2013 Supreme(Guj) 151

GUJARAT HIGH COURT
Hon’ble Mr. Chief Justice Bhaskar Bhattacharya & Hon’ble Mr. Justice J.B. Pardiwala
Administrator - Shri Dhakdi Group Co-operative Cotton Seed & Ors.
Versus
Union of India & Ors.
Special Civil Application No. 930 of 2011—Decided on 22/04/2013

Point in Issue :
Whether impugned notification dated 28.1.2003 issued by Central Government is legal and valid.

Headnote:Gujarat Co-operative Societies Act, 1961 — Debt Recovery Tribunal Act — Recovery of Debts Due to Banks and Financial Institutions Act, 1993 — Constitution of India, 1950 — Article 14, Schedule VII, List I, Entry 43 and Schedule VII Entry 32 — Securitisation and Reconstruction of Financial Assets and Enforcement or Securities Act, 1961 — Sections 2(1)(c)(v), 13(2), 13(4), 17 & 37 — Notification dated 28.1.2003 issued by the Central Government bringing Co-operative Banks within purview of the Secruitisation Act — Constitutional validity of notification — Finding of Court considering the provision of the different Acts and constitutional provisions and held that impugned notification issued by Central Government is ultra vires, unconstitutional, non est and void ab initio — Court also restrained the respondent Co-operative Banks from taking any action against members under Section 13(4) of the Securitization Act.

       Held :

       The question that falls for determination in these Special Civil Applications is, whether the notification indicated above should be held to be invalid in view of the fact that the Securitization Act was enacted in exercise of power conferred under List I of Schedule VII under Item No. 45, whereas Co-operative Society is included in List II of Schedule VII under Item No. 32 [Para 11]

       In the case of Greater Bombay Co-operative Bank Ltd., two questions had arisen for determination before the Supreme Court:

       [1]. Whether the RDBI Act applies to debts due to Co-operative Banks constituted under the Maharashtra Co-operative Societies Act, 1960, the Multi-State Co-operative Societies Act, 2002 and the Andhra Pradesh Co-operative Societies Act, 1964.

       [2]. Whether the State Legislature is competent to enact legislation in respect of Co-operative societies incidentally transacting business of banking in the light of Schedule VII List II Entry 32 of the Constitution? [Para 12]

       In answering the first question referred to above, the Supreme Court held that the Co-operative Banks established under the Maharashtra Co-operative Societies Act or the Multi-State Co-operative Societies Act or the Andhra Pradesh Co-operative Societies Act transacting the business of banking do not fall within the meaning of “banking company” as defined in Section 5(c) of the BR Act and, thus, the provisions of the RDBI Act are not applicable to the recovery of dues by the Co-operative societies from their members. [Para 12.1]

       In answering the second question referred to above, the Supreme Court held that the express exclusion of the Co-operative societies in Schedule VII List I Entry 43 and the express inclusion of Co-operative societies in List II Entry 32 separately and apart from but along with corporations other than those specified in List I and universities, clearly indicated that the constitutional scheme was designed to treat the Co-operative societies as the institutions distinct from the corporations.

        [Para 12.2]

       Therefore, in order to issue notification for inclusion of bank in terms of the definition Clause of the Securitization Act, such bank must be regular bank over which the Parliament must have power to legislate in respect of recovery of its dues, but at least, not a Co-operative Society doing limited banking business because the Parliament has no right to legislate in regard to the matters relating to recovery of the dues from its member being specifically excluded from List I and conferred upon List II. [Para 18]

       In other words, the Debt Recovery Tribunal created under the RDBI Act having been held to have no jurisdiction to pass any order in the proceedings by or against a Co-operative Society for recovery of due on the sole ground that the RDBI Act is the creature of Parliament, for the selfsame reason, the Securitization Act will also have no jurisdiction to proceed at the instance of a Co-operative Society for enforcement of its security on the ground that the concerned legislation is a creature of Parliament and cannot encroach upon the field exclusively meant for the State Legislature.

        [Para 19]

       Consideration of the entire materials on record, we hold that the notification dated 28th January 2003 issued by the Central Government impugned in these writ-applications is ultra vires, unconstitutional, non-est, and, void ab-initio and the respondent- Co-operative Banks are restrained from taking any action against its members under Section 13 (4) of the Securitization Act. [Para 23]

       Law Laid Down :

       Impugned notification dated 28.1.2003 issued by Central Government bringing Co-operative Bank within purview of the Securization Act is ultra vires, unconstitutional, non-est and void ab initio.