RESERVE BANK OF INDIA Vs. IMRAN ASHRAF FURNITUREWALA

JUDGEMENT

(1.) Rule. Rule made returnable forthwith. Heard the learned Counsel for the parties.

(2.) Reserve Bank of India, who is the original complainant, has filed this Revision Application against the order dated 3.8.2009 passed by the Metropolitan Magistrate, 29th Court, Dadar, Mumbai. whereby he refused to issue process against the accused Nos.2 to 10 and accused No.12 in Criminal Case No. 59/SW/2009, who are respondent Nos. 1 to 10 in this Revision Application.

(3.) To state in brief, the accused No.1 - Memon Co-operative Bank is a registered Multi-State Co-op. Society carrying on banking business. Accused No.2 is the Chairman of the said Bank. Accused No.3 is the Vice-Chairman. Accused Nos.4 to 9 are the Directors. Accused No.10 is the Expert Director. Accused No.11 is a General Manager and Chief Executive Officer and accused No.12 is the Special Adviser to the Board of the Directors. Accused No.1, a Cooperative Bank, is entitled to carry on banking business which includes acceptance of deposits from the public and advance of loans. As such, it is governed by the provisions of Banking Regulation Act, 1949 as applicable to Co-operative Societies and the provisions of Multi-State Co-operative Societies Act, 2002. It is the contention of RBI - complainant that under Section 29 of the Banking Regulation Act, the accused No.1 - Bank is required to prepare a balance sheet and profit and loss account on the last working day of each financial year. The balance sheet and profit and loss account is required to be signed where there are more than 3 directors of the company by at least 3 of its directors. The profit and loss account and the balance sheet prepared under Sec. 29 and the audit report under Sec. 30 are required to be published in the prescribed manner and 3 copies of such accounts and balance sheet together with auditors' report are to be furnished as returns to the Reserve Bank of India within 3 months from the last date of period to which they refer. It is contended that the respondent No.1 Bank submitted the balance sheet and profit and loss accounts for the years ending March, 2006, March 2007 and March 2008 showing the profit of Rs. 13.34 lakh, Rs.5.95 lakh and Rs.5.77 lakh respectively. However, as directed by Reserve Bank of India, the accused No.1 Bank got the accounts audited by a statutory auditor. The statutory auditor's report revealed that the Bank had actually incurred loss of Rs.5409.52 lakh during the year ending 31.3.2006, loss of Rs.7493.65 lakh during the year ending 31.3.2007 and loss of Rs.9153.12 lakh for the year ending 31.3.2008. In view of the discrepancy in the returns submitted by the Bank and the statutory auditor's report, RBI got the accounts inspected and it was revealed that the accused No.1 had actually suffered loss of Rs.12818.41 lakh, Rs. 16111.38 lakh and Rs.11880.52 lakh during the years ending 31.3.2006, 31.3.2007 and 31.3.2008 respectively. In view of these facts, RBI found that the accused No. 1 Bank , and all its Directors, Special Adviser and CEO had committed offence punishable under Section 46 of the Banking Regulation Act because they had willfully made false statements in the returns of the said 3 years. It was contended that accused Nos. 2 to 12 holding various posts in the accused No.1 Bank were in charge and were responsible to the accused No.1 for the conduct of business at the time of failure to comply with the provisions of Sec. 31 of the Banking Regulation Act. Accordingly, the complaint was filed.