S.J. Vazifdar, J.
1. The petitioners have challenged the action of the respondent banks under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Securitisation Act") on merits, the applicability of the said Act to co-operative banks including those constituted under the Maharashtra Cooperative Societies Act (hereinafter referred to as the MCS Act) and the constitutional validity of the said Act.
2. There is little, if anything, to be said in favour of the petitioners on merits. They are debtors of the respondent co-operative banks and, prima-facie atleast, there appears to be no defence to the claim of the respondent banks on merits. The petitioners have however challenged the Constitutional validity of the Securitisation Act. In Mardia Chemicals Ltd. and Ors. v. Union of India and Ors. 2004(2) Mh.L.J. (SC) 1090 the Supreme Court upheld the constitutional validity of the Securitisation Act including the very provisions which were challenged before us. The petitioners however contended that the judgment is per incuriam, having failed to notice the relevant provisions of the Constitution of India.
3. We have decided all the petitions by this common judgment though in some of them the constitutional validity of the Securitisation Act has not expressly been challenged as, a decision on that aspect in one petition would affect the outcome of the other petitions in any case.
4. The following contentions have been raised by the counsel for the petitioners:
I. The Securitisation Act does not apply to co-operative banks including those constituted under the Maharashtra Co-operative Societies Act.
II. The Securitisation Act, if applicable to co-operative banks, is arbitrary and violative of Article 14 of the Constitution of India as it deprives the borrowers such as the petitioners the right to challenge the action of the bank under Section 13.
III. By adopting proceedings under the Securitisation Act the borrower is deprived the right to have the claim adjudicated under the provisions of the MCS Act.
IV. If the exact amount is not mentioned in the notice under Section 13, the same is bad and illegal.
V. Unless there is first a final adjudication of the quantum of the claim, no action under Section 13 of the Securitisation Act can be taken.
VI. Assuming that the Securitisation Act applies to co-operative banks it is to that extent without legislative competence as Parliament has no legislative competence to enact the Securitisation Act with respect to co-operative banks.
Re : 1. The Securitisation Act does not apply to co-operative banks including those constituted under the Maharashtra Co-operative Societies Act.
5. (A) A consideration of the provisions of the Securitisation Act establishes beyond doubt that the same is made applicable to co-operative banks. Section 2(1)(c) of the Securitisation Act reads as under:
2. Definitions.- (1) In this Act unless the context otherwise requires,.-
(c) "bank" means-
(i) a banking company; or
(ii) a corresponding new bank; or
(iii) the State Bank of India; or
(iv) a subsidiary bank; or
(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;
(B). In exercise of its powers conferred under Section 2(1)(c)(v), the Central Government issued a notification dated 28-1-2003, which reads as under:
NOTIFICATION UNDER SECTION 2(1)(c)(v):
NOTIFICATION No. SO 105(E), DATED 28-1-2003 In exercise of the powers conferred under item (v) of Clause (c) of Sub-section (1) of Section 2 of the Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (54 of 2002), the Central Government hereby specifies "Co-operative Bank" as defined in Clause (cci) of Section 5 of Banking Regulation Act, 1949 (10 of 1949) as 'bank' for the purpose of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002).
6. Section 5 of the Banking Regulation Act, 1949 (hereinafter referred to as "the B.R. Act") is the interpretation clause. By virtue of an amendment Section 56 of the B.R. Act reads as under:
APPLICATION OF THE ACT TO CO-OPERATIVE BANKS
56. Act to apply to co-operative societies subject to modifications. - The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely : (c) in Section 5, -
(i) after Clause (cc), the following clauses shall be inserted, namely: "(cci) 'Co-operative Bank' means a State Co-operative Bank, a Central Co-operative Bank and a Primary Co-operative Bank;
7. It is clear therefore that on a conjoint reading of Section 2(1)(c)(v) of the Securitisation Act, the Notification dated 28-1-2003 and Section 56(c)(i) read with Section 5 of the B.R. Act, that the Securitisation Act also applies to cooperative banks. The learned Counsel appearing on behalf of the respondents were unable to indicate how on a plain reading of the aforesaid provisions, cooperative banks do not fall within the ambit of the said Act. They however relied upon the judgment of the Supreme Court in the case of Greater Bombay Cooperative Bank Ltd. v. United Yarn Tex. Pvt. Ltd. and Ors. 2007 AIR SCW 232. By this judgment, the Supreme Court overruled a judgment of the Full Bench of the Bombay High Court, to which one of us (S. J. Vazifdar, J.) was a party.
8. The question that falls for considerations in these petitions did not fall for consideration before the Supreme Court. The question that fell for consideration before the Full Bench was whether the Courts and authorities constituted under the Maharashtra Co-operative Societies Act, 1960 (the 1960 Act) and the Multi-State Co-operative Societies Act, 2002 (the 2002 Act) continue to have jurisdiction to entertain applications/disputes submitted before them by the Co-operative Banks incorporated under the 1960 Act and the 2002 Act for an order for recovery of debts due to them, after establishment of a Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as RDB Act). The Full Bench answered the question in the negative. The Supreme Court overruled the judgment on an interpretation of the relevant provisions of the RDB Act and the B.R. Act. As we shall presently demonstrate, the Supreme Court, while holding that the term "bank" in the RDB Act did not include co-operative banks, in fact, referred to the said notification dated 28-1-2003, and the provisions of the Securitisation Act and noting the difference in the definitions of the terms "bank" in the RDB Act and the Securitisation Act, in fact, held that the Securitisation Act includes within its ambit co-operative banks. One of the submissions, which was accepted, was precisely to this effect and as follows:
45. ...It was next contended that significantly the Co-operative Banks have been brought in by the Parliament in Section 2(c)(v) of the Securitization Act by way of a Notification and enabling provisions and the purpose of Part III of the Securitization Act is also recovery of banks' dues, but the RDB Act employed no such device.
Paragraphs 30, 34 and 59 of the judgment read thus:
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002 [SECURITISATION ACT].
30. The Parliament had enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ['the Securitisation Act'] which shall be deemed to have come into force on 21st day of June 2002. In Section 2(d) of the Securitisation Act same meaning is given to the word 'banking company' as is assigned to it in Clause (e) of Section 5 of the BR Act. Again the definition of 'banking company' was lifted from the BR Act but while defining 'bank', Parliament gave five meanings to it under Section 2(c) and one of which is 'banking company'. The Central Government is authorized by Section 2(c)(v) of the Act to specify any other bank for the purpose of the Act. In exercise of this power, the Central Government by Notification dated 28.01.2003, has specified "co-operative bank" as defined in Section 5(cci) of the BR Act as a "bank" by lifting the definition of 'co-operative bank' and 'primary co-operative bank' respectively from Section 56 Clauses 5(cci) and (ccv) of Part V. The Parliament has thus consistently made the meaning of 'banking company' clear beyond doubt to mean 'a company engaged in banking, and not a co-operative society engaged in banking' and in Act No. 23 of 1965, while amending the BR Act, it did not change the definition in Section 5(c) or even in 5(d) to include cooperative banks; on the other hand, it added a separate definition of 'cooperative bank' in Section 5(cci) and 'primary co-operative bank' in Section 5(ccv) of Section 56 of Part V of the BR Act. Parliament while enacting the Securitisation Act created a residuary power in Section 2(c)(v) to specify any other bank as a bank for the purpose of that Act and in fact did specify 'co- operative banks' by Notification dated 28-1-2003. The context of the interpretation clause plainly excludes the effect of a reference to banking company being construed as reference to a cooperative bank for three reasons : firstly, Section 5 is an interpretation clause; secondly, substitution of 'co-operative bank' for 'banking company' in the definition in Section 5(c) would result in an absurdity because then Section 5(c) would read thus: "co-operative bank" means any company, which transacts the business of banking in India; thirdly, Section 56(c) does define "co-operative bank" separately by expressly deleting/inserting Clause (cci) in Section 5. The Parliament in its wisdom had not altered or modified the definition of 'banking company' in Section 5(c) of the BR Act by Act No. 23 of 1965.
34. Section 2(d) defines "banks" to mean (i) a banking company; (ii) a corresponding new bank; (iii) State Bank of India; (iv) a subsidiary bank; or (v) a Regional Rural Bank. In terms of Clause (e) "banking company" shall have the meaning assigned to it in Clause (c) of Section 5 of the BR Act. Chapter II of 'the RDB Act' provides for establishment of Tribunal(s) and Appellate Tribunal(s) and the qualifications of person(s) for appointment as Presiding Officer of the Tribunal and a Chairperson of the Appellate Tribunal, their term of office and other service conditions, Section 17 in Chapter III provides for Jurisdiction, Powers and Authority of Tribunals. Section 18 bars the jurisdiction of a Civil Court in relation to the matters specified in Section 17." "59. The RDB Act was passed in 1993 when Parliament had before it the provisions of the BR Act as amended by Act No. 23 of 1965 by addition of some more clauses in Section 56 of the Act. The Parliament was fully aware that the provisions of the BR Act apply to co-operative societies as they apply to banking companies. The Parliament was also aware that the definition of 'banking company' in Section 5(c) had not been altered by Act No. 23 of 1965 and it was kept intact, and in fact additional definitions were added by Section 56(c). "Co- operative bank" was separately defined by the newly inserted Clause (cci) and "primary cooperative bank" was similarly separately defined by Clause (ccv). The Parliament was simply assigning a meaning to words; it was not incorporating or even referring to the substantive provisions of the BR Act. The meaning of 'banking company' must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. It would have been the easiest thing for Parliament to say that 'banking company' shall mean 'banking company' as defined in Section 5(c) and shall include 'co-operative bank' as defined in Section 5(cci) and 'primary co-operative bank' as defined in Section 5(ccv). However, the Parliament did not do so. There was thus a conscious exclusion and deliberate commission of co-operative banks from the purview of the RDB Act. The reason for excluding co-operative banks seems to be that co-operative banks have comprehensive, self- contained and less expensive remedies available to them under the State Co-operative Societies Acts of the States concerned, while other banks and financial institutions did not have such speedy remedies and they had to file suits in Civil Courts.
9. The judgment of the Supreme Court therefore, far from being of any assistance to the petitioners is, in fact, against them. While the Securitisation Act expressly includes within its ambit co-operative banks, the RDB Act does not. The RDB Act and the Securitisation Act by definition are applicable to "banks". Both Acts define banks to mean inter-alia "a banking company" (Section 2(c)(i) of the Securitisation Act and Section 2(d)(i) of the RDB Act). Both Acts provide that "banking company" shall have the meaning assigned to it in Clause (c) of Section 5 of the Banking Regulation Act, 1949. [section 2(d) of the Securitisation Act and Section 2(e) of the RDB Act]. However, what is important to note is that the RDB Act does not have a provision similar to Section 2(c)(v) of the Securitisation Act.
In the circumstances, the first contention is rejected.
Re : 11. The Securitisation Act, if applicable to Co-operative Banks, is arbitrary and violative of Article 14 of the Constitution of India as it deprives the borrowers such as the petitioners the right to challenge the action of the banks under Section 13.
10. It was contended on behalf of the petitioners that in cases where the claim is not admitted and therefore requires to be adjudicated, the Securitisation Act does not provide the borrower any mechanism for the adjudication thereof.
It was further contended that Section 17 of the Securitisation Act only empowers the Debt Recovery Tribunal to ascertain whether the banks have followed the procedure regarding the issuance of the notice under Section 17 and nothing else. In other words, it was contended that the jurisdiction under Section 17 is only clerical in nature.
11. We are unable to agree with the above contentions either in principle or on precedent. The matter is no longer res integra in view of the judgment of the Supreme Court and atleast two Division Bench judgments of this Court.
12. In Mardia Chemicals Ltd. and Ors. v. Union of India and Ors. , the validity of the Securitisation Act and, in particular, the Constitutional vires of Sections 13, 15, 17 and 34 thereof had been challenged. It was contended that the Securitisation Act vested arbitrary powers in the banks, without any guidelines for the exercise thereof and also without providing any appropriate and adequate mechanism to decide the disputes relating to the correctness of the demand, its validity and the actual amount of dues, sought to be recovered from the borrowers (paragraph 4 of the judgment).
(A). In paragraph 33 of the judgment, the Supreme Court formulated inter-alia, the following questions which fell for determination:
33. Taking an overall view of the rival contentions of the parties, we feel the main questions which broadly fall for consideration by us are:
ii) Whether provisions as contained under Sections 13 and 17 of the Act provide adequate and efficacious mechanism to consider and decide the objections/disputes raised by a borrower against the recovery, particularly in view of bar to approach the Civil Court under Section 34 of the Act?
iii) Whether the remedy available under Section 17 of the Act is illusory for the reason it is available only after the action is taken under Section 13(4) of the Act and the appeal would be entertainable only on deposit of 75% of the claim raised in the notice of demand?
vi) Whether the provisions under Sections 13 and 17(2) of the Act are unconstitutional on the basis of the parameters laid down in different decisions of this Court ?
(B). In paragraph 45 the Supreme Court stated that it would consider as to what forums or remedies were available to the borrower to ventilate their grievances. While doing so, the Supreme Court observed that there must be some meaningful consideration of the objections raised by the borrower in answer to the notice under Section 13(2) before proceeding to take measures under Section 13(4). The Supreme Court observed that it would be necessary for the banks to appraise the borrower the reasons for not accepting the objections or points raised in the reply to the notice under Section 13(2) and communicate the same to the borrower.
(C). The Supreme Court proceeded to hold as under:
48. The next safeguard available to a secured borrower within the framework of the Act is to approach the Debts Recovery Tribunal under Section 17 of the Act. Such a right accrues only after measures are taken under Sub-section (4) of Section 13 of the Act.
51. However, to a very limited extent jurisdiction of the Civil Court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the Civil Court in the cases of English mortgages....
(D). The challenge was upheld in respect of Sub-section (2) of Section 17, which required a deposit of 75% of the amount of the demand notice before an Appeal could be entertained by the tribunal.
(E). The Supreme Court thereafter summarised the judgment as under:
79. Some submissions have been made pointing out that in certain circumstances it would not be clear as to in what manner the provisions of the Act would be workable. We feel the objections pointed out are not such which render the statute invalid or unconstitutional. Such problems about working of any particular provision of the Act in any particular factual situation, may be considered as and when they may arise. We, therefore, do not think it necessary to go into those questions.
80. Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debts Recovery Tribunal. The abovenoted provisions are for the purpose of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows:
1. Under Sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days' notice before proceeding to take any of the measures as provided under Sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage.
2. As already discussed earlier, on measures having been taken under Sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal.
3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose.
4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of the amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down.
5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in Civil Court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court.
81. In view of the discussion held in the judgment and the findings and directions contained in the preceding paragraphs, we hold that the borrowers would get a reasonably fair deal and opportunity to get the matter adjudicated upon before the Debts Recovery Tribunal. The effect of some of the provisions may be a bit harsh for some of the borrowers but on that ground the impugned provisions of the Act cannot be said to be unconstitutional in view of the fact that the object of the Act is to achieve speedier recovery of the dues declared as NPAs and better availability of capital liquidity and resources to help in growth of the economy of the country and welfare of the people in general which would subserve the public interest.
82. We, therefore, subject to what is provided in para 80 above, uphold the validity of the Act and its provisions except that of Sub-section (2) of Section 17 of the Act, which is declared ultra vires Article 14 of the Constitution of India.
13. It is therefore clear that similar challenges to Sections 13 and 17 were rejected by the Supreme Court. Thus, on the basis of the judgment of the Supreme Court in Mardia Chemicals alone, the Petitioner's contentions ought to be rejected.
14. It is important to note two amendments to the Securitisation Act after the judgment of the Supreme Court in Mardia Chemicals.
These amendments were pursuant to and in consonance with the judgment of the Supreme Court in Mardia Chemicals and the observations therein.
15. Firstly, in Section 13 of the Act, the following was added after Sub-section (3), as Sub-section (3A):
ENFORCEMENT OF SECURITY INTEREST
(3-A) If, on receipt of the notice under Sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17-A.;
16. Secondly, Sub-sections (2) and (3) of Section 17 were substituted as follows:
ENFORCEMENT OF SECURITY INTEREST
17. Right to appeal. - (1) ...
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under Sub-section (4) of Section 13.
17. Thus, the infirmities in Sections 13 and 17 of the Securitisation Act as pointed out by the Supreme Court in Mardia Chemicals have been completely taken care of by the Legislature. This has been so held by a Division Bench of this Court in Ghanshamdas s/o Salchandra Ahuja v. The Jintur Urban Cooperative Bank Ltd. and Ors. 2005(11) LJ. Soft 117 : (2005) Marathwada Cases Reporter 688. The Division Bench held as follows:
23. The validity of the Securitisation Act was challenged before the Apex Court and the Apex Court has upheld the Constitutional validity except it declared Sub-section (2) of Section 17 of the Act as ultra vires of Article 14 of the Constitution of India, but after the judgment of the Apex Court, Section 17 came to be amended by the Ordinance. In view of the change in law, brought by the Ordinance, we may not go on to consider submissions of the parties regarding availability of the alternate remedy as provided under Section 17(2) of the Act. In our view, by virtue of amendment in Section 17 brought by the Ordinance, the party has a remedy to approach the Tribunal by filing application before it. We may also refer to orders passed by the Division Bench in W.P. No. 4251/2003 decided on 5-3-2004 and W. P. No. 2166 of 2003 decided on 20-7-2004, wherein the question arose before the Division Bench regarding the availability of the alternate remedy to the parties against whom the action is taken by the Bank under Section 13(2) of Securitisation Act." "24. So far as the constitutional validity of the Act is concerned, it is no more res integra, in view of the constitution Bench judgment of the Apex Court in the case of Mardia Chemicals Limited and Ors. v. Union of India and Ors. . Here we will not advert those challenges, as is impermissible for this Court to ponder on the challenges." "25. The learned Counsel for the petitioners still tried to raise the contentions regarding validity of the Securitisation Act. In respect of these challenges in our view, it will not be open for this Court to ponder on those contentions once again, in view of the law declared by the Apex Court in Mardia Chemicals (supra), Anil Kumar, Director Settlement and Suganthi Suresh Kumar (supra). Hence, we proceed to consider other contentions raised by the respective counsel.
18. In Trade Well and Anr. v. Indian Bank and Anr. Criminal Writ Petition No. 2767 of 2006 since reported in 2007(2) Mh.L.J. (Cri) 412 a Division Bench, by its judgment dated 2nd April, 2007 while considering the provisions of Section 13(4) of the Act held as under:
Besides as per proviso to Section 13(3-A) and explanation to Section 17, non-communication of reasons to the borrower does not confer on the borrower or any person right to prefer an application under Section 17 at the stage of communication. This is the scheme of the NPA Act. It is so framed to achieve its object. At first blush this may appear harsh. But it is not so. The borrower and the third party is not remedyless. Remedy is provided in Section 17 where appropriate relief can be given to them. It is after measures under Section 13(4) are taken that an application under Section 17 can be filed by a borrower or any person and in that application, all grievances including the grievance that reasons were not communicated can be voiced. Prior to that, at no point of time any grievances can be raised. Section 17 offers an adequate remedy. We shall advert to Section 17 a little later.
19. The observations of the Supreme Court in Mardia Chemicals and of the Division Bench of this Court in Trade Well's case are also a complete answer to the contention that the jurisdiction of the tribunal under Section 17 is merely clerical. It by no means is clerical. All grievances can be raised in an appeal under Section 17. There is nothing in the section which even remotely suggests that the function of the tribunal is reduced to merely a clerical one.
In the circumstances, the second contention is also rejected.
Re : III. By adopting proceedings under the Securitisation Act the borrower is deprived the right to have the claim adjudicated under the provisions of the MCS Act.
Re : IV. If the exact amount is not mentioned in the notice under Section 13 of the Securitisation Act, the same is bad and illegal.
Re : V. Unless there is first a final adjudication of the quantum of the claim, no action under the Securitisation Act can be taken.
20. These submissions too, in our view, are not well founded both' on principle and on precedent. The Constitutional validity of Sections 13 and 17 have been upheld firstly by the judgment of the Supreme Court in Mardia Chemicals except Sub-section (2) of Section 17.
The question of the constitutional validity of these sections was considered qua similar submissions regarding the efficacy of the reliefs under these sections in Ghanshamdas's case. The Division Bench held that once the Supreme Court decides the validity of a particular enactment, the High Court under Article 226 of the Constitution, cannot again reconsider the challenge.
21. We are also of the view that the submissions are founded on a fundamental misconception regarding the scope of an adjudication under Section 17 and the ambit of Section 13 of the Securitisation Act.
22. It is necessary at the outset, in this regard, to reiterate the statement of objects and reasons for the Securitisation Act, which read as under:
Statement of Objects and Reasons.- The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the level system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and do sell them without the intervention of the Court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction.
23. The statement of objects and reasons therefore make it clear that the main purpose of the Securitisation Act and, in particular, Section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the Court. This aspect must be considered in conjunction with Sub-section (10) of Section 13, which reads as under:
13. Enforcement of security interest -
(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower.
24. In an application under Section 17, the tribunal is concerned only with the validity of the acts of the secured creditors of taking possession of the securities and dealing with the same under Section
13. While considering this, it is not necessary for the Tribunal to finally adjudicate the exact amount due to the secured creditor. In other words, the purpose of an application under Section 17 is not the determination of the quantum of the claim per se.
25. This is best illustrated by the following example. Take for instance a case where the secured creditor takes possession of the secured assets with a view to realising its dues. If the Tribunal comes to the conclusion that the extent of indebtedness of a debtor is higher than the value of the security, it would, in the absence of any other defence, justify a rejection of the borrower's application under Section 17. It would not be necessary for the Tribunal in such a case to adjudicate the exact amount due by the borrower to the secured creditor. This is for the obvious reason that in that event there would be no prejudice to the borrower because its liability would be greater than the security which is sought to be realised. The extent by which the liability is greater than the value of the security would be irrelevant in such an enquiry under Section 17 where the only question is the validity of the secured creditor's action in enforcing the security and not the quantum of the claim per se, to wit not the ascertainment of the indebtedness of the borrower.
26. To realise the balance dues, the secured creditor would have to proceed under Section 13(10). Where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, it would have to file an application to the Debt Recovery Tribunal "or a competent Court, as the case may be, for recovery of the balance amount from the borrower".
Thus, in the case of a co-operative bank, it may well be that it would, for the balance amount, have to file proceedings under the provisions of the Maharashtra Co-operative Societies Act. It is in such proceedings for the adjudication of the claim that the Debt Recovery Tribunal or the competent Court, as the case may be, would have to adjudicate the exact amount due by the borrower to the secured creditor. Such proceedings, for instance under Sections 91 and 101 of the M.C. Act necessitate the adjudication, inter-alia of the quantum of the claim.
27. Where the value of the secured assets is equal to or greater than the dues of the borrower, the Debt Recovery Tribunal may well have to adjudicate the amount due to the secured creditor by the borrower even in proceedings under Section 17. But, such an adjudication is only for the purpose of ascertaining the validity of the action of the seemed creditor in enforcing its security under Section 13 and not for the purpose of a final adjudication regarding the indebtedness of the borrower.
28. Thus, the scope of the two proceedings viz. an application under Section 17 and proceedings pursuant to the provisions of Section 13(10) are entirely different. This aspect is further clarified by a reference to Section 37 of the Act which reads as under:
37. Application of other laws not barred.- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.
29. There is nothing in the Securitisation Act which even remotely suggests that a notice under Section 13(2) is bad if the amount stated therein as due is not the exact amount actually due. The learned Counsel for the petitioners were unable to substantiate this submission in any manner. In fact once the difference in the nature of proceedings under Section 17 and 13(10) are appreciated, the fallacy of this submission is evident.
30. The above submissions are therefore rejected.
Re : VI. Assuming that the Securitisation Act applies only to Cooperative Banks it is to that extent without legislative competence as the Parliament has no legislative competence to enact the Securitisation Act with respect to Co-operative Banks.
31. The submission is based on Schedule VII List I Entry 43 and Schedule VII List II Entry 32 of the Constitution, which read as under:
Schedule 7 List I. Union List
43. Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies. Schedule 7 List 2. State List
32. Incorporation, regulation and winding up of corporations, other than those specified in List 1, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; cooperative societies.
It was submitted that disputes between the members of the co-operative societies can be agitated only under Sections 91 and 101 of M.C.S. Act and not under any other Act including the Securitisation Act.
32. It is necessary to keep in mind two principles while considering the challenge to the constitutional validity of an enactment. Firstly, the approach of the Court while examining the challenge to the constitutionality of an enactment is to start with a presumption of constitutionality. The Court should try to sustain the validity of an enactment to the extent possible. It should strike down the enactment only when it is not possible to sustain it. (paragraph 75 of the judgment in Greater Bombay Co-operative Bank Ltd.) Secondly, as observed by the Federal Court in Subramanavan Chettiyar v. Muttuswami Goundan .
It must inevitably happen from time to time that legislation though purporting to deal with a subject in one list, touches also upon a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the Legislature enacting them may appear to have legislated in a forbidden sphere. Hence the rule which has been evolved by the Judicial Committee, whereby the impugned statute is examined to ascertain its pith and substance or its true nature and character for the purpose of determine whether it is legislation with respect to matters in this list or that.
33. At the outset it must be noted that the Supreme Court in Mardia Chemicals upheld the constitutional validity of the Securitisation Act. It was however contended that the judgment of the Supreme Court in Mardia Chemicals is per incuriam as the Supreme Court had failed to consider the relevant provisions of law including of the Constitution of India and is therefore not binding on us. We are unable to agree.
34. (A). It is important in this regard to refer to Ghanshamdas's case. Two of the reliefs claimed in the Writ Petition in that case were for a writ striking down the Securitisation Act and in the alternative striking down Sections 9, 13, 15, 19, 34, 35, 41 and 42 of the Securitisation Act. It was contended before the Division Bench that though the Supreme Court had upheld the constitutional validity of the Securitisation Act in Mardia Chemicals, certain points of challenge were not before the Supreme Court. It was contended that though the entire Act was challenged, the Supreme Court referred to certain aspects which were not answered.
(B). The contention was rejected by the Division Bench inter-alia in paragraphs 22 to 25 of the judgment which we have set out earlier. The Division Bench held that once the Apex Court had decided the validity of the Securitisation Act in Mardia's case, it was not open to the High Court to reconsider the challenge on some different ground/point and for the High Court to consider the validity of the Securitisation Act once again.
(C). We are bound by the judgment of the Division Bench. The contention must be rejected on this ground alone.
35. In Asha Oil Food Pvt. Ltd. v. Jalgaon Co-operative Bank Ltd. 2005 (7) L.J. Soft 130 : 2006 M.C.R. 25, the petitioners sought a declaration that the provisions of the Securitisation Act cannot be applicable to them. It was contended that once a recovery certificate was issued under the M.C.S. Act, the Bank had no authority to take action under the Securitisation Act as such action would render the provisions of the M.C.S. Rules redundant. It was contended that the claim of the Bank had already been adjudicated under Section 101 of M.C.S. Act and therefore, further action could be taken only under the M.C.S. Act and M.C.S. Rules and not under any other provisions of law. It is important to note the following contentions urged before the Division Bench:
a) The MCS Act carves out a remedy under Section 101 as a special remedy in addition to the existing remedies under Sections 91, 93 and 98 thereof. Therefore, Section 101 has overriding effect on all other provisions in any law whatsoever. If recourse to Section 13 of the Securitisation Act is permitted, the scheme of Section 101 r.w. Rule 107 of MCS Rules providing for separate mechanism of recovery shall be rendered totally redundant and nugatory which cannot be the intent or scheme of the law makers while enacting Section 101.
b) That Section 37 of Securitisation Act provides that the provisions thereof shall have overriding effect to provisions of Transfer of Property Act, but no such overriding effect is given over provisions of MCS Act.
Rejecting the contentions, the Division Bench held as under:
16. Petitioner's submission that Section 37 of the Securitisation Act creates a non obstante clause only qua the provisions of Transfer of Property Act and not as against any other law, is not based on any foundation whatsoever. Section 37 is amply clear while it says that the provisions of this Act (Securitisation Act) or the Rules made therein shall be in addition and not in derogation to various laws named therein as well "any other law for the time being in force". The phraseology "any other law for the time being in force" renders the interpretation of various provisions of the Securitisation Act to have overriding effect over the Debt Recovery Act as well as MCS Act. The term "any other law for the time being in force" appearing in Section 37 of Securitisation Act essentially comprehends numerous statutes one amongst which has to be the Maharashtra Co-operative Societies Act, 1960 along with Section 91 or Section 101 thereof or other provisions whatsoever contained therein.
19. The contention raised by the petitioner expressing that it ought to be held that the bank does not have the remedy available under Section 13 of the Securitisation Act since recourse will render the scheme of the recovery of dues under Section 101 of the Act redundant, is a submission which is based on total illusion. No question of such nature is now left open for any further adjudication in view of Manila Chemicals case.
36. Although the question raised before us is not identical to the questions which were raised before the Division Bench, it is important to note that the Division Bench held that in view of Section 37, the Securitisation Act has a overriding effect over the D.R.T. Act as well the M.C.S. Act.
37. In Marathwada Gramin Bank v. Maharashtra State Co-operative Bank Ltd. and Ors. 2007 (2) Mh.L.J. 594 : 2007 (2) L.J. Soft 20, it was contended inter-alia that the winding up provisions under the M.C.S. Act are a superior efficacious remedy. Reliance was placed on Entry 32 List II of Schedule VII which covers the winding up of co-operative societies. In such a position, reliance was placed on Entry 43 of List I of the Seventh schedule wherein co-operative societies are specifically and distinctly excluded. It was therefore, submitted that the winding up of Co-operative Societies was covered by the M.C.S. Act and no entrenchment is permissible in the said field including of the Securitisation Act. It was further submitted that in case of conflict between the two legislations i.e. The M.C.S. Act and the Securitisation Act, the M.C.S. Act would prevail. Rejecting the above contention, the Division Bench held as under:
What emerges from reading of the objects and reasons in enacting the said Securitisation Act, 2002 is that the said Act has been passed to enable the Banks to take possession of the securities and to sell them to recover the dues as it was found that the existing mechanism was not enough. The said Act according to us is therefore referable to Entry 42 list I in Schedule VII which entry covers "banking". The legislation in respect of the said entry is therefore the exclusive domain of Parliament. Insofar as the winding up of Co-operative Societies is concerned it is covered by Entry 33 of List II of the VII Schedule where the State legislature is competent to prescribe the mode provided for such winding up. Both the statutes therefore according to us operate in distinct and separate fields. As adverted by us hereinabove the Securitisation Act, 2002 is referable to the entry "Banking" whereas the MCS Act is referable to Entry 33 of List 2 of VII Schedule. In our view therefore there is absolutely no conflict between the said two enactments...."
Though the said two statutes have been enacted by the respective legislatures in their allotted sphere and operate in different and separate fields, in the context of the appointment of the liquidator under the MCS Act 1960 on the Karkhana a overlap or conflict has arisen. In such a situation by virtue of the non-obstante clause in Article 246(1) the Central Act will predominate. Therefore in our view the Securitisation Act, 2002 has overriding effect over the MCS Act, 1960 and we are also fortified in our view by the Division Bench judgment of this Court reported in 2005 (7) LJSOFT 130 : 2005 (2) All.M.R. 721 (supra).
38. It was not disputed that the above judgments clearly answered the Petitioner's contention regarding the constitutional validity of the Securitisation Act in the negative. It was however, contended that the judgments of the Division Bench of this Court and of the Supreme Court in Mardia Chemicals have been impliedly overruled by the judgment of the Supreme Court in Greater Bombay Co-operative Bank Ltd. v. United Yarn Text Pvt. Ltd.
39. The question that falls for consideration in this petition did not even fall for the consideration of the Supreme Court in Greater Bombay Co-operative Bank Ltd. We have already noted that one aspect of the matter before the Supreme Court in Greater Bombay Co-operative Bank Ltd., was the applicability of the RBD Act to co-operative banks. The Full Bench of the Bombay High Court held that on and from the date on which the D.R.T. was constituted under the RBD Act, the Courts and the Authorities under the M.C.S. Act as also the Multi State Co-operative Societies Act, 2002, would cease to have jurisdiction to entertain applications submitted by the Co-operative Banks for recovery of their dues. The Full Bench of this High Court upheld the legislative competency of the State Legislature to enact the M.C.S. Act. The Supreme Court was also concerned with the Civil Appeal filed against the judgment of the Full Bench of the Andhra Pradesh High Court. The Full Bench of the Andhra Pradesh High Court inter alia held that the recovery of moneys due to the institutions including co-operative banks fell in core and substance in the area of the legislative field of banking in Entry 43 List I of the Seventh Schedule; that it was therefore excluded to the State Legislature under Entry 32 List II of the Seventh Schedule and that recovery of moneys due to the co-operative banks is not a matter that falls within the incidental and ancillary areas of the State Legislative field in Entry 32 List II of the VII schedule. The learned Counsel appearing on behalf of the Petitioner relied upon the following observations of the Supreme Court while overruling the judgment of the Full Bench of the Andhra Pradesh High Court:
56. The dues of co-operatives and recovery proceedings in connection therewith are covered by specific Acts, such as the MCS Act, 1960 and the APCS Act, 1964, which are comprehensive and self-contained legislations. Similarly, for Multi-State Co-operatives there is a specific enactment in the form of the MCS Act, 2002 comprehensively providing the legal framework in respect to issues pertaining to such co- operatives. Therefore, when there is an admittedly existing legal framework specifically dealing with issues pertaining to co-operatives and especially when the co-operative banks are, in any case, not covered by the provisions of the RDB Act specifically, there is no justification of covering the co- operative banks under the provisions of the RDB Act by invoking the Doctrine of Incorporation.
58. The distinction between peoples' co-operative banks serving their members and corporate banks doing commercial transactions is fundamental to the constitutional dispensation and understanding cooperative banking generally and in the context of co-operative banking not coming under the ambit of the BR Act. Thus, even if the cooperatives are involved in the activity of banking which involves lending and borrowing, this is purely incidental to their main co-operative activity which is a function in public domain.
61. Accordingly, the burden of the Civil Courts in the matter of suits by banks and financial institutions was shifted to the Debt Recovery Tribunals. The disputes between co-operative banks and their members were being taken care of by the State Co-operative Acts and they were to remain where they were. If co-operative disputes are also to go to the Debt Recovery Tribunals, then those Tribunals will be over- burdened and the whole object of speedy recovery of debts due to banks and financial institutions would be defeated. The Co-operative Societies Acts on the one hand and RDB Act on the other cannot be regarded as supplemental to each other viz., the provisions of the said Acts cannot be said to be pari-materia.
62. This Court in Virendra Pal Singh v. District Assistant Registrar directly deals with the question of the
legislative competence relating to a co-operative society doing banking business. This decision in clear terms has laid down in para 10 as under: "10. We do not think it necessary to refer to the abundance of authority on the question as to how to determine whether a legislation falls under an entry in one list or another entry in another list. Long ago in Prafulla Kumar Mukherjee and Ors. v. Bank of Commerce Ltd., the Privy Council was confronted with the question whether the Bengal Money-Lenders Act fell within Entry 27 in List II of the Seventh Schedule to the Government of India Act, 1935, which was 'money lending', in respect of which the Provincial Legislature was competent to legislate, or whether it fell within Entries 28 and 38 in the List I which were 'promissory notes' and 'banking' which were within the competence of the Central Legislature. The argument was that the Bengal Money Lenders Act was beyond the competence of the provincial Legislature insofar as it dealt with promissory notes and the business of banking. The Privy Council upheld the vires of the whole of the Act because it dealt in pith and substance, with money- lending. They observed : Subjects must still overlap, and where they do the question must be asked what in pith and substance is the effect of the enactment of which complaint is made, and in what list is its true nature and character to be found. If these questions could not be asked, such beneficent legislation would be stifled at birth, and many of the subjects entrusted to provincial legislation could never effectively be dealt with.
Examining the provisions of the U.P. Co-operative Societies Act in the light of the observations of the Privy Council we do not have the slightest doubt that in pith and substance the Act deals with "Cooperative Societies". That it trenches upon banking incidentally does not take it beyond the competence of the State Legislature. It is obvious that for the proper financing and effective functioning of Co-operative Societies there must also be Co-operative Societies which do banking business to facilitate the working of other Co-operative Societies, Merely because they do banking business such Co-operative Societies do not cease to be Co-operative Societies, when otherwise they are registered under the Co-operative Societies Act and are subject to the duties, liabilities and control of the provisions of the Co-operative Societies Act. We do not think that the question deserves any more consideration and, we, therefore, hold that the U.P. Co-operative Societies Act was within the competence of the State Legislature. This was also the view taken in Nagpur District Central Co-operative Bank Ltd. v. Divisional Joint Registrar, Co-operative Societies and Sant Sadhu Singh v. the State of Punjab ." "80. In R.C. Cooper etc. v. Union of India , this Court observed that power to legislate for setting up corporations to carry on banking and other business and to acquire, hold and dispose of property and to provide for administration of the corporations is conferred upon the Parliament by Entries 43, 44 and 45 of the Constitution. Therefore, the express exclusion of co-operative societies in Entry 43 of List I and the express inclusion of co-operative societies in Entry 32 of List II separately and apart from but along with corporations other than those specified in List I and universities, clearly indicated that the constitutional scheme was designed to treat co-operative societies as institutions distinct from Corporations. Co-operative Societies, incorporation, regulation and winding up are State subjects in the ambit of Entry 32 of List II of Seventh Schedule to the Constitution of India. Co-operatives form a specie of genus 'corporation' and as such cooperative societies with objects not confined to one State read in with the Union as provided in Entry 44 of List I of the Seventh Schedule of the Constitution, MCS Act, 2002 governs such multi-state co-operatives.
40. Firstly, as we have already noted, the point which falls for consideration did not fall for the consideration of the Supreme Court in this judgment. This was not denied by the petitioners. They however, submitted that their submissions are a logical consequence of the aforesaid observations. Apart from the fact that we do not agree with this contention, such an approach is not even permissible. It is well established that a judgment is a precedent for what it decides and not what may appear to logically flow from it.
41. The Legislative competence of the Parliament to enact the Securitisation Act was not and indeed cannot be challenged. The only question is whether Parliament has entrenched on the State subject under Entry 32 of List II of Schedule VII. The above observations of the Supreme Court not only do not support the petitioners' submissions but militate against them. The R.D.B. Act and the M.C.S. Act which were under consideration of the Supreme Court dealt with recovery proceedings. Both enactments entitle the claimant to institute proceedings for recovery of their dues.
Therein lies a fundamental difference between the State enactments and the Securitisation Act. The Securitisation Act and in particular Section 13 thereof does not create a mechanism for the secured creditors instituting proceedings for adjudication or recovery of their dues. It is in fact quite the contrary. The Securitisation Act permits and enables the secured creditors to realize their security without the intervention of the Courts or Tribunal or any other Authorities. In the event of the amounts realized by enforcing the securities being inadequate, Section 13(10) clarifies that the secured creditor is entitled to institute proceedings before the Tribunal under the RBD Act or the competent Court for recovery of the balance amounts from the borrower.
42. By enabling a borrower to challenge the action of the secured creditor under Section 17 of the Securitisation Act, the provisions of the RBD Act relating to recovery proceedings have not been made applicable to co-operative societies. The Tribunal under the RBD Act is only the forum before which such an application may be made. It is important to note that there is a difference between the right of a creditor to file recovery proceedings and the right of a borrower to file an application under the RBD Act to challenge the action of a secured creditor to enforce/realise its security without the intervention of the Court under Section 13. Section 17(3) reads as under:
17. Right to appeal. (1) ...
(3) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.
43. It is important to note that Section 17(3) does not make the recovery proceedings under the RBD Act applicable to co-operative societies. It merely provides that the application under Section 17(1) would be disposed of in accordance with the provisions of the RBD Act which is a different thing altogether. In other words, the forum constituted under the RBD Act is made available for the adjudication, not of recovery proceedings per se, but for determining the validity of the act of the secured creditor under Section 13 which is without the intervention of the Court. The procedure under the RBD Act is made applicable for the determination of such an application and the machinery under the Act for recovery of dues per se, is not made applicable. In the case of co-operative banks, the right to institute necessary proceedings would be under the relevant State law including the MCS Act.
44. If the petitioner's arguments were to be accepted, even the provisions to the Banking Regulation Act, 1949 would have to be declared as constitutionally invalid.
45. Parliament was therefore conscious of and in fact drew a distinction between the enforcement/realisation of the secured assets without the intervention of Courts, tribunals or other authorities on the one hand and recovery proceedings on the other. Further, Parliament was also actually aware of its legislative limitations regarding both these aspects. This is apparent from the fact that whereas for the former purpose the Securitisation Act is made applicable to the various banks stipulated in Section 2, by Section 13(10) Parliament provided that recovery proceedings would have to be instituted before the DRT or the competent Court. Parliament was thus conscious of the fact that under the constitutional scheme recovery proceedings per se could not be provided under a Central legislation for all banks. Thus seen, the scheme under the Securitisation Act is in conformity with the constitutional scheme under Article 246 and the relevant entries in List I and List II of the Seventh Schedule.
46. We have reproduced the observations of the Supreme Court in paragraph 62 of the judgment. By the same process of reasoning, it must be held that the Securitisation Act deals, in pith and substance, with the field of banks or banking. Merely because the Securitisation Act permits the co-operative banks also to realize their security without the intervention of the Court cannot lead to a conclusion that it trenches upon the State subject of co-operative societies under Entry 32 of List II. At the highest it could be said that this is merely a case of incidental entrenchment which would not render the Act constitutionally invalid.
47. It was submitted that while enacting the Securitisation Act, Parliament had no intention to extend it to co-operative societies and that the power under Section 2(c)(v) must be read by applying the principle of ejusdem generis. So read, it was submitted, Section 2(c)(v) would not entitle Parliament to issue a notification in respect of co-operative banks. In support of this contention, the Petitioner relied upon Section 37 of the Securitisation Act. It reads as under:
37. Application of other laws not barred.- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.
It was submitted that only Central legislations are referred to in Section 37 and, therefore, the words "or under any other law..." must be read as limited only to Central enactments and not to State enactments.
48. The Petitioner relied upon the judgment of the Supreme Court in Jang Ram v. State of Haryana . The judgment does not support the petitioner's contention. In fact, the Supreme Court held that if a provision is plain and unambiguous and the legislative intent is clear, there is no option to call into aid the ejusdem generis rule and that the rule should be applied with caution. Relying upon the judgment in Lilavati Bai v. The State of Bombay (1957) SCR. 721, the Supreme Court held that the restricted meaning based on the said principle has to be given to words of general import only where the context of the whole scheme of legislation requires it and that where the context and the object of the enactment do not require a restricted meaning to be attached to words of general import, it becomes the duty of the Court to give these words their plain and ordinary meaning.
49. We have already discussed the scheme of the enactment and the statement of objects and reasons for the same. There is nothing in the scheme of the Securitisation Act which warrants such a narrow interpretation contrary to the plain language of Section 37. There is no other enactment which permits the secured creditors an option of enforcing/realising their securities without the intervention of the Court. In the circumstances, we are of the view that the ejusdem generis rule is not applicable to the provisions of Section 37 of the Act.
50. It will be useful to note the provisions of Section 17(4) of the Securitisation Act, which reads as under:
17. Right to appeal.(1) ...
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under Sub-section (4) of Section 13 to recover his secured debt.
51. If the submission on behalf of the Petitioner is correct, then the expression "or any other law for the time being in force" in Section 17(4) should also be restricted only to Central Acts and not to State Acts. However, in Transcore v. Union of India and Anr. 2006 Indlaw SC 900, the Supreme Court held as under:
In our view, Section 17(4) shows that the secured creditor is free to take recourse to any of the measures under Section 13(4) notwithstanding anything contained in any other law for the time being in force e.g., for the sake of argument, if in the given case the measures undertaken by the secured creditor under Section 13(4) comes in conflict with, let us say the provision under the State Land Revenue Law, then notwithstanding such conflict, the provision of Section 13(4) shall override the local law. This provision also stands clarified by Section 35 of the NPA Act which states that the provisions of NPA Act shall override all other laws which are inconsistent with the NPA Act.
52. Thus, it is clear that there is no warrant for restricting the ambit of the expression "or any other law" only to Central enactments.
53. There is therefore, no question of any conflict between the two enactments. They operate not only in distinct fields but in an altogether different manner.
54. In the circumstances, we reject the above contentions of the petitioners.
55. This leaves for consideration the preliminary objection raised by the respondent regarding the maintainability of the Petition. It was contended that the Writ Petition is not maintainable as the respondent banks are neither State nor an instrumentality of the State within the meaning of Article 12 of the Constitution of India, as held inter-alia by the Full Bench of this High Court in Shyamrao Vitthal Co-operative Bank Ltd. and Anr. v. Padubidri Pattadhiran Bhatt and Anr. . This point must be answered in favour of the
petitioners in view of the judgment of the Division Bench of this Court in Ghanshamdas (Paragraph 47) where it was held:
In our view, the petitions as filed are not maintainable as the Full Bench of this Court in Shamrao Vithal (supra) and the Apex Court in General Manager, Kisan Sahkari Chini Mills Ltd. (supra) held that the Cooperative Society is not a State within the meaning of Article 12 of the Constitution and it is not also other authority within the meaning of Article 12 of the Constitution. Applying the law which is binding on us, we hold that the writ petitions as filed are not maintainable. Besides, maintainability of the petitions on these aspects, otherwise also the petitions involved seriously disputed questions of facts and therefore, it will be improper for the writ Court to exercise the jurisdiction under Article 226 of the Constitution of India, in the peculiar facts of W. P. No. 1071/2004, where several disputed facts were pressed in service and the petitioners themselves have contended in the body of the petition that the Bank is not amenable to the writ jurisdiction as it does not fall within the ambit of Article 12 of the Constitution of India. We accordingly hold that these petitions are not maintainable as i) Bank is not amenable to writ jurisdiction, ii) Several serious disputed questions of facts are involved, iii) There is effective efficacious remedy available to the petitioners under Sections 17 and 18 of the Securitisation Act, by approaching the Tribunal under 1993 Act.
56. In the circumstances, the Writ Petitions are dismissed.
57. At the request of the petitioners, for a period of six weeks from today, the respondents shall not proceed to take any further action under Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Further interim orders, if any, shall also continue for a period of six weeks from today. However, the respondent banks shall be entitled to take formal possession of the secured assets if formal or physical possession is not already taken.