1. The petitioner Reserve Bank of India (RBI for short) has taken out present petition seeking below mentioned relief and direction:
"7(A) Call for the records and proceedings of the Revision Application No.77 of 2012 before the Respondent No.1 and issue an appropriate writ and quash and set aside the Order dated 10.04.2012 at Annexure "A" hereto passed by the Respondent No.1 in Revision Application No.77 of 2012.
(B) During the pendency and final disposal of this petition, stay the execution, implementation and operation of the order dated 10.04.2012 at Annexure "A" hereto passed by the Respondent No.1 in Revision Application No.77 of 2012."
1.1. The petition was presented for hearing on 13th April 2012 when, upon hearing learned counsel appearing for the petitioner, RBI, below mentioned order was passed:
"1.
Leave to amend so as to add The Bhuj Mercantile Co-op. Bank Ltd. as respondent No.10 is granted. Amendment to be carried out forthwith.
2. Heard Mr. Saurabh Soparkar, learned Senior Counsel with Mr. Amar N. Bhatt, learned advocate for the petitioner.
3. It emerges from the record that under the order dated 30.3.2012 the petitioner RBI issued certain instruction - direction to the respondent No.1. In pursuance of the said instruction the respondent No.2 passed order dated 30.3.2012.
4. It appears that the said order passed by respondent No.2 is taken in revision vide Revision Application No.77 of 2012 by the respondent No.4 to 9. It further emerges from the record that the Revisional Authority has, upon considering the revision application and submission made by the learned advocate for the applicant passed order dated 10.4.2012 whereby the order dated 30.3.2012 passed by respondent No.2 is stayed. As a result of the said order the instruction issued by the RBI under its communication dated 30.3.2012 have lost its efficacy and the operation of the said order is also under injunction.
5. Mr. Saurabh Soparkar, learned Senior Counsel for the petitioner has submitted that the said order is directly in violation of provisions contained under Section 115-A(3) and (4). In support of his submission he also relied on the decision of the Hon'ble Apex Court in case of Reserve Bank of India vs. M.Hanumaiah and others (2008 [1] SCC 770).
6. I have considered the instruction / order dated 30.3.2012 passed by RBI and order passed by respondent No.2. I have also considered the impugned order dated 10.4.2012 passed by the Revisional Authority.
Having regard to the provision contained under Section 115-A (3) and (4) and the above mentioned decision by the Hon'ble Apex Court, below mentioned order is passed:-
Let Notice be issued to the respondents. The office is directed to issue Notice making it returnable on 18.4.2012. The operation and implementation of the order dated 10.4.2012 annexure-A (page 17) shall remain stayed until 19.4.2012. Direct service is permitted today."
1.2. Subsequently the said order has been extended from time to time under order dated 18.04.2012, 20.04.2012, 01.05.2012, 07.05.2012, 09.05.2012, etc.
2. In the meanwhile, on 07.05.2012, the learned counsel for petitioner tendered draft amendment and prayed for leave to amend the petition. With the consent of learned advocate for respondents No. 3 to 9 the amendment was granted. Accordingly, the petitioner has made addition in original para 2.9 of the petition and has also amended para 7.0 (prayer clause) so as to add para 7(AA) and 7(BB). The said additional relief/s prayed for under para 7(AA) and 7(BB) read thus:
"7(AA).Issue a writ of prohibition or any other appropriate writ to restrain the respondent no.1 from proceeding further with the hearing of Revision Application No.77 of 2012 before the respondent no.1.
7(BB). During the pendency and final disposal of this petition, stay the further proceedings of the Revision Application No.77 of 2012 pending before the respondent no.1."
3. The respondent No.6 has filed reply-affidavit dated 16th April 2012. Subsequently the same respondent has filed additional affidavit dated 8th May 2012. In response to the affidavit dated 16th April 2012, the petitioner has filed counter i.e. affidavit in rejoinder dated 1st May 2012.
3.1. It emerges from the record of the petition being Special Civil Application No.4913 of 2012 that considering the relevant facts and circumstances, particularly the reports by the inspection team, the petitioner RBI had, by its order dated 30th March 2012, required the Registrar of Co-operative Societies, Gujarat State (hereinafter referred to as the Registrar) to make an order of supersession of Board of Directors of the Bhuj Mercantile Bank Ltd., Ahmedabad (a non-scheduled bank) (hereinafter referred to as the said bank) and in pursuance of the said order the Registrar passed an order dated 30th March 2012 superseding the Board of Directors of the said bank. The Directors of the said bank thereafter preferred Revision Application No.77 of 2012 against the order dated 30th March 2012 passed by the Registrar. The concerned authority, by order dated 10th April 2012 in the said Revision Application and stayed the operation of the order of Registrar. The petitioner RBI, upon being aggrieved by the said order of the Revisional Authority preferred the petition being Special Civil Application No.4913 of 2012.
3.2. The respondent No.6 in the captioned petition being S.C.A. No. 4913 of 2012 filed by RBI, also has taken out a petition being Special Civil Application No.5000 of 2012 wherein the petitioner prayed for below mentioned relief:
"9(A) be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the order dated 30.03.2012 passed by the respondent No.1 at Annexure-A to the petition.
(B) be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction commanding the respondents to restore the petitioners and other Board of Directors in the Bhuj Mercantile Cooperative Bank Limited.
(C) Pending admission and final disposal of this petition, Your Lordships will be pleased to stay the execution, operation and implementation of the order dated 30.3.2012 passed by the respondent No.1 at Annexure-A to the petition and consequently the order made by the respondent No.3"
3.3. The said petition was listed for hearing on 18th April 2012 wherein below mentioned order was passed.
"Notice returnable on 20/04/2012.
To be heard with Special Civil Application No.4913 of 2012. Direct service is permitted."
3.4. In the above mentioned petition being Special Civil Application No.5000 of 2012 the petitioner (who is respondent No.6 in S.C.A. No. 4913 of 2012) has brought under challenge the same order dated 30.03.2012 passed by RBI requiring the Registrar to supersede the Board of Directors of the said bank.
4. Thus, two petitions are interconnected and the learned counsel appearing for the contesting parties in S.C.A.No.4913 of 2012 who are also appearing for contesting parties in S.C.A. No. 5000 of 2012 have made common submissions in respect of both the petitions.
4.1. The petitioner RBI in S.C.A.No.4913 of 2012 and the petitioner in S.C.A.No.5000 of 2012 i.e. one of the Directors of the said bank (i.e. respondent No.6 in S.C.A.No.4913 of 2012) have prayed for interim relief.
4.2. While RBI has prayed stay of operation of the order passed by revisional authority, whereas, the petitioner in S.C.A.No.5000 of 2012 has prayed for stay of operation of the direction / order issued by RBI requiring the Registrar to supersede the Board of Directors of the said bank.
5. Mr.
Soparkar, learned senior counsel has appeared with Mr.A.N.Bhatt, learned advocate for Reserve Bank of India (petitioner in S.C.A.No.4913 of 2012) and Mr.B.S.Patel has appeared for respondents No. 4 to 9 (in S.C.A.No. 4913 of 2012). Mr. B.S.Patel, learned counsel has also appeared for four petitioners in S.C.A.No. 5000 of 2012 (i.e. respondent No. 6, respondent No.7, respondent No.8 and respondent No.9 in S.C.A.No. 4913 of 2012). Mr. Shirish Joshi, learned counsel has appeared for respondents No.3 and 10 i.e. the Administrator of the said bank (in S.C.A.No. 4913 of 2012).
5.1. Mr.Soparkar, learned senior counsel appearing for RBI has relied on the various inspection reports filed by the inspection team who conducted the statutory inspection/audit and special inspection/audit of the said bank. He has also relied on the correspondence exchanged between the said bank and RBI and also the notice, calling for explanation from the said bank, issued by RBI. In light of the details emerging from the various reports filed by the inspection team, the directions issued by RBI under Section 35(A) read with Section 56 of the Banking Regulation Act as well as in light of the provisions contained under Section 115(A)(3) of the Gujarat Cooperative Societies Act (GCS Act, for short) and Sections 6 and 7 of Banking Regulation Act and other documents on record, he submitted that the petitioner RBI considered it necessary and appropriate, in the interest of the bank and the depositors to require the Registrar to pass order of supersession of the Board of Directors of the said bank. He submitted that the grounds in support of the said order as well as the reasons and justification for such direction to the Registrar are to be found in the reports filed by the inspection team and the notice issued by RBI calling for the explanation and reply from the said bank and the conduct of the said bank even after the directions issued under Section 35(A) read with Section 56 of the Banking Regulation Act by RBI. He, while assailing the order passed by the Revisional Authority, submitted that the said order dated 10th April 2012 is unsustainable and completely contrary to the provisions under Section 115(A)(3) of the GCS Act. He also submitted that in view of the provisions contained under Section 115(A)(3) of the GCS Act, the Registrar is obliged to carry out the requirement - direction issued by the RBI and in present case the order dated 30.03.2012 passed by the Registrar was not only in pursuance and in consonance with the requirement - direction issued by the RBI but also in consonance with the provisions contained under Section 115(A)(3) of the GCS Act and that therefore there was no justification for the Revisional Authority to stay, and that too ex-parte, the operation of the order dated 30.03.2012 passed by the Registrar. He submitted that the order passed by the Revisional Authority has effect of putting at naught the requirement - direction issued by the RBI in exercise of its power under Section 115(A)(3) of the GCS Act and the Revisional Authority does not have any jurisdiction or authority to pass such an order. Mr. Soparkar, learned senior counsel relied on the decision by the Apex Court in case of Reserve Bank of India v. M. Hanumaiah & Ors. [(2008) 1 SCC 770].
5.2. While dealing with the affidavit in reply and additional affidavit filed by respondent No.6 opposing the petition filed by R.B.I., Mr. Soparkar relied upon the notice issued by RBI, the reply given by the said bank in response to the notice and the inspection reports submitted by the inspection team. He also referred to and relied upon the minutes of the 47th meeting of Task Force for Urban Cooperative Banks (TAFCUB for short) which comprises two representatives of R.B.I., two representatives of State Government, a member of each of State Level Federation and National Federation of Urban Cooperative Banks. Mr. Soparkar, learned senior counsel for R.B.I. submitted that the order passed by the Revisional Authority is unsustainable and deserves to be set aside and that until the final hearing and final order in the petition, the operation of the order by the Revisional Authority deserves to be stayed.
6. Mr.
Patel, learned counsel appearing for respondents No.4 to 9 in S.C.A. No. 4913 of 2012 and for the petitioners in S.C.A.No.5000 of 2012 has advanced common submissions in support of S.C.A. No. 5000 of 2012 and for opposing S.C.A.No.4913 of 2012 and relief prayed for by R.B.I. Mr. Patel, learned counsel submitted, inter alia, that the directions dated 30.03.2012 passed by Executive Director is without reasons. The said order is neither speaking nor reasoned order. Hence, it is not maintainable. Mr. Patel submitted that the reasons have been supplied by the communication dated 30.03.2012 which is signed by Deputy General Manager which aspects substantiate that the Executive Director passed the order without application of mind. It is also contended that any reasons or circumstances establishing and justifying urgency, which is sine qua non for such decision and order, is neither recorded nor established either in the order dated 30.03.2012 signed by the Executive Director or in the communication by Deputy General Manager. Mr. Patel also contended that the impugned order came to be passed without hearing the Board of Directors/Individual Directors. Mr. Patel also submitted that the said bank/Board of Directors had taken steps and corrective measures after the instructions received from RBI and the Chairman and other Directors against whom RBI allegedly irregularities were removed from the Board and that therefore also there was no justification to issue requisition for supersession of the Board. Mr. Patel also submitted that such an action should not have been taken so casually inasmuch as it creates crises of trust amongst depositors and the members which would lead the bank to liquidation. He also submitted that though the financial position of the said bank is sound unnecessary panic is created because of the impugned order. Mr. Patel also claimed that the said bank had submitted satisfactory explanation and reply, along with supporting documents, dealing with and explaining each of the allegations about the alleged irregularities and in view of such explanation there was no justification and basis for impugned requisition by RBI i.e. for exercise of power under Section 115(A)(3) of the Cooperative Societies Act. He also submitted that a Director of RBI has no authority to act on behalf of R.B.I. and to issue such requisition. The learned counsel for the Directors repeatedly emphasized the contention that the requisition was issued without opportunity of hearing to the Directors and that order was passed by the Executive Director of RBI and reasons were supplied by the Deputy General Manager and above all, the contention that the new or subsequently elected Board of Directors was subjected to penal action for the alleged irregularities of the previous Board of Directors which was in office prior to 28.05.2011 and that therefore also the impugned order was unjustified and unsustainable. Mr. Patel relied on the decision in the matter between P.M.Raiyani v. State of Gujarat [(2007) 3 G.L.R. 2006] and in the matter between A.S.Baldiwala v. Registrar, Cooperative Societies [(2010) 3 GLR 2349].
7. I have heard the learned counsel for the contesting parties and considered the rival contentions as well as the material on record.
8. According to RBI inspection of the said bank was undertaken in October and November 2011 for the financial year ending as on March 2011 and that the said inspection revealed major irregularities in its financial position and conduct of its affairs and business which included violation of Section 6 and Section 7 of the Banking Regulation Act, allowing intraday overdrawals in Savings Accounts, irregularities in sanctioning loans to the Directors, their relatives or the firms in which they are interested, violation of Section 20 and 20A of Banking Regulation Act. About 18 irregularities are mentioned in para 2.2 of the petition. The record reveals that penal action were also taken in past against the said bank (mentioned in para 2.3 of the petition). It is claimed by RBI that the irregularities which were noticed during the inspection were conveyed to the bank vide letter dated 1st December 2011 and the case of the said bank was also considered by TAFCUB wherein it was agreed that the conduct of the bank's former Chairman as well as past and present Board of Directors had not been observing and complying the prescribed guidelines for Directors. In response to the allegations by the concerned Directors that TAFCUB was not in favour of such action, it is claimed by RBI that initially TAFCUB had recommended that the said bank may be given an opportunity to rectify the irregularities and to take corrective measures. In pursuance of which certain restrictions were placed on the said bank. The matter was reviewed in the meeting held on 28.03.2012 and the said discussion brought out that the said bank had failed to take any real, effective and meaningful action and ultimately at the recommendation of TAFCUB, R.B.I. issued requisition dated 30.03.2012 to the Registrar to supersede the Board of Directors of the said bank. It appears that the action of superseding the Board of Directors was taken after making reference of the irregularities detected during the inspections and audit and the discussions during the meeting of TAFCUB and in light of the various violations of statutory requirements by the said bank, however, the Revisional Authority stayed the operation of the order passed by the Registrar in pursuance of the instructions issued by R.B.I. under Section 115(A)(3) of the GCS Act. In this background it is contended that the Registrar has no authority to go behind RBI's instruction or to question the instructions which are issued by R.B.I. under Section 115(A)(3) and that the application under Section 155 of the GCS Act against the instructions issued by RBI under Section 115(A)(3) of the GCS Act or against the order passed by the Registrar in pursuance of RBI's instructions is not maintainable. It is also claimed that the impugned order passed by the Revisional Authority is against the interest of the depositors and members of the said bank besides being violative of principle of natural justice.
8.1. It is noticed that earlier, RBI had imposed certain restrictions against the said bank under its communication dated 16.12.2010 which were subsequently modified/intensified by RBI vide directions dated 23.02.2012. In view of the irregularities noticed by RBI in the conduct of affairs, activities and business of the said bank, RBI had also issued directions in exercise of powers under Section 35A read with Section 56 of Banking Regulation Act vide communication dated 2nd April 2012. The RBI also informed, vide its communication dated 02.12.2012, about 31 irregularities to the said bank and called for explanation while instructing the said bank to take corrective measures. The said bank forwarded its response to RBI which is found at page 40 to 71 on the record of S.C.A. No. 5000 of 2012 and further reply is available at page 75 to 84. The RBI also forwarded instructions and directions to the said bank which are available at page 112 to 153 and pages 154 to 284.
8.2. It transpires from the minutes dated 22.12.2011 of the meeting of TAFCUB, that the TAFCUB had expressed serious concerns over the functioning of the bank and large number of serious irregularities/violation committed by the bank. It also comes out from the said minutes that some members expressed the view that although the role of the management was unsatisfactory action against the entire Board may have an adverse impact. The details recorded in the said minutes, particularly in para 2(d), (e) and (f) are relevant. Thus, the same are reproduced herein below.
"(d) TAFCUB expressed serious concerns over the functioning of the bank and large number of serious irregularities/violations committed by the bank and agreed that the conduct of the bank's former Chairman as well as the past and present board of directors had not been in keeping with the Dos' and Don'ts prescribed for the directors. TAFCUB concurred with RBI that the continued violations of the applicable statutes and RBI directives could not be permitted or justified in any manner and the bank has to function as per banking norms and the standards of corporate governance prescribed by RBI. Further, the management of the bank could not be allowed to be run or influenced by one particular person. The wrong practices needed to end.
(e) Some members held a view that although the role of the management was unsatisfactory, the financial health of the bank caused no concerns for the present and therefore, felt that action against the entire board of the bank could adversely impact the interest of the bank and its depositors. TAFCUB was particularly concerned that any major supervisory action on this bank may have adverse impact on the interest of other UCBs in the region. However, they agreed that there was an imperative need for a change in the management of the bank in such a way that it is free from the influence of its former chairman and the directors connected with the previous board and for rectification of financial irregularities relating to unauthorised remissions and rewards given by the bank, as pointed out in the inspection report and for ensuring that the bank functions as per prescribed norms.
(f) After considering all the relative aspects, TAFCUB recommended that:
(i) GUCBF may take up with the bank for ensuring necessary changes in its management to ensure that persons responsible for irregularities are completely disassociated from the bank and for ensuring rectification of the financial irregularities relating to unauthorised remissions and rewards given by the bank for which the bank may be given time till March 31, 2012 subject to review of the progress made by the bank in this regard in the next TAFCUB meeting.
(ii) RCS may expedite action against the members of the then board of directors as per the SCN issued to them based on the RBI inspection as on March 31, 2010.
(iii) RCS may conduct inquiry under Section 86 of GCS Act, 1961 against the managerial personnel and members of the board of directors of the bank found to be responsible for the violations of the RBI Directives/instructions and other banking norms and take action under Section 76 of the Act, Ibid. RCS may also examine/explore the possibilities of taking other action against the ex-chairman/other directors/officials responsible for causing losses to the bank, recovering the amount given to various personnel otherwise inadmissible to them as per terms of their employment or recovering the same from the directors/officials of the bank;
(iv) Operational instructions earlier imposed on the bank under Section 36(1)(a) of the B.R.Act, 1949 may be continued. RBI may also take such action as may be warranted keeping in view the gravity of the inspection findings, under provisions of BR Act."
8.3. In the facts of the case it is also relevant to take into account the relevant part of the minutes of the 47th meeting of TAFCUB which was convened on 28.03.2012 which reads thus:-
"a. The status of action taken in respect of the decisions of TAFCUB in its 45th and 46th meetings with regard to the above bank was reviewed. A special note for information of TAFCUB was also placed with a summary in respect of (I) status of implementation of operational instructions issued by RBI to the bank, as per TAFCUB recommendations, (ii) status of disassociation of directors connected with the previous board, (iii) status of compliance with the observations in the inspection report, (iv) comments/explanations in respect of violations pointed out in the IR and (v)findings of the special scrutiny in respect of the complaint/market information. The president, GUCBF also reported that they have not been able to prevail upon the above bank in seeking disassociation of the directors of the erstwhile Board of Directors from the present board of the bank.
b.
After through deliberation, and considering the nature and extent of violations, the method of working and governance of the bank, TAFCUB recommended that Chairman and Co-Chairman of TAFCUB may take suitable action regarding Management of the bank and issue further operational instructions on the bank as deemed fit.
c. The Chairman and Co-Chairman decided that RBI may issue a requisition to the RCS, Gujarat under Section 115A(3) of the G.C.S.Act, 1961 seeking supersession of the Board of the Bank and RCS may appoint a Board of Administrators. Further to protect the flight of deposits, restrictions may be imposed with immediate effect on allowing premature withdrawal of fixed deposits ( including recurring deposits) beyond Rs. one lakh as also on loans against such deposits of beyond Rs. one lakh."
8.4. The abovementioned details recorded in the minutes of TAFCUB, prima facie stare in the face of the said bank's contention to the effect that RBI's decision and impugned requisition is contrary to the recommendation by TAFCUB and/or that the bank had taken steps in compliance of RBI's directions by removing the Ex-Chairman and one of the Directors who, according to RBI, exercised undesirable influence over the Board of the said bank and were allegedly responsible for the irregularities. From the said details emerging from the minutes it emerges that the TAFCUB recommended the action and it is only after deliberation during the meeting of TAFCUB and after sufficient and proper consideration of relevant aspects including the seriousness of irregularities and repetition or continuation of the irregularities adversely affecting the financial health of the bank and the interest of its depositors and members, that RBI issued requisition in exercise of power under Section 115(A)(3) of the GCS Act. It also prima facie appears that according to the provisions contained under the said Section, Registrar cannot go behind the requisition issued by RBI and/or cannot examine its propriety or justification but he has to act on such requisition. The said provision reads thus:
"115-A.
Order for winding up, reconstruction, suppression of committee, etc. of insured co-operative bank not to be made without sanction or requisition of Reserved Bank of India - Notwithstanding anything contained in this Act, in the case of an insured co-operative bank, -
.....
.....
[(2-A) .....
(3) if so required by the Reserve Bank of India in the public interest or for preventing the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of the bank, an order shall be made by the Registrar for supersession of the committee and the appointment of an administrator in place thereof for such period or periods, not exceeding five years in the aggregate, as may from time to time be specified by the Reserve Bank of India, and the administrator so appointed shall, after the expiry of his term of office, continue in office until the day immediately preceding the date of the first meeting of the new committee of such bank; (emphasis supplied) (4) ........
........."
In this context, it is also appropriate to take into account the below mentioned observations by the Apex Court in the matter between the Reserve Bank of India v. M. Hanumaiah (supra):
"3.
The facts and circumstances in which the question arises are brief and simple and may be stated thus:
On inspection of Kalidasa Cooperative Bank Ltd.(respondent No.16) (hereinafter referred to as the "Cooperative Bank" or "the Bank")made on June 30, 1994 under Section 35 read with Section 56 of the Banking Regulation Act the Reserve Bank of India (the appellant before us) found a number of serious irregularities in its affairs. It sent a copy of the inspection report to the Cooperative Bank and called the members of its board of directors for discussion on the findings in the report. It also forwarded a copy of the inspection report to the Joint Registrar, Cooperative Societies. The Joint Registrar advised the Reserve Bank to make requisition for supersession of the committee of management of the Bank. The Reserve Bank, however, withheld any action in that regard but called the members of the board of directors of the Bank for several rounds of discussions at different levels. The board of directors was repeatedly urged to take stringent actions to improve the financial health of the Bank. Apparently, no remedial measures were taken and the affairs of the Cooperative Bank continued in a state of financial distress. Finally, the Reserve Bank issued a requisition to the Registrar Cooperative Societies, Karnataka on January 22, 2002 requiring him to supersede the board of directors of the Cooperative Bank and to appoint an Administrator for a period of one year as provided under Section 30(5) of the Karnataka Cooperative Societies Act. The requisition was made in public interest and for preventing the affairs of the Bank being conducted in a manner detrimental to the interest of the depositors and for securing proper management of the Bank.
19. Mr.Trivedi also submitted that the Maharashtra Cooperative Societies Act, 1960 had a similar provision in Section 110A like the one contained in Section 30(5) of the Karnataka Act. Sub-section (ii) of Section 110A provided that an order for the winding up of the bank would be made by the Registrar, if so required by the Reserve Bank of India in the circumstances referred to in section 13-D of the Deposit Insurance Corporation Act, 1961. Dealing with the provisions the Bombay High Court had held that the power conferred under Section 110A of the Maharashtra Cooperative Societies Act should not be hindered by reading into it the requirement of show cause notice. Learned counsel cited before us two decisions of the Bombay High Court. One in Mahendra Husanji Gadkari vs. State of Maharashtra & Ors. [1992 Mah.L.J.1442] and the other in Ishwardas Premkumar Choradiya & Anr. vs. State of Mahrashtra & Ors. [2002 (2) Mah.L.J.844]. In the latter decision, a learned Single Judge of the Bombay High Court held as follows :
"4.The question is : whether under Section 110A of the Maharashtra Cooperative Societies Act, 1960, respondent No.5 was duly bound to give a show cause notice to the petitioners herein. In the first instance, the section does not provide for a show cause notice. Once that be so, the question is: whether it can be implied in the absence of provision of show cause notice whether by implication it is required that a show cause notice must be issued as it involves civil consequences. Sub-section (3) of Section 110A of the Mahrashtra Cooperative Societies Act, 1960, came up for consideration before a Division Bench of this Court in the case of Mahendra Husanji vs. State of Maharashtra, 1992 Mah.L.J.1442. The Division Bench of this Court, after considering the provisions of sub-section (3) of Section 110A of the Maharashtra Cooperative Societies Act, has held that the Reserve Bank of India can issue directions only when the situation contemplated by Section 110A of the Act exists. The directions issued are binding on the Registrar. In other words, once a direction is issued by the Reserve Bank of India, the Registrar has no discretion in the matter, but to supersede and appoint an Administrator. Once that be so, and as there is no discretion left in respondent No.5, it must mean that the right of hearing is excluded. Once that be so, there was no question of issuing a show cause notice to the petitioner herein before passing the impugned order. In fact, though not directly in issue in the case of L.V.Sasmile vs. State of Maharashtra 1992 CTJ 729, another Division Bench, considering the material on record, had directed the appointment of an Administrator under Section 110A of the Maharashtra Cooperative Societies act. That also would indicate that there is no requirement under Section 110 for hearing."
In our opinion the Bombay High Court has taken the correct view of the matter.
20. On hearing Mr.Trivedi, counsel for the appellant, and on a careful consideration of the relevant provisions of law and the decisions cited before us we have no hesitation in accepting the submissions made on behalf of the appellant. We accordingly answer the question (framed in the beginning of the judgment) in the negative and hold and find that on receipt of a requisition in writing from the Reserve Bank of India the Registrar, Cooperative Societies is statutorily bound to issue the order of supersession of the Committee of Management of the Cooperative Bank. At that stage the affected bank/its Managing Committee has no right of hearing or to raise any objections (emphasis supplied).
8.5. As a result of the impugned order by the Revisional Authority, the requisition issued by RBI in exercise of statutory power, is rendered nugatory and ineffective. While passing the impugned order the Revisional Authority does not appear to have taken into account the circumstances and the facts which weighed with RBI in issuing the requisition. The Revisional Authority also does not appear to have taken into account the diverse and numerous irregularities noticed by the inspection/audit team, in the conduct of the affairs of the said bank and/or by the members of the Board of Directors. The Revisional Authority also does not appear to have considered the decision by the Apex Court in the matter between Reserve Bank of India v. M. Hanumaiah (supra).
8.6. In light of the facts and circumstances of present case and the contentions raised by RBI against the impugned order and having regard to the details emerging from the record including the prima facie material related to the alleged irregularities and after considering the scope of the provision under Section 115(A)(3) as well as Section 155 of the Cooperative Societies Act it appears that the petition preferred by RBI i.e. S.C.A. No. 4913 of 2012 deserves consideration and the ad interim relief granted earlier staying the operation of the order dated 10.04.2012 passed by the Revisional Authority deserves to be confirmed. Hence, so far as S.C.A.No.4913 of 2012 is concerned below mentioned order is passed.
Rule returnable on 2nd July 2012. Ad interim relief granted earlier vide order dated 13.04.2012 stands confirmed and will continue to operate until final hearing and decision in the petition or until any other or further order is passed.
9. The petition preferred by the concerned Directors i.e. S.C.A.No.5000 of 2012 challenges the requisition issued by RBI in exercise of powers under Section 115(A)(3) of the GCS Act which is one of the aspects involved in the petition preferred by RBI and is part of the basis of the said petition. Thus, when the petition preferred by RBI is admitted and the concerned Directors are questioning the legality and propriety of the requisition issued by RBI in exercise of powers under Section 115(A)(3) of the GCS Act, then it would not be appropriate to not to entertain the said petition preferred by the Directors and to reject the said petition at threshold. Therefore, below mentioned order is passed so far as said Special Civil Application No.5000 of 2012 is concerned.
Rule.
To be heard with Special Civil Application No.4913 of 2012.
10. So far as the request for interim relief prayed for by the petitioners in S.C.A.No. 4913 of 2012 is concerned, in the facts and circumstances of the case and in view of the foregoing discussion and reasons the interim relief as prayed for by the petitioners in S.C.A.No.4913 of 2012 does not deserve to be granted. The Administrator is already appointed and he has taken over the charge pursuant to the order passed by the Registrar. The Administrator has supported the request made by RBI. Furthermore, in view of the details recorded in the meeting of TAFCUB i.e. in the minutes dated 22.12.2011 and the minutes dated 28.03.2012 it prima facie appears that the facts of the case would not support or justify the contention that action against the subsequently elected body cannot be taken for wrongs committed by the previous body, inasmuch as the material on record prima facie demonstrates that irregularities appear to have continued even during the tenure of the subsequently elected body. Thus, in view of the above mentioned reasons and the reasons recorded while passing order with reference to the petition preferred by RBI, the interim relief prayed for by the petitioner in S.C.A.No.4913 of 2012 does not deserve to be granted and that therefore the said request is declined.
The two petitions being Special Civil Application No.4913 of 2012 and Special Civil Application No.5000 of 2012 shall be listed for final hearing on 02.07.2012.
(K.M.THAKER, J.) jani Top