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<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd"> <html xmlns="http://www.w3.org/1999/xhtml"> <head> </head> <body> <div style="font-family:Verdana, Geneva, sans-serif; font-size:12px; text-align:justify"> <table width="800" border="0" style="border:1px solid #ccc;padding:5px;" align="center" cellpadding="6" cellspacing="0"> <tr> <td align="left" valign="top"> Supreme Court SARFAESI Act is applicable to Cooperative Banks MANU/SC/0429/2020 - (05 May 2020) </td> </tr> <tr> <td align="left" valign="top">Pandurang Ganpati Chaugule vs Vishwasrao Patil Murgud Sahakari</td> </tr> <tr> <td align="left" valign="top" style="background-color:#FDEDCE">In present case, 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, 1950 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 (‘the SARFAESI Act’) to the co-¬operative banks. 
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 (‘the BR Act, 1949’) covers co¬ operative banks registered under the State law and also multi¬-State co¬operative societies under the Multi¬-State Co-operative Societies Act, 2002 ('the MSCS Act'). Writ petitions were filed questioning vires of the Notification dated 28th January, 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 co¬operative banks, which are governed by the BR Act, 1949, are involved in banking activities within the meaning of Section 5(b) of the BR Act, 1949 thereof. They accept money from the public, repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise. Merely by the fact that lending of money is limited to members, they cannot be said to be out of the purview of banking. They perform commercial functions. A society shall receive deposits and loans from members and other persons. They give loans also, and it is their primary function. Thus, they are covered under 'banking' in Entry 45 of List I. 
Even assuming for the time being that definition of 'bank' in Section 5(c) of the BR Act, 1949 did not cover the co-operative banks; the expression 'bank' has been defined in the SARFAESI Act under Section 2(1)(c), and the provisions contained in Section 2(1)(c)(v) authorises the Central Government to specify 'such other bank' for that Act. Thus, the notification issued on 28th January, 2003 notifying 'co¬ operative bank' as the 'bank' is covered by Entry 45 of List I as they are regulated by the BR Act, 1949, and the RBI Act. For the 'banking' activity under Entry 45 of List I, the Parliament had the power to enact such a provision defining 'bank' to authorise and prescribe the recovery procedure for such a bank as provided in Section 13 of the SARFAESI Act. 
The co¬operative banks registered under the State legislation and multi¬-State level co-operative societies registered under the MSCS Act, 2002 with respect to 'banking' are governed by the legislation relatable to Entry 45 of List I of the Seventh Schedule of the Constitution of India. The co-operative banks run by the co-operative societies registered under the State legislation with respect to the aspects of 'incorporation, regulation and winding up', in particular, with respect to the matters which are outside the purview of Entry 45 of List I of the Seventh Schedule of the Constitution of India, are governed by the said legislation relatable to Entry 32 of List II of the Seventh Schedule of the Constitution of India. 
The co-operative banks cannot carry on any activity without compliance of the provisions of the Banking Regulation Act, 1949 and any other legislation applicable to such banks relatable to 'Banking' in Entry 45 of List I and the RBI Act relatable to Entry 38 of List I of the Seventh Schedule of the Constitution of India. The co-operative banks under the State legislation and multi-State co-operative banks are ‘banks’ under section 2(1)(c) of the SARFAESI Act. The recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, a legislation relatable to Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable. 
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 SARFAESI Act with respect to co-operative banks. The provisions of Section 2(1)(c)(iva), of the SARFAESI Act, adding “ex abundanti cautela”, ‘a multi-State co-operative bank’ is not ultra vires as well as the Notification dated 28th January, 2003 issued with respect to the co¬ operative banks registered under the State legislation. The civil appeals, writ petitions and the pending applications, are disposed of accordingly.</td> </tr> <tr> <td align="left" valign="top" ></td> </tr> <tr> <td align="left" valign="top" >Tags : SARFAESI Act, Co-operative banks, Applicability</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr>  <td align="left" valign="top">Source : newsroom.manupatra.com</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> <tr> <td align="left" valign="top">Regards</td> </tr> <tr> <td align="left" valign="top">Team Manupatra</td> </tr> <tr> <td align="left" valign="top">&nbsp;</td> </tr> </table> </div> </body> </html>