IN THE HIGH COURT OF DELHI AT NEW DELHI

SUBJECT ; BANKING REGULATION ACT, 1949

LPA NO. 557 OF 2006
DATE OF HEARING: 14 .12.2006
DATE OF DECISION : 29.01.2007

IN THE MATTER OF :

VINAYAK LOCAL AREA BANK LIMITED APPELLANT

Through Mr.Chetan Sharma, Sr.Advocate

with Ms.Neera Gupta, Mr.R.K.Kashyap
and Mr.Sushil Kumar Pandey, Advocates

Versus

RESERVE BANK OF INDIA and ORS. RESPONDENTS

Through Mr.Jaideep Gupta, Sr.Advocate

with Mr.H.S.Parihar and Mr.Kuldeeep Parihar
Advocates for R-1/RBI.
Ms.Monika Garg, Advocate for R/UOI

CORAM

HON'BLE THE CHIEF JUSTICE

HON'BLE MS.JUSTICE HIMA KOHLI

HIMA KOHLI, J.

By this judgment and order we propose to dispose of the present appeal which is filed by
the appellant/respondent no. 3 in the writ petition, being aggrieved by the judgment and
order dated 5th December, 2005 passed by the Learned Single Judge whereby the writ
petition by respondent No.1, Reserve Bank of India was allowed and the impugned order
therein dated 14th September, 2004, being an order on second review petition preferred
by the appellant herein, was held to be non-est and was therefore quashed.

2. The brief facts relevant for disposing of the present appeal are that in November 1996,
the appellant applied to respondent no.1, namely, the Reserve Bank of India (RBI), under
Section 22 of the of the Banking Regulation Act, 1949 (hereinafter referred to as `the
Act') for grant of a licence to it to commence banking business. In January, 1999 the RBI,
conveyed its approval in principle for the promotion of a local area bank subject to
various terms and conditions and finally on 28th July, 2000, granted a licence to the
appellant to carry on banking business. It was an express condition of the said licence that
the appellant would always maintain a minimum paid up capital of Rs. 5 crores as per the
requirement of the RBI Guidelines regarding capital adequacy.

3. However, various irregularities, and in particular the non- maintenance of minimum

capital as was required by the RBI Guidelines, were noticed during on-site supervisory
visits on two occasions, which were duly intimated to the appellant. In spite of regular
reminders, the appellant did not restore the original minimum capital of Rs.500 lacs
which was an essential requirement for grant of the licence and accordingly a Notice to
Show Cause was issued to the appellant on 4.7.2001.

4. In September, 2001, in exercise of powers conferred under Section 35A of the Act, the
RBI prohibited the appellant from granting any loans and advances, making any
investment or incurring liability including borrowal of funds and acceptance of fresh
deposit or removal of existing deposit etc., without the prior approval of the RBI. On 13th
November,2001 an oral hearing was granted to the appellant in the course of which it
admitted that lapses had occurred and that rectificatory steps would be taken by 22nd
December,2001. Time was extended up to 10th January, 2002, but the irregularities were
not removed. In these circumstances, in exercise of powers conferred under Section 22 of
the Act, the licence granted to the appellant was cancelled vide order dated 16th January,
2002.

5. The appellant preferred a statutory appeal against the said order of cancellation under
the provisions of Section 22(5) of the Act, which came to be dismissed on 13th
September, 2002. Thereupon, the appellant filed a writ petition in the High Court of
Rajasthan in October, 2002 challenging the orders dated 16th, January 2002 and 13th
September, 2002. During the pendency of the said writ petition, the appellant also filed a
first review petition before the Appellate Authority, which was dismissed on 23rd
December,2003. One of the grounds for dismissal was that the Appellate Authority did
not possess powers to review a previous order.

6. Subsequently a second review petition was filed on 5th April, 2004 before the same
Appellate Authority, which was allowed by an officer different to the one who had
decided the appeal, by an order dated 14th September, 2004 and the RBI was directed to
restore the licence of the appellant. Thereafter, the writ petition filed by the appellant in
the High Court of Rajasthan was disposed of on 4th April, 2005 on the ground that during
the pendency of the writ petition, final order had been passed by the Appellate Authority
on 14th September, 2004

7. Aggrieved by the aforesaid order dated 14th September, 2004 passed by the Appellate
Authority on the second review petition preferred by the appellant, respondent No.1
herein filed a writ petition in this court praying, inter alia, for quashing the order and for
restoration of the earlier order dated 16th January, 2002 passed by respondent No.1
herein, cancelling the licence issued to the appellant.

8. A preliminary objection was raised before the learned Single Judge by the appellant,
respondent No.3 in the writ petition as to the maintainability of the writ petition on the
ground that this Court should not exercise territorial jurisdiction in the matter and that the
petitioner therein, respondent No.1 herein was guilty of forum shopping. The learned
Single Judge rejected the contentions of the appellant on the ground that the writ petition
preferred by the appellant before the Rajasthan High Court was dismissed without any
observations as to the legal propriety of the order dated 14th September, 2004 passed in
the second review petition, which is under challenge in the present writ petition. It was
further held by the Learned Single Judge that since the Appellate Authority is located in
Delhi and all the hearings took place in Delhi, this High Court has jurisdiction to
entertain the writ petition.

9. Having rejected the above-mentioned preliminary objection, the Learned Single Judge
went ahead to test the validity of the order passed by the Appellate Authority in a second
review petition. After perusing the provisions of Section 22 (4), (5) and (6) of the Act and
specifically relying on Sub-section (6) of Section 22 which lays down that the decision of
the Central Government where an appeal has been preferred to it under sub-section (5), or
of the Reserve Bank where no such appeal has been preferred, shall be final, the learned
Single Judge referred to the various judgments of the Supreme Court and held that quasi
judicial authorities cannot presume or assume powers of review which must be conferred
on them by a Statute either specifically or by necessary implication. It was held that right
to file an appeal is not an unending one and thus the impugned order passed on the
second review petition preferred by the appellant was non-est and the same was quashed.
Aggrieved by the aforesaid judgment dated 5th December, 2005, the appellant has
preferred the present appeal.

10. Learned senior counsel for the appellant submitted that assuming that there is no
power of review vested in the Appellate Authority in view of the fact that the parties were
already before the Rajasthan High Court, respondent No.1 ought not to have approached
the Delhi High Court by way of a writ petition impugning the order dated 14th
September, 2004 but should have approached the Rajasthan High Court. Reliance was
placed on the provisions of Section 36B read with Section 5 (o) of the Act and Section 10
(1) of the Companies Act to submit that the Rajasthan High Court alone had the
jurisdiction to entertain the writ petition. It was further submitted that if the second
review petition suffered with material irregularity, the first review petition also suffered
from the same irregularity and as the said plea was not taken by respondent No.1 before
the Appellate Authority, the same is deemed to have been waived. Another argument
advanced on behalf of the appellant was that if there is a statutory infraction of Section 22
(4) of the Act, then notwithstanding the fact that there is an order passed by the Appellate
Authority, sufficient opportunity for taking necessary steps for complying with or
fulfilling such conditions by the defaulter party ought to have been granted by the RBI
for making good such deficiencies, which was not done in the case of the appellant.
Learned senior counsel for the appellant relied on the following judgments in support of
its case: (i) M.V.Elisabesh Vs. Harwan Investment and Trading Private Limited 1993
upp (2) SCC 433.

(ii) Stridewell Leathers (P) Ltd. and others Vs. Bhankerpur Simbhaoli Beverages (P) Ltd.,
AIR 1994 SC 158.

(iii) Kusum Ingots and Alloys Ltd. Vs. Union of India and another, (2004) 6 SCC 254.

(iv) M/s Bombay Snuff P.Ltd. Vs. UOI, 2006 I AD (DELHI) 291.

11. Per contra, learned senior counsel for respondent No.1 submitted that the jurisdiction
for entertaining the writ petition vests in the Delhi High Court and the same flows from
Article 226 (2) of the Constitution of India and that if the Act would alone apply for
deciding the issue of territorial jurisdiction in instituting a writ petition, as sought to be
argued by the learned senior counsel for the appellant, then it shall result in denuding the
High Court of a power vested in it under the Constitution. It was further argued that in the
present case, the Appellate Authority being located in Delhi where all the hearings took
place, this court would ipso facto have territorial jurisdiction to deal with the writ
petition. Learned senior counsel for respondent No.1 submitted that reliance placed by
the for the appellant on the provisions of Section 36B of the Act was misconceived as the
same is not applicable to the facts of the present case for the reason that the order in
question had been passed under Section 22 which is not included in Part III and Part IIIA
of the Act and that Section 36B defines the word `High Court' for the purposes of
winding up proceedings under Part III and Part IIIA of the Act. 12. On the issue of
maintainability of the review petition, it was submitted on behalf of the respondent No.1
that the learned Single Judge rightly arrived at the conclusion that the power of review
must be explicitly available and that there can be no question of implying or reading in
such powers in the case of quasi judicial bodies and further that in any event even if it is
presumed that a review is maintainable, a second review of the order would certainly not
lie under any circumstances.

13. On merits, it was submitted by learned senior counsel for respondent No.1 that it was
found that the appellant did not have sufficient funds to maintain a minimum paid up
capital of Rs.5 crores as per the requirements of respondent No.1 and that sufficient
opportunities were granted to the appellant for making good the said default, which it
failed to avail of, thus endangering the interest of the depositors, which could not be
permitted under any circumstances. Reliance was placed on the following judgments:

(i) Patel Narshi Thakershi and others Vs. Shri Pradyumansinghji Arjunsighji, 1971 (3)
SCC 844.

(ii) State of Assam and another Vs. J.N.Roy Biswas, (1976) 1 SCC 234.

(iii) R.R.Verma and others Vs. Union of India and others (1980) 3 SCC 402.

(iv) Oil and Natural Gas Commission Vs. Utpal Kumar Basu and others, (1994) 4
SCC 711.

(v) Indian National Congress (I) Vs. Institute of Social Welfare and others, AIR
2002 SC 2158.

14. We have heard the learned counsels for the parties and have also perused the records.
We have also carefully perused the impugned judgment.

15. In so far as objection taken by the appellant with regard to the jurisdiction vested in
the Rajasthan High Court alone is concerned, the contention of the appellant that merely
because its operations were in the State of Rajasthan, only the Rajasthan High Court
would have jurisdiction, is not sufficient to oust the jurisdiction of the Delhi High Court.
As held by the Supreme Court in the case of Oil and Natural Gas Commission (supra), on
a plain reading of the clauses (1) and (2) of the Article 226 of the Constitution of India, it
becomes clear that a High Court can exercise the power to issue directions, orders or
writs for the enforcement of any of the fundamental rights conferred by Part III of the
Constitution or for any other purpose if the cause of action, wholly or in part, arises
within the territories in relation to which it exercises jurisdiction, notwithstanding that the
seat of the Government or authority or the residence of the person against whom the
direction,order or writ is issued is not within the said territories. We may usefully advert
to the following observations of the Supreme Court in the aforesaid case:

“Para 6: ...Therefore, in determining the objection of lack of territorial jurisdiction the

court must take all the facts pleaded in support of the cause of action into consideration
albeit without embarking upon an enquiry as to the correctness or otherwise of the said
facts. In other words the question whether a High Court has territorial jurisdiction to
entertain a writ petition must be answered on the basis of the averments made in the
petition, the truth or otherwise whereof being immaterial. To put it differently, the
question of territorial jurisdiction must be decided on the facts pleaded in the
petition...”

16. We may note that clause (1-A) was inserted by 15th Amendment Act, 1963, to confer
on the High Courts, jurisdiction to entertain a petition under Article 226 against the
Union of India or any other body or authority located in Delhi if the cause of action has
arisen, wholly or in part, within its jurisdiction. Clause (1-A) was later renumbered as
clause (2) of Article 226. In the present case, on the facts alleged it is apparent that the
learned Single Judge rightly exercised his powers under Article 226 of the Constitution of
India and entertained the writ petition inasmuch as the Appellate Authority was situated
in Delhi, hearings were granted to the appellant in Delhi and hence the Delhi High Court
did not lack jurisdiction to entertain the writ petition in the present case. Reliance placed
by the learned senior counsel for the appellant in the cases of Kusum Ingots and Alloys
Ltd.(supra) and Stridewell Leathers (P) Ltd. (supra) is misplaced. In the case of
Stridewell Leathers (P) Ltd. (supra), the court was dealing specifically with the
provisions of Section 10 (F) of the Companies Act and there was no occasion to examine
the issue of territorial jurisdiction of the High Court under Article 226 of the Constitution
of India. In Kusum Ingots and Alloys Ltd.(supra), the Supreme Court has categorically
held that a distinction between a legislation and executive action should be borne in mind
while determining whether a cause of action arose at a particular place. Passing of a
legislation by itself does not confer any such right to file a writ petition unless a cause of
action arises therefore and held as below:

“Para 26. .....Situs of office of Parliament, legislature or a State or authorities empowered

to make subordinate legislation would not by itself constitute any cause of action on cases
arising. In other words, framing of a statute, statutory rule or issue of an executive order
or instruction would not confer jurisdiction upon a court only because of the court of the
situs of the office of the maker thereof.

Para 27: When an order, however, is passed by a court or tribunal or an executive

authority whether under provisions of a statute or otherwise, a part of cause of action
arises at that place. Even in a given case, when the original authority is constituted at one
place and the appellate/revisional authority is constituted at another, a writ petition would
be maintainable at both the places as order of the appellate authority constitutes a part of
cause of action, a writ petition would be maintainable in the High Court within whose
jurisdiction it is situate having regard to the fact that the order of the appellate authority is
also required to be set aside and as the order of the original authority merges with that of
the appellate authority.”

17. We may also observe that merely because the appellant chose to approach the High
Court of Rajasthan by assailing the orders dated 16th January and 13th September, 2002
passed by respondent No.1 that by itself is no ground to state that respondent No.1 ought
to have approached the said High Court for impugning the subsequent order dated 14th
September, 2004 passed by the Appellate Authority on the second review petition
preferred by the appellant during the pendency of the writ petition before the Rajasthan
High Court. The claim of the appellant that Section 36B read with Section 5(o) of the Act
and Section 10(1) of the Companies Act confers jurisdiction on Rajasthan High court
alone, is misconceived and misplaced. Section 36B defines `High Court' in relation to a
banking company in the context of winding up of a banking company under the
Companies Act as contained in Part III and Part IIIA of the Act. In fact, orders have been
passed by respondent No.1 under Section 22, which is included in Part III of the Act, to
which the Section 36B has no applicability. In any case, respondent No.1 cannot be
precluded from invoking the powers of judicial review vested in the Delhi High Court
under Article 226 of the Constitution of India, merely on account of the provisions of the
Act. As such the said Act cannot place any embargo on the powers of the High Court
vested on it by the Constitution of India. Such an argument would render nugatory the
inherent powers of the High Court, which is neither permissible nor envisaged under the
under the framework of the Constitution.
18. The second plea of the appellant that respondent No.1 has deemed to have waived its
objection with regard to the maintainability of the second review petition by participating
in the first review petition, is also devoid of any force. Respondent No.1 had taken an
objection in reply to the first review petition preferred by the appellant that there is no
provision for review of orders passed under Section 22 of the Act. This is apparent from a
perusal of the order dated 23rd December, 2003 passed by the Appellate Authority
wherein it is recorded that respondent No.1 raised a preliminary objection that there is no
provision for review of the orders passed under Section 22 (5) of the Act.

19. The law on power of review is now very well settled in view of the following
judgments:

(i)Patel Narshi Thakershi and others Vs. Shri Pradyumansinghji Arjunsighji, 1971
(3) SCC 844.

(ii)State of Assam and another Vs. J.N.Roy Biswas, (1976) 1 SCC 234.

(iii)R.R.Verma and others Vs. Union of India and others (1980) 3 SCC 402.

(iv) Dr.(Smt.) Kuntesh Gupta Vs. Management of Hindu Kanya Mahavidyalaya,

Sitapur, AIR 1987 SC 2186.

(v) Indian National Congress (I) Vs. Institute of Social Welfare and others, AIR
2002 SC 2158.

20. In all the aforementioned judgments, it has been held that a quasi judicial authority
cannot review its own order unless the power of review is expressly conferred on it by the
statute under which it derives its jurisdiction.

21. In Patel Narshi Thakershi (supra), the Supreme Court held as below:

“Para 4:...It is well settled that the power to review is not an inherent power. It must be
conferred by law either specifically or by necessary implication. No provision in the Act
was brought to notice from which it could be gathered that the Government had power to
review its own order. If the Government had no power to review its own order, it is
obvious that its delegate could not have reviewed its order...”

22. In the light of the aforesaid discussion, we find no infirmity in the impugned
judgment. The learned Single Judge has rightly arrived at the conclusion that the
impugned order dated 14th September, 2004 passed by the Appellate Authority on the
second review petition of the appellant is non- est and hence liable to be quashed. The
present appeal is dismissed being devoid of any merits. Parties are left to bear their own
costs.
 Sd/-

(HIMA KOHLI)
JUDGE

Sd/-
CHIEF JUSTICE