The Chairman/Secretary, Shri ... vs Nitin Agro Engineers And The Pune ...
2004 Latest Caselaw 139 Bom

JUDGMENT

D.Y. Chandrachud, J.

1. Rule, returnable forthwith. Counsel for the Respondents waive service. By consent taken up for hearing and final disposal.

2. These two petitions are directed against a judgment and order dated 9th September 2002 passed by the Co-operative Appellate Court sustaining in appeal an award of the Co-operative Court at Pune. The Co-operative Court directed the two Petitioners in these two writ proceedings to pay an amount of Rs. 14,02,766/- to the First Respondent together with interest at the rate of 16% p.a., from 15th January 1990 until realisation. For convenience of reference, it would be expedient to refer to the Petitioner in Writ Petition 282 of 2003 as the Co-operative Society, the Petitioner in Writ Petition 3548 of 2003 as the Bank and the First Respondent in both the said petitions as the contractor.

3. An agreement was initially entered into on 30th January 1988 between the Co-operative Society and the Contractor which was thereupon followed by an agreement of 4th February 1988 between the Bank the Society and the Contractor. The latter agreement which was a tripartite agreement, recites that the Bank had recommended a loan to NABARD for undertaking a Lift Irrigation Project for the Co-operative Society, The Society, the Contractor and the Bank, it was stated, had agreed to implement the project. The Co-operative Society authorised the Contractor to act as an implementing agency for the project and the Bank at the request of the Society agreed to recommend the contractor as an implementing agency. The Co-operative Society agreed to authorise the contractor to receive payment from the Bank in the manner stipulated in the schedule to the agreement and authorised the Bank to raise debits in the account of the society with the Bank. Similarly, it was agreed that all payments made by the Bank to the Contractor shall be deemed to be payments to the Co-operative Society which the Society was liable to repay together with interest to the Bank. These provision can be culled out from the recitals to the tripartite agreement and from Clauses 2 and 3 thereof. A bill was submitted by the Contractor on 15th December 1990 which was followed by a letter dated 20th June 1991 claiming an amount of Rs. 8,13,361/- from the Co-operative Society. Eventually, a dispute was filed by the Contractor before the Co-operative Court at Pune against the Society and the Bank which ended in the award of the Co-operative Court in an amount of Rs. 14,02,766/-. The award has been confirmed in appeal. Parties led evidence before the Co-operative Court.

4. In assailing the award of the Co-operative Court and of the judgment in appeal, Counsel appearing on behalf of the Co-operative Society urged that by a letter dated 20th June 1991, the Contractor had raised a total claim of Rs. 8,13,361/-, but that as opposed to the aforesaid claim what has been awarded by the Co-operative Court is an amount of Rs. 14,02,766/-. The second submission was that in any event the rate of interest that has been awarded of 16% p.a., is disproportionately high. Counsel appearing for the Bank in the Companion petition has sought to question the maintainability of the dispute under Section 91 and submitted that the Co-operative Court was not competent to entertain the dispute as against the Bank.

5. In considering the correctness of the submissions which between urged on behalf of the Petitioners it would, at the outset, be necessary to note that in paragraph 39 of the dispute before the Co-operative Court, the Contractor had claimed that out of a total amount of Rs. 1,17,88,120/- which was receivable an amount of Rs. 1,00,25,208/- had been received. In paragraph 24 of the written statement, the society admitted that the Contractor was entitled to get an amount of Rs. 1,14,95,910/- under the contract. The Society admitted in paragraph 36 of its Written Statement that what had actually been received by the Contractor was Rs. 1,00,25,208/-. In the course of the evidence that was led on behalf of the Society, the Secretary of the Society admitted that the total amount which was due and payable to the Contractor was Rs. 8,13,361/- inclusive of retention moneys and the earnest money deposit. The Secretary of the Society admitted that upon receipt of the Contractor's letter dated 20th June 1001. no dispute ha been raised by the society at any stage. In so far as the Bank's witness is concerned, he too stated categorically in the course of his cross-examination that the amount of retention money was liable to be paid to the Contractor upon the completion of one year of the Project. There was an admission to the effect that as of 15th December, 1990, a total amount of Rs. 17,62,912/- was due and payable.

6. From the evidence on the record, it is an admitted position that the retention amount was to Rs. 5,89,479/-. The retention amount was due and payable to the Contractor one year after the completion of the project In the contractor's letter dated 20th June 1991, the aforesaid amount was specifically excluded from the payments which were then due to the Contractor since the period of one year had not clapsed. The amount of Rs. 8,13,361/- which was computed in the aforesaid letter of the Contractor dated 20th June 1991 was in the circumstances exclusive of the retention money. Admittedly, the retention moneys became due and payable upon the lapse of a period of one year. The total amount which has been found to be due and payable by the Co-operative Court hence includes the original claim of Rs. 8,13,361/- contained in the aforesaid letter and in addition the retention amount which subsequently became due and payable to the Contractor. In the circumstances having regard to the averments contained in the Written Statement filed by the Co-operative Society and the admissions in the depositions of the witnesses of the Society and the Bank, the award of the Co-operative Court cannot be faulted on merits.

7. The Court must now deal with the submission of Counsel for the Bank that the dispute was not maintainable under Section 91 of the Maharashtra Co-operative Societies Act, 1960. If the dispute is not maintainable at all, the Award passed by the Co-operative Court cannot be sustained. The first agreement between the Society and the Contractor was of 30th January 1988 whereas the second agreement dated 4th February 1988 was a tripartite agreement between the Society, the Contractor and the Bank. The defence which was raised in the Written Statement filed by the Co-operative Society in regard to the maintainability of the dispute was that at the time of the alleged agreements dated 30th January 1988 and 4th February 1988, the Contractor was not a member of the Society. Now obviously this submission has no merit at all because the relevant date for considering the maintainability of the dispute under Section 91 is not the date of the agreement but the date on which the dispute was instituted before the Co-operative Court. In the present case, on 30th January 1988, the Contractor made an application for membership of the Co-operative Society (marked in evidence as Exh.96). The contractor paid the entrance fee and share subscription amount of the Co-operative Society and on 24th July 1988 a receipt was executed by the Co-operative Society at Exh.97. In paragraph 6 the petition filed by the Co-operative Society, there is a clear admission that the aforesaid amount has been receipted. The Secretary of the Society in the course of his deposition initially sought to submit that the application had not been received by the Society. Subsequently, however, he has duly admitted that the signature on the receipt at Exh.97 was indeed his signature. So far as the Bank was concerned, its witness stated that he recognised the signature of the Secretary of the Co-operative Society and the signature on the receipt was that of the Secretary. Thus, in so far as the Co-operative Society is concerned, thee is absolutely no merit in the objection raised with reference to Section 91. From the evidence on record it has been brought out that the Contractor had in fact been inducted as a member of the Co-operative Society in pursuance of his application and that the society has duly issued a receipt for the payment of the entrance amount and share subscription.

8. In so far as the defence on the part of the Bank is concerned, the Written Statement of the Bank may now be scrutinised. In paragraph 4 of the Written Statement of the Bank, the defence which was sought to be made out was not that the Contractor was not a member of the Bank but that on the date of the transaction (that is on the date of the agreement dated 30th January 1988) the Contractor was not a member of the Co-operative Society. Hence, it was urged that the Co-operative Court would have no jurisdiction. The Co-operative Court negatived the challenge to its jurisdiction. Significantly, the Bank accepted the award of the Co-operative Court and did not prefer any appeal against that award before the Appellate Court. Hence, I find merit in the submission urged on behalf of the First Respondent that the Bank which had not challenged the award of the Co-operative Court in the first place, cannot be heard in these proceedings to challenge the award of the Co-operative Appellate Court. That apart, in this case the Bank was a party to the tripartite agreement. The Bank was interested in the due and proper implementation of the project by the Contractor for, the repayment of the dues of the Bank by the Society depended upon the proper implementation of the contract. Both the Bank as well as the society recognised the Contractor as an implementing agency for the project. In paragraph 8, 9 and 10 of the claim, the aforesaid facts were pleaded and it was stated that the Bank had agreed to act as an agent of the Society and agreed to make payment to the Contractor on behalf of the Society. In paragraph 42 of the claim it was averred thus:

"42. The opponent No. 1 is a Co-operative Society registered under the Maharashtra Co-operative Societies Act, 1960. The Disputant is a "B" class Member of the Opponent No. 1. The Opponent No. 2 is also a society deemed to be registered under the Maharashtra Co-operative Societies Act, 1960. The Opponent No. 2 was and is an agent of the Opponent No. 1 for the purposes of the work referred to dispute. The Opponent No. 2 being interested in the said work is a necessary party to the present dispute. The disputant and the opponents are persons specified in Section 91 of the said Act. The present dispute touches the business of each of the Opponents. The present dispute therefore, falls under Section 91 of the said Act."

While dealing with the averments contained in paragraph 42 of the claim filed by the contractor, all that the Bank stated while denying the claim in general was that on the date of the transaction, the contractor was not a member of the Co-operative Society. This was the only objection which was taken Section 94(3)(a) of the Maharashtra Co-operative Societies Act, 1960 provides thus:

"94(3)(a) If the Co-operative Court is satisfied that a person whether he be a member of the society or not has acquired any interest in the property of a person who is a party to a dispute it may order that the person who has acquired the interest in the property may join as a party to the dispute; and any decision that may be passed on the reference by the Co-operative Court shall be binding on the party so joined, in the same manner as if he were an original party to the dispute."

Section 94(3)(a) postulates a situation where the Co-operative Court is satisfied that a person whether he is a member or otherwise of the Co-operative Society has acquired any interest in the property of a person who is a party to the dispute. In such case, the Co-operative Court may order that the person who has acquired such interest be joined as a party to the dispute and any decision that may be passed on the reference by the Court shall be binding on the party so joined. Section 94(3)(a) is obviously intended to deal with a situation where a person who is not a member of a society as nevertheless acquired any interest in the property of a person who is a party to the dispute. In order to facilitate a full and final adjudication of the dispute, the Act postulates that such a person can be impleaded as a party to the proceedings.

9. In the present case, the Co-operative Court was justified in holding that its jurisdiction in regard to the Bank was not ousted under Section 91. There was a tripartite agreements between the parties to which the Bank was a party. The Bank was interested n the due implementation of the project. The payment which the Bank was to make to the Contractor who was the implementing agency had to be recovered by the Bank from the Co-operative Society. The proper implementation of the project would determine the recoverability of the moneys due to the Bank from the Co-operative Society. Above all, the Bank accepted the award of the Co-operative court and chose not to contest the matter in appeal. In that view of the matter, I am of the view that there is no merit in the challenge by the Bank.

10. On the question of interest, however, I am of the view that there is merit in the contention which has been urged on behalf of the Co-operative Society. The Co-operative Court has awarded interest at the rate of 16% p.a. This to my mind is disproportionately high. The rate of interest, in my view has to be reduced. Hence, in substitution of the direction of the Co-operative Court the rate of interest shall be confined to 9% p.a.

11. In the circumstances, this petition shall stand allowed in part. The award of the Co-operative Court, as confirmed by the Co-operative Appellate Court holding that an amount of Rs. 14,02,766,/- is due and payable to the original disputant to the proceedings before the Co-operative Court, (the First Respondent in these proceedings) is hereby affirmed. The rate of interest which has been awarded on the aforesaid amount from 15th January 1990 till the payment or realisation shall stand reduced to 9% p.a.

12. During the pendency of these proceedings, by an interim order dated 30th April 2003 the Contractor was permitted to encash a pay order of Rs. 32,62,499/- drawn in his favour by the Pune District Central Co-operative Bank subject to his furnishing a Bank Guarantee in the aforesaid amount. The Court is informed that the pay order as thereupon encashed and a Bank Guarantee has been furnished in favour of the Pune District Central Co-operative Bank Ltd. Having regard to the fact that by this order the rate of interest awarded by the Co-operative Court has been reduced from 16% to 9%, it would be necessary for the Court to direct that the Contractor shall refund to the Pune District Central Co-operative Bank the excess amount of interest over and above 9% that has been realised. Counsel appearing on behalf of the Contractor states that the aforesaid amount shall be refunded to the Bank within a period of three weeks from today. In the event that the Contractor fails do so, the Bank will be entitled to encash the Bank Guarantee which has been furnished by the Contractor to the extent of the aforesaid difference in the amount of interest. Upon the payment being made by the Contractor to the Bank, the Bank shall release the Bank Guarantee which has been furnished by the Contractor duly discharged.

13. The Petitions are accordingly disposed of in the aforesaid terms. No order as to costs.

14. Parties be given copies of this order duly authenticated by the Sheristedar/Personal Secretory of this Court.