My guess is that this is a kidnapping gone wrong. Batman has abducted some random citizen for whatever improbable Silver Age scheme he has going on. (Hypnotize him to pose as Bruce Wayne, fer instance.) This is why he's lowering his cape, he had it wrapped around his victim's head. He is greatly surprised that his kidnappee is none other than Kent, who takes it in good humor as he loves far-fetched ruses himself and is willing to play along.