ORDER
V.N. Sinha, J.
1. Heard Sri Binod Kumar Kanth, Senior Advocate for the petitioner and Sri Tara Kant Jha, Senior Advocate for the Reserve Bank of India, Respondent No. 1 (hereinafter referred to as RBI).
2. Petitioner, Siwan Central Co-operative Bank Limited, Siwan has filed this writ application assailing the directions issued by the RBI under Section 35-A of the Banking Regulation Act, 1949 (hereinafter referred to as “the Act”) dated 30.12.2004, Annexure 3 restraining the petitioner-Bank from accepting fresh deposit, including deposits in the Savings/Current Accounts, Fixed/Recurring Deposit is also restraining the withdrawal of any sum exceeding Rs. 1,000/- from the bank and further restraining the bank from making any, expenditure, except the salary, rent, electric bills, purchasing stationery and other legal expenses.
3. Learned counsel for the petitioner, while assailing the aforesaid directions, submitted that the petitioner-bank was established even before enactment of the Act. Petitioner-Bank was subjected to the provisions of the Act only after insertion of Part V of the Act with effect from 1.3.1966. Within the stipulated period on 26.5.1966 the petitioner-Bank applied for grant of licence under the Act and has continued with the Banking business by virtue of proviso to Sub-clause (2) of Section 22 of the Act. Since before the date of application for grant of licence until issue of the impugned directions, Petitioner-Bank has been discharging the banking activities to the satisfaction of all the depositors, creditors and other customers of the Bank. The NABARD made an inspection of the Petitioner-Bank during the year 2003 and submitted inspection report dated 9.3.2004, Annexure 5 to the supplementary affidavit. Counsel for the petitioner further submitted that trouble in the Bank began only after the bank was served with letter dated 30th December, 2004, Annexure 2 whereunder with reference to the aforesaid inspection report of the NABARD, it was stated that in order to protect the interest of the depositors, the Reserve Bank of India has been constrained to issue directions under Section 35-A of the Act for compliance by the Bank with immediate effect. The communication further indicted that the directions were also enclosed along with the letter dated 30th December, 2004, Annexure 2. Counsel thereafter submitted that another letter of the same date i.e. 30th December, 2004, Annexure-3 containing the aforesaid directions was received by the Bank, which has been impugned in the present case. While the communication contained in Annexures-2 and 3, were received by the Bank on 30th December, 2004, the Bank was served with another notice dated 28th December, 2004, Annexure 4 on 4.1.2005, whereunder the authorities of the Reserve Bank of India called upon the petitioner-Bank to show cause under Section 22(3) of the Act as to why the application of the petitioner Bank for grant of Banking Licence be not rejected and steps be not taken to wind up the bank itself. Paragraph 3 of the said notice indicates that the Bank was allowed one month time to answer the show cause notice. Counsel, with reference to the communications dated 30th December, 2004, Annexures 2 and 3 and the notice dated 28th December, 2004, Annexure 4 submitted that by issuing communications Annexures 2 and 3 and notice Annexure 4, the RBI levied twin assault on the banking activities of the petitioner-bank as the RBI issued notice to show cause within one month from the date of receipt of notice as to why the application for grant of Banking licence under Section 22 of the Act be not rejected and before the notice could be served on the petitioner and time granted thereunder to file the show cause reply could be over; the RBI issued directions contained in letter dated 30th December, 2004, Annexure 3 virtually closing the banking transactions in the petitioner-Bank and thereby the RBI not only violated the principles of natural justice but also infringed the constitutional rights of the petitioner-bank guaranteed under Article 19(1)(g) of the Constitution and acted with a closed mind indicative of the fact that RBI has already decided to close the petitioner-bank and in these circumstances it was submitted that this Court should not relegate the petitioner-bank to avail the alternative remedy in terms of Sub-section (2) of section 35-A of the Act as the representation dated 1.1.2005/4.1.2005, Annexures 6 and 6/1 is pending with the RBI for more than two months and the RBI for obvious reasons has not chosen to consider the representation. Learned counsel substantiated his submission that the authorities of the RBI are biased against the petitioner-bank, which is apparent from the fact that communication dated 30.12.2004, Annexure 2 and 3 were issued on 30th December, 2004 and were served on the petitioner-bank at Siwan on 30.11.2004 but notice dated 28th December, 2004, Annexure 4 was served on the petitioner after the. service of Annexures 2 and 3 on 4.1.2005. Learned counsel further submitted that the application for grant of banking licence is pending for more than 39 years and show cause notice dated 28.12.2004 seeking a reply to reject the application for grant of licence filed 39 years ago is reminiscent of bias on the part of the RBI as for lodging the twin assault on the petitioner-bank report of NABARD dated 9.3.2004, Annexure 5 is being relied upon.
4. In order to satisfy this Court that the Bank authorities on their own are taking steps to improve the situation in the Bank, counsel for the petitioner, referred to the chart in paragraph 17 of the writ petition showing the financial position of the petitioner, wherefrom it appears that the Bank was in red during the financial year closing on 31.3.2003, but the situation started improving in financial year closing on 31.3.2004 and the Bank is likely to earn profit during the financial year closing on 31.3.2005 by which date financial liabilities of the petitioner Bank shall be cleared and in these circumstances he submitted that this Court should itself intervene in the matter and stay the directions of the Reserve Bank of India contained in letter dated 30th December, 2004, Annexure 3 until disposal of the representation, Annexure 6 by the Reserve Bank of India.
5. In support of the aforesaid submissions that the petitioner- bank should not be relegated to avail the alternative remedy of statutory representation, learned counsel for the petitioner relied on two judgments of the Hon’ble Supreme Court rendered in the case of Whirlpool Corporation v. The Registrar, Trade Marks, reported in 1998 (8) SCC 1 paragraphs 14,15 and Anr. judgment of the Hon’ble Supreme Court rendered in the case of Pramod Malhotra and Ors. v. The Union of India and Ors., reported in 2004 (3) SCC 415 paragraph 25. Perusal of the judgment of the Hon’ble Supreme Court in the case of Whirlpool, (supra) would indicate that thereunder the registrar of Trade Marks had taken suo motu action under Section 56(4) of the Trade and Merchandise Marks Act 1958 for cancellation of the certificate of renewal granted in favour of the Whirlpool Corporation. The Corporation had assailed the suo motu action of the registrar by filing the writ petition before the Bombay High Court. The Bombay High Court dismissed the writ petition directing the Whirlpool Corporation to raise its objection before the Registrar of Trade Marks. The said order of the Bombay High Court was challenged before the Hon’ble Supreme Court and the Hon’ble Supreme Court, with reference to a title suit pending in the Delhi High Court in regard to registration of trade mark between the same parties in which temporary order of injunction in favour of the Whirlpool Corporation was already passed which was even affirmed by the Division Bench of the High Court as also by the Hon’ble Supreme Court, ruled that in view of the pendency of the matter in the Delhi High Court, the Bombay High Court should not have relegated the Whirlpool Corporation to the jurisdiction of the Registrar, Trade Marks.
6. In the case of Pramod Malhotra and Ors., (supra) the Hon’ble Supreme Court transferred the writ petition field in the Delhi High Court challenging the Scheme framed under the Act on the ground that the Branch of Sikkim Banking Limited was established at New Delhi after approval of the RBI when the application of the Sikkim Banking Limited for grant of licence under Section 22 of the Act was itself pending before the RBI and the Branch represented to its various customers that it shall pay higher rate of interest to them and on failure to pay higher rate of interest, the RBI framed the scheme which was challenged in the writ petition. The Hon’ble Supreme Court while dismissing the writ petition, made observations in paragraph 25 of the reported judgment that the RBI while taking action under the provisions of the Act has to maintain the balance between general public interest and the interest and need of the Banking institutions.
7. On the other hand, learned counsel for the RBI, with reference to the provisions contained in Sub-section (2) of Section 35-A of the Act submitted that the petitioner Bank instead of rushing to this Court should have awaited the result of its representation dated 1.1.2005/4.1.2005, Annexures 6 and 6/1 and the said representation shall be considered by the Reserve Bank of India within four weeks from today and this Court should not intervene as the Banking business involves fiscal consideration and the RBI being the sole repository of the fiscal interest of the Nation should be given a free hand in the matter. Learned counsel for he RBI in view of the alternative remedy available to the petitioner did not make submission on the merits of the case of the petitioner.
8. Having heard counsel for the parties and having perused the writ petition and the annexure appended thereto as also the provisions of the Act and the two case law relied by the counsel for the petitioner in the case of Whirlpool Corporation and Pramod Malhotra and Ors. (supra), I am satisfied that the directions contained in communication dated 30th December, 2004 Annexure 3 has been issued by the RBI in exercise of its power contained in Section 35-A of the Act which is subject to the result of the representation of the petitioner-bank, in terms of the provisions contained in Sub-section (2) of Section 35-A of the Act. Petitioner bank having already filed its representation dated 1.1.2005/4.1.2005, Annexures 6 and 6/1 should await the result of its representation dated 1.1.2005/4.1.2005, Annexures 6 and 6/1, which should be disposed of by the RBI by passing a speaking order within a period of four weeks from today as already undertaken by Sri Tara Kant Jha, Senior Advocate for the RBI during the hearing of this application or in any case within four weeks of the receipt/production of a copy of this order. In the event representation of the petitioner-bank is rejected, the petitioner-bank shall be at liberty to assault the rejection order before this Court.
9. This application is, accordingly, dismissed with the aforesaid observation. No cost.