2017 (7) TMI 1353 - HC - Indian Laws

Invocation of provisions of SARFAESI Act, 2002 by a co-operative bank - petitioner submits that, a co-operative society carrying on bank business cannot invoke the Act of 2002 - HELD THAT - Since the petitioner has made out a prima facie case and the balance of convenience and inconvenience lies in favour of the petitioner, the bank will not take any step against the petitioner under the Act of 2002 in any manner whatsoever until further orders of this Court.

Summary

Issues:
1. Jurisdiction of a co-operative bank to invoke the SARFAESI Act, 2002.

Analysis:
The petitioner challenges a co-operative bank's action under the SARFAESI Act, 2002, arguing that a co-operative society engaged in banking activities lacks the authority to utilize the provisions of the said Act. The petitioner's counsel cites precedents, including a judgment from 2011 and a Supreme Court ruling from 2007, to support the contention that the bank's actions are beyond its jurisdiction. Conversely, the co-operative bank's representative relies on a decision from the Calcutta High Court and a Division Bench judgment from the Andhra Pradesh High Court, asserting that a co-operative bank is empowered to invoke the SARFAESI Act under Sections 56(1)(a) and 56(cc) of the Banking Regulation Act, 1949, with the Reserve Bank of India being the sole authority to determine such matters.

The Court is tasked with determining the validity of the co-operative bank's invocation of the SARFAESI Act. While the co-operative bank argues for its authority based on statutory provisions and judicial decisions, the Court observes that prima facie, the bank may not have the entitlement to utilize the Act, noting a relevant Division Bench judgment. Consequently, the Court directs the respondents to file affidavits within specified timelines, with the matter scheduled for further review in four weeks. Additionally, the Court issues an interim order restraining the bank from taking any action against the petitioner under the SARFAESI Act until further orders, considering the petitioner's prima facie case and the balance of convenience in their favor.

Furthermore, the petitioner's counsel raises concerns regarding the bank's existing physical possession of the property in question. In response, the Court instructs the bank to refrain from dealing with the property and mandates the implementation of measures for its protection and preservation at the bank's expense. The Court also facilitates the provision of urgent certified copies of the order to the involved parties upon completion of necessary formalities, ensuring prompt dissemination of the judicial directives for compliance and reference.