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Judgment
K. Sreedhar Rao
The promoters of the Petitioner-Bank applied to the third respondent for license to constitute and run the Manila Co-operative Bank in the District of Hassan. The third respondent accorded formal permission vide Annexure - R1 dated 29.01.1996 and imposed a condition that a Co-operative Society has to be registered with minimum of 1500 members and that after registration of the Society within three months, an application is to be made for grant of license. The Registrar of Co-operative Societies propose inclusion of 300 members into the Society. The said proposal was seriously opposed and challenged resulting in tiling of writ petitions and writ appeals and also SLP before the Supreme Court The litigation became almost long drawn. The general body meeting of the Petitioner-Society elected the office bearers. The Registrar held that the elections of the office bearers is illegal A writ petition was filed before this Court in W.R No. 29329/1997. This writ petition was clubbed with earlier writ petition No. 23212/1997, which was disposed of by this Court, on 27.02.1998 holding that the elections held are valid and also. the direction to include 300 members'' is invalid. Writ Appeal was filed in W.A. Nos. 3148/1998 and 974/1999. The Writ Appeals were disposed with certain directions on 09.12.2002.
The persons whose request to become members was rejected, filed S.E.P. before the Supreme Court. The SLP was dismissed on 15.10.2004. in the meantime, the third respondent vide Annexure - ''R1'' had communicated to the petitioner bank that the formal approval granted for setting up a Mahila Co-operative Bank has been withdrawn. Respondent No. 3 vide Annexure - ''R2'' granted extension of time till 30.09.1996 for registration and submission of license application. The petitioner bank because of the above litigations could not submit an application for license within the time stipulated vide Annexure - R2.
The dispute between the members came to be ultimately resolved in the writ appeal and by dismissal of SLP Respondent No.2 vide letter dated 13.11.2000 requested the third respondent to re-consider the withdrawal of permission granted and requested for extension of time to submit license application. The third respondent vide letter dated 14.06.2001 stated that the request for re-consideration would be considered in the light of the judgement of the High Court and also in accordance with the revised entry point norms. The third respondent again by letter dated 27.06.2003 intimated the Joint Registrar that it is not possible to re-consider the decision for setting up of the petitioner - bank because of change in the licensing policy.
The third respondent again wrote a letter dated 14.10.2003 to the Revenue Minister that in view of the change in the licensing policy it is not possible to reconsider the decision of withdrawing the permission. The third respondent has produced vide Annexure - ''R3'', the licensing of new Primary (Urban) Co-operative Banks, which is as follows:
Pleas a refer to you letter dated July 24, 2003 requesting far restoring the ''in-principle'' approval for selling up of the above bank. In this connection, we advise that we have carefully considered the case. However, we regret, to inform you that it is not possible to accede to the request as the ''in-principle'' approval was granted to the bank in January 1996. Since then the licensing policy has been revised twice. As such, it is not possible to reconsider our decision of withdrawing the in principle approval granted for setting up of the above bank.
The third respondent also directed the second respondent to wind up the Petitioner - Co-operative Society. Accordingly, the second respondent exercising power u/s 72 (ii)(b) passed order of winding up on the ground that the Society has not commenced its business after its registration within the time prescribed. The Petitioner - Society aggrieved by the above communication for winding up has preferred this writ petition.
Sri G. Krishna. Murthy, counsel for the petitioner strenuously submitted that Respondent No. 3 is bound by the principle of promissory estoppel and it cannot retract from the promise given to grant license. The petitioners pursuant to the formal approval given registered the Society and deposited a sum of Rs. 18 Lakhs and odd on 25.01.1997 with the District Cooperative Bank. A policy produced at Aunexure - ''R3'' should be construed as prospective in nature and the said policy should not be made applicable to the requests and applications made prior to the introduction of new policy. In that, view, it is argued that the Petitioner Society had submitted application and. the formal approval is given, the Society is registered and required amounts are deposited. It is because of the litigations between the members inter se and the litigations with the Department, the elected body was paralysed and could not make any application for license in time. In. that view of the matter, it is argued that the rejection for request of extension of time for submitting the application for grant, of license on the part, of the third respondent is bad in law. The business of the Society could not be commenced because of the obvious reasons known to the Registrar. Therefore, there was no mistake or latches on the part of the members of the Society for not commencing the business. Hence, the order of winding up of the Society is bad in law.
Sri K. Kasturi, Senior Counsel for the respondents relied on the decision of the Hon''ble Supreme Court reported in Joseph Kuruvilla Vellukunnel Vs. The Reserve Bank of India and Others, in the case of Joseph Kuruvilla Vellukunnel vs. Reserve Bank of India and others. The counsel referred to the observations made in Para Nos. 44 and 45, which is reads thus:
These observations lay down clearly that there may be occasions and. situations in which the legislature may. with reason, think that the determination of an issue may be left to an expert executive like the Reserve Bank rather than to Courts without incurring the penalty of having the law declared void. The law thus made is justified on the ground of expediency arising from the respective opportunities for action. Of course, the exclusion of Courts is not tightly to be inferred nor lightly to be conceded. The reasonableness of such a law in the total circumstances will, if challenged, have, to be made out to the ultimate satisfaction of this Court and it is only when this Court considers that it is reasonable in the individual circumstance that the law null be upheld.
In the present case, in view of the history of the establishment of the Reserve Bank as a central bank for India, its position as a Bankers'' Bank, its control over banking companies and banking in India, its position as the issuing bank its power to license banking companies and cancel their licences and the numerous other powers, it is unanswerable that between the Court and the Reserve Bank, the momentous decision to wind up a tottering or unsafe banking company in the interest of the depositors, may reasonably be left to the Reserve Bank, No doubt, the Court can also, given the tune perform this task. But the decision has to be taken without delay, and the Receive Bank already knows intimately the affairs of banking companies and has had access to their books and accounts. If the Court were called upon to take immediate action, it would almost always be guided by the opinion of the Reserve Bank. It would be impossible for the Court to reach a conclusion unguided by the Reserve Bank if immediate action was demanded. But the law which gives the same position to the opinion, of the Reserve Bank is challenged as unreasonable. In our opinion, such a challenge has no force. The situation that arose in this case is typical of the occasions on which this extraordinary power would normally be exercised, and, as we have said already, if the power is abused by the Reserve Bank, what will be struck down would be. the action of the Reserve Bank but not the law. An appeal against the Reserve Bank''s action or a provision for an ex post facto finding by the Court is hardly necessary. An appeal to the Central Government will be only an appeal from. Caesar to Caesar, because the Reserve Bank would hardly act without the concurrence of the Central Government and the finding by the Court would mean, to borrow the macabre phrase of Raman Nayar, J., a post-modern examination of the corpse of the banking company.
The counsel submitted that the Reserve Bank of India by a policy vide Annex ore - ''R3'' is not permitting opening of any new Co-operative Bank till the existing policy is revised. The contention that the petitioner has prospective policy and does not apply to the pending application made prior to the policy is untenable. The respondent No. 3 vide Annexure - ''R2'' had extended time only till September 1996. Thereafter, there were no further extension. The Petitioner Bank did not make any application in time for license or at least before the advent of new policy. Respondent No. 2 vide letter dated 18.11.2000 had made a request for reconsidering for grant of decision and for extension of time for submitting the application. Respondent No. 3 after considering the case and in the light of the policy guidelines found that, extension of time is not permissible and accordingly communicated the same. The contention that the application for license was pending is untenable and that the doctrine of promissory estoppel would also not. apply to the case, in the light, of the observations made by the Supreme Court in Joseph Kuruvilla case. That in respect of grant of license to the Banks and regulating the Bank functions, it should be left: to the expert body and Court should formally not: interfere in the matter.
Upon consideration of the rival contentions, it is to be noted that the promoters did comply with the preliminary requirement of the registration of the Society. However, a dispute arose between the members of the Society and the Registrar when he, proposed to include 300 fresh members, which resulted in litigation. The general body meeting of the Society elected the office bearers. The Registrar held that the election of office bearers is invalid, Ultimately, this Court in the year 2002 in the writ appeal upheld the election of the office bearers in the general body meeting held in the year 1997. However, during the pendency of the litigations, the office bearers who are elected did not choose to make any application to this Court seeking permission to submit an application for grant of license to Reserve Bank of India. The requirement of submitting the application within the stipulated time by Respondent No. 2 is not complied. Therefore, there has been automatic lapse of the formal approval given by the Reserve Bank of India. The request made for further extension of time by the second respondent is also rejected on the ground that there is a change in the policy and extension will not be granted. Therefore, the order of Reserve Bank of India in not extending time for submitting the application for license cannot be held to be illegal or malafide. The request has been rejected purely on the consideration of the guidelines in the policy. On the question of winding up, the Reserve Bank 0f India has powers u/s 72(A) to direct the Register to wind up any, Co-operative Bank. The Registrar has however exercise his power u/s 72(2)(B) that the Society has not commenced business. The Society may have valid reason for not commencing of the business, but nevertheless, the RBI has refused the grant of license and extension of time to submit the application for license. The purpose of registration of the Society had become anfractuous. In that, view of the matter, the order of winding up is also sound and proper. Hence, petition is dismissed.