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TMI Blog2007 (12) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... forming the interpretation Clause of that Act are relevant in this context. Clause (zf) defines "security interest". Clause (zd) defines a "security creditor" to mean any bank or financial institution or any consortium or group of banks or financial Institutions in whose favour security interest is created for due repayment, by any borrower, of any financial assistance and includes the different entities enumerated in Sub-clauses (i) to (iii) thereof. Clause (c) defines a "bank" to mean, among other things, going by sub-clause (v), such other bank which the Central Government may, by notification, specify for the purposes of the SARFAESI Act. The Co-operative Banks, the rights of which are dealt with in these writ petitions, can be banks for the purpose of the SARFAESI Act, only if they stand on the strength of notification in terms of Clause (c)(v). 3. The Central Government, through the Ministry of Finance and Company Affairs (Department of Economic Affairs)(Banking Division), have issued notification dated 28-1-2003, in exercise of powers conferred under item (v) of Clause (c) of Sub-section (1) of Section 2 of the SARFAESI Act. Thereby, the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banks" as defined in Section 5(cci) of the BR Act, falling within the notification dated 28-1-2003, issued under the SARFAESI Act. 9. By Clause (ccv) in Section 5 of the BR Act, "Primary Co-operative Bank" means a Co-operative Society other than a primary agricultural credit society; (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other Co-operative Society as a member. 10. An "Urban Co-operative Bank", going by Section 2(ta) of the KCS Act, means a Society registered under that Act and having its area of operation in the urban areas and which undertakes banking business. It is not the allegation of the petitioners that the bye-laws of the Urban Co-operative Banks permit admission of any other Cooperative Society as a member or that the paid-up share capital and reserves of those banks are less than one lakh of rupees. Therefore, the Urban Co-operative Banks are Primary Co-operative Banks as defined in Clause (ccv) in Section 5 of the BR Act and hence, Co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that "Co-operative Societies" is a subject included in Entry 32 of List II, the State List, in the Seventh Schedule to the Constitution. On such basis, it is argued that in the absence of a power with the Union to make a primary legislation touching co-operative societies, the power of the Central Government to issue a notification in terms of Section 2(1)(c)(v)(1) of the SARFAESI Act, does not include the power to notify a Co-operative Bank as a bank for the purpose of that Act. The Central Government's notification dated 28-1-2003 is also specifically challenged in some of these writ petitions. 15. In support of the challenge, considerable reliance is placed on the decision of the Apex Court in Greater Bombay Co-op. Bank Ltd. v. United Yarn Tex (P) Ltd. AIR 2007 SC 1584, hereinafter referred to as the "GBCB". Reference was also made on behalf of the petitioners to the decision of the Apex Court in Virendra Pal Singh v. District Assistant Registrar (1980) 4 SCC 109 and the decision of the Bombay High Court in Nagpur District Central Co-operative Bank Ltd. v. Divisional Joint Registrar, Co-operative Societies AIR 1971 Bom 365 laying down that the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, including in Clause (i), any security interest created in agricultural land. An examination of the provisions of the SARFAESI Act, particularly those contained in Chapter III thereof, in the backdrop of the interpretation Clause contained in Section 2 of that Act, would show that the said legislation is not a statute that merely creates an alternate mode of recovery, or provides for Courts, Tribunals or authorities with exclusive Jurisdiction and thereby changes the forum of adjudication, unlike what has been essentially done by the legislation of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, hereinafter referred to as the "RDB Act". Section 2(2) of the SARFAESI Act provides that the words and expressions used and not defined in that Act, but defined in the Indian Contract Act or the T. P. Act or the Companies Act or the Securities and Exchange Board of India Act shall have the same meanings respectively assigned to them in those Acts. The right of a secured creditor created by Section 13 of the Act with the support of the overriding effect of the SARFAESI Act provided by Section 35 thereof, is the creation of an Interest In property and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operative societies. If such a view is possible, the TP Act cannot govern the immovable properties belonging to the co-operative societies. Nor would the Contract Act apply to the co-operative societies. 20. Entries 43 and 45 in List I to the Seventh Schedule were appreciated, qua Entry 32, in List II, in GBCB (supra), to notice that the statutes relating to the field of co-operative societies that fell for consideration provided a mechanism under those legislations for resolution of disputes and that therefore, any exclusion of the jurisdiction of those authorities by the operation of the RDB Act is constitutionally impermissible in view of the exclusiveness given to the for a provided by those State legislations. In rendering that verdict, Their Lordships appreciated a classic and nice distinction between the provisions of the SARFAESI Act and the RDB Act. This can be noticed on a clear reading of the assimilation of those statutes in paragraphs 26 to 28 of that judgment. Dealing with the SARFAESI Act, the Apex Court noticed, among other things, as follows: The Central Government is authorised by Section 2(c)(v) of the Act to specify any other bank for the purpose of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the RDB Act are also those which create an alternate forum, intended to provide a quicker mode of recovery, by substituting the Tribunals constituted under that Act for the civil Courts. That necessary fall out, was in tune with the needs of the changing times. The RDB Act does not provide the creation of any interest like security interest as is created by the SARFAESI Act. 23. The legislative competence as regards SARFAESI Act falls easily within Entries 6 and 7 of List III and thereby within the competence of the Union, even as regards the co-operative banks. The impugned notification, issued by the Central Government, therefore, stands. 24. For the aforesaid reasons, the issues regarding the applicability of SARFAESI Act to the Kerala State Co-operative Bank, the District Co-operative Banks and the Urban Co-operative Banks and the validity of notification dated 28-1-2003 issued by the Central Government, in exercise of power under Section 2(1)(c)(v) of the SARFAESI Act, are answered against the petitioners and these writ petitions are dismissed, preserving the right of the petitioners for appropriate statutory remedies in terms of the provisions in the SARFAESI Act. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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