R.C. COOPER VS. UNION OF INDIA

COURT: Supreme Court of India

CITATIONS: 1970 AIR 564, 1970 SCR (3) 530, AIR 1970 SUPREME COURT 564

DATE OF JUDGMENT: 10 February, 1970

BENCH: 11 judges

FACTS:

1. The Government of India, through the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, nationalized 14 major banks.
2. C. Cooper, a shareholder of one of the nationalized banks (Central Bank of India), challenged the Act, arguing it violated fundamental rights under Article 19(1)(g) (right to practice any profession, trade, or business and Article 31 (right to property).
3. The government justified the nationalization on the grounds of economic growth and control over credit to serve national interests

ISSUES:

1. Whether the Act violated the fundamental rights of shareholders, banks, and employees under Articles 19(1)(g) and 31 of the Indian Constitution?
2. Whether the doctrine of eminent domain was correctly applied in nationalizing private banks?
3. Whether compensation provided to shareholders was adequate and fair?

LAW APPLIED:

1. Article 19(1)(g): Right to practice any profession or
2. Article 31; Right to property (prior to its deletion by the 44th Amendment).
3. Doctrine of Eminent Domain: The state’s right to take private property for public use with compensation.

JUDGMENT:

The Supreme Court in R.C. Cooper v. Union of India (1970) struck down the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, ruling it unconstitutional. The Court held that the Act violated Article 19(1)(g) (freedom of trade and business) and Article 31 (right to property) by unfairly restricting shareholders rights and failing to provide just compensation for nationalized banks. It emphasized that fundamental rights are interlinked, and government policies, including nationalization, must be subject to judicial review. This landmark judgment expanded the scope of fundamental rights and reinforced protection against arbitrary state action in economic matters.

LEGAL PRINCIPLES:

1. Fundamental Rights Are Interlinked: Property rights (Article 31) affect business freedom (Article 19(1)(g)).
2. Shareholders’ Rights Recognized: They can challenge
3. Eminent Domain Requires Fair Compensation: Government must provide just compensation for acquired property.
4. Judicial Review of Economic Policies: Nationalization must comply with fundamental rights.
5. Business Freedom Protected: Restrictions must be reasonable under Article 19(6).

ANALYSIS:

1. The Supreme Court ruled that nationalization directly affected the business of banks and shareholders and was not merely an issue of ownership.
2. It held that the Act was unconstitutional as it violated fundamental rights under Article 19(1)(g), affecting the shareholders’ rights and interests.
3. The Court also observed that compensation provided was not fair and just, making the acquisition unlawful.
4. The ruling overturned the earlier Sholapur Spinning Mills Case, where it was held that only companies (not shareholders) could challenge such acquisitions.

CONCLUSION:

The Supreme Court struck down the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969, as unconstitutional. The case significantly impacted constitutional law and property rights, reinforcing the principle that individual rights could not be ignored under the guise of economic policies.