2007 (4) TMI 679 - SC - Indian Laws

Whether the RDB Act applies to debts due to co- operative banks constituted under the MCS Act 1960; the MSCS Act 2002 and the APCS Act 1964? Whether the State Legislature is competent to enact legislation in respect of co-operative societies incidentally transacting business of banking in the light of Entry 32 List II of Seventh Schedule of the Constitution?

Summary

Issues Involved:
1. Right of recovery of debts by co-operative banks under the Co-operative Societies Acts.
2. Applicability of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) to co-operative banks.
3. Legislative competence of the States to enact provisions relating to co-operative banks.
4. Jurisdiction of courts and authorities under the Maharashtra Co-operative Societies Act, 1960, and the Andhra Pradesh Co-operative Societies Act, 1964, after the establishment of a Tribunal under the RDB Act.

Issue-wise Detailed Analysis:

1. Right of Recovery of Debts by Co-operative Banks:
The judgment discusses the mechanism for recovery of debts by co-operative banks constituted under the Co-operative Societies Acts of Maharashtra and Andhra Pradesh. The primary question is whether these banks should proceed under their respective Co-operative Societies Acts or the RDB Act. The courts and authorities under the Co-operative Societies Acts were initially responsible for debt recovery, but the enactment of the RDB Act raised questions about their continued jurisdiction.

2. Applicability of the RDB Act to Co-operative Banks:
The judgment clarifies that co-operative banks do not fall within the definition of "banking company" under Section 5 (c) of the Banking Regulation Act, 1949 (BR Act). Consequently, the provisions of the RDB Act are not applicable to the recovery of dues by co-operatives from their members. The legislative intent was to exclude co-operative banks from the RDB Act, considering they already had effective and speedy mechanisms for debt recovery under the State Co-operative Societies Acts.

3. Legislative Competence of the States:
The judgment upholds the legislative competence of the States to enact provisions relating to co-operative banks under Entry 32 of List II of the Seventh Schedule of the Constitution. The co-operative banks, being primarily co-operative societies, fall under the purview of State legislation. The judgment emphasizes that the co-operative banks' incidental banking activities do not bring them under the ambit of Entry 45, List I, which deals with "banking."

4. Jurisdiction of Courts and Authorities:
The judgment addresses the jurisdiction of courts and authorities under the Maharashtra Co-operative Societies Act, 1960, and the Andhra Pradesh Co-operative Societies Act, 1964, after the establishment of a Tribunal under the RDB Act. It concludes that the courts and authorities under these Acts would cease to have jurisdiction to entertain applications submitted by co-operative banks for recovery of their dues once the Debts Recovery Tribunal under the RDB Act is constituted. However, the State Legislature remains competent to enact the Co-operative Societies Acts.

Conclusion:
The judgment concludes that co-operative banks established under the Co-operative Societies Acts of Maharashtra, Andhra Pradesh, and the Multi-State Co-operative Societies Act, 2002, do not fall within the meaning of "banking company" under the BR Act. Therefore, the RDB Act does not apply to them for debt recovery. The legislative competence to enact provisions for co-operative banks lies with the States under Entry 32 of List II of the Seventh Schedule of the Constitution. The judgment emphasizes the distinct legislative fields of co-operative societies and banking, affirming the States' authority over co-operative banks.