Andhra Pradesh High Court - Amravati
Dasari Venkata Srinivasa Rao, vs The State Of Andhra Pradesh, on 9 July, 2024
APHC010112892024
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3330]
(Special Original Jurisdiction)
TUESDAY, THE NINTH DAY OF JULY
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE TARLADA RAJASEKHAR RAO
WRIT PETITION No: 5957/2024
Between:
Dasari Venkata Srinivasa Rao, ...PETITIONER
AND
The State Of Andhra Pradesh and Others ...RESPONDENT(S)
Counsel for the Petitioner:
1. GANTA PRASAD
Counsel for the Respondent(S):
1. S DILIP JAYA RAM
2. GP FOR COOPERATION
The Court made the following:
2
ORDER:
This Writ Petition is filed under Article 226 of the Constitution of India for the following relief:-
"To issue an appropriate Writ, Order or direction more particularly one in the nature of Writ of Mandamus to declare that the Certificate issued by the respondents 2 & 3 under Section 71(1) of the APCS Act 1964 in case No.702/23-24 dated 22.08.2023 for an amount of Rs.27,25,923/-, as illegal, arbitrary and beyond the power and without authority, jurisdiction, contrary to principles of Natural Justice, violative of Fundamental Rights guaranteed under Article 14 of the Constitution of India and contrary to provisions and procedure contemplated under Andhra Pradesh Cooperative Societies Act, 1964 and rules framed thereunder and set aside the same and pass such other orders."
2. The unnecessary details are shorn off:
At the outset, it is the case of the petitioner that he has availed a long term housing loan of Rs.25,00,000/- from the 4th respondent-The Krishna District Co-operative Central Bank Limited (hereinafter called, „the bank‟) on 19.02.2019 by mortgaging the ground floor of his house, which is repayable in 20 years and due date is 19.02.2039 in 240 monthly equal instalments with interest @ 9.5% and the monthly EMI is Rs.23,304/- and the petitioner herein has repaid amount of Rs.11,63,498/- and subsequently an amount of Rs.70,000/- was appropriated on 13.02.2024 towards loan account. As the petitioner has committed default in paying EMIs, the bank has obtained a decree against the petitioner for an amount of Rs.27,25,923/- from the 3rd 3 respondent and the 3rd respondent issued a certificate for the said amount with further interest @11.5% under Section 71(1) of the Andhra Pradesh Co-operative Societies Act, 1964 (hereinafter called, „the APCS Act‟).
3. The certificate which was issued under Section 71 of the APCS Act was assailed in the present Writ Petition on the sole ground that the 2nd and 3rd respondents have no jurisdiction to entertain the proceedings under Section 71(1) of the APCS Act, as the respondents-society is carrying on banking business and they fall under the definition of Section 5(cd) of the 1949 Act and the banks and banking companies fall within the meaning of Section 2(d) and (e) of the 1993 Act and when the debt more than Rs.10,00,000/-, the respondents have to invoke the jurisdiction of the Debts Recovery Tribunal constituted under the 1993 Act, which have exclusive jurisdiction to entertain and adjudicate upon recovery claims of Co-operative Banks and therefore the power of the Registrar of Co-operative Societies to deal with such claims is only comprehensively excluded and hence prayed to allow the Writ Petition.
4. And he relied on the judgment of the composite High Court at Hyderabad in M.Babu Rao v. Deputy Registrar of Co-operative Societies/Officer on Special Duty, Vasavi Co-op. Urban Bank Ltd., Malakpet, Hyderabad1 and the judgment of the Hon‟ble Supreme Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited2 and also relied on the common judgment of the High 1 2005(4) ALD 582 = 2005(4) ALT 327 2 (2020) 9 SCC 215 Constitutional Bench 4 Court for the State of Telangana in W.A.No.1680 of 2017 and batch dated 31.12.2021, to substantiate his contentions referred supra.
5. Heard Sri Neeleash Ganta, learned counsel representing Sri Ganta Prasad, learned counsel for the petitioner and Sri P.Veera Reddy, learned Senior Counsel appearing for Sri S.Dilip Jaya Ram, learned Standing Counsel for the respondents 3 to 5-bank.
6. Respondent Nos.2 to 5 filed counter and denied all the averments made in the writ affidavit filed in support of the Writ Petition and inter alia contended by the learned designated Senior Counsel Sri P.Veera Reddy that both the SARFAESI Act and DRT Act provided for recovery of dues to the banks including Co-operative Societies, which is essential part of banking activity and the Act in no way trenches on the field reserved under Entry 32 of List II and is a piece of legislation traceable to Entry 45 of List I and the „banking company‟ is a company engaged in banking and not a „co-operative society‟ engaged in banking and the Parliament did not alter or modify the meaning of „banking company‟ under Section 4(C) of the Banking Regulation Act, 1949 and there is a procedure contemplated for recovery of dues by banks under the Co- operative Societies Act. Merely, inserting „co-operative bank‟ in clause (cci) to Section 56 of the Act and „primary co-operative bank‟ in clause (ccv) to Section 56 of the Act, it could not be said that the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), applies to the co-operative banks transacting the business of banking.
57. It is also submitted that the facts stated in the Writ Petition are totally misconceived and also further contended that under Section 70 of the APCS Act, an alternative remedy of appeal is provided.
8. Learned Senior Counsel for the respondent-bank relied on the judgment of the Hon‟ble Supreme Court titled as Greater Bombay Cooperative Bank Limited v. United Yarn Tex Private Limited3, incorporating the provisions contained in the Andhra Pradesh Co- operative Societies Act and similar to the Act called as Maharashtra Co- operative Societies Act, 1960 (MCS Act).
9. The Apex Court has framed two issues in the following manner:
"(a) Whether the RDB Act applies to debts due to co-
operative banks constituted under the MCS Act, 1960; the MSCS Act, 2002 and the APCS Act, 1964?
CONSTITUTIONAL CLAUSE:
(b) Whether the State Legislature is competent to enact legislation in respect of co-operative societies incidentally transacting business of banking in the light of Entry 32, List II of Seventh Schedule of the Constitution?"
10. And the reference was answered as under:
""Co-operative banks" established under the Maharashtra Co-operative Societies Act, 1960 [MCS Act, 1960]; the Andhra Pradesh Co-operative Societies Act, 1964 [APCS Act, 1964]; and the Multi-State Co-operative Societies Act, 3 (2007) 6 SCC 236 6 2002 [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 [BR Act]. Therefore, the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [RDB Act] by invoking the Doctrine of Incorporation are not applicable to the recovery of dues by the co-operatives from their members."
11. And the field of co-operative societies cannot be said to have been by the Central Legislation by reference to Entry 45 List I of the Seventh Schedule of the Constitution of India.
12. Learned Senior Counsel also relied on the judgment of the composite High Court at Hyderabad in D.China Mallaiah and others v. District Registrar, Karimnagar District Co-operative Central Bank Limited, Karimnagar and others4 and also relied on the judgment of the composite High Court at Hyderabad in Taraporewalla Agencies v. Government of Andhra Pradesh5 for the proposition that a certificate which had been issued under Section 71 of the APCS Act, 1964, the petitioner is having a remedy of an appeal under Section 76 of the APCS Act, 1964, and without availing the same, the petitioner cannot invoke the jurisdiction under Article 226 of the Constitution of India. And prayed to dismiss the Writ Petition and also prayed to direct the petitioner herein to invoke the appeal jurisdiction provided under Section 76 of the APCS Act, 1964.
42005 (1) ALD 721 5 2004 (1) ALD 724 7
13. A Constitutional Bench of the Hon‟ble Supreme Court in the case of Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited (2 supra) held that banks/banking companies under the SARFAESI Act, held, includes all co-operative banks either registered under the State Legislation or otherwise. After examining the provisions of the Co-operative Societies Act, the judgment of the Apex Court in Greater Bombay Cooperative Bank Limited v. United Yarn Tex Private Limited (3 supra) was overruled in the aforesaid judgment. The Hon‟ble Supreme Court has dealt with its earlier judgments and held at paragraph Nos.120 and 142 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 cooperative societies constituted under MSCS Act as well as State Cooperative Acts arose and also whether the State legislature was competent to enact legislation concerning co- operative societies incidentally transacting the business of banking in the light of Entry 32 of List II. 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 co- operative banks are doing the banking business, it could not be 8 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 Entry 45 of List I of the Seventh Schedule of the Constitution of India.
142.1. (b) The cooperative banks run by the cooperative 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 Entry 45 of List I of the Seventh Schedule of the Constitution of India, are governed by the said legislation relatable to Entry 32 of List II of the Seventh Schedule 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 Entry 45 of List I. 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 Entry 45 of List I and the RBI Act relatable to Entry 38 of List I of the Seventh Schedule of the Constitution of India.9
142.3. (3)(a) The cooperative banks under the State legislation and multi-State cooperative banks are „banks‟ under section 2(1)(c) of Securitization 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 Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable.
142.4. (3)(b) The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery under section 13 of the Securitization 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)(iva), of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, adding "ex abundanti cautela", „a multi-State cooperative 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."
14. The judgments relied by the respondent-bank has been overruled by the Constitutional Bench of the Hon‟ble Supreme Court. Article 141 of the Constitution of India gives the Supreme Court of India whether in the sense that its judgments are binding on all subordinate courts including the High Courts, which is binding with the law declared by the Supreme Court. It is trite to say that a decision is binding not because of conclusions but with regard to its ratio and the principles laid down therein.10
15. In similar circumstances, a Division Bench of the High Court for the State of Telangana by relying on the judgment in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited case (2 supra) held that in the judgment in the case of Greater Bombay Cooperative Bank Limited v. United Yarn Tex Private Limited (3 supra), the provisions were not correctly appreciated and held that as per the Constitutional Bench judgment of the Hon‟ble Supreme Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited case (2 supra) the action initiated under the APCS 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.
16. In view of the judgment of the Hon‟ble Supreme Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited case (2 supra), the 5th respondent-bank has to invoke the jurisdiction of the Recovery of Debts and Bankruptcy Act, 1993, as it cannot invoke the jurisdiction of the Registrar under Section 71 of the APCS Act, 1964.
17. The second contentious issue raised by the learned Senior Counsel appearing for the respondent-bank that the petitioner has to invoke the alternative remedy provided under Section 76 of the APCS Act, 1964.
18. The Hon‟ble Apex Court in Radha Krishan Industries v. State of Himachal Pradesh and others6, wherein after referring several 6 AIR 2021 SC 2114 = (2021) 6 SCC 771 11 decisions, including the judgment of Whirlpool Corporation v. Registrar of Trademarks7, the Apex Court has emerged certain principles of law, which are re-produced herein:
(i) The power under Article 226 of the Constitution of India to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well;
(ii) The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person;
(iii) Exceptions to the Rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged;
(iv) An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law;
(v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This Rule of exhaustion of statutory remedies is a Rule of policy, convenience and discretion; and
(vi) In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, 7 (1998) 8 SCC 1 12 if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with.
19. As per the above judgment of the Apex Court, alternative remedy is not an absolute bar to entertain a Writ Petition under Article 226 of the Constitution of India, when there has been a violation of principles of natural justice or the proceedings impugned are wholly without jurisdiction or vires of legislation is challenged or for the enforcement of the fundamental right protected by Part III of the Constitution of India, the Writ Petition can be entertained.
20. In the present case, the order passed by the Registrar of Co- operative Societies is without jurisdiction and the 5th respondent has to invoke the jurisdiction under the Debts Recovery Tribunals Act. Hence, the said issue is answered against the respondents and in favour of the petitioner herein.
21. In view of the judgment of the Apex Court in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited case (2 supra), the present Writ Petition is liable to be allowed, as the petitioner has to invoke the jurisdiction of the Debts Recovery Tribunal and, accordingly, it is allowed and the impugned order is hereby set aside and the 5th respondent is at liberty to invoke the jurisdiction of the Debts Recovery Tribunal or SARFAESI Act for realization of the amount in accordance with law.
22. Accordingly, the Writ Petition is allowed. There shall be no order as to costs.
13As a sequel, interlocutory applications pending, if any, in this Writ Petition shall stand closed.
__________________________________ JUSTICE TARLADA RAJASEKHAR RAO Date: 09.07.2024 siva 14 THE HON'BLE SRI JUSTICE TARLADA RAJASEKHAR RAO WRIT PETITION No.5957 OF 2024 Date: 09.07.2024 siva