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(a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue;
(b) that the affairs of the company are not being, or are not likely to be, conducted in a manner detrimental to the interests of its present or future depositors;
(c) that the general character of the proposed management of the company will not be prejudicial to the public interest of its depositors;
(d) that the company has adequate capital structure and earning prospects;
The Petitioners filed a Writ Petition in the Delhi High Court challenging the scheme. However, pursuant to an Order of this Court dated 26th April, 2000, wherein it was directed that all matters connected with the amalgamation of SBL with UBI must be filed only in this Court that Petition was withdrawn and this Petition has been filed.
Mr. Lalit submitted that under the Act RBI has got wide powers to control banking companies. He submitted that RBI is to ensure that the affairs of banking companies are not being or are not likely to be conducted in a manner detrimental to the interest of the depositors. He submitted that RBI had not issued a license to SBL because it found deficiencies in its working and yet on 25th June, 1997 it permitted SBL to open a branch in Delhi. He referred to Section 23 of the Act whereby no banking company can open a new place of business without prior permission of RBI. He pointed out that before granting such permission RBI must be satisfied about the financial condition and history of the company, the general character of its management, the adequacy of its capital structure and earning prospects. He submitted that every banking company has compulsory to display the license issued by RBI at a prominent place. He submitted that the whole purpose is that the public would know whether to deal with a particular bank or not. He submitted that if a license is granted by RBI then the public would presume that the financial condition of the company and the general character of its management are good and that the company had an adequate capital structure and earning prospects. He submitted that in this case RBI was already aware, before it granted permission to open a branch, that SBL had not been able to raise the sum of Rs. 50 crores as directed by RBI; that it could raise its capital only to the extent of Rs. 15.18 crores of which Rs. 5.80 crores was by siphoning of the bank's own funds; that there were several irregularities in its functioning and that it had advised SBL to rectify its irregularities. He submitted that yet RBI granted the license to open a branch thereby enabling SBL to dupe innocent depositors. He submitted that even though RBI became aware by 1998 that non-performing assets were to the tune of Rs. 58.26 crores and that there was a short provision of Rs. 55.72 crores RBI allowed SBL to issue advertisements seeking deposits offering high rate of interest and did not warn the public: about the poor financial condition of SBL.