A public interest litigation (PIL) questioning the regulatory power of Reserve Bank of India (RBI) over cooperative banks has been filed in the Gujarat High Court.
The PIL has also questioned constitutional validity of the amendment by the parliament which brought the cooperative banks under the ambit of the Banking Regulation Act, thereby under the regulations of the RBI. It further questions the legislative competence of Parliament to enact laws for co-operative societies, which is purely a state subject.
The petition assumes significance in background of the recent decision of the RBI to cancel the licence of Ahmedabad-based Madhavpura Marcentile Cooperative Bank (MMCB). The PIL has been filed in by one Consumer Protection and Analytic Committee through their lawyers Vishwas Shah and Masoom Shah. The lawyers have argued on the point that incorporation, regulation and winding up of co-operative societies was a state subject and was governed by the state laws on co-operative societies. "Co-operative society falls in 7th Schedule List II Entry 32 of the Constitution of India. It is pertinent that every co-operative bank is a co-operative society, but converse is not always true," the petition read.
The petitioner has urged the court to declare that the Centre has no legislative competence to enact a law for a co-operative society registered under the state's co-operatives law. The PIL has also requested the court to declare the Banking Regulation Act of 1966 ultra vires for provisions contradictory to the Constitution. In 1966, the Banking Regulation Act, 1949 was amended by the parliament to bring co-operative banks within the discipline of RBI constituted by RBI Act, 1934.
The lawyer further contended the 1966 amendment in Banking Regulation Act creates dual control over co-operative societies. Some functions are governed by the State Registrar of Co-operative Societies while banking functions are regulated by RBI, they added.
During hearing on the matter yesterday, the Centre, which is one of the respondents, objected to this PIL through the assistant solicitor general. The state government also told that court that it too was concerned with the subject and would like to make formal statement. Following the preliminary hearing the division bench of acting Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala, asked the petitioner to supply copies to the Central and state government lawyers and kept next hearing on July 26.