Banking companies cannot be treated as 'dealers' under the Sales Tax Act while disposing of securities for the realization of loans advanced, as the provisions of section 8 of the Banking Regulation Act prohibit banking companies from trading.

M. L. PENDSE, C.J. - An Interesting question as to whether a banking company under the Banking Regulation Act, 1949, can be treated as a "dealer" under section 2(1)(k) of the Karnataka Sales Tax Act, 1957, while realising the security, falls for determination in this appeal preferred by a nationalised bank. The facts which gave rise to the filing of this appeal, are not in dispute and are required to be briefly stated to appreciate the claim of the appellant-bank.

The appellant is a Government of India undertaking which was acquired by the Government of India under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The business of the appellant-bank is regulated under the provisions of the Banking Regulation Act, 1949. The expression "banking" is defined under section 5(b) and means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. The expression "secured loan or advance" is defined under section 5(n) and means a loan or advance made on the security of assets, the market value of which is not at any time less than the amount of such loan or advance. Section 6 of the Act sets out the forms of business in which banking companies may engage and sub-section (1)(a), inter alia, provides that in addition to the business of banking, a banking company may engage in lending or advancing of money either upon or without security. Section 6(1)(a) to (n) sets out various forms of business in which the banking companies can engage. Clause (f) confers power on the banking company to manage, sell or realise any property which may come into the possession in satisfaction or part satisfaction of any of its claims, while clause (i) authorises the banking company to undertake the administration of estates as executor, trustee to otherwise. Clause (o) of sub-section (1) of section 6 entitles the banking company to engage in any other form of business which the Central Government may specify as a form of business. Sub-section (2) of section 6 prescribes that no banking company shall engage in any form of business other than those referred to in sub-section (1).

Section 8 of the Banking Regulation Act reads as follows :

"8. Prohibition of trading. - Notwithstanding anything contained in section 6 or in any contract, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation or with such of its business as is referred to in clause (i) of sub-section (1) section 6 :

Provided that this section shall not apply to any such business as is specified in pursuance of clause (o) of sub-section (1) of section 6.

Explanation. - For the purposes of this section, 'goods' means every kind of movable property, other than actionable claims, stocks, shares, money, bullion and specie, and all instruments referred to in clause (a) of sub-section (1) of section 6."

2. The Karnataka Legislature passed the Karnataka Sales Tax Act, 1957, to consolidate and amend the laws relating to the levy of tax on the purchase or sale of goods in the State. Section 5 of the Act provides that every dealer shall pay for each year tax on his taxable turnover. The expression "dealer" is defined under section 2(k) and means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration. The expression "business" is defined under section 2(1)(f-2), which reads as follows :

"(f-2) 'business' includes, -

(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce o