I. Legal Framework for Banks

1. Section 45 BR Act - Moratorium + Reconstruction / Amalgamation Scheme:
RBI can apply to Central Govt to place a banking company under moratorium and prepare a scheme of:

• Reconstruction, OR
• Amalgamation with another banking company.

Every such scheme under Section 45(5)(i) MUST contain provision for continuation of services of all employees.

2. 2020 PSB Consolidation: Under Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 & 1980 - 10 PSBs merged into 4. Gazette Amalgamation Schemes contained Clause 5 - Continuity.

3. IBC vs Banks: Lakshmi Vilas Bank, PMC Bank, Yes Bank were resolved under BR Act, not IBC.

II. What does Continuity Mean? - Supreme Court Interpretation

Continuity is not absolute same terms forever. Courts have balanced Article 14 & business necessity.

1. Punjab National Bank Ltd. v. Workmen (1963) - FOUNDATIONAL CASE

SC, 24 Jan 1963 - Merger of Bharat Bank Ltd. into PNB

Ratio:

• Successor bank inherits employees of transferor bank.
• Continuity of service recognized for gratuity, leave, PF.
• For pay fixation, seniority - employees can be integrated into transferee bank's structure.

2. K.I. Shephard & Ors. v. Union of India (1987) - Exclusion is Void

SC (1988) - Amalgamation of Hindustan Commercial Bank, Bank of Cochin, Lakshmi Commercial Bank

Facts: RBI scheme excluded 300+ employees saying they were not fit.

SC held: Exclusion violates natural justice under Article 14 & 16. Even in compulsory amalgamation under Sec 45, you cannot render employees jobless. All employees on rolls on date of amalgamation must be taken over.

This case is why every scheme now says "All employees shall continue".

3. New Bank of India Employees Union v. Union of India (1996) - PSB Merger

SC 13 March 1996 - New Bank of India merged into PNB

Most cited case for PSB mergers.

Scheme Clauses challenged:

• Clause 4(a)(iii) & 4(b)(ii) - 2 years service in Transferor Bank = 1 year in Transferee Bank for seniority/promotion.
• Reduction of retirement age from 60 to 58.

SC held:

• Employees of transferor bank will continue to be employees of transferee bank on same terms and conditions as they were enjoying under erstwhile employer - BUT subject to transferee bank's policies.
• Fixation of seniority 2:1 ratio is valid - merger of small bank with stronger bank cannot be ground to claim automatic seniority parity. Not arbitrary.
• Retirement age: Employees will be governed by terms of corresponding rank in transferee bank. So if PNB retires at 58, New Bank employees also retire at 58.

4. Canara Bank v. M.S. Jasra (1992)

Amalgamation - Lakshmi Commercial Bank into Canara Bank

SC held: While scheme may contain provisions regarding employees' terms, these are subject to transferee bank's existing policies upon amalgamation. Continuity does not mean you carry your old superannuation age forever.

5. Indian Bank v. K. Usha (1998)

SC held: Pre-amalgamation labour settlements of transferor bank are enforceable against successor bank under Section 19(d) Specific Relief Act. Successor cannot ignore settlements.

6. Yes Bank Ltd. Reconstruction Scheme, 2020 - MODERN RESOLUTION MODEL

Notification S.O. 993(E) dt 5 March 2020 + G.S.R. 174(E) dt 13 March 2020

Clause 7: Continuation of services of employees:

"All employees of the reconstructed bank shall continue to be employees of the reconstructed bank with the same remuneration and on the same terms and conditions of service, including terms of determination of service, for a minimum period of one year."

Proviso: Board may discontinue services of Key Managerial Personnel at any time after following due procedure.

Same clause was used in Lakshmi Vilas Bank Ltd. (Amalgamation with DBS Bank India Ltd.) Scheme, 2020.

Result: Moratorium lifted 18 March 2020, all 20,000+ employees retained, no retrenchment.

III. Practical Position Today

Key Takeaway for Employees:
If bank is under moratorium under BR Act, your job is protected by statute and scheme. You cannot be terminated as part of resolution. If it goes under IBC (like DHFL), protection is only under Sec 53 and resolution plan - continuity is not guaranteed, only priority of dues.