Pandurang Ganpati Chougule v. Vishwasrao Bank Ltd. (2020) - SARFAESI Act is applicable to Cooperative Banks


Court :
Supreme Court of India

Brief :
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.

Citation :
REFERENCE - CIVIL APPEAL NO. 5674 OF 2009

Pandurang Ganpati Chougule v. Vishwasrao Bank Ltd. (2020)
(Cooperative Banks come under the purview of Entry 45 of List I & SARFAESI Act)
(Entry 45 List of Constitution of India and Ss. 2(1)(c)(v) and 2(1)(c)(iva) of SARFAESI Act)

  • JUDGMENT SUMMARY – Pandurang Ganpati Chougule v. Vishwasrao Bank Ltd.
  • DATE OF THE JUDGMENT –  May 05, 2020
  • JUDGES –   Arun Mishra, Indira Banerjee, Vineet Saran M.R. Shah, Aniruddha Bose

PARTIES – 

  • PANDURANG GANPATI CHAUGULE …  APPELLANT VERSUS
  •  VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED …  RESPONDENT

ISSUES 

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

SUBJECT 

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.

AN OVERVIEW

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

IMPORTANT PROVISIONS 

Banking Regulation (Amendment) and Miscellaneous Provisions Act, 2004 - An Act further to amend the Banking Regulation Act, 1949 and the Deposit Insurance and Credit Guarantee Corporation Act, 1961.

SARFAESI Act - It allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans.

ANALYSIS 

1. Section   2(10)   of   the   Maharashtra   Co-operative   Societies   Act, 1960,   is   related   to   the   management   and   business   of   co-operative societies.   Under   Section   91   of   the   Maharashtra   Act,   any   dispute touching the constitution, management or business is required to be referred to a co-operative court.

2. The object of the SARFAESI Act is to regulate securitisation and reconstruction   of   financial   assets   and   enforcement   of   security interests. The business of securitisation is not a banking business. Under Section 2(1)(l) of the SARFAESI Act, a 'financial asset' means debt or receivable and includes inter alia any financial asset.  Section 2(1)(ha) defines 'debt' to mean the same as defined in clause (g) of Section 2 of the RDB Act, 1993.  

3. Financial assistance to members is another form of business that is not a banking business.  Therefore, an attempt to regulate the assets of a co-operative bank by bringing them   within   the   purview   of   the   SARFAESI   Act   is   contrary   to   the original intent of the extending provisions of the BR Act, 1949 and that would amount to exercising control over the entities which are beyond the purview of competence of Parliament.

4.  Entities doing banking are basically co-operative societies.  Regarding the SARFAESI Act, it was observed in paragraph 41 of the decision quoted above that meaning of 'banking company' is a company engaged in banking and not a 'cooperative society' engaged in banking

CONCLUSION 

The   co-operative   banks   under   the   State   legislation   and multi-State co-operative banks are ‘banks’ under section 2(1)(c) of Securitisation   and   Reconstruction   of   Financial   Assets   and Enforcement of Security Interest Act, 2002. The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery under section 13 of the Securitisation   and   Reconstruction   of   Financial   Assets   and Enforcement of Security Interest Act, 2002 with respect to cooperative   banks.

To download the original copy of the judgment, click here

 

"Loved reading this piece by Priaanti Thaakre?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"

Click here to join our Telegram group.

Priaanti Thaakre
on 05 January 2021
Published in Others
Views : 375


 Recent Comments

Total: 0







×

Menu

Post a Suggestion for LCI Team
Post a Legal Query
Forensics & Evidence     |    x