IN THE HIGH COURT AT CALCUTTA

CIVIL APPELLATE JURISDICTION

APPELLATE SIDE

BEFORE:-

THE HON’BLE JUSTICE SHAMPA SARKAR

&

THE HON’BLE JUSTICE ARJUN RAY MUKHERJEE

FMA 898 of 2020

with

CAN 1 of 2018

Sri Bhaskar Mukherjee & Anr.

vs.

The State of West Bengal & Ors.

For the Appellant : Mr. Shyamal Kumar Mukherjee, Sr. Adv.,

Mr. Sattwik Bhattacharyya, Adv.

Mr. Aashutosh Bhattacharyya, Adv.

Mr. Aritra Roy, Adv.

For the State : Ms. Susmita Saha Dutta, Ld. AGP.,

Ms. Tanusree Ghosh, Adv.

Mr. Dipjyoti Chakraborty, Adv.

Judgment reserved on : 19.08.2026

Judgment pronounced on : 16.09.2026

Judgment uploaded on : 16.09.2026

Arjun Ray Mukherjee, J.

1. This is an appeal against an order dated June 4, 2018, arising out

of W.P. No. 140 [w] of 2017. By the said order, the learned Single Judge

dismissed the writ petition, thereby upholding the judgment and order

Page 2 of 38

dated October 4, 2016, passed by the West Bengal Cooperative Tribunal

[hereinafter referred to as ‘the Tribunal’] in Appeal No. 71 of 2004,

preferred by the appellants / writ petitioners.

2. The case of the appellants, which is relevant for the purpose of

adjudication of the issues involved in this appeal, is stated hereinbelow:-

a) The appellant no. 1 / writ petitioner no. 1 [hereafter ‘appellant no. 1’]

is a member of the Pranabananda Cooperative Bank Limited /

appellant no. 2 / writ petitioner no. 2 [hereafter ‘the said Bank’]. The

said Bank owes its origin to the Pranabananda Coo perative Credit

Society [hereafter ‘the said credit society’] which was founded in or

about April, 1985. The said credit society achieved steady progress in

its business and by an order bearing no. 727/16.51.25/95-96 dated

April 17, 1996, the Reserve Bank of India [hereafter ‘the RBI’]

included it in the list of primary cooperative banks. Pursuant to such

direction of the RBI, the said credit society was renamed as ‘the

Pranabananda Cooperative Bank Limited, Burdwan. The appellants

subsequently applied for a licence under Section 22 of the Banking

Regulation Act, 1949 [hereafter ‘the said Act, 1949]. By an order

dated July 27, 1999, the Cooperation Department, Government of

West Bengal, owing to resignation of some members from the Board of

the said Bank, dissolved the elected Board of Directors and appointed

a Board of Administrators in its place. The order dated July 27, 1999

was assailed before this Court in W.P. No. 4273 [w] of 2000 and by an

order dated March 30, 2001, a learned Single Judge of this Court

Page 3 of 38

allowed the said writ petition by quashing the order dated July 27,

1999. Despite repeated requests, the charge of the Bank was not

handed over either by the Board of Administrators or by the authority

concerned, to the appellant no. 1 or other Board members.

b) When the said Bank was under the control and management of the

Board of Administrators, the RBI issued a show cause notice dated

June 24, 2000, calling upon the said Bank to show cause as to why

its application dated March 1, 1997, for the grant of licence should

not be rejected.

c) The RBI by an order no. “UBD.CO.BSD III/2167/12.03.1542/2000 -

2001 dated January 25, 2001, rejected the application dated March 1,

1997. The order reads as follows:

“1. The Pranabananda Co -operative Bank Ltd, Burdwan

(hereinafter referred to as the bank) was initially registered as

a Society as on 30 April 1985 and subsequently included in

the li8st of Co-operative Banks as on 17 April 1996. It had on

1 March 1997 applied for grant of license under Section 22 of

the Banking Regulation Act 1949 (As applicable to Co -

operative Societies) (hereinafter referred to as the ‘Act’), to

carry on banking business in India. The said application was

kept in abeyance in view of various deficiencies/irregularities

noticed in its working which were duly communicated to it

with an advice to rectify the same.

2. The first statutory inspection since its inception as a bank

was conducted by Reserve Bank of India with reference to its

financial position as on 31/12/97, which revealed the

precarious financial position of irregularities/deficiencies were

observed the bank, further, the following major

irregularities/deficiencies were observed:

i. the erosion in the value of assets of the bank, worked out to

Rs. 279.72 lakh as on 31 December 1997, which not only

wiped out the entire paid-up capital and reserves of the bank

but also eroded its deposits to the extent of Rs. 213.32 lakh.

The bank is, therefore, not complying with the provisions of

Page 4 of 38

Section 11(1) of the Banking Regulation Act, 1949 (As

Applicable to Co-operative Societies);

ii. While the total outside liabilities of the bank stood at Rs.

1487.64 lakh as on 31 December 1997, the realizable value of

its assets was estimated at Rs. 1274.32 lakh as on the date.

Thus, the bank did not have the capacity to pay its present

and future depositors in full as and when their claims accrue

and hence it had not complied with the provisions of Section

22(3)(a) of the Act;

iii. the bank had been a chronic defaulter in submission of

return in Form I since the commencement of banking business

in June 1996;

iv. the bank did not maintain a Register to record, inter alia,

the particulars of Cash Reserve and Liquid Assets required to

be maintained and actually maintained by the bank on daily

basis. Instead, the bank prepared the positions in loose

sheets only on each reporting Friday;

υ. the bank had been defaulting heavily in the maintenance of

SLR under Section 24 of the Banking Regulation Act, 1949 (As

Applicable to Cooperative Societies) throughout the entire

period of its functioning as an urban cooperative bank since

June 1996.

vi. the bank had violated RBI directives on payment of interest

on deposits and granted incentives to the agents of Daily

Deposit Scheme against RBI guidelines;

vii. pre-sanction appraisal of loan proposals and post sanction

supervision of loans and advances suffered from serious

deficiencies;

viii. the bank had not implemented RBI guidelines on income

recognition, asset classification and provisioning for non

performing assets;

ix. the accumulated loss as on 31 December 1997 amounted

to Rs. 235.31 lakh;

x. the internal control, particularly in the area of balancing of

books of accounts, reconciliation of bank's accounts, etc., was

not property exercised by the banks,

xi. the methods of operation of the bank and the conduct of its

affairs are defective and detrimental to the interests of its

Page 5 of 38

depositors. The bank, therefore is not complying with the

provisions of Section 22(3)(b) of the Act, ibid.

3. It can be seen from the aforesaid that the bank was not

Complying with the provisions of Section 11(1), 22(3)(a) and

(b) of B.R. Act, 1949 (as Applicable to Cooperative Societies)

and its methods of operations were not satisfactory and found

to be detrimental to the interests of the public and the

financial position of the bank has deteriorated to such an

extent as to leave no scope for turnaround after the first

inspection itself. To check the deteriorating financial position

of the bank, the bank was issued directions under Section 35

of B.R. Act 1949 (AACS) vide UBD -

BSDIV/1476/12.03.1542/99 -2000 dated 5 November 1999,

which was effective from 13 November 1999.

4. Subsequent to this, it was reported that the bank was

closed and that the bank was not responding to the various

communications addressed to it. Moresoever in the State Level

Review committee meeting convened by the Calcutta Regional

Office, the Chief Executive Officer of the bank had stated that

the head office and almost all the branches of the bank were

closed since 29 November 1999 due to depositors' unrest. It

was further observed that due to non -availability of

actual/up-to-date accounts of the bank, Board of

Administrators had expressed their inability to submit any

statutory return to RBI or submit any concrete proposal for

revival of the bank.

5. A show cause Notice dated 24/6/2000 was issued to the

bank under Section 22 of the Banking Regulation Act, 1949

(AACS) listing out the irregularities/deficiencies observed in

its functioning and advising it to show cause within a month

of receipt of the notice as to why its licence application should

not be rejected.

6. In response to the show cause notice, the bank contended

that the deficiencies pointed out were 'matters of records'. The

reply did not contain any meaningful clarification/concrete

proposal for rectification of errors and improvement in its state

of affairs, The bank's reply is, therefore, considered

unsatisfactory.

7. It is evident from the foregoing that:

1. the bank is not in a position to pay its present and future

depositors;

Page 6 of 38

2. the affairs of the bank are being conducted in a manner

detrimental to the interest of depositors;

3. the financial position of the bank leaves little scope for its

revival;

4. in all likelihood, public interest would be adversely affected

if the bank is allowed to carry on its business any further.

8. Having regard to all these facts, Reserve Bank of India is

satisfied that no useful purpose would be served by keeping

in abeyance the request of the bank to grant it a licence to

carry on banking business under Section 22 of the Act and the

same deserves to be rejected. Accordingly, the applicable for

licence, dated 1 March 1997 submitted by the Pranabananda

co-operative Bank Ltd., Burdwan (West Bengal) to carry on

banking business in India under Section 22 of the Banking

Regulation Act, 1949 (As applicable to Co-operative Societies)

is rejected.

9. A copy of the order may be served on the Pranabananda

Co-operative Bank Ltd. Burdwan, West Bengal.

Sd/-P.B. Mathur

Executive Director

d) By another order no. UBD.BSD III2166/12.03.1542/20002001 dated

January 25, 2001, the RBI issued requisition to the Registrar of

Cooperative Societies, West Bengal [hereafter ‘the RCS’] to wind up

the said Bank. The order reads as follows:

“The Pranabananda Co-operative Bank Ltd., Burdwan-

Action under Sections 99 and 100 read with Section

145 of the West Bengal Co-operative Societies Act, 1983

and Section 13D(i) of the Deposit Insurance- and Credit

Guarantee Corporation Act, 1961. Reserve Bank of

India, being satisfied in the public interest that the

Pranabananda Co-operative Bank Ltd., Burdwan (West

Bengal) has failed to comply with requirements

specified under Sections 11(i), 22(3)(a), 22(3)(b) of the

Bank Regulation Act, 1949 (As Applicable to Co -

operative Societies) and that the bank is unable to pay

its debts, hereby requires the Registrar of Co-operative

Society West Bengal in terms of the provisions of

Section 99 and 100 read with Sect 145 of the West

Bengal Co-operative Societies Act, 1983 and Section 13

D(1) the Deposit Insurance an d Credit Guarantee

Page 7 of 38

Corporation Act, 1961 to make order for winding up of

the Pranabananda Co-operative Bank Ltd., Burdwan

(West Bengal) and the appointment of a liquidator

thereof."

Sd/ P.B. Mathur

(P.B. Mathur)

Executive Director"

e) The RCS in purported exercise of the power conferred by Section 99 of

the West Bengal Cooperative Societies Act, 1983 [hereafter ‘the said

Act, 1983’] passed an order no. 6884 dated August 6, 2002 for the

winding up of the said Bank. The order dated August 6, 200 2 is

reproduced hereunder:

“No. 6884 Date 6.8.2002

ORDER

Whereas Pranabananda Co -operative Bank Ltd., Burdwan

having Registration No. 122 dt. 15.5.1996, is a Cooperative Bank

registered as per West Bengal Cooperative Societies Act, 1983

and West Bengal Cooperative Societies Rules, 1987 (herein after

referred to as said Bank);

AND

Whereas an inspection under section 92 was conducted into

the affairs of the said bank, which, inter alia, exhibits a lot of

irregularities into the working, financial and administrative

affairs of the Bank;

AND

Whereas Reserve Bank of India, Mumbai had, in their letter

No.2166 dated 25th January, 2001, requested to make an order

for winding up of the said Bank & appointment of a liquidator in

terms of section 99 and 100 of WBCS Act respectively in view of

non-compliance of section 11(1), 22(3)(a) and 22(3)(b) of the

Banking Regulation Act, 1949;

AND

Whereas I am of the opinion that the Pranabananda Co -

operative Bank Ltd. ought to be wound up in the interest of the

public in particular and cooperative movement in general;

Now, therefore, in exercise of the power conferred on me

under section 99(1) of the WBCS Act, 1983, I do hereby order for

winding up of the said bank;

Page 8 of 38

Sd/-

Registrar of Co-operative Societies

West Bengal.

Date 6/8/2002"

f) The order dated August 6, 2002 was challenged by the appellant no. 1

by filing a writ petition before this Court. By an order dated October

9, 2002, a learned Single Judge of this Court dismissed the said writ

petition granting liberty to the petitioners therein to avail the

alternative remedy of appeal provided by the said Act, 1983.

g) Pursuant to the leave granted by this Court, the appellants

approached the Tribunal. The Tribunal, after hearing the learned

counsel for the parties, by a judgment and order dated July 7, 2006,

passed in Appeal No. 71 of 2004, set aside the impugned order dated

August 6, 2002. The operative portion of the order dated July 7, 2006

is as follows:

“Thus, it appears that the impugned order dt. 6.08.02 is

arbitrary, illegal and violative of principle of natural justice.

So also the order dated 6.1.02 appointing the Liquidator.

Hence,

It is ordered that the appeal be and the same is allowed on

contest without cost. The impugned order dated 6.08.02. is

hereby set aside. LCR be sent back along with a copy of

judgment”.

h) The Principal Secretary to the Government of West Bengal along other

officers of the State Government, and the RBI, by filing W.P. No.

Page 9 of 38

22474 [w] of 2006 and W.P. No. 6139 of 2007 respectively, questioned

the legality and validity of the order dated July 7, 2006 passed by the

Tribunal. The appellants also filed W.P. No. 7933 [w] of 2007 seeking,

inter alia, a direction upon the respondents to hand over the charge of

the Bank together with its assets and valuable documents to the

appellant no. 1.

i) A learned Single Judge of this Court took up all the aforesaid three

writ petitions for hearing together and by a judgment and order dated

May 5, 2009, disposed of all the writ petitions. The operative portion

of the judgment and order dated May 5, 2009 is reproduced

hereunder:

“The impugned judgment of the Tribunal stands set

aside. Appeal No.71/2004 is remanded back to the

Tribunal for a fresh decision in the light of the

aforementioned observations.

The Tribunal is encouraged to decide the appeal at an

early date but positively within a period of four months

from date of receipt of this order upon granting reasonable

opportunity of hearing to the parties concerned. The parties

shall co-operate with the Tribunal to enable it decide the

appeal within the above time-frame.

Consequently, W.P. Nos. 22474 (W) of 2006 and W.P.

No.6139 (W) of 2007 stand allowed while W.P. No. 7933

(W) of 2007 stands dismissed.

The records of Appeal No.71/04 shall now be de -

tagged and transmitted to the Tribunal at once by the

office.”

j) Challenging the judgment and order dated May 5, 2009, three appeals

being F.M.A. No. 1266 of 2010, M.A.T. No. 1499 of 2010 and M.A.T.

No. 1500 of 2010 were preferred. All three appeals were taken up for

consideration by a coordinate Bench of this Court and by an order

Page 10 of 38

dated March 7, 2013, the Division Bench disposed of the appeals,

inter alia, by passing the following order:

“In the aforesaid circumstances, we modify

the impugned judgement and order under

appeal passed by the Learned Single

Judge by directing the learned Tribunal to

decide the appeal No. 71 of 2004 afresh

upon taking note of all the relevant

documents including the documents

referred to and relied upon by the Learned

Single Judge in the impugned judgement

and order under appeal.

Needless to mention that the learned

Tribunal will decide all the issues as have

already been raised or may be raised at

the time of hearing of the appeal, strictly in

accordance with law by a reasoned order

without being influenced by the earlier

findings of the learned Tribunal or by any

observation of the Learned Single Judge as

recorded in the impugned judgement and

order appeal.

Since a considerable time has already

passed, we direct the learned Tribunal to

decide the appeal as early as possible but

positively within a period of four months

from the date of receipt of this order. The

learned counsel of the respective parties

are requested to cooperate with the learned

Tribunal to decide the appeal at an early

date.

With the aforesaid observations and

directions, we dispose of the three appeals

without awarding any order as to costs”.

k) Appeal No. 71 of 2004, was once again taken up for consideration by

the Tribunal. By a judgment and order dated October 4, 2016, the

Tribunal dismissed the said appeal, thereby, affirming the order of

winding up dated August 6, 2002, passed by the RCS. The operative

Page 11 of 38

portion of the judgment and order dated October 4, 2016 reads as

follows:

“That the appeal be and the same is hereby

dismissed on contest against the respondents.

Consequently, the Order of liquidation dated

06.08.2002 passed by the RCS is hereby

affirmed.

Let a copy of this judgment along with LCR be

communicated to the RCS. Government of West

Bengal for information.”

l) The appellants, being aggrieved by the judgment and order dated

October 4, 2016, filed W.P. No. 140 [w] of 2017 [hereafter ‘the said

writ petition’], seeking, inter alia, the following reliefs:

“a. A writ in the nature of Mandamus commanding the Registrar of

Cooperative Societies, West Bengal to cancel and / or to rescind the

winding up order and appointment of liquidator dated 06.08.2002

passed vide its memo nos. 6884 and 6886 dated 06.08.2002, upon

setting aside the impugned judgment and order dated 04.10.2016

passed in Appeal no 71 of 2004 by the Learned Cooperative Tribunal,

West Bengal confirming the liquidation and appointment of liquidator

without setting aside the order of winding up dated 06.08.2002 of the

instant Bank;

b. A Writ in the nature of Certiorari directing the Registrar and the

authorities concerned to transmit all the records pertaining to the

instant case before This Hon'ble Court so that conscionable justice may

be done by setting aside the impugned judgment a nd order dated

04.10.2016 passed in Appeal No 71 of 2004 by the Learned

Cooperative Tribunal, West Bengal and orders dated 06.08.2002

passed by Registrar of Cooperative Societies, West Bengal.”

m) The said writ petition came for consideration before the learned Single

Judge of this Court and by the impugned judgment and order dated

June 4, 2018, the learned Single Judge dismissed the said writ

petition. The learned Single Judge, inter alia, observed the following:

Page 12 of 38

“The facts of this case, inter alia are that the said Cooperative

Bank Limited was originally registered as a Cooperative

Society and subsequently declared an Urban Cooperative

Bank in the year 1996. The bank is stated to have made an

application for license under the Banking Regulation Act 1949

before the Reserve Bank of India in the year 1997. The

Reserve Bank of India conducts an inspection and finds

serious and gross irregularities in the functioning of the bank.

Details reasons have been given by the Reserve Bank of

India, in that regard. The R.B.I. also conducted a further

inspection in the context of Sections 99 and 100 read with

Section 145 of the West Bengal Cooperative Societies Act,

1983 and Section 13D(1) of the Deposit Insurance and Credit

Guarantee Corporation Act, 1961. A recommendation dated

25 January 2001 was made by the Executive Director of the

RBI for appointment of a liquidator on the said Cooperative

bank. Pursuant to such recommendation dated 25 January,

2001 the Registrar Cooperative Societies, West Bengal passed

an order dated 6 August 2002 for winding up the bank under

Section 99 of the WBCS Act, 1983. The Registrar also

appointed a liquidator on the Bank.

Such order came to be challenged in diverse proceedings

initially before the Cooperative Tribunal, which stayed it. The

said order of the Cooperative Tribunal dated 7th July, 2006

was challenged before this Court both by the RBI, and the

State Government. The matter was remanded back to the

Tribunal by this Court for consideration of grievance, of the

parties afresh.

Upon remand, as aforesaid, in Appeal no.71 of 2004 the

Cooperative Tribunal has come to confirm the order of the

Registrar, Cooperative Society and as also the order of

winding up of the bank.

In fact, the Registrar under the 2006 Act is entitled to take the

benefit of an enquiry by a much larger and more stringent

watchdog on Banks in this country as conceived of Banking

Regulation Act, 1949. The same reason could apply to the

argument raised by the petitioner in respect of the order of the

Registrar under Section 145 of the 1983 Act.

There is yet another reason not to entertain this writ

application. Mr. Roy for the State Government has asserted a

preliminary objection that when an order of winding up has

been passed no proceeding can be maintained in the name of

the society and it is only the liquidator who can sue or

maintain any proceeding. It is thoroughly illegal and highly

improper on the part of the writ petitioner no.1 to include and

Page 13 of 38

implead as a second writ petitioner and the bank herein

which is itself under liquidation. The writ petitioner was trying

to mislead this Court if not act contumaciously on the face of

the Court.

In any event the order and recommendation dated 25.01.2001

of the R.B.I. have not been challenged before any forum and

have attained finality.

In these circumstances W.P. No.140 (W) of 2017 is

dismissed.”

3. Mr. Shyamal Mukherjee, learned counsel appearing for the

appellants, placed reliance on Sections 93, 99, 100 and 145 of the

said Act, 1983. Mr. Mukherjee submitted that before passing the

impugned order of winding up dated August 6, 2002, neither any

inspection under Section 92 nor inquiry under Section 93 of the said

Act, 1983 was conducted. The respondents also did not issue 30

days’ notice to the said Bank in terms of Section 99[2] of the said Act,

1983 prior to passing of the order dated August 6, 2002. He

submitted that the order dated August 6, 2002 was in violation of the

principles of natural justice.

4. Per contra, Ms. Susmita Saha Dutta, learned Additional Government

Pleader, State of West Bengal, appearing for the State respondents,

opposed the contentions of Mr. Mukherjee. She submitted that there

was no infirmity in the order dated August 6, 2002, as the RCS acted

on the direction of the RBI. The Tribunal, having considered the

issue in question, rightly dismissed the appeal preferred by the

Page 14 of 38

appellants. Consequently, the learned Single Judge dismissed the writ

petition.

5. We have considered the rival contentions of the parties.

6. Before we proceed to deal with the legality and validity of the order

dated August 6, 2002, followed by the order of the Tribunal and the

learned Single Judge, certain aspects are required to be considered.

7. The subject appeal was taken up by this Court on July 14, 2026 and

the following order was passed:-

“In Re: FMA 898 of 2020

6. The Registrar of cooperative societies will come back with definite

information and records, including the enquiry report indicating:-

(a) Whether the inspection was made prior to the decision for winding

up, as per Section 92 of the West Bengal Co-operative Societies Act,

1983”.

(b) Whether a report was prepared and served upon the appellants.

(c) Whether the appellants were heard and thereafter the order was

passed.

(d) Present status of the society and its assets and liabilities upon the

liquidator being appointed.

7. The other issue which should be clarified on the basis of the records

and the law, is whether a request by the RBI to wind up the bank

would be binding on the Registrar of cooperative societies and the

Registrar of Cooperative societies could act on the basis of such request

Page 15 of 38

without following the other requirements of Section 99 of the West

Bengal Cooperative Societies Act, 1983”.

8. Pursuant to the order dated July 14, 2026, the learned counsel for

the State respondents filed a report dated August 14, 202 6, duly

affirmed by the Special Registrar of Cooperative Societies,

Government of West Bengal. The said report provides as follows:

“A Report in connection with FMA 898 of 2020 in the Matter of

Sri Bhaskar Mukherjee & Anr. Vs The State of West Bengal &

Ors.:

In compliance with solemn order passed by the Hon'ble

Division Bench of High Court, Calcutta dated 14.07.26 in FMA

898 of 2020 with CAN 1 of 2018 With CAN 2 of 2018 in the

matter of Sri Bhaskar Mukherjee & Anr. Vs The State of West

Bengal &

Ors, the following report is submitted based on the existing

records and reports:

1. [Point (a) of Para 6]: Prior to issuance of order for winding

up of Pranabananda Cooperative Bank Ltd (hereinafter

referred to as 'liquidated entity'], an inspection under Sec 92 of

the now repealed WBCS Act, 1983 was carried out in terms of

Order No. 6003 dated 29.07.1999 of the Additional Registrar

of Cooperative Societies, West Bengal.

Pertinent to add that the Reserve Bank of India (RBI) is also

empowered under Section 35 of the Banking regulation act,

1949 to conduct inspect of the said cooperative bank at any

time and examine its books and accounts. In the instant case,

Pranabananda Cooperative Bank Ltd was regularly inspected

by the RBI.

2. [Points (b) and (c) of Para 6]: A detailed report covering

various aspects including its general working, financial

analysis, etc. was compiled by the Inspection team and

submitted to the Registrar. It appears further the first

petitioner Sri Bhaskar Mukherjee, the Chief Promoter turned

Chief Executive, was placed under suspension by the

Government appointed Board of Administrators with effect

from 09.08.1999 for alleged misconduct of illegal issuance of

appointment letters to casual employees.

3. In terms of Section 145 of the WBCS Act, 1983 read with

Banking Regulation Act, 1949, the liquidated entity was a

cooperative bank under the direct supervision of the Reserve

Page 16 of 38

Bank of India. The statutory inspection carried out by the RBI

having revealed several serious irregularities, the apex bank

had, in terms of order No. UBD.CO.BSD.III/2167 dated

25.01.2001, rejected the application of the liquidated entity

for banking licence. The said advisory was served upon the

liquidated entity as well.

4. In another order bearing No. UBD.BSD.III/2166 dated

25.01.2001, the RBI had requested the Registrar to make an

order for winding up of the liquidated entity and appoint a

liquidator thereof. On the basis of the said advisory, the

Registrar of Cooperative Societies, West Bengal issued order

for winding up of the Pranabananda Cooperative Bank Ltd in

terms of Section 99(1) of the WBCS Act, 1983. The said order

was issued in terms of No. 6884 dated 06.08.2002.

5. It is worth reproducing Section 145 of WBCS Act, 1983 in

order to understand the position of RBI as regards an

insured cooperative bank:

'Notwithstanding anything contained elsewhere in this Act,

the Registrar shall not take any action under this Act in

respect of an insured cooperative bank without obtaining

previous sanction of the Reserve Bank of India and without

compliance with the requirement of the Deposit Insurance

Corporation Act, 1961. The liquidated entity's deposits were

insured with the DICGC, a wholly owned subsidiary of RBI,

and RCS, WB was bound to com ply with the request of the

RBI for winding up. The non obstante clause in Section 145

of WBCS Act, 1983 implies that the usual procedure laid

down in Sec 99 ibid need not be followed. Subsequently, Sri

Phelaram Mukherjee, an officer in the rank of Cooperative

Development Officer, was appointed as the Liquidator.

6. The records of the liquidated entity were subsequently

seized in connection with a case and as per latest report

from the Addl. DG & IGP, Western Zone, WB, the case was

transferred to the Enforcement Branch, West Bengal and the

records are not available with the Purba Bardhaman District

police. Hence, audit could not be carried out nor the exact

financial position as regards the assets and liabilities known

to the authorities. [latest correspondence is attached]”.

9. We shall deal with the aforesaid report filed by the State respondents

a little later, but before that, we shall deal with the two

communications of the RBI. By the first order bearing no.

“UBD.CO.BSD III/2167/12.03.1542/2000 -2001 dated January 25,

Page 17 of 38

2001 [hereafter ‘the first order of RBI’], the RBI rejected the

application of the appellants dated March 1, 1997 for grant of licence.

n) In the second order bearing no. UBD.BSD III 2166/12.03.1542/2000

2001 dated January, 25, 2001 [hereafter ‘the second order of RBI’],

the RBI issued requisition to the RCS for winding up of the said Bank.

10. The first order of RBI, rejecting the appellants’ application for grant

of a banking licence, was passed in exercise of the discretion vested in

the RBI by the Banking Regulation Act, 1949. The second order of

RBI was a consequential direction issued pursuant to the first order,

requiring the RCS to take steps for the winding up of the Bank in

accordance with the provisions mentioned therein. We once again, at

the risk of repetition, reiterate the exact direction passed by the RBI

in the second order:

“Reserve Bank of India, …..…………., hereby requires the

Registrar of Co-operative Society West Bengal in terms of the

provisions of Section 99 and 100 read with Sect 145 of the

West Bengal Co-operative Societies Act, 1983 and Section 13

D(1) the Deposit Insurance and Credit Guarantee Corporation

Act, 1961 to make order for winding up of the Pranabananda

Co-operative Bank Ltd., Burdwan (West Bengal) and the

appointment of a liquidator thereof.”

11. Since the said Bank was set up under the provisions of the said

Act, 1983, the RBI while requiring the RCS to make an order of

winding up referred to the provisions of the said Act, 1983, and

Page 18 of 38

Section 13D(1) of the Deposit Insurance and C redit Guarantee

Corporation Act, 1961.

12. To deal with the rival contentions we deem it fit to refer to the

following provisions of the said Act, 1983:

“Section 93. Inquiry by Registrar. (1) The Registrar may, at

any time of his own motion, hold by himself or by any

person authorised by him by order in writing an inquiry into

the constitution, working and financial condition of a co-

operative society or into any specific matter relating to the

affairs of a co-operative society.

(2) An inquiry under sub-section (1) may also be held by the

Registrar or by any person authorised by him by order in

writing on the application of-

(a) the financing bank, if any, of which the co-operative

society is a member or a debtor;

(b) the majority of the directors of the board of the co-

operative society;

(c) one-third of the members of the co-operative society each

of whom has been a member for not less than six months

immediately preceding the date of application and who

have deposited such security for costs, if any, as the

Registrar may direct: Provided that in the case of a co-

operative society having more than one thousand and five

hundred members, an application under this sub -section

Page 19 of 38

may be made by the delegates elected in the prescribed

manner;

(d) the creditors, representing not less than one-half of the

borrowed capital of the co-operative society, who have

deposited such security for cost, if any, as the Registrar

may direct.

(3) The Registrar shall communicate the report of an inquiry

under this section or a summary thereof to the co-operative

society and to the applicant who made the application

under sub-section (2).

Section 99. Winding up of co-operative society. (1) If, after

an audit under section 90 or an inspection under section 92

or an inquiry under section 93 or on an application made by

not less than three-fourths of the members of any co -

operative society, the Registrar is of opinion that the co-

operative society should be wound up, he may by order

direct it to wound up.

(2) The Registrar may of his own motion, after giving thirty

days' notice in the form prescribed, by order direct the

winding up of a co-operative society-

(a) where the co-operative society has not commenced

working within twenty-four months from the date of its

registration or has ceased to function for eighteen months;

or

Page 20 of 38

(b) where the number of members of the co-operative society

has been reduced to less than the minimum provided in

section 13 for the purpose of registration.

(3) The Registrar may, after orders have been issued under

sub-section (1) or sub-section (2), consider the reports, if

any, of the liquidator appointed under section 100, by order

cancel the registration of the co-operative society.

(4) If, however, the Registrar is of opinion that a co-operative

society which has been directed to wound up under sub -

section (1) or sub-section (2) should continue to function, he

may, with the prior approval of the State Government,

cancel such order for winding up.

Section 100. Appointment of liquidator.- After an order has

been issued under sub-section(1) or sub-section (2) of

section 99, the Registrar may, in accordance with the rules,

appoint a person to be a liquidator of the co-operative

society in respect of which such order has been issued and

fix his remuneration in the manner prescribed and may, if

necessary, in the like manner remove such person and

appoint another person in his place:

Provided that it shall not be necessary to appoint any

liquidator for winding up of a co-operative society which

has not commenced working.

Page 21 of 38

Section 145. Insured cooperative bank.- Notwithstanding

anything contained elsewhere in this Act, the Registrar

shall not take any action under this Act in respect of an

insured co-operative bank without obtaining previous

sanction of the Reserve Bank of India and without

compliance with the requirements of the Deposit Insurance

Corporation Act, 1961 (47 of 1961).

Explanation- “Insured co-operative bank” shall mean a

cooperative bank which is an insured bank within the

meaning of clause (1) of section 2 of the Deposit Insurance

Corporation Act, 1961.”

13. The first order of the RBI was passed while considering the

society’s application for licence to carry on banking business in India.

The application was rejected in exercise of power under Section 22 of

the Banking Regulation Act. The second order is a requisition to the

RCS to make an order of winding up with reference to Sections 99,

100, 145 of the Cooperative Societies Act. The fact that winding up

process was guided by the provisions of the said Act, 1983 was also

the legal understanding of the RBI. The RCS was required to act

within the four corners of the law. We have already quoted the

relevant provisions of the said Act, 1983 in the preceding paragraphs.

14. Section 99[1] of the said Act, 1983 empowers the RCS to pass an

order for the winding up of any cooperative society if in his opinion

Page 22 of 38

the said cooperative society should be wound up. Such decision is

subject to the fulfilment of any of the four preconditions, namely, [i]

after an audit under Section 90, or [ii] an inspection under Section

92, or [iii] an inquiry under Section 93 or [iv] on an application made

by not less than three-fourth of the members of any cooperative

society. The report of the RCS mentions an inspection under Section

92 of the said Act, 1983, which was carried out sometime in 1999,

whereas, the requisition of the RBI is dated August 6, 2002.

15. At this stage, we wish to refer to a portion of a paragraph, which is

part of the judgment and order dated May 22, 2009 passed by a

learned Single Judge, referred to hereinabove, in W.P. No. 22474 [w]

of 2006 and two other writ petitions:

“In their writ petition, the Principal Secretary and the other

officers of the Government have annexed an inspection report

wherefrom it appears that an inspection of the Bank under Section

92[1][a] of the 1983 Act was conducted in terms of the order of the RCS

dated 27.09.1999 for ascertaining its working and financial condition.

A report was submitted by the Deputy Registrar of Cooperative

Societies on 6.9.1999.”

16. It appears from the above paragraph that the inspection report

sought to be relied upon by the RCS in his report filed before this

Bench was conducted in terms of Section 92[1][a] of the said Act,

1983. Under Section 99 of the said Act, 1983 an inspection held as

Page 23 of 38

per the legal provision and report prepared on the basis thereof can

be a precursor to winding up of a cooperative society.

17. Section 92 of the said Act, 1983 reads as follows:

“Inspection by Registrar or financing bank.-

(1) Every co-operative society shall be liable at any time to

inspection-

a) By the Registrar or by any person authorised by the State

Government or the Registrar in this behalf by general or special

order;

b) By the financing bank, if any, of which it is a debtor;

c) By the apex society or the central society, if any, of which it is a

member.

(2) An inspection under sub-section (1) by a financing bank or an

apex society or a central society, as the case may be, shall be

made by an officer of such financing bank or apex society or

central society certified by the Registrar in accordance with the

rules as competent to conduct such inspection.

(3) The Registrar may by general or special order direct that the

report of an inspection under sub-section (1) or a summary

thereof in respect of a co-operative society or a class of co-

operative societies shall be communicated within one month

from the date of inspection to the co-operative society and to the

financing bank and the apex society or the central society, if

any, of which it is a debtor or a member, as the case may be,

and, when the inspection is made by the financing bank, to the

Registrar also.

(4) An inspecting officer may seize in the manner prescribed

any book or document of a co -operative society during its

working hours and shall report the fact of such seizure to the

Registrar within twenty-four hours with a copy of the seizure

list and the requisition:

Provided that no such seizure shall be made unless a written

requisition is served on the co-operative society specifying

therein the books and documents to be seized and the reasons

therefor.”

18. Therefore, in terms of Section 92[1][a] of the said Act, 1983, the

RCS himself or any person authorised by the State Government or the

Registrar, by a general or special order can cause any cooperative

society to be inspected. Once such inspection is conducted, the RCS,

Page 24 of 38

in terms of Section 92[3], shall, by a general or special order, direct

that the report of the inspection conducted under Section 92[1] or a

summary thereof in respect of a cooperative society , shall be

communicated to the cooperative society, within one month from the

date of such inspection.

19. Therefore, before taking any coercive steps under Section 99 of the

said Act, 1983, based on an inspection in terms of Section 92 thereof,

the Statute provides a mechanism for adherence to the principles of

natural justice. The provision under Section 92 being couched in the

words ‘… shall be communicated within one month from the date of

inspection to the cooperative society …’ is mandatory in nature.

Since such report can be the sole basis for winding up of a society,

any violation of such mandate not only gives rise to an infraction of

the statutory provision but also constitutes a violation of the rules of

natural justice, thereby, being de hors the provisions of Article 14 of

the Constitution of India.

20. It is the case of the appellants that no such inspection report was

ever served on them.

21. Before ascertaining whether such report was served on the

appellants, we will reiterate two questions, posed by this Bench, to

the State respondents on July 14, 2026:-

“[i] Whether the inspection was made prior to the decision for

winding up, as per Section 92 of the West Bengal Co-operative Societies

Act, 1983”.

Page 25 of 38

[ii] Whether a report was prepared and served upon the appellants.”

22. So far as the first question is concerned, the State in its report

dated August 14, 2026, referred to hereinabove, furnished the

following answer:

“Prior to issuance of order for winding up of Pranabananda

Cooperative Bank Ltd (hereinafter referred to as 'liquidated entity'], an

inspection under Sec 92 of the now repealed WBCS Act, 1983 was

carried out in terms of Order No. 6003 dated 29.07.1999 of th e

Additional Registrar of Cooperative Societies, West Bengal.”

23. So far as the second question is concerned, we have not found any

answer and by drawing an adverse inference, we come to a conclusion

that the said inspection report was never served upon the appellants

before passing the impugned order of winding up dated August 6,

2002 under Section 99 of the said Act, 1983.

24. Here, we have taken note of an interesting chain of events. As we

have pointed out earlier, by an order dated July 27, 1999 the

Cooperation Department, Government of West Bengal, owing to the

resignation of some members from the Board of the said Bank,

dissolved the elected Board of Directors of the said Ba nk and

appointed a Board of Administrators in its place. The inspection was

conducted two days after the order dated July 27, 1999, i.e. on July

29, 1999. The appointment of the Board of Administrators was

quashed by this Court on March 30, 2001. Therefore, even assuming

that the report was served, it did not reach the appellants and / or

Page 26 of 38

the actual stake-holders [the dissolved Board of Directors], but was

received by the Board of Administrators, whose appointment was

declared by this Court as illegal and who did not have any interest to

save the Society. Despite there being a declaration by this Court vide

order dated March 30, 2001, that the appointment of the Board of

Administrators was illegal, the appellants were not allowed to function

and subsequently the impugned order of winding up was passed on

August 6, 2002.

25. The suffering of the appellants did not end here. As we have

already stated, the Government of West Bengal dissolved the elected

Board of Directors on July 27, 1999 and with effect from the said date

till the date of winding up, neither the appellants nor the other

Members of the Board got a chance to manage the affairs of the Bank.

Therefore, when the said Bank was under the control and

management of the Board of Administrators, the RBI issued the show

cause notice dated June 24, 2000, calling upon the said Bank to

show cause as to why its application dated March 1, 1997 praying for

the grant of a licence, should not be rejected. The reply, if any, came

from the Board of Administrators, who were appointed as a stop-gap

arrangement and who did not have any interest in the survival of the

Bank / Society and the appellants, who were the actual aggrieved

persons, did not get an opportunity to respond to such show cause

notice.

Page 27 of 38

26. The RBI, being dissatisfied with the so-called reply to the show

cause notice, which was sent by the Board of Administrators, issued

the two purported orders dated January 25, 2001, which prompted

the RCS to immediately issue the order of winding up.

27. Therefore, it appears that not only the orders dated January 25,

2001 and order of winding up dated August 6, 2002 were passed

behind the back of the appellants, but a series of illegal actions were

also taken and decisions were made in an orchestrated manner, in

gross violation of the statutory provisions and the settled principles of

natural justice.

28. The entire chain of events clearly suggests that the principles of

natural justice have seriously been compromised by the acts of the

respondents. The RCS acted arbitrarily, illegally and on the dictates

of the RBI, without recording reasons as to why he was of the opinion

that the society should be wound up.

29. Even assuming that the report was served upon the Board, t he

principles of audi alteram partem require that a hearing should be

given to the person(s) likely to be affected by the proposed decision

and not to the person(s) who, in the guise of being an affected person,

involves himself in the course of hearing but ultimately will not be

aggrieved by any coercive decision. Such course of action would

render the entire decision-making process void ab-initio. Moreover,

the said report has not been produced even before the Tribunal in the

appeal, or before this Bench, despite several opportunities. The report

Page 28 of 38

of the RCS filed before us indicates that the inspection was held after

the supersession of the elected Board, but not after the RBI required

the RCS to make an order of winding up of the society.

30. Apart from non-service of the report of the purported so-called

inspection, the RCS did not extend an opportunity of hearing to the

appellants before passing the order of winding up dated August 6,

2002. The report has not seen the light of the day and we are

persuaded to draw an adverse presumption under Section 114 of the

Evidence Act. Mere mention in the impugned order to an inspection

under Section 92 of the said Act, 1983 cannot substitute the need for

production of the report for scrutiny by the Tribunal in the appeal,

when the Division bench had specifically directed that all relevant

documents, records and materials should be considered by the

Tribunal, de novo.

31. There is no express provision in Section 99 of the said Act, 1983

requiring an opportunity of hearing to be extended to the person likely

to be affected, but it is well settled that even when there is no specific

provision in a statute asking the person to show-cause against the

action proposed to be taken, the duty to give a reasonable opportunity

of being heard must be read into the statute.

32. In A.K. Kraipak Vs. Union of India reported in 1969 [2] SCC 262 /

AIR 1970 SC 150, the Hon’ble Supreme Court, inter alia, observed:

“20. The aim of the rules of natural justice is to secure justice or

to put it negatively to prevent miscarriage of justice. These rules

Page 29 of 38

can operate only in areas not covered by any law validly made.

In other words they do not supplant the law of the land but

supplement it. …”

33. In Maneka Gandhi Vs. Union of India reported in 1978 [1] SCC 248

/ AIR 1978 SC 597, the Hon’ble Supreme Court, inter alia, observed:

“It is well established that even where there is no specific provision

in a statute or rules made thereunder for showing cause against

action proposed to be taken against an individual, which affects the

rights of that individual, the duty to give reasonable opportunity to

be heard will be implied from the nature of the function to be

performed by the authority which has the power to take punitive or

damaging action.”

34. In Swadeshi Cotton Mills v. Union of India, reported in (1981) 1 SCC

664, the Hon’ble Supreme Court, inter alia, observed:

“… if the statute conferring the power is silent with regard

to the giving of a pre-decisional hearing to the person affected

and the administrative decision taken by the authority involves

civil consequences of a grave nature, and no full review or

appeal on merits against that decision is provided, courts will be

extremely reluctant to construe such a statute as excluding the

duty of affording even a minimal hearing shorn of all its formal

trappings and dilatory features at the pre-decisional stage,

unless, viewed pragmatically, it would paralyse the

Page 30 of 38

administrative progress or frustrate the need for utmost

promptitude. In short, this rule of fair play must not be jettisoned

save in very exceptional circumstances where compulsive

necessity so demands. The court must make every effort to

salvage this cardinal rule to the maximum extent possible, with

situational modifications. But, the core of it must, however,

remain, namely, that the person affected must have reasonable

opportunity of being heard and the hearing must be a genuine

hearing and not an empty public relations exercise.”

35. One may contend that, once the RBI decided to reject the

appellants’ application for a banking licence and issued a requisition

to the RCS for the winding up of the said Bank, any opportunity of

hearing or issuance of a show cause would be otiose and / or an idle

formality as the appellants, in the facts and circumstances of the

present case, could not have demonstrated real prejudice in not being

heard, as the winding up of the bank was inevitable.

36. We must remember that w here there has been a violation of the

principles of natural justice, the question of actual prejudice is

immaterial. In M.S. Nally Bharat Engineering Co. Ltd. v. State of

Bihar, reported in (1990) 2 SCC 48, the Hon’ble Supreme Court, inter

alia, observed:

“25. The management need not establish particular

prejudice for want of such opportunity. In S.L.

Kapoor v. Jagmohan Chinnappa Reddy, J., after referring to

Page 31 of 38

the observation of Donaldson, J., in Altco

Ltd. v. Sutherland said that the concept that justice must

not only be done but be seen to be done is basic to our

system and it is concerned not with a case of actual

injustice but with the appearance of injustice or possible

injustice. It was emphasized that the principles of natural

justice know of no exclusionary rule dependent on whether

it would have made any difference if natural justice had

been observed. The non-observance of natural justice is

itself prejudice to any man and proof of prejudice

independently of proof of denial of natural justice is

unnecessary.”

37. In Mangilal v. State of M.P., reported in (2004) 2 SCC 447, the

Hon’ble Supreme Court, inter alia, observed:

“10. Even if a statute is silent and there are no positive words

in the Act or the Rules made thereunder, there could be

nothing wrong in spelling out the need to hear the parties

whose rights and interest are likely to be affected by the

orders that may be passed, and making it a requirement to

follow a fair procedure before taking a decision, unless the

statute provides otherwise. The principles of natural justice

must be read into unoccupied interstices of the statute, unless

there is a clear mandate to the contrary. No form or procedure

Page 32 of 38

should ever be permitted to exclude the presentation of a

litigant's defence or stand. Even in the absence of a provision

in procedural laws, power inheres in every tribunal/court of a

judicial or quasi-judicial character, to adopt modalities

necessary to achieve requirements of natural justice and fair

play to ensure better and proper discharge of their duties.

Procedure is mainly grounded on the principles of natural

justice irrespective of the extent of its application by express

provision in that regard in a given situation. It has always

been a cherished principle. Where the statute is silent about

the observance of the principles of natural justice, such

statutory silence is taken to imply compliance with the

principles of natural justice where substantial rights of parties

are considerably affected. The application of natural justice

becomes presumptive, unless found excluded by express

words of statute or necessary intendment.”

38. It is well settled that an administrative order which involves civil

consequences must be consistent with the rules of natural justice.

The expression 'civil consequences' encompasses infraction of not

merely property or personal rights but of civil liberties, material

deprivations and non-pecuniary damages. In its wide umbrella ,

everything that affects a citizen in his civil life inflicts a civil

consequence. [See: 1978 (1) SCC 405 (Paragraph 66) (Mohinder Singh

Gill & Anr. Vs. Chief Election Commissioner, New Delhi & Ors.)].

Page 33 of 38

39. In Rajesh Kumar v. CIT, reported in (2007) 2 SCC 181, the Hon’ble

Apex Court, inter alia, observed:

“26. Effect of civil consequences arising out of determination of

lis under a statute is stated in State of Orissa v. Dr. Binapani

Dei. It is an authority for the proposition when by reason of an

action on the part of a statutory authority, civil or evil

consequences ensue, principles of natural justice are required to

be followed. In such an event, although no express provision is

laid down in this behalf, compliance with principles of natural

justice would be implicit. In case of denial of principles of natural

justice in a statute, the same may also be held ultra vires Article

14 of the Constitution.”

40. In the light of the aforesaid propositions of law laid down by the

Hon’ble Supreme Court and the facts of the present case, let us now

examine the judgment under appeal.

41. The Learned Single Judge dismissed the writ petition on three

grounds, namely, [i] that the Registrar under the 2006 Act was

entitled to take the benefit of an enquiry by a much larger and more

stringent watchdog on banks in this country as conceived under

Banking Regulation Act, 1949 and the same reasoning could apply to

the argument raised by the appellants in respect of the order of the

Registrar under Section 145 of the 1983 Act; [ii] that when an order of

winding up had been passed, no proceeding could be maintained in

the name of the society and it was only the liquidator who could sue or

Page 34 of 38

maintain any proceeding; and [iii] that the order and recommendation

dated 25.01.2001 of the RBI was not challenged before any forum and

had attained finality.

42. Firstly, the finding of the learned Single Judge is erroneous to the

extent that the provisions of the 2006 Act do not apply to the present

case. The provision under Section 145 of the said Act, 1983 which

says: ‘Notwithstanding anything contained elsewhere in this Act, the

Registrar shall not take any action under this Act in respect of an

insured co-operative bank without obtaining previous sanction of the

Reserve Bank of India and without compliance with the requirements of

the Deposit Insurance Corporation Act, 1961 ’ is an additional

protection provided by the legislature to the insured co-operative

banks to the extent that, before the RCS could take recourse to the

provisions of the said Act, 1983, a previous sanction of the RBI was

mandatory without compliance of the provisions of D IC Act, 1961.

Here, the RBI required winding up of the society. Thus, the said

provision would only be applicable when the RCS takes steps against

a cooperative bank on his own or as per the provisions of the Act.

This section does not empower the RBI to direct winding up by RCS,

without due adherence to the procedure prescribed by said Act, 1983.

43. Secondly, the learned Single Judge appears to have been oblivious

to the fact that the appellants had been pursuing the issue of winding

up and appointment of the liquidator by the order dated August 6,

2002 since 2002. Almost 24 years have lapsed, but the appellants

Page 35 of 38

are still awaiting the outcome of the proceedings. In any event, to

require the appellants to challenge the appointment of the liquidator

through the liquidator himself, as suggested by the learned Single

Judge, is like an ‘appeal from Caesar to Caesar’s wife’. Asking the

liquidator to challenge his appointment amounts to asking him to be

a judge in his own cause. Significantly, the learned Single Judge

failed to take notice of the provisions under Section 136 of the Act of

1983 and the corresponding provisions of the Third Schedule, which

is set out below:-

THIRD SCHEDULE

Appeals

Serial No. Appeal lies

against

By whom

appeal may

be preferred

Authority to

whom

appeal shall

lie

Period of

limitation

*** *** *** *** ***

13. An order for

winding up of

a co-operative

society under

section 99.

Any member

of the

Co-operative

society.

To the

Co-operative

Tribunal

having

jurisdiction.

Two

months

from the

date on

which the

order is

communica

ted.

44. A member can prefer an appeal from an order of winding up.

45. Thirdly, it is true that the orders dated January, 25, 2001 have not

been challenged, but that does not give the RCS a freehand to violate

the provisions of the said Act, 1983. The RCS ought to have passed

the order of winding up within the four corners of the said Act, 1983

Page 36 of 38

and by not doing so, the rights of the appellants have been severely

infringed.

46. The learned Single Judge erred in holding that an enquiry by RBI

was sufficient compliance of Section 99 of the said Act. The society

was registered as a cooperative society and not a cooperative bank. It

did not have the permission to conduct banking business, but was

allowed by RBI in the interim period. Under Section 35A of the

Banking Regulation Act, 1949, RBI can issue directions, but RBI

cannot usurp the power conferred upon the RCS under Section 99 of

the said Act, 1983.

47. Section 35A of the Banking Regulation Act is quoted below:-

“35.A. Power of the reserve Bank to give directions. - (1)

Where the Reserve Bank is satisfied that—

(a) in the [public interest]; or

[(aa) in the interest of banking policy; or]

(b) to prevent the affairs of any banking company being

conducted in a manner detrimental to the interests of the

depositors or in a manner prejudicial to the interests of the

banking company; or

(c) to secure the proper management of any banking company

generally,

It is necessary to issue directions to banking companies

generally or to any banking company in particular, it may, from

time to time, issue such directions as it deems fit, and the

Page 37 of 38

banking companies or the banking company, as the case may

be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its

own motion, modify or cancel any direction issued under sub-

section (1), and in so modifying or cancelling any direction may

impose such conditions as it thinks fit, subject to which the

modification or cancellation shall have effect.]”

48. The order of the RCS is unreasoned. Every statutory function and

decisions taken in exercise thereof must be tested on the touchstone

of reasons. The unreasoned order smacks of arbitrariness and is

violative of Article 14 of the Constitution of India.

49. A wrong, more precisely a statutory violation, cannot be diluted by

the passage of time. A citizen, whose right is protected under the law

of the land, should not suffer on the grounds of delay due to the

pendency of litigation or change of circumstances. The appellants had

a right to fair treatment and they were entitled to an opportunity of

hearing from the stage when the Board of Directors was illegally

dissolved and subsequently the inspection under Section 92 was

conducted, followed by the issuance of the impugned order dated

August 6, 2002, passed by the RCS. Therefore, we must turn the

clock back to that stage for the ends of justice.

50. Accordingly, the impugned order of winding up dated August 6,

2002, passed by the RCS, is quashed. Consequently, the order dated

October 4, 2016 passed by the Tribunal and the order under appeal

Page 38 of 38

dated June 4, 2018 are set aside. The society will revive as a

cooperative credit society and function in accordance with law. The

society shall not carry on any banking business as a cooperative

bank. The RCS is at liberty to act and proceed in accordance with law,

if he deems fit.

51. The order of appointment of the liquidator is also set aside. The

liquidator will hand over the assets to the members of the society. The

RCS will supervise the process of handing over. This order will not

cause any prejudice to the proceedings, if any, initiated by any other

authority.

52. The appeal is allowed to the above extent.

53. Urgent Photostat certified copies of this judgment, if prayed for, be

supplied to the parties upon fulfillment of requisite formalities.

I agree.

(Arjun Ray Mukherjee, J.) (Shampa Sarkar, J.)