Karnataka High Court
Smt H Ravikala vs The Reserve Bank Of India on 7 March, 2022
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF MARCH 2022
BEFORE
THE HON'BLE MR. JUSTICE P. KRISHNA BHAT
WRIT PETITION No.1967 OF 2014 (GM-RES)
BETWEEN:
SMT H RAVIKALA
D/O LATE BHASKAR SHANBHOG
AGED ABOUT 43 YEARS
R/A NO.282, 14TH MAIN,
4TH 'T' BLOCK, 38TH CROSS
JAYANAGAR, BANGALORE - 41.
...PETITIONER
(BY SRI.ASHOK V.T., ADV.(ABSENT))
AND:
1. THE RESERVE BANK OF INDIA
CENTRAL OFFICE BUILDING SHAHEED
BHAGATH SINGH MARG
MUMBAI 400 001
REP BY ITS EXECUTIVE DIRECTOR.
2. RESERVE BANK OF INDIA
URBAN BANKS DEPARTMENT
NO.10/3/8, NRUPATHUNGA ROAD
BANGALORE - 01
REP BY ITS GENERAL MANAGER.
2
3. THE JANATHA SEVA CO-OPERATIVE BANK
PRIVATE LIMITED
NO.14, RAJATHA BHAVANA
1ST MAIN ROAD, HAMPINAGARA
VIJAYANAGAR, 2ND STAGE
BANGALORE 560 104
REP. BY ITS PRESIDENT.
4. B V NARASIMAHAMURTHY
S/O LATE VENKATANARASAIAH
AGED ABOUT 52 YEARS
NO.202 (S-2), 2ND FLOOR
SHRIVEN LEGACY
2ND MAIN, BYRAPPA BLOCK
THAYAGRAJNAGAR
BANGALORE 560 028.
...RESPONDENTS
(BY SMT. RASHMI SUBRAMANYA, ADV. FOR R1 & R2;
SRI. K.N. PUTTEGOWDA, ADV. FOR R3:
SRI. G. CHANDRASHEKARAIAH, ADV. FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLE
226 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE IMPUGNED ENDORSMENT DATED
18.11.13, ISSUED BY THE R2, AT ANN-T AND
DIRECT THE R1 HEREIN TO CONSIDER THE
REPRESENTATION OF THE PETITIONER DATED
13.11.13, VIDE ANNEXURE-R & TAKE ACTION
AGAINST THE R3, IN ACCORDANCE WITH LAW.
3
THIS PETITION COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
Learned counsel for the petitioner is absent. No representation.
2. The pleadings are complete and respondent Nos.1 and 2 have filed their detailed statement of objections and also additional statement of objections along with annexures.
3. This petition is pending since 2014.
4. The petitioner is aggrieved by the endorsement issued by respondent No.2 dated 18.11.2013 by which the request of the petitioner to cancel the banking licence granted to respondent No.3 under Section 22 of the Banking Regulations Act, 1949 (hereinafter referred to as 'the Act' for short) was 4 rejected. Reason given by respondent No.2 is that the matter was subjudice.
5. It appears that petitioner had grievance against respondent No.3 as it had advanced a loan to respondent No.4 and to the said transaction, the petitioner was a surety and she had mortgaged her house property as a security to the loan and the further allegation appears to be that respondent No.3 has colluded with respondent no.4 and they had created some false documents, on account of which the security offered by her is compromised. The sum and substance of the allegations of the petitioner against respondent No.3 is that respondent No.3 had violated the conditions under which loan was granted to respondent No.3 with petitioner as guarantor and therefore, the banking licence issued by respondent No.2 should be cancelled. 5
6. The contention of the learned counsel for respondent Nos.1 and 2 is two fold. Firstly, she submits that it is a personal grievance of the petitioner in respect of the loan transaction done by respondent No.3 to respondent No.4. Second submission of Ms. Rashmi Subramanya, learned counsel for the respondent Nos.1 and 2 is that the banking licence granted to financial institutions under Section 22 of the Act and the cancellation of the same is governed under Section 22 of the Act. She has taken me in detail through the provisions of Section 22 of the Act and submits that respondent No.3 is a Co-operative Bank. She has also taken through Section 56 of the Act and submitted that there is no dispute that respondent No.3 is holding a banking licence to carry on its banking transactions. The cancellation of the banking licence granted is regulated under Sub-Section 3 and 3A of Section 22 of the Act. The precise contention of the learned counsel 6 for respondent Nos.1 and 2-RBI is that there is no such violation of any terms and conditions as adumbrated under Sub-Section 3 and since Sub-Section 3A of Section 22 of the Act applies to a company incorporated outside India, in this particular instance, cancellation of banking licence is governed by Sub-Section 3 of Section 22 of the Act. The precise submission of the learned counsel for respondent Nos.1 and 2 is that there is no violation of condition as contained under Sub-Section 3 of Section 22 of the Act. The action as mandated under Sub-Section 3 of Section 22 of the Act has already been taken by respondent Nos.1 and 2 as could be seen from Annexure-R5 filed along with the additional statement of objections dated 07.02.2019, which reads as follows:
"Please refer to our letter UBD (BL) No.206/13.03.052/2013-14 dated July 18, 2014 calling upon the Janatha Seva Co- operative Bank Ltd., Bangalore, to Show Cause as to why a penalty of Rs. 1.00 crore should 7 not be imposed on it for deficiencies observed in the opening of three accounts viz., a) SB A/c No.14332 in the name of Shri B V Narasimhamurthy : b) SB A/c No 14928 in the name of Smt. Ravikala and © Current account No. 1206 in the name of SLN Enterprises in violation of the Reserve Bank directives / guidelines / instructions contained in Reserve Bank Circular UBD.No.DS.PCB.Cir. 17/13.01.00/2002-03 dated September 18, 2002 read with Circular UBD.PCB.Cir.30/ 09.16..100/2004-05 dated December 15, 2004.
2. The bank in response to the Show Cause Notice requested for a personal hearing with the RD vide its letter JSCB / 070 / 2014-15 dated July 22, 2014. It also submitted a detailed reply to the SCN vide its letter No.JSCB / 1487 / 2014-15 dated July 24, 2014 wherein it stated that the SB Accounts in the name of Smt Ravikala Sri B V Narasimhamurthy and SLN Enterprises were opened in June 2002, prior, to the issuance of RBI Circular on KYC norms dated September 8 18, 2002, and that it was following the KYC guidelines in the cases of accounts opened subsequent to the issuance of guidelines. It also stated that both Ravikala and B V Narasimhamurthy were members of the bank and the required documents were available in their membership forms. Later, when the two of them became defaulters, the bank filed cases before the JRCS on March 07, 2003 for recovery of the dues, and in the process had submitted the documents to the court after which the bank did not update the KYC requirements with the apprehension that it may amount to tampering of documents when the matter was sub-judice. Further, the bank has also stated that it is complying with KYC guidelines from time to time scrupulously and will continue to follow in future also.
The explanation submitted by the bank was taken on record and as requested by the bank, a personal hearing with the RD was held at 4.00 pm on August 13, 2014. During the personal hearing, the officials of the bank, in addition to reiterating what was stated earlier 9 in their letters, emphasized that as the bank was having proper documents, it was making sincere efforts, including initiating legal action in various courts to recover the dues from the defaulters. They also stated that the bank's directors themselves were free from any allegations and were sincerely working for the improvement of the bank and pleaded for waiver of penalty.
3. Reserve Bank has taken on record the reply to the Show Cause Notice and the submission made by the representatives of the bank during the personal hearing with Regional Director. In view of the above, it has been decided to take a lenient view. However, the Reserve Bank while expressing displeasure in the matter as such violations are of serious nature, warns The Janatha Seva Co-operative Bank Ltd., Bangalore, that any violations of Reserve Bank's directives / instructions / guidelines in future will be viewed seriously and appropriate disciplinary action will be initiated against the bank, including imposing of monetary penalty.10
4. This letter may be placed before the Board of directors in the next meeting.
5. Please acknowledge receipt of this letter."
7. Under the said circumstances, the prayer in the writ petition does not survive for consideration and the writ petition is liable to be dismissed.
Accordingly, the writ petition is dismissed.
SD/-
JUDGE MBM