S.N. Hussain, J.@mdashThis writ petition has been filed by the petitioner challenging order dated 5.7.2004 (Annexure-2) as well as order dated 4.2.2008/7.2.2008 (Annexure-5), both passed by Registrar, Co-operative Societies, Bihar, Patna (respondent no. 2) and also for restraining the Bihar State Co-operative Bank Limited (respondent no. 3) and its Managing Director (respondent no. 4) from interfering with the rights and liabilities of the petitioner as its member.
2. The petitioner bank is a body corporate registered under the provisions of the Bihar Co-operative Societies and the Rules framed thereunder and is a member of the Bihar State Co-operative Bank Limited (respondent no. 3), but the petitioner discharges its function at par with other scheduled banks in terms of the Banking Regulation Act and its functioning is under the supervision and control of the Reserve Bank of India.
3. Learned counsel for the petitioner submits that the management of the petitioner bank vests in the Managing Committee constituted under the aforesaid Act, Rules and its bye laws. However, the Managing Committee of the petitioner bank remained under dissolution and the State Government (respondent no. 1) took over its management by appointing an administrator which continued for about 15 years, whereafter on the orders of this court the democratic system in the petitioner bank and other societies were restored and accordingly election was held and ultimately the present Managing Committee was constituted at the special general meeting dated 6.9.2003.
4. Learned counsel for the petitioner stated that as per the policy of the State Government as well as of NABARD the banks including the petitioner are required to provide loans to the agriculturists through Primary Societies and the said loans are described as Khariff loan and Rabi loan provided between 1st April till 30th September and 1st October till 31st March respectively. The Distribution of such loans has been fully described in paragraph-10 as well as Annexure-1 of the writ petition.
5. Learned counsel for the petitioner further submitted that the petitioner bank is affluent one in the State of Bihar and it had sufficient deposits to the tune of Rs. 60 crores and apart from it the petitioner had sufficient means to advance money to the societies or to distribute loans to farmers through its own resources which it was regularly doing. It is also stated that the petitioner also gave loan to the Housing Co-operative Federation which refunded the total amount with interest to the petitioner in due course.
6. Learned counsel for the petitioner also stated that a new Managing Director was appointed for Bihar State Co-operative Bank Limited (respondent no. 3) and he passed order dated 5.7.2004 (Annexure-2) stating that the petitioner bank was not taking loan from respondent no. 3 although the petitioner was a member and hence it ordered de-affiliation of the petitioner bank from respondent no. 3 and also ordered supersession of its voting rights with immediate effect holding that the petitioner bank ceased to be a member of respondent no. 3 and was divested of all voting rights in the affairs relating to respondent no. 3 and if the petitioner so desires it may apply to respondent no. 3 for return of share capital. By the said order, the Managing Director also recommended to the Registrar, Co-operative Societies (respondent no. 2) to dissolve the Board of petitioner bank and conduct fresh election, whereafter respondent no. 3 shall watch the working of the new Board and if the new Board is inclined to follow the norms and respects its laws then respondent no. 3 shall introduce the petitioner bank to its membership fold and restore the affiliation, but till that period the petitioner bank''s affiliation was to remain suspended..
7. Learned counsel for the petitioner submits that the said order dated 5.7.2004 was challenged by the petitioner in C.W.J.C. No. 9436 of 2004 which was allowed by a Bench of this court on 10.2.2005 quashing the said order which was marked as Annexure-2 in that writ petition. Against the said order of the Single Judge, respondent no. 3 filed L.P.A. No. 137 of 2005 which was allowed by a Division Bench of this court on 21.3.2005 (Annexure-A) on the ground that an appeal had also been filed before the Registrar, Co-operative Societies against order of respondent no. 3 dated 5.7.2004. Hence a direction was given to the Registrar, Cooperative Societies (respondent no. 2) to dispose of the said appeal within fifteen days from the date of receipt of a copy of the said order and respondent no. 3 was also directed to file a show-cause within one week before the Registrar in pursuance of notice dated 23.7.2004. The said order of the Division Bench was challenged by the petitioner in Civil Appeal No. 2844 of 2005 but the Supreme Court passed order dated 21.4.2005 (Annexure-B) affirming order passed by the Division Bench. Learned counsel for the petitioner submits that order dated 21.3.2005 passed in L.P.A. No. 137 of 2005 affirmed by the Supreme Court in Civil Appeal No. 2844 of 2005 passed on 21.4.2005 was to be complied within two weeks, but the Registrar, Co-operative Societies (respondent no. 2) passed his order after more than two years on 7.2.2008 (Annexure-5).
8. Learned counsel for the petitioner argued that since the petitioner had sufficient funds of its own and had been providing loans as per the policy of the Government and NABARD to the agriculturists, there was no question of violation of any rules or bye laws, as in the said circumstances the petitioner was not duty bound to take loan on interest from respondent no. 3. It was also claimed that the Managing Director of respondent no. 3 had no power to pass such order, as such decision taken in the impugned order dated 5.7.2004 can be taken only by the General Body of respondent no. 3, but till date the General Body has not taken any such decision and thus the said order was without jurisdiction. Learned counsel for the petitioner submitted that the Registrar, Co-operative Societies wrongly assumed in his impugned order dated 4.2.2008/7.2.2008 (Annexure-5) that the petitioner had not given any loan to the farmers which was a serious error of record. Learned counsel for the petitioner also submitted that the then Managing Director of respondent no. 3 was merely blackmailing the petitioner and such other banks and was coercing them to take loan from respondent no. 3 which provided loans at much higher rates of interest. This aspect of the matter was ignored by the Registrar, Co-operative Societies, which made out a third case.
9. On the other hand, learned counsel for respondent nos. 3 and 4, namely the Bihar State Co-operative Bank Limited and its Managing Director argued that in its meeting dated 22.3.2004, the Managing Committee of the petitioner bank disassociated itself with respondent no. 3 and hence it was the petitioner itself which wanted de-affiliation from respondent no. 3. It was also stated that the Registrar, Cooperative Societies passed its impugned order on the ground that the petitioner bank had not distributed loan as per the Government policy even from its own fund. It was further asserted that apart from the aforesaid facts admittedly the petitioner bank was giving loans to other institutions which was not legal and proper. Learned counsel for respondent nos. 1 and 2 supported the contentions of learned counsel for respondent nos. 3 and 4.
10. From the aforesaid arguments as well as from the materials on record, it is quite apparent that Section 14(3) of the Bihar Co-operative Societies Act, 1935 (hereinafter referred to as ''the Act'' for the sake of brevity) provided the powers of a Managing Director in which no such power is provided for Managing Director either to dissolve the Board of a member Bank or to suspend its affiliation. Such power according to the provisions of the Act lies with the General Body of respondent no. 3, but it is an undisputed fact that till date the General Body of respondent no. 3 has not taken any decision in that regard nor has even affirmed order dated 5.7.2004 (Annexure-2) passed by its Managing Director. Hence, the said order dated 5.7.2004 is clearly without jurisdiction and on that basis itself the Registrar, Co-operative Societies (respondent no. 2) should have allowed the appeal and set aside the said order but he completely ignored the said fact as well as the provision of law while passing his impugned order dated 4.2.2008 (Annexure-5).
11. So far the resolution of the Managing Committee of the petitioner bank dated 22.3.2004 is concerned, the Registrar, Co-operative Societies (respondent no. 2) completely misdirected himself and failed to appreciate the context in which the said resolution was taken. The said resolution was only with respect to loan transaction due to high rate of interest fixed by respondent no. 3 and hence it was decided that the loan was not to be taken from respondent no. 3 as the petitioner bank had itself sufficient fund. The said resolution of the Managing Committee of the petitioner was in no way for disconnection of its relation with respondent no. 3. It may be noted in this regard that the relation of the petitioner bank with respondent no. 3 is on the basis of its affiliation, as respondent no. 3 is the member of Banking Clearing House and hence the cheques of petitioner bank had to be cleared through respondent no. 3, and for maintaining that relation, it was not incumbent upon the petitioner to necessarily take loan from respondent no. 3.
12. It is quite apparent from the counter affidavit filed by the Reserve Bank of India in C.W.J.C. No. 9436 of 2004 (Annexure-3) that respondent nos. 3 and 4 of the instant writ petition, who were respondent nos. 4 and 5 in that writ petition, were taking undue advantage of the provisions of the regulations and were blackmailing its member bank and were depriving it the banking facility and clearing facility which was absolutely unjustified. It was also stated in the said counter affidavit that even otherwise the Managing Director cannot take suo motu any decision in the matter as it was for the Board or the General Body of the State Co-operative Bank to take decision in the matter. It was further stated that the Managing Director was not competent to deprive the member banks of sub-membership of Bankers Clearing House and clearing facility.
13. It may be noted that a Central Co-operative Bank namely the petitioner is a Co-operative Society having area of operation within the district concerned whose membership is open to Co-operative Societies within the district and it is popularly known as ''Federal Society'', whereas the State Co-operative Bank (respondent no. 3) is the Co-operative Society of the Co-operative Societies within the State whose membership is open to Co-operative Societies within the State and is called as ''Apex Society''. These two are distinct classes of Co-operative Societies for the purposes of Banking Regulation Act, 1949 and are regulated separately. The petitioner bank was Cooperative Society registered in the year 1927 under Co-operative Societies Act, 1912 and is a Central Co-operative Bank within the meaning of Section 2(d) of NABARD Act and a Co-operative Bank u/s 2(CCV) of Banking Regulation Act, 1949 as applicable to Co-operative Societies and is entitled to carry on banking business independently. The Reserve Bank of India has been vested with the power of regulation of Central Co-operative Bank such as petitioner under the provisions of Banking Regulation Act, 1949, whereas NABARD is also a supervisory authority u/s 35 of the Banking Regulation Act, 1949.
14. From the aforesaid facts and circumstances, it is quite apparent that the petitioner was fully authorized to grant loan to the Bihar State Housing Co-operative Federation which had duly refunded the said loan with interest to the petitioner. Furthermore, the petitioner had specifically given details showing that the target of agricultural finance was duly met, but the same had been completely ignored by the Registrar, Co-operative Societies (respondent no. 2) in his impugned order 4.2.2008/ 7.2.2008. Furthermore, non-availing of loan from respondent no. 3 was also not mandatory, as the target was achieved by the petitioner from its own fund which was quite sufficient, hence it cannot be forced to take loan from respondent no. 3 and pay such interest to it thereupon. These cannot be grounds for respondent nos. 3 and 4 to refuse the banking facility and clearing of cheques and allowing withdrawal from its account and collecting its cheques to the petitioner. The Bihar State Co-operative Bank Limited or its Managing Director cannot legally take advantage of its monopoly and refuse banking facility to the petitioner bank which clearly amounts to blackmailing under the threat of huge loss to the petitioner.
15. Furthermore, when the Managing Director (respondent no. 4) had no power or jurisdiction to pass such order as it had passed on 5.7.2004 (Annexure-2) and the General Body of respondent no. 3 had not taken any such decision, the Registrar, Co-operative Societies (respondent no. 2) cannot assume the power of the governing body of respondent no. 3 and affirm the illegal order passed by the Managing Director of Bihar State Co-operative Bank Limited (respondent no. 3).
16. In the aforesaid facts and circumstances, it is quite apparent that order of the Managing Director of Bihar State Co-operative Bank Limited (respondent no. 3) dated 5.7.2004 (Annexure-2) was illegal and without jurisdiction, whereas order dated 4.2.2008/7.2.2008 (Annexure-5) passed by the Registrar, Co-operative Societies (respondent no. 2) rejecting Appeal Case No. 105 of 2004 is also illegal, arbitrary and perverse. Accordingly, both the said orders of respondent no. 4 and respondent no. 2 are hereby quashed and respondent nos. 3 and 4 are restrained from interfering with the rights and liabilities of the petitioner as a member until an appropriate order is legally passed in accordance with the provisions of law by an appropriate authority.
