1. This is an appeal by the Corporation of the City of Nagpur against the order of acquittal passed by the Judicial Magistrate, First Class, (Corporation) Nagpur, on 17 May, 1974, acquitting the agent of the Bank of Baroda who was charged for an offence under S. 7(2A) of the Bombay Shops and Establishments Act, 1948. It appears that on 8 January, 1974, at about 10.45 A.M the shop inspector attached to the corporation visited the premises of the Bank of Baroda, Dharampeth Branch, Nagpur, and observed that the employer had failed to send an application in the prescribed Form B for renewal of registration certificate in respect of his establishment for the year 1974. After going through the formalities, a challan was lodged.

2. On behalf of the accused it was contended that the provisions of the Shops and Establishments Act, 1948 (Act No. 79 of 1948), do not apply and as such there was no necessity of taking any such licence. It may be observed that subsequently for the same year 1974, such a licence has been asked for and granted and for subsequent years also the bank has taken care to get such licences. However, it is desired by both the contesting parties that the matter should be decided authoritatively whether such a licence is necessary.

3. According to S. 7 of the Shops and Establishments Act, registration of establishment is to be done by sending a statement in the prescribed form together with the prescribed fees. Section 4 of the Act, provides for exemptions. It is Sch. II of the Act which is referred to by S. 4 and such of the provisions as are mentioned in column 3 of that schedule would not apply to the establishments mentioned in column 2. An “establishment” hap been defined by Sub-sec. (8) of S. 2 of the Act. It means a shop and commercial establishment together with other concerns referred to with which we are not concerned in this appeal. “Commercial establishment” has been independently defined in Sub-sec. (4) of S. 2 of the Act. It means an establishment which carries on any business, trade or profession or any work in connexion with or incidental or ancillary to, any business, trade or profession. There is no dispute that the functions of the bank make it a commercial establishment. If we have a look at item 118 of Sch. II to the Shops and Establishments Act, 1948, we find banks included in the schedule, but column 3 will show that the provisions of S. 13 alone are exempted. Reading this entry an impression would be created that the registration certificate contemplated under S. 7 of the Act would be necessary in respect of the respondent-bank also.

4. However, the learned counsel appearing for the respondent relies upon entry 1 in Sch. II which relates to establishments of the Central Government and exempts such establishments from all provisions of the Act. According to the learned counsel, after the passing of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (Act No. 5 of 1970), the character and functioning of the scheduled banks have changed and they have become establishments of the Central Government Bank of Baroda limited is mentioned in column 1 of Sch. I to this Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The newly corresponding unit as would be apparent from column 2 is Bank of Baroda. Thus the limited character is lost and Cl. (d) is also abolished.

5. A number of provisions were referred to in the arguments by both sides in support of the rival contentions that Bank of Baroda is an establishment or is not an establishment of the Central Government. The Act came into force on 19 July, 1969. Chapter II deals with transfer of the undertakings of existing banks as specified in Sch. I. Sub-section (1) of S. 3 lays down the formation of the corresponding new banks as specified in Sch. I. Sub-section (3) of S. 3 is as follows:

“The entire capital of each corresponding new bank shall stand vested in, and allotted to, the Central Government.”

It is this provision and some other provisions which are strongly relied upon by the learned counsel for the respondent for saying that the entire vesting of the properties is in the Central Government, the entire management is with the Central Government and as such the undertaking now has to be looked upon as the establishment of the Central Government.

6. The management of corresponding new banks is dealt with under Chap. IV of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (hereinafter referred to as the Transfer of Undertakings) Act. Sub-section (1) of S. 7 speaks of the location of the head office, whereas Sub-sec. (2) lays down that the general superintendence, direction and management of the affairs and business of a corresponding new bank shall vest in a board of directors which shall be entitled to exercise all such powers and do all such acts and things as the corresponding new bank is authorized to exercise and do. section 8 of that act enjoins that the new banks are to be guided by the directions of the Central Government in regard to matters of policy involving public interest. Section 9 speaks of the power of the Central Government to make scheme after consultation with the Reserve Bank. Under S. 10 new banks are under obligations to keep the books of accounts closed properly and get them audited with the approval of the Reserve Bank.

7. It is, therefore, argued that there is sufficient control of the Central Government on all activities of the new banks and by reason of the express provisions of Sub-sec. (3) of S. 3 entire capital stands vested in the Central Government. It is, therefore, said that the respondent-Bank of Baroda, should be looked upon as an undertaking or an establishment of the Central Government so that there was no necessity of taking any registration certificate.

8. Our enquiry with the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, however, would be incomplete if the provisions above said alone are looked into and opinion is formed thereon. The cumulative effect of all the provisions would be necessary for giving a final finding whether the new bank is a Central Government establishment or is as if a department of the Central Government directly run by it. The scheme of Chap. II would show that when the transfer of undertaking was taking place corresponding new banks were established. Provision regarding their paid up capital, etc., was made. The establishments were vested in the Central Government, but so far as the management is concerned, it appears that there is sufficient latitude and independence for the banks to carry on their business. Sub-section (4) of S. 3 provides that the new bank shall be a body corporate with perpetual succession and common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property and to contract, and may sue and be sued in its name. With certain limitations, therefore, the new banks are independent corporate bodies and have their own common seal and succession. The contracts are to be independently entered into and the liabilities when sued are viewed in the name of the banks conceived as different entities.

9. In this light S. 4 of the Act is material. It is no doubt true that the previously existing undertakings were transferred when new banks were created. The provision runs as follows:

“On the commencement of this Act, the undertaking of every existing bank shall be transferred to, and vest in, the corresponding new bank.”

The undertaking, as such, therefore, is not merged in or amalgamated with the Central Government, but remains vested in the corresponding new bank which is to be looked upon as a separate unit. What is an undertaking may not be of much relevance in this appeal. The learned counsel for the respondent relied upon the observations in R.C Cooper v. Union of India [(1970) 1 SCC 248 : A.I.R 1970 S.C 564]. In Para. 176 at page 630, the observations are:

“The undertaking of a bank will, therefore, be the entire integrated organization consisting of all property, moveable or immoveable and the totality of undertaking is one concept which is not divisible into components or ingredients.”

10. Whatever be that concept, S. 5 of the Transfer of Undertakings Act dealing with the general effect of vesting is clear that the undertaking of each existing bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, moveable and immovable, cash balances, reserve funds, investments and all other rights and interests in, or arising out of such property as were immediately before the commencement of this Act in the ownership, possession, power or control of the existing back in relation to the undertaking. Reading of this provision would thus show that the undertaking stands vested in the new bank. Sub-section (4) of S. 5 further provides that unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, power of attorney, etc., subsisting immediately before the commencement of the Act to which the existing bank was a party shall be of as full force and effect against or in favour of the corresponding new bank Similar provision in respect of pending action seems to have been in Sub-sec. (5) of S. 5.

11. The board of directors, appointed for the management is to work on this background of the vesting of the assets, etc., in the new bank and having the same liabilities obligations or rights as the transferror banks and had before the creation of the new banks. Detachment of the control of the Central Government is thus apparent.

12. In this connexion, we can usefully refer to S. 11 of the Transfer of Undertakings Act under which the corresponding new bank is deemed to be an Indian company for the purposes of the Income-tax Act, 1961. Although it is true that the undertaking is looked upon as an Indian company for some specific purpose, namely, for the purpose of Income-tax Act, it gives us an idea as to the manner in which the unit or the concern is treated by the Central Government. Section 18 of the Act provides for dissolution. There is a prohibition that winding up laws would not apply to the corresponding new bank. It further lays down that the corresponding new bank cannot be placed in liquidation save by order of the Central Government and in such manner as it may direct. Although the dissolution of the new bank is thus entirely with the Central Government the remaining provisions can be of immense use in understanding the character and function of the new banks inasmuch as with the permission of the Central Government liquidation proceedings could be started which could never have been the effect had the new banks been the concerns or the establishments of the Central Government. I do not think, therefore, that the learned counsel for the respondent is on a sound footing when he says that the respondent-bank is an establishment of Central Government.

13. The learned advocate for the appellant Miss Deshpande who ably argued her case placed reliance upon a number of decisions calculated to show that in similar concerns such as Life Insurance Corporation, State Road Transport, Hindustan Steel, etc., Art. 311 of the Constitution does not apply, which would have been the case had the concerns been of the Central Government. Our case would have to be looked upon as standing on par by reason of the provisions of the Transfer of Undertakings Act, looked into in details so far. It would be useful in this connexion to look to the observations of the Bench in Subodh Ranjan Ghosh v. Sindri Fertilizers [A.I.R 1957 Pat. 10]. While denying the application of Arts. 311 and 320 of the Constitution to the employees of the Sindri Fertilizers Company, it was observed that in the eye of the law the company was not the agent of the Union Government or trustee for them. As the name suggested, it was a limited company, but it was completely owned by the Union Government. The directors were appointed by the President, who was also authorized to remove those directors from office in his absolute discretion. The decision, of the case, turned on the character of the company remaining as a separate legal entity having separate legal existence, as the name indicated. The provisions of the Transfer of Undertakings Act in my opinion lead us to a similar conclusion that the new banks are separate entities.

14. A study of the different entries in the Shops and Establishments Act would also be profitable. It is already seen that banks are referred to in item 118 of Sch. II to the Act. Without that exemption, though partial, banks would be looked upon as commercial establishments having the obligation to conform to all the requirements of the Act. It could be legitimately said that the entry does not apply to the bank with which we are concerned it being a nationalized bank and that after the Act of 1970 that entry would be applicable only to the non-nationalized banks. A look at item 6A shows that the offices of the Reserve Bank of India are exempted from the provisions of the Act. In other words without this exemption even the offices of the Reserve Bank of India would have been subjected to the obligations under the Shops and Establishments Act. If this is the inference in respect of the Reserve Bank of India, I suppose it would apply with stronger force in relation to the new banks. Item 91 provides for exemption to the offices of the State Bank of India in certain respects thus showing that even such in exemption would not have been available if there was no such item. It would be of interest to note that establishments of State Government, establishments of local authority and establishments of railway administration are specifically exempted by entries 2, 3 and 5 of Sch. II so that in their absence the Act could have been applicable to them also. On stronger reason, therefore, we should have expected an entry in the name of the nationalized bank in case any such exemption was intended.

15. I cannot, therefore, uphold the contention of the learned counsel for the respondent that the Bank of Baroda is exempted from the provisions of the Ships and Establishments Act it being an establishment of the Central Government. Consequently, the breach with which the bank was charged exists and an offence is proved. The judgment given by the learned Magistrate acquitting the accused cannot be upheld.

16. I must, however, observe that the case has come before me more as a test case and hence the finding ought not to be looked upon as a stigma or carrying the ill effects of a defaulter. Under S. 52 of the Act minimum punishment for the breach under S. 7 is of fine of Rs. 25. Hence I pass the following order.

17. The order passed by the Additional Special Judicial Magistrate, First Class (Corporation), Nagpur, dated 17 May, 1974, is set aside. The respondent is found guilty of the offence under S. 7 read with S. 52 of the Bombay Shops and Establishments Act, 1948. The respondent is fined Rs. 25. Four weeks time is granted for making the payment of fine.