PANDURANG GANPATI CHAUGULE versus VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED

Citation: [2020] 5 S.C.R. 1038 · Decided: 05-05-2020 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Reference answered

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 5 S.C.R.
PANDURANG GANPATI CHAUGULE
v.
VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED
(Civil Appeal No.5674 of 2009)
MAY 05, 2020
[ARUN MISHRA, INDIRA BANERJEE, VINEET SARAN,
M. R. SHAH AND ANIRUDDHA BOSE, JJ.]
Constitution of India – Seventh Schedule – List I, Entry 45;
List II, Entry 32 – Power of the Parliament to legislate – Applicability
of SARFAESI Act, 2002 to co-operative banks – Held: Co-operative
banks registered under the State legislation and multi-State level
co-operative societies registered under MSCS Act w.r.t ‘banking’
are governed by the legislation relatable to Entry 45, List I, Seventh
Schedule – Co-operative banks run by co-operative societies
registered under the State legislation w.r.t the aspects of
‘incorporation, regulation and winding up’, in particular, w.r.t the
matters outside the purview of Entry 45, List I, Seventh Schedule,
are governed by the said legislation relatable to Entry 32, List II,
Seventh Schedule – Co-operative banks involved in activities related
to banking are covered within the meaning of ‘Banking Company’
defined u/s.5(c) r/w s.56(a) of the 1949 Act, a legislation relatable
to Entry 45, List I – Co-operative banks cannot carry on any activity
without compliance of said Act and any other legislation applicable
to such banks relatable to ‘Banking’ in Entry 45, List I and the RBI
Act relatable to Entry 38, List I, Seventh Schedule – Co-operative
banks under the State legislation and multi-State co-operative banks
are ‘banks’ u/s.2(1)(c), SARFAESI Act – Recovery is an essential
part of banking; as such, the recovery procedure prescribed u/
s.13 of the said Act, a legislation relatable to Entry 45, List I, Seventh
Schedule, is applicable – Parliament has legislative competence u/
Entry 45, List I, Seventh Schedule to provide additional procedures
for recovery u/s.13 SARFAESI Act, with respect to co-operative banks
– s.2(1)(c)(iva), SARFAESI Act adding “ex abundanti cautela”, ‘a
multi-State co-operative bank’ and notification dtd. 28.01.03 issued
with respect to the co-operative banks registered under the State
legislation are not ultra vires – Securitisation and Reconstruction
[2020] 5 S.C.R. 1038
1038
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of Financial Assets and Enforcement of Security Interest Act, 2002
– ss.2(c), (d), 2(1)(c)(iva), 2(1)(c)(v), 2(1)(d), 13 – Multi-State Co-
operative Societies Act, 2002 – ss.3(f), 84 –Banking Regulation
Act, 1949 – Part II, V – ss.5(b), (c), 5A, 6, 11, 18, 19, 22, 23,
35A(1)(c), 56(a)-(c), (e) – Interpretation of Statutes – Doctrine of
Pith and Substance; Incorporation by reference – Recovery of Debts
and Bankruptcy Act, 1993 – Doctrine of Colourable Legislation –
Banking Laws [Application of Cooperative Societies Act, 1965 (Act
No.23 of 1965)] – Reserve Bank of India Act, 1934 – ss.2(bii),
2(biii), 2(biv), 2(ciii), 2(civ) – National Bank for Agriculture and
Rural Development Act, 1981 – State Bank of India Act, 1955 –
Banking Companies Act, 1949 – Transfer of Property Act, 1882.
Banking Regulation Act, 1949 – ss.5(b), (c), 6, 56(a) – Held:
s.6 is not a provision of the conferral of the status of the banking
company – Definitions of ‘banking’ and ‘banking company’ are
contained in s.5(b) & 5(c) respectively, and when reading with
s.56(a), it means co-operative banks also – Co-operative bank falls
within the definition of s.5(c), and its activity is of banking, and in
addition a co-operative bank may engage in any of the business as
enumerated in s.6.
Constitution (Ninety Seventh Amendment) Act, 2011 – Arts.
43B, 243ZI, 243ZL, 243ZL(1); and Entry 45, List I, Seventh Schedule
– Held: Art. 43B was added concerning the management of co-
operative societies – Art.243ZI provides that the legislature of a
State may, by law, make provisions with respect to ‘incorporation,
regulation and winding up’ of co-operative societies – Art.243ZL
deals with supersession and suspension of the board and interim
management – Constitutional provision itself makes distinction
between a co-operative bank and other co-operative societies and
applied law enacted u/Entry 45, List I, Seventh Schedule – It set at
rest any controversy concerning the applicability of the Act 1949 to
banks run by co-operative societies – It also makes it clear that
such banks are governed by Entry 45, List I, Seventh Schedule –
Banking Regulation Act, 1949.
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002

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