Back
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR
A.H. Joshi & R.C. Chavan, JJ.
Rama Steel Industries - Petitioners
Versus
Union of India - Respondents
Writ Petition No.4056 of 2007
Decided on : 7th September, 2007
"(c) "bank " means -
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank; or
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act.
(d) "banking company" shall have the meaning assigned to it in Clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949)."
Maharashtra Co-operative Societies Act, 1960 - Section 101 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 2(1)(c)(v) and 17 - Banking Regulation Act, 1949, Sections 5(c), 56 and 37 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 2 and 34(2) - Co- operative Bank - Section 5 of the Banking Regulation Act does not define a Bank. - Section 5 of the Banking Regulation Act does not define a Bank. The said Act defines "Banking Company" in Clause (c) of Section 5. However, "Co-operative Bank" has been separately defined in Clause (cci) of Section 5, which has been inserted by enacting Section 56 of the Banking Regulation Act.
Maharashtra Co-operative Societies Act, 1960 - Section 101 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 2(1)(c)(v) and 17 - Banking Regulation Act, 1949, Sections 5(c), 56 and 37 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 2 and 34(2) - Co-operative Bank. - Chapter III of the Securitisation Act provides for enforcement of security interest by a secured creditor. The term "secured creditor" is wider than a "Bank", or a "Banking Company", or a "Financial Institution". Clause (zd) of Section 5 of the Securitisation Act defines "secured creditor". This clause refers to a "Bank" but not to a "Banking Company". In view of this, the challenge of the petitioners reveals to be based on a misconception relating to the scope of expressions "Bank" and "Banking Company" in the Securitisation Act, has to be rejected.
Maharashtra Co-operative Societies Act, 1960 - Section 101 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 2(1)(c)(v) and 17 - Banking Regulation Act, 1949, Sections 5(c), 56 and 37 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 2 and 34(2) - Co-operative bank - The Securitisation Act is an independent enactment providing remedy to a group of creditors defined as secured creditors in Clause (zd) of Section 5 of the Securitisation Act - A creditor seeking recovery under the borrowers of the RDB Act need not necessarily have a secured interest on the basis of which he could claim realization of the debt while under the Securitisation Act, he would claim liquidation of debt on the strength of secured asset - It has to be noted that the scheme emerging through the Securitisation Act has not come up as a Chapter added to the R.B.D. Act, and scheme of the Securitisation Act cannot be narrowed down and limited by taking aid of the R.D.B. Act. - The Securitisation Act is an independent enactment providing remedy to a group of a creditors defined as secured creditors in Clause (zd) of Section 5 of the Securitisation Act. A creditor seeking recovery under the provisions of the RDB Act need not necessarily have a secured interest on the basis of which he could claim realization of the debt while under the Securitisation Act, he would claim liquidation of debt on the strength of secured asset. It has to be noted that the scheme emerging through the Securitisation Act has not come up as a chapter added to the RBD Act, and scheme of the Securitisation Act cannot be narrowed down and limited by taking aid of the RDB Act.
Maharashtra Co-operative Societies Act, 1960 - Section 101 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 2(1)(c)(v) and 17 - Banking Regulation Act, 1949, Sections 5(c), 56 and 37 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 2 and 34(2) - Co-operative bank - The expression "or any other law for the time being in force" appearing in Section 37 of the Securitisation Act is missing in Section 34(2) of the RDB Act - The question of availability of other mechanism of recovery cannot be a bar for providing remedy under the Securitisation Act, since such remedy is in addition to those available under any other law. - It may be seen that the expression "or any other law for the time being in force" appearing in Section 37 of the Securitisation Act is missing in Section 34(2) of the RDB Act. This is crucial, because it would show that the remedy provided in addition to remedy under any other law for the time being in force.
Maharashtra Co-operative Societies Act, 1960 - Section 101 - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 2(1)(c)(v) and 17 - Banking Regulation Act, 1949, Sections 5(c), 56 and 37 - Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Sections 2 and 34(2) - Co- operative Bank - To sum up attempt of the petitioners to evade recovery of dues by action under the Securitisation Act must, therefore, fail, since the contentions raised have absolutely no force. - To sum up, this attempt of the petitioner to evade recovery of dues by action under the Securitisation Act must, therefore, fail, since the contentions raised have absolutely no force. The petition is, therefore, dismissed.
Per R.C. Chavan, J. :
1. The petitioners are the defaulting debtors of respondent No.2-Bank . The petitioners had mortgaged immovable properties to respondent No.2-Bank. Respondent No.2 started proceedings under Section 101 of the Maharashtra Co-operative Societies Act, 1960 for recovery of Rs.47,69,648/-. On 14-7-2003, during the pendency of these proceedings, respondent No.2-Bank issued a notice of demand under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, hereinafter referred to as the Securitisation Act). On 18-9-2003, respondent No.2 Bank took physical possession of the secured assets.
2. The petitioners preferred an appeal, which was dismissed by the Debts Recovery Tribunal on 4-10-2006. The petitioners appealed to the Debts Recovery Appellate Tribunal. During the pendency of the proceedings before the Debts Recovery Appellate Tribunal, the Apex Court decided Greater Bombay Co-op. Bank Ltd. v. M/s. United Yarn Tex. Pvt. Ltd. & Ors. [2007(5) Scale 366], and M/s. Transcore v. Union of India & Anr. [2006(12) Scale 585]. The Debts Recovery Appellate Tribunal, however, dismissed the petitioners' appeal on 20-7-2007 leaving to the petitioners liberty to argue before the Debts Recovery Tribunal the question of Bank's right to pursue parallel remedies.
3. The petitioners have, therefore, rushed to this Court challenging the constitutional validity of Notification dated 28-1-2003 issued in exercise of powers under Section 2(1)(c)(v) of the Securitisation Act and consequently the correctness of the judgment dated 20-7-2007 of the Debts Recovery Appellate Tribunal.
4. The challenge to the validity of the Securitisation Act before the Supreme Court was negatived on 8-4-2004. The Supreme Court struck down only sub-section (2) of Section 17 of the Securitisation Act as unconstitutional. The remedy of an appeal before the Debts Recovery Tribunal under Section 17 of the Securitisation Act is available to a defaulting debtor.
5. We have heard both the learned Advocates for the petitioners and the respondents. Reliance is placed by the petitioner solely on the judgment of Apex Court in case of Greater Bombay Cooperative Bank Ltd. v. M/s. United Yarn Tex. Pvt. Ltd. & Ors., reported in AIR 2007 SCW 232.
6. The issue of availability of remedies under the Securitisation Act to the Co-operative Banks need no longer detain us, since it is covered by a decision of the Division Bench of this Court sitting at Aurangabad in Writ Petition No.2672 of 2007 (M/s. Khaja Industries v. The State of Maharashtra and Anr.) decided on 3rd July, 2007. This decision duly considers the effect of judgment of the Supreme Court in Greater Bombay Co-op. Bank Ltd. v. M/s. United Yarn Tex. Pvt. Ltd. & Ors., referred to above.
7. It has been urged that legality of Notification dated 28-1-2003, which includes Co-operative Banks within the definition of term Bank under Section 2(c) of the Securitisation Act was not a matter of challenge in the case of M/s. Khaja Industries, supra, before this Court. The learned Advocate for the petitioners has contended that the Central Government could not issue the impugned Notification dated 28-1-2003 in exercise of its powers under Section 2(1)(c)(v) of the Securitisation Act specifying Co-operative Banks, as defined in clause (cci) of Section 5 of the Banking Regulation Act, 1949 as bank for the purpose of the Securitisation Act, de hors the provisions contained in the Banking Regulation Act.
8. He submitted that the Central Government could not do something which the Parliament itself had not chosen to do, namely inclusion of Co-operative Bank in the definition of Banking Company. According to the learned Advocate for the petitioners, inclusion of Co-operative Bank as a Bank, without amending the definition of Banking Company was inconsequential. Therefore, since the impugned Notification amounts to excessive use of delegated authority
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
