Supreme Court of India

Pandurang Ganpati Chaugule v Vishwasrao Patil Murgud Sahakari Bank Ltd

AIROnline 2020 SC 527; Civil Appeal No. 5674 of 200920201 min read
The case in brief30-second read
Facts
Co-operative banks had used S.13 of the SARFAESI Act, 2002 against defaulting borrowers, first under a notification of 28 January 2003 issued under S.2(1)(c)(v), and later under S.2(1)(c)(iva), inserted with effect from 15 January 2013 for multi-State co-operative banks. Borrowers challenged the notification and the amendment, arguing that co-operative banks fall under Entry 32, List II (co-operative societies). Because of the scope of Entry 45, List I (banking) and doubts about earlier decisions, the matter was referred to a Constitution Bench of five Judges (Arun Mishra, Indira Banerjee, Vineet Saran, M.R. Shah and Aniruddha Bose JJ).
Issue
Whether co-operative banks are "banks" under the SARFAESI Act and whether Parliament had competence to apply the Act to them.
Held
Co-operative banks registered under State law and multi-State co-operative banks are governed, as to banking, by laws under Entry 45, List I, while their incorporation, regulation and winding up outside banking fall under Entry 32, List II. Co-operative banks engaged in banking are covered by the definition of banking company in S.5(c) read with S.56(a) of the Banking Regulation Act. They are banks under S.2(1)(c) of the SARFAESI Act; recovery is an essential part of banking, so the procedure under S.13 applies. Parliament was competent to provide it, and neither S.2(1)(c)(iva) nor the 2003 notification is ultra vires.
Principle
The banking activities of co-operative banks fall within Entry 45, List I, and the SARFAESI Act applies to them.
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Facts

  • Co-operative banks had used S.13 of the SARFAESI Act, 2002 against defaulting borrowers, first under a notification of 28 January 2003 issued under S.2(1)(c)(v), and later under S.2(1)(c)(iva), inserted with effect from 15 January 2013 for multi-State co-operative banks. Borrowers challenged the notification and the amendment, arguing that co-operative banks fall under Entry 32, List II (co-operative societies). Because of the scope of Entry 45, List I (banking) and doubts about earlier decisions, the matter was referred to a Constitution Bench of five Judges (Arun Mishra, Indira Banerjee, Vineet Saran, M.R. Shah and Aniruddha Bose JJ).

Issue

  1. Whether co-operative banks are "banks" under the SARFAESI Act and whether Parliament had competence to apply the Act to them.

Held

  • Co-operative banks registered under State law and multi-State co-operative banks are governed, as to banking, by laws under Entry 45, List I, while their incorporation, regulation and winding up outside banking fall under Entry 32, List II. Co-operative banks engaged in banking are covered by the definition of banking company in S.5(c) read with S.56(a) of the Banking Regulation Act. They are banks under S.2(1)(c) of the SARFAESI Act; recovery is an essential part of banking, so the procedure under S.13 applies. Parliament was competent to provide it, and neither S.2(1)(c)(iva) nor the 2003 notification is ultra vires.

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Citation

Pandurang Ganpati Chaugule v Vishwasrao Patil Murgud Sahakari Bank Ltd AIROnline 2020 SC 527; Civil Appeal No. 5674 of 2009

Reported: Supreme Court of India judgment dated 5 May 2020 (api.sci.gov.in); https://indiankanoon.org/doc/156404699/. This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.