TaxTMI 
TaxTMI 
2005 (7) TMI 357
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....V. Bhadram, G. Satish Reddy, M.R. Mohd. Irfan, Smt. A Anasuya and Eranki Phani Kumar for the Petitioner. S. Ashok Anand Kumar, A.H. Rama Krishna Rao, Deepak Bhattacharjee, N. Ratna Reddy, C.B. Rammohan, E. Ajay Reddy, Kishore Rai, K.B. Ramanna Dora, A Kella Sreenivas Rao, A. Ananda Rao, P. Indra Prakash, Nuty Ram Mohan Rao, Maturi Aravindu, K. Gopala Krishna Murthy, Dr. P.B. Vijay Kumar, P. Uma Shankara Rao, V. Venkataramana, K. Ramanuja Chari, Venkata Rangadas Kanuri and V. Dyumani for the Respondent. JUDGMENT Goda Raghuram, J. - Heard Sri E. Manohar, Sri J. V. Suryanarayana, senior advocates, Sri D. V. Bhadram, Sri K. V. Satyanarayana, Sri Badri Premnath, advocates for the several petitioners/appellants; learned Advo-cate General for the State of Andhra Pradesh; Sri Nooti Ram Mohan Rao, Sri Ashok Anand Kumar, Sri K. Gopala Krishna Murthy, advocates for the several co-operative banks and Sri M. Ratna Reddy, advocate for the Union of India. 2. The several writ petitions were filed at various stages of proceedings before the authorities of the Registration Department of the State. All the writ petitioners had obtained loans; or overdraft facility from the respective co-oper....
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....9 [Central Act 10/49] ("the 1949 Act"), fall for consideration. As competing claims as to the vitality of the Union and State legislations fall for determination in these writ petitions, notice was issued to the Union of India in the Ministry of Finance Department of Economic Affairs (Banking Division). Sri M. Ratna Reddy, learned counsel representing the Central Government, on instructions, has only submitted that the Union of India had not conveyed its views on the construction of the provisions of the several statutes and that it desires to await the decision of the courts on the issues. Why the Full Bench? 6. Aggrieved by the certificate dated June 14, 2004; issued by the Deputy Registrar of Co-operative Societies and Officer on Special Duty of the Vasavi Co-operative Urban Bank Limited, Hyderabad, ordering recovery of about Rs. 33 lakhs towards the debt due to the Vasavi Bank, W. P. No. 18535 of 2004 was filed. A learned Single Judge of this Court by the order, dated October 11, 2004, granted interim stay of all further proceedings pursuant to the certificate dated June 14, 2004, on condition that the writ petitioner should deposit half the amount due under the certifica....
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....desh. The provisions of the Act are arranged in XIV Chapters including Chapter XIII-A. Chapter II sets out provisions relating to registration of societies and matters connected and incidental thereto; Chapters III and IV deal with membership of the society, composition of managing committees of the societies, the rights and liabilities of the members and matters relating to management of societies including the powers and functions of the managing committee, respectively; Chapters V to VII deal with the rights and privileges, properties and funds and substantive and procedural provisions relating to audit, inquiry, inspection and surcharge in relation to a society; Chapter VIII includes provisions regarding settlement of disputes and section 61 in this chapter is one of the provisions which confers arbitral power for recovery of dues of a co-operative society; Chapters IX, XI and XII contain provisions relating to winding up and cancellation of registration of a society, to appeal, revision and review and offences and penalties, respectively; Chapter X includes provisions relating to execution of decisions and decrees and orders and in this chapter are included sections 70 and 71 ....
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....to be admitted or not; (iii)a claim by a society against a member, past member, or the nominee, heir or legal representative of a deceased member for the delivery of possession to the society of land or other immovable property resumed by it for breach of the conditions of assignment or allotment of such land or other immovable property. 12. A co-operative bank provides loans and advances only to its members. On a true and fair construction of the provisions of section 61(1) considered in the invariable factual setting that loans and advances are provided by a co-operative bank only to its members and the broad definition in the Explanation to section 61(1) that a dispute includes "a claim by a society for any debt or other amount due to it from a member, past member, the nominee, heir or legal representative of a deceased member", a dispute regarding recovery of the loans, advances and any debt due to a co-operative bank from its members constitutes (on a textual construction of the provision), a dispute falling within the adjudicatory domain of the Registrar. 13. Chapter X includes provisions for execution of decisions, decrees and orders of the authorities under the Act....
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....ng up of the Special Tribunals with special powers for adjudication of such matters and speedy recovery as critical to the successful implementation of the financial sector reforms. An urgent need was, therefore, felt to work out a suitable mechanism through which the dues to the banks and financial institutions could be realized without delay. In 1981 a Committee under the Chairmanship of Shri T. Tiwari had examined the legal and other difficulties faced by banks and financial institutions and suggested remedial measures including changes in law. The Tiwari Committee had also suggested setting up of Special Tribunals for recovery of dues of the banks and financial institutions by following a summary procedure. The setting up of Special Tribunals will not only fulfil a long-felt need, but also will be an important step in the implementation of the Report of Narasimham Committee. Whereas on September 30, 1990, more than fifteen lakhs of cases filed by the public sector banks and about 304 cases filed by the financial institutions were pending in various courts, recovery of debts involved more than Rs. 5,622 crores in dues of public sector banks and about Rs. 391 crores of dues of th....
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....n this Chapter are provisions relating to appeals to the Appellate Tribunal and other incidental matters. Chapter V sets out provisions relating to recovery of the debt determined by the Tribunal and appeals against the order of Recovery Officer. Chapter VI contains provisions relating to miscellaneous matters. Section 34 enacts overriding effect to the provisions of the Act. Including in this chapter are provisions relating to rule-making powers of the Central Government. The Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 [Act 30/95] ("the 1995 Act"): 16. Increased State's participation in financing and management of co-operative societies substantially eroded the autonomy of co-operative societies and even the co-operative societies for perceiving themselves as administrative arrangement of the State. These shared perceptions were inconsistent with the co-operative principles and the dynamic national goal of deregulation and liberalisation. The State Government therefore enacted this legislation to promote self-reliant, and autonomous co-operative societies and to ensure a vibrant co-operative moment in the State. Suffice to notice for the purposes of this l....
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....ve bank [56(a)]. 20. Section 5 of the Act is the definitions/interpretations clause, which defines various expressions set out therein. Section 56(c) incorporates definition of certain expressions like "co-operative bank", "co-operative credit society" and "primary agricultural credit society" into section 5 of the Act. Accordingly "co-operative bank" means a State co-operative bank, a central co-operative bank and a primary co-operative bank. "Primary co-operative bank" means a co-operative society, other than a primary agricultural credit society, the primary object or principal business of which is transaction of banking business, the paid up share capital and reserves of which are not less than rupees one lakh and bye-laws of which do not permit admission of any other co-operative society as a member. The expressions "central co-operative bank", "co-operative society", "primary rural credit society" and "State co-operative bank" have meanings respectively assigned to these expressions in the National Bank for Agricultural and Rural Development Act, 1981 (Act 61 of 1981) [The 1981 Act]. 21. Section 56(7) prohibits the use of the words "bank", "banker" or "banking" by any c....
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....Financial Assets and Enforcement of Security Interest Act, 2002 (the 2002 Act) - brief analysis. 26. The slow pace of recovery of defaulting loans and mounting levels of non-performing assets, absence of legal provision for facilitating securitisation of financial assets of banks and financial institutions are some of the concerns that are addressed by this legislation by Parliament, which provides for securitisation and empowering banks and financial institutions to take possession of the Securities and to sell them without the intervention of the court. This legislation enables banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. 27. Section 2(c) defines the expression "bank" to mean, inter alia, "a banking company" and "a banking company" is defined with reference to the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 [section 2(d)]. Section 2(f) defines "borrower'' to mean a person who has been granted....
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....lative, urge the respondent-banks. The case of the petitioners: A."Banking" is within the exclusive legislative field of the Union - article 246 read with entry 45, List I of the Seventh Schedule. B.Each of the respondent-banks is a "co-operative bank" and "banking company" within the meaning of the 1949 Act, including section 5(c) of the said Act. C.The debt due from each of the petitioners is in excess of Rs. 10 lakhs. D.In view of the definition of the expressions "bank", "banking company" and "debt" in section 2(d), (e) and (g ) of the 1993 Act, every respondent-bank-a co-operative bank, is a "banking company" and therefore a "bank" and the debt due from every petitioner is a debt recoverable only under the provisions of the 1993 Act. E.The substantive and procedural prescriptions for recovery of the debt due from each of the petitioners is confined to the exclusive jurisdiction, power and authority of the Tribunal constituted under the 1993 Act and the jurisdiction, power or authority of every other court or other authority (including the Registrar - exercising powers under the 1964 Act) is excluded. The exclusive jurisdiction of the Tribunal constituted unde....
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....ions of the 1964 Act. Under the 1993 Act "bank" means "banking company" and "banking company" is defined with reference to the meaning assigned to this expression in section 5(c) of the 1949 Act. Since the 1949 Act does not exclude or eclipse the provisions of the 1964 Act and the provisions of the 1964 Act can operate alongside the provisions of the 1949 Act (section 2 of the 1949 Act) the impugned recovery proceedings, under the provisions of the 1964 Act are competent, valid and enforceable. D.Section 3 of the 1949 Act excludes application of the provisions of this Act to a Primary Agricultural Credit Society (PACS); a co-operative Land Mortgage Bank (LMB) and any other co-operative society, except in the manner and to the extent specified in Part V. By the amendment to the 1949 Act (by Act 23/65), Part V was incorporated. By section 56(c) clause (cci) was inserted in section 5 of the Act; whereunder "co-operative bank" is defined to mean a State co-operative bank, a central co-operative bank and a primary co-operative bank. Clause (ccvii) of section 5 of the 1949 Act defines the expression "State co-operative bank" and "central co-operative bank" with reference to the meanin....
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.... Legislature is incompetent since the relevant field of legislation belongs exclusively to the Union, the discourse as to an earlier/later State enactment (prevailing over a Union legislation) is non-sequitor. F.Recovery of the debt due to a bank is not a matter that integrally falls within the scope of the legislative field "banking" in entry 45 of List I. It falls within the wider entry "...Regulation .... of co-operative societies" . . . entry 32 of List II. G.As the petitioners voluntarily submitted to the jurisdiction of the Registrar (exercising powers under section 61 or 71 of the 1964 Act), they are estopped from questioning such jurisdiction or the orders passed by in exercise of the jurisdiction. The issues for determination : A.Are the respondent banks, co-operative banks and banking companies within the meaning of these expressions as defined in the 1949 and 1993 Acts ? B.Do the debts due from the petitioners to the respondent-banks constitute "debt" within the meaning of the expression as defined in section 2(9) of the 1993 Act; are the respondent-banks "bank" within the meaning of the said Act? C.Do the Tribunals constituted under the 1993 Act have e....
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....J. in Youngstown Sheet and Tube Co. v. Sawyer [1952] 343 US 579; 96 L. Ed. 1153 stated this principle of judicial restraint in felicitous phrase "A basic rule is the duty of the court not to pass on a constitutional issue at all, however narrowly it may be confined, if the case may, as a matter of intellectual honesty be decided without even considering delicate problems of power under the Constitution. It ought to be, but apparently is not a matter of common understanding that clashes between the different branches of Government should be avoided if a legal ground of less explosive potentialities is properly available. Constitutional adjudications are apt by exposing differences to exacerbate them". In Basheshar Nath v. CIT [1959] 35 ITR 190 (SC); S.R. Das, CJ. in a majority opinion declined to pronounce upon the issue whether breach of fundamental rights, other than those flowing from article 14, could be waived. Das, CJ. held : "...For disposing of this appeal it is not necessary for us to consider whether any of the other fundamental rights enshrined in Part III of our Constitution can or cannot be waived. We take the view that this Court should not make any pronouncement on....
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....ks the paid up share capital and reserves of which are of the value of Rs. 1 lakh above including State co-operative banks, central co-operative banks and primary non-agricultural credit societies including urban co-operative banks that have banking as a principal business and paid-up capital and reserves of a nominal value of Rs. 1 lakh or more. Excluded from the provisions of the Act are : (a)Primary agricultural credit societies irrespective of the value of their paid up capital and reserves; (b)Non-agricultural primary credit societies with paid up capital and reserves of the value of less than Rs. 1 lakh, even though their primary object or principal business is banking and they may be accepting deposits from non-members; (c)Co-operative credit societies, the principal business of which is not banking but is providing financial help to its members and which do not accept deposits from non-members; and (d)Co-operative societies that do not carry on any banking business. 38. At this stage of analysis, we may dispose of a contention projected by Sri Ashok Anand Kumar, learned counsel appearing for the Vasavi Co-operative Urban Bank Limited and the Prudential Co-ope....
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...."primary rural credit society", "State co-operative bank" are, in the 1949 Act assigned the same meanings as respectively assigned to them in the 1981 Act [vide section 5( ccvii) of the 1949 Act]. It is not the case of the respondent-banks that these banks are "central co-operative bank" or "State co-operative bank" or even "primary rural credit society" as defined in the 1949 Act. 42. Section 5(cciv) of the 1949 Act defines a "primary agricultural credit society" to mean a co-operative society, the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities including marketing of crops and the, bye-laws of which do not permit admission of any other co-operative society as a member except that admission of a co-operative bank as a member is permitted where such co-operative bank subscribes to the share capital of such co-operative society out of the funds provided by the State Government for the purpose. 43. The respondent-banks are not and do not even claim to be a primary agricultural credit society. They admit to being "co-operative society" within the me....
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.... society shall carry on the business of banking in India unless it uses as part of its name at least one of such words. Sub-section (2) of section 7 provides that the aforesaid requirement and prohibition [in section 7(1)] does not apply to certain classes of co-operative societies such as primary credit society, a co-operative society formed for the protection of the mutual interest of co-operative banks or co-operative land mortgage banks, or any co-operative society not being a primary credit society, formed by the employees of a banking company or the State Bank of India or a corresponding new bank or a subsidiary bank of such banking company, State Bank of India or a corresponding new bank, or a co-operative bank or a primary credit society or a co-operative land mortgage bank. The respondent-banks do not come within the exceptions to the operation of the substituted section 7(1) of the 1949 Act. Such is not their case either. Admittedly, they are a co-operative society carrying on banking business and also use of the word "bank" as part of their respective names and in connection with their respective business. In the aforesaid uncontested factual matrix and unambiguous statu....
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....very of debts due to them from the petitioners, is wholly and comprehensively excluded. 49. On behalf of the respondent-banks it is contended, tentatively by some of the representing counsel but emphatically by others that inasmuch as section 2(e) of the 1993 Act defines the expression "banking company" with reference to its definition in section 5(c) of the 1949 Act and without clearly enacting that the said expression shall have the meaning assigned to it in section 5(c) of the 1949 Act as amended by Act 23 of 1965 or read with section 56, the provisions of the 1993 Act should properly be construed as confined to a banking company which is a "company" as defined in section 5(d) of the 1949 Act, meaning a company as defined in section 3 of the Companies Act, 1956 ('the 1956 Act') and including a foreign company within the meaning of section 591 of the 1956 Act. Put differently, the contention of the respondent-banks is that as "bank" and "banking company" are not defined in the 1993 Act with reference to the amended definitions of these expressions in the 1949 Act (by the amendments introduced by Act 23 of 1965), co-operative banks must be considered as excluded from the purvie....
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.... held, is to write those sections into the Act as if they had been actually written in it with the pen, or printed in it." (p. 615) 53. Ordinarily if an Act is incorporated into a later Act the intention is to incorporate the earlier Act with all the amendments made to it up to the date of incorporation. Sikri, J. speaking for a Constitution Bench in State of Maharashtra v. Madhav Rao Damodar Patil AIR 1968 SC 1395, applied this principle and concluded that by including the Maharashtra State Agricultural Lands (Ceiling on Holdings) Act, 1961 in the Ninth Schedule to the Constitution, the said Act as amended by Maharashtra Act XIII of 1962 must be deemed to have been included and not merely the original unamended Act of 1961. In Mayor of Portsmouth v. Smith [1885] 10 AC 364 (HL) Lord Blackburn spelt out the principle of construction when only particular sections of an earlier enactment are incorporated into a later enactment, thus : "Where a single section of an Act of Parliament is introduced into another Act, I think, it must be read in the sense it bore in the original Act from which it is taken, and that consequently it is perfectly legitimate to refer to all the rest of t....
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....re questions of law and jurisdiction. No decision of the Registrar could be conclusive on such issues nor can a decision of the Registrar be declared final and irreviewable by this Court on the jejune grounds of waiver or estoppel-Chief Justice of Andhra Pradesh v. L.V.A. Dixitulu [1979] 2 SCC 34; L.Chandra Kumar v. Union of India [1997] 228 ITR 725. 59. It is also a settled principle of law that a writ of prohibition or certiorari would issue if a court or Tribunal proceeds to act under a law which is ultra vires or unconstitutional, acts in excess of its jurisdiction or even on an erroneous assumption of jurisdictional facts. If the jurisdiction, power or authority of the Registrar is non-existent either on account of an exclusive jurisdiction conferred on a Tribunal under the 1993 Act or as the provi- sions of the 1964 Act insofar as they provide for adjudicatory mechanisms for recovery of debts due to co-operative banks are incompetent (on the grounds of legislative competence), it cannot be contended that the determination by the Registrar or a cognisance by him of the claim preferred by a co-operative bank for recovery of debts due to it, is conclusive and irreviewable by ....
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....hat a uniform and consistent departmental practise arising out of the construction placed upon an ambiguous statute by the highest executive officers at a time contemporaneous to the enactment and continuing over a considerable period of time is an admissible aid to the proper construction of the statute by the court and such construction should not be disregarded except for cogent reasons. This aid to construction of statutes is a relatively unreliable aid to construction of statutes. The appropriateness of its application depends on variable and plural factors, including the duration of time for which the executive construction is followed, the nature and magnitude of rights affected by the construction, the injustice or public mischief resulting from its departure and the approval of such construction as received in precedents or subsequent legislations. This aid to construction of statute has been applied in a few cases - State of Nagaland v. Ratan Singh AIR 1967 SC 212; National & Grindlays Bank Ltd. v. Municipal Corpn., Greater Bombay AIR 1969 SC 1048; N. Suresh Nathan v. Union of India AIR 1992 SC 564. Similarly documents issued by the appropriate Government simultaneously w....
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....ng guide to the construction of the provisions of the 1993 Act or to hold that the expression "bank" in the said Act excludes a "co-operative bank". 64. We accordingly hold issue-H against the respondent-banks. Analysis of issues E and F: 65. In the analysis of issues A to D supra, we have considered whether the provisions of the 1993 Act exclude the adjudicative jurisdiction and domain of the Registrar under the 1964 Act. We have concluded that a Tribunal constituted under the 1993 Act has exclusive jurisdiction to entertain and decide applications from a co-operative bank for recovery of debts due wherever the amount of debt due is Rs. 10 lakhs or above. We have also concluded that claim of a co-operative bank and the proceedings consequent on the determination of such a claim, which falls within the jurisdiction and authority of a Tribunal under the 1993 Act cannot be entertained or determined by the authorities under the 1964 Act. The analysis and the conclusions above are on the basis of interpretation of the provisions of the relevant statutes. 66. In issues E and F we are called upon to determine whether adjudication of disputes relating to debts due to a co-oper....
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....ions but excluding banking corporations which are co-operative societies that are not multi-State in character, contend the petitioners. 69. The provisions set out in Part XI, Chapter I of the Constitution, principally govern the allocation and distribution of legislative powers between the Union and the States under the Indian Constitution. Articles 249 to 252 confer on Parliament, the power to legislate with respect to a matter in the State list (list II, Seventh Schedule) and set out principles for resolving inconsistency between laws made by Parliament under articles 249 and 250 and laws made by the Legislature of a State (within the State legislative powers). With respect to any matters not enumerated in the Concurrent or the State list, residuary, legislative power is conferred on Parliament (article 248). Power to make a law for implementing or giving effect to international agreements, treaties or conventions is also conferred on Parliament (article 253). Article 246 sets out the distribution of legislative powers between the Union and the States in mutually exclusive lists, List I (Union); List II (State) and a Concurrent list (List III). 70. In the case on hand we a....
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.... exclusivity in the distribution of legislative powers enumerated in Lists I and II. The Constitution does not countenance the delegation of legislative powers, either expressly or by abstinence in the exercise of legislative powers by the appropriate Legislature. 72. In respect of matters enumerated in the Concurrent list however it is possible that laws made by the Union and the State could co-exist. Resolution of conflicts in this area is by application of the doctrines of "the occupied field" and "repugnancy" and such disputes are to be resolved by recourse to the principles set out in article 254. 73. The elaborate constitutional plan of distribution of legislative powers between the Union and the States enumerated in the exclusive lists (Lists I and II) and the Concurrent list (List III) does not however avoid potential disputes as to the legitimacy of a law on the grounds of legislative competence. This is so as the matters enumerated in the several entries in the lists in the Seventh Schedule are not powers but fields of legislation and a liberal construction must be put on them. Each head of legislation carries with it all ancillary and subsidiary powers - United Pro....
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....v. State of Orissa AIR 1961 SC 1438, section 14A of the Orissa Sales Tax Act, 1947, which deprives assessees of a right to obtain a refund of tax paid under an error of law and which provides that a refund could be claimed only by the person from whom the tax was realised, was upheld on the view that the granting of refund of a tax improperly or illegally collected and the restriction on the exercise of that right were both ancillary or subsidiary matters relating to the primary head of tax on sale of goods. This decision and the principle of ancillary and subsidiary powers spelt out in the above judgment were specifically approved by the Bench of seven (7) judges in R. S. Joshi v. Ajit Mills Ltd. AIR 1977 SC 2279. 74. To resolve legislative conflicts, the doctrine of pith and substance was evolved. The Privy Council with reference to the British North America Act, 1867 (which is the closest approximation to a constitution of Canada) evolved the doctrine. Sections 91 and 92 of this Act enumerate the exclusive matters for the legislative authority of Parliament and the provinces in Canada. Even so disputes as to whether a particular law falls within a matter exclusively authorize....
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....slative power so given is plenary in its quality. The purpose of the enumeration is to name a subject for the purpose of assigning it to that power. The names of descriptions employed are usually of the briefest kind. It is true that certain powers do involve a description amounting almost to a formal definition;. . . But more often they are the most general names of general topics. . . . To borrow the words of Gray J. delivering the opinion of the Sup. Ct. in Juilliard v. Greenman [1883] 110 U.S. 421. 'The Constitution. .. by apt words of designation or general description marks the outlines of the powers granted to the National Legislature; but it does not undertake, with the precision and detail of a code of laws, to enumerate the sub-divisions of those powers, or to specify all the means by which they may be carried into execution'." 77. This principle was first applied in India, by Gwyer C. J. in the Central Provinces' case-Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, In re AIR 1939 FC 1. 78. Overlapping of fields of legislation occurs for variety of reasons. A subject of legislation of wide scope may be divided between the Union a....
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....legislative powers in the exclusive lists is to identify the matter of the legislation or what is known as the "pith and substance" of the challenged law. The second step is to assign the matter or the substance of the impugned legislation to one of the heads/fields of legislation distributed in the lists in the Seventh Schedule. Often, as pointed out by Laskin (in relation to the allocation of legislative powers under the British North America Act, 1867), these two steps "are in the nature of interlocking processes in which the constitutional provisions and the challenged legislation react on one another and fix each one's meaning". Nevertheless, for the purposes of analysis and resolution of the conflicts, the essential steps involved are : (a) characterisation of the challenged law; and (b) interpretation of the power distributing provisions of the Constitution. 82. As legislative conflicts are a regnant feature of federal constitutional arrangements and we have adopted some of the principles evolved in other federal jurisdictions for resolving the legislative conflicts under our Constitution, for identification of the dominant characteristic of a chal-lenged law in order to ....
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.... flexibility and pragmatism to the structure of the division of exclusive powers while providing a check against clear usurpation of power to an extent that disturbs the carefully constructed constitutional plan of federal balance. Under this arrangement, incidental trenching in exercise of ancillary powers, into a forbidden legislative territory is permitted as a matter of privileged encroachment not amounting to usurpation. 86. Normatively "trenching" connotes in the context of legislations by different levels of Government and within the scheme of the exclusive Union and State fields (Lists I and II), an unconstitutional encroachment by one Legislature on the exclusively authorised field of another. In practice however, following the employment of this device and terminol-ogy by the Privy Council in the Canadian cases Tennant v. Union Bank of Canada [1894] AC 31; Attorney-General of Ontario v. Attorney-General for Canada [1896] AC 348; Grand Trunk Railway Company of Canada v. Attorney-General, Canada [1907] AC 65 (PC); R. v. Thomas Fuller Construc- tion [1980] 1 SCR 695 and Reference re Goods and Services Tax [1992] 2 SCR 445 (Canada)], the Indian courts have adopted (a) the ....
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.... to whether it appropriately belongs to the core or penumbral areas of a legislative field, regard must be had to the provisions of the Act as a whole in which the impugned provisions occur, the enumerated fields of legislation in the exclusive Lists (I and II) and the constitutional values and purposes underlying the distribution of legislative powers to the two levels of Government - the federal and provincial. Consideration of these aspects would, in most cases provide a satisfactory resolution to legislative conflicts. 90. The difficulty in identifying the "matter" the "dominant feature" or the "pith and substance" of a law is that many statutes have features which fall within one level of Government and others falling within the other level of Government, i.e., within a State field and Union field. Selection of one or the other feature as the dominant characteristic or the "pith and substance" of the statute normally disposes of the question as to the competence of the Legislature which enacted the statute in question. This characteristic of a law is referred to as the "double aspect" doctrine, a recognition and acknowledgment that some kinds of laws have a dual characteris....
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.... v. Secretary, Municipal Committee, Kamptee AIR 1950 SC 11, State of Karnataka v. Ranganatha Reddy AIR 1978 SC 215, Kerala State Electricity Board v. Indian Aluminium Co. Ltd. AIR 1976 SC 1031, Tripura Goods Transport Association v. Commisioner of Taxes [1999] 2 SCC 253/1999 AIR SC 719. 93. The question of invasion into the territory of another Legislature must be determined not by the degree but by substance; the extent of invasion though is not altogether irrelevant; the extent of invasion into the forbidden sphere may some times determine the "pith and substance" of the impugned legislation -Thakur Amar Singhji v. State of Rajasthan AIR 1955 SC 504. 94. In identifying the dominant characteristic or the "pith and substance" of a legislation, the court is also required to consider the effect of the statute. If the direct legal effects of the provisions of law are directed to the indirect achievement of other purposes or if the provisions substantially impact a field preserved exclusively for the other level of Government, the statute or its provisions to the extent of the transgression will be invalidated. In characterising a law for the purpose of judicial review on legisla....
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....owever carved out an important exception to this general principle. If the effect of the State law would impair the status, the essential powers or the intrinsic efficacy of regulation of a matter eminently falling within the Federal field or would effect a vital area of a federally regulated enterprise, then the State law although valid in the generality of its application will be held not to apply to the federally incorporated or regulated enterprise. Peter W. Hogg refers to principle as the principle of Interjurisdictional Immunity (Constitutional Law of Canada - 2001). An illustration of the application of this principle is in the decision of the Canadian Supreme Court in Bell Canada v. Quebec [1988] 1 SCR 749. The question in this case was whether Bell Canada, an inter-provincial telephone company, was bound in Quebec by a Quebec law that required the protective reassignment of pregnant workers who work with video monitors, Beetz J. held that the provincial law was constitutionally incapable of applying to the federal undertakings, and should be read down as inapplicable to it, it was held that "it is sufficient that the provincial statute which purports to apply to the federa....
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....Ltd. v. Mill Mazdoor Sabha [1966] 36 Comp. Cas. 901 AIR 1967 SC 691. The doctrine against colourable legislation is not concerned with the motive of legislation; it is in essence a question of vires or the power of the Legislature to enact the law in question. 97. In the limited area of ancillary and incidental powers of the two levels of Legislature, there is thus a concurrency of legislative power even in respect of the exclusive lists. In this area the apparently conflicting legislative provisions must be reconciled. When reconciliation is not however possible, the Union's exercise of legislative power in areas that are incidental and ancillary to its authorised field of legislation commands dominant treatment and paramountcy. The principle of such paramountcy of the Union legislation has been explained by Mrs. Ruma Pal J. in a concurring judgment (per majority) in ITC Ltd. v. Agricultural Produce Market Committee [2002] 9 SCC 232, 281 as under : "93. That the legislative power of Parliament in certain areas is par-amount under the Constitution is not in dispute. What is in dispute is the limits of those areas as judicially defined. Broadly speaking, parliamentary paramoun....
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.... Centre. Within the sphere allotted to them, States are supreme. The Centre cannot tamper with their powers. More particularly, the courts should not adopt an approach, an interpretation, which has the effect of or tends to have the effect of whittling down the powers reserved to the States' (see S. R. Bommai v. Union of India [1994] 3 SCC 1). 94. Although Parliament cannot legislate on any of the entries in the State List, it may do so incidentally while essentially legislating within the entries under the Union List. Conversely, the State Legislatures may encroach on the Union List when such an encroachment is merelyancillary to an exercise of power intrinsically under the State List. The fact of encroachment does not affect the vires of the law even as regards the area of encroachment (see A. S. Krishna v. State of Madras AIR 1957 SC 297). This principle commonly known as the doctrine of pith and substance, does not amount to an extension of the legislative fields. Therefore, such incidental encroachment in either event does not deprive the State Legislature in the first case or Parliament in the second, of their exclusive powers under the entry so encroached upon. In the eve....
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.... the Provinces. The scheme of distribution has varied with different Constitutions, but even when the Constitution enumerates elaborately the topics on which the Centre and the States could legislate, some overlapping of the fields of legislation is inevitable. The British North America Act, 1867, which established a Federal Constitution for Canada, enumerated in sections 91 and 92 the topics on which the Dominion and the Provinces could respectively legislate. Notwithstanding that the lists were framed so as to be fairly full and comprehensive, it was not long before it was found that the topics enumerated in the two sections overlapped, and the Privy Council had time and again to pass on the constitutionality of laws made by the Dominion and Provincial Legislatures. It was in this situation that the Privy Council evolved the doctrine that for deciding whether an impugned legislation was intra vires, regard must be had to its pith and substance. That is to say, if a statute is found in substance to relate to a topic within the competence of the Legislature, it should be, held to be intra vires, even though, it might incidentally trench on topics not within its legislative competen....
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.... examined to ascertain its "pith and substance" or its "true nature and character" for the purpose of determining whether it is legislation in respect of matters in this list or in that . . .' This point arose directly for decision before the Privy Council in Prafulla Kumar Mukherjee v. Bank of Commerce Ltd. AIR 1947 PC 60; 74 Ind. App. 23. There, the question was whether the Bengal Money Lenders Act, 1940 which limited the amount recoverable by a money-lender for principal and interest on his loans, was valid insofar as it related to promissory notes. Money-lending is within the exclusive competence of the Provincial Legislature under item 27 of List II, but promissory note is a topic reserved for the Centre, vide List I, Item 28. It was held by the Privy Council that the pith and substance of the impugned legislation being money-lending, it was valid notwithstanding that it incidentally encroached on a field of legislation reserved for the Centre under entry 28. After quoting with approval the observations of Sir Maurice Gwyer C. J. in Subrahmanyan Chettiar v. Muttuswami Goundan [1940] FCR 188; AIR 1941 FC 47 Lord Porter observed : 'Their Lordships agree that this passage c....
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.... under entry 1 of List II, that is a topic within the exclusive competence of the Province. Then the Ordinance provided for preventive detention, imposition of collective fines, control of processions and public meetings, and there were special provisions for arrest and trial for offences under the Act. The contention was that though the sections of the Ordinance relating to maintenance of public order might be covered by entry 1 in List II, the sections constituting the offences and providing for search and trial fell within items 1 and 2 of the Concurrent List, and they were void as being repugnant to the provisions of the Criminal Procedural Code. In rejecting this contention, Mukherjea, J. observed: 'Thus all the provisions of the Ordinance relate to or are concerned primarily with the maintenance of public order in the Province of Bihar and provide for preventive detention and similar other measures in connection with the same. It is true that violation of the provisions of the Ordinance or of orders passed under it have been made criminal offences but offences against laws with respect to matters specified in List II would come within item (37) of List II itself, and have ....
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....the Privy Council struck down an Alberta (a Canadian province) law. The law imposed a special tax only on banks. The Privy Council held that the pith and substance of the law was to discourage the operation of banks in the Alberta province. The high rate of tax imposed by the law and the fact that the law was part of package of social credit policies inimical to bank credit were among the factors which led to the characterisation of the law as one in relation to banking and thus a prohibited field for provincial legislation - Attorney-General for Alberta v. Attorney-General for Canada [1939] AC 117. 101. In the interpretation of entries in the Lists, the devise of reading a general power in a restricted sense in favour of a specific power is employed to achieve harmony, and resolve the apparent and identified conflict. In the Central Provinces case - Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, In re ( supra) the doctrine of "pith and substance" as evolved by the Privy Council in relation to the provisions of the British North America Act, 1867 was first applied in India. The court held that though under entry 45, List I of the Seventh Sch....
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....ent) Act, 1969 were challenged in Sant Sadhu Singh v. State of Punjab AIR 1970 P&H. 528, the petitioners contended that the Punjab Legislature was incompetent to make a law pertaining to banking corporations; co-operative societies doing banking business are banking corporations and, therefore the amendment Ordinance and Act are beyond the competence of the Punjab Legislature and that the State legislation was a colourable exercise of power insofar as banking co-operative societies are concerned. A Division Bench of the Punjab and Haryana High Court held that in order to give a harmonious construction to entries 43 and 45 in List I of the Seventh Schedule, it must be interpreted that only the business of "banking" as such fell within entry 45, whereas the incorporation, regula-tion and winding up of trading corporations including banking corpora-tions fell within the ambit of entry 43 of List I. The Punjab Court further held that the constitution of societies and their working would have fallen within the ambit of entry 43 of List I but for the fact that co-operative societies were expressly excluded from the purview of entry 43 of List I and included in entry 32 of List II of the ....
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....if carried on in addition to the hard-core of banking business, Parliament is competent to legislate within its exclusively allocated field under entry 45 of List I. The Union further contended that apart from the business of acceptance of money from the public for lending or investment, withdrawable by cheque, draft or otherwise, banking includes any allied business activities, which banks engage in and all such businesses fall within the legislative field of banking in entry 45. Shah, J. speaking for the majority, rejecting such expansive construction of entry 45, held: "In modern times in India as elsewhere, to attract business, banking establishments render and compete in rendering, a variety of miscellaneous services for their constituents. If the test for determining what 'banking' means in the constitutional entry is any commercial activity which bankers at a given time engage in, great obscurity will be introduced in the content of that expression. The coverage of constitutional entry in a Federal Constitution which carves out a field of legislation must depend upon a more satisfactory basis. The legislative entry in List I of the Seventh Schedule is 'Banking' and not....
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....e markets". Consequently, it was held that the Forward Contracts (Regulation) Act, 1952 was a law within the exclusive field enumerated in entry 48 of the Union List, even though (on a broader construction) it could be a law with reference to "trade and commerce" (entry 26 of List II). 108. In Agricultural Produce Market Committee's case (supra ) a Constitution Bench of the Supreme Court had to consider whether its earlier judgment in ITC Ltd. v. State of Karnataka [1985] Suppl. SCC 476, was correct. In the Karnataka ITC case, the majority had held that the provisions of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966, are invalid as repugnant to the Union legislation - the Tobacco Board Act, 1975 and that "Tobacco" should be excluded from the Schedule of the Karnataka law. Sabyasachi Mukharji, J. recorded the minority view that the State legislation and the Tobacco Board Act, 1975 could co-exist. The Constitution Bench had therefore to determine whether the several State legislations relating to market committees could co-exist with the Tobacco Board Act, 1975 in respect of the sale of tobacco in market areas within the frame work of the agricultural produce....
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....troleum and Petroleum products'' or "mineral oil resources" in entry 53 of List I includes "natural gas or its derivative forms", the Supreme Court (Per K. G. Balakrishnan, J.) went into the chemical and other characteristics of natural gas as defined in encyclo- paedias and texts on science, the dictionary meanings of "natural gas" and definitions of "petroleum" in legislations of other countries such as the United Kingdom and Australia. The Supreme Court opined that entry 25 of List II (Gas and Gas-works) means "any work" or "industry" relating to manufactured gas which is often used industrially, medically and for other similar purposes and that the word "gas" in entry 25 of List II takes its colour from other words "gas-works". In the result, the Supreme Court answered the Presidential reference as under: 1.Natural gas including LNG is a Union subject covered by entry 53 of List I and the Union has exclusive legislative competence to enact laws on "natural gas". 2.The States have no legislative competence on the subject of "natural gas and LNG", under entry 25 of List II ; and 3.The Gujarat Legislation of 2001 insofar as its provisions related to "natural gas or LNG" a....
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....covery of the debts due to them, are matters eminently and exclusively within the spectrum of the legislative field "banking" in entry 45 of List I. Having regard to the exclusivity of the enumerated fields of legislation of the Union List and the paramountcy accorded to the Union legislative power, [article 246(1)], the Legislatures of the States must be considered and declared as denuded of any legislative power to regulate the business of banking, regardless of the existence or otherwise of a Union legislation covering the field. Consequently the 1964 Act a State Act, cannot provide for the adjudication of disputes relating to banking business even where such business is pursued by a co-operative society (a co-operative bank). In view of the provisions of the 1993 Act, we hold and declare that it is the Tribunals constituted under this Act that have the sole and exclusive power, authority and jurisdiction to entertain and determine the claims of co-operative banks [subject to the monetary parameters prescribed in section 1(4) of the Act]. This jurisdiction of the Tribunals under the 1993 Act is to the exclusion of civil courts and all other authorities (section 18 of the 1993 Ac....
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....ness of banking are in one class". The Bombay Full Bench further observed (para. 26); "There can be little doubt that under entry 45 of List I, it is Parliament alone which can enact a law with regard to the conduct of business by the banks. Recovery of dues is an essential function of any banking institution. In exercise of its legislative power relating to banking, Parliament can provide the mechanism by which monies due to the banks and financial institutions can be recovered.... As none of the items in the lists are to be read in a narrow or restricted sense, the term 'banking' in entry 45 would mean legislation regarding all aspects of banking including ancillary or subsidiary matters relating to banking. Setting up of an adjudicatory body like banking Tribunal relating to transactions in which banks and financial institutions are concerned would clearly fall under entry 45 of List I giving Parliament specific power to legislate in relation thereto". The Narendra Kantilal Shah's case (supra) Full Bench concurred with the Division Bench view in Shamrao Vithal Co-operative Bank Ltd.'s case (supra) in disagreeing with the approach and conclusions of the Rajasthan Division Bench i....
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....aged in the business of banking". It is apparent that in a limited sphere, entries 43, 44 and 45 of List I and 32 of List II have a measure of overlapping potency. In view of the established principles of construction and interpretation of Legislative fields, ancillary, incidental and subsidiary aspects of an authorised legislative field also fall within the enumerated field of legislative power. There is therefore inherent in such a scheme of power distribution a measure of concurrency of legislative power even in the area of exclusively enumerated legislative fields, as incidental trenching is permitted when the pith and substance of the legislation is within the authorised legislative field. That is the correct approach to the understanding of the Punjab Division Bench decision in Sant Sadhu Singh's case AIR 1970 P.&H. 528. 118. In Nagpur District Central Co-operative Bank Ltd. v. Divisional Joint Registrar, Co-operative Societies AIR 1971 Bom. 365, 374, a Division Bench considered the scope of entries 43 and 45 of List I and 32 of List II. The petitioner co-operative bank was registered under the Maharashtra Co-operative Societies Act, I960 and was in the banking business. T....
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....ng to their type and financial position to specify the staff pattern to be adopted by the different classes of co-operative societies and also to make rules relating to the qualifications, remuneration, allowances and other conditions of service of the officers and servants of the different classes of co-operative societies". Another contention of the petitioners that the rule-making power conferred by section 80 encroaches into the field occupied by the provisions relating to the same matters contained in the 1949 Act, was also repelled by the High Court on the ground except the areas specified and, to the extent and, manner specified in the 1949 Act, none of the other provisions of the said Act are applicable to co-operative societies and no such applicable provisions of the 1949 Act were shown to the court that occupy or deal with the area covered by the impugned State Rules. 120. In Virendra Pal Singh v. District Assistant Registrar, Co-operative Societies [1980] 4 SCC 109 the petitioners contended that the provisions of the U.P. Co-operative Societies Act, 1965 were inapplicable to Co-operative Banks. Chinnappa Reddy, J. held that in pith and substance the State Act deals w....
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.... well. 123. We now consider the decisions rendered by this Court on the very issue whether a co-operative bank is a banking company within the meaning of the expression in the 1993 Act. 124. A learned Single Judge of this Court in Hyderabad Co-operative Urban Bank Ltd. v. S.M. Hussain Rasheed [2003] 6 ALT 608 held that the Arbitrator or the Co-operative Tribunal (exercising powers under the provisions of the 1964 Act) had no jurisdiction and the jurisdiction to entertain and determine the claim of a co-operative bank for the debt due to it is a matter within the exclusive jurisdiction of the Tribunal constituted under the provisions of the 1993 Act. A co-operative bank was held to be a banking company within the meaning of the expression in the 1993 Act. 125. In K. Jayaprakash Ram v. Additional Director General of Police [2003] 1 ALD (Crl.) 768 (AP), a learned Single Judge of this Court held that the Vasavi Co-operative Urban Bank, Hyderabad "is only a society registered under the Societies Registration Act and doing banking business and is not a 'banking company' within the meaning of section 5(c) of the Banking Regulation Act as it was not formed under the Companies Act,....
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....e field "banking". Since recovery of dues is an essential function of banking institutions, it would logically follow that the subject-recovery of dues to banking institutions is a core area, a basic and integral component of the legislative field "banking"- [a field exclusively authorised to the Union and fortified by a non obstante clause-article 246(1)]. In our considered view, in our constitutional scheme of distribution of legislative powers, the 1993 Act is a legislation which in pith and substance is referable to an essential and core area (and not ancillary or incidental) of the legislative field, banking. 128. It is a settled principle of constitutional interpretation and in particular with respect to those areas of the Constitution dealing with distribution of legislative powers that while identifying the legislative field to which an impugned legislation appropriately belongs and by application of the pith and substance doctrine the apparent label or title of the legislation is neither conclusive nor determinative. The legislation should be carefully examined to ascertain the underlying legislative purposes and to the achievement of which ends its provisions are direc....
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....is a permitted concurrency of legislative powers, the Union legislation is entitled to dominant treatment on the paramountcy principle [article 246(1)]. Consequently, the provisions of the 1993 Act would prevail and comprehensively eclipse those provisions of the 1964 Act that enable entertainment, adjudication and execution of claims of a co-operative bank with respect to the debts due to it from its members (to the extent such claims fall within the provisions of the 1993 Act). 130. In the considered view of this Court, guided by the settled principles as to interpretation of the constitutional scheme of distribution of legislative powers between the different levels of the Government, we conclude that the legislative field of "banking" being a specific entry abstracts from the general and broad entry "incorporation, regulation and winding up of...co-operative societies" in entry 32 of List II the subject of "banking" even where "banking" is carried or pursued by a co-operative society. 131. On the above analysis those provisions of the 1964 Act which confer an adjudicatory domain on the Registrar (in respect of claims of a co-operative bank for recovery of dues from its me....
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....1 is in broad terms and expansively construed would include the conferral of power on Registrar to adjudicate upon a dispute between a co-operative bank and its members in respect of recovery of a debt due to it from such members. The provisions of section 61 could however be restrictively construed (read down) as to exclude the conferral of such a power on the Registrar which leads to transgression by the State Legislature of the limits of its legislative territory. We therefore hold (on a restrictive construction) that section 61 of the 1964 Act does not enable the Registrar of Co-operative Societies to adjudicate upon any dispute regarding debts due to a co-operative bank. 133. Section 71 begins with a non obstante provision and confers power on the Registrar to issue a certificate for recovery of amounts advanced by a society to its members. A.P. Act 10/1970 (whereby, the Registrar is empowered to issue such certificates even on an application made inter alia by a financing bank) amended the provision as initially enacted. Section 71 clearly and precisely confers powers on the Registrar to recover the arrears of any sums advanced to a member by a financing bank. In our exami....
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....reof, it is the intention of the Legislature that is the determining factor. The test to be applied is whether the Legislature would have enacted the valid part if it had known that the rest of the statute was invalid. 2. If the valid and invalid provisions are so inextricably mixed up that they cannot be separated from one another, then the invalidity of a portion must result in the invalidity of the Act in its entirety. On the other hand, if they are so distinct and separate that after striking out what is invalid, what remains is in itself a complete code independent of the rest, then it will be upheld notwithstanding that the rest has become unenforceable. 3. Even when the provisions which are valid are distinct and separate from those which are invalid, if they all form part of a single scheme which is intended to be operative as a whole, then also the invalidity of a part will result in the failure of the whole. 4. Likewise, when the valid and invalid parts of a statute are independent and do not form part of a scheme but what is left after omitting the invalid portion is so thin and truncated as to be in substance different from what it was when it emerged out of the Legisla....
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....pplicable provision of the 1964 Act. Conclusions 137. On the analysis above, we conclude, declare and hold : (a)That recovery of monies (whether called a debt, arrears or by any other name) due to a banking institution including a co-operative bank is a matter that integrally falls within the core and substantative area of the legislative field banking in entry 45, List I of the Seventh Schedule of the Constitution. (b)The above subject-matter is therefore excluded from the State legislative field in entry 32, List II of the Seventh Schedule. (c)Recovery of monies due to a co-operative bank is not a matter that falls within the incidental and ancillary areas of the State legislative field in entry 32, List II of the Seventh Schedule. (d)A co-operative bank as defined in section 5(cci) of the Banking Regulation Act, 1949 (as amended by Act 23 of 1965) is a bank and a banking company within the meaning of section 2(d) and (e) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. (e)A Tribunal constituted under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 has exclusive jurisdiction, powers and auth....
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....orum and under the appropriate law, in accordance with this judgment. (l)As the proceedings initiated before the Registrar or any other authority under the 1964 Act were bona fide and as considerable time had been consumed in the litigation in this case also, the respondent-banks shall be entitled to set off the period spent in pursuing their claims before the Registrar or other fora and before this Court, in computing the period for filing appropriate applications/claims before the appropriate authority/Tribunal. 138. Apart from writ petitions mentioned earlier in this judgment, this batch consists of certain other matters. Writ Appeal Nos. 664 and 669 of 2001 are directed against the dismissal of Writ Petition Nos. 3238 and 3367 of 2001. These writ petitions are filed challenging the awards passed by the Registrar on claims preferred by the Charminar Co-operative Urban Bank Limited. The value of the debt determined and directed to be paid by each of the petitioner's is over Rs. 10 lakhs. The writ petitions were dismissed by the common order of the learned Single Judge on the ground that each of the petitioners had pursued the alternative remedy of an appeal to the Co-operat....