Co-operative banks can use Sarfesi Act to recover dues: Supreme Court of India

The constitutional bench of The Honourable Supreme Court of India, Coram consisting of Hon’ble Justice Arun Mishra, Hon’ble Ms. Justice Indira Baneerjee, Hon’ble Justice Vinit Saran, Hon’ble Justice M. R. Shah, Hon’ble Justice Anniruddha Bose in Civil Appeal No. 5674 of 2009 and in case between Pandurang Ganapati Chaugule Vs. Vishwasrao Patil Murgud Sahakari Bank Limited held that The Co-operative banks under State legislation and multi-State co-operative banks are ‘banks’ under Section 2 (1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Hon’ble Court further also has observed 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. Since the recovery is an essential part of banking; as such, and the recovery procedure prescribed under section 13 of SARFESI Act, a legislation relatable to Entry 45 list I of the Seventh Schedule to the Constitution of India, is applicable