2003 Supreme(SC) 1056

2003(8) Supreme 400
Supreme Court of India
(From Bombay High Court)
S.N. Variava and H.K. Sema, JJ.
The Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd. —Appellant
versus
The Maharashtra State Co-operative Bank Ltd. & Ors. —Respondents
Civil Appeal No. 439 of 1997
With
C.A. No. 8478 of 2003
(Arising out of SLP (C) No. 4877 of 1997)
Decided on 29-10-2003
Counsel for the Parties :
For the Appearing Parties : R.N. Trivedi, Additional Solicitor General, T.R. Andhyarujina, G.L. Sanghi, K. Rajendra Chowdhary, Harish N. Salve, Bhimrao Naik, K. Parasaran, Sr. Advocates, R.K. Sanghi, N.M. Sharma, Rajesh Prasad Singh, Rakesh K. Sharma, Prashant Naik, R.K. Sharma, H.S. Parihar, Kuldeep Parihar, S.V. Deshpande, Mukesh K. Giri, Advocates.

Important point
Unless a cooperative society is a state cooperative bank or a central cooperative bank or a primary cooperative bank (as defined under the NABARD Act), no licence can be issued by the Reserve Bank of India to carry on banking business.

Headnote:Banking Regulation Act, 1949—Sections 5(b), 22(1) rw/s 56(o)—National Bank for Agriculture and Rural Development Act, 1981—Section 2(u)—Multi State Coperative Societies Act, 1984—Banking licence to co-operative society—Appellant made an application to Reserve Bank of India for a license to start an Apex Bank for Maharashtra and Goa—Appellants got themselves registered as a Multi State Cooperative Society—RBI gave a banking license to appellants—Writ petition challenging grant of license by RBI—RBI was directed to review its decision of granting License to Appellants—Whether a cooperative society registered under the Multi State Act can be granted a license by RBI to commence and carry on banking business—Held, unless a coopera­tive society is a state cooperative bank or a central cooperative bank or a primary cooperative bank, no license can be issued by RBI—It would be necessary that a declaration under the NABARD Act be first obtained—Whether a Cooperative Society registered under the Multi State Act can be recognized and notified by the State Government as a State Cooperative Bank.

       Held : Under Section 22(1) a primary credit society can carry on banking business. However if a co-operative society is not a primary credit society then to carry on banking business it must be a co-operative bank and hold a license issued by the RBI. The above extracted portion of Section 22(2) merely exphasis that a co-operative society, other than a primary credit society, has to apply to the RBI for license before it can commence banking business. However, this does not mean that RBI can give to any or all co-operative societies, a banking license. RBI can only give a license as provided in Section 22(1) i.e. to a co-operative bank. The term “Co-operative Bank” has been defined in the Bank­ing Regulation Act and only includes a state co-operative bank or a central co-operative bank or a primary co-operative bank. Reference to the term “co-operative bank” in the Multi State Act is of no assistance. When a term is specifically defined in a statute then for purposes of that statute that term cannot bear a meaning assigned to it in another statute. One cannot ignore the specific definition given in the Banking Regulation Act and apply some other definition set out in some other statute. Thus, so far as the Banking Regulation Act is concerned the term “co-operative bank” must have the meaning assigned to it in Section 5(cci). RBI cannot go by any other meaning given to the term “co-operative bank” for purposes of licencing under the Banking Regulation Act. The RBI has to go by the meaning given to this term in the Bank­ing Regulation Act. In view of the above, we hold that the RBI by virtue of its power under Section 22 cannot grant a license to any co-operative bank unless it is a state co-operative bank or a central co-operative bank or a primary co-operative bank. (Paras 16 and 17)

       It appears to us that the Legislature has provided separately in respect of the Co-operative Societies Act, 1912 and used the words “in any State” in order to indicate its intention that the term “any other law relating to co-operative societies for the time being in force in any State” did not include all laws relating to co-operative societies. If the intention was to rope in all socie­ties registered under all laws relating to co-operative societies in force, then there was no necessity to use the additional words “in any State” or to separately provide for Co-operative Socie­ties Act, 1912. As stated above, mere use of the words “any other law relating to co-operative societies for the time being in force” would have been sufficient. The legislature was clearly emphasizing that it is only co-operative societies registered under local or state laws relating to co-operative societies which would be covered. This interpretation is supported by the fact that the provision pertaining to a state co-operative bank provides for a declaration only by the State Government. If a declaration is by the State Government it must be in respect of a society which is registered in that State and which can be regu­lated by the Registrar of that State. A society which is regis­tered under an Act, like the Multi State Act, would not be under the regulation of the Registrar of the State. It was submitted that if the Legislature intended to restrict the application of NABARD Act to co-operative societies registered under local laws it would have used the words “of any State”. It was submitted that the fact that the Legislature has not used the words “of any State” indicates that the co-operative society could be registered under any law in force in any State. We are unable to accept this submission. The Legislature could not have used the words “of any State”. That would have meant that a co-operative society regis­tered under a law in force in State `A’ could be considered as a co-operative society in States `B’, `C’ or `D’ also. That was not what the Legislature intended. The words “in any State” indicate that the co-operative society must be registered under the law in force in any State in which it wants to operate. (Para 26)

       Under the Multi-unit Act if a society had objects not confined to one State then such a society was deemed to be registered even in other States, but for purposes of registration, control and dissolution it was the State law where it was first registered which continued to operate. Thus, after the enactment of the Multi-unit Act it became clear that even though a society may be deemed registered under the Multi-unit Act, but for purposes of registration, control and dissolution it ­continued to be bound by the law relating to ­co-operative societies for the time being in force in the State in which it was first ­registered. More importantly after the enactment of the Multi-Unit Act, the Co-operative Societies Act, 1912 only dealt with co-operative societies confined to one province. Societies with objects not confined to one province were deemed registered under the Multi-Unit Act. Thus the use of the words “Co-operative Societies Act, 1912” in the NABARD Act, also indicates that the definition is restricted to Societies registered under the law relating to co-operative societies in the State in which they want to operate. This is clear because significantly the Legislature has not provided that Societies registered under the Multi-unit Act would be included.­ (Para 27)

       The carrying on of the business must be prior to the State Government declaring a society as a state co-operative bank otherwise there would be no criteria on the basis of which the State Government could judge whether the society proposed to be so declared will or will not perform its task truly and effi­ciently. The test for the Government has to be past performance. It is not as if the State Government can at its whims and fancy declare any society as a state co-operative bank. The State Government has to look into and be satisfied that that society has faithfully and efficiently been carrying on the business of financing other co-operative societies in that State and that there have been no complaints against that society. To allow the State Government to declare any society, even a society which has done no business of financing other co-operative societies, as a state co-operative bank would be to permit arbitrariness. (Para 36)

       In this case prior to the Notification dated 13th December, 1995, the Appellants had not carried on any business of financing any co-operative society. All that they had done was accepting entrance fees and share subscription from members. As stated above this is not business as contemplated by Section 2(u) of the NABARD Act. On this ground also it will have to be held that the Notification dated 13th December, 1995 cannot be sustained. (Para 37)

       The Appellants were not carrying on any business and that they were not carrying on the business of financing other co-operative societies. We are, therefore, unable to accept the submission that the 1st Respondent cannot now be allowed to take this contention. For all the above reasons it is held that the State Government could not have declared the Appellants as a state co-operative bank. As it could not be so declared the Orders dated 25th January, 1996 and 14th May, 1996 could not have been passed. The High Court was, therefore, right in striking down the Notifi­cation dated 30th December, 1995 and two orders/directions dated 25th January, 1996 and 14th May, 1996. (Paras 41 and 42)

       As the definition of co-operative societies in the NABARD Act is restricted to co-operative societies registered under State Acts and as the provision is for a State to declare a co-operative society as a “state co-operative bank” the license, which can be issued by the RBI, can only be in respect of that State. Merely because one State declares a co-operative society as a “state co-operative bank” would not enable the RBI to issue that society a license to carry on banking business in other States or in the rest of the country. In this case, the RBI was wrong in issuing a license to the Appellants for the States of Maharashtra and Goa when, admittedly, the Appellants had not been declared a state co-operative bank in the State of Goa. Thus, it is held that the banking license could not have been issued for the State of Goa. (Para 44)