Madras High Court
Jhon vs The General Manager - Repco Bank on 13 December, 2021
W.P.Nos.3628 to 3632 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 13.12.2021
CORAM
THE HON'BLE MR. JUSTICE KRISHNAN RAMASAMY
W.P.Nos.3628 of 3632 of 2018
W.P.No.3628 of 2018
Jhon ...Petitioner
Vs
1.The General Manager - REPCO Bank,
Having its Registered Office at
No.33, North Usman Road,
T.Nagar, Chennai -17.
2.The Branch Manager,
Dharmapuri Branch,
1/15A-1, Salem Main Road,
Bharathipuram
Dhamapuri -5. ... Respondents
Prayer Writ Petition filed under Section 226 of the Constitution of India,
prayed for the issuance of Writ of Mandamus, directing the respondents to close
the mortgage loan in SLB 147 and consequently to return all the original
documents based on the representation dated 14.08.2017.
1/15
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For Petitioner : No Appearance
For Respondents : Mr.A.Ilangovan
ORDER
These Writ Petitions have been filed, for the issuance of Writ of
Mandamus, directing the respondents to close the mortgage loan in SLB 147,
SLB 152, SLB, 162, MSL 21 & MSL 26 and consequently to return all the
original documents based on the representation dated 14.08.2017.
2.When the matter was taken up for hearing today, there is no
representation on behalf of the petitioners.
3.The learned counsel appearing for the respondents submitted that the
respondents in the present Writ Petition is the Multi Cooperative Society,
therefore, the Writ Petition will not lie against the respondents. He further
submitted that in the case of S.P.Ganesan vs. The Authorised Officer, REPCO
Bank, reported in 2021 5 CTC 517, the Hon'ble First Bench of this Court held
that the respondents herein is not a Government Organisation.
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4.The order passed by the Hon'ble First Bench of this Court referred to
above is extracted hereunder:
"The short question that falls for consideration
in this matter is whether the REPCO Bank is
authorised to invoke the provisions of the
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002.
2. The writ petitioner has obtained credit
facilities from the respondent REPCO Bank. Upon the
perceived failure on the part of the writ petitioner to
repay the dues within time, a notice has been issued
under Section 13(2) of the Act of 2002 on April 20,
2017. A further notice has been issued under Section
13(12) of the Act of 2002 on November 15, 2019 for
taking possession of the secured assets. Since a
possession notice has been issued, it is evident that the
respondent has purported to take steps under Section
13(4) of the Act of 2002. In an ordinary situation
where the respondent may be regarded as a secured
creditor within the meaning of that expression used in
the Act of 2002, the writ petitioner in the present case
would have had an opportunity to approach the
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appropriate Debts Recovery Tribunal under Section 17
of the Act of 2002.
3. The writ petitioner, however, contends that
the respondent is not a bank at all and, thus, cannot be
regarded as a secured creditor within the meaning of
the relevant expression in the Act of 2002. The writ
petitioner asserts that all steps taken by the respondent
under the Act of 2002 are void and completely without
jurisdiction.
4. For the purpose of obtaining the views of the
Reserve Bank of India, a notice was issued to such
central bank. According to the Reserve Bank, the
respondent is not a bank within the meaning of the
Banking Regulation Act, 1949. It is further submitted
on behalf of the Reserve Bank that it has not issued
any banking license to REPCO Bank.
5. Indeed, the writ petitioner has relied on an
affidavit filed by the Reserve Bank in W.P.No.9623 of
2019 in this Court. At paragraph 12 of such affidavit,
the Reserve Bank categorically indicated that “the
Repatriates Cooperative Finance and Development
Bank Limited (REPCO BANK), which was originally
registered under the Madras Cooperative Societies Act,
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1961 as a co-operative society, is deemed to be
registered under the Multi-State Co-operative Societies
Act, 2002 as a multi-state cooperative society, but has
not been issued a banking licence by the RBI and does
not come under the regulatory purview of Reserve
Bank of India.” Elsewhere in the relevant affidavit, the
Reserve Bank stated that the respondent was under the
administrative control of the Ministry of Home Affairs,
Government of India and was regulated by the Central
Registrar of Co-operative Societies. The Reserve Bank
also referred to an order of March 26, 2014 by which
the Central Registrar instructed all multi-state co-
operative societies to discontinue accepting deposits
from nominal members “as this is construed as
acceptance of deposits from public and carrying out
banking activities.”
6. Though limited participation of the Reserve
Bank was invited by this Court, such central bank has
indicated the position without expressing any opinion.
7. According to the respondent, it was conferred
the status of a bank in or about 1969. The history of the
respondent has been recounted in the counter-affidavit
filed on its behalf. It has been asserted that the
Repatriates Cooperative Finance and Development
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Bank was brought into existence to look into the
rehabilitation of repatriates from the then Ceylon,
Burma and Vietnam. According to the respondent, it
was initially involved in the implementation of welfare
schemes to help repatriates from the three countries,
inter alia, to set up business. It is admitted that the
respondent was registered under the Madras
Cooperative Societies Act, 1961.
8. The counter-affidavit refers to the Sirima-
Shastri Pact coming to an end in 1982, whereupon the
Ministry of Home Affairs, through its Freedom
Fighters Division, continued the further functioning of
the respondent for the welfare of the repatriates from
the three countries.According to the respondent, it
“entered into the full-fledged financial activities in
order to cater to the needs and the Rehabilitation of
Repatriates ... ventured to accept deposits from its
members and started lending loans to such members ...
in terms of the provisions of Multi-State Co-operative
Societies Act, 2002.”
9. The respondent claims to earn profit out of its
business activities and asserts that it has distributed
dividends of at least 20% every year.
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10. The shareholders of the respondent have
been indicated at paragraph 14 of the counter-affidavit.
The Government of India apparently holds 49.07% of
the shareholding in the respondent. Repatriates
constitute the second largest block of 44.70% and the
State Governments of Tamil Nadu, Andhra Pradesh,
Telangana, Kerala and Karnataka hold the balance.
The Chairman of the respondent is of Principal
Secretary rank in the State of Tamil Nadu and the
Board of Directors comprises an Additional Secretary
in the Union Ministry of Home Affairs, a Joint
Secretary from the Rehabilitation Division of the same
Ministry and representatives from States, among
others.
11. Paragraph 14 of the counter-affidavit refers
to the respondent having made “an application for a
regular banking license ... and is under consideration
by the Reserve Bank of India.”
12. In essence, the respondent has tried to
demonstrate that it is a responsible organisation
manned by senior government personnel. Whether to
attach a degree of intimidation or a further notch of
seriousness, the Court's attention is drawn to pages 62
and 63 of the typed set filed by the respondent, which
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reveals that a meeting pertaining to the respondent was
held by the Prime Minister's office, no less.
13. However exalted may have been the venue
of any meeting pertaining to the respondent, the
character of the organisation and the bounds of its
authority must be found in legal provisions.
14. The respondent is not a secured creditor
within the meaning of Section 2(zd) of the Act of 2002.
The definition has five limbs, the first of them being a
bank or financial institution; the second and fourth
being debenture trustees; the third being an asset
reconstruction company and the fifth being any other
trustee holding securities on behalf of a bank or
financial institution. The respondent cannot be covered
by the last four limbs and does not proclaim to be
answering to any of such descriptions. However, the
respondent claims to be covered by sub-clause (i) of
clause (zd) of the definition section:
“(zd) “secured creditor” means -
(i) any bank or financial institution or any
consortium or group of banks or financial
institutions holding any right, title or interest
upon any tangible asset or intangible asset as
specified in clause (l)”
15. As is evident from the expression itself, a
secured creditor must first be a creditor and must also
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have obtained securities from the debtor. Thus, a
secured creditor within the meaning of aforesaid
definition may be a bank or a financial institution or
any consortium or group of banks or financial
institutions to satisfy the first limb of the definition;
and, such bank or banks or financial institution or
institutions must also hold securities by way of
financial assets as defined in clause (l) of Section 2(1)
of the Act which is the definition provision.
16. A bank is defined in Section 2(1)(c) of the
Act of 2002. The respondent cannot demonstrate that it
is a banking company or a corresponding new bank or
State Bank or a subsidiary bank or even a multi-state
co-operative bank. There is no doubt that the
respondent is a multi-state co-operative society, but a
multi-state co-operative society need not be a multi-
state co-operative bank.
17. The respondent is not a financial institution
within the meaning of the expression in Section
2(1)(m) of the Act of 2002. The several limbs under
clause (m) cover a public financial institution;
specified institutions; the International Financial
Corporation; a debenture trustee; an asset
reconstruction company and other institutions as may
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be notified by the Central Government. There is no
document or any shred of paper relied upon by the
respondent to indicate that it falls within any of such
limbs of clause (m) of the definition provision.
18. Most importantly, the trump card that the
respondent uses to assert its character as a secured
creditor within the meaning of the Act of 2002 is a
notification published by the Central Government in
1972. An extract from the Gazette of India of February
19, 1972 has been relied upon. So that nothing is
detracted from the submission of the respondent in
such regard, the entirety of the relevant publication is
reproduced:
“New Delhi, the 19th January,
1972 S.O. 626.– In exercise of the
powers conferred by section 53, read
with section 56 of the Banking
Regulation Act, 1949 (10 of 1949), the
Central Government, on the
recommendation of the Reserve Bank of
India, hereby declares that the provisions
of sub-section (1) of section 7 of the said
Act, in so far as they prohibit a co-
operative society other than a cooperative
bank from using the word “Bank” as part
of its name, shall not apply to the
Repatriates' Cooperative Finance and
Development Bank Limited, Madras,
which is not a co-operative bank but a
society authorized to accept deposits of
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money only from its members and not
from the public.”
19. By such notification, all that the Central
Government permitted the respondent to do was to use
the word “bank” as a part of its name. However, the
use of such word “bank” did not imply that the
respondent could carry on banking activities. Section 7
of the Banking Regulation Act, 1949, inter alia,
prohibits the use of the words “bank”, “banker”,
“banking” or “banking company” by any person other
than a banking company or any person other than one
carrying on the business of banking in India. The very
fact that Section 7 came into play and the exemption
was granted by the 1972 notification by the Central
Government was recognition of the fact that the
respondent herein did not carry on banking business
but was permitted to incorporate the word “bank” as a
part of its name, nonetheless.
20. It may also not be missed that the relevant
notification prohibited the respondent society to accept
deposits of money from the public.
21. Whatever the business of the respondent
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may have blossomed to, it cannot be regarded as a
bank. No banking business is undertaken in this
country without obtaining a license from the Reserve
Bank. There is a reference in the counter-affidavit used
by the respondent that it has applied for a banking
license. Implicit in such reference is the admission that
the license has not yet been granted.
22. The respondent has relied on a judgment
reported at (2020) 9 SCC 215 (Pandurang Ganpati
Chaugule v. Vishwasrao Patil Murgud Sahakari Bank
Limited) and has relied on several passages therefrom,
including paragraph 103 and thereafter. However, it is
evident that the finding rendered in the judgment
pertained to co-operative banks being entitled to
invoke the provisions of the Act of 2002 and not
cooperative societies which are not entitled to carry on
banking business as the present respondent. The
dictum in the said judgment does not assist the
respondent herein, which is admittedly a mere co-
operative society not carrying on banking business and
not a co-operative bank either.
23. Indeed, in Pandurang Ganpati Chaugule the
second legal question that was raised was whether the
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expression, 'banking company', as defined under
Section 5(c) of the Act of 1949 covered co-operative
banks registered under the State co-operative laws or
as multi-state co-operative societies. The issue was
answered in paragraphs 103 to 122 of the judgment. It
is evident from the concluding paragraphs of the
discussion that only co-operative banks were found to
be banks and covered under “Banking” in List-I, Entry
45 of the Seventh Schedule to the Constitution.
24. For the grounds indicated above, the
respondent cannot be regarded as a bank or a secured
creditor within the meaning of the relevant word and
expression in the Act of 2002. As a consequence, the
respondent cannot resort to any of the measures
indicated in the said Act, whether under Section 13
thereof or otherwise.
25. That does not imply that the respondent has
no recourse to the writ petitioner or to pursue a
defaulting debtor. If the respondent has obtained
securities, as it appears to have, the respondent has to
carry the claim to an appropriate forum, possibly to a
civil Court, and invoke Order XXXIV of the Code of
Civil Procedure, 1908 that has recently gone out of
fashion after bank claims have been parked with a
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tribunal and taken beyond the pale of the sovereign
court system.
26. W.P.No.33133 of 2019 is allowed by setting
aside the notices issued by the respondent under the
Act of 2002 and setting at naught all measures
purported to be taken by the respondent under such
statute, including, in particular, the impugned notices
dated April 20, 2017 and November 15, 2019. There
will be no order as to costs."
5.The above order passed by the Hon'ble First Bench of this Court makes
it clear that, the first respondent is not a Bank within the meaning of the
Banking Regulation Act, 1949. Therefore, no Writ Petition will lie against the
respondents.
6.However, since there is no representation for the petitioner, these Writ
Petitions are dismissed for non-prosecution. No costs.
13.12.2021
Index: Yes/No
Internet:Yes/No
Speaking Order/Non Speaking Order
rst
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W.P.Nos.3628 to 3632 of 2018
KRISHNAN RAMASAMY.J.,
rst
W.P.Nos.3628 of 3632 of 2018
13.12.2021
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