Jabalpur: The Madhya Pradesh High Court has stayed an RBI notification related to appointment and removal of managing directors and whole-time directors in Urban Cooperative Banks (UCBs) operating in states.
A division bench comprising Chief Justice Mohammad Rafiq and Justice VK Shukla, while hearing a petition, on Friday (September 3) stayed the Reserve Bank of India (RBI) circular issued on June 25.
The HC has also issued notices to the RBI, the Centre and state governments on the petition filed by Bhopal-based Mahanagar Nagrik Sahkari Bank Maryadit, the petitioner bank’s counsel, Ajay Gupta, said.
The court order said, Issue notice to the respondents on payment of PF (processing fee) within seven days returnable within eight weeks. In the meanwhile, operation and effect of the impugned order dated 25.06.2021 qua ((with regard to) the petitioner shall remain stayed , the HC said.
The Bhopal-based urban cooperative bank has challenged the constitutional validity of the RBI notification.
Gupta said the RBI’s order has regulated appointment, re-appointment and removal of managing directors (MDs) and whole-time directors (WTD) of UCBs.
Service conditions of MDs and/or Chief Executive Officers of UCBs is governed under the bye-laws of the MP State Cooperative Societies Act, the petitioner’s counsel said.
The cooperative as a subject falls under Entry 32 in List-II – State list – in the Seventh Schedule of the Constitution, whereas the banking falls under Entry 45 in List-I – Union list – of the Seventh Schedule, he said.
Therefore, the power to legislate and regulate UCBs falls exclusively with the state domain and does not lie in the purview of the Union, much less the RBI, Gupta said.
“Thus, the RBI order is absolutely incompetent and lacks in authority,” he claimed.
The court has granted eight weeks to the respondents to file their replies to the notices issued to them, Gupta added.