Goa State Cooperative Bank Not A ‘State’: Bombay HC

OVERVIEW 

The Bombay High Court, in a Full Bench comprising of Justice MS Sonak, Justice Dama Seshadri Naidu and Justice Bharati H Dangre on March 5, 2021 in a landmark judgment titled Mr Vassudev Madkaikar and others vs. State of Goa and others in Writ Petition No. 92 of 2021 (Filing) held that the Goa State Co-operative Bank is not a State, nor does it fall within the ambit of ‘any other authority’ within the meaning of State for the purposes of Section 12 of the Constitution of India.

In the instant case, after the writ petition was filed, a need was felt by the division bench to resolve doubts and contradictions on the status of not only the Goa State Co-operative Banks but also, all other co-operative banks functioning in the State of Goa.

The bench further applied various tests as developed by the Courts under Article 12, and observed that a writ in the nature of mandamus would also lie against a private body, but only when such body performs any public function. A commercial business of banking, therefore, though is a function of public importance is not a public function.

BACKGROUND 

In the case of Ganesh Morto Naik v. Goa State Co-operative Bank Ltd. (1991) SCC OnLine Bom 211 and Surendra J. Kalangutkar v. Goa State Cooperative Bank Ltd. (2016) SCC OnLine Bom 2587, the Bombay High Court ruled that the Co-operative banks discharge public functions and therefore in under the ambit of the definition of State as has been defined under Article 12 of the Constitution of India. 

The definition of State ‘the State includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India,’ has been expanded to bring within its purview, several organisations, which though private, performs functions which are of public importance.

In another judgment delivered by the Aurangabad Bench in case of Shri Suresh Bhanudas Shinde & Anr v. State of Maharashtra & Ors W.P. No.334, the Court reversed its judgement and decided on a contrary view and that cooperative bank is not supposed to fall under the purview of State.

Full Bench of the Bombay HC in Shamrao Vithal Co-operative Bank Limited v/s. Padubidri Pattabhiram Bhat, reiterated the previous judgement of Suresh Bhanudas Shinde and decided that the purpose of commercial bank, though to discharge public functions, is not a State.

FURTHER DETAILS 

The Bombay High Court in a full division bench pronounced an 85 page order in order to determine whether the Goa State Co-operative Bank is a State. 

The Court deemed it appropriate to resolve the said contentious issues, as such issues recur in various matters, relating not only to the GSCB but also, other Cooperative banks in the State of Goa and referred the matter for a decision by a Larger Bench.

The Court went on to analyse the provisions of Sec. 2 (u) and (v) of the National Bank for Agriculture and Rural Development Act, 1981 (NABARD) and noted that although the Goa State Co-operative Bank falls gains recognition under NABARD, that doesn’t necessarily mean that it is a State. Certain benefits are conferred on virtue of Chapter 6 of the Act if such a bank gains recognition, particularly conferred under Section 21 and 25. The State Cooperative Banks along with the regional rural banks or any other financial institutions approved by the RBI are entitled for re-finance, loans and advances from the National Bank, but by virtue of subsection 3 of section 21, the National Bank may in its discretion grant a loan or advance to a State Cooperative Bank if the loan or advance is fully guaranteed for repayment of principal and interest by the Government and also in case of a State Cooperative Bank which is a scheduled bank.

CONCLUSION 

In the instant case, the Bombay High Court recognised its need to resolve contradictory opinions regarding whether the status of ‘State’ can be conferred to Goa State Cooperative Bank. In its order, the Bench arrived at the following conclusion:

1) The Goa State Cooperative Bank Ltd is not a 'State' or an instrumentality thereof nor does it fall within the ambit of 'Any other authority' for the for the purposes of Article 12 of Constitution of India. 

2) The GSCB does not discharge any public functions, which would warrant issuance of writ in the nature of mandamus in discharge of its performance of public functions. 

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