Co-operative Societies is a state subject and Banking a Central Subject. What about banking by co-operative societies? Does it require licence under the Banking Regulation Act?

2. All these original petitions relate to the registration and functioning of unlicensed urban banks. The very expressions "unlicensed" and "Bank" would call for a detailed examination as to what is banking and whether it requires licence for conducting banking business. Such examination is all the more necessary since the unlicensed banking is attempted to be conducted by co-operative societies registered under the Kerala Co-operative Societies Act, 1969. The scope of the expressions "Co-operative Society" and various types of such societies and "banking" as appear in the Kerala Co-operative Societies Act, 1969 (Act 21, 1969) Banking Regulation Act, 1949 (Act 10 of 1949) Reserve Bank of India Act 1934 (Act 2 of 1934) National Bank for Agriculture and Rural Development Act, 1981 generally known as NABARD Act (Act 61 of 1989) and The Deposit Insurance and Credit Guarantee Corporation Act, 1961 (Act 47 of 1961) also requires to be examined.

3. Banking is entry 45 in List I of the Seventh Schedule of the Constitution of India. Entry 43 in List I _ Union List- provides for "incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies". Entry 32 in list II State list- provides for “incorporation, regulation and winding up of corporations, other than those specified in list 1 and universities, unincorporated trading, literary, scientific and religious and other societies and associations; co-operative societies. Co-operative societies is a State subject and banking a Central subject. But what about the banking by co-operative societies? An attempt is made by the state and supporting respondents that since List I entry 43 specifically deals with incorporation, regulation and winding up of trading corporations including banking, insurance and financial corporations, but excluding specifically the co-operative societies and since the co-operative societies is a state subject, it is for the state to regulate banking by the co-operative societies. I do not think that the issue needs any elaborate discussions for two reasons (1) Entry 43 list 1 does not exclude regulation of banking by co-operative societies. What it takes in is the incorporation, regulation and winding up of banking corporation, excluding co-operative societies. In other words the word "banking" in entry 43 is not indicative of the activity of banking. In its plain and literal construction it only indicates incorporation, regulation and winding up of trading corporations, banking corporations, insurance corporations and financial corporations, but excluding co-operative societies meaning thereby that incorporation, regulation and winding up if co-operative societies is excluded being a State subject. (2). It is now well settled that once there is a special and specific entry in the Union List with regard to a subject, it provides for the exclusive legislative domain of the parliament, though it may incidentally encroach on matters assigned to State legislature. Article 246 (1) confers exclusive power on the parliament to make laws with respect to matters enumerated in List 1. Entry 45 Banking and 46 Bills of Exchange, cheques, promissory notes and any other like instruments deal with banking business. It is for the parliament alone to legislate on such activity of banking business. Same is the situation with regard to Entry 47 "Insurance". It is fruitful in this context to refer to the recent decision of the Supreme Court in Union Of India v. Delhi High Court Bar Association, reported in AIR 2002 SC 1479. The apex court therein considered the constitutional validity of Recovery of Debts Due to Banks and Financial Institutions Act (51 of 1993). Referring to the legislative competence, th