Telangana High Court

Mohd. Abdullah Khan, Hyd vs Person Incharge, The Hyd Coop ... on 31 December, 2021

Bench: Satish Chandra Sharma, N.Tukaramji

 THE HON'BLE THE CHIEF JUSTICE SATISH CHANDRA SHARMA
                                AND
          THE HON'BLE SRI JUSTICE N. TUKARAMJI


W.A.No.1680, 1681, 1682, 1695, 1696, 1701, 1711, 1712 and
                      1714 of 2017
COMMON JUDGMENT:   (Per the Hon'ble the Chief Justice Satish Chandra Sharma)


     Regard being had to the controversy involved in the

aforesaid cases, they were heard together and are being

decided by a common judgment.

     The facts of W.A.No.1680 of 2017 are reproduced as

under:

     W.A.No.1680 of 2017 is arising out of an order

passed in W.P.No.8910 of 2007 which was decided by the

learned Single Judge by a common order passed on

22.09.2017 in W.P.Nos.8910, 8911, 9044, 9045, 9047,

9084, 12014, 12015 and 12016 of 2007.                           The facts of

W.P.No.8910 of 2007 reveal that the respondent No.1

herein/the Hyderabad Cooperative Urban Bank Limited

(hereinafter referred to as, the Bank) incorporated under

the provisions of the Andhra Pradesh Cooperative

Societies Act, 1962, granted financial assistance to

Mohd. Abdullah Khan, who is the appellant in the

present writ appeal and who was one of the respondents

in the writ petition preferred by the Bank and the

Hyderabad Cooperative Credit Society Limited.

Undisputedly, the loan amount was not repaid by Mohd.

Abdullah Khan and in those circumstances, proceedings

were initiated under Section 61 of the Andhra Pradesh

Cooperative Societies Act. An award was passed on

30.03.2002 and pursuant to the award, execution

petition was preferred under Section 71 of the Andhra

Pradesh Cooperative Societies Act read with Rule 52 of

the Rules framed thereunder. The undisputed facts of

the case further reveal that the appeal was preferred

before the Andhra Pradesh Cooperative Tribunal at

Hyderabad (hereinafter referred to as, the Tribunal) and

finally the Tribunal has allowed the appeal by judgment

dated 09.03.2007. In all the cases, the appeals were

allowed in favour of the borrowers. It is noteworthy to

mention that the property was sold, sale certificates were

granted in the matter and the Bank thereafter preferred

writ petitions challenging the order dated 09.03.2007

passed by the Tribunal. The writ petitions were also filed

by the successive bidders in whose favour sale was

confirmed and finally the learned Single Judge has

allowed the writ petitions and set aside the award passed

by the Tribunal dated 09.03.2007. The operative portion

of the order passed by the learned Single Judge while

allowing the writ petitions in favour of the Bank is

reproduced as under:-

"80. Applying the above principles, if the borrower is allowed to raise the above referred technical pleas and seek to escape liability to pay money to the Bank which he admitted before the arbitrator, it would be a travesty of justice and it cannot be permitted. The Tribunal lost sight of this basis principle of justice and granted relief to the borrower by allowing his appeals accepting the hyper technical pleas raised by him, which have no merit.

81. For the aforesaid reasons, all the Writ Petitions are allowed; orders dt.09-03-2007 in C.T.A.Nos.86, 87, 88 of 2002 as well as C.T.A.Nos.89, 90 and 91 of 2006 are set aside; the sale confirmation orders dt.26-09-2006 in E.P.Nos.8, 9 and 10 of 2005 of the Dy. Registrar/Divisional Cooperative Officer, Charminar Division in favour of the petitioners in W.P.No.12014, 12015 and 12016 of 2007 are declared as valid and enforceable; the sale certificates issued to the said petitioners pursuant to the said orders are held valid; and they are entitled to delivery of possession of the property mentioned therein from the borrower or other persons in possession thereof. No costs.

82. As a sequel, the miscellaneous petitions pending, if any, shall stand closed."

The present appeals have been filed by the

borrowers before this Court and the learned counsel

appearing for the borrowers has straight away drawn the

attention of this Court towards the judgment delivered by

a Full Bench of this Court in the case of M. Babu Rao

and others v. Deputy Registrar of Co-operative

Societies/Officer on Special Duty, Vasavi Co-op.

Urban Bank Ltd., Malakpet, Hyderabad and others1.

His contention is that in the light of the judgment

delivered by the Full Bench of this Court, the action

initiated under Section 61 of the Andhra Pradesh

Cooperative Societies Act is a nullity and the Tribunal

was not having jurisdiction in the matter. He has also

argued before this Court that the debt due in the present

case was more than Rs.10.00 lakhs and therefore, the

only recourse available to the Bank was to file an

application under the provisions of the Recovery of Debts

and Bankruptcy Act, 1993. He has also placed reliance

upon the judgment delivered by the Constitution Bench

of the Hon'ble Supreme Court in the case of Pandurang

Ganpati Chaugule v. Vishwasrao Patil Murgud

Sahakari Bank Limited2 and his contention is that in

the light of the aforesaid judgment also, the Bank could

not have invoked the provisions under the Andhra

Pradesh Cooperative Societies Act, 1964, and the entire

action is null and void and hence, the order passed by

the learned Single Judge deserves to be set aside.

On the other hand, learned counsel appearing for

the Bank and the subsequent purchasers have placed

reliance upon the judgment delivered in the case of

2005 (4) ALD 582 (FB)

(2020) 9 SCC 215

Greater Bombay Coop. Bank Ltd. v. United Yarn Tex

(P) Ltd. and others3 and the contention of the learned

Senior Counsel appearing in the matter is that in the

light of the aforesaid judgment, the action initiated by the

Cooperative Society does not warrant any interference

and the learned Single Judge was justified in allowing the

writ petition. It has also been argued that in the light of

the Judgment delivered by the Hon'ble Supreme Court in

the case of Greater Bombay Coop. Bank Ltd. (supra),

the question of interference by this Court does not arise.

It has also been argued before this Court that the

subsequent judgment delivered by the Hon'ble Supreme

Court in the case of Pandurang Ganpati Chaugule

(supra) was a case arising out of Securitisation and

Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002, and therefore, the judgment

does not help the appellant at all.

This Court has carefully gone through the judgment

delivered on the subject by the Full Bench of this Court

in M.Babu Rao's case (supra). The Full Bench of this

Court in paragraph 133 of the said judgment has held as

under:-

(2007) 6 SCC 236

"133. On the analysis above, we conclude, declare and hold:

(a) That recovery of monies (whether called a debt, arrears or by any other name) due to a banking institution including a Co-operative Bank is a matter that integrally falls within the core and substantative area of the legislative field Banking in Entry-45, List-I of the Seventh Schedule of the Constitution.

(b) The above subject matter is therefore excluded from the State legislative field in Entry-32, List-II of the Seventh Schedule.

(c) Recovery of monies due to a Co-operative Bank is not a matter that falls within the incidental and ancillary areas of the State legislative field in Entry-32, List-II of the Seventh Schedule.

(d) A Co-operative Bank as defined in Section 5(cci) of the Banking Regulation Act, 1949 (as amended by Act 23 of 1965) is a Bank and a Banking company within the meaning of Section 2(d) and (e) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993.

(e) A Tribunal constituted under the provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 has exclusive jurisdiction, powers and authority to entertain and decide applications from a Co-operative bank for recovery of debts due to such bank, subject to the pecuniary limits of jurisdiction specified by or under the said Act.

(f) Section 71(1) of the 1964 Act in so far as it expressly confers power on the Registrar to issue a certificate for recovery of arrears of any sum advanced by a financing bank to its members, is beyond the legislative competence of the State.

(g) The words "or financing bank" in Section 71(1) of the Andhra Pradesh Co-operative Societies Act, 1964 expressly result in the provisions of the Section transgressing the State's legislative limits. These words being severable are therefore declared invalid.

(h) The provisions of Section 61 and 71 {after striking down of the words in Section 71(1)} are restrictively construed as excluding any jurisdiction, powers or authority in the Registrar in respect of recovery of debts or arrears due to a Co-operative Bank, its members or others which are advanced, lent or otherwise made over to such member or person, during the course of the banking business of such Co- operative Bank.

(i) (a) No claim, application or other proceedings lodged or instituted before the Registrar, by a Co-operative Bank for recovery of the amount/debt due from a member or other person pursuant to advances made in the course of its banking business could be entertained or determined by the Registrar.

(b) Any award or order passed, certificate issued or an order in execution proceedings, by the Registrar on any claim or application of a Co-operative Bank, is patently and inherently without jurisdiction, null, void and inoperative.

(j) During the pendency of these writ petitions, by virtue of various court orders certain amounts have been deposited by some of the writ petitioners. At no point of time these writ petitioners have disputed the liability of the amounts already deposited with the banks in pursuance of the orders of the Court. Therefore, we direct that the amounts deposited shall be retained by the concerned banks and adjusted against the liabilities, if any, that remain to be

determined pursuant to proceedings initiated by the respective banks in accordance with this judgment.

(k) In view of the declaration in this judgment, the respondent-banks are at liberty to proceed with the recovery of debts due to them, before the appropriate forum and under the appropriate law, in accordance with this judgment.

(l) As the proceedings initiated before the Registrar or any other authority under the 1964 Act were bona fide and as considerable time had been consumed in the litigation in this case also, the respondents-banks shall be entitled to set off the period spent in pursuing their claims before the Registrar or other Fora and before this Court, in computing the period for filing appropriate applications/claims before the appropriate authority/Tribunal.

In the considered opinion of this Court, keeping in

view the judgment of the Full Bench, the action initiated

by the Bank certainly deserves to be set aside, as it was

only the Debts Recovery Tribunal, which was having

jurisdiction in the matter keeping in view the definition of

"bank" and "banking company" as defined under the

Banking Regulation Act, 1949.

Learned Senior Counsel appearing for the Bank has

argued that in the year 2009, the banking licence was

cancelled.

The banking licence was cancelled in the year 2009,

whereas action was initiated by the bank in the year

2002 and the matter was adjudicated by the Tribunal in

the year 2007. Therefore, the subsequent revocation of

banking licence does not help the respondents 1 and 2

herein in any manner. Much has been argued by the

learned Senior Counsel in the matter placing reliance on

Greater Bombay Coop. Bank Ltd.'s case (supra). The

Hon'ble Supreme Court in the said decision has held as

under (paragraphs 96 and 97):-

"96. None of the contentions of the learned counsel for the respondents supporting the judgments and orders of the High Courts impugned before this Court on the question of interpretation clause as well as the question of constitutional clause formulated hereinabove can be sustained.

97. For the reasons stated above and adopting pervasive and meaningful interpretation of the provisions of the relevant statutes and Entries 43, 44 and 45 of List I and Entry 32 of List II of the Seventh Schedule of the Constitution, we answer the reference as under:

"Cooperative banks" established under the Maharashtra Cooperative Societies Act, 1960 (the MCS Act, 1960), the Andhra Pradesh Cooperative Societies Act, 1964 (the APCS Act, 1964), and the Multi-State Cooperative Societies Act, 2002 (the MSCS Act, 2002) transacting the business of banking, do not fall within the meaning of "banking company" as defined in Section 5(c) of the Banking Regulation Act, 1949 (the BR Act). Therefore, the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (the RDB Act) by invoking the doctrine of incorporation are not applicable to the recovery of dues by the cooperatives from their members."

The Hon'ble Supreme Court in the case of

Pandurang Ganpati Chaugule (supra), which is the

judgment delivered by the Constitution Bench, has dealt

with the earlier judgment of the Supreme Court and

paragraphs 120 and 142 of the aforesaid judgment read

as under:

"120. In Greater Bombay Coop. Bank Ltd. v. United Yarn Tex (P) Ltd. ((2007) 6 SCC 236), the provisions of the BR Act, 1949 were simply noted; there was no in- depth consideration of the various provisions and, more particularly of those contained in Section 56 of the Act. The main issue was whether the court had jurisdiction or Debts Recovery Tribunal to recover the amount from the debtor. In that connection, the question of application of RDB Act, 1993 to the co- operative societies constituted under MSCS Act as well as State Cooperative Acts arose and also whether the State legislature was competent to enact legislation concerning cooperative societies incidentally transacting the business of banking in the light of List II Entry 32. The findings were recorded on various aspects with which we are unable to agree. The discussion on various issues was not in depth, could not be said to be binding. We have dealt with the various questions with the help of various decisions of this Court, and we find ourselves unable to agree with the conclusions recorded therein. The cooperative banks are doing the banking business, it could not be said to be an incidental activity but main and only activity. We are unable to subscribe to the view taken in Greater Bombay Coop. Bank Ltd. (supra) as the provisions were not correctly appreciated.

142. Resultantly, we answer the reference as under:

142.1.(1)(a) The cooperative banks registered under the State legislation and multi-State level cooperative societies registered under the MSCS Act, 2002 with respect to "banking" are governed by the legislation relatable to Schedule VII List I Entry 45 of the Constitution of India.

142.1. (b) The cooperative banks run by the co- operative societies registered under the State legislation with respect to the aspects of "incorporation, regulation and winding up", in particular, with respect to the matters which are outside the purview of Schedule VII List I Entry 45 of the Constitution of India, are governed by the said legislation relatable to Schedule VII List II Entry 32 of the Constitution of India.

142.2. (2) The cooperative banks involved in the activities related to banking are covered within the meaning of "banking company" defined under Section 5(c) read with Section 56(a) of the Banking Regulation Act, 1949, which is a legislation relatable to List I Entry 45. It governs the aspect of "banking" of co- operative banks run by the cooperative societies. The cooperative banks cannot carry on any activity without compliance of the provisions of the Banking Regulation Act, 1949 and any other legislation applicable to such banks relatable to "Banking" in List I Entry 45 and the RBI Act relatable to Schedule VII List I Entry 38 of the Constitution of India.

142.3. (3)(a) The cooperative banks under the State legislation and multi-State cooperative banks are "banks" under Section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The recovery is an

essential part of banking; as such, the recovery procedure prescribed under Section 13 of the SARFAESI Act, a legislation relatable to Schedule VII List I Entry 45 to the Constitution of India, is applicable.

142.4. (3)(b) Parliament has legislative competence under Schedule VII List I Entry 45 of the Constitution of India to provide additional procedures for recovery under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with respect to cooperative banks. The provisions of Section 2(1)(c)(iv-a), of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, adding "ex abundanti cautela", "a multi-State co- operative bank" is not ultra vires as well as the Notification dated 28-1-2003 issued with respect to the cooperative banks registered under the State legislation."

The aforesaid paragraphs make it very clear that the

Constitution Bench of the Hon'ble Supreme Court has

held that the provisions of Banking Regulation Act, 1949,

were simply noted in the case of Greater Bombay Coop.

Bank Ltd. (supra) and there was no in-depth

consideration of the various provisions and more so,

particularly of those contained in Section 56 of the Act of

1949. In the aforesaid case, the Hon'ble Supreme Court

has observed that "we are unable to subscribe to the view

taken in Greater Bombay Coop. Bank Ltd. (supra) as the

provisions were not correctly appreciated."

In view of the judgment delivered by the