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ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 4731 OF 2020
ALONGWITH
INTERIM APPLICATION (L) NO. 6750 OF 2020
Zeeshan Mehdi )
Age 50 years, Occupation : )
The Chairman, Bombay Mercantile)
Co-operative Bank Ltd., having ) address at 78, Mohammedali Road,)
Mumbai – 400 003, Maharashtra ) ….. Applicant/
Petitioner
Through the Ministry of Agriculture)
And Farmers Welfare, )
Dept. of Agriculture, Co-operation )
And Farmers Welfare, Krishi Bhavan)
New Delhi – 110 001 )
2. The Central Registrar Co-op. )
Societies, Government of India, )
Ministry of Agriculture and Farmers)
Welfare, Dept. of Agriculture, )
Co-operation And Farmers Welfare)
Krishi Bhavan, New Delhi – 110 001)
Respondent nos. 1 and 2 served ) through The Union of India, office at)
Aykar Bhavan, Maharshi Karve Road)
Churchgate, Mumbai – 400 021 )
3. Bombay Mercantile Co-operative)
Bank Ltd., )
Through Managing Director, )
78, Mohammedali Road, )
Mumbai – 400 003, Maharashtra )
Mumbai )
4. Mr.Bahar U. Barqi, ) s/o. Late Shri Iftikhar Uddin )
Kanchan
V.
C-4, 2nd
Floor, Lajpat Nagar – III, )
New Delhi 110 024 )
Email Id : )
5. Mr.Ashok Kumar Jain, )
Returning Officer, )
Bombay Mercantile Co-operative )
Bank Ltd., )
78, Mohammedali Road, )
Mumbai – 400 003, Maharashtra ) ….. Respondents
Mr.Aspi Chinoy, Senior Advocate, a/w. Mr.Zishan Quazi and Mr.Joel
Carlos for the Petitioner.
Mr.Y.S.Bhate, a/w. Mr.Atul S.Singh for the Respondent Nos. 1 and 2.
Mr.Anil Sakhare, Senior Advocate, i/b. Mr.Rohan S.Mirpury for the
JUDGMENT
2. Sometime in the year 2012, the petitioner was elected as a KVM director of the respondent no.3 bank. The chairman of the respondent no.3 had issued a show cause notice on 12th January, 2013 alleging that the petitioner was a defaulter and accordingly he would be dismissed under bye-law 51 from the respondent no.3 bank. The petitioner was thereafter removed as a director on the ground that as per the RBIs inspection report dated 24th December, 2012, he was a defaulter. Such action on the part of the chairman of the respondent no.3 was challenged by filing arbitration proceedings by the petitioner on 4th August, 2013 under section 84 of the Multi State Co-operative Societies Act, 2002 (for short the said MSCS Act).
3. The learned arbitrator made an award on 4th August, 2013 declaring that the petitioner was not a defaulter and was pleased to set aside the order of dismissal of the petitioner. The said award made by the learned arbitrator was not challenged by the bank and attained finality. The petitioner was thereafter elected as a chairman on 16th May, 2016. It appears that on 5th June, 2017, the Reserve Bank of India addressed a letter to the respondent no.2 stating that the complaint had been received against the petitioner pursuant to which the Reserve Bank of India had carried out an enquiry which allegedly indicates that the accounts of the petitioner had been repaid out of fresh sanctions to two other accounts/parties. The Reserve Bank of India accordingly KVM requested the Central Registrar to review the election of the petitioner as a director and chairman of the respondent no.3 bank.
4. Pursuant to the said request made by the Reserve Bank of India on 5th June, 2017, the respondent no.2 issued a show cause notice on 1st August, 2017 to the petitioner to show cause as to why the petitioner should not be considered to be in violation of section 29(d) of the Act and why the bank should not be directed to invoke the provision of bye-law 51(5) of the respondent no.3 bank. The said show cause notice was replied by the petitioner on 10th August, 2017. The petitioner pointed out that vide arbitration award dated 4th August, 2013, the arbitrator had declared that these accounts were not NPA and that the allegations of RBI were factually incorrect.
5. On 16th May, 2018, the respondent no.2 observed that the issues involved a lot of complexities which required technical examination including expert opinion and that as such further examination thereof would take time. The respondent no.3 accordingly passed an ex-parte order restraining the petitioner from exercising the powers of chairman/ director including attending any board meetings in the capacity of chairman/director of the bank till further orders. KVM
6. This Court passed an order on 16th May, 2018 in the writ petition bearing no.2367 of 2018 filed by the petitioner impugning the said order dated 16th May, 2018 and was pleased to set aside the order dated 16th May, 2018. By an order dated 5th February, 2019, this Court was pleased to set aside the order dated 16th May, 2018 by holding that any such order had to be supported by statutory provisions. This court observed that there was no statutory provision to pass such order dated 16th May, 2018 by the respondent no.2. The said order dated 16th May, 2018 as well as order dated 5th February, 2019 were not impugned by the respondent no.3 bank or by the respondent no.2 through the State Government.
7. A perusal of the record indicates that on 30th September, 2019, the petitioner has been elected to the board of directors and thereafter as a chairman by the newly elected board.
8. On 23rd October, 2019, the respondent no.4 filed a petition under section 84 of the MSCS Act before the respondent no.2 for a declaration that the petitioner was disqualified to be a member and consequent thereto his election as a director and chairman was illegal. He also challenged the order dated 29th August, 2019 by which his nomination was rejected. He applied for a declaration that the entire KVM election process for 2919-24 was illegal. The petitioner was served with the notice of hearing dated 10th December, 2019 by the respondent no.2. In the meeting on 19th December, 2019 the respondent no.2 took a view that as one of the three issues raised i.e. the alleged disqualification of the petitioner based on the letter dated 5th June, 2017 addressed by the Reserve Bank of India was already pending before him, the earlier proceedings shall be clubbed for adjudication jointly.
9. The respondent no.3 filed a reply on 7th February, 2020 before the respondent no.2 pointing out that the matter was at preliminary stage for examination of its maintainability and reference under section 84 of the MSCS Act. The petitioner vehemently raised an objection of clubbing of two proceedings on 21st August, 2020 before the respondent no.2.
10. On 23rd September, 2020, the respondent no.2 rejected the application filed by the petitioner for recalling the direction for clubbing the two proceedings. In view of the order dated 23rd September, 2020 passed by the respondent no.2, the respondent no.2 proposed to proceed with the hearing of the matter pursuant to the letter addressed by the Reserve Bank of India and the dispute filed by the respondent no.4 himself. KVM
11. Mr. Chinoy, learned senior counsel for the petitioner invited our attention to various documents annexed to the petition and would submit that at the first instance the Reserve Bank of India could not have directed the respondent no.2 to look into the complaint against the petitioner vide letter dated 5th June, 2017 and to review the election of the petitioner as a director and chairman of the respondent no.3 bank. He submits that in absence of any power of Reserve Bank of India to direct the respondent no.2 to review the election of the petitioner as a chairman and director of the respondent no.3 bank, no such directives could be issued by Reserve Bank of India at all. He submits that if there was any dispute in respect of the election of the petitioner as a director and chairman of the respondent no.3, such dispute could be referred to the arbitration under section 84.
12. It is submitted by the learned counsel that insofar as the dispute filed by the respondent no.4 before the respondent no.2 is concerned, the respondent no.2 could not have acted as an arbitrator to resolve the dispute between the respondent no.4 and the petitioner if any. He strongly placed reliance on section 84(4) of the MSCS Act and would submit that under the said provision the Central Registrar is only empowered to appoint the arbitrator for adjudication of the disputes KVM falling under section 84(1) of the Act and not to act as an arbitrator himself.
13. It is submitted that since the respondent no.2 could not act as arbitrator and since the Reserve Bank of India has no power to direct the respondent no.2 to look into the issue of election of the petitioner to the post of director and chairman, there was no question of the respondent no.2 clubbing both the proceedings.
14. Mr.Chinoy, learned senior counsel fairly invited our attention to the affidavit in reply filed by the respondent no.4 and would submit that the respondent no.4 has not able to point out in the affidavit in reply as to how the dispute raised by him challenging the election of the petitioner as well as the rejection of the nomination form of the respondent no.4 by the respondent no.3 bank could be entertained by the respondent no.2.
15. Mr.Sakhare, learned senior counsel for the respondent no.3 tendered a copy of the order dated 7th July, 2020 passed by the Government of Maharashtra under section 84(4) of the MSCS Act thereby appointing Dr.R.M.Khan as arbitrator for the Multi State Society for a period of one year from the date of the said order. He KVM states that in view of the said order already passed by the Government of Maharashtra, respondent no.2 himself could not have acted as an arbitrator.
16. Mr.Bhate, learned senior counsel for the respondent nos. 1 and 2 on the other hand though tried to defend the action of the respondent no.2, could not point out any provision either under the Banking Regulation Act or under the MSCS Act empowering the Reserve Bank of India to issue such directions to the respondent no.2 to review the election of the petitioner to the post of director as well as chairman or the Central Registrar to act as an arbitrator in the dispute relating to the election under section 84(2)(c) of the MSCS Act.
17. Learned counsel for the respondent nos. 1 and 2 invited our attention to the order dated 5th February, 2019 passed by this Court in Writ Petition No. 2367 of 2018 filed by the petitioner against the Union of India and others and would submit that by the said order this Court had directed that the further proceedings on the basis of the show cause notice dated 1st August, 2017 shall continue and the Union of India and the Central Registrar shall take the said notice to its logical conclusion, as expeditiously as possible. He submits that in view of the said order passed by the Division Bench of this Court, the petitioner cannot be KVM now allowed to raise an issue that the Reserve Bank of India had no power to issue any directions to the respondent no.2 vide letter dated 5th June, 2017 pursuant to which the said show cause notice dated 1st August, 2017 came to be issued by the respondent no.2.
18. A perusal of the record indicates that the petitioner was already elected as a chairman of the board of directors initially in the month of May 2016. The said election of the petitioner to the post of chairman of the board of directors was not impugned by any of the aggrieved party. The Reserve Bank of India however addressed a letter on 5th June, 2017 to the respondent no.2 pointing out the alleged complaint received against the petitioner and requested the Central Registrar to review the election of the petitioner as director and chairman of the respondent no.3 bank.
19. Learned counsel for the respondent nos. 1 and 2 could not point out any such power of the Reserve Bank of India under the provisions of Banking Regulation Act or any other provision of law to request or direct the Central Registrar to review the election of the petitioner as a director and chairman of the respondent no.3 bank.
20. The election of the petitioner as a chairman of the board of KVM directors of the respondent no.3 bank on 16th May, 2016 was not challenged by any of the aggrieved party by invoking provisions of section 84(2)(c) of the MSCS Act. A perusal of section 84(2)(c) of the said MSCS Act clearly indicates that any dispute arising in connection with the election of any officer of a multi-State co-operative society shall be deemed to be disputes touching the constitution, management or business of a multi-State co-operative society. Section 84(2) (c) has to be read with section 84(1) which provides that such disputes are required to be referred to the arbitration.
21. Under section 84(3) of the MSCS Act, it is clearly provided that if any question arises whether a dispute referred to arbitration under section 84(1) is or is not a dispute touching the constitution, management or business of a multi-State co-operative society, the decision of the arbitrator thereon shall be final and shall not be called in question in any court.
22. In our view, merely because this Court in Writ Petition No.2367 of 2018 filed by the petitioner had directed the respondent nos. 1 and 2 to continue further proceedings on the basis of the show cause notice dated 1st August, 2017 and to take such notice to its logical conclusion, the said order would not confer jurisdiction on the respondent nos. 1 KVM and 2 to adjudicate upon the issue as to whether the election of the petitioner as a director and chairman of the respondent no.3 bank was valid or not. A perusal of the said order passed by this Court indicates that the issue before this Court in the said writ petition was limited. The petitioner had impugned the order dated 16th May, 2018 addressed by the Joint Secretary to the Government of India who is the Central MSCS Act thereby restraining the petitioner from exercising any powers of chairman/director including attending any board meetings in the capacity of chairman/director of the respondent no.3 bank till further orders. There was no such direction issued by the Reserve Bank of India which is the subject matter of this petition in the said writ petition.
23. Be that as it may, this Court did not decide the issue whether Reserve Bank of India could issue any such directions to the Central chairman of the respondent no.3 bank under the provisions of the Banking Regulation Act or any other provisions of law. We are thus not inclined to accept the contention of the learned counsel for the respondent nos. 1 and 2 that in view of the said order passed by this court on 5th February, 2019 in the said Writ Petition No. 2367 of 2018 KVM filed by the petitioner, the respondent no.2 had jurisdiction to adjudicate upon the validity of election of the petitioner as director and chairman of respondent no.3 bank. The reliance placed by the learned counsel for the respondent nos. 1 and 2 on the said order dated 5th February, 2019 is thus misplaced and would not advance the case of the respondent nos. 1 and 2. In our view, the respondent no.2 thus did not have any jurisdiction to adjudicate upon or to review the election of the petitioner as a director and chairman of the respondent no.3 bank. He thus could not have passed any order for clubbing of the issue of election of the petitioner with the dispute filed by the respondent no.4.
24. Under section 84(2)(c) of the Multi State Bank any dispute arising in connection with the election of any officer of a multi-State co-operative society shall be deemed to be disputes touching the constitution, management or business of a multi-State co-operative society and is thus required to be referred to the arbitration in accordance with the provisions of section 84(1). Under section 84(4), the dispute has to be referred to arbitration under sub-section (1) of section 84 and has to be settled or decided by the arbitrator to be appointed by the Central Registrar and not by the Central Registrar.
25. Learned senior counsel for the respondent no.3 has already KVM produced a copy of the order under section 84(4) of the MSCS Act passed by the Government of Maharashtra, Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra State, Pune thereby appointing Dr.R.M.Khan as an arbitrator of the Multi State Society for a period of one year from the date of the said order dated 7th July, 2020.
26. In our view the Central Registrar has no power to act as an arbitrator for adjudicating upon the dispute referred in section 84(1) read with section 84(2). Such dispute can be referred only to the arbitrator to be appointed by the Central Registrar under section 84(4) for adjudication. The respondent no.2 thus could not have even otherwise proceeded with the dispute filed by the respondent no.4 on 23rd October, 2019 before the respondent no.2. The respondent no.2 ought to have directed the respondent no.4 to invoke the provisions of section 84(1) of the MSCS Act if the dispute raised by the respondent no.4 would fall under one of the dispute described in section 84(1) of the MSCS Act and to refer such dispute to arbitration. The respondent no.2 has acted totally without jurisdiction and contrary to the provisions of MSCS Act and also the Banking Regulation Act.
27. The Multi State Co-operative Societies Act, 2002 is a self KVM contained Code and provides the complete mechanism for resolution of disputes specified in section 84(1) read with section 84(2) of the said Act including the dispute relating to election of any of the officer of the Multi State Co-operative Society. The respondent no.2 has no power to decide the validity of election of any such officer by exercising powers under section 84(4) of the Act.
28. We have perused the affidavit in reply filed by the respondent no.4. A perusal of the said affidavit indicates that the respondent no.4 has raised various issues on the merits of the dispute filed by him in the affidavit in reply and has not disputed the contention of the petitioner raised in the petition challenging the jurisdiction of the respondent no.2 either to club the dispute filed by the respondent no.4 with the directives issued by the Reserve Bank of India or that the respondent no.2 had no jurisdiction to act as an arbitrator to resolve the dispute raised by the respondent no.4 against the petitioner. It is made clear that this Court has not expressed any views on the merits of the dispute filed by the respondent no.4 about the rejection of his nomination form or other issues raised by him on the merits regarding the election of the petitioner. If any such disputes are referred to arbitration in accordance with section 84 of the said Act, the same shall be decided on its own merits. KVM
29. We, therefore, pass the following order:- (a) Writ petition is made absolute in terms of prayer clauses (a) and (b). No order as to costs. (b) In view of the disposal of the writ petition, interim application pending, if any, also stands disposed of. [V.G.BISHT, J.] [R. D. DHANUKA, J.]