Case Note & Summary
The judgment pertains to two writ petitions filed by Sri N Ravindranath Kamath and another petitioner challenging the sale notice dated 19.01.2021 issued by the Authorised Officer of Sri Subramanyeshwara Cooperative Bank Limited under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, for recovery of dues. The petitioners sought quashing of the sale notice and a direction to the bank not to auction the scheduled property. The primary legal issue was whether a cooperative bank is a 'bank' under Section 2(c) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and can initiate proceedings under the SARFAESI Act. The petitioners argued that the cooperative bank is not a 'bank' under the SARFAESI Act and that the proceedings under the Karnataka Cooperative Societies Act, 1959, should apply. The respondents contended that the cooperative bank is a 'bank' under Section 2(c) of the SARFAESI Act, as it is a 'cooperative bank' as defined in Section 5(cci) of the Banking Regulation Act, 1949, and that the SARFAESI Act prevails over the state Act. The court analyzed the definition of 'bank' under Section 2(c) of the SARFAESI Act, which includes a 'cooperative bank' as defined in the Banking Regulation Act, 1949. The court held that the cooperative bank is indeed a 'bank' under the SARFAESI Act and can enforce security interest under the Act. The court further held that the writ petitions are not maintainable as the petitioners have an efficacious alternative remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. The court found no jurisdictional error or violation of principles of natural justice to justify interference under Article 226. Consequently, both writ petitions were dismissed.
Headnote
A) Banking Law - SARFAESI Act - Cooperative Bank - Section 2(c) of SARFAESI Act, 2002 - A cooperative bank is a 'bank' under Section 2(c) of the SARFAESI Act, 2002, as it is a 'cooperative bank' as defined in Section 5(cci) of the Banking Regulation Act, 1949, and is included in the definition of 'bank' under Section 2(c) of the SARFAESI Act. The court held that the SARFAESI Act applies to cooperative banks and they can enforce security interest under the Act. (Paras 5-8) B) Banking Law - SARFAESI Act - Alternative Remedy - Section 17 of SARFAESI Act, 2002 - A writ petition under Article 226 of the Constitution challenging a sale notice under the SARFAESI Act is not maintainable when the petitioner has an efficacious alternative remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. The court held that the petitioners failed to demonstrate any jurisdictional error or violation of principles of natural justice to bypass the statutory remedy. (Paras 9-11) C) Banking Law - SARFAESI Act - Sale Notice - Rule 8(6) of Security Interest (Enforcement) Rules, 2002 - The sale notice dated 19.01.2021 issued by the Authorised Officer under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, was not shown to suffer from any jurisdictional error or illegality. The court held that the petitioners' challenge to the sale notice on merits cannot be entertained in writ jurisdiction. (Paras 12-13)
Issue of Consideration
Whether a cooperative bank is a 'bank' under Section 2(c) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and can initiate proceedings under the SARFAESI Act; Whether the writ petitions challenging the sale notice under the SARFAESI Act are maintainable in view of the alternative remedy under Section 17 of the SARFAESI Act.
Final Decision
Both writ petitions are dismissed. The petitioners are at liberty to avail the alternative remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal.
Law Points
- Cooperative Bank is a 'bank' under Section 2(c) of SARFAESI Act
- 2002
- SARFAESI Act prevails over Karnataka Cooperative Societies Act
- 1959
- Writ petition not maintainable when alternative remedy under Section 17 of SARFAESI Act is available
- No jurisdictional error in sale notice under Rule 8(6) of Security Interest (Enforcement) Rules
