Co-operative Society Can Undertake Banking Activities: Kerala High Court Upholds State Co-operative Banking Framework

A Division Bench comprising Justice N. Nagaresh and Justice Johnson John delivered the judgment.

The appellant approached the Court seeking to declare State legislations, namely the Kerala Co-operative Societies Act, 1969 and the Kerala State Co-operative Agricultural Development Banks Act, 1984 as unconstitutional for enabling co-operative societies to conduct banking activities, a subject falling under Entry 45 (Banking) of the Union List.

It was argued that banking is exclusively within Parliament's domain under Article 246 read with List I of 7th Schedule. It was submitted that any inconsistency with the Banking Regulation Act, 1949 renders the State laws illegal and unconstitutional.

The Court relied on Supreme Court precedents including Pandurang Ganpati Chaugule v Vishwasrao Patil Murgud Sahkari Bank Limited [ (2020) 9 SCC 215], and Greater Bombay Co-operative Bank Limited v United Yarn Text (P) Limited [(2007) 6 SCC 236] and reiterated that co-operative Banks are subject to the Banking Regulation Act, 1949 in matters of banking regulation.

It was further observed that Co-operative Society do not cease to be Co-operative Societies merely because they do banking business,

“Merely because they do banking business, such Co-operative Societies do not cease to be Co-operative Societies, when otherwise they are registered under the Co-operative Societies Act, and are subjected to the duties, liabilities and control of the provisions of the Co-operative Societies Act.” Court noted.

Relying on Nagpur District Central Co-operative Bank Limited, Nagpur v Divisional Joint registrar, Co-operative Societies, Nagpur [AIR 1971 Bom 365], the Court observed that Co-operative Societies, including those engaged in banking, fall within the ambit of Entry 32 of the State List.

The appellant further challenged the statutory mechanism that channels disputes to co-operative arbitration forums, arguing that it violates the right to access civil courts.

The Court dismissed this argument, holding that the exclusion of civil court jurisdiction is a well-recognised legislative practice.

“.. the exclusion of jurisdiction of the Civil Court is permissible in law. The grant of specified powers conferred on the Civil Court under the CPC to adjudicating authorities is a common feature in many Statutes. For that reason also, it cannot be said that the Kerala Co-operative Societies Act and the Kerala State Co operative Agricultural Development Banks Act, 1984 are illegal or ultra vires” Court noted

The Court noted that the writ petition effectively sought a declaration of unconstitutionality without asserting specific personal grievances, hence it bore the character of a public interest litigation (PIL), but was not filed in compliance with procedural requirements governing PILs.

The Court thus upheld the validity of the impugned statutes and dismissed the appeal.

Case Title: Thomas M.K v Govt. of Kerala and Ors.

Case No: WA 3019/ 2025

Citation: 2026 LiveLaw (Ker) 180

Party-in-Person

Counsel for Respondents: P.C Haridas, K. Arjun Venugopal, Millu Dandapani, Imam Gregorious Karat (Spl. GP)