The Bombay High Court has clarified that the Parliament has treated cooperative banks differently under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), and the SARFAESI Act. The Court also pointed out that the RDB Act was specifically amended to include “multi-State co-operative banks” but not State cooperative banks.
Essentially, the Court emphasised that the special saving provisions in Sections 18 and 31 of the RDB Act for multi-state cooperative banks, with no corresponding provision for state cooperative banks, suggest a “conscious legislative choice” to restrict the scope of the RDB Act.
However, deeming it improper to disagree with the conflicting precedents of a Coordinate Bench, and given the wide practical consequences for recovery proceedings, the High Court referred the core dispute revolving around the issue as to whether a cooperative bank can be considered a “bank” under the RDB Act, thereby giving the DRT exclusive jurisdiction for debt recovery and ousting the Cooperative Court’s authority under Section 91 of the MCS Act, to the Larger Bench.
A Single Judge Bench of Justice Amit Borkar observed that the real issue is fair balancing of the RDB Act and the MCS Act, when on one side, Parliament’s power under Entry 45 of the Union List is clear, as the ‘banking, including recovery of bank dues’, clearly falls within this area, and Parliament has full authority to make laws on it. On the other side, the States continue to have their own constitutional power under Entry 32 of the State List to regulate co-operative societies. This power includes setting up forums and procedures to decide disputes within the co-operative system.
The Bench stated that what is important is that Parliament has not made any clear and specific provision in the RDB Act stating that the State co-operative banks are included under it or that the jurisdiction of Co-operative Courts under Section 91 of the MCS Act is taken away.
Since this absence of a clear statement in the law creates real uncertainty, which issue cannot be answered without doubt, the Bench cautioned for careful consideration of the competing arguments on constitutional powers. Thus, to maintain a proper balance, rather than to reach a hurried conclusion, the Bench concluded that the issue at hand requires authoritative adjudication by a larger bench.
Briefly, the present case is a review petition, challenging the previous judgment which had restored a money decree in favour of TJSB Sahakari Bank Limited. The petitioner had sought the review based on a subsequent order from the Nagpur Bench of the High Court in Washim Urban Cooperative Bank Ltd. v. Girishchandra [Writ Petition No.3783 of 2021 dated November 03, 2025], wherein it was held that for recovery of debts exceeding Rs. 10 lakhs, cooperative banks must approach the Debts Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), as the jurisdiction of Cooperative Courts under the Maharashtra Cooperative Societies Act, 1960 (MCS Act) is barred.
Appearances:
Advocates Sharad Bansal and Laxman Jain, for the Petitioner
Advocates Shadab Jan, Nikhil Rajani, and Ajay Deshmane, for the Respondent
