Rupee Bank: Bombay HC suspends RBI order till Oct 17
On the day when 110-year-old Rupee Cooperative Bank ceased its operations, Bombay High Court (HC) offered relief to investors and suspended RBI order till next month
On the day when 110-year-old Rupee Cooperative Bank ceased its operations, Bombay High Court (HC) offered relief to investors and suspended RBI order till next month.
Bombay HC suspended the RBI order dated August 8 of cancellation of bank licence till October 17, when finance ministry will also take up matter for hearing.
The bank unions had appealed before joint secretary, finance ministry who has kept the hearing on October 17
The court order by Judge Sandeep K Shinde stated, “Pending appeal before the appellate authority-Respondent No.2 (RBI), operation of the impugned order dated August 8, 2022 shall remain suspended. The appellate authority shall dispose of the appeal positively on October 17, 2022 in accordance with law. It is clarified that this court has not expressed any opinion either on merits and pleas of bank and respondent are kept open.”
Administrator of the Rupee Bank Sudhir Pandit said, “We are happy with the decision of Bombay High Court. Though it is not the ultimate solution, we have gotten a breathing time to further strengthen our efforts to protect the interest of depositors, employees and banks. We are hopeful of positive developments in days to come ”
The HC in its order observed that RBI recorded its satisfaction stating that though the bank was put under all inclusive directions in February 2013, and had ample time and opportunity for its revival, the bank’s financials continued to be precarious. The merger proposals of other urban cooperative banks either did not materialise or found not acceptable by the DICGC or viable; the Task Force for Co-operative Urban Banks (TAFCUB) recommended for cancellation of licence of the bank.
Earlier RBI had argued that the gross Non-Performing Assets (NPA) of the bank was as high as 98.44% as on March 31,2021. The erosion in the deposit assessed, as on March 31, 2021 was 41.49%; whereas net worth was ₹537.97 crore.Thus, concluded that efforts made by the bank were not sufficient to justify continuation of its operation.
The HC took the view that it is not the function of the court “to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies, equally applies herein”.
The HC further observed that in any case, the RBI before cancelling the licence had examined revival and merger proposals.
“In view of these facts, I am not inclined to interfere with the order dated August 8, 2022 on merits and that is left open for Appellate Authority to examine in Appeal. However, since the statutes has provided for substantive appeal under Section 22(5) of the Banking Regulations Act, 1949 and further the appeal is scheduled for hearing on October 17, 2022 in the interest of justice, if the operation of RBI’s order dated August 8, 2022 is not suspended, until the disposal of the statutory appeal, the appeal itself would be rendered infructuous at this stage,” the judge stated.
The bank employees’ union and Naresh Vasant Raut one of petitioners had challenged the show-cause notices dated June 2, 2014 and June 22, 2017 in their writ petitions respectively and requested the Court to direct RBI to not proceed with cancellation of licence based on show-cause notices. “In consideration of the facts of the case, the Appellate Authority shall endeavour to conclude the hearing of the appeal on the scheduled date and under no circumstances, shall adjourn the proceedings either on the request of the appellant or of the respondents ‘’ the order stated.