TaxTMI 
TaxTMI 
2021 (3) TMI 908
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....Khairdi for the Petitioners in WP/2301/2018. Mr. Ritesh Wagh h/for Mr. Tejpal S. Ingale for the Applicants in CAW/ 1275/2018. Mr. Shrinivas S. Patwardhan a/w Mr. Bhooshan R. Mandlik for the Respondent No.4. Mr. Venkatesh Dhond, Senior Advocate a/w Mr. Prasad Shenoy, Ms.Aditi Phatak and Ms. Kirti Ojha i/by Udwadia and Co. for the Respondent No.5-Reserve Bank of India. Mr. Girish S. Godbole i/by Mr. Vishwajeet Mohite and Ms. Pooja Mankoji for the Respondent Nos. 6 and 7 in WP/2301/2018. Mr. Girish S. Godbole i/by Mr. Ketan Joshi and Ms. Pooja Mankoji for the Respondent Nos. 8 and 9 in WP/2301/2018. JUDGMENT (Per R. D. Dhanuka, J.) :- 1. Learned Advocate General appearing for the respondent nos.1 to 3 waives service. Learned counsel appearing for respondent no.4 waives service. Learned senior counsel appearing for respondent no.5 waives service. Learned counsel appearing for respondent nos. 6 to 11 waives service. By consent of parties, this Writ Petition is heard finally. 2. By this petition filed under Article 226 of the Constitution of India, the petitioners seek a writ of certiorari or any other appropriate writ, order or direction in the nature of writ of certiorari thereb....
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....t an administrator/ administrative board to look after the day-to-day affairs of the respondent no.4. 6. On 6th July, 2017, the said NABARD prepared a report and sought opinion of the General Manager of the Additional Chief Secretary, Corporation, Government of Maharashtra requesting the Government to advice the respondent no.4-bank to augment capital funds to achieve 9% CRAR, reduce NPAs, ensure KYC/AML compliance etc to improve the financial position and methods of operation in a time bound manner. The NABARD also requested to nominate NABARD and Maharashtra RO, Pune about the action proposed to be taken in the matter. A copy of the said opinion was also sent to the Reserve Bank of India (for short 'RBI'), the Registrar of Co-operative Societies and the Managing Director, the Maharashtra State Co-operative Bank Ltd. and also to respondent no.4. 7. On 12th July, 2017, the office of the Commissioner for Cooperation and Registrar of Co-operative Societies, Maharashtra State addressed a letter to the RBI pointing out the report submitted by NABARD and stating that in order to secure proper management of the respondent no.4 and to protect the interest of the depositors as well as th....
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....ndent no.4 and appointing Shri Milind Bhalerao, Divisional Joint Registrar, Co-operative Societies, Nashik as Administrator in place of the Board of Directors to manage the affairs of the bank. By the said order, the Administrator was directed to take the charge immediately till further order. It was made it clear that during the said period, Administrator shall take corrective measures in the working of the said bank. The said order dated 29th December, 2017 passed by the Commissioner for Co-operation and Registrar of Co-operative Societies is impugned by the petitioners in this writ petition. 12. Mr. Anturkar, learned senior counsel for the petitioners submits that respondent no.2 i.e. Commissioner for Co-operation and Registrar of Co-operative Societies (hereinafter referred to as 'Registrar') could not have superseded the Board of Directors of respondent no.4 without applying his mind and without coming to a conclusion whether supersession was necessary or whether suspension of the Board of Directors would be sufficient. He submits that the subject 'cooperation' is to be found in item 32 of the list II (State list), whereas the subject 'banking' is to be found at item 45 of th....
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....of the respondent no.4 has not availed any financial assistance from the Government. There is an express prohibition by a constitutional provision under Article 243 ZL. In spite of such prohibition, the RBI issued directives to the said Registrar, Cooperative Societies to supersede the Board of Directors of the respondent no.4 and appoint a Board of Administrators. 16. It is submitted by the learned senior counsel that Chapter XA of the MCS Act is introduced in the said Act by the amendment in the form of Maharashtra Act 54 of 1969 and part IX-B of the Constitution of India inserted by the Constitution (97th Amendment, Act), 2011 w.e.f. 15th February, 2012. The constitutional amendment is effected at much later point of time then the Maharashtra Act, 1969. If the said Registrar would have given an opportunity to the petitioners who were the then Board of Directors of respondent no.4, the petitioners could have pointed out these provisions of law for consideration of the said Registrar. 17. The learned senior counsel relied upon the second proviso to Article 243ZL and would submit that the provisions of the Banking Regulation Act shall also apply to the co-operative bank addition ....
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.... 23. The next submission of the learned senior counsel for the petitioner is that under Section 110A(1)(iii) of the MCS Act, the Registrar, Co-operative Societies has discretion either to order for suspension or for supersession of the Board of Directors, as the case may be, and to order the appointment of the administrator in its place for the period not exceeding one year. He submits that the words 'as the case may be' would clearly indicate that the said power is not discretionary and thus the directive issued by the RBI to the Registrar, Co-operative Societies to suspend or supersede the Board of Directors is not binding upon the Registrar, Co-operative Societies. 24. When this Court enquired whether according to the learned senior counsel, the Registrar could exercise his discretion either to supersede or to suspend though the RBI had issued directives to supersede the power of the Board of Directors, learned senior counsel submitted that if the RBI would have issued the directives to supersede the Board of Directors, the Registrar in that event could have exercised the discretion not to supersede the Board of Directors but to pass an order of suspension of the Board of Direc....
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....tives issued by the RBI to the Registrar, Co-operative Societies to supersede the Board of Directors of the respondent no.4 bank. He submits that the petitioners thus cannot be allowed to challenge the powers of the RBI under the provisions of the MCS Act thereby issuing directives to the Registrar, Co-operative Societies to supersede the Board of Directors of the respondent no.4 bank. 27. It is submitted that the arguments of the petitioners that the RBI has no power either under the Banking Regulation Act or under the provisions of the MCS Act are thus academic and cannot be considered by this Court. He submits that the only question which can be considered by this Court in this petition is whether the Registrar, Cooperative Societies could have passed an order superseding the Board of Directors of the respondent no.4 bank under Section 110A(1)(iii) of the MCS Act on the basis of such directives issued by the RBI or not. He submits that though the petitioners have annexed a copy of the directives issued by the RBI in the writ petition, there is no prayer impugning the said order. 28. Learned senior counsel placed reliance on the judgment of the Hon'ble Supreme Court in case of ....
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....etout therein. The Registrar, Co-operative Societies while exercise such powers for winding up of the Co-operative bank, has to give an opportunity to the society and to the creditors of the society if any of being heard before passing the final order of winding up or confirming the interim order. The said provision is an independent provision and not in any manner connected with the binding directives of the RBI required to be followed by the Registrar mandatorily and cannot be mixed up with the provisions of Section 110A of the MCS Act. The legislative intent to provide such different provision is clear. He submits that in case of the co-operative society rigors of the provisions of Section 110A of the MCS Act applies. 32. Learned senior counsel invited our attention to Section 38(1)(b) of the Banking Regulation Act and would submit that under the said provision, if any application for winding up of the banking company is made by the RBI under Sections 37 or 38 of the Banking Regulation Act, 1949 before the High Court, the High Court is bound to pass an order of winding up of such banking company. Even the High Court in that event has no discretion not to pass an order of windin....
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....e any action under the provisions of the Banking Regulation Act or under Section 110A(1)(iii) of the MCS Act. 36. Learned senior counsel placed reliance on the judgment delivered by the Andhra Pradesh High Court in case of Reserve Bank of India, Central Office, Urban Banks Department, Mumbai vs. Pattem Surya Prakash Rao & Others, 2007 SCC OnLine AP 736. He submits that the Full Bench of the Andhra Pradesh High Court in the said judgment has considered the similar submissions made by the learned counsel for the petitioners in this case after adverting to various judgments of the Hon'ble Supreme Court. He submits that the State Government has already carried out amendment in Section 110A(1)(iii) of the MCS Act w.e.f. 14th February, 2013 in line with the Article 243ZL of the Constitution of India by increasing the period to one year. There is no inconsistency in the said Article 243ZL of the Constitution of India and the amendment inserted in Section 110A (1) (iii) of the MCS Act as sought to be canvassed by the learned senior counsel for the petitioners. 37. Mr. Kumbhakoni, learned Advocate General on behalf of the State of Maharashtra on the other hand supported the case of the RB....
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....January, 2019 in case of Shri Bharat Sudam Sutkar and Anr. v/s. The State of Maharashtra, through Department of Cooperation and Ors. in Writ Petition No. 7131 of 2018 and other companion matters and in particular paragraphs 2 and 5 to 8 in support of the submission that the directions issued by the RBI under Section 110A(1)(iii) of the MCS Act are binding on the Registrar, Co-operative Societies and has no discretion in the matter but to supersede and appoint an administrator. 41. Insofar as the reliance placed by the learned senior counsel for the petitioners on Article 243 ZL of the Constitution of India is concerned, it is submitted that the petitioners not having challenged the directives issued by the RBI to the Registrar to supersede the Board of Directors of the respondent no.4, the petitioners cannot be allowed to urge that the exercise of powers by RBI under Article 243 ZL for supersession of board and for appointment an administrator was not justified. He submits that second proviso to the said Article is subject to the third proviso. 42. Learned counsel placed reliance on Article 243 ZL and would submit that the amendment carried out by the State Government to Section ....
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....BI, directives issued by the RBI to the Registrar, Co-operative Societies are mandatory and not directory. He submits that in the said judgment the Hon'ble Supreme Court has held that under Section 38(1)(c) of the Banking Regulation Act, if the RBI recommends on an application made by the RBI on satisfaction of the ground mentioned therein for winding up of a banking company, the Court has no discretion other than to windup the affairs of such co-operative bank. The same principles applies to the powers of RBI exercised under Section 110A(1)(iii) of the MCS Act to the Registrar, Co-operative Societies. 46. Learned counsel placed reliance on Section 152 and 154 of the MCS Act and would submit that any order passed by the Registrar, Cooperative Societies following the directives issued by the RBI and thereby suspending or superseding the committee of Board of Directors of a co-operative bank is neither an appealable order nor can be challenged under Section 154 of the MCS Act. Once the RBI directs the Registrar to supersede or suspend and to appoint an administrator, the Registrar, Co-operative Societies has no discretion but to comply with the directives issued by the RBI. There wa....
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.... the said judgment in support of this submission. 50. Learned senior counsel for the petitioners submits that the petitioners have not challenged the directions issued by the RBI to the Registrar, Co-operative Societies to supersede or suspend the committee of Board of Directors or to appoint the Board of Administrators of the respondent no.4 bank. He submits that the directives issued by the RBI could be challenged and could be interfered by this Court under its limited powers. He submits that concession made by the learned Advocate General in favour of the RBI is contrary to the legislative intention of the State Government. He submits that the words "as the case may be' inserted in Section 110A(1)(iii) of the MCS Act would clearly indicate that the directives of the RBI under the said provision are not mandatory. If the RBI would have directed the Registrar, Co-operative Societies to supersede the committee of Board of Directors of respondent no.4 bank, the registrar had discretion not to supersede the committee of Board of Directors but could have exercised his discretion to suspend the said Board of Directors. The Registrar, Co-operative Societies could not have refused to ac....
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.... for the RBI submits that the said Section 36ACA of the MCS Act is already omitted as the RBI will have power to direct the Register, Co-operative Societies to supersede or to suspend the committee of Board of Directors only in case of Multi State Cooperative Society Limited. 55. It is submitted by the learned senior counsel for the RBI that the words 'as the case may be' and the words 'if so required by the Reserve Bank of India' would clearly indicate that the discretion vested only in the RBI either to supersede or to suspend the committee of Board of Directors, which are two separate and distinctive situations. For lifting of suspension order, the Register, Co-operative Societies has to take prior permission of RBI and no discretion is left in the Registrar to lift an order of suspension. The State Government can also legislate which Registrar will have what powers. 56. Learned senior counsel strongly placed reliance on the judgment of Supreme Court in case of Reserve Bank of India v/s. M. Hanumaiah and Ors. (supra) in particular paragraphs 16, 30 and 37 and would submit that though the Court has power of judicial review against the decision of the RBI exercising writ jurisdi....
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....d to follow the procedure prescribed under Section 102 of the MCS Act while complying with the directives issued by the RBI Section 110A(1) (iii) of the MCS Act and superseding the Board of Directors of the Cooperative Bank or while appointing board of administrators/sole administrator of a co-operative bank or not ? 58. It is an undisputed fact that the RBI vide letter dated 27th December, 2017 to the Commissioner for Co-operation and Registrar of Co-operative Societies, Government of Maharashtra had issued the directives for supersession of the Board of Directors of the respondent no.4 bank and to appoint a Board of Administrators in terms of provisions of Section 110A (1)(iii) of the MCS Act. A perusal of the said directives indicates that the RBI had examined the financial position of the respondent no.4 bank and other relevant facts brought by the NABARD in its inspection report in respect of the financial position of the respondent no.4 as on 31st March, 2016 and unaudited financial position as on 31st March, 2017. Along with the said letter, the RBI had enclosed a requisition dated 19th December, 2017 from the Executive Director of the RBI for supersession of the Board of D....
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....of this Court in case of Namdeo s/o Natha Sanap and Anr. v/s. The State of Maharashtra and Ors., 2015(1) Mh.L.J. 838 (h) Judgment delivered by a Division Bench of this Court on 31st January, 2019 in case of Shri Bharat Sudam Sutkar and Anr. v/s. The State of Maharashtra, through Department of Cooperation and Ors. in Writ Petition No. 7131 of 2018 and other companion matters and in particular paragraphs 2 and 5 to 8. 62. Mr.Anturkar, learned senior counsel for the petitioners submits that all these judgments referred to and relied upon by the respondents and some of the judgments even brought to the notice of this Court by the petitioners except the judgment delivered by this Court in case of Namdeo s/o Natha Sanap and Anr. (supra) are delivered prior to the date of the amendment to Section 110A(1)(iii) of the MCS Act in the year 2013 and are thus not binding precedent and cannot be relied upon by the respondents. The submissions of the learned senior counsel is that though the judgment delivered by a learned Singe Judge of this Court in case of Namdeo s/o Natha Sanap and Anr. (supra) was after such amendment to Section 110A(1)(iii) in the year 2013, the said judgment does not ta....
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....t has been admittedly not challenged by the petitioners on any ground in this petition. 66. We are not inclined to accept the submission of the learned senior counsel for the petitioners that there is repugnancy in Article 243 ZL of the Constitution of India and Section 110A(1)(iii) of the MCS Act. The view thus taken by the Hon'ble Supreme Court and this Court in various judgments referred to aforesaid relied upon by both the parties on the issue whether the RBI having once issued directives under Section 110A(1)(iii) of the MCS Act to the Registrar, Cooperative Societies are mandatory and are required to be followed by the Registrar, Co-operative Societies are applicable to the facts of this case and are binding on this Court. This Court after adverting to the aforesaid judgment in case of Arun T. Dhumale and Ors. v/s. State of Maharashtra and Ors. in Writ Petition (Stamp) No. 95405 of 2020 and in other companion matters, has held that the Registrar, Co-operative Societies is bound by the directives issued by the RBI under Section 110A(1)(iii) of the MCS Act and cannot refuse to abide such directives. 67. In our view, there is no substance in the submission of the learned senio....
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....provision. In our view, the submission made by the learned senior counsel is ex-facie contrary to the plain reading of the said provision i.e. Section 110A(1)(iii) of the MCS Act and also the principle of law laid down by the Hon'ble Supreme Court and this Court in catena of decisions referred to aforesaid. 70. Insofar as the submission of the learned senior counsel for the petitioners that the amendment to Section 110A(1)(iii) of the MCS Act substituting the period of 5 years by 1 year was not in compliance with or in conformity with Article 243 ZL of the Constitution of India is concerned, in our view there is no merit in this submission. The said amendment is in conformity with and in compliance with the Article 243 ZL of the Constitution of India and not repugnant thereto. The Registrar, Co-operative Societies was thus not bound to issue any show-cause notice followed by the personal hearing to the petitioners. Since, this Court is of the view that there is no repugnancy in the provisions of the Article 243 ZL and Section 110A(1)(iii) of the MCS Act, Article 243 ZL of the Constitution of India does not prevail over the Section 110A(1)(iii) of the MCS Act. 71. In our view, the....
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.... or on happening of contingencies set out therein. The powers of the Registrar under Section 102 of the MCS Act cannot be equated with the duty of the Registrar, Co-operative Societies to comply with the directives issued by the RBI under Section 110A(1)(iii) of the MCS Act. Both the provisions operate in different fields and in different circumstances and cannot be mixed up with each other. In our view, the Registrar, Cooperative Societies is thus not bound to follow the procedure prescribed under Section 102 of the MCS Act while complying with the duties under Section 110A(1)(iii) of the MCS. 74. The judgment of the Hon'ble Supreme Court in case of Vipulbhai M.Chaudhary (supra) would not apply to the facts of this case in view of there being no repugnancy between Article 243ZL and section 110A of the MCS Act. The reliance placed by the learned senior counsel on the said judgment is thus misplaced. There is no substance in the submission of the learned senior counsel that the State Government did not carry out any corresponding amendment in line with the Article 243ZL in section 110A or in any other provision of MCS Act. 75. In our view, Mr. Dhond, learned senior counsel for the....
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....s of the Banking Regulation Act or under section 110A(1)(iii) of the MCS Act. 78. In our view, the learned Advocate General appearing for the State of Maharashtra is right in his submission that the option granted under Section 110A(1)(iii) of the MCS Act to suspend or supersede the Board of Directors of an insured co-operative bank vest with the RBI only and not with the Registrar under Section 110A(1)(iii) of the MCS Act. In our view, the word 'shall' in Section 110A(1)(iii) would clearly indicate that the Registrar, Co-operative Societies is bound to comply with the directives of the RBI and mandatorily. 79. Mr.Godbole, learned counsel for he respondent nos. 6 to 9 is right in his submission that the amendment carried out by the State Government to Section 110A(1)(iii) of the MCS Act in the year 2013 is in conformity with the provisions of Article 243 ZL of the Constitution of India and is in tune with fourth proviso to Article 243 ZL of the Constitution of India. Learned counsel for the respondent nos. 6 to 9 rightly placed reliance on the judgment of Supreme Court in case of Joseph Kuruvilla Vellukunnel (supra) in support of his submission that the word 'shall' denotes that ....