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Issues:
Justifiability and suitability of circulars issued by Reserve Bank of India restricting loans to directors and relatives of Primary Co-operative Banks. Discrimination against relatives of directors under Article 14 of the Constitution of India. Analysis: 1. The petitioner challenged the circulars issued by the Reserve Bank of India restricting loans to directors and their relatives in Primary Co-operative Banks. The petitioner had an overdraft account with an Urban Co-operative Bank, which was rejected due to his brother being a member of the Bank's Director Board. The petitioner argued that the circulars interfered with his rights. The circulars defined 'financial accommodation' and 'relative' extensively, including close family members. 2. The petitioner's counsel contended that the Reserve Bank of India's powers to issue circulars are derived from specific sections of the Banking Regulation Act. However, the counsel argued that there was no independent consideration by the Reserve Bank of India before issuing the circulars. The petitioner's right to avail overdraft facilities was established over time, and the counsel disputed the validity of the circulars based on the lack of independent consideration. 3. The Reserve Bank of India defended the circulars, stating that they were issued after thorough consideration, including references to the Joint Parliamentary Committee's recommendations. The Bank argued that the circulars were necessary for public interest and to prevent irregularities in banking practices. The Bank emphasized that the circulars were binding on Urban Banks and were not arbitrary or discriminatory. 4. The counsel for the petitioner raised concerns about discrimination against relatives of directors under Article 14 of the Constitution of India. However, the Reserve Bank justified the classification, stating that the circulars aimed to prevent misuse of positions by directors and their relatives. The Bank argued that the circulars were essential for public benefit and economic stability. 5. The court dismissed the Writ Petition but allowed the petitioner to continue availing facilities until a specified date. The court directed the petitioner to close the accommodation by the given date, acknowledging the interim orders that allowed the transactions to continue. The court upheld the validity of the circulars issued by the Reserve Bank of India. In conclusion, the judgment upheld the circulars issued by the Reserve Bank of India restricting loans to directors and their relatives in Primary Co-operative Banks, emphasizing public interest and economic stability over individual rights. The court found the circulars valid and binding on Urban Banks, dismissing the petitioner's claims of discrimination and interference with his rights.
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