Point of Law: Particular role of RBI as an important functionary in economic and financial system of country, with expertise in matters entrusted to it.

JUDGMENT :

1. The present petition under Article 226 of the Constitution is directed principally against directives dated 23.09.2019, 26.09.2019, 03.10.2019, 14.10.2019 and 05.11.2019 issued by the respondent No.1-Reserve Bank of India [hereinafter, “RBI”]. By the aforesaid directives, issued under Section 35A of the Banking Regulation Act, 1949 [hereinafter, “BR Act”], the RBI imposed certain restrictions on withdrawals by depositors from their accounts in respondent No.2 Punjab and Maharashtra Co-operative Bank Limited [hereinafter, “PMC Bank”].

A. Factual Background

2. The petitioners are account holders in PMC Bank. The petitioner Nos. 2 and 3 are the parents of petitioner No. 1. The petitioner Nos. 2 and 3 hold four fixed deposits in PMC Bank amounting to a total of Rs.97 lakhs. The contentions in the writ petition are that PMC Bank was established in the year 1984 as an Urban Cooperative Bank [hereinafter, “UCB”]. It was conferred with the status of a Scheduled Bank in the year 2000 and with the status of a Multi-State Urban Co-operative Bank in the year 2004.

3. According to the petitioners, PMC Bank’s annual reports for the year 2018-19 showed deposits in excess of Rs.11,000 crores, income of almost Rs.1,300 crores and a profit of almost Rs.100 crores, with a net ratio of Non-Performing Assets of 2.19%. It is contented that the petitioners, being depositors in PMC Bank, were taken by complete surprise when the RBI issued the impugned directives restricting the permissible extent of withdrawal from the amounts deposited by them in PMC Bank. From the various impugned directives placed on record, it appears that PMC Bank was first restrained from granting loans and advances, making investments, incurring liabilities and disbursing any payments. As far as the petitioners are concerned, the effective restrictions against them were that PMC Bank was restrained from releasing an amount in excess of Rs.1,000/-from the total balance in each savings account or current account or deposit account. This amount was increased to Rs.10,000/-and thereafter to Rs.25,000/-by subsequent directives dated 26.09.2019 and 03.10.2019. The amount of Rs.25,000/-was subsequently increased to Rs.40,000/-by a directive dated 14.10.2019, noting that the financial position of PMC Bank had been substantially impaired due to fraud perpetrated on it by certain persons. While increasing the amount to Rs.50,000/-by a directive dated 05.11.2019, the RBI noted that 78% of the depositors would thus be able to withdraw their entire account balance in PMC Bank.

4. An Administrator was also appointed in respect of PMC Bank by a directive dated 26.09.2019. The Administrator-Mr. J.B. Bhoria, has been arrayed as respondent No. 5 in this petition.

5. The grievance of the writ petitioners is that the impugned directives impose a fetter on their access to their own funds lying deposited in PMC Bank. The petitioners have drawn attention to a fraud committed by various persons in management of PMC Bank, which led to the substantial erosion of PMC Bank’s financial position. It is contented that the aforesaid position was a result of inadequate supervision and control by the RBI, being the regulator of the banking sector. It is further stated that one of the senior officers of the RBI namely, Mr. Laxman Kamble [hereinafter, “Kamble”], who was responsible for supervising UCBs during the period of these irregularities, thereafter took employment with PMC Bank. Thus, in addition to allegations of actionable negligence against the RBI, the petitioners, in fact, plead fraud and active collusion on the part of the concerned officers of the RBI. In these circumstances, the petitioners seek the following reliefs in this writ petition:-

“I. That this Hon'ble Court be pleased to issue a Writ of Mandamus or any other appropriate Writ/Order of Direction, quashing/setting aside or modifying Directions with regards to Directive No. DCBS.CO.BSD-1/D-I/12.22.183/2019-20 dated 23rd September 201