Dileepkumar M.C. v. State of Kerala and Others

**MONDAY, THE 6TH DAY OF AUGUST 2018 / 15TH SRAVANA, 1940** **WP(C).No. 16973 of 2018** ## **PETITIONER** **DILEEPKUMAR M.C., S/O.CHANDRASEKHARAN, AGED 52 YEARS, RESIDING AT MATHIRAPPILLY HOUSE, CHERANALLOR 682034** **BY ADV.SRI.M.M.MONAYE** ## **RESPONDENTS:** **1. STATE OF KERALA REPRESENTED BY SECRETARY TO GOVERNMENT, DEPARTMENT OF CO OPERATION, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM 695001** **2. REGISTRAR OF CO OPERATIVE SOCIETIES OF KERALA THIRUVANANTHAPURAM 695001** **3. JOINT REGISTRAR OF CO OPERATIVE SOCIETIES (GENERAL) ERNAKULAM, KAKKANAD, KOCHI 682030** **4. THE ERNAKULAM DISTRICT CO OPERATIVE BANK LTD. HEAD OFFICE, KAKKANAD, KAKKANAD PO, ERNAKULAM 682030, REPRESENTED BY ITS GENERAL MANAGER** **R1 TO R3 BY SPL GOVERNMENT PLEADER MOHAMMED HASHIM R4 BY SRI.N.RAGHURAJ, SC,** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 20-06-2018, THE COURT ON 06-08-2018, DELIVERED THE FOLLOWING:** ## **WP(C).No. 16973 of 2018 (V)** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **EXHIBIT P1 TRUE COPY OF THE SETTLEMENT DEED NO. 489/2000 DATED 13.02.2000** **EXHIBIT P2 TRUE COPY OF THE DISCHARGE CERTIFICATE FROM THE GENERAL HOSPITAL DATED 05.03.2015** **EXHIBIT P3` TRUE COPY OF THE PASS BOOK GIVING DETAILS OF THE AMOUNT REMITTED TOWARDS THE LOAN TAKEN ON PAGE 1 EXHIBIT P4 TRUE COPY OF THE NOTICE DATED 29.03.2018 EXHIBIT P5 TRUE COPY OF THE REPRESENTATION DATED 11.4.2018 EXHIBIT P6 TRUE COPY OF THE ACKNOWLEDGEMENT CARD DATED 21.04.2018** **EXHIBIT P7 TRUE COPY OF THE SECURITY ENFORCEMENT NOTICE DATED 11.09.2017 EXHIBIT P8 TRUE COPY OF THE CIRCULAR NO. 23/2014 DATED 30.05.2014** ## **RESPONDENTS EXHIBITS NIL** **/TRUE COPY/** **PA TO JUDGE** **sdr/-** **7.8.18** ## **ANU SIVARAMAN, J. ----------------------------------------------W.P(C).No. 16973 of 2018 ----------------------------------------------Dated this the 6[th] day of August, 2018** ## **JUDGMENT** The issue raised in this writ petition is with regard to the legal validity of the action taken by a District Co-operative Bank to recover amounts due from the petitioner by recourse to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'SARFAESI Act'). The petitioner primarily seeks a declaration that the provisions of the Kerala Co-operative Societies Act, 1969 (for short, 'the Act') will prevail for recovery of amount due from the petitioner and that the SARFAESI Act stands ousted. Exhibit P4 notice issued under the SARFAESI Act is under challenge as being in violation of the provisions of the Act. 2. Heard learned counsel for the petitioner and the learned Standing Counsel for the respondent Society as well as the learned Government Pleader. 3. Learned counsel for the petitioner places reliance on the decision of three Judge bench of the Apex Court in _**Greater**_ 2 _**WP(C).16973/18**_ ## _**Bombay Co-op. Bank Ltd. v. United Yarn Tex (P) Ltd.**_ [2007(3) KLT 302 (SC)]. Relying on the observations in paragraph 26 of the said judgment, the learned counsel would contend that the Apex Court has held that in view of the definition of 'banking company' as provided in the Banking Regulation Act and in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) as well as the definition of “Banking Company” under the SARFAESI Act, it is clear that banking company does not include a Co-operative Bank. It is further contended that the bench had come to the conclusion that Co-operative Banks established under the State Co-operative Societies Act and Multi-State Co-operative Societies Act, 2002 transacting the business of banking, do not fall within the meaning of “banking company” under the Banking Regulation Act and therefore the provisions of the RDB Act are not applicable to the recovery of dues by the cooperative societies from their members. 4. The learned counsel also relied on a decision of the Karnataka High Court in _**V.Krishnaswamy v. KRKSB Niyamitha**_ [AIR 2008 Karnataka 20] where, relying on the decision of the Apex Court, it was held that the observation 3 _**WP(C).16973/18**_ made by the Apex Court would make it clear that the definition of 'Bank' under the SARFAESI Act, which adopts Banking Regulation Act, does not include Co-operative Banks. 5. Learned counsel for the 4[th] respondent would, on the other hand, relies on a decision of this Court in _**Varghese v. Kerala State Co-operative Bank Ltd.**_ [2008(1) KLT 521] to contend that the issue of applicability of the SARFAESI Act to cooperative Banks has been specifically considered by this Court and it has been held that in view of the notification of the Central Government dated 25.9.2013, debts due to the State Co-operative Banks, District Co-operative Banks and Primary Credit Co-operative Societies can also be realised under the provisions of the SARFAESI Act. 6. I have considered the contentions advanced. The contention of learned counsel for the petitioner is founded on the observation contained with regard to the SARFAESI Act in the decision of the Apex Court. However, I notice that the question which was raised for consideration before the bench of the Apex Court was specifically with regard to the applicability of the RDB Act to Co-operative Banks established under the Maharashtra Co-operative Societies Act, 1960, the Multi-State 4 _**WP(C).16973/18**_ Co-operative Societies Act, 2002 and Andhra Pradesh Cooperative Societies Act, 1964. Paragraph 12 of the decision in _**Greater Bombay Co-op. Bank Ltd.'s case (supra)**_ shows that the provisions of the various Statutes are relevant for the purpose of deciding the question raised before the bench. Thereafter, the Apex Court observed as follows: _“26. The 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 21st day of June 2002. In S.2(d) of the Securitisation Act same meaning is given to the word 'banking company' as is assigned to it in clause (e) of S.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 S.2 (c) and one of which is 'banking company'. The Central Government is authorised by S.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 “co-operative bank” as defined in S.5 (cci) of the BR Act as a “bank” by lifting the definition of 'co-operative bank' and 'primary cooperative bank' respectively from S.56 Clauses 5 (cci) and (ccv) of Part V. The 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 No. 23 of 1965, while amending the BR Act, it did not change the_ 5 _**WP(C).16973/18**_ _definition in S.5 (c) or even in 5(d) to include co-operative banks; on the other hand, it added a separate definition of 'co-operative bank' in S.5 (cci) and 'primary co-operative bank' in S.5 (ccv) of S.56 of Part V of the BR Act. Parliament while enacting the Securitisation Act created a residuary power in S.2 (c)(v) to specify any other bank as a bank for the purpose of that Act and in fact did specify 'co-operative banks' by Notification dated 28-1-2003. The context of the interpretation clause plainly excludes the effect of a reference to banking company being construed as reference to a co-operative bank for three reasons: firstly, S.5 is an interpretation clause; secondly, substitution of 'co-operative bank' for 'banking company' in the definition in S.5 (c) would result in an absurdity because then S.5 (c) would read thus: “co-operative bank” means any company, which transacts the business of banking in India; thirdly, S.56 (c) does define “co-operative bank” separately by expressly deleting/ inserting clause (cci) in S.5. The Parliament in its wisdom had not altered or modified the definition of 'banking company' in S.5 (c) of the BR Act by Act No. 23 of 1965.”_ The finding of the Apex Court was specifically with regard to the applicability of the RDB Act to Co-operative Banks. 7. In the above view of the matter, the finding of the Karnataka High Court at paragraph 13 of the judgment referred to in _**V.Krishnaswamy's case (supra)**_ that the observation made by the Apex Court would make it clear that a Co-operative 6 _**WP(C).16973/18**_ Bank is not a banking company under the SARFAESI Act was neither justified nor accurate. After considering the judgment of the Apex Court as well, a learned single Judge of this Court has, in _**Varghese's case (supra),**_ clearly held that the definition of 'Bank' under Section 2(c) of the SARFAESI Act takes in Cooperative Banks which the Central Government may, by notification, specify for the purpose of this Act. It was also noticed that Section 35 of the SARFAESI Act provides that the provisions of the Act shall have effect notwithstanding anything contained in any other laws in force. It was further held that 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 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, were answered against the petitioner in the said writ petition. 7 _**WP(C).16973/18**_ 8. It is not in dispute before me that the Central Government has notified District Co-operative Banks as Banks for the purpose of the SARFAESI Act. In the above view of the matter, having gone through the decision of the learned single Judge of this Court and the decisions of the Apex Court as well as the Karnataka High Court, I am unable to agree with the proposition that Co-operative Banks are exempted from the provisions of the SARFAESI Act. In view of the notification issued by the Central Government, a District Co-operative Bank would definitely be a Bank for the purpose of the application of the SARFAESI Act, even if it is not a banking company as provided under the RDB Act. 9. The contention that the 4[th] respondent is not empowered to invoke the provisions of the SARFAESI Act for realisation of amounts due to it cannot be accepted. I am in agreement with the decision in _**Varghese's case (supra)**_ on the above point. The prayer for declaration is therefore not liable to be granted. 10. Further contention of the petitioner that the right of the petitioner to raise a dispute under Section 69 of the Act cannot be precluded by the invocation of the powers under the 8 _**WP(C).16973/18**_ SARFAESI Act by the Society appears to be a sound proposition, since the non obstante clause in Section 13 of the SARFAESI Act mentions only Sections 69 and 69(A) of the Transfer of Property Act and not the provisions of any other Act. Section 37 also provides that application of other Laws are not barred. The right of the petitioner to raise a dispute under Section 69 will therefore remain unaffected by the steps initiated by the Bank under the SARFAESI Act. However, the remedy as against the measures initiated under the SARFAESI Act would evidently be under Section 17 thereof which the petitioner is also free to invoke. With the above observation, the writ petition is dismissed. Sd/- **ANU SIVARAMAN JUDGE** _vgs_