The Greater Bombay Co-Operative ... vs Shri Dhillon P. Shah, Smt. ...
2003 Latest Caselaw 1106 Bom

JUDGMENT

A.M. Khanwilkar, J.

1. Heard Counsel for the parties. Rule. Rule made returnable forthwith, by consent. Mr. Dharmadhikari, Senior Counsel i/b Mr. A.A. Joshi waives notice for Respondents 1 and 2. Mr. M.H. Solkar, A.G.P. waives notice for Respondent No. 3.

2. As short question is involved, Petition is taken up for final disposal forthwith, by consent.

3. This Writ Petition filed by the Petitioner Bank essentially takes exception to the Judgment and Order passed by the Respondent No. 3 dated 23rd July, 2003, directing parties to maintain status-quo till further orders. The background in which the present petition has been filed and the facts relevant for deciding the point in issue, are as follows:-

(a) The Petitioner Bank had extended loan facilities to M/s. Mahaganesh Texpro Limited, of which, Respondents 1 and 2 were directors at the relevant time. Besides, the Respondents 1 and 2 had extended personal guarantees with regard to the loan facilities extended by the Petitioner Bank. The Petitioner Bank is essentially a co-operative society duly registered under the provisions of the Maharashtra Co-operative Societies Act, 1960. As the said borrower company was in default and inspite of several demands, the outstanding amount was not paid, the Petitioner Bank took recourse to remedy under Section 101 of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as 'the Act'). In those proceedings, Recovery Certificate has been issued on 30th August, 2001 in favour of the Petitioner Bank for a sum of Rs. 2,58,94,363/- and against the said Company as well as its directors, including Respondents 1 and 2 herein. In terms of the said Recovery Certificate, Petitioner No. 2, being the Recovery Officer, called upon the concerned to pay the amount, by notice dated 19th September, 2001, being sum of Rs. 3,13,51,800/- along with interest. The Respondents 1 and 2 along with other guarantors, against whom recovery certificate has been issued, preferred Revision Application under Section 154 of the Act. That Revision Application was, however, dismissed on 10th December, 2001. Against that decision, the Respondent Nos. 1 and 2, along with others, filed Writ petitioner in this Hon'ble Court being Writ petition No. 26 of 2002 (Original Side). This Hon'ble Court, while entertaining the said Writ Petition, on 12th February, 2002, passed conditional order, which reads as follows:

"1. Rule. Respondent Nos. 1 to 3 waives service, through respective Advocates.

2. The Petitioner shall deposit in this Court an amount of Rupees One Crore towards the liability within a period of eight weeks from today. Upon such deposit being made, the Prothonotary & Senior Master to invest the same in a Fixed Deposit of a Nationalised bank initially for a period of three years and to renew the same thereafter till the disposal of the Writ Petition. The Petitioners shall not create any third party rights in respect of the properties under attachment during the pendency of this Petitioner."

(b) Against the above conditional order, the Respondent Nos. 1 and 2 as well as other guarantors, who were also obliged to pay the amount in terms of the recovery certificate and the above noted conditional order, preferred appeal before the Division Bench of this Court being Appeal No. 363 of 2002. That appeal was disposed of on 23rd April, 2002. The Division bench modified the order passed by the Single Judge to the limited extent as noted in its order, which reads as follows:

"1. Heard the Learned Counsel appearing for the parties and the counsel for Oman International Bank.

2. After hearing the parties, we modify the order of the learned Single Judge to the extent as follows:-

3. The appellants shall deposit in this Court amount of Rs. 50,00,000/- in two installments of Rs. 25,00,000/- each, first installment to be paid on or before 16th June, 2002 and the second installment to be paid on or before 12 August, 2002. If the amount is deposited, respondent No. 3 Bank will be entitled to withdraw the same subject to the result of the petition. If the amount is not deposited within the stipulated period and in case of any default with petition to stand dismissed for non-prosecution.

4. Respondent No. 3 and Oman International Bank shall seek appropriate reliefs from the Debt Recovery Tribunal in respect of the sale of movable and immovable assets of the principal borrower. This order is without prejudice to the contentions of the respondent No. 3 Bank that the Debt Recovery Tribunal has no jurisdiction to sit in appeal over the certificate granted under Section 101 of the Cooperative Societies Act, D.R.T. and that respondent No. 3 has statutory charge over the assets of the principal borrower. Debt Recovery Tribunal may pass appropriate orders regarding sale of movable and immovable assets of the principle borrower after hearing both Banks as also the Company.

5. The attachment of the properties mentioned in schedule of properties at page 68 of the compilation to continue but no further action will be taken in respect of those properties without prior permission of the Court.

6. Liberty to apply in case the property of the company is sold.

Hearing of the Writ Petition is expedited. The Trial Court is requested to dispose the Petition within 4 months.

Appeal is disposed of."

(c) Once again, the Respondents 1 and 2 were given time to deposit the amount as quantified by the Division Bench, failing which, the Writ Petition was to stand dismissed. Thereafter, the time as granted by the Division Bench came to be extended at the request of the Appellants (including Respondents 1 and 2 herein) by the Division Bench on 18th June, 2002. It is relevant to reproduce the order as passed by the Division Bench extending time, which reads thus:

"Heard parties.

Time to deposit the first installment of Rs. 25 lacs is extended by four weeks. It is made clear that no further extension would be granted under any circumstances. If the amount is not deposited, the petition shall stand dismissed as per order dated 23.4.2001."

(e) Inspite of this extension, neither the Respondents 1 and 2, nor the other guarantors deposited the amount as directed. As a consequence of which, the Writ Petition No. 26 of 2002 filed by Respondents 1 and 2 along with others, stood dismissed and the recovery certificate issued in favour of Petitioner Bank became final. Later on, the Petitioner Bank issued notice-cum-proclamation of sale and called upon the Respondents 1 and 2 to hand over possession of specified properties which included "Saket Bunglow" at Vile Parle, Mumbai and one flat in "Gopal Bhuvan Society" at Vile Parle. By notice issued by the Petitioners, the Respondents 1 and 2 were called upon to hand over possession of the attached properties, which included the above two properties. After this notice as issued, Respondents 1 and 2 herein alone filed another Writ Petition in this Court being Writ Petition No. 1063 of 2003 (Original Side), challenging the notices issued by the Petitioner Bank and the entire execution process as was proceeded by the Special Recovery Officer. That Writ Petition was entertained by this Court on 30th April, 2003, when the following order was passed:

"1. Rule.

2. Prima facie, it appears that the Respondents have not acted in accordance with the proviso to Rule 107 (11) (e) of the Maharashtra Co-operative Societies Rules, 1961. The sale has been postponed for more than seven days after the notice of attachment is given. In view of this, the Respondents are at liberty to issue a fresh proclamation in respect of the sale. The property which is already attached will remain so attached during the pendency of this petition. The Respondents will not take coercive steps till a fresh proclamation for the intended sale is given and the produce stipulated under Rule 107 of the Rules is follows."

(f) On plain language of the aforesaid order, it is amply clear that the Petitioner Bank was permitted to proceed with the execution in relation to the recovery certificate already issued in favour of the Petitioner Bank, but by following proper procedure, afresh. In terms of the aid liberty, the Petitioner bank once again issued fresh proclamation on 17th May, 2003, which relates to the above said two properties. After the said proclamation, the Special Recovery Officer proceeded with the sale on 29th June, 2003 and accepted the highest bid. In the meantime, however, the Respondents 1 and 2 had filed Notice of Motion No. 284 of 2003 in Writ Petition 1063 of 2003, inter alia, for the following reliefs:

"(a) Pending the hearing and final disposal of this Petition, this Hon'ble Court be pleased to restrain Respondent Nos. 1 and 3, their servants and agents from in any manner acting in pursuance to letter dated 17th May, 2003 and 23rd June, 2003."

(g) However, the above Notice of Motion was not properly moved before the Court, for which reason, the learned Judge directed the Respondents 1 and 2 to get the Motion registered and thereafter, get i produced before the Court. The said Notice of Motion was accordingly moved before the Court on 3rd July, 2003. What is relevant to note is that by this Notice of Motion, the Respondents 1 and 2 were questioning the steps taken by the Special Recovery Officer for issuing fresh proclamation on various grounds. The grounds on which the said action was questioned, can be discerned from the affidavit-in-support of the Notice of Motion filed by the Respondents 1 and 2, which reads thus:

"(a) the Respondent No. 3 does not have authority and jurisdiction to conduct the execution proceedings as the recovery of debts due to Banks and Financial Institutions Act is applicable and therefore the entire execution proceedings is nullity.

(b) Assuming without admitting that the Recovery Certificate is valid under Section 31 of the D.R.T. Ac,t even the execution proceedings stands transferred to the Debt Recovery Tribunal and the officers appointed under the Maharashtra Co-operative Societies Act, namely Respondent No. 3 has no jurisdiction to continue with the execution of the recovery certificate.

(c) the Respondent No. 3 is acting in violation of the Maharashtra Co-operative Societies Rules, inasmuch as under the said Rules the moveable assets are to be disposed of first and then the immovable property is to be proceeded with.

(d) It is learnt that the Respondent No. 3 has taken the possession of all the moveable assets, however, he is not accounting for the same.

(e) It is also learnt that the Respondent No. has disposed off the movables and no account of the same is given.

(f) The proclamation is not served in the proper form on the petitioners inasmuch as the proclamation is never mentioned the date of auction, time and place of auction.

(g) No upset price is fixed of the said properties as required.

(h) The proclamation also does not mention that any proceedings is subject to the outcome of the present Petition.

(i) The attachment levied and the property put to auction is an excessive attachment inasmuch as the property of the company (Borrower) is already in possession of the Respondent No. 3 and the same is sufficient to be claimed."

(h) The matter was contested before the learned Single Judge of this Court and after considering the submissions of both the sides, learned Judge was pleased to reject the said Notice of Motion on July 14, 2003. The learned Judge has recorded that the only contention which was sought to be raised is that the proclamation issued is not in terms with the Rule 107(11)(c) of the Maharashtra Co-operative Societies Rules, 1961. That contention, however, did not find favour with the learned Judge. The relevant portion of the Judgment reads thus:

"Only contention which was sought to be raised is that the proclamation issued is not in terms with the Rule 107(11)(e) of the Maharashtra Co-operative Societies Rules, 1961. In case there is any irregularity in the issuance of the proclamation, the same cannot be a justification to stall the further proceedings for sale of the property at the instance of the applicants once this Court, after considering the prima facie case in the matter, had ordered that the respondents were at liberty to issue a fresh proclamation and to continue with the same for the sale of the property. Viewed from this angle, there is no case for granting any relief in the notice of motion in favour of the applicants. Hence the notice of motion is rejected with no order as to costs."

(i) After the said Notice of Motion was rejected, the Special Recovery Officer caused to issue notice to Respondents 1 and 2 to deliver possession of the above referred two properties. That notice was issued on 15th July, 2003. The Respondents 1 and 2 thereafter rushed to the Divisional Joint Registrar, Co-operative Societies, Mumbai Division, Mumbai, by way of Revision Application No. 608 of 2003 and inter alia prayed that the sale be set-aside. That Revision was resisted by the Petitioner Bank. The petitioner Bank placed on record that the contention, which was pressed into service in the said Revision Application was specifically raised before the High Court. Moreover, it was contended that, with the rejection of the Notice of Motion as filed by Respondents 1 and 2 before the High Court, it was not open for them to agitate the questions raised in the Revision Application. It was also argued before the Revisional Authority on behalf of the Petitioner Bank that the issue regarding fixing of upset price was specifically taken before the learned Single Judge of the High Court in Notice of Motion, as can be seen from ground (g) stated in the affidavit-in-support of the said Notice of Motion. Nevertheless, the objection as taken on behalf of the Petitioners that the Divisional Joint Registrar, Co-operative Societies, by the impugned Judgement and Order dated July 23, 2003, not only entertained the Revision, but also directed the parties to maintain status-quo until further orders. The reason as recorded by the Revisional Authority reads as follows:

"After hearing both the parties at length on stay application and on perusal of documents, it appears that the Respondents Nos. 1 and 2 failed to give any explanation with regards to fixing of upset price. Further the Learned Advocate for the Applicant has prima facie succeeded in seeking interim relief in the matter and there appears to be of substance in the submission made by him. So also R and P requires to be called for to verify and examine the factual position of the case."

4. It is this decision, which is subject matter of challenge in the present Writ Petition. According to the Petitioner, although the question of maintainability of the Revision as filed was specifically taken during the arguments before the Revisional Authority, the same has been wrongly glossed over or discarded by the Revisional Authority. It is argued that in view of the proceedings already taken out by Respondents 1 and 2 before the High Court, it was not open to the Revisional Authority to entertain the Revisional on the principles of res-judicate or principles analogous thereto. Besides, it is contended on behalf of the Petitioner that the Revision as filed could not have been entertained at all, as there was no statutory compliance of 50% deposit in terms of Section 154(2A) of the Act as amended. And on that account, the Revisional Authority had no jurisdiction to entertain the Revision as filed at the instance of Respondents 1 and 2 herein. According to the Petitioners, the proceedings before the Revisional Authority resorted to, by Respondents 1 and 2 are plainly abuse of process, and perhaps, that has been done because the Respondents 1 and 2 must have found that Forum to be a convenient Forum to get the relief as the one passed on 23rd July, 2003.

5. On the other hand, according to the Respondents 1 and 2, on fault can be found with the impugned order of the Divisional Joint Registrar for having entertained the Revision preferred by Respondents 1 and 2 against the irregular procedure followed by the lower authority during the execution of the recovery certificate. It is further argued that the issues that will have to be examined in the Revision Application were independent and filing of Notice of Motion by Respondents 1 and 2 before this Court would not preclude them from taking recourse to the remedy of Revision as was permissible by law. It is further contended that in fact, the Respondents were required to take recourse to that remedy, having regard to the objection taken by the Petitioner at various stages that they should approach the appropriate forum. It is further contended that in fact, the main issue in the pending Writ Petition No. 1063 of 2003 is, whether the authorities under the Act have jurisdiction to try and decide the matter in issue in relation to the Petitioner Society which is a Bank, and therefore, governed by the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act. It was argued that by virtue of the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, the authority and powers of the Officers under the provisions of the State Act is expressly excluded. it is submitted that if the authorities had no power and that issue was pending in this Court, then no fault can be found with the order passed by the Revisional Authority in directing the parties to maintain status-quo.

6. Having considered the rival submissions, I have no hesitation in taking the view that the remedy of revision resorted to by Respondents 1 and 2 is, on the face of it, abuse of process of law. I have already adverted to the pleadings filed on behalf of the Respondents 1 and 2 before this Court as well as the orders passed by this Court from time to time which are in anterior point of time. It is amply clear that the issue regarding the appropriateness of fresh proclamation and the actions based thereon, was specifically put in issue by the Respondent Nos. 1 and 2 in Notice of Motion No. 284 of 2003 in Writ Petition No. 1063 of 2003. However, that argument came to be rejected by the learned Single Judge of this Court on 14th July 2003. If at all the Respondents 1 and 2 were not satisfied with the said order, they could have taken the matter in appeal before the Division Bench of this Court; but instead, the Respondents 1 and 2 taking advantage of some subsequent incidental notice chose to raise the same issue once again before the Revisional Authority. Moreover, what is intriguing to note is that on the one hand the case of the Respondent Nos. 1 and 2 in the pending Writ Petition is that that the Authorities under the State Act have no jurisdiction but, on the other hand, having failed to get suitable interim order from this Court in that Writ Petition, they preferred to invoke the jurisdiction of the Authority under the State Act, whose powers are being questioned. Besides, it is agreed that the Respondent Nos. 1 and 2 have already filed appeal against the decision of the single Judge dated 14th July 2003 before the Division Bench of this Court and the same is pending. If that is so, there was no tangible reason for the Respondent Nos. 1 and 2 to not instituting and pursuing the appeal, instead of rushing to the Respondent No. 3 for interim relief. Besides, although the Revisional Authority was apprised of the fact that the Respondent Nos. 1 and 2 have taken recourse to remedy before this High Court and had failed, yet the Respondent No. 3 - Revisional Authority obliged the Respondent Nos. 1 and 2 by not only entertaining the said Revision Application but also granted interim relief. Suffice it to observe that in such a situation, the Revisional Authority should have stayed of its hands. To a mind, there is substance in the argument canvassed on behalf of the Petitioners that the Revision as filed by the Respondents 1 and 2 before the Respondent No. 3 is not maintainable on the principles of res-judicate or principles analogous thereto. On the above reasoning alone, this Petition should succeed without examining any other aspect.

7. Be that as it may, the argument that the Respondent Nos. 1 and 2 filed Revision before the Respondent No. 3 in the wake of objection taken by the Petitioners in the past to the proceedings initiated by the said Respondents, is also without any substance. For if the said Respondents had specifically raised similar issues before this Court in anterior point of time, then it was not open to them to go back to the Revisional Authority to agitate the same issue merely because that remedy was available. That could have been done only if this Court was to keep that remedy open or grant such liberty and not otherwise. Similarly, the Respondent Nos. 1 and 2 cannot be permitted to justify the impugned order of status-quo passed by the Respondent No. 3 on the premise that the larger issue as to whether the Authorities under the State Act have power to adjudicate the matter was already pending in this Court. Because that could not be the basis for grant of interim relief to the said Respondents by the Respondent No. 3. Moreover, in so far as the larger issue is concerned, in the first place the decision in 2003(2) All.M.R. 583 does not positively hold that the jurisdiction of the Authorities under the State Act is excluded. Secondly, the aid issue is already referred to the full Bench of this Court vide speaking order dated July 7, 2003 in Writ petition No. 6029 of 2002 (Appellate Side). In that order, it has been, inter alia, observed that the Co-operative Bank such as the Petitioner Bank is essentially a Co-operative Society to be governed by the provisions of the State Act which is enacted by the State Legislature in terms of Entry 32 of List II of the Seventh Schedule of the Constitution of India. Accordingly, by virtue of Article 246(3) of the Constitution of India, the state enactment should prevail. Suffice it to hold that so long as there is no authoritative pronouncement on that issue, it cannot be presumed that the Authorities under the State Act are incompetent to proceed in the matter as per the State enactment.

8. Assuming that the Revision was properly filed by the Respondents 1 and 2, however, the Revisional Authority could not have entertained that Revision in view of non-compliance of the mandate of Section 154(2A) of the Act, which reads thus:

"No application for revision shall be entertained against the recovery certificate issued by the Registrar under Section 101 unless the applicant deposits with the concerned society, 50% amount of the total amount of recoverable dues."

To get over this position, learned Counsel for the Respondents 1 and 2 contends that the said Respondents were not challenging the recovery certificate as such, but only the consequential steps taken by the authorities for execution of the recovery certificate so issued. To my mind, that would not extricate the said Respondents from the liability fastened under Sub-section (2A) referred to above. It will be propsoterous to accept the stand that a person "against whom", recovery certificate is issued, need not challenge the recovery certificate as such or for that matter, even if he has failed in the challenge to the recovery certificate (as in the present case), yet would be entitled to interdict the process of recovery of the amount specified under the recovery certificate, by ostensibly challenging only the derivative action by way of Revisional Application under Section 154 of the Act without complying the mandatory requirement under Sub-section (2A) thereof of 50% payment of the total amount of the recoverable dues. For, a person "against whom" recovery certificate has been duly issued and, who has not challenged the same or has failed in his challenge thereto, cannot be in a better position than a person who intends to challenge the recovery certificate itself by way of revision application under Section 154 and who is then obliged to pay fifty per cent. of amount of recoverable dues. In my opinion, having regard to the purpose and the legislative intent for introducing Sub-section (2A), the language of that provision would deserve liberal construction so as to encompass challenge to the derivative actions, by way of revision application under Section 154 of the act, founded on the recovery certificate which has either not been challenged or the challenge thereto has failed. To put it differently, the rigours of Sub-section (2A) would take within its sweep revision application filed by a person "against whom" recovery certificate under Section 101 of the Act has been issued, challenging the recovery certificate itself or any attempt by him to interdict the process of recovery of the dues founded on such recovery certificate, by ostensibly challenging only the derivative action in relation to the recovery certificates so issued and has become final. Only such purposive construction would suppress the mischief and advance the remedy. Inasmuch as, such construction would suppress subtle inventions and evasions for continuance of the mischief, and pro private commando, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico. This principle laid down in Heydon's case has been enunciated in Criases on statute Law 7th Edition at Page 96. It is necessary to bear in mind that Sub-section (2A) was inserted by amendment vide Maharashtra Act 41 of 2000 with effect from 23rd August 2000. This provision has been introduced so as to ensure speedy recovery of the dues of the Societies specified in Section 101 of the Act. This provision facilities immediate recovery of at least fifty per cent. amount of the total amount of recoverable dues of such Societies and not allow the entire amount being embroiled in a long drawn litigation. It will be apposite to advert to the statement of objects and reasons for introducing Sub-section (2A). The same reads thus:

"5. In order to curb the proactive of delaying the recovery process as a result of defaulters resorting to the proactive of filing revisions applications, Government has decided to amend Section 154 of the Act suitably, so as to provide for the depositing of fifty per cent. amount of the recoverable dues by the applicant, at the time of filing such revisions applications."

Indubitably, the underlying concern of the Legislature was to provide effective mechanisms for speedy recovery of the certificated dues of the specified societies. This amendment was necessitated to make the special remedy for recovery of the dues of the specified societies as envisaged by Section 101 of the Act, more meaningful. Obviously, therefore, no power is given to the Revisional Authority to either waive this condition or even relax the quantum of fifty per cent. Such is the mandate of the amended provision. Viewed in this perspective, the submission canvassed on behalf of Respondent Nos. 1 and 2 that the mandate of Sub-section (2A) has no application to the fact situation of the present case is devoid of merits. A priori, the Respondent No. 3 had no authority to entertain the revision application as filed by the Respondent Nos. 1 and 2 for want of compliance of mandatory requirement of deposit of fifty per cent. amount of the total amount of recoverable dues, much less to grant any interim relief.

9. Accordingly, I have no hesitation in observing that the impugned Judgment and Order directing the parties to maintain status-quo until further orders as passed on 23rd July 2003 cannot be allowed to stand and the same is, therefore, quashed and set-aside.

10. In the circumstances, this writ Petition succeeds with costs.

11. At this stage, learned Counsel for Respondents 1 and 2 submits that the operations of this order be stayed to enable the said Respondents to take up the matter in appeal, if so advised. I see no reason to entertain this request, especially having recorded the finding that the Respondents 1 and 2 have not approached the Court with clean hands. In the circumstances, that prayer is rejected.

12. All concerned to act on the ordinary copy of this order, duly authenticated by the Personal Secretary.