Bombay High Court

Economic Offences Wing

PMC bank scam

Depositors of the crisis-hit Punjab and Maharashtra Cooperative (PMC) Bank are “partially to be blamed” for their own fate, thehas observed in a 72-page order. Rejecting a clutch of PILs filed against the Reserve Bank of India (RBI), a division bench of Justices SC Dharmadhikari and Riyaz Chagla said, “If they are not, then they would have promptly resorted to contractual remedies and forced the bank to allow them to operate their accounts.” The bench added that the depositors could still approach civil court for relief.The PILs had sought lifting of restrictions imposed by the RBI on cash withdrawals, which was initially Rs 1,000 per customer for six months. Later, it was raised to Rs 10,000 and is currently at Rs 50,000. The depositors had alleged that it was arbitrary and irrational of the RBI to do so. The HC had dismissed their pleas on December 5, the order for which was uploaded on December 20. “We possess no experience and expertise in financial and fiscal matters. In matters of banking practices and the business of banking and its regulation, we must leave everything to the wisdom of the RBI,” the bench observed.The court, however, said it did not know if “all investors are totally innocent or unaware” of PMC Bank’s dealing with the defaulting realty firm Housing Development Infrastructure Ltd (HDIL). “The litigants must realise that this court cannot grant reliefs on the specious ground of sympathy. We are bound by law. No writ contrary to law can be issued,” they observed. The crisis at the PMC bank is attributed to the loans allocated to HDIL without scrutiny. These loans later turned into non-performing assets.The court also talked about how the Supreme Court, in several orders, has held that a customer is not expected to be “so vigilant” in all cases or note “any wrong doings in the bank with which he has contractual dealings.” The court held that the relationship between a bank and its customers may be contractual, but it is based on faith. “The banking system operates on such faith,” it said.The Mumbai Police’s, which is probing the alleged Rs 4,355-crore, has arrested 12 persons, including four top bank officials and two promoters of HDIL – Rakesh Wadhawan and his son Sarang – apart from some auditors. On September 23, the RBI had imposed regulatory restrictions on the bank for six months over alleged financial irregularities.