IMPORTANT POINT
Section 71 of the Gujarat Cooperative Societies Act is not in derogation of any other law such as the Banking Regulation Act but in addition to it.

Headnote:(i) Banking Regulation Act, 1949-Sections 2, 5(b) and 6(1)(a)-Gujarat Cooperative Societies Act, 1961-Section 71-Forms of business in which banking companies may engage-Investment of funds by a Central Cooperative Bank-Whether there is any inconsistency between the Central Act and the State Act-(No).
       Held : A fascicule reading of Sections 2, 5 and 6 of the Banking Regulation Act and Section 71 of the Gujarat Co-operative Societies Act would clearly posit that Section 71 of the Act is not in derogation of any other law such as the Banking Regulation Act but in addition to it. In the instant case, the State Act being dominant legislation under Article 254(2) the intendment of legislature that there is no repugnancy between the State Act and the Central Act is clearly expressed due to the assent by the President in view of the provisions of Section 71 of the State Act providing restrictive mode of investment by the co-operative bank. Section 71 was brought to the Statute book with a view to strengthen the already existing law namely the Banking Regulation Act and to safeguard the interests of the members of co-operative banking business by discouraging the members from investing in the institutions other than those specified in clauses (a) to (f) of Section 71, without prior sanction of the State Government. Therefore, it would not be opt to say that either the legislature or the President intended to create any repugnancy between these two Acts. The fact that the assent of the President was sought for, could only be in addition to and not in derogation of any other Law such as the Central Act. It is also clear from the language employed in Section 2 of the Banking Regulation Act that the provisions of the Act were in addition to and not in derogation of any other Law for the time being in force. Conjoint reading of Sections 2, 5 and 6 of the Banking Regulation Act and Section 71 of the Gujarat Co-operative Societies Act, in our view, there is no repugnancy or inconsistency between the State Act and the Central Act which satisfies the test set out by this Court in M. Karunanidhi s case. (Paras 10 and 11)
       (ii) Constitution of India-Article 226-Gujarat Cooperative Societies Act, 1961-Section 71-Non-compliance of-Public Interest Litigation-Mehsana District Central Cooperative Bank violated provisions of Section 71 of the Act by investing large sums in undertaking other than those enumerated in Section 71(a) to (f) of the Act-No action initiated against the Bank and Members of Board of Directors-Whether High Court was justified in issuing a writ of mandamus directing respondents Nos. 4 and 5 to take appropriate action against appellants-(Yes).
       Held : In the facts and circumstances stated above, the High Court by the impugned order issued a writ of mandamus directing respondent Nos. 4 and 5 to take appropriate action against the appellants in accordance with the provisions contained in the Gujarat Cooperative Societies Act and the rules framed thereunder. We do not see any infirmity in the impugned order. The Acts and Rules are made to be followed and not to be violated. When the Statute prescribes the norms to be followed, it has to be in that fashion. Converse would be contrary to law. If there is any allegation of violation of statutory rules which have been brought to the notice of the authorities and if the concerned authorities do not perform their statutory obligation, as in the present case, any aggrieved citizen can always bring to the notice of the High Court about the inaction of the statutory authorities and in such event it would always be open to the High Court to pass an appropriate order as deemed fit and proper in the facts and circumstances of the case. In the present case, the facts as alluded above, would clearly reveal that the High Court was clearly justified in issuing a writ of mandamus, which cannot be faulted. (Para 15)

JUDGMENT

Sema, J.-Civil Appeal No. 3040 of 1998

This appeal is against the judgment and order dated 16.4.1998 passed by the Division Bench of the High Court. The facts of this case may be briefly recited :-

2. The appellant-society was registered under the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as the Act). It was carrying on the banking activities. Section 71(1)(a) to (f) of the Act enumerates various institutions in which a co-operative bank is to make investments. Clause (g) of Section 7(1) empowers the State Government to permit any society to invest the funds in any institution other than those mentioned in clauses (a) to (f) of the Section. Section 71 of the Act is relevant for the purpose of disposal of the present appeal. We shall be dealing with this Section in detail at an appropriate time. The appellant-bank sought permission of the State government to invest funds in an institution outside those falling under clauses (a) to (f) of Section 71(1) of the Act. However, the Government declined the request. Inspite of the refusal, the appellant-bank invested the funds in Mutual Fund, which was outside the purview of clauses (a) to (f) of Section 71 of the Act. It is stated that for non-compliance of Section 71 of the Act, notices were issued to the appellants calling for an explanation as to why action should not be initiated against them as contemplated under the Act. It is also stated that the appellants have not filed their replies to those notices and the matter is still pending with which we are not concerned in this appeal.

3. The appellant-bank undisputedly is a Cooperative Bank and is also a Central Co-operative Bank. The Banking Regulation Act, 1949 was amended by the Central Act No. 23 of 1965, which came into force with effect from 1st March, 1966. By the aforesaid amending Act, Part V was inserted in the Banking Regulation Act, 1949, providing for application of the Act to cooperative banks.

4. Mr. K.G. Vakharia, learned Senior counsel for the appellants, contended that Section 5(b) of the Banking Regulation Act, 1949 defines "banking" and provides that "banking" means the accepting, for the purpose of lending or investment of deposits of money from the public. He further argued that sub-section (1)(a) of Section 6 of the Banking Regulation Act, 1949 provides for business of banking companies which will include cooperative banks. He, therefore, urged that the appellant-bank is entitled to be engaged in banking business in terms of the norms contemplated under Sections 5 and 6 of the Banking Regulation Act and not according to the norms of investment enumerated under Section 71 of the Gujarat Co-operative Societies Act.

5. The whole contention of the learned Senior counsel for the appellants is based on repugnancy and inconsistency between the Central Act and the State Act. In other words, the conflict is between 71 of the Gujarat Co-operative Societies Act and Sections 5(b) and 6(1)(a) of the Banking Regulation Act. To answer the aforesaid question it will be relevant to make a quick survey of the relevant provisions of the Gujarat Co-operative Societies Act and the Banking Regulation Act.

6. To appreciate the controversy in proper perspective Sections 5(b) and 6(1)(a) of the Banking Regulation Act and Section 71 of the Gujarat Societies Act are extracted :-

"5. Interpretation.-In this Act, unless there is anything repugnant in the subject or context,-

(a) .............

(b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; ............"

"6. Forms of business in which banking companies may engage.-(1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely:-

(a) the borrowing, raising, or taking up of money; the lending or

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2004 Supreme(SC) 106

IMPORTANT POINTSection 71 of the Gujarat Cooperative Societies Act is not in derogation of any other law such as the Banking Regulation Act but in addition to it.

Cases Referred (1)

IMPORTANT POINT
Section 71 of the Gujarat Cooperative Societies Act is not in derogation of any other law such as the Banking Regulation Act but in addition to it.