Cooperative Banks cannot make recoveries through DRT: SC

New Delhi, Apr 7 (UNI) The Supreme Court in a significant ruling has held that the Cooperative Banks cannot make recoveries from their members by approaching Debts Recovery Tribunal.

A three-judge bench comprising Justices B N Agrawal, P P Naolekar and Lokeshwar Singh Panta gave the ruling. ''Cooperative Banks established under the Maharashtra Cooperative Societies Act 1960 (MCS Act), the Andhra Pradesh Cooperative Societies Act 1964 (APCS Act) and the Multi State Cooperative Societies Act 2002 (MSCS Act), transacting the business of banking do not fall within the meaning of 'Banking Company' as defined in Section Five (C) of the Banking Regulation Act 1949 (BR Act).

Therefore the provisions of the Recovery of Dues to the Bank and Financial Institutions Act 1993 (RDB Act) by invoking the Doctrine of Incorporation are not applicable to the recovery of dues by the Cooperatives from their members.'' The bench handed down the ruling on April 4 while answering the reference made to it by a two-judge bench on December 1, 2005.

The apex court, answering the reference made on the appeal of Greater Bombay Cooperative Bank Ltd also observed, ''Judicial system has an important role to play in our body politic and has a solemn obligation to fulfil. In such circumstance it is imperative upon the courts while examining the scope of legislative action to be conscious to start with the presumption regarding the constitutional validity of the legislation.

The burden of proof is upon the shoulders of the incumbent who challenges it.

It is true that it is duty of the constitutional courts under our Constitution to declare a law enacted by Parliament or the state legislature as unconstitutional when Parliament or the state legislature had assumed to enact a law which is void, either for want of constitutional power to enact it or because the constitutional forms or conditions have not observed or where the law infringes the Fundamental Rights enshrined and guaranteed in part three of the Constitution.'' Justice Panta in his 91-page judgment also held that the field of Cooperative Societies cannot be said to have been covered by the Central legislation by reference to entry 45, list one of the Seventh Schedule of the Constitution.

UNI