Co-operative bank licensing requires prior State declaration; multi-state registration alone cannot sustain banking authority across States.

A multi-state co-operative society could not obtain a banking licence unless it first satisfied the statutory definition of a co-operative bank under the Banking Regulation Act. The analysis states that a State declaration as a State co-operative bank under the National Bank for Agriculture and Rural Development Act was a necessary precondition, and the broader status of a multi-state co-operative society could not override that licensing framework. It further states that State recognition depended on the society being the principal co-operative society in the State and actually carrying on the requisite business there; mere registration or receipt of subscription funds was insufficient. Recognition in one State did not support banking operations in another State without a valid declaration there.

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Issues: (i) whether a co-operative society registered under the Multi-State Co-operative Societies Act, 1984 could be granted a banking licence by the Reserve Bank of India under the Banking Regulation Act, 1949 without first being declared a State co-operative bank under the National Bank for Agriculture and Rural Development Act, 1981; (ii) whether such a society could be recognised and notified by a State Government as a State co-operative bank under section 2(u) of the National Bank for Agriculture and Rural Development Act, 1981; and (iii) whether a licence granted for banking operations in more than one State could be sustained when the society had not been recognised as a State co-operative bank in all such States.

Issue (i): whether a co-operative society registered under the Multi-State Co-operative Societies Act, 1984 could be granted a banking licence by the Reserve Bank of India under the Banking Regulation Act, 1949 without first being declared a State co-operative bank under the National Bank for Agriculture and Rural Development Act, 1981.

Analysis: The Banking Regulation Act, 1949 treats a co-operative bank as only a State co-operative bank, a central co-operative bank, or a primary co-operative bank. A co-operative society that does not fall within those defined categories cannot obtain a licence to carry on banking business. The definition in the Multi-State Co-operative Societies Act, 1984 could not override the specific definition in the Banking Regulation Act, 1949 for the purpose of licensing.

Conclusion: A declaration as a State co-operative bank under the National Bank for Agriculture and Rural Development Act, 1981 had to precede the grant of a banking licence, and the Reserve Bank of India could not licence the society as a multi-state co-operative society simpliciter.

Issue (ii): whether such a society could be recognised and notified by a State Government as a State co-operative bank under section 2(u) of the National Bank for Agriculture and Rural Development Act, 1981.

Analysis: The statutory scheme required the society to be the principal co-operative society in the State, carrying on business in the State, and engaged in financing other co-operative societies in that State. Mere registration under the Multi-State Co-operative Societies Act, 1984 and mere receipt of entrance fees and share subscriptions did not amount to carrying on the required business. The proviso to section 2(u) did not authorise an arbitrary declaration unrelated to the statutory conditions.

Conclusion: The State Government could not validly declare the society as a State co-operative bank, and the notification and consequential directions were unsustainable.

Issue (iii): whether a licence granted for banking operations in more than one State could be sustained when the society had not been recognised as a State co-operative bank in all such States.

Analysis: A Reserve Bank licence could operate only to the extent the society had been validly declared a State co-operative bank by the competent State. Recognition in one State did not authorise banking operations in another State where no such declaration existed. The grant of licence for Goa, when no State co-operative bank notification existed there, was therefore without legal foundation.

Conclusion: The banking licence could not validly extend to the State of Goa, and the licence granted by the Reserve Bank of India was liable to be revoked.

Final Conclusion: The legal effect of the decision was that the State notification and consequential regulatory directions were upheld as invalid, the banking licence could not survive, and the challenge to the licence failed while the cross-challenge succeeded.

Ratio Decidendi: For a co-operative society to obtain a banking licence under the Banking Regulation Act, 1949, it must first satisfy the statutory definition of a co-operative bank, and a State declaration under the National Bank for Agriculture and Rural Development Act, 1981 is a necessary precondition that cannot be bypassed by invoking the broader category of multi-state co-operative societies.

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