TMI Blog1990 (3) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature and, therefore, the executive power cannot extend to issue such an order. (ii) The circular dated April 14, 1982, annexure-J, issued by the Reserve Bank of India has statutory force, inasmuch as it falls under section 54(b) of the Reserve Bank of India Act read with section 21 of the Banking Regulation Act and, therefore, it was not open to the State Government to issue circular, annexure-A, contrary to the terms contained in the circular, annexure J. (iii) The re-ceding of the appellants/petitioners to the District Central Co-operative Bank results in civil consequences, and, therefore, the petitioners ought to have been given an opportunity before directing them to pass a resolution to agree to have linking with the District Central Co-operative Bank. (iv) All the societies whether their performance is good or bad are roped in in one category and have been directed to re-cede to the District Central Co-operative Bank and, therefore, there is discrimination. 4. The learned single judge has negatived all the four contentions and has dismissed the writ petitions. Before us, the last contention is not pressed into service. However, the first three contentions are advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age with the commercial banks and the petitioners herein are among those institutions who have continued their linkage with the commercial banks. 6. Sri B.V. Acharya, the learned Advocate General appearing for respondents Nos. 1 to 3, submitted that the Primary Agricultural Co-operative Societies that were left with the commercial banks were very few and that their number was about 10 per cent. It is these Primary Agricultural Credit Co-operative Societies which continued their linkage with commercial banks which are now required to end their linkage with the commercial banks and to re-establish the same with the District Central Co-operative Banks. It is in this regard that the impugned circular dated May 17, 1989, produced as annexure-J is issued. Annexure-J is not a direction. It is only an advice issued by the Reserve Bank of India as to the policy to be followed with regard to the financing of the Primary Agricultural Credit Co-operative Societies. 7. The said circular also does not fall under section 54(b) of the Reserve Bank of India Act read with section 21 of the Banking Regulation Act. 8. Section 54 of the Reserve Bank of India Act states that the bank may mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar issued in purported exercise of the executive power of the State is invalid. 12. It is not possible to accept this contention. The petitioners are not the banking institutions coming under the purview of the Banking Regulation Act. They are the co-operative societies registered under the Act, and as such they are governed by the provisions of the Act passed by the State Legislature. Consequently, the State Government has control over them to the extent the Act permits. Major activities of the petitioners are to finance its members. For the purpose of financing its members, they borrow money from the financing agencies and repay the same. Merely because the petitioners-the co-operative societies in question-are required to advance loans to their members, they do not cease to be co-operative societies governed by the Act nor can they be treated as banking companies. It is also not possible to hold that these activities of the petitioners amount to banking as contemplated under the Banking Regulation Act, 1949, inasmuch as these co-operative societies are not established for the purpose of doing banking as defined in section 5(b) of the Banking Regulation Act, 1949. 13. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney Lenders Act were invalid because the said provisions affected the subject of banking . It was claimed in that case that the said provisions were ultra vires the powers of the Provincial Legislature. Repelling the said contention, the Federal Court held thus (at page 8) : The validity of section 30 and 36 of the Act was also impugned on the ground that even these provisions affect the subject of `banking'. As the liabilities of the debtors in these cases have been fixed with reference to the provisions of these sections it is necessary to deal with this contention separately. Our attention was drawn in this connection to certain observations of Duff C.J. in [1942] SCR (Can) 31-Reference as to Validity of the Debt Adjustment Act, Alberta. A number of objections to the validity of the legislation then in question were considered by the Supreme Court in that case but when the matter went on appeal to the Judicial Committee in Attorney-General for Alberta v. Attorney-General for Canada [1943] AC 356, their Lordships dealt with only one objection (not relevant to the present case) and expressed no opinion on the other points. It has been argued before us that as the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nited Commercial Bank, Divisional Office, Bangalore. 9. Sri N. Jagathpal, Manager, H. O. Syndicate Bank, Manipal. 10. Sri K. M. Holla, A.D.O., Zonal Office, Syndicate Bank, Bangalore. 11. Sri V. Jeevendhar Kumar, A.D.O. Zonal Office, Syndicate Bank, Bangalore. 12. Sri S. B. Angadi, Deputy General Manager, Apex Bank, Bangalore. 13. Sri G. V. Ramanathan, Manager, NABARD, Bangalore. 14. Sri P. Das, Deputy Manager, NABARD, Bangalore. 15. Sri R. V. Kulkarni, Deputy Manager, NABARD, Bangalore. 19. This committee examined the matter in its meeting held on March, 18, 1989, and reported to the State Government. The said report reads : Scheme for financing of PACS by commercial banks-Task forces meeting on modalities of transfer of PACS to DCCBs. Held on March, 18, 1989-Proceedings. The Fifth State Level Co-ordination Meeting dated July 14, 1988, chaired by Chief Minister decided to set up a task force under the chairmanship of DGM, National Bank to decide the modalities of retransfer of PACs ceded to commerical banks/RRBs to their respective DCCBs so that the borrower members start getting crop loans from the DCBs from the kharif 1989 season. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should immediately take up the matter with the Development Commissioner, Secretary of Co-operation Department and RCS for issue of the Government order urgently. Other formalities of transfer should be over by a time-bound programme within one month from the Government order. The other decisions taken on the modalities of transfer were as under : (i) The retransfer of PACs to concerned DCBs will take place on the same terms and conditions as at the time of original ceding, namely, that the current dues and overdues of the concerned PACs will be taken over by the DCCBs on collection basis as specified in the RBI circular dated April 14, 1982. The DCCBs will not have to make outright payment for these dues immediately but on recovery of dues, as and when effected, they will pass on the amounts to the commercial banks/RRBs concerned without using them in their business as done in the past. Separate accounts and records will be maintained by DCCBs/RRBs/CBs. The Department of Co-operation/RCs will keep a watch over this through the concerned JRCs/DRCs in the district. (ii) Cases of misappropriation, etc., showing gaps between outstandings at PACs and DCCB levels wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the petitioners are concerned, they are not in any way adversely affected. Hitherto, they were having financial linkage with commercial banks. Now they will continue to have the same linkage with the District Central Co-operative Banks. It is not brought to our notice as to what difference it will make in the working of these petitioners-co-operative societies and how they are adversely affected by a change in the financial linkage. Therefore, we are of the view that there is no question of any civil consequences resulting out of the circular in question by changing the financial linkage. In addition to this, this circular has been given effect to after issuing letters to all the co-operative societies and further requesting them to resolve to have the linking with the District Central Co-operative Banks. Therefore, it is not possible to accept the contention of learned counsel that there is any violation of the principles of natural justice. 21. It is also submitted by learned counsel for the petitioners that it does result in civil consequences because in the case of the co-operative societies which have got linking with the commercial banks,certain portoin of the loans ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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