RESERVE BANK OF INDIA versus M. HANUMAIAH & ORS.

Citation: [2008] 1 S.C.R. 16 · Decided: 04-01-2008 · Supreme Court of India · Bench: G.P. MATHUR · Disposal: Case Allowed

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Judgment (excerpt)

[2008] 1 S.C.R.16 
RESERVE BANK OF INDIA 
v. 
M. HANUMAIAH & ORS. 
(C.A. No. 9 of 2008) 
JANUARY 4, 2008 
(G.P. MATHUR AND AFTAB ALAM, JJ) 
Karnataka Co-operative Societies Act, 1959: 
s. 30(5) - Supersession of Committee of Management 
of Co-operative Bank - On requisition from Reserve Bank of 
India - Challenged for not affording opportunity of hearing -
HELD: In the event of supersession of committee of 
management of a cooperative bank in terms of sub-s. (5) of 
s.30, the affected bank/its managing committee has no right 
of hearing -· Banking Regulation Act - ss. 35 and 56 -
Administrative Law - Natural justice - Opportunity of hearing. 
The appellant-Reserve Bank of India, on inspection 
of the respondent-Cooperative Bank (Respondent no. 16) 
on 30.6.1994 found a number of serious irregularities in 
its affairs. The appellant called the Members of the Board 
of Directors of the respondent-Cooperative Bank for 
several rounds of discussion at different levels and 
repeatedly urged them to take stringent action to improve 
its financial position, but to no avail. Ultimately, the 
appellant-Reserve Bank issued a requisition to the 
Registrar, Co-operative Societies on 22.1.2002 in terms 
of s.30 (5) of the Karnataka Co-operative Societies Act 
requiring him to supersede the Board of Directors of the 
respondent Cooperative Bank and to appoint an 
Administrator for one year. Accordingly, the Registrar, 
Cooperative Societies issued an order on 31.1.2002 
superseding the Board of Directors of the respondent-
Cooperative Bank and appointing an Administrator in its 
place. The said order was challenged in a writ petition 
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RESERVE BANK OF INDIA v. 
17 
M. HANUMAIAH & ORS. 
before the High Court. The single Judge quashed the A 
order holding primarily because no opportunity of hearing 
was afforded before passing the same. During the 
pendency of the writ appeal filed by the Reserve Bank, it 
was pointed out that fresh elections for the Committee of 
Management were scheduled to take place. The Division B 
Bench of the High Court, accordingly, held the writ appeal 
as infructuous. Aggrieved, the Reserve Bank of India filed 
the instant appeal. 
During the course of hearing of the appeal, the Court 
felt that though the Managing Committee of the C 
respondent-Cooperative Bank for supersession of which 
action was taken by Reserve Bank was no longer in 
existence, the issue involved in the case. needed to be 
decided as it was likely to crop up in future in regard to 
the respondent Bank or other cooperative banks. D 
Accordingly, the Court framed for its consideration the 
question: "whether the principles of natural justice have 
any application at the stage when the Registrar Co-
operative Societies, on being so required in writing by the 
Reserve Bank of India passes an order removing the E 
Committee of Management of a Co-operative Bank and 
appointing an Administrator to manage its affairs for such 
period, as may be specified by the Reserve Bank of 
India?" 
Answering the question in the negative and allowing F 
the appeal, the Court 
HELD: 1.1 On receipt of a requisition in writing from 
the Reserve Bank of India in terms of sub-section (5) of 
s.30 of the Karnataka Co-operative Societies Act, 1959 the G 
Registrar Cooperative Societies is statutorily bound to 
issue the order of supersession of the committee of 
management of the cooperative bank. At that stage the 
affected bank/its managing committee has no right of 
hearing or to raise any objections. [para 18] [31-A, B] 
H 
18 
SUPREME COURT REPORTS 
[2008] 1 S.C.R. 
A 
1.2 Sub-sections (1) to (4) of s.30 of the Act relate to 
)-
removal of the committee of a Cooperative society by the 
....
Registrar, Co-operative Societies and sub-section (5) 
relates to supersession of the managing committee of a 
cooperative bank on requisition from the Reserve Bank 
B of India. It is to be seen that in case of removal of the 
committee of a cooperative society in terms of sub-
sections (1) to (4), compliance with the principles of natural 
justice is expressly required inasmuch in sub-section (1) 
! 
it is stipulated that the Registrar would pass the order of 
c removal only 'after giving the committee an opportunity 
to state its objections'. On the other hand the requirement 
of any hearing is absent in sub-section (5) which starts 
with a non-obstante clause that also covers the provisions 
of the earlier sub-sections of Section 30. [para 11] (

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