Bank Of India vs Lucknow Producers Cooperative ...
2018 Latest Caselaw 1973 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 


 

 
A.F.R.
 
Reserved Judgment
 
Court No. - 19
 
Case :- MISC. SINGLE No. - 1758 of 1999
 
Petitioner :- Bank Of India
 
Respondent :- Lucknow Producers Cooperative Milk Union, Lucknow & Another
 
Counsel for Petitioner :- Saurabh Lawaniya,A.K. Pandey
 
Counsel for Respondent :- Sudeep Kumar
 

 
Hon'ble Vivek Chaudhary,J.

1. Present writ petition is filed by the Bank challenging the order dated 06.04.1999 passed by the Co-operative Tribunal, U.P., Lucknow in Appeal No. 2 of 1995 filed by the Lucknow Producer Co-operative Milk Union, Lucknow, respondent no.1 (Milk Union).

2. Facts of the case are that Milk Union had taken a Cash Credit Loan from the petitioner bank for purposes of its milk business. It is claimed by the bank, though disputed by the respondents, that certain amount on interest etc. on the aforesaid cash credit loan was due against the Milk Union. For the said reasons the bank filed a claim under Section 15 of the U.P. Agriculture Credit Act, 1973 (Credit Act, 1973) read with Section 70 U.P. Co-operative Societies Act before the Registrar. The Additional Registrar allowed the claim of the petitioner. Against the order of the Additional Registrar an appeal was filed under Section 17(3) of the Credit Act, 1973 by the Milk Union, which is allowed by the Tribunal and the order of the Tribunal is now under challenge in the present writ petition. The Tribunal has found that the loan taken by the Milk Union does not come within the definition of 2(a) agriculture or agricultural purpose and 2(e) financial assistance and, therefore, section 15 of the Credit Act, 1973 shall not apply and has left it open for the bank to take proceedings before the appropriate Court.

3. Learned counsel for petitioner has strongly argued that it is not disputed that the loan was taken by the respondents Milk Union, which is a co-operative society, and, therefore, procedure provided by Chapter-V, Sections 13 to 15 of the Credit Act, 1973 will apply on the same, which is followed by the Bank. As per the procedure provided under the aforesaid sections, an application was moved under Section 15 before the Registrar who has rightly decided the dispute and the order of the Tribunal on appeal is not correct.

4. Counsel for the respondents, during course of argument, fairly conceded that the finding of the Tribunal to the extent that Credit Act of 1973 is not applicable is not correct. He further submitted that it is not Chapter-V but Chapter-IV of the Credit Act, 1973 which would be applicable in the facts of the present case as the loan admittedly was taken by the Milk Union for purposes of its milk business. Therefore, the orders passed both by Additional Registrar as well as by the Tribunal are illegal.

5. The Credit Act, 1973 came with the objective to facilitate adequate flow of credit for agricultural production and development through banks and other institutional credit agencies and for matters connected therewith on incidental thereto. The same received the assent of the President on October 17, 1973. The said Act provides for two separate procedures for credit available to different class of persons and two separate procedures to recover them. Relevant provisions of the Act, for purposes of this case, are quoted below:

"The U.P. Agricultural Credit Act, 1973.

U.P. Act No.19 of 1973

Chapter 1

Preliminary

2. Definitions. - In this Act, unless the context otherwise require-

[(a) "agriculture" and "agricultural purpose" includes making land fit for cultivation, cultivation of land, improvement of land (including development of sources of irrigation), raising and harvesting of crops, horticultures, forestry, cattle breeding, animal husbandary, dairy farming, piggery, poultry farming, seed farming, pisciculture, apiculture, sericulture and such other activities as are generally carried on by persons engaged in any of the aforementioned activities and also includes -

(i) marketing of agricultural products, their storage and transport;

(ii) the acquisition of implements and machinery in connection with any such activity;

(iii) the acquisition of gobar-gas plant; and

(iv) the establishment and maintenance of agro-service centres .

Explanation. - For the purposes of this clause, the expression "agro-service centre" means a place or a shop where the entreprenures, trained by the U.P. State Agro-Industrial Corporation Limited, carry on the sale of seeds, fertilizers, insecitsides, pesticides, or other goods of agricultural use or agricultural operations in respect of land held by others by tractors or other mechanised process on hire or repair of the agricultural implements;]

(b) "agriculturist" means a person who is engaged in agriculture;

(d) Co-operative Society means a Co-operative society registered or deemed to be registered under the Uttar Pradesh Co-operative Societies Act, 1965 (U.K. Act No. XI of 1966), the object of which is to provide financial assistance to its members, and includes a co-operative land development bank;

(e) "financial assistance" means assistance granted by way of loan, advance, guarantee or otherwise : (i) either to an agriculturist for agricultural purposes or, (ii) to a Co-operative Society for enabling it to grant loans and advances to its members for agricultural purposes ;

Chapter IV

Recovery of Dues by Banks

11. Recovery of dues of a bank through a prescribed authority. - [(1) Notwithstanding anything contained in any law for the time being in force an officer specified by the State Government by notification in the Gazette (hereinafter referred to as the prescribed authority) may, on the application of a bank by order, direct that any amount due to the bank on account of financial assistance given to an agriculturist be paid by the sale of the land of any interest therein or other immovable property which is charged or mortgaged for the payment of such amount:

Provided that no order of sale shall be made under this sub- section unless the agriculturist has been served with a notice by the prescribed authority calling upon him to pay the amount due.

(1-A) The provisions of the Limitation Act, 1963 shall apply in relation to an application under sub-section (1), as if such application were a suit in civil court for sale of the land or interest therein or other immovable property for enforcing recovery of the sum referred to in that sub-section.]

(2) An order passed by the prescribed authority shall, subject to the result of appeal under Section 12, be final and be binding on the parties.

(3) Every order passed by the prescribed authority in terms of sub-section (1) or by the appellate authority under Section 12 shall be deemed to be a decree of a civil court and shall be executed in the same manner as a decree of such court by the civil court having jurisdiction.

[(4)] No suit for the recovery of any sum due to a bank on account of financial assistance given to an agriculturist shall lie in the civil court.

11-A. Recovery in the case of personal security. - (1) Where any amount of financial assistance is granted by a bank to an agriculturist and the agriculturist fails to pay the amount together with interest on the due date, then without prejudice to the provisions of Sections 10-B and 11, the local principal officer of the bank by whatever name called may forward to the Collector a certificate in the manner prescribed, specifiying the amount due from the agriculturist.

(2) The certificate referred to in sub-section (1) may be forwarded to the Collector within three years from the date when the amount specified in the certificate fell due.

(3) On receipt of the certificate, the Collector shall proceed to recover the agriculturist the amount specified therein together with expenses of recovery as arrears of land revenue, and the amount due to the bank shall be paid after deducting the expenses of recovery and satisfying any Government dues or other prior charges, if any.

Explanation. - For the purposes of this section, the expression "Collector" means the Collector of the district in which the agriculturist ordinarily resides or carries on the activities referred to in clause (a) of Section 2 or where any movable or immovable property of the agriculturist is situate, and includes any officer, authorised by him in that behalf.

12. Appeal. - (1) Any party aggrieved by an order of the prescribed authority under Section 11 may within a period of thirty days from the date of the order prefer an appeal to such appellate authority as may be specified by the State Government by notification in the Gazette.

(2) The appellate authority may after giving an opportunity of hearing to the parties, pass such order as it think fit.

Chapter V

Financing of Co-Operative Societies by Banks

13. Definition of Registrar. - In this Chapter, Registrar means the Registrar of Co-operative Societies, Uttar Pradesh, and includes, except where the context otherwise requires, any other officer exercising the powers of Registrar of Co-operative Societies under the Uttar Pradesh Co-operative Societies Act, 1965.

15. Disputes between a bank and a co-operative society. - (1) Notwithstanding anything contained in the Uttar Pradesh Co-operative Societies Act, 1965 or any other law for the time being in force, any dispute touching the constitution, management or the business of a co-operative society, between a bank giving financial assistance to Co-operative Society and the Co-operative Society receiving such assistance, other than disputes regarding the disciplinary action taken by the society or its committee against a paid employee of the society shall be referred by either of the parties to the dispute to the Registrar for decision.

[Explanation. - A claim by a bank for the recovery of its dues from a co-operative society in respect of the financial assistance given to it shall be deemed to be a dispute which shall be referred to the Registrar under this sub-section.]

(2) Where any question arises whether, for purposes of the foregoing sub-section, a matter referred to for decision is a dispute or not, the question shall be decided by the Registrar whose decision shall be final.

16. Settlement of disputes. - (1) If the Registrar is satisfied that any matter referred to him or brought to his notice is a dispute within the meaning of Section 15, the Registrar shall decide the dispute himself or refer it for disposal to any other officer nominated by him.

(2) Where any dispute is referred under the foregoing sub-section for decision to the Registrar's nominee the Registrar may at any time, for reasons to be recorded in writing, withdraw such dispute from his nominee and may decide the dispute himself or refer it again for decision to any other officer nominated by him.

(3) The Registrar may, if he is of the opinion that the question at issue between a co-operative society and a bank is one involving complicated question of law and fact, by order stay action under sub-section (1), until the question has been tried by a regular suit instituted by one of the parties to the dispute. If however, no suit is instituted within two months of such order, the Registrar shall take action as is provided in sub-section. (1).

17. Decision of registrar or his nominee. - (1) When the dispute is referred for decision the Registrar or his nominee may, after giving a reasonable opportunity to the parties to the dispute to be heard, make an award in respect of the dispute, the expenses incurred by the parties to the dispute in connection with the proceedings and fees, expenses payable to the Registrar of his nominee. Such an award shall not be invalid merely on the ground that it was made after the expiry of the period fixed for deciding the dispute by the Registrar and shall, subject only to appeal to the Co-operative Tribunal constituted under Section 96 of the Uttar Pradesh Co-operative Societies Act, 1965, be binding on the parties to the dispute.

(2) Nothing in the Arbitration Act, 1940, shall apply to such reference or appeal.

(3) Any person aggrieved by an award of the Registrar or his nominee may within thirty days after the date on which the award is communicated to such person appeal to the Tribunal.

(4) The Tribunal after hearing an appeal under this section may pass such order as it may deem just.

18. Recovery of money award. - Every award given by the Registrar or his nominee or on appeal by the Co-operative Tribunal under Section 17, shall be deemed to be a decree of a civil court and shall be executed in the same manner as a decree of such court by the civil court having jurisdiction.

6. A perusal of the aforesaid sections clearly demonstrates that under the Credit Act, 1973, two different types of financial assistance can be granted by the Bank. One is to the agriculturist for the agricultural purposes and another is to a co-operative society for enabling it to grant loans and advances to its members for agricultural purposes [Section 2(e)]. The financial assistant granted to an agriculturist for agricultural purposes can be recovered as per the procedure prescribed by Chapter-IV of the act wherein bank can take steps for recovery of amount through Collector. So far as the second category of financial assistance is concerned, i.e., with regard to a co-operative society which has taken financial assistance, for enabling it to grant loans and advances to its members for agricultural purposes, for recovery, the procedure is provided under Chapter-V. With regard to such financial assistance, for recovery, it is open for the bank to move an application under Section 15 before the Registrar.

7. It is not disputed that in the present case, the Milk Union which is a co-operative society, has not taken loan under the second category i.e. for enabling it to grant loans and advances to its members for agricultural purposes. It has taken loan as an agriculturist itself under the first category for agricultural purposes, for its milk business. The Milk Union is a co-operative society which is in business of dairy farm, production and distribution of dairy products. The said activity is covered by Section 2(a) under the definition of agriculture and agricultural purposes. Therefore, under Section 2(b), the Milk Union is also an agriculturist and the bank has financed it as an agriculturist for its agricultural activities and has not financed it as a co-operative society.

8. In view thereof, since the finance is given to the Milk Union as an agriculturist, it is the provision of Chapter-IV under which the recovery procedure could be adopted by the Bank and procedure provided under Chapter-V, which is available only for the second category financial assistance, i.e., for enabling the co-operative society to grant loan and advances to its members for agricultural purposes, would not be applicable. The petitioner bank in the present case has wrongly proceeded under Chapter-V of the Credit Act, 1973. The said procedure would not available to the petitioner bank in the facts of the present case.

9. In view thereof, both order dated 06.04.1999 passed by the Tribunal as well as order dated 15.04.1994 passed by the Additional Registrar are set aside and the Claim Petition filed by the Bank before the Registrar under Section 15 of the Credit Act, 1973 is rejected.

10. With the aforesaid, the writ petition is disposed of.

Order Date :- 14.08.2018

Arti/-

(Vivek Chaudhary,J.)