13/01/2026
The District Central Cooperative Bank ... vs The Reserve Bank Of India on 12 January, 2026
NEUTRAL CITATION NO. 2026:MPHC-GWL:1303
1 WP-13866-2022
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE AMIT SETH
WRIT PETITION No. 13866 of 2022
THE DISTRICT CENTRAL COOPERATIVE BANK HEAD OFFICE AT NEAR
GIRLS SCHOOL COURT ROAD SHIVPURI THR. ITS
Versus
THE RESERVE BANK OF INDIA AND OTHERS
Appearance:
Shri Narottam Sharma - Advocate for the petitioner.
Shri Raju Sharma - Advocate for respondent No.1.
None for respondent No.2, though served.
Reserved on : 03/12/2025
Delivered on : 12/01/2026
ORDER
The instant writ petition filed under Article 226 of the Constitution of India claims the following reliefs:
"(a) That, the order Annexure-P/1 may kindly be quashed and the waiver application of the petitioner may kindly be allowed, The orders levying penal interest Annexure-P/4 & P/5, so also the recovery and coercive proceedings pursuant thereto may also be quashed,
(b) Costs and any other relief which this Hon'ble Court may deem fit kindly be awarded."
2. Brief facts leading to filing of the present writ petition are as under:
2.1 The petitioner, being a District Central Cooperative Bank registered NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 2 WP-13866-2022 under the provisions of the M.P. Cooperative Societies Act, 1960, is operating in District Shivpuri and is holding a banking license from the RBI.
2.2 Since the petitioner bank failed to maintain the Statutory Liquidity Ratio (hereinafter referred to as "SLR") and Cash Reserve Ratio (hereinafter referred to as "CRR") for certain months in the financial year 2021-2022, the penal interest was levied on the petitioner bank by the respondent in the following manner:
August to October 2021 ₹34,60,302
November 2021 to January 2022 ₹25,70,237
Total ₹60,30,539.00
2.3 A representation seeking waiver of the penal interest for the failure to maintain SLR and CRR for certain months was moved by the petitioner before the respondents, which came to be rejected vide order dated 02.06.2022 (Annexure-
P/1), whereby the petitioner was informed that the representation of the petitioner was considered sympathetically but the same is not acceptable. Accordingly, the petitioner was directed to deposit the penal interest. It is this order which is under challenge in the instant writ petition.
3. Learned counsel appearing for the petitioner submits that Section 18(1- B) and Section 24(8) of the Banking Regulation Act, 1949, empower the respondent to waive off the penal interest levied for failure to maintain SLR/CRR upon an application in writing by the defaulting banking company, showing sufficient cause for its failure to comply with the provisions of the Act. The petitioner's counsel submits that the Act contemplates a statutory power on the respondent authorities to decide the application seeking waiver of penal interest and therefore, the application made by the petitioner was required to be considered and decided by the respondents by passing a reasoned and speaking order. He NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 3 WP-13866-2022 submits that the order dated 02.06.2022 impugned in the instant writ petition, is patently a non-speaking order. The respondents were bound to decide the representation/application made by the petitioner seeking waiver of penal interest by passing a reasoned and speaking order.
4. Learned counsel appearing for the petitioner, by referring to the pleadings made in the petition, submits that there was a failure on the part of the petitioner bank to maintain SLR/CRR in some months of financial year 2021- 2022 on account of financial crunch in all sectors of the economy caused by the spread of pandemic COVID-19 in the last two years. That apart, the bank suffered defalcation and fraud to the tune of ₹80,56,21,342, resulting in a precipitation of financial crisis in the petitioner bank, for which an FIR was also registered by the petitioner. He further submits that non-maintenance of CRR/SLR does not result in any harm or financial loss to the RBI. The levy of penal interest for failure to maintain SLR/CRR is deterrent in nature and not compensatory. Therefore, there being no willful default on the part of the petitioner, the RBI ought to have waived the penal interest levied on the petitioner and decided the application submitted by the petitioner by passing a reasoned and speaking order.
5. On the other hand, learned counsel appearing for respondent No.1, by referring to their return, submits that the Reserve Bank of India, being a statutory body constituted under Section 3 of the Reserve Bank of India Act, 1934, and in terms of the Banking Regulation Act, 1949, has been vested with the responsibility of superintendence and control of the banking business in the country under the provisions of the Banking Regulation Act. The Reserve Bank exercises various powers in relation to regulation and supervision of the banks in the country.
6. He submits that the petitioner, being a cooperative bank, in terms of NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 4 WP-13866-2022 Sections 18 and 24 of the Banking Regulation Act, is required to maintain the CRR/SLR in terms thereof and the petitioner bank is statutorily bound to comply with the said provisions. In the event of failure to maintain CRR/SLR, the respondent is empowered under the law to levy penal interest on the petitioner bank and Section 18(1-B) and Section 24(8) of the Banking Regulation Act, 1949, does not cast any duty on the respondent to pass a speaking order on the application seeking waiver of penal interest levied by it. He further submits that the petitioner itself never disclosed its default to the respondents, and it is only during the scrutiny of the audited accounts of the petitioner, the default of the petitioner came to the knowledge, and thereafter, the order levying penal interest for not maintaining CRR/SLR was passed against the petitioner.
7. He submits that neither the waiver of penal interest could be claimed as a matter of right, nor, in the petition, any valid ground has been raised which may warrant reconsideration of the decision taken by the respondents. He submits that fraud and misappropriation of funds in the petitioner bank is not a ground on which the petitioner could seek indulgence of this Court. The petitioner, since is dealing with the public money, cannot be permitted to take advantage of the default which has occurred due to lax of system, control and shortcomings on the part of the management/officials of the petitioner.
8. Learned counsel appearing for the respondent submits that it is not the case of solitary default on the part of the petitioner in the financial year 2021- 2022. He submits that even during the pendency of the present writ petition, persistently continuous defaults in maintaining SLR/CRR have been committed by the petitioner, for which separate orders have been passed by the respondents from time to time levying penal interest on the petitioner. Though the petitioner, NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 5 WP-13866-2022 by way of filing separate interlocutory applications for amendment, has sought to challenge the aforesaid subsequent orders as well in the instant petition but the fact remains that the petitioner Bank, dealing with public money, is continuously defaulting in statutory compliances by not maintaining the SLR/CRR. Therefore, the conduct of the petitioner also disentitles him from any discretionary relief under Article 226 of the Constitution of India. Accordingly, he submits that the petition deserves to be dismissed.
9. No other point has been pressed by the learned counsels appearing for the parties.
10.Heard learned counsels for the parties and perused the record.
11.It is undisputed that the petitioner is under statutory obligation to maintain CRR/SLR in terms of Sections 18 and 24 of the Banking Regulation Act, 1949. It is further not in dispute that in the event of default of maintaining CRR/SLR, it is open for the respondents to levy penal interest on the petitioner. The waiver of penal interest has been sought for by the petitioner by placing reliance on Section 18(1-B) and Section 24(8) of the Banking Regulation Act, 1949 to contend that the application seeking waiver of penal interest ought to have been considered and decided by the respondents by passing a reasoned and speaking order.
12.Section 18(1-B) of the Banking Regulation Act, 1949 reads as under:
"[(1B) Notwithstanding anything contained in this section, if the Reserve Bank, is satisfied, on an application in writing by the defaulting banking company, that such defaulting banking company had sufficient cause for its failure to comply with the provisions of sub-section(1), it may not demand the payment of the penal interest.]..."
NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 6 WP-13866-202213.Whereas, Section 24(8) of the Banking Regulation Act, 1949 reads as under:
"(8) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an application in writing by the defaulting banking company, that the banking company had sufficient cause for its failure to comply with the provisions of [***] sub-section (2A), the Reserve Bank may not demand the payment of the penal interest. ..."
14.The waiver of penal interest has been sought for by the petitioner primarily on the ground that the petitioner has failed to maintain SLR/CRR for some months in Financial Year 2021-2022 on account of defalcation and fraud to the tune of ₹80,56,21,342, committed by its officials for which an FIR (Annexure- P/3) has been lodged by the petitioner.
15.The perusal of FIR filed by the petitioners indicates that the accused in the case are the officials and employees of the petitioner bank itself. Thus, it is abundantly clear that though the petitioner bank is dealing with public money, yet there has been lax system, control and shortcomings on the part of the management/officials of the petitioner itself. The money which has been defalcated is public money; mere lodging of an FIR would neither absolve the petitioner bank from its liability to the public exchequer, nor could be said to be a valid ground to seek waiver from levy of penal interest.
16.Moreover, records of the case indicate that there has not been a solitary instance of default in maintaining SLR/CRR on the part of the petitioner in some months of Financial Year 2021-2022; but, even during pendency of the instant writ petition, there has been persistent and continuous default on the part of the petitioner in maintaining SLR/CRR, and separate orders have been passed against the petitioner by the respondents, levying penal interest from time to time, which NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 7 WP-13866-2022 orders have been challenged by the petitioner by filing separate interlocutory applications seeking amendment in pleadings and prayer clause. The details of the said interlocutory applications filed by the petitioner, indicating persistent and continuous default in maintaining SLR/CRR on the part of the petitioner, are as under:
Table providing details of default committed by the petitioner/Bank during the pendency of the instant writ petition.
Sr. No. Interim Period and details of default Total Penalty
Application Levied (after
Number rounding off)
1. IA No. 7515 of In February 2022 and March 2022, INR 8,36,986
2022 - presented continuing default in maintaining SLR on 14.10.2022 and CRR was committed by the Bank in the following manner:
a. 1.02.2022 to 28.02.2022 - CRR not maintained; penalty of INR 5,26,712.74 levied b. 01.03.2022 to 31.03.2022 - CRR not maintained; penalty of INR 3,09,278.18 was levied.
c. 12.02.2022 to 25.02.2022 - SLR not maintained; penalty of INR 955.55 was levied (Source: Annexure P/9)
2. IA No. 7515 of In April 2022, continuing default in INR 6,82,928 2022 - presented maintaining CRR was committed by the on 14.10.2022 Bank in the following manner:
a. 01.04.2022 to 30.04.2022: CRR not maintained; penalty of INR 6,82,928.26 was levied.
(Source: Annexure P/10)
3. IA No. 7515 of In May 2022, continuing default in INR 8,80,386 2022 - presented maintaining CRR was committed by the on 14.10.2022 Bank in the following manner:
a. 01.05.2022 to 31.05.2022: CRR not maintained; penalty of INR 8,80,386.40 was levied.
(Source: Annexure P/11)
4. IA No. 7515 of In June 2022, continuing default in INR 9,15,699 NEUTRAL CITATION NO. 2026:MPHC-GWL:1303
8 WP-13866-2022
4. IA No. 7515 of In June 2022, continuing default in INR 9,15,699 2022 - presented maintaining CRR was committed by the on 14.10.2022 Bank in the following manner:
a. 01.06.2022 to 30.06.2022: CRR not maintained; penalty of INR 9,15,698.93 was levied.
(Source: Annexure P/12)
5. IA No. 7515 of In July 2022, continuing default in INR 10,31,065 2022 - presented maintaining CRR was committed by the on 14.10.2022 Bank in the following manner:
a. 01.07.2022 to 31.07.2022: CRR not maintained; penalty of INR 10,31,064.81 was levied.
(Source: Annexure P/13)
6. I.A. No. 9156 of In August 2022, continuing default in INR 11,56,563 2022 - presented maintaining CRR was committed by the on 19.12.2022 Bank in the following manner:
a. 01.08.2022 to 31.08.2022: CRR not maintained; penalty of INR 11,56,563.09 was levied.
(Source: Annexure P/16)
7. I.A. No. 9156 of In September 2022, continuing default in INR 11,22,732 2022 - presented maintaining CRR was committed by the on 19.12.2022 Bank in the following manner:
a. 01.09.2022 to 30.09.2022: CRR not maintained; penalty of INR 11,22,731.82 was levied.
(Source: Annexure P/17)
8. I.A. No. 694 of In October 2022, continuing default in INR 12,29,489 2023 - presented maintaining CRR was committed by the on 18.01.2023 Bank in the following manner:
a. 01.10.2022 to 31.10.2022: CRR not maintained; penalty of INR 12,29,488.81 was levied.
(Source: Annexure P/19)
9. I.A. No. 694 of In November 2022, continuing default in INR 10,49,198 2023 - presented maintaining CRR was committed by the on 18.01.2023 Bank in the following manner:
a. 01.11.2022 to 30.11.2022 : CRR not maintained; penalty of INR NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 9 WP-13866-2022 10,49,197.89 was levied.
(Source: Annexure P/20)
10. I.A. No. 2584 of In December 2022, continuing default in INR 11,86,407 2023 - presented maintaining CRR was committed by the on 03.04.2023 Bank in the following manner:
b. 01.12.2022 to 31.12.2022: CRR not maintained; penalty of INR 11,86,406.61 was levied.
(Source: Annexure P/22)
11. I.A. No. 2584 of In January 2023, continuing default in INR 11,90,511 2023 - presented maintaining CRR was committed by the on 03.04.2023 Bank in the following manner:
a. 01.01.2023 to 31.01.2023: CRR not maintained; penalty of INR 11,90,510.88 was levied.
(Source: Annexure P/23)
12. I.A. No. 4653 of In February 2023 and March 2023, INR 24,05,006 2023 - presented continuing default in maintaining CRR on 14.06.2023 was committed by the Bank in the following manner:
a. 01.02.2023 to 28.02.2023: CRR not maintained; penalty of INR 11,13,842.19 was levied.
b. 01.03.2023 to 31.03.2023: CRR not maintained; penalty of INR 12,91,163.40 was levied.
(Source: Annexure P/25)
13. I.A. No. 8691 of In April 2023, continuing default in INR 12,51,672 2023 - presented maintaining CRR was committed by the on 25.09.2023 Bank in the following manner:
a. 01.04.2023 to 30.04.2023: CRR not maintained; penalty of INR 12,51,672.45 was levied (Source: Annexure P/28)
14. I.A. No. 8691 of In May 2023, continuing default in INR 13,15,132 2023 - presented maintaining CRR was committed by the on 25.09.2023 Bank in the following manner:
a. 01.05.2023 to 31.05.2023: CRR not maintained; penalty of INR 13,15,132.11 was levied.
NEUTRAL CITATION NO. 2026:MPHC-GWL:1303
10 WP-13866-2022 (Source: Annexure P/27)
15. I.A. No. 8691 of In June 2023, continuing default in INR 5,99,851 2023 - presented maintaining CRR was committed by the on 25.09.2023 Bank in the following manner:
a. 01.06.2023 to 14.06.2023: CRR not maintained; penalty of INR 5,99,851.34 was levied.
(Source: Annexure P/29)
16. Total INR 1,68,53,625
17.The Apex Court in the case of Peerless General Finance and Investment Co. Ltd. and Another vs. Reserve Bank of India (1992) 2 SCC 343, has observed as under:
"30. Before examining the scope and effect of the impugned paragraphs (6) and (12) of the directions of 1987, it is also important to note that Reserve Bank of India which is bankers' bank is a creature of statute. It has large contingent of expert advice relating to matters affecting the economy of the entire country and nobody can doubt the bona fides of the Reserve Bank in issuing the impugned directions of 1987. The Reserve Bank plays an important role in the economy and financial affairs of India and one of its important functions is to regulate the banking system in the country. It is the duty of the Reserve Bank to safeguard the economy and financial stability of the country. ..."
[Emphasis Supplied]
18.The above position of law emphasises the regulatory role and institutional competence of the respondent in matters concerning banking regulatory affairs. In the present facts, therefore, the decision taken by the respondent in declining waiver of penal interest is traceable to its regulatory functions and appears to be in line with the statutory duty assigned to it as held by the Apex Court in Peerless General Finance (supra).
19.The Apex Court, in the case of National Highway Authority of India and NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 11 WP-13866-2022 Others vs. Madhukar Kumar and Others (2022) 14 SCC 661, in paragraphs 49 and 73, has held as under:
" 49. An administrative authority, exercising judicial or a quasi- judicial power, must record reasons for its decision. This is subject to the exception where the requirement has been expressly or by necessary implication done away with.
###
73. The Constitution does not contemplate any public authority, exercising power with caprice or without any rationale. But here again, in the absence of the duty to record reasons, the Court is not to be clothed with power to strike down administrative action for the mere reason that no reasons are to be found recorded. In certain situations, the reason for a particular decision, may be gleaned from the pleadings of the authority, when the matter is tested in a court. From the materials, including the file notings, which are made available, the court may conclude that there were reasons and the action was not illegal or arbitrary. From admitted facts, the court may conclude that there was sufficient justification, and the mere absence of reasons, would not be sufficient to invalidate the action of the public authority. Thus, reasons may, in certain situations, have to be recorded in the order. In other contexts, it would suffice that the reasons are to be found in the files. The court may, when there is no duty to record reasons, support an administrative decision, with reference to the pleadings aided by materials."
[Emphasis Supplied]
20.The respondents, while exercising their regulatory powers, have declined to waive the penal interest levied on the petitioner; which decision, in the given facts and circumstances of the case particularly the persistent and continuous default on the part of the petitioner in statutory compliances, in the considered opinion of this Court, cannot be said to be arbitrary, illegal, or unjustified.
21.In the present case, except asserting that the impugned order dated 02.06.2022 is non-speaking, the petitioner has failed to point out any material particular or statutory requirement which would necessitate the respondents to NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 12 WP-13866-2022 pass a reasoned order while rejecting the waiver application. A perusal of Section 18(1-B) and Section 24(8) of the Banking Regulation Act, 1949 indicates that a discretion has been conferred upon the respondent to waive the penal interest if it is satisfied that sufficient cause is made out. The facts available on record are thus self-illustrative and, in the given facts and circumstances of the case, no per se requirement of recording reasons can be read into the exercise of discretion by the respondent.
22.Accordingly, in light of the admitted defaults and continuous non- compliance with the statutory requirements of the Banking Regulation Act, 1949 by the Petitioner and the nature of discretion vested with the respondents, this Court is of the considered view that the impugned order does not call for any interference therein. No material has been placed before this Court either, to demonstrate that the decision making process suffered from arbitrariness or mala fides so as to warrant inference by this Court.
23.Consequently, the writ petition, being devoid of merit, is hereby dismissed.
24.In terms of interim order dated 04.08.2025, the interim applications vide I.A. No.4653/2023, I.A. No.2584/2023, I.A. No.694/2023, I.A.No.7515/2022, I.A. No.8691/2023, I.A. No.9156/2022 filed by the petitioner challenging the subsequent demand notices also stand rejected.
25.Pending application(s), if any, shall also stand disposed of.
(AMIT SETH) JUDGE NEUTRAL CITATION NO. 2026:MPHC-GWL:1303 13 WP-13866-2022 Adnan
