LAXMAN VITHOBA SASMILE Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) SHRI Kotwal, learned counsel appearing for the petitioner, applies for deletion of names of respondent Nos. 6 to 19. Prayer granted. 2. Rule, returnable fort with. Shri More, Assistant Government Pleader, waives service on behalf of respondent Nos. 1, 3 and. 4 Shri Chandrachud and Shri Sawant waive service on behalf of respondent Nos. 2 and 5 respectively. Heard counsel. 1. The respondent No. 5 Bank is managed by Board of Directors who were elected on April 14, 1989 for a term upto May, 1993. The petitioner complains that the Bank is totally mismanaged with a dishonest and selfish motive and for the betterment of self interest or the interest of family members or nearest relatives, by the Directors. The petitioner complains that the affairs are managed in contravention of the provisions of Banking Regulation act and Maharashtra Co-operative Societies Act. The gravamen of the complaint is that most of the customers/depositors who had deposited their hard earned money are unable to withdraw the life savings because the Bank is closed down for last couple of months. The petitioner further complains that the present financial position of the Bank is extremely precarious and the Bank is unable to honour the demand of the depositors and customers, who are unable to withdraw their funds from the accounts. The customers made various representations to the Government of Maharashtra and Reserve Bank of India as well as the Registrar of the Co-operative societies, but the grievance was not attended to. The petitioner points out thatin view of the hop eless financial position of the Bank, the State/bank of India has cancelled the membership of respondent No. 5 Bank as a clearing house. It is further pointed out that the Government of Meharashtra appointed an investigating committee under the chairmanship of Shri P. M. Bias to investigate into the affairs and management of the Bank. The committee submitted its report and the report reveals the Bank was entirely mismanaged and the affairs were manipulated to subserve the interest of the Directors.

(2.) THE petitioner points out that the Registrar, in exercise of powers conferred under Section 78 (1) of the Maharashtra Co-operative Societies act, is entitled to remove the Board of Directors and can appoint the committee consisting three or more members of the society or an administrator to manage the affairs. The petitioner points out that the Registrar exercised the lower under section 78 (1) and appointed the Assistant Registrar as an administrator to look into the affairs of the Bank. The order passed by the Registrar was challenged in appeal and then in revision and the proceedings are pending before the State Government with the result that the order is not implemented. The petitioner complains that the power to appoint administrator is for a short duration and it would be impossible for the administrator to discharge the functions properly and bring the affairs of the bank back to the health. The petitioner claims that the Reserve Bank of india should exercise power under Section 110 A of the Act and direct the registrar of Coperative Societies to wind up the Bank. The petitioner points out that in case the Reserve Bank of India directs the Registrar in public interest or for preventing the affairs of the Bank being conducted in a manner detrimental to the interest of the depositors or for securing the proper management of the Bank, then the Registraris bound to pass an order for supersession of the Board of Directors and appoint an administrator. Shri Kotwal, learned counsel for the petitioner, pointed out that the order of supersession passed by the Registrar in pursuance of the direction given by the Reserve bank of India is not open to appeal and the administrator appointed by the registrar is entitled to hold office for a duration of five years. Shri Kotwal submittedthat it is necessary to direct Reserve Bank of India to issue such direction to the Registrar of Co-operative Societies. The submission is of considerable merit and deserves acceptance.

(3.) SHRI Cbandrachud, learned counsel appearing on behalf of Reserve bank of India, submitted that the affairs of the Bank were mismanaged and it is essential and in the public interest to supersede the Board of Directors and appoint an administrator. The learned counsel further submitted that it is essential that the administrator should take over the affairs of the Bank forthwith and the Board of Directors should not be permitted to continue by filing appeals after appeals against the order of the Registrar, Co-operative societies. Shri Chandrachud submitted that the Registrar should pass an appropriate order in pursuance of Section 110-A (iii) as required by the reserve Bank of India and supersede the Board of Directors and appoint proper administrator. Shri Sawant, learned counsel appearing on behalf of the respondent No. 5 Bank, could not dispute that the Bank is not functioning for last couple of months and the bank management is unable to pay the amount of depositors. Shri Sawant did not dispute that the State Bank of India had withdrawn the facility of clearing house. Shri Sawant also did not dispute that tbere are several depositors who had deposited their life savings in the Bank and these depositors are left high and dry because of inability of the Bank to function. Shri sawant therefore could not debate that it is in the interest of the depositors that the suitable administrator should take over the charge and bring the bank back to health. Shri More, learned Assistant Government Pleader, appearing OD behalf of the State Government and the Registrar, Co-operative societies, also joined in the request: made by Shri Kotwal and Shri Chandrachud shri More submitted that the Registrar will forthworth pass an order in pursuance of the directions now issued by the Reserve Bank of India under section 110-A (iii) of the Act.