State control over co-operative banks survives banking law changes where the entity remains a co-operative society.

A co-operative society does not lose its character merely because it carries on banking business, so the State retains competence to regulate its co-operative aspects under the Gujarat Co-operative Societies Act, 1962. Harmonious construction of the constitutional entries leaves banking in its pure form within the Union field, but does not by itself displace State control over the internal affairs and regulatory supervision of co-operative societies, including co-operative banks. Section 71 therefore remained valid and applicable, and proceedings initiated under that provision were held legally sustainable. The Court did not examine the factual propriety of the investment decisions or show-cause process, leaving those matters to be dealt with according to law.

---

---

Issues: Whether Section 71 of the Gujarat Co-operative Societies Act, 1962 continued to apply to co-operative banks after the Banking Regulation Act, 1949 was amended, and whether action initiated under that provision was legally sustainable.

Analysis: The field of legislation concerning co-operative societies falls under Entry 32 of List II, while banking is dealt with under the Union entries in List I. A co-operative society does not cease to be a co-operative society merely because it carries on banking business. On a harmonious construction of the constitutional entries, the State Legislature retained power to regulate co-operative societies, including co-operative banks, so long as the subject matter remained within the co-operative society field and did not transgress the exclusive Union field of banking in its pure form. The amendment to the Banking Regulation Act did not displace the State law governing the internal affairs and regulatory control of co-operative societies. The Court also declined to express any view on the factual propriety of the investment decisions or the show-cause proceedings, leaving those matters to be dealt with in accordance with law.

Conclusion: Section 71 of the Gujarat Co-operative Societies Act, 1962 was held to be valid and applicable to the petitioners, and the proceedings initiated under that Act were held to be legal and sustainable.

Final Conclusion: The petitions failed because the State enactment was found to validly regulate co-operative banks as co-operative societies, and no interference was warranted with the impugned action.

Ratio Decidendi: A co-operative society engaged in banking remains subject to State regulatory control under the co-operative societies law, and the Union law on banking does not by itself oust the State's competence over such societies.

---