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Registrar competent to issue show cause notice, but questions can be raised on statutory limits: Calcutta High Court

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Kolkata (ILNS): The Calcutta High Court, while passing judgment on a challenge to a show-cause notice issued by the registrar of a cooperative society, has said that a registrar is competent to issue show-cause notices for violation of rules and bye-laws. The court, however, also said that the petitioner is also competent to raise the points that such violation does not come within the circumference of the regulations or the bye-laws or is beyond the perceivable statutory limits of the Registrar.

The above observation was made by Justice Harish Tandon in a writ petition challenging the show cause notice of April 12, 2019, issued against the Chairman of ‘Andaman & Nicobar State Cooperative Bank Limited’ by the Registrar of the said Cooperative society.

The petitioner is the chairman of the bank which is a cooperative society registered under Andaman and Nicobar Islands Cooperative Societies Regulations, 1973. The Chairman and Vice-chairman, along with other members of the managing committee were elected in a democratic process for a term of five years. The petitioner-bank was functioning initially in profit and expanded its horizon of banking activities by opening several branches within the Islands upon getting a permission/license from the Reserve Bank of India, but subsequently, there appears to be a recession in such business as the non-performing asset has increased considerably.

Subsequently, the inquiries and the other allied exercise were made in order to ascertain the commercial stability in such business and the strength of the petitioner; several letters were exchanged and the replies were invited thereto from the Managing Committee of the petitioner-bank.

The show-cause notice was challenged on various grounds including the competence of the Registrar of the Cooperative Society under the said Regulation.

The petitioners sought to project in the instant writ petition that the source of the said show cause notice is an outcome of political rivalry, more particularly, on the basis of a complaint lodged by the member of the rival political party against the members of the Managing Committee being a supporter of another political party.

The Court reiterates the position of law enunciated on the competence of the Writ Court exercising powers under Article 226 of the Constitution of India on the challenge over the show cause notice.

In the case of State of Uttar Pradesh Vs. Brahm Datt Sharma and another reported in (1987) 2 SCC 179, “the power of the writ jurisdiction against the issuance of show cause notice has been succinctly highlighted therein. It is held that the scope of a judicial challenge to a show-cause notice is very limited and the Writ Court should not interfere, in other words, rather reluctant to interfere at such stage unless the notice of show cause appears to have been issued by an authority who lacks such authority of law. It would be relevant to quote the observations made in the said report which runs thus:-

“9. The High Court was not justified in quashing the show cause notice. When a show cause notice is issued to a government servant under a statutory provision calling upon him to show cause, ordinarily the government servant must place his case before the authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. ‘The purpose of issuing show cause notice is to afford the opportunity of hearing to the government servant and once cause is shown it is open to the Government to consider the matter in the light of the facts and submissions placed by the government servant and only thereafter a final decision in the matter could be taken. Interference by the court before that stage would be premature, the High Court in our opinion ought not to have interfered with the show cause notice.”

The bench observed that several facts had been disclosed by the respective parties pertaining to the consistent audit and inquiry not only by the credit agency appointed under the Banking Regulation Act but also with the Reserve Bank of India and ultimately after getting the report from the aforesaid authorities, the action of the Registrar was considered expedient.

The bench however observed that

it has not closed the door of the writ petitioner to vindicate such points before the authority. The authorities, in the show cause notice, have alleged the violation not only of the statutory provisions but also the regulations and bye-laws governing the petitioner bank and therefore it is still open to the petitioner to raise the points that such violation does not come within the circumference of the Regulations or the bye-laws or is beyond the perceivable the statutory limits and the Registrar of Cooperative Society shall consider the same including the authority to adjudicate upon the allegations made in the show cause notice.”

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Thus finding the entire cause of action premature the Court refrained from further interference with the show cause notice and dismissed the writ petition.


-India Legal Bureau

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