2018 (2) TMI 1326 - SC - Indian Laws

Supreme Court: Banking Regulation Act Section 21A Valid under Constitution, Exceptions for Debt Relief Acts

Jayant Verma And Ors. Versus Union of India And Ors.

The Supreme Court upheld the constitutional validity of Section 21A of the Banking Regulation Act, 1949, under Entry 45, List I. However, in States with ... Vires of Section 21A of the Banking Regulation Act - What is the scope of Entry 45, List I vis-à-vis Entry 30, List II of the Seventh Schedule to the Constitution? - Whether Section 21A can be said to prevail over State Debt Reliefs Acts in the event of a clash between the two? Held that: - It is clear that where Section 21A of the Banking Regulation Act incidentally trenches upon the State Debt Relief Acts, enacted under Entry 30, List II, so far as relief of agricultural indebtedness is concerned, where there is State legislation on the same subject matter which directly clashes with Section 21A, Section 21A will have to give way to the State Debt Relief Acts insofar as relief from agricultural indebtedness due to banks is concerned. Entry 30, List II cannot be read to refer to relief of agricultural indebtedness other than what is specified in List I, as that would be reading into Entry 30 words that are conspicuous by their absence, but which are found in Entries 32 and 63, List II. All this would go to show that where the States have exclusive legislative competence under certain entries of List II, legislation made thereunder cannot be effaced by legislation made under List I, which incidentally trenches upon State legislation made under an exclusive power. It is clear, therefore, that where a matter is not argued at all by the respondent, and the judgment is one of reversal, it would be hazardous to state that the law can be declared on an ex parte appraisal of the facts and the law, as demonstrated before the Court by the appellant’s counsel alone. That apart, where there is a detailed judgment of the High Court dealing with several authorities, and it is reversed in a cryptic fashion without dealing with any of them, the per incuriam doctrine kicks in, and the judgment loses binding force, because of the manner in which it deals with the proposition of law in question. Also, the ratio decidendi of a judgment is the principle of law adopted having regard to the line of reasoning of the Judge which alone binds in future cases. Section 21A of the Banking Regulation Act is valid as it is part of an enactment which, in pith and substance, is relatable to Entry 45, List I of the Seventh Schedule to the Constitution. Issues Involved:1. Constitutional validity of Section 21A of the Banking Regulation Act, 1949.2. Scope of Entry 45, List I (Banking) vis-à-vis Entry 30, List II (Relief of Agricultural Indebtedness) of the Seventh Schedule to the Constitution.3. Whether Section 21A prevails over State Debt Relief Acts in case of a clash.4. The binding nature of the judgment in Yasangi Venkateswara Rao v. State Bank of India.Issue-wise Detailed Analysis:1. Constitutional Validity of Section 21A of the Banking Regulation Act, 1949:The writ petition challenged the constitutional validity of Section 21A of the Banking Regulation Act, 1949, introduced by the Banking Laws (Amendment) Act, 1983. Section 21A states that the rates of interest charged by banking companies are not subject to scrutiny by courts, thus preventing courts from reopening transactions between banks and debtors on grounds of excessive interest rates. The petitioners argued that this provision should be abolished, especially concerning rural indebtedness, as it leads to exploitation and farmer suicides. The Court upheld the validity of Section 21A, stating that it falls within the legislative competence of Parliament under Entry 45, List I of the Seventh Schedule to the Constitution.2. Scope of Entry 45, List I (Banking) vis-à-vis Entry 30, List II (Relief of Agricultural Indebtedness) of the Seventh Schedule to the Constitution:The Court examined the scope of Entry 45, List I, which pertains to 'banking,' and Entry 30, List II, which deals with 'relief of agricultural indebtedness.' It was noted that the entries in the Seventh Schedule should be given the widest possible meaning. The Court harmonized the entries, stating that while Entry 45, List I covers banking, Entry 30, List II specifically addresses relief of agricultural indebtedness, which includes debts due to banks. Therefore, Section 21A, while valid under Entry 45, List I, incidentally encroaches upon Entry 30, List II when it comes to agricultural indebtedness.3. Whether Section 21A Prevails Over State Debt Relief Acts in Case of a Clash:The Court held that Section 21A of the Banking Regulation Act would not operate in States where there is a State Debt Relief Act that covers debts due to banks. The non-obstante clause in Section 21A cannot override State Debt Relief Acts concerning agricultural indebtedness. The Court emphasized that Parliament cannot give itself supremacy over State legislation where none exists under the Constitution. Therefore, in States with Debt Relief Acts that apply to banks, Section 21A will yield to such State legislation.4. The Binding Nature of the Judgment in Yasangi Venkateswara Rao v. State Bank of India:The Court examined the judgment in Yasangi Venkateswara Rao v. State Bank of India, which had previously upheld the validity of Section 21A. The Court noted that the judgment was delivered without hearing the respondent and lacked detailed reasoning or reference to relevant case law. Consequently, the Court held that the judgment in Yasangi Venkateswara Rao was not binding as it was per incuriam, meaning it was decided in ignorance of relevant legal principles and authorities.Conclusion:The Supreme Court upheld the constitutional validity of Section 21A of the Banking Regulation Act, 1949, as it falls within the legislative competence of Parliament under Entry 45, List I. However, Section 21A will not operate in States with Debt Relief Acts covering debts due to banks, as these Acts fall under Entry 30, List II. The judgment in Yasangi Venkateswara Rao was deemed not binding due to its lack of reasoning and consideration of relevant legal principles.