Gujarat High Court
Chandrakant Shankerlal Shah Thro Poa ... vs Liquidator Anand Peoples Co-Operative ... on 18 August, 2023
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 18361 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 18367 of 2018
With
R/SPECIAL CIVIL APPLICATION NO. 18364 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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CHANDRAKANT SHANKERLAL SHAH THRO POA KANTIBHAI P THAKKAR
Versus
LIQUIDATOR ANAND PEOPLES CO-OPERATIVE BANK LTD & 5 other(s)
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Appearance:
MR MASOOM K SHAH(6516) for the Petitioner(s) No. 1
MS JEENAL ACHARYA, AGP for the Respondent(s) No. 4,5
MR ARVIND R YADAV WITH MR MIT S THAKKAR(11223) for the
Respondent(s) No. 1
MR P B PRAJAPATI(11275) for the Respondent(s) No. 3
MR. MH SHEKHAWAT(7194) for the Respondent(s) No. 3
NOTICE SERVED for the Respondent(s) No. 6
NOTICE UNSERVED for the Respondent(s) No. 2
MR AMIT R JOSHI for the Respondent(s) No. 3 & 4( SCA NO.18364/2018)
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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NEUTRAL CITATION
C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023
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Date : 18/08/2023
CAV JUDGMENT
1.Heard learned advocate Mr. Masoom K. Shah for the petitioner, learned advocate Mr. Arvind R. Yadav for Mr. Mit S. Thakkar for respondent no.1, learned advocate Mr. Amit R. Joshi for respondent nos. 3 and 4 in Special Civil Application No.18364/2018 and learned Assistant Government Pleader Ms. Jeenal Acharya for the respondent State.
2.Rule returnable forthwith. Learned advocate Mr. Arvind R. Yadav for Mr. Mit S. Thakkar, learned advocate Mr. Amit R. Joshi and learned Assistant Government Pleader Ms. Jeenal Acharya waives service of notice of rule for the respective respondents. Considering the issue arising in a narrow compass with the consent of the learned advocates, these petitions are taken up for Page 2 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined hearing.
3.As the controversy arising in these petitions are similar with regard to the challenge to the Judgment and Order dated 12.09.2018 passed by the Gujarat State Cooperative Tribunal, Ahmedabad (For short "the Tribunal") in Appeal No.21 of 2013 as well as order dated 11.11.2009 passed by the Registrar Cooperative Societies, Gandhinagar and orders dated 02.11.2015 and 19.11.2015 passed by the State Government for extending the term of liquidation of Anand Peoples Co- Operative Bank Ltd. (In Liquidation), the same were heard analogously and are disposed of by this common judgment.
4.Special Civil Application No. 18361/2018 is treated as a lead case and the facts taken from the said matter are as under:
4.1) The petitioner was guarantor of the Page 3 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined Anand Peoples Co-Operative bank Ltd. (In Liquidation) (For short "the bank").
4.2) On 22.02.2001, the respondent no.1 bank sanctioned the hypothecation loan in favour of respondent no.2 for an amount of Rs. 40 Lakh. Respondent no.3 and the petitioner stood as guarantors for the said loan.
4.3) As respondent no.2 failed to pay the outstanding dues of the bank, Lavad Case No.1558 of 2005 was filed by the liquidator of the bank before the Board of Nominees under the provisions of Gujarat Co-operative Societies Act, 1961 (For short, "the Act, 1961") for recovery of Rs.42,36,920.86.
4.4) By Judgment and Order dated 27.04.2010, the Board of Nominees, Anand, passed the decree against respondent nos. 2, 3 and the petitioner to make payment of Page 4 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined outstanding dues of the bank.
4.5) The petitioner preferred an appeal under section 102 of the Act, 1961 on 11.09.2012 before the Tribunal challenging the order passed by the Board of Nominees with an application to condone the delay.
4.6) The Tribunal by order dated 29.01.2013 refused to condone the delay in Misc. Application (Delay) No. 26 of 2012.
4.7) The petitioner therefore preferred Special Civil Application No.8307 of 2013 before this Court challenging the said order.
This Court, by order dated 14.10.2013 allowed the said petition by condoning the delay in preferring the appeal against the final judgment and order passed by the Board of Nominees, Anand in Lavad Case No.1558 of 2005.
4.8) The Tribunal by judgment and order Page 5 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined dated 12.09.2018 rejected the appeal of the petitioner upholding the Judgment and Decree passed by the Board of Nominees. 4.9) It is the case of the petitioner that on 22.10.2005 the final order of liquidation qua the bank was passed under section 107 of the Act, 1961 by the Registrar, Cooperative Societies and liquidator was appointed for three years. Thereafter by order dated 04.09.2008 proceedings for the purpose of winding up was extended for a further period of one year from 27.10.2008 to 26.10.2009 which was further extended for one year by order dated 11.11.2009 and 19.09.2011 and thereafter extended by order passed in October 2012 and subsequently, it was extended from time to time every year upto 26.10.2017 by passing orders under section 114 of the Act, 1961. The State Government thereafter extended the Page 6 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined liquidation period from 27.10.2017 to 26.10.2018 by order dated 18.10.2017 exercising powers under section 161 of the Act, 1961. The petitioners therefore contended that there is illegal extension of liquidation process initiated in the year 2005 with regard to the winding up process of the bank and it has continued till the date of filing of the petition.
5.Learned advocate Mr. Masoom Shah for the petitioner submitted that the respondent authorities could not have exercised powers under sections 114 and 161 of the Act, 1961 to extend the time to complete the liquidation process contrary to the provisions of the Act, 1961. It was submitted that in view of illegal extension of liquidation process, the respondent bank cannot continue the recovery process against the petitioners as respondent no.1 liquidator Page 7 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined of the bank is not empowered to continue the winding up process in view of such orders of extension passed by the respondent authorities being contrary to law. 5.1) However, learned advocate Mr. Shah fairly submitted that the issue now is concluded by the decision of Hon'ble Supreme court in case of Goa State Cooperative Bank Limited v. Krishna Nath A. (Dead) through legal representatives and others reported in (2019) 20 Supreme Court Cases 38 wherein while dealing with pari materia provisions of Maharashtra Cooperative Societies Act, 1960 the Hon'ble Supreme Court has held that recovery rights of the bank are not defeated under the provisions of the said Act by virtue of liquidation/winding up provisions prescribed in sections 109 and 110 of the Act.
5.2) In view of such submission, the main Page 8 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined grievance of the petitioners would not survive as the Hon'ble Supreme Court after detailed analysis and discussion has held that recovery right can be pursued by the Registrar of Cooperative Societies or liquidator of the bank as under:
"(15.) The Society and the liquidator had filed recovery cases against all the defaulting members of the society to whom loans were advanced. The bank in total advanced Rs.250 lakhs to the society and on taking charge by the Bank as liquidator of the said society, the bank had outstanding of Rs.241 lakhs as principal amount and Rs.233 lakhs towards interest. The arrears due to the efforts of the liquidator bank were reduced to Rs.37 lakhs towards principal and Rs.154 lakhs towards interest. It is pertinent to mention that the bank has further pointed out that out of the cases filed against the defaulting members, in 42 cases appeals had been filed before the Cooperative Tribunal wherein stay orders were granted. It is also pointed out that 80 cases were pending with the Zonal Recovery Offices, i.e., Assistant Registrar, Cooperative Society s Sales and Recovery Officer under section 156 of the Act. Therefore, the termination of the winding up under section 109 of the Act, cannot be Page 9 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined strictly applied so as to defeat the very purpose of the legislative intent of recovery of amount. (16.) It is also submitted that by lapse of time under section 109(1) of the Act, recovery proceedings cannot come to an end. It is further pointed out that the recovery of public money from defaulting members is absolutely necessary failing which huge financial loss would be caused to the appellant bank. The interim stay granted by the tribunal cannot come to the prejudice of the bank. Thus, the provisions of Section 109 have to be construed in such a fashion so as to enable continuance of the proceedings for recovery. As the interim order of the court cannot work to the prejudice of any of the parties, the provision of section 109 of the Act should be construed in a manner that it is not used to interdict recovery from the defaulting members. (17.) It is apparent from the facts of the instant case that the winding up of the Society has been ordered and liquidator has been appointed as the Society has utterly failed to achieve its avowed objectives in disbursement of loans to proper persons and in its recovery. No doubt about it that the liquidation of the Society has come to an end after a particular period of time as fixed under section 109. However, on lapse of time as fixed under sub Page 10 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined section (1) of section 109 of the Act, proceedings have to be terminated by the Registrar on receipt of final report from the liquidator as ordered under section 109(2). However, at the same time, the Registrar has power to extend the period of 6 years fixed under section 109(1), not exceeding one year at a time and four years in the aggregate, and maximum for 10 years. In case time is not extended, the winding up comes to an end on the expiry of 6 years or at the end of the extended period. The total period can be 10 years. The second proviso to section 109 makes it clear that if the Registrar comes to a conclusion that the work of liquidation could not be completed by the liquidator due to the reasons beyond his control, he shall call upon the liquidator to submit his report. After getting the report, if the Registrar is satisfied that the realisation of assets, properties, sale of properties still remains to be realised, he shall direct the liquidator to complete the entire work and carry out the activities only for the purposes of winding up and submit his report within such period not exceeding one year reckoned from the date of receipt of the report from the liquidator. (18.) Section 109(2) of the Act contains a non obstante clause which empowers the Registrar to terminate the liquidation proceedings on receipt of the final report from the Page 11 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined liquidator. The liquidator shall state in the report that the liquidation proceedings of the society have been closed, and how the winding up has been conducted and the property and the claims of the society have been disposed of and shall include a statement showing a summary of the account of the winding up including the cost of liquidation, the amount, if any, standing to the credit of the Society in liquidation, after paying off its liabilities including the share or interest of members and suggest how the surplus should be utilised.
(19.) Section 110 of the Act deals with disposal of surplus assets. They should either be divided by the Registrar, with the previous sanction of the State Government, amongst its members, if they specify that such a surplus shall be utilised for the particular purpose or may be utilised for both the purposes.
(20.) It is apparent that on the termination of the liquidation proceedings, liability of the members for the debts taken by them does not come to an end. There is no such provision in the Act providing once winding up period is over, the liability of the members for loans obtained by them which is in their hands, and for which recovery proceedings are pending shall come Page 12 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined to an end. No automatic termination of recovery proceedings against the members is contemplated. On the other hand, on completion of the period fixed to liquidate the society, final report has to be submitted as to the amount standing to the credit of the society in liquidation after paying off its liabilities including the share or interest of members. Thus, even in the case of liquidation the accountability remains towards surplus and liabilities do not come to an end. Even if the period fixed for liquidation of society is over, that does not terminate the proceedings for recovery which have been initiated and appeals are pending.
(21.) It is a settled law that when there is stay of proceedings by court, no person can be made to suffer for no fault on his part and a person who has liability but for the interim stay, cannot be permitted to reap the advantages on the basis of interim orders of the court. In Amarjeet Singh v. Devi Ratan, (2010) 1 SCC 417, it was held that no person can suffer from the act of court and unfair advantage gained by a party of interim order must be neutralised. The Court should never permit a litigant to perpetuate illegality by abusing the legal process. It is the bounden duty of the court to ensure that dishonesty and any attempt to abuse the legal process must be Page 13 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined effectively curbed and the court must ensure that there is no wrongful, unauthorised or unjust gain for anyone by the abuse of process of the court. No one should be allowed to use the judicial process for earning undeserved gains or unjust profits. The object and true meaning of the concept of restitution cannot be achieved unless the courts adopt a pragmatic approach in dealing with the cases. The Court observed:
"18. In Ram Krishna Verma v. State of U.P. (1992) 2 SCC 620, this Court examined the similar issue while placing reliance upon its earlier judgment in Grindlays Bank Ltd. v. ITO, (1980) 2 SCC 191 and held that no person can suffer from the act of the court and in case an interim order has been passed and the petitioner takes advantage thereof and ultimately the petition is found to be without any merit and is dismissed, the interest of justice requires that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised."
(emphasis supplied) (22.) The principle of restitution enjoins a duty upon the courts to do complete justice to the party at the time of final decision, and to do away with the effect of interim Page 14 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined order in the fact situation of the case. In South Eastern Coalfields Ltd. v. State of M.P., (2003) 8 SCC 648, it was observed that no party can take advantage of litigation, it has to disgorge the advantage gained due to delay, in case lis is lost. (23.) The concept of restitution is a common law principle and it is a remedy against unjust enrichment or unjust benefit. The court cannot be used as a tool by a litigant to perpetuate illegality. A person who is on the right side of the law, should not have a feeling that in case he is dragged in litigation, and wins, he would turn out to be a loser and wrong doer as a real gainer, after 20 or 30 years. Thus, the members who have obtained stay in appeal or on recovery proceedings or the case is pending, cannot take advantage of the fact that the period fixed for Liquidator under the Act is over.
(24.) Once a report has been submitted, the Registrar has to take action in terms of the report and in such circumstances when the proceedings for recovery are pending against the members and the Society has taken loan from the banks for its member, the actual money has to go to the creditor i.e., to the bank who is going to be benefited by recovery of public money in the hands of members. In such cases it would be appropriate for the Page 15 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined Registrar to send notice of the proceedings to a person who is to be benefited from the recovery. In the instant case, the bank itself is a prime lender cum liquidator. The proceedings cannot come to the end. Thus, in our considered opinion, it is open to the bank to continue with the recovery proceedings and make recoveries from the defaulting members. Merely on the liquidation of Society, or the factum that the period fixed for liquidation is over, liability of the members for the loans cannot be said to have been wiped off. The disbursement of loan in an arbitrary manner and failure to recover was the very fulcrum on the basis of which winding up of the Society was ordered.
(25.) The decision of the High Court to the contrary, deserves to be and is hereby set aside. Though the Liquidator cannot continue once the proceedings are over. Notice in such cases should be issued by the Registrar to the creditors and to persons for whose benefit recovery is to be made, to continue the pending proceedings in the instrumentality of court/ tribunals/ recovery officers etc. We hold that appellant Bank can continue the pending proceedings. The appeal is allowed to the aforesaid extent." 5.3) Learned advocate Mr. Shah further Page 16 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined submitted that the respondent bank could not have initiated the proceedings under the provisions of the Act, 1961 as the respondent bank was required to initiate the proceedings under the provisions of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (For short "the SARFAESI Act") or under the provisions of Recovery of Debts and Bankruptcy Act, 1993 in view of the decision of the Apex Court in case of Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited reported in (2020) 9 Supreme Court Cases 215. 5.4) It was therefore, submitted that the respondent bank is required to comply with the provisions of the Banking Regulation Act, 1949 in view of definition of 'bank' as provided in section 2(1)(c) of the SARFAESI Act which has been amended by the parliament Page 17 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined to include Multi-State Cooperative bank by inserting sub-clause(iv-a) which would also cover cooperative bank registered under State law and multi-State Cooperative bank registered under Multi-State Cooperative Societies Act, 2002 in section 5(c) of the Banking Regulation Act, 1949. It was therefore, submitted that the impugned orders passed by the Tribunal and the Board of Nominees could not be enforced by respondent no.1.
5.5) Reliance was also placed on the judgment of Andhra Pradesh High Court dated 31.12.2021 passed in W.A. No.1680/2017 and allied matters, wherein it is held that in view of the judgment delivered by the Constitution Bench of the Hon'ble Supreme Court in case of Pandurang Ganpati Chaugule (supra), the action initiated under the Andhra Pradesh Cooperative Societies Act, Page 18 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined 1964 was certainly a nullity and the bank was having a remedy of filing an application under the Recovery of Debts and Bankruptcy Act, 1993 and the order passed by the learned Single Judge was quashed and set aside by the Division Bench and the writ petitions were allowed by quashing and setting order passed by the Tribunal declaring that the Sale Certificate issued to the petitioners were held valid and they were held to be entitled to delivery of possession of the property mentioned therein from the borrower or other persons in possession thereof. 5.6) Relying upon the aforesaid decision, it was submitted that the impugned orders passed by the Board of Nominees and Tribunal are required to be quashed and set aside and respondent no.1 should file an application under the provisions of the Recovery of Debts and Bankruptcy Act, 1993 or under the Page 19 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined provisions of SARFAESI Act and no recovery proceedings should be continued against the petitioner pursuant to the orders passed by the Board of Nominees and the Tribunal. 5.7) Learned Advocate Mr. Shah submitted that Board of Nominees passed the judgment and decree without providing any opportunity of hearing as the petitioner could not file an application for leave to defend before the Board of Nominees. It was submitted that the Tribunal also did not entertain the appeal as the right to defend was not available with the petitioner without entering into the merits.
5.8) Learned advocate Mr. Shah in support of such submissions referred to and relief upon the decision of Apex Court in case of G.N.R. Babu alias S.N.Babu v. Dr. B.C. Muthappa and Others reported in 2022 SCC OnLine SC 1158 wherein in context of Page 20 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined provisions of Order IX Rule 13 of the Code of Civil Procedure, 1908 (For short "the Code"), question was decided as to whether it was open for the defendants to agitate in the regular appeal against the decree that the trial Court had no justification for proceeding ex-parte against the appellant when the defendant did not avail the remedy under Order IX Rule 13 of the Code. The Apex Court held that in such case though the appellant would not be entitled to lead evidence in appeal for making out a sufficient cause for his absence before the trial Court, he can always argue on the basis of the record of the suit that either the suit summons was not served upon him or that even otherwise also, the trial Court was not justified in proceeding ex- parte against him. It was therefore, submitted by the learned advocate Mr. Shah that the Tribunal could not have dismissed the appeal of the Page 21 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined petitioner without considering the plea of the petitioner as to whether the summons issued by the Board of Nominees was served upon the petitioner or not. It was therefore, submitted that in this context, the impugned Judgment and Order passed by the Tribunal is required to be quashed and set aside.
6.On the other hand, learned advocate Mr. Arvind R. Yadav with learned advocate Mr. Mit S. Thakkar for the respondent no.1 submitted that in view of decision of the Apex Court in case of Goa State Cooperative Bank Limited (supra), the main contention of the petitioner with regard to extension of winding up process by the respondent authorities would fail and therefore, the petition deserves to be dismissed on that ground.
6.1) It was further submitted that the Page 22 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined submissions made by the petitioner on merits cannot be accepted as the petitioner did not avail the opportunity to defend Lavad suit and therefore, the petitioner is bound by the Judgment and Decree passed by the Board of Nominees.
6.2) With regard to the contention raised on behalf of the petitioner of deciding the appeal by the Tribunal without considering the ground of service of summons upon the petitioner is concerned, it was submitted that the petitioner has not raised such plea before the Tribunal and therefore, the same could not have been raised before this Court in writ petition filed under Article 227 of the Constitution of India.
6.3) With regard to the reliance placed by the petitioner upon the decision of Apex Court in case of Pandurang Ganpati Chaugule(supra), it was submitted that the Page 23 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined said decision does not negate the provisions of the Act, 1961 ultra vires the Constitution as alleged and sought to be declared by the petitioner. It was submitted that the remedy for recovery of dues provided under the provisions of SARAFESI Act and the proceedings under the Act, 1961 would co- exist and the respondent bank has already initiated the proceedings under the provisions of the Act, 1961. Respondent no.1 is entitled to effect the recovery of the dues of the bank in liquidation from the petitioner, borrowers and other guarantors. 6.4) It was further submitted that the directions came to be imposed by the Reserve Bank of India under section 35A of the Banking Regulation Act, 1949 upon the bank on 30.08.2022 precluding the bank from carrying out banking business and activities including selling, transferring or otherwise disposing Page 24 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined of any of its properties or assets without prior permission from RBI and thereafter license of the bank was also cancelled by order dated 26.10.2005 under section 22 of the Banking Regulation Act, 1949 by the RBI. It was therefore, submitted that winding up proceedings were initiated against the bank and the liquidator was appointed by the Registrar, Cooperative Societies in exercise of powers conferred under the provisions of section 115A(2) read with sections 107 and 108 of the Act, 1961 by order dated 27.10.2005 and hence in such circumstances, as the bank was not entitled to carry on the banking business, the only remedy available to respondent no.1 is to file Lavad Suit before the Board of Nominees and recovery procedure initiated would continue to subsist under the provisions of Act, 1961 and the Rules framed thereunder in addition to recourse to SARFAESI Act for recovery of dues Page 25 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined of the bank from the defaulting borrowers. It was therefore, submitted that respondent no.1 is entitled to continue the recovery proceedings and the petitions therefore, deserve to be dismissed.
6.5) Learned advocate Mr. Thakkar referred to and relied upon the decision of this Court in case of Modi Harnishkumar Hasmukhlal v. People's Cooperative Credit Society Ltd. reported in (2014) 3 GLH 778, wherein it is held that when the Tribunal concluded that the petitioner lost the opportunity to defend the suit, the petitioner cannot challenge the condition imposed while granting leave to defend. The said decision is followed in case of Rohitbhai Jayantilal Shah and others v. Dhrangadhra People's Cooperative bank Limited and others (Order dated 02.12.2016 passed in Special Civil Application No.6995/2015), Page 26 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined wherein it is held as under:
"5. In Modi Harnishkumar Hasmukhlal vs. People State Co-operative Society Limited. [2014 (3) GLR 1996], this Court held that once the defendant failed to deposit the money as condition imposed by the Board of Nominees, he would lose right to defend the suit.
5.1 The Court held as under, "12. There appears a difference between the provisions of Order 37 of the Code and Section 99(4) (5) of the Act as well as Rule 41A of the Rules as regards condition for leave to defend and the effect of non-compliance of the condition. Under the provisions of Order 37, discretion is available with the Court to grant unconditional leave whereas subsection (4) and (5) of section 99 of the Act with Rule 41-A mandates to impose condition of deposit of 33.5% amount of the claim of dispute or such less amount as may be fixed by the learned Board of Nominees. Clause (e) of sub section (5) of section 99 of the Act provides that non-
compliance of the condition may result in passing of award against the defendant as if the defendant has not been granted leave to defend.
13. From the above provisions of the Act and Rules, what appears Page 27 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined is that the defendant would lose his right to defend the suit if he does not comply with the condition of deposit of the amount for leave to defend. Such right would not be revived if the order imposing condition for leave to defend is allowed to attain finality by not challenging the same byway of revision application during the pendency of the suit.
14. There is no provision in the Act or the Rules like Order XLIII, Rule 1A of the Code which gives right to a party to challenge non appealable orders while challenging the final decree entitling the party to lavad suit to challenge any order made in the suit when appeal is filed before the Tribunal against the final award passed in the suit. Mr. Parikh however relied on Regulation No. 6(4) (f) of the Gujarat State Cooperative Tribunal Regulations, 1964 to contend that such order imposing condition can be challenged in appeal against the final award.
Such contention cannot be accepted. In the appeal under section 102 of the Act, the grounds available are to challenge the final award. In such appeal, the petitioners are not entitled to challenge the order imposing condition of deposit of amount for leave to Page 28 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined defend the suit. The Tribunal has therefore, rightly held that the petitioners cannot challenge the condition for leave to defend. The Tribunal has also not committed any error in refusing to remand the matters to Board of Nominees. Simply because the petitioners were desirous to deposit the amount as per the condition for leave to defend is no ground to remand the matter to Board of Nominees. For remand of the matter, the Tribunal is to be satisfied that rehearing is necessary to meet with the ends of justice. No such case was made out by the petitioners. The petitions are therefore required to be dismissed. However, the amount deposited by the petitioners pursuant to the order dated 4.10.2013 passed in the present petitions shall be required to be adjusted towards the dues outstanding against the petitioners."
5.2 The aforesaid law laid down by this Court disentitles the petitioners who lost their right to defend the suit. It is held that such right cannot be revived by showing the readiness to deposit the amount in appeal. In Modi Harnishkumar (supra), the Court upheld the order of the Tribunal on the aforesaid ground.
6. Even otherwise, on attentively considering the facts on record and Page 29 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined on carefully perusing the impugned judgment and order of the Tribunal, it could be noticed that, the transaction of loan was proved by virtue of the documents executed in favour of the Bank. The petitioners were the guarantors of the loan amount. The loan was given at 18% interest by executing hypothecation deed, letter of lien, memorandum of deposit of title deeds and others documents accepting the loan transaction. The fact that the petitioners stood as guarantors could not be disputed. The petitioners did not avail the right to defend and lost such right. The Board of Nominees passed the decree legally and on the basis of the evidence. The judgment and order in appeal was also found to be proper and legal. From no stand-point, the petitioners could challenge the impugned judgment and decree and the confirmation thereof by the Tribunal as per the impugned order."
7.Learned Assistant Government Pleader Ms. Jeenal Acharya adopted the arguments advanced by learned advocate Mr. Mit Thakkar.
8.Having heard the learned advocates for the respective parties and having considered the controversy arising in these petitions in light of the provisions of the Act, 1961, Page 30 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined SARFAESI Act, the Banking Regulation Act, 1949 as well as decision of the Apex Court in relation to exercise of the remedy to recover the dues of the bank is concerned, the Apex Court in case of Pandurang Ganpati Chaugule(supra) after considering the various provisions has come to the conclusion that the cooperative bank can also initiate the proceedings for recovery under the provisions of SARFAESI Act. However, the Apex Court has not precluded the cooperative society to initiate the proceedings under the provisions of Act, 1961 by filing Lavad Suit before the Board of Nominees so as to get the Judgment and Decree.
9.In facts of the case, the petitioner has failed to appear before the Board of Nominees and lead any evidence by filing an application for leave to defend as provided under the provisions of the Act, 1961 and Page 31 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined therefore, the petitioner cannot now raise any issue with regard to the merits of the matter, more particularly, when the petitioner has failed to demonstrate before the Tribunal as well as before this Court with regard to the non-service of summons by the Board of Nominees. The Tribunal has therefore, rightly rejected the appeal filed by the petitioner without considering the same on merits as the petitioner for the first time has raised the controversy with regard to the guarantee issued by him for the amount borrowed by respondent no.2 from the bank in these petitions.
10. Reliance placed by the petitioner on the decision of the Apex Court in case of G.N.R. Babu alias S.N.Babu(supra) would not apply to the facts of the case as the petitioner has failed to demonstrate before the Tribunal about the fact with regard to service of Page 32 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined summons. The Tribunal has therefore, rightly rejected the appeal.
11. It is also pertinent to note that the petition is also filed by the power of attorney holder of the petitioner namely, Shri Kantibhai Thakkar who filed appeal before the Tribunal challenging the order passed by the Board of Nominees who passed an ex-parte order in the year 2010 with an application to condone the delay. This Court (Coram: Hon'ble Mr.Justice C.L. Soni, As His Lordship was then) while allowing the Special Civil Applications condoning the delay in preferring the appeal before the Tribunal held that considering the fact that the advocate of the petitioner was not present when the decision was pronounced by the Board of Nominees and therefore, it cannot be said that such decision was communicated to the petitioner in view of Rule 41(4)(c) of the Page 33 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined Gujarat Cooperative Societies Rules, 1965. Therefore, in absence of such communication, the petitioner was entitled to file appeal with delay which is required to be condoned.
12. Therefore, in view of the above findings to condone delay cannot be justified to quash and set aside the impugned Judgment and Order passed by the Tribunal on merits which has dismissed the appeal of the petitioner on the ground of not defending the case before the Tribunal.
13. The petitioner has also not been able to point out with regard to the issue of service of summons upon him by the Board of Nominees as it is recorded in the impugned order of the Board of Nominees that the advocate of the petitioner remained present but no defense was filed. The Board of Nominees has also recorded in the Judgment and Order that the summons were already served upon the Page 34 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined petitioner.
14. In such circumstances, no interference is warranted in the impugned Judgment and Decree passed by the Board of Nominees as well as the Appellate order of the Tribunal on merits while exercising extra ordinary jurisdiction under Article 227 of the Constitution of India.
15. The Division Bench of this Court in case of Smitaben Mahin Modi v. State of Gujarat & Ors. (Judgment dated 10.02.2021 passed in LPA No.1011/2015 and allied matters) after considering the decision of Apex Court in case of Goa State Cooperative Bank Limited (supra) disposed of the Letters Patent Appeal in same terms as held by the Apex Court confirming the order passed in Special Civil Application by the learned Single Judge. Page 35 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023
NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined
16. As held by this Court in case of Rohitbhai Jayantilal Shah and others(supra), the petitioner is dis-entitled to defend the suit when the petitioner has lost its right to defend the suit before the Board of Nominees and such right cannot be revived even if the petitioner shows readiness to deposit the amount in appeal, more particularly, when the bank has proved the transaction of loan by virtue of documents executed in its favour and when the petitioner was the guarantor of the loan amount by executing hypothecation deed, letter of lien, and other documents and the fact that the petitioner stood as guarantor is not in dispute. As the petitioners failed to avail the right to defend the suit and lost such right, the Judgment and Decree passed by the Board of Nominees and confirmed by the Tribunal on the basis of evidence cannot be set aside by remanding the matter Page 36 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined as the Judgment and Order in appeal was also found to be proper and legal.
17. In view of foregoing reasons, the petitions deserve to be dismissed and are accordingly dismissed. Rule is discharged. No order as to costs.
(BHARGAV D. KARIA, J) Learned advocate Mr. Parth Thummar for learned advocate Mr. Masoom K. Shah submitted that by order dated 3.12.2018, this Court passed the order in terms of para-9(B) whereby the impugned Judgment and Order dated 12.09.2018 passed by the Gujarat State Cooperative Tribunal was stayed.
It was therefore, submitted that the interim relief granted during the pendency of the petitions may be continued for a further period Page 37 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023 NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined of four weeks.
Learned advocate Mr. Arvind Yadav for respondent no.1 submitted that after grant of interim relief by this Court, the Hon'ble Supreme Court in case of Goa State Cooperative Bank Limited v. Krishna Nath A. (Dead) through legal representatives and others reported in (2019) 20 Supreme Court Cases 38 has negatived the contention of the petitioner with regard to issue of extension of time of respondent no.1 under the provisions of Gujarat Co-operative Societies Act, 1961.
During the course of hearing also, learned advocate Mr. Masoom Shah has fairly submitted that in view of decision of Goa State Cooperative Bank Limited (supra), the issue with regard to extension of time of respondent no.1 was squarely covered by the aforesaid decision. Page 38 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023
NEUTRAL CITATION C/SCA/18361/2018 CAV JUDGMENT DATED: 18/08/2023 undefined In view of above, the request to extend the interim relief granted by this Court on 3.12.2018 is not accepted and accordingly refused.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 39 of 39 Downloaded on : Sun Sep 17 01:32:52 IST 2023