Court case(1970) 1 SCC 248

On 19 July 1969 the President promulgated an Ordinance nationalising fourteen major Indian banks; it was replaced by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969. R.C. Cooper, a shareholder and director of the Central Bank of India, petitioned under Article 32. He argued that the Act took over the banks' business without real compensation, discriminated against the fourteen banks while leaving foreign and smaller banks free, and destroyed the banks' right to carry on business. The Union argued, on the authority of A.K. Gopalan, that a law of acquisition under Article 31 could not be tested under Article 19.

By ten judges to one (Ray J dissenting), the Court held the Act invalid. A shareholder can petition where State action impairs his own rights along with the company's. Rejecting the Gopalan approach, the majority held that the validity of a law is judged by its direct effect on fundamental rights, not by its object or subject matter; Articles 19 and 31 are not mutually exclusive. The compensation principles in the Act were illusory because they ignored the value of goodwill and other assets, violating Article 31(2); the Act also unreasonably restricted the banks' right to carry on business and was discriminatory. The Ordinance question was treated as academic, but the Court doubted that the President's satisfaction under Article 123 is wholly beyond review.