Telangana High Court
Mohd. Abdullah Khan, Hyderabad vs Ahmed Bin Abdullah, Hyderabad 7 … on 31 December, 2021Bench: 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.
2
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:-
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“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.
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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
1
2005 (4) ALD 582 (FB)
2
(2020) 9 SCC 215
5
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:-
3
(2007) 6 SCC 236
6
“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.
7
(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
8
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
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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.”
10
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.
11
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
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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.”
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In view of the judgment delivered by the
Constitution Bench of the Hon’ble Supreme Court in the
case of Pandurang Ganpati Chaugule (supra), this Court is
of the opinion that the action initiated under the Andhra
Pradesh Cooperative Societies Act, 1964, was certainly a
nullity and the Bank was having a remedy of filing an
application under the Recovery of Debts and Bankruptcy
Act, 1993.
Resultantly, as the proceedings were without
jurisdiction, this Court is left with no other choice, except
to set aside the order passed by the learned Single Judge.
Therefore, the writ appeals are accordingly allowed
and the order passed by the learned Single Judge is
hereby set aside.
The miscellaneous applications pending, if any,
shall stand closed. There shall be no order as to costs.
______________________________________
SATISH CHANDRA SHARMA, CJ
______________________________________
N. TUKARAMJI, J
31.12.2021
vs
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