Copy of the inspection note of a Cooperative Bank - CIC: All the banks publicise their strong points to attract business; it is equally important that their wrong doings are also in the public domain to enable the public at large to take informed decision
This matter pertains to an RTI application dated 2.3.2012 filed by the Appellant, seeking certified copy of the “inspection note report” conducted by the Respondents on Kodagu District Cooperative Central Bank Limited (KDCCBL), Madikeri “for the period 31.3.2009”. The CPIO responded on 21.3.2012 and denied the information under Section 8 (1) (a) of the RTI Act. Not satisfied with the reply of the CPIO, the appellant filed an appeal to the First Appellate Authority on 14.4.2012. In this appeal, he stated, inter alia, that he had sought the information with reference to the functioning of KDCCBL against RBI guidelines, wherein the bank had made certain investments in prohibited funds, benefiting certain individuals and an inspection was conducted and a detailed report was made by NABARD. In his order dated 7.5.2012, the FAA upheld the CPIO’s reply. The Appellant approached the CIC in second appeal on 23.7.2012.
Hearing on 11.6.2014
2. We heard the submissions of the representative of the Appellant and the Respondents. The representative of the Appellant stated that in 2009, KDCCBL had invested about 70 crore rupees in mutual funds in violation of the NABARD and RBI regulations. Based on the investigations conducted by NABARD and having examined the matter, the RBI had imposed a penalty of Rs. 5 lakhs on KDCCBL. The imposition of this penalty was also reported in the media. The representative of the Appellant further submitted that Rs. 350 to 400 crores of funds of the public in the area are invested in KDCCBL. Therefore, information concerning any wrongdoing by it should be available in the public domain. He further submitted that the Appellant is also a member of a cooperative society affiliated to KDCCBL. Therefore, in this capacity also, he is entitled to receive the information sought by him. In the above context, we note that the Appellant had enclosed a copy of a letter dated 22.6.2011 from the RBI to KDCCBL with his appeal to the Commission. In this letter, the RBI had referred to a show cause notice issued to KDCCBL. The RBI had further stated that the reply of KDCCBL to the show cause notice was not found satisfactory and that despite observations made in the inspection report of the NABARD and advice issued by the RBI, KDCCBL had persistently violated the relative instructions and made fresh investments in mutual funds aggregating Rs. 5 crore on as many as ten occasions in November 2009. It was further stated in the RBI letter that it had been decided to impose a penalty of Rs. five lakhs on KDCCBL under Section 46 read with Section 47A of the Banking Regulation Act, 1949.
3. The Respondents submitted that besides sub Section (a) of Section 8 (1) of the RTI Act, invoked by the CPIO, the information sought by the Appellant was also covered by Section 8 (1) (d). They further submitted that disclosure of the inspection report sought by the Appellant would undermine the competitive position of KDCCBL, particularly since the contents of this report may be misconstrued by the public, resulting in their losing confidence in the above bank. In response to our query, the Respondents did not deny the fact of wrongdoing by KDCCBL, mentioned by the representative of the Appellant. The Respondents further submitted that KDCCBL has a number of societies affiliated to it and the fact of the Appellant being a member of one of those societies does not entitle him to receive information concerning the above bank. The Respondents also drew our attention to the Commission’s orders No. CIC/SG/A/2011/002793/15661 dated 14.11.2011 and No. CIC/SG/A/2011/002405/ 16514 dated 21.12.2011. They submitted that they had challenged both these orders in the High Court of Delhi and the matter is pending in that court. They further submitted that the High Court has granted a stay on the above two orders. In response to our query, the Respondents stated that the stay order of the High Court of Delhi is specific to the above two orders.
4. We would like to give an opportunity to the third party in this case, viz. Kodagu District Cooperative Central Bank Limited (KDCCBL) to make a submission in the matter before we consider it further and issue our final order. Accordingly, we will take up this matter again through videoconferencing on 10 th July, 2014 at 10.00 a.m. The CPIO is directed to forward a copy of this order well in time to the authorities of Kodagu District Cooperative Central Bank Limited, informing them to be present during the next hearing, in case they wish to be heard in this matter. The venue for videoconferencing for the parties will be as follows:For the Appellant and KDCCBL NIC District Centre, C/o Zilla Panchayat Office fort, Madikeri – 571201. The Contact Officer is Mr. A. P. Sathyanarayana, Scientist –B & DIO, Contact No. 08272224289 For the Respondents NIC, VC Studio State Centre, 7th Floor, Mini Tower, Visveshwaraya Building, Dr. Ambedkar Veedhi, Bengaluru – 56000. The contact officer is Mr. M. Subramanian, Scientist – C & Contact No. – 08022863218 & 22863790
Hearing on 10.7.2014
5. As directed in paragraph 4 above, the matter came up before us again on 10.7.2014.
6. Shri Uma Kant, Managing Director of KDCCBL submitted that the inspection report sought by the Appellant vide his RTI application is a statutory report, which is confidential in nature between NABARD and his bank. He further submitted that the language of this report is “regulatory language” which cannot be understood by a layman / general public and, therefore, its disclosure may lead to misinterpretation of its contents. He stated that in view of the foregoing, his bank objects to the disclosure of the report. Shri Uma Kant also stated that the Appellant, being an exemployee of the bank, might be having some "hidden agenda” behind soliciting this information. In response to our query, he stated that he was not contesting the contents of the RBI letter dated 22.6.2011, mentioned in paragraph 2 of this order.
7. Shri L. L. Raval, DGM, representing the Respondents submitted that the inspection report sought by the Appellant is a “statutory report” prepared under Section 35 of the Banking Regulation Act, 1949. He added that it is a “regulatory framework” which is confidential in nature. The report prepared under the above section regarding a District Cooperative Bank is made available to a limited number of entities in the regulatory framework: the Reserve Bank of India, Registrar of Cooperative Societies, the State Cooperative Bank and the District Cooperative Bank. The representative of the Respondents reiterated that disclosure of the inspection report would prejudicially affect the economic interest of the State and is, therefore, exempt from disclosure under Section 8(1)(a) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence; of the RTI Act. In this context, he further submitted that since the language of the report is regulatory language, which cannot be understood by a layman / general public, its disclosure to the public at large may lead to misinterpretation of its contents, resulting in the public losing faith in the bank. Thus, its disclosure could harm the competitive position of KDCCBL and ought to be exempt from disclosure under Section 8 (1) (d) also. He recalled that the operation of the two orders dated 14.11.2011 and 21.12.2011 of the Commission, mentioned in paragraph 3 above, remains stayed by the High Court of Delhi. While confirming that the stay order of the High Court is specific to the above mentioned two orders, he pleaded that a decision in this matter should await the decision of the High Court of Delhi on the above two orders.
8. The representative of the Appellant stated that the inspection report ought to be a public document and needs to be disclosed. He further submitted that KDCCBL had paid the fine of Rs. 5 lakhs, imposed by the RBI, from public funds and the public at large should know the reasons for imposition of this fine.
9. We have considered the records and the submissions made before us by all the parties. We would like to touch briefly upon the reference by the representative of KDCCBL to the fact that the Appellant is an exemployee of their bank. In this context, we note that the mere assertion by him that the Appellant, being an exemployee of the bank, might be having some "hidden agenda” does not establish any malafide intent on his part in seeking the information mentioned in his RTI application. Further, the fact that he is an exemployee of the bank does not debar him from seeking information concerning the bank under the RTI Act.
10. The Respondents submitted that the inspection report is a statutory report prepared under section 35 of the Banking Regulation Act, 1949. They also referred to the circulation of such reports to a limited number of entities. However, they did not advance any argument to establish that the fact of preparation of the report under the above section in any way bars its disclosure under the RTI Act. In the above context, we note that the Supreme Court in Ashoka Marketing Limited and Another vs. Punjab National Bank and Others had observed, inter alia, the following:"
50. One such principle of statutory interpretation which is applied is contained in the latin maxim: leges posteriors priores conterarias abrogant, (later laws abrogate earlier contrary laws). This principle is subject to the exception embodied in the maxim: generalia specialibus non derogant, (a general provision does not derogate from a special one). This means that where the literal meaning of the general enactment covers a situation for which specific provision is made by another enactment contained in an earlier Act, it is presumed that the situation was intended to continue to be dealt with by the specific provision rather than the later general one."
Based on the above, the Commission has been upholding action of public authorities to ask seekers of information to take recourse to the procedure laid down under a law, other than the RTI Act, which creates a channel for the public to access information in a specific area, such as access to the records held by the National Archives of India under the Public Records Act, 1993 and the Public Records Rules, 1997. Clause 5 of section 35 of the Banking Regulation Act,1949 states that the Central Government may, after giving reasonable notice to the banking company, publish the report submitted by the Reserve Bank or such portion thereof as may appear necessary. Therefore, the above section does not establish an alternative channel for the public to access information concerning the reports prepared under it, but merely authorises the government to make public such reports or a portion thereof after giving reasonable notice to the banking company. In view of the foregoing, section 35 does not override the provisions of the RTI Act.
11. We now come to invocation of Section 8 (1) (a) of the RTI Act by the Respondents to deny the information. It could not be anyone's case that the disclosure of the inspection report would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific interests of the state, relation with foreign state or lead to incitement of an offence. That leaves us with the issue of prejudicial effect on the economic interests of the State. The only submission made by the Respondents in support of invoking Section 8 (1) (a), as also Section 8 (1) (d), is that the inspection report, which is written in regulatory language, may be misunderstood and misconstrued by the general public. The fact that the Reserve Bank of India imposed a fine of Rs. 5 lakhs on KDCCBL under Section 46 read with Section 47A of the Banking Regulation Act, 1949 is already in the public domain. The fact that the RBI did not find the reply of KDCCBL, to the show cause notice issued to them, satisfactory and that despite observations made in the inspection report of NABARD and advice issued by the RBI, KDCCBL had persistently violated the relative instructions and made fresh investment in mutual funds aggregating Rs. 5 crore on as many as ten occasions in November 2009, is also in the public domain. It can, therefore, be argued that a fuller disclosure of the wrong doings by KDCCBL would give a better perspective of the matter to the public, who are dealing / desirous of dealing with this bank and that the maturity of the public to appreciate the findings, mentioned in the report, for what they are, can and should be counted upon. Even if one were to accept the argument that the general public may misconstrue the contents of the inspection report concerning KDCCBL, it should not lead to the conclusion that such a development would prejudicially affect the economic interests of the Indian State.
12. As regards invocation of Section 8 (1) (d), it could not be the intention of the Respondents to sustain the competitive position of the third party in this case (KDCCBL) by withholding the information concerning its wrong doings from the public. All the banks publicise their strong points to attract business. It is, therefore, equally important that their wrong doings are also in the public domain, so that the public at large can take well informed decisions in regard to their dealings with specific banks. Disclosure of information concerning such wrong doings, therefore, serves larger public interest. In this context, a full bench of the Commission, while deciding a matter concerning disclosure of reports concerning inspections conducted by the RBI, had observed as follows in its decision No. CIC/MA/A/2006/00406 & 00150 dated 7.12.2006:
“ Before parting with this appeal, we would like to record our observations that in a rapidly unfolding economics scenario, there are public institutions, both in the banking and nonbanking sector, whose activities have not served public interest. On the contrary, some such institutions may have attempted to defraud the public of their moneys kept with such institutions in trust. RBI being the Central Bank is one of the instrumentalities available to the public which as a regulator can inspect such institutions and initiate remedial measures where necessary. It is important that the general public particularly the shareholders and the depositors of such institutions are kept aware of RBI’s appraisal of the functioning of such institutions and taken into confidence about the remedial actions initiated in specific cases. This will serve the public interest. The RBI would therefore be well advised to be proactive in disclosing information to the public in general and the information seekers under the Right to Information Act, in particular. The provisions of Section 10 (1) of the RTI Act can therefore be judiciously used when necessary to adhere to this objective."
13. In the light of the foregoing, we are of the view that the inspection report sought by the Appellant in this case ought to be disclosed to him by applying, if necessary, the severability clause under Section 10 of the RTI Act to blank out any information regarding clients that may have been provided by them to the bank in a fiduciary relationship. However, as pointed out by the Respondents, the High Court of Delhi has given a stay on the Commission's decision no. CIC/SG/A/2011/002793/15661 dated 14.11.2011. Though the stay is specific to the above decision, we note that in it, the Commission had directed NABARD to disclose its inspection reports of apex cooperative banks of various states/Mumbai District Cooperative Bank. Therefore, it would be prudent to wait for the decision of the Delhi High Court in the above matter, to save multiple litigation. Accordingly, we refrain from giving any direction to the Respondents at this stage. We will take a final decision after the High Court of Delhi passes an order in the above matter. Meanwhile, we direct the Respondents to keep the inspection report sought by the Appellant in this case in safe custody till the final decision by the Commission.
14. Parties are free to approach the Commission after the disposal of the case by the Hon’ble High Court of Delhi.
15. Copies of this order be given free of cost to the parties.
Citation: Shri M K Somaiah v. National Bank for Agriculture and Rural Development, (NABARD) in File No. CIC/VS/A/2012/001010/SH