High Court
Legal Reasoning
(1)wp1556.16IN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABAD23 WRIT PETITION NO.1556 OF 2016Shri B. J. Khatal Janata Sahakari,...PETITIONERBank Limited, Sangamner,Tq. Sangamner, Dist. AhmednagarThrough LiquidatorShivnath Mahantyappa SwamiVERSUS1.The Ahmednagar District Central,...RESPONDENTSCo-operative Bank Ltd. AhmednagarStation Road, AhmednagarThrough its Managing Directors2.The Deposit Insurance and CreditGuarantee Corporation having its officeat 2nd Floor, RBI Building,Opp. Mumbai Central Railway StationMumbai, Through its General MangerMr. Vitthal H. Dighe Advocate for the petitioner Mr. V. R. Dhorde, Advocate for respondent No.1Mr. S. V. Adwant, Advocate for respondent No.2CORAM:KISHORE C. SANT, J.RESERVED ON:20th SEPTEMBER, 2023 PRONOUNCED ON:01st DECEMBER, 2023P. C. 1.The petitioner bank has approached this court1 of 18 (2)wp1556.16challenging the judgment and order passed by the learnedPresident State Cooperative Appellate Court, Bombay in AppealNo. 108/2012. The learned President by way of impugnedjudgment has dismissed the appeal of the petitioner. Thepetitioner had challenged the award passed by the CooperativeCourt, Nagar allowing the dispute filed by the AhmednagarDistrict Central Cooperative Bank-respondent No.1 against thepetitioner bank and members of the board of directors. Disputeis partly decreed. The petitioner bank was held to be liable torepay to the respondents an amount of Rs.37,83,663.33/- withinterest @ 12% with 6 monthly rests from 30-09-2006 tillrealization. This award was passed by the judgment and orderdated 31-03-2012. In this petition, subsequently respondentNo.2-Deposit Insurance and Credit Guarantee Corporation cameto be added. Respondent No.2 is the Corporation establishedunder Section 3 of the Deposit Insurance and Credit GuaranteeCorporation Act, 1968 (‘DICGC’ for short) and was havingcontrol over petitioner bank as the bank was under liquidation.2 of 18 (3)wp1556.162.Facts in short, giving rise to the present petition areas below:3.That respondent No.1 is the District CentralCooperative Bank having jurisdiction over Ahmednagar District.It gives loans to the Cooperative Banks and Credit CooperativeSocieties, the petitioner as well as respondent No.1 bank areregistered under the Maharashtra Cooperative Societies Act,1961. The respondent-bank had granted loan of Rs.50,00,000/-to the petitioner bank by passing resolution dated 16-09-2005 @12% p.a. for a term till 30-09-2006. The petitioner bankpursuant to sanction of loan withdrew the amount from time totime for giving it to its members. However, the petitioner couldnot repay amount of loan regularly. The petitioner bankthereafter went in liquidation under the order of District DeputyRegistrar Cooperative Societies, Ahmednagar dated 16-06-2008.Since, the loan was not repaid the respondent bank filed adispute for recovery of amount of outstanding against thepetitioner bank as well as Members of Board of Directors.3 of 18 (4)wp1556.164.The petitioner appeared through its Liquidator. Inwritten statement it is stated that bank is under liquidation. Thebank is therefore, governed by respondent No.2-Corporation.The dispute is not maintainable for nonjoinder of the parties.Under the Act, the DICGC bank had accepted to deposit theamount and therefore no amount can be paid without itspermission. It was stated that because of Rules of DICGC theamount needs to be deposited with only DICGC.5.The learned Judge of the Cooperative Court,Ahmednagar allowed the dispute as stated above only againstthe petitioner bank. The petitioner approached the Co-oprataigeAppellate Court, Bombay by filing a appeal No. 108/2012 on theground that the provisions of DICGC are applicable to the bankand therefore, the bank cannot be directed to pay the amount.Further ground was taken that the appellate bank is inliquidation since 2008 and Liquidator is looking after the affairsof the bank. In view of the Maharashtra Cooperative Societies4 of 18 (5)wp1556.16Act dispute is not maintainable. Another ground taken was thatthe General Manager of DICGC was a necessary party to thedispute and the dispute was not maintainable for non-joinder ofthe parties. Initially, though the General Manger of DICGC wasadded but subsequently same was deleted by the petitioner.Learned President of the Cooperative Societies after hearing ofthe parties held that the disputant was entitled to recover loanamount with interest by confirming the judgment and orderpassed by the learned Member of Cooperative Court. Thepetitioner is thus before this court challenging the judgment andorder in appeal.6.Respondent Nos.1 and 2 have filed their affidavits.Respondent No.1 has opposed the petition as devoid of merits.Respondent No.2 has filed say supporting the petition andsubmits that the judgment and order passed by the appellatecourt deserves to be quashed and set aside. It is prayed that therespondent No.1 be directed to refund the amount ofRs.55,55,088.72/- as settled by the DICGC. It is the stand of the5 of 18 (6)wp1556.16DICGC that sum of Rs.6,78,29,397.99/- was paid by DICGC tothe Cooperative Bank through its Liquidator for settling themain claim and in supplementary claims of Rs.7,90,08,263.72/-.It is stated that the petitioner bank had refunded the amount ofRs.6,99,77,610.40/- and thus the amount of Rs.34,75,565.20/-is lying with the Corporation and towards disbursal amountrefunded by the Liquidator. Thus, total amount due as on datewas Rs. 55,55,088.12/-. In the meantime the property of thebank is attached and therefore, Liquidator could not take anyaction and could not disburse the amount as per priorities.7.In the above facts, the learned advocate Mr. Dighefor petitioner submits that on the date of filing of the suit, theLiquidator was holding the charge of the petitioner bank. No suitwas maintainable against the bank without adding theLiquidator as a party. In written statement it was specificallymentioned that the bank is under Liquidation and thereforeLiquidator is a necessary party. Still the Cooperative Court hasnot framed such an issue. Decree passed in the dispute was only6 of 18 (7)wp1556.16against the petitioner bank. He submits that the points were notproperly framed. Even in the appeal specific grounds were takenas regards non-joinder of the necessary party. In spite of suchgrounds the learned Appellate Court has not framed necessarypoints. It was necessary for the President of the Appellate Courtto consider the effect of appointment of Liquidator on the bankand also that the provisions of DICGC Act are applicable andappeal ought to have been allowed. He submits that the learnedcourt below has wrongly placed reliance upon the Rule 106(7)and 106(8) of the Cooperative Societies Act and the points wereframed. Since the points were not framed necessary foradjudication there was no discussion. The discussion is onlyabout the liability about which there was a dispute. In view ofsection 103 of the MCS Act it was incumbent on the part of theCooperative Court and the Appellate Court to add Liquidator asparty. At the most it could have been directed the disputant bankto approach the Liquidator. The Liquidator upon the claim of thebank would have taken care of repayment by considering theprovisions of DICGC Act. 7 of 18 (8)wp1556.168.In view of section 105 a person having a decree hasto approach the Liquidator for payment of decreetal amount. Itis further submitted that the suit was filed with prior permissionfrom the District Deputy Registrar. While granting permissionDistrict Deputy Registrar had specifically granted permissionsubject to provisions of law as regards liquidation and DICGC.Looking to the prayer in dispute, he submits, that therespondent has exceeded such permission and this aspect is alsonot considered by both the courts below and they havecommitted illegality. He submits that since the property wasattached the recovery officer of the respondent bank hadapproached the Deputy Director of Land Record, Nashik Region,Nashik who directed to show the charge on the property CTSNo.2578 belonging to the petitioner. He submits that therefore,even a writ petition was filed bearing No. 1695/2012 showingthat the bank is required to approach the Liquidator. TheLiquidator would then give the amount as per the priorities. Itwas necessary for respondent to stand in the queue. He lastly8 of 18 (9)wp1556.16submits that the courts have not passed the order on merits andconsidering the provisions of the Act.9.Learned advocate for the respondent No.1-banksubmits that various grounds and points in respect of theLiquidator and the DICGC Act have been raised for the first time.These points were never raised before the trial court. He submitsthat after the award is passed now the action would followunder the provisions of MCS Act. The petitioner did not in factpursue the matter in the appellate court and at one point theappellate court was constrained to pass an order of dismissal fordefault as the appellant remained absent. He submits that themain ground in the petition appear to be not considering themerits in the matter and the provisions of the Act and for thatpurpose the matter can be remanded. The appellate court canvery well go through the merits and the legal submission again.Respondent No.2 was initially made a party in the appealhowever subsequently it was deleted by the petitioner itself, nogrievance now can be made before this court about the same.9 of 18 (10)wp1556.16Even in this writ petition respondent No.2 was not a party but issubsequently added. Since the Liquidator did not take promptaction, therefore, the bank had no option but to go forattachment of the property and consequential action under MCSAct. He submits that respondent No.2 will have no say as itstood deleted in the appeal. Mr. Dhorde further submits thatorder under section 107 of the MCS Act was passed in this casea permission from the Registrar was sought to file the disputeand therefore bar under Section 107 would not be attracted.Recovery Officer has rightly acted and proceeded in furtheranceof under Rule 107 (10) of the MCS Rules. He further submitsthat to attract the provisions of DICGC it is necessary that thebank should be insured under Section 10 of the said Act. Hefurther submits that in view of section 13(c) of the DICGC Actthat registration of the banking company as insured bank wouldstand cancelled on the occurrence of any of the event mentionedin section 13.10.Learned advocate for the respondent No.2 submits10 of 18 (11)wp1556.16that the dispute was presented on 26-09-2009. The bankinglicense of the petitioner bank was cancelled on 10-06-2008 andon 16-08-2008 the Liquidator was appointed. Thus, on the dateof presentation of the dispute administrator was alreadyappointed and was holding the charge. This fundamental aspectwas not stated in the plaint. The plaint itself ought to have beenrejected under the order 7 Rule 11-A and Order 7 Rule 11-D. Nodispute could have been filed without impleding respondentNo.2 as party to the dispute. He submits that when in writtenstatement of the petitioner bank it was specifically mentionedthat the bank is under liquidation and that was under the DICGCit was obligatory on the part of the court not to proceed with thedispute/suit till this respondent is made a party. In spite of thispleading learned Member of the Cooperative Court did notframe any issue about the DICGC Act. When such pleading ismade before the court, the court need not wait for applicationunder order 7 Rule 11. The court has to frame this issue aspreliminary issue as there is sufficient pleadings before thecourt. He further submits that when the grounds were11 of 18 (12)wp1556.16specifically taken by the petitioner bank in the appeal, it wasnecessary for the appellate court to frame the points on thisaspect. Respondent No.1 was expected to file proceeding undersection 110 (a) of the MCS Act which starts with non-obstantclause of Section 20 of the DICGC Act. He submits that this courtalso can direct the petitioner to pay the amount to respondentNo.2 as it is only respondent No. 2 who is entitled to receive theamount from the petitioner bank. In any case he submits that itis for the Liquidator to repay the amount in order of priority tothe persons entitled to receive the amount. He relies upon thejudgment reported in 2015(9) SCC 629 in the case of DepositInsurance and Credit Guarantee Corporation Vs RaghupatiRaghwan and others. He submits that Section 21 of the DICGCAct makes it obligatory on the part of the official Liquidator torepay the amount to the Corporation and any other preferentialcreditor would get an amount only after the amount payableunder Section 21 of the Act is paid to the Corporation. Tocounter the submission of Mr. Dhorde in view of Section 13 thelearned Advocate Adwant submits that in view of Sections 1712 of 18 (13)wp1556.16and section 19 once the bank was under Liquidation it is underobligation to inform the DICGC. He submits that in view ofsection 21 till the liability is paid nobody has right to get anamount.11.In rebuttal, the petitioner argues that as theproperties were attached the Liquidator could not take propersteps. He further submits that moment Liquidator is appointed.Respondent No.2 Corporation comes into picture by virtue of themandatory provisions of the Act.12.Learned advocate shows from the letter grantingpermission of the District Deputy Registrar that permission wasgranted only to sue with certain prayers. In the permission, itwas specifically mentioned of Liquidation. Respondent- Bankhowever without adding Liquidator as party has proceeded withthe dispute.13.Copy of permission is produced on record in which it13 of 18 (14)wp1556.16is specifically put as a condition that the permission is grantedonly to the extent of adding Liquidator as party. It is furthermade clear that by filing the dispute no obstruction would bemade in the liquidation proceedings, if conditions are notobeyed the permission to file dispute would stand cancelled. Inthis case, respondent bank has not added Liquidator as partyand subsequently by attaching the property of the bank hascreated obstacles in the work of the liquidation and for thisreason also dispute permission is deemed to have beencancelled.14.Looking to the submission of all the parties and legalposition this court finds that the learned Lower appellate courthas failed to appreciate the legal position and relevant facts andhas arrived at a conclusion and dismissed the appeal with costs.The court failed to consider the specific grounds taken in theappeal in respect of the liquidation proceeding. There is nodispute that on the date of filing of the suit, Official Liquidatorwas already appointed, that fact is not properly considered by14 of 18 (15)wp1556.16both the courts. Even the authority had granted permission tofile a suit only with limited prayer and with necessaryconditnion if Liquidator is appointed , however, prayers weremade which were beyond the permission granted by theauthorities. Proceeding of attachment etc. by the recovery officeralso was illegal. The learned appellate court ought to havepassed the order on merits. This court also finds substance in theargument of the Mr. Adwant, learned advocate for respondentNo.2 that the plaint was presented on 26-02-2009 whereasbanking license was cancelled on 10-06-2008 and Liquidatorwas appointed on 16-06-2008 i.e. much prior of filing of thedispute. This material fact was suppressed by the plaintiff. Thedispute was filed without making respondent No.2 as party andfor that reason also the suit was not maintainable for want ofjoining of necessary party. Though in written statement the issuewas raised the court did not frame any issue on this respect. Thecourt also has not considered the provision of The DepositInsurance Credit Guarantee Corporation Act. His furthersubmission is that though in the appeal ground Nos.3, 7 & 915 of 18 (16)wp1556.16taken no proper points were were formulated.15.In fact in view of of order 41 Rule 17 C.P.C. thelearned appellate court should have dismissed the appeal indefault and should not have proceeded to consider and decidethe appeal on merits. In para No.6 of the judgment the learnedAppellate Court has specifically recorded that the appellant andhis advocate were absent on various dates. In such case onlycourse open to the appellate court was to dismiss the appeal fordefault.16.The Hon’ble Apex Court has clearly held in judgmentreported in (2012) 8 SCC 745 Ghanshyam Dass Gupta VsMakhan Lal that only course open to the appellate court is todismiss the appeal in case of absence of appellant in view orforder 41 Rule 71. The power of order 41 available to co-operative court in view of explanation to Section 149 of theCooperative Societies Act, 1960. This court finds that sinceproper opportunity was not given to the appellant/petitioner, it16 of 18 (17)wp1556.16would be proper to remand back the appeal for fresh decision tothe learned appellate court. The appellate court to offer anopportunity of hearing to all the parties to this petition anddecide the appeal on merits by considering all the provisions asregards the appointment of liquidator and provisions of DICGCAct. Needless to mention that the appellate court shall decidethe appeal without being influenced by the observations made inthis judgment. Hence, the following order:-ORDERa]Writ petition stands partly allowed. b]The appeal is remanded back to the learnedappellate court for fresh consideration. The learnedappellate court to decide the appeal as early aspossible and preferably by 30-06-2024. c]All the Parties to this petition to appear beforethe learned appellate court on 11-12-2023.17 of 18
Decision
(18)wp1556.16d]In view of disposal of the petition, pendingcivil applications if any stands disposed off. [KISHORE C. SANT, J.]17.At this moment, learned advocate for respondentNo.1 prays for stay to the execution and operation of this order.This court finds that no order adverse to any of the party ispassed requiring stay to the operation and execution of thisorder. Hence, request is rejected. [KISHORE C. SANT, J.]VishalK/wp1556.1618 of 18