TMI Blog2015 (6) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... person enrolled as nominal member, does not fall outside the purview of the word “public” and that any deposits from the members on interest and for which amount is to be repayable on demand or otherwise, is an activity which amounts to banking activity. The activities of the Cooperative Societies in the State of Rajasthan have clearly demonstrated that the deposits and investments of general public, who can become nominal members and ordinary members of the Cooperative Societies, and for them lucrative schemes are being floated by the Cooperative Societies are at risk. Their investments are not covered by any protection. The provisions under the Multi-State Cooperative Societies Act, 2002 restrict the deposits upto ten times the paid up capital and the reserve. This condition is not sufficient to protect the deposits if the reserves can be advanced as loans without sufficient security. If such a restriction was sufficient, the entire banking activity could be carried out without obtaining licence under the Act of 1949. The Reserve Bank of India circulars and directives are binding on all the banks which are licensed under the Act of 1949. This protection must apply to all kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India. (ii) By an appropriate writ, order or direction, the respondent no.1 to 8 may very kindly be directed to take necessary action in the matter, so that, illegal activities, being carried out, in the nature of financial and banking activities, by the respondent No.9 to 12 societies and other such credit cooperative societies which are either registered under Rajasthan Cooperative Societies Act, 2001 or under The Multi-State Cooperative Societies Act, 2002, could be stopped and necessary directions, may kindly be issued for refund of money of public, with interest, who have invested money with these societies or a committee may kindly be directed to be appointed under supervision of Reserve Bank of India, to find out the ways for solution of the problem. (iii) By an appropriate writ, order or direction, the registration certificate of the private respondent credit cooperative societies, and others if found doing banking activities, may kindly be seized and the properties of such societies may kindly be taken over by the Government, by appointing administrator so as to protect the public money, in larger public interest. (iv) Any other order or direction which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Interest Litigation. 5. In response to the preliminary objection raised by learned counsel appearing for the respondents Nos.9 to 12, the petitioner submits that he was the Chairman of one of such society. The business was, however, closed down and that all accounts have been settled. It is stated that he was in legitimate business of cooperative society but since some of his employees had committed fraud, his business had to be closed. He is no longer in any such business for last many years and that in respect of each of FIRs on the deposit of money, final reports have been submitted. It is submitted that though the petitioner may appear to be a concerned person but since he has suffered himself, he wishes to bring notice of the Court the ill-deeds of the other cooperative societies who are carrying on banking business. He wants to save general public from the losses which they may suffer in the hands of unscrupulous persons. 6. We do not find that the petitioner has approached the Court with any ulterior motive or ill will and, accordingly, the objections are over-ruled. 7. Learned counsel appearing for the respondents Nos.9 to 12 have contested the averments made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are quoted below:- 18.In view of the above, we hold that the RBI by virtue of its power under Section 22 cannot grant a license to any cooperative bank unless it is a state co-operative bank or a central co-operative bank or a primary co-operative bank. It would be necessary that a declaration under the NABARD Act be first obtained....... 46.It is to be seen that the RBI can only give a license to a state co- operative bank which has been so declared by a particular State. As the definition of co-operative societies in the NABARD Act is restricted to co-operative societies registered under State Acts and as the provision is for a State to declare a co-operative society as a state co- operative bank the license, which can be issued by the RBI, can only be in respect of that State. Merely because one State declares a co- operative society as a state cooperative bank would not enable the RBI to issue that society a license to carry on banking business in other States or in the rest of the country. In this case, the RBI was wrong in issuing a license to the Appellants for the States of Maharashtra and Goa when, admittedly, the Appellants had not been declared a state co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- As an interim measure, until further orders, the Central Registrar, Multi-State Cooperative Society, New Delhi, the Registrar, Cooperative Society, Rajasthan, Jaipur, the District Collectors, Barmer, Jaisalmer and Jodhpur and Director General of Police, Rajasthan will ensure that respondents Nos.9 to 12 or any other Multi-State Cooperative Society or the State Cooperative Society do not carry on any banking business in the State of Rajasthan, unless they have a licence under the Banking Regulation Act, 1949. These cooperative societies will not be allowed to carry on banking business namely, to take deposits, opening branches for its banking activities, installation and running of ATMs and distributing loans to the depositors. The respondents will not allow any banking business by the Multi-State Cooperative Society and the District Cooperative Society unless they have licence from the Reserve Bank of India under the Banking Regulation Act, 1949. As desired under the order aforesaid, a reply to the writ petition has already been filed by the Reserve Bank of India stating therein that the role of the RBI in the regulation and supervision of co-operative societies is lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01, as the case may be. We have considered the arguments advanced. The petitioner has approached this Court to stop banking activities by the respondent cooperative societies who are not having requisite licence as per provisions of the Banking Regulation Act, 1949. Some of the advertisements published in different news papers on behalf of respondents Sanjivani Credit Cooperative Society Ltd. and Navjivan Credit Cooperative Society Ltd. indicate about involvement of the societies in banking activities, however, at this stage we do not want to give any definite finding in this regard but certainly we desire to record our displeasure about such misleading publicity undertaken by the societies. We are also of considered opinion that the respondent societies are not entitled to undertake any banking activity without having licence under the Act of 1949. Looking to the factual position noticed above we deem it appropriate to dispose of the applications with following directions as interim measures :- 1. No Multi State Cooperative Society or any other cooperative society created and registered under the Multi State Cooperative Societies Act, 2002 or any other State legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent Cooperative Societies, in which the respondent No.9 is Multi-State Cooperative Society that they are carrying on business strictly in accordance with the provisions of the Rajasthan Cooperative Societies Act, 2001 and the Multi-State Cooperative Societies Act, 2002, under which, they are entitled on the registration of the Cooperative Society and a Multi-State Cooperative Society to accept the deposits from its members. Reference has been made to the provisions of Section 50 and 51 of the Rajasthan Cooperative Societies Act, 2001 and the provisions of Section 49(2)(h)(k) and (l) and Section 67 of the Multi-State Cooperative Societies Act, 2002 as well as the Byelaws of the Cooperative Societies registered under the Rajasthan Cooperative Societies Act, 2001 and with the Central Registrar under the Multi-State Cooperative Societies Act, 2002 to justify the deposits and borrowings. 6. Learned counsel appearing for the petitioner submits that respondents Cooperative Societies are not Cooperative Banks under the State or the Central Act. They are Cooperative Societies carrying banking business as prescribed under Section 22 of the Banking Regulation Act, 1949 ( the Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot secured. There is no security in terms of RBI and SEBI guidelines for investors. The Regulations such as Cash Reserve Ratio and Statutory Liquidity Ratio are not applicable to Cooperative and Multi State Cooperative Socities leaving investors fund at risk. Although it is stated that nominal members are not given loans, most of the loans are given to the nominal members for which the complaints have been made and enquiries are pending with the Registrar, Rajasthan Cooperative Societies and the Central Registrar, Cooperative Societies, in which, investigations having not been made. 8. It is submitted by learned counsel appearing for the Registrar, Cooperative Societies and the Central Registrar, Cooperative Societies that they do not have any machinery to investigate the complaints and to carry out the investigation. They hand over these complaints to the machinery of the State Government with no effective steps taken so far. 9. Learned counsel appearing for the Reserve Bank of India has categorically stated that no banking as defined under Section 5(b) of the Act of 1949 can be carried out without a licence under Section 22 of the Act of 1949. In paragraphs 2,4,5,6 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anking), Office of Registrar, Co-operative Societies, Rajasthan sent a communication dated 27.11.2014 and alongwith the said communication the details regarding Co-operative Societies situated in various Districts of all the seven Divisions were sent to the RBI. It becomes apparent from this communication that information from certain units were still not received. The said communication was received at the Jaipur office of the RBI on 16.12.2014. Copy of communication dated 27.11.2014 is hereby produced and marked as ANNEXURE-R/3-5. 7. That after due examination entire information as provided the Registrar, Co-operative Societies, Rajasthan, it was found that five societies were accepting deposits from non-members. Details regarding paid-up capital of two such societies were also available whereas, the said information regarding other three societies was not available. The respondent Bank compiles the relevant information and the same has been sent to the Central Office vide communication dated 06.01.2015. A copy of communication dated 06.01.2015 alongwith statement showing particulars of the Primary Credit Societies is hereby produced and marked as ANNEXURE-R/3-6. Thereafter, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cooperative Society is formed for the benefits of members and that a Cooperative Society can carry on its business within the purview of the provisions of the Rajasthan Cooperative Societies Act, 2001 and the Multi-State Cooperative Societies Act, 2002 and its registered bye-laws. It does not require a licence under the Act of 1949. It is submitted that the petitioner was also running a Cooperative Society in which deposits were accepted. This Court has directed an enquiry into the affairs of the petitioner both as Director of the Cooperative Society and as Advocate and that Superintendent of Police is carrying out the enquiry. The petitioner has not filed balancesheet and the income tax returns despite direction issued by the Court and thus, he is not entitled to maintain the writ petition. 13. After hearing learned counsels for the parties, we are of the view that activities carried out by the respondents Nos.9 to 12 as Cooperative Societies may be within the purview of legitimate business under the Rajasthan Cooperative Societies Acdt, 2001 and the Multi-State Cooperative Societies Act, 2002 and the registered bye-laws, these activities in accepting for the purpose of lending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vide order of even number dated 29th May, 2013, certain instructions were issued for registration and extension of area of operation of Multi-State Cooperative Societies having objects and functioning relating to thrift and credit. 2. In order to protect the interest of members and public, it has been decided to extend the applicability of the instructions issued vide this Department's order of even number dated 29th May, 2013 to the multipurpose cooperative societies. 3. It has also been decided that, henceforth, the primary multi state cooperative societies shall be registered initially with only two contiguous states, UTs as area of operation. After starting the operation, the society may submit proposal for amendment of its byelaws for extending the area of operation. 4. The existing multipurpose and credit societies shall have to submit N.O.C. from the concerned Registrars for extending type of activities and area of operation. 5. Reserve Bank of India (RBI) is of the view that acceptance of deposit from nominal members by Multi State Credit Societies may have to be construed as accepting deposit from Public and carrying out banking activity. In view of the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evoid of any substance. 18. So far as the allegation against the petitioner is concerned, this Court has already directed the Superintendent of Police of the concerned district to enquire about the complaints of the investors. In case the petitioner has committed any misconduct under the Regulation of Bar Council of India, a complaint can be made against him to the Bar Council of Rajasthan. These allegations against the petitioner was not detain us to decide the writ petition in the larger public interest. 19. The writ petition is partly allowed with a direction that respondents Nos.9 to 12 or any other Cooperative Societies or the Multi-State Cooperative Societies registered under the Rajasthan State Cooperative Societies Act, 2001 and the Multi- State Cooperative Societies Act, 2002 shall not accept deposits of any kind and under any scheme from public, including nominal members, ordinary members or the members of any category of these Societies, except after obtaining licence under Section 22 of the Banking Regulation Act, 1949. 20. The restriction will, however, not apply for repayment of the deposits for a period of three months. If licences are obtained within three ..... X X X X Extracts X X X X X X X X Extracts X X X X
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