Case: Reserve Bank of India Vs. M. Hanumaiah and Ors

such a challenge has no force. The situation that arose in this case is typical of the occasions on which this extraordinary power would normally be exercised, and, as we have said already, if the power is abused by the Reserve Bank, what will be struck down would be the action of the Reserve Bank but not the law. An appeal against the Reserve Bank’s action or a provision for an ex post fact finding by the Court is hardly necessary. An appeal to the Central Government will be only an appeal from Caesar to Caesar, because the Reserve Bank would hardly act without the concurrence of the Central Government and the finding by the Court would mean, to borrow the macabre phrase of Raman Nayar,J. a post-mortem examination of the corpse of the banking company.” (emphasis added) 15. The decision in the case of Palai Bank undoubtedly goes a long way to support the contention of the appellant in the case in hand. 16. Mr.Trivedi also submitted that the Maharashtra Cooperative Societies Act, 1960 had a similar provision in Section 110A like the one contained in Section 30(5) of the Karnataka Act. Sub-section (ii) of Section 110A provided that an order for the winding up of the bank would be made by the Registrar, if so required by the Reserve Bank of India in the circumstances referred to in section 13-D of the Deposit Insurance Corporation Act, 1961. Dealing with the provisions the Bombay High Court had held that the power conferred under Section 110A of the Maharashtra Cooperative Societies Act should not be hindered by reading into it the requirement of show cause notice. Learned counsel cited before us two decisions of the Bombay High Court. One in Mahendra Husanji Gadkari vs. State of Maharashtra & Ors. [1992 Mah.L.J.1442] and the other in Ishwardas Premkumar Choradiya & Anr. vs. State of Mahrashtra & Ors. [2002 (2) Mah.L.J.844]. In the latter decision, a learned Single Judge of the Bombay High Court held as follows: “The question is: whether under Section 110A of the Maharashtra Cooperative Societies Act, 1960, respondent No.5 was duly bound to give a show cause notice to the petitioners herein. In the first instance, the section does not provide for a show cause notice. Once that be so, the question is : whether it can be implied in the absence of provision of show cause notice whether by implication it is required that a show cause notice must be issued as it involves civil consequences. Sub-section (3) of Section 110A of the Mahrashtra Cooperative Societies Act, 1960, came up for consideration before a Division Bench of this Court in the case of Mahendra Husanji vs. State of Maharashtra, 1992 Mah.L.J.1442. The Division Bench of this Court, after considering the provisions of sub-section (3) of Section 110A of the Maharashtra Cooperative Societies Act, has held that the Reserve Bank of India can issue directions only when the situation contemplated by Section 110A of the Act exists. The directions issued are binding on the Registrar. In other words, once a direction is issued by the Reserve Bank of India, the Registrar has no discretion in the matter, but to supersede and appoint an Administrator. Once that be so, and as there is no discretion left in respondent No.5, it must mean that the right of hearing is excluded. Once that be so, there was no question of issuing a show cause notice to the petitioner herein before passing the impugned order. In fact, though not directly in issue in the case of L.V.Sasmile vs. State of Maharashtra 1992 CTJ 729, another Division Bench, considering the material on record, had directed the appointment of an Administrator under Section 110A of the Maharashtra Cooperative Societies act. That also would indicate that there is no requirement under Section 110 for hearing.” 17. In our opinion the Bombay High Court has taken the correct view of the matter. 18. On hearing Mr.Trivedi, counsel for the appellant, and on a careful consideration of the relevant provisions of law and the decisions cited before us we have no hesitation in accepting the submissions made on behalf of the appellant. We accordingly answer the question (framed in the beginning of the judgment) in the negative and hold and find that on receipt of a requisition in writing from the Reserve Bank of India the Registrar Cooperative Societies is statutorily bound to issue the order of supersession of the committee of management of the cooperative bank. At that stage the affected bank/its managing committee has no right of hearing or to raise any objections. The question may here arise whether the principles of natural justice are completely excluded from the process or it may be that against the requisition, the affected bank may move the Reserve Bank itself and try to show that it had wrongly arrived at the decision for its supersession. The other course may be that after the supersession order was issued by the Registrar that may be challenged before a court of law and in that proceeding one of ground for assailing the order might be that the decision of the Reserve Bank was arrived at without giving the affected cooperative bank a proper opportunity of hearing. We, however, refrain from going into that question as it does not arise in the facts of the present case. In light of the discussions made above, both the orders passed by the learned Single Judge and the Division Bench appear quite untenable. Both the orders are accordingly set aside. However, since the matter has become quite old it needs to be clarified that the order of supersession passed by the Registrar on January 31, 2002 shall not be automatically revived but in case the Reserve Bank of India is of the opinion that the situation so warrants it may issue a fresh requisition to the Registrar Cooperative Societies, Karnataka, who would on that basis pass the order of supersession as held in the judgment.19.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]the question (framed in the beginning of the judgment) in the negative and hold and find that on receipt of a requisition in writing from the Reserve Bank of India the Registrar Cooperative Societies is statutorily bound to issue the order of supersession of the committee of management of the cooperative bank. At that stage the affected bank/its managing committee has no right of hearing or to raise any objections. The question may here arise whether the principles of natural justice are completely excluded from the process or it may be that against the requisition, the affected bank may move the Reserve Bank itself and try to show that it had wrongly arrived at the decision for its supersession. The other course may be that after the supersession order was issued by the Registrar that may be challenged before a court of law and in that proceeding one of ground for assailing the order might be that the decision of the Reserve Bank was arrived at without giving the affected cooperative bank a proper opportunity of hearing. We, however, refrain from going into that question as it does not arise in the facts of the present case. In light of the discussions made above, both the orders passed by the learned Single Judge and the Division Bench appear quite untenable. Both the orders are accordingly set aside. However, since the matter has become quite old it needs to be clarified that the order of supersession passed by the Registrar on January 31, 2002 shall not be automatically revived but in case the Reserve Bank of India is of the opinion that the situation so warrants it may issue a fresh requisition to the Registrar Cooperative Societies, Karnataka, who would on that basis pass the order of supersession as held in the judgment.