HIGH COURT OF MADHYA PRADESH, JABALPUR W.P.No.9106/2009 M/s Krishna Trading Company through Prop. Hanuman Prasad Bansal Son of Shri Bherolal Bansal aged 55 years, Occupation-presently unemployed r/o Pali Road, Sheopur Kala, district Sheopur (M.P.) ....... Petitioner Versus 1. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Branch Manager Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Branch Sheopur Kala distt. Sheopur (M.P.) 2. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Authorised Officer, Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Head Office, Sadar Bazar, Morena (M.P.) ......Respondents W.P.No.13795/2012 M/s Jagdamba Traders, through Prop. Shri Mohanlal Gupta, s/o Shri Gulaba Chand Gupta aged about.adult, r/o Balapura Mohalla Seopur kala district Sheopur (M.P.) .......Petitioner Versus 1. Union of India through its Secretary, Ministry of Finance North Block, Central Secretariat, New Delhi.
2. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Branch Manager Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Branch Sheopur Kala distt. Sheopur (M.P.) 3. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Authorised Officer, Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Head Office, Sadar Bazar, Morena (M.P.) ......Respondents 2 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank W.P.No.13802/2012 M/s Modi Sales Corporation through Prop. Dayal Babu Bansal s/o Shri Bharolal Bansal, aged about 45 years Occupation: presently unemployed r/o Pali Road, Sheopur Kala ,distt. Sheopur (M.P.) ....Petitioner Versus 1. Union of India through its Secretary, Ministry of Finance North Block, Central Secretariat, New Delhi.
2. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Branch Manager Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Branch Sheopur Kala distt. Sheopur (M.P.) 3. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Authorised Officer, Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Head Office, Sadar Bazar, Morena (M.P.) ......Respondents W.P.No.13808/2012 M/s Aman Trading Company through Prop. Smt. Seeta Devi Bansal, w/o Shri Chaturbhuj Bansal, aged about adult Occupation: presently unemployed r/o Pali Road, Sheopur Kala ,distt. Sheopur (M.P.) Versus 1. Union of India through its Secretary, Ministry of Finance North Block, Central Secretariat, New Delhi.
2. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Branch Manager Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Branch Sheopur Kala distt. Sheopur (M.P.) 3. Vyavasaik Evam Audhyogik Sahkari Bank Ltd. through Authorised Officer, 3 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank Vyavasaik Evam Audhyogik Sahkari Bank Ltd. Head Office, Sadar Bazar, Morena (M.P.) ......Respondents Present : Hon. Shri Justice Krishn Kumar Lahoti Hon.(Smt.) Justice Vimla Jain Shri Sankalp Kochar, counsel for petitioners. Smt. Shimla Jain, Counsel for respondents. ORDER
( .10.2012) Per Krishn Kumar Lahoti, J : The petitioners have challenged notification dated 28.1.2003 published in the Gazette of India (Extraordinary) Part II Section 3(ii) dated 28.1.2003 issued by Central Government. The Notification is reproduced as under :- “Ministry of Finance and Company Affairs (Department of Economic Affairs) Notification not S.O.105(E) dated the 28th January,2003. Published in the Gazette of India (Extraordinary) Part II Section 3(ii) dated 28.1.2003 page 1. In exercise of the powers conferred under item (v) of clause (c)of sub-section (1) of Section 2 of the Securitisation and Reconstructin of Financial Assets and Enforcement of Security Interest Act,2002 (54 of 2002), the Central Government hereby specifies :Co-operative Bank”. as defined in clause (cci) of Section 5 of Banking Regulation Act,1949 (10 of 1949) as 'bank' for the purpose of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (54 of 2002).”
. As a common question is involved in all the above four petitions, all are being decided by this order. We have taken facts from W.P. 9106 of 2006 for the convenience. The case of the petitioner is that a Co-operative Bank is a Co-operative Society and is not a banking company and does not fall within the purview of other Bank as is defined in definition under Sec.2(1)(c)(v) of Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act”
4. W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank (hereinafter referred to as the Securitization Act). It is submitted that under Section 56 of the Banking Regulation Act,1949, a specific provision has been made that the Banking Regulation Act shall be applicable to co-operative societies subject to modification but co-operative Banks could not have been notified under sub clause (iv) of clause (c)of Section 2(i) of the Securitization Act. He has placed reliance to the judgment of Apex Court in Greater Bombay Co-operative Bank Ltd. vs. United Yarn Tex(P) Ltd. and others [(2007) 6 SCC 236]. in supported of his contention, in particular paragraph 43 of the judgment, and submitted that in view of the law laid down by the Apex Court, this petition may be admitted for final hearing. We have gone through the various provisions. For ready reference we quote Section 2(1) (c)of the Securitization Act which reads thus :- 2(1)(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; Relevant part of Section 56 of the Banking Regulation Act,1949 reads thus :-
“5. (c)(1)(cci): “Co-operative Bank”. means a state Co-operative bank, a rcentral co-operative bank and a primary co- operative bank;”. The Central Government in exercise of powers, vested in it under Section 2(1)(c)(v) of the Securitization Act has issued the aforesaid notification which has been challenged solely on the ground that the co-operative societies are not a bank and could not have been notified by the Central Government by the aforesaid notification for the purpose of applicability of the 5 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank provisions of Securitization Act. It was submitted by Shri Kochar, learned counsel for the petitioners that for co-operative societies a complete mechanism has been provided for enforcing the recovery of the dues by the bank and the provisions of Securitization Act shall not apply to the cooperative banks. The Apex Court has consider this aspect in United Yarn Tex (P) Ltd (supra) in which the Apex Court considering the relevant provisions held :- 37. This Act was brought into force on 16-3-1949. Section 3 of the BR Act clearly provides that the Act would apply to cooperative societies in certain cases, subject to the provisions of Part V of the Act. The BR Act defines “banking company”. under Section 5(c) as follows:
“5. (c) ‘banking company’ means any company which transacts the business of banking in India;”.
38. In Section 5(d) “company”. means any company as defined in Section 3 of the Companies Act, 1956 (1 of 1956) and includes a foreign company within the meaning of Section 591 of that Act.
39. 39. Chapter V of the BR Act was inserted by Act 23 of 1965 w.e.f. 1-3-1966. Section 56 of the Act provides that the provisions of this Act, as in force for the time being, shall apply to, or in relation to, banking companies subject to the following modifications, namely:
“56. (a) throughout this Act, unless the context otherwise, requires,— (i) references to a ‘banking company’ or ‘the company’ or ‘such company’ shall be construed as references to a cooperative bank; (ii) * * *”. The purpose and object of modifications were to regulate the functioning of the cooperative banks in the matter of their business in banking. The provisions of Section 56 itself start with the usual phrase “unless the context otherwise requires”. is to make the regulatory machinery provided by the BR Act to apply to cooperative banks also. The object was not to define a cooperative bank to mean a banking company, in terms of Section 5(c) of the BR Act. This is apparent from the fact that instead of amending the original clause (c) of Section 5 separate clause (cci) was added to cover the “cooperative bank”. to mean “a State cooperative bank, a Central cooperative bank and a primary cooperative bank”.. In clause (ccv) “primary cooperative bank”. means “a cooperative society, other than a primary agricultural credit society”.. The 6 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank primary object or principal business of the “cooperative bank”. should be the transaction of banking business.
40. The modifications given in clause (a) of Section 56 are apparently suitable to make the regulatory machinery provided by the BR Act to apply to cooperative banks also in the process of bringing the cooperative banks under the discipline of Reserve Bank of India and other authorities. A cooperative bank shall be construed as a banking company in terms of Section 56 of the Act. This is because the various provisions for regulating the banking companies were to be made applicable to cooperative banks also. Accordingly, Section 56 brought cooperative banks within the machinery of the BR Act but did not amend or expand the meaning of “banking company”. under Section 5(c). On a plain reading of every clause of Section 56 of the BR Act, it becomes clear that what is contained therein is only for the purpose of application of provisions that regulate banking companies to cooperative societies. According to the expression “cooperative societies”. used in Section 56 means a “cooperative society”., the primary object or principal business of which is the transaction of banking business. In other words, first it is a cooperative society, but carrying on banking business having the specified paid-up share capital. Other definitions also make it clear that the entities are basically cooperative societies. The Apex Court further in para 41 to 43 have considered the provisions of Securitization Act, held thus :- 41. Parliament had enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“the Securitisation Act”.) which shall be deemed to have come into force on 21- 6-2002. In Section 2(d) of the Securitisation Act same meaning is given to the words “banking company”. as is assigned to it in clause (e) of Section 5 of the BR Act. Again the definition of “banking company”. was lifted from the BR Act but while defining “bank”., Parliament gave five meanings to it under Section 2(c) and one of which is “banking company”.. The Central Government is authorised by Section 2(c)(v) of the Act to specify any other bank for the purpose of the Act. In exercise of this power, the Central Government by notification dated 28-1-2003, has specified “cooperative bank”. as defined in Section 5(cci) of the BR Act as a “bank”. by lifting the definition of “cooperative bank”. and “primary cooperative bank”. respectively from Section 56, clauses 5(cci) and (ccv) of Part V. Parliament has thus consistently made the meaning of “banking company”. clear beyond doubt to mean “a company engaged in banking, and not a cooperative society engaged in banking”. and in Act 23 of 1965, while amending the BR Act, it did not change the definition in Section 5(c) or even in Section 5(d) to include cooperative banks; on the other hand, it added a 7 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank separate definition of “cooperative bank”. in Section 5(cci) and “primary cooperative bank”. in Section 5(ccv) of Section 56 of Part V of the BR Act. Parliament while enacting the Securitisation Act created a residuary power in Section 2(c)(v) to specify any other bank as a bank for the purpose of that Act and in fact did specify “cooperative banks”. by notification dated 28-1-2003.(Emphasis supplied).
42. The context of the interpretation clause plainly excludes the effect of a reference to banking company being construed as reference to a cooperative bank for three reasons: firstly, Section 5 is an interpretation clause; secondly, substitution of “cooperative bank”. for “banking company”. in the definition in Section 5(c) would result in an absurdity because then Section 5(c) would read thus: “cooperative bank”. means any company, which transacts the business of banking in India; thirdly, Section 56(c) does define “cooperative bank”. separately by expressly deleting/inserting clause (cci) in Section 5. Parliament in its wisdom had not altered or modified the definition of “banking company”. in Section 5(c) of the BR Act by Act 23 of 1965.
43. As noticed above, “cooperative bank”. was separately defined by the newly inserted clause (cci) and “primary cooperative bank”. was similarly separately defined by clause (ccv). The meaning of “banking company”. must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. If the intention of Parliament was to define the “cooperative bank”. as “banking company”., it would have been the easiest way for Parliament to say that “banking company”. shall mean “banking company”. as defined in Section 5(c) and shall include “cooperative bank”. and “primary cooperative bank”. as inserted in clauses (cci) and (ccv) in Section 5 of Act 23 of 1965. The Apex Court considering provisions of the Banking Regulation Act have specifically held that in view of the specific provision as contained in Section 56, the cooperative bank are not governed by the provisions of in the Banking Regulation Act. So far as the notification of the Central Government under Sec.2(1)(c)is concerned, the Apex Court in para 41 and 42 of the judgment has also held that such notification could have been made even in respect of cooperative banks. In this case the petitioner has challenged the notification Annexure P-5 by which the State Government has specified Co- operative Bank as Bank for the purpose of Securitization Act. The aforesaid powers are conferred upon the Central Government 8 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank under item (v) of Clause (c) of sub-section 1 and section 2 of the Securitization Act. The petitioner has not challenged the aforesaid powers conferred upon the Central Government in this regard but has challenged the notification. When item (v) of Clause (c) of sub-section 1 of Section 2 of Securitization Act specifically empowers the Central Government to notify such other Bank for the purpose of Securitization Act then the notification was issued within the powers conferred upon the Central Government. The Parliament in its wisdom has vested the Central Government to specify such other Bank as 'Bank' for the purpose of the Securitization Act, if the Central Government by exercising such powers have notified the Co-operative Banks as 'Bank' for the purposes of Securitization Act, the aforesaid notification has been issued under the authority of the aforesaid powers, the aforesaid notification cannot be said to be without authority merely because the Co-operative Bank is having its own mechanism to enforce its recovery under the M.P. Co-operative Societies Act,1959. In Greater Bombay (supra), the Apex Court was considering the applicability of Banking Regulation Act, 1949 in respect of the Co-operative Bank but in the present case, the controversy is entirely different. The Division of Bombay High Court at Nagpur Bench in a similar circumstances in M/s Rama Steel Industris & Ors. vs. Union of India & Anr. (AIR 200.Bombay
38) considering similar controversy held in para 16 and 17 of the judgment thus :-
“16. The distinction in the expression used in Section 37 of the Securitisation Act and sub-section (2) of Section 34 of the RDB Act, which has been underlined by the Division Bench of this Court at Aurangabad in writ petition No.2672 of 2007 squarely debunks the arguments of the learned Advocate for the petitioners. These Sections may be usefully reproduced for ready reference as under : “ Section 37 of the Securitization Act :Application of other laws not barred. The 9 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank provisions of this Act or the Rules made thereunder shall be in addition to and not in derogation of the Copanies Act, 1956 (1 if 1956), the Securities Contracts (Regulation)Act,1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1992) or any other for the time being in force.”
. “Sub-section (2) of Section 34 of the RDB Act: The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act,1948, the State Financial Corporations Act,1951, the Unit Trust of India Act,1983, the Industrial Reconstruction Bank of India Act,1984 (the Sick Industrial Companies (Special Provisions ) Act, 1985 and the Small Industries Development Bank of India Act,1989).”
. It may be seen that the expression “or any other law for the time being in force”. appearing in Section 37 of the Securitization Act is missing in section 34(2) of the RDB Act. This is crucial, because it would show that the remedy provided is in addition to remedy under any law for the time being in force, which, as held by the Division Bench of this Court at Aurangabad in W.P. No.2672 of 2007, includes the Maharashtra Co-operative Societies Act,1960.
17. The question of availability of other mechanism of recovery cannot be a bar for providing remedy under the Securitization Act, since such remedy is in addition to those available under any other law.”
. The Apex Court has already considered the aforesaid aspect in Greater Bombay (supra), there is no iota of doubt that the Central Government is within its power to notify cooperative banks for the purpose of Bank under Sec.2(1)(c)(v) of the Securitization Act . In view of the aforesaid, we are of the view that the notification issued by the Central Government was within its competence and the aforesaid notification cannot be said to be invalid merely on the basis of the judgment of the Apex Court in Greater Bombay (supra) in which the controversy was different and was in respect of applicability of the provisions of Banking Regulations Act to the Co-operative Banks. So far as the contention of the petitioner that for the 10 W.A.No.9106/2009 M/s Krishna Trading Co. Vs Vyavasaik Evam Audhyogik S.Bank cooperative banks there is separate mechanism and provisions of Securitization Act ought not to have been applied is concerned, the Parliament has enacted Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 to regulate securitisation reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The statement of objects and reasons provides that to inforce the speedy recovery of the bank such enactment was made by the Parliament. If for the recovery of the dues of cooperative bank the provisions contained in Securitisation Act have been made applicable, no fault is found. In view of the aforesaid, the challenge in all these petitions in so far as it relates to power of the Central Government for issuance of notification dated 28.1.2003 is found without merit and all the petitions are accordingly dismissed. However, in respect of other grievances raised by the petitioners in these petitions in respect of the correctness of the dues etc. are concerned, those can be agitated by the petitioners before the appropriate forum including by filing a fresh petitions in this regard. We do not find any merit in these petitions challenging the notification dated 28.1.2003. All the petitions are accordingly dismissed in that regard at the admission stage with the liberty as indicated herein above with no order as to costs. (Krishn Kumar Lahoti) (Smt.Vimla Jain) JUDGE JUDGE .10.2012 .10.2012 vj.