HC dismisses plea against coop. bank amalgamation

‘Court has no scope for interference with the process’

The Kerala High Court on Wednesday dismissed a batch of writ petitions against the newly incorporated provisions of the Kerala State Cooperative Society Act which facilitated amalgamation of district cooperative banks with the Kerala State Cooperative Bank, paving the way for the formation of Kerala Bank.

Justice A Muhammed Mustaq observed that there was no scope for interference with the process initiated to amalgamate the district cooperative banks with the Kerala State Cooperative Bank to form Kerala Bank.

All district banks, except the Malappuram District Cooperative Bank, had approved the scheme of amalgamation proposed by the State government at their respective general body meetings.

The court pointed out that as per the new Section 14A, the district cooperative banks could transfer its assets and liabilities to the Kerala State Cooperative Bank by passing a resolution by a simple majority and the transfer would take effect from the date on which the Registrar approved the resolution.

The court said that once a resolution was passed under Section 14A for transferring the assets and liability, Chapter XC of the Act, which referred to special provision for amalgamation, would step in for compulsory amalgamation.

The court dismissed the contention of the petitioner that compulsory amalgamation provided under Chapter XC of the Act was against the autonomous character of the district cooperative bank. The court said that compulsory amalgamation was based on voluntary initiation of the transfer of assets and liability by district cooperative banks to the Kerala State Cooperative Bank.

This decision was purely a decision of the district cooperative bank. When the assets and liabilities had been decided to be transferred, the Registrar had no option but to merge the entity with Kerala State Cooperative Bank. This did not affect the autonomous character of district cooperative banks.

The court rejected the contention that as the State and district cooperative banks were under the control of the administrators, no scheme could be proposed by the Kerala State Cooperative Bank for amalgamating the district cooperative banks with it. It was the special general body meeting of district banks which had taken the decision to transfer the assets and liabilities.

Therefore, the decision was taken not by the administrator or administrative committee. Besides, there was no stipulation in the newly added provision that all district banks should pass resolution for amalgamation. The scheme of amalgamation would be given effect only based on prior approval of the government.

The court said that it was for the RBI to decide whether the conditions stipulated in its communication granting in-principal approval for the Kerala Bank was followed or not.