Supreme Court of India
RESERVE BANK OF INDIAversusM. HANUMAIAH & ORS.
- Citation
- 2008 INSC 7
- Decided
- 4 January 2008
- Disposal
- Case Allowed
- Bench
- G P MATHUR
Holding
Under s.30(5) the Registrar must supersede the committee upon RBI’s requisition without granting a hearing, so natural‑justice principles do not apply.
Summary
The Reserve Bank of India (RBI) inspected Kalidasa Cooperative Bank and, after finding serious irregularities, requisitioned the Registrar of Cooperative Societies under s.30(5) of the Karnataka Co‑operative Societies Act, 1959 to supersede the bank’s Board of Directors and appoint an administrator. The Registrar issued the supersession order on 31 January 2002, which was challenged by the former board members in the Karnataka High Court. The High Court quashed the order on the ground that the bank was denied a hearing, and later dismissed the RBI’s appeal as infructuous. The Supreme Court was asked whether natural‑justice principles apply to the supersession power under s.30(5). The Court held that the statute expressly excludes any hearing requirement; upon receipt of the RBI’s requisition the Registrar is statutorily bound to supersede the committee, and the affected bank has no right to a hearing. Consequently, the High Court orders were set aside, but the supersession order would not revive automatically; a fresh requisition may be issued if warranted. The appeal was allowed.
Issues considered
- Whether the principles of natural justice apply to the supersession of a cooperative bank’s committee of management under s.30(5) of the Karnataka Co‑operative Societies Act, 1959.
Legislation cited
- Banking Regulation Acts. 35, s. 56
- Karnataka Co-operative Societies Act, 1959s. 30(1), s. 30(2), s. 30(3), s. 30(4), s. 30(5)
- Maharashtra Cooperative Societies Act, 1960s. 11QA
Subjects
natural justicesupersessioncooperative bankKarnataka Co‑operative Societies ActReserve Bank of Indiaadministrative lawright to hearingstatutory duty
Judgment
[2008] 1 S.C.R.16
RESERVE BANK OF INDIA
v.
M. HANUMAIAH & ORS.
(C.A. No. 9 of 2008)
JANUARY 4, 2008
(G.P. MATHUR AND AFTAB ALAM, JJ) l
Karnataka Co-operative Societies Act, 1959:
s. 30(5) - Supersession of Committee of Management
of Co-operative Bank - On requisition from Reserve Bank of
India - Challenged for not affording opportunity of hearing -
HELD: In the event of supersession of committee of
management of a cooperative bank in terms of sub-s. (5) of
s.30, the affected bank/its managing committee has no right
of hearing -· Banking Regulation Act - ss. 35 and 56 -
Administrative Law - Natural justice - Opportunity of hearing.
The appellant-Reserve Bank of India, on inspection
of the respondent-Cooperative Bank (Respondent no. 16)
on 30.6.1994 found a number of serious irregularities in
its affairs. The appellant called the Members of the Board
of Directors of the respondent-Cooperative Bank for
several rounds of discussion at different levels and
repeatedly urged them to take stringent action to improve
its financial position, but to no avail. Ultimately, the
appellant-Reserve Bank issued a requisition to the
Registrar, Co-operative Societies on 22.1.2002 in terms
of s.30 (5) of the Karnataka Co-operative Societies Act
requiring him to supersede the Board of Directors of the
respondent Cooperative Bank and to appoint an
Administrator for one year. Accordingly, the Registrar,
Cooperative Societies issued an order on 31.1.2002
superseding the Board of Directors of the respondent-
Cooperative Bank and appointing an Administrator in its
place. The said order was challenged in a writ petition ;
16
t
RESERVE BANK OF INDIA v. 17
M. HANUMAIAH & ORS.
before the High Court. The single Judge quashed the A
order holding primarily because no opportunity of hearing
'' was afforded before passing the same. During the
pendency of the writ appeal filed by the Reserve Bank, it
was pointed out that fresh elections for the Committee of
Management were scheduled to take place. The Division B
Bench of the High Court, accordingly, held the writ appeal
as infructuous. Aggrieved, the Reserve Bank of India filed
the instant appeal.
During the course of hearing of the appeal, the Court
felt that though the Managing Committee of the C
respondent-Cooperative Bank for supersession of which
action was taken by Reserve Bank was no longer in
existence, the issue involved in the case. needed to be
decided as it was likely to crop up in future in regard to
the respondent Bank or other cooperative banks. D
Accordingly, the Court framed for its consideration the
question: "whether the principles of natural justice have
any application at the stage when the Registrar Co-
operative Societies, on being so required in writing by the
Reserve Bank of India passes an order removing the E
Committee of Management of a Co-operative Bank and
appointing an Administrator to manage its affairs for such
period, as may be specified by the Reserve Bank of
India?"
Answering the question in the negative and allowing F
...
!
the appeal, the Court
HELD: 1.1 On receipt of a requisition in writing from
the Reserve Bank of India in terms of sub-section (5) of
s.30 of the Karnataka Co-operative Societies Act, 1959 the G
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. [para 18] [31-A, B]
H
18 SUPREME COURT REPORTS [2008] 1 S.C.R.
A 1.2 Sub-sections (1) to (4) of s.30 of the Act relate to )-
removal of the committee of a Cooperative society by the ....
Registrar, Co-operative Societies and sub-section (5)
relates to supersession of the managing committee of a
cooperative bank on requisition from the Reserve Bank
B of India. It is to be seen that in case of removal of the
committee of a cooperative society in terms of sub-
sections (1) to (4), compliance with the principles of natural
justice is expressly required inasmuch in sub-section (1) !
it is stipulated that the Registrar would pass the order of
removal only 'after giving the committee an opportunity
c to state its objections'. On the other hand the requirement
of any hearing is absent in sub-section (5) which starts
with a non-obstante clause that also covers the provisions
of the earlier sub-sections of Section 30. [para 11] (24-C,
D, E]
D
Joseph Kurnvilla Velukunnel vs. Reserve Bank of India
& Ors. AIR 1962 SC 1371 - Relied on.
/shwardas Premkumar Choradiya & Anr. vs. State of
Mahrashtra & Ors. 2002 (2) Mah.L.J.844 - approved.
E Virendra vs. The State of Punjab 1958 SCR 308; and
Mahendra Husanji Gadkari vs. State of Maharashtra &
Ors. 1992 Mah.L.J.1442 - referred to.
1.3 Thus, both the orders passed by the Single Judge
and the Division Bench of the High Court appear quite
F
untenable and are accordingly set aside. However, since
the matter is 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
G so warrants, it' may issue a fresh requisition to the
Registrar Cooperative Societies, who would on that basis )-
'
pass the order of supersession as indicated in the
judgment. [para 20] (31-E, F]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9 of
H
2008.
RESERVE BANK OF INDIA v. 19
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
From the final Judgment and Order dated 3.3.2005 of the A
High Court of Karnataka at Bangalore in W.A. No. 6120/2002
(CS-RES)
' R.N. Trivedi, Kuldeep Parihar, Shweta Garg and H.S.
Parihar, for the Appellant.
B
A. Deb Kumar (for K. Rajeev) for the Respondents.
The Judgment of the Court was delivered by
AFTAB ALAM, J. Leave granted.
2. Whether the principles of natural justice have any c
application at the stage when the Registrar Co-operative
Societies, on being so required in writing by the Reserve Bank
of India passes an order removing the Committee of
Management of a Co-operative Bank and appointing an
Administrator to manage its affairs for such period, as may be D
specified by the Reserve Bank of India? This is the question
that falls for consideration in this case.
3. The facts and circumstances in which the question arises
are brief and simple and may be stated thus :
E
4. On inspection of Kalidasa Cooperative Bank Ltd.
(respondent No.16) (hereinafter referred to as the 'Cooperative
Bank' or 'the Bank') made on June 30, 1994 under Section 35
read with Section 56 of the Banking Regulation Act the Reserve
Bank of India (the appellant before us) found a number of serious F
.4 irregularities in its affairs. It sent a copy of the inspection report
to the Cooperative Bank and called the members of its board
of directors for discussion on the findings in the report. It also
forwarded a copy of the inspection report to the Joint Registrar,
Cooperative Societies. The Joint Registrar advised the G
Reserve Bank to make requisition for supersession of the
committee of management of the Bank. The Reserve Bank,
~
however, withheld any action in that regard but called the
members of the board of directors of the Bank for several rounds
of discussions at different levels. The board of directors was
H
20 SUPREME COURT REPORTS [2008) 1 S.C.R.
A repeatedly urged to take stringent actions to improve the
financial health of the Bank. Apparently, no remedial measures
were taken and the affairs of the Cooperative Bank continued
in a state of financial distre$S. Finally, the Reserve Bank issued
a requisition to the Registrar Cooperative Societies, Karnataka
B on January 22, 2002 requiring him to supersede the board of
directors of the Cooperative Bank and to appoint an
Administrator for a period of one year as provided under Sectio11
30(5) of the Karnataka Cooperative Societies Act. The
requisition was made in public interest and for preventing the
c affairs of the Bank being conducted in a manner detrimental to
the interest of the depositors and for securing proper
management of the Bank.
5. In compliance with the requisition made by the Reserve
Bank the Registrar Cooperative Societies issued an order on
D January 31, 2002 superseding the board of directors of the Bank
and appointing an Administrator in its place.
6. The order of supersession issued by the Registrar was
challenged before the Karnataka High Court by respondents 2
to 13 (members of the committee of management of the
E Cooperative Bank that was in existence at that time) in
W.P.No.6706 of 2003 (CS-RES). The writ petition was allowed
by a learned Single Judge of the Court by order dated
September 21, 2002. It is a brief order in which after noticing
the relevant provision as contained in Section 30(5) of the
F Karnataka Cooperative Societies Act, the learned Judge simply
observed as follows:
"From the order, I find that the supersession is at the
instance of the Reserve Bank of India since it is referred
to in the impugned order. Further, the reason given by
G
the Reserve Bank of India in order to supersede the
Committee of Management in the public interest has
not been disclosed in the impugned order. Further, no
opportunity of hearing a/so has been afforded before
passing an order by the Cooperative Bank. In the result,
rl
RESERVE BANK OF INDIA v. 21
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
I pass the following order : A
(a) Writ Petition is allowed.
(b) The impugned order is quashed."
(Emphasis added)
7. Against the order passed by the learned Single Judge, B
the Reserve Bank of India preferred Writ Appeal No.6120 of
2002 (CS-RES). When the appeal was taken up on March 31,
2003, the Court was told that fresh elections for the committee
of management were to take place on March 20. The Division
Bench took the view that this development had rendered the C
writ appeal infructuous and disposed it of as such, leaving it
open 'to the Reserve Bank to proceed against the Bank, if
necessary, in accordance with law'.
8. Mr.RN.Trivedi, learned senior counsel, appearing on
0
behalf of the appellant, submitted that both the learned Single
Judge and the Division Bench of the High Court seriously erred
in the matter, the learned Single Judge by introducing the
elements of natural justice where none existed and the Division
Bench by treating the appeal as infructuous.
E
9. The learned counsel submitted that the Division Bench
overlooked the main issue and failed to appreciate that as long
as the Registrar was held obliged to give an opportunity of
hearing to the cooperative bank it was pointless to say that it
'would be open to Reserve Bank of India to proceed against F
the bank, if necessary, in accordance with law'. Counsel further
submitted that the learned Single Judge had set aside the
supersession order on two grounds. The first ground was wrong
on facts and the second was flawed legally. It was incorrect to
say that the order of the Registrar did not disclose the reasons G
for supersession. The reasons were stated in the preamble of
the order. Moreover, the reasons for supersession were stated
in detail in the requisition made by the Reserve Bank. But it
was the second ground in regard to the opportunity of hearing
to the cooperative bank that was fundamentally bad as it tended H
22 SUPREME COURT REPORTS [2008] 1 S. C.R.
A to defeat the very object and purpose of supersession of the
managing committee of the bank. Learned counsel submitted
that the order of the learned Single Judge would in effect give
rise to a process of adjudication at the level of the Registrar. In
other words, the Reserve Bank which is the apex expert body in
B the country in regard to banking affairs would be required to go
to the Registrar and satisfy him about the need for supersession
of the management of the bank. What is worse is that this
process of adjudication might take a few weeks' time and thus
completely frustrate the need for an urgent intervention by the
c Reserve Bank in order to protect the interests of small
depositors.
10. We are satisfied that Mr.Trivedi is right in his
submission and though the managing committee of the
Cooperative Bank for the supersession of which action was
D taken by the Reserve Bank may no longer be in existence the
issue involved in the case needs to be decided as it is likely to
crop up in future in regard to the respondent-bank or other
cooperative banks.
11. In order to examine the question it would be best to
E begin with the legal provision. Section 30 of the Karnataka Co-
operative Societies Act, 1959 is as follows :
"30. Supersession of committee - (1) If, in the opinion
of the Registrar -
F (a) the committee of a co-operative society persistently
makes default or is negligent in the performance of
the duties imposed on it by this Act or the rules or
the bye-laws or commits any act which is prejudicial
to the interests of the society or its members, or is
G . otherwise not functioning properly; or
(b) a co-operative society is not functioning in
accordance with the provisions of this Act, the rules
or bye-laws or any order or direction issued by the
State Government or the Registrar, "including the
H
direction issued under Section 308''.
RESERVE BANK OF INDIA v. 23
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
-( the Registrar may, after giving the committee an A
opportunity to state its objections, if any, by order in writing
remove the said committee, and appoint an administrator
to manage the affairs of the society for such period, not
exceeding [six months], as may be specified by the
Registrar. The Registrar may for the reasons to be B
recorded in writing extend the period of such appointment
for a furlher period of six months at a time and in any
~ case such extension shall not exceed one year in
aggregate.
(2) The administrator so appointed shall, subject to c
the control of the Registrar and such instructions
as he may give from time to time, exercise all or
any of the functions of the committee or of any [office
bearer] of the co-operative society and take such
action as he may consider necessary in the interest D
of the society
' 'r (3) The administrator shall, before the expiry of his term
of office arrange for the constitution of a new
committee after holding the election in accordance
with this Act, the rules and the bye-laws of the co-
E
operative society
Provided that in such an election, no member
of the committee removed under sub-section (1)
shall, notwithstanding anything contained in this act, F
-<, the rule or the bye-laws, be eligible for being elected
as a member of the Committee, for a period of four
years from the date of supersession of the
committee under the said sub-section.
(4) Before taking any action under sub-section (1) in G
respect of a co-operative society, the Registrar shall
consult the financial banks to which it is indebted.
(5) Notwithstanding anything contained in this Act, the
Registrar shcill, in the case of a co-operative bank,
H
24 SUPREME COURT REPORTS [2008] 1 S.C.R.
A if so required in writing by the Resetve Bank of
India in public interest or for preventing the affairs
of the co-operative bank being conducted in a
manner detrimental to the interest of the depositors
or for securing the proper management of the co-
B operative bank, by order in writing, remove the
committee of that co-operative bank and appoint
an administrator to manage the affairs of the co-
operative bank for such period as may, from time to
time, be specified by the Reserve Bank of India."
c (Emphasis added)
Sub-sections (1) to (4) relate to removal of the committee
of the cooperative society and sub-section (5) relates to
supersession of the managing committee of a cooperative bank.
It is to be seen that in case of removal of the committee of a
D cooperative society compliance with the principles of natural
justice is expressly required inasmuch in sub-section (1) it is
stipulated that the Registrar would pass the order of removal
only 'after giving the committee an opportunity to state its
objections'. On the other hand the requirement of any hearing is
E absent in sub-section (5) which starts with a non-obstante clause
that also covers the provisions of the earlier sub-sections of
Section 30. Mr.Trivedi submitted that in case of supersession
of the management of a cooperative bank there was no
application of the principles of natural justice for two reasons;
F one was that the Reserve Bank of India was the apex expert
body in the country in banking matters and once the Reserve
Bank of India was satisfied in regard to the need of
supersession of the bank's management, the Registrar
cooperative societies who had no experience in the affairs of
G banks was simply obliged to carry out the instructions of the
Reserve Bank; secondly, once the decision of supersession was
taken it was necessary to have it effected speedily because
any delay would cause irreparable loss and harm to the interests
of small depositors of the bank. It was, therefore, by design that
H no opportunity of hearing was mentioned in sub-section (5) even
RESERVE BANK OF INDIA v. 25
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
i though it was stipulated earlier (in sub-section (1 )) in the same A
section.
12. Mr.Trivedi submitted that a similar question arose
before this Court when the validity of section 38 of the Banking
Companies Act, 1956 came in question in the case of Joseph
Kurnvilla Ve/ukunnel vs. Reserve Bank of India & Ors. [AIR B
1962 SC 1371] relating to the winding up of the Palai Central
Bank Ltd., Kerala. The Reserve Bank of India made an
application in the High Court of Kerala under Section 38 of the
Banking Companies Act read with some allied provisions of
the Indian Companies Act for the winding up of the Palai Central C
Bank Limited and for appointment of the official liquidator etc.
The High Court allowed the application and the decision of the
High Court came to be challenged before this Court in appeal
in which the main question related to the constitutional validity
of Section 38 of the Banking Companies Act. A Constitution D
Bench upheld the validity of the provision by a majority of 3 to 2.
13. Section 38 of the Banking Companies Act laid down
as follows : ·
"38(1 ). Notwithstanding anything contained in Section 391, E
Section 392, Section 433 and Section 583 of the
Companies Act, 1956, but without prejudice to its powers
under sub-section (1) of Section 37 of this Act, the High
Court shall order the winding up of a banking company -
(a) if the banking company is unable to pay its F
debts; or
(b) if an application for its winding up has been
made by the Reserve Bank under Section 37
of this Section.
G
(2) The Reserve Bank shall make an application under
this section for the winding up of a banking company
if it is directed so to do by an order under clause (b)
of sub-section (4) of Section 35.
H
26 SUPREME COURT REPORTS [2008] 1 S.C.R.
A (3) The Reserve Bank may make an application under
this section for the winding up of a banking company
xxx xxx xxx xxx
B (b) if in the opinion of the Reserve Bank -
xxx xxx xxx xxx
(iii) the continuance of the banking company is
prejudicial to the interests of its depositors.
c 14. Mr.Trivedi argued that in case of Palai Bank the issue
was far more fundamental and grave than the issue in the case
in hand. In Palai Bank the provision of Section 38 ousted the
avthority and power of the High Court and not merely that of a
Registrar, Cooperative Societies; furthermore, the provision
D allowed for the winding up of a banking company and thus
interfered with the fundamental right to carry on business. In the
case in hand the business of the cooperative bank would go
unhindered and interference was limited only to the
management of the bank.
E
15. One of the grounds on which the validity of Section 38
was challenged was that it offended the principles of natural
justice. In paragraphs 30 to 31 of the judgment this Court noticed
the grounds on which the provisions were assailed and observed
as follows:
F
"(30) The main ground of attack is the way Ss.38(1) and
(3)(b)(iii) make it mandatory for the High Court to pass
an order winding up a banking company whenever the
Reserve Bank under its powers or under an order of the
Central Government makes an application for the winding
G
up a banking company. It is argued that such a power to
the Reserve Bank is an uncontrolled and despotic power
and to crown all, access to Courts is not possible because
the Court itself must pass an order without deciding
whether the affairs of the banking company are being
H
RESERVE BANK OF INDIA v. 27
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
' conducted in a manner detrimental to the interests of the A
depositors - a fact capable of being proved like any
other fact. It is argued as a matter of principle that any
law which bars a decision by the Court is itself
unreasonable without more. Mr. Pathak, in supplementing
the above contentions of Mr.Nambiar, a/so contends that B
by the law in question a judicial process has been
converted into an executive action, and subjective
determination has taken the place of judicial
determination. He a/so contends that the Reserve Bank
accuses a banking company, and then tries the issue to c
the complete exclusion of Courts.
(31) It must not be overlooked that the winding up of a
banking company takes place before the High Court
and under the process of law. The judicial process is
excluded only to respect of the momentous decision D
whether a winding up order should be made or not. This
opinion is left to the Reserve Bank, and the Court merely
passes an order according to the Reserve Bank's
opinion. and then proceeds to wind up the banking
company according to law. The narrow question is E
whether in leaving this decision to the Reserve Bank the
law offends the principles of natural justice and becomes
so unreasonable, viewed in the light of Art. 19, as to
become void. This is the point on which the respective
parties joined issue and had much to say, and this is the F
crucial point in this case."
(emphasis added)
Rejecting the submissions the majority decision referred
to an earlier decision of this Court in Virendra vs. The State of
Punjab [1958 SCR 308] relied upon by the Attorney General G
and in paragraphs 44 and 45 observed as follows :
"(44) These observations lay down clearly that there may
be occasions and situations in which the legislature, may
with reason, think that the determination of an issue may
H·
28 SUPREME COURT REPORTS [2008] 1 S.C.R.
A be left to an expert executive like the Reserve Bank ).
rather than to Courts without incurring the penalty of
having the law declared void. The law thus made is
iustified on the ground of expediency arising from the
respective opportunities for action. Of course, the
8 exclusion of Courts is not lightly to be inferred nor lightly
to be conceded. The reasonableness of such a law in
the total circumstances will, if challenged, have to be
made out to the ultimate satisfaction of this Court and it
is only when this Court considers that it is reasonable in
c the individual circumstance that the law will be upheld.
(45) In the present case, in view of the history of the
establishment of the Reserve Bank as a central bank for
India, its position as a Bankers' Bank, its control over
banking companies and banking in India, its position as
D the issuing bank, its power to license banking companies
and cancel their licenses and the numerous other powers,
it is unanswerable that between the court and the Reserve ....,
Bank, the momentous decision to wind up a tottering or
unsafe banking company in the interest of the depositors,
E may reasonably be left to the Reserve Bank. No doubt,
the Court can also, given the time perform this task. But
the decision has to be taken without delay, and the
Reserve Bank already knows intimately the affairs of the
banking companies and has had access to their books
F and accounts. If the Court were called upon to take
immediate action, it would almost always be guided by l
the opinion of the Reserve Bank. It would be impossible
for the Court to reach a conclusion unguided by the
Reserve Bank if immediate action was demanded. But
the law which gives the same position to the opinion of
G
the Reserve Bank is challenged as unreasonable. In
our opinion sucf-i 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
H
RESERVE BANK OF INDIA v. 29
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
1 abused by the Reserve Bank, what will be struck down A
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 B
Reserve Bank would hardly act without the concurrence
of the Central Government and the finding by the Court
1 would mean, to borrow the macabre phrase of Raman
Nayar,J. a post-mortem examination of the corpse of the
banking company." c
(emphasis added)
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.
D
16. Mr.Trivedi also submitted that the Maharashtra
Cooperative Societies Act, 196Q had a similar provision in
't" Section 11 QA like the one contained· in Section 3Q(5) of the
Karnataka Act. Sub-section (ii) of Section 11 QA provided that
an order for the winding up of the bank would be made by the
E
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 11 QA of the Maharashtra Cooperative Societies Act
.... should not be hindered by reading into it the requirement of show F
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 lshwardas Premkumar Choradiya & Anr. vs. State of
Mahrashtra & Ors. [2QQ2 (2) Mah.L.J.844]. In the latter decision, G
a learned Single Judge of the Bombay High Court held as
--\ follows:
"The question is: whether under Section 11QA of the
Maharashtra Cooperative Societies Act, 196Q, respondent
H
30 SUPREME COURT REPORTS [2008] 1 S.C.R.
A 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
B is required that a show cause notice must be issued as it
involves civil consequences. Sub-section (3) of Section
11 OA 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
c Maharashtra, 1992 Mah.L.J.1442. The Division Bench of
this Court, after considering the provisions of sub-section
(3) of Section 11 OA 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
D
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 si.;persede and appoint ,,,
an Administrator. Once that be so, and as there is no
discretion left in respondent No.5, it must mean that the
E 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,
F considering the material on record, had directed the .}._
appointment of an Administrator under Section 11 OA of
the Maharashtra Cooperative Societies act. That also
would indicate that there is no requirement under Section
110 for hearing."
G
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
H the decisions cited before us we have no hesitation in accepting
RESERVE BANK OF INDIA v. 31
M. HANUMAIAH & ORS. [AFTAB ALAM, J.]
the submissions made on behalf of the appellant. We accordingly A
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 B
cooperative bank. At that stage the affected bank/its managing
committee has no right of hearing or to raise any objections.
19. 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 C
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 D
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.
20. In light of the discussions made above, both the orders E
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 F
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.
G
21. The appeal is, accordingly, allowed but with no order
as to costs.
R.P. Appeal allowed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "natural justice"Sign in to search