Gauhati High Court
Rashtriya Gramin Vikas Nidhi (Rgvn) vs Union Of India And 8 Ors on 5 September, 2024
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GAHC010155232024
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/3880/2024
RASHTRIYA GRAMIN VIKAS NIDHI (RGVN)
A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT
XXI,1860. WITH ITS REGISTERED OFFICE AT OPP. BYE LANE NO. 8,
RAJGARH ROAD, GUWAHATI 781003 ASSAM INDIA, THROUGH ITS
EXECUTIVE DIRECTOR, DR. AMIYA KUMAR SHARMA, PHD
VERSUS
UNION OF INDIA AND 8 ORS
THROUGH THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF
FINANCIAL SERVICES, JEEVAN DEEP BUILDING, SANSAD MARG, NEW
DELHI 110001
1:A) FORMER CHAIRMAN OF THE GOVERNING BOARD OF RGVN
WHO WAS THE NOMINEE OF THE INDUSTRIAL FINANCE CORPORATION
OF INDIA (IFCI) LTD.
HOUSE NO. 55
RAJGARH ROAD
GUWAHATI 781003
DIST KAMRUP M ASSAM AND ALSO AT IFCI LIMITED
IFCI TOWER
61
NEHRU PLACE
NEW DELHI 110019
2:IFCI LIMITED
THROUGH THE CHAIRMAN CUM MANAGING DIRECTOR
IFCI TOWER
61
NEHRU PLACE
NEW DELHI 110019
Page No.# 2/14
3:SRI MANOJ MITTAL
FORMER CMD
IFCI LTD
CURRENTLY MD AND CEO
SIDBI LIMITED
SIDBI TOWER
15
ASHOK MARG
LUCHNOW
UP 226001
4:SRI PRASOON
EXECUTIVE DIRECTOR
IFCI LIMITED
IFCI TOWER
61
NEHRU PLACE
NEW DELHI 110019
5:SRI CHIRAG SAPRA
DGM
IFCI LIMITED
IFCI TOWER
61
NEHRU PLACE
NEW DELHI 110019
6:ICICI BANK
ICICI BANK TOWERS
BANDRA KURLA COMPLEX
MUMBAI 400051
MAHARASTRA
7:THE BRANCH MANAGER
ICICI BANK
BHANGAGARH BRANCH
GROUND FLOOR
SHANTI COMPLEX
G.S ROAD
BHANGAGARH
GUWAHATI 781005 ASSAM
8:THE STATE BANK OF INDIA
STATE BANK BHAWAN
VIDHAN BHAVAN MARG
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NARIMAN POINT
MUMBAI MAHARASTRA 400021
9:THE BRANCH MANAGER
NEW GUWAHATI BRANCH
BAMUNIMAIDAM
NEW GUWAHATI DIST KAMRUP M GUWAHATI 781021 ASSA
Advocate for the Petitioner : J A MONDAL, MR. A. K. SARMA,MS. S SARMA,MR. B J
TALUKDAR
Advocate for the Respondent : DY.S.G.I., MR. S SARMA(R-2, 4),MR. C TALUKDAR(R-2, 4),P
BORUAH(R-2, 4),MR D K MEDHI(R-2, 4),A GAUTAM(R-2, 4),MR D GOSWAMI(R-9),MR P
GOGOI(R-9),MR. W SHARMA(R-9),MR. A K SAHEWALLA(R-9),SC, I C I C I BANK,SC, SBI
BEFORE
HONOURABLE MR. JUSTICE ARUN DEV CHOUDHURY
Date : 05-09-2024
JUDGMENT & ORDER (ORAL)
1. Heard Ms. S Sarma, learned counsel for the petitioner.
Also heard Mr. S Sarma, learned senior counsel assisted by Mr. A
Gautam, learned counsel for the respondent Nos.2, 4 and 5 and Mr.
M.K. Choudhury, learned senior counsel assisted by Mr. M Dutta,
learned counsel for the respondent No.3.
2. The present writ petition is filed seeking a writ of
mandamus and/or certiorari and/or any writs of like nature
restraining the respondents from interfering with the affairs of the
petitioner society. It is further prayed that pending disposal of the
writ petition, the respondents more particularly, respondent No.1(a)
to 5 be restrained from interfering in the affairs of the petitioner
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society, till contentions raised in Title Suit 605/2023, pending for
disposal in the court of learned Civil Judge, Senior Division, Kamrup
(M) at Guwahati, is decided and as an interim measure to direct the
respondent Nos.6 to 9 to defreeze the accounts of the petitioner
society.
3. The brief facts of the case of the petitioner as urged by
Ms. S Sarma, learned counsel and pleaded in the writ petition is to
the effect that Rashtriya Gramin Vikas Nidhi (for short, RGVN), is a
society registered under the Societies Registration Act, 1860. Such
society was registered in the year 1990. According to the petitioner,
the activities of the organization are currently carried out by a team
of 20 regular and 188 contractual qualified professionals headed by
its Executive Director. It is also the case of the petitioner that the
Governing Body of the society has been headed by the Chairman
nominated by Industrial Finance Corporation of India (IFCI), a
Government of India undertaking and it was one of the initial
sponsors of the society at the time of its inception in the year 1990.
According to the petitioner, the respondent No.3 as Chairman of the
Governing Body of the RGVN worked to the detriment of the RGVN
in different manners, which are narrated in paragraph 5 of the writ
petition.
4. According to the petitioner, for the illegal action of the
respondent No.3, i.e., the Chairman, the society was not being able
to upload the Annual Financial Accounts as the society had less than
7 Board Members. It was the further contention that for the fault of
the Chairman, the numbers of Board fell below 7, which is the
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minimum requirement as per the Memorandum of Association, the
closure of the society was imminent inasmuch as in such an
eventuality, the society would face with cancellation of the
registration.
5. In the aforesaid backdrop of illegality, according to the
petitioner, the independent members of the Board had expressed
deep anguish. A suit was preferred by the RGVN, which was
registered as Title Suit No. 605/2023. During the pendency of the
suit, according to the petitioner, being faced with existential threat,
the members of the Governing Board decided to increase the
numbers of the members of the Governing Board and accordingly,
an EOGM was called and the same was held on 27.09.2023, wherein
the respondent No.3 did not attend and accordingly, the existing
members therein unanimously chose that one Sri Gautam Baruah
would be the Chairman of the Governing Board of RGVN. Thereafter,
the new Board members of the Governing Board of the RGVN
amended the Memorandum of Association of the RGVN and the
same was uploaded on the website of Register of Societies for the
purpose of ensuring the continued existence of the RGVN inasmuch
as, the accounts of the RGVN could be uploaded on the website of
the Income Tax authorities, only after uploading of such resolution in
the portal of Register of Societies. However, according to the
learned counsel for the petitioner, on 11.07.2024 the respondent
No.5 (Branch Head of IDBI Bank) froze the accounts of the society.
Thereafter, on 31.07.2024, the accounts of RGVN maintained in
ICICI Bank, Bhangagarh Branch, and the accounts maintained in
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SBI, New Guwahati Branch were also frozen. Such decisions are
challenged in the present writ petition.
6. Ms. Sarma, learned counsel for the petitioner argues that
such action on the part of the bank is unauthorized and illegal and
void for violations of Principles of Natural Justice. Such actions are
also in contravention of the provisions contained in section 45 ZB of
the Banking Regulation Act, 1949 and the RBI Master Circular on
Know Your Customer (KYC) norms/Anti Money Laundering (AML)
Standards/Combating of Financing Terrorism (CFT)/obligations of the
Banks under PMLA, 2002. According to the learned counsel, the
condition precedent which empowers the banking authority under
the aforesaid RBI Master Circular was not available in the case in
hand and therefore, the action of the respondents are out and out
illegal. Therefore, such actions are liable to be interfered with.
7. In addition to the aforesaid, Ms. Sarma, learned counsel
for the petitioner argues that when the matter was sub-judice and
was pending for adjudication before a competent court, the
respondent authorities were not within its jurisdiction to act in the
manner they have acted and on this count alone the impugned
orders are liable to be set aside.
8. The respondent No.3 i.e the IFCI has filed an affidavit in
opposition. Relying on such affidavit, Mr. S Sarma, learned senior
counsel argues that though the writ petition has been filed in the
name of the Society, however, the petitioner No.1 is having no
sanction and authority in the name of RGVN. The society cannot be
represented by the Executive Director nor the writ petitioner society
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is the actual RGVN. According to him, the Executive Director is
having no sanction and authority under law to file such a petition on
behalf of the RGVN and the petitioner is a non entity in the eye of
law. Further, the very existence of the society represented by the
Executive Director is asserted to be illegal and according to Mr.
Sarma, already the IFCI has filed a Title Suit against such entity.
9. It is further contended by Mr. Sarma that a bare perusal of
the Title Suit preferred by the petitioner shall disclose that the suit
was filed against the Chairman of the Governing Board and for a
declaration that the Chairman nominated by the IFCI has no right to
interfere with the activities of the plaintiff organization and a
permanent injunction was also sought. However, the petitioner has
suppressed such fact of seeking an injunction and non grant of any
injunction till date by the trial court. Therefore, on this count alone
the present writ petition is liable to be dismissed, contends Mr.
Sarma, learned senior counsel.
10. On merit Mr. Sarma argues that the IFCI is the sponsor and
founder of RGVN and therefore the basic structure of the society
cannot be changed, in the manner the same has been done at the
behest of the Executive Director. It is contended that only to have a
control over the society, the Executive Director in collusion with
others have altered the basic structure of RGVN including its
Memorandum of Association and such alteration is under challenged
in the Title Suit preferred by the IFCI. Therefore, the IFCI being the
sponsoring and controlling authority of RGVN, it has every right to
ask banking authorities to freeze the account so as to protect public
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money and to ensure that such money do not go to the hands of
certain people who are not having any authority under law to run
the affairs of the RGVN. According to Mr. Sarma, learned senior
counsel the RBI guidelines is not applicable in the given facts of the
present case, inasmuch as the petitioner represented by its
Executive Director is not the society in whose name the accounts are
being maintained.
11. I have given my anxious consideration to the arguments
advanced by the learned counsel for the parties.
12. As the argument revolves around the structure of the society
and also as regards the question who is the actual society, let this
court first consider the Memorandum of Association of the society.
13. The Memorandum of Association of the society defines IFCI
as Industrial Finance Corporation of India. "Other Central Financial
Institutions" is defined as IDBI, ICICI, NABARD and such other
institutions as may be recognized by the Governing Board. As per
the MOA, the Governing Board is a Board constituted for the purpose
of General Superintendence, Management and Control of the affairs
of the society. "Sponsors" are being defined to mean IFCI and such
other Central Financial Institutions as may be recognized as sponsors
by the Governing Board. The MOA further defines management as
the Management of Affairs of the society in accordance with rules of
the society by a Governing Board.
14. A Rule has also been framed. Rule 2 of the rules of the
society deals with funds of the society. Amongst others, the funds of
the society shall consist of grants received from the Sponsor or any
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member of the society.
15. Rule 4 prescribes that General Body of the society shall
consist of Permanent Members and Institutional Members.
Permanent Members are the sponsors and the Institutional Members
will be Financial Institutions, Banks, Corporate Bodies, Charitable
Trust, Benevolent Societies, Academic Bodies, Research Institutions,
Institute or Bodies organized or set up by Central Government or
State Government.
16. Thus ,from the aforesaid it is clear that IFCI is the sponsor
of the society as well as Member of the Society along with other
financial institutions like IDBI, ICICI etc.
17. Rule 6 of the Rules prescribes that Governing Board shall
consist of not less than 7 and not more than 21 members excluding
the Executive Director and nominees of sponsor. It further provides
that the IFCI shall have right to nominate 2 members and each of
the sponsor shall have a right to nominate one member and the
other members may be co-opted by the Governing Board from
amongst eminent personalities. It further prescribes that a nominee
of the IFCI shall be the ex-officio Chairman of the Governing Board
and the society.
18. Thus, from the original rule, it is prima facie seen that the
Board can consist of only permanent and institutional members with
a provision of co-opting two members from amongst the prominent
personalities and that the ex-officio chairman shall be nominee of
IFCI.
19. Therefore, this court is of the view that the IFCI is having a
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dominant control over the affairs of society being one of the major
sponsors of the society and IFCI itself is a Central Government
Organization and the other sponsors are ICICI & IDBI.
20. The function of the Executive Director is detailed in Rule 14
of the Rules and Executive Director is responsible for proper
administration of the society and for conduct of the staff and such
Executive Director is to perform under direction and control of the
Governing Board.
21. Rule 30 prescribes for procedure of alteration of rules and
such procedure mandates that a majority of the members of the
society present and voting at the General meeting of the society can
do it by vote. The members are defined to be the permanent
members and institutional members as discussed hereinabove. Thus
as per MOA the Rule can be altered by Permanent and Institutional
Members.
22. It is also on record that a proposal was made on 16.05.2023
by the Executive Director addressed to the Chairman to co-opt five
persons. It is also on record that the 97 th Meeting of the Governing
Board was held on 23.06.2023, wherein the nominee of the IFCI,
NABARD, two members and Ex-Officio Chairman and the Executive
Director were present. The issue of co-opting Governing Board
members as made by communication dated 16.05.2023 was
withdrawn, which finds a mention under agenda item No.5 of the
meeting. Thereafter, on 04.08.2023, the Executive Director again
proposed five names to be co-opted as Board Members of the
society, which was responded by the IFCI to the effect that as the
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subject matter was already taken up in Board of Governors meeting
dated 23.06.2023, no response is required from the IFCI.
Thereafter, another meeting was purportedly held on 15.09.2023, to
be 98th meeting of the Governing Board consisting of one
Chairperson of the meeting, one member, Executive Director, three
Directors and one Assistant Director, Accounts and in the said
meeting five members were co-opted.
23. From the records, it is seen that in the aforesaid meeting
(15.09.2023) none of the Permanent Members and Institutional
members were present. The MOA or Rules were also not amended in
such meeting, which was, however, subsequently done by the new
Board of Directors selected on the meeting dated 15.09.2023.
Subsequently, certain Rules were amended which are under
challenge in the civil suit preferred by IFCI. The IFCI preferred the
suit challenging the aforesaid decisions to amend the Rules and MOA
to be illegal and unauthorized which is still pending disposal.
24. From the records and pleadings made available, this court
has also arrived at a prima facie view, subject to determination in
the suit that the Board of Directors can consist of permanent
members and institutional members with provisions of inclusion of
co-opted members and as recorded herein above, the Chairman is to
be the nominee of the IFCI and that the rules can be amended with
a General Body Meeting with a prior written proposal.
25. Therefore, this court is also of the prima facie view, subject
to the decision that may be made in the pending suit between the
parties, that the institutional members were not part of such
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meeting when decision to choose the Chairman was taken and the
meeting altering the Rules of the society.
26. Therefore, in the given facts of the present case, to allow
the operation of the bank account, which has been frozen on the
request of IFCI, this court is to make a determination as regards the
right of the present petitioner to operate such bank account, which
in the considered opinion, cannot be a subject matter of a writ
petition inasmuch as the same is pending adjudication before the
trial court and above that, still an injunction seeking similar relief by
the petitioner is pending before the trial court for adjudication.
27. The Master Circular 2002 upon which heavy reliance is being
placed, was introduced in the context of recommendations made by
the Financial Action Taskforce on Anti Money Laundering standards
and on Combating Financing of Terrorism and the aim of such
circular is to consolidate all the instructions/guidelines issued by RBI
in this regard. The learned counsel for the petitioner has argued
that reading of clause 2.18 (a), 2.18 (d)(ii), 2.18(d)(V) and 2.18(e)
(i) & (ii) permits that only persons involved in terrorists activities and
who comes within the provision of section 51(a) of the U.A.P.A Act
1967 would be liable to have their account frozen. It is the further
contention of the learned counsel for the petitioner that in terms of
section 45 ZB of Banking Regulation Act, 1949 the Bank accounts
can be frozen only on the basis of any order issued by a court of
competent jurisdiction. This court is of the view that to apply the
aforesaid provisions, it is to be established that the bank account
already frozen belongs to the petitioner inasmuch as it is recorded
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that the dispute as regards ownership of the account is still under
adjudication. This court for the reasons as recorded hereinabove of
is also having a prima facie satisfaction, on the basis of MOA and the
Rules of the society that IFCI is having a better right as on date
compared to the right of the petitioner.
28. That being the position, the guidelines, Rules and provisions
of law upon which the petitioner has placed heavy reliance, cannot
be made applicable, more particularly, until and unless, it is
determined who is the actual account holder of the bank accounts
and whether the present petitioner is the actual society represented
by its Executive Director. Such determination is pending adjudication
before the competent court of law and an injunction application is
also pending in this regard.
29. The respondent Nos.8 and 9 has also filed an affidavit and
according to them, as the Rules of RGVN specifically states that a
nominee of the IFCI shall be the Ex officio Chairman of the
Governing Board and the IFCI has directly written a letter to the
bank praying for freezing the account and also considering the
interest of all the parties, the bank has taken a recourse of freezing
the bank account. Such reason given by the bank, in the considered
opinion of this court, more particularly in the given facts of the
present case, cannot be treated as arbitrary, unreasonable, or illegal
decision to warrant an interference at the hands of this court in
exercise of its power of judicial review.
30. Therefore, this court, for the reasons recorded herein above,
finds no merit in this writ petition and accordingly, same stands
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dismissed. Parties to bear their own cost.
31. While parting with the record, it is made clear that the
observations made in this order is for the purpose of considering the
legality of the action of freezing the bank account, and any
observations made herein shall not influence the learned trial court
in determining the issues raised before it by the parties in their
respective suits and in the miscellaneous applications.
JUDGE
Comparing Assistant
