Rupee Co Op Bank Ltd. Thr Its ... vs The Union Of India Thr Ministry Of ...
2022 Latest Caselaw 9650 Bom

                                                          501&502-WP-11300-2022.odt

                              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                      CIVIL APPELLATE JURISDICTION

          Digitally
                                    WRIT PETITION NO.11300 OF 2022
          signed by
          SHAMBHAVI
SHAMBHAVI NILESH
NILESH
SHIVGAN
          SHIVGAN
          Date:
                       Rupee Co-op. Bank Ltd.                            ..... Petitioner
          2022.09.22
          17:40:43          Vs.
          +0530
                       The Union of India & Ors.                         ....Respondents

                                                  WITH
                                    WRIT PETITION NO.11318 OF 2022

                       Rupee Sangharsh Samiti                            ...Petitioner
                            Vs.
                       Reserve Bank of India and Ors.                    ...Respondents

                                                        ....

                       Mr. Pratap Patil with Ms. Vishakha Shelar for the Petitioner in WP
                       11300/2022.
                       Mr. Avinash Fatangare i/by Ms. Archana Shelar for Petitioner in
                       WP 11318/2022.
                       Mr. Parag A. Vyas with Ms. Karuna Yadav for Respondent No.1-
                       UOI in WP/11300/2022.
                       Smt. M.S.Srivastava AGP for State for Respondent Nos.4 and 5 in
                       WP 11300/2022.
                       Mr. Venkatesh Dhond Senior Adv. With Mr. Prasad Shenoy with
                       Mr. Parag Sharma with Ms. Aditi Phatak with Ms. Kirti Ojha with
                       Mr. Vijay Salokhe i/by BLAC and Co. for Respondent No.1 in WP
                       11318/2022.

                                       CORAM: SANDEEP K. SHINDE, J.

RESERVED ON : SEPTEMBER 21, 2022 PRONOUNCED ON: SEPTEMBER 22, 2022 P.C.

1. These Petitions were heard on 21st September, 2022

and listed on today's board for pronouncing the order at 2.30

p.m.

Shivgan 1/10 501&502-WP-11300-2022.odt

2. In the first session, Mr. Dhond, learned Senior Counsel

appearing for the RBI brought to the notice of this Court that the

order impugned being passed under the Banking Regulation Act,

1949, the learned Single Judge does not have the power to

dispose of the petitions in terms of Chapter 17 Rule 18 of the

Bombay High Court Appellate Side Rules, 1960. Mr. Dhond, thus,

suggested that petitions may lie before the Division Bench. Mr.

Patil, learned counsel appearing for the Bank relied on Rule 18(3)

of the Chapter 17 of the Bombay High Court Appellate Side

Rules, 1960, to submit that the learned Single Judge of this Court

can entertain the petition against the order passed under the

Banking Regulation Act, 1949.

3. Registrar (Judl) of this Court was requested to

examine, whether petitions would lie before the Division Bench

or Single Judge. Accordingly, Registry opined that in terms, of

the Sub-rule (3) of Rule 18 of Chapter 17 that Petition

challenging the order passed by the authority under the Banking

Regulation Act, 1949 can be disposed of finally by the learned

Single Judge. Accordingly, Petitions are entertained.

4. The licence issued to the Petitioner-Bank to carry on

banking business in India, under Section 22 read with Section 56

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of the Banking Regulation Act, 1949 was cancelled by the

Reserve Bank of India vide order dated 8 th August, 2022.

5. The RBI recorded its' satisfaction stating, that (i)

though the bank was put under all inclusive directions in

February, 2013 and had ample time and opportunity for its

revival, the Bank's financials continued to be precarious; (ii) the

merger proposals of other urban co-operative banks either did

not materialise or found not acceptable by the DICGC or viable;

(iii) the Task Force for Co-operative Urban Banks (TAFCUB )

recommended for cancellation of licence of the bank. (iv) the

gross NPA of bank were as high as 98.44% as on 31 st March,

2021. (v) the erosion in the deposit assessed, as on 31 st March,

2021 was 41.49%; whereas net worth was (-) 537.97 Crores.

. Thus, concluded that efforts made by the bank were

not sufficient to justify continuation of its operation.

6. It is a matter of record that the Bank employees'

union, Pune and Mr. Naresh Vasant Raut had challenged the

show-cause notices dated 2nd June, 2014 and 22nd June, 2017

respectively in Writ Petition No. 2938 of 2014 and Writ Petition

No.9286 of 2017 respectively and requested the Court to direct

Shivgan 3/10 501&502-WP-11300-2022.odt

RBI not to proceed for cancellation of licence based on show-

cause notices. The Division Bench of this Court vide order dated

12th September, 2017 disposed of the petitions. The operative

part of the order reads as under;

"(i) The Petitioners in both the Petitions are at liberty to give reply to the Reserve Bank of India to the impugned show-cause notice within four weeks from today.

(ii) The Reserve Bank of India shall consider the reply of the Chairman, Board of Administrator, Rupee Co- operative Bank Ltd., as well as both the Petitioners in the above Petitions and pass appropriate orders after hearing the Board of Administrator of Rupee Co- operative Bank as well as the Petitioners in the above Petitions within eight weeks from the date of receipt of the reply.

(iii) In the event, the order of the Reserve Bank of India pursuant to the impugned notice is adverse to the interest of the Petitioners as well as the Board of Administrator of Rupee Co-operative Bank Ltd., the same shall not be implemented for a period of 6 weeks from the date of communication thereof on the advocate for the Petitioners and Board of Administrator of Rupee Co- operative Bank."

7. Pursuant to order, the RBI issued notices to the

Petitioners in the above two Writ Petitions giving them

opportunity to file Written Statement to the show-cause notices.

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8. It appears, replies of the petitioners in the above two

writ petitions were carefully examined by the RBI, however,

replies were not containing a concrete proposal, for revival of the

bank nor any steps were suggested for turning negative turnover

of the bank, positive

9. In any case, the order dated 8th August, 2022

cancelling the banking business licence was carried in appeal

under Section 22(5) of the Banking Regulation Act, 1949 before

the Appellate Authority, Department of Financial Service

(Banking Division) Ministry of Finance, New Delhi.

10. Pending appeal, vide Interim Application No.1 of 2022,

petitioner-bank requested, to suspend the operation of the order

dated 8th August, 2022.

11. The Appellate Authority vide order dated 19 th

September, 2022 found no reason to interfere with the impugned

order and thus, the prayer for interim relief was declined.

Shivgan 5/10 501&502-WP-11300-2022.odt

12. The order dated 19the September, 2022 is challenged

by the Bank and Rupee Sangharsha Samiti, an Association of

Depositors of the Rupee Bank, in these Petitions.

13. In so far as the Writ Petition No.11318 of 2022, filed

by Rupee Sangharsh Samiti is concerned, apparently, petitioner

does not have locus to challenge the order dated 19th

September, 2022 passed by the Appellate Authority, reason

being Rupee Sangharsha Samiti was not an Appellant before the

Appellate Authority. Petition also questions legality of the order

dated 8th August, 2022 passed by the RBI. However, it is brought

to my notice by Mr. Dhond, learned Senior Counsel for the

Respondents that the Rupee Sangharsh Samiti has

independently challenged the order dated 8 th August, 2022

before the Division Bench. Mr. Phatangare appearing for Rupee

Sangharsh Samiti does not dispute this fact. For all these

reasons, I am not inclined to entertain the petition filed by Rupee

Sangharsh Samiti.

14. In so far as the Writ Petition filed by the bank is

concerned, Mr. Patil, learned counsel contended that the

Appellate Authority has not recorded its' independent finding

Shivgan 6/10 501&502-WP-11300-2022.odt

while declining the interim relief. Mr. Patil submitted that the

Appellate Authority, simply accepted and upheld the reasons

recorded by the Reserve Bank of India. Nextly, he submitted that

the proposal of the group of investors to convert bank into Small

Finance Bank (SFB) with infusion of capital has not been

considered by the Reserve Bank of India while passing the

impugned order. Mr. Patil further, submitted that statutory

appeal is scheduled for hearing on 17 th October, 2022. He,

submitted that if order dated 8 th August, 2022, passed by the

Reserve Bank of India is not stayed, the statutory appeal, which

is a substantive right of the Petitioners will be frustrated. Mr.

Patil, therefore, urged that till the disposal of the statutory

appeal, operation of order dated 8th August, 2022 be suspended.

15. Mr. Dhond, learned counsel appearing for the RBI,

would submit that having regard to the fact, that deposit erosion

at 85.93% as on March 31, 2022 and gross NPA of the Bank at

Rs.285.42 Crores and further, there was no improvement in

financial position even after passage of nine years from the

imposition of operational instructions, this Court may not

interfere with the impugned order. Mr. Dhond, on instructions,

submitted that Petitions were also moved before the Division

Shivgan 7/10 501&502-WP-11300-2022.odt

Bench of this Court by the Sangharsha Samiti bearing Writ

Petition No.11096 of 2022, two Petitions by Bank Employees

Union on 20th September, 2022 before the Division Bench. Mr.

Dhond submitted, the Division Bench did not interfere in the

order dated 8th August, 2022 although order of the Appellate

Authority, declining interim relief was placed before the Bench.

The learned counsel further submitted that submissions of

Sangharsha Samiti before the Division Bench were not

considered and, therefore, the Samiti ought not to have filed the

second petition before this Court. Mr. Dhond, learned Senior

Counsel, on instructions, submitted that RBI did not receive any

proposal from investors, as contended by Mr. Patil, learned

counsel for the Petitioner-Bank.

16. The conclusion of the RBI that if the petitioner is

allowed to carry on its' business any further, would adversely

affect the public interest, is founded on the facts and figures set

out in paragraph 5 of the order dated 8 th August, 2022. In

context of this fact, reliance placed on the ruling of the Apex

Court in the case of Peerless General Finance and

Investment Co. Ltd. and Anr. v. Reserve Bank of India

(1992) 2 SCC 343 that it is not function of the Court to sit in the

Shivgan 8/10 501&502-WP-11300-2022.odt

judgment over matters of economic policy and it must

necessarily be left to the expert bodies, equally applies herein. In

any case, the RBI before cancelling the licence had examined

revival and merger proposals. In view of these facts, I am not

inclined to interfere with the order dated 8 th August, 2022 on

merits and that is left open for Appellate Authority to examine in

Appeal. However, since the statutes has provided for substantive

appeal under Section 22(5) of the Banking Regulations Act, 1949

and further the appeal is scheduled for hearing on 17 th October,

2022 in the interest of justice, if the operation of RBI's order

dated 8th August, 2022 is not suspended, until the disposal of the

statutory appeal, the appeal itself would be rendered infructuous

at this stage. Moreover, it could be seen from the impugned

order that the Appellate Authority has directed the respondents

therein to file counter affidavit within two weeks, giving liberty to

the Bank to file rejoinder thereto. The next hearing is fixed on

17th October, 2022 through video conference. In consideration of

this fact, I deem it appropriate to suspend the order dated 8 th

August, 2022, passed by the RBI till the conclusion of Bank's

appeal pending before the Appellate Authority.

Shivgan 9/10 501&502-WP-11300-2022.odt

17. In consideration of the facts of the case, the Appellate

Authority shall endeavour to conclude the hearing of the appeal

on the scheduled date and under no circumstances, shall adjourn

the proceedings either on the request of the appellant or of the

respondents.

18. Thus, the following order;

(i) Pending appeal F.No.14/06/2022-AC of 2022 before

the Appellate Authority-Respondent No.2, operation of the

impugned order dated 8th August, 2022 shall remain suspended.

(ii) The Appellate Authority shall dispose of the appeal

positively on 17th October, 2022 in accordance with law.

(iii) It is clarified that this Court has not expressed any opinion

either on merits and pleas of Bank and respondent are kept

open.

19. Writ Petition No.11300 of 2022 is disposed of. Writ

Petition No.11318 of 2022 be placed before the appropriate

Bench as per the roaster.

                                          (SANDEEP K. SHINDE J.)




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