Whether Co-operative Banks Must Approach DRT for Recovery Above ₹10 Lakh Needs Larger Bench Determination: Bombay High Court Flags Constitutional and Statutory Conflict

“In absence of clear legislative intent, jurisdictional ouster of Co-operative Courts cannot be inferred — the question demands authoritative determination by a larger bench”: Bombay High Court referred to a larger Bench the significant legal question whether State co-operative banks must approach the Debts Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) for recovery of debts exceeding ₹10 lakh, thereby ousting the jurisdiction of Co-operative Courts under Section 91 of the Maharashtra Co-operative Societies Act, 1960 (MCS Act).

Justice Amit Borkar observed that “in view of conflicting Supreme Court precedents, legislative ambiguity, and unresolved constitutional implications arising under Entries 32 and 45 of the Seventh Schedule, the issue cannot be conclusively answered by a coordinate bench and demands consideration by a larger Bench.”

“The conflict between Pandurang Ganpati Chaugule and Greater Bombay Co-operative Bank raises real constitutional and statutory tensions that impact the forum of recovery proceedings for co-operative banks”: Bombay High Court

The Court was dealing with a review petition arising from its earlier decision dated November 11, 2025, which had restored a money decree passed in favour of TJSB Sahakari Bank Ltd. by a Co-operative Court. The petitioner, Amritlal Shah, sought review based on the decision in Washim Urban Co-operative Bank Ltd. v. Girishchandra (Nagpur Bench), which held that co-operative banks are within the ambit of the RDB Act and must approach the DRT, not the Co-operative Court, where claims exceed ₹10 lakh.

The petitioner relied heavily on the Constitution Bench judgment in Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd., (2020) 9 SCC 215, asserting that it had implicitly overruled Greater Bombay Co-operative Bank Ltd. v. United Yarn Tex Pvt. Ltd., (2007) 6 SCC 236, and established that co-operative banks are "banking companies" under Section 5(c) of the Banking Regulation Act, 1949, and hence qualify as "banks" under the RDB Act. Thus, per the petitioner, Section 17 of the RDB Act gives DRT exclusive jurisdiction, and Section 18 bars any other authority, including Co-operative Courts.

“A judgment cannot be overruled by implication unless there is irreconcilable conflict on the same legal issue”: Court cautions against excessive reliance on Pandurang Ganpati Chaugule

Rejecting a hasty reading of Pandurang Ganpati, the respondent bank submitted that the Constitution Bench dealt exclusively with the SARFAESI Act and not the RDB Act. According to the bank, the judgment does not explicitly declare that co-operative banks are “banks” under Section 2(d) of the RDB Act. Moreover, Parliament has only expressly included multi-State co-operative banks in the RDB Act, not State co-operative banks governed by State laws like the MCS Act.

The Court noted that the judgment in Greater Bombay Co-operative Bank had explicitly excluded State co-operative banks from the purview of the RDB Act, holding that recovery actions by such banks fall within State competence under Entry 32 of List II. In contrast, Pandurang Ganpati held that co-operative banks carry on full-fledged banking business and are thus subject to central regulation under Entry 45 of List I. However, Pandurang never directly addressed the scope or application of the RDB Act to co-operative banks.

Justice Borkar remarked, “While Pandurang undermines the constitutional foundation of Greater Bombay, it does not expressly overrule it on the question of the RDB Act’s applicability to State co-operative banks.”

“The doctrine of pari materia cannot be invoked to rewrite legislative omissions” — Court finds the interpretive leap in Washim Urban unsustainable

In a detailed statutory analysis, the Court examined the definitions under the RDB Act, SARFAESI Act, and the Banking Regulation Act. It accepted that both the RDB and SARFAESI Acts borrow the definition of "banking company" from Section 5(c) of the Banking Regulation Act. However, it emphasized that Parliament has treated co-operative banks differently in each statute.

Under SARFAESI, co-operative banks were brought into the fold by a 2003 notification and upheld by Pandurang Ganpati. Under the RDB Act, however, only multi-State co-operative banks were expressly included via a 2013 amendment. Sections 18 and 31 of the RDB Act contain savings only for such banks. This selective inclusion, according to the Court, indicates deliberate legislative choice.

“In the absence of a clear legislative mandate including State co-operative banks under the RDB Act, courts cannot stretch definitions or apply the pari materia doctrine to fill what appears to be a deliberate legislative gap,” the Court observed.

The Court also clarified that definitions do not confer jurisdiction. Jurisdiction arises from express statutory conferment, not by implication or definitional overlaps.

“Recovery of bank dues is part of banking under Entry 45 List I, but Co-operative Court’s jurisdiction under Entry 32 List II survives unless Parliament expressly excludes it”: Court strikes constitutional balance

Justice Borkar further examined the interplay between central and state legislative fields under the Seventh Schedule. While recognising that banking, including loan recovery, falls under Entry 45 of List I (Union List), the Court accepted that co-operative societies as such remain under Entry 32 of List II (State List).

Although Pandurang Ganpati clarified that recovery of dues is integral to banking, and hence under central domain, the Court underscored that no express provision in the RDB Act removes the jurisdiction of the Co-operative Court under Section 91 of the MCS Act for State co-operative banks.

The Court opined that “Parliamentary silence in expressly including State co-operative banks in Sections 2(d), 17 or 18 of the RDB Act may reflect a conscious legislative decision to retain State forums for such entities.”

Review Petition Kept Pending; Question of Law Referred to Larger Bench

Recognising that the issue involves substantial questions of constitutional law, legislative competence, and statutory interpretation, the Court exercised its power under Chapter I Rule 8 of the Bombay High Court Appellate Side Rules, 1960, and referred the matter to the Hon’ble Chief Justice for constitution of a larger Bench.

The core question framed for reference is: “Whether, and to what extent, recovery proceedings initiated by State co-operative banks are governed by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and whether the jurisdiction of the Co-operative Court under Section 91 of the Maharashtra Co-operative Societies Act, 1960 stands excluded by reason of Sections 17, 18 and 34 of the said Central Act, particularly in the light of the decisions of the Supreme Court in Greater Bombay Co-operative Bank Ltd. v. United Yarn Tex Pvt. Ltd. (2007) 6 SCC 236 and Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Ltd. (2020) 9 SCC 215.”

The Court directed that the review petition shall remain pending and be taken up after the larger Bench renders its opinion.

The Bombay High Court has taken a measured and constitutionally sensitive approach in addressing the jurisdictional dilemma faced by co-operative banks: whether they must approach the DRT under central law or may continue to file recovery suits before the State Co-operative Court.

While recognising that Pandurang Ganpati Chaugule altered the constitutional understanding of co-operative banking, the Court rightly noted that a definitive answer on the RDB Act’s applicability to State co-operative banks remains elusive in law. In refusing to speculate or override a coordinate Bench decision, and instead choosing to refer the issue to a larger Bench, the Court has preserved judicial discipline while setting the stage for an authoritative resolution.

Date of Decision: December 23, 2025