P C Mohan vs The State Of Karnataka on 20 April, 2010

[Cites 7, Cited by 0]

Karnataka High Court

P C Mohan vs The State Of Karnataka on 20 April, 2010

Bench: K.Sreedhar Rao

  

\
r-\ \
\,

IN THE HIGH COURT OF KARNATAKA AT BANGALORE Q/H
DATED THIS THE 20TH DAY OF APRIL 
PRESENT % § %  % _
THE HONBLE MR JUSTICE  _ I % I "  
AND   'A 1'  .  
THE HON'BLE MRIIUSTIOEA :1 .
WRIT PETITION NOS. 

C/W. W.P.NO.34813/2009 AND WP NO. '£28148-
S6 'ZOQQ   *

I. P. O.' MORAN,  ,   

S /O.LATE:.CHIKKA _ 'UNIS'wAIvIApPA,
AGED ABOUT 4.5 'Y.EARS__,"~ 

NO. 657/ 6,1 1TH 

7TH BLOCK; JAYANAGAR.

 . t BAN(}AZgORE~560«0.82..v

 2;fE S.»
-S/O-  SRINIVASAN,

_  ﬂ_8TH MAIN, BSK 3RD STAGE
" '   ' ~ VL%B.AI\IGAL»ORE--560070.

AGED 50 YEARS.
NO;'3056,'1-7TH CROSS,

9

. . PETITIONERS

3

1



ADV)

AND

I. THE STATE OF KARNATAKA, .-- ~  
BY ITS PRINCIPAL SECRETARY TO"  . I 
GOVERNMENT, DEPARTMENT 

OF CO-OPERATION, I I
GOVERNMENT OF KARNATAIIA,

6TH FLOOR, M.S.BUILDING,"'-~._F
DR.B.R.AMBEDKAR VEEDHI,____ 'n_ ~
BANGALORE~56O 001:  ' 'I

2. THE GENERAL MANAGER; ' :
RESERVE BANKOF INIJIAQ ' "
AMAR BUIL1)IN':I._S;' 'FORT; ~
MUMBAI-4_0--0'--»Q0il_,__j. - * I

3. THE JOIINT%_REGISTRA_R  
CO--OFERATfVE SOCIETIES I

(URBAN EANI{C'E3I,LI,  R

OFFICE 'OF THE REGISTRAR OF
CO-OPERATIVE SOCIETIES IN KARNATAKA,
NO. 1_,AL1 ASKARROADI

 _ & BANI3AI;ORE--560 0151.

  
*--FA_T_FHER*S NAME NOT KNOWN TO

T°HE--.PETITIO}$JERS,
AGED NIAIOR,

 ; {\NOR.KIN.G AS DEPUTY REGISTRAR
~   CO---OPERATIVE SOCIETIES),
 4' ..fAfJMINIS'1"RATOR, THE GRAIN
 ~   _ MERCHANTS' CO--OPERATIVE BANK LTD.,
I   NO.2,PAMPAMAHAI<AV1 ROAD,

[BY SRILKISI-IORE KUMAR 8: G.1\/IURALIDHAR,



C PET.
BANGALORE--56O 018.

5. A.M.RAMA MURTHY,
S/O.LATE.A MARIYAPPA,

N056/3, 2ND CROSS,

K.P.WEST,

BANGALORE--56O O20.   '

  

[BY SRI.D. WJAYAKI.JMAf{,,_  AGE  EOR  *

R-1 & R-3, SR1.R.S.RAJA<3_o1?AL S-R;CQ"UN'.SEL,FOR
FOX MANDAL  i: 3:
ASSTS,SoL1c1ToRS  EQR"-~ R72 '"&1' R-7,
SR1.N.RAMAcHANDRA,j;~ E.    C/R4,
SRI.U.S.SANJEEV   R~5
SRI.H.N.SHASH1_DHAR,..1.._KESV1fS 0&1  FOR R5,
SOUTHERN :AW_ ASSTS; EQR;;_R;0; T0 T0 R-10.

THESE %%%% _.WRI_'I' ,:PEFIT§:( )NS--.::._,,.A§E FILED UNDER
ARITIC;LES'R'A~I,E'V_V226  227 OF THE
CONSTIT(}'TION~'fC)F"  PRAYING TO QUASH THE

IMPUGNEDA    "ORDER DATED
13.11.20009__1  PER ANNEXURE-E.

 V'  §_J_\_f.§.'«1\}O*1'348 1312000 '

1 .SR1.N,v1:1~:KATESHA1AH,

 % QS/0. LATE NARAYANAPPA,
«  RGVED 91 YEARS,
» S {i'JO.1'--4/1, NORTH ANJANEYA
- A   TEMPLE STREET, BASAVANAGUDI,
"  BANGALORE--560004.



2. SR1. C.P.SUBBARAJU SETTY,
S/O LATE. C.KRISI-INAIAH SETTY,
AGED ABOUT 80 YEARS,

R/A NO.187, 25TH CROSS,
III BLOCK, JAYANAGAR,
BANGALORE~56001 1.

3. SRI. R.P.M. SRINIVASALU,   
s/0 LATE R.P. MUNISWAMAPPAZ,   
AGED ABOUT 65 YEARS,   "A ' J
R/A NO.506, 36TH CROSS, 19TH MAIN,
JAYANAGAR, 4TH T BLOCK; A  A
BANG!-\LORE~560041. 

4. sRI. M.V MURALIDHAR,    , 
s/0 LATE P. VENKATANARASIMHAIAH;  _
AGED ABOUT 6: YEARS,"  ' 1   .
R/A NO. B3, 1 PLAQoRA,"'  _  ~  A
NO.35, "PRIPURA,     
11TH CROSS A A

BANGAIJO£{E_5_Qo_oo'3_» 

5. SMT;..AT.S'. PA}"{\fZAfI"I=I§V;'AVE.__" L
W/O. K. PUTfrAsWA'MY';~.__  
AGED ABOUT 56 

R/A NG.221i24,' 8TH MAIN,

  , é 4T1-Z» 'BLOCK, JAYANAGAR,
 , "BANGLORE.   PETITIO1\ERS

 (BY.$RI~.:§IA¥AK[fMAR.S.PATIL, ASSTS, ADV)

  THE STATE OF KARNATAKA,
- _  ITS PRINCIPAL SECRETARY TO
  "  GOVERNMENT, DEPARTMENT OF
A   CGDPERATION,



GOVERNMENT OF KARNATAKA,
6TH FLOOR, M.S BUILDINGS,
DR. B.R. AMBEKAR VEEDHI.
BAN GALORE--56000 1 .

2. THE GENERAL MANAGER,
RESERVE BANK OF INDIA,
AMAR BUILDINGSJTORT,
MUMBAL400001 .

3. THE JOINT REGISTRAR O_F'--
CO~OPERATIVE SOCIETIES  

(URBAN BANK CELL),     
OFFICE OF THE REGISTRAR OF» _ _  _
CO--OPERATIVE SOCIETIES 'I.N§Vj'K:ARi:\JATAKAs
NO. 1, ALI ASKAR ROAD, *   i   I. 
BANGALORE--560Q51./V"  I F. ;

4. SR1. ARLTNKUMAR; ,;    -.  I
FATHER'S1\EAiS/IRE NOT KNOWN' 
TO THE..P_ETITIO1'FE:ERS.I. AGEI>~M_AJOR,
[WORKING AS313 EPU'fY REGISTRAR

OF CO4vOPERATI'\!fEI4 SOCF1_E§'i'1ES),
ADMINISTRATOR,T1€E"G_F<A}N

MERCHANTS CO--OPERATIVE BANK LIMITED,

No.2, PAMPAIVIAHAKAVI RO .

  , A  . IIIII 14 .
 , 'BANGALQRE:_5600I8.

 5.VxTiI-VIE  IVIERCI-IANTS'

CO-OPERATIVE BANK LIMITED,
HAVI.NG_jI'l'S"REGISTERED OFFICE AT

 1_NO.2, PAP;/IPAMAHAKAVI ROAD,
  
 '-_BAN'G._ALORE~560018.'
   REP. "BY ITS SECRETARY.

W



6. RAMAMURTHY

S/O LATE A. MARIYAPPA,
N056/3, 2ND CROSS,

K. P. WEST,
BANCrALORE~560020.
(INTERVENERJ

7. Y. N. JAYARAM,

S/O. LATE Y.R.RARAYANAPPA, 

AGED ABOUT 51 YEARS,
RESIDING AT NO.170,
J.M.LANE, BALEPET.
BANGALORE-560 053.

8. R. NAGARAJ BABU;~--  
S/O. R.J.RAM, -

AGED ABOUT 42 YEARS;   Ii;  M L

RESIDING AT 

6'1'!-I MAIN,_2ND   33'

K.§~I.B.COLONY,'_.»    A 
1ST STAGE;V4TH"1B,:LOC_K~,__  

BASAVESWARA NA,GAR;., T  
BANGALO-LRE«560j-~Q79."=.__ * A

9. N.RAVIVPRASAVD..  ' 
s/O.%NARAYAN+Az>PA, A
AGED ABOUT 46-YEARS,

 "  NO;.5;' R;N.BUILDING,'

IYENGAR ROAD,

 OB;ANO»ALOz2E:_5:f50 053.

:0;  
s/O"; LATE. LAKSHMINARAYAN.

 . ?_  ' A ,AGEO ABOUT 44 YEARS,
" w  ,RES_IDIN'G AT N0.0401,
 , ~.NO.29, PLATFORM ROAD,
1'  SESHADRIPURAM,



BAN GALORE--56O 020.

11. L.UMESH,

S/O.LATE.B.N. LAKSHMINARAYAN,
N029, PLATFORM ROAD,
SESI-EADRIPURAM,

BANGALORE -- 560 020.   Rh',S}"=O:.'I:i\'a_"I)'E';:}.,\IV"I'.VS  ' ~ M'

(BY SRLD. VIJAYA KUMARAGA §fOF§"R.-:'1 AND 
sR1.P.S.RAJAGORAL.SR.COUNSEL, FOR  

ASSTS, ADV FOR R-2, M 2, A. V _
SRI.N.RAMACHANDRA FOR (:»,./R4 & RE":,__   
SRLMADHUSUDHAN R.NAIK__SR.CO_UNSE§'L--,.FOR NAIK
& NA;K LAW FIRM. FOTRTR-5;" '  _ 
SR{.U.S.SANJEEVA MU--RT1-B( ROR 'Rs;S., "  A
SRI.H.N.SHASHIDHARA: KESVY: &:C.O,--;1E'O§--R R-6
SOUTHERN LAW ASSTS'RO'R R472 TO R51 1.

THIS  PB'I'I'BON --»X_Sv.FII}E-D...UNDER ARITICLES 226
AND 227 OF .THE":.cONST:TUT1ON OF INDIA PRAYING
TO QULASH THE'-»QRDER"-- PASSED BY THE R3, THE
JOINT REGiSTRAR= OR "CO--OPERATIVE SOCIETIES,
(URBAN  ' . BA_NK_ A  CELL) BANGALORE

" V" "*g[.VR;A28 1'48J1.5_6/2O%O9&

1. SR1. A;.N,,SHANTHARAM,

 % gs/O.A.V;NANJUNDA SETTY.
  'AGED ABOUT 56 YEARS,
* " "i1'X~PRESIDENT.
  "  SRLKANYAKAPARAMESWARI
A   C®-OPERATIVE BANK LTD..



K. R. CIRCLE.
MYSORE~570001.

R/AT "KADAMBARI".
No.45, PRINTERS es: PUBLISHERS.

K. R. CIRCLE.

MYSORE--57000I. 

2. SR1. M. S. NAGARAJU GUPTHA, 1 
S/O M. SURYANARAYANA GVUPTHA, 
AGED ABOUT 64 YEARS, S 
EX~DIRECTOR.

SR1. KANYAKAPARAMESW S   
CO-OPERATIVE<3BANK'Lf1'D.._;"V '  ; V 
K.R. CIRCLE,  '. --. 
MYSORE~57000}.

R/AT " AMBA NVILAYIF'; 
NO. 1 065/6__C~,  'FERM ROAD, A
    
MYSORE:.5f70.00ii--;;;::'_  A '

3. SR1.H. R.RGUR'1)U*2rENATESH KUMAR.
S /0 H.S'.KR§SHNA  

AGED ABOII1' R50 
EX--D.I--R'ECTOR. =  S

 , é SR1; 
~ S "CQ40PERAT£VE BANK LTD,
 K.,R;CIRCi.«E;.  ..

My.sQSRE;5f70Q0"~1 .'

R/AT "  NILAYA "

 S 1_N0.1989/1, KOTHWAL RAMAIAH STREET
"  _MYS_.ORE--57000 1.

 *  E. 4.. SM"A1'. N. PARIMALAMMA,
E   Wm M. K. NAGARAJA SETTY,



AGED ABOUT 76 YEARS,
EX--DIRECTOR.

SR1. KANYAKAPARAMESWARI
CO~OPERATIVE BANK LTD.,
K.R. CIRCLE,
MYSORE-570001.

R/AT NO. 536, I FLOOR,   '

MAHARSHI DAYANANDA SARAS'WAr:3H.I:O'I€0A[3§"'    'O

P & T BLOCK.
KUVEMPUNAGAR,
MYSORE--570023

5. SRLY.  *  

s/0 Y.NARAYANA  _  

AGED ABOUT 76 YEARS V  
EX~DIRECTOR   M 1 'V 
CO--OPERA'1'IVE iB_ATNIi_I{1"D..,   .
K.R. CIRCLE,      
MYSOREM-_57QQO'1:  O "

R/AT "SAI)ANAL'iA.,AN'ILAYA"   %
N03962: %  
K.R.R0A9, ,1). MOOHAWLIALV
MYSORE~57"OOO'1V.7' '

 'Ow P;._vIO;AKSH;D/IINARAYANA SETTY,
~AG_ED' A130 76 YEARS,

SR1... KA,N1'AKAPARAMEswAR1

 %  CO~O."?E1§_{ATIVE BANK LTD.,
'  L «. V "K,.R.c1RcLE,
v~.fMVYS(_)RE--57OOO1.

   R;/AT No.73,



SAYYAJIRAO ROAD,
MYSORE--57000 1.

7. SR}. RATHNAKARAN,

s/0 c. KRISHNAIAH SETTY,

AGED ABOUT 78 YEARS,
EX«DIRECTOR,

SRI. KANYAKAPARAMESWARI   
co-OPERATNE BANK LTD.,  
K.R.CIRCLE.

MYSORE*570001.

R/AT No.72,

M. 2 .G 11, HUDCO, . 
LAKsHM1KANTHANAGAR,.. 
MYSORE-570017.  '

8. SR1. H. s. BJI7/3;1§I,}'UNATIL'%{SE'{'l'YJ*
s/0 H. S. §§R'£SHNA.IAH'    .
AGED ABOUT.-57 YEARS}  =  
    " 
SR1. 
CO-OP:'ERATIVE'f€5ANK 7

K. R. CIRCLE   
MYsoRE--'5700,0 1..  W 

 _ R/A"£'ﬁO'. 2989,77  ..... - .
A  
   PETITIONERS

['I'H()UC3}Hé'7'!.'HV..1'?i3vVPE'I'ITIONER No.2, 4, 5, 6 & 7
BEING SENIOR CITIZENS THEY ARE NOT

_  ' ' CLAMINC§'_r ANY BENEFIT MEANT FOR SENIOR
" "   _ CITI__ZEN~S UNDER THIS WRIT PETITION]

 .. {BY'SRI.DESHRAJ.ADV)



  A A

AND

1. THE REGISTRAR.

DEPARTMENT OF co--oPERATIvE SocIETIES,_7  . n

ALI ASKER ROAD,
BANGALORE.

2. THE JOINT REGISTRAR OF co4C)PERATrVE;f  _   

SOCIETIES, (URBAN BANK CELL}.__
CENTRAL OFFICE, '

0/0 THE REGISTRAR OF Cf)--'QPEEATT$E  A

ALI ASKER ROAD,
BANGALORE.

3. THE DEPUTY REGIS'TRA.R7.O]§? COQOPERATIVE
SOCIETIES,  _  A   
MYSORE REGION.     
MYSORE.      
4. THE ASSISTIXNE'  0E'c0--oPERATwE
SocIETIES,_    

MYSGRE SIIB+DIvII GN,~-. I  

MYSORE. A A  "   

5. THE CH1E_F GEPJERALJR/IANAGER,
INCHARGE, RESERVE BANK OF INDIA,

V"-._6.V:TI1E  MANGER.

RESERVE"-«BAN-K"OF INDIA.
MUMBA1.  

 _  THE. ASSISTANT GENERAL MANAGER,
   BANKS DEPARTMENT,
 '~«REQSERVE BANK GE INDIA,
    -_N'O."1'O/O3/08,
A G' ..__"NRUPATHUNGA ROAD,

5%/A.



BAN GALORE--56000 1 .

8. SRI. KANYAKAPARAMESWARI,
COOPERATIVE BANK LTD.,

BY ITS GENERAL MANAGER,

K. R. CIRCLE,

MYSOR1E3--570001. 

9. B. JOSH1,

ADMINISTRATOR, 1

SR1. KANYAKAPARAMESWARI'_
CO--OPERA'{'IVE BANK LTD.,  "

BY ITS GENERAL MANAGER,   ~

K. R. CIRCLE,    "  i' S 
ALSO WORKING AS COOPERPLTIVE   *  M
DEVELOPMENT OFFICER-DEPUTED *1*<:1 _ 
O/O OF THE JOINT  I  
CO-OPERAT1VE'SOC1Efr1ESA~" "   '
MYSORE  ~   
MYSORE.  3  A  A

10.SRI .M. L  
Ex--RRES113ENTR,-fj»M_"   A
SR1. KANYAKAPARAMESWACRI
CO--OPERA17IV}~T. BANK LTO,

K.R. CIRCLE;  * *

 _ MYSQRE¥57000'1~L  ____ M .

 R/1ATVNC:_).9O,.:9O_/ 1, 9TH MA1N,
-111 CROSS, SARASWATHIPURAM,

MYSQRE45'7fOC09.
 . A   RESPONDENTS

{BY SRIAVIJAYAKUMAR, AGA FOR R-1 TO R~4, ..jM/Sv,A.H.LAW FIRM FOR R--8,SRI.N.R.KRISHNAPP _ FOR R--10,DKS ASSTS FOR IMPLEEDING 9 R--5,R--6 & R-9 ARE SERVED) THESE WRIT PETITIONS ARE FXLED UNDER ARITICLES 226 AND 227 oxr V.--THE coNs'rrrU'r1oN 01+' INDIA PRAYING TO ISSU-Ei~.VA CERTIORARI AND QUASH THE ORDER. "--DPxTED 4.8.2009, PASSED BY THE R3, VIDE AN}..'--T;EX'URE--H__V"i_v THESE WRIT PETITIONS COMINQVFOR o:2DiS;RS*;:tTH1sii * R DAY, SREEDI-IAR RAO J, MADE "'i"H_E--,'F;OLLGWII\i'(}:"« oRI5g3:_«___1g W.P.Nos.34813 and pertain to suppression of Grain Bank.

Writ Petition ' Nose, =: = V 281 56 / 2009 pertain to ' Parameshwari Co~ operative Bank. "'?The'"~..above writ petitions invoive common' V' "qpuestio:-ﬁr V"-o_f"'*"1aw and fact. Hence, heargg .. pp together "for common disposal. ij2;E"§rh¢.'iaeserve Bank of India (RBI) conducted periodical ~. «inspectionof Grain Merchants Co--operative '4 M " JB.anuk Kannika Parameshwari Co--operative Bank for "period ending with March 31st 2009. In the '____J0/ course of inspection, serious ﬁnancial irregularities like grant of{1] loan to the reiatives of the directors, without propersecurities, [3] loan to the. . persons and (4) missapplications of one ti1.'Iie'---sjettiement "

scheme to the ioan accounts riot§':oVered_ 'under:"*'--thei_:

Schemes.

3. The RBI sent 3. -1-gport granting four months tirn'e__ to Banks to rectify the:__ Vo"fiV'er_' ierrpianation for mis-

ﬁsician_ce.... 1:':-1:5 The RBI even before their compliance report, directed . to remove the Managing . ,.VC0Ffi1*;£1i'':t.:é65 h it A v the above banks u KCS Act (for short 'Act'). The tenure of thepelectecitvhaieoinmittee of both the Banks was to expire VMarch 2010. The supersession was ":i:"reco"m«mended by the RBI 4 months prior to the expiry V' --. it oféthe tenure.

'I3/_

4. The Grain merchants Co--operative Bank, after supersession but within the period of four months had submitted the action taken report to the RBI. The Kannika Parameshwari Co--operative Bank has not submitted action taken .

so far. The Registrar of Co--operatiV.epSoci§etie's; it "

to the directions of the supersession of both the .ba.nks hand. in, respect of = L' members of Kannika Paramesh37v*ari--.Cosoperatire Bank. The Registrar further' 'the committee members of Kaziliika;_'Para1é?1esi1wariV' C?0?operative Bank are <Vi~isqu'a1ifie'dj'-~Vtovdwcoritest the election for a period of members of the committee the...__order have ﬁled the Writ Petitions. _Résp5ﬁdent No.6 in WP No.34813/2009 has come as; intervener on record supporting the order of V' ' - supersession.

CL"

6. The following common questions of law arise for consideration in the above petitions:

[1] Whether it is incumbent on the RBI_.§to' . an opportunity of hearing before " A the supersession under" "section« the Kcs Act?

[2] Whether the proVisio'n:'of Se.ction"'3V.{3[b')v;:o1; KCS Act, iIr1bibes"" a scope for post decisional. ..

(3) Whether the /sysioisspy Kcs Act, while recorrm1énding:_._tI1.e suipersession appoint an admiri~;s:trpatc-rp beyond the period eiections?

7. *met section 30(1) of the Act.

_ empcfvver. the Registrar to supercede the committee at .ﬂdis_creti.on, if the stated irregularities are found. Registrar is obligated to hear A the greeted 'committee before the order of supersession 0' 'Misti niadei The Section 30(1) of the Act, came to be argzended with effect from 30.10.2009, where under the I7 Registrar has to seek prior approval from RBI for effecting supersession u/s.30(1] of Section 30(3) of the Act debars the _ superseded committee to contest for eiectiond"-fore a "' period of four years from the d»ate;jof:'ord.er. of the Act. The members are"vdis~qua:iifiied...in; enquiry u/s.29 of the also ..dise:qAual:ified to contest for the e1ections..fcr of four years.

8. The to :fiss_uem direction to the Registra.r..for"'retntivai the Ma,naging committee of the Bank s.'3'O(5)V"Vof"§'_or convenient reference, the 9 provisionsﬂ of .' 30(5) of the Act . «_ areV_»e:%;tracted hereunder:

Nptvathstandmg anything contained in this Act,' -'die Registrar shali, in the case of a Co- operative bank, if so required in Writing by the A_ji"gReserve Bank of India in public interest or for 'preventing the affairs of the Co--operative Bank being conducted in a manner detrimental to the interest of the depositors or for securing the roper management of the Co--operative bank, by writing, remove the committee of that * Bank and appoint an administrator_--to' affairs of the Co-operative may, from time to time, be specified ~. Bank of India".

9. The un--amended 31 of the Act, invested a disci'etion:.w1th:':: 'eupe;-sede on fulﬁllment of before such.

an 0rder...C§5i11fd .i{egistrar is obliged to hear __ for supersession. The amended uprovirsions;A.ehav7e taken away the discretion of the order supersession 11/ s 30 (1) of the Act';--v\i§rit1fie1g1t.é:th_e approval of RBI. Section 30(3) of the embargo on the members of the 'e_supersed;ed committee from contesting election period of 4 years from the date of order. In contra distinction, the members of the committee who 4 are removed u/s 30(5) of the Act, do not sufier automatic disqualiﬁcation to stand for e1ectionV,'eS."_I:"hey would stand disqualiﬁed only if an _ after enquiry u / s 29 (c ) of the Acts"

10. Sri Jayakumar S Patii and-..Sri 1'Ianj:;.irida., Reddv, ' learned senior advocates ..f(3.f_IAs'uVAI§ie1'S€d€d banks and Sri ,,1ear;:1ed Senior Counsel appeaxfing Merchants Co-Operative contended that the directionsVissued*Iby_--the (5) of the Act, would visit consequence of forfeiture of the ofﬁce"e._bSy'., members. Therefore, it is é_ i1'lCv_1.;1i;I1b:§x'I1iLVvu}).'()"I'1'Th_€.RB§ to provide an opportunity for 'h..éaring_V4'before-._ any recommendation is made to the Registrar 'i'o'rV.i'emova1. The rules of naturai justice have to be into the provisions of Section 30(5) of the Act, «.:Sf";3ny:SiI':ﬁ1p1iCation and right of hearing should be given before any direction is issued to the Registrar. In this W."

20 regard the learned counsel relied upon the following decisions:

(1) SAHARA INDIA {FiPgivI)--,.i;i}:(3KNQV'f ~ Vs.coMM1ss1oNER or '. 3 :"I1\iC:GM*E3_;

'I'AX,CEN'i'RAL~I AND ANO'FiI.E;R-E2068)' 1551; (2) K.I. SHEPHARD AND v;s.um¢N oi?" INDIA AND OTHERS-(iQié"7)A t.4*--.ice;t sec 431; (3) RESERVE BANK HZXNUMAIAH 8:

ORS- __ - lg AIR Q sew 540.

11. counsel appearing for the RBI strenuouslyVconte'11ded that when the statute does pp notffzrojfide Tig}'£t...fQI' hearing to the parties, rules of natura} should be construed as excluded by the statute. VThe__b1an1(ing companies stand out as a distinct ttsepagrate class of corporation. The RBI is the sole {tf1'egulatoty authority. The direction/order of RBI V' becomes inscrutable in the Court of law. In this regard, l reiied upon the decision of the Supreme Court in Hanumaiah's case (AIR 2008 SCW 540) wherein the observations of the Supreme Court in Joseph Kurnivilla Velukunnel vs Reserve Bank of India ~ AIR 1371 is extracted in para 14 which is H "(44) These observations . cleiariiy . there may be occasions ai1c1"'~.situations_iiiV w.__hieh'the * ' legislature, may "_ think-v..AAthat the determination of an lei't_to an expert executive like than to courts without incurring' having the law declared void. Thextaw, thus is justified on the ground of A_ expefdieificyyp arising..__from the respective opportunities for the exclusion of Courts is not lightly to Vibe nor lightly to be conceded. The 'greasoraableness of such a law in the total circumstances "if challenged have to be made out to the ultimate giéltisfaction of this C d it is only when this court 22 considers that is its reasonable in the individual circumstances that the iaw wiil be upheid. (45) In the present case, in View of the establishment of the Reserve Banjkmas' 'a y_c'entrai:

India. its position as a Bankers banking companies and banking in India, its position as 2 R' the issuing bank, its to iicense banking companies and cancei':'th_eir thenumerous other powers, it is unans'3ierahfIe:'th--at. iiietween the court and the Reservet'BVank;."tf1eirnoinentousﬂdecision to wind up a tottering bat}k'i1'ig""'company in the interest of reasonably be ieft to the R€S€fVB""l3&ﬂI:{ﬁ§f'N&¥{i0i.ib1;;"th€\_'CCi;11't can also, given the time perform the decision has to be taken I without de1"ay,V and .Vpth.e""..»iReserve Bank already knows intirnwateiy thee-affairs the banking companies and has "id"vhac£i:i._éicc;essv~« to theirbooks and accounts. If the court inrereV.ca1ied«z:ipon to take immediate action it would be guided by the opinion of the Reserve Bank. Ithwoehld be impossible for the Court to reach a 3"'f"conciu'sion unguided by the Reserve Bank if immediate was demanded. But the law which gives the same position to the opinion of the Reserve Bank is c[/ 23 challenged as unreasonable. In our opinion such a challenge has no force. The situation that arose in___this case is typical of the occasions on which_i'-this extraordinary power would normally be exerci's'ed,» as we have said already, if the power is K Reserve Bank, what will be struck' down woijlud_be--.thév--.4 2 action of the Reserve Bank"; b1'_1't<i' not :'"lavu"<.f An appeal against the Reserve V"i3ai1.ks or 'a provision for an ex post facts:finding" the Lfouri: is hardiy necessary. An apypealiijo theuCentra1A 'Government will be only an appsaj to Caesar.

Because the Reserve without the concurrence aft and the ﬁnding by the borrow the macabre phrase of R.a;7nan \ _a postmortem examination of the l.cor.pse':_*._"o.f'-.._the banking company". Rajagopal, learned counsel, further the aggrieved members of the supercededcommittee can avail the right of post .hc'zecisiona"1 hearing. In this regard, relied upon a p'_.'decision in LIBERTY ox. MILLS vs. UNION OF INDIA -- l 24 [1984] 3 SCC 465. The counsel further submitted that the RBI had directed the Registrar to enquire matter. Therefore, necessarily enquiry _ held u/s.64 and 65 and as we11s.29'i'c)"'the "' it Therefore, the petitioners have an decisionai hearing.

13. The RBI independent' of provi'sions of KCS Act is invested with the jurisdietioiiV_of:s.ection; as and 36AA of the Banking» -..Ac.t. to remove the directorstofqthte ' it

14. A c1ose«--.readinga provisions of Sec.30(5) of the §Actqtp'do_es not.di.sc}ose that the RBI has any further con'troi"ov'er*t:he_functions of the Registrar after directing removal pofxithe committee in the sense the RBI cannot 'x__1ega11y~~ vdireyct enquiry by the Registrar u/s.29[c) or 64 of the Act. The enquiry by the Registrar under the said provisions is in the independent discretion 4 25 of the Registrar. In other words, the RBI has no legal jurisdiction to insist Registrar to hold enquiry the members under the above said _

15. The Supreme Court in I-Ianur:r;aia' cas_e'~i_ﬁ' p'a_r'a¢1*8_' has made the followingl "observations .5are extracted hereunder for_____ui'co1'rvenie'nt.__ reference:

"18. question whether the principles of Jcornpletely excluded from "may be that against--_th--e"' aflfected bank may move the Reserve to show that it had wrongly arIfivied:_at the hdecision for its supersession. The other be that after the supersession order issued by the Registrar that may be l'V.,pchal1envged before a court of law and in that proceeding ,,:l."'(;-f ground for assailing the order might be that the decision of the Reserve Bank was arrived at ﬁg/t Without giving the affected co operative bank a proper opportunity ofhearing. We, however, refrain from going into that question as it does not arise in the facts present case."

16. The close reading of the abovegggobservation*'rr1'a}{es "= clear that Supreme Court has refrained' the question Without givingia'-..conc1uded opinionabout the possible options aVaiiab1p¢..d:V'€o_ti1e affected rnembers. The said observationsT'g_canr3§oi: 'A .t'>éinterpreted that the affected mcrnbers' "=upost--decisiona1 hearing. In the.V~conite2.rtéV"of the provisions contained in Section 65 of the Act., it cannot _ be inferred thatthe affected members have a legal scope :AfQr.,dipost?idecisiona1 hearing because enquiry 1.1/s.29(c), the Act, is soiely at the discretion of the "V Registrar RBI cannot legally compel the Registrar in V' V ' i f .. thatifegard.

Cg/A

17. On a thorough consideration of the anaiogous provisions relating to supersession of the Managing Committee under Sec.80[1) of the Act, 35 and the Banking Regulations Act, the pre~decision;ai*hearing H is mandatory. It cannot be gainsaid orde«r removal of the Managing Committee_-upndéer r the Act, visit with civil consequerices to members. Therefore, in the cannot be said that the directions to the Registrar for remova1:,o'f"t-he Vn1e'mberspzA"of"'the Managing Committee p*rovidi.ng opportunity of hearing. More so, Vvhcnvfffteﬁjere 'scope for affected members to avail the"d«.ber1etit._kcf"~p'ost~ decisional hearing. It is upon,,.____t,he RBI while issuing directions 's--.3pO{5}'iofé:ti1,e Act, should adhere to the principles of natural Otherwise, the affected members stand almostueternally condemned without an opportunity of " if ©£/

18. The unwamended provisions of Sec.30[5) of the Act, declared that "appointrrlent of an administrator to manage the affairs of the Co-operative Bank for a period not exceeding 5 years in aggregate as n time to time speciﬁed by the Reserve 25/98 W.e.f. 15.9.88 the Words §"not"e::ce.ed;i11Ag_"i"5_Vyeaijs'i7 is omitted. A close reading of the Vélirrovisionstuf of the Act, discloses that t1'ie:."iorderV"of°t}ae 'removing committee should be :yvi,t}*1..the tenure of the committee, because '»~of..'--the term, the committee cease €eXist°'c,y"'operation of law, the tenurelyof = the 'member's,.,,_of the committee comes to an end.

The "prcyis.ions of Section 30(1) of the Act, 'rnandate'~,th,at .__when once committee is removed, the adn1inistrat0r'tshou1d be appointed for six months and furthcrvtttextension by six months and in any case, such extension shall not exceed by one year in aggregate. in other words, the elections are to be held immediately 4/, 29 after one year. The provisions of Sec.39A of the Act, declares that the general elections for electing the members of the committee to be held Within before the date of expiry of the term of . committee and the out going com.mitte§-3:" A"

date for election. In the absence fofcoinniitteejfthei administrator or the Special._vC~'ﬂx"icer"wills of * it election. Sec.39(A)(4];__. of eirxpowérs the Government to post»-ponle'~t1:.ef't'»c}andnc.th of elections for the reasons stateldjn .pro§'isiorisVV'Vfor a period not exceeding six i_non*cl';s'an--dv' in anyicase not exceeding two years agg1'egate;.,p4Vt A '"con_duct of elections is an inviolable 'den1ocraticfpro.cess in the scheme of the Act. The RBI hashnot to continue appointment of an '¢__Administ;rator without elections contraly to the spirit A "provisions of Sec. 31 and 39A of the Act. Therefore, the power of the RBI u/s.30(5) of the Act, for removal of 0% the committee and appointment of an Administrator should be in consonance and consistent with the other allied provisions of the Act. The Administratorpnce appointed has the discretion of holding accordance with the provisions of the.~~Ac:tj~.,an:{:'i .1211?' postponement of election is necessaryrLn".l Act, and he can recommend'ilaccordinigly. "

21. In respect V :"Grain%.j_p'lﬁllerchants Co--operative Bank, during the' hearing the tenure of the elected 1:0 end and fresh elections "Therefore, the reiief prayed for in Writ Periuori li$i¢ls;a%i.s13 and 35163-164/2009, is V. p_ onlyfof an acadernic interest.

p22,}'*T[;'h_e'tenure of the Kannika Pararneshwari Co~ opei'ative'7Bjaiik is also expired. The elections are to be held. order passed by the Registrar 11/s.3O(5) of the A "if"_Act'}":disqualifying the Managing Committee members to K contest elections for a period of four years is bad in law. The Registrar is however, empower to conduct separate enquiry 11/ s.29 of the Act and pass appropriate. but While passing orders u/s.30(5) of _ Registrar does not get jurisdiction to «theiu '» members from contesting elections. A 3 A Accordingly, wp Nos..2si4s"' i2s1ss"/32.999 ism partly allowed in the tenns_Vi_i:in§iic.ated" WP Nos.35163-164/200V9"~.zé;nd'é--_ are N¢.t§34s13/2009 are disposed of. V. . .

tttt M ,Tudq9 'S-0,3-(3%

Unlock Advanced Research with PRISMAI

Karnataka High Court