Bombay High Court
Sagar Maruti Suryawanshi vs Reserve Bank Of India And Ors on 12 March, 2021
Bench: K.K.Tated, Riyaz I. Chagla
34 WP 10740-19.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10740/2019
Sagar Maruti Suryawanshi .. Petitioner
vs.
Reserve Bank of India & Ors .. Respondents
.....
Dr. Abhinav Chandrachud, Deepali Kedar i/b Sagar K. for the
Petitioner.
Mr. Prasad Shenoy a/w Aditi Phatak i/b Udwadia & Co. for
Respondent No. 1.
.....
CORAM: K.K.TATED, &
RIYAZ I. CHAGLA, JJ.
DATED : MARCH 12, 2021 P.C. . Heard.
2. By this petition under Article 226 of the Constitution of India, the Petitioner is seeking directions against the Reserve Bank of India to take appropriate steps as per Section 35A of the Banking Regulation Act, 1949.
3. The learned counsel for the Petitioner submits that, Respondent No.1 has conducted Statutory Inspection under Section 35A of the Banking Regulation Act, 1949 for the financial position as on 31/03/2016 of Respondent No.3. He submits that in the Statutory Inspection Report, it is specifically described by Respondent No.1 that financial irregularity is committed by Respondent No.3.
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4. The learned counsel for the Petitioner submits that, some the irregularities are serious which are as under:
"4.1 Adherence to exposure norms: The bank had exceeded the respective single non-SLR investment exposure limit on ten occasions during FY 2014-15 and on five occasions during FY 2015-16 through its investments in units of debt/liquid mutual funds (List of Instances - LOI) Thus, the bank had violated instructions prescribed under para 13.1.3(h) of RBI Master Circular on Investments by UCBs issued vide DCBR.BPD(PCB).MC.No.4/16.20.000/2015-16 dated July 1, 2015.
5.1.1 Compliance with statutory and regulatory norms: The bank had not adhered to various exposure norms as detailed below:
(a) Single and group borrower exposure norms: The aggregate exposure of 2320.36 lakh under 13 term loans (LOI) sanctioned to Shri Vinay Vivek Aranha as on the DPI was in violation of the maximum Single Borrower Limit (SBL) of 1798.04 lakh as per para 2.1 of RBI Master Circular on exposure norms and statutory/other restrictions issued to UCBs videDCBR.CO.BPD.(PCB)MC. No.13/13.05.000/ 2015-16 dated July 1, 2015.
(Action)
(b) Exposure to Housing, Real Estate and Commercial Real Estate (CRE) sector: The bank reported its aggregate exposure towards housing, real estate and CRE sector as on the DPI at 12673.81 lakh. It was however observed that the bank had not considered the outstanding amount in case of cash credit accounts instead of the higher sanctioned amount (LOI). Considering he same, the bank's exposure towards housing loans for more than 25.00 lakh, real estate and CRE sector was assessed at 13845.83 lakh, which constituted Laxmi 2/5 ::: Uploaded on - 17/03/2021 ::: Downloaded on - 01/09/2021 09:07:19 ::: 34 WP 10740-19.odt 13.82% of previous year's net total assets (100124.39 lakh), thereby violating the limit of 10.0% prescribed vide para 2.3.1 of RBI Master Circular on exposure norms and statutory/other restrictions issued to UCBs vide DCBR.CO.BPD.(PCB)MC.No.13/13.05.000/ 2015-16 dated July 1, 2015. Further, after considering housing loans less than 25.00 lakh, the aggregate exposure of 16503.53 lakh at 16.48% of previous year's net total assets also violated the relaxed limit of 15% prescribed in para 2.3.1 of the Circular, ibid."
5. The learned counsel for the Petitioner submits that, as per Section 35A, it is the duty of Respondent No.1 to forward the said report to the Central Government or Respondent No.2 for taking an appropriate action. He submits that as Respondent No.1 has failed and neglected to do so, hence the Petitioner has filed the present writ petition for direction against the Reserve Bank of India to take action on the basis of their Statutory Inspection Report.
6. The learned counsel for the Petitioner submits that when the report is prepared RBI has to take appropriate action on the basis of the said report of Statutory Inspection. In support of this contention he relies on the Judgment of the Apex Court in the matter of Commissioner of Police, Bombay Vs. Gordhandas Bhanji reported in AIR 1952 SC16 which reads thus:
"45 It was objected as to this that there is no specific law which compels him to exercise the discretion. Rule 250 merely vests a discretion in him but does not require him to exercise it. That is easily met by the observations of Earl Cairns L.C. in the Laxmi 3/5 ::: Uploaded on - 17/03/2021 ::: Downloaded on - 01/09/2021 09:07:19 ::: 34 WP 10740-19.odt House to Lords in Julius v. Lord Bishop of Oxford, observations which have our full and respectful concurrence:-
"There may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may coupled the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do so."
46. The discretion vested in the Commissioner of Police under Rule 250 has been conferred upon him for public reasons involving the convenience, safety, morality and welfare of the public at large. An enabling power of this kind conferred for public reasons and for the public benefit is, in our opinion, coupled with a duty to exercise it when the circumstances so demand. It is a duty which cannot be shirked or shelved nor can it be evaded; performance of it can be compelled under section 45."
7. On the other hand, the learned counsel for Respondent No.1 submits that, they have filed their affidavit in reply in the present proceedings. He submits that they have prepared Inspection Report including irregularity committed by the Petitioner and being a member of the Bank-Respondent No.3. He submits that, Respondent No.1 is under process to take appropriate steps as per law for implementation of the said report. He submits that, as per Section 56(w)(i)(d) and 4(A)of the said Act, they have to submit the report to the Registrar of Co-operative Societies Laxmi 4/5 ::: Uploaded on - 17/03/2021 ::: Downloaded on - 01/09/2021 09:07:19 ::: 34 WP 10740-19.odt of the State in which the Bank is working and has been inspected and found irregularities. He submits that Respondent No.2, the Commissioner and Registrar of the Co- operative Societies, Maharashtra State also participated in doing inspection under Section 35A of the Banking Regulation Act, 1949. He submits that if any action is taken by Respondent No.2 can be explained by the learned AGP who is appearing for State. He further submits that even the Petitioner may be directed to place on record how much amount they have borrowed from Respondent No.3 and how much amount is due and payable by them.
8. Hence, the following order:
a. The Petitioner is directed to file an additional affidavit explaining how much amount he has borrowed from Respondent No.3 from time to time, under which account, how much amount is due and payable along with the interest as on 01/03/2021 on or before 25/03/2021.
b. Respondent No.2 is directed to file their affidavit explaining what action they have taken on the basis of the Statutory Inspection Report prepared by Respondent No.1 under Section 35A of the Banking Regulation Act,1949 on or before 25/03/2021, with copy to other side.
c. Matter to appear on board on 31/03/2021.
( RIYAZ I. CHAGLA, J.) (K.K.TATED, J.) Laxmi 5/5 ::: Uploaded on - 17/03/2021 ::: Downloaded on - 01/09/2021 09:07:19 :::