Legal uncertainty persists over whether State Co-operative Banks fall under the RDB Act or MCS Act for debt recovery proceedings
In a landmark decision, the Bombay High Court has referred a crucial legal question concerning the jurisdiction for recovery proceedings initiated by State Co-operative Banks to a larger bench. The referral comes amid ongoing debates about whether such proceedings should fall under the purview of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) or remain within the jurisdiction of Co-operative Courts under the Maharashtra Co-operative Societies Act, 1960 (MCS Act).
The case at hand involved Amritlal P. Shah, the petitioner, against TJSB Sahakari Bank Limited, where the primary contention revolved around whether co-operative banks are considered "banks" under the RDB Act, thereby granting exclusive jurisdiction to the Debts Recovery Tribunal (DRT) for debt recovery claims exceeding Rupees Ten Lakhs. This question has been a point of contention following divergent interpretations in judicial precedents, including the Supreme Court's decisions in the cases of Greater Bombay Co-operative Bank Ltd. v. United Yarn Tex Pvt. Ltd. and Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd.
Justice Amit Borkar, presiding over the matter, observed that the principal legal issues involve a complex interplay of constitutional entries and conflicting precedents. The court refrained from making a final determination, instead deciding to refer the matter to a larger bench for authoritative adjudication. The decision underscores the significance of the question, which involves the interpretation of central and state laws and the respective scopes of Entries 45 of List I and 32 of List II in the Constitution.
The case stems from a review petition filed by Amritlal P. Shah, challenging a previous order that restored a money decree in favor of TJSB Sahakari Bank Limited. The petitioner argued that co-operative banks should only proceed under the RDB Act, given their classification as "banks" under central law. However, the respondents contested this view, emphasizing that the jurisdiction of Co-operative Courts under Section 91 of the MCS Act remains valid and that the decision in Pandurang Ganpati Chaugule was confined to the SARFAESI Act, not extending to the RDB Act.
The legal uncertainty has prompted the Bombay High Court to seek a more definitive answer from a larger bench, which will address whether recovery proceedings by State Co-operative Banks are governed by the RDB Act and whether the Co-operative Court's jurisdiction is ousted by Sections 17, 18, and 34 of the RDB Act. The outcome of this referral will have significant implications for the speed and finality of recovery disputes initiated by co-operative banks, potentially affecting numerous pending cases across the state.
Bottom Line:
Jurisdictional conflict between State Co-operative Courts under Maharashtra Co-operative Societies Act, 1960 and Debts Recovery Tribunal under Recovery of Debts and Bankruptcy Act, 1993 concerning recovery proceedings initiated by co-operative banks.
Statutory provision(s): Recovery of Debts Due to Banks and Financial Institutions Act, 1993, Maharashtra Co-operative Societies Act, 1960, Banking Regulation Act, 1949, SARFAESI Act, 2002, Indian Constitution (Entries 45 of List I and 32 of List II)
Amritlal P. Shah v. TJSB Sahakari Bank Limited, (Bombay) : Law Finder Doc Id # 2825764
