Banking licence cancellation and winding-up directions upheld where persistent non-compliance threatened depositors' interests.

Persistent non-compliance, erosion of capital and deposits, and deteriorating asset quality justified RBI's cancellation of a co-operative bank's licence in public interest and for protection of depositors. The Court held that repeated regulatory opportunities, restrictions, and notices were sufficient, and no fresh notice was required before cancellation. It further held that once RBI requisitioned winding up under the Maharashtra Co-operative Societies Act, the Registrar had no discretion to refuse the requisition or insist on a separate show-cause process; the general winding-up procedure did not apply. The challenge to both the licence cancellation and winding-up direction failed, and the impugned orders were upheld.

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Issues: Whether the Reserve Bank of India was justified in cancelling the banking licence of the co-operative bank and whether the Registrar of Co-operative Societies was justified in directing winding up and appointing a liquidator.

Analysis: The Court found that the bank had been under repeated regulatory scrutiny for a prolonged period, with persistent non-compliance, serious erosion of capital and deposits, high NPAs, and no credible revival or merger proposal. The Reserve Bank of India had issued multiple restrictions, afforded opportunities for compliance, and even deferred action after the first show cause notice. The second show cause notice was followed by replies, but the financial condition continued to deteriorate. The Court held that the Reserve Bank of India acted within its statutory powers under the Banking Regulation Act to cancel the licence in public interest and for protection of depositors. It further held that once the Reserve Bank of India requisitioned winding up under the Maharashtra Co-operative Societies Act, the Registrar had no discretion to refuse or to issue a separate show cause notice, and the procedure under the general winding-up provisions did not apply. The Court also rejected the contention that a fresh notice was required or that the depositors' remedy under appeal was defeated.

Conclusion: The challenge to the cancellation of the banking licence and to the winding-up order failed. The impugned orders were upheld and the petitions were dismissed.

Ratio Decidendi: Where a banking co-operative persistently fails to satisfy statutory and prudential requirements despite repeated opportunities, the Reserve Bank of India may cancel its licence in public interest, and a statutory winding-up direction issued to the Registrar binds him without further hearing or separate procedure.

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