Shiv Kumar Bagra and Another vs The Panchkula Urban CooperativeBank Limited and Others

The main point involved in the writ petition is whether to an insured Cooperativebank, for removal of members of the Managing Committee or Board of Directors, action has to be taken in accordance with the provisions of Section 94 of the Haryana Cooperative Societies Act, 1984 (for short ''the Act''), or in accordance with the provisions of Section 34 of the Act. Our answer is that Section 94 of the Act would be applicable.

The Panchkula Urban CooperativeBank, Ltd. Panchkula, District Ambala, which is an insured CooperativeBank (hereinafter called ''the insured bank''), was being governed by the Board of Directors. The Deputy Registrar, exercising the powers of the Registrar Cooperative Societies,--vide order dated 23rd June, 1989, copy Annexure P1, placed under suspension the Board of Directors u/s 34 of the Act, and appointed the Assistant Registrar, Cooperative Societies, Ambala, as an Administrator for the management of the affairs of the bank till the proceedings u/s 34 of the Act, which were to be initiated separately were completed. Vide Annexure P4, dated 7th July, 1989, the Deputy Registrar served a show cause notice on the Board of Directors detailing the allegations levelled against their way of working. Annexure P5 is the reply, and,--vide order Annexure P6, dated 15th December, 1989, in exercise of the powers u/s 34 of the Act, the Deputy Registrar removed the members of the Board of Directors, after giving a finding that all the allegations were proved. By the same order, the Deputy Registrar allowed the Assistant Registrar, Cooperative Societies, Ambala, to continue to act as Administrator of the insured bank for a period of one year or till the elections of the Board of Director of the bank are held, whichever is earlier.

The order of removal of the members of the Board of Director and the suspension has been challenged in this writ petition filed in January, 1990.

While u/s 34 of the Act, the Registrar has the authority to order the removal of such persons on being satisfied about their persistent defaults or negligent in the performance of their duties, u/s 94 of the Act the Registrar can do so if so required by the Reserve Bank in public interest or for prevention of the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of the bank.

As already noticed, it is not disputed that the Board of Directors or the Managing Committee of the Bank, with which we are concerned, is an insured Cooperativebank while counsel for the Petitioners has argued that special provision has been made in Section 94 of the Act for taking such action in the case of insured Cooperativebank, the stand of the Respondents is that Section 34 of the Act would be applicable. In order to appreciate the controversy, it will be desirable to reproduce both the provisions:

34: Removal of Committee.--(1) If in the opinion of the Registrar, a committee persistently makes default or is negligent in the performance of duties imposed on it by this Act or the rules of the bye-laws or commits any act which is prejudicial to the interest of the society or its members, the Registrar may after giving the committee an opportunity to state its objections, if any, by order in writing, remove the committee, and order fresh election of the committee or appoint administrators in accordance with the provisions of Section 33.

(2)

(3)

(4) Before taking any action under Sub-section (1) in respect of a Cooperativesociety, the Registrar shall consult the financing institution to which it is indebted.

Special provision for insured Cooperativebanks.

Notwithstanding anything contained in this Act, in the case of an insured Cooperativebank:

(i) an order for the winding up, or an order sanctioning a scheme of compromise or arrangement or of amalgamation or reconstruction (including division or reorganisation) of the bank may be made only with the previous sanction in writing of the Reserve Bank of India;

(ii) an order for the winding up of the bank shall be made by the Registrar if so required by the Reserve Bank of India in the circumstances referred to in Section 13D of the Deposit Insurance and Credit Guarantee Corporation Act, 1961;

(iii) if so required by the Reserve Bank of India in the public interest or for prevention the affairs of the bank being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of the bank an order shall be made by the Registrar for the removal of the committee of management or other managing body (by whatever name called) of the bank and the appointment of an administrator therefor for such period or periods, not exceeding five years in the aggregate, as may from time to time be specified by the Reserve Bank of India, and the administrator so appointed shall, after the expiry of his term of office, continue in office until the day immediately preceding the date of the first meeting of the new committee;

...........

A reading of the aforesaid two provisions will show that if it is not a case of insured Cooperativebank then Section 34 of the Act would be applicable but in case of an insured bank there is special provision in Section 94 of the Act. Not only that it is mentioned in Section 94 of the Act itself that it is special provision for an insured Cooperativebank. Opening words in this section are "Notwithstanding anything contained in this Act", which means in spite of anything contained in any other provision of the Act, in case of insured Cooperativebanks, Section 94 of the Act alone would be applicable to the exclusion of Section 34 if action is required to be taken against the Managing Committee or other Managing body (by whatever name called) of the bank. Therefore, the non obstante clause, notwithstanding anything contained in this Act, has to be born in mind while coming to the conclusion whether Section 94 of the Act excludes the applicability of Section 34 of the Act in the case of an insured Cooperativebank.

In this view of the matter, we are of the opinion that in case of an insured Cooperativebank, special provisions contained in Section 94 of the Act would be applicable and not Section 34 of the Act.

The law framers kept in view the special rights of an insured Cooperativebank and for that reason made a special provision as is contained in Section 94 of the Act, wherein it was provided that if action is to be taken against an insured Cooperativebank, it will be taken if so required by the Reserve Bank. In this case, there is no such requirement by the Reserve Bank of India and in the absence thereof Registrar u/s 94 of the Act could not take action against the Managing Committee or the Board of Directors.

The action taken u/s 34 of the Act, is therefore, without jurisdiction. Even if the Deputy Registrar had mentioned that he was taking action u/s 94 of the Act but without being so required by the Reserve Bank of India, it would have been without jurisdiction.

For the reasons recorded above, we allow the writ petition and quash order Annexure P-6 with costs, quantified at Rs. 1,000. Since the initiation of proceedings by the Registrar was without jurisdiction, order of suspension, Annexure P-1 is also quashed.

However, this order will not stand in the way of the Registrar to take action afresh against the delinquent Board of Directors on the same allegations if so required by the Reserve Bank of India.