INDIA BUSINESS WORLD - JANUARY 1st - JANUARY 15th
- 2008
NO HEARING WHEN RBI SUPPRESSES MANAGEMENT OF COOPERATIVE BANKS: SUPREME COURT
The Supreme Court has ruled that in case of suppression of the management of a co-operative bank by the Reserve Bank of India (RBI) to safeguard the interests of small investors, no hearing would be given to the management of the affected bank.
A bench comprising Justices G P Mathur and Aftab Alam have allowed the appeal of the RBI against the judgment of the Karanataka High Court quashing the RBI order appointing an administrator Kalidasa co-operative Bank dated January 22, 2002.
The RBI took the drastic step following failure of the bank management to improve its functioning despite several opportunities.
The RBI issued requisition to the Registrar Co-operative Societies, Karnataka, to appoint an administrator.
The apex court in its judgment said, "On hearing Mr Trivedi, counsel for the appellant, and on careful consideration of the relevant provisions of the law and decisions cited before use, we have no hesitation in accepting the submissions made on behalf of the appellant. We accordingly answer the question (framed in the beginning of the judgment) in the negative and hold and find that on receipt of a requisition in writing from the RBI, the Registrar Co-operative Societies is bound to issue the order of suppression of the committee of management of the co-operative bank. At that stage the affected bank has no right of hearing or to raise any objections." The SC further noted, "The question may here arise again whether the principles of natural justice are completely excluded from the process or it may be against the requisition, the affected bank may move the RBI itself and try to show that it had wrongly arrived at the decision for its suppression.
"The other course may be that after suppression order was issued by the registrar that may be challenged before the court of law and in that proceeding one ground for assailing the order might be that the decision of the RBI was arrived at without giving the affected co-operative bank a proper opportunity of hearing. We, however, refrain from going into the question as it ds not arise in the facts of the present case," the court said.
The apex court, however, held that the order of the Registrar, dated January 31, 2002, of suppression would not be automatically revived but in case the RBI was of the opinion that the situation so warranted it may issue a fresh requisition to the Registrar Cooperative Societies, Karnataka, who would on that basis pass the order of suppression as held in the judgment.
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