Case: Surendra K. Kambli &amp; Another Vs. Bhandari Co-Op.Bank Limited &amp; Others

22.9 Now it needs to be seen if the Reserve Bank has come to form any such opinion in the present case and therefore, is within its authority to not grant any further time to the First Respondent despite appointment of a Board of Administrators for six months. The impugned order of the Reserve Bank dated 11 November 2011 notes the parameters such as Net Worth, CRAR, Deposit Erosion and Net Profit / Loss of the First Respondent as disclosed in the inspection on 31 March 2009, 31 March 2010 and 31 March 2011. Secondly, it notes the various deficiencies / irregularities revealed in the inspection report of 31 March 2011. In particular, it takes into account (a) that the erosion in the value of assets has not only wiped out the entire owned funds but the deposits have been eroded to the extent of 25.6% of total deposits, (b) that net NPAs had sharply increased from 26.6% as on 31 March 2010 to 42.3% as on 31 March 2011, (c) that the recoveries of NPA were not satisfactory, (d) that there were frauds in various loan accounts and (e) that the First Respondent had not adhered to prudential norms relating to income recognition, asset classification and provisioning, etc. The Reserve Bank also took into account the compliance report submitted by the First Respondent on 30 August 2011 and the same was not found satisfactory. The Reserve Bank also noted that fresh cases of fraud were coming to light. In view of these circumstances, a show cause notice before cancellation of licence was served by the Reserve Bank to the First Respondent. The reply of the First Respondent dated 14 September 2011 was examined and found to be unsatisfactory specially having regard to the facts that (a) the First Respondent bank had admitted to the precarious financial position and (b) the gross and net NPAs had increased to Rs.3156.00 lakh and Rs.1981.00 lakh of gross and net advances respectively on 31 August 2011. Based on the material adverted to by it, the Reserve Bank came to the conclusion that -i) The financial position of the bank is precarious and there is no scope for its revival.ii) The bank is not in a position to pay its present and future depositors in full, as and when their claims accrue.iii) The bank does not comply with the provisions of Section 11(1), 22(3)(a) and (b) of the Act.iv) The affairs of the bank are being conducted in a manner detrimental to the interest of its present and future depositors.v) The public interest would be adversely affected if the bank is allowed to carry on its banking business any further.Based on the above findings, the Reserve Bank formed an opinion that allowing the bank to carry on banking business any further would be detrimental to the interests of the present and future depositors and hence, the licence granted to the bank to conduct banking business deserves to be cancelled. In these premises, the Reserve Bank cancelled the banking licence of the First Respondent under Section 22(4) of the BR Act with immediate effect.10 The impugned order, as noted above, is based on relevant and germane considerations and satisfied the requirements of sub-section (4) of Section 22 including the proviso to that sub-section.11 The Appellate Authority, acting under sub-section (5) of Section 22 of the BR Act, has duly considered the grounds of appeal raised by the First Respondent and the Petitioners and found the impugned order to be valid and justified. The Appellate Authority has accordingly rejected the appeal. The Appellate Authority, in particular, noted as follows:As regards the contentions of the appellant bank regarding improvement of the financial position after cancellation of licence, there is no convincing evidence placed before me to prove the claim. The audit for the year 2011-12 is yet to be completed which would bring out the latest financial position of the bank. The appellant bank was given ample opportunity to improve its financial position since 2005. However no improvement was noticed. If fact, the financial position continued to deteriorate. The appellant has not alleged any arbitrariness or illegality on the part of RBI while passing the order.12 It is not for this Court to question the wisdom of two expert bodies on the matter of banking business generally and fulfillment or otherwise of conditions requisite for continuing banking business in particular, whilst exercising its writ jurisdiction. It is trite saying that a Writ Court is concerned rather with the decision making process than the decision itself. We find nothing wrong with that decision making process here. The merits of the decision are best left to the expert body. The Court is not equipped to question the wisdom of such expert body in the matter.13 The Supreme Court in the case of Federation of Railway Officers Association vs. Union of India (2003) 4 SCC 289 ), whilst examining the scope of judicial review of a policy decision by the executive, held as follows:12. In examining a question of this nature where a policy is evolved by the Government judicial review thereof is limited. When policy according to which or the purpose for which discretion is to be exercised is clearly expressed in the statute, it cannot be said to be an unrestricted discretion. On matters affecting policy and requiring technical expertise the court would leave the matter for decision of those who are qualified to address the issues. Unless the policy or action is inconsistent with the Constitution and the laws or arbitrary or irrational or abuse of the power, the court will not interfere with such matters.14 The impugned orders of the Reserve Bank and the Appellate Authority in cancelling, and affirming cancellation of, the banking licence of the First Respondent cannot be said to be inconsistent with the Constitution or in breach of any law or arbitratory or irrational or abuse of power. The orders, in the premises, are unassailable in the writ jurisdiction of this Court.

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

Explanation:
0[ds]10 The impugned order, as noted above, is based on relevant and germane considerations and satisfied the requirements of(4) of Section 22 including the proviso to thatThe Appellate Authority, acting under(5) of Section 22 of the BR Act, has duly considered the grounds of appeal raised by the First Respondent and the Petitioners and found the impugned order to be valid and justified. The Appellate Authority has accordingly rejected the appeal. The Appellate Authority, in particular, noted as follows:As regards the contentions of the appellant bank regarding improvement of the financial position after cancellation of licence, there is no convincing evidence placed before me to prove the claim. The audit for the yearis yet to be completed which would bring out the latest financial position of the bank. The appellant bank was given ample opportunity to improve its financial position since 2005. However no improvement was noticed. If fact, the financial position continued to deteriorate. The appellant has not alleged any arbitrariness or illegality on the part of RBI while passing the order.12 It is not for this Court to question the wisdom of two expert bodies on the matter of banking business generally and fulfillment or otherwise of conditions requisite for continuing banking business in particular, whilst exercising its writ jurisdiction. It is trite saying that a Writ Court is concerned rather with the decision making process than the decision itself. We find nothing wrong with that decision making process here. The merits of the decision are best left to the expert body. The Court is not equipped to question the wisdom of such expert body in the matter.13 The Supreme Court in the case of Federation of Railway Officers Association vs. Union of India (2003) 4 SCC 289 ), whilst examining the scope of judicial review of a policy decision by the executive, held as follows:12. In examining a question of this nature where a policy is evolved by the Government judicial review thereof is limited. When policy according to which or the purpose for which discretion is to be exercised is clearly expressed in the statute, it cannot be said to be an unrestricted discretion. On matters affecting policy and requiring technical expertise the court would leave the matter for decision of those who are qualified to address the issues. Unless the policy or action is inconsistent with the Constitution and the laws or arbitrary or irrational or abuse of the power, the court will not interfere with such matters.14 The impugned orders of the Reserve Bank and the Appellate Authority in cancelling, and affirming cancellation of, the banking licence of the First Respondent cannot be said to be inconsistent with the Constitution or in breach of any law or arbitratory or irrational or abuse of power. The orders, in the premises, are unassailable in the writ jurisdiction of this Court.