THIS WRIT APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:

CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C.M. POONACHA

C.A.V. JUDGMENT

(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)

INTRODUCTION

1. The appellant has filed the present appeal impugning the order dated 01.09.2025 (hereinafter ‘the impugned order’) passed by the learned Single Judge of this Court rejecting Writ Petition No.2991 of 2023 (GM-RES), captioned G.K. Gururaja Rao v. Union of India and Others. The appellant had filed the said writ petition under Article 226 of the Constitution of India, inter alia impugning Section 18A(5) and Section 21(3) and (4) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (hereinafter referred to as ‘the Act’), to the extent that those provisions entitle the respondent No.3. (hereinafter referred to as ‘the Corporation’ for short) to the reimbursement of the amount in aid paid to depositors, as being violative of Articles 14, 19, 21, 38, 43-B and 300-A of the Constitution of India.

2. The appellant is aggrieved by the Corporation securing reimbursement of the amount paid by it to the depositors of respondent No. 4, Sri Guru Raghavendra Sahakara Bank Niyamitha (hereinafter referred to as ‘the Bank’ in short ), in priority to the other amounts due to the depositors. The appellant contends that on the principle of subrogation the Corporation cannot be accorded a higher priority to recover the amounts paid to the depositors than the priority of payment of the said dues to the said depositors.

3. The appellant is the Secretary of Sri Guru Raghavendra Sahakara Bank (Ni) Tevanidarara Sangha (hereinafter referred to as ‘the Sangha’ or ‘the appellant’), a society registered under the Karnataka Societies Registration Act, 1960, on 21.07.2020. The Sangha claims to have been formed to protect the interests of its members, who are depositors, shareholders, and account holders of the Bank.

4. It is relevant to note that prior to the filing of the writ petition from which the present appeal arises, the appellant had preferred a public interest litigation (PIL), Writ Petition No.25989 of 2022 (CS-RES), in this Court, seeking to quash the communication dated 03.01.2022 issued by the Corporation to the Bank demanding repayment of the insurance amounts disbursed by it. By an order dated 03.01.2023, the Division Bench permitted the appellant to withdraw the said writ petition, reserving liberty to file a fresh petition only to the extent of challenging the constitutional validity of Section 21 of the Act. The Division Bench, however, made it clear that such liberty shall not be treated as permission to challenge the notification dated 03.01.2022 afresh.

5. The present appeal concerns a dispute arising from the demand made by the Corporation for repayment of insurance amounts paid to the depositors of the Bank (hereinafter the Depositors). The Bank is a co-operative bank, and the Reserve Bank of India (RBI) has frozen its banking activities under Section 35A read with Section 56 of the Banking Regulation Act, 1949, with effect from 10.01.2020, consequent upon the detection of serious financial irregularities. The appellant impugns Sections 18A(5), 21(3), and 21(4) of the Act as introduced by the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (Hereinafter the Amendment Act), which enable the Corporation to reimburse the insurance amounts paid to the Depositors prior to the Bank’s liquidation.

6. Before considering the reliefs sought by the appellant in the writ petition and the challenge raised in the present appeal, it is relevant to set out the factual context in which the controversy involved in the present appeal arises.

PREFATORY FACTS

7. The State of Karnataka enacted the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as ‘the KCS Act’), consolidating and codifying the law relating to