The court said, "No prejudice would be caused to the petitioner if an inquiry is ordered as the banking business involves trust and confidence of its depositors, which certainly would have a cascading effect on the public at large."
The Bombay High Court recently dismissed a writ petition filed by Mumbai District Central Cooperative Bank, commonly known as Mumbai bank – headed by Leader of Opposition in the Maharashtra Legislative Council Pravin Darekar, also a BJP leader – against an inquiry initiated by cooperative societies divisional joint registrar (DJC) in regard to alleged irregularities in the bank between 2015 and 2020.
The court said, “No prejudice would be caused to the petitioner if an inquiry is ordered as the banking business involves trust and confidence of its depositors, which certainly would have a cascading effect on the public at large.”
A single judge bench of Justice Girish S Kulkarni on Thursday passed the order in plea by the bank, which was aggrieved by the September 22 order of the DJC of Co-operative Societies (Mumbai Division) initiating an inquiry under the Maharashtra Co-operative Societies Act. The state cooperative department had initiated the inquiry into alleged irregularities, including bad loans given to corporate entities, irregularities in gold mortgage loans in unproductive category and loans given to cooperative housing societies on the basis of bogus documents, among others.
The bank also assailed the September 1 order notice of the DJC, asking it to give within 15 days a rectification report regarding the test audit report submitted by a special auditor on August 10. However, the HC noted that for 17 days, the bank did not respond to the letter and on September 20, it sought an extension till December 31 to provide the report, which led the DJC to pass the September 22 order, initiating inquiry against it.
The bank, through senior advocate Vineet Naik, had sought directions to the DJC to grant three months to submit its explanation in respect of observations, defects and irregularities referred to in the test audit report and for an opportunity to make submissions on the same.
Naik said that in the past, the accounts and transactions of the bank have been duly audited by statutory auditors and NABARD and defects pointed out in such audits have been explained by filing rectification reports. The petitioner called the inquiry “illegal, premature”, stating that there was no opportunity granted to it to rectify the defects in accounts prior to the probe.
Senior advocate S U Kamdar and government pleader Priyabhushan P Kakade justified the action by government and submitted an affidavit by Deputy Registrar Prashant Satpute, which raised preliminary objection to the maintainability of the writ plea. The respondents said that the bank has an alternate remedy to file a revision application and inquiry has already commenced.
The bench noted that the September 1 notice was not violative of the provisions of law and that the petitioner’s contention of prior opportunity to rectify defects before initiation of inquiry cannot be accepted.
“Even if such an inquiry is undertaken and on conclusion of an inquiry, there are defects which are pointed out, Section 87 of the Act provides for an opportunity to the petitioner to comply with the deficiencies and/or defects, which may be pointed out even in such inquiry. In these circumstances, the petitioner ought not to be concerned when an inquiry has been ordered to
bring about transparency and accountability in the affairs of the petitioner, more particularly, when financial irregularities and/or substantial defects are alleged to be noted in the audit report..,” it said.
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