MEHSANA DISTRICT CENTRAL COOPERATIVE BANK LTD. AND ORS. versus STATE OF GUJARAT AND ORS.

Citation: [2004] 1 S.C.R. 1125 · Decided: 28-01-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Dismissed

Judgment (excerpt)

MEHSANA DISTRICT CENTRAL COOPERATIVE BANK 
A 
.... 
LTD. AND ORS. 
v. 
ST ATE OF GUJARAT AND ORS. 
JANUARY 28, 2004 
B 
[S.N. VARIA VA AND H.K. SEMA, JJ.] 
Banking Regulation Act, 1949-Sections 2, 5 and 6-Gujarat Co-
operative Societies Act, 1961-Section 7 I (/)-Gujarat Cooperative Bank Act- c 
State Act providing restrictive mode of investment by co-operative bank-
Amendment in the Banking Regulation Act-Central Act, providing for 
application of the Act to co-operative banks-Central Co-operative Bank 
investing funds outside permitted investment in contravention of the provisions 
of the State Act-Challenge to the same-Bank pleading that it is entitled to 
carry on banking activities under Central Act and not in terms of State Act; D 
and that there is repugnancy and inconsistency between.Central Act and State 
-~ 
Act-Held: The fact that the State Act was assented to by the President, 
section 7 I is only in addition to and not in derogalion of any other law such 
as the Central Act, thus there is no repugnancy and inconsistency between 
Cznlral and State Act-Jn the other appeal issuance of writ of mandamus by E 
High Court in PIL by third party directing authorities to take necessary action 
against the bank for co111ravening norms of investment under section 71 is 
justified since the Acts and Rules made are lo be followed and not violated-
Constilution of India, 1950-Article 254. 
Appellant-bank was registered under the Gujarat Co-operative F 
,> 
Societies Act, 1961-State Act and was carrying on banking activities. It is 
a Co-operative Bank and also a Central Co-operative Bank. By virtue of 
section 71(1)(a) to (I) of the 1961 Act co-operative bank could make 
investments in various institutions enumerated and by clause(g) the State 
Government could permit it to invest funds in any institution outside those 
falling under clauses (a) to (f) of Section 71(1). Furthermore, by G 
amendment in the Banking Regulation Act, 1949-Central Act, the 1949 
Act was made applicable to the co-operative banks. 
) 
Appellant-bank sought permission of the State Government to invest 
funds in an institution outside those falling under clauses (a) to (f) of H 
1125 
1126 
SUPREME COURT REPORTS 
[2004) I S.C.R. 
A Section 71(1) of the Gujarat Co-operative Societies Act, 1961. Government 
refused the permission. However, the appellant-bank invested the funds 
in Mutual Fund, which was outside the purview of clauses (a) to (I) of 
Section 71 and the same was challenged, and a writ of mandamus was 
issued to the respondent by the High Court directing the authorities to 
B initiate necessary proceedings against appellants for having committed 
breach of the provisions contained in section 71 of the Act. Hence the 
present appeals. 
Appellants contended that it is entitled to be engaged in banking 
business in terms of the norms contemplated under Sections 5 and 6 of 
C the 1949 Act-Central Act and not according to the norms of investment 
enumerated under Section 71 of the 1961 Act-State Act. It was also 
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 who 
was the business rival of the appellants due to clash of interest. 
D 
Dismissing the appeals, the Court 
HELD: I. On a conjoint reading of Sections 2, 5 and 6 of thi: Banking 
Regulation Act, 1949 and Section 71 of the Gujarat Co-operative Societies 
Act, 1961, there is no repugnancy or inconsistency between the State Act 
and the Central Act. In the instant case, the State Act being dominant 
E 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 
F 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 (I) of Section 71 without prior 
sanction of the State Government. Thus, Section 71 is not in derogation 
of any other law such as the Banking Regulation Act but in addition to it. 
G Also from the language employed in Section 2 of the 1949 Act it is clear 
that the provi

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