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

2 The First Respondent is established as abank under the provisions of the MaharashtraSocieties Act (MCS Act). It held a banking licence issued by Reserve Bank of India. The Managing Committee of the First Respondent committed various irregularities. The Registrar ofSocieties initiated action under Section 88 of the MSC Act against the Managing Committee members of the First Respondent for the loss caused to the bank due to their negligence and sanctioning of bogus loans. F.I.Rs. were registered against the Managing Committee members under various provisions of the Indian Penal Code and Prevention of Corruption Act. In these circumstances, the Reserve Bank of India issued an order under Sectionof the Banking Regulation Act (BR Act) imposing financial restrictions on the First Respondent for a period of six months. This order was passed on 11 August 2011. On 17 August 2011, the Reserve Bank issued directives under Section 110A of the MCS Act for appointment of administrator of the bank. This was followed by a show cause notice under Section 22 of the BR Act for cancellation of the banking licence of the First Respondent. Replies were furnished by the Administrator and progress reports filed. In the meantime, on the representation of the Petitioners and others, the Board of Administrators was reconstituted on 7 October 2011. The reconstituted Board included the First and Second Petitioners among others. Further recoveries were made and progress reports were submitted by the reconstituted Board. Not satisfied with the financial position of the bank, the Reserve Bank, on 11 November 2011, cancelled the banking licence of the First Respondent under Section 22(4) of the BR Act. The matter was carried in appeal under Section 22(5) of the BR Act. The Appellate Authority rejected the appeal and upheld the Reserve Bank order of cancellation of the banking licence. Being aggrieved, the Petitioners have invoked the writ jurisdiction of this Court.

Court's reasoning:
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.