Dist. Co-Op. Bank Ltd. & Ors Vs. State of Gujarat & Ors  Insc 52
(28 January 2004)
Variava & H.K. Sema.
APPEAL NO. 3041 OF 1998 Mehsana District Central Cooperative Bank Ltd. &
Ors. Appellants Versus Arvindbhai B. Patel & Ors. .. Respondents SEMA,J
CIVIL APPEAL NO. 3040 OF 1998 This appeal is against the judgment and order
dated 16.4.1998 passed by the Division Bench of the High Court. The facts of
this case may be briefly recited:- The appellant-society was registered under
the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as the
Act). It was carrying on the banking activities. Section 71(1)(a) to (f) of the
Act enumerates various institutions in which a co-operative bank is to make
investments. Clause (g) of Section 71(1) empowers the State Government to
permit any society to invest the funds in any institution other than those
mentioned in clauses (a) to (f) of the Section. Section 71 of the Act is
relevant for the purpose of disposal of the present appeal. We shall be dealing
with this Section in detail at an appropriate time. The appellant-bank sought
permission of the State government to invest funds in an institution outside
those falling under clauses (a) to (f) of Section 71(1) of the Act. However,
the Government declined the request. Inspite of the refusal, the appellant-bank
invested the funds in Mutual Fund, which was outside the purview of clauses (a)
to (f) of Section 71 of the Act. It is stated that for non-compliance of
Section 71 of the Act, notices were issued to the appellants calling for an
explanation as to why action should not be initiated against them as
contemplated under the Act. It is also stated that the appellants have not
filed their replies to those notices and the matter is still pending with which
we are not concerned in this appeal.
appellant-bank undisputedly is a Cooperative Bank and is also a Central
Co-operative Bank. The Banking Regulation Act, 1949 was amended by the Central
Act No.23 of 1965, which came into force with effect from 1st March, 1966. By the aforesaid amending Act,
Part V was inserted in the Banking Regulation Act, 1949, providing for
application of the Act to cooperative banks.
K.G. Vakharia, learned Senior counsel for the appellants, contended that
Section 5(b) of the Banking Regulation Act, 1949 defines "banking"
and provides that "banking" means the accepting, for the purpose of
lending or investment of deposits of money from the public. He further argued
that sub-section (1)(a) of Section 6 of the Banking Regulation Act, 1949
provides for business of banking companies which will include cooperative
banks. He, therefore, urged that the appellant-bank is entitled to be engaged
in banking business in terms of the norms contemplated under Sections 5 and 6
of the Banking Regulation Act and not according to the norms of investment
enumerated under Section 71 of the Gujarat Co- operative Societies Act.
whole contention of the learned Senior counsel for the appellants is based on
repugnancy and inconsistency between the Central Act and the State Act. In
other words, the conflict is between Section 71 of the Gujarat Co-operative
Societies Act and Sections 5(b) and 6(1)(a) of the Banking Regulation Act. To
answer the aforesaid question it will be relevant to make a quick survey of the
relevant provisions of the Gujarat Co-operative Societies Act and the Banking
appreciate the controversy in proper perspective Sections 5(b) and 6(1)(a) of
the Banking Regulation Act and Section 71 of the Gujarat Societies Act are
extracted: - "5. Interpretation. - In this Act, unless there is anything
repugnant in the subject or context, - (a).
means the accepting, for the purpose of lending or investment, of deposits of
money from the public, repayable on demand or otherwise, and withdrawal by cheque,
draft, order or otherwise;
"6. Forms of business in which banking companies may engage. -(1) In
addition to the business of banking, a banking company may engage in any one or
more of the following forms of business, namely: - (a) the borrowing, raising,
or taking up of money; the lending or advancing of money either upon or without
security; the drawing, making, accepting, discounting, buying, selling,
collecting and dealing in bills of exchange, hoondees, promissory notes,
coupons, drafts, bills of lading, railway receipts, warrants, debentures,
certificates, scrips and other instruments and securities whether transferable
or negotiable or not; the granting and issuing of letters of credit, traveler's
cheques and circular notes; the buying, selling and dealing in bullion and
specie; the buying and selling of foreign exchange including foreign bank
notes; the acquiring, holding, issuing on commission, underwriting and dealing
in stock , funds, shares, debentures, debenture stock, bonds, obligations,
securities and investments of all kinds; the purchasing and selling of bonds, scrips
or other forms of securities on behalf of constituents or others, the
negotiating of loans and advances; the receiving of all kinds of bonds, scrips
of valuables on deposit or for safe custody or otherwise; the providing of safe
deposit vaults; the collecting and transmitting of money and securities;"
Investment of funds. –
society may invest or deposit its fund, -
a Central Bank, or the State Co-operative Bank,
the State Bank of India,
the Postal Savings Bank,
any of the securities specified in section 20 of the Indian Trust Act, 1882 (II
shares, or security bonds, or debentures, issued by any other society with
limited liability, or
any co-operative bank or in any banking company approved for this purpose by
the Registrar, an on such conditions as the Registrar may from time to time
any other mode permitted by the rules, or by general or special order of the
anything contained in sub-section (1), the Registrar may, with the approval of
the State Co-operative Council, order a society or a class of societies to
invest any funds in a particular manner, or may impose conditions regarding the
mode of investment of such funds." We may also extract clause (7) and
clause (19) of Section 2 of the Gujarat Co-operative Societies Act:
"co-operative bank" means a society registered under this Act and
doing the business of banking, as defined in clause (b) of sub-section (1) of
section 5 of the Banking Companies Act, 1949 (X of 1949);
"society" means a co-operative society registered, or deemed to be
registered, under this Act;" Section 2 of the Banking Regulation Act, 1949
reads as under:- "Application of other laws not barred. - The provisions
of this Act shall be in addition to, and not, save as hereinafter expressly provided,
in derogation of the Companies Act, 1956 (1 of 1956), and any other law for the
time being in force." We may also notice that while introducing the
Gujarat Co-operative Societies Act, 1961 (Gujarat Act No. X of 1962), the aims
and objects of the Act were to consolidate and amend the Law relating to
co-operative societies in the State of Gujarat. The synopsis read as follows: -
Act complete code falling in Entry 32 of List II of Schedule VII not repugnant
under Article 254.
Object of Co-operative Movement.
Resolution pertaining to internal management cannot be held illegal.
Gujarat Co-operative Societies Act was assented to by the President on the 1st March, 1962.
of India and another, (1979) 3 SCC 431 had considered the question of
repugnancy and inconsistency between the Central Act and the State Act and held
that before any repugnancy can arise the conditions which must be satisfied
that there is a clear and direct inconsistency between the Central Act and the
such an inconsistency is absolutely irreconcilable; and
the inconsistency between the provisions of the two Acts is of such a nature as
to bring the two Acts into direct collision with each other and a situation is
reached where it is impossible to obey the one without disobeying the
fascicule reading of Sections 2,5 and 6 of the Banking Regulation Act and
Section 71 of the Gujarat Co-operative Societies Act would clearly posit that
Section 71 of the Act is not in derogation of any other law such as the Banking
Regulation Act but in addition to it. In the instant case, the State Act being
dominant legislation under Article 254(2) the intendment of legislature that
there is no repugnancy between the State Act and the Central Act is clearly
expressed due to the assent by the President in view of the provisions of
Section 71 of the State Act providing restrictive mode of investment by the
co-operative bank. Section 71 was brought to the Statute book with a view to
strengthen the already existing law namely the Banking Regulation Act and to
safeguard the interests of the members of co-operative banking business by
discouraging the members from investing in the institutions other than those
specified in clauses (a) to (f) of Section 71, without prior sanction of the
State Government. Therefore, it would not be opt to say that either the
legislature or the President intended to create any repugnancy between these
two Acts. The fact that the assent of the President was sought for, could only
be in addition to and not in derogation of any other Law such as the Central
Act. It is also clear from the language employed in Section 2 of the Banking
Regulation Act that the provisions of the Act were in addition to and not in
derogation of any other Law for the time being in force.
reading of Sections 2, 5 and 6 of the Banking Regulation Act and Section 71 of
the Gujarat Co-operative Societies Act, in our view, there is no repugnancy or
inconsistency between the State Act and the Central Act which satisfies the
test set out by this Court in M. Karunanidhi's case (supra). The contention of
the learned counsel for the appellants is not well founded. The appeal is
devoid of merits and is accordingly dismissed.
APPEAL NO. 3041 OF 1998 This appeal is directed against the judgment and order
dated 17.4.1998 passed by the Division Bench of the High Court in SCA No.5473
of 1997 (PIL).
stated the facts are:- A complaint was filed by the respondents herein to the
effect that the Central Cooperative Bank is governed by the provisions
contained in the Gujarat Cooperative Societies Act, 1961 and the Rules framed thereunder.
It is further alleged that the Mehsana District Central Cooperative Bank had
violated the provisions contained in Section 71 of the Gujarat Cooperative
Societies Act by investing large sums in undertakings other than those
enumerated in Section 71(a) to (f). Consequently, the Mehsana District Central
Cooperative Bank had lost substantial amount. Though the matter had been
brought to the notice of the State Government, Registrar of Cooperative
Societies and the District Registrar, no action had been initiated against the Mehsana
District Central Cooperative Bank and the Members of the Board of Directors. A
prayer was also made for issuance of a writ of mandamus directing the
authorities under the Gujarat Cooperative Societies Act to initiate necessary
proceedings against the respondents/appellants herein for having committed
breach of the provisions contained in Section 71 of the Act. It was further
alleged that the Mehsana District Central Cooperative Bank had invested a sum
of Rs. 95 crores in four different establishments which do not fall within the
ambit of institutions enumerated in Section 71(a) to (f) of the Act without the
approval of the State Government or the appropriate authority.
Anand, learned Senior counsel contended that the High Court ought not to have
entertained the petition in the form of PIL as the petition had been preferred
by a person no other than the business rivalry of the appellants due to clash
of interest. We see no substance in the contention.
facts and circumstances stated above, the High Court by the impugned order
issued a writ of mandamus, directing respondent Nos. 4 and 5 to take
appropriate action against the appellants in accordance with the provisions
contained in the Gujarat Cooperative Societies Act and the rules framed thereunder.
We do not see any infirmity in the impugned order.
Acts and Rules are made to be followed and not to be violated. When the Statute
prescribes the norms to be followed, it has to be in that fashion.
would be contrary to law. If there is any allegation of violation of statutory
rules which have been brought to the notice of the authorities and if the
concerned authorities do not perform their statutory obligation, as in the
present case, any aggrieved citizen can always bring to the notice of the High
Court about the inaction of the statutory authorities and in such event it
would always be open to the High Court to pass an appropriate order as deemed
fit and proper in the facts and circumstances of the case. In the present case,
the facts as alluded above, would clearly reveal that the High Court was
clearly justified in issuing a writ of mandamus, which cannot be faulted.
two appeals are dismissed being devoid of merits. Parties are asked to bear
their own costs.