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Rajasthan High Court · body

2015 DIGILAW 692 (RAJ)

Ashok Chand Sharma v. Reserve Bank of India

2015-03-24

AJIT SINGH, SUNIL AMBWANI

body2015
JUDGMENT : 1. We have heard learned counsel appearing for the appellant. 2. A writ petition was filed by the petitioner (appellant herein), a senior citizen, with the prayer for setting aside the orders dated 24.10.2011, 13.04.2012 and 22.10.2012 passed by the Reserve Bank of India, imposing certain conditions on the respondent No.3-Ajmer Urban Co-operative Bank (for short, 'Co-operative Bank') with regard to disbursement of the amount, on maturity of the fixed deposit. The petitioner also prayed for return of the amount deposited by him in Cooperative Bank, in the fixed deposit, along with interest and expenses. 3. In the reply filed by the Reserve Bank of India, it was stated that the directive dated 24.10.2011, prohibiting withdrawal of amount in excess of Rs.1,000/- from the deposit accounts, was issued by the Reserve Bank of India, in exercise of powers under Section 35A read with Section 56 of the Banking Regulation Act, 1949 (for short, 'the Act'), in public interest, and in the interest of depositors, to restrict preferential payment, preserve assets of the Co-operative Bank, and in order to give the Co-operative Bank, an opportunity to improve its financial position. 4. Section 35A of the Banking Regulation Act provides that where the Reserve Bank of India is satisfied, that in the public interest, or in the interest of the banking policy, or to prevent the affairs of any co-operative bank, being conducted in a manner, detrimental to the interests of the depositors, or in a manner, prejudicial to the interests of the co-operative bank, or to secure proper management of the banking business of any co-operative bank, generally, it is necessary to issue directions to the co-operative banks, or to any co-operative bank, in particular, it may, from time to time, issue such directions, as it deems fit, and the co-operative banks or the co-operative bank, as the case may be, shall be bound to comply with such directions. 5. During the course of the hearing of the writ petition, Shri P.N. Das, General Manager, Co-operative Bank, present in person, submitted that the Reserve Bank of India had tentatively decided to cancel the licence of the Bank, but the process will take at least one month's time, to be completed. 6. 5. During the course of the hearing of the writ petition, Shri P.N. Das, General Manager, Co-operative Bank, present in person, submitted that the Reserve Bank of India had tentatively decided to cancel the licence of the Bank, but the process will take at least one month's time, to be completed. 6. Learned Single Judge, recording that the petitioners have shown their satisfaction to the decision of the Reserve Bank of India for cancellation of licence, passed an order, that since the Reserve Bank of India has taken a decision to cancel the licence, which will follow the process of disbursement of the amount through the process of liquidation, nothing further survives in the writ petition. Learned Single Judge thereafter, directed the Reserve Bank of India to pass a formal order of cancellation of licence of Bank, at the earliest, and not later than one month from the date, when the judgment was passed. The petitioners were given liberty to participate in the subsequent proceedings, more specifically, after liquidation, and for the process of recovery of amount. 7. It is submitted by learned counsel appearing for the appellant that the petitioner's interest was involved in receiving the money deposited by him, as a senior citizen, in the Cooperative Bank, along with interest. The conditions, imposed by the Reserved Bank of India under Section 35A read with Section 56 of the Act, were challenged on the ground not the Bank is in a good financial condition, and is in a position to pay the amount to its depositors. The Co-operative Bank was earier advised on 02.11.2012, that the depositors may be allowed to withdraw an amount of Rs.1,00,000/- on medical grounds, and Rs.50,000/-in other cases, and that the depositors could contact the Co-operative Bank to apply in a prescribed form, with supporting documents, establishing their hardships. 8. In the reply, it was stated that on the assessment of the financial position, the Bank's financial performances were found to be unsatisfactory, with deposit erosion of 25%, and on account of which, net worth of the Bank was eroded with losses of Rs.1518.16 lacs, in public interest, and in the larger interest of the depositors, all inclusive, directions given under section 35A of the Act. 9. 9. We are of the view that the statement of the General Manager of the Co-operative Bank should not have been taken by learned Single Judge on its face value, and further that the petitioner's satisfaction on the decision taken by the Reserve Bank of India for cancellation of licence, could not be a ground, on which learned Single Judge may have directed that a formal order of cancellation of the licence of the Bank be passed. 10. The Reserve Bank of India is a Regulatory Body, under the Reserve Bank of India Act 1934, of the Banking Institutions, and that on its satisfaction, after going through the financial performance of the Bank, it may take a decision and direct the Bank to close its business. The directions under Section 35A of the Act, are by way of interim directions, for protecting the interest of the depositors, and other stakeholders. While examining, the conditions imposed by the Reserve Bank of India for releasing the amount of fixed deposit, the Court could not have, on the statement of the petitioners, or the General Manager of the Bank, or some of the depositors, directed the Reserve Bank of India to cancel the licence of the Bank. 11. Learned Single Judge has issued the directions without considering the financial condition of the Bank, and the reply of the Reserve Bank of India, in which it was no where stated that the Reserve Bank of India has decided to cancel the licence of the Bank. We may also observe that the cancellation of a licence will also entail, taking into account the availability of the assets, and the manner of disbursement, a statutory procedure to be followed. Learned Single Judge acted presumptuously, in issuing direction, to cancel the licence, without considering the consequences of his order on the stakeholders, including the depositors. He did not have the wholesome picture of the assets and financial liability of the Bank in issuing the directions. 12. The Special Appeal is allowed. The judgment and order of learned Single Judge, directing cancellation of the licence of the Co-operative Bank, is set aside. The matter is remanded to learned Single Judge to consider the prayers of the petitioner, in accordance with law.