The court affirmed that Section 36AAA of the Banking Regulation Act remains valid, allowing for the supersession of a cooperative bank's board for up to five years, without the necessity of a hearing.

JUDGMENT :

Firdosh P. Pooniwalla, J.

1. RULE. Respondents waive service. Rule made returnable forthwith, heard finally by consent of the parties.

2. This Writ Petition has been filed under Article 226 of the Constitution of India, seeking the following final reliefs:-

“(a) That this Hon’ble Court be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ and/or order and direction under Article 226 of the Constitution of India calling for records and proceedings of the impugned order dated 24.11.2023 passed by the Respondent No.1 and after looking into legality and propriety of the impugned order dated 24.11.2023, the same be quashed and set aside;

(b)That this Hon’ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ and/or order and direction under Article 226 of the Constitution of India after looking into legality and propriety of the impugned order dated 24.11.2023 direct the Respondent No.1 to withdraw the impugned order dated 24.11.2023.”

3. The case of the Petitioners in the Petition is as follows:-

(a) In 1964, Respondent No.7, i.e. Abhyudaya Co-operative Bank Limited, was registered under the Maharashtra Co-operative Societies Act, 1960 (“the MCS Act, 1960”).

(b) In 1965, Respondent No.7 was converted into a bank with the permission of Respondent No.1, i.e. Reserve Bank of India, and the Commissioner of Co-operation.

(c) In September, 1988, Respondent No.7 complied with the norms to become a Scheduled Bank. Thereafter, Respondent No.7 has been declared as a Scheduled Bank by Respondent No.1.

(d) In 2007, two banks in Gujarat and one bank in Karnataka were amalgamated into Respondent No.7 and, therefore, Respondent No.1 became a Multi State Co-operative Bank w.e.f. September, 2007.

(e) Respondent No.1 issued supervisory directions from 28th February, 2014 to 17th February,2020 to Respondent No.7 whereby restrictions were placed upon Respondent No.7 for advancing loans and thus restricting Respondent No.7 to loan transactions for not more than Rs.6329.11Crores.

(f) It is the case of the Petitioner that this affected profit of Respondent No.7.

(g) On 17th February, 2020, Respondent No.1 lifted the supervisory restrictions upon the advances of loan and Respondent No.7 was permitted to advance loans as per the exposure limit, which was Rs. 130 Crores per borrower.

(h) It is the case of the Petitioners that the functioning of Respondent No.7 was very smooth and it was making profit. In March, 2020, Respondent No.7 was classified as “A” class in the Audit of the Bank up to March, 2020. Respondent No.7 could pay dividend at the rate of 5% for the Financial Year 2018-2019 with the permission of Respondent No.1 and thus the functioning of Respondent No.7 was very regular up to March, 2020.

(i) From March, 2020, the Covid Pandemic spread all over Maharashtra, Gujarat and Karnataka and all business activities virtually stopped. This pandemic situation adversely affected the volume of business conducted by persons who had availed of loans from Respondent No.7. In the result, the recovery of loan amounts was also severally prejudiced.

(j) On 28th May, 2021, Respondent No.1 imposed a Supervisory Action Framework. Pursuant to this restrictions, as imposed by Respondent No.1, Respondent No.7 duly complied with the Action Framework timeline and submitted all the relevant and requisite documents to the satisfaction of Respondent No.1. This action was supervised by the Board of Directors, i.e. the Petitioners, and the documents to that effect are a part of Respondent No.7.

(k) On 1st June, 2021, Respondent No.7 constituted a Board of Management as per the directions of the Supervisory Action Framework dated 28th May, 2021. This Board of Management consisted of two bankers and one Advocate as external members and two Chartered Accountants and one person having more than 25 experience in banking as internal members.

(l) On 22nd July, 2021, Respond