On February 10, 1970, a Supreme Court verdict stunned the country: the nationalisation of 14 major Indian banks by Prime Minister Indira Gandhi in 1969 was ruled unconstitutional. The reason? The method of compensating the banks' shareholders was deemed unfair.
The decision, broadcast on All India Radio, caught many off guard — especially members of the ruling Congress party. The news rippled through Delhi’s political circles and reached the residence of then Chief Justice Mohammad Hidayatullah just as he was hosting a dinner party. There, over drinks and hushed conversations, a historic moment was quietly unfolding.
The Bold Move of 1969
On July 19, 1969, Indira Gandhi’s government nationalised 14 of India’s largest commercial banks, which then controlled around 70% of the country’s deposits. The move, packaged as a push toward socialism and financial inclusion, was seen as a political masterstroke that aligned with Gandhi’s pro-poor image.
But bank owners and legal experts raised questions: could the government simply take over private property? And if so, was the compensation offered fair?
Legal Challenge and Verdict
R.C. Cooper, a shareholder in the Central Bank of India, filed a case against the government, arguing that his fundamental rights were violated. The Supreme Court, in a majority verdict, agreed. The bench held that the government’s acquisition of the banks violated Article 31 (right to property, since repealed) and that the method of compensation was discriminatory.
The judgment didn’t oppose nationalisation per se but attacked the manner in which it was carried out — particularly the provisions that denied banks the right to manage their businesses during the transition, and the inadequacy of the compensation provided.
Political Aftermath
The verdict posed a major challenge to Indira Gandhi’s authority. Within days, her government responded by introducing an ordinance to nullify the judgment and by swiftly drafting a new version of the nationalisation law, this time with carefully worded compensation clauses. Parliament passed it almost immediately, and the banks remained nationalised.
Later, in 1971, the Constitution was amended to ensure that certain laws related to property acquisition would not be subject to judicial review — a move seen by many as a direct fallout of the bank nationalisation case.
A Landmark in Constitutional Law
The case — R.C. Cooper vs. Union of India — became a landmark in Indian constitutional jurisprudence. It helped redefine the relationship between individual rights and state power and laid the foundation for future cases involving economic and property rights.
As for the radio bulletin and the dinner party, they remain symbols of how deeply law, politics, and daily life intersect — moments when the course of a nation shifted over the clink of glasses and the crackle of a radio broadcast.
FAQ
1. Why did the Supreme Court rule the 1969 bank nationalisation unconstitutional?
The Supreme Court found that the method of compensating shareholders was unfair and discriminatory, violating their fundamental rights under Article 31 (Right to Property, since repealed). The ruling didn’t oppose nationalisation itself, but objected to the manner in which it was carried out.
2. Who filed the case against the bank nationalisation?
Rustom Cavasjee Cooper, a shareholder in the Central Bank of India, filed the petition that led to the landmark case R.C. Cooper vs. Union of India.
3. What happened after the verdict?
Prime Minister Indira Gandhi’s government quickly passed an ordinance and a revised law to override the judgment. The banks remained nationalised with improved compensation terms.
4. How did the government respond politically?
In response to the verdict, the government passed a constitutional amendment in 1971 to prevent such economic laws from being overturned by the courts in the future.
5. Why is this case significant in Indian constitutional history?
The R.C. Cooper case redefined the interpretation of fundamental rights and property rights, influencing later judgments such as Kesavananda Bharati vs. State of Kerala (1973), which established the “basic structure doctrine.”
6. What’s the connection to the dinner party and radio news?
The verdict was announced via All India Radio, and the Chief Justice was reportedly hosting a dinner party when the news broke — symbolising how the decision echoed instantly through both public and private spheres.
Publish on JUNE 4,2025 by :selvi