Judgment KOCHAR R.J., J.:---Rule. In view of the urgency and importance of the matter, by consent rule made returnable forthwith. Respondents waive service. 2. Heard. The petitioners are directors/members of the Managing Committee of the Raghuvanshi Co-operative Bank Limited (6th respondent bank). The said bank is registered under the provisions of the Maharashtra Co-operative Societies Act, 1960 in December 1977. The said bank appears to be dominated by the Raghuvanshi community. It is specifically averred in the petition that it derives substantial financial support from the said community and that substantial deposits in the said bank are from the members/institutions of the said community. It is claimed by the petitioners that it has 6700 shareholders and more than 21000 depositors and account holders. The petitioners have further claimed that its deposits had reached the climax of Rs. 40 crores. Though, however, in the last 15-20 days the depositors worth Rs. 10 to 12 crores had withdrawn their deposits on account of scam news in the co-operative banking sector. The alleged scam was in respect of a broker Home Trade Limited, through which a number of Co-operative Banks including the respondent No. 6 bank had purchased Government securities. It may be mentioned at this stage itself that according to the learned Counsel for the State Government and also the Reserve Bank of India, the scam wherein the Home Trade Ltd., is involved, more than Rs. 350 crores are lost and investigation in this scam in going on Shri Sawant, the learned Government Pleader has pointed out that all the Co-operative Banks which are concerned with the said Home Trade Ltd., their Board of Directors have been similarly superseded under section 110-A(iii) of the Maharashtra Co-operative Societies Act. The petitioners have challenged the order passed by the Registrar of Co-operative Societies under section 110-A(iii) to remove the petitioners and other directors of the bank. By the impugned order, the Registrar had dissolved the present Board of Directors of the said bank and appointed an administrator to look after the day to day affairs of the bank. The petitioners have challenged the said order as not legal, proper and bona fide as they were not given any show cause notice or they were not given any opportunity of hearing and in gross violation of the principles of natural justice. According to the petitioners, there was only one investment of Rs. The petitioners have challenged the said order as not legal, proper and bona fide as they were not given any show cause notice or they were not given any opportunity of hearing and in gross violation of the principles of natural justice. According to the petitioners, there was only one investment of Rs. 5.41 crores bona fide made in the Government securities through the Home Trade Ltd., about which the controversy appeared in the newspapers. The petitioners have claimed that they had in the past six such transactions with the said broker, which were successfully completed and that neither the co-operation department nor the Reserve Bank of India had raised any objection during the course of their audit/inspection. The petitioners have claimed that even the last transaction entered by the bank with the said broker was strictly in accordance with the rules, regulations and the law. The petitioners, however, have candidly admitted that they had no knowledge or information about the scam in which the said broker, Home Trade Ltd. was involved and that they had bona fide entered into the contract as prescribed under the Securities Contracts (Regulation) Act, 1956 (for short "the Securities Act") and in accordance with the Securities and Exchange Board of India Act, 1992 (for short "the SEBI Act). The petitioners have further pointed out that the last transaction of Rs. 5.41 crores was also in the same manner entered into as were the past six transactions with the same broker. The petitioners have averred that since no objections of any nature were raised by the auditors of the co-operation department, nor by the Reserve Bank of India in its regular inspection, the bank management had no occasion, ground or reason to think that the last transaction was in violation of the rules, regulations or guidelines of Reserve Bank of India. The petitioners have prayed for quashing and setting aside of the aforesaid order of the Registrar. The petitioners have further averred that as soon as the news item appeared on 26th April, 2002, with regard to a cheque issued by the Home Trade Ltd., getting bounced, the bank lodged a complaint with the police on 30th April, 2002 and even the SEBI Registrar and the R.B.I. were informed about the same. The petitioners have further averred that as soon as the news item appeared on 26th April, 2002, with regard to a cheque issued by the Home Trade Ltd., getting bounced, the bank lodged a complaint with the police on 30th April, 2002 and even the SEBI Registrar and the R.B.I. were informed about the same. It is also averred that the bank had issued a legal notice to the Home Trade Ltd. and its directors, calling upon the said broker to give the Government securities with transfer documents as per the contract in respect of the transaction entered into with the said broker. The petitioners have also questioned the propriety of the drastic action of the dissolution of the elected Board of Directors of the bank on the ground that the Registrar had already issued a notice under section 78(i) and also under section 88 of the Maharashtra Co-operative Societies Act. According to the petitioners, the said enquiries ought to have been completed wherein the bank and the petitioners would have got an opportunity of hearing. The Registrar has acted in a great hurry under section 110-A of the Act to supersede the Board of Directors and to appoint an administrator for the bank without getting the enquiries completed. The Registrar has finally withdrawn the said notice under section 78(1) of the Act after the order under section 110-A(iii) was passed. 3. The respondent No. 2 and the respondent No. 3, the Divisional Joint Registrar and the District Deputy Registrar of co-operative societies, Mumbai respectively have filed their affidavits dated 10th June, 2002 and 19th June, 2002 respectively to oppose the petition. Even the respondent No. 4 the Reserve Bank of India has filed an affidavit of one Mr. Bhargava, the General Manager Urban Bank Department, Central Office. 4. All the aforesaid three authorities have justified the action of dissolution of the Board of Directors under section 110-A(iii) of the Act. According to them, the decision was competent and was taken by the competent authorities empowered under section 110-A of the Act. The Registrar has stated on oath that a scam relating to the buying of Government securities by some of the district Co-operative Banks was discovered and the magnitude of the scam was estimated to the tune of Rs. 350 crores. The Registrar has stated on oath that a scam relating to the buying of Government securities by some of the district Co-operative Banks was discovered and the magnitude of the scam was estimated to the tune of Rs. 350 crores. The State Government became deeply concerned of the functioning of the said district Co-operative Banks and the urban Co-operative Banks and, therefore, the State Government directed a special investigation to be carried out of the various district Co-operative Banks as well as urban Co-operative Banks through out the State. Such inspection was carried out by the special auditors appointed by the State Government. It is further stated that the inspection of the respondent No. 6, bank was also carried out and it was disclosed that it had paid for Government securities an amount of Rs. 5.41 crores and had parted with money without delivery of such securities. It appeared to the State Government that such transaction entered into by the respondent No. 6 bank was detrimental to the interest of bank as well as its depositors. The State Government was of the opinion that since the Government securities bought through the broker there was little chance for the bank to recover the said amount of Rs. 5.41 crores. The State Government acted on the special inspection report carried out by the special inspection team. On receipt of the said report, the reserve bank was intimated and was requested to initiate action under the provisions of the Act. It is also averred in the affidavit that looking to the gravity of the situation simultaneously an action under section 78 of the Act was also initiated. It is further stated in the affidavit that in the mean time, the R.B.I. by its letter dated 28th May, 2002 addressed to the Commissioner, co-operation, Pune directed him to pass an order under section 110-A(iii) of the Co-operative Societies Act for the reasons stated in the said letter of the R.B.I. The Commissioner Co-operation by his order dated 30th May, 2002 acted on the basis of the direction from the R.B.I. under section 110-A(iii) and superseded the Board of Directors and appointed the Dy. Registrar of Co-operative Societies as an administrator of the respondent No. 6, bank. Registrar of Co-operative Societies as an administrator of the respondent No. 6, bank. It is further pointed out in the affidavit that an enquiry under section 88 of the said Act has also been initiated to fix the responsibility for the said transaction. The affiant further points out that the respondent No. 6 bank had violated guidelines issued by the reserve bank vide its circular dated 4th September, 1992. The respondent No. 6 had committed serious breaches of the said guidelines while purchasing the Government securities through the broker Home Trade Ltd. The bank could not directly make payment to the broker as it was directed to pay to the seller of the securities and to take delivery of the securities purchased from the seller directly and that the bank was not supposed to pay to the broker. The bank has violated the said mandatory guidelines of the R.B.I. It is further pointed out that the R.B.I. had also carried out the inspection under section 35 of the Banking Regulation Act, 1949. It was also pointed out by the affiant that no panel of brokers was formed by the bank as advised by the Reserve Bank of India. In respect of the contention of pre-decisional hearing it was pointed out that a learned Single Judge of this Court (Rebello, J.) in an unreported decision in the Writ Petition No. 890 of 2002, (Ishwardas Premkumar Choradiya v. State of Maharashtra)1, reported in 2002(4) Bom.C.R. 1 , had held that as far as the provisions of section 110-A are concerned, the principles of natural justice are not attracted. The affiant has justified the action based on the inspection report and other material available in the interest of the members and the depositors and the public at large to maintain the confidence of the people in the bank. 5. In the second affidavit the State Government has pointed out that similar action was initiated against the Nagpur District Central Co-operative Bank, Wardha District Central Co-operative Bank, Osmanabad District Central Co-operative Bank, Amraoti People's Co-operative Bank, Sadguru Jangali Maharaj Bank, Suvarnayug Co-operative Bank, Pune and the Raghuvanshi Co-operative Bank Ltd., Pune, the respondent No. 6 herein. 6. 5. In the second affidavit the State Government has pointed out that similar action was initiated against the Nagpur District Central Co-operative Bank, Wardha District Central Co-operative Bank, Osmanabad District Central Co-operative Bank, Amraoti People's Co-operative Bank, Sadguru Jangali Maharaj Bank, Suvarnayug Co-operative Bank, Pune and the Raghuvanshi Co-operative Bank Ltd., Pune, the respondent No. 6 herein. 6. The Reserve Bank of India has filed a detailed affidavit setting out the background and various provisions of the Banking Regulation Act to indicate the source of power under which the Reserve Bank of India being the primary bank kept on the highest pedestal by the law to supervise and control the banking system in the country. The affiant has pointed out that due to heavy erosion in the value of the assets of the respondent No. 6 it was assessed that the bank should be included in the list of weak banks and placed under rehabilitation. The Reserve Bank discovered many deficiencies and irregularities in its inspection under section 35 of the Act as on 30th September, 2001. The affiant has set out all those deficiencies in para 15 of the affidavit. Para 17 sets out how the respondent No. 6 indulged into paper transactions without actual physical sale and purchase of the Government securities. It is pointed out that all the transactions entered into by the respondent No. 6 in respect of investment in the Government securities were contrary to the directions issued by the Reserve Bank from time to time. It is further pointed out that the respondent No. 6 and its Board of Directors violated the R.B.I. circulars, directives, guidelines related to the limited role of brokers in the Government securities transaction. It is provided that the brokers would only bring the parties together and nothing more. The payment and delivery was to be directly between the parties without involvement of the broker. The affiant has pointed out that by making direct payment to the Home Trade Ltd., the broker, the respondent No. 6 has committed a serious breach of the guidelines by releasing a huge amount of Rs. 5.41 crores as it was very unlikely that the said amount would be recovered from the said broker. The affiant has pointed out that by making direct payment to the Home Trade Ltd., the broker, the respondent No. 6 has committed a serious breach of the guidelines by releasing a huge amount of Rs. 5.41 crores as it was very unlikely that the said amount would be recovered from the said broker. The affiant has asserted that considering all the facts and circumstances disclosed from the inspection report and other material, it was thought just and proper to direct the Registrar to initiate action under section 110-A of the Maharashtra Co-operative Societies Act. The said decision was based on the cogent and relevant material available and that the situation required immediate action in the interest of the depositors and in the public interest. The Reserve Bank was fully satisfied that the respondent No. 6 had violated the guidelines in respect of investment in the Government securities and that it had not formulated the investment policy and it also had not formed a panel of brokers and that it had transacted through one and the only broker i.e. Home Trade Ltd. It was repeated that the bank was not supposed to pay directly to the broker any amount for the Government securities and that it ought to have paid that amount directly to the party/seller. Under all these circumstances, the Reserve Bank of India justified its direction to the Registrar to initiate action against the respondent No. 6 under section 110-A(iii) of the Act. 7. Shri Naphade, the learned Counsel for the petitioners had vehemently challenged the drastic action of the respondents in dissolving and superseding the validly elected Board of Directors and appointing a non-banking officer as an Administrator of the Bank. According to Shri Naphade, the petitioners ought to have been given an opportunity of hearing before taking the aforesaid extreme decision. 7. Shri Naphade, the learned Counsel for the petitioners had vehemently challenged the drastic action of the respondents in dissolving and superseding the validly elected Board of Directors and appointing a non-banking officer as an Administrator of the Bank. According to Shri Naphade, the petitioners ought to have been given an opportunity of hearing before taking the aforesaid extreme decision. Shri Naphade took me through various provisions of Securities Contracts (Regulation) Act, 1956 and the Rules framed thereunder and also the Securities and Exchange Board of India Act, 1992 and Rules framed thereunder, in order to justify his submissions that the respondent No. 6 bank and the petitioners as the directors of the bank had acted strictly within the four corners of the law and did not violate any of the provisions in entering into the transaction of purchase of Government securities from the broker Home Trade Ltd., which was a registered broker with the S.E.B.I. and was also member of the Pune Stock Exchange. Shri Naphade pointed out that a regular statutory contract was signed by the parties for purchase of the Securities and that under the Rules 14 days time of completion of contract was prescribed. Shri Naphade has further pointed out that even in the past, the bank had entered into six similar transactions of purchase of Government securities through the same broker from August 2000 to 30th November, 2001. Shri Naphade emphasised the fact that the R.B.I. had not pointed out in its inspection under section 35 of the R.B.I. Act any irregularities in the aforesaid transaction and since no objection was raised by the R.B.I. as also by the Registrar, the bank was left with a confidence that its transactions with the Home Trade Broker were legal and valid and, therefore, the bank had entered into the last transaction in a bona fide belief of the transactions being legal. Shri Naphade further pointed out that in the aforesaid 6 transactions, except the last one, the bank had earned a profit of Rs. 1 crore. Shri Naphade has further stressed the point that had the R.B.I. inspectors pointed out that the aforesaid six transactions were in any manner objectionable and had they noted any adverse remarks, the bank would have never entered into the last transaction, which was again in good faith on the part of the petitioners. 1 crore. Shri Naphade has further stressed the point that had the R.B.I. inspectors pointed out that the aforesaid six transactions were in any manner objectionable and had they noted any adverse remarks, the bank would have never entered into the last transaction, which was again in good faith on the part of the petitioners. Shri Naphade, has further submitted that even the Government auditors who audited the books of accounts of the bank under section 81 of the Maharashtra Co-operative Societies Act, did not raise any objection of any nature in respect of the past transaction with the Home Trade Ltd. The auditors never warned that those transactions were illegal. Shri Naphade, therefore, stressed the point that there was nothing irregular or illegal in the transaction between the bank and the Home Trade and that there was no reason much less an immediate reason to act in a great hurry to dissolve the validly elected Board of Directors. Shri Naphade pointed out that as soon as the news item against the Home Trade appeared on 26th April, 2002 and that there were complaints from other Co-operative Banks that cheques issued by the Home Trade were bounced, the petitioners and the bank immediately lodged a police complaint on 30th April, 2002 and had also issued a notice to the said broker. Even the R.B.I., S.E.B.I. and the Registrar, co-operative societies were informed about the last transaction and the complaint against the Home Trade Ltd. Shri Naphade, further pointed out that even in the letter dated 9th January, 2002 from the R.B.I. with inspection report there was no whisper about the alleged illegalities of the transactions with the said broker. Shri Naphade challenged the bona fides of the Registrar on the ground that he himself had invited the R.B.I. to issue a direction to him under section 110-A of the Maharashtra Co-operative Societies Act to dissolve the Board of Directors of the respondent No. 6 bank. The R.B.I. had not acted independently but had issued the directions as per the desire of the Registrar. There was nothing on record to show, says the learned Counsel, that the R.B.I. as well as the Registrar were independently satisfied to initiate the impugned action against the bank. Shri Naphade, further pointed out that the Registrar had already issued two notices under section 78(1) as well as section 88 for investigation. There was nothing on record to show, says the learned Counsel, that the R.B.I. as well as the Registrar were independently satisfied to initiate the impugned action against the bank. Shri Naphade, further pointed out that the Registrar had already issued two notices under section 78(1) as well as section 88 for investigation. The impugned hasty action was to satisfy the public outcry against the scam by Home Trade Ltd., the broker, submits Shri Naphade. It is further stated by the learned Counsel for the petitioner that the R.B.I. as well as the Registrar both acted mala fide to pacify the public outcry without completing the statutory investigation under sections 78 and 88 of the Maharashtra Co-operative Societies Act. As soon as the action under section 110-A was taken the Registrar had withdrawn the notice under section 78(i) while section 88 notice still subsists. Shri Naphade has stressed the point that there was absolutely no immediacy or urgency to take such a drastic action of dissolution of the Board of Directors and that a pre-decisional hearing was mandatory on the part of the authorities. Such emergent action under the said section would be taken only in extreme and extra ordinary situation which never existed as the Registrar had already initiated action under section 78 and 88 of the Maharashtra Co-operative Societies Act, adds the learned Counsel. There was nothing on record to point out what promoted the authorities to take action under section 110-A after the notice under sections 78 was issued to the bank. Shri Naphade has pointed out that inspection was taken from 7th May, 2002 to 10th May, 2002 and on the basis of the inspection of the accounts of the bank a show cause notice was issued on 24th May, 2002 under section 78 of the Maharashtra Co-operative Societies Act and hearing was kept on 17th June, 2002. Shri Naphade has tried to cast suspicion on the authorities from the variance in the reference to the date of the report. He pointed out that at one place the date of the report is said to be 13th May, 2002 at other place it was mentioned as 15th May, 2002 and at third place it was 17th May, 2002. Shri Naphade, wondered which was the correct report. He further laid stress that there was no existence of report of 17th May, 2002 at all. Shri Naphade, wondered which was the correct report. He further laid stress that there was no existence of report of 17th May, 2002 at all. According to him, no material was disclosed for the drastic action under section 110-A. He repeated that action under section 110-A warranted an extra ordinary emergent situation while in the present case, there was no such situation which had arisen to warrant action under section 110-A(iii) of the Maharashtra Co-operative Societies Act as the very issuance of notice under sections 78 and 88 would show that there was no immediacy to invoke the extra ordinary powers under section 110-A(iii) of the Act. He compared section 78 with section 110-A to point out that section 78 contemplated full scale hearing and, therefore, we have to infer that under section 110-A some minimal hearing was contemplated. Shri Naphade pointed out from the provisions of the section 110-A including the heading, marginal notes etc. to show that the said provisions were to be invoked only when the initial emergency existed and that the institution was on the brink of collapse. Shri Naphade has further pointed out that the R.B.I. itself, could have taken an independent action and it was not necessary for the R.B.I. to act through the Registrar. Shri Naphade pointed out that the depositors of the respondent No. 6 bank were not at all frightened to withdraw the deposits and that they had full faith and confidence in the management of the respondent No. 6 bank. He tried to draw my attention to many letters written by the depositors worth crores of rupees to show that they continue to have faith in directors. 8. Shri Naphade relied upon a judgement of the Supreme Court reported in A.I.R. 1981 S.C. 818. (Swadeshi Cotton Mills v. Union of India)2. From paragraphs 42, 51 and 52 Shri Naphade submitted that the principles of natural justice must be read in section 110-A of the Maharashtra Co-operative Societies Act. He, however, did not give challenge to the constitutional validity of the said section but submitted that this Court should read the principles of natural justice in the said provisions before action under the said section was taken. He, however, did not give challenge to the constitutional validity of the said section but submitted that this Court should read the principles of natural justice in the said provisions before action under the said section was taken. According to Shri Naphade, the decision of the learned Single Judge (Rebello, J.) of this Court is per inquerium as the ratio in the Swadeshi Cotton (supra) was not followed by the learned Single Judge and that the said judgment has no binding effect on this Court and that this Court should take an independent view of the matter following the ratio laid down by the Supreme Court in Swadeshi Cotton Mill's case, which interpreted section 18-AA of the Industries Development (Regulation) Act, 1951. 9. Shri Naphade has also relied upon the following judgments in support of his contention in respect of pre-decisional hearing to be given to the parties :- i) A.I.R. 1978 S.C. 851 (Mohinder Singh Gill and another v. The Chief Election Commissioner, New Delhi and others)3. ii) A.I.R. 1981 S.C. 136 (S.L. Kapoor v. Jagmohan others)4. 10. Shri R.M. Sawant, the learned Government Pleader has supported the action taken by the respondent No. 2. Shri Sawant submitted that when the State came to know about the scam to a very large extent involving about Rs. 350 crores, it could not wait for any so called hearing to be given to the Co-operative Banks, which were involved in the scam. The immediacy or the urgency was writ large on the face of the situation and that the State had to swing into an action under section 110-A of the Maharashtra Co-operative Societies Act. It has dissolved the Board of Directors of six Co-operative Banks and that the respondent No. 6 was not the only bank against which the action was taken by the Registrar. The Registrar was required to act swiftly and immediately as inaction on his part would have been detrimental to the interest of the public and the depositors. The circumstances warranted an immediate action without any delay. No doubt, initially, the Registrar had contemplated an enquiry under section 78 and section 88 of the Act, but the emergent situation and development compelled the Registrar to immediately dissolve the Board of Directors of six Co-operative Banks including the respondent No. 6 in the present petition. The circumstances warranted an immediate action without any delay. No doubt, initially, the Registrar had contemplated an enquiry under section 78 and section 88 of the Act, but the emergent situation and development compelled the Registrar to immediately dissolve the Board of Directors of six Co-operative Banks including the respondent No. 6 in the present petition. The Registrar has acted under the directions of the R.B.I. to pass an order under section 110-A of the Act. Even the Registrar had independent material in support of such action. Shri Sawant submitted that it is not that the Registrar has not applied his mind before passing the order. The account books of the respondent No. 6 bank were audited and reports were available with the Registrar. Shri Sawant has given the chronology of the events as under :- 7th May 2002 to 10th May 2002 : Scrutiny of the bank books was carried out by the auditors appointed by the Registrar : 13th May 2002 : The auditor submitted his report to the D.D.R. 14th May 2002 : The D.D.R. wrote to the R.B.I. and the Auditor visits the bank, respondent No. 6, and submits his separate report to the other authority, Divisional Joint Registrar on 15th May, 2002. 15th May 2002 : The Registrar writes to the R.B.I. on the basis of the said two reports submitted by the Auditor and the D.D.R. re spectively. According to Shri Sawant, the Registrar had taken the action after satisfying himself about the necessity and immediacy of the action under section 110-A of the Act. His decision was based on the tangible material and it was not in air as accused by Shri Naphade. The Registrar had good material before him to take action under section 110-A in consultation with the R.B.I. Shri Sawant has submitted that section 110-A excludes all other provisions and any pre-decisional hearing. Shri Sawant has heavily relied upon the unreported judgment of Justice Rebello, J., and also the reported judgment of the Division Bench of this Court in 1992 Mh.L.J. 1442 (Mahendra Husanji Gadkari v. State of Maharashtra others and Jayant Vasant Wairangale and others)5. According to Shri Sawant, the judgment of the learned Single Judge is binding on this Court. Shri Sawant repeated that there was sufficient material on record to take action against the Co-operative Banks which were involved in this scam. According to Shri Sawant, the judgment of the learned Single Judge is binding on this Court. Shri Sawant repeated that there was sufficient material on record to take action against the Co-operative Banks which were involved in this scam. Shri Sawant, further submitted that these Co-operative Banks had violated the mandatory guidelines of the Reserve Bank while entering into the transactions of the nature they entered into with the broker. According to Shri Sawant, therefore, an immediate action in public interest was justified under section 110-A(iii) of the Act and therefore, this Court should not interfere with the order passed by the Registrar under its extra ordinary jurisdiction under Article 226 of the Constitution of India. 11. Shri Tulzapurkar, the learned Counsel for the Reserve Bank of India very strongly supported the action taken by the Registrar under the directions of the Reserve Bank. The learned Counsel submitted that the primacy of the Reserve Bank of India as the Bankers' Bank in the country is unquestionable. As the principal controller and custodian of the banking system in the country, it issues guidelines to all the constituents banks to regulate the financial system in the country. What action in these circumstances, is required to be taken and what guidelines were required to be prescribed was the sole discretion of the R.B.I. as the sole authority. It is the sole Judge in the matter and none can sit in appeal over such decision taken by the R.B.I. unless they are in breach of any legal provisions. Shri Tulzapurkar pointed out that all the banks were issued guidelines from time to time to manage their banking and financial affairs accordingly and no bank can be heard to say that they did not know those guidelines or that they were ignorant of the guidelines. The inspecting team of the R.B.I. had noted two serious breaches committed by the respondent No. 6 bank viz. (i) Panel of the brokers was not formed and no such resolution was passed by the Board of Directors, (ii) The respondent No. 6 bank was acting only through one broker i.e. Home Trade Ltd. The learned Counsel further pointed out that the R.B.I. has prohibited any direct payment to the broker. (i) Panel of the brokers was not formed and no such resolution was passed by the Board of Directors, (ii) The respondent No. 6 bank was acting only through one broker i.e. Home Trade Ltd. The learned Counsel further pointed out that the R.B.I. has prohibited any direct payment to the broker. The purchase and sale transaction of the Government securities must take place directly between the seller and the purchaser and the payment has to be made to the seller and never to the broker who is entitled only to get his commission and not the full purchase price of the Government securities. Shri Tulzapurkar further pointed out that all the past six transactions were only paper entries and there were no real physical delivery of the securities. In those transactions, the respondent No. 6, bank was only financing the Home Trade from time to time and had shown a profit from those transactions. No transfer of the Government securities had taken place and no such transactions were ever registered with the R.B.I. in its public debt office. The respondent No. 6 bank had also not formulated its investment policy and it also violated the 5% limit of investment through one broker. Shri Tulzapurkar further made his point good by submitting that the R.B.I. had acted on the basis of its inspection report which was carried on between 7th May to 10th May, 2002. There was an independent inspection by the R.B.I. and the aforesaid material irregularities were noted by the inspecting team. Shri Tulzapurkar further attacked the behaviour of the respondent No. 6 bank on the basis that it had not formulated any investment policy and that the broker, Home Trade, was not a registered broker with the National Stock Exchange and the Mumbai Stock Exchange, though he might have been registered with the Pune stock exchange. It was the mandatory requirement for the bank to act through only a broker registered with the N.S.E. Shri Tulzapurkar pointed out that a detailed inspection report dated 9th January, 2001 was sent to the bank but there was no compliance by it. Shri Tulzapurkar further submitted that even the last entry of payment of Rs. 5.41 crores to the Home Trade was only a vague or fraudulent transaction in the sense that the broker was financed to that extent without any interest and without any security. Shri Tulzapurkar further submitted that even the last entry of payment of Rs. 5.41 crores to the Home Trade was only a vague or fraudulent transaction in the sense that the broker was financed to that extent without any interest and without any security. Shri Tulzapurkar took a very serious view of the matter that the Co-operative Banks have in the present scam parted with not less than Rs. 350 crores as loan to the Home Trade as a broker without receipt of physical delivery of the Government securities. The said Co-operative Banks have indeed financed the Home Trade under the garb of sale and purchase of the Government securities and without any proper documentation. The learned Counsel pointed out that many depositors worth Rs. 10 to 12 crores have withdrawn their deposits from the respondent No. 6 bank. There has been chaos in the management. The bank has violated cash requirements guidelines. Shri Tulzapurkar criticises the complaint lodged by the bank and the petitioners on 30th April, 2002 only as an eye wash. The learned Counsel pointed out that the bank had made payment of Rs. 5.41 crores to the Home Trade on 15th February, 2002. The waiting period to get the physical delivery of the securities was prescribed as 14 days. According to the learned Counsel any party would become totally restless after the expiry of 14 days and would knock the doors of the brokers who had received a huge amount of Rs. 5.41 crores. The present bank had waited till 30th April, 2002 and that too only when there was public outcry, in the newspapers against the said broker. Shri Tulzapurkar submitted that the petitioners as directors were hand-in-glove with the said broker and that the entire episode was a murky affair for which a drastic surgery alone was called for and which the R.B.I. performed through the Registrar of co-operative societies. Shri Tulzapurkar further pointed out that the directive of the R.B.I. was that such transaction should take place only through brokers who are registered with the N.S.E. while the Home Trade was registered with the Pune Stock Exchange and not even with the Mumbai Stock Exchange. Shri Tulzapurkar criticises casting aspersion on the conduct of the petitioners who have not approached any Mumbai based broker, but have chosen to approach a Pune based broker registered with the Pune Stock exchange. Shri Tulzapurkar criticises casting aspersion on the conduct of the petitioners who have not approached any Mumbai based broker, but have chosen to approach a Pune based broker registered with the Pune Stock exchange. According to the learned Counsel, we have to only read in between the lines of the transactions. The petitioners and the Home Trade broker certainly had an understanding which could not be said to be in good faith and bona fide sale and purchase of Government securities. Shri Tulzapurkar further stressed the point that the transfer of the Government securities could be done only under section 3 of the Public Debt Act, 1944. The learned Counsel further submitted that merely because the R.B.I. inspection note did not mention or point out all the irregularities, it will not validate or regularise otherwise an illegal and irregular transaction which had taken place in violation of the mandatory guidelines issued by the R.B.I. from time to time. Shri Tulzapurkar stoutly defended the action of the R.B.I. and direction of the Registrar. He submitted that the decision of the R.B.I. was based on independent material and on independent application of mind and that its decision was not based on only the letter written by the Registrar. According to him, the R.B.I. was an expert body and was the sole judge to decide such matters and the courts cannot sit in appeal over the decision of the R.B.I., particularly when it had collected germane material for action. Whether the material was sufficient or not cannot be gone into by the courts, says the learned Counsel. The Reserve Bank was established to protect the public interest and had lived up to the times of crisis in such matters. According to Shri Tulzapurkar, it was correct, proper, lawful and justified decision to direct the Registrar to take action under section 110-A(iii) of the Maharashtra Co-operative Societies Act and this Court should not interfere under the extra ordinary jurisdiction of Article 226 of the Constitution of India. The decision of the R.B.I. was to protect the interest of public and the depositors worth crores of rupees who had invested in the different Co-operative Banks including the respondent No. 6 bank. Shri Tulzapurkar submitted that the decision of the Supreme Court relied upon by Shri Naphade viz., Mohinder Singh Gill and Swadeshi Cotton Mill had no application in the present case. Shri Tulzapurkar submitted that the decision of the Supreme Court relied upon by Shri Naphade viz., Mohinder Singh Gill and Swadeshi Cotton Mill had no application in the present case. The judgment of the Supreme Court in the case of Swadeshi Mill was under different enactment and was interpreting section 18-AA of the Industries Development (Regulation) Act. The provisions of section 18-AA of the said Act cannot be compared with section 110-A of the Maharashtra Co-operative Societies Act. The latter Act is in a specialised field and it has different context. Shri Tulzapurkar relied upon the judgment of the Supreme Court reported in A.I.R. 1962 S.C. 1371 (Joseph Kuruvilla Vellukunnel v Reserve Bank of India others)6, under the Banking Regulation Act and, therefore, in fact the ratio of that judgment would squarely apply to the present case. According to Shri Tulzapurkar the limited action of the R.B.I. was to avoid further drastic action of liquidation of the respondent No. 6 bank. It has merely ordered dissolution for a limited period up to the tenure and that the tenure of the present Board of Directors is very short and hereafter elections would be held. This order would continue only till the elections are held and new Board of Directors would be elected. Shri Tulzapurkar further submitted that Swadeshi Cotton case is not a binding authority for deciding a case under section 110-A of the Maharashtra Co-operative Societies Act. Even in the said decision it is clear from para 42 that in certain cases hearing can be excluded before decision. Since Shri Naphade and Shri Tulzapurkar have referred to the necessity of pre-decisional hearing in certain cases, it would be appropriate to reproduce para 42 of the Swadeshi Cotton Mills judgment. "In short, the general principle as distinguished from an absolute rule of uniform application seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage. Conversely, if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature and, no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need for utmost promptitude. In short, this rule of fairplay "must not be jettisoned same in very exceptional circumstances where compulsive necessity so demands". The Court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, to recall the words of Bhagwati, J., the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise." Shri Tulzapurkar has further relied upon the judgement of the Division Bench of the Assam High Court on the point of exclusion of audi alteram partem rule reported in (A.I.R. 1983 Guwahatti 55)7. Para 2 of the judgment would be relevant for our purpose, which reads as under : 2. Natural justice is undoubtedly a brooding omnipresence because of the strides made by the courts in India during the last two decades but the courts have always struck a balance between the expansion of the rule and the empirical socio-economic needs, public interest and the authority of the legislature. The never ending process of evolution has taken note of various checks and balances. The never ending process of evolution has taken note of various checks and balances. In administrative law a prima facie right to prior notice and opportunity to be heard may be held to be excluded by implication if any of the following facts is present, singly or in combination with another: (1) Where the functions of the competent authority are held to be non-judicial; (2) Where the authority in which is vested the power to decide is entrusted with a wide discretion; (3) Where the action taken constitutes denial of a privilege as distinct from interference with a right; (4) Where to impose an obligation to disclose relevant information to the party affected would be prejudicial to the public interest; (5) Where an obligation to give notice and opportunity to be heard would obstruct the taking of prompt action, especially action of a preventive or remedical nature; (6) Where for any other reason it is impracticable to give prior notice or opportunity to be heard; (7) Where appropriate substitutes for prior notice and opportunity to be heard are valuable; (8) Where legislation expressly requires notice and hearing for certain purposes but imposes no procedural requirement for the purposes; (9) Where the matter in issue or the monetary value of the interest at stake is too trivial to justify an implication that notice or opportunity to be heard be afforded before action is taken, and (10) Where the power exercised is disciplinary (vide Judicial Review of Administrative Action (4th Edn.) S.A. de Smith pp. 183-194). These are only illustrative cases. In Wade's Administrative Law. 4th Edition this aspect has been dealt with at page 451 onwards. Lord Denning M.R. in (R.V. Gaming Board for Great Britain, Ex. P. Benaim Khaida)8, 1970(2) Q.B. 417 (430) observed; "It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent. 4th Edition this aspect has been dealt with at page 451 onwards. Lord Denning M.R. in (R.V. Gaming Board for Great Britain, Ex. P. Benaim Khaida)8, 1970(2) Q.B. 417 (430) observed; "It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent. Everything depends on the subject matter." The application of natural justice rests on statutory implication and, therefore, it must always be in conformity with the scheme of the Act and the subject matter of the case, urgent actions are needed to be taken to safeguard public health or safety, viz., to seize and destroy obnoxious fish or meat exposed for sale or to order the removal to hospital of a person suffering from infectious disease, in such cases the normal presumption must be that action may be taken without hearing. There are various urgent administrative matters where for obvious reasons no prior hearing can be granted before taking action. There may be cases where giving of hearing may frustrate the very object of the action. In (Pearlberg v. Varty)9, 1972(1) W.L.R. 534 (540) Lord Hailsham L.C. said in the House of Lords- "The doctrine of natural justice has come in for increasing consideration in recent years and the courts generally, and Your Lordships House in particular, have, I think rightly, advanced its frontiers considerably, But at the same time they have taken an increasingly sophisticated view of what it requires in individual cases." To preserve flexibility the courts in India have frequently observed that the requirements of natural justice depend on the circumstances of each case, the nature of the inquiry, the statutory provisions under which the authority is acting, the subject matter to be dealt with. The gamut of statutory and factual context must be considered before applying the rule." Shri Tulzapurkar sought support from the said judgement for his submission that there was no express provision for pre-decisional hearing in section 110-A and, therefore, if there is any deadlock in the general interest of the public it should be tilted in favour of public interest. Since there was no provision of hearing under section 110-A of the Maharashtra Co-operative Societies Act, it should be inferred that audi alteram partem rule was excluded by necessary implication. 12. Since there was no provision of hearing under section 110-A of the Maharashtra Co-operative Societies Act, it should be inferred that audi alteram partem rule was excluded by necessary implication. 12. Shri Tulzapurkar laid great emphasis on the point that the Reserve Bank circular or guidelines had statutory force and that all the banks were required to follow them. Shri Tulzapurkar has relied upon a judgment of the Supreme Court reported in (Canara Bank v. P.R.N. Upadhaya)10, 1999 Bank.J. (S.C.)689 : 1998(6) S.C.C. 526 . In para 11, the Supreme Court has observed as under :- "That the circulars issued by the Reserve Bank of India under section 21 or 35 of the Banking Regulation Act, 1949 are statutory in nature and are required to be complied with by the banks is not in any doubt." 13. To emphasise the peculiar and extra ordinary role of the Reserve Bank of India Shri Tulzapurkar has cited another judgment reported in A.I.R. 1962 S.C. 1371. The Supreme Court has observed that the banking companies are in an entirely different class as they deal with money of the depositors who have no security except the solvency of the banking company and its sound dealings with their money. Ex facie, the banking companies must be regulated some what differently and the interests of the depositors must be paramount and the winding up of such companies depend upon other considerations chief among which is the desire to pay off the creditors as far as possible in full or at least equitably. The interest of the depositors is considered to be paramount and the Reserve Bank is placed on the highest pedestal of the banking industry. The Supreme Court has in para 45 observed as under:- "But the decision has to be taken without delay, and the Reserve Bank already knows intimately the affairs of banking companies and has had access to their books and accounts. If the Court were called upon to take immediate action, it would almost always be guided by 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 the Reserve Bank is challenged as unreasonable. In our opinion, such a challenge has no force." 14. 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 the Reserve Bank is challenged as unreasonable. In our opinion, such a challenge has no force." 14. Shri Tulzapurkar finally summed up that the decision of the Reserve Bank cannot be assailed as arbitrary or unreasonable. It was an independent decision based on cogent material available with the Reserve Bank. It has acted strictly within the four corners of law. It has scrupulously decided the matter on the basis of the tangible and cogent material to come to a conclusion that the respondent No. 6 and the petitioners had violated the guidelines issued by the R.B.I. from time to time and such guidelines had statutory force. 15. Shri Naphade in reply to the submissions on behalf of the State Government, Registrar and Reserve Bank of India has pointed out that in fact there has been no order passed by the Reserve Bank against the respondent No. 6, bank, stating reasons for direction to the Registrar to take action under section 110-A(iii) of the Maharashtra Co-operative Societies Act. Shri Naphade has pointed out that there has been a casual approach on the part of the authorities of the R.B.I. He pointed out from the affidavit that the affiant had sworn on oath that he did not know whether the Home Trade broker was registered with the Pune Stock Exchange. This affidavit is filed in the present petition much after the report dated 10th May, 2002 wherein it is clearly stated that the Home Trade was a member of Pune Stock Exchange. According to Shri Naphade, it was not necessary for the respondent No. 6, bank to have transacted through a broker who was registered with the National Stock Exchange or Bombay Stock Exchange. Under the law such a broker is required to be registered with the SEBI and the Home Trade Ltd. was registered as a broker with SEBI. Shri Naphade stressed the point that the respondent No. 6, bank, was entitled to transact through any broker who is registered with the SEBI and it was not necessary that such a broker should be registered with the NSE, for the purpose of transactions of Government securities. Shri Naphade stressed the point that the respondent No. 6, bank, was entitled to transact through any broker who is registered with the SEBI and it was not necessary that such a broker should be registered with the NSE, for the purpose of transactions of Government securities. According to the learned Counsel, the bank had right to purchase securities from any stock exchange and that neither the Banking Regulation Act under section 24 nor the Reserve Bank of India under section 42 give any power or authority to the Reserve Bank of India to issue directions to purchase the Government securities only through a broker who is registered with the NSE. The learned Counsel pointed out that the law of the land permitted purchase of the securities from any stock exchange and the Reserve Bank had no jurisdiction or power to issue such directions which would run counter to the law of land. In the submissions of Shri Naphade, the report dated 10th May, 2002 cannot be said to be material to take action under section 110-A of the Act. The order passed on 28th May, 2002 passed by the Reserve Bank does not disclose any material to enable the Registrar to take the drastic action under section 110-A of the Act. Shri Naphade further submitted that the grounds set out in para 15 of the affidavit were disclosed for the first time and the affidavit cannot be said to be a material on record for taking the action under section 110-A of the Act. Shri Naphade pointed out that there is nothing on record to show or identify the authority who has passed the order and has exercised the powers under section 110-A of the Act. He has pointed out that the report dated 10th May, 2002 was prepared by someone else while the affidavit is filed by another officer and directions are given to the Registrar by a third officer. The officer who is purported to have exercised the power under section 110-A of the Act has not filed an affidavit to support the action taken by the R.B.I. Shri Naphade has candidly accepted that his clients have committed a small breach of not complying with the direction of the Reserve Bank in respect of 5% purchase of the securities from one broker. Shri Naphade, however, submitted that though he was not pleading ignorance, his clients were indeed not aware of such restrictions and it was only once that the mistake was committed. There was no persistence in that regard. Besides, in the inspection of the R.B.I. this mistake was also not pointed out and the bank was not guided by the Reserve Bank Inspector. Had he pointed out, the bank would have definitely abided by such advice. Shri Naphade, further submitted that the second breach which was committed by the bank was that the purchases were made through one broker i.e. Home Trade. Shri Naphade explained that many of the Co-operative Banks were going to the said broker and he became a much credit worthy broker in the field of the Co-operative Banks and, therefore, the petitioners bona fide believed that transactions could go through swiftly and safely through him. Shri Naphade, however, submitted that this could not be a ground for taking such drastic action under section 110-A of the Act. There is no live nexus between the action and the material, says Shri Naphade. He has pointed out that the inspection report dated 30th September, 2001 was replied and was complied with after the letter dated 9th January, 2002 from the R.B.I.. The bank had submitted its compliance report on 4th March, 2002. The R.B.I. inspection report dated 10th May, 2002 did not state any serious breach to indicate or to warrant the drastic action taken under section 110-A to dissolve the Board of Directors. Shri Naphade has pointed out that the action of dissolution of the Board of Directors in the circumstances is totally disproportionate and they could have been subjected to any other minor or small punishment if at all they were guilty of the aforesaid two small breaches, submits the learned Counsel. 16. Shri Naphade has filed an affidavit stating the newspaper report that at the intervention of the Union Minister Shri Kanshiram Rana as also other political leaders from Gujarat and in view of the assurances given by them, the Reserve Bank has agreed to withdraw its decision and instructions to supersede the Board of Directors of each of the eight Co-operative Banks against whom similar actions of supersession of their respective Boards was similarly taken. Though the respondents were served with this affidavit, there is no reply. Though the respondents were served with this affidavit, there is no reply. The learned Advocate for the R.B.I. admits under instructions from the officer present that there was a meeting held as indicated in the report but no decision was taken. I have set out the whole case as submitted by the learned Counsel on both the sides in detail in order not to miss any point. I have considered the submissions on both the sides. I record my findings as follows :-- 17. The impugned order is passed under section 110-A of the Maharashtra Co-operative Societies Act. I have set out the whole case as submitted by the learned Counsel on both the sides in detail in order not to miss any point. I have considered the submissions on both the sides. I record my findings as follows :-- 17. The impugned order is passed under section 110-A of the Maharashtra Co-operative Societies Act. The said section reads as under :- "Order for winding up, reconstruction, supersession of committee, etc., of insured Co-operative Bank, not to be made without sanction or requisition of Reserve Bank of India." Notwithstanding anything contained in this Act, in the case of an insured Co-operative Bank- (i) an order for the winding up, or an order sanctioning a scheme of compromise or arrangement or of amalgamation, or reconstruction (including division or re-organisation), of the bank may be made only with the previous sanction in writing of the Reserve Bank of India; (ii) an order for the winding up of the bank shall 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; (iii) If so required by the Reserve Bank of India in the public interest or for preventing the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of the bank, an order shall be made (by the Registrar for the supersession (removal) of the committee and the appointment of an administrator therefor for such period or periods, not exceeding five years in the aggregate, as may from time to time be specified by the Reserve Bank of India, and the Administrator so appointed shall, after the expiry of his term of office, continue in office until the day immediately preceding the date of the first meeting of the new committee; (iv) an order for the winding up of the bank or an order sanctioning a scheme of compromise or arrangement or of amalgamation or reconstruction (including division or re-organisation) or an order for the supersession (removal) of the committee and the appointment of an administrator therefor made with the previous sanction in writing or on the requisition of the Reserve Bank of India shall not be liable to be called in question in any manner; and - (v) the liquidator or the insured Co-operative Bank or the transferee bank, as the case may be, shall be under an obligation to repay the Deposit Insurance Corporation established under the Deposit Insurance Corporation Act, 1961, in the circumstances, to the extent and in the manner referred to in section 21 of that Act. (Explanation- In this section,-- (a) the expression "an insured Co-operative Bank" means a society which is an insured bank under the provisions of the Deposit Insurance Corporation Act, 1961; (b) the expression "the transferee bank" has the same meaning as assigned to it in that Act;" Under Clause (iii) of the section, the Reserve Bank claiming to act in the public interest and for preventing the affairs of the bank being conducted in a manner detrimental to the interest of the depositors and for securing the proper management of the bank, has directed the Registrar to supersede the Board of Directors of the banks and under the impugned order the Registrar has dissolved and superseded or removed the Board of Directors of the respondent No. 6 bank. According to Shri Naphade, both the authorities have acted very hastily and in contravention of the principles of natural justice. Shri Naphade has submitted that before taking such a drastic action a pre-decisional hearing ought to have been given. No doubt, it is a fact that there is no provision in the section either for pre-decisional hearing or for post decisional review of the order passed under these provisions. Shri Naphade has made a herculian effort to convince me of the arbitrary and unreasonable action taken by the Registrar under the directions of the Reserve Bank, and I am convinced, to some extent, that before taking such a drastic action to remove the elected Board of Directors abruptly, a prior notice and hearing would have been ideal, I am also convinced that there was no immidiacy to over-turn the elected body by a stroke of pen within a few minutes, as the Registrar had already issued a show cause notice under section 78 and also under section 88 of the Act against the bank and the Directors, calling upon them to explain certain things which were found to be objectionable by the Registrar, who had fixed the hearing on 17th June, 2002. It is rather strange that before the said date of hearing, the impugned action has been hurriedly taken. It is, therefore, clear that there was no death immediacy or urgency to dissolve the Board of Directors without hearing them on 17th June, 2002, when notice to that effect was given on 23rd May, 2002 under section 88 and on 24th May, 2002 under section 78(i) of the Act. It is, therefore, clear that there was no death immediacy or urgency to dissolve the Board of Directors without hearing them on 17th June, 2002, when notice to that effect was given on 23rd May, 2002 under section 88 and on 24th May, 2002 under section 78(i) of the Act. Unfortunately, for the learned Counsel, however, section 110-A of the Act has received interpretation at the hands of a Division Bench of this Court and also at the hands of a learned Single Judge of this Court (Rebello, J.). I, therefore, cannot take any different view in this matter. The Division Bench (V.A. Mohta and V.V. Chavan, JJ.) in the case of Mahendra Husanji Gadkari v. State of Maharashtra others and Jayant Vasant Wairagale others (supra), reported in 1992 Mh.L.J. 1442 has observed in paras 5, 6, 7 and 10 as under :- "5. Following main consequences ensue as a result of the above provision :- (A) The Registrar without written sanction of the R.B.I. cannot on any ground pass an order for winding up or for sanctioning a scheme of compromise or arrangement or of amalgamation or of reconstruction of the bank; (B) The R.B.I.'s directions for winding up of the bank in the circumstances referred to in section 13-D of the D.I.C. Act are binding upon the Registrar; (C) The R.B.I.'s directive to supersede the committee and to make an appointment of an administrator (a) in public interest or (b) for preventing the affairs of the bank being conducted detrimental to the interest of the depositors or (c) for securing the proper management of the bank, is binding upon the Registrar. 6. The petitioners want us to read in section 110-A an implied embargo even on the power of the Registrar under section 78 of M.C.S. Act to remove the Committee even in the situations not mentioned in section 110-A. We see no justification to do so, for variety of reasons. 7. In the first place, the plain language of section 110-A, does not warrant that conclusion. 7. In the first place, the plain language of section 110-A, does not warrant that conclusion. Had that been the legislative intention, simplest thing to do was to add the word "removal" in sub-clause (i) of section 110-A. The absence of the said word goes a long way to infer that entire jurisdiction of the Registrar in the matter of removal of the committee was not intended to be taken away and only limited embargo (the extent of which is specified) was intended to be put. In this context, section 102 of the M.C.S. Act may be noticed. It provides for Registrar's specific power of winding up. Considering the scheme of the D.I.C. Act in general and sections 15 and 16 of the said Act in particular, Registrar's powers in the matter of winding of has been hedged and ultimate authority in the matter is bestowed upon the R.B.I. This is fortified also from the provisions of sub-section (ii) under which even the R.B.I. can take initiative in the matter. There is no justification whatsoever for placing the order for winding up of the bank and order of removal of committee at par when the legislature has not chosen to do so. 10. There is nothing in the object from which conclusion contrary to the plain language employed in section 110-A can be drawn. True, there is control of the R.B.I. even in the matter of removal of the committee, but it is to the extent specified. Removal of the committee can be made under section 78 of the M.C.S. Act on several reasons and some of them may not have bearing on the interest of the depositors. It is pertinent to notice that when the R.B.I. is not fully empowered to issue binding directives to remove the Committee. Those directives have to be only under conditions specified in section 110-A." In the present case, the Reserve Bank has issued the directions for removal of the Board of Directors to the Registrar and the Registrar has accordingly acted. The Reserve Bank has acted in public interest and in the interest of the depositors as is clear from the affidavit in reply filed by the Reserve Bank. It cannot be said that the Reserve Bank has no tangible or objective material to act under the said provisions. The Reserve Bank has acted in public interest and in the interest of the depositors as is clear from the affidavit in reply filed by the Reserve Bank. It cannot be said that the Reserve Bank has no tangible or objective material to act under the said provisions. Whether the material available with the Reserve Bank was sufficient or not cannot be gone into by this Court under Article 226 of the Constitution of India. It is, however, certain that this is not the case of absence of any material. The affidavit discloses the material on the basis of which the action was taken. The Reserve Bank had statutory inspection report dated 9th January, 2001 which was sent to the respondent No. 6 bank but there appears no compliance with the requirements or deficiencies pointed out in the said report. In addition to the said inspection report, the Reserve Bank had also carried out inspection during the period 7th May to 10th May, 2002 and this was an independent inspection which disclosed that the respondent No. 6 had not maintained a regular audit procedure in respect of the investments and directives in respect of the investment and the brokers were breached. From the inspection reports, the following material was disclosed. From the inspection reports, the following material was disclosed. (a) Panel of brokers was not formed; (b) Respondent No. 6 bank had acted only through one broker i.e. Home Trade Limited; (c) The respondent No. 6 bank had handed over the payment directly to the broker which is strictly prohibited; (d) The Government securities are to be sold and purchased through the permissible brokers only and no direct payment of the securities is to be made to the brokers but the respondent No. 6 had done so in all the transactions; (e) Respondent No. 6 had made full payment of the Government securities to the broker without insisting for delivery of the Government securities; (f) According to the report all the seven past transactions were only paper transactions and no securities were delivered and no transfer of the securities had taken place and they were not registered with the Reserve Bank in its public debt office; (g) No investment policy was formulated and 5% limit per broker was violated and all the investment was done through one broker i.e. Home Trade; (h) The Home Trade was not registered with the National Stock Exchange and was also not registered with the Bombay Stock Exchange but was registered only with Pune Stock Exchange; 18. Factually, there is hardly any dispute that the aforesaid breaches were committed by the respondent No. 6 on the basis of which the Reserve Bank has initiated the action. It, therefore, cannot be said that the Reserve Bank has acted without any material. The respondent No. 6 bank has not followed the Reserve Bank's mandatory directions. In my opinion, the Reserve Bank being the expert body and being the sole judge had properly acted in the matter and there was sufficient germane material for such action to protect the public interest and the interest of the depositors. Merely because, there is some clerical discrepancy pointed out by the learned Counsel, it cannot be said that the action of the Reserve Bank was callous and did not disclose any material. The affidavit filed by the Reserve Bank makes it very clear that before initiating the action the Reserve Bank had sufficient germane material for the action under section 110-A of the Maharashtra Co-operative Societies Act. The very fact that the respondent No. 6 had parted with a huge sum of Rs. The affidavit filed by the Reserve Bank makes it very clear that before initiating the action the Reserve Bank had sufficient germane material for the action under section 110-A of the Maharashtra Co-operative Societies Act. The very fact that the respondent No. 6 had parted with a huge sum of Rs. 5.41 crores without any security is detrimental to the interest of the depositors. No prudent and reasonable person would ever dare to part with such a huge amount on his own without any security and without insisting on the physical delivery of the Government securities. How the respondent Bank could risk such a big amount which was entrusted to it by the depositors public is the question which stares straight in my face. It would, therefore, be clear that the Reserve Bank rightly suspected that all these transactions were loan transactions between the respondent No. 6 bank and the broker who was financed by the respondent No. 6 bank without getting any return by way of interest on such a huge amount. I agree with the submissions of Shri Tulzapurkar that crores of rupees were handed over to the said broker without proper documentation. I am not able to agree with the submissions of Shri Naphade that though there were admitted breaches of the Reserve Bank directives, all other things were proper with the petitioners. It is also not possible for me to agree with the charge of callousness levelled against the Reserve Bank authorities on the basis of some discripancies and human errors here or there. In these circumstances, the Registrar cannot be blamed as he was bound to act under the directions of the Reserve Bank under section 110-A of the Maharashtra Co-operative Societies Act. The impugned order, therefore, cannot be termed as illegal or ultra vires of the Act. Both the authorities were, therefore, perfectly within the limits of their powers and jurisdiction in passing the impugned order. 19. Principally Shri Naphade is right when he submits that the ratio in the case of Swadeshi Mills (supra) that before any action is taken the principles of natural justice should be complied with and the minimal hearing is expected to be given by the authorities before taking any administrative action having civil consequences. 19. Principally Shri Naphade is right when he submits that the ratio in the case of Swadeshi Mills (supra) that before any action is taken the principles of natural justice should be complied with and the minimal hearing is expected to be given by the authorities before taking any administrative action having civil consequences. He is also theoritically right when he submits that if no post decision review is provided for by the law in that case, pre-decisional hearing is implied. These principles can be successfully applied when it can be validly alleged that the authority had formed an opinion to act without any objective material. In the present case, it cannot be said that the authorities had no material at all and that it was the case of total absence of material. On the contrary, the inspection reports were made available to the respondent bank and it is pertinent to note that though inspection report was dated 9th January, 2002, there was no compliance by the bank. The petitioners as directors of the respondent No. 6 bank cannot be heard to say that they were not knowing any directives issued by the Reserve Bank and that the Reserve Bank Inspectors ought to have specifically pointed out and advised them to follow the directives. A bank is not a grocery shop opened by the petitioners. The petitioners were dealing with the public and public money. Every bank is a trustee or custodian of public money and the banker's bank Reserve Bank is the custodian of the public interest and the depositors. The Reserve Bank is the watch dog of the banks. The charge of callousness or mallice or mala fides cannot be lightly made against the Reserve Bank. The very fact that the respondent No. 6 bank had put all its eggs in one basket of Home Trade by handing over crores of rupees to it without getting the physical delivery of the Government securities, shows that the fault lies with the respondent No. 6 bank and not with the Reserve Bank. The Reserve Bank has rightly put a restriction that only 5% of the investment transactions should be done through one broker following the well known adage that one should not keep all the eggs in one basket. This should be enough to infer deliberate defiance of the Reserve Bank directions. The Reserve Bank has rightly put a restriction that only 5% of the investment transactions should be done through one broker following the well known adage that one should not keep all the eggs in one basket. This should be enough to infer deliberate defiance of the Reserve Bank directions. If the petitioners were to strictly adhere with the said directives they would have surely saved their huge amount of Rs. 5.41 crores which has today vanished in the air and has gone beyond the hope of recovery. The petitioners were mandatorily prohibited from directly dealing with the brokers. The petitioners were mandatorily directed to have direct transactions with the seller of the securities and to keep the role of the broker only as a broker to bring the two parties together and to receive brokerage or commission on completion of deal and not to hand over the entire amount of the securities to the broker blindly. The petitioners have recklessly and carelessly handed over the huge or large amounts to one and the same broker. It, therefore, cannot be said that there was no live nexus between the action and the material under section 110-A of the Maharashtra Co-operative Societies Act. There need not be such live nexus as suggested by Shri Naphade. In such matters we must remember that the past events are to be cumulatively considered as nexus otherwise the charge of hasty action would be hurled. The directives of the bank are the result of the prudent advice from their experience in the banking system. Every piece of such advice must be followed by those who are responsible to safeguard the public money of depositors. Every such directives must be followed scrupulously by every banker. Technically and strictly speaking, Shri Naphade might be right in his submissions that the respondent No. 6 was free to transact through any broker registered with the S.E.B.I. and that he need not be registered with the National Stock Exchange or Bombay Stock Exchange and that it was enough that the said broker had registered and recognised by the Pune Stock Exchange. All said and done, the final outcome of not following the Reserve Bank directives is loss of Rs. 5.41 crores for the bank and in turn to the depositors. 20. All said and done, the final outcome of not following the Reserve Bank directives is loss of Rs. 5.41 crores for the bank and in turn to the depositors. 20. Shri R.M. Sawant, the learned Government Pleader has rightly placed reliance on the unreported judgment of a Single Judge of this Court (Rebello, J.) in (Writ Petition No. 892 of 2002)11. The learned Single Judge was dealing with the same point and the same provisions of law. There is absolutely no reason for me to disagree with the views expressed by the learned Judge. I am in respectful agreement with the judgment of the learned Judge. In para 4 the learned Judge has posed the very same point and has answered the same. He has categorically concluded that the Registrar was bound to act in accordance with the Reserve Bank directions and the right of hearing is excluded in section 110-A. The learned Judge has given his reasoning in paras 4, 5 and 7. Para 6 refers to the case law cited before him. The said paragraphs are reproduced hereinbelow for ready reference :- 4. The question is to whether under section 110-A of the Maharashtra Co-operative Societies Act, 1960, respondent No. 5 was duty bound to give a show cause notice 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 110-A of the Maharashtra Co-operative Societies Act, 1960, came up for consideration before a Division Bench of this Court in the case of Mahendra Husanji v. State of Maharashtra, 1992 Mh.L.J. 1442. The Division Bench of this Court, after considering the provisions of sub-section (3) of section 110-A of the Maharashtra Co-operative Societies Act, has held that the Reserve Bank of India can issue directions only when the situation contemplated by section 110-A 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. 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 is no question of issuing the 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 v. State of Maharashtra)12, 1992 C.T.J. 729, another Division Bench, considering the material on record, had directed the appointment of an administrator under section 110-A of the Maharashtra Co-operative Societies Act. That also would indicate that there is no requirement under section 110 for hearing. 5. The object of introducing section 110-A of the Maharashtra Co-operative Societies Act is in public interest. There are a large number of small depositors who deposit their monies in such banks. Public interest, therefore, like the Reserve Bank of India which oversees the functioning of such banks, are empowered where public interest requires to issue direction to the Registrar. The issue of show cause notice, or hearing, or opportunity to show cause will arise if the direction issued by the Reserve Bank of India is directory and not mandatory. Once the Reserve Bank of India issues a direction to the Registrar, it is binding on the Registrar. The language used is : "if so desired by the Reserve Bank of India". Once, therefore, the Reserve Bank of India issues a direction desiring that the Board of Directors should be superseded, there is no discretion left in the Registrar, but to issue the notice. The right to issue show cause, or hearing, or fair opportunity from the Registrar, before issuing of the order is excluded. It was contended on behalf of the petitioners that they had no knowledge whatsoever about the material based on which the said direction was given. That is belied by the letter dated 4th February, 2002, written on behalf of the bank to the 3rd respondent-Reserve Bank of India. It was contended on behalf of the petitioners that they had no knowledge whatsoever about the material based on which the said direction was given. That is belied by the letter dated 4th February, 2002, written on behalf of the bank to the 3rd respondent-Reserve Bank of India. One of the items set out there is:- "The present Board of Directors may either be dissolved or nominees of R.B.I. and/or State Government shall be appeared on the Board." In words, the petitioners were aware that the Reserve Bank of India, after inspection, was contemplating a drastic action in the matter. In my opinion, the powers conferred under section 110-A of the Maharashtra Co-operative Societies Act should not be hindered by reading into it the requirement of a show cause notice. The Reserve Bank of India is the apex statutory body overseeing the functioning of the financial institutions, including banks. Whether there is compliance by the Reserve Bank of India in issuing a report or not is irrelevant to section 110-A. Even otherwise, the Reserve Bank of India has submitted the report to respondent No. 7 for compliance. The order of respondent No. 5 discloses the reasons as to why action has been taken. From the excerpts from the report of the Reserve Bank of India, it cannot be said that these reasons are irrelevant or not germane. Even otherwise, as pointed out earlier, it was not open for respondent No. 5 to consider whether the reasons are germane. 7. It is by now a well-settled principle of law that an order, including an administrative order, which involves civil consequences, the requirement to show cause is necessary unless it is excluded. The Division Bench of this Court has held that respondent No. 5 was duty bound to comply with the directions issued by the Reserve Bank of India. The judgments cited are not on the interpretation of section 110-A of the Act and they would not directly have a bearing on the matter, even though they deal with the right of hearing and principles of fair play and justice." Shri R.M. Sawant has also referred to the case of Swadesi Mill (supra). The facts before the learned Judge were almost identical. In that case also statutory inspection was carried out by the Reserve Bank of India and the directions were issued on the basis of the inspection report. The facts before the learned Judge were almost identical. In that case also statutory inspection was carried out by the Reserve Bank of India and the directions were issued on the basis of the inspection report. The learned Judge has rightly held that such report cannot be said to be irrelevant or not garmane. There is no reason for me to take any different view and I entirely agree with the learned Judge who had followed the judgement of the Division Bench in the case of Mahendra Gadkari (supra). 21. The last attack on the impugned order by Shri Naphade was on the basis of proportionality of the action. The learned Counsel submitted that for one single erroneous transaction, the drastic action of causing death of Board of directors is totally disproportionate and smacks of indescent haste to silence the public outcry against the scam which broke out as a result of the failure on the part of the Home Trade Ltd. to make payment to several Co-operative Banks which had handed over to the said broker crores of rupees allegedly for purchase of Government securities. Shri Naphade puts it as failure of the system which allowed or which connived at for such events to happen and to finally outburst. According to the learned Counsel his clients are getting punished for the utter failure of the system including the R.B.I. which was expected to be as alert as a night watchman. According to Shri Naphade, the bank had transacted with the said broker successfully for six transactions in the past and that they had earned a profit of Rs. 1 crore in the transactions with the said broker. The learned Counsel has candidly accepted the fact that the directors had committed a mistake but for that the extreme and drastic punishment of their removal is not justified. Shri Naphade further pointed out that the bank or the directors were not persisting in their mistakes and that they had not repeatedly committed breaches of the directives of the Reserve Bank. He further pointed out that they had promptly lodged a complaint with the police when they learnt about the failure of the Home Trade to honour the cheques of other Co-operative Banks. He further pointed out that they had promptly lodged a complaint with the police when they learnt about the failure of the Home Trade to honour the cheques of other Co-operative Banks. The learned Counsel, therefore, submitted that the extreme penal action of removal of the directors was not at all justified and the R.B.I. could have taken some lesser or milder action. 22. There is some substance and merit in the submissions of Shri Naphade on the ground of proportionality of the action. There is no allegation that the respondent bank has been persistent in committing breaches of the Reserve Bank directives. There is nothing on record to show that the affairs of the bank were being conducted in a manner detrimental to the interest of the depositors. Section 110-A(iii) certainly contemplates a continuous misconduct on the part of the bank. The affairs must be shown to have been continuously conducted in a manner detrimental to the interest of depositors. Barring the fact that the respondent bank transacted through one and the same broker, there is no allegation of any other misconduct committed by the bank. It is also on record that even in the inspection reports, the inspector had not observed that the past six transactions through Home Trade Broker were irregular and that the respondent bank should correct its method. A simple warning or caution would have been sufficient. The Reserve Bank Inspector did not care or bother to even write one sentence in that direction. The respondent No. 6, bank therefore, was left under the impression that their transactions were approved by the inspector and that there was nothing wrong to continue to transact with the said broker. Even the Government auditor had audited the bank accounts but did not take any objection to the transactions with the Home Trade. In these circumstances, the management of the bank cannot be wholly blamed, if an impression was created that their actions were not blameworthy and, therefore, they continued and entertained into the last fatal transaction of Rs. 5.41 crores with the said broker. If the Government auditors and the Reserve Bank Inspector were to caution and to take objections in respect of the said transactions, the bank perhaps would have corrected itself. 5.41 crores with the said broker. If the Government auditors and the Reserve Bank Inspector were to caution and to take objections in respect of the said transactions, the bank perhaps would have corrected itself. In the impugned order of supersession of the Board of Directors and/or appointment of administrator, the period for which such appointment of the administrator is not specified. It is not clear from the impugned order for what period the supersession or the removal of the Board of Directors would continue. Considering all the circumstances, I am of the opinion that though the action of the Reserve Bank and the Registrar is legal it cannot be said to be a proportionate action in the given circumstances, which are peculiar in the facts of this case which I have discussed hereinabove. Mere removal of the Board of Directors or mere supersession and mere appointment of the administrator in the place of the Board of Directors would not protect the interest of the depositors. This act would certainly not bring back in the coffers of the bank the huge amount of Rs. 5.41 crores. The bank has already lost the said amount which obviously was of the depositors. 23. In order to safeguard the said amount it is necessary to take certain steps to secure the said amount and to bring the money back to the respondent No. 6 bank. According to me, the whole responsibility should be fixed on the directors of the bank including the petitioners, for their serious lapse in transacting through only one broker without formulating any investment policy. In my opinion, if the petitioners and the other directors of the Board of the bank are directed to make good the entire loss caused to the bank by bringing the amount of Rs. 5.41 crores the depositors would be secured to that extent, and it would be in the interest of complete justice to the public and the depositors as is contemplated under section 110-A of the Act. Mere removal of the Directors would not bring back the amount which is lost to the Home Trade by the petitioners. The petitioners and the other directors of the bank must be made to realise that they owe serious responsibility to the depositors and they must follow the bank regulations with of seriousness and they cannot feign ignorance of the Reserve Bank directives. The petitioners and the other directors of the bank must be made to realise that they owe serious responsibility to the depositors and they must follow the bank regulations with of seriousness and they cannot feign ignorance of the Reserve Bank directives. They cannot be heard to say that they are laymen and they are not expert in the banking industry. The bank has lost huge amount of Rs. 5.41 crores on account of their so called ignorance and carelessness and callousness which is apparent from the record of the case. I say so as I simply cannot imagine that anyone who has his senses would simply hand over a huge amount of Rs. 5.41 crores without getting the physical delivery of the Government securities in the return. It is a case of financing the broker for personal gains by jeopardising the bank money and the depositors interest. The bank directors have done so and, therefore, I call them careless and callous. They must be made to realise their responsibility to the public and the depositors. They cannot escape their responsibility by getting away on account of removal from the Board of Directors of the bank. 24. I, therefore, direct the petitioners and the other directors of the respondent No. 6 bank to jointly and severally or collectively bring back the entire amount of Rs. 5.41 crores within eight weeks from today. As and when they bring back the said amount, the impugned order shall stand revoked. In case, they fail to bring back the said amount, they should be disqualified permanently from contesting the elections for the Board of Directors not only of respondent No. 6 bank but of any other Co-operative Banks or financial institutions. If they fail to act accordingly in making good the loss sustained by the bank, the impugned order passed by the Registrar under section 110-A would stand confirmed. 25. To be precise, the writ petition would stand allowed if the petitioners would deposit the amount of Rs. 5.41 crores with the administrator of the respondent bank within eight weeks from today and the impugned order would stand revoked and the administrator shall stand discharged. And the writ petition shall stand dismissed without any further orders if the petitioners and the directors do not comply with this order. 5.41 crores with the administrator of the respondent bank within eight weeks from today and the impugned order would stand revoked and the administrator shall stand discharged. And the writ petition shall stand dismissed without any further orders if the petitioners and the directors do not comply with this order. The impugned order shall continue to be in force and in operation until the amount of Rs. 5.41 crores is deposited with the administrator of the respondent bank, the outer limit being eight weeks. Otherwise the impugned order shall remain in force and in operation in accordance with law. 26. The administrator shall continue to function till the Directors satisfy him that the amount of Rs. 5.41 crores is deposited by the petitioners and the other directors in the respondent No. 6 bank and, thereafter, shall hand over the working of the bank to the Board of Directors. 27. The Registrar is hereby directed to hold enquiry under section 78(i) and section 88 of the Co-operative Societies Act and complete the same as expeditiously as possible in accordance with the law. 28. The Reserve Bank is also hereby directed to note and point out the breaches and irregularities committed by the concerned banks which are subjected to its statutory inspection under section 35 of the Banking Regulations Act and not merely submit mechanically its report. The inspection report should be as if the affairs of the bank are being subjected to statutory audit by the Reserve Bank of India to warn and caution the Bank of its lapses or breaches noticed and render proper advice as the Parent Bank. 29. The writ petition is disposed of as above. No order as to costs. -----