Bombay HC Refuses to Grant Interim Stay on RBI Order Cancelling Co-op Bank's License

The Bombay High Court has refused to grant an interim stay on operation of the order passed by the Reserve Bank of India cancelling the license of the CKP Co-op Bank and observed that there was no fundamental error in the decision.

In an order passed in the last week, a division bench of Justices Nitin Jamdar and SP Tavade noted the RBI had taken the decision with an objective of protecting the interests of depositors and other stake-holders.

The court was hearing a petition filed by Thane resident Vishwas Utagi challenging the April 24, 2020 order of the RBI cancelling the license of the cooperative bank.

Utagi stated he had filed the petition on behalf of the 500 share-holders, account-holders, depositors, employees and other stake-holders of the CKP Co-op bank.

He stated the RBI order was an attempt to cover up failures of the members of the Board of Administrators who were nominated by the state government to run the cooperative bank from May 2012.

He also alleged that the RBI overlooked the interests of the bank''s depositors and other stake-holders.

The bench noted that before the license of the bank was cancelled, it was preceded by various notices and inspections by the RBI which revealed several irregularities.

"The Reserve Bank of India has the power of superintendence over the Banks in the country in the interest of the banking policy. Various powers are available to the RBI under the Banking Regulations Act," the HC said.

"The financial position of the bank (CKP) deteriorated from time to time. The RBI found that the affairs of the bank were conducted detrimental to the interest of the depositors and public," it stated.

It is in this background that the RBI formed an opinion that the order cancelling the bank's license had to be passed, the bench said.

"The steps taken by the RBI are for the benefit of the depositors. The RBI is entrusted with powers to take necessary steps in the interest of depositors, banks and public," the high court said, adding that prima facie it did not find any fundamental error in the approach of the RBI.

The HC refused interim relief and directed that the petition be heard when normal court resumes.