PANDURANG GANPATI CHAUGULE vs VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(SC) 358

SUPREME COURT OF INDIA
ARUN MISHRA, INDIRA BANERJEE, VINEET SARAN, M.R. SHAH, ANIRUDDHA BOSE, JJ.
PANDURANG GANPATI CHAUGULE– APPELLANT
VERSUS
VISHWASRAO PATIL MURGUD SAHAKARI BANK LIMITED – RESPONDENT
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Decided on : 05-05-2020

Advocates Appeared:
For the Parties :Mahesh Agarwal, Ankur Saigal, Vikrant Pachnanda, Utkarsh Pratap, E.C. Agrawala, Devansh A. Mohta, Shishir Deshpande, Amit Yadav, Nilakanta Nayak, Sujata Kurdukar, Devansh A. Mohta, Mrigank Prabhakar, Sakshi Banga, Gautam Prabhakar, Devansh A. Mohta, Gaurav Nair, Sanika Mehra, Pranati Bhatnagar, Kritya Sinha, Varun Singh, Vikas Mehta, Apoorv Khator, Rajat Sehgal, Satpal Singh, Seema Thapliyal, Jaimon Andrews, K. Prajagopal, Piyo Harold Jaimon, Sandeep Thakur, Naresh Kumar, Zaid Ali Subzposh, Tamim Qadri, Lakshmi Raman Singh, Vineet Bhagat, Manju Bhagat, Nikhil Goel, S.K. Kulkarni, M. Gireesh Kumar, Ankur S. Kulkarni, M. P. Vinod, Atul Shankar Vinod, Dileep Pillai, Ajay Kumar Jain, Sajith P., Kannan Gopal Vinod, Chinmoy Khaladkar, Sanjay Kharde, Chandan Ramamurthi, Pradhuman Gohil, Taruna Singh, Ranu Purohit, Tanya Srivastava, Charu Mathur, Yadav Narender Singh, E.R. Sumathy, Sarad Kumar Singhania, Rashmi Singhania, Vanshaja Shukla, Rameshwar Prasad Goyal, Harish Pandey, H. Chandra Sekhar, Rekha Chandra Sekhar, Karri Venkata Reddy, Chirag M. Shroff, Yashika Verma, Abhilasha Bharti, M.A. Chinnasamy, Arvind Gupta, Sandeep Kumar Singh, Piyush Sharma, Anil Kumar Sahu, Meera Mathew, Malay Swapnil, Prakash Gautam, Sujeet Kumar, J.N. Pathak, Sunil Kumar Pandey, Amol Nirmalkumar Suryawanshi, Nirmal Goenka, S. Sada Siva Reddy, Karri Venkata Reddy, S. Usha Reddy, Santosh Krishnan, S. S. Ray, Rakhi Ray, Abhay Kumar, M.J. Paul, Renjith. B, Lakshmi N. Kaimal, Jayakrishnan U., Mahendra Kumawat, Subodh S. Patil, Supriya Patil, Ajay Kumar Singh, Garvesh Kabra, Pooja Kabra, Nikita Jaju, Abhishek Jaju, Harshvardhan Jha, Anup Lohiya, Adarsh Upadhyay, Abhishek Chaudhary, Anurag Kishore, Mirdula Kanti Sinha, Hitesh Kumar Sharma, S.K. Rajora, Akhileshwar Jha, Mamta Upadhyaya, Kusum Chaudhary, Atul Babasaheb Dakh, Pragya Baghel, Ajay Majithia, Satyajit A. Desai, Prakash Shantilal Jain, Archana Wajurkar, Anagha S. Desai, Bankey Bihari Sharma, Rabin Majumder, Akanksha Shrivastava, Mausmi Roy, Joydeep Mukherjee, Abhishek Agarwal, A. Venayagam Balan, V. S. Lakshmi, Gaurav Agrawal, Vijay Kumar, Bharat L. Gandhi, Vithika Garg, Vidushi Garg, Karishma Singhal, Garima Prashad, Suresh Chandra Tripathy, Anirudh Sanganeria, Karunakar Mahalik, B. Vishwanath Bhandarkar, Sarbendra Kumar, Upendra Narayan Mishra, Durga Dutt, C. P. Singh, Prakash Sharma, Dilip Annasaheb Taur, Rajul Shrivastav, Mohit D. Ram, Monisha Handa, Sachin Kaushal, Bhagirath N. Patel, Rajat Nair, Swati Ghildiyal, Akshay Amritanshu, A.K. Sharma, Shubham Saurav, Vanshaja Shukla, Kuldeep S. Parihar, H.S. Parihar, Ikshita Parihar, Shivaji M. Jadhav, Nicholas Choudhary, Aditya P. Khanna, Aditya S. Jadhav, Shiv Ram Pandey, S. Lakshmi Iyer, Aishwarya Dash, Chinmoy Khaladkar, M/s. S.M. Jadhav and Company Mr. Rutwik Panda, Nikhar Berry, Anshu Malik, M.Y. Deshmukh, Manjeet Kirpal, Avanish Pandey, Sneha Kalita, Gwen Karthika, Abha R. Sharma, Ritin Rai, P. S. Sudheer, Rishi Maheshwari, Mayuri Nayyar Chawla, Anne Mathew, Bharat Sood, Shruti Jose, Amar Dave, Vishwas K. Shah, Massom K. Shah, Anup Jain, Udit Gupta, Pulkit Tare, Ashok Panigrahi, Apoorv Kurup, Upama Bhattacharjee, Nidhi Mittal, Anil Katiyar, Pratap Venugopal, Surekha Raman, Ayushi Gaur, Akhil Abraham Roy, Vijay Valsan, M/S. K.J. John and Co. Mr. A.N. Arora, Piyush Sharma, M.T. George, Susy Abraham, Johns George, Aniruddha P. Mayee, A. Rajarajan, N. Annapoorani, D. Bharat Kumar, Prasanna Kumar Parhi, Tadimalla Baskar Gowtham, Aman Shukla, D.V. Raghu Vamsu, Siddhartha Sinha, Hathindra Manda, Abhijit Sengupta, Anil Kumar Mishra, Anurag Singh, Praveena Gautam, Pawan Shukla, Sweety Pandey, Raja Ram, M. Khairati, Irshad Ahmad, Aniruddha A. Joshi, Rajeev Maheshwaranand Roy, Gunjan Kumar, P. Srinivasan, Navjeet Giri, Rajeev K. Panday, V.N. Raghupathy, Manendra Pal Gupta, S.N. Bhat, Hemantika Wahi, Chinmoy Khaladkar, Neha Sharma, Deeptakirti Verma, Rajiv Shankar Dvivedi, Praveen Satale, Anuradha Mutatkar, Usha Singh, Nidhi Saini, Akhilesh Kumar Mishra, Siddharth Mittal, Arun Aggarwal, Anshika Aggarwal, Ankur Prakash, Praveen Chaturvedi, Jyoti Chaturvedi, Lalit Bhasin, Nina Gupta, Palak Chadha, Ruchika Joshi, P.V. Yogeswaran, Asha Gopalan Nair, Sudhanshu S. Choudhari, Rameshwar Prasad Goyal, Debmalya Banerjee, Kartik Bhatnagar, Rohan Sharma, A.S. Aman, Ujjwal Singh, Vardaan Wanchoo, For M/S. Karanjawala & Co., Soumyajit Pani, Chittaranjan Singh, For Mr. Vinodh Kanna B., A. Venayagam Balan, P.I. Jose, Prashant K. Sharma, Jenis Francis, Ravi Sagar, Anupam Mishra, C. Rubavathi, Hari Kumar V., Siddhesh Kotwal, Bansuri Swaraj, Nirnimesh Dube, Astha Sharma, Arshiya Ghose, Divyansh Tiwari, Ana Upadhyay, Rajesh Mahale, Arjun Krishnan, Ankur Singh, Shourya Bari, Aaditya A. Pande, Chander Shekhar Ashri, Chandrashekhar A. Chakalabbi, Awanish Kumar, Shiv Kumar Pandey, Anshul Rai, M/s. Dharmaprabhas Law Associates Mr. B.K. Pal, G. Prakash, Jishnu M.L., Priyanka Prakash, Beena Prakash, P.V. Dinesh, Uday B. Dube, Y. Raja Gopala Rao, Vismai Rao, K. Pramod Kumar, Siddhesh Kotwal, Bansuri Swaraj, Vanshaja Shukla, Anuja Pethia, Sanjeev Kumar, Pankaj Tikde, Sanjay Kumar, H.K. Naik, Rajnish K., Awanish Kumar, Ajay Amritraj, Arvind Kr. Sharma, Aniteja Sharma, Raj Kishor Choudhary, Shakeel Ahmad, Rohit K. Singh, Uday Tiwary, P.N. Razdan, Mirza Kayesh Begg, Anshruta Maheshwari, Usha Nandini. V, Bineesh Karat, Biju P. Raman, M.S. Vishnu Sankar, Athira G. Nair, Sonal Jain, Heena Sharma, Ishkaran Singh, Kumar Shashank, Rukhmini Bobde, Aviral Kapoor, Shagufa Salim, Nivesh Kumar, Riya Dhingra, Satyavir Yadav, Vishal Prasad, Anil Nag, Arjun Vinod Bobde, Richa Relhan, Sathak Bhatia, S. Bushra Kazim, Rajat Joseph, Suresh Dutt Dobhal, Shreya Tandon, Anil Kumar Sangal, Harish Pandey, Pratibha Jain, Vijay Kumar, Dharmendra Kumar Sinha, Shashibhushan P. Adgaonkar, Rahul Chitnis, Sachin Patil, T.L.V. Rama Chari, Hitesh Kumar Sharma, Akhileshwar Jha, T. Ramamurty, Sushma Suri, Shreekant N. Terdal, Tanvir Nayar, Praful Sinha, Manoj Kr. Mishra, M/s. Udit Kishan Associates Mr. Ankur S. Kulkarni, M. P. Vinod, Chandan Ramamurthi, Charu Mathur, Yadav Narender Singh, E. R. Sumathy, Sarad Kumar Singhania, Vanshaja Shukla, Harish Pandey, H. Chandra Sekhar, M. A. Chinnasamy, Arvind Gupta, Amol Nirmalkumar Suryawanshi, S. Usha Reddy, Santosh Krishnan, Rakhi Ray, Abhay Kumar, Mrigank Prabhakar, Satpal Singh, Vikas Mehta, M. J. Paul, Renjith. B, Subodh S. Patil, Garvesh Kabra, Rutwik Panda, Lakshmi Raman Singh, Kusum Chaudhary, Sujata Kurdukar, Varun Singh, Atul Babasaheb Dakh, E. C. Agrawala, Pragya Baghel, Naresh Kumar, Anagha S. Desai, Bankey Bihari Sharma, Rabin Majumder, Abhishek Agarwal, A. Venayagam Balan, Gaurav Agrawal, Vijay Kumar, Garima Prashad, Suresh Chandra Tripathy, Anirudh Sanganeria, Karunakar Mahalik, Shishir Deshpande, Vineet Bhagat, Nikhil Goel, Dilip Annasaheb Taur, Mohit D. Ram, Sushma Suri, M/S. K J John And Co, A. N. Arora, Piyush Sharma, M. T. George, Aniruddha P. Mayee, N. Annapoorani, Abhijit Sengupta, Anil Kumar Mishra, Praveena Gautam, Irshad Ahmad, H. S. Parihar, Anup Jain, S. N. Bhat, Hemantika Wahi, Deeptakirti Verma, Rajiv Shankar Dvivedi, Anuradha Mutatkar, Siddharth Mittal, Arun Aggarwal, Ankur Prakash, Praveen Chaturvedi, Shivaji M. Jadhav, M/S. S.M. Jadhav and Company, P. V. Yogeswaran, Anil Katiyar, Asha Gopalan Nair, Sudhanshu S. Choudhari, Rameshwar Prasad Goyal, M/S. Karanjawala & Co., Abha R. Sharma, Vinodh Kanna B., P. I. Jose, M. Y. Deshmukh, Nirnimesh Dube, Rajesh Mahale, Arjun Krishnan, Chander Shekhar Ashri, M/S. Dharmaprabhas Law Associates, Rajeev Maheshwaranand Roy, V. N. Raghupathy, P. S. Sudheer, P. V. Dinesh, Uday B. Dube, Y. Raja Gopala Rao, Sanjeev Kumar, Raj Kishor Choudhary, Rohit K. Singh, Usha Nandini. V, B. K. Pal, G. Prakash, Sonal Jain, Vishal Prasad, Anil Nag, Rajat Joseph, Suresh Dutt Dobhal, Chirag M. Shroff, Anil Kumar Sangal, Harish Pandey, Pratibha Jain, Dharmendra Kumar Sinha, M/s. Udit Kishan Associates, Manoj Kr. Mishra, Advocates

Headnote:(A) SARFAESI Act, 2002 - Sections 2(1)(c)(iva) and 56(c) - Banking Regulation Act, 1949 - Definition of 'banking company' - Co-operative banks as entities engaging in banking defined, and their treatment under the Act justified. (Paras 1-102)

(B) Legislative competence - Central Parliament has the authority to legislate on banking matters, which includes co-operative banks, as per Entries 43 and 45 of the Seventh Schedule of the Constitution. Exclusion of co-operative societies from certain entries does not obstruct the recognition of their banking activities under Entry 45. (Paras 30, 41)

(C) Incidental encroachment - Automatic applicability of the SARFAESI Act to co-operative banks underlines that banking operations and recovery mechanisms are not limited by their classification as co-operative societies. (Paras 46, 49)

(D) Public interest - Enhancements in the legislative framework promote effective banking operations and management through the SARFAESI Act without infringing upon state powers regarding co-operative societies. (Paras 80, 87)

Table of Content
1. overview of conflicting decisions about cooperative banks. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7)
2. arguments regarding the legislative scope of banking laws. (Para 8 , 9 , 10 , 11 , 12 , 13 , 15 , 16)
3. court's analysis on the legislative entries and banking definitions. (Para 18 , 19 , 20 , 21 , 22 , 24 , 26 , 27)
4. key ratios regarding the applicability of banking regulations. (Para 28 , 29 , 30 , 31 , 32 , 34 , 35 , 36 , 37 , 38 , 39 , 40)
5. final conclusions on the legislative competence regarding cooperative banks. (Para 94 , 102)

JUDGMENT

Arun Mishra, J.

The matters have been referred in view of conflicting decisions in Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd. and Ors., (2007) 6 SCC 236, Delhi Cloth & General Mills Co. Ltd. v. Union of India and Ors., (1983) 4 SCC 166, T. Velayudhan Achari and Anr. v. Union of India and Ors., (1993) 2 SCC 582, and Union of India and Anr. v. 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 Co-operative 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 Co-operative 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 v. 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

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