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2021 (9) TMI 561 - HC - Indian LawsPower to legislate in the field of Cooperative Societies - scope/ jurisdiction falls exclusively with the State and does not lie within the domain of the Union, much less the Reserved Bank of India? - HELD THAT - The Parliament by Constitution (97th Amendment) 2011 while inserting Article 243ZL(1) provided that in case of cooperative society carrying on the business of banking, the provisions of the Banking Regulation Act 1949 shall also apply. This provision was struck down by the Gujarat High Court in RAJENDRA N SHAH VERSUS UNION OF INDIA ANR. 2013 (4) TMI 972 - GUJARAT HIGH COURT , whereby Part IXB introduced by way of aforesaid amendment was declared ultra vires the constitution for want of rectification by the State Legislation under proviso (2) to Article 368 (2). The aforesaid judgment has been upheld by the Supreme Court recently in UNION OF INDIA VERSUS RAJENDRA N SHAH ANR. 2021 (9) TMI 315 - SUPREME COURT . The petitioner has therefore challenged the constitutional validity of amended Section 4 of the Banking Regulation Amendment Act, 1965. The argument therefore is that the impugned order dated 25.06.2021 issued by the Reserve Bank of India is absolutely incompetent and lacks in authority. Issue notice to the respondents on payment of PF within seven days, returnable within eight weeks - List after eight weeks.
Issues:
Constitutional validity of amended Section 4 of the Banking Regulation Amendment Act, 1965 - Conflict between State and Union laws regarding Cooperative Banks' service conditions and recruitment. Analysis: The judgment delves into the conflict arising from the governance of service conditions of Managing Directors and Chief Executive Officers of Cooperative Banks under the M.P. State Cooperative Societies Act, 1960, and the Banking Regulation Act, 1949. The petitioner, an Urban Cooperative Bank, argues that its service conditions are regulated by the State's byelaws approved by the Registrar of Cooperative Societies. The State has exclusive legislative power over Cooperative Societies, while banking is under the Union's jurisdiction. The petitioner challenges the constitutional validity of the amended Section 4 of the Banking Regulation Amendment Act, 1965, citing the omission of certain sections in 1966 and subsequent insertion of Article 243ZL(1) by the Constitution (97th Amendment) 2011. The Gujarat High Court and the Supreme Court have previously addressed similar issues, declaring certain provisions ultra vires the constitution due to lack of rectification by State Legislation. The judgment highlights the petitioner's contention that the Reserve Bank of India's order dated 25.06.2021, based on the amended Section 4, lacks authority and competence. The court issues notice to the respondents, directing payment of PF within seven days, returnable within eight weeks. Meanwhile, the operation and effect of the impugned order concerning the petitioner are stayed. The case is listed for further proceedings after eight weeks. The court's decision to stay the impugned order indicates a cautious approach to preserve the status quo pending a detailed examination of the constitutional validity of the amended provisions and their implications on Cooperative Banks' governance and autonomy.
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