Back
IN THE HIGH COURT OF JHARKHAND AT RANCHI
ANUBHA RAWAT CHOUDHARY, J.
Tundi Primary Agricultural Credit Cooperative Society (PACS) & Ors. - Petitioners
Versus
State of Jharkhand, Represented through its Secretary, Department of Cooperative & Ors. - Respondents
W.P. (C) No. 7479 of 2013
Decided On : 08-04-2024
COOPERATIVE BANKS - AMALGAMATION OF COOPERATIVE BANKS - Jharkhand Cooperative Societies Act, 1935; Jharkhand Cooperative Societies Rules, 1959; Banking Regulation Act, 1949; 97th Constitutional Amendment - The court examined the legality of the compulsory amalgamation of the Dhanbad Central Cooperative Bank with the Jharkhand State Cooperative Bank under Rule 39 of the Jharkhand Cooperative Societies Rules, 1959. It highlighted that Rule 39 is applicable to cooperative banks, but the amalgamation process must comply with Section 44(AK) of the Jharkhand Cooperative Societies Act, 1935, which requires prior approval from the Reserve Bank of India (RBI). The court found that the decision for compulsory amalgamation was not taken in accordance with the law, as the necessary financial assessments and RBI's consent were not obtained, leading to the quashing of the impugned order.
Fact of the Case:
The petitioners, shareholders of the Dhanbad Central Cooperative Bank, challenged the directive for compulsory amalgamation with the Jharkhand State Cooperative Bank, arguing that the invocation of Rule 39 of the Jharkhand Cooperative Societies Rules, 1959 was improper and that the necessary approvals from the RBI were not obtained. The Dhanbad Central Cooperative Bank had previously rejected a proposal for voluntary amalgamation.
Finding of the Court:
The court found that the decision to amalgamate was not taken in accordance with the law, as the necessary financial assessments and prior approval from the RBI were not obtained. The court emphasized that Rule 39 applies to cooperative banks but requires compliance with Section 44(AK) of the Jharkhand Cooperative Societies Act, 1935.
Issues: 'Whether the decision to amalgamate the Dhanbad Central Cooperative Bank was taken in accordance with the law.', 'Whether Rule 39 of the Jharkhand Cooperative Societies Rules, 1959 applies to cooperative banks.', 'Whether the necessary approvals from the Reserve Bank of India were obtained for the compulsory amalgamation.'
Ratio Decidendi: The court held that the compulsory amalgamation of cooperative banks under Rule 39 requires prior approval from the RBI and must consider the financial positions of the banks involved. The failure to comply with these requirements rendered the amalgamation directive invalid.
Final Decision: The court quashed the directive for compulsory amalgamation of the Dhanbad Central Cooperative Bank with the Jharkhand State Cooperative Bank due to procedural irregularities and lack of necessary approvals.
JUDGMENT :
Anubha Rawat Choudhary, J.
Learned counsels for the parties are present.
2. This writ petition has been filed for the following reliefs :
(ii) For quashing of Letters as contained in Reference No. 543/13 dated 04.12.2013 [Annexure-4] whereby and where under in compliance to the Order of the Respondent No.2 and the consequent Order of the Administrator of the Dhanbad Central Cooperative Bank Limited [Respondent No. 3], the Managing Director of The Dhanbad Central Cooperative Bank Limited [Respondent No.4] has convened a meeting of the share-holders of the DCC Bank, Dhanbad on 20.12.2013 to consider the matter of compulsory amalgamation of the Dhanbad Central Cooperative Bank with the Jharkhand State Cooperative Bank under Section 39 of the Jharkhand Cooperative Societies Rules, 1959.”
The background.
3. Petitioner Nos.1 and 2 are short-term Cooperative Credit Societies registered under the Jharkhand Cooperative Societies Act, 1935 [hereinafter referred to as “the Act of 1935”] as also governed by the Jharkhand Cooperative Societies Rules, 1959 [hereinafter referred to as “the Rules of 1959”]. Petitioner Nos. 1 & 2 are the share-holders of the Dhanbad Central Cooperative Bank Ltd. and are accordingly, members of its general body and have obtained financial loan/assistance from it for its members. The State of Jharkhand is also a share holder of Dhanbad Central Cooperative Bank as has been stated in the counter-affidavit.
4. At the time of filing the writ petition, Dhanbad Central Cooperative Bank was under supersession since December, 2006 and in the instant writ it has been represented by its Administrator. However, new managing committee has been constituted in the year 2018 and a counter affidavit has also been filed by the new managing committee supporting the petitioners.
5. The Cooperative Credit Societies are registered under the said Act of 1935, which cater to agricultural financing and are classified under three different categories [Three Tier System], in terms of their area of operation as follows:-
(ii) District Level Cooperative Societies: - For each district there was one District Central Cooperative Bank, the area of operation of which generally covered the entire district in which it was situated and they were also entitled to carry out the function of a bank having a banking licence duly granted to them by the Reserve Bank of India and were also governed by the relevant provisions of the Banking Regulation Act. It was the primary object of the Cooperative Banks to provide financial inputs to the PACS whenever required and needed on minimum rate of interest, who in turn, financed its farmer members on a minimum rate of interest.
(iii) State Level Cooperative Society: - For the entire State, there was one State Cooperative Bank, the area of operation of which covers the entire State with the primary object to provide financial inputs to the District Central Cooperative Banks, wherever required and needed on minimum rate of interest.
6. Initially in the State of Jharkhand, there existed nine District Central Cooperative Banks out of which one, that is the Daltonganj District Central Cooperative Bank, was liquidated some years back by the Reserve Bank of India and the rest included the respondent-the Dha
The compulsory amalgamation of cooperative banks must comply with the provisions of the Jharkhand Cooperative Societies Act, 1935, including obtaining prior approval from the Reserve Bank of India, a....
The Registrar's jurisdiction to approve bank amalgamations remains valid despite the amendment of Section 44A of the Banking Regulation Act, 1949, with amendments not affecting ongoing merger request....
Point of Law : Section 74A of 1969 Act was incorporated to ensure that benefits of DICGC Act, 1969 were extended to Co-operative Banks as well.
Merger of cooperative banks does not violate statutory regulations when properly sanctioned; the petitioner acted out of self-interest and lacking standing.
An appeal against the order of amalgamation of co-operative banks approved by the RBI is barred under Section 79 of the Chhattisgarh Co-operative Societies Act.
Cooperative banks operate under state law for incorporation and management, while banking activities are regulated by central law, establishing a division of legislative competence.
A cooperative society must demonstrate its multi-state operations to be registered under the Multi-State Cooperative Societies Act, 2002, as per legal requirements and Reserve Bank directives.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
