The Supreme Court has made the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act of 2002 (SARFAESI Act) applicable to cooperative banks as well. A 5-judge constitution bench of the court headed by Justice Arun Mishra ruled that cooperative banks come under the category of banks as defined under Section 2(1)(c) of the SARFAESI Act and the recovery procedures mentioned under that law apply to these banks as well. The Act empowers banks to seize and sell defaulters’ assets. The bench, which also included justices Indira Banerjee, Vineet Saran, M.R. Shah and Aniruddha Bose, upheld the legislative power of the Parliament to bring cooperative banks under the ambit of SARFAESI Act and a notification issued under the Banking Regulation Act, 1949, that brought cooperative banks within the class of ‘banks’ under the Act. The constitution bench took up the issue after a series of conflicting decisions by earlier Supreme Court judgements in 2007 and 2002.
