The Bombay High Court on Thursday suspended the operation of the Reserve Bank of India (RBI) order cancelling the banking license of Rupee Co-op Bank Ltd, which was to come into effect from September 20.
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The HC said that “pending appeal before the appellate authority, operation of the August 8, 2022 order shall remain suspended and the appellate authority shall dispose of the appeal positively on October 17 in accordance with law.”
A single-judge bench of Justice Sandeep K Shinde on Thursday passed an order in a plea by the Bank and Rupee Sangharsh Samiti, an association of depositors. The petitioners said the impugned order was challenged before the Appellate Authority, Department of Financial Service (Banking Division) Ministry of Finance.
The Appellate Authority, through its September 19 order, had found no reason to interfere with the impugned RBI order and thus, the prayer for interim relief was declined. The said order was then challenged by the Bank and Rupee Sanghash Samiti.
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Senior advocate Venkatesh Dhond, for the RBI, said that the single-judge bench does not have power to decide plea against the impugned order as per HC Rules and same may lie before a division bench comprising two judges.
Dhond further said that the Samiti has independently challenged the August 8 order before a division bench, after which Justice Shinde said he was not inclined to entertain the petition by the Samiti.
Dhond justified the RBI order and said that there was 85.93 per cent deposit erosion as on March 31 and gross non-performing assets (NPAs) of the Bank were at Rs. 285.42 crore and there was no improvement in financial position even after nine years from the imposition of operational instructions. If the petitioner is allowed to carry on its business any further, it would adversely affect the public interest, the RBI argued
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Advocate Pratap Patil for the Bank contended that the Appellate Authority has not recorded its independent finding while declining interim relief and simply upheld the RBI order. Patil added that the proposal of the group of investors to convert the cooperative bank into a small finance bank (SFB) with infusion of capital has not been considered by the Reserve Bank while passing the impugned order.
He said the statutory appeal is scheduled for hearing on October 17 and if the August 8 RBI order is not stayed or suspended, the substantive right of petitioners will be frustrated.
After hearing submissions, the single-judge bench said that the Supreme Court judgement which said that “it is not the function of court to sit over matters of economic policy and the same be left to expert bodies” applied in the present case.
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Justice Shinde observed, “In any case, the RBI before cancelling the licence had examined revival and merger proposals. I am not inclined to interfere with the August 8 order on merits and that is left open for Appellate Authority to examine in Appeal.”
The bench held, “In the interest of justice, if the operation of RBI’s order is not suspended, until the disposal of the statutory appeal, the appeal itself would be rendered infructuous at this stage. I deem it appropriate to suspend the August 8 order passed by the RBI till the conclusion of Bank’s appeal pending before the Appellate Authority.”
