Mumbai: The Supreme Court on Tuesday held that the cooperative banks involved in the activities related to banking are covered within the meaning of ‘banking company’ and Parliament has legislative competence to provide for procedure for recovery of loan under the Sarfaesi Act.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, allow banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans.
It enables banks to reduce their non-performing assets by adopting measures for recovery or reconstruction.
A five-judge Constitution bench headed by Justice Arun Mishra said, “In our opinion, the framers of the Constitution cannot be said to have confined the meaning of ‘banking’ to a particular definition, as given in the Banking Regulation (BR) Act, 1949. The word ‘banking’ has been incorporated in Entry 45 of List I. The decision in Rustom Cavasjee Cooper (1970 verdict) vividly leaves no room for doubt that banking done by the cooperative bank is covered within the ambit of Entry 45 of List I”.
