Explained- Do all banks including co-operative banks come under RTI?

 

 

After scams and irregularities in banks started surfacing the unrest in people’s mind as to why private and co-operative banks do not come under the ambit of RTI Act 2005 became vocal. While it is true that there have been irregularities in public sector banks also even though they come under RTI Act, it is at least possible to gather some information to expose these irregularities.

 

The reasoning and the ratio given by the apex court in Civil appeal No. 5674 of 2009 Pandurang Ganapati Chowgule V/S Vishwasrao Patil Murugud Co-operative bank Ltd. while declaring that the co-operative banks are covered under SARFAESI Act has given hope that co-operative banks can come under RTI Act.

 

In order that this hope becomes real RTI applicant will have to knock first the doors of Central Information Commission (CIC) and thereafter, if necessary, even the Supreme Court. This is because whether any establishment is a “public authority” under RTI Act or not is decided by either State Information Commission or CIC. As we have to use the ratio that these banks are under the control of RBI one has to approach CIC.

 

 

Bombay High Court judgement of February 2017: Even though Aurangabad bench of the Bombay High Court in February 2017 (WP no. 1304 of 2008) in Jalgaon Jillha Urban Cooperative Banks Association Ltd., Jalgaon, Petitioner v/s The State of Maharashtra and others, has stated that Co-operative banks are public authorities under RTI Act these banks however, continue to turn away RTI applicants and stonewall the information.

 

 

One of the parameters as per section 2(h) of RTI Act on which it is decided whether anybody is a “public authority” or not is whether it is a body controlled by the appropriate government. In Civil Appeal No. 9017 of 2013 (Arising out of SLP (C) No.24290 of 2012) Thalappalam Ser. Coop. Bank Ltd. and others Appellants Versus State of Kerala and others Respondents, SC held that the Cooperative Societies registered under the Kerala Co-operative Societies Act and coming under the administrative control of the Registrar did not come under the purview of RTI Act. The matter of control over these banks under Banking Regulation Act, 1949 (BR Act) was not before the court and hence the court may not have examined it. The court has however, analyzed, interpreted and finely dissected section 2 (h) of RTI Act clearing cobwebs surrounding it.

 

It stated that a public authority under Section 2(h) (d) (i) and (ii) would be either (a) a body owned by the appropriate government or (b) a body controlled by the appropriate Government or (c) a body substantially financed directly or indirectly by funds provided by the appropriate Government or (d) non-Government organization substantially financed directly or indirectly by funds provided by the appropriate Government.

 

The Court observed that as word “control” or “controlled” has not been defined in the RTI Act we have to understand the scope of the expression ‘controlled’ in the context of the words which exist prior and subsequent i.e. “body owned” and “substantially financed” respectively.

 

After analyzing various SC judgements dealing with the word control the court observed “We are of the opinion that when we test the meaning of expression “controlled” which figures in between the words “body owned” and “substantially financed”, the control by the appropriate government must be a control of a substantial nature. The mere ‘supervision’ or ‘regulation’ as such by a statute or otherwise of a body would not make that body a “public authority” within the meaning of Section 2(h)(d)(i) of the RTI Act.”

 

 

In a Civil appeal no. 5674 of 2009 Pandurang Ganpati Chaugule v/s Vishwasrao Patil Murgud Sahakari Bank Limited one of the questions framed by SC for determination by it was the applicability of SARFAESI Act 2002 to the cooperative banks and consequentially power of the Parliament to legislate.

 

After examining the history of Banking Companies Act, 1949, the Statement of Objects and Reasons of Bill amending Reserve Bank of India Act, 1934 and the Banking Companies Act, 1949 in December 1964 to regulate the banking business of certain cooperative societies, SC has observed that as it became necessary to apply certain provisions of the BR Act to the co-operative banks, amendments were specified in Section 56 of the Act without amending individual sections.

 

The court after enumerating and dealing with various provisions of BR Act has observed that “it is apparent that deep and pervasive control by the RBI is provided on primary credit society, which is involved in banking. As per the provisions of the BR Act no business can be done by any co-operative society without obtaining a license from RBI. The very existence of the cooperative banks is dependent and is governed by the RBI Act as well as the BR Act”.

 

The Court has further observed that the ratio of the judgment is material. The above observation forms part of the verdict of the Supreme court on the applicability of SARFAESI Act 2002 to the Co-operative banks and thus qualifies to be a ratio of the judgement. “It is apparent that deep and pervasive control by the RBI is provided on primary credit society, which is involved in banking” is thus a law declared by a five judge constitution bench of the Supreme Court and is binding on all courts within the territory of India as per article 141 of the Constitution of India. A deep and pervasive control is obviously much more than a mere regulatory or supervisory control. The apex court observation is based only on control of RBI, add to this the control of state authorities and the control of government over co-operative banks becomes deeper and far more pervasive.

 

While a two-judge bench of SC in Thalappalam Ser. Coop. Bank Ltd. case (supra) said that control should be “substantial” the five-judge constitution bench in Pandurang Ganpati Chaugule (supra) has found that control of RBI over co-operative banks is “deep and pervasive” which surely is far more than substantial. Control by RBI is nothing but control of government. It thus meets the parameter of control for being declared a “public authority” under RTI Act.

 

Actions of RBI in the recent past: The RBI not giving extension to MD and CEO of Yes bank, superseding it’s board and appointing it’s nominee on the board, Rescue plan implemented by the government, appointing RBI representative on the board of Lakshmi Vilas bank and Dhanlaxmi Bank, prior approval of RBI for the appointment of MD and CEO of banks, issues relating to Kotak Mahindra bank over promoter shareholding and cap on voting rights, prompt corrective action in respect of weak banks, stringent measures against many co-operative banks are indicative of deep and pervasive control of RBI over banks.

 

All banks a public authority? The natural corollary of the above is that if co-operative banks are under deep and pervasive control of RBI then obviously other banks, private or public sector, must also be under deep and pervasive control of RBI. It is therefore that the co-operative banks and private sector banks also come within the purview of the definition of public authority under RTI Act, public sector banks already being there.

 

It is well settled that what is meant by an “entity is controlled by the government” is that the government has the authority to legally control it and it is immaterial whether government in fact exercises it or not. Nor it is necessary that control is exercised over it’s operations on an ongoing basis or on a daily basis. Such entities may be given operational freedom but it does not take away from the fact that entities are controlled by the Government. What it essentially means is that while government would not interfere or meddle with its affairs on a routine basis it can and will surely intervene if a situation so demands and in large public interest.

 

A clear declaration from Supreme Court necessary: Be that as it may, what is needed is a declaration from Supreme Court that Co-operative banks and private sector banks also come under the purview of RTI Act by reason of they being controlled by government through RBI. Those seeking information from any of these banks will have to first move a RTI application to some private sector bank and a co-operative bank and in the event of it being rejected will have to complain to CIC and then knock the doors of Supreme court, if necessary, it must be remembered that the burden to show that a body is controlled by the appropriate government is on the applicant who is seeking information. One will have to forcefully argue on the basis of ratio in Pandurang Ganpati Chaugule quoted above. This is a long route but this being the only route it is a shortest route.