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2015 DIGILAW 155 (CHH)

Aruna Dixit v. State Of Chhattisgarh

2015-05-15

PRASHANT KUMAR MISHRA

body2015
ORDER : Prashant Kumar Mishra, J. 1. Petitioner Ms. Aruna Dixit, Ex-chairman and shareholder of the Bilasa Mahila Nagrik Sahkari Bank Maryadit, Bilaspur (for short 'the Bilasa Bank') has assailed the legality and validity of the order dated 18.01.2011 passed by the Registrar Cooperative Societies, Chhattisgarh under Section 18(1) of the Chhattisgarh Cooperative Societies Act, 1960 (for short 'the Act, 1960') directing amalgamation of the Bilasa Bank with the respondent No. 4 i.e Laxmi Mahila Nagrik Sahkari Bank Maryadi, Raipur (for short 'the Laxmi Bank'). 2. Briefly stated, the facts of the matter, as projected from the material available on record, are that the Bilasa Bank was established and constituted in the year 1996 under the provisions of the Act, 1960. The said bank was conducting its business and affairs through its members and elected office bearers. On committing defaults and mismanagement, the Board of Directors of the Bilasa Bank was superseded on 13.09.2006. The said order of supersession was extended for another year vide order dated 12.09.2007, however there was no order of extension till 02.01.2010 when another order was passed directing continuance of the supersession and further increasing the same by one year from the said date. Another extension was granted on 30.12.2010 for a period till 12.09.2011. In the first order of supersession, one Shri D.R. Thakur, Assistant Registrar, Cooperative Societies, was appointed as the authorized officer, who continued even in the order dated 02.01.2010, however in the third order dated 30.12.2010, one Shri Nirmal Tirkey was appointed as the authorized officer. 3. The authorized officer convened the annual general meeting of the shareholders of the Bilasa Bank on 07.11.2009 and in the said meeting, a resolution was passed for amalgamation of the Bilasa Bank with the Laxmi Bank, despite objection raised by the shareholders of the Bilasa Bank including the present petitioner. Pursuant to the said resolution, the Registrar sent the proposal of amalgamation for approval by the Reserve Bank of India (for short 'the RBI')- The RBI vide its communication dated 21.05.2010 rejected the proposal on the ground that documents as envisaged in the RBI circular dated 02.02.2005 have not been submitted along with the proposal. The RBI returned the merger application and the documents to the Registrar with the said communication. The RBI returned the merger application and the documents to the Registrar with the said communication. Pursuant to this, a meeting of officers of the Bilasa Bank was convened on 15.06.2010 and the decision along with other documents were sent by the Laxmi Bank to the Registrar on 07.07.2010, who, in turn, resubmitted the proposal to the RBI and eventually the RBI issued statutory No Objection Certificate (for short 'the NOC') on 27.12.2010. After the said NOC, the Registrar, Cooperative Societies has passed the impugned order directing merger of the Bilasa Bank with the Laxmi Bank. 4. The petitioner, thereafter, preferred an appeal before the State Government under Section 77 of the Act, 1960 and the State Government vide order dated 19.07.2011 set aside the Registrar's order dated 18.01.2011. 5. Laxmi Bank preferred a petition, bearing W.P. (C) No. 4095 of 2011, before this Court to challenge the order passed by the State Government on 19.07.2011. The writ petition was allowed by this Court on the ground that in view of the provisions contained in Section 79 of the Act, 1960, the appeal before the State Government was not maintainable, however, this Court left it open for the petitioner and the Bilasa Bank to take recourse to such remedy as may be available to them under law to assail the legality and validity of the order dated 18.01.2011. The present petition has, thus, been filed exercising the liberty, to challenge the Registrar's order dated 18.01.2011. Rival contentions 6. It is putforth by Shri Mazumdar, learned counsel for the petitioner that : "On the date of meeting of the shareholders of the Bilasa Bank convened on 07.11.2009, there was no order operative in favour of the authorized officer namely, Shri D.R. Thakur to act in the said capacity, therefore, resolution itself was not competent; The provisions contained in Section 16 of the Act, 1960 in respect of convening of meeting, framing of scheme of amalgamation, etc. have not been followed, therefore, the said provision being mandatory, the amalgamation of the Bank is per se illegal; Rule 11 of the Chhattisgarh Cooperative Societies Rules, 1962 (for short 'the Rules, 1962') has not been followed in as much as, the scheme of the amalgamation has not been framed in accordance with the mandatory provision contained in this Rule; RBI having once rejected the proposal, the meeting of the shareholders of the Bilasa Bank should have been convened afresh and the entire process should have been initiated de novo, and the same having not been done, the order directing amalgamation is palpably illegal; The NOC granted by the RBI itself provides that State laws concerning amalgamation should be followed, therefore, the same having not been followed,-grant of NOC will not validate an amalgamation, which has no sanctity in law; and According to the petitioner, while granting NOC, RBI examines only financial aspects." To buttress the aforesaid contention, learned counsel for the petitioner placed reliance upon the decisions rendered in K.I. Shephard and others v. Union of India and others (1987) 4 SCC 431 : AIR 1988 SC 686 and H. Puttappa and others v. The State of Karnataka and others AIR 1978 Karnataka 148. 7. Per contra, Shri Kanak Tiwari, learned Senior counsel appearing with Shri Jitendra Pali, learned counsel for the respondent No. 4, Ms. Smiti Sharma, learned Dy. Government Advocate appearing for the State and Shri PR. Patankar, learned counsel appearing for the respondent No. 3, would submit that: "The petitioner has no locus standi to challenge the impugned order as the Board of Directors of the Bilasa Bank is superseded; The petitioner has an alternative remedy of filing a revision application before the Tribunal; The procedure prescribed under Section 16 of the Act, 1960 and Rule 11 of the Rules, 1962 have been followed; The petitioner having misused her capacity as Chairman/Director of the Bilasa Bank inviting supersession and thereafter amalgamation, is estopped from challenging the order of amalgamation. It is also submitted that a new bank has already become operational, therefore, the writ petition is not maintainable; It has been putforth that by virtue of provisions contained in part V of Section 56 of the Banking Regulation Act, 1949 (for short 'the Act, 1949') concerning application of the RBI Act to the Cooperative Banks, particularly Section 56 (d) introducing a new Section 5A in the said Act for the Cooperative Banks, the Act, 1949 shall override to other provisions of the bye-laws of the society or agreement or resolution, therefore, once the RBI having approved the amalgamation, the same is not amenable to challenge on the ground of violation of provisions of State laws; Ms. Smiti Sharma, learned Dy. Government Advocate would argue that the procedure envisaged under Section 16 of the Act, 1960 is directory, therefore, even if there is compliance of the said provision, the same would not vitiate the impugned order; and Shri Patankar, learned counsel appearing for the RBI, would additionally submit that the RBI is only concerned with the financial aspects of the merger proposal and is not an authority to oversee compliance of the State Acts and the Rules framed thereunder." In support of the aforesaid contention, learned counsel placed reliance upon the decision of the Supreme Court rendered in Joseph Kumvilla Vellukunnel v. Reserve Bank of India and others AIR 1962 SC 1371 and Reserve Bank of India v. M. Hanumaiah and others (2008)1 SCC 770 . 8. The seminal issue arising for consideration in the present case is- "Whether the respondents have violated the provisions of Section16 of the Act, 1960 and Rule 11 of the Rules, 1962, if yes, whether such non compliance of the provisions has vitiated the entire exercise? Competency of the authorized officer Shri D.R. Thakur for convening a meeting on 07.11.2009; if he was not competent, effect thereof." The provisions of the State Law 9. Section 16 of the Act, 1960 provides for reorganisation of societies, which reads as under:-- "16. Competency of the authorized officer Shri D.R. Thakur for convening a meeting on 07.11.2009; if he was not competent, effect thereof." The provisions of the State Law 9. Section 16 of the Act, 1960 provides for reorganisation of societies, which reads as under:-- "16. Reorganisation of Societies.--(1) In this section - (a) "affected society" means a society which decides to reorganize itself in any of the manners specified in sub-section (2); and (b) "resulting society" means a society - (i) which is formed as a result of amalgamation under clause (a) of sub-section (2); or (ii) to which the assets and liabilities of the affected societies are transferred in whole or in part under clause (b) Sub-section (2); or (iii) which is formed as a result of division under clause (c) of sub-section (2); or (iv) which is the result of change of class as provided in clause (d) of sub-section (2). (2) A society may, by resolution passed by two-third majority of the members present and voting at a special general meeting held for the purpose decide to reogranise itself by - (a) amalgamating itself with another society; or (b) transferring its assets and liabilities in whole or in part to any other society; or (c) dividing itself into two or more societies; or (d) converting itself into a class of society, the object of which is materially different from that under which it has been classified under this Act : Provided that nor such decisions shall take effect unless it is approved by the Registrar: Provided further that in case of a Co-operative Bank, the Registrar shall not give his approval save with the previous sanction in writing of the Reserve Bank. (3) Notwithstanding anything contained in sub-section (2) where the Registrar is satisfied that it is essential in the public interest or in the interest of the members of the affected societies or necessary to secure the proper management of any society, he may direct that any society or societies shall reorganise itself or themselves in any one or more of the modes indicated in sub-section (2) : Provided that, in the case of a Co-operative Bank, the Registrar shall not issue any direction save with the previous sanction in writing of the Reserve Bank : Provided further that before a final order under this sub-section is passed by the Registrar every society concerned shall be given an opportunity of expressing its opinion on the reorganisation proposals. (4) The procedure for reorganisation of a society in accordance with the decision under sub-section (2) or the direction of the Registrar under sub-section (3), as the case may be, shall be such as may be prescribed. (5) If any such reorganisation under sub-section (2) or (3) is likely to affect in any manner the interest of any person, notice thereof shall be given to all such persons and every such person shall be given an option, to be exercised within a month from the date of the issue of such notice, of either becoming a member of the resulting society or societies or of demanding the payment of the share or interest or dues in respect of the affected society, as the case may be. (6) No reorganisation shall be final until the assent of every such person whose interest is likely to be affected, has been obtained or deemed to have been obtained by virtue of his failure to exercise the option given to him, and further, unless all the claims of persons who have exercised the option of demanding the payment of their shares or interests or dues under sub-section (5) have been met in full. (7) Every resulting society under this section shall have such constitution, property, powers, rights, interests, authorities, duties and obligations as may be specified in the scheme of reorganisation and every such scheme of reorganisation may contain such consequential, incidental and supplemental provisions as may, in the opinion of the Registrar, be necessary to give effect to such scheme. (7) Every resulting society under this section shall have such constitution, property, powers, rights, interests, authorities, duties and obligations as may be specified in the scheme of reorganisation and every such scheme of reorganisation may contain such consequential, incidental and supplemental provisions as may, in the opinion of the Registrar, be necessary to give effect to such scheme. (8) Notwithstanding anything contained in the Transfer of Property Act, 1882 (IV of 1882) or the Indian Registration Act, 1908 (XVI of 1908), a resolution of a society approved by the Registrar under Sub-section (3) shall be sufficient conveyance to vest the assets and liabilities of each affected society in the resulting society or societies concerned, such vesting being subject only to the provisions of the scheme of reorganisation. (9) The reorganisation of societies shall not in any manner, whatsoever affect any right or obligation of the resulting society or societies or render defective any legal proceedings by or against the society or societies and any legal proceedings that might have been continued or commenced by or against the society or the societies, as the case may be, before the reorganisation may be continued or commenced by or against the resulting society or societies. (10) Where any two or more societies have been amalgamated or a society has been divided or converted, the registration of such society or societies shall be deemed to have been cancelled on the date of registration of amalgamated society or of the converted society or of the new societies into which the society may have been divided. (11) Where a land mortgage bank has been reorganized by amalgamation with a central bank, the amalgamated bank shall in respect of all transactions relating to the land mortgage bank business made on and after such amalgamation be deemed to be a land mortgage bank within the meaning of the law relating to Land Mortgage Banks for the time being in force. Explanation - For the purposes of this section "Central Bank" means a society with the words "Central Bank" or "District Bank" as part of its name and whose main object is to finance societies which are members of it lie within a specified area. (12) Every scheme of such reorganisation shall be published in the official Gazette for general information." 10. (12) Every scheme of such reorganisation shall be published in the official Gazette for general information." 10. Section 18 makes provision for cancellation of registration as a result of amalgamation of a society with another society. On and from the date of such order of cancellation, the society is deemed to be dissolved and shall cease to exist as a corporate body. 11. Rule 11 of the Rules, 1962 prescribes the procedure for reorganisation of societies. The said Rule reads as under:-- "11. Re-organisation of societies - (1) Every society desiring to effect amalgamation, transfer of assets and liabilities, division or conversion under sub-section (2) of Section 16 shall frame a full scheme of reorganisation indicating how the proposed amalgamation, transfer of assets and liabilities, division or conversion would be useful to the society and be given effect to. Where the scheme involves a division of a society into two or more societies, it shall contain proposals regarding the name, the area of operation, draft byelaws and the list of members and creditors of the new society or societies into which the society would be divided. Where the scheme involves conversion of the society into a class of society, the object of which is materially different from that under which it has been classified under the Act. It shall contain draft bye-laws of that class of society into which the society would be converted. (2) After framing the scheme of reorganisation under sub-rule (1), the society shall convene a special general meeting by giving a written notice of twenty-one days to all its members along with the proposed scheme of reorganisation. In the case of the society desiring amalgamation with or transfer of the assets and liabilities in whole or in part to any other society (hereinafter referred to as the other society), the society shall send a copy of the notice and the proposed scheme to the other society also for information. The society shall pass a resolution for amalgamation, transfer of assets and liabilties, division or conversion, as the case may be, by two-thirds majority of the members present and voting at the special general meeting and shall in the case of the amalgamation or transfer of assets and liabilities forward a copy of such resolution to other society. The society shall pass a resolution for amalgamation, transfer of assets and liabilties, division or conversion, as the case may be, by two-thirds majority of the members present and voting at the special general meeting and shall in the case of the amalgamation or transfer of assets and liabilities forward a copy of such resolution to other society. (3) After the receipt of the resolution the other society shall convene a special general meeting by giving a written notice of twenty-one days to all its members along with the scheme of reorganisation and draft amendment to its bye-laws, if any, and pass a resolution by two-thirds majority of the members present and voting at the special general meeting for approving the scheme of reorganisation and the amendment to its bye-laws, if any, and send a copy of its resolution in respect of the approval to the society which has decided to re-organise itself. (4) The affected society shall, in the case of amalgamation or transfer of assets and liabilities, after the receipt of the approval under sub-rule (3) and in the case of division or conversion, after the passing of the resolution under sub-rule (2), take action under Sub-sections (5) and (6) of Section 16. (5) The affected society shall submit a report to the Registrar of the action taken by it and request him to approve the decision for amalgamation, transfer of assets and liabilities, division or conversion. (6) On receipt of the report from the affected society under sub-rule (5), the Registrar shall, after satisfying himself that the procedure has been properly followed, approve the decision of the society and register the amalgamated, divided or converted society or societies. (7)(a) Before issuing any direction under sub-section (3) of Section16 for the amalgamation, transfer of assets and liabilities, division or conversion of any society or societies, the Registrar shall prepare a draft scheme of reorganisation in respect of such amalgamation, transfer of assets and liabilities, division or conversion stating in particular the manner in which the new committee or committees of the society or societies resulting from such amalgamation, transfer of assets and liabilities, division or conversion shall be constituted and the bye-laws which such society or societies shall follow. The Registrar shall send a copy of the draft of the direction proposed to be issued by him under sub-section (3) of Section 16, to the Society or each of the societies concerned calling upon it or them to invite objections or suggestions from any member or class of members thereof or from any creditor or class of creditors and to submit such objections or suggestions together with its own or their own opinion within a period to be specified by the Registrar. (b) The Registrar shall consider all such objections, suggestions and opinion and make such modifications in the draft direction as may seem to him desirable in the light of those objections, suggestions or opinion and then issue a final direction under sub-section (3) of Section 16." 12. The provisions contained in Section 16 of the Act, 1960 and Rule 11 of the Rules 1962, quoted above, mandates that every society desiring to affect amalgamation, shall frame a full scheme of reorganisation indicating how the proposed amalgamation, transfer of assets and liabilities, division or conversion would be useful to the society and be given effect to. After framing of such scheme, it is obligatory for the society to convene a special general meeting by giving a written notice of twenty one days to all its members along with the proposed scheme of reorganisation. In the case of the society desiring amalgamation with or transfer of the assets and liabilities in whole or in part to any other society, the society shall send a copy of the notice and the proposed scheme to the other society also for information. The society shall, thereafter, pass a resolution by two-third majority of the members present and voting at the special general meeting and in case of amalgamation forward a copy of such resolution to the other society. The other society shall, thereafter, convene a special general meeting and pass a resolution in the same manner and send a copy thereof to the affected society who shall, thereafter, submit a report to the Registrar and on receipt of such report from the affected society, the Registrar shall, after satisfying himself that the procedure has been properly followed, approve the decision of the society and register the amalgamated, divided or converted society or societies. 13. 13. Sub-section (5) of Section 16 of the Act, 1960 also provides for a notice to such person, who is likely to affect in any manner as a result of the reorganisation giving him an option, to be exercised within one month from the date of issue of such notice, of either becoming a member of the resulting society or societies or of demanding the payment of the share or interest or dues in respect of the affected society, as the case may be. Sub-section (6) further provides that no reorganisation shall be final until the assent of every such person whose interest is likely to be affected, has been obtained or deemed to have been obtained by virtue of his failure to exercise the option given to him, and further, unless all the claims of persons who have exercised the option of demanding the payment of their shares or interests or dues under sub-section (5) have been met in full. Sub-section (12) mandates that every scheme of such reorganisation shall be published in the official Gazette for general information. Whether provision/procedure of State law followed 14. In the case in hand, annual general meeting of the shareholders of the Bilasa Bank was convened on 07.11.2009. In the return, the respondent State or Laxmi Bank have neither made any pleading nor filed any document to substantiate that the meeting convened on 07.11.2009 or for that matter, the subsequent meeting convened on 15.06.2010 was a special general meeting and that the said convening was by giving a written notice of twenty one days to all its members along with the proposed scheme of reorganisation. Thus, the provisions contained in Section 16 (2)of the Act, 1960 and Rule 11 of the Rules, 1962 have not been followed. 15. Similarly, the documents produced by the parties do not contain any scheme of reorganisation of proposed amalgamation framed by the Bilasa Bank. There is nothing in the record that the merger scheme which finds mention in the document Annexure-R4/9, which is minutes of the meeting of the prescribed officer of the Bilasa Bank held on 15.06.2010, was a meeting of the shareholders. Even this document refers to a merger scheme and not scheme of reorganisation affecting amalgamation as is worded in Section 16(2) of the Act, 1960 and Rule 11 of the Rules, 1962. Even this document refers to a merger scheme and not scheme of reorganisation affecting amalgamation as is worded in Section 16(2) of the Act, 1960 and Rule 11 of the Rules, 1962. The document Annexure-R4/9 is signed by the Chief Executive Officer and Officer-in-charge of the Bilasa Bank. It is not minutes of meeting or copy of resolution passed either in the annual general meeting or special general meeting of the shareholders of the Bilasa Bank. Thus, it appears, no meeting of the members of the Bilasa Bank has been convened for adopting the merger scheme or the scheme of reorganisation. Interestingly, the Laxmi Bank has accepted the merger scheme and decided to send it for approval to the RBI, in the meeting of its Directors held on 26.05.2010. Thus, this meeting has taken place even before the meeting of the prescribed officer of the Bilasa Bank, whatever the worth, the said meeting was held on 15.06.2010. Under the procedure as prescribed in Rule 11 (2) of the Rules, 1962, the scheme of reorganisation by amalgamation is to be approved by two-third majority of the affected society i.e. the Bilasa Bank and, thereafter, the same is required to be sent to the other society i.e. the Laxmi Bank, who shall then convene a special general meeting of its member giving twenty one days notice and pass a resolution by two-third majority approving the scheme of reorganisation. There is no document of any special general meeting convened by the Laxmi Bank after 15.06.2010. Thus, Rule 11 (3) has also been violated by the Laxmi Bank. 16. Another issue falling for consideration is the competency of the authorized officer to convene a meeting on 07.11.2009 because, as put forth by the petitioner, the appointment of Shri Thakur as authorized officer was not alive and operative on the said date. Indisputably, the Bilasa Bank was superseded on 13.09.2006 and thereafter Shri Thakur was appointed as authorized office for a period of one year. This was extended for another year on 12.09.2007, however, there is no order of extension of Shri Thakur on and after 12.09.2008 till the meeting convened on 07.11.2009. Indisputably, the Bilasa Bank was superseded on 13.09.2006 and thereafter Shri Thakur was appointed as authorized office for a period of one year. This was extended for another year on 12.09.2007, however, there is no order of extension of Shri Thakur on and after 12.09.2008 till the meeting convened on 07.11.2009. Third order of extension was passed on 02.01.2010, which reads as under:-- dk;kZy; iath;d lgdkjh laLFkk,W NŸkhlx<+ jk;iqj Ø-@lk[k&3@ukx-cSad@09&10@35 jk;iqj] fnukad 2@1@10 vkns’k dk;kZy;hu vkns’k Øekad@lk[k&3@ukx-cSda@06@4693 fnukad 13-09-06 }kjk fcyklk efgyk ukxfjd lgdkjh cSad e;kZ- fcykliqj ds lapkyu eaM+y dh izFker% 01 o”kZ ds fy, gVk;k x;k Fkk ,oa vkns’k Øekda 4815 fnukad 12-09-07 }kjk blesa ,d o”kZ o`f) dh xbZ FkhA lapkyd eaM+y dks vf/kØfer djrs djrs gq, le; yxk;s x;s vkjksi vkt Hkh fo|eku gSA blfy, cSad ds lnL;ksa ,oa tekdrkZvksa ds O;kid fgrksa dks n`f”Vxr j[krs gq;s lapkyd eaM+y dh vf/kØe.k vof/k dks yxkrkj tkjh j[krs gq;s blesa vkxkeh ,d o”kZ ds fy; o`f) fd;k tkuk vko’;d izrhr gksrk gSA vr% NŸkhlx<+ lgdkjh lkslkbVh vf/kfu;e] 1960 dh /kkjk 53¼1½ ds rgr~ lapkyd eaM+y ds vf/kØe.k dh vof/k esa vkxkeh ,d o”kZ ds fy;s vkSj c<+kbZ tkrh gSA rFkk Jh M+h-,l- Bkdqj] la;qDr iath;d lgdkjh laLFkk,a fcykl iqj] izkf/kd`r vf/kdkjh ds :i esa ;Fkkor cus jgasxsA ;g vkns’k vkt fnukad 31-12-2009 dks esjsa gLrk{kj ,oa dk;Zy;hu in eqnzk ls tkjh fd;k tkrk gSA lgh ¼ds-Jhfuoklqyw½ iath;d lgdkjh laLFkk, NŸkhlx<+ Ø-@lk[k&3@ukx-cSd@09&10@35 jk;iqj] fnukad 2@1@10 izfrfyfi& ¼1½ egkizca/kd] Hkkjrh; fjtoZ cSad] lqHkk”kh’k ifjlj] lqUnj uxj] jk;iqjA ¼2½ lfpo] N-x- ‘kklu] lgdkfjrk foHkkx] ea=ky; jk;iqjA ¼3½ dysDVj] fcykliqj dh vksj lwpukFkZA ¼4½ la;qDr iath;d lgdkjh laLFkk;s fcykliqj dks muds i= Øekad 2144 fnukad 11-12-09 ds lanHkZ esa lwpukFkZA ¼5½ Jh M+h-lh- Bkdqj] izkf/kd`r vf/kdkjh] fcyklk efgyk ukxfjd lgdkjh cSad e;kZ] fcykliqj ,o ala;qDr iath;d lgdkjh laLFkk;sa fcykliqj dks lwpukFkZ ,oa ikyukFkZA ¼6½ izc/kd] fcyklk efgyk ukxfjd lgdkjh cSad e;kZ- fcykliqj dks lwpukFkZ ,oa vko’;d dk;Zokgh gsrqA lgh iath;d lgdkjh laLFkk, NŸkhlx<+ 17. The above order dated 02.01.2010 clearly mentions that the order of supersession passed on 13.09.2006 was extended for another one year on 12.09.2007, however, since the situation has not changed, the order of supersession requires to be continued and extended for further one year. The operative part, thereafter, says that the supersession is increased for one more year from 02.01.2010 and Shri Thakur shall continue as authorized officer. The operative part, thereafter, says that the supersession is increased for one more year from 02.01.2010 and Shri Thakur shall continue as authorized officer. Thus, the order nowhere ratifies the working of Shri Thakur as authorized officer during 12.09.2008 till 02.01.2010 includes the date i.e. 07.11.2009 when the annual general meeting of the members of the Bilasa Bank was convened by Shri Thakur. Apparently, Shri Thakur was not authorized on that day to convene the annual general meeting of the Bilasa Bank because, there is no order in existence, even an ex post facto order approving his appointment as authorized officer during the period of 12.09.2008 till 02.01.2010. Thus, Shri D.R. Thakur could not have convened a meeting of shareholders of the Bilasa Bank on 07.11.2009. 18. It has been argued by the respondents that the RBI having issued the NOC for the proposed merger/amalgamation of the Bilasa Bank with the Laxmi Bank, this Court may not sit on appeal over the said NOC to annul the merger because, the functions of the RBI being of specialized nature writ Court has no jurisdiction to pass any such order. 19. The aforesaid argument of the respondents is to be adjudged keeping in view the provisions employed in the guidelines for merger/amalgamation of Urban Co-operative Banks issued by the RBI on 02.02.2005. Paras 2 & 3 of the said guidelines and Para 4 of Annexure I of the said guidelines need reference, therefore, they are reproduced hereunder:-- "2. Although the Banking Regulation Act, 1949 (AACS) does not empower Reserve Bank to formulate a scheme with regard to merger and amalgamation of co-operative banks, the State Governments have incorporated in their respective Co-operative Societies Acts a provision for obtaining prior sanction in writing, of RBI for an order, inter alia, for sanctioning a scheme of amalgamation or reconstruction. 3. The request for merger can emanate from banks registered under the same State Act or from banks registered under the Multi State Cooperative Societies Act (Central Act) for takeover of a bank/s registered under State Act. While the State Acts specifically provide for merger. of co-operative societies registered under them, the position with regard to take over a co-operative bank registered under the State Act by a co-operative bank registered under the Central Act is not clear. While the State Acts specifically provide for merger. of co-operative societies registered under them, the position with regard to take over a co-operative bank registered under the State Act by a co-operative bank registered under the Central Act is not clear. Although there are no specific provisions in the State Acts or the Central Act for the merger of a co-operative society under the State Acts with that under the Central Act, it is felt that, if all concerned including administrators of the concerned Acts are agreeable to order merger/amalgamation, RBI may consider proposals on merits leaving the question of compliance with relevant statutes to the administrators of the Acts. In other words, Reserve Bank will confine its examination only to financial aspects and to the interests of depositors as well as the stability of the financial system while considering such proposals. Annexure 1 4. The procedure for merger either voluntary or otherwise is outlined in the respective state statutes/the Multi State Cooperative Societies Act. The Registrars, being the authorities vested with the responsibility of administering the Acts, will be ensuring that the due process prescribed in the Statutes has been complied with before they seek the approval of the RBI. They would also be ensuring compliance with the statutory procedures for notifying the amalgamation after obtaining the sanction of the RBI." 20. Similarly, para 2 of the NOC issued by the RBI also needs reference, hence, the same is reproduced hereunder:-- "2. The merger proposal has been examined by Reserve Bank with regard to the financial aspects, as per the guidelines on merger/amalgamation of Urban Cooperative Banks and we have no objection to the proposed Merger of the Bilasa Mahija Sahakari Bank Maryadit, Bilaspur (target bank) with Laxmi Mahila Nagarik Sahakari Bank Ltd., Raipur (acquirer bank) subject to the following conditions/observations. (i) Where the scheme contains provisions requiring approval from other authorities like Revenue authorities, Registrar of Cooperative Societies, Central Registrar of Cooperative Societies etc., the No Objection Certificate (NOC) from the Reserve Bank should not be construed as approval of all such provisions of the schemes. The NOC would mean that the Reserve Bank has looked into financial aspects of the proposal from the point of view of the deposit protection of the acquired and acquirer banks and the acquirer bank's compliance with the prudential financial parameters post-merger. The NOC would mean that the Reserve Bank has looked into financial aspects of the proposal from the point of view of the deposit protection of the acquired and acquirer banks and the acquirer bank's compliance with the prudential financial parameters post-merger. The bank needs to pursue approval from concerned authorities for other provisions, wherever necessary. (ii) a. 'In principle', we have no objection to shifting/relocation of the branches of the acquired bank within the area of operation of the acquirer bank provided it has valid authorization and the customers of the branches shifted/relocated are serviced through the existing branches of the acquirer/acquired bank. The acquirer bank should obtain prior approval of Reserve Bank for such shifting/relocation of branches. b. The acquirer bank should approach RBI for issue of fresh authorization in lieu of transferor bank's licence issued under Section 22 of B.R. Act, 1949 and branch authorization immediately after the merger. (iii) The acquirer bank should comply with the Know Your Customer (KYC) norms in respect of the clientele taken over from the acquired bank within a reasonable time. (iv) the acquirer bank should pursue all avenues for recovery of NPAs of the target bank including legal remedies. (v) All civil and criminal proceedings already initiated against the officials and the management or personnel of the acquired bank should be pursued without any let up. Further, the acquirer bank should be required to institute appropriate inquiry, where frauds, embezzlements, etc. have been detected and initiate such disciplinary/civil/criminal actions as would be necessary thereafter. The acquirer bank should also be required to submit a special report to the Reserve Bank within six months from the date of the merger about the action taken and the progress in this regard. (vi) The acquirer bank should amortize the goodwill, if any, on merger within a period of five years including the year of merger. (vii) The non-banking assets to be taken over from the acquired bank may be disposed off within an extended period of seven years from the date of merger. (viii) The reference date of merger as may be advised by the RCS, Chhattisgarh in his order for the proposed merger of the Bilasa Mahila Sahakari Maryadit, Bilaspur with Laxmi Mahila Nagarik Sahakari Bank Ltd., Raipur shall be reckoned as the reference date for the purpose of this No Objection Certificate." 21. (viii) The reference date of merger as may be advised by the RCS, Chhattisgarh in his order for the proposed merger of the Bilasa Mahila Sahakari Maryadit, Bilaspur with Laxmi Mahila Nagarik Sahakari Bank Ltd., Raipur shall be reckoned as the reference date for the purpose of this No Objection Certificate." 21. The guidelines and the contents of the NOC make it explicit that the RBI, while considering grant of NOC for merger/amalgamation, confines its examination only to financial aspects and the interest of depositors as well as the stability of the financial system while considering such proposals and the RBI leaves the question of compliance with relevant statutes to the administrators of the Acts and the Registrars, being the authorities vested with the responsibility of administering the Acts, will be ensuring that the due process prescribed in the statutes has been complied with before they seek approval of the RBI. The impact of the said provisions would be that the NOC issued by the RBI is not to be treated as compliance of the mandatory provisions of the said Acts nor does it approve or dilute if the provisions of said Acts have not been complied with. 22. In K.I. Shephard (supra), the Supreme Court while dealing with application of principles of natural justice vis-à-vis the employees of the Bank sought to be amalgamated held thus : "12.........even when a State agency acts administratively, rules of natural justice would apply. As stated, natural justice generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed so that they may be in a position (a) to make representations on their own behalf; (b) or to appear at a hearing or enquiry (if one is held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet." 23. In the case in hand, application of principles of natural justice are inbuilt in the provisions contained in Section 16(2) of the Act, 1960 and Rule 11 of the Rules, 1962 because these provisions provided for prior 21 days notice to the members of the affected society; their participation at the stage of framing scheme of reorganization and the said provisions having been violated by not issuing 21 days notice; by not circulating the scheme of reorganization/amalgamation to the members of the Bilasa Bank; and by not holding a special general meeting, the principles of natural justice have been violated by affecting the impugned amalgamation. 24. From the language of Section 16(2) of the Act, 1960 and Rule 11 (2) (3) (4) & (5) of the Rules, 1962, it would clearly appear that at all material places, the legislature has used the word 'shall' and since the object and purpose of the procedure prescribed for amalgamation is to hear and involve the members of the affected societies, the principles of natural justice are also inbuilt therein, therefore, the provision is mandatory as held by the Supreme Court in State of Uttar Pradesh and others v. Babu Ram Upadhya AIR 1961 SC 751 , Hari Vishnu Kamath v. Syed Ahmad Ishaque and Others AIR 1955 SC 233 : (1955)1 SCR 1104 , State of U.P. v. Manbodhan Lal Srivastava AIR 1957 SC 912 , Raza Buland Sugar Co. Ltd., Rampur v. The Municipal Board, Rampur AIR 1965 SC 895 , and Rai Vimal Krishna and Others v. State of Bihar and Others (2003) 6 SCC 401 . 25. The Supreme Court in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal and Others (2011)1 SCC 236 , held thus : "32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "'substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. (Emphasis supplied) 26. The above discussion compels this Court to take the view that the relevant provisions of the Act, 1960 and the Rules, 1962 being mandatory in nature and the same having not been complied with, the entire procedure for amalgamation is vitiated. 27. It has been argued by Shri Kanak Tiwari, learned senior counsel appearing for the Laxmi Bank, that the decision concerning amalgamation of the Bilasa Bank and the same having been approved by the RBI, being in the nature of policy decision concerning financial institutions, this Court may not exercise the power of judicial review. 28. To appreciate the aforesaid submission, this Court deems it apt to refer to the scope of judicial review in matters involving administrative actions/orders. 29. The Supreme Court in Kalinga Mining Corporation v. Union of India and others (2013) 5 SCC 252 , held thus : "62. It is by now well settled that judicial review of the administrative action/quasi-judicial orders passed by the Government is limited only to correcting the errors of law or fundamental procedural requirements which may lead to manifest injustice. When the conclusions of the authority are based on evidence, the same cannot be reappreciated by the Court in exercise of its powers of judicial review. The Court does not exercise the powers of an appellate court in exercise of its powers of judicial review. When the conclusions of the authority are based on evidence, the same cannot be reappreciated by the Court in exercise of its powers of judicial review. The Court does not exercise the powers of an appellate court in exercise of its powers of judicial review. It is only in cases where either findings recorded by the administrative/quasi-judicial authority are based on no evidence or are so perverse that no reasonable person would have reached such a conclusion on the basis of the material available that the Court would be justified to interfere with the decision. The scope of judicial review is limited to the decision-making process and not to the decision itself, even if the same appears to be erroneous." 30. In respect of Court's power of dealing with scope of judicial review, the Supreme Court in Tata Cellular v. Union of India (1994) 6 SCC 651 held thus:-- "75. In Chief Constable of the North Wales Police v. Evans Lord Brightman said : "Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made. * * * Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power." In the same case Lord Hailsham commented on the purpose of the remedy by way of judicial review under RSC, Ord. 53 in the following terms : "This remedy, vastly increased in extent, and rendered, over a long period in recent years, of infinitely more convenient access than that provided by the old prerogative writs and actions for a declaration, is intended to protect the individual against the abuse of power by a wide range of authorities, judicial, quasi-judicial, and, as would originally have been thought when I first practised at the Bar, administrative. It is not intended to take away from those authorities the powers and discretions properly vested in them by law and to substitute the courts as the bodies making the decisions. It is intended to see that the relevant authorities use their powers in a proper manner (p. 1160)." In R. v. Panel on Take-overs and Mergers, ex p Datafin pic, Sir John Donaldson, MR. It is intended to see that the relevant authorities use their powers in a proper manner (p. 1160)." In R. v. Panel on Take-overs and Mergers, ex p Datafin pic, Sir John Donaldson, MR. commented : "An application for judicial review is not an appeal." In Lonrho pic v. Secretary of State for Trade and Industry, Lord Keith said : "Judicial review is a protection and not a weapon." It is thus different from an appeal. When hearing an appeal the Court is concerned with the merits of the decisions under appeal. In Amin, Re, Lord Fraser observed that : "Judicial review is concerned not with the merits of a decision but with the manner in which the decision was made....Judicial review is entirely different from an ordinary appeal. It is made effective by the court quashing the administrative decision without substituting its own decision, and is to be contrasted with an appeal where the appellate tribunal substitutes its own decision on the merits for that of the administrative officer." 77. The duty of the court is to confine itself to the question of legality. Its concern should be : (1) Whether a decision-making authority exceeded its powers? (2) committed an error of law, (3) committed a breach of the rules of natural justice, (4) reached a decision which no reasonable tribunal would have reached, or (5) abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under : (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, 'consider whether something has gone wrong of a nature and degree which requires its intervention." 31. Thus, it is settled that while making judicial review, this Court is concerned with the decision making process rather than the decision itself. The discussion on the procedure adopted by the Bilasa Bank and the Laxmi Bank is only to find out whether the procedure for amalgamation as envisaged under the Act, 1960 and the Rules, 1962 has been followed or not. This Court is not concerned with the decision itself, but with the procedure followed while deciding to amalgamate and the consequent order passed by the Registrar. 32. The discussion made in the preceding paras would reveal that the decision making process is vitiated, therefore, it is within the powers of this Court under Article 226 of the Constitution of India to test the validity of the order within the parameters of judicial review, as held by the Supreme Court in Kalinga Mining Corporation (2013) 5 SCC 252 (supra) and Tata Cellular (1994) 6 SCC 651 (supra). 33. The nature of power and jurisdiction under Article 226 of the Constitution of India conferred on the High Court has been explained by the Supreme Court in Dwarka Nath v. Income-tax Officer, Special Circle, D. Ward, Kanpur and another AIR 1966 SC 81 as under : "4.....This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression 'nature', for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart, High Courts can also issue directions, orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to meet the peculiar and complicated requirements of this country. Any attempt to equate the scope of the power of the High Court under Article 226 of Constitution with that of the English Courts to issue prerogative writs is to introduce the unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of Government to a vast country like India functioning under a federal structure. Such a construction defeats the purpose of the Article itself......." 34. Yet again in Gujarat Steel Tubes Ltd. and others v. Gujarat Steel Tubes Mazdoor Sabha and others (1980) 2 SCC 593 , the Supreme Court held thus : "73, While the remedy under Article 226 is extraordinary and is of Anglo Saxon vintage, it is not a carbon copy of English processes. Article 226 is a sparing surgery but the lancet operates where injustice suppurates. While traditional restraints like availability of alternative remedy hold back the court, and judicial power should not ordinarily rush in where the other two branches fear to tread, judicial daring is not daunted where glaring injustice demands even affirmative action. The wide words of Article 226 are designed for service of the lowly numbers in their grievances if the subject belongs to the court's province and the remedy is appropriate to the judicial process. There is a native hue about Article 226, without being anglophilic or anglophobic in attitude. Viewed from this jurisprudential perspective, we have to be cautious both in not overstepping as if Article 226 were as large as an appeal and not failing to intervene where a grave error has crept in. Moreover, we sit here in appeal over the High Court's judgment. Viewed from this jurisprudential perspective, we have to be cautious both in not overstepping as if Article 226 were as large as an appeal and not failing to intervene where a grave error has crept in. Moreover, we sit here in appeal over the High Court's judgment. And an appellate power interferes not when the order appealed is not right but only when it is clearly wrong. The difference is real, though fine." 35. This Court in Dashrath Gupta (HUF) & Others v. State of Chhattisgarh & Others1, at para 9, held thus : "9. The common thread flowing from the above referred judgments of the Supreme Court with regard to the nature of power and jurisdiction under Article 226 is to the effect that the High Court's power is equitable and discretionary. The High Court is required to exercise the jurisdiction to reach injustice wherever it is found. There are no limits to the power, the same should not be exercised unless substantial injustice has ensued or is likely to ensue and further that the Court can always take cognizance of the entire facts and circumstances and pass appropriate directions to balance the justice. It also follows that the wide words of Article 226 are designed for service of the lowly numbers in their grievances if the subject belongs to the court's province and the remedy is appropriate to the judicial process and that the High Court should not fail to intervene when a grave error has crept in and injustice or arbitrariness has ushered." 36. Present is a case where the Bilasa Bank was in supersession at the relevant time, however, the members of the society were entitled to have their say in the matter of amalgamation or preparation of scheme of reorganization/merger. Their rights have been infringed by not following the mandatory provisions contained in Section 16 of the Act, 1960 and Rule 11 of the Rules, 1962. When the mandatory provisions have not been followed, the entire exercise has to go. Therefore, the writ petition is maintainable even if the Board of Directors of the Bilasa Bank was in supersession. 37. The respondents' objection regarding availability of alternative remedy is not tenable for exactly the same reason on which this Court has rendered the judgment in W.R (C) No. 4095 of 2011. Therefore, the writ petition is maintainable even if the Board of Directors of the Bilasa Bank was in supersession. 37. The respondents' objection regarding availability of alternative remedy is not tenable for exactly the same reason on which this Court has rendered the judgment in W.R (C) No. 4095 of 2011. Similarly, the objection regarding overriding powers of the RBI over the State laws has also no substance because the provisions contained in Section 56 read with Section 5A of the Act, 1949 speaks about the primacy of the provisions of the Act, 1949 over the bye-laws of the society or agreement or resolution, however, this Court has dealt with the issue on the basis of the provisions contained under the Act, 1960 and not on the basis of any bye-laws of the society or agreement or resolution. 38. For the foregoing, this Court has no hesitation in quashing the impugned order dated 18.1.2011 and also subsequent actions taken by the respondents in consequent thereto. It is ordered, accordingly. 39. As an upshot, the writ petition is allowed, leaving the parties to bear their own costs.