Co-operative bank recovery law remains under State competence; central debt recovery statute does not apply to member dues.

Co-operative banks under the Maharashtra, Andhra Pradesh and Multi-State Co-operative Societies laws are not included within "banking company" in Section 5(c) of the Banking Regulation Act, as Section 56 uses distinct definitions for co-operative banks and the legal fiction there cannot be extended into other statutes. On that basis, the Recovery of Debts Due to Banks and Financial Institutions Act does not govern recovery of dues by way of member-recovery under co-operative statutes. Entry 32 of List II continues to support State legislation on co-operative societies, and incidental banking activity does not transfer the subject to Entry 45 of List I. State recovery provisions for co-operative banks therefore remain within legislative competence.

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Issues: (i) Whether co-operative banks constituted under the Maharashtra Co-operative Societies Act, 1960, the Andhra Pradesh Co-operative Societies Act, 1964 and the Multi-State Co-operative Societies Act, 2002 fall within the definition of "banking company" in Section 5(c) of the Banking Regulation Act, 1949 so as to attract the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. (ii) Whether the State Legislatures had competence under Entry 32 of List II to enact provisions governing recovery machinery for co-operative banks notwithstanding Entry 45 of List I.

Issue (i): Whether co-operative banks constituted under the Maharashtra Co-operative Societies Act, 1960, the Andhra Pradesh Co-operative Societies Act, 1964 and the Multi-State Co-operative Societies Act, 2002 fall within the definition of "banking company" in Section 5(c) of the Banking Regulation Act, 1949 so as to attract the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Analysis: The definition of "banking company" in Section 5(c) of the Banking Regulation Act, 1949 was kept distinct from the separately inserted concepts of "co-operative bank" and "primary co-operative bank" in Section 56. The Parliament did not amend Section 5(c) to include co-operative banks, and the legal fiction in Section 56 operated only for the purposes of applying banking regulation provisions to co-operative banks, not for importing the definition into another statute. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was enacted to address recovery by banks and financial institutions that lacked self-contained recovery machinery, whereas co-operative banks already had specific remedies under the State co-operative statutes.

Conclusion: Co-operative banks do not fall within "banking company" under Section 5(c) of the Banking Regulation Act, 1949, and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 does not apply to recovery of their dues from members by incorporation.

Issue (ii): Whether the State Legislatures had competence under Entry 32 of List II to enact provisions governing recovery machinery for co-operative banks notwithstanding Entry 45 of List I.

Analysis: Entry 32 of List II expressly covers co-operative societies, while Entry 45 of List I covers banking. Co-operative banking was treated as incidental to the regulation of co-operative societies and not as a transfer of the subject of co-operative societies into the Union field. The challenged State enactments were therefore referable to the State subject of co-operative societies, and the central law on banking recovery did not displace them in this field. The Court also applied the principles of pith and substance and legislative competence to preserve the State legislation.

Conclusion: The State Legislatures were competent under Entry 32 of List II to enact and maintain recovery provisions for co-operative banks.

Final Conclusion: The legal position was clarified in favour of the co-operative banks: the central recovery statute was held inapplicable to their member-recovery proceedings, and the State co-operative law framework was held to remain the governing field for such matters.

Ratio Decidendi: A co-operative bank remains a co-operative society for constitutional and statutory purposes unless the legislature expressly includes it within the relevant central definition; a legal fiction created for one enactment cannot be extended by implication to another, and State legislation on co-operative societies continues to operate within Entry 32 of List II despite incidental banking activity.

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