Andhra Pradesh HC Upholds Exclusive Tribunal Jurisdiction | Registrar Powerless In Debt Recovery By Cooperative Banks | Banking Recovery Lies Solely Under RDB Act
Isabella Mariam
The High Court of Andhra Pradesh Division Bench of Chief Justice Dhiraj Singh Thakur and Justice Ravi Cheemalapati held that the Registrar of Cooperative Societies under the Andhra Pradesh Cooperative Societies Act, 1964, lacks the jurisdiction to adjudicate or enforce debt recovery claims initiated by cooperative banks. The Court dismissed a writ appeal filed by a cooperative bank challenging the decision of the Single Judge, who had earlier stated that recovery proceedings under the A.P. Cooperative Societies Act were impermissible. The Division Bench affirmed that such banks must resort to remedies available under the Recovery of Debts and Bankruptcy Act, 1993, or other legislations enacted by Parliament such as the SARFAESI Act, 2002. Referring to authoritative decisions of the Supreme Court, the High Court held that debt recovery being an essential component of banking activity, falls within the Union List, thereby precluding the Registrar's authority under State legislation in such matters. Consequently, the appeal was dismissed with the Court explicitly stating that the remedy under the State Act is "no longer available" to cooperative banks for debt recovery from members.
The dispute originated from a loan transaction in which the petitioner, Dasari Venkata Srinivasa Rao, availed a loan of Rs.25 Lakhs in the year 2019 from the Krishna District Cooperative Central Bank Limited, a cooperative society registered under the Andhra Pradesh Cooperative Societies Act, 1964. Upon defaulting on repayment, the bank-initiated recovery proceedings under the said State Act, invoking the jurisdiction of the Registrar of Cooperative Societies.
The Registrar issued a certificate under Section 71 of the A.P. Cooperative Societies Act, 1964, declaring arrears against the petitioner. This action was challenged in a writ petition, wherein the Single Judge allowed the petition, holding that the Registrar had no authority to entertain or adjudicate recovery proceedings against the petitioner.
The Single Judge’s findings were based on the argument that the Krishna District Cooperative Central Bank, though a cooperative society, was engaged in banking activities. As such, recovery of debts from its members did not fall within the State legislative domain but instead was governed by Union legislation, notably the Recovery of Debts and Bankruptcy Act, 1993.
The appellant bank, aggrieved by the Single Judge’s judgement, filed a writ appeal before the Division Bench. The principal contention raised was that the Registrar possessed the statutory authority under Sections 70 and 71 of the A.P. Cooperative Societies Act to recover debts from members through certificates issued post-enquiry.
The bank submitted that Chapter VIII of the 1964 Act governed disputes between societies and their members, while Chapter X laid out the execution mechanisms for such decisions. Section 70(1) enabled the Registrar to recover specified amounts via attachment and sale of property, while Section 71 empowered the Registrar to issue certificates post-enquiry for recovery of sums due.
In opposition, the petitioner argued that the cooperative bank fell within the scope of Section 5(c) of the Banking Regulation Act, 1949, and hence was a banking institution. It was contended that since banking was an activity falling within Entry 45 of List I of the Seventh Schedule to the Constitution, the State Legislature lacked the competence to legislate on recovery mechanisms involving cooperative banks.
Reliance was placed on the Full Bench judgment of the Andhra Pradesh High Court in M. Babu Rao vs. Deputy Registrar of Cooperative Societies, which held that recovery of debts by cooperative banks was a matter within the exclusive legislative domain of Parliament.
Further reliance was placed on the Constitution Bench decision of the Supreme Court in Pandurang Ganpati Chaugule vs. Vishwasrao Patil Murgud Sahakari Bank Limited, wherein it was held that banking activity falls squarely under Entry 45 of List I, and that cooperative banks undertaking banking activities were within the ambit of the Banking Regulation Act, 1949.
The appellant contended that the Supreme Court had not explicitly invalidated the State-level recovery mechanisms and argued that the provisions under the SARFAESI Act provided merely an additional mode of recovery.
The Division Bench observed that the learned Single Judge had relied on the decision in Pandurang Ganpati Chaugule, which clarified that cooperative banks fall within Entry 45 of List I.
"Recovery of dues by cooperative banks being an essential feature of a banking activity could be dealt with only by an enactment framed by the Parliament in terms of List I Entry 45 of the Seventh Schedule," recorded the Bench.
The Court traced the statutory framework under Sections 70 and 71 of the A.P. Cooperative Societies Act. It noted:
"Section 70(1) enables recovery by the Registrar of amounts due under decisions or orders...by attachment and sale of property...while Section 71 empowers the issuance of recovery certificates by the Registrar post-enquiry."
However, referring to Section 18 of the Recovery of Debts and Bankruptcy Act, 1993, the Bench held: "No court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority...in relation to the matters specified in section 17."
The Division Bench further noted that the Full Bench of the Andhra Pradesh High Court in M. Babu Rao had held: "Recovery of monies due to a cooperative bank is integrally part of banking and falls within Entry 45 of List I. Section 71(1) of the 1964 Act conferring such power on the Registrar is beyond the legislative competence of the State."
Citing Greater Bombay Cooperative Bank Ltd. vs. United Yarn Textile (P) Ltd., the Bench referred to the finding: "The Parliament deliberately excluded cooperative banks from the purview of the RDB Act, as they already had remedies under State laws. However, that does not alter the legislative domain under which such recovery falls."
In Pandurang Ganpati Chaugule, the Constitution Bench had stated: "The activity of cooperative banks is definitely, beyond an iota of doubt, covered by Entry 45 of List I."
Referring to Paragraph 87 of the said judgment, the Court noted: "Incorporation, regulation and winding up of the cooperative societies are covered under Entry 32 of List II, whereas banking activity of such cooperative societies/banks shall be governed by Entry 45 of List I."
Rejecting the argument that the Registrar’s jurisdiction remained unaffected, the Court recorded: "On a reading of the aforementioned provisions, it would be clear that the option to approach either the Tribunal established under the RDB Act or resort to the mechanism provided under the multi-State Cooperative Societies Act is limited only in the case of multi-State Cooperative Societies."
The Court concluded: "We find no merit in the present writ appeal which is accordingly, dismissed."
The Division Bench explicitly declared: "The remedy as provided under the provisions of the Andhra Pradesh Cooperative Society Act, 1964, for purposes of recovery of debt due from its members is no longer available."
Further, the Bench clarified that: "The remedy would lie only under the provisions of the RDB Act, 1993, as recovery of dues by Cooperative Banks being an essential feature of a banking activity...could be dealt with only by an enactment framed by the Parliament in terms of List I Entry 45 of the Seventh Schedule."
Pending miscellaneous applications, if any, were directed to stand closed.
Advocates Representing the Parties:
For the Appellants: Mr. P. Veera Reddy, Learned Senior Counsel appearing vice Mr. S. Dilip Jaya Ram
For the Respondents: Mr. Ghanta Prasad, Government Pleader for Cooperation
Case Title: The Krishna District Cooperative Central Bank Limited and others vs. Dasari Venkata Srinivasa Rao and others
Neutral Citation: APHC010352472024
Case Number: Writ Appeal No. 693 of 2024
Bench: Chief Justice Dhiraj Singh Thakur, Justice Ravi Cheemalapati
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