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2008(1) Supreme 137
Supreme Court of india
G.P. Mathur & Aftab Alam, JJ.
Reserve Bank of India — Appellant
Versus
M. Hanumaiah & Ors. — Respondents
Appeal (civil) 9 of 2008
Decided on 04.01.2008
Facts of the Case-
1.Issue in consideration in present case was whether the principles of natural justice have any application at the stage when the Registrar Co-operative Societies, on being so required in writing by the Reserve Bank of India passes an order removing the Committee of Management of a Co-operative Bank and appointing an Administrator to manage its affairs for such period, as may be specified by the Reserve Bank of India?
Findings of the Court-
In case of supersession of management of a cooperative bank there is no application of principles of natural justice for reasons; that Reserve Bank of India being apex expert body in country in banking matters and once it is satisfied in regard to the need of supersession of the bank’s management, Registrar cooperative societies who have no experience in affairs of banks are simply obliged to carry out instructions of Reserve Bank. Again, once decision of supersession is taken it is necessary to have it effected speedily because any delay would cause irreparable loss and harm to interests of small depositors of the bank.It is, therefore, by design that no opportunity of hearing is mentioned in sub-section (5) of Section 30 even though it was stipulated earlier (in sub-section (1)) in the same section. Hence held that on receipt of a requisition in writing from Reserve Bank of India Registrar Cooperative Societies is statutorily bound to issue order of supersession of committee of management of cooperative bank At that stage affected bank/its managing committee has no right of hearing or to raise any objections.
Result : Appeal allowed.
judgment
Aftab Alam, J. —
1.Leave granted.
2.Whether the principles of natural justice have any application at the stage when the Registrar Co-operative Societies, on being so required in writing by the Reserve Bank of India passes an order removing the Committee of Management of a Co-operative Bank and appointing an Administrator to manage its affairs for such period, as may be specified by the Reserve Bank of India? This is the question that falls for consideration in this case.
3.The facts and circumstances in which the question arises are brief and simple and may be stated thus :
On inspection of Kalidasa Cooperative Bank Ltd. (respondent No.16) (hereinafter referred to as the Cooperative Bank or the Bank) made on June 30, 1994 under Section 35 read with Section 56 of the Banking Regulation Act the Reserve Bank of India (the appellant before us) found a number of serious irregularities in its affairs. It sent a copy of the inspection report to the Cooperative Bank and called the members of its board of directors for discussion on the findings in the report. It also forwarded a copy of the inspection report to the Joint Registrar, Cooperative Societies. The Joint Registrar advised the Reserve Bank to make requisition for supersession of the committee of management of the Bank. The Reserve Bank, however, withheld any action in that regard but called the members of the board of directors of the Bank for several rounds of discussions at different levels. The board of directors was repeatedly urged to take stringent actions to improve the financial health of the Bank. Apparently, no remedial measures were taken and the affairs of the Cooperative Bank continued in a state of financial distress. Finally, the Reserve Bank issued a requisition to the Registrar Cooperative Societies, Karnataka on January 22, 2002 requiring him to supersede the board of directors of the Cooperative Bank and to appoint an Administrator for a period of one year as provided under Section 30(5) of the Karnataka Cooperative Societies Act. The requisition was made in public interest and for preventing the affairs of the Bank being conducted in a manner detrimental to the interest of the depositors and for securing proper management of the Bank.
4.In compliance with the requisition made by the Reserve Bank the Registrar Cooperative Societies issued an order on January 31, 2002 superseding the board of directors of the Bank and appointing an Administrator in its place.
5.The order of supersession issued by the Registrar was challenged before the Karnataka High Court by respondents 2 to 13 (members of the committee of management of the Cooperative Bank that was in existence at that time) in W.P.No.6706 of 2003 (CS-RES). The writ petition was allowed by a learned Single Judge of the Court by order dated September 21, 2002. It is a brief order in which after noticing the relevant provision as contained in Section 30(5) of the Karnataka Cooperative Societies Act, the learned Judge simply observed as follows :
“From the order, I find that the supersession is at the instance of the Reserve Bank of India since it is referred to in the impugned order. Further, the reason given by the Reserve Bank of India in order to supersede the Committee of Management in the public interest has not been disclosed in the impugned order. Further, no opportunity of hearing also has been afforded before passing an order by the Cooperative Bank. In the result, I pass the following order :
(a)Writ Petition is allowed.
(b)The impugned order is quashed.” (Emphasis added)
Against the order passed by the learned Single Judge, the Reserve Bank of India preferred Writ Appeal No.6120 of 2002 (CS-RES). When the appeal was taken up on March 31, 2003, the Court was told that fresh elections for the committee of management were to take place on March 20. The Division Bench took the view that this development had rendered the writ appeal infructuous and disposed it of as such, leaving it open to the Reserv
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