HC junks Mumbai Bank’s plea challenging inquiry ordered by divisional jt registrar

The divisional joint registrar of Mumbai division had on September 22 appointed an inquiry officer to probe into different issues highlighted in a recent test audit report

The Bombay high court (HC) last week dismissed a petition filed by the Mumbai District Central Co-operative Bank (also known as Mumbai Bank), challenging an inquiry ordered by the divisional joint registrar of co-operative societies.

The bank had moved HC challenging the order, primarily on the ground that the divisional joint registrar ordered the inquiry on the basis of the test audit report, but without giving an opportunity to the bank to rectify the defects pointed out in the report (HT FILE)

The divisional joint registrar of Mumbai division had on September 22 appointed an inquiry officer to probe into different issues highlighted in a recent test audit report, including the expenditure incurred by the bank in the past five years on updating its computer programme, system maintenance expenditure, hardware purchases, repairs and renovation of immovable property, outstanding loans given by the bank under the corporate loan policy, loans given to co-operative housing societies, outstanding loans given by violating the area of its operation to sugar factories and other establishments and gold mortgage loan in the unproductive category.

The bank had moved HC challenging the order, primarily on the ground that the divisional joint registrar ordered the inquiry on the basis of the test audit report, but without giving an opportunity to the bank to rectify the defects pointed out in the report.

A single judge bench of justice Girish Kulkarni on October 28 rejected the argument and dismissed the bank’s petition, observing that sections 82 and 83 of the Maharashtra Co-operative Societies (MCS) Act, 1960 – which deal with rectification of defects pointed out by auditors and the registrar’s power to order inquiry – are independent provisions, and the opportunity of rectifying the defects highlighted in the test audit report cannot be a condition precedent for ordering the inquiry.

Justice Kulkarni also said that no prejudice would be caused to the bank by the inquiry ordered under section 83, more particularly when its business involves trust and confidence of its depositors, which certainly would have a cascading effect on the public at large.

“Even if such an inquiry is undertaken and on conclusion of an inquiry, there are defects which are pointed out. Clearly, section 87 of the (MCS) Act provides for an opportunity to the petitioner [the bank] to comply with the deficiencies and/or defects,” said the bench.

“In these circumstances, the petitioner ought not to be concerned when an inquiry has been ordered to bring about transparency and accountability in the affairs of the petitioner, more particularly when financial irregularities and/or substantial defects are alleged to be noted in the test audit report as also in the report of the special auditor,” the court added.

Bharatiya Janata Party (BJP) legislator and leader of opposition in the Maharashtra legislative Council, Pravin Darekar, is currently the chairman of Mumbai Bank.