Page 20 - Banking Finance September 2021

CO-OPERATIVE BANK NEWS

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RBI cancels licence of Dr it said adding that public interest which dealt with issues related to ef-
would be adversely affected if the bank fective management of co-operative
Shivajirao Patil Nilangekar is allowed to carry on its banking busi- societies in the country was passed by

Urban Co-op Bank, Latur ness any further. Parliament in December 2011 and had
The Reserve Bank of India (RBI) said, With cancellation of its licence, the come into effect from February 15,
it has cancelled the licence of Dr bank has been prohibited from con- 2012.
Shivajirao Patil Nilangekar Urban Co- ducting the business of 'banking' that The change in the Constitution has
operative Bank Ltd, Nilanga, Latur, as includes acceptance of deposits and amended Article 19(1)(c) to give pro-
it does not have adequate capital and repayment of deposits with immediate tection to the cooperatives and in-
earning prospects. effect. serted Article 43 B and Part IX B, re-
Also, the Maharashtra-based bank lating to them.
with its current financial position would SC quashed part of amend- While Article 19(1)(c) guarantees free-

be unable to pay its depositors in full, ment on setting up of co- dom to form association or unions or
the central bank said while announc- cooperative societies subject to certain
ing cancellation of its licence. ops restrictions, Article 43 B says that
The bank ceases to carry on banking The Supreme Court in a 2:1 majority states shall endeavour to promote vol-
business, with effect from the close of verdict upheld the validity of the 97th untary formation, autonomous func-
Constitutional amendment that deals tioning, democratic control and profes-
business.
with issues related to effective man- sional management of cooperative so-
Further, the Commissioner for Coop- agement of cooperative societies but cieties.
eration and Registrar of Cooperative
struck down a part related their set-
Societies, Maharashtra, has also been ting up and functioning. The Part IX B of the Constitution in-
requested to issue an order for wind- serted by 97th amendment deals with
ing up the bank and appoint a liquida- A bench of Justices R F Nariman, K M incorporation, terms of members of
tor for the bank. Joseph and B R Gavai said, We have board and its office bearers and effec-
struck down part IX B of the Constitu- tive management of cooperative soci-
The RBI said Dr Shivajirao Patil
tion related to cooperative societies eties.
Nilangekar Urban Co-operative Bank but we have saved the amendment.
does not have adequate capital and The Centre has contended that the
earning prospects, and as such, it does Justice Nariman said, Justice Joseph provision does not denude states of
not comply with the provisions of the has given a partly dissenting verdict their power to enact laws with regard
Banking Regulation Act, 1949. and has struck down the entire 97th to cooperatives.
constitutional amendment.
"The continuance of the bank is preju- The apex court's verdict came on the
The 97th constitutional amendment, Centre's plea challenging the Gujarat
dicial to the interests of its depositors,"

20 | 2021 | SEPTEMBER | BANKING FINANCE