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IN THE HIGH COURT OF CALCUTTA (PORT BLAIR)
Harish Tandon, J.
Andaman & Nicobar State Cooperative Bank Limited & Another - Appellants
Versus
Andaman And Nicobar Administration & Others - Respondents
CAN No.141 of 2019 WP No.140 of 2019 and CAN No. 074 of 2019 WP No.325 of 2017
Decided On : 02-03-2020
COOPERATIVE SOCIETY - SHOW CAUSE NOTICE - COMPETENCY OF REGISTRAR OF COOPERATIVE SOCIETY - AUTHORITY TO ISSUE SHOW CAUSE NOTICE - INTERFERENCE BY COURT - SCOPE AND GROUNDS - PREMATURE CHALLENGE - EXCEPTIONS - BIAS - ALLEGATIONS IN SHOW CAUSE NOTICE - REQUIREMENT OF CLARITY AND SPECIFICITY - OPPORTUNITY OF HEARING - PRINCIPLES OF NATURAL JUSTICE - JUDICIAL REVIEW - GROUNDS FOR INTERFERENCE - PUBLIC INTEREST - BANKING REGULATION ACT, 1949 - APPLICABILITY TO COOPERATIVE BANKS - AUTONOMY OF COOPERATIVE BANKS - SCOPE OF JUDICIAL INTERFERENCE.
Fact of the Case:
The petitioners, a Cooperative Society registered under the Andaman and Nicobar Islands Cooperative Societies Regulations, 1973, and its Chairman, challenged a show cause notice issued by the Registrar of Cooperative Societies (RCS) under Regulation 27 of the Regulations. The RCS alleged various violations of the Regulations, bye-laws, and directives by the Managing Committee of the Cooperative Bank, resulting in financial losses and mismanagement. The petitioners contended that the RCS lacked the authority to issue the show cause notice, that the allegations were vague and lacked specificity, and that the RCS was biased against them. They also argued that the Cooperative Bank was governed by the Banking Regulation Act, 1949, and not the Regulations.
Finding of the Court:
1. The RCS has the authority to issue a show cause notice under Regulation 27 of the Regulations if it has a prima facie opinion that the Managing Committee of the Cooperative Society has persistently defaulted or been negligent in performing its duties, or has committed acts prejudicial to the interests of the society or its members.2. The show cause notice must be clear, specific, and provide sufficient details of the alleged violations to enable the Managing Committee to respond effectively.3. The RCS must act fairly and impartially and provide an opportunity of hearing to the Managing Committee before taking any action under Regulation 27.4. The court will not ordinarily interfere with a show cause notice unless it is manifestly seen that the RCS lacks the authority to issue it, or there are exceptional circumstances such as bias, mala fides, or a complete lack of jurisdiction.5. The Banking Regulation Act, 1949 does not oust the jurisdiction of the RCS under the Regulations. Cooperative banks are subject to both the Act and the Regulations, and the RCS has the authority to regulate and supervise cooperative banks in accordance with the Regulations.
Issues: 1. Whether the RCS had the authority to issue the show cause notice under Regulation 27 of the Regulations.2. Whether the allegations in the show cause notice were vague and lacked specificity.3. Whether the RCS was biased against the petitioners.4. Whether the Cooperative Bank was governed by the Banking Regulation Act, 1949, and not the Regulations.
Ratio Decidendi: 1. The RCS has the authority to issue a show cause notice under Regulation 27 of the Regulations if it has a prima facie opinion that the Managing Committee of the Cooperative Society has persistently defaulted or been negligent in performing its duties, or has committed acts prejudicial to the interests of the society or its members.2. The show cause notice must be clear, specific, and provide sufficient details of the alleged violations to enable the Managing Committee to respond effectively.3. The RCS must act fairly and impartially and provide an opportunity of hearing to the Managing Committee before taking any action under Regulation 27.4. The court will not ordinarily interfere with a show cause notice unless it is manifestly seen that the RCS lacks the authority to issue it, or there are exceptional circumstances such as bias, mala fides, or a complete lack of jurisdiction.5. The Banking Regulation Act, 1949 does not oust the jurisdiction of the RCS under the Regulations. Cooperative banks are subject to both the Act and the Regulations, and the RCS has the authority to regulate and supervise cooperative banks in accordance with the Regulations.
Final Decision: The writ petitions and the connected applications were dismissed. However, the time to file objections to the show cause notice was extended by three weeks from the date of the judgment. The RCS was directed to make an endeavor to complete the proceeding as expeditiously as possible.
JUDGMENT
Harish Tandon, J. - There has been a several round of litigations at the behest of the petitioners challenging the notice, order or even a show cause issued by the competent authority impinging upon the functioning and working of the Cooperative Bank. A little prelude to the genesis of the birth of the petitioner no. 1 is required to be highlighted though the points raised therein is hovering around the show cause issued against it by the respondent no. 2.
2. Admittedly, the petitioner no. 1 is a Cooperative Society registered under Andaman and Nicobar Islands Cooperative Societies Regulations, 1973 and the petitioner no. 1 is a Chairman of the said Cooperative Bank. The Reserve Bank of India granted licence to commence and carrying on the banking business in the Andaman & Nicobar Islands under Banking Regulation Act, 1949. The Chairman and Vice-chairman alongwith other members of the managing committee were elected in a democratic process for a term of five years. The petitioner-bank was functioning initially in profit and expanded its horizon of banking activities by opening several branches within the Islands upon getting a permission/ licence from the Reserve Bank of India but subsequently there appears to be a recession in such business as the non performing asset has increased considerably. Subsequently, the inquiries and the other allied exercise were made in order to ascertain the commercial stability in such business and the strength of the petitioner no. 1; several letters were caused and the replies were invited thereto from the Managing Committee of the petitioner-bank.
3. From time to time the directions were passed by the Registrar of the Cooperative Society, the respondent no. 2, herein and those were challenged before this Court. The orders were passed sometimes setting aside the said order with the directions to initiate de - novo enquiries but the disputes remained and consistently continued for several years.
4. A show cause notice was issued by the Registrar of the Cooperative Society on February 25, 2019. The petitioners challenged the said show cause before this Court in taking out a writ petition being WP No. 79 of 2019 which came up before the Single Bench on March 8, 2019. After noticing the contents of the said show cause and the language employed therein, a sense was inculcated in the mind of the authority that the same is not in consonance with the spirit of the Regulations and the submission was advanced on behalf of the respondent authorities that they would not proceed further on the basis thereof as the same shall be withdrawn. On the basis of such submission so advanced, the writ petition was disposed of. Thereafter, the impugned show cause notice was issued on April 12, 2019 inviting the bank through its Managing Committee to submit reply to the allegation of charges leveled therein.
5. This gives rise to the initiation of the instant writ petition challenging the said show cause notice dated April 12, 2019 on various grounds including the competence of the Registrar of the Cooperative Society under the said Regulation. Apart from the same the challenges also based upon the allegations of bias, acting with the closed mind and in excess of the jurisdiction conferred upon the Registrar under the aforesaid Regulation. The petitioners sought to project in the instant writ petition that the source of the said show cause notice is an outcome of political rivalry, more particularly, on the basis of complaint lodged by the member of the rival political party against the members of the Managing Committee being a supporter of another political party.
6. Several applications are taken out by the respective parties seeking amendment of reliefs and consequential orders but the moot question which this Court finds from the rival stands of the parties is concentrated on the legality and efficacy of the show cause notice both on factual and legal parameters.
7. Before this Court proceeds to deal with
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