terests exist. There will be three customers with the adequate secu­ types of prohibited loans; namely loans rity—with your better judgement as to a banker—how would you comply with (i) any of its directors, or the Reserve Bank’s request. (ii) any firm or company in which any of its directors is interest­ Shri V. T. Dehejia; I have known ed as a Director, Managing the Reserve Bank at least far the last Agent, partner, manager, em­ three years fend I can say the Reserve ployee or guarantor, or Bank considers all these questions when giving a directive. They will (iii) to any concern in which Direc­ give a directive when there is a rea­ tors have a substantial inter­ sonable hope of its being achieved. est Now these are cumulative prohibi­ Shri S. S. Kothari: What difficulties tions in regard to granting of loans. have you experienced in the past with I suggest the grant of a loan to a con­ regard to loans being given to agricul­ cern in which a director has interest ture sector? only as a director should not really be the criteria but the extent of his in­ Shri V. T. Dehejia: We have given Rs. 183 crores to cooperative-cum- terest should be the criteria. ruial sector primarily for agriculture. Shri V. T. Dehejia: If one is a no director with nominal interest that Shri S. S. Kothari: Would you be need not disqualify. in favour of Government guaranieeing loans given by you to certain sectors? Shri N. Dandeker: In other words a borrowing company of which the Shri V . T. Dehejia: There is already director of a bank is also a director a guarantee in respect of small gcale need not be disqualified from borrow­ industries. ing merely because it has a director of a bank as its director. Shri S. S. Kothari: You have sug­ Shri V. T. Dehejia: Unless he has gested both-Co-operators and Accoun­ substantial interest. tants.

Shri V. T. Dehejia: No, somebody Shri Morarji R. Desai: May I know may have accountants and some may if any Director is not interested i a have £o-operators. company, why is he a Director there? 38 Shri N. Dandeker: I happen to be banking facilities with that bank. 3n a number of companies. Now would you say that an exception should be made where the borrowing Shri Morarji R. Desai: Are you not record of the borrowetr is such that it interested in them? is perfectly good? A number of com­ panies. ... Shri N. Dandeker: Trifling. This is what I wanted to know from him. Shri V. T. Dehejia: There alre quite a few loans by banks to companies Shri V. T. Dehejia: A Solicitors’ which are undesirable. If that has to ftyrm nominee represents merely the be cut out some provision has to be legal part. With any substantial fin­ found. ancial interest It has only a nominal holding. They supply the legal know­ Shri N. Dandeker: Supposing we ledge. That is all. say in sub-clause (2) relating to the continuity of existing loan “whelre the Shri N. Dandeker: Merely because Reserve Bank so requires”? a man is a director of a company— should this disqualify it for a loan? Shri V. T. Dehejia: I wonder whe­ ther it will be a practical solution. Shri V. T. Dehejia: The term ‘sub­ Shri N. Dandeker: Why? Every in­ stantial interest’ will have to cover spection report of the Reserve Bank this thing. Where thee clause however specifies the interests...... falls short is this: The borrowing may be by a subsidiary of a company in Shri V. T. Dehejia: I am afraid it which he is a director. The bank may is not so The Governor of the Re­ give a loan: to that subsidiary that serve Bank is coming after me. He will benefit the parent company also will explain this. From what I know and a director with substantial interest about them, they do not have either is obviously interested. Here we have the means or the inside knowledge of not said ‘company or its subsidiary’. these things.

Shri Morarji R. Desaid: That lacuna Shri N. Dandeker: I have seen their is noted. inspection reports commenting on these. Shri V. T. Deliejia: Commercial Shri V. T. Dehejia: I have known companies also have subsidiaries. The of cases where what was turned down director of a company may borrow by the management of the bank being for its subsidiary which gets a loan sanctioned by the Board lateir. i do from the bank in which he is a direc­ not want to go into individual details. tor. ’ Reserve Bank hag not been able to prevent it. Shri N. Dandeker: What I wanted to say first, of all was that merely Shri N. Dandeker: Suppose we make being a director of the bank and a provision on the lines on which I director the borrowing company suggested? should not be a disqualification. My second point is this: Some companies Shri V. T. Dehejia: I do not think already have banking facilities from it will be practical. Let there be an a bank in which there is a common independent examination by another director. For instance, take the case body. of, the State Bank. A number of companies of which a director of the Shri N. Dandeker: Under sub-clause State! Bank is also a director have (2) I want to suggest that the loans 99 that ought to be moved out should Shri y. T. Dehejia: On the 17th and be loans which are of doubtful char­ 18th I will be busy. On the 19th I acter. can come.

Shri V. T. Dehejia: It will be diffi­ Mr. Chairman: On 19th by about 4 cult to prove one way or the other. P.M.? In that case you will also be throw­ ing doubt on particular director. That Shri V. T. Dehejia: Any time 2.30 or is why the general provision is there. 3,30 whichever suits you. Shri N. Dandeker: Because of a few bad oases, you want the whole lot to Mr. Chairman: Thank you. be treated like that. Shri V. T. Dehejia: Here I differ. (The witness then withdrew) It is not as if they arc very few.

Shri ft. Dandeker: State Bank have the lalrgest number of companies in which directors are common directors. m . Shri L. K. Jha, Governor Reserve In terms of percentage it is an aval­ Bank of India anche. (The witness was \called in and h* Shri V. T. Dehejia: I have got the took his seat). percentage. Shri Morarji R. Desai: He will Shri N. Dandekar: Would you say have to be asked questions straight­ that a majority of those loans are bad way. loans? Shri N. Dandeker: I have only a Shri V. T. Dehejia: State Bank has few questions. a particular by high standard in giv­ ing loans. The same does not apply Mr. Chairman: Before that let me to other banks. read out Speaker's Direction No. 58 to the witness. Shri N. Dandeker; The standards will differ. I take it that State Bank “Where witnesses appear before a loans are all good loans— Committee to give evidence, the Chairman shall make it cleair to the Mr. Chairman: Please conclude now. witnesses that their evidence shall be treated as public and it is liable Shri N. Dandeker: Without finishing to be published, unless they specific the questions? cally deirse that all or any part of the evidence given by them Is to Mr. Chairman: The Reserve Bank be treated as confidential. It shall, Governor is coming at 5 P.M. however, be explained to the wit­ Shri N. Dandeker: Mr. Dehejia may nesses that even though they might desire their evidence to be treated be requested to come on the 18th. as confidential such evidence is lia­ Mr. Chairman: We cannot go on ble to be made available to the asking every witness to come again. members of Parliament.” I can only request you to be brief. I hope your evidence is not confi­ Shri N. Dandeker: I am brief. But dential. ’ I have to cover all the points. Shri Morarji R. Desai: He can come Shri L. K. Jha: No, Sir. I have no on the 18th. special points to make, 4©

Mr* Chairman: Have you no com­ have to appoint about 2,000 to 5,000 ments to make to the present Amend* auditors or more. I db not know the ment Bill? number. There is a proviso exempting sanction for branch auditors. Other­ S* S* Kothari: No, no. He is wise, you have taken upon yourself the author of ths emendroents. I iave a responsibility which you may not one or two points to ask from him’. be able to manage. One is this. Before social control came into existence there were indus­ Shri L K Jha: You are giving that trial houses who were supposed to be responsibility to the Reserve Bank. But big ones who were spending money I would say that the previous approv­ very lavishly, Now the whole esffl al may be a little difficult to adminis­ possibility has been put on the Gov­ ter. Even the approval may not be in ernor of the Reserve Bank You. as the writing. But the banks do consult Governor of the Reserve Bank have the Reserve Bank informally. We come taken upon yourself the responsibility to know whether the auditors are with regard to safeguarding the inte­ working properly in the branches only rests ofl depositors. What fulrther when we inspect. In the case of steps are you going to take to tighten banks normally we would have con­ up to see that the depositors* money fidence in the auditors and go along. is not frittered away by some of the It is only rarely that we would have banks. I want to know whether you an occasion to say that a change of are leaving eveirything practically at auditor is desirable. the hands of the industrial houses, Shri S. S. Kothari: Even for a Shri L. K. Jha: It is a fact that in change your sanction is taken. But, the earlier development of our bank­ with regard to the auditors working ing industry, link with the industrial in the branches in places like Belgatim houses has been an important crite- etc. how would you ensure that they rian. But, as the industry has matur­ are working satisfactorily, i want an ed and developed, a very large num­ opinion on this. ber of them now stand on their own Mr. Chairman: He has already ans­ feet and on their own ability and in­ wered. The answer will be the same teger ty. Smaller banks are in a some­ for this too. what different position. I think the Deputy Prime Minister had isaid in Shri S. S. Kothari: With regard to his statement in Parliament that in­ the branch auditors, sanction is taken itially for the smaller banks, the ex­ for their change. isting .arrangements will not be in­ terfered with, lest there should be Shri L. K. Jha: It may well happen a lack of public confidence in the that a particular branch may have got management and stability. Certainly, a bad report. Now. in that case, at­ on the Reserve Bank you are confer­ tention will have to be focussed on ring some additional powers which th^t branch. Sometimes we do get mean additional re^ponsibililties and complaints that in such and such a we will have to be more vigilant branch, an irregularity has been com­ now than before. T do fe*l that in the mitted. For that, even the top man­ case of a large number of banks, it agement has been blamed. I think, m*v be said that the Chief Executives for thte, a working solution will have hnvp a stature and thf*t they should to be found. ho able to discharge their additional Shri S. 8. Krrthari: If some amend­ refoomfbnities. ment is made, do you feel that will ShH S. 55, Kofhari: The Reserve cover your ideas? Bank shall have to annoirrt a number of auditors in branch** also. You may Shri L. K. Jha: I think 41 8h vl Samafendrm K udu: From your sion to the Reserve Bank’s activities experience, we would like to know to clothe it not only with the res­ why the Reserve Bonk is not able to ponsibilities and powers but also to „ cope up with the problem of regulating indicate some broad points on which and conducting of flow of credit into Parliament would like special atten­ economy by the commercial banks in­ tion to be given. That is why, while spite of some sort of a legislation or there was only a phrase called ‘pub­ enactment made by Parliament? Is it lic interest’ in the Act, now a new because that it could not be implement phrase called ‘banking policy* is ed because the proportion is huge? Or being defined. So this is a fresh is it because you wanted to implement mandate and fresh charter which is it but it could not be carried on by being given to the Reserve Bank and you? Is it because you did not or I hope that it will carry it out satis­ could not Implement it as it should factorily. have been implemented as per the Act? Shri L. K. Jha: I think the Reserve Shri Samarendra Kundu: My point Bank has always had a wide range was specific. Let me make it elabo­ of powers. Now, the purpose for which rate. There has been an allegation the powers are exercised are partly that there is some sort of lacuna in the law itself and also in the imple­ derived from the Statute itself and partly by the judgment which the mentation of it a certain section of industry got large loans while others Bank exercises on the state if the economy as it develops from time td were deprived of that benefit. Can you tell us the reasons for this—is time and partly also by an over all there any lacuna in the law or is it assessment of the economic situation not being implemented properly? - and of the national policy, which is How do you think that this Bill made A : For the Shri Kamalnayan Bajaj: Of cou rts Industry? the industry first goes to the Reserve Bank and ask you; if they are not Shri L. K. Jha: It would be about able to convince them, don’t you think 70 per cent. it might be a better idea that they should go to the Finance Ministry to Shri S. S. Kothari: What is the plead what are the genuine difficul­ projected percentage for agriculture ties? and the sinall scale industry? Shri L. K. Jha: It is very difficult Shri L. K. Jha: So far it was the for me to express a view on thi3 firm policy to keep the agricultural problem. But my own feeling is scheme for the cooperatives alone. that the banks themselves would not The pumping of credit to agriculture be happy with such an arrangement went through the cooperatives for as a satisfactory arrangement, be- which the Reserve Bank made the cuse in every country, including India, money available through the State banks live under supervision of the and apex cooperative societies. Now Central Bank and there is enough that the agriculture is entering into communication between the Govern­ a new phase and new demands are ment and the Reserve Bank for the coming up, the question of bank fin­ Reserve Bank not to pursue policies ance coming into the field has also which run contrary to national poli­ been taken up. We are currently cies. So a provision of appeal would discussing in the National Credit only add a degree of legalism Council what should be the role of that would hamper. Personally I do the banks so as to see that on the not think it is necessary or deirable. one hand the growth of cooperative movement is not impinged upon and Shri kamalnayan Bajaj: They are on the other not to create any scar­ terrified of you. One of the directives city in industry which is also after all of the Reserve Bank is that on a important. What the final figure particular day you freeze all the ac­ would be, I would like to project at counts of the trading concern and the moment. industries. That creates difficulties for the clients. The clients some­ Shri Kamalnayan Bajaj: Some­ times could not fulfil their commit­ times the Reserve Bank gives direc- ments in the market .... tiwes which are in the interests of the general ecenomy, but in actual Shri Morarji R. Desai: There should life it may be found to be very difli- be no discussion here. You should ^cult. Do you have any experience ask for information which is rele­ where the bankers or the clients of vant to the Bill. bankers have been harassed or put into vef? serious difficulties because Mr. Chairman: You can ask fo r of these directives to the banking some information. industry? Shri Morarji R. Desai: If you go on discussing like this, there will be Shri L. K. Jha: Well, if a directive is given by the Reserve Bank, to do no end to it. that banks are otherwise not pre­ Shri Kamalnayan Bajaj: In the pared to do, inevitably there is some Bill, practically almost all the powers- element of hardship, even harass­ have been given to the Reserve Bank, ment. But in the larger interests of in Chapter H. the economy, it may be necessary it is also clearly desirable that in such Shri Morarji R. Desai: No, No. It cases every attempt should be made is the National Credit Council. There to alleviate the hardship. all interests are represented. Nobody can appeal to them; but scheme which protects 90 per cent of anybody can write to them. He can the deposits. So nobody is unmind­ always approach the Reserve Bank ful of the depositors* interests and as Governor or the Finance Ministry. I said in the past the prime interest of the Reserve Bank was depositors9 Shri Kamalnayan Bajaj: That is safety. Now, because we feel that the not done formally, but informally. depositors' money is safe we are think­ ing in terms of going ahead in new Shri Morarji R. Desai: Informal directions where we can have purpose­ things are better than formal. ful guidance of the credit and not be Shri Kamalnayan Bajaj: The price entirely security minded. of raw-material has gone up . . Shri N. Dandekar: I want to confine Shri Morarji E. Desai: Is this a myself to the question of policy only. question to be put for this Bill? Such I must confess you gave an extremely questions cannot be asked here. You lucid explanation of how it isv sought can utilise this opportunity to press by this Bill to get the policy Imple­ the Governor to give moral support mented at the operative level, at the to anything. director level and the policy-making level. In the first place I want to take it at the director level. Don’t Shri M. Thirumala Rao: The Re­ you think that we are jumping too serve Bank also acts for the protection suddenly from a Board of Directors— to the depositors. A large number in most cases lindoubtedly composed of practices still exist in several of industrialists—to a Board of Direc­ banks. The Reserve Bank has to pro­ tors on which the maj<>rity of the tect the interests of the depositors. people will be non-industrialists? You know the history of how the Life Insurance was nationalised when Shri L. K. Jha: I feel there are no thousands of life insurance premiums real risks in this. I would say that worth crores of rupees were being especially when applied to the larger played with by our industrialists in banks. I do not see any real risk i*n those days. Today you see the bank those cases. If you analyse the work­ deposits and capitals of the banks, i.e., ing of a big bank, so many of the thousands of crores of rupees of the decisions have got to be decentralised money Is being managed by interme­ and not taken by the Board itself. diaries. Is there any consideration to There is enough expertise, enough give some representation to the de­ capacity at the Branch Manager’s positors also on the Directorate of level, at the Secretary's level to deal these banks? You have put a large with the vast majority of cases. number of qualifications for being Directors. There are so many people Shii N.. Dandekar: Would you say who do not qualify under any of these 40 per cent would be inadequate and categories. that it must be majority?

Shri Morarji R. Desai: That is a Shri L. K.. Jha: I would not say matter for us to consider. must be majority. If the people are responsible and responsive they Shri L. K» Ufa: On yotir first point should, when, functioning on a Board, I would say that purely as a question fbrget that they are industrialists/ eco­ o f fact the bank deposits today are nomists . qi* mathematicians.1 mean wEe 'very much more secure than they- !iad ypu are ori a Board then you are func­ been at any time in the past. Apart tioning as, a member of a team. It is from things, v&.# the stability % rquj?sti

upheaval if the qualification was Till now a guarantee by &n Indian inserted 'if the Reserve Bank so re­ bank has been regarded as complete­ quired’. ly sound. The party abroad has to­ day to do research to find out whether Shri L K, Jha: For the Reserve any of the directorial relationship i* Bank to deal with all accounts of this going to affect guarantee. He will nature and to exercise judgment in­ then say: “I won’t take the Indian dividually would be a difficult task bank guarantee, but I will take the administratively. What to my mind guarantee of the Reserve Bank or the is a reasonable interpretation or possi­ Government of India. That will ble view is to give the Reserve Bank mean more burden financially and ad­ powers in regard to the time limit ministratively both to the Government It cannot do without a time limit. and to the Reserve Bank which I do not think is desirable. In this clause Shii N. Dandeker: If the loan is inclusion of guarantees worries me. good and if the concern has to move If you leave out guarantees, and deal to another bank. . . with loans and advances it will be better. Even in regard to loans and Shri Morarji R. Desai: May I sug­ advances, I do not think we can treat gest a remedy? The loan need not be all loans as necessarily b$d. There returned when the director ceases to are some types of loans. For instance be a director. He can go to another a man has a fixed deposit account in. bank,* the bank. When he operates on that account, he is borrowing. It is a loan* Shri N. Dandeker: Directors have taken on some responsibilities to the depositors once to the shareholders Shri N. Dandeker: I will now come who have elected them. One grows to the .policy making level of the Re­ into certain obligations. One cannot serve Bank. You are no doubt fami­ lightly throw up his directorship. He liar with this section. Sec. 7(1) of the is there because of his intimate Reserve Bank Act says that the Cen­ knowledge of trade and economy. It tral Government may from time to does seem to me pointless except time give such directions to the Re­ where it is a bad loan that the loan serve Bank as it may, after consulta­ should be moved from bank A to bank tion with the Governor of the Bank B. It does not seem to make any consider necessary in the public in­ sense. terest. Then there are several sections in the Banking Regulation Act, for Shri Morarji R. Desai: It is your instance, sections 21, 35A ad 36. Then suggestion that the loan already given there are other minor sections. When should not have to be returned, but the Reserve Bank has got these con­ no new loan should be given. That siderable directive powers as to general we can consider. Any amount of policy, in regard to everything that is discussion between you two won’t now sought to be included under the solve that problem. definition of ‘banking policy’, am I misreading it if I say that the new Shri N. Dandeker: Now about Re­ definition of “banking policy” does serve Bank's views regavding guaran­ not go really beyond what is already tees by banks. permissible to the Reserve Bank by way of directive issue power under Shri L. K. Jha: Here one feels a sections 21, 35-A, 30 and some other little uneasy. In one of the clauses sections of the Regulation Act? As guarantees have been referred to. I far as I can make out, all these mat­ fee 1 that perhaps a reference to guar­ ters are already there by virtue of antees in this clause is not desirable. the power which the Reserve Bank Guarantees are given by our banks has in the public interest or in the usually to outsiders against credit. interests of the depositors. Now it Is 47 proposed to insert ‘in the interests of rested in knowing this fend I hope that banking policy1 in all those sections. I the Select Committee too is interested am not very clear, in spite of your in knowing the exposition of policy. very good explanation, what is now going to be added by way 0f directive Mr. Chairman: We are also very capacity of the Reserve Bank which much interested. After all, we have it does not have now. to see Mr. Jha the time also.

Shri L. K. Jha: I would answer it Shri N. Dandeker: This is much this way. I would myself be quite more important than the clock. Mr. prepared to argue that the word Jha, I fol’ow what you say. But on ‘public interest* does embrace all this. reading the Banking Bill, I find the But it is open to any judiciary to following: take a different view because the public interest is one of the common “banking policy” means ’any law concepts which really rests on policy which is specified from definition given by the judiciary time to time by the Reserve Bank rather than by law. Now, it is quite in the interests of the depositors possible for a High court or Supreme or of the banking system or in the Court to say that this interest is no interests of monetary stability or doubt desirable, but, there is some­ sound economic growth, having thing more important in the view of regard to the volume of deposits the learned judges to say that it is and other resources of banks, and not in the public interest. And there the need for the equitable alloca­ have been cases where public interest tion and efficient use of these de­ rulings have been given like this. posits and resources*.

Shri N. Dandeker: Is it in relation I want to know whether, if the to Reserve Bank? Reserve Bank in its judgment came to the conclusion that rapid inflation Shri L. K. Jha: I am talking general­ was in conformity with,—shall we say, ly. Public interests are always in a under the Fourth Five Year Plan,— matter of doubt. The Reserve Bank and that the banking policy that we has in fact been keeping this criterion have must endeavour to do that, in view. So far this has not been whether would it be against the de­ challenged. If this measure were to positors? Obviously these are against be challenged with a sheet anchor in the interests of the depositors. the shape of the definition as % is provided here, it wou'd be quite Shri L. K. Jha*: This is against the TOtensible, otherwise I do not feel interest of the depositors. The Re­ ^ certain. The court might strike down serve Bank would not do that. * the action which we consider to be in public interest. The public interest Shri N. Dandekar: Would it be should be re-defined* entitled to do that? Shri N. Dandeker: May I put this Shri L. K. Jha: It is a matter of Question? legal opinion. I am not a legal ex­ pert. Mr. Chairman: Mr. Dandeker, now ! you must conclude. Shri N. Dandeker: Would you have that this should be governed by the %Shri N. Dandeker: These are policy interest of depositors? Questions which are most interesting to hear. And the Governor is ex­ Shri L. K. Jha: I would gay that plaining very nicely. The Finance these are grounds. On this or any Minister was good enough to give him of the grounds, the Reserve Bank can the trouble to come here. I am inte­ act. But, if it w*as contrary to one’s 48 own b asic objects, then it will be Shri Indrajit Gupta: Mr. Chairman, against depositors’ interests. you have to send for the Attorney General too for this. Shr N. Dandeker: Would you have any objection if the phrase is worked Shri L. K. Jha: What wsuld be the like this viz. “subject to the interests implication of the changes—I would of the depositors?” not like to express an opinion on this. Shri Morarji R. Desai: That would But, in substance, the depositors’ inte­ lead to litigation. It is for the High rests should not be jeopardised. Court to say that. Shri N. Dandeker: I thought so. I Shri N. Dandeker: That is really the was going to say this. But, you have crux of the matter. You use a phrase said so. and I wotild like to know whether the Governor of the Reserve Bank would Mr. Chairman: Is there anybody accept the phrase ‘subject to the inte­ who would like to ask questions? rests of the depositors. You say pro­ bably it wH not arise. I say it would Shri Jyotirmoy Bosu: Mr. Jha, you then be definitely good if the phrase represent the Reserve Bank. I look is put like this viz., ‘subject to the at you as the king-pin of Indian Bank­ interest of the depositors’. ing industries controlled by Mr. Desai and his Ministry. Mr. Desai has said Shri L. K. Jha: I do not say that it in a statement ‘it has been clearly ad. will not arise. I only say that it mitted that the resources of the bank­ would be wrong for the Reserve Bank ing system are not being equitably to issue a directive if it means permit­ and purposefully distributed in con­ ting one of the objectives which is formity with the developmental re­ detrimental to the other. quirements and the private sectors are not receiving their due share and that Shri N. Dandeker: What prohibits their clients or groups of c1ients are this? only being favoured in the matter of distribution of credits.’ To this I Shri Morairji R. Desai: The deposi­ add further that the Reserve Bank is tors will disappear. not properly functioning. As per the law it is not implementing speedily Shri N. Dandeker: That is a diffe­ and timely the glorious provisions of rent matter. They may disappear. the Reserve Bank Act and the Bank­ ing Companies Act with regard to * Shri L. K. Jha: My point is that I persistent violations and irregularities do not regard any of these as good. committed by commercial banks. With ^ immunity it is no good in saying that these lapses are part of Reserve Shri N. Dandeker: If you leave out Bank’s administrative difficulties. the phrase ‘subject to the interest of There are numerous instances of lapses . the depositors’ and keep the definition that are taking place in the recent past as it is, will it be all right? After all, it is an enabling provision. The Re­ and also in the past. T ishall site in­ stances of Palai Central Bank, serve Bank can honestly say that for the purpose of sound economic gro­ Lakshmi Bank and a number of irr*- wth such and such a thing must be gularities committed in the Punjab I done; if we ask ‘contrary to the in­ National Bank, Indo Commercial Bank. ■ terests of the depositors’ you say it and mrany others. I would like to hear* is unlike’y. May I then suggest you your impressions to my utterance. can have no objection to the phrase ‘subject to the interest of the deposi­ Shri L. K. Jha: I am not very deaf tors’? of what the question in. 4 9 0hri Jyotirmoy Bosu: It is not a -Shri L. K. Jha: I am sorry that in question. I say that you represent the the job I am doing I don’t have to Reseore Fpnk and you are under the differentiate between the three. direct control of the glotrious Finance Ministry. You have failed to deliver Shri Jyotirmoy Bosu: In the Act the goods to the common people in you have tried to penalise the people the country. Under the circumstances, who would___ would I be justified in expressing my suspicion about the working of the Shri Morarji R. Desai: Not he; I Reserve Bank? have done that. The legislation be­ longs to the Government, not to the Stori Morarji E* Desai: May I inter­ Reserve Bank. vene lor a minute? I must correct you Mr. Bastr. You have quoted me Shri Jyotirmoy Bosu: I am wanting twice that I have made a statement to know his reactions to that I have stating that has .been admitt)ed\ been having the benefit of people put­ These are your own words. You are ting me on the right track all the misquoting me. P’ease see the text of time. With limited resources in my my statement. It begins with ‘there upstairs, I often get confused because have been persistent complaints that of this. this has happened*. This is what I Mr. Chairman: Since yesterday I have said. have been requesting you to put ques­ Shri Jyotirmoy Bosu: May I proceed tions relevant to the issue. Mr. Chairman? Shri Jyotirmoy Bosu: Mr. Jha, Mr. Chairman: I have been patiently would you support the idea that there hearing whatever you have been say­ should be representatives of Em­ ing. I have also been waiting to tell ployees’ Unions on the Board of Direc­ you to ask questions relevant to the tors of a Bank? subject matter under discussion. Shri L» K. Jha: I would not rule Shri JyotirmoyBosu: I am trying to that out. ascertain from the Governor of the Reserve Bank of India as to what the Shri Jyotirmoy Bosu: There is no Reserve Bank has done with regard to provision in the Bill. Would you the commercial banks which are suggest such a provision in the Bill plundering the common man. Mr. for better working of the institutions Jha, which particular provision of this and for better relationship between proposed Bill will actually bring about the management and the workers? ♦the severance between the big busi­ ness and the commercial banks so that Shri L. K. Jha: As I stated earlier, thfe benefits of banking and other cre­ when a Board meets there are no con­ dit institutions would reach the com­ stituencies except the loyalty to the mon man? Board. But I would say that an awareness of the labour problems and Slhri L. K. Jha: I think both the also a background in that is certainly sections, one which deals with the one of the possible interests that could composition of the Board and the • make a useful contribution in the other limiting loans to the people on general discussion. the Board when they have got common interest, will help to achieve the Mr. Chairman: No more questions. ^ objective in view. Shri Jyotiitaoy Bosu: How would Shri Jyotirmoy Boon: In spite of the existing standing orders, why do you you differentiate between peaceful think that the Government have obstruction, satyagraha and picket­ brought this Bill? ing? 80 Shri L. K. Jha: You are referring to employer-employee relationship. I S6 AD. If you look at that section, it would look at that section as not deals with a number of situations. being primarily a matter of labour- One is doing discredit to or undermin­ management relationship in a bank ing a bank’s credit. This is a matter but a matter which enables a bank to which does get covered under the function efficiently and discharge its employer-emiployee relationship. But responsibilities fully. It enables a this clause affects anybody who dis­ bank to honour certain pledges with­ credits a bank's creditworthiness. I out d elay under the Negotiable Ins* know of a case where somegody was trumen ts Act. not a worker but a high-paid man in a major bank who left the bank and Mr. Chairman: Thank you very then carried on propaganda of a much, Mr. Jha. nature which did result in a run on the bank. Now that is beta* made (The witness then withdrew) criminal. I think it has nothing to do with the standing rules governing the (The Committee then adjourned) MINUTES OF EVIDENCE GIVEN BEFORE THE SELECT COMMITTEE ON THE BANKING LAWS (AMENDMENT) BILL, 1967.

Wednesday, the 17th April, 1908 at 14.30 hours

PRESENT

Shri G. S. Dhillon—Chairman

M em b ers

2. Shri Kamalnayan Bajaj 3. Shri S. S. Kothari 4. Shri N. Dandeker 5. Shri C. T. Dhandapani f3, Shri C. M. Kedaria 7. Shri Samarendra Kundu 8. Shri Indrajit Gupta 9. Chaudhary Nitiraj Singh 10. Shri Krishna Chandra Pant 11. Shri S. R. Rane 12. Shri M. Thirumala Rao 13. Shri Dwaipayan Sen 14. Shri K. N. Tewari ‘ 15. Shri Jyotirmoy Bosu 16. Chawdhury Sadhu Ram 17. Shri Morarji R. Desai.

Legislative Council

Shri S. K. Maitra, Joint Secretary and Legislative Counsel, Ministry of Law•

Representatives of the Ministry

1. Shri S. S. Shiralkar, Additional Secretary, Deptt. of Economic Affairs, Ministry of Finance. 2. Shri R. K. Seshadri, Executive Director, Reserve Bank of India, Bombay 3. Shri D. N. Ghosh, Deputy Secretary, Deptt of Economic Affairs, Ministry of Finance. 4. Dr, V. A. Pai Panandiker, O. S. D., Ministry of Finance. : 5. Shri B. N. Mehta, Legal Adviser, Reserve Batik of India,-Bombay. 51 52

Secretariat Shri M. C. Chawla—Deputy Secretary.

Witnesses Examined I. The All India Overseas Bank Employees' Union. Madras.

Spokesmen: 1. Shri C. R. Chandrasekharan— President 2. Shri P. Balagopala Menon— General Secretary. 3. Shri D. Jayasuryan—Asstt. General Secretary.

II. The All India Bank Employees* Association, Delhi. Spokesmen : 1. Shri A. C. Kakar—President. 2. Shri Prabhat Kar— General Secretary. 3. Shri H. H. Parvana— Secretary.

III. The All India State Bank of India Staff Federationf Calcutta: Spokesmen: 1. Shri S. N. Dubber— General Secretary. 2. Shri Amrit Lai Airi—Asstt. General Secretary. 3. Shri J. N. Kapur—Circle Welfare Secretary. L The All India Overseas Bank Employees’ Union, Madras. Spokesmen: I 1. Shri C. R. Chandrasekharan. 2. Shri P. Balagopala Menon 3. Shri D. Jayasuryan. (The witnesses were called in and they took their seats) Mr. Chairman: Kindly Introduce Mr. Chairman: Thank you your colleagues. much. You are welcome. Before start, I read, out to you Directive S§> Shri Menon: I am P. Balagopala issued by the Speaker: “Where wit­ Menon, General Secretary of the All-India Overseas Bank Employees nesses appear before a Committee to Union. give evidence, the Chairman shall' make it clear to the witnesses that* Shri Chandrasekharan: I am C. R. their evidence shall be treated aaa Chandrasekharan, President of the public and is liable to be published* All India Overseas Bank Employees unless they specifically desire that all4 Union. or any part of the evidence tendered by them is to be treated as confiden­ Shri Jayasuryan: I am D. Jaya­ tial. It shall, however, be explained suryan, Joint Secretary of the All to the witnesses that even thougtfr India Overseas Bank Employees they might desire their evidence V* Union be treated as confidential soch evi-^ 55 dence Is liable, to be made available Shri S. S. Kothari: What is your to the members of Parliament” suggestion?

I hope you don’t want any portion Shri Menon: I would suggest that of it to be treated as confidential. people not connected with that bank­ ing company should be appointed Shri Menon: No, Sir. and the Reserve Bank should be the whole person to decide about the Mr. Chairman: Will you explain Chairman. your case before I allow members to raise questions? Now, I come to clause 3 inserting Shri Chandrasekharan: We have a new section 10(a) wherein the got something more to tell in addition Board of Directors are re-constituted to what is said in the memorandum. and certain sectors, are given priority so that their interests are covered, for Shri Menon: Respected Chairman instance, small scale industries, agri*- and Hon. Members of the Committee, culture, etc. As a trade union work­ you have before you the Banking er I wish, Sir, that consistent with Laws (Amendment) Bill not uncon­ the policies of this Government of nected with matters with which we a socialistic goal that we have chosen* as employees working in a bank, feel, for ^ourselves, labour should be given are affected. Our union is a well- a role here and the employees should known organisation, unaffiliated to be, represented in the board of direc­ any All-India Association with any tors/ I would request the hon. Chair­ political bias or anything. As such, man and Ihe members of the Select we have been confining our activities Committee to consider this aspect that to only matters relating to employees. in the board of directors while giving representation to various interests the interests of the employees should also The objectives of the Social control be represented and a representative of Bill which is before you, as far as the employees of the banking com­ our knowledge goes, is quite laudable, panies should be given a place in the and: we feel that we are not com­ board of directors. That is also con­ petent to place before you our views cerned with the Industrial Policy Re­ whether this could be achieved by solution the Government had passed the Bill before your scrutiny. But one as early as 1956 wherein it was said* or two aspects we would like to place in a socialist democracy labour is a before you for your consideration. partner in the common task of deve­ One is that there has been a lopment. statement that banks themselves have come forward to voluntarily imple­ Now, I would come to something1 ment some of the provisions of this which very much agitates us, tliat is, Bill. We doubt whether the Parlia­ section 36 AD. We believe that this ment is quite awar$ of the fa * that section should not find a place in this- this voluntary implementation by the Bill because it hampers our trade banks is sincere or not. For instance, union rights. It takes away things the appointment of Chairman. Al­ that we achieved after so much o f ready most of the banks have had labour. The right of demonstration their General Managers designated is a fundamental right and I wish, as Chairmen. We are not sure whe­ this hon. Committee would see that ther that is the purpose and the object my right should not be affected in* of the framers of this Bill that they this manner. If I do a mistake, if I wanted the Chairman tu a person indulge in indecent demonstration* appointed with the approval of the there is ample provision under the- ^.B.1. because ---- bank’s own service conditions to# 54 take action against me. I am gov­ Mr. Chairman: You may go to other erned as a employee of this bank by points. :& bipartite settlement arrived at bet­ ween the employers and the em­ Shri Menon: The national commis­ ployees. This settlement has provi­ sion of labour has in iia study group sion for disciplinary action being made a request that this 36A (d) may 'taken on various mis-conducts— be withdrawn pending the submission major and minor mis-conducts. By of their report I believe that they depriving me of what I have achieved are the competent authority to decide by way of collective bargaining and that. I wish that this provision is now having recourse to a court of removed at the earliest time. This law and plead for justice, I wish amounts to an interference in the you would in all your wisdom see bipartite settlement. I And that under that such a thing is not done. I this Mil if the banking company does will not be able to function as not follow the provisions of this a trade union member if this section bill and contravenes it the only is passed. My elementary right is punishment that you meet out is to curtailed. I have achieved these take over the assets of that banking rights after a long struggle. I have company. not endangered the security of these banks. These banks are prospering. Shri Morarji R. Desai: Is it small Section 36AA Part 2(a) in the Bank­ provision? ing Companies Regulation Act the provision is already there that the Shri Menon: It is small. R.B.I. has got powers to send out any employee of the bank. Supposing, Shri Morarji R. Desai: Any person now R.B.I. s e o i me out and suppos­ will be there. Not only you. 36AD ing this section is also passed the applies to any person. Union will have no power to do any­ thing to see that I am re-instated. Shri Menon: I wish in that provi­ This, I am afraid, will take us back sion there is penal provision that to the last century. other directors will be sent to jail for doing that.

Shri Morarji R. Desai: The Reserve Shri Morarji R. Desai: 36AD will Bank has not done it so long. be there. You can do it.

Shri Menon: We wish that they do Shri Menon: Shri Chandrasekharan not also. But as long as this parti­ will say something. cular clause 36 AD is there—when there is provision already that you Shri Chandrasekharan: Any legis­

Shri Indrajit Gupta: Do you think for this kind of information, it is not that this fact of existence of only one correct. union with which the managment deals has contributed to the indus­ Shri Jyotirmoy Bosu: For informa­ trial peace? tion on economic offences?

Shri Menon: Yes. Shri Morarji R. Desai; That has no relevance for banking industry. We Shri Jyotirmoy Bosu: During your have not yet extended it to them. 13 years of experience with your present employers, tell me in how Shri Jyotirmoy Bosu: That will be many cases action was taken within extended. your knowledge under the provisions of the standing orders (a) against the Shri Morarji R. Desai: They relate Directors; (b) against senior execu­ to concealment of income tax, wealth tives and (c) against non-executive tax and smuggling. staff? Shri Jyotirmoy Bosu: If a bank Shri Menon: None in the case of director makes a false transfer? directors and executives. Against the Shri Morarji R. Desai: We will wel­ non-executive staff some actions have been taken under the standing orders. come all such information. We have not said that rewards will be given. Shri Jyotirmoy Bosa: S ub-claw Shri Jyotirmoy Bosu: If a gentle­ (c) of 36AD says: man comes and makes such a report, “act in any manner calculated you will say that it will reflect on the to undermine the creditworthi­ creditworthiness of the bank. ness of any banking company.” Mr. Chairman: I am sorry. This question is not relevant. This comes mainly from the people of the directorial cadre and not from Shri Jyotirmoy Bosu: It is very the subordinate staff. Do you agree? relevant. Do you have that freedom today? Shri Menon: I do agree. Shri Menon: I have had the free­ Shri Jyotinnoy Bosu: You may be dom hitherto. aware of the fact that the Finance Ministry invite information on eco­ Shri Samarendra Kundu: Mr. nomic offences committed in this Menon, would you kindly say from country and perhaps they are willing your memory how many of the em­ to pay rewards for such information. ployees of your union have lost their Do you in that context . enjoy the jobs or been punished for certain freedom, as a bank employee, to misconduct after the standing order report to Government about activities has been accepted? which are against the interests of the country, bank and depositors? Shri Menon: Before the bipartite settlement came, there was the Desai Shri Menon: I have never had an Award. It contained sortie provisions occasion. regarding disciplinary matters. Under that to my mind about three em­ Mr. Chairman: How is it relevant ployees were dismissed from service. for this discussion? The new settlement is of 1966.. Even last year under this standing order Shri Morarji R. Desai: When you one employee was discharged from say Government is giving rewards service. 57 Shri Samarendra Kundu: You have Shri Menon: It is largely aow been wo: king in the bank for 13 years. C.)uid you remember any per­ Shri Samarendra Kundu: Now, son other than the bank employee another thing is this. This provision being prosecuted by the bank for does not qualify. If it is a recent creating some trouble inside the demonstration or not the prosecutior bank? has to be launched by the executive authorities. And don’t you think that Shri Menon: 1 remember one this provision gives a lot of powers drunken person came and created on the authority to freely use the aome trouble and we called the police clause to beat against any active trade and handed him over to them. union worker who would be fighting for a just cause? ( Shri Samarendra Kundu: When was it? Shri Menon: That is my main ^ grievance. The hon. Chairman might Shri Menon: Three or four years have seen the recent reported state­ ago. That is my personal experience. ment made by the Minister of State in tht Ministry of Finance, Shri K. C. Shri Samarendra Kundu: That is Pant that the Select Committee might the only incident? consider some other amendments to this Bill. Not only the demonstration Shri Menon: That h the only but also obstructing an entry into or incident I remember. There we going out also might be removed. Also called in the Police. the word Indecent’ should be re­ moved from the demonstration. This Shri Samarendra Kundu: Please has aggravated our people. About look at clause 36AD. Do you think Sec. 36 AD there is a word appearing that sub-clauses (a) and Ob) can also ‘indecent demonstration’. The hon. create a fear in the clientele of the Minister made a statement that the bank that this will result in the Select Committee might consider for decline of the business of the bank? removal of this word. Hitherto they were only prohibiting the indecent demonstration. Now it is very clear Shri Menon: I asn afraid It is that all types of demonstrations are almost like that—perticularly section sought to be prohibited.

higher in proportion to the offence bank. What do you say to this? Is which has been committed. Don't you something to be done? think that the punishment under 36 AB & C is very severe? Shri Menon: I say nobody has been obstructed. I also said that we Shri Menon: I feel it is very have indulged in a peaceful picketing severe. In the bank. And peaceful picketing, according to us, is not an obstruction Shri Morarji R. Desai: He has and this is our fundamental right. already stated it. Shri N. Dandeker: I am not talking Shri Samarendra Kundu: Have you of peaceful demonstrations but I am studied the trade1 union aspects of talking of preventing any one from the Bill? entering the bank. Shri Menon. I have explained that Shri Mtenon: We have not physi­ as a trade unionist all activities re- " cally prevented anybody from enter­ late to the interests of our members. ing the bank. We have not exercised our mind on the wider aspects of the bill. Shri N. Dandeker: I am only using Shri N. Dandeker: I take it that the word obstruction. This is what it is clear to you that this section in you are feeling. From your experi­ turn is applicable to anybody regard­ ence, in you bank, has anybody been less of whether he is an employee or prevented? It is a very positive thing anybody. You said that for several when you say that nobody has been years when you have been in the obstructed from entering your bank. employ of the bank, this sort of thing Suppose if somebody has obstructed has never happened viz., the persons anyone from entering the bank and having been obstructed from entering doing any business there. Surely you the office of the bank or having enter­ would agree that something should ed being prevented from carrying on be done about that. any business. Shri Menon: Something can be Shri Menon: If it has happened, done. The I.P.C. is there. There is the service rules are sufficient to deal a provision which covers theft, com­ with that. Naturally, our manage­ mitting of public nuisance etc. ment has not suffered from' any diffi­ culties because of lack of any parti­ Shri N. Dandeker: Public nuisance cular law in the country. is not the same thing. Shri N. Dandeker: I am asking you Shri Menon: Theft, wrongful re­ a very simple question. You are in straint and all sorts oi! things are a particular bank for 13 years and there. during that time, have persons been prevented from entering the bank? Shri N. Dandeker: But, obstructing Shri Menon: No. Sir. anybody from entry is not there. Shri Menon: It is a wrongful re­ Shri N. Dandeker: Have persons straint If a person id prevented been prevented from doing any busi­ from entering the premises, it is a ness in the bank during that time? wrongful restraint. Shri Menon: No, Sir. Shri N. Dandeker: Gherao is a Shri N. Dandeker: Occasions may wrongful restraint. arise not in your bank but in some banks or the other where people may Shri Menon: If anyone is obstruct­ obstruct some one from entering the ing anybody, for a wrongful restraint, hank of from doing anything in the he can be prosecuted. 59 Shri N. Dandeker: I don’t think Whether under this proposed law or* in your experience in your bank any other law, you agree that action* offences such as committing a public should be taken? nuisance or preventing anybody from entering the bank have happened. Shri Menon: If such a contingency arises, the Service Buies have ample Shri Menon: No, Sir. provision. Our point is that this pro­ vision need not be here in this Bill Shri N. Dandeker: Suppose it hap­ because you have already got neces­ pens in a bank. sary powers.

Shri Menon: l.P.C. is there. The Shri N. Dandeker: I will come to police may be informed about „ the that later. Let us come to agreement, person who obstructs someone from if we can. If demonstrations or things* entering the bank. like incitement to commission of any offence take place within the premises- of the bank, action should be taken. Shri N. Dandeker: But Public nuisance should be stopped. You agree? Shri Menon: I agree. Shri Menon: It has already been stopped. Shri N. Dandeker: What you are say ing is that action not in the form Shri N. Dandeker: Your point is that is given here but in some other that action should be taken but not form is necessary. You agree. necessarily under this section. Shri Menon: Yes, Sir. Shri Menon: it is completely un­ necessary1. Shri N. Dandeker: Now we will come to the term ‘the commission of ‘Shri N. Dandeker: You are not an offence within the precincts of the saying that if any one is obstructing Bank’. Are you aware that in the anyone from entering the bank, ac­ Punjab National Bank during July, tion should not be taken. Suppose August & September, there were de­ some body obstructs someone from monstrations inside the Bank buildings entering the hank or prevents any­ and that action could not be taken body from doing business in the under their bye-laws because of the bank. Should not action be taken? Union’s resistance? What you are saying is not that action should not be taken, Shri Menon: In spite of the resist­ i ance, I have found my colleagues in Shri N. Dandeker: Now let us take the Punjab National Bank being pro­ sub-section (b) which says: ceeded against under the Service Rules. 'hold any demonstration which is indecent’. Shri N. Dandeker: Yes, some of It need not necessarily be indecent. them were proceeded against.

‘or which amounts to the com­ Shri Menon: We do not know what mission, or incitement of the ‘resistance’ means. All our resist- commission, of any offence, within anct is only shouting slogans. When the precincts.../ you take action, this is the only type* of resistance. Now, with regard to holding demons­ trations inside the precincts of the Shri N. Dandeker: Are you claim­ bank, surely if that happens, you will ing it as a trade-union right to shout: agree that action should be taken. slogan within the Bank premises? 6o

Shri Menon: I am not aware of the aware of,—an act calculated to un­ ^circumstances under which the dermine the creditworthiness of the management of the Punjab National bank, don’t you think that some dras­ Bank found themselves so helpless. tic action should be taken?

Shri N. Dandeker: Whatever be Shri Menon: I feel that the word­ the circumstances, are you against ing of the clause is very vague. Cal­ such things or are you for? culated by whom? Who does find it?

Shri Menon: Supposing the Shri N. Dandeker: Only a Magis­ Management has not exercised their trate can. The Bank cannot be the .powers, it is their folly that has judge. -created those circumstances. I could not answer for them. Shri Menon: Before that he is tak­ Shri N. Dandeker: I am not ask­ ing me to the court. ing for any remedy. I am only ask­ ing you this simple question. Suppose Shri N. Dandeker: I am not taking in your bank people start behaving you to the court. I am talking of a rudely and staging demonstrations, do man who has calculatedly committed I agree you disapprove of that? an act to undermine the creditworthi­ ness of the bank. Shri Menon: I disapprove it Shri Kamalnayan Bajaj: You sug­ Shri N. Dandeker: You have Seen gest that the wor<’ ‘calculated’ should in the bank service for 13 years and be withdrawn. you hold a responsible position in the Union and I am sure you disapprove Shri Menon: I suggest that the all these things? entire clause should be withdrawn.

Shri Menon: I do disapprove of it Shri N. Dandeker: Would you agree in the strongest terms. that ‘to act in any manner likely to undermine* is different from *to act in Shri N. Dandeker: Supposing in any manner calculated to undennine other banks where the position may the crtditworthiness of a banking not be as happy* as in your bank, such institution’, upon which depends sort of things do occur, you agree that tremendously the economic prosperity drastic action should be taken? of the country. Would you agree that drastic action is necessary? Shri Menon: I do agree. Shri Menon: Again my difficulty^ Shri N. Dandeker: Now let us go to is that this word ‘creditworthiness* clause (c). Clause (c) says ‘act in has not been defined. The hon Com­ any manner calculated to under­ mittee may please excuse me if I mine . .’ . Note, it is not ‘likely to seek a clarification. Suppose a depo- undermine’. It should be an act tor says that he is not satisfied with deliberately done so as to undermine the services of the bank, that the bank the creditworthiness of any banking is not serving its clientele properly, company. So you have to distinguish it will immediately attract the provi­ between an act that is likely to be sions of this clause. injurious to the creditworthiness of a bank and an act calculated to under­ Shri N. Dandeker: You have been mine the creditworthiness. Supposing in the banking line for 13 years and * in this particular matter as in regard you should know what ‘creditworthi­ to all matters, the question is that ness’ means. When people start say­ where any paricular employee does ing that this bank is likely to defraud this,—there have been cases I am its depositors, that is undermining creditworthiness. To say ‘we do not of the bank. I think if you perba&i get proper service* is not undermining read this provision it is not repre­ creditworthiness, senting any particular interests. It begins like tttb: Shri Menon: If all the depositors ‘shall have special knowledge stop coming to the bank, it will affect of or practical experience in res­ the bank. Suppose one depositor sends round a word that the Bank is pect o f.. sinking, then there will be a run and accountancy’, etc. people will stop coming to the bank. Is it not representing accountancy profession. What it is representing is Shri N. Dandeker: Please under­ that anybody may be a director but stand my question. I have myself he must be a director for instance sometimes comp j aired to my bamc with the special knowledge of account­ that they are taking a fright fully ancy or practical experience of ac­ long time to cash my cheque. There­ countancy*, agriculture or banking. by I a*m not assailing the creditworthi­ ness of the Bank. I was assailing its Shri Menon: If I may put it cor­ efficiency, not undermining the cre­ rectly, I would correct it like this, ditworthiness of the bank which is ‘having special knowledge about pro­ different thing. You have been in blems of labour'. the bank which is a different thing, Shri N. Dandeker: That is a diffe­ the bank long enough to know pre­ rent matter. cisely what is meant by creditworthi­ ness compared to efficiency and com­ Shri Menon: And that special petence of the Bank. know!edge can be had oly by an emp­ loyee. Shri Menon: My criterion is: If there is one customer in our Bank Shri N. Dandeker: If you were to like our hon Member and if he says say, ‘having special knowledge or practical eperience of fcabour-manage- that this bank is no good, it would ment affairs’, perhaps there is some­ seriously affect our bank. thing to be said for what you say. But Mr. Chairman: Instead of prolong­ the moment you say that the “emp­ ing on this, you may pass on to the loyee” as an interest should be repre­ next question. sented as an interest should be re­ presented; then officers fcs an interest Shri N. Dandeker: You agree that should be represented; depositors as (these are objectionable things, but the an interest should be represented and only point is: why should they be so on. This is not representing .any brought in here and made as an interest. Are you asking for a man offence and subject to the penal pro­ with special knowledge or practical visions, why not deal with them experience of labotir-management otherwise? But you agree that these relations? are objectionable activities? Shri Menon: The person whom you select should be an employee only. It Shri Menon: Otherwise, it will would be in the interest of banking not find a place in our Standing industry a’so to have a person from among the employees who would be Orders. I do agree thes'* are objec­ knowing the day-to-day work. tionable things, but as 1 **aid, I do object to the remedy sought in this Shri N. Dandeker: Not just a man banner. with special knowledge in ' labour- management relations, but an emplo­ Shri N. Dandeker: Now we come yee of the Bank. to the proposed section IDA, You want representation for the employees Shri Menon: Yes 702 (Ai) LS—5. 62

Shri Samarendra Kundu: Why do Shri Menon: It had happened in you want an employee to be there? our Bank. But that was a matter Is it because you feel that there will which we could deal. be better participation trf employees in the management? Shri S. S. KoUuuri: What about the 10 metres distance provided for this Shri Menon: Yes, It will also be purpose? in accordance with the policy enun­ ciated in the Industrial Policy Reso­ Shri Menon: That also must go# lution. because it prohibits others in the next room forming a trade union however Shri S. S. Kothari: If 36 AD is not much the management may indulge in to be deleted, can you suggest any blackmarket and other undesirable amendment with regard to phrases things. In a big building there may /ike imprisonment etc.? be another Company in the next room. Shri Menon: I would not just com­ promise myself to anything other than Shri Jyotirmoy Basu: I would like complete deletion, if I am given a to have a clarification from Mr. Dan­ choice. dekar. When he was asking the opinion of Mr. Menon on sub-clause Shri S. £. Kothari: If a person is (b), did he mean violent demonstra­ imprisoned, under the Shastri Award, tion or a peaceful demonstration? what will be the effect on his career? Shri Morarji Desai: We can dis­ Shri Menon: His services could be cuss it among ourselves. terminated. Chaudhary Nitiraj Singh: You in­ Shri S. S. Kothari: Will it have sist that, your representative should any effect on his re-emp’oyment? be appointed on the Board of Direc­ tors. Would you be satisfied if the Shri Menon: It will be according to Chief Personnel Officer is appointed the standing order. on the Board?

Shri S. S. Kothari: Can he be ap­ Shri Menon: That is a matter of pointed elsewhere? detail. We could decide that with the Employees* Union. I wish that Shri Morarji Desai: If he is dis­ the management first concedes our missed by one bank, he will not be , demand for the appointment of a Di­ rector from the ranks of employees. taken by any other bank.

Shri S. S. Koihari: Why do you Chaudhary Nitiraj Singh: You want to demonstrate inside the Bank? would admit that the present Bill gives more power of control to the Shri Menon: It depends upon Reserve Bank. Do you insist that the circumstances. I have had occasions Reserve Bank should have the right to witness the officers of the Bank to appoint the Chairman? assaulting the employees and even Shri Menon: I was prompted to the Police did not interfere. say that because there was the talk Shri S. S. Kothari: Officers assault­ that the banks had already voluntari­ ing the employees! ly started implementing the provisions of this Bill. The purpose the framers Shri Menon: I wish you beUeve. of the Bill had in mind is being defea­ ted. The Chairman has to be the full­ Shri Morarji K. Desai: In your time executive and that is necessary bank? in the interest of the banking industry. 6 3

But that is being circumvented now considerations or poetical influence because they are appointing their Ge­ working behind him, it could remove neral Manager, who were responsible him. for certain things which prompted this measure by the Government, as Chair­ Shri Kamalnayan Bajaj: What will men. It is only old wine in a new be your reaction if the Chief Person­ bottle. nel Officer is appointed on the Board as your representative? Mr. Chairman: I am all the while requesting the Members to be brief. I Shri Menon: I have already said request that you may also be brief in that it cuold be considered later, be­ your replies. cause it is a matter of detail. We shall not be satisfied by anybody other Shri Kamalnayan Bajaj: In answer than the person who enjoys the com­ to a question you stated that you had plete confidence of employees being the freedom of complaining to the Fi­ represented on the Board of Directors nance Ministry against any actions of the Bank which were not in the in­ Shri C. M. Kedaria: At page 3, at terests of the country or the bank or the end, of your memorandum you the depositor. In your service of 13 have stated. “We are not for a mo­ years how many times you have com­ ment suggesting to your goodselves plained to the Finance Ministry in this that the Bank employees, should be regard? given the privilege to obstruct the functioning of the Banks or to indulge Shri Menon: We have never done in indecent demonstrations or to give that. Fortunately for us, things were the right to undermine the credit­ rectified when we had the occasion to worthiness of the Bank or indulge in point out certain things to the mana­ any unlawful activities.” Are you still gement. of the same opinion? Shri Kamalnayan Bajaj: You are a Shri Menon: I am still of that opi­ reputed leader of your Union and you nion. also know that there are many other Unions working all over the country. Shri C. M. Kedaria: Will you It must be within your knowledge please explain the scope.... that the demands of the Unions are not so much prompted by legitimate in­ Shri Morarji R. Desai: He has al­ terest of the employees but there are ready explained. He gave a long lec­ I political influences behind such de­ ture on it. He has already stated that mands. chis should not be there. , Shri M. Thlrumala Rao: Mr. Menon, Shri Menon: Sometimes such things you are aware that many of these do happen. Unions have got their political affilia­ tions. But are you not aware that in Shri Kamalnayan Bajaj: You want this connection, politics can play a that on the Board ot Directors there very, very important and a v

der any law, is it provided in the Shri Morarji R, Desai: Then, should standing order* which are now pre­ that employee work under any officer valent in your banks to re-employ who will be under the Director? him? Shri Menon: I would read out the Shri Menon: That is what you wan­ particular provision in our standing ted. orders: “If he be acquitted, it sha'l be open to the management to proceed Shri Morarji R. Desai: We have not against him under the provisions set said it. You are asking for it. I have out below in clauses 17.11 and 17.12 not asked for it/ But I am asking you infra relating to discharges. However, how you solve this problem. Will it in the event of the management decid­ be possible for any officer to take ing after enquiry not to continue him work from him when he is a Direc­ in service, he shall be liable to only tor? for termination of service with three months* pay and allowances in lieu Shri Menon: That is a very hypo­ of notice..” thetical question.

Shrf Indrajit Gupta: Under section Shri Morarji R. Desai: No, it is not 36AD, even if there is an acquittal, hypothetical. This wiU happen. Any the bank management is free to take Director, whether he is chosen from action against him? the employees or from others, cannot be different from other Directors. Shri Menon: They can simply termi­ There cannot be discrimination. nate him. x Shri Menon: Directors don't give direct orders to employees. Shri Morarji E. Desai: After an en­ quiry. Shri Morarji R. Desai: And, no Di­ rector receives salary. Shri C. T. Dhandapanl; Are the de­ monstrations held before or after office hours? Shri Chandrasekharan: He must be full-time Director. Shri Menon: It depends upon the situation, Sir, or the urgency. Usually Shri Morarji R. Desai: Then there it is before or after office-hours. must be a Special Director. He will receive the same salary as of an em­ Shri Morarji R, Desai: it is also done ployee. during office-hours. May I ask two questions? You say that an employee Shri Menon: Yes, Sir. should be taken on the Bank directly, for management Supposing an em­ Shri Morarji R. Dekai: As a person ployee is taken on the Bank directorate interested in public affairs and also in and he becomes a Director, do you ex­ the country, I am sure, you will agree pect that he should cease to be an em. that if the banking institutions work polyee? efficiently and without disturbances, there are better opportunities for em­ Shri Menon: No, Sir. ployees to prosper and more employees to be taken in. Do you grant it?

Shri Morarji R, Desai: Then, do you Shri Menon: I do. realise that when he works as Direc­ tor, he is above all employees; that is, Shri Morarji R. Desai: Do you think superior to every other officer^ it it the right of the Trade Union to make demonstrations inside the pre­ Shrf Menon: Yes. mises? Please te-1 me wnat is meant 65 by demonstration. Demonstration means tany demonstration. Demons ^Sluri Menon: Prevented physically traton is demonstration.

Shri Menon: I would request that Shri Morarji B# Desai: If you lie the trade union should be given the down at the entrance and you do not right to.. allow him to go like that. Is it not.. Shri Menon: If 1 put a placard with Shri Morarji E. Desai: ‘Should be the slogan___ given' is a different matter. Do you claim that it is the right of the Trade Stei Morarji It Desai* I am not for Unions? taking away the right of satyagraha from anybody. If you stand peace­ Shri Menon: Ye^. fully there and do not prevent a per­ son from going in nobody can prose­ Shri Morarji E. Desai: Then, does cute you. that right not infringe the right of other people to work there peacefully? Mr. Chairman: Thank you very much, gentlemen. Shri Menon: It does. (The witnesses then withdrew) Shri Morarji E. Desai: Then how n. The AH India Bank Employees' can you have a right tagainst the Cons­ Association, Delhi. titution? Spokesmen: Shri Menon: It is not against the 1. Shri A. C. Kakar Constitution. 2. Shri Prabhat Kar Shri Morarji E. Desai: That is 3. Shri H. L. Parvana against the Constitution. I am asking you: can you prevent another emplo­ III. The All India State Bank of yee from working in the Bank be­ India Staff Federation, Calcutta cause you do not want him work? Spokesmen: Shri Menon: Question of preven­ 1. Shri S. N. Duber tion does not arise. 2. Shri Amrit Lai Airi Shri Morarji R. Desai: Can you pre­ 3. Shri J. N. Kapur. vent him? {The witnesses were called in and Shri Menon: 1 cfennot say. they took their seats)

Shri Morarji E. Desai: That woOld Vtt. Chairman: You are welcome. be unconstitutional. Then, can you Before we start I would just read also claim the right to obstruct another tq you the direction 58: "Where wit­ person from entering in a bank for nesses appear before a committee to work or for transaction of work? Is it give evidence the Chairman shall your right? make it clear to the witnesses thai their evidence shall be treated as Shri Menon: It depends on what is public and is liable to be published meant by ‘obstruction’. If peaceful unless they specifically desire that all picketing is included.... or any part of the evidence given by them is to be treated as confiden­ Shri Morarji E. Desai: The man can tial. It shall, however, be explained be prevented from going in .... to the witness that even though they 6 6 might desire their evidence to ba any office or place of the banking treated as confidential such evidence company or from carrying on any is liable to be made available to the business there. If we divide into Members of Parliament." two parts, one isf obstruct any person from entering any office at the place I hope you do not want your evi­ of banking of the banking company. dence to be treated as confidential. The right of peaceful picketing is Shri Prabhat Kar: No there. It is part of genuine trade union activity, it has been held to be Mr. Chairman; Will you explain the right of the trade union by the your case first or confine yourself to court. That means the right to the memorandum submitted earlier. strike and also the means to strike and also peaceful picketing is a Shri Prajbhat Kar: I will just ex­ part of genuine trade union activity plain our case. and this has been there. * This can’t be considered as an offence. In the Shri Prabhat Kar: We shall make Court of the Industrial Tribunal, an attempt to place our case as brie­ Delhi in the case of Burmah Shell fly as we can. We shall be dealing Delhi vs. its workmen, the court has with various clauses of the bill about held as follows: what we have 10 say. According to us 36AD directly affects us. i will “Peaceful picketing is a part put the point very briefly. As far as of the strike and is associated our understanding goes it restricts the with the strike. When it has freedom of speech and expression, been recognised that strike is a assembly and demanstration. This legitimate and lawful weapon in freedom of speech is guaranteed by the hands of workmen so long the constitution. I will explain fur­ as strike is not legal I fail to see ther afterwards. It restricts the right how peaceful picketing in furthe­ of peaceful picketing which has also rance of such a strike can be been held to be legal and justified by held to justify the action of the even the courts of law including the management in this case. The highest courts of our land, the sup­ action of the management view­ reme court of India. The Bill res­ ed from whatever angle cannot tricts the right to agitate for a cause, be upheld.” which is also guaranteed by the cons­ titution. It restricts the pen-down, sit-down and stay-in strike which has Peaceful picketing is part of the been held to be legal by the supreme strike. The right to strike has been court of India. The right to strike guaranteed as per the judgement of is already guaranteed and pen down, the court. Now obstructing any per­ sit-down and stay in strike also Is part son from entering any office means of the legal strike. This has been that there can’t be a peaceful picket­ held by the supreme court of India. ing. Peaceful picketing has been This is in relation to 36AD 1(a) and held to be part of strike. That means 1(b). So far as (lc) is concerned it the right to strike, is also being indi­ restricts the criticism about the func­ rectly taken away. So, it restricts tioning of the bank. It restricts the the right of peaceful picketing. You bringing into line of various activi­ say ‘carrying on any business there’ ties even conspiratorial and shady The second part takes away my right deals of the bank. These are (a) (b) to strike, pen-down, or sit-down or (c) clauses. Now I will show how it stay-in strike which has been held restricts. I am also representing the by the Supreme Court as legal. If employees. The word *no person’ a person is there sitting in the seat Iricludes the employees also. That is, and not working, as the union ha* obstruct any person from entering called a strike, if he refuse* to vacate 67 his seat, then he falls within the would not amount to , 'criminal mischief of the words carrying on trespass’ within the meaning of business there* of obstructing carry­ S. 441 of the Indian Penal code. ing on any business there. Sit down It should be noticed that there strike and refusal to work and sitting are 2 essential ingrediants which also has been held to be legal part of must be established before crimi­ the strike by the Supreme Court of nal trespass could be proved, India. I will just explain it. I will against the concerned employees. read out from the judgment of the Even assuming that the con­ Supreme Court of India. It says: cerned employees entry in the bank premises was unlawful, or that their continuance in the On a plain and grammatical premises became unlawful, it could construction of the definition of not be contended that the said 4srike* in S2(q) of the Industrial entry was made with intent to Disputes Act, it would be diffi­ insult or annoy the superior offi­ cult to exclude a strike where cers of the Bank. Even if the workmen enter the premises of strikers might have known that their employment and refuse to the strike might annoy or insult take their tools in hand and start the Bank’s officers, it would be their usual work. Refusal under difficult to hoia that such know­ comon understanding to continue ledge would necessarily lead to to work is a strike and if in pur­ the inference of the requisite in­ suance of such common under­ tention. In every case where the standing the employees entered impugned entry causes annoyance the premises of the Bank and or insult it cannot be said to be refused to take their pens in their actuated by the requisite inten­ hands, that would no dobt be a tion. The said intention has strike under S. 2(q) of the Act. always to be gathered from the circumstances of the case, and it may be that the necessary or Further the entry of the con­ inevitable consequence of the cerned workmen in +he Bank impugned act may be on relevant premises and their refusal to circumstances. But it could not vacate their seats in spite of be contended that the likely con­ warning, would not amount to sequence of the act and its know­ civil trespass or criminal trespass ledge must necessarily import a within the meaning of S. 441 of - corresponding intention. the Indian Penal Code. The concerned workmen were not put under suspension on the days -n question. So long as the rela­ I do not want to read everything. tionship of master and servant continued, the employees coUW not be said to have c o m m itte d “The history of trade union cjvil trespass when they entered legislation in England shows that the bank premises at the time the trade union movement had to in question. . Even assuming that wage a long and bitter struggle civil trespass was involved in the to secure recognition for the conduct of the concerned emplo­ workmen’s right to organise them­ yees, that by itself could not jus­ selves into unions and to exercise tify the rejection of Iheir claim their right of collective bargain­ for reinstatement. ing if necessary by the use of the w e a p o n of strikes. I n America a similar struggle took place, which Further such conduct on the was also marked t>y violence on part of the concerned employees 68

the part of both capital and labour Shri Morarji R. Desai; I do not because the employer's theory of dispute it. "hire and fire” offered relentless resistance to the workmen’s Shri Prabhat Kar: When I say that claim to form unions and to re­ it restricts pen-down, and sit-down sort to “strikes" for trade union strikes. 1 was explaining that this purposes. Fortunately, as the part of their carrying on any business. Indian Trade Unions Act 16 of 1926, the Industrial Employment Shri Morarji R. Desai: That is not (Standing Orders) Act XX of mentioned, that is a matter for argu­ 1946 and the Industrial Disputes ment. Act 14 of 1947 show, our legisla­ ture has very wisely benelitted by Shri Phabhat Kar: According to our the experiences of other countries understanding we have put foward in the matter of the development our case. of trade union movement, and has Then I come to sub-clause (b) of made progressive, just and fair 36AD in Part IIB It says; “ hold any provision governing the important demonstration which is indecent of problems of industrial relation­ which flrilounts to the commission, or ships, the formation of trade incitement to the commission, o f any uinons, and the settlement of offence, within the precincts of, or in­ industrial disputes. It can be side, any building in which the office justly claimed that though we or place of business of any banking have Witnessed capital labour company is situated or within ten conflicts in our country, on the metres from any entrance to or exit whole neither party has departed from such building'’. Here there are from the pursuit of peaceful two things. One is indecent demons­ methods, and both parties submit tration the other is commission of any their disputes to be resolved in offence, or incitement. You will agree accordance with the provisions of that the word “indecent” is subjective the Act. In dealing with indus­ There is no absolute definition of that trial disputes as in the instant word. If the reports which have been case the relevant statutory provi­ published on the bill which was dis­ sions and the Indian decisions cussed in the Lok Sabha recently are must be primarily considered and correct you will see that there were thus considered the conclusion is such sharp differences of opinion on inevitable ‘ that the pen-down the word obscenity. Similarly the strike is a . “strike" within the word indecent is very vague. It will meaning of S. 2(q) of thie Act jftiif p^it an embargo on any demonstration. so it could not be treated as illegal. Similarly the word “offence" is also no& defined. It has the widest conno­ The general hypothetica$tffein- tation. For instance wearing badges sideration that pen-down strike by work-men may annoy the manage­ may in some cases lead to rowdy ment and that becomes an offence. demonstrations or result in dis­ According to law it means causing not turbances or violence or shake the only insult but annoyance. Wearing credit of the employer would not of badges may fall under the mis­ justify the conclusion that even if chief of the word “offence”. In brief the strikers are peaceful and non­ nothing can be done by the employees violent and have done nothing under the sub-clause (b), within ten more than occupying their seats metres from any entrance to or exit during office hours, their partici­ from such building. pation in the strike would be itself * disqualify them from claiming Sub-clause (c) says “act in any - reinstatement. manner calculated to undermine the 6 9 creditworthiness of any banking were dismissed for that. We have got company.” that pamphlet. On the day when the Vivian Bose Report was being dis­ It is not our intention at all to un­ cussed In the Lok Sabha, I read out dermine the creditworthiness of any the pamphlet and read out the findings unit of the banking industry. We have of the Vivian Bose Report Each and been working in the banks and in the every item was found to be correct trade union for the last 22 years. We With the Statement of Objects and can very well say that up till now we Reasons of the Bill as enumerated by have never undermined the creditwo­ the Deputy Prime Minister we entire­ rthiness of any bank. ly agree. If has been stated that ”A good deal of concern has been expres­ Shr| Morarji R. Desai: Have you sed in the recent past about the func­ been an employee of the bank? tioning of the commercial banks.” Concern has been expressed in the An hon. Member: . He was an M.P. past because certain things have been found to be not conducive to the Shxi Morarji R . Desai: That 1 know development of the country’s econo­ But I did not know that he was an my. If these tilings are put forward, employee of the bank. eve** through the Members of Parlia­ ment, we come under the mischief of Shri Prabhat Kar: I was an em­ this section. We cannot even supply ployee, but not now. We have never these informations to Members of undermined the creditworthiness of Parliament. On the floor of the House, any bank till now. I would like to at times, many things have been dis­ know what all the word “creditworthi­ cussed including the affairs of the ness” includes. As early as 1950, we very many big industrialists—all were brought to the notice of the Reserve involved in the bank affairs. We can­ Bank certain matters relating to not just inform you that this is what Bharat Bank Ltd. At that time Bharat is happening because we fall under Bank went into liquidation because, the mischief of this Act. Earlier we it only transferred assets and liabili­ brought to the notice of the Reserve ties to the Punjab National Bank. Bank the facts regarding the Mundhra When the Vivian Bose Commission affairs. Not only that. This was in went into this it was proved that every relation to a foreign bank. ' The man item of complaint placed before the who was involved at that time any­ Reserve Bank was correct. About 750 how had gone back to England. At workers did not get jobs as it was a that time Mundhras were purchas­ question of transfer of Assets and lia­ ing Jessop’s shares from the Jessops bilities. Subflquent/ly, the question of and Company violating the provisions amalgamation of the Banks came as a of the Foreign Exchangfe Control Re­ result of amendments to the Banking gulations and it was done of course Regulation Act which was not there. through a bank. It was purely a matter between the Board of Directors of two banks and intimately, when the L.I.C. affairs therefore 750 employees of the Bharat were being discussed in the Lok Bank lost their jobs. Sabha only then these things came to light. Earlier we brought it to the As early as 1951, we brought out an notice of the authorities. Action might appeal to the Members of the AlCC have been or might not have been regarding the activities of persons taken. Who is the real authority who were controlling the Punjab whom we can tell these things? In­ National Bank at that time, We side Parliament, only the peoples pointed out to the Members of the representatives can do that. We can­ A.I.C.C. with certain items We sim­ not bring this to the notice of any­ ply drew their attention to certain body because we shall ootne under activities o f the bank. 150 employees this section. Parliament has immunity 70 Members of Parliament can do this. and certain activities of the b a n k s , How can they know this unless some­ we may be able to bring to the notice body can brief them. Otherwise this of the Deputy Prime Minister if not will have no effect. Now we cannot to anybody else but that will involve go to the Members of Parliament me under Sec. (c) of this Act. and tell them these things because we iall under thi* mischief of sub-sec. of this Act. That is how this section Shri Morarji E. Desai: It wi 1 not restricts. happen. I can assure you that you may bring that to my notice. I have epressed my point about three sections. Firstly it restricts the Shri Prabhat Kar: Thank you, Sir. freedom of speech and expression and Only one thing I want to tell you. assembly of people; it restricts the The law has been framed. But it right of peaceful picketing; it restricts debars me from bringing certain mat­ the pen do^yn, sit down and stay ins­ ters to the notice of the authorities. trike; it also restricts criticism about Suppose I bring them to the notice of the functioning of the banks; also it the authorities, immediately I fall un­ restricts bringing into light the acti­ der the mischief of this section. vities of the shady deals of the bank. I cannot claim any authority whether I cannot deal with ‘ penal clauses. I in an Act which regulates the bank­ can on'y speak about the restrictions ing practices, you can import a sec­ which have been put under the above tion which may be part of other law. sections. I can understand a common law that As you know, Sir, trade unions no person shall commit a theft. Here, have got their rights which are sacred. you can talk in terms of a shareholder They must have the right to agitate or in terms of the management or and hold demonstrations. The supreme board of directors. You can think in court has held that the demonstration terms of an employee. But, how the falls within the freedom of expression. Banking Regulations Act can impose That means demonstration, which restrictions on common men who have means freedom of expression. got nothing to do with the banking itself? So far as restriction on demonstra­ tion is concerned, the Supreme Court Shri Morarji E. Desai: He is not has struck down holding that Central covered. Anybody who goes to the Government’s rules infringe up­ bank is covered. on the fundamental rights of the worker. That is why the Shri Prabhat Kar: Anybody who Supreme Court held that the demons­ demonstrates within 10 metres is tration has been he'd to be a funda­ covered. Take for instance a demons­ mental right of the workers. Peaceful tration which has nothing to do with picketing is also, as I have said, a the bank. Sir, you hud been recently right; sit down strike Is a right; that to Calcutta. Take the Netaji Subhas means obstructing somebody else do­ Road. You know the position there, ing a certain thing. This has been commercial firms and banks are situ­ held as a legitimate right. R e g a r d i n g ated side by side. If y o u enact this criticism about the working of a bank, law, that whole area will become a I have explained already. A statement ‘Silence Zone* as no party can hold has been made by the Deputy Prime; a demonstration within ten metre*? Minister himself in the Bill which from a bank. begins with *A good deal of concern has been expressed in the recent past Shri Jyotirmoy Rasu: It will be a about the functioning of the commer­ perpetual Sec. 144. cial banks in the country/* Steps are naturally being taken. As regards Shri Prabhat Kar: Not only that, Concern expressed with regard to acts it will create a ‘Silence Zone*. Just 71 as we have the signal for a silence Shri Morarji K. Desai: Yes, the zone a horn with a cross over it, you matter is important, but he is also a hAve to put the figure of a human very important person. I also grant head and put a cross over its lips. that. * The roads in our cities are not go wide—of course, new cities may come Shri Prabhat Kar. Thnk yoau for up, but as it is, they a're not so wide your compliment Sir, I just want to and if you enforce this provision, you explain...... will be reducing it to a silence zone. Shri Morarji R. Desai: You have Shri Morarji H. Desai: That parti­ done it sq many times. You have cular zone is more than 10 metres tken 35 minutes. wide. Shr| Prabhat Kar: I was trying to Shri Prabhat Kar: 10 metres means explain to you. 33 feet. The total width of the road is 50 ft. This bank will be within 20 Shri Morarji R. Desai: Do you think ft. of another bank. we are dunce to understand that? Shri Prabhat Kar: May be in my Shri Morarji R. Desai: On the side anxiety, I am trying to impress upon of the Government House it does not you so that I can carry you with me. mean that.

Shri Prabhat Kar: You are asking Shri Morarji R. Desai: That is not me that if I have got a grievance, I possible. got to go to Ouchterlony monument Or I have to go to Azad Maidan and Shri Prabhat Kar: At least in this shout the*re. matter.

ShH Morarji R. Desai: That will -be Shri Morarji R. Desai: Even if you safer. take 3 hours, you cannot carry me but you can carry other members.

Shri Prabhat Kar: That is not what Shri Prabhat Kar: But I want to you wanted. Either you ask me to go carry you on this matter. to Azad Maidan or Ouchterlony monu­ ment to speak about my grievances Just on this matter I was telling not only against any bank but also that in the Bank House there are other against any commercial or mercantile commercial and mercantile firms on firm. So even, the Jute mill workers the first, second or ithe third floor /Or the engineering workers cannot and their employees cannot also de­ * demonstrate before the Bengal Cham­ monstrate against their employers. ber of Commerce because within 10 That is how it will wotrk. The only metres of the Bengal Chamber of point here is that a legitimate trade Commerce building there ate four union right is sought to be stifled. I banks situated. If you impose restric­ will just quote from a judgment of tions on me this way, you are impos­ Shri Das Gupta, Chairman of the ing restrictions on all working class Labour Tribunal. people in that area. Shri Morarji R. Desai: You can Mr. Chairman: Please be concise leave it here. Why to read it out? now. Shri Prabhat Kar: I will only rea d Shri Samarendra Kunfln: This is a two lines: very important matter, Sir Let him1 take his own time. ‘The whole object of the trade 72

unions is to oarry on collective tion of industrial relations of the bank bargaining and negotiation with employees or any of the officers have employers . *\ been dealt with. It lays down Does and Don’ts for the bank management. Mr, Chairman: What is the point? It has got nothing to do with the em- ployer-employee relations. This is a Shri Prabhat Kar: He further says: Banking Regulation Act hut Part IIB relates to relations between the em­ “When all attempt® fail, coercive ployer and the employees which should power is adopted a* a Enal re­ rightly be governed by law® relating course. Strike is one of these co­ t0 industrial relations and it has no ercive powers. It is most es­ place in a banking regulation law. It sential part of a trade union pro­ also violates the provisions of awards gramme. The strike, picketing and and agreement. Today in the banking boycott are the coercive powers industry there is existing agreement Without these coercive powers which is binding legally on the parties which have to be used with ut­ upto 31st December 1963 and beyond most vigilance, the union is de­ that also until that agreement is modi­ fenceless.” fied. These awards and agreements are being followed. There is already Therefore, it is part of a trade-union a standing order which governs the activity. When we say that it is a relationship, particularly in respect of trade union right, I only wanted to what you call minor and major mis­ support it by a judgment which I conducts, punishment^ etc. All these iead. things are covered by the standing order. This is another superlative standing order which is being foisted Sir, this section is irrelevant to the over and above the agreement on the object of the Bill as 1 understand. The plea of banking relations. The bank object of the Bill, as it is mentioned employees have been chosen to b e here is that the Banks’ erodit should discriminated against. There is noth­ be diverted accordin to planned ing which forbids other workers to act economy so that priority sectors re­ in any manner they like. But, here ceive the due share in particular restrictions are put on the bank em­ time. The main object of the Bill ployees and so it discriminates bank is to amend the Banking Regulations employees. It grants premium to Act to incorporate certain, new provi- banking business because it puts res­ jions towards achieving this purpose. trictions on person-v on whom restric­ tions cannot be imposed by the exist­ If it was being complained earlier ing Act. Now, in our memorandum that because of the demonstration, the we have given certain amendments. priority sectors did not receive their due share or because of the demons­ Mr. Chairman: Mr. Kar, how much tration the banks are fotrced to give time will you take? advances to a particular group of clientele or because of the demonstra­ tion, the bank could not invest or Shri Prabhat Kar: We represent properly invest for the development 1,75,000 bank employees . . . of country's economy, then purely res­ trictions oto workers' activity will Shri Jyotirmoy Basra: . . . out have relevance to the Bill. Now these of 2-l|2 lakhs. have got no relevancy towards the ; object of the Bill. It is extraneous Shri Prabhat Kar* Naturally, ff we to the purposes of the original Act. hare taken some more time on tW? That Is nowhere in this Act. The ques­ matter, I wish to be excused. 73 Shri Morarji R. Desai: I don’t say Shri N. Dandeker: The witness that necessary time should not be should be allowed whatever time he taken. wants. So far as Mr. Ktfr is ooijcarn- ed, he should be allowed. Shri PrfebhaA Kar: It only shows our anxiety. Shri Morarji R. Desai: I think Shri Mor&rji R. Desai: In your we meet again at 3-30 to 5-30 tomor­ anxiety don’t consider us as incapa­ row. I don’t think they will require ble of understanding. mtfre than an hour.

Shri Prabhat Kar: I shall require ShU Jyotirmoy Bastr: We start with at least an hour more to explain. them' tomorrow.. Shri Morarji R. Desai: You have Shri Prabhat Kar: Yes, Sir. already taken 45 minutes. You want an hour more! You have given us your memorandum also If you want to say (The witnesses then withdrew). something apart from the memoran­ dum, you can say that. (The Committee then adjourned) MINUTES O r EVIDENCE GIVEN BEFORE THE SELECT COMMITTEE 014 THE BANKING LAWS (AMENDMENT) BILL, 1967.

Thursday, the 18th April, 1968 at 14.30 hours.

PRESENT Shri G. S. Dhillon—Chairman.

Members . 2. Shri Kamalnayan Bajaj 3. Shri S. S. Kothari 4. Shri N. Dandeker 5. Shri C. T. Dhandapani 6. Shri C. M. Kedaria 7. Shrimati Sucheta Kripalani 8. Shri Indrajit Gupta 9. Chaudhary Nitiraj Singh 10. Shri Krishna Chandra Pant 11. Shri £>. R. Rane 12. Shri M. Thirumala Rao 13. Shri Dwaipayan Sen 14. Shri K. N. Tewari 15. Shri Jyotirmoy Bosu 16. Chawdhury Sadhu Ram 17. Shri Morarji R. Desai.

Legislative Counsel Shri S. K. Maitra, Joint Secretary and Legislative Counsel, Ministry of Law.

Representatives of the Ministry 1. Shri S. S. Shiralkar, Additional Secretary, Deptt. of Economic Affairs, Ministry of Finance. 2. Shri R. K. Seshadri, Executive Director, Reserve Bank of India, Bombay. 3. Shri D. N. Ghosh, Deputy Secretary. Deptt. of Economic Affairs, Ministry of Finance. 4. Dr. V. A. Pai Panandiker, O.S.D., Ministry of Finance. 6. Shri B. N. Mehta, Legal Adviser, Reserve Bank of India, Bombay. 75

Secretariat Shri M. C. Chawla—Deputy Secretary.

Witnesses Examined L Indian Batiks’ Association, Bombay : Spokesmen: — 1. Shri F. K. F. Nariman— Chairman, t/riion Bank ofIndia Ltd. 2. Shri S. C. Trikha—Chairman, Punjab National Bank , Ltd.

3. Shri R . B. Shah—-Chairman, United Commercial Bank Ltd. 4. Shri S. G. Shah—Secretary, Indian Banks Association. IL All /?idia Banfc Employees' Association, Delhi. Spokesmen: — 1. Shri A. C. Kakar—President. 2. Shri Prabat Kar— General Secretary. 3. Shri H. L. Parvana— Secretary. 4. Shri P. L. Syal—Member , Central Committee. III. All India State Bank of India Staff Federation, Calcutta. Spokesmen: — 1. Shri S. N. Duber —General Secretary. 2. Shri J. N. Kapur—Circle Welfare Secretary. 3. Shri Amrit Lai Airi—Asst. General Secretary.

I. Indian Bank's Association, Bombay point I want to ask is whether it will Spokesmen:— improve matter if instead of the word 1. Shri F. K. F. Nariman “investment” it is said not investment that is, the gross investment less 2. Shri S. C. Trikha. money borrowed for the purpose of 3. Shri R. B. Shah investment. At present it is gross 4. Shri S. G. Shah value of plant and machinery which determines whether it is small scale (The witnesses were called in and industrial concern or large scale in­ they took their seats) dustrial concern. The point on which Mr. Chairman: Should we start I want your opinion is whether it now Yes, Mr. Dandeker. would improve,* from the practical point of view if it was provided in a Shri N. Dandeker: Now in clause 2 suitable way that it is net investment. which bring in some new definitions that should be considered. I want to invite your attention to the definition of small scale industrial Shri Nariman: I personally think concern and as you see there the that the limits which are defined for iimiU are: Investment in plant and small scale industries are very rea­ machinery is not in excess of seven and a half lakhs of rupees or such sonable. higher amount, not exceeding fifteen lakhs of rupees, as the Central Gov- Shri N. Dandeker: The next point erment may, by notification...” The is about the definition of substantial 76 , interest’, “wh*re in relation to a com­ Shri Nariman: This is not made ap­ pany, means the holding of a benefi­ plicable to those banks. cial interest by an individual which is to the extent of five lakhs of rupees Shri N. Dandeker: I see. Now it is or five per cent of the paid-up capital said here: ‘Shall have special know­ of the company, which is less*'. That ledge practical experience of the va­ seems to be very narrow, or do you rious categories that are mentioned.’ think it is adequate, or would you That is for categories (i) to (viii). agree with the view if I suggest ins­ What do you think of this special tead of 'whichever is lees* we say knowledge or practical experience? ‘whichever is more.* A man may be very good at interna­ tional law, but may not have any practical experience whatsoever. Shri Nariman: I think the present They should have either spccial definition is very small because 5 per knowledge, or if they have no special cent is a term which may in practical knowledge, then they must have pra­ terms mean only Rs. 5,000 also. In ctical experience of the accountancy. the definitions of substantial interest If we say special knowledge and the amount may be reduced from Rs. practical experience is it all right? I 5 lakhs provided that it is amended invite attention to item No. (ix) in to read 5 per cent or Rs. 3V lakhs that list, where, the Reserve Bank is whichever is more. That will be more left to select people who have know equatable in our opinion. ledge and experience.

Shri N. Dandeker: Then clause 3, Shri Nariman: The choice of selec­ introducing certain provisions having tion within that particular category a bearing on the managerial struc­ is there except for two limitations ture of banks. Now, there are three where two of them must be from the questions that I want to ask you. small-scale industries vnd cooperative First of all, do you think or agree to agricultural sector. It is left to the suddenly switching over from what­ shareholders and the board of direc­ ever be the present compsition of the tors of the bank. It is a wide choice. Board to a situation where not less than 51 per cent should be directors Shri N. Dandeker: I am Asking you of the special categories that are whether it is a competent choice. mentioned here or would you suggest that it needs a more gradual change­ Shri Nariman: It is within the com­ over to that kind of postion. petence of the Board of Directors, to J select those personnel within that Shri Nariman: I think that is a definition. matter of policy on which we would not like to express opinion. Several Shri N. Dandekar: You don’t anti­ banks have been able to make the cipate any difficulty on that. Very adjustments. good. Npw I come to item (ix) in the list, ‘any other riiatter.*' Wou’d Shri N. Dandeker: I am thinking you suggest any change there be­ of the smaller banks because they cause otherwise politicians by way of may not be able to find competent merely being politicians could get in men. I think in large banks there is there. Should it be defined more pre­ no difficulty but I am talking of a cisely? large number of small banks in whose case it will be difficult and Shri Nafiman: If in the opinion of 51 per cent of such directors may the Reserve Bank politicians are use­ merely bring ignorance on the boards ful, it is all right. I expressed my of such banks. opinion the other day. Merely being 77 politician would not be the ideal more about is this. I have recently thing; but there are politicians on been reading your speech, Mr. Nari­ the Board of different banks. man which you gave as Chairman of Shri N. Dandeker: I am on the the bank. No doubt other executive Board of Directors of a Bank, not as Chairman would be making their a politician. Would you think it speeches. I want to know what would ought to be provided to mean engi­ you say if the Reserve Bank thought neers or actuaries or something of that any chairman criticising banking that kind? Persons with technical or fiscal policy, the monetary or eco­ nomic policies, was not a fit and pro­ knowledge and experience? per person. Shri Morarji Desai: That is cover­ ed by the next clause. Shri Nariman: is there any claim to question that? Shri N. Dandeker: Is there no case that ‘any other’ should have more precise meaning than just ‘any other’ Shri N. Dandeker: One of the things the propounders of policy Shri Nariman: It is in che opinion sometimes resent is the criticism of of the Reserve Bank. I am not in a those policies. position to give an opinion.

Shri N. Dandeker: In your opinion Shri Nariman: The choice will be it ought not to be narrowed down. left to the chief executive to continue or not. Shri Nariman: We do not anticipate any difficulty in this. Shri N. Dandeker: From the point of view of banking industry, should Shri Trikha: If it is made clear, it we have Chairmen who are fearless would be better. It will be desirable critics if necessary of bauking policy if it is made more precise. while carrying out the directives of the Reserve Bank? I am hot sugges­ Shri N. Dandeker: I am thinking of ting that failure to carry out the excluding political influence from directive is not misconduct. It would ibanks. If they have already other obviously be. T Rave to invite your qualifications they can come in. As reaction to this, hamely, from the > practical men, how would you like point of view of a bank, really com­ politics intruding into the board of petent chairman should not be afraid directors? to criticise policies, even though they may have to be carried out. Should Shri Nariman: This answer is we have something like this: Provid­ given on more than one occasion and ed that no person who is or has been I expressed the opinion how the Bank elected to be the Chairman of the feels about it. If they have special Board of Directors shall be deemed knowledge which will be useful to not to be a fit and proper person to banking industry they come on their hold such office by reason merely of his being a critic of monetary, bank­ own merit. ing and economic policies?

Shri N. Dandeker: Special know­ ledge, that is how you would put it. Shri Nariman: The clause is too Very good. Now, Please see the wide. I do not think that anything clause at page 6 which is admira­ which you visualise could ever be ble. Now, the point I want to know done. 702 (Ai) LS— 78 Shri N. Dandeker: The freedom of of the interest which he holds in it; expression of opinion of the Chair­ and thirdly, to persons who are ma­ man who may hold the office with naging agents or partners or guaran­ long experience of banking should tors. I want to ask you whether banks be protected. should be prohibited from giving loans to a company of which the di­ Shri Nariman: It should be pro­ rector of a bank is a director merely tected. because of the fact that the director of the company is a director of the Shri Morarji B. Desai: Are they bank or whether there should be any going to be debarred? You are per­ further requirement that he is the haps worried that if the executive director of a company in which he; chairman is a critic of the policy, he has substantial interest. will not be there. Shri Nariman: This is the submis­ Shri N. Dandeker: He may be re­ sion that we have made in our memo­ garded as not a fit or proper person randum. to hold that post. Shri N. Dandeker: Could you ela­ Shri Morarji B. Desai: How are borate it? you going to mention it here?

Shri N. Dandeker: There is noth­ Shri (Nariman: We have said about ing in the Bill that precludes the directors, managing agents, managers Reserve Bank from saying that such or guarantors holding substantial in­ a person is not a fit or proper person. terest. The reason why we are seek­ ing this amendment is that in several Shri Morarji B. Desai: I do not countries including India, institutions think that that will be supported by which are financially interested Government. seek to protect their interests by having a man of their choice on the Shri N. Dandeker: It has got to be boards of those companies. When it is supported because it comes from the a question of nominal interest—and Reserve Bazik. that term has been defined—I feel that the banks should make tlieir ad­ Shri Morarji B. Desai: Still, Gov­ vances to various companies. They ernment have supervision over the can have a nominee who can be as Governor. In such cases, the banks one of the directors... jnay appeal. Shri N. Dandeker: I have caught Shri N. Dandeker: I refer you to the the point. proposed new section 10 (B) (7) at page 7 of the Bill which says that any This is about the appointment to order made by the Reserve Bank the board of persons to protect the shall be final and shall not be called financial interests. I want to take it in question. on to a wider footing. Is a company tainted by reason of the fact that the Now, I come to the provisions con­ director of the bank is the direcor of tained in the proposed new section a company? 20, which occurs in clause 5, at page 8 of the Bill. So far as I can see, sub­ Shri Nariman: The question of section (1) debars or prevents the having substantial interest may have grant of loans to three categories of a certain bearing on that. In the Bill persons: firstly, to the directors them­ it is proposed that 51 per cent of the selves, which is perfectly in order, directors' of banks shall be persons secondly, to the concerns in which who shall have special knowledge a n d the director is a director regardless practical experience of one or more 79

of the various fields and who will not Shri Kamalnayan Bajaj; During have any link with the industrial that period, if normal growth is there, houses. This will be a sufficient safe­ should it be stopped? guard against the industrial links of the directors of banks. As regards Shri Nariman: If growth and every­ the other 49 per cent of the directors thing else is considered, then it will of banks, our suggestion is that pro­ be difficult because you cannot allow hibition against the grant of loans or any advances, and increasing the advances to directors or to companies limit would be tantamount to new or firms with which they are connect­ advances. Certain powers should be ed should apply only where the direc­ given to the Reserve Bank so that tors of banks hold a substantial inte­ there will not be any genuine diffi­ rest in these companies. But it should culty. Looking to the genuine needs not apply when they hold only a of the case, more powers should be nominal interest. We are trying to given to the Reserve Bank. suggest that all the persons who have special knowledge or who provide Shri Kamalnayan Bajaj: Can you consultancy services may be appoint­ enlighten us that wherever the direc­ ed. In the present Bill it has been tors are interested, in your bank, if proposed that not less than 51 per any amounts involved in the accounts cent of the directors. , . . of the director will be in risk?

Shri N. Dandeker: 51 professionalis­ Shri Natriman: In my opinion, if ed directors. money is advanced by us I don't think there is any risk. It is no more a Shri Nariman: This is the submis­ problem at alL sion that we have made in our memo­ randum. Shri Kamalnayan Bajaj: At recent, in your own bank or in any of the Shri N. Dandeker: Sub-section 2 of banks wherever they are, the direc­ section 20 contemplates not only tors have a common interest either in freezing but repayment of the facili­ the bank or anywhere. Is there any ties already existing in favour of a risk involved in their account? company of which the director of the bank happens to be a director. Would Shri Nariman: We cannot give a you like to comment on that? reply to this for the whole banking system, because our knowledge is Shri Nariman: If there are restric­ limited to the working of our own tions on future advances, some res­ banks. trictions should be there on the exist­ ing advances. But the reasonable Shri Kamalnayan Bajaj: I would time-limit which should be three like to know the percentage of inte­ years should be specified except in rest by your bank as this will perhaps cases where there are long-term ad­ show the pattern. vances made to fulfil contractual oblgations. In case of a renewal Shri Nariman: With the change in which is only a review every year, the present directors, our bank more this provision is bound to result in or less has 1 per cent interest of the conflict. This ambiguity should be directors. It was 9 per cent formerly. removed that the period should be three years or the period of contrac- Shri Kamalnayan Bajaj: May I ) tual obligation whichever is longer. know if Mr. Trika would oblige me as to what is the percentage of direc­ Shri N. Dandeker: It should be made tor’s interest in your bank? clear so that adequate time should be given to the director either to quit Shri Trlkha: It was 7 per cent be­ the company or the bank. fore. Shri Kamalnayan Bajaj: Have you there any indiscipline or obstruction any knowledge as to what is the per­ to the normal workng of the bank? centage of the State Bank? Have you any experience of this sort?

Shri Trikha: It was about 16 or 18. Shri Trikha: Two latest experience per cent. I do not remember exactly. of these things was in 1967—from It was perhaps more I understand it August to October. In those three was about 23 per cent last year. months »a dispute was raised by the employees on the matter of promotion Shri Kamalnayan Bajaj: Have you We had also made offers to them for any knowledge of any serious objec­ the promotion to officers grade. This tion having been taken by the inspec­ was an option given to them and tor of the Reserve Bank on any ac­ not a compulsion at all. They accept­ count which they were not able be ed the offer of officers' grade. But, remedy? the union raised a dispute and during the dispute what they did was that Shri Trikha: No serious objection they used to go to the managers and was taken. Certain objections were other officers and sit down in the raised which were of a routine na­ officer’s cabin or in their rooms, they ture. would not permit him to come out of his room or permit anybody to go in. They staged demonstrations outside Shri Kamalnayan Bajaj. Do you the bank premises. They collected in know any company or companies large numbers inside the bank and whose accounts were with your bank moved from seat to seat, from table long before any person who became to table and from department to de­ a director in that company and also in your bank? partment shouting slogans and using abusive language towards officers. Shri Trikha: Yes. There were cer­ They sat at the counters but would tain such accounts with the banks. not work. They went deaf and dumb I know in one cfase this happened that and would not speak to the customers. a company who dealing with the They would not talk to anybody and bank long before a director of the they wou’d not perform any work. Bank came on the scene of that com­ All these things were done just be­ pany. fore and inside banks. They used to beat their cheats with their hands Shri Kamalnayan Bajaj: Are their and shouted *hai, hai\ After this, the accounts included in this 7 per cent? leaders would indulge in speeches against the bank’s officers. These Shri Trikha: Yes, Sir. things continued for about three \ months particularly inside the bank premises. They were shouting slogans Shri Kamalnayan Bajaj: Have you and moving from department to de­ seen those accounts? What would partment shouting indecent language. be the rough percentage if at all you know? Shri Kamalnayan Bajaj: Can you give us the slogans used by them? Shri Trikha: i think that should come down from 7 per cent to 4 to 5 per cent. Shri Trikha: I have a few with me. What they said in demonstration was Shri Kamalnayan Bajaj: As far as ‘TMrty officers of the bank” “come to the strike and gheraos ftnd other senses” , rascal officers of the bank things are concerned in the premises, come to senses, wake up.” can you enlighten us as to whether the employees have threatened or in­ Mr. Chairman: We have now got timidations have taken p^ace or was the idea. You need not go on. ghrf Kamalnayan Bajaj: Did this 'at many places even in the interior have any effect in the activities of where the Reserve Bank has no the bank and did it affect the effi­ branch of their own, do you cient working of the banks? Did that think there will be any practical diffi­ have any effect on the overtime? Can culty? Would it be better if the you enlighten us on this point? clause is entirely dropped or it should be retained? Shri Trikha: It was a height of in­ discipline in the offices of the Bank. Shri Nariman: We have expressed There was no question of efficiency our views about this clause in our ex­ because they would not work. They planatory note that is placed. would sit at the counter and start “the Shri Kamalnayan Bajaj: That you work to rule” movement and they have done. But would you prefer that did not speak to the customers and clause to be dropped entirely? did not attend to them. They dragged the people from their seats to join Shri S. S. Kothari: You realise the their demonstrations and their meet­ connection between the industrial ings. houses and the Banks is practically severed or it would be severed com­ Shri Kamalnayaa Bajaj: Did at pletely. So a great responsibility has any time the demand of this kind devolved upon you now. You are come in writing or even orally from obviously the General Manager and the employees that those who were Chairman and you have to protect the either absent or were on official leave interests of the depositors. What do were also to be paid overtime as if you suggest shou!d be done? Deposits they were on duty during those leave upto Rs. 10,000 or 50,000 should be or absent days. insured or would you like any guar­ antee corporation floated by the Gov­ Shil Trikha: So far as overtime is ernment of India which would guar­ concerned, it has increased to many­ antee advances given by you so that fold. I have got the figures. In I960, the interests of the public and de­ the total overtime for the bank was positors are safeguarded? Rs. 8.81 lakhs whereas in 1966 it Bs. 80 lakhs—it has shot up to Rs. 80 Shri Nairiman: As far as insurance lakhs nearly 10 times more. The de­ of deposits is concerned, as high as it mand of the Union as that whether could be, is more welcome. an employee was absent or present, since he was a member of the Union, Shri Morarji B. Desai: Guaranteeing he should be treated on a uniform what? basis and should be paid overtime no ' matter whether he has ’actually work­ Shri S. S. Kothari: Advances given ed or not. by the bank. Shri Kamalnayan Bajaj: Is there Shri Morarji B. Desai: Government anything else in connection with the should guarantee that? strike and other things which you think would be useful for the infor­ Shri S. S. Kothari: Government mation of the Committee to come to could charge some premium. Would a conclusion? you ask for a similar corporation? Shri Kamalnayan Bajaj: I would Shri Nariman: It will be difficult, invite your attention to clause 36AD because it will also engulf a very big where it has been said that where area of the Co-operatives. I do not any demonstration takes place, with­ think the commercial banks (fan ask out the permission of the Reserve to be p’aced in a better, position. Co­ Bank no complaint would be made to operative Banks are actually the best the Police authorities. In the light fitted for the purpose of agricultural of the fact that Banks have branches finance and to go to the Reserve Bank 82

and ask for a corporation to guarantee not cover employee only. It covers only the advances made by the bank, any person whether he is a depositor would not be proper. We are our­ or customer. How can you dismiss u selves finding out whether any pri­ depositor? vate or even the public sector insur­ ance company could assure the risk in Shri S. S. Kothari: What about em­ regard to the advances made by in­ ployees? Deipositors include em dividual banks. We have that in ployees. mind as regards agricultural finance. Mr. Chairman: His answer is veij Shri S. S. Kothari: But you agree to clear. You proceed further. the necessity of having this risk in­ sured, but who is to take up the Shri S, S. Kothari: Have you ap» insurance is the question. It may be plied your mind to the point of com­ a private insurance company or it may pensator Under certain circum­ be a Government corporation floated stances banks may be nationalised or for this specific purpose. taken over or a particular bank may be taken by the Government. As far Shri Nariman: As in the present as I can see from the compensation at age, our knowledge is extremely clause, it is provided that the bank limited in that field and our person­ shall be paid the market value of their nel are also limited, we consider it— assets. Question arises as to what we think personally—that it will not about the good-will. The bank may be possible for the Reserve Bank to lose a special source of deposits. Would guarantee to any one to the exclusion you like something to be provided for of the other. goodwill with respect to los? of ear*** ing power or an alternative basis pro­ Shri S. S. Kothari: My second point vided for computing the compensation, is that Reserve Bank may require you to invest a certain portion of your Shri Tftkha: The intrinsic value it funds in the small scale industrial the right criterion. sector or agricultural sector. If you do not find adequate se­ Shri S. S. Kothari: What about the curity, would you, against your goodwill—for loss of earning power? better judgment, give loans or you would not? In that event, how would Shri Morarji R. Desai: What is the you comply with the Reserve Bank’s goodwill in this? directive that a certain portion of your funds should be invested m a parti­ Shri S. S. Kothari: The only pay­ cular sector—small-scate or agri­ ment that the State makes is for tak­ ing over the assets and liabilities. But ' cultural? the; shareholder.-; lose all their 'nte- Shri Nariman: I do not think to my rests, earning power and income. knowledge there is any proviso at the moment where the Reserve Bank will Shri Trikha: What will be the re­ ask us to put so much in the agricul­ turn should be calculated and pay­ tural sector. After all the depositors* ment should be made accordingly. interests have to be safeguarded. Shri S. S. Kothari: Only on the Shri S. S. Kothari: Now coming to basis of assets and liabilities. For Clause 36AD, would you agree to the loss of earning power you do not want penal provisions being dropped and any compensation? only a provision made that the em­ ployee shall be dismissed? Shri Trikha: That should be refer­ red to the ordinary judiciary. No Shri Trikha: Thfc clause covers any special tribunal is necessary as en­ person creating obstruction. It does visaged in Cl. 3SAH. 83 Mr. Chairman: This question is not Shri Nariman: Yes. very relevant. You do not go into matters which have got nothing to do Shri Jyotirmoy Bosu: That is not with the present Bill. agriculture.

Shri Morarji R. Desai: Mr. Kothari Shri Nariman: Yes. That is also neg­ wants more compensation. They do ligible. We have 4teo to learn. Every not ask for it. He becomes a greater effort is being made to have an agri­ advocate because he is interested. cultural cell in the bigger banks. The Agricultural Finance Corporation Shri S. S. Kothari: I do not have any will try and assist the smaller banks bank shares. in various way? in expanding the port­ folios of advances. Then there & the Shri Morarji R. Desai: Perhaps you question of limitation of resources. At may be auditing some of them. the moment what we have is fully Shri S. S. Kothari: I do not audit employed. Then, we have also to banks. look to the interest of depositors. If we are now to divert what we have, Chaudhary Nitiraj Singh: In clause then the question of priorities will 3 which deals with Sub-section 10B(2) disappear. We are trying to mobilise you have suggested that there should deposits and from the additional be no prohibition on the Chairman re­ deposits we will contribute to the new maining as a Director of any credit Shri K. N. Tiwari: Do you propose institution Your suggestion is not to that the system of advances should be prohibit the Chairman from director­ introduced in all the banks? You ship in credit instltutons. If it is said that the advance to agricultural accepted, will it not affect some of the sector is negligible. What should be principles of policy laid down in the the ratio of advance to agriculture proposed legislation? and industry? Shri Nariman: The intercourse bet­ sector. ween the two would be of benefit to Shri Nariman: The banks will not both. Such directorships are held in be deciding that. That National Credit public interest and carry no financial Council will decide that. involvement. The provisions for the chief executives to act as directors of Shri Indrajit Gupta: You mention­ financial or credit institutions is sought ed about the steps already taken by only in respect of such institutions as some, may be most, of the banks to may be notified by the Central Gov­ appoint whole-time chairman in line ernment or the Reserve Bank of India with the provisions of the Bill. As from time to time. far as we know this has been done in most of the cases by appointing the Chaudhary Nitiraj Singh: What as existing General Managers as Chair­ the percentage of Indian Banking men. Would you please tell us whe­ Association’s total assets being ad ther you consider that this type of vanced to agricultural sector? Do appointment which the Banks have yon mean to increase the investment done suo motu. even before the Bill and if so, what steps do you propose has been passed, is in keeping with to take? the larger sort of purpose which is behind the Bill? Shri Nariman: Frankly at the moment it is very negligible. But Shri Nariman: If I may give my we have made advances to plantations. personal opinion, after all the bank­ ing is a very specialised subject. Shri Jyotirmoy Basu: To organised Whether we go into one sector or ano­ tea plantation? ther, it is necessary that the expertise 84 which has been built over years is Shri Nariman: It is a fair limit, es­ very essential because the chief exe­ pecially when we consider the large cutive, whether he is called the Chair­ industrial concerns and what they are man or the Managing Director or the doing is in the larger interests of the General Manager, is the person who economy. They will need working looks after everything and sees that funds, advances to carry on. I don’t all the proposals are properly pro­ think it is going to be that easy at the cessed. Any outsider wiU find him­ moment to switch over from one to self in a difficult position. It is a ques­ the other. tion of putting into effect what we have been asked to do. The priorities Shri Indrajit Gupta: Don’t you think are something new to us and I don't that this would virtually amount to see a n y reason why we will not be freezing the social control policy? able to do them successfully. Shri Nariman: We are not consi­ Shri Indrajit Gupta: Do you think dering any new proposals. The exist* that the traditional executives of the ing arrangement being what it is, a bank can properly discharge the certain period is necessary for repay­ policy-making obligations also, es­ ment. pecially when, you say that you are strangers to the new priorities? Shri Jyotirmoy Bosu: Supposing the Parliament insists oi putting cer­ Shri Nariman: In the new compo­ tain number of employees or repre­ sition of the Board 5Q per cent is sentatives of the Union on the Board technocrats and professionals. That of Directors, do you feel they can will greatly add to our strength, be­ attend the Board’s meetings, enjoy cause of their special knowledge in the status of a Director and come back particular fields. to their own job? Yesterday, dispute was raised here in regard to this. Shri Indrajit Qupta: Why are the banks in such a hurry to bring about Shri Nariman: Whatever the Parlia­ these changes even before fhe bill is ment directs, we will carry out. passed? Slpi Jyotirmoy Bosu: I am asking from the working point of view. Shri Morarji R. Desai: They have agreed to implement the new policy Shri Nariman: The time is not yet without waiting for the bill to be ripe. passed I asked them to do that. May I suggest your question in another Shri Jyotirmoy Bosu: Once they are way if I am right in presuming what m a d e Directors, then can’t they take you want to ask? Are the new Chair­ orders from their senior executive and men being appointed in tune with the all that? I am putting it like this. new policy? They go to the Board meetings, enjoy­ ing Director’s status, efcst their votes wherever they like, and come back to Shri Indrajit Gupta: Whether they perform their duty and draw their are in tune with the new policy or not, we can see that later on. I salary. don't wish to labour on that point. Mr. Nariman, you must be familiar Shri Nariman: Once they are giver* with the clause on page 8 of the Bill a superior status, I think it is going to which relates to the time-limit for the be difficult to do that. That is my recovery of existing loans. The ti’me- feeling. littiit which is given here is a period of three years. In your opinion, is Shri Morarji R. Desai: It was asked this a fair limit or should it be re­ only for information; it was not a duced? point of dispute. 85

Shri C. T. Dhandapanl. { understand tation to depositors on the Board of: there is a secret reserve. Directors. He will be another watch­ dog. . . Shri Nariman: That is allowed un­ der the Banking Companies Act. Shri Morarji Desai: What watchdog? Most of the Directors will be depo­ Shri C. T. Dhandapani: Has the sitors. Government or any other, authority the power to look into this? Shri M. Thirumala Rao: But here is a helpless one who places money in Shri Nariman: Reserve Bank of the bank. India and Income-tax authorities are there to do this. Shri Morarji R. Desai: If he is so Shri M. Thirumala Rao: I would helpless, he will not put a deposit. like to ask a question with 'regard to deposits. We have insurance only up Shri M, Thirumala Rao: Where will to Rs. 5000. It is the depositor who he go? is really the mainstay of a bank that contributes the whole funds, exclud­ ing the share money. But, to my Shri Nariman: There has been an mind, the limit for insurance, i.e. increase particularly in the case of Rs. 5000 is very low. What is the Savings Bank depositors, which are present value of Rs. 5000? Is it not small people or middle class people. I possible to raise it to Rs. 25,000, and am sure they just would not put any­ also devise a method of giving repre­ thing there unless they are quite cer­ sentation to depositors on the Board of tain about it. There are potential Directors? Is there any objection from safeguards which the Reserve Bank giving epresentation to the depositors and Government take. That has made on the Board of Directors? Is there it safe and sound. any objection from the management to this proposal of giving represta­ Shri M, Tirumala Rao: I am not tion to the depositors on tha Board Of satisfied with your reply. But I don’t Directors? want to pursue the question any1 fur­ ther. Are you of the opinion that the (Shri Nariman: The average deposits new Bill will bring about a new ori­ afe area Rs. 5000. Except for the entation in the working of these people who are having large amounts banks? Are you sure? Or old condi- and they are spread ovter separate tios will prevail? banks. But I think Rs. 5000 limit is quite reasonable. It covers a sub­ Shri Nariman: It will take some stantial amount of the depositors. time because we are now in this field. Shri M. Thirumala Rao: You are Shri Morarji R. Desai: Is it your accepting it with an open mind? opinion that under the new arrange­ ment the banks will be working with Shri Nariman: Yes. more risk than before?

Shri Nariman: To start with, we will Shri M. Thirumala Rao: It is not a have to take extra risk, because we question of loyalty to Government? are new. But we have done well. It. is only a question of gaining a little time. iShri Nariman: It is a question of loyalty to ourselves and to the people. Shri M. Thirumala Rao: You were saying something about the represen­ - (The witnesses then withdrew) 86 JL The All India Bank Employees9 “Bombay bankers welcomed the Association, Delhi social control of banking despite some of its cumbersome features: Spokesmen: (i) absence of any drastic feature 1. Shri A. C. Kakar. in the Bill. 2. ShriPrabhat Kar (ii) its primary responsibility for 3. Shri H. L». Parvana giving depth to social control 4. Shri P. L. Syal. on the Reserve Bank; HI. The All India State Bank of India (iii) the threat of take-over is Staff Federation, Calcutta academic. The proposal that the Central Govt, and not the Reserve Bank will take over Spokesmen: recalcitrant bank is consider­ 1. Shri S. N. Duber. ed sound in principle as take­ 2. Shri Asnrit Lai Airi over by the Government in­ volves payment of compensa­ 3. Shri J. N. Kapur. tion and consequently parlia­ mentary approval; ( The witnesses were called in and they took their seats) Shri Morarji B. Desai: Why do you take their opinion? They are making Mr. Chairman: You are welcome the best of a bad bargain. -again today. Please begin from where you ended yesterday. Shri Indrajit Gupta: In their memo­ randum the bankers have written that they are glad to find that most of the Shri Prabhat Kar: Yesterday I was provisions are in conformity with the pointing out with regard to the ques­ discussions they had with him. I do tion of Supreme Court judgements not know how it is the best of a bad and I said I will get reference. It re­ bargain. N fers to the judgement “Kameshwar Prasad vs. State of Bihar”. It was a question of Government employee Shri Morarji E Desai: I did not where the questions of a demonstra­ leave for them any chance. I told them tion undermines discipline. that they will have to agree and they said that they agree.

Shri Morarji R. Desai: There is a Shri Prabhat Kar: The last point I lacuna, therefore, that happened. want to emphasise is:

Shri Prabhat Kar: The question of

Shri Morarji ft. Desai: All this will Shri Prabhat Kar: I know. The be settled down properly. National Credit Council is not a sub­ ject of this bill. That is what I am Shri Prabhat Kar: Even after this saying. Within the framework of the it has happened.. bill we made some suggestions. Clause 10(a) for instance. Not less than 51 Shri Morarji R. Desai: I would also per cent of the total number of mem­ want that to be done because the co­ bers of the Board of Directors shall operative sector would not be reject­ consist of persons who shall have spe­ ed. cial knowledge and all these things. Accountancy is there. Anybody1 who Shri Prabhat Kar: You know the has been there for some years in the functioning of cooperative sector at bank has developed some special present. knowledge about the accountancy. You are deciding how the policy of Shri Morarji R. Desai: In Kerala the bank should be determined. for instance. In Bengal the coopera­ tive did not exist for the last ten Shri Morarji R. Desai: These are months. different categories to select.

Shri Prabhat Kar: The National Shri Prabhat Kar: Accountancy is Credit Council is to determine the not a special knowledge so far as priority1 of this. I do not know if you banking is concerned. About the have been reported rightly in the Board of Directors you have said agri­ press. Here in the objects it has been culture and rural economy. stated that the priority sector should be given preference. This is the ob­ Shri Morarji R. Desai: Proper ac­ ject as far as it goes, priority sector counting of the bank is also relevant. receives the due share. Shri Prabhat Kar. For smooth func­ Shri Moraji R. Desai: Due share, tioning of the bank you have made not preference. They were not prio­ suggestion in Section 10A. We have rity sector before. They are attached made certain suggestions. There to priority sector. It is not to divide should also be persons who represent 88 the trade union in Board of Directors Shri Prabhat Kar: Immediately after so that those who work day to day the appointment, Reserve Bank should will also have a say in the bank’* verify these facts. functioning and administration. Shri Morarji R. Desai: They will do Shri Morarji R. Desai: What is the it. special knowledge of trade union to understand banking, I would like to know. x Mr. Chairman: Please be brief. Do not repeat whatever is stated in the Shrf Prabhat Kar: He is the repre­ memorandum. sentative of the employees. Shri Prabhat Kar: We are to-day Shri Morarji R. Desai: It is not appointing a paid Chairman, a whole­ essential that banking knowledge time employee in the executive. Un­ will be there. less the Chairman is whole-time he cannot give proper attention to his Shri Prabhat Kar: Accountancy is functions. Once we decide that the redundant That is what I say. Chairman should be the Chief Execu­ tive of the Bank, the question of hold­ Shri Morarji R. Desai: Accountancy is better knowledge than trade union. ing any other office will frustrate the purpose. Shri Prabhat Kar: He is representa­ tive of the employees who will be I come to page 8 which refers to the working day to day in bank. period of three years. If time is to be given for three years, then passing Shri Morarji R. Desai: They may be of the Bill will have no meaning. doing separate work which is not all banking work. There would be some, Shri Morarji R. Desai: Suppose they I agree, not all of them. are not able to find loans elsewhere, your employees themselves will go Shri Prabhat Kar: I am not saying out of jobs. any one of them. He should also have a preference there. Shri Prabhat Kar: When you give three years’ time and you want to pass Shn Morarji R. Desai: That is all the Bill tomorrow---- right Shri Morarji R. Desai: It is not for Shri prabhat Kar: Then at page 5, any new loan. I would say even three sub-clause of the same clause, you years is not necessary. say, by reason merely of defect in the composition thereof. Shri Prabhat Kar: You have already stated ‘within the time fixed or three Shri Morarji R. Desai: It has got to years’. be done. Shri Morarji R. Desai: If the time fixed is longer, then it is three y e a rs. Shri Prabhat Kar: You are re -c o n s ­ tituting the board. Shri Prabhat Kar: If three years are allowed, there will be no money Shri Morarji R. Desai: Suppose to advance. , through ignorance something has been done. Because that one director s apo- Shirt Morarji R. Desai: More deposits intment may be wrong the whole thing will come. has to be invalid, the bank will come to grief. So it has got to be rectified Shri Prabhat Kar: They will come whenever it is found. but it will affect the priority. It snouid 8 9 be adhere^, to as early as possible sions. Then only this will be done. I Already more than six months are can understand your giving them a over. ; chance but not ‘persistently’.

Shri Morarji R. Desai: You have to Shri Morarji R. Desai: We will see give some reasonable limits without to it. We must have a reasonable defi­ causing any disturbance to the econo­ nition. mic life of the country. You perhaps do not mind disturbance but I do mind. Shri Prabhat Kar: In 36AE(1) (i), you say ‘in the interest of the depo­ Shri Prabhat Kar: I do mind. But sitors of such banking company, or’. we are doing a thing which will be Our suggestion is ‘and that’ occuring in purposeful. If they are given *a long the previous line should be changed time, the purpose will not be served. into ‘or that’. In respect of 36AE(1), Therefore, we suggest that a lesser my point is this. period should be there. Clauses (a) and (b) read as fol­ Coming to Part IIC, you have said lows:— ^persistently failed to comply*. You are giving them a long rope. You know “ (a) has persistently failed ...... ” the Reserve Bank used to publish a lot of data in the earlier days. I do not know why it is not done now. “ (b) is being managed in a manner Please see that they publish all the detrimental to the interests of figures. its depositors,” and that—

Shri Kamalnayan Bajaj: May be due My suggestion is instead of 'and that’ to paper economy. it should read as ‘or that’. Why I say is that you are taking over the bank be­ Shri Prabhat Kar: Now it is a very cause that is in the interest of the thin publication. depositors of such banking company, otr in the interest of banking policy. Shri Morarji R. Desai: But was it stopped after the publication of the You are laying down the banking Bill? policy. That is what we call ‘social control’. Shri Prabhat Kar: It is for the last two or three years. Shri Morarji R. Desai: Mark the words ‘has persistently failed’. That Shri Morarji R. Desai: Even before it is number one. See clause (b). TTiat was conceived. Anyway we shall look is being managed in a manner detri­ into it. I want to give more and more mental to the interests of its deposi­ Information not less. tors. That is why it has to be taken over. These are the criteria under Shri prabhat Kar: In so many cases, which the bank is taken over. That is there have been failures to comply another reason why this has been put with the directions of the Reserve like that. Bank of India. Shri Prabhat Kar: As fair as I have Shri Morarji R. Desai: Why not send understood it, the words sh o u ld be ‘or me a list of such failures? that’ and not ‘and that’. Shri Morarji R. Desai: See clause Shri prabhat Kar: Surely I will give you. But ‘persistently’ means there (b). The words are (b) is being managed in a manner detrimental to must have been a number of such occa­ 90 « the interests of itjs depositors, and banks. To-day there are only 97 and that— all were amalgamated,

(i) in the interest of the depositors Shri Prabhat Kar: No doubt amal­ of such banking company/ it is nece­ gamation had come in. ssary to acquire the undertaking. It must be like that. What else can Shri Morarji R. Desai: After the there be? Laxmi Bank had gone into liquida­ Shri Prabhat Kar: Even then what tion, this thing took place. I was suggesting was ‘or that— Shri Prabhat Kar: Banking Regula­ (i) in the interests of the depositors tions Act was mended i,e., Sec. 45. of such banking company, or (ii) in the interest of banking policy... .etc., Shri Morarji R. Desai: The depo­ it is necessary to acquire the under­ sitors question also came up, taking. Shri Prabhat Kar: All these things Shri Morarji R. Desai: If it is read came in as a result of this. That ‘or in the interests of the depositors exactly gave a big jolt to the Finance of such banking company, or in the Ministry to take over banking com­ interest of banking policy, or for the panies. better provision of credit’ with three

Shri M. Thimmala Rao: The people Shri Prabhat Kar: I know that our can come before Government for tak­ Deputy Prime Minister will have the ing over the bank courage to do it by the front door. Shri Morarji R. Desai: The bill is only a recommendation. Next point is this. On page 15, line 10 (clause (c) with regard to Shri M. Thimmala Rao: Anyway taking over of the bank, there is a they seek the Government help. line ‘as the case may be, on the same terms and conditions so far as may Shri prabhat Kar: So many things be, as are specified in clauses (i) and were done earlier in the public interest. (j) of sub-section (5) of Section 45”. We have said that ‘provided, how­ Shri Morarji R, Desai: What happn- ever, that after the expiry of one ed was that earlier there were 350 year’. 9 i Shri Morarji R. Desai: What do you Shri Morarji R. Desai: It may be- propose to be done? there. If it is done by Statute it is bet­ ter for the bank. After all the trans­ Shri Prabhat Kar: Under Sec., 45, fer is to its own subsidiary banks. No my amendment is the following:— body knows what would happen to­ ‘One year after the employees morrow we have got to provide. You are taken over in the new bank, the may start an agitation that he may readjustments of their salaries not be transferred. You know that should be made.’ such a transfer has created a strike also. Shri Morarji R, Desai: They are to be taken over in the same terms and Shri Prabhat Kar: Sir, it is already conditions as far as may be. And I provided for in the service conduct cannot go beyond that. rules and so I say this should not be Shri Prabhat Kar: Within three there. These are my amendments years we will take over the bank if which i have suggested. it has been mismanaged Shri Dnber: I intend to make my Shri Morarji R. Desai: Let the Se­ submission before this hon Committee lect Committee consider your sugges­ particularly from the view point of tion. State Bank employees.

Shri Prabhat Kar: All right. Now We, in the State Bank, have built clause 28, page 30- new section 54AA up most cordial relations and har­ is an amendment to the Reserve Bank monious relations through joint con­ Act. I suggest that it may be amend­ sultative body meetings and bipartite ed in guch a way that the Reserve talks. I do not say that all is well Bank should not have the Tight to in the State Bank. There were de­ transfer any member. The industri­ monstrations here and there and lar­ al relations should ibe» governed by gely, these demonstrations were spon­ the award or agreement. taneous and not organized by the Unions. Such incidents are decreas­ Shri Morarji R. Desai: After all ing gradually___ the transfer is to its own subsidiary. I don’t think I can allow that. Shri Morarji R. Desai: What is your Shri Prabhat Kar: it is already suggestion? being done. Shri Duber: I am coming. Shri Morarji R. Desai: No please. Shri Morarji R. Desai: You come to Shri Prabhat Kar: Under the ser­ that. vice rules governed by the Reserve Bank it is there. Shri S. S. Kothari: Instead of read­ ing it out, you can just give us a Shri Morarji R. Desai: It is better to gist of the points. have a Statute.

Shri Prabhat Kar: I do not know. Shri Duber: Sir, we in the State This is my apprehension. Bank are trying to arrive at an impli­ cit understanding between the mana­ Shri Morarji R. Desai There is no gement and the employees to solve apprehension at all. all the problems across the table. To­ day nobody in the State Bank thinks Shri Prabhat Kar: If it is in the in terms of agitation in so far as service rules, why should this be their own issues are concerned. They done? have pinned their ful] faith in the 9*

Bipartite settlements. Sir, this change envisaged in Cl. 36AD (b) that no has not come about abruptly. It is the person shall be allowed to hold any spirit with which we are working for demonstration within 10 metres of a the last twelve years to eschew agi­ banking institution and so on. Let tational approach as far as possible me assume, Sir, that by ‘person* is and through the process of collective meant a bank employee. No defini­ bargaining. The Federation to-day tion has been given about the ‘person*. is participating in the management to Then what will happen? Employees a very limited extent through the cannot hold peaceful demonstration Joint Consultative and negotiating within the bank premises and outside machinery and the results are satis­ the bank premises Sec. 144 is in force. factory. Hon. Members may visualise Here in New Delhi, all the major the results when the right of the em­ banks are situated in Parliament ployees to participate in the manage­ Street and Sec. 144 remains enforced ment thrQugh the Federation would be throughout the year. Police does not recognised. grant permission to hold a demons­ tration under the influence of the I would earnestly and humbly beg banks* management. Then, naturally that provision for representation) of the Bank employees would find out recognized unions may please be made other ways to give vent to their grie­ in the Bill for achieving positive re­ vances and approach the political par­ sults. ties for help. If the cause is genuine, naturally, the political parties would In this connection I wish, Sir, the lend their support and the demons­ other banks follow the good step of trations would be staged by their the State Bank management and take workers instead of by the bank em­ their representatives into their con­ ployees. In this situation not only fidence for working out ways and Cl. 36AD would become ineffective means for building up harmonious re­ but politics would start pouring into lations. the trade unions.

Sir, Clause 36AD is sought to be Shri Morarji R. Desai: But the incorporated in the Banking (Amend­ clause will remove politics. ment) Bill to ban indecent demon­ Shri Duber: I have a different strations, to protect the credit-worthi- opinion. ness 0f the banks. All these offences have already been covered under the Shri Morarji R. Desai: You will see disciplinary action procedure or the the result when it is passed by Parlia­ laws of the land. According to us, ment. the whole section is superfluous and no useful purpose will be served by Shri Duber: It has be passed by keeping such a clause in a Bill which a majority of votes. Naturally, there essentially deals with financial disci­ will be persons who will oppose it. pline and to tighten the control over Shri M. Thirumala Rao: All laws banks. I firmly believe. Sir, that the are passed by majority. more the laws we have on any given subject, the result would be less and Shri Duber: So far as the State less implementation of those laws, Bank Federation is concerned, I may thereby making them Ineffective. It state here, Sir, that it is run by the will increase litigation in the bank­ employees of the Bank. Right from ing industry and instead of bringing the Council member to the President, peace to the banking industry, would all are employees of the Bank. I hope, give further rise to discontentment. Sir, that it is not the intention of the New means would surely be found out Government to increase the political for staging agitations. It has been influence of any party in the unions. 9 3 | know from my personal experience considered the recommendations of tht that through Workers* Education Sche­ National Labour Commission. These mes employees are being encouraged recommendations were unanimous. I to run their own unions. Further, hope the hon. Members will give due Sir, if the employees are stopped to weight to the recommendation of stage peaceful demostrations within this Study Group to the National the Bank premises, thereby prohibit­ Labour Commission. Further, there is ing them from showing their collective a Standing Labour Committee and this strength, thus leaving with them no section may, as per conventions be alternative but to launch strikes on processed through this Committee. every issue to dhow their collective There is the forum of Indian Lab­ .strength to achieve their demands. our Conference and this forum may also be fully uti­ Sir, I am reminded of the saying lised to process this problem. Sir, all of Mahatma Gandhi that every indi­ the problems facing the industry and vidual has some good in him and that the trade unions in the past were good in him should be exploited to the being discussed and decided upon maximum for the benefit of the coun­ through these agencies. This is a try and the nation. convention and I hope this conven­ I believe, Sir, that this good in each tion will be followed in this respect individual can be successfully exploit­ also. ed through joint consultative machi­ Sir, staging peaceful demonstration nery, voluntary acceptance of a code within the bank premises, stay in and of discipline and the proper function­ stay out of banks, peaceful picketing, ing of the grievance procedure as is etc., are the conventional and tradi­ being experimented in the State Bank. tional trade union rights of the work­ Instead of resorting to enacting more ing class, having the sanc+' ja of the and more laws, I may be permitted highest authority in ifcnd and I to submit that this is a human problem respectfully sub~£ mat, while consi­ and may be tackled as such. dering cl36AD, hon. Members may advise the Govern­ If hon Members still feel that some­ ment to follow the method of thing has to be done to arrest the ten­ proper communication, constant dencies on account of which Sec. 36AD dialogues between the manage­ is being inserted, then I may be per­ ment and the representatives of the mitted to submit that the Banking recognised trade unions. Though it is (Amendment) Law dealing with a long process, yet it would bring bet­ social control over Banks is not the ter results than the proposed section .appropriate place for such a law. 0 30AD. Negative approach never yields Shri Morarji R. Deseai: How long is the desired results. Our positive ap­ your statement? You said you want­ proach would surely help us in creat­ ed only 2 minutes. Now it is 10 minu­ ing the much desired goodwill in the tes. How many pages more are there delicate banking industry for the for you to read0 benefit of the people of our sacred motherland. Shri Duber: 3 more pages. Shri Morarji R. Desai: You said that the National Labour Commission Shri Morarji R. Desai; Go on. I has recommended. This was moved only wanted to know how long it is. by the representative of Banking Shri Duber: The Study Group for* Employees Organisations. They said med under the aegis of the National this to the Study Group set up by Labour Commission has addressed a this commission. The Study Group letter to its Chairman, Shri Gajendra­ after considering it should advise the gadkar, to delete this scction from the the National Labour Commission. Bill and to leave a decision to be The employees have said that they taken only after Government had should consider this. 702 (A i) L S — 7. 94 Shri Kamalnayan Bajaj: In their Shri Jyotirmoy Bosu: Do you ap­ memorandum they have said that. prove of the idea that there should be no Member of Parliament on the Shri Morarji E. Desai: The Com­ Board of Management of a Bank? mission has not recommended to Gov­ ernment You have said it to the Shri Prabhat Kar: I don’t know Study Group. You don’t lose anything whether I shall encroach upon the in demanding something unanimous­ privileges of the Members of Parlia­ ly. ment by saying anything about that. Mr. Chairman: I hope that you Shri Jyotirmoy Bosu: By their pre­ don’t exclude the ex-Members of sence they might influence. Parliament when you talk of political influence. Shri Prabhat Kar: Any influential man will automatically be there and Shri iytiBrmoy Bosu: Mr. Kar, the Members of Parliament will have which particular provision of the bill greater influence. you reckon will actually bring the benefit of banking credit facilities to Shri Jyotirmoy Bosu: Do you the common man? think that the Chairman of the bank should be an outsider, not from Shri Prabhat Kar: So far as this among the existing set-up, like the bill is concerned, no section of it goes General Manager etc. in the direction of bringing the benefit to the common man. Shri Prabhat Kar: Our feeling is that promotion of General Manager Shri Morarji R. Desai: It has no re­ to the chairmanship really does not lation to the common man! mean anything because the General Manager will not be able to assert Shri Jyotirmoy Bora: Yet, it has the himself in the Board on account of the phrase ‘social control’. How do you fact that he was holding office at the define peaceful obstruction and satya­ whims of the Directors. graha and picketting? Shri Prabhat Kar: Satyagraha Shri Morarji R. Desai: Now he means peaceful obstruction. cannot be removed. Shri Kamalnayan Bajaj: Mr. Bosu, Shri Prabhat Kar: This will not in you should have asked this question any way alter the character of the to the person who quoted the scrip­ Board of Directors—it is a question, ture from Mahatma Gandhi. % pure and simple, of their promotion.

Shri Jyotirmoy Bosu: Sub-clause Shri Morarji R. Desai: We have (c) of Section 36AD(1) reads: not directed that the General Manager “act in any manner calculated should be appointed as the Chairman* to undermine the creditworthiness The Government have said that the of any banking company.” Chairman must be a full-time Chair­ man with sound banking experience. From what little past experience I Simply because a General Manager have, I can say that all such actions has been appointed the Chairman, it have come so far from the men at does not mean that he is incompetent. the top, from the managerial cadre. Shri Prabhat Kar: Up-tiU now from Shri Prabhat Kar: It is not a ques­ what has been revealed by various tion of their—Incompetence. The commissions, I can say that your pro­ point is whether he will be able to position is accepted. Whatever has control the vested interiests. TCie been done, defalcations, failure etc., purpose of having the whole-time has been by the persons at the top. Chairman is that. The General 9 5 Manager who is now the Chairman Take my own case. I was in the was holding the office of General Lloyds Bank and I was dismissed. Manager under the Board of Direc­ Ten years an employee had to wait tors. ' to get reinstatement because of a wrong decision, but there was no Shri Morarji R. Desai: That is why punishment for the management. Ten 50 per cent, will be technocrats and years an employee had to rot. professional people. Shri Morarji R. Desai: It must Shri Prabhat Kar: The point is have been with costs in this case. whether this type of wholetime chair­ manship is going to be helpful. Shri Prabhat Kar: Salaries paid. For some period it was half the* Shri Morarji R. Desai: Will M.P. salary. You will appreciate, for ten Chairman serve that purpose? years----

Shri Prabhat Kar: It will depend Shri Morarji R. Desai: I cannot upon which type of M.P. is the say that this is reasonable. Chairman. Shri Jyotirmoy Bosu: Don't you Shri Morarji R. Desai: It is not think that the present standing orders not the category but it is the man. are good enough and wide enough to cover cases of indiscipline, and tell Shri Prabhat Kar: We have also us how many persons do you know the experience of M.P. being the who are the victims of these standing chairman of a big bank. orders of a particular bank?

Shri Jyotirmoy Bosu: What are Mr. Chairman: Yesterday he cited the weapons the worker has in this country for getting speedy and inex­ an example. pensive justice? Shri Jyotirmoy Bosu: How many cases? It should be highlighted. Shri Prabhat Kar: So far as our experience goes, we have spent quite Shri Prabhat Kar: I will not be a lot of money and time to get justice. able to say exactly but more than We have got reinstatement after ten 1000 cases. I can submit a list. years, because the persons were wrongfully dismissed by the manage­ Shri Morarji R. Desai: Have they ment. Even then the management gone to court; if so, how many suc­ had no punishment. ceeded and how many failed?

Shri Morarji R. Desai: Which was Shri Prabhat Kar: I can submit a the Bank? list if you like.

Shri Prabhat Kar: Punjab National Shri Morarji R. Desai: It will give Bank. He was dismissed in 1950 and us some idea. were re-instated in 1959. Out of 150 Shri Jyotirmoy Bosu: Mr. Kar how persons who had been dismissed, three many cases you know about the vio­ died in between; they could not get back. . lation of directives of the Reserve Bank by commercial bank granting Shr| Morarji R. Desai: Were all credits? re-instated? Shri Prabhat Kar: We know very Shri Prabhat Kar: Most of them. many cases which we have referred 96 to. We referred to Mundhra yester­ completely different. When we are on day. I know even today persons who a movement, naturally certain deci­ are working as Branch Manager who sions of the Union will go against were found to have indulged in frau­ the decisions of the management. dulent transactions. They are still continuing. Mr. Chairman: You should be brief in your reply. Mr. Bajaj you should Shri Morarji R. Desai: Will you ask questions which are the subject send me the list? matter of the Bill.

Shri Prabhat Kar: Yes. Particular­ Shri Kamalnayan Bajaj: As mem­ ly T have got to mention one parti­ ber of Parliament I have a right to cular bank. I know hundreds of such ask such questions. Mr. Kar you have cases. A man who was under bail just said that there had been no viol­ of a few lakhs continued as Chief ence in the last twenty years. Would Accountant. you recall that three or four years ago when the Punjab National Bank Shri Jyotirmoy Bosu: The Govern­ Board meeting was held in Calcutta ment invite information (Srf economic some of the Members of the Board offences and pay rewards to some of were ghertaod and man-handled. My the informers.. waste coat was torn; I was not al­ Shri Prabhat Kar: Up-till now there lowed to go out of the Board meeting has been no such reward room and there were shouting of slogans outside. Shri Jyotirmoy Bosu: For certain economic offences, the informers are Shri Prabhat Kar: Yes, it was re­ supposed to gef some reward. Have ported to me. I was at that time at you got the freedom to write to the Delhi. This meeting took place at proper authorities about the mischiefs Calcutta. It was connected with bo­ in the Bank? nus matter. I just got a report from Calcutta. But if it has happened it Shri Prabhat Kar: There have been is very sorry affair. This question of cases of dismissal. man-handling was not there but Shri Jyotirmoy Bosu: You have shouting was there. some victims? Shri Prabhat Kar: Yes. Shri Kamalnayan Bajaj: My waste coat was tom. It was not tom by the Shri Kamalnayan Bajaj: Then if wind. Was any action taken on the the General Manager has not taken part of the union workers who viola­ any steps, probably it was within ted. your rights to report to the higher authorities. Did you do that? I want Shri Morarji R. Desai: There have to know the facts. As leader of the cases. Why do you try to prove it Trade Union, have you come across through him, some cases of insubordination, violence etc. Shri Kamalnayan Bajaj: On page 4 in your 13 para you say that wher­ Shri Prabhat Kar: Regarding vio­ ever if there has been found some lence, there has not been a single ins­ mistake and so on those mistakes tance of violence in the banking should not be allowed to go on. Su­ industry during the last 20 years pposing if there is a technical mis­ of our existence as a trade take in the appointment of a direc­ union. Whenever a case has been tor, do you mean to say that whatever reported, it has has been found to be he has done should also be nullified. incorrect and it has been dismissed. It will create chiaos. About the question of insubordination, I may explain that a part in a Shri Prabhat Kar: I am only point­ general pen down strike will be au­ ing out that for the first time we had tomatically insubordination. That is a tribunal composed of three high 97 court judges. There is a technical from branch to branch take* along mistake on the part of Government with him a particular account wher# and after having spent a few lakhs some illegal transactions take place. of rupees and spending three years Certain subordinate staff is also taken of time the whole Award was nulli­ along with him who used to delay fied. My point is the clause 8 does the payment. But the subordinate not talk of technicalities. The ques­ staff is dismissed and the manager is tion is if a thing has been done by kept in service. What is the way a person who has no authority or out? What I have done? I have who is not authorised to be in the raised slogan only. I have not Board his action should be nullified. slapped anybody.

Shri Morarji R. Desai: If by mis­ Chaudhary Nitiraj Singh: You said take Government servants do certain that the word ‘persistently* should be things they are also indemnified. If deleted. Do you want to suggest that a man is appointed in a wrong the mistake if committed should not manner his work that is done during be allowed to be corrected by giving that period cannot be nullified. That the banks a chance to correct them? is all that i*s provided. He will be punished if there is punishment. Shri Prabhat Kar: Without the word ‘persistently* that chance is also Shri Kamalnayan Bajaj: Regarding available to him. Persistence means page 8, para 24, you say about the that things should have to be re­ relationship. You say the law should peated for half a dozen times before not be made, it should go to tribunal any action could be taken. etc. In this I think it is in favour of banking industry including employees. Shri Morarji R. Desad: If the bank It tries to give peaceful and quiet does it 3 times it is persistent. But 3 atmosphere. How do you presume times in 30 years is not persistent. that it disturbs the industrial rela­ tionship at all? Shri Prabhat Kar: If you delete the word ‘persistently* it does not take Shri Morarji R. Desai: Do you away the right of the bank to get seriously expect him to support you? chances. You know the answer yourself. This is not useful at all. Shri N. Dandeker: I think I under­ stood you correctly. Your point was Shri Prabhat Kar: I have explained this. Section 36AD clause (a) and it yesterday. (b) were mentioned by you. You say they make offences where they art Chavdhary Nitiraj Singh: You have not offences. Not only that. These sai'd about section 36A(d). Do you make certain offences which are feel or not that raising of slogans against fundamental rights. Am I inside the bank premises throughout right? the whole day is justified or not? Or, would you call it a peaceful Shri Prabhat Kar: Section (a) demonstration? takes away my two rights; section (b) makes an offence which is a mis­ Shri Prabhat Kar: If for a wrong­ conduct. Today, offence raises such a ful act I am to wait for 10 years for large connotation which includes getting justice what is the other annoyance. alternative? What is the other alter­ Shri N. Dandeker: Today these native left to me? For 10 years I things are not offences. have to wait. Is there any other way to get justice? You are talking Shri Prabhat Kar: These are mis­ generally. A bank manager who goes conduct 98 Shri N. Dandeker: You cited the With regard to the proposed new ruling of the Indutrial Tribunal, section 36AD, I suggest something Delhi, which said that peaceful with which you may not agree. Sub­ picketing is part of the strike and clause (a) says that no person shall associated with strike, strike being a obstruct any person from entering fundamental part of the labour work­ any office or place of business of a ing. You also quoted the decision of banking company or from carrying on Indl. Tribunal, Calcutta, which went any business. I suggest that the further and said that strikes, picket­ Bombay High Court Division Bench ing and boycott are part of the esta­ has precisely said this. I will read blished labour rights. You gave us out to you from the Bombay High also ruling of the Supreme Court that Court Division Bench judgment re­ pen down and refusal to vacate seat lating to an injunction under sub­ is not offence and it is not civil tres­ clause (b). “There will be an in­ pass. Refusing to do work or to terim injunction restraining the de­ leave need not also necessarily am­ fendants either by themselves or ount to criminal trespass. All that through their agents, etc. from shout­ you have said. But I would like to ing, holding meetings, shouting slo­ know this from you. Are you fami­ gans, uttering abuses and holding liar with the order passed by the demonstrations within the premises high court in the Syndicate Bank’s of the plaintiff’s bank or any of its case? branches.’*

Shri Prabhat Kar: Yes. Another one (bearing on the same sub-clause. ‘There will also be an Shri N. Dandeker: There were two interim injunction restraining the de­ injunctions. They still are interim fendants by themselves or through injunctions, which the High Court theiT agents etc. from disfiguring upheld and practically they cover walls or any part of the plaintiff's clause (a). This order was given by bank or any of its branches from a division bench, not by a single affixing posters or handbills on the judge. It said: walls of any part of the plaintiff’s bank or any of its branches except ‘There will also be an interim an injuction restraining the defend- injunction restraining the defen­ union situated within the bank pre­ dants either by themselves or mises.” through the agents or servants from obstructing or intimidating or preventing the entry of any Then we have that part of clause customer or visitor to the plain­ (b) which is concerned with doing tiffs bank and or at any of its things ten metres from any entrance. branches.*’ There are two injunctions also in the same order. “There will be an in­ Another injunction was this. “There terim injunction restraining the defen­ will also be an interim injunction dants from shouting abusive or de­ restraining the defendants either by famatory slogans against the plain­ themselves, through their agents, or tiff or any of the officers or customers servants from holding any demonstra­ within a radius of ten meters from tion or morcha near any of the any of the entrances of the plaintiffs entrances of the plaintiff's bank or bank or any of its branches.” any of its branches in such a manner as to cause obstruction or interfer ence in any manner to the officers or Another one. “There will also be the staff of the bank or its customers an injunction restraining the defend­ or its business by causing any nui­ ants either by themselves or through sance by any of the aforesaid acti­ their agents etc., from taking out any vities/’ procession or morchas or holding any 99 demonstration or shouting slogans worthiness of the bank. The term which are abusive or defamtory with­ used is “in any manner calculated to in the premises, threatening or Inti­ utidermine the creditworthiness.* midating within a radius of thirty Therefore, if you write to the Finance metres from the residence of any of Ministry a letter that sj and so has the directors of officers or customers coirmitted a foreign e.renange fraud, of the plaintiffs bank.” it will not be in a manner calculated to undermine the creditworthiness. Are you aware of these various in­ You are precisely doing what is not ductions and would you like to com­ prohibited here. ment upon them in relation to these previsions. Shri Prabhat Kar: These terms are required to be interpreted by the Shri Prabhat Kar: I know also of Court when this matter comes up other interim injunctions where the before it. distance was reduced to one meter. We are also aware of the fact that Shri N. Dandeker: If you do it in the High Court were of the opinion a responsible manner without broad­ that these types of interim injunc­ casting it so much, you will be tions should not be granted. These within your rights to do it. are all interims. The final thing has not yet come. So we need not bother Shri Prabhat Kar: Suppose I bring much about these. it to the notice of a Member of Parliament. Shri N. Dandeker: Now sub-clause the court but punished by been taken against an employee who the bank. has been dismissed on the ground that he has done such and such a •Shri S. S. Kothari: If he is convic­ thing affecting the revenue of the ted, what is the position? Will he bank? be taken by any other bank?

Shri Prabhat Kar: Uptil now, we Shri Prabhat Kar: He may not be have no such case. taken by any other bank and his carrier is finished. Shri Indrajit Gupta: Whether any such charge or allegation been Shri M. Thirumala Rao, Mr. Kar, brought against him? I just want to ask one question. You have quoted extensively the rulings Shri Prabhat Kar: No, Sir. given by the Supreme Court about the legality of sitting down, pen Shri Indrajit Gupta: One more down and other strikes. May1 I know question is this. Suppose a shady if you have any personal knowledge deal comes to your notice and some' and experience of gheraos—a new body prosecutes you on a complaint expression? That is also an agitation. And when a prosecution has been launched against you in the court, Shri Prabhat Kar: I know the does it not mean that under the word ‘gherao*. standing orders of the bank, the management can also take actiion Shri M. Thirumala Rao: Have you against you and suspend you? any experience of the gherao being practised in India?

Shri Prabhat Kar: Yes, Sir. Under Shri Prabhat Kar: Uptil now it has the standing orders, the management not taken place in the banking indus­ has an authority and the right to try. probe into the matter and take their own decision in the matter. Shri M. Thirumala Rao: Are you aware of the Calcutta High Court's Shri Morarji R. Desai: That is the judgment holding this as illegal? same thing is being done as in the case of government servants here Shri Prabhat Kar: Yes, Sir. too. Shri M. Thirumala Rao: Now I would like to draw your attention to Shri Indrajit Gupta: I am asking some criticisms made about the work­ you another question. Suppose he is ing of the bank and the weapon used acquitted in the court. While the viz., gheraos. case has been going on in the court he has been kept under suspension under the standing orders. If he is Shri Prabhat Kar: I do not know acquitted, is the suspension order whether this matter has been refer­ against him withdrawn? red to. But, I have made a refer­ ence to a certain things. It may be that a demonstration may* become Shri Prabhat Kar: No, Sir. Until violent but that does not mean that the departmental enquiry of the bank the demonstration should be stopped is over and until they come to decision completely by any law. Art. 19 of that he should be acquitted, the sus­ the Constitution gives an opportunity pension order will be there. It is as a right. Demonstration takes only after that that will be with­ place violently only because dom en­ drawn. tiling has been done to the employees. 102

-Anyway; that is not the way of get­ Shri Morarji R . Desai: Do you ting justice to a cause. I have given •think that a demonstration can be some references. healthy to the working any office?

Shri Morarji R. Desai: May I have Shri Prabhat Kar: I am just only some clarifications from you? I under­ pointing out. The question is: I can­ stand—I am sure that you tare interes­ not see a proposition that in no cir­ ted—that everybody is interested in cumstances it should take place. seeing that the banks function use­ Generally, it does not take place. fully and profitably. Am I correct That is not conducive to the smooth in my understanding? functioning of' the institution.

Shri Prabhat Kar: I can give so Shri Morarji R , Desai: When you many examples. say peaceful picketing, that is all right. I also believe that peaceful Shri Morarji R. Desai: This is the picketing is the right of anybody. impression I gather and I want to get I am not disputing it because I have that confirmed. fought for it though I have not parti­ cipated in picketing.

Shri Prabhat Kar: Yesf Sir. Shri Kamalnayan Bajaj: I have done it. Shri Morarji R. Desai: If it is so, can anything that can disturb the Shri Morarji R . Desai: I also functioning of the bank usefully and .grant that right, but does peaceful profitably be called a right of any­ picketing include obstruction of entry body? I am not referring to strike. or exit? Strike is the right of a person. If it is an illegal strike, anybody will Shri Prabhat Kar: Peaceful picket­ object. But, if it is a legal strike, ing means you stand in front and say nobody can object to that. •Please do not go*. So, naturally it is obstruction. Shri Prabhat Kar: We only want to see that the institution functions Shri Morarji R . Desai: That is no smoothly and that ‘nuisance* should obstruction because I am saying. You be avoided. I do not want to go disregard what I tell you and go in into the matter of how disturbance but can you stand! in my way and takes place. prevent me from going in or lying (down or blocking the way? Shri Morarji R. Desai: If there are ways and means of looking into the Shri Prabhat Kar: If I lie down, case and finding remedies, is any dis­ that is peaceful picketing. That has turbance to counter a disturbance been done as early as 1913. justified? Shri Morarji R . Desai: Mahatma Shri Prabhat Kar: If that is there, Gandhi has condemned it. perhaps there would be none. Shri Prabhat Kar: But he has ap­ proved lying down. Shri Morarji R. Desai: Do you make any difference between a de­ Shri Morarji R . Desai: I can give monstration in a public place, in a it to you in his own words. You will street or road and a demonstration accept that he was the apostle of in an office? Satyagraha. Neither you nor I know Satyagraha completely or properly, Shri Prabhat Kar: There is some but he knew. Therefore, we have to •difference. take his definition for it 103 Now if that is so, how can you Shri Prabhat Kar: This is peaceful claim that it is the right of any parti­ obstruction. cular person to act against the . legiti­ mate right of any other persons? Shri Morarji R. Desai: Orally if you tell somebody not to go in, it Shri Prabhat Kar: When you talk does not mean obstruction at all. It in terms of peaceful picketing and if is only a request. A request is not you look at the words ‘obstruction’ an obstruction. from any person from entering the bank. Shri Prabhat Kar: I am doubtful ~ on this question. Shri Morarji R. Desai: Obstructing means that the person is prevented Mr. Chairman: Now we have from going in. finished. Thank you Mr. Prabhat Kar and your colleagues for coming here Shri Prabhat Kar: Even my saying and giving us the benefit of your will mean obstruction. views.

Shri Morarji R. Desai: It does not (The witnesses then withdrew) mean obstruction. Obstruction can never mean that. (The Committee then adjourned) MINUTES OF EVIDENCE GIVEN BEFORE THE SELECT COMMITTEE OH THE BANKING LAWS (AMENDMENT) BILL, 1967.

Friday, the 19th April, 1968 at 14.30 hours.

PRESENT Shri G. S. Dhillon—Chairman.

Members 2. Shri Kamalnayan Bajaj 3. Shri S. S. Kothari 4. Shri N. Dandeker 5. Shri C. M. Kedarla 6. Shrimati Sucheta Kripalani 7. Shri Samarendra Kundu 8. Shri Indrajit Gupta 9. Chaudhary Nitiraj Singh 10. Shri Krishna Chandra Pant __ 11. Shri S. R. Rane 12. Shri M. Thirumala Rao 13. Shri Dwaipayan Sen 14. Shri K. N. Tewari 15. Shri Jyotirmoy Bosu 16. Chawdhury Sadhu Ram 17. Shri Morarji R. Desai.

ISII‘1'' LK i i i f !II1 Legislative Council Shri S. K. Maitra, Joint Secretary and Legislative Counsel, Ministry of Law. Representatives or the Ministry 1. Shri S. S. Shiralkar, Additional Secretary, Deptt. of Economic Affairs, Ministry of Finance. 2. Shri R. K. Seshadri, Executive Director, Reserve Bank of India, Bombay. 3. Shri D. N. Ghosh, Deputy Secretary, Deptt. of Economic Affairs,Ministry of Finance. 4. Shri B. N. Mehta, Legal Adviser, Reserve Bank of India, Bombay. 5. Dr. V. A. Pai Panandiker, O.S.D., Ministry of Finance.

104 105

S e c r e t a r ia t

Shri M. C. Chawla—Deputy Secretary.

W it n e s s e s E x a m i n e d

I. The Indian Merchants* Chamber, Bombay.

Spokesmen: — 1. Shri Pratap Bhogilal— President. 2. Shri J. H. Doshi—Vice-President. 3. Shri C. L. Gheevala—Secretary.

II. Shri V. T. Dehejia, Chairman, State Bank of India, Bombay .

The Indi&n Merchants’ Chamber, explained to the witnesses that even Bombay if they might desire their evidence to be treated as confidential, such evi­ Spokesmen: — dence is liable to be made available to the Members O f Parliament.* 1. Shri Pratap Bhogilal.

2. Shri J. H. Doshi. I hope you do not want your evi­ dence to be treated as conildential. 3. Shri C. L. Gheevala. Your memorandum is before us. Do you still want to make any other point (The witnesses were called in and clear? Or would you like our Mem­ they took their seats). bers to put questions?

Mr. Chairman: You are welcome. Shri Pratap Bhogilal: We would like to stress some points. At the out­ Shri Pratap Bhogilal: We represent set, we would like to thank you, Sir the Indian Merchants* Chamber. I and the other Members of the Select em the President of the Chamber; Mr. Committee for giving us an opportu­ Doshi is the Vice-President and Mr. nity for appearing before the Com­ Gheevala is the Secretary of the mittee and particularly, so because, Chamber. we asked for a change in the appoint­ ment which you were kind enough to give. Mr. Chairman: We put before you the Direction No. 58 by the Speaker viz,, ‘Where witnesses appear before a Committee to give evidence, the We have already submitted our Chairman shall make it clear to the memorandum and therefore, I would witnesses that their evidence shall be like to refer to ithe main issues only treated as public and is liable to be which we have raised. May I, at published unless they specifically de­ the outset, make it clear that our sire that all or any part of the evi­ Chamber represents a cross section of dence given by them is to be treated trade and industry including small - as confidential. It shall, however, be soale industries and small traders too. 106

Shri Morarji R. Desai: As also the Bank should not be deemed to be a Banking Association? person holding an Office of Profit. Otherwise it is likely to create certain Shri Pratap Bhogiial: This is also difficulties. This is so far as the a Member of our Chamber. We ap­ Chairman is concerned. preciate the objectives underlying the Bill in the context of our needs for Another aspect which we have economic growth and planned deve­ touched is restriction on loans and lopment. advances. This refers to Sec. 20 of the Banking Regulation Act placing We believe, Sir, that it is towards restrictions on loans and advances. this end that this Bill seeks to bring Sub-section (1) of Sec. 20 prohibits about certain changes and in addition loans and advances or guarantees to to large powers already vested in the the companies or firms in which the Be6erve Bank for the direction and directors are interested. This even regulation of the banking in the coun­ applies to an employee. We feel try. that this provision will cause great hardship particularly in Touching upon the viewpoints that respect of technical or pro­ we have raised in our memorandum, fessional directors like lawyers and we would like to clarify certain as­ accountants 6ince their valuable ad­ pects of the same with a view to vice will not be available either to masking the working of the banks the bank or the industry if they have smooth, effective and efficient. First­ to resign from the industry1 or the ly, we have raised this question re­ company. We feel that since under garding Section 10B in connection this legislation, a majority of the with the appointment of the Chair­ directors are to be non-industrial man of the Bank. According to this directors, there should not be any ap­ Section of the Bill, the Chairman has prehension or fear regarding indus­ been entrusted with the management trial directors getting any undue of the whole of the affairs of the advantage or benefit from companies banking company. It is not clear in which they are interested and as however as to who will entrust these such we feel that this negation of powers to the Chairman; whether advances to these industrial directors' the Bill automatically gives them or companies would create unnecessary whether the Board of Directors will hardship, we suggest that if it is expressly entrust sudh powers to him thought necessary, the Bill may pro­ under the Articles of Association of vide for a fixation of a ceiling limit the banking company. If the former on such advances by* a certain per­ is the view, the same is not clear in centage of the total advances of the the proposed Bill itself and if this is bank to such companies or firms say, going to be so, I beg to submit that may be a maximum of 10 per cent. the position of the board of directors is likely to be anomalous since the Another lacuna that we see is that Chairman and the Chief Executive all existing advances and loans will are both combined in one and the have to be recovered on the expiry same person. Under these circums­ of periods specified in the existing loan tances we do not think that the board contracts, or where no periods are of directors will be able to function specified within three years of the effectively. We have also suggested date on which this provision is that the Board of directors should be brought into force. Sir normally, all given powers to fix remuneration of advances are renewable either six the Chairman subject of course to the monthly or yearly basis. That the approval of the Beserve Bank. It is limit of three y^ears will not take into necessary, Sir, I think from the point account this yearly or 'half-yearly of view of section 314 of the Com­ renewals is a point that needs to be panies Act that the Chairman of the clarified. 107

Another difficulty that we envisage Shri Samarendra Kundu: But he is in regard to the fresh opening of has omitted many if you have follow­ Letters of Credit on behalf of the ed carefully and emphasized some companies or firms in which directors points. That is the object of evidence, are interested. A letter of credit to impress upon certain points which naturally, has an element of guaran­ he wants to emphasize. tee by the Bank and therefore, we feel that such contingencies should be Shri Pratap Bhogilal: After all we excluded from the definition of the feel that the statutory auditors of the term ‘loans, advances and guarantee* banking companies are paid by the Another lacuna that we may point company. What we feel, Sir, is that out is that the blanket provision will in the normal course they should have come in the way of a director of the investigated certain things and repor­ company discounting at any office of ted to the Reserve Bank. Then if the bank even a cheque drawn by there is something that has specially him on his own account at any other come to the notice of the Reserve branch of the bank other than he Bank and the Reserve Bank wants an branch where he might have a subs­ investigation, is it not better that it tantial credit balance. It is suggested should be through an independent in­ that loans and advances may be allow­ vestigation? ed to be granted to the Directors of the Bank against the security of their Shri S. S. Kothari: It is intended fixed deposit or other credit balances. to be an independent investigation when they say that the Reserve We have also referred to sub-sec­ Bank may direct the auditor of a tion (1) of Sec. 30 where the sub­ banking company. After all he is section authorises the Reserve Bank performing a public duty, and he is- directly to ask the auditors, the statu­ expected to be independent. tory auditors of the banking company, to report directly to the Reserve Bank Shri Pratap Bhogilal: Supposing in connection with any account or any certain things have not come to the transaction of the bank. This provision notice of auditors who have already we feel, will place the Directors of audited the accounts, will they not the Bank as well as the auditors in have a little bit of hesitation? Would' an embarrassing situation. it not be in the interests of all con­ Shri S. S. Kothari: Why? cerned that an independent auditor should be appointed? Shri Pratap Bhogilal: Our sugges­ tion is that in order to avoid this Shri & S. Kothari: Let the auditor embarrassing situation, any outside worry about it. ^ auditor may be directed to make such Shri Kamalnayan Bajaj: Do you an inquiry and that the Director feei that the Chairman appointed un­ should be given jm opportunity to der the Bill should be a whole-timer place his points of view before any action is taken by the Reserve Bank necessarily? on such report. Shri Pratap Bhogilal: I do not see Shri K. N. Tewari: Sir, all these any objection to his being a whole- points are given in the memorandum. timer. I think it may be a good thing Over and above all those things, if even. What I feel is that the Chair­ he has to say anything, he may be man of the Board of Directors who is asked to explain. also the Chief Executive should func­ tion normally under the direction and Shri Pratap Bhogilal: It is just an control of the Board of Directors. The amplification of whatever we have last point that we have mentioned in mentioned in our memorandum. our memorandum is in connection with io8

'Sec. 36AD. We feel that such de­ Shri Pratap Bhogilal: I do not monstrations do seriously interfere see any particular objection for the "with the working of the establishment two offices being in one person pro­ and cause great hardship and incon­ vided, of course, the overall superi­ venience to the public dealing with ority of the Board of Directors is the establishment. A lacuna in the maintained. provision, we feel, is that the court can take cognizance of any offence under this section only on a complaint Shri Kamalnayan Bajaj: Now I in writing made to it by the Reserve come to Sec. 36AE—Part IIC where Bank or by a person authorised by it. a banking company has repeatedly We feel that this will make the provi­ not complied with the directions of sion not very effective and we submit the Reserve Bank there is a proviso that the banking companies that are that on the recommendation of the most affected by such demonstration Reserve Bank, the Bank could be should be the authority which should nationalised. Do you feel that if the be entitled to initiate proceedings in Board of Directors or the Executive this regard. After all the banking or the Management have failed to company, we feel, is a sort of public comply with the directions of the utility concern. Reserve Bank oftener, only then should they take over the manage­ Thank you. ment of the company or change the management of the company or SJiri S. S. Kothari: With regard change the managers or the Board of to Sec. 30, cl. A, with regard to audi­ Directors of the Bank. I think they tors reporting direct to the Reserve can improve the conditions Qr they Bank, why should you have any should be made as a temporary ad­ objection wfyen such a provision ministration as an alternative to exists in the Companies Act even in take over the bank and nationalise regard to any other company. Why it. should banks be treated differently? Also any reasonable auditor will give the management an lopportuni by to Shri Pratap Bhogilal: After all explain his point of view and then the ownership should not count real­ he will report to the Reserve Bank. ly. After all it is the management I do not think there should -be any that is responsible for any non-ob­ reason w h y you should be apprehen­ servance of the directions or not fal­ sive about it, anti, therefore, the ling within the limits of the policies powers that are vested in the Chair­ laid down. Therefore, I think, the man should be those that are dele­ better thing would be to change the gated to the Chairman the Chief Exe­ Board of Directors, if necessary or cutive by the B&ard. change the Chief Executive, if neces­ sary.

Shri Kamalnayan Bajaj: Do you also feel that there is no objection Shri Kamalnayan Bajaj: You if the Chairman and the Chief Exe­ mean thereby that the Management cutive remain the same person be­ being at fault, the shareholders, the cause the Chief Executive will be owners of the Bank should not be doing the day to day work and he is penalised. the only person who will supervise or guide the Board of Directors? Shri Pratap Bhogilal: After all Will it be better in your opinion that the owners are not responsible for the Chairman and the Chief Execu­ the day to day management. tive are two different people or it is 7 good, if they are combined in on* Shri Morarji R. Desai: who are ^person? the owners? 109

. Shri Pratap Bhogftial: The share­ industrial and banking experience. holders are the owners of the Bank. People with business and industrial experience will not be able tc con­ Shri Morarji R. Desai: How much tribute to the growth of Banking in­ they oun? What is their owner­ dustry and people with specialised ship compared to the depositors and banking experience will not be able it is these owners who appoint the to contribute to the industrial deve­ managers and they deserve to be lopment of the country. punished more than the managers. Shri Pratap Bhogiial: I had al­ Shri Kamalnayan Bajaj: You have ready told that there should not be .suggested that wherever demonstra­ any objection to advances being tion and other things take place, re­ given in the case of companies where garding the complaint that is to be professionals are Directors. Even in made, the bank should only be able to the case of industrial Directors, as make the complaint and it should not they are called, there should not be be necessary that the Reserve Bank any objection to giving advances to should be approached but apart from their concerns. After all the loans the bank, there are clients who may are given on merits. Where it is toe going to the bank for their own not so, the Reserve Bank lias ample ^wprk and they may be obstructed. Do powers to see that these misdemean­ you mean to say that apart from the ours are stopped. By and large the bank, even the individual's freedom Industrial Directors have been of and liberty would be jeopardised. So great use and I think they have also the bank should be able to* take ac­ contributed to the development of tion or this offence should be made banks. cognizable so that even the Police or any individual can take objection Shri Doshi: In the case of finan­ anti go to the court. cial institutions like the IFC, ICICI, they always reserve the right to no­ Shri Pratap Bhogiial: It may be minate a Director over the Board of made cognisable, but, after all, sup­ any industry to whom they give posing some individuals are affected, loan. In this case, the representative particularly, when some abuses of of the Bank on the Board of man­ the nature that you mentioned take agement of the industry watches the place, I think an individual can take activities of the industry concerned. action against the persons concern­ Tt is the same the other way round ed. He should be in a position to —the industrial Director on the Bank. do so because he is being obstructed. But I do not think it is possible for Shri Morarji R. Desai: It is strange an individual to take action against argument. It is the industrial repre­ the* whole group. sentative going to the industry. The ICICI does not sent a member be­ Shri Kamalnayan Bajaj: In your longing tc* that industry. He is not experience as the Indian Merchants holding any shares. This is quite C h a m b e r , have you come across cases different. There is no comparison where there are common Directors for marrying the horse with a kha- 4>n the Company and also cm the chchar. Bank their experience in the Com­ pany has benefited the Bank and Shri Kamalnayan Bajaj: You vice versa? If it is barred, apart from should also be clear on this point the technical experts as solicitors, whether the time-limit of 3 years lawyers etcM that such common Di­ would be applicable to such renewals rectors should not be there, then both which are done yearly or once in six the Bank and the Company will lose months. What is your opinion if the services of men with business, such a time limit is removed and 702 (Ai) LS—B no such amounts are allowed to be con­ vision in order to help the overall tinued with the permission of the development of national economy. I f Reserve Bank—after all they are also that objective is kept in view, I producing wealth and creating good don’t think there should be any ob­ for the country? The powers are jection. already there with the Reserve Bank and if necessary those powers could Shri C. M. Kedaria: You said that be enhanced. the opening of a letter of credit i* not a direct responsibility. Do you Shri Pratap Bhogilal: I have al­ consider it as a substantial interest ready said that in principle there of the ^Director? should not be any objection for con­ tinuing the advances given to the Shri Pratap Bhogilal: Take, for Directors of companies. If it is de­ example, the company which has eded to allow such advances then large advances and the company’s necessary changes should be made in Director is also there on the Bank- the bill, the provision where it has ink company. For every transaction been mentioned that the advances a letter of credit is to be opened and should be called back, should be it is in the nature of a guarantee and liquidated within three years or the bank guarantees the payment. So within the time of the advance. Nor­ long as it is within the limits already mally all advances are recallable on sanctioned, a letter of credit should demand. They are renewed yearly not be termed as a guarantee w ith in or six-monthly also. Even here the the meaning of loans and advances. advances are given on merits and the Reserve Bank has ample powers Shri C. M. Kedaria: You hold*that to see that such advances are really it is not a direct responsibility, as given on merits. When it finds that the loan is. any advance has not been given on merits, it could be called back. Shri Pratap Bhogilal: When the Bank opens a letter of credit, the Shri Kamalnayan Bajaj: There is party shipping the goods gets the a provision in the Bill that in the money, even before the customer in Board of Directors^ more than 50 per India has paid for. Therefore, it cent Directors should be from the becomes an advance for a temporary category of specialists and les 3 than period. The Bank guarantees due 50 per cent from the category of payment of letter of credit. There­ industry. The banking industry or fore it is both in the nature of ad­ the banking institutions, as you know vance and also guarantee. are giving large advances to different aspects of industry and in doing this Shri C. M. Kedaria: The opening they are greatly helped by the in­ of LC is not a direct guarantee on dustrial and business experience of the Director. the Directors. If the present propos­ ed system is to be followed, do you Shri Pratap Bhogilal: It should not not think that there will be difficulty be classified as guarantee in in discharging the duties of the the normal sense of the term. Other­ Bank and total experience and in­ wise, as the clause st&nds as it !% terest required for the growth of there might be difficulties in opening banks will be jeopardised or handi­ letters of credit. Therefore this cla­ capped? rification is being sought for.

Shri Prafap Bhogilal: I don't think Shri C. M. Kedaria: You have held so. After all, the pefiple who are that the Chief Executive and the chosen as technicians and profession­ wholetime Chairman should be als, will also have a broad-minded one and the same person. But the IZZ feeling of the general public is that honorary chairmanship is a more res­ P ra ta p I cannot gay pectful position than the paid one. Our general public is of the opinion . . . (v,S*?.ri.1MOrSirji R> D®sal: Do you think that the powers of the Reserve Shri Morarji R. Desai: What do i eforf are enough to carry you mean by the general public? You Bill? ° bjeCtives specified in this do not represent the general public here, nor do I. Shri Pratap BhofiLU; it is really Shri K, N, Tewari: I hope advan­ a question of seeing how this Bill ces for agriculture are also made. will operate after all.

Shri Pratap Bhogilal: After all, Shri Morarji R. Desai: But you agriculture is a very big industry. We seeing the objectives here. have got to see that agriculture func­ tions and develops properly. Shri Jyotirmoy Bosu: Has the theory impressed you? Shri indrajit Gupta: May I know what is your understanding of the Bill before us here? What are the Bhogilal: Social objec- objectives of this social control bill Hni I® ,een mentioned in this as you understand? Bill—particularly the objective of hnmMlng tgriculture- Now, in mj Shri Pratap Bhogilal: After all, humble submission the banks in the banks function to collect the deposits previous instance were not expected and see that deposits are allocated to function in this direction and utilized in various sectors of trade, business and industry in such Shri Morarji R. Desai: i am ask­ a way that the development of the ing whether with those powers which country will be maximum. And that the Reserve Bank had so far, the should be the objective of every Bill; Reserve Bank could cope with the I believe this is the objective of this objectives which are there now? Bill also. Shri Pratap Bhogilal: My submis­ Shri Indrajit Gupta: Does it mean sion is this. The Reserve Bank had that this objective has not been sa­ the power to say that advances for tisfactorily achieved uptil now? agriculture should have been given by the banks.... Shri Pratap Bhogilal: I would not say that. The banking policy was Shri Morarji B. Desai: Did they directed in such a way that the have powers to do that? economic development could be ma­ ximised; but there might have been Shri Pratap Bhogilal: I believe so. some lacuna. Shri Morarji R. Desai: I don’t Shri Indrajit Gupta: Therefore, think. would you say that the powers en­ joyed by the Reserve Bank . were Shri Pratap Bhogilal: My under­ enough to carry out those objects? standing is a little different.

Shri Pratap Bhogilal: In my hum­ Shri Indrajit Gupta: Do you also ble opinion, they were. feel that it is desirably to break this link between the industrial houses Shri fndrajit Gupta: Then there is and the banking companies in the really nothing in this Bill? way in which has been so long? 112

Shri Pratap Bhogiial: My submis­ would be in the minority; majority sion is that the link has^ always got would be obstructionists. tc be there between the bank and the industry concerned. If that link Shri Samarendra Kundu: Don’t has proved disastrous or is against you think that if this feeling goes the interests of the country I tiiink round the country, banking business the Reserve Bank had ample powers will be seriously affected? to see that these links are snapped and it has been done in the past in Shri Pratap Bhogiial: Well, Sir, several instances. Some banks have there would be a serious effect on been wound up. Some of the Direc­ the banking business of the country. tors. etc.. have been taken to task. These obstructions are undermining the confidence of the public as well Shri Indrajit Gupta: So, in your as it may undermine the stature of opinion, apart from hoping that this banks... new Bill may work better, you don’t think that anything new is being in­ Shri Samarendra Kundu; My troduced? ' question is different.... Shri Pratap Bhogiial: After all, we are living in hope. The Bill may Shri Morarji R. Desai: May I ex­ achieve which has not so far been plain to you. His question is this: achieved. Will a person who is passing by get involved in the section even if he Shri Jyotirmoy Bosu: I am also has nothing to do with the demons­ hoping against hope! tration? If so, will it not discourage people from going to the bank as a Shri Samarendra Kundu: Would result of this section? you kindly see section 36AD of the Bill? I will put certain propositions Shrf Pratap Bhogiial: The backing before you. Do you think that habit would be affected. under this section any person who is r»ot a worker can also be booked even Shri Morarji R. Desai: You are not if he is not directly connected with understanding what he is asking. He the demonstration but just passing wants to know if section 36AD is kept by? Is there a possibility of his being will the banking habit diminish? harassed? Shrf Pratap Bhogiial: No, Sir. It is Shri Pratap Bhogiial: There is a the other way. If the demonstrations possibility. After all, if he is res­ are not precluded the banking habit ponsible for obstruction, there is no is likely to be affected. reason why he should not be. Shri Jyotirmoy Bosu: Gentlemen, Shri Samarendra Kundu: My ques­ how do you define the term ‘credit tion is: Is there a possibility? worthiness’ of a bank. I have a defi­ nition of my own. Please let me know Shri Bhogiial: Yes. whether you agree with it or not: Shri Samarendra Kundu: Yes. So, “that you find out who are persons a person who is passing by a place on the &oard, whether they are honest where a demonstration goes on, can or not; secondly you try to find whe­ be booked under this law, though ther they have substantial assets in V is not in any way connected with conducting banking business and third­ it? ly, I hope you would agree, whether they are liberal enough to give you Shri pratap Bhogiial: It is just po­ over-drafts.” These three things at­ ssible. But after all such things tract a customer to ^ bank. That Is 1X3

my impression. Tell me what are the Shri Jyotirmoy Bosu: It seems to me things in a bank that attract you to that you are not inclined to support be their customers? 36AD because of the demonstrations etc. But has those things really Shri Pratap Bhogilal: First of all, hindered the growth of banking habits, the assets of the bank; then the pro­ trade, commerce and industry or the mptness of the service, its credit recession which the Government worthiness, the management of the and the Finance Ministry have failed bank, there are many factors. to check has hindered the growth?

Shri Jyotirmoy Bosu: What is the Shri Pratap Bhogilal: I am in sup­ management if a 'man who has been port of this clause. I am not against convicted under section 421 has been this clause. In fact, I want to streng­ found to be desirable to be on the then it because these demonstrations management? have had their predominant place dur­ ing the last few years and the extent Shri Pratap Bhogilal: There may be of damage that might accrue can only a few instances but the Reserve Bank be gauged in course of time. has acted there. Generally, the bank management has been in sound hands. Shri Jyotirmoy Bosu: Have these Credit worthiness of a bank is com­ demonstrations really hindered the posed q£ so many factors and if any growth of banking habits, trade, c o m ­ one factor is affected its credit worthi­ merce and industry in this country? ness is affected. Banking is a very very sensitive instrument. Shri Pratap Bhogilal: Yes, they have Shri Jyotirmoy Bosu: The subordi­ certainly affected trade, commerce and nate staff matter is not one of the industry. Whether the banking habit items which dominates the list. has been affected or not is too early to judge. Shri Pratap Bhogilal: It is one of the items. If there is mishandling on Shri Jyotirmoy Bosu: So far, you the hands of the Board of Directors have not appreciated anything. they should not be sp-ared. But we Shri Pratap Bhogilal: It is too early should also see that the subordinate to judge. staff also behaves and the sensitive mechanism of our economic develop­ Shri Jyotirmoy Bosu: You must be ment should not be jeopardised. going to produce markets. I had the chance to do. In produce market Shri Jyotirmoy Bosu: The State you have to do a lot of things especial­ Bank commands a big business in this ly in jute markets in villages. There country but the service of the State one could peacefully demonstrate, re­ Bank is very poor. Even today if you sist to a price, high or low,.. . . ---- go to National and Grindlays B a n k you get a cheque cashed in five minutes Shri Pratap Bhogilal: I have not whereas the State Bank will take 20 gone to any produce market. minutes. Inspite of that they com­ mand a big business because they Shri N. Dandeker: I would like to offer full security, lower rate of bor­ be clear on two points. rowing interests and some such ser­ vices. Would you agree with me? First of all talking about ‘the Chair­ man shall be entrusted with the man­ Shri pratap Bhogilal: Unfortunate­ agement of the whole of the affairs ly, I do not agree. My experience of the Banking Company* there is one with the State Bank is not as bad technical point you have raised. I am 4U9 you say. not very much concerned with that. I 114 am concerned with the other question. Shri Pratap Bhogilal: Under Sec­ —about entrusting the powers to the tion 314 any person holding an office Chairman of the entire Management, of profit, a Resolution has got to be the entire business of the Banking passed by 75 per cent majority. It company's affairs. might be possible that 25 per cent of the people might vote against that; Snri Pratap Bhogilal: If it is auto­ It is a sa^ty provision that I was matic by the Banking Company Law, thinking of. then there is not delegation of powers.

Shri N. Dandeker: The office of pro­ Shri N. Dandeker Are you suggest­ fit has other consequences. Would ing, if by this Section it is automatic, token remuneration be fixed by the then the whole of the management of Board of Directors? I am thinking of the business of the banking affairs is the limit. In the Company Act, there entrusted to the Chairman. Is it your is a limit of 5 per cent, whatever be point that the Board of Directors the remuneration if it is the Chief have no function to discharge? Executive, and total over-all limit of managerial emoluments is 11 per Shri Pratap Bhogilal: The position cent. Would it get counted or not, of the Board of Directors will be if it is not an office of profit? .anomalous. -x. Shri Pratap Bhogilal: It is

Shri N. Dandeker: I want to take I want to take you now to a couple you to our Company’s Act which re­ of definitions. It is not in your Memo­ quires Chief Executive, General Man­ randum; for Small Scale Industrial ager, Managing Director, has t0 be a concern, which is defined in Clause 2, person to be entrusted with the whole sub-clause 3 — a new definition has management, subject to the control, been introduced. At page 2 the defini­ guidance and direction of the Board tion of Small Scale Industrial con­ of Directors. Are you suggesting___ cern is being introduced. If you have any comments on that definition at Shri pratap Bhogilal: If the Board all or not, please let me know. I might has to be fructuous. remind you that it has two bearings:— one in relation to the qualifications of Shri N. Dandeker: The second point Directors who come within the cate­ I want to get cleared is this. You have gory of Specialist Directors or Indus­ said that the Chairman—whole time trial Directors and the other is in re­ Chairman, paid by the Bank ought lation to the granting of loans. The not to t>e regarded as holding an office granting of loans to Company if it is of profit. Why not? really small scale idustry Company §b not helped by this provision. Hav­ Would you think it is again a too res* ing regard to this purpose, have you trictive definition of substantial in­ studied this at all and have you any terest? comment on this? Shri Pratap Bhogiial: I think it is Shri Pratap Bhogiial: Actually I do too narrow. In fact I mentioned in not know that the Director of Small my submission that there should not Seale Industry who is a Director of be any objection to giving loans to the Bank is hit by this. companies in which the Director* have substantial interest. Shri N* Dandeker: You find in the loan clause’, the Director is hit even Chaudhary Nitiraj Singh: Mr. H he has no substantial interest. If Tewari asked you a question. He said, . you turn to the definition of substan­ if agriculturists could be added, you tial interest—interest in small scale said ‘yes’ I would like to know whe­ industry, it has got relevance,—from ther those who are mainly industria­ lists and to a lesser degree agricultu- that point of view have you any com­ ments on the definition? istt are to bo included or persons who are solely tillers of the soil are io be included? ’ Shri Pratap Bhogiial: I do not see why the definition of small scale in­ Shri Pratap Bhogiial: If he is a dustry be changed. farmer, he is a farmer also. He also is an agriculturist. It depends on the Shri N. Dandeker: ls the definition share holders whether to elect him as a too small for small scale industry in Director. He should not be debairred modern times? from coming into the category of agri­ culturists because of his interests in Shri pratap Bhogila!: It might de­ industry. Simultaneously he might pend on inflation. qualify for the industrial category also. Shri N. Dandeker: You know what has been in the last 10 years. You Chaudhary Nitiraj Singh: You would think the definition to be a restrictive also include organised planters. one. Shri Pratap Bhogiial: Yes. Shri Pratap Bhogiial: In the present Shri M. Thimmala Rao: You said circumstances. After all if we raise to under the Act the Chairman should be 25 lakhs, it might be more in Itoe controlled by the board of directors -with the present context. and he will take orders from them. If that is so what is the new differ­ Shri N. Dandeker: in other words ence between this chairman and the it is too restrictive. existing managing chairman of the companies’ Act? ShU Pratap Bhogiial: 15 might be raised to 25. Shri Pratap Bhogiial: Under the definition the Chairman is also the Shri N. Dandeker: Now, the defini­ Chief Executive. That makes a lot of tion of substantial interest: It means difference. Interest which exceeds 5 lakhs or Ii per cent of the paid-up capital of the Company whichever is less. In Shri M. Thimmala Rao: He is subject other words many of the small indus­ to control and direction of the board tries are there. If 5 per cent or 10 of directors you said. • In the existing per cent interest is there, because state of affairs such directors of big *then it bccomes a substantial interest. industries and banks are interlinked 116 together. This exercises such an in­ the Chief Executive by the Board of* fluence abwt their loans, about the Directors. It is in the fitness at terms of loans, good loans, bad loans things, if the 'management is to be- and extending indiflnitely the term of managed as a joint stock company. repayment etc. that I think you would agree that this Bill is intended to put Shri IMP. Thirumala Rao: You don't an end to this State of affairs in the agree that the Chairman under the banking industry. So this bill is sought Act will not be subject to any* undue to be placed on the statute-book. Do influence and pressure by the Board you want to perpetuate the same thing of Directors to suit their purposes? again? There are several cases of peo­ ple who have taken lakhs of rupees Shri Pratap Bhogilal: It was never­ not merely for industrial purposes or so in Ihe past. It can never be for business purposes but for using also. it for some .other purposes as well and Shrlmati Sucheta Kripalani: I want stalling the repayments. There are to refetr to page 12 of the Bill, to clause several cases like that. In order to 38 AE. There it says ‘persistently remedy these affairs when you ask for failed \o comply with the directions’ - a chairman who m*ay not be comple­ Now, *rhat do you think would con­ tely under the directors would you stitute persistent failure on the part envisage a position like this? For of the bank? example, a municipal corporation is there and the executive called the Shri Pratap Bhogilal: It is difficult commissioner of the corporation has for us to say. The Reserve Bank got certain executive powers—some­ gives certain directives. If the direc­ what independent of the corporators. tives are not complied with by the The corporators will have statutory board of directors or by the chairman powers like rules, regulations and then the powers should be vested with resolution. But the executive capacity the Reserve Bank to remove. of the Chairman should not be easily amenable to the influence of these Shriiraati Sucheta Kripalani: What directors. Do you envisage such a posi­ do yo\4 say, is it a wide power or tion if you are to remedy present limited, or it should be further defin­ state of affairs? ed or qualified or should it be as it is? W! *t is your view?

Shri Pratap Bhogilal: I don’t agree Shri Pratap Bhogilal: It should be with you, with due respect to your more specified. point of view that the position there is in the nature of the municipal cor­ Mr. Chairman: Thank you very- porators. The second thing is this. I much. do no agree with you that there has (The witnesses then withdrew) been such an interlocking between business and industry and banks that II. Shri V. T. Dehejia, Chairman,. certain things have acted against the State Bank of India interents of the country. After all the percentage of such banks advances as (The witness was called in and her you have pointed out is very very in- took his seat). finitislmal. The composition of the Board of directors is being changed. Shri Jyotirmoy Bosu: You have 51 per cent are non-industrial direc­ given a very interesting note andt tors. After all, the banking company after you left day before yesterday Is a company. And if the Board of we had met your staff people and they Pirect.ors is there, the Board of Direc­ all seem to be quite happy with the tors is supposed to guide and control staff relations in the State Bank of and direct the affairs of the Bank. India. I don't think you will contra^- The powers otight to be delegated to diet that. H 7

Siiri V. T. Dehejia: It is a very good also a number of other cases, in res­ compliment to both sides, to the em­ pect of individuals as well as bankr ployees as well as to the management. as a whole. Take for instance at Patna. A number of bad instances did Shri Jyotirmoy Bosu: It is very happen in Patna a year ago*- I can good. Have you more than 1,75,000 multiply the instances. staff? ^fhat is your staff strength? Shri Jyotirmoy Bosu: You don't Shri V. T. Dehejia: 48,000. make a 'mountain out of a mole-hill.

Shri V. T. Dehejia: It is not so Shri Jyotirmoy Bosu: Why are you supporting this 36 AD? Shri K. N. Tewari: Was there any Labour trouble in any of your Bran­ Shri V. T. Dehejia: When I talk of ches—any strike or gherao? the provisions of the Bill it is not with respect to the State Bank of India Shri V. T. Dehejia: Gherao I can­ alone but it applies to entire banking not recall. There was a strike by a industry. And I take into account fairly large section on the 28th of what is happening in the entire bank­ February this year. ing industry and not only what happens in the State Bank of India. Before that, for the bank as a whole, I don’t recall strike but in Shri Jyotirmoy Bosu: I have to other individual offices, there has compliment you that the staff relations been accessation of work. are good because you give them a human treatment. You try to look Shri K. N. Tewari. You have stated into their difficulties because you take that the relations between the staff personal care and interest in their and the management are very cordial affairs. Don’t you think if the other and good. banks follow the example like this in their staff relations there should be Shri V. T. Dehejia: It is cordial i)one of the articles like 36AD? and good. When I say it is good, it is with the top management and the Shri V. T. Dehejia: As I have top officials or leaders of most of the stated earlier good relations are due unions. That does not apply to all the to both sides—management as well unions or leaders or all the staff of as the employees. Some of our unions the branches. and the federation itself is good and reasonable and that is why our rela­ Shri K. N. Tewari: What is the tions are good and we are able to lean that you give to agriculturists? maintain good relations. I have seen that it is wholly and completely out Shri V. T, Dehejia: We have given of hand in certain banks. all-told a loan of Rs. 183 crores for agriculture and allied purposes includ­ ing thte cooperative societies. Shri Jyotirmoy Bosu: The Gentle­ man who came from Union Bank Mr. ^ChaudHury Nitiraj Singh: Out of a Nariman said like this. He has had 35 tota of what? - years of standing in the banking in­ dustry. He believes in your philoso­ Shi I V. T. Dehejia: Out of a total phy*. He does the same thing as you of Rs. 600 and odd crores. Thi$ is a do. The relation there as between very large proportion. staff and management is good.

Shri V. T. Dehejia: The Syndicate Shri K, N. Tewari: For what pur­ Bank had lot of trouble. Their work­ pose you make the advances to the ing had come to a standstill. There are agriculturists. "Shri V. T. Dehejia: Our advances Shri K. N. Tewari: Uptil now our •are to cooperatives. These are the experience is that whatever advances the figures as on 31st March 1968: the agriculturists get, they get them Cooperatives Rs. 121 crores. through cooperatives. Are you to make advances through the coopera­ Warehousing Rs. 18 crores. tives? And should they not be di­ Agriculture proper Rs. 45 crores. rectly to the agriculturists? They are also divided purpose wise like this: Shri V. T. Dehejia: We make ad­ vances to the agriculturists directly For production. Rs. 90 crores. also. This point I want to make. For process Rs. 12 crores. For storage Rs. 18 crores. Shri K. N. Tewari: Will you tell Rest for marketing. us that the system of making direct advances to agriculturists should be I have got divided this into different encouraged and should be adopted by parts—poultry, farm, markets, dairy all types of banks? faming, finance for production, agri­ cultural produce, finance for tractors Shri V. T. Dehejia: I see no diffi­ and other implements. I have got the culty. If you prefer to combine this, figures. that is a different matter. Instead of doing that they are proposing to form Shri K. N. Tewari: Do you make an agricultural finance corporation. I advances* only through cooperatives or think it is a good move. The Indian make advances directly to them too? Bank’s Association has set up an Agricultural Finance Corporation and Shri V. T. Dehejia: We have got that Finance Corporation advances direct advances to agriculture also. loans. I think this is a good arrange­ ment. Shri K. N. Tewari: Do you give .through your branches—some selective Chaudhary Nitiraj Singh: You said branches at different laces? that Rs. 183 crores are advanced to agriculturists: May I know which Shri V, T. Dehejia: I would not be State of the country has got the maxi­ able to say whether very branch has mum amount? this. But, it is all over India. Shri V. T. Dehejia: I have not got Shri K. N. Tewari: Will you agree the statewise break-up but I have got with me if 1 suggest that advances to the purposewise break-up with me. agriculturists for agricultural develop­ Production Rs. 90 crores. ment such as for purchase of tractors Process Rs. 12 crores. and so on should be introduced direct but not through cooperatives? Direct Storage Rs. 18 crores. advances should bv. made through the Marketing Rs. 60 and odd crores. banks. Shri Kamalnayan Bajaj: You have Shri V. T. Dehejia: It should be held very important posts in Govern­ well as to cooperatives depending on ment a$ administrator and also as wel as to cooperatives depending on head of the biggest commercial bank the conditions of the area—in some fn the country. Because of your ex­ areas, cooperatives are well-developed perience, can you enlighten us that while in some areas they are not well- when the directive as it is provided in developed. The bank should not start the Bill in Part, IIC, 36AE(I) that if Stepping on the toes of cooperative, any bank does net follow repeatedly ■the cooperative movement should the directive or fails to follow the succeed and it is s part of our Consti­ directive of the Reserve Bank under tution also. some given circumstances, on the re­ 119 commendation of the Reserve Bank, Shri Kamalnayan Bajaj: That might that particular bank would be nationa­ be due to inefficiency on the part of lised. If the management or the somebody. The responsibilities on the Board of directors1 are at fault in part of the Reserve Bank may not be carrying out the policies or the direc­ very effective. tives given by the Reserve Bank, as an administrator do you think that Shri M. Thirumala Rao: The powers under the administrative action, the are not very effective. management if it is bad, could be taken over? This is one thing. Should Shri Kamalnayan Bajaj: The powers the ownership also be taken over by are' not very effective. Or due to administrative action without going inefficiency the Reserve Bank wfes not to Parliament? very effective. In some cases, you Shri V. T. Dehejia: I see nothing might recall that they have taken wrong in the proviso. action and they have removed the Shri Kamalnayan Bajaj: Has it persons concerned. been done in any industry or wher­ ever it is badly managed—in textile Shri V, T. Dehejia: They have stop­ and so on—the Government takes it ped some advances or they have &sk- over for the management to take over ed them to re-pay to the Banks. In the ownership by nsgotiation is a one case the Chairman had to resign •different story, but to take over by from a bank because a loan was given •administrative action. The policy­ by him to a particular concern. These making authority would be the Re­ instances are there. But, in spite of serve Bank and the same authority that, there are quite a few instances would be the judge and whetehr that known to be of bad bankers. policy has repeatedly been failed or whether the same authority would re­ Shri Kamalnayan Bajaj: This Bill /commend as to whether such a bank prohibits completely giving of dvaoces should be nationalised or not and where common directorship is there. whether there is a possibility of dis­ Do you not think that it will ham­ crimination or not in that? per the experience available to botn Shri V. T. Dehejia: I do not think the companies and the banks. Instead there is the least possibility of discri­ of that if it is provided that advances mination; the Reserve Bank, in the are given only subject to the permis­ -past, had exercised powers with ex­ sion of the Reserve Bank—something treme care. like that—will it satisfy the objective that is behind the Bill? Shri Kamalnayan Bajaj: In your experience, Mr. Dehejia, whether the Shri V. T. Dehejia: This question common directorship has been mis­ used in any bank. The other day if was also aaked earlier and in my reply I remember correctly, you said some­ I said that it would not be practicable thing that the common directorship for the Reserve Bank to scrutinise the advances thoroughly because so many has been misused in some of the factors arc suppressed. The Reserve banks. Rimlr cannot go into the detailed Shri V. T. Dehejia: That is true. working of the banks. It has got to Shri Kamalnayan Bajaj: And for go on certain facts which are furnish­ stopping that, whether the Reserve ed. Bank, under the Bill, has sufficient power or not so that certain issues Shri M. Thirumala Rao: There is a could be corrected? general reputation for the State Bank, Shri V. T. Dehejia: Whatever the that one who goes to the State Bank must have to stay for longer time than powers the Reserve Bank has, it has if he goes to other banks. Is it your not been able to implement these experience? Have you received such

complaints that people have to spend vote unless he has got qualifying more time in the State Bank even to number of shares. cash a cheque? Shri V. T. Dehejia: That is what Shri V. T. Dehejia: I have received I have explained to you that the de­ such complaints. In some cases they positors’ interests 'are safeguarded by are true and while in some others I a variety of ways. found they are exaggerated. Shri M. Thirumala Rao: Why vica­ Shri M. Thirumala Rao: Is it be­ rious way of safeguarding? After all cause of a feeling that State Bank the shareholder holds a much smaller being a State-owned bank, it is just holding. A mfen holding Rs. 50 lakhs like public undertaking? You know worth of shares controls an asset of the history of public undertakings in Rs. 200 erores of deposits. the country. Apart from the principle of socialism that all the public under­ Shri Morarji R. Desai: The hon. takings must be managed by Govern­ Member knows that in other com­ ment, is there any possibility of a panies also there are depositors. Have remedy for this thing, as a matter of they any representation? Are they competition with other banks where making deposits in order to have re­ they are getting better service? presentation?

Shri V. T. Dehejia: We are putting Shri M. Thirumala Rao: My points through a scheme which should soon is. . . give quick service. We are introduc­ ing a thing known as teller system. It Mr. Chairman: He has clearly stated has been introduced in some branches that in his answer. and it will soon be extended to more branches. Under that we would be Shri M. Thirumala Rao: Sir, he is able to compete like banks in foreign the head of a whole public institution. countries. He is different from private banks.

Shri M. Thirumala Rao: Then there Mr. Chairman: If he does not state is the question of representation to as you wish him to say, you should staff of the Bank on the Directorate. not go on pressing. Have you given your thought to this? Shri M. Thirumala Rao: It is all against orthodox thinking. But there Shri V. T. Dehejia: No. is nothing which will prevent him- Is there a possibility of Government Shri M. Thirumala Rao: You don’t? having it? That is all what I want Have you ever thought of the idea of to know. representation of the depositors also on the Board of Directors? Shri S. S. Kothari: There is a cor­ poration for guaranteeing loans to Shri V. T. Dehejia: It does not arise. small-scale industries. Would you be in favour of a similar scheme for Shri M. Thirumala Rao: This is guaranteeing loans to agricultural sec­ quite an orthodox way of reply. tor so as to safeguard the interests of Shri V. T. Dehejia: The depositors depositors? are such a body, for them to elect one Shri V. T. Dehejia: I don’t think person is not possible. And the Direc­ such a corporation would be necessary. tors of the Bank are also depositors A bank taking a risk should itself as­ of most of them. sess the risk. If it is to depend on a guaranteeing organization, then thfr Shri ML Thirumala Rao: Thtet is not lendig will become indiscriminate. the point. But a depositor cannot Ill

Shri S. S. Kothari: Then why was it bhri Samarendra Kundu: You think considered necessary in the case of the borrowers, the individual bor­ loans to small-scale industries? rowers and big industrial houses can­ not influence the Chairman and Shri V. T. Dehejia: Firstly the guar­ Board of Directors if it is re-organiz­ antee organization has not been resor- ed, to give special privilege,to certain ie

Shri V. T. Dehejia: Computerised Shri V. T. Dehejia: In the case of judgement will not work. Whether it State Bank, advances to Directors is a democracy or controlled demo­ include advances to the members of cracy or even dictatorial, judgements local boards also. We have got seven, are personal. local Boards and one Central Board. There are in all 49 persons as at the Shri Samarendra Kundu: Similarly end of December 1967. So when we in subclause (c) of Section 36AD(1) mention that, it covers the entire should not ‘in any manner* be quali­ batch of 49 persons. While in the ca se fied? Don’t you think that it will be of other banks the Board of Direc­ better to be moire .specific, instead of tors would be, say, of 10 to 12 per­ being specific? Will it not be better sons; and that will cover only 10 to 12' if it is stated, 'in any manner detri­ persons. mental to the interest of the deposi­ tors*? Shri Morarji R. Desai: You were asked and 'told and complimented that the relations between the mana­ Shri V. T. Dehejia: Palai Bank gement, the Board and the staff have worked in a manne'r detrimental to been happy. That is, there has been the interest of the depositors and ac­ no violent trouble. Do you think it tion had to be taken. Advances were has not put a strain to do all that on of a particular type; they could not the Board? be recalled; they could not materia­ lise. Again, I may say that compu­ Shri V. T. Dehejia; Yes. terised judgement will not work; a judgement has to be made. If you weTe to say, 'if so many advances Shri Morarji R. Desai: Do you think are sticky*, it will be far more com­ these healthy relations will] always plicated. it may act otherwise also. be there? And they will not be affected by what is happening in other banks? Shri Samarendra Kundu: Yours is State Bank. Supposing it wdre in Shri V. T. Dehejia: One can never the private hands, the Directors be stfre that it will always be so. would be trembling in fear that they will be called to book, which in turn Shri Morarji R. Desai: Do you think will affect the growth of banking in­ that the absence 0f this nature would dustry. They must know what is not be conducive to the future help- the specific allegation what is the to banking institutions? meaning of ‘persistently*, what is the meaning of ‘in a maimer calculated* Shri V. T. Dehejia: I think an. As- etc. They must know what are the tually it was mentioned by the hon. types of advances that go against the member concerned. He put it that banking policy or against the inter­ I had taken special pains in thls- ests of depositors. matter. 124

Shri Morarji R. Desai: Is it also due Shri V. t . Dehejia: I do not know ~to the fact that the State Bank is of any such notice for some montns. giving very high emoluments as a result of the legacy of the Imperial Shri Morarji R. Desai: Threat can­ Bunk that you have? not be objected to.

Shri V. T. Dehejia: Yes. Shri Samarendra Kundu: Mr. De­ hejia, don’t you think that the pro­ Shri Morarji R. Desai: Therefore, motion of Banking business is very that also is the reason why the rela­ necessary for industrial harmony and tions are healthy. peace in the banks?

It has been asked sometimes in the Shri V. T. Dehejia: At a price. •course of evidence whether the Re­ serve Bank has ample powers, as it Shri Samarendra Kundu: Price may is. Do you think that the powers be too heavy. Don’t you think that the Reserve Bank had so far, are suffi­ for industrial harmony and peace in cient to carry out the new policy re­ banking industry, personal relations garding the working of the Banks between management and workers, contained in this new Bill? etc. are very necessary? Shri V. T.Dehejia: No; because I Shri V. T. Dehejia; Yes, I do agree. liad onre made an analysis of the powers of the Reserve Bank, and the Shri Samarendra Kundu: Going a wording chosen was such all along step further, don’t you think that in the sections that the Reserve Bank the fear of a sword hanging on the would find it difficult to act under head of these workers—I am referr­ the existing Act. ing to section 36AD—will always dis­ turb industrial harmony and peace? Shri Morarji R. Desai: Would you say that the policy followed by the Shri V. T. Dehejia: I would not Banking institutions in this country describe it as a sword hanging over was the same as it has been now one’s head. Now, take this direction sought to be re-oriented in this new ‘Please don’t smoke*. This is not like Bill? a swotrd hanging over one’s head. Shri V. T. Dehejia: In the Bill, the There are things like that. policy has been, as I explained in rerply to some questions, certainly Chaudhary Nitiraj Singh: Are you oriented towards particular sectors. If satisfied with the investment the I may put it, it is a very long step State Bank made for agricultural towards controlling banking indus­ purposes or that some steps should try. ' be taken to improve? An hon. Member: Are you awaire Shri V. T. Dehejia: We want, to of the fact that same of the emplo­ yees in your Parliament Street improve. Branch were harassed by the super­ Chaudhary Nitiraj Singh: What visory officials recently? If so, have wouM you suggest for improving that? you made any enquiry? Shri V. T. Dehejia: Actually it has Shri V. T. Dehejia: Agriculture ad­ been brought to my notice. I have vances. We are setting up cells, that started enquiry into the matter. is, units in all our local head offices which will undertake proposals of Shri M. Thirumala Rao: Last week direct advances to agriculture and we I read in some newspaper that the would like to go in advance for employees of Bombay office gave a n°- fertilisers, insecticides, tractors, *tice for strike. Are you aware of it? pumps, etc. They will go into the 125 question and on the basis of additio­ Shri V. T. Dehejia: The banks nal productivity* being achieved by scales are very much higher for these inputs the results would be clerks. His comprehensive emolu­ assessed and loans given. This will ments are Rs. 275 to Rs. 300 and be be primarily at our local head offices can rise without a day’s promotion and the Central head office. Firstly, to thousand rupees. we are taking intensive areas. We are setting up an office at Pant Nagar. Shri K. N. Tewari: What total amo­ unt you pay yearly for overtime? Shri C. M. Kedaria: You have had good experience in the Administra­ Shm V. T. Dehejia: I cannot say. tion and also as the Chairman of the Mr. Chairman: Thank you very State Bank. Will you please tell us much, Mr. Dehejia. regarding the emoluments and pay- scales paid to the bank employees as (The witness then withdrew) compared to the Government em­ ployees? Who are at an advantage? (The meeting then adjourned)

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