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2019 DIGILAW 2725 (ALL)

Ashutosh Mishra v. State Of U. P.

2019-12-06

BALA KRISHNA NARAYANA, ROHIT RANJAN AGARWAL

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JUDGMENT : Rohit Ranjan Agarwal, J. Heard Sri H.R. Misra, learned Senior Counsel assisted by Sri K.M. Misra, learned counsel for the petitioner and learned Standing Counsel for the respondent nos. 1 to 5. 2. This writ petition has been filed assailing the order dated 29.08.2018 passed by the respondent no. 5 directing inquiry under Section 65 of the U.P. Cooperative Societies Act, 1965 (hereinafter referred to as the ‘Act’). 3. Facts, in brief, as narrated in the writ petition, are that there is one Brahmawarta Commercial Cooperative Bank Limited (hereinafter referred to as the ‘bank’) having its Head Office at 90, M.I.G. Ratan Lal Nagar, Kanpur Nagar. The aforesaid bank has been registered under the provisions of the Act and was granted banking license by the Reserve Bank of India under the provisions of Banking Regulations Act, 1949. The bank in question is a Primary Urban Cooperative Bank having been insured under the provisions of the Deposit Insurance Corporation Act, 1961. 4. According to the petitioner there are forty thousand individuals as members of the bank. By order dated 26.06.2018, relying upon the inspection report dated 31.03.2014, the Reserve Bank of India cancelled the license of the bank in question. On 26.06.2018, the Executive Director of the Reserve Bank of India by exercising powers under Section 22 read with Section 56 of the Banking Regulations Act, required the Registrar of Cooperative Societies U.P. to wind up the affairs of the bank in terms of Section 90-B (II) of the Act read with Section 13-D of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and further appoint a Liquidator. 5. Simultaneously, the General Manager of the Reserve Bank of India referring to the letter of the Executive Director on 28.06.2018 directed the respondent no. 2 to appoint Official Liquidator in the bank under Section 90-B (II) of the Act. Against the orders of the Executive Director of the Reserve Bank of India, the bank preferred statutory appeal before the Central Government under Section 22 (5) of the Banking Regulations Act. On 03.07.2018 the respondent no. 3 directed the respondent no. 4 to ensure immediate action in regard to appointment of Official Liquidator in the bank in question. Pursuant thereto one Rakesh Kumar, A.D.C.O. Kanpur Nagar, was appointed as the Official Liquidator of the bank. On 03.07.2018 the respondent no. 3 directed the respondent no. 4 to ensure immediate action in regard to appointment of Official Liquidator in the bank in question. Pursuant thereto one Rakesh Kumar, A.D.C.O. Kanpur Nagar, was appointed as the Official Liquidator of the bank. It appears that the Official Liquidator, so appointed, proceeded to issue an office memorandum dated 10.07.2018, which was challenged before this Court in Writ Petition No. 17873 of 2018. On 27.09.2018. A co-ordinate Bench of this Court quashed the order dated 10.07.2018 passed by the Official Liquidator and held that the employees would be deemed to be continuing in service without any break with all consequential benefits. Thereafter, the respondent no. 2 on 17.10.2018 appointed one Raj Kumar Mishra, Regional Assistant Commissioner/Assistant Registrar, Cooperative, U.P. Kanpur Region, Kanpur as Official Liquidator. 6. It was after the appointment of Sri Mishra that the respondent no. 5 by the order impugned dated 29.08.2018 had directed for inquiry under the provisions of Section 65 of the Act constituting a three member committee. 7. Sri H.R. Misra, learned Senior Counsel, appearing on behalf of the petitioner, submitted that the inquiry contemplated under Section 65 of the Act can be held only on application of a society or upon an application signed by not less than 1/3 of the total members of the society, or majority of the members of the Committee of Management of the society, as in the present case the bank is under liquidation and no application has been moved signed by1/3 of the total members of the society nor majority of members of the Committee of Management have come up for such inquiry, as such, the order passed by the respondent no. 5 initiating the inquiry is against the provisions of Sub-Section 2 of Section 65 of the Act. 8. He further contended that the Assistant Commissioner/Assistant Registrar, Cooperative Societies, Kanpur Region, Kanpur is admittedly the Official Liquidator, then in such a view of the matter the order dated 29.08.2018 is wholly illegal and without jurisdiction and no inquiry can be initiated under Section 65 of the Act. Apart from these two contentions no other point was pressed by learned counsel for the petitioner. He further placed reliance upon a decision of co-ordinate Bench of this Court passed in Writ Petition No. 37566 of 2019 (Hari Om Gupta Vs. Apart from these two contentions no other point was pressed by learned counsel for the petitioner. He further placed reliance upon a decision of co-ordinate Bench of this Court passed in Writ Petition No. 37566 of 2019 (Hari Om Gupta Vs. State of U.P. and others) where a solitary member of the society had filed petition for direction for initiating inquiry and this Court declined to interfere in the said case. 9. Per contra, learned Standing Counsel submitted that there is no bar under the Act that the Registrar cannot suo moto himself initiate the inquiry under Section 65 of the Act and also in a case where a society is under liquidation. He further placed before the Court a decision of a coordinate Bench of this Court passed in Public Interest Litigation (PIL) No. 48181 of 2017 (Vishnu Kumar Jha Vs. Reserve Bank of India and others) in which similar prayer was made for inquiry against the bank in question, and the Court declined to entertain the petition and directed that the petitioner may approach the Registrar, Cooperative Societies, for holding an inquiry in respect of the financial irregularities. The said order dated 13.10.2017 is extracted here as under; “The only prayer made in the writ petition reads thus: "I. Issue a writ, order or direction in the nature of Mandamus commanding the respondent no. 1 to set up an investigating sleuth and conduct through and proper enquiry of financial embezzlement and corruption, being done by the respondent no. 5, in the garb of alleged ban imposed by the respondent no. 1 Brahmwart Commercial Cooperative Bank Ltd. having its registered Office at Ratan Lal Nagar, Kanpur Nagar." We are not inclined to entertain this writ petition for such a prayer since there are several remedies available under the provisions of the U.P. Cooperative Societies Act, 1965 for redressal of his grievance including under Section 65. Under this provision, it is always open to the petitioner to approach the Registrar, Cooperative Societies, for holding an inquiry in respect of financial irregularities. Keeping that remedy open, the petition is disposed of.” 10. We have heard learned counsel for the parties and perused the material on record. 11. Before proceeding to appreciate the respective arguments it would be appropriate to have a glance of Section 65 of the Act, which is reproduced below; “65. Inquiry by Registrar. Keeping that remedy open, the petition is disposed of.” 10. We have heard learned counsel for the parties and perused the material on record. 11. Before proceeding to appreciate the respective arguments it would be appropriate to have a glance of Section 65 of the Act, which is reproduced below; “65. Inquiry by Registrar. -(1) The Registrar may, of his own accord, himself or by a person authorised by him by order in writing, hold an inquiry into the constitution, working and financial condition of a co-operative society. (2) An inquiry of the nature referred to in sub-section (1) shall be held by the Registrar or by a person authorised by him in writing in this behalf on the application of- (a) a co-operative society to which the society concerned is affiliated; (b) not less than one-third of the total members of the society; (c) a majority of the members of the committee of management of the society. (3) The Registrar, or the person authorised by him under subsection (1) shall for the purposes of any inquiry under this section, have the following powers, namely - (a) he shall, at all times, have access to the books, accounts, documents, securities, cash and other properties belonging to or in the custody of the society and may summon any person in possession of, or responsible for the custody of any such books, accounts, documents, securities, cash or other properties, to produce the same at any place at the headquarters of the society or any branch thereof; (b) he may summon any person who, he has reason to believe has knowledge of any affairs of the society to appear before him at any place at the headquarters of the society or any branch thereof and may examine such person on oath; (c) he may, notwithstanding any rule or bye-law specifying the period of notice for a general meeting of the society required the officers of the society to call a general meeting at such time and place at the headquarters of the society or any branch thereof and to determine such matters as may be directed by him and where the officers of the society refuse or fail to call such a meeting he shall have power to call it himself; and (d) he may in the manner and for the purpose mentioned in clause (c) requires to be called of himself call a meeting of the committee of management. (4) Any meeting called under clause (c) or clause (d) of subsection (3) shall have the powers of the general meeting or meeting of the committee of management, as the case may be, under the bye-laws of the society and its proceeding shall be regulated by such bye-laws. (5) When an inquiry is made under this section, the Registrar shall communicate the result of the inquiry to the society and, in the case of inquiry on an application under clause (a) of sub-section (2), also to the applicant co-operative society.” 12. A careful reading of Section 65 of the Act provides that Registrar may, of his own accord, himself or by a person authorised by him by order in writing, hold an inquiry into the constitution, working and financial condition of a co-operative society. A careful reading of Section 65 of the Act provides that Registrar may, of his own accord, himself or by a person authorised by him by order in writing, hold an inquiry into the constitution, working and financial condition of a co-operative society. Thus, Sub-Section (1) of Section 65 is crystal clear as far as the powers of Registrar are concerned for suo moto initiating inquiry by himself or by a person authorised by him, as in the present case the Assistant Commissioner/Assistant Registrar, who has been delegated powers of the Registrar, proceeded to initiate inquiry under Section 65 of the Act. 13. Sub-Section (2) of Section 65 of the Act deals with a situation where any society which is affiliated to the society in question approaches with an application to the Registrar or where 1/3 of the total members of the society or majority of the members of the Committee of Management approach the Registrar for initiating inquiry, then the Registrar may initiate inquiry as provided under Sub-Section (1) of Section 65 of the Act. Thus, from the conjoint reading of the Sub-Sections 1 and 2 of Section 65, it is clear that both sub-sections operate independently and Registrar under Sub-Section 1 has ample power to either himself order for an inquiry or by any person authorised by him order holding an inquiry into the constitution, working and financial condition of cooperative society. Thus, there is no bar that only on application by a society or 1/3 of the total members of the society or majority of members of Committee of Management inquiry can be initiated into the constitution, working or financial condition of a society. 14. Rather, Sub-Section 2 has been provided under Section 65 of the Act so as to safeguard in those cases where Registrar or his subordinate failed to exercise the powers, so conferred on them, then on an application by the society or 1/3 members of the society or majority of members of the Committee of Management an inquiry can be held under Section 65. 15. The argument raised by Sri Misra, learned Senior Counsel, cannot be accepted to the extent that only on an application of 1/3 members of the society or majority of the members of the Committee of Management, Registrar can exercise power of inquiry under Section 65 of the Act. 15. The argument raised by Sri Misra, learned Senior Counsel, cannot be accepted to the extent that only on an application of 1/3 members of the society or majority of the members of the Committee of Management, Registrar can exercise power of inquiry under Section 65 of the Act. The Act in noway bridles the powers of Registrar suo moto exercising power of inquiry into the constitution, working and financial condition of a cooperative society. 16. The second argument of the learned Senior Counsel in regard to the bank in liquidation and the Assistant Commissioner/Assistant Registrar holding the charge of Official Liquidator, hence, Registrar cannot order for inquiry is also not founded on any cogent reasons, as the respondent no. 5, in the present case, had constituted a three member committee for holding inquiry under Section 65 of the Act. Further, Section 72 of the Act contemplates winding up of a cooperative society if the Registrar after an inquiry as has been held under Section 65 or upon inspection made under Section 66, or on receipt of an application made by not less than 3/4 members of the cooperative society is of the opinion that the society ought to be wind up may pass an order for winding up, meaning thereby that the conditions precedent to the winding up are that either an inquiry has been held under Section 65 or an inspection has been made under Section 66 or an application has been made by not less than 3/4 of the members of the society that society be wound up. 17. As we have seen that the license of the bank in question was cancelled by the order of the Reserve Bank of India and further on its directions the Registrar had appointed Official Liquidator for winding up, thus, the order passed by the respondent no. 5 directing for inquiry under Section 65 of the Act cannot be faulted on either of the grounds, as the Reserve Bank of India had already formed the opinion that the functioning of the bank was not proper and after the Reserve Bank of India was satisfied not to allow bank to carry on banking business any further as it would be detrimental to the interest of its present and future depositors, cancelled the license, which was granted to it. 18. 18. It is very strange to note that the petitioner before this Court is Secretary/General Manager of the bank, which is under liquidation, who is resisting the inquiry under Section 65 of the Act, as the Reserve Bank of India had taken this drastic step to save the money of the depositors, which in the wisdom of the Reserve Bank of India not much has been left to pay its present and future depositors put a safeguard by cancelling the license, thus, the inquiry directed by the respondent no. 5 cannot be faulted. 19. From the perusal of the writ petition, we find that petitioner has failed to disclose any reason as to why he is opposing the inquiry, so initiated, under Section 65 of the Act, as he is the Secretary/General Manager of the bank and the inquiry, so conducted, would only bring to surface the irregularities committed in working and financial condition of the society by the persons concerned, who could be brought to justice. 20. We fail to understand why this petition on behest of the petitioner has been filed to stall the inquiry, so initiated, by respondent no. 5 in a bank which is under liquidation, as the same would be beneficial to the depositors and their money lying in the bank. 21. In view of the above, we are not inclined to interfere with the order impugned and writ petition is dismissed, accordingly.