The Madras High Court on Monday desisted from staying the operation of certain provisions of Banking Regulation (Amendment) Ordinance of 2020. A couple of writ petitions were filed by cooperative banks, which claimed that the Centre had impinged upon the powers of the State government to incorporate, regulate and wind up cooperative societies.
The First Division Bench of Chief Justice Amreshwar Pratap Sahi and Justice Senthilkumar Ramamoorthy, however, said that the plea for interim relief would be considered as and when any overt or covert action was taken against cooperative societies either by the Central government authorities or the Reserve Bank of India and it was proved before the court with sufficient materials.
The decision was taken on petitions filed by Big Kanchipuram Cooperative Town Bank Limited and Velur Cooperative Urban Bank Limited. Appearing on behalf of them, Additional Advocate General P.H. Arvindh Pandian said there was no qualm over the RBI regulating the banking operations of cooperative societies since such a regulation was already in place for years.
In the process, the Centre could not be allowed to deal with incorporation, regulation and winding up of cooperative societies too through the ordinance, he said. Stating that the subject matter falls exclusively within the competence of the State legislature, he argued that regulation of societies was totally beyond the legislative competence of Parliament and the ordinance making power of the Centre.
However, senior counsel A.L. Somayaji and C. Chevanan Mohanan, representing the RBI, defended the ordinance and claimed that it had been rightly promulgated for better regulation of cooperative banks. Additional Solicitor General R. Shankaranarayanan said many cooperative banks across the country were facing financial disruptions on account of fiscal indiscipline.
Hence it had become necessary for the Centre to promulgate the ordinance and provide greater control over them by the RBI. The prime object behind it was to protect the interests of the investors who had deposited their money in cooperative banks, he said.
“The ordinance nowhere trenches upon the status of cooperative societies, which run the petitioner banks. Even for the sake of argument, if it is assumed that the ordinance does incidentally trench upon the affairs of a cooperative society, such incidental trenching upon is legally permissible,” he said and relied upon a few Supreme Court judgments.
The judges directed the Centre and RBI to file their counter affidavits and adjourned the case to September 1.
