2002 (12) TMI 504 - HC - Companies Law

Co-operative Banks fall under 'banking company' in Debt Recovery Act

The court held that Co-operative Banks are included in the definition of 'banking company' under the Recovery of Debts due to Banks and Financial ... Recovery of Debts Due to Banks and Financial Institutions Issues Involved:1. Whether a Co-operative Bank is included in the definition of 'Banking Company' under section 2(e) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (Act of 1993).2. The jurisdiction of the Debt Recovery Tribunal over Co-operative Banks.3. The interpretation of legislative incorporation regarding the Banking Regulation Act, 1949, and the Act of 1993.Issue-wise Detailed Analysis:1. Inclusion of Co-operative Bank in the Definition of 'Banking Company':The central issue is whether a Co-operative Bank falls under the definition of 'Banking Company' as per section 2(e) of the Act of 1993. The Act of 1993 defines 'banking company' as having the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949. Section 56(a)(i) of the Banking Regulation Act, 1949, states that references to 'banking company' shall be construed as references to 'Co-operative Bank' unless the context otherwise requires. The court held that the meaning of 'banking company' in the Banking Regulation Act, including section 56(a)(i), is incorporated into the Act of 1993. Therefore, Co-operative Banks are included in the definition of 'banking company' under the Act of 1993.2. Jurisdiction of the Debt Recovery Tribunal:The Debt Recovery Tribunal (DRT) had initially ruled that it lacked jurisdiction over the matter because the petitioner was a Co-operative Bank and not a company under the Companies Act, 1956. This decision was upheld by the Debt Recovery Appellate Tribunal. However, the High Court overturned these decisions, holding that Co-operative Banks are included within the definition of 'banking company' under the Act of 1993. Consequently, the DRT has jurisdiction over disputes involving Co-operative Banks for the recovery of debts.3. Interpretation of Legislative Incorporation:The court examined the principles of legislative incorporation, noting that when a provision from an earlier Act is incorporated into a later Act, it becomes part of the later Act as if it had been written into it. This means that the meaning of 'banking company' under section 5(c) of the Banking Regulation Act, which includes Co-operative Banks by virtue of section 56(a)(i), is incorporated into the Act of 1993. The court referenced several precedents, including Surana Steels (P.) Ltd. v. Dy. CIT and U.P. Avas Evam Vikas Parishad v. Jainul Islam, to support this interpretation. The court emphasized that the intention of the legislature was to include Co-operative Banks within the scope of the Act of 1993 to ensure they benefit from the mechanisms for the recovery of debts.Conclusion:The court concluded that Co-operative Banks are covered under the Act of 1993 for the adjudication and recovery of debts. The orders of the Debt Recovery Tribunal and the Debt Recovery Appellate Tribunal were set aside, and the Original Application No. 568 of 2001 was restored for further proceedings. The court also stayed the further proceedings for eight weeks to allow for any potential appeals.