SC liberates cooperative banks from state control
May 18, 2013, 04.23AM IST TNN
[ Dhananjay Mahapatra ]Ruling parties have regularly interfered to ensure that people close to them are elected directors of cooperative banks.
NEW DELHI: In a landmark judgment, the Supreme Court has freed the management of cooperative banks from the unwritten control of political masters in states despite being brought under the supervision of the Reserve Bank of India through a 1965 law.
Ruling parties have regularly interfered to ensure that people close to them are elected directors of these cooperative banks and have also exerted pressure on Registrar Cooperative Societies to supersede cooperative bank managements if the management did not honour their wishes.
A bench of Justices K S Radhakrishnan and Dipak Misra told the supervisory body that it would be personally liable for succumbing to political pressure to supersede elected board of directors of cooperative banks.
"Registrar/joint registrar shall not act under political pressure or influence and, if they do, be subjected to disciplinary proceedings and be also held personally liable for the cost of the legal proceedings," the bench said.
The apex court's judgment came on a petition which related to a decision of Registrar Cooperative Societies, Sagar division, which superseded the board of directors of District Cooperative Central Bank Ltd, Panna, holding it responsible for discrepancies of the previous management.
Sanjay Nagayach and other board members challenged the decision in the high court, which quashed the order to supersede the board of directors. The state government appealed against the HC judgment in the Supreme Court.
Senior advocate Vivek Tankha, appearing for Nagayach, said the HC was right in setting aside the order to supersede the board of directors as the registrar had done no meaningful consultation with the RBI prior to taking the decision.
The bench of Justices Radhakrishnan and Misra not only agreed with Tankha and reinstated the board of directors, which was superseded on September 30, 2011, but also found it strange on the part of the Shivraj Singh Chouhan government to take keen interest in the litigation and pursue it till the Supreme Court.
"We fail to notice why the state government, department of cooperative societies, has taken so much interest in this litigation," the bench said and slammed the state for spending public money by pursuing appeals till the apex court.
Dismissing the appeals against the HC judgment and directing immediate reinstatement of the board of directors, the bench said, "We also direct the state of Madhya Pradesh to pay an amount of Rs 1 lakh to MP Legal Services Authority within a period of one month by way of costs and also impose a cost of Rs 10,000 against the joint registrar, cooperative societies, Sagar, the officer who passed the order, which will be deducted from his salary and deposited in the Panna District Cooperative Bank within two months."
Importantly, Justices Radhakrishnan and Misra laid down a series of guidelines that will check state governments' control over cooperative banks. Highlights of the guidelines are:
* Supersession of elected managing committee/board is an exception and should be resorted to only in exceptional circumstances
* Elected committee not to be penalized for shortcomings or illegalities of previous committee
* Elected committee to be given six months to rectify mistakes of previous committee
Ruling parties have regularly interfered to ensure that people close to them are elected directors of these cooperative banks and have also exerted pressure on Registrar Cooperative Societies to supersede cooperative bank managements if the management did not honour their wishes.
A bench of Justices K S Radhakrishnan and Dipak Misra told the supervisory body that it would be personally liable for succumbing to political pressure to supersede elected board of directors of cooperative banks.
"Registrar/joint registrar shall not act under political pressure or influence and, if they do, be subjected to disciplinary proceedings and be also held personally liable for the cost of the legal proceedings," the bench said.
The apex court's judgment came on a petition which related to a decision of Registrar Cooperative Societies, Sagar division, which superseded the board of directors of District Cooperative Central Bank Ltd, Panna, holding it responsible for discrepancies of the previous management.
Sanjay Nagayach and other board members challenged the decision in the high court, which quashed the order to supersede the board of directors. The state government appealed against the HC judgment in the Supreme Court.
Senior advocate Vivek Tankha, appearing for Nagayach, said the HC was right in setting aside the order to supersede the board of directors as the registrar had done no meaningful consultation with the RBI prior to taking the decision.
The bench of Justices Radhakrishnan and Misra not only agreed with Tankha and reinstated the board of directors, which was superseded on September 30, 2011, but also found it strange on the part of the Shivraj Singh Chouhan government to take keen interest in the litigation and pursue it till the Supreme Court.
"We fail to notice why the state government, department of cooperative societies, has taken so much interest in this litigation," the bench said and slammed the state for spending public money by pursuing appeals till the apex court.
Dismissing the appeals against the HC judgment and directing immediate reinstatement of the board of directors, the bench said, "We also direct the state of Madhya Pradesh to pay an amount of Rs 1 lakh to MP Legal Services Authority within a period of one month by way of costs and also impose a cost of Rs 10,000 against the joint registrar, cooperative societies, Sagar, the officer who passed the order, which will be deducted from his salary and deposited in the Panna District Cooperative Bank within two months."
Importantly, Justices Radhakrishnan and Misra laid down a series of guidelines that will check state governments' control over cooperative banks. Highlights of the guidelines are:
* Supersession of elected managing committee/board is an exception and should be resorted to only in exceptional circumstances
* Elected committee not to be penalized for shortcomings or illegalities of previous committee
* Elected committee to be given six months to rectify mistakes of previous committee
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