- (1.) The petition under Article 226 of the Constitution has been filed in order to assail the legality of an order dated 4 June 2014 passed by the Reserve Bank of India under section 35-A of the Banking Regulation Act, 1949(the Act). A challenge has also been made to a subsequent order that was passed by the Executive Director of the Bank on 1 July 2014 on the objections submitted by the Bank. In consequence, a mandamus is sought to the effect that the petitioner should be permitted to withdraw the money deposited in its current account and to undertake normal banking activities.
(2.) The seventh respondent, Indian Mercantile Co-operative Bank Limited, is a primary Urban Co-operative Society registered under the U.P. Co-operative Societies Act, 1965 and has been granted a banking licence by the Reserve Bank. It is stated that the seventh respondent is a primary co-operative bank within the meaning of section 56(ccv) of the Act. The petitioner had opened a current account in the bank through which its business transactions were conducted.
(3.) On 4 June 2014, the Reserve Bank issued directions in exercise of the powers conferred by section 35-A of the Act. The directions prohibit the seventh respondent, without the prior approval in writing of the Reserve Bank, from granting or renewing any loans or advances, making any investment, incurring any liability including borrowal of funds and acceptance of fresh deposits and disbursement of any payment in discharge of its liabilities, obligations or otherwise. This is subject to the condition that a sum not exceeding one thousand rupees, out of the total balance in every savings account or current account or any other deposit account by whatever name called, may be allowed to be withdrawn by a depositor provided that wherever a depositor has a liability to the bank in any manner, the amount may be adjusted first to the relevant borrowal account. Certain other exceptions have been stipulated which are not material for the purpose of these proceedings.;