Constitutional Validity of Securitisation Act Notification Upheld

The Court upheld the constitutional validity of the Notification dated 28-1-2003 under the Securitisation Act, rejecting challenges regarding the inclusion of Co-operative Banks within the definition of "Bank." Additionally, the Court affirmed the judgment of the Debts Recovery Appellate Tribunal and clarified that the Securitisation Act provides independent remedies to secured creditors, including Co-operative Banks. It dismissed claims of excessive delegated authority by the Central Government and affirmed the legislative competence of the State Legislature in providing remedies to Co-operative Banks, emphasizing that the Securitisation Act is not limited by other laws. Ultimately, the Court dismissed the petition, ruling against attempts to avoid recovery of dues under the Securitisation Act.

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Issues Involved:
1. Constitutional validity of Notification dated 28-1-2003 issued u/s 2(1)(c)(v) of the Securitisation Act.
2. Correctness of the judgment dated 20-7-2007 of the Debts Recovery Appellate Tribunal.
3. Availability of remedies under the Securitisation Act to Co-operative Banks.
4. Excessive use of delegated authority by the Central Government.
5. Legislative competence of the State Legislature in providing remedies to Co-operative Banks.

Summary:

1. Constitutional Validity of Notification dated 28-1-2003:
The petitioners challenged the constitutional validity of the Notification dated 28-1-2003 issued u/s 2(1)(c)(v) of the Securitisation Act, which included Co-operative Banks within the definition of "Bank". The Court observed that the challenge was based on a misconception relating to the scope of expressions "Bank" and "Banking Company" in the Securitisation Act. The Court held that the definitions of "Bank" and "Banking Company" in Clauses (c) and (d) of Section 2(1) of the Securitisation Act, and Clauses (d) and (e) of Section 2 of the RDB Act, show that the law does not require every Bank to be a Banking Company. Therefore, the challenge to the Notification was rejected.

2. Correctness of the Judgment dated 20-7-2007 of the Debts Recovery Appellate Tribunal:
The petitioners appealed against the judgment of the Debts Recovery Appellate Tribunal dated 20-7-2007, which dismissed their appeal. The Court noted that the Debts Recovery Appellate Tribunal had left the petitioners the liberty to argue before the Debts Recovery Tribunal the question of the Bank's right to pursue parallel remedies. The Court found no reason to interfere with the judgment of the Debts Recovery Appellate Tribunal.

3. Availability of Remedies under the Securitisation Act to Co-operative Banks:
The Court referred to the decision of the Division Bench in Khaja Industries v. The State of Maharashtra and Anr., which considered the effect of the Supreme Court's judgment in Greater Bombay Co-op. Bank Ltd. v. United Yarn Tex. Pvt. Ltd. and Ors. The Court held that the Securitisation Act provides an independent remedy to secured creditors, including Co-operative Banks, and this remedy is in addition to those available under any other law.

4. Excessive Use of Delegated Authority by the Central Government:
The petitioners contended that the Central Government's issuance of the Notification dated 28-1-2003 amounted to excessive use of delegated authority. The Court rejected this contention, stating that the Legislature had to bring Co-operative Societies undertaking Banking within the control and governance of the Banking Regulation Act. The Court emphasized that the scheme and object of the Banking Regulation Act cannot be used to defeat a special enactment like the Securitisation Act.

5. Legislative Competence of the State Legislature:
The petitioners argued that the State Legislature could not have provided such a remedy to Co-operative Banks under the Maharashtra Co-operative Societies Act, and therefore, the Central Government could not have created such a remedy. The Court referred to the judgment of the Division Bench in Khaja Industries, which upheld the legislative competence of the State Legislature. The Court reiterated that the Securitisation Act is an independent enactment providing remedies to secured creditors and is not limited by the provisions of the RDB Act.

Conclusion:
The Court dismissed the petition, holding that the contentions raised by the petitioners had no force and that the attempt to evade recovery of dues by action under the Securitisation Act must fail.

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