1 wp-7687-2011 pdp IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 7687 OF 2011 Y. D. Mane and ors. .. Petitioners Vs. Commissioner and Registrar for Co-op. Societies, Maharashtra State, Pune and ors. .. Respondents Mr. P. D. Dalvi for petitioners. Ms. Neha Bhide, “B” Panel Counsel for respondent nos.1 and 2. Mr. Amit Borkar for respondent no.4. Mr. S. S. Patwardhan for respondent no.5. CORAM: B. H. MARLAPALLE & SMT. NISHITA MHATRE, JJ. RESERVED ON : OCTOBER 03, 2011. PRONOUNCED ON : OCTOBER 21, 2011. P.C. 1. This petition filed under Articles 226 and 227 of the Constitution impugns the order dated 27/7/2011 passed by respondent no.1 2 wp-7687-2011 under Section 110-A(i) and (iv) of the Maharashtra Cooperative Societies Act, 1960 (the Act for short), thereby sanctioning the scheme of amalgamation of Shri Balbhim Co-operative Bank Ltd., Kolhapur with Apna Sahakari Bank Ltd., Mumbai with effect from 1/10/2011. 2. The petitioners claim that they are the members of the respondent no.4 – Co-operative Bank i.e. Shri Balbhim Co-operative Bank Ltd., Kolhapur. The said bank was established in the year 1915 and managed by the Managing Committee duly elected. It is a specified Co- operative Society under Section 73G of the Act with the area of operation spread over the districts of Kolhapur and Sindhudurg. As per the petitioners, the respondent no.4-Bank was working well upto the year 2008 and thereafter it became sick on account of its mismanagement by the Chairman and other Directors. The mismanagement of the Bank resulted into monetary losses. As per the petitioners, the impugned order passed by respondent no.1 is patently illegal and it has been passed without considering the guide-lines of the Reserve Bank of India. It is alleged that the respondent no.1 hurriedly and without considering the procedure laid down under Section 18-A and Section 110-A of the Act processed the proposal for amalgamation and the procedure laid down under Rules 16 3 wp-7687-2011 and 17 of the Maharashtra Co-operative Societies Rules, 1961 ( the Rules for short ) was also given a go-by. 3. The learned counsel for the respondent nos.4 and 5 have opposed the petition. Our attention has been drawn to the order passed by a Division Bench of this court on 16/8/2007 in Writ Petition No. 5853 of 2007. The amalgamation of Shree Sadguru Jungli Maharaj Sahakari Bank Ltd., Chinchwad with another Co-operative Bank as per order dated 10/7/2007 passed under Section 110-A of the Act was challenged in Writ Petition No. 5853 of 2007 and the petition was dismissed by this court, after noting down that all the required procedure, including the prior approval of the Reserve Bank of India, was followed. The Reserve Bank of India had noted, in that case, that the capital adequacy ratio was not properly maintained and the said ratio desired to be 9% had gone below -5%. 5. In the instant case, in the special general body meeting of the respondent – bank held on 29/4/2010, a resolution was passed to submit a proposal for amalgamation with any other Co-operative Bank. Accordingly, the respondent no.5-Bank submitted its proposal on 4 wp-7687-2011 14/6/2010 along with the resolution of its Board of Directors passed on 12/6/2010. The draft of the Memorandum of Understanding was submitted by respondent no.5-Bank on 24/6/2010. The draft of the MOU was considered and it was placed before the Board of Directors of respondent no.4-Bank on 28/6/2010. The draft of the MOU was approved and Shri Nandkumar S. Tivale, Chairman of the respondent no.4-Bank was authorised to sign the MOU on behalf of the bank. The MOU was signed between respondent no.4 and respondent no.5 on 1/7/2010 and was submitted along with the proposal for amalgamation, vide letter dated 9/7/2010, to respondent no.1 and it was received on 14/7/2010. Simultaneously, by letter dated 9/7/2010 the proposal for amalgamation along with the copy of MOU signed between respondent no.4 and respondent no.5 was also submitted to the Chief General Manager, Reserve Bank of India, Urban Bank Department, Mumbai. On 14/8/2010 95th Annual General Meeting of the respondent no.4-bank was held and the MOU as well as the draft scheme for amalgamation was discussed and approved by the general body. On 21/8/2010, respondent no.1 submitted the proposal for amalgamation of respondent nos.4 and 5 along with the MOU and resolution passed by the 95th Annual General Meeting of respondent no.4 – bank to the Chief General Manager, Reserve Bank of 5 wp-7687-2011 India, Urban Banks Department, Mumbai. The respondent no.1 also intimated that there was no objection for the proposed merger. 6. Section 18-A of the Act deals with the amalgamation of Co- operative Banks and Section 110-A states that, notwithstanding anything contained in the Act, in the case of an insured co-operative bank – an order of amalgamation of a bank may be made only with the previous sanction in writing of the Reserve Bank of India. The expression “an insured co- operative bank” means a society which is an insured bank under the provisions of the Deposit Insurance Corporation Act, 1961. There is no dispute that respondent no.4 is an insured bank. The Reserve Bank of India considered the proposal submitted by respondent no.1 and by its letter dated 6/6/2011 informed the respondent no.5-bank as well as respondent no.1 that the proposal of amalgamation was examined and it issued the No Objection Certificate under Section 110-A(i) and (iv) of the Act. There is also no dispute that the financial position of respondent no.4 – bank was very weak and its losses had eaten all the owned funds and as per the audit report for the year 2010-11 negative net-worth as on 31/3/2011 was (-) Rs. 88.73 lacs and according to the due diligence done by the transferee bank the negative net-worth was (-) Rs.234.31 lacs. Therefore, in the larger 6 wp-7687-2011 interest of the depositors of the transferor bank, the bank has passed the resolution to amalgamate the bank into financially sound bank. 7. We are satisfied that the due process as laid down in Section 18-A and Section 110-A of the Act read with Rules 16 and 17 of the Rules has been followed and before the impugned order was passed, the Reserve Bank has given its clearance for amalgamation of respondent no.4 – bank with respondent no.5 – bank. The impugned order does not suffer from any procedural infirmities and the said order has been passed in public interest and more particularly to protect the interest of the shareholders, depositors and employees etc. At the same time none of the resolutions passed in the Annual General Body Meeting or the Special General Body Meeting for amalgamation has been challenged before the competent forum by any member of the Respondent No.4 – Bank. 8. Hence this petition fails at the threshold and the same is hereby rejected summarily. (SMT. NISHITA MHATRE, J.) (B. H. MARLAPALLE, J.)