Allowed

Urban Co-Operative v. Drt,Cuttack

Orissa HC5 Apr 2023WP(C)/18453/2014

Case brief

AI extract

What is this about?

This writ petition challenged an order by the Debt Recovery Tribunal quashing notices issued by a Co-operative Bank under the SARFAESI Act. The High Court set aside the lower tribunal's order, relying on the Supreme Court's decision in Pandurang Ganpati Chagule, which upheld the applicability of SARFAESI to co-operative banks, leading to the restoration of the appeal.

What did the court decide?

The writ petition is allowed; the impugned order dated 04.09.2014 is set aside, and the appeal is restored and listed for hearing on 05.07.2023.

Urban Co-Operative Vs Drt,Cuttack — Company and Corporate | Orissa HC (2023)

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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WP(C) No.18453 of 2014

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The Urban Co-operative Bank Ltd., Cuttack ….. Petitioner Mr. Sudarsan Nanda, Adv. Vs. Debt Recovery Tribunal, Cuttack ….. Opp. Parties Bench & Others. Mr. S.S. Rao & Mr. B.K. Mohanty,

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Advocate. (For Opposite Parties No.2 & 3)

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CORAM:

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JUSTICE S.TALAPATRA JUSTICE SAVITRI RATHO

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ORDER 05.04.2023

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Order No.

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1. This matter is taken up through hybrid mode.

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2. By means of this writ petition, the petitioner has challenged the order dated 04.09.2014, Annexure-5 to the writ petition, passed

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by the Debt Recovery Tribunal (DRT), Cuttack Bench in S.A. No.23 of 2014.

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3. By the said order dated 04.09.2014, Annexure-5 to the writ petition, the Debt Recovery Tribunal, Cuttack Bench has held that since the Gujarat High Court had declared the notification dated 28.01.2003 published by the Ministry of Finance and Company

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Affairs in the Gazette of India (Extraordinary), in exercise of power

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Page 1 of 6

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conferred under Section 2 (1) (v) of the SARFAESI Act ultra vires and void abinitio by holding that a Co-operative Bank cannot enforce security interest created in favour of the bank by the loanee under Section 13 of the SARFAESI Act, the action of the petitioner taken under Sections 13(2) and 13(4) of the SARFAESI Act is liable to be quashed.

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4. The Gujarat High Court in Shri Dhakdi Group Co-operative Cotton-Seed and others vrs. Union of India and others: 2014 (1) Bankers’ Journal 464 had decided that the Debt Recovery Tribunal, created under the R.D.D.F & F.I. Act have no jurisdiction to pass any order in the proceeding by or against a Co-operative Society for recovery of due on the sole ground that the R.D.D.B. & F.I. Act is the creature of the Parliament and therefore, no incorporation can be made by a notification. For the self-same reason, the SARFAESI Act will not confer any jurisdiction to proceed at the instance of a Cooperative Society for enforcement of its security interest on the ground that the concerned Legislation is a creature of the Parliament and cannot encroach the field occupied by the State Legislature.

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5. By the impugned order, the Opposite Party No.1, having relied on the said Judgment, has held that the notice that was issued by the Co-operative Bank (the writ petitioner herein) under Section

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Page 2 of 6

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13 (2) or under Section 13(4) against the borrower/s or the guarantor/s is not maintainable in as much as the Co-operative Bank has no right to secure its interest under the SARFAESI Act against the borrower/s and accordingly, those notices as issued under Section 13(2) and under Section 13 (4) of the SARFAESI Act are liable to be quashed. However, the Co-operative Bank has been given liberty to recover the dues from the borrower/s by resorting to the action as available under law. Consequently, the proceeding

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being S.A. No.23 of 2014 has been dismissed as not maintainable.

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6. The said order dated 04.09.2014 has been challenged by the Co-operative Bank (the writ petitioner herein) by this petition. By the order dated 20.05.2016 passed in Misc. Case No.16374 of 2014 (arising from this writ petition), this court had passed the following interim order:

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<As an interim measure, we direct that operation of the Order dated 04.09.2014 passed by the Debts Recovery Tribunal, Cuttack in S.A. No.23 of 2014 under Annexure5 shall remain in abeyance till the next date.=

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7. The counsel for the petitioner has stated that the decision of

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the Gujarat High Court in Shri Dhakdi Group Co-operative CottonSeed and others (supra) has been reversed by the apex court in

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Pandurang Ganpati Chagule Vs. Vishwasrao Patil Murgud

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Page 3 of 6

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Sahakari Bank Limited: (2020) 9 SCC 215 having observed thus:

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< 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 cooperative 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.

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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.

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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 co- operative banks. The provisions of Section 2(1)(c) (iv-a), of the 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 co− operative banks registered under the State legislation.=

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[Emphasis Added]

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8. Hence, the law decided by the Gujarat High Court does not

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hold the field any longer.

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Page 4 of 6

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9. Following the decision of Pandurang Ganpati Chagule (supra), this court in Urban Co-operative Bank Limited, Cuttack Vs. Registrar, Debt Recovery Tribunal, Cuttack Bench & Others (Order dated 22.02.2023 in WP(C) No.23694 of 2014) has observed that in Pandurang Ganpati Chaugule (supra), the apex court has unequivocally held that the Co-operative Banks can invoke the provisions of the SARFAESI Act.

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10. Having observed thus, the similar order passed by the Debt Recovery Tribunal has been set aside and the proceeding in which the order holding that the Cooperative Bank cannot invoke the provisions of the SARFAESI Act was passed has been restored.

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11. In view of the above position of law, we set aside the impugned order dated 04.09.2014, Annexure-5 to the writ petition, passed in S.A. No.23 of 2014. The Opposite Parties No.2 and 3 (the Appellants No.1 and 2 in the Securitisation Appeal No.23 of 2014) have appeared in this proceeding through Mr. S.S. Rao and Mr. B.K. Mohanty, learned counsel.

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12. In view of what we have observed above, we restore the appeal which was declared not maintainable by the impugned order 04.09.2014, Annexure-5 to the writ petition. Further, we direct the

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DRT to list the appeal for hearing on 05.07.2023.

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Page 5 of 6

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13. In the above terms, the writ petition is allowed and disposed

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14. A copy of this order be sent to the Presiding Officer of the DRT, Cuttack Bench forthwith.

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(S.Talapatra) Judge

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