Appellate Authority to Review Appeal Under Section 45-IA(7)

The Division Bench set aside the Single Judge's decision and allowed the appellant to appeal to the Appellate Authority under section 45-IA(7) of the Act. The Appellate Authority is directed to consider all issues, provide both parties a chance for a personal hearing, and make a decision in accordance with the law, without being influenced by previous observations. The appeal must be heard within two months from the judgment date, accounting for the time the writ petition and appeal were pending.

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Issues Involved:
1. Cancellation of Certificate of Registration by RBI without prior opportunity for rectification.
2. Grounds for cancellation not mentioned in the show-cause notice.
3. Violation of principles of natural justice by different officers hearing and passing the order.
4. Compliance with conditions and directions issued by RBI.

Detailed Analysis:

Issue 1: Cancellation of Certificate of Registration by RBI without prior opportunity for rectification:
The petitioner argued that as per the first proviso to sub-section (6) of section 45-IA of the Reserve Bank of India Act, 1934, RBI should have given an opportunity to rectify the violations before canceling the Certificate of Registration. The learned Single Judge dismissed this argument, stating that the provisions for rectification notice under the first and second provisos of section 45-IA were not applicable in this case. The cancellation fell under clauses (iv) and (v) of sub-section (6) of section 45-IA, which do not require a rectification notice. The Division Bench noted that the Single Judge should not have foreclosed the question of law and left it open for the Appellate Authority to decide whether the first proviso was applicable.

Issue 2: Grounds for cancellation not mentioned in the show-cause notice:
The petitioner contended that the final order of cancellation included grounds not mentioned in the show-cause notice, violating the principles of natural justice. The respondent countered that all issues were raised and discussed during various correspondences and meetings. The Division Bench refrained from examining the detailed documents and suggested that the Appellate Authority, with its technical expertise, should review the materials to decide if new grounds were introduced without prior notice.

Issue 3: Violation of principles of natural justice by different officers hearing and passing the order:
The petitioner argued that the officer who heard the matter was different from the one who passed the final order, violating the second proviso to sub-section (6) of section 45-IA. The respondent maintained that the hearing was an institutional hearing, and the decision was taken by the Bank, not by a designated individual officer. The Division Bench did not accept the argument that the order was automatically invalid due to this procedural aspect and left it for the Appellate Authority to consider.

Issue 4: Compliance with conditions and directions issued by RBI:
The petitioner claimed that all conditions and directions were fully complied with, including an increase in capital due to the merger with two other companies. The respondent refuted this, stating that the appellant's records did not reflect compliance and highlighted consistent violations. The Division Bench noted the conflicting stands and suggested that the Appellate Authority should review all documents and determine whether the final order was validly passed after giving reasonable opportunity to the appellant.

Conclusion:
The Division Bench set aside the finding of the learned Single Judge and allowed the appellant to approach the Appellate Authority under section 45-IA(7) of the Act. The Appellate Authority is to consider all issues, give both parties an opportunity for personal hearing, and decide the matter in accordance with the law, uninfluenced by observations made by the Single Judge or the Division Bench. The appeal should be entertained within two months from the date of receipt of the judgment, considering the period during which the writ petition and appeal were pending.

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