JOHNY KURUVILLA Vs. RESERVE BANK OF INDIA

JUDGEMENT

(1.) The issue that has been agitated by the petitioner is justifiability and suitability of Ext. P2 and P3 circulars issued by the Reserve Bank of India dated 29.4.2003 and 26.6.2003. The cumulative effect of the above circulars is that Primary Cooperative Banks of the country are not to make, provide or renew either secured nor unsecured loans and advances nor extend any other financial accommodation to its directors and their relatives. The term 'financial accommodation' and 'relative' had been defined in the annexure of the order and the relatives include Father, Mother, Son, Son's wife, Daughter, Daughter's husband, Brother, Brother's wife, Sister, Sister's husband etc.

(2.) The petitioner was having an uninterrupted and well maintained overdraft account with the 2nd respondent Urban Cooperative Bank from 1990 onwards. This was renewed from year to year. The limit was Rs.1,00,000/- originally, but from 1995 onwards, this has been raised to Rs.2,50,000/-. The direct result of Ext. P2 and P3 was that an application of the petitioner made to the Bank was rejected for the reason that his brother was a member of the Director Board of the Bank. Petitioner felt that the above was high-handed and unnecessary interference with his basic rights. It has resulted in the Writ Petition.

(3.) Sri. S. Easwaran, learned counsel appearing for the petitioner projected two grounds in support of his attack. The powers of the Reserve Bank of India, according to the counsel, for issuing circulars could be tranced to S.21 and S.35A of the Banking Regulation Act, 1949 alone. Even though such powers are invoked in the present orders, a scrutiny, will reveal that there has not been any independent consideration at the instance of the Reserve Bank of India while issuing such circulars. Petitioner does not dispute that, where the Reserve Bank of India is satisfied that it is necessary and expedient in public interest and in the interest of the Banking policy or to the interest of the depositors or to the interests of the banking company generally, power is there to issue circulars binding the banking companies. But he is categoric that there has not been any independent consideration at the level of the Bank for bringing this restriction. The petitioner's right to avail overdraft facilities, was settled over a period of time and he was uninterruptedly enjoying it from 1990 onwards. Even though reference is made to the Parliamentary Committee Reports as leading to the above such circulars, he is positive that they cannot be taken as materials, since power is expressly limited to issue circulars only when the Reserve Bank of India is satisfied of the necessity of issuing them. Satisfaction of the third party, namely the Parliamentary Committee, is not a contingency contemplated by the statute and therefore, the circulars are not liable to be followed.