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of <h1>Court rules RBI circular advisory, State circular valid for co-op societies, no civil consequences, appeals dismissed.</h1> <h3>Vyavasaya Seva Sahakara Sangha Versus State Of Karnataka And Others</h3> The court determined that the circular, annexure-J, issued by the Reserve Bank of India did not have statutory force as it was advisory in nature. It held ... - Issues Involved:1. Whether circular, annexure-J, has any statutory forceRs.2. Whether annexure-A circular dated May 17, 1989, issued by the State Government is beyond the legislative competence of the State LegislatureRs.3. Whether the re-ceding of the petitioners societies to the District Central Co-operative Bank results in civil consequences, therefore, whether an opportunity should have been afforded to the petitionersRs.Summary:Issue 1: Statutory Force of Circular, Annexure-JThe court examined whether the circular, annexure-J, issued by the Reserve Bank of India (RBI) had statutory force. It was determined that annexure-J is advisory in nature and does not contain any direction. The circular was issued after a study group reviewed the financing scheme of Primary Agricultural Credit Societies (PACS) by commercial banks and recommended linking them with District Central Co-operative Banks (DCCBs) instead. The court concluded that annexure-J does not fall u/s 54(b) of the Reserve Bank of India Act read with section 21 of the Banking Regulation Act, and thus does not have statutory force. Hence, point No.1 was answered in the negative.Issue 2: Legislative Competence of State Government Circular, Annexure-AThe court addressed whether the State Government's circular, annexure-A, was beyond its legislative competence. It was argued that banking activities fall under entry 45 of List I of Schedule VII to the Constitution, which is within the Parliament's domain. However, the court held that the petitioners are co-operative societies governed by the Karnataka Co-operative Societies Act, 1959, and not banking institutions under the Banking Regulation Act. The circular was deemed an administrative direction permissible under the Act, and thus within the State Government's power. Consequently, point No.2 was answered in the negative.Issue 3: Civil Consequences and Opportunity for PetitionersThe court considered whether the re-ceding of the petitioners' societies to the DCCBs resulted in civil consequences, necessitating an opportunity for the petitioners to be heard. The court noted that a Task Force, including representatives from various stakeholders, had examined the matter and recommended the retransfer of PACS to DCCBs. The petitioners were not adversely affected as they would continue to have financial linkage, albeit with DCCBs instead of commercial banks. The court found no violation of natural justice principles and concluded that the change in financial linkage did not result in civil consequences. Accordingly, point No.3 was answered in the negative.Conclusion:All contentions raised by the petitioners were rejected, and the writ appeals were dismissed. The court also refused to grant a certificate u/a 134-A read with article 133 of the Constitution, as the judgment did not involve a substantial question of law of general importance needing a decision by the Supreme Court.
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