ARUN MISHRA, J. - (1.) The matters have been referred in view of conflicting decisions in Greater Bombay Coop. Bank Ltd. vs. United Yarn Tex (P) Ltd. and Ors., (2007) 6 SCC 236, Delhi Cloth and General Mills Co. Ltd. vs. Union of India and Ors., (1983) 4 SCC 166, T. Velayudhan Achari and Anr. vs. Union of India and Ors., (1993) 2 SCC 582, and Union of India and Anr. vs. Delhi High Court Bar Association and Ors., (2002) 4 SCC 275. The question relates to the scope of the legislative field covered by Entry 45 of List I viz. 'Banking' and Entry 32 of List II of the Seventh Schedule of the Constitution of India, consequentially power of the Parliament to legislate. The moot question is the applicability of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the SARFAESI Act') to the co-operative banks. 1. The Parliament's competence to amend Section 2(c) of the SARFAESI Act by adding sub-clause '(iva) - a multi-State co-operative bank' has also been questioned. The issue arises whether the definition of 'banking company' contained in Section 5(c) of the Banking Regulation Act, 1949 (for short, 'the BR Act, 1949') covers cooperative banks registered under the State law and also multi-State co-operative societies under the Multi-State Co-operative Societies Act, 2002 (for short, 'the MSCS Act'). Consequently, (i) whether cooperative banks at State and multi-State level are co-operative banks within the purview of the SARFAESI Act ? and (ii) whether provisions of the SARFAESI Act apply to the co-operative banks registered under the MSCS Act ?
(2.) Section 56(c)(i)(cci) is contained in Part V of the BR Act, 1949, and was brought into force on 1.3.1966. It defines 'co-operative bank' to mean a 'state co-operative bank,' a 'central co-operative bank,' and a 'primary co-operative bank.' By the notification issued in 2003, the co-operative bank was brought within the class of banks entitled to seek recourse to the provisions of the SARFAESI Act. Section 2(1)(c) (iva) was inserted into the SARFAESI Act, w.e.f. 15.1.2013. Before that, the co-operative bank and the multi-State co-operative bank took recourse to the SARFAESI Act under the notification issued in 2003.
(3.) Writ petitions were filed questioning vires of the notification dated 28.1.2003 issued under Section 2(1)(c)(v) of the SARFAESI Act and the insertion of Section 2(1)(c)(iva) to the SARFAESI Act in 2013.The backdrop history of litigation indicates that in Narendra Kantilal Shah vs. Joint Registrar, Co-operative Societies, AIR 2004 Bom 166 a Full Bench of the Bombay High Court opined that term 'banking company' also means co-operative bank within the meaning of Section 2(d) of the RDB Act, 1993. Hence, with effect from the date of constitution of Debts Recovery Tribunal under RDB Act, 1993, the courts and authorities under the Maharashtra Co-operative Societies Act, 1960, as also the MSCS Act would cease to have jurisdiction to entertain the applications submitted by the co-operative banks for recovery of their dues. The decision in Narendra Kantilal Shah (supra) was set aside by this Court in Greater Bombay Coop. Bank Ltd. (supra). This Court opined that the co-operative banks established under the Maharashtra Co-operative Societies Act, 1960 and Andhra Pradesh Co-operative Societies Act, 1964, transacting the business of banking do not fall within the meaning of 'banking company' as defined in Section 5(c) of the BR Act, 1949. Therefore, the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, now renamed as The Recovery of Debts and Bankruptcy Act, 1993 (for short, 'the RDB Act, 1993'), by invoking the doctrine of incorporation do not apply to the recovery of dues by co-operative banks from their members. The field of co-operative societies cannot be said to have been covered by the Central legislation by reference to Entry 45 of List I of the Seventh Schedule of the Constitution of India. Co-operative banks constituted under the Co-operative Societies Acts enacted by the respective States would be covered by 'co-operative societies' by Entry 32 of List II of the Seventh Schedule of the Constitution of India. In the year 2004, the Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004, was passed by the Union of India, amending various provisions contained in the BR Act, 1949 retrospectively, w.e.f. 1.3.1966. On the same anvil, the question posed is whether provisions can be applied to recovery provisions carved out in the SARFAESI Act.;