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Andhra Pradesh High Court
Judges : A.LAKSHMANA RAO, P.L.N.SHARMA, P.VENKATRAMA REDDY
Pothula Ranga Rao - Appellant
Versus
Advath Sakru - Respondent
Decided On : 03-03-93
Whether Section 21-A of the Banking Regulation Act, 1949 applies to transactions which were entered into prior to its commencement, even though suits were instituted subsequent thereto? Whether it applies only to transactions entered into after the commencement of Central Act 1 of 1984? Whether it applies only to suits which were pending on the date of commencement of Central Act 1 of 1984? Whether it applies to suits instituted and in which decrees were passed before the commencement of the Act? Whether it applies only to suits instituted after the commencement of the Act irrespective of the date of the transaction? Whether it makes any difference if the loan was an agricultural and not a commercial loan?
Fact of the Case:
The main point that was debated before the Division Bench was regarding applicability of Section 21-A of the Banking Regulation Act, 1949 to the transactions entered into between a Banking Company and its debtors.
Finding of the Court:
The Court held that Section 21-A of the Banking Regulation Act, 1949 applies to all transactions entered into between the banking company and its debtor whether the transaction was entered into prior to its commencement or after. It also applies to suits pending on the date of coming into force of the said section and to pending appeals irrespective of the fact whether a decree was passed giving relief to the debtor or not. Section 21-A makes no distinction between an advance made for agricultural purpose or for commercial purpose and it equally applies to both.
Issues: 1. Whether Section 21-A of the Banking Regulation Act, 1949 applies to transactions which were entered into prior to its commencement, even though suits were instituted subsequent thereto? 2. Whether it applies only to transactions entered into after the commencement of Central Act 1 of 1984? 3. Whether it applies only to suits which were pending on the date of commencement of Central Act 1 of 1984? 4. Whether it applies to suits instituted and in which decrees were passed before the commencement of the Act? 5. Whether it applies only to suits instituted after the commencement of the Act irrespective of the date of the transaction? 6. Whether it makes any difference if the loan was an agricultural and not a commercial loan?
Ratio Decidendi: The Court held that the Parliament intended to divest the Court of the power to give relief under the respective debt laws of the states as well as under the provisions of Usurious Loans Act 10 of 1918. The intention of enacting Section 21-A is made clear by necessary implication that Parliament wanted to divest the Court of the power to give relief under the respective debt laws of the states as well as under the provisions of Usurious loans Act 10 of 1918.
Final Decision: The Court answered the questions referred to it as follows: (1) Section 21-A of the Banking Regulation Act, 1949 applies to all transactions entered into between the banking company and its debtor whether the transaction was entered into prior to its commencement or after. (2) Section 21-A of the Banking Regulation Act, 1949 applies to suits pending on the date of coming into force of the said section. (3) Section 21-A applies to pending appeals irrespective of the fact whether a decree was passed giving relief to the debtor or not. (4) Section 21-A makes no distinction between an advance made for agricultural purpose or for commercial purpose and it equally applies to both.
( 1 ) SECOND Appeal Nos. 268 of 1985, 832 of 1987 and 378 of 1986 were heard by a Division Bench of this Court consisting of V. Sivaraman Nair and D. J. Jagannadha Raju, JJ. In these appeals, Banking Companies are the appellants, while in A. S. No. 1778 of 1984 Union Bank of India is the first respondent.
( 2 ) THE main point that was debated before the Division Bench was regarding applicability of Section 21-A of the Banking Regulation Act, 1949 to the transactions entered into between a Banking Company and its debtors.
( 3 ) ON behalf of the Banking Companies, it was contended that after coming into force of Section 21-A of the Banking Regulation Act, 1949 (for short regulation Act, 1949 ), Courts are prohibited/debarred from re-opening the transactions entered into between the Banking Company and it s debtor invoking the provisions of Usurious Loans Act, 1918 (for short act 10 of 1918 ), irrespective of the fact whether the transaction was entered into prior to the coming into force of Section 21-A of the Act. It is also contended that Sec. 21-A will be applicable to a suit filed prior to the coming into force of the said provision and pending on the said date as well as to a suit filed subsequent to the coming into force of Section 21-A of the Act. In other words, it was contended that irrespective of the fact that the transaction took place earlier to the coming into force of Section 21-A of the Act and whether the suit in respect of the said transaction is filed prior to the said date or not, the said provision will debar or prohibit the Court from reopening the transaction and scaling down the interest by applying the provisions of Act 10 of 1918.
( 4 ) ON the other hand, it was contended by the counsel appearing for the debtors that Section 21-A is only prospective and not retrospective, in the sense that it will not be applicable to the transactions entered into prior to the coming into force of the Act, irrespective of the fact whether the suit was filed prior to or after coming into force of Section21-A of the Act. In any event, it is contended that Section 21-A has no application to the suits filed prior to the coming into force of the said provision irrespective of the fact that the suits are pending on that day. It is also contended that the moment the suit is filed the right to have the transactions reopened under the provisions of Act 10 of 1918 accrued or acquired by the debtors and the said right is a vested right and the same cannot be defeated by Section 21-A of the Act.
( 5 ) LEARNED Judges of the Division Bench stated that there are atleast three views expressed by co-ordinate Benches of this Court on the points debated before them and came to the conclusion that it is essential that the controversy which involved an important question of law of public importance should be set at rest by a decision of a Full Bench of this Court and accordingly, directed the cases to be placed before the Hon ble Chief justice to have them heard by a full Bench for answering the questions raised by them. That is how these matters came up before us.
( 6 ) THE questions referred to the Full Bench are:1. Whether Section 21-A of the Banking Regulation Act, 1949 applies to transactions which were entered into prior to its commencement, even though suits were instituted subsequent thereto?2. Whether it applies only to transactions entered into after the commencement of Central Act 1 of 1984?3. Whether it applies only to suits which were pending on the date of commencement of Central Act 1 of 1984?4. Whether it applies to suits instituted and in which decrees were passed before the commencement of the Act?5. Whether it applies only to suits instituted after the commencement of the Act irrespective of the date of the transaction?6. Whether it makes any difference if the loan was an agricultural and not a commercial loan?
( 7 ) BEFORE taking up the questions referred to us, it is necessary to refer to certain eve
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