Bombay High Court

Sahakari Bank Karmachari Sangh vs The Commissioner, Co-Operative ... on 10 March, 2017

Bench: S.C. Dharmadhikari

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  IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                   CIVIL APPELLATE JURISDICTION

                   WRIT PETITION NO. 3627 OF 2013



Sahakari Bank Karmachari Sangh                         ..Petitioner
              Vs.
The Commissioner-Co-operative Societies

State of Maharashtra and Another                       ..Respondents

Mr. Neel Helekar, for the Petitioner.

Ms. Sushma Bhende, Asst. Govt. Pleader, for the Respondent

No.1.

Mr. R. V. Govilkar i/b Mr. Suhas S. Inamdar, for the

Respondent No.2.

                             CORAM :- S.C. DHARMADHIKARI &
                                         B.P.COLABAWALLA , JJ.

DATE :- MARCH 10, 2017.

ORAL JUDGMENT (Per. S. C. Dharmadhikari, J.)

Rule. Respondents waive service. By consent,

rule made returnable forthwith.

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2                  By this Writ Petition under Article 226 of the

Constitution of India, the Petitioner is challenging the legality

and validity of an order dated 25 th June, 2012. The Petitioner

is also seeking a writ of mandamus or any other writ, order

or direction in the nature thereof directing the Respondents

to release the payment of compensation as per order dated

3rd April, 2012.

3 This Writ Petition is filed on 13 th March, 2013 and

the material averments therein are that, the Petitioner is a

union. It represents the cause of 55 employees whose names

are mentioned in Annexure-A to the Petition. 1st Respondent

is the Commissioner Co-operative Societies, State of

Maharashtra who has passed the order impugned in this Writ

Petition. 2nd Respondent is the bank styled as Solapur Nagari

Audyogic Sahakari Bank Limited sued through its liquidator.

4 The Petitioner states that it is a representative

union functional under the Bombay Relations Act, 1946. The

Petitioner union has negotiated several demands of the

employees and that is why it has been granted the above Aswale 2/38

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status. Relying upon this position and a Agreement /

Settlement with the 2nd Respondent, it is submitted that the

bank was registered as a Co-operative Society under the

provisions of the Maharashtra Co-operative Societies Act,

1960. It is carrying on banking business since 19 th October,

1979. The Petitioner states that from 2001, this bank was in

financial crisis. There was an audit undertaken by the

Reserve Bank of India as well as of the audit department in

the Ministry of Co-operation, Government of Maharashtra.

The conclusion drawn after this exercise is that on account of

certain wrong financial policies and decisions, the bank is

losing its ground. It is not possible to improve its financial

position which deteriorated further. It is stated that the bank

was directed by the Reserve Bank of India by invoking the

powers conferred vide Section 35-A of the Banking

Regulation Act, 1949 to improve its financial condition. That

an opportunity of six months was granted so as to improve its

financial condition. Later on, on 12th August, 2011 the bank

was directed to show cause as to why its licence should not be

cancelled.

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5                  The bank could not improve its financial position.

It could not also provide any restructuring or revival plan.

Hence, on 4th November, 2011, the Reserve Bank of India

acted under the Banking Regulation Act, 1949. It invoked

Section 22 thereof to pass an order cancelling the banking

licence. This order, copy of which is at Exhibit-A to the

Petition was passed on 4th November, 2011. Thereupon, 1st

Respondent made an order on 11th November, 2011 putting

the bank under liquidation and appointed a Liquidator.

6 The Liquidator had taken charge and thereupon

the Petitioner union approached him with a representation

dated 20th December, 2011. They submitted that an Appeal

was filed against an order cancelling the banking licence. The

union requested the Liquidator to release the arrears of

Dearness Allowance as payable to the employees. It also gave

reference to several awards and orders of the Labour Court.

The details of dues payable were also provided on 5 th

January, 2012. The 2nd Respondent prepared a proposal of

the entire dues payable to the employees and forwarded it to Aswale 4/38

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1st Respondent. The above exercise is reflected from

Exhibits-D and E to the Petition.

7 The Petitioner relies upon a Voluntary Retirement

Scheme. It is stated that the bank even prior to its

liquidation declared this scheme and stated that those who

do not accept it, the services of such employees would be

terminated forcibly.

8 It is on account of the fear of termination that 55

employees mentioned in Annexure-A and on whose behalf the

Petition is filed submitted their applications. They sought

Voluntary Retirement from the services of 2 nd Respondent

bank. That was with effect from 1st November, 2011.

However, though the applications were accepted, the

retirement came into effect, but their dues or compensation

was not paid.

9 That is how the Petitioner submits that after order

of liquidation, 1st Respondent gave approval to the Voluntary

Retirement Scheme which was sent by the then management

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on 25th October, 2011. As per the scheme, the employees

were granted only one months' salary for minimum services

and plus ten months' salary as extra compensation. Though

this scheme was forwarded for approval, till the date of

liquidation the approval was not granted. It is only on 19 th

January, 2012, that this scheme was approved. As per the

approval, concerned 55 employees were entitled to receive

an amount of compensation equivalent to one months' salary

for each remaining period of the service. Exhibit-F is a copy

of the order/approval.

10 Then, 2nd Respondent submitted a proposal on 17th

February, 2012 seeking to enhance the amount of

compensation. Three separate proposals were submitted.

One for payment of existing 97 staff and another for 55

covered by the Petition for payment of compensation. Third

proposal was for payment of arrears of Dearness Allowance

and yearly increments and amount of salary deduction.


11                 All the three proposals including particulars of the

financial condition were forwarded.                  1st Respondent, after
Aswale                                       6/38





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considering the financial position, granted approval to all the

three proposals. The 1st Respondent directed 2nd Respondent

to disburse the amounts. The order to this effect is dated 3 rd

April, 2012. The concerned 55 employees, therefore, became

entitled to receive certain sums towards compensation in

terms of this order.

12 The complaint of the Petitioner is that despite such

approval, the amounts have not been disbursed. A provision

was made and two statutory authorities, namely, the Deposit

Insurance and Credit Guarantee Corporation so also the

Reserve Bank of India was informed.

13 The Petitioner is aware of the position that in the

bank there were deposits and of those constituents and

members who expressed their faith and trust invested their

valuable monies, based on such trust. The interests of such

depositors has to be protected and that is why the deposit

insurance policy and credit guarantee was obtained in terms

of the Deposit Insurance and Credit Guarantee Corporation,

Act, 1961 ("DICGC Act").

Aswale                                  7/38





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14                 The Petitioner is further aware of the fact that 2 nd

Respondent being a bank, licence to carry on banking

operations by the Reserve Bank of India is required. The

Bank obliged to adhere to the terms and conditions of the

licence and provisions of the Banking Regulation Act, 1949.

It is bound and liable to act in terms of the directives and

circulars of the Reserve Bank of India and they bind it.

Hence, in actual disbursal of amounts and payments, it is

these two statutory authorities would have a definite role.

Therefore, the information has to be provided to them.

15 So long as these steps were taken by 2 nd

Respondent, the Petitioner union did not raise any objection

but they moved this Petition after they noticed that 1 st

Respondent Commissioner has passed a further order on 25 th

June, 2012 by which he recalled his earlier direction

contained in the order dated 3rd April, 2012. It is in these

circumstances that this Writ Petition is filed.


16                 Though the Petitioner approached 1st Respondent

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and requested him to cancel the earlier order of 25th June,

2012, he has rejected or has not taken any note of the same.

It is in these circumstances that this Writ Petition is filed.

17 Mr. Helekar appearing for the Petitioner would

submit that the impugned order is contrary to law in as much

as once the Liquidator proceeded on the footing that all

employees and serving the bank have to be treated on par

and none can be selected or given a march over the other for

disbursement of the compensation, then, the three proposals

approved earlier ought to have been allowed to be

implemented and taken to their logical end. The grievance of

the Petitioner is that by the impugned order at Exhibit-H to

the Petition, what 1st Respondent has done was to inform 2nd

Respondent Liquidator that though the Liquidator has taken

up the cause of such of the affected 55 employees who have

been requesting for Voluntary Retirement four days prior to

cancellation of the banking licence, still, the position now

emerging is that it is the employees who were in service when

the order of liquidation was made, who are alone held to be

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entitled and paid the compensation. The members of the

Petitioner were not in service prior to the winding up order

or on the date of the same, they had obtained voluntary

retirement or availed of the same four days prior to the

cancellation of the banking licence. After noticing this

position, the earlier order dated 3rd April, 2012 is cancelled.

The Liquidator, therefore, should abide by earlier direction

contained in the letter dated 19th January, 2012, is the

further impugned direction. Mr. Helekar would submit that

1st Respondent cannot determine the issue of employer-

employee relationship in this manner. His understanding

that somebody who had sought voluntary retirement and

prior to four days of the cancellation of banking licence is not

in service of the bank on the date of winding up order, is

incorrect. As is apparent, according to Mr. Helekar, that

there is a Voluntary Retirement Scheme. That is nothing but

an offer made by the bank. That offer has to be accepted by

the members of the Petitioner union. That acceptance has to

be convened. After that acceptance is convened, the

Voluntary Retirement Scheme and the benefits thereof have

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to be extended and in terms of the scheme. So long as the

benefits and flowing from the scheme are not extended nor

the amounts thereunder fully paid, it cannot be said that the

employer-employee relationship had come to an end. The

presumption that it comes to an end, when the application

seeking Voluntary Retirement is tendered, is therefore,

erroneous and not sustainable in law. 1 st Respondent has

taken over the adjudication of such vexed and contested

issue and determined that perfunctorily without any

application of mind. The justification provided in the

impugned order is therefore not sound but untenable in law.

The impugned order is also vitiated by a non-application of

mind. It is on this footing that it is required to be quashed

and set aside.

18 The Chairman of the Liquidator Board

Mr. Bapurao Shivaji Katare filed his affidavit in reply. He

submitted that this Writ Petition proceeds on an erroneous

assumption that the cancellation of the banking licence is the

only triggering fact. It was also pointed out to the employees

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that the bank's position is precarious and critical. The

Reserve Bank of India had given a warning and from time to

time called upon the bank to improve its financial position.

The Reserve Bank informed the Board of Directors that Bank

Staff should be reduced. The staff strength had to be brought

down. That is how the management issued circulars on 15 th

and 19th September, 2011. The Voluntary Retirement

Scheme was declared. The employees were granted 15 days

salary for remaining service. Since there was no response

from the employees, the then management announced

another scheme by circular dated 20 th September, 2011.

This affidavit annexes copies of these circulars. 56

employees submitted their resignations as per the scheme

and claimed compensation. As per the scheme, the

employees were granted one month salary for remaining

service. The copy of resignation of one of the employees is

annexed. The Managing Committee, in its meeting dated 30 th

September, 2011, accepted resignation of 55 employees and

rejected the resignation of one. Accordingly, 55 employees

informed about acceptance of resignation with effect from 1 st

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November, 2011 as per Voluntary Retirement Scheme dated

20th September, 2011. A copy of this letter is also annexed to

this affidavit.

19 On 10th October, 2011, the then Management

requested the Reserve Bank of India for permission for

payment of the amount to the employees who had accepted

this voluntary retirement. On 13th October, 2011, the Reserve

Bank of India informed that the authority for approval of the

said Voluntary Retirement Scheme is not with the Reserve

Bank of India but the Commissioner and Registrar of Co-

operative Societies, Maharashtra State. That is how the bank

approached the Commissioner-1st Respondent on 25th

October, 2011 and sought his approval. It was informed that

the Management has relieved these 55 employees from

service with effect from 1st November, 2011.

20 In the meanwhile, the banking licence of 2nd

Respondent was cancelled on 4th November, 2011. As soon as

that was cancelled, 1st Respondent passed an order putting

the bank under liquidation and appointing the Board of Aswale 13/38

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Liquidator. The Liquidator had taken charge on 11th

November, 2011. It is stated that on 19th January, 2012, the

Voluntary Retirement Scheme was approved by 1st

Respondent. He informed that the compensation be paid to

these 55 employees as per that scheme. 55 employees were

paid gratuity, medical allowances, leave with wages etc on

31st October, 2011 and compensation on 7th January, 2013 to

the extent of Rs. 132.45 lakhs. A chart is annexed. It is

submitted that neither the Voluntary Retirement Scheme nor

the approval granted by 1st Respondent has been challenged

by any of these employees (55). They have accepted the

scheme and also the approval.

21 When the Petitioner union submitted a proposal

for compensation to the existing employees on the date of

liquidation and claimed four months wages per year for

remaining service, the Liquidator passed a Resolution for

payment to these existing employees. He sought approval of

1st Respondent to disburse the amounts and based on the

availability of the funds. That was approved by 1 st

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Respondent. The payment of two and half months wages per

year for remaining service towards compensation has been

granted and accepted. The Liquidator has thus paid to the 97

employees Rs. 153.70 lakhs on 8th January, 2013.

22 The Petitioner union submitted proposal for

compensation to existing employees on the date of liquidation

and the Liquidator Committee passed Resolution on 13th

February, 2012 and forwarded a proposal dated 17 th

February, 2012 to 1st Respondent for approval. That was

approved on 3rd April, 2012. The reasoning therein is then

referred and in paragraph 11 of this affidavit it is submitted

that the cash in hand available with the bank is Rs. 11.36

lakhs and bank balance of Rs.83.20 lakhs up to 31 st August,

2013 was not enough to satisfy the liability of Rs. 5643.60

lakhs. It is at this stage, 2nd Respondent presses the issue of

the interest and benefit of depositors. It is submitted that the

depositors deposited Rs. 2496.06 lakhs with the bank. The

balance amount has to be utilized, therefore, to make

payment of these depositors as per the claim list. Once the

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present funds are insufficient to meet the demands, then, the

Petition deserves to be dismissed.

23 The Petitioner filed an additional affidavit and

pointed out that 2nd Respondent bank has forced 55

employees to take the Voluntary Retirement Scheme on 30 th

October, 2011. The Reserve Bank of India cancelled banking

licence on 4th November, 2011. The contention that the

employees have accepted the Voluntary Retirement Scheme

voluntarily and were paid their legal dues accordingly, is

incorrect. The Voluntary Retirement Scheme was never

sanctioned by 1st Respondent till April 2012. The letter

dated 17th February, 2012 which is at Annexure-E to the

Petitioner clearly reflects this position.

24 The letter of 19th January, 2012 is not reflected or

referred in the letter of 17th February, 2012. Therefore, in

the order passed on 3rd April, 2012, 1st Respondent granted

approval to a proposal of 2nd Respondent dated 17th February,

2012. 1st Respondent has not mentioned anything in respect

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of a letter or order of 19th February, 2012. The Petitioner has

thus disputed the existence of such a letter. On 25 th June,

2012, such a non-existent letter could not have been

referred and to make the impugned order of 25 th June, 2012

is thus the stand taken in this additional affidavit dated 12 th

October, 2012.

25 What we then have on record is an additional

affidavit tendered by 2nd Respondent in this Court on 22nd

February 2017. That affidavit was tendered after a brief

hearing of this Writ Petition by this Court and rather by this

Bench. This Bench raised several questions and queries.

That order of the Bench dated 1st February, 2017 reads as

under:-

"1. Pursuant to our earlier order, the Liquidator is present in court. The Liquidator's advocate has handed over a complete file and in relation to the transactions/deal, particularly about the sanction and approval of the voluntary retirement scheme of the employees.

2. When this file was handed over, we inquired from the learned advocate as to what prevents the present Liquidator from acting in accordance with law. Meaning thereby, if the amounts have been sanctioned and disbursed though with purported prior approval of the

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Registrar, what the Reserve Bank of India informs the union and equally the Registrar writes to the then Liquidator is that the amounts have to be paid and disbursed in terms of the priorities and determined by the Liquidator. Secondly, he has to abide by the law. Therefore, we would like a clarification from the Liquidator and presently in-charge as to how prior to his taking over, the amounts towards voluntary retirement scheme were sanctioned and disbursed to some employees and in doing that, whether Sub-section (1) of section 105 of the Maharashtra Co-operative Societies Act, 1960 and particularly clauses (e) and (f) thereof were adhered to. Equally, the mandate flowing from Rule 89, which requires the Liquidator to exercise powers under section 105 and in some cases with prior approval of the Registrar. Therefore, what is the prior approval, what is placed before us is the prior approval or otherwise, if priorities are determined or not determined till date and if finally everything is not found in accordance with law, will the Liquidator make a report to the Registrar and recommend to call back all such disbursements and sanctions and made till date, which do not conform with the mandate of law.

3. It is no answer that the present Liquidator has taken charge in 2013 and therefore, was not responsible for any acts and deeds committed prior thereto. He has been in-charge from 2013 and is presumed to be aware of the law. Whether he has adhered to the law and if not, the reason for not adhering to the same are the particulars and details sought from him and which he must furnish to this court. Eventually, such Liquidators are accountable and answerable to the court. Hence, we find that in the absence of a proper affidavit on the above points we will not be in a position to issue any directions. For us to issue binding directions and to all concerned, we would require these details.

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4. At the request of the learned advocate and to enable him to tender this affidavit of the Liquidator, we grant time of three weeks. Stand over to 22nd February, 2017. To be listed on the "Supplementary Board".

26 The additional affidavit of 2nd Respondent

therefore traces the entire history. It is stated that the

deponent is the Deputy Registrar, Co-operative Societies,

Solapur city and presently Chairman of the Board of

Liquidators of the Solapur Nagari Audyogik Sahakari Bank

Limited, Solapur (2nd Respondent bank). He says that he

took charge on 2nd February, 2017. He has perused the

Petition and the Annexures thereto. He has also perused the

relevant records and has gathered certain information. He is

deposing on the basis of the same and after setting out

certain Government Resolutions, Circulars and guidelines

issued by 1st Respondent, in paragraphs 2 and 3 it is pointed

out that the legal position as emerging from the Maharashtra

Co-operative Societies Act, 1960 is that in the case of a bank,

1st Respondent has to act in terms of his power and conferred

vide Section 110-A. Inviting our attention to Chapter-X-A

which is inserted by Maharashtra Act 54 of 1969, it is

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pointed out that an order for winding up of a Co-operative

Bank (2nd Respondent) shall be made by the Registrar if so

required by the Reserve Bank of India in the circumstances

referred to in Section 13-D of the DICGC Act. It is submitted

that the Registrar had made the order of winding up. After

that order was passed, the stand taken is that the prior

Chapter-X, titled "Liquidation" would come into play. Section

102 provides for a winding up order being passed

independent of the situation contemplated by Section 110.

Once such a winding up order has been passed and in terms

of Section 102, it is appealable under Section 104. However,

appointment of a Liquidator is contemplated by Section -103.

It is stated that the Committee of Liquidator can be appointed

even in terms of Section 103. Apart therefrom, there are

powers conferred by Section 105. Our attention is invited to

Clause (e) of sub-section-1 of Section 105. Our attention is

also invited to Section 18-A of the Act. Our attention is then

invited to the Maharashtra Co-operative Societies Rules,

1961. It is submitted that the Rules and which have been

referred to by this Court, namely, Rule 89 dealing with

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appointment of Liquidator and procedure to be followed and

powers to be exercised by him, contemplates that the

Liquidator must proceed in terms thereof. However, that

does not rule out the applicability of other Rules or provisions

in the Act. That is why the Liquidator realized that priorities

can be determined by taking recourse to either Section 18-A,

dealing with a situation on par with winding up and also by

relying upon other Rules, namely Rule 18-A of the same

Rules. Those are Rules which enable realizing of the assets

and liquidating a liability of a deregistered society by an

official assignee. A situation of winding up is on par with a

deregisteration of the society and that is why recourse to this

Rule is permissible.

27 Proceeding on these lines, it is then contended that

there are circulars issued as to how the bank should proceed.

Relying upon two Circulars it is submitted that as far as

properties are concerned, it is this Court's judgment and

order in Writ Petition No.1886 of 2012 which would guide 2 nd

Respondent. It is submitted that this judgment and order

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dated 19th August, 2013 is relied upon. It is then, that

reference is made to the meeting of the Board of Directors

dated 10th August, 2009 and a discussion therein on the

Voluntary Retirement Scheme. On 11th July, 2009, the

Voluntary Retirement Scheme was finalized. Copy of the

same is at Exhibit-3 to this affidavit. The approval contained

also the guidelines for implementation of the policy. On the

basis of this decision of the Board of Directors, on 7 th April,

2010 a Circular was issued. The employees were informed

that as per the directions/instructions of the Reserve Bank

of India, it has became necessary to reduce the number of

employees and they can therefore opt for Voluntary

Retirement Scheme. Those who opt for Voluntary

Retirement Scheme would be paid one months salary for each

year of balance service. However, the Voluntary Retirement

Scheme compensation would be to the extent of and for a

period of 10 years maximum and therefore an appeal was

made to opt for this Voluntary Retirement Scheme on 15 th

April, 2010. Those who do not opt for the same would be

retrenched from the services of the bank. This Circular did

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not meet with any response. Therefore, one more Circular

dated 20th September, 2011 was issued after one year and

five months. The employees were requested to opt for

Voluntary Retirement Scheme by 24 th September, 2011.

They were specifically informed that any application for

Voluntary Retirement Scheme received after this date would

not be considered and the employees would be removed from

the services compulsorily. Initially, 56 employees applied for

Voluntary Retirement Scheme. Lateron, one of them

withdrew the application. The Board of Directors in its

meeting dated 30th September, 2011 considered these

applications and resolved that the resignation of these

employees who had applied for Voluntary Retirement

Scheme, be accepted on/from 1st November, 2011 and they be

paid salary at the rate of 30 days per year and for balance

period of their service, however, restricted to the period of

10 years maximum. The compensation to these 55

employees, whose applications for Voluntary Retirement

Scheme were accepted, was paid on 7 th January, 2013. That

is how the bank transferred a sum of Rs.1,47,66,769/- being

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the service dues of 97 employees who did not opt for the

Voluntary Retirement Scheme and to be paid, transferred

through RTGS or NEFT to their respective accounts. The

amounts were paid out of the own funds of the bank in

liquidation and not from financial assistance from DICGC.

The bank in liquidation, thereafter, by letter dated 10 th

October, 2011 addressed to the Chief General Manager,

Reserve Bank of India sought permission of the Reserve Bank

of India to sanction the Voluntary Retirement Scheme of 56

members pointing out that after reduction of the strength of

the staff, a sum of Rs. 65 lakhs would be reduced and the

management costs would then stand reduced accordingly.

The Reserve Bank of India addressed letter on 13 th October,

2011 and the contents of the same are already referred by us

herein-above. The gist is that it is the job of 1 st Respondent

whether to accept the Voluntary Retirement Scheme or

sanction or approve it or otherwise. The Reserve Bank of

India is not concerned with the same. However, the Board of

Directors resolved that on receipt of the requisite sanctions /

approvals amount due to the 55 employees be paid. In the

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meanwhile, however, the banking licence was cancelled and

the liquidation intervened.

28 There was indeed a communication dated 19th

January, 2012 where-under 1st Respondent accorded its

sanction for the Voluntary Retirement Scheme. The

Chairman on 17th February, 2012 informed the

Commissioner about the financial position. It is accepted

that on 3rd April, 2012 the order was made and in terms

referred above. However, the bank by its letter dated 16 th

April, 2012 informed DICGC about its financial position and

details of expenses. On 16th April, 2012, this letter and duly

forwarded to 1st Respondent was received and acting in terms

thereof, he cancelled the permission dated 3rd April, 2012 on

the ground that 55 employees were not in the service on the

date of liquidation, and therefore, permission granted by

letter dated 3rd April, 2012 to pay compensation to them was

cancelled. Then, it is stated that the DICGC addressed a letter

on 20th July, 2012 and specifically informed that the issue of

payment of legal dues of the employees was not within the

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purview of DICGC or the statute. Even, the Reserve Bank of

India stated that this is a matter governed by the liquidation

Rules. Further, a sum of Rs.32,47,89,564.65 received from

DICGC under a Deposit Insurance Scheme for settlement of

the claim of the depositors, was fully utilized for settlement of

their claims and no part of that amount was used towards the

dues of the employees. It is in these circumstances that the

fresh orders were issued. It is therefore contended that the

dues of the employees were paid as per resolution of the

Board of Directors prior to cancellation of the banking

licence. The Reserve Bank of India as well as DICGC clarified

the position that after cancellation of this licence, the issue of

payment of dues to the employees, was under the authority of

the Registrar of the Co-operative Societies. The DICGC has

also expressed an opinion that the issue of payment of dues

of the employees was within the authority of the Registrar.

That is how the further affidavit reads and it is submitted

that the Liquidator has been acting in terms of the existing

policies which are defined and clear. He has not deviated in

any manner therefrom.

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29                 Mr. Govilkar appearing for 2nd Respondent and

contesting            the      Writ     Petition      therefore     supported           the

impugned order and consistent with this affidavit. He has

addressed us in detail about the ambit and scope of the legal

provisions. It is in these circumstances that he would submit

that the Writ Petition be dismissed.

30 With the assistance of all advocates, we have

perused the Writ Petition and all the Annexures thereto. A

Division Bench order passed by this Court in Writ Petition

No.1886 of 2012 was dealing with two Writ Petitions. One

was filed by a Credit Society and another by Sangli District

Co-operative Central Bank Limited.

31 While it is true that there could be an authority to

pass a winding up order post the developments and noticed

under Section 110-A, namely, cancellation of the banking

licence and which order in the present case has been passed

by the Competent Authority, still, the question remains as to

how the priorities have to be determined.

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32                 We are mindful of the fact that the Act has made

provisions in the Rules for dealing with such contingencies.

The Division Bench has referred to Chapter-IX of the Rules

titled "Liquidation". Rule 87 therein deals with mode of

communication of an interim order under Section 102. Rule

88 provides for cost of hearing Appeal. Rule 89 deals with

appointment of Liquidator and the procedure to be followed

and powers to be exercised by him. The appointment of the

Liquidator has to be notified by the Registrar. When the

Liquidator receives the Registrar's final order confirming the

interim order, the Liquidator shall publish by such means as

he may think proper a notice requiring all claims against the

society to be notified to him within two months of the

publication of the notice and thereafter proceed to take such

further action as he is empowered to take under the Act. All

liabilities recorded in the account books of the society shall be

deemed ipso facto to have been duly notified to the Liquidator

under this Rule. By sub-Rule (5) of Rule 89 the Liquidator

shall, after settling the assets and liabilities of the society as

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they stood on the date on which the winding up order is

made, proceed to determine the contribution to be made or

remaining to be made to the assets of the society by persons

and estates referred to in clause (h) of Section 105 and by

order call upon each of them to pay the amount specified in

the order as contribution and costs of the liquidation

determined under clause (k) of Section 105. Every such

order shall be submitted for approval to the Registrar, who

may modify it or refer it back to the Liquidator for further

inquiry or other action or may forward it for execution under

Section 98. If the sum is assessed against any member but is

not recovered, then, there are further provisions in the sub-

rules enabling the Liquidator to pass or to issue a subsidiary

order. A quarterly progress report and other returns and

statements have to be filed and duly forwarded to the

Registrar. Then, there are other enabling provisions. We

have seen that all the powers which the Liquidator exercises

and in terms of clause (e) of Section 105, are not to be

exercised without the prior approval of the Registrar. Thus,

though there is sufficient guidance in this rule to the

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Liquidator, yet, till the disposal of surplus assets and other

steps, the determination of the priorities has to be made. For

that purpose, the Division Bench of this Court derived

assistance from Section 21-A titled as "deregistration of

societies" and a Rule enabling appointing a official assignee,

after such deregistration order is passed, to carry it out and

give it effect. In that, there are certain references to the

determination of priorities. So far there could not be any

dispute.

33 In the instant case, however, we find that the

Liquidator may have rightly forwarded certain proposals and

for approval of the Registrar. Has the Liquidator proceeded

on the footing that the Registrar is empowered to even deal

with and decide vexed issues and contested claims?, is a

moot question. On the own showing of 2 nd Respondent and as

reflected in the additional affidavit, what we find is that this

is a case of winding up a bank. The depositors' interests are

protected by the DICGC in terms of DIC Act, 1961. So far so

good, we do not harm the interests of the depositors nor we

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make any observations and render any findings in that

regard.

34 Equally, we are mindful of the mandate of the

Banking Regulation Act, 1949. In that, even a Co-operative

Bank will have to obtain licence from the Reserve Bank of

India before commencing and carrying on banking

operations. Once it is a bank, then, the above regime comes

in.

35 In the instant matter, however, the bank is put in

liquidation. Admittedly, the Voluntary Retirement Scheme

was mooted when the bank's position was precarious and

critical. Admittedly, one proposal for Voluntary Retirement

Scheme and as disclosed in the additional affidavit did not

impress and was never accepted by the employees.

Therefore, another proposal was mooted. The dates in that

regard are crucial. On the own showing of the deponent, the

bank mooted another proposal by issuing a Circular dated

20th September, 2011. A copy of this Circular is at Exhibit-5

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to this additional affidavit. It says that the bank has decided

to moot a proposal for Voluntary Retirement Scheme. The

bank has issued Circulars on 15th and 19th September, 2011.

By this Circular of 20th September, 2011, all employees were

informed that on account of the directions of the Department

of Co-operation and the Reserve Bank, it is imperative to

reduce the number of employees. Therefore, those who opt

for this scheme of Voluntary Retirement, they would be paid

one months salary for the remaining service (basic+Dearness

Allowance and one month salary per year with 10 years

sealing). However, the willingness has to be conveyed before

24th September, 2011. Page 129 is a copy of this Circular.

Then, what we find is that this affidavit makes a reference to

the minutes of the Board of Directors meeting held on 30 th

September, 2011. It is proclaimed that these applications

were considered by the Board and it was held that the

resignation of those employees who applied for Voluntary

Retirement be accepted on or before 4 th November, 2011 and

they be paid 30 days salary per year for the balance period of

their service restricted to the period of 10 years maximum.

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                                                 904.wp.3627.13.doc

The crucial aspect comes after this development is noted.

The compensation of those 55 employees who tendered their

applications for Voluntary Retirement was paid on 7 th

January, 2013.

36 In paragraph 5 of the additional affidavit at pages

102 and 103, it is reiterated that a sum of Rs.1,47,66,769/-

being service dues of the balance 97 employees came to be

transferred to their accounts. These 97 employees did not

opt for Voluntary Retirement Scheme. We are therefore of

the clear opinion that till 7th January, 2013 on which date the

amount was purportedly disbursed, several developments

have taken place. The banking licence was cancelled and a

winding up order came into effect. If the disbursement is

much after the winding up order, then, how did the Registrar

determine and approved this scheme of payment of money or

disbursal of funds by presuming that 55 employees who get

nothing beyond what is stipulated in the Voluntary

Retirement Scheme, is not clear to us at all. If in one breath

he says that on 3rd April, 2012 even these 55 employees are

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entitled to receive amounts on par with these 97 who did not

opt for Voluntary Retirement Scheme, then, why this position

had to be changed or reviewed or what was the requirement

for such alteration or review of the earlier position, is equally

unclear. These are not matters which should be determined

by letters, communications and interse between the

Committee of Liquidators and 1st Respondent. These matters

and issues vitally affect the rights of parties like the

members of the Petitioner union and other employees.

Equally, they affect the interests of other creditors. 1 st

Respondent and equally the Committee of the Liquidators

cannot proceed on the footing that beyond the employees

dues or that of the depositors, nobody else is entitled to

receive any amount from them. That there are no liabilities

other than these, is the assumption and based on which

everybody has proceeded. Even if there are liabilities, those

persons would not be entitled to receive any sum earlier than

the employees is another presumption. If reliance is placed

on the priorities as determined in Rule 18-A and in cases of

de-registration, then, the wages and salaries of the employees

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according to this committee of Liquidators takes precedent /

or priority even over secured loans, or otherwise has not

been indicated in the impugned order. That means the

understanding is that even when the Voluntary Retirement

is accepted but the amounts are not disbursed, all employees

have to be treated on par. Whether that is the legal position

or otherwise is not reflected from the impugned order.

37 It is clear from a perusal of the same that it does

not decide any of these aspects and with clarity. Neither is

the employee given any opportunity nor the union. It is

pointed out in the affidavit in rejoinder/additional affidavit

dated 12th October, 2014 by the Petitioner (page 95) that

there is a serious dispute about the communication of 19 th

January, 2012 purportedly exchanged between 2 nd and 1st

Respondent. They also rely on a letter of 17th February,

2012. It is in these circumstances that they would submit

that the impugned letter works serious prejudice.

38 It is this aspect which has weighed with us, and

therefore, we agree with Mr. Helekar that the same would Aswale 35/38

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have to be looked into again. For that to be looked into, we

cannot sustain the directions in the letter of 25 th June, 2012.

Equally, we cannot proceed on the footing that everything

that was determined on 3rd April, 2012 is correct and in

accordance with law. We think that just as a winding up

order was passed with exercise of due care and caution and

by adhering to the mandate of the Act, similarly even when

determining such issues as are now sought to be determined,

1st Respondent / Commissioner would have to be careful,

attentive and hold a proper adjudication.

39 The letter of 25th June, 2012 addressed to the

Committee of these Liquidators would not suffice and meet

the requirement in law. A perusal of the same (page 44)

would reveal that though it purports to affect the future

entitlement of all the employees, it is not at all meeting the

ordinary and common expectation of fairness, equity and

justice. Those vitally affected were not even heard nor is

their stand reflected. A short communication like this

therefore cannot be sustained.

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40                 We, therefore, proceed to quash and set aside the

said communication.


41                 We direct the 1st Respondent to re-adjudicate and

reconsider all issues and as enumerated by us above.                           1 st

Respondent shall hear not only the Committee of the

Liquidators but the representative of the Petitioner and such

others representing 97 employees who did not opt for

Voluntary Retirement Scheme. 1 st Respondent shall consider

all the matters arising out of the Voluntary Retirement

Scheme, its acceptance and the vital factor of disbursement

in terms thereof and made on 7th January, 2013. Whether

that accords with the mandate and flowing from Section 105

Clause (e), Rule 89 and Section 18-A and enabling Rules,

must be determined by him. 1 st Respondent would have to

therefore consider the priorities of the creditor's dues.

Whether he can make any segregation of the claims of the