Case: Apex Coop Bank Of Urban Bank Of Mah.&amp;Goa Vs. Maharashtra State Coop Bank

as noted by the High Court in the impugned judgment was as follows: "Mr Singhvi submitted that as per the definition of "State Cooperative Bank" given in the said section 2(u), such a bank could only be the principal co-operative society in a state, the primary object of which would be the financing of other co-operative societies in the state, and that by the proviso it is in effect provided that the State Government may declare a co-operative society in addition to such principal society but such additional society must be carrying on banking business and that too in the State i.e. State of Maharashtra. According to him, admittedly the 5th Respondent for want of necessary license, was not carrying on any banking business as on the date of the impugned declaration, and that the 5th Respondent being a multi state co-operative society could not be said to be a society carrying on such banking business in the State." 42. He pointed out that the High Court held as follows: "The words carrying on business" means that the such additional or such principal cooperative society must be carrying on business, the business being naturally that of banking. It is true that nowhere, neither in the first part nor in the proviso, the word banking is even mentioned. In our opinion the underlying or the basic requirement is that the principal cooperative society must be carrying on the business of banking and its primary object must be to finance other cooperative societies in the State. Otherwise how can a society be recognized as the State Cooperative bank when it is not even functioning as such on the date of such recognition as a bank nor has the primary object to finance other cooperative societies in the state?" 43. He submitted that there is not a single word and a single finding by the High Court that the Appellant was not carrying on business except in the sense of banking business. He submitted that the reason for this is obvious i.e. there was no argument and no challenge that the Appellant was carrying on business other than banking business. He submitted that it is not open to the Respondent to argue something that was not argued before the High Court and which is not investigated and found as fact by the High Court. 44. We are unable to accept this submission. In the Writ Petition it has been stated that the Appellant was not carrying on any business or banking business. This shows that in the Petition itself this ground has been taken. Just because it is also mentioned that banking business was not being carried does not detract from fact that it is averred that no business was carried on. Once it is mentioned that no business was carried on it was not necessary to state that business of financing other co-operative societies was not carried on. In the impugned judgment, apart from the submissions highlighted by Mr. Andhyarujina, the following submissions have also been noted: "Mr. Singhvi first attacked the Notification dated 30th December, 1995 issued by the State Government purportedly under section 2(u) of NABARD Act. It was his submission that the same was illegal and invalid inasmuch as that at the time of the said declaration Respondent No. 5 was admittedly not carrying on any Banking business i.e. the business of financing to other co-operative societies in the State, and that it was only registered as a Multi-State Co-operative Society under the Multi State Act and was endeavouring to obtain the License from REI under the provisions of Banking Regulation Act for carrying on banking business". (emphasis supplied)This shows that the use of the term "banking business was intended to be the business of financing other co-operative societies in the State. In the impugned Judgment the High Court has interalia held as follows:"....... In our opinion, the Co-operative Bank which is recognized as the State Co-operative Bank is required to have as its primary object the object of financing of other Co-operative Societies in the State." Of course the High Court has then gone on to hold that banking business was required to be carried on. As set out above the High Court was wrong in equating business of financing other co-operative societies to banking business. But it is clear that it had been the case of the 1st Respondent, not only in the Writ Petition, but also in the submissions before the High Court that the Appellants were not carrying on any business and that they were not carrying on the business of financing other co-operative societies. We are, therefore, unable to accept the submission that the 1st Respondent cannot now be allowed to take this contention. 45. For all the above reasons it is held that the State Government could not have declared the Appellants as a state co-operative ban. As it could not be so declared the Orders dated 25th January, 1996 and 14th May, 1996 could not have been passed. The High Court was, therefore, right in striking down the Notification dated 30th December, 1995 and two orders/directions dated 25th January, 1996 and 14th May, 1996.38. As seen above, in answer to Question No. (a) it has been held that RBI could not have granted the licence unless the Appellants were first declared a state co-operative bank under the NABARD Act. As it is now being held that the Appellants could not have been declared as a State co-operative bank under the NABARD Act and it is held that as such declaration was correctly struck down it will have to be held that the RBI cannot issue it a license to carry on banking business. In view of the contrary stand taken by RBI, it cannot now be left to discretion of RBI to cancel the license granted by it. It is held that the High Court was in error in not striking down the issuance of the license by RBI to the Appellants.

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

Explanation:
1[ds]17. We are unable to accept these submissions also. The portion extracted above does not detract from what is provided in Section 22(1). Under Section 22(1) a primary credit society can carry on banking business. However if a co-operative society is not a primary credit society then to carry on banking business it must be a co-operative bank and hold a license issued by the RBI. The above extracted portion of Section 22(2) merely exphasis that a co-operative society, other than a primary credit society, has to apply to the RBI for license before it can commence banking business. However, this does not mean that RBI can give to any or all co-operative societies, a banking license. RBI can only give a license as provided in Section 22(1) i.e. to a co-operative bank. The term Co-operative Bank" has been defined in the Banking Regulation Act and only includes a State co-operative bank or a central co-operative bank or a primary co-operative bank. Reference to the term co-operative bank in the Multi State Act is of no assistance. When a term is specifically defined in a statute then for purposes of that statute that term cannot bear a meaning assigned to it in another statute. One cannot ignore the specific definition given in the Banking Regulation Act and apply some other definition set out in some other statute. Thus, so far as the Banking Regulation Act is concerned the term co-operative bank" must have the meaning assigned to it Section 5(cci). RBI cannot go by any other meaning given to the term co-operative bank for purposes of licencing under the Banking Regulation Act. The RBI has to go by the meaning given to this term in the Banking Regulation Act.18. In view of the above, we hold that the RBI by virtue of its power under Section 22 cannot grant a license to any co-operative bank unless it is a state co-operative bank or a central co-operative bank or a primary co-operative bank. It would be necessary that a declaration under the NABARD Act be first obtained.In our view the High Court does not appear to be right in concluding that the words carrying on business must mean carrying on banking business. If the Legislature had so intended they would have so specifically provided as they have done in Section 3(e) of the Multi State Act and Sections 80P(2)(a)(i) of the Income Tax Act, 1961. However, a reading to the provisions makes it clear that what is necessary is that co-operative society must be carrying on the business of financing other co-operative societies. The proviso has to be read in the light of the main provision. If read in the light of the main provision it is clear that even though banking business, as understood in the strict sense, may not be carried on, yet the business of financing other co-operative societies in the State must be carriedour view this was not sufficient. What was required was carrying on business of financing other co-operative societies.In this case prior to the Notification dated 13th December, 1995, the Appellants had not carried on any business of financing any co-operative society. All that they had done was accepting entrance fees and share subscription from members. As stated above this is not business as contemplated by Section 2(u) of the NABARD Act. On this ground also it will have to be held that the Notification dated 13th December, 1995 cannot be sustained.For all the above reasons it is held that the State Government could not have declared the Appellants as a state co-operative ban. As it could not be so declared the Orders dated 25th January, 1996 and 14th May, 1996 could not have been passed. The High Court was, therefore, right in striking down the Notification dated 30th December, 1995 and two orders/directions dated 25th January, 1996 and 14th May, 1996.38. As seen above, in answer to Question No. (a) it has been held that RBI could not have granted the licence unless the Appellants were first declared a state co-operative bank under the NABARD Act. As it is now being held that the Appellants could not have been declared as a State co-operative bank under the NABARD Act and it is held that as such declaration was correctly struck down it will have to be held that the RBI cannot issue it a license to carry on banking business. In view of the contrary stand taken by RBI, it cannot now be left to discretion of RBI to cancel the license granted by it. It is held that the High Court was in error in not striking down the issuance of the license by RBI to the Appellants.47. It is to be seen that the RBI can only give a license to a State co-operative bank which has been so declared by a particular State. As the definition of co-operative societies in the NABARD Act is restricted to co-operative societies registered under State Acts and as the provision is for a State to declare a co-operative society as a "State co-operative bank the license, which can be issued by the RBI, can only be in respect of that State. Merely because one State declares a co-operative society as a state co-operative bank would not enable to RBI to issue that society a license to carry on banking business in other States or in the rest of the country. In t his case, the RBI was wrong in issuing a license to the Appellants for the States of Maharashtra and Goa when, admittedly, the Appellants had not been declared a state co-operative bank in the State of Goa. Thus, it is held that the banking license could not have been issued for the State ofare unable to accept this submission. The 1st Respondent had challenged the Notification and the grant of license immediately. The Appellants have all along been aware that their status was under challenge in a Court of law. Thereafter, the High Court struck down the Notification. Now the Appellants knew full well that that was the law. Merely because on obtaining a stay from this Court they continued to operate would not be a circumstance which can be taken into consideration by this Court. The Appellants cannot be allowed to continue to operate as a state co-operative bank when in law they are not entitled to be one. We, therefore, do not accept this