Case Note & Summary
The appellant, Sri G.K. Gururaja Rao, Secretary of Sri Guru Raghavendra Sahakara Bank Niyamitha, filed a writ petition under Article 226 of the Constitution of India challenging the constitutional validity of Sections 18A(5) and 21(3)(4) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (DICGC Act). The appellant also sought a refund of the insurance premium paid for 40,568 account holders from only 8,000 account holders. The learned Single Judge dismissed the writ petition, leading to the present appeal. The appellant argued that the provisions were arbitrary and unconstitutional as they limited deposit insurance to Rs.5 lakh per depositor, and that the bank should be refunded the premium paid for accounts exceeding the insured limit. The respondents, including the Union of India, Reserve Bank of India, and DICGC, contended that the provisions were valid and that the appellant lacked locus standi. The Division Bench, comprising Chief Justice Vibhu Bakhru and Justice C.M. Poonacha, upheld the impugned order, holding that the provisions were not unconstitutional as they were based on economic policy and served the public interest of protecting small depositors. The court also held that the appellant, as secretary of the bank, had no locus standi to seek a refund of the premium, as the bank itself was a party and the premium was paid for the benefit of depositors. The appeal was dismissed.
Headnote
A) Constitutional Law - Validity of Statute - Sections 18A(5), 21(3)(4) DICGC Act, 1961 - Challenge to provisions limiting deposit insurance to Rs.5 lakh per depositor - Court held that the provisions are not arbitrary or unconstitutional as they serve the public purpose of protecting small depositors and are based on economic policy considerations - Held that the classification is reasonable and has a nexus with the object sought to be achieved (Paras 1-10).
B) Cooperative Banking - Deposit Insurance - Section 18A(5) DICGC Act, 1961 - Refund of premium - Appellant sought refund of insurance premium paid for 40,568 account holders from 8,000 account holders - Court held that the bank is not entitled to refund as the premium is paid for the benefit of depositors and the scheme is mandatory - Held that the appellant lacks locus standi to seek refund on behalf of the bank (Paras 11-20).
Issue of Consideration
Whether Sections 18A(5) and 21(3)(4) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, are unconstitutional and void, and whether the appellant is entitled to refund of insurance premium paid for account holders beyond the insured limit.
Final Decision
The appeal is dismissed. The impugned order dated 01.09.2025 passed by the learned Single Judge in W.P.No.2991/2023 is upheld.
Law Points
- Constitutional validity of DICGC Act provisions
- Deposit insurance coverage limit
- Refund of insurance premium
- Locus standi of bank secretary
Case Details
2026 LawText (KAR) (04) 38
Writ Appeal No. 1805 of 2025 (GM-RES)
Vibhu Bakhru, C.J., C.M. Poonacha, J.
Sri S.P. Shankar, Senior Advocate for Sri Manjunath Nayak, Advocate for appellant; Smt. Nayana Tara B.G., CGC for R-1; Sri Manik B.T., Advocate for R-2; Sri Dhyan Chinnappa, Senior Advocate for Sri Pradeep S. Sawkar, Advocate for R-3 & Sri K.S. Harish, Government Advocate for R-5
Union of India, Reserve Bank of India, Deposit Insurance Credit Guarantee Corporation, Sri Guru Raghavendra Sahakara Bank Niyamitha, State of Karnataka
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Nature of Litigation
Writ appeal challenging the constitutional validity of provisions of the DICGC Act and seeking refund of insurance premium.
Remedy Sought
Appellant sought to set aside the order dated 01.09.2025 in W.P.No.2991/2023, quash the letter dated 03.01.2022 issued by DICGC, seek refund of insurance premium paid for 40,568 account holders from 8,000 account holders, and declare Sections 18A(5), 21(3)(4) and Section 21 of DICGC Act as void and unconstitutional.
Filing Reason
The appellant challenged the constitutional validity of Sections 18A(5) and 21(3)(4) of the DICGC Act and sought refund of insurance premium.
Previous Decisions
The learned Single Judge of the High Court of Karnataka dismissed Writ Petition No.2991 of 2023 on 01.09.2025.
Issues
Whether Sections 18A(5) and 21(3)(4) of the DICGC Act, 1961, are unconstitutional and void.
Whether the appellant is entitled to refund of insurance premium paid for account holders beyond the insured limit.
Submissions/Arguments
Appellant argued that the provisions are arbitrary and unconstitutional as they limit deposit insurance to Rs.5 lakh per depositor.
Respondents contended that the provisions are valid and based on economic policy, and the appellant lacks locus standi.
Ratio Decidendi
The provisions of Sections 18A(5) and 21(3)(4) of the DICGC Act are not unconstitutional as they are based on economic policy and serve the public purpose of protecting small depositors. The appellant, as secretary of the bank, has no locus standi to seek refund of premium paid by the bank.
Judgment Excerpts
The appellant has filed the present appeal impugning the order dated 01.09.2025 passed by the learned Single Judge of this Court rejecting Writ Petition No.2991 of 2023.
The appellant had filed the said writ petition under Article 226 of the Constitution of India, inter alia impugning Section 18A(5) and Section 21(3) and (4) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
Procedural History
The appellant filed Writ Petition No.2991 of 2023 before the High Court of Karnataka challenging the constitutional validity of Sections 18A(5) and 21(3)(4) of the DICGC Act and seeking refund of insurance premium. The learned Single Judge dismissed the writ petition on 01.09.2025. The appellant then filed the present writ appeal under Section 4 of the Karnataka High Court Act, which was heard and reserved for judgment, and pronounced on 28.04.2026.
Acts & Sections
- Deposit Insurance and Credit Guarantee Corporation Act, 1961: 18A(5), 21(3), 21(4)
- Constitution of India: Article 226
- Karnataka High Court Act: Section 4
