Gujarat High Court
Smitaben Mahin Modi vs State Of Gujarat on 10 February, 2021
Bench: Gita Gopi
C/LPA/1011/2015 JUDGMENTDT.:10.02.2021
SMITABEN MAHIN MODI Vs. STATE OF GUJARAT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
1. R/LETTERS PATENT APPEAL NO. 1011 of 2015
In
R/SPECIAL CIVIL APPLICATION NO. 11088 of 2014
With
2. R/LETTERS PATENT APPEAL NO. 984 of 2015
In
SPECIAL CIVIL APPLICATION NO. 12323 of 2014
With
3. R/LETTERS PATENT APPEAL NO. 985 of 2015
In
SPECIAL CIVIL APPLICATION NO. 12324 of 2014
With
4. R/LETTERS PATENT APPEAL NO. 986 of 2015
In
SPECIAL CIVIL APPLICATION NO. 12325 of 2014
With
5. R/LETTERS PATENT APPEAL NO. 987 of 2015
In
SPECIAL CIVIL APPLICATION NO. 12326 of 2014
With
6. R/LETTERS PATENT APPEAL NO. 988 of 2015
In
SPECIAL CIVIL APPLICATION NO. 12327 of 2014
With
7. R/LETTERS PATENT APPEAL NO. 989 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11641 of 2014
With
8. R/LETTERS PATENT APPEAL NO. 990 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11642 of 2014
With
9. R/LETTERS PATENT APPEAL NO. 991 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11643 of 2014
With
10. R/LETTERS PATENT APPEAL NO. 992 of 2015
In
SPECIAL CIVIL APPLICATION` NO. 11644 of 2014
With
11. R/LETTERS PATENT APPEAL NO. 993 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11645 of 2014
With
12. R/LETTERS PATENT APPEAL NO. 994 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11646 of 2014
Page 1 of 34
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SMITABEN MAHIN MODI Vs. STATE OF GUJARAT
With
13. R/LETTERS PATENT APPEAL NO. 1012 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11089 of 2014
With
14. R/LETTERS PATENT APPEAL NO. 1013 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11090 of 2014
With
15. R/LETTERS PATENT APPEAL NO. 1014 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11091 of 2014
With
16. R/LETTERS PATENT APPEAL NO. 1015 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11092 of 2014
With
17. R/LETTERS PATENT APPEAL NO. 1016 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11093 of 2014
With
18. R/LETTERS PATENT APPEAL NO. 1017 of 2015
In
SPECIAL CIVIL APPLICATION NO. 11094 of 2014
With
19. R/SPECIAL CIVIL APPLICATION NO. 16610 of 2014
With
20. R/LETTERS PATENT APPEAL NO. 845 of 2016
In
SPECIAL CIVIL APPLICATION NO. 13778 of 2009
With
21. CIVIL APPLICATION (FOR STAY) NO. 1 of 2016
In
R/LETTERS PATENT APPEAL NO. 845 of 2016
In
SPECIAL CIVIL APPLICATION NO. 13778 of 2009
With
22. R/SPECIAL CIVIL APPLICATION NO. 14011 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE DR. JUSTICE VINEET KOTHARI
and
HONOURABLE MS. JUSTICE GITA GOPI
==============================================================
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SMITABEN MAHIN MODI Vs. STATE OF GUJARAT
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
==============================================================
SMITABEN MAHIN MODI
Versus
STATE OF GUJARAT & 1 other(s)
==============================================================
Appearance in LPA No.1011 of 2015:
MR MAUNISH T PATHAK(5892) for the Appellant(s) No. 1
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1
MR DHARMESH V.SHAH for the Respondent(s) No. 2
Appearance in LPA No.984 of 2015 To 988 of 2015:
MR MAUNISH T PATHAK(5892) for the Appellant(s) No. 1, 2
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1, 2-4, 5
MR H M PARIKH SENIOR COUNSEL for the Respondent(s) No. 3
MR RASESH H. PARIKH for the Respondent(s) No.3
Appearance in LPA No.989 of 2015:
MR RIDDHESH TRIVEDI for the Appellant(s) No. 1
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1, 2-4, 5
MR H M PARIKH SENIOR COUNSEL for the Respondent(s) No. 3
MR HEMANG H. PARIKH for the Respondent(s) No.3
Appearance in LPA No.990 To 993 of 2015:
MR RIDDHESH TRIVEDI for the Appellant(s) No. 1
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1, 2-4, 5
MR H M PARIKH SENIOR COUNSEL for the Respondent(s) No. 3
MR MR HEMANG H. PARIKH for the Respondent(s) No.3
Appearance in LPA No.994 of 2015:
MR MAUNISH T PATHAK(5892) for the Appellant(s) No. 1, 2
MR RIDDHESH TRIVEDI for the Appellant No.3
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1, 2-4, 5
MR H M PARIKH SENIOR COUNSEL for the Respondent(s) No. 3
Appearance in LPA No.1012 To 1015 of 2017:
Page 3 of 34
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SMITABEN MAHIN MODI Vs. STATE OF GUJARAT
MR MAUNISH T PATHAK(5892) for the Appellant(s) No. 1
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1
MR DHARMESH V.SHAH for the Respondent(s) No. 2
Appearance in SCA No.16610 of 2014:
MR CHIRAG B.PATEL(5892) for the Appellant(s) No. 1, 2
MR UTKARSH SHARMA AGP for the Respondent(s) No. 1, 2
MR VIRAL K.SHAH for the Respondent(s) No. 3
Appearance in LPA No.845 of 2016 & C.A. NO.1/2016:
MR M B GOHIL for the Appellant(s) No. 1
MR DHARMESH V.SHAH for the Respondent(s) No.1
MR JAYDEEPSINGH H RAJPUT for the Respondent(s) No.1
Appearance in SCA No.14011 of 2019:
MR CHIRAG B.PATEL(5892) for the Appellant(s) No. 1
RULE SERVED BY DS: 1-2, 3.
==============================================================
CORAM: HONOURABLE DR. JUSTICE VINEET KOTHARI
and
HONOURABLE MS. JUSTICE GITA GOPI
Date : 10/02/2021
COMMON ORAL JUDGMENT
(PER : HONOURABLE DR. JUSTICE VINEET KOTHARI)
1. The present batch of Letters Patent Appeals arise out of the
order of the learned Single Judge dated 05.05.2015 dismissing the
Special Civil Applications filed by the Borrowers / Guarantors of the
respondent Natpur Cooperative Bank Ltd., in liquidation. The
observation of learned Single Judge while dismissing the Writ
Petitions, are quoted below for ready reference:
"[14] Section 110 of the Act provides for
powers to be exercised by the liquidator which
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include powers to institute and defend the suits and
other legal proceedings, civil or criminal, on behalf of
the society, in the name of his office; to compromise
all calls or liabilities to calls and debts and liabilities
capable of resulting in debts, and all claims present
or future, certain or contingent, subsisting or
supposed to subsist between the society and a
contributory or alleged contributory or other debtor
or person apprehending liability to the society;all
questions in any way relating to or affecting the
assets or the winding up of the society, on such terms
as may be agreed and take any security for the
discharge of any such call, liability, debt,or claim and
give a complete discharge in respect thereof and to
determine, from time to time, after giving an
opportunity to answer the claim, the contribution to
be made or remaining to be made by the members or
past members or by the estate, nominees, heirs or
legal representatives of deceased members, or by
any officer, past officer or the estate or nominees,
heirs or legal representative of deceased officer to the
assets of the society, such contribution being inclusive
of debts due from members or officers; to make
application under section 103 of the Act and to take
such action as may be necessary under section 19
with the prior approval of the Registrar, if there is
reason to believe that the society can be
reconstructed.
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[15] The above powers would strongly go to
suggest that the legislature never intended that
authority of the liquidator would just end on closure
of the winding up proceedings as per section 114 of
the Act.
[16] Section 103 of the Act provides for
mode of recovery of money on the order passed by the
liquidator or the Registrar on the certificate signed by
the Registrar or a liquidator which is to be deemed a
decree of Civil Court and money can be recovered on
the basis of certificate by application to be made
either by the society or liquidator in-charge of the
society with the help of the Collector. Such
application is to be made within 12 years from the
date fixed in the order and if no date is fixed then
from the date of order. Now when liquidator is also
permitted to make such application within 12 years
from the date of order passed, in no way it can be said
that the legislature ever intended to curtail tenure of
authority of the liquidator by section 114 of the Act
when it provided for closing winding up proceedings.
Similarly availability of powers with the liquidator to
take action under section 19 for reconstruction of the
society would also go to show that legislature would
never have intended to curtail the powers of the
liquidator to act as liquidator on expiry of maximum
seven years period from the date of winding up order.
Therefore, it does not appear that section 114 of the
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Act would curtail the authority and power of
liquidator to continue to act even after completion of
period of seven years from the date of winding up
order. To hold so would run counter to the provisions
of section 108 and section 110 of the Act.
[17] Section 114 of the Act provides for
closing of the liquidation proceedings within period
of three years and it will be thereafter within extended
period of four years in aggregate.
[18] The idea behind such provision is to see
that the winding up proceedings get concluded
without unnecessary delay which would be in the
interest of the society. But such would never mean
that society which is otherwise entitle to get its dues
recovered after the deemed closure of winding up
proceedings cannot continue with the legal action to
recover such dues through the liquidator. In above
view of the matter, the contention that on expiry of
seven years period from the date of winding up since
liquidation proceedings shall be deemed to have been
closed the liquidator would lack jurisdiction to take
action including action of serving notice to the
debtors and guarantors for recovery of dues, cannot
be accepted.
[19] Now as regards the contention that
proceedings of lavad suits stood abated and
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terminated on account of deeming provisions of
section 114 of the Act, it needs to be mentioned that
as per section 37 of the Act, a society on its
registration becomes corporate body capable of filing
and defending suits or any other legal proceedings.
Thus, it is independent legal entity recognized under
the Act which can file suit and legal proceedings and
can continue such proceedings either through its
managing body or if it is in liquidation through
liquidator till such legal proceedings get terminated
by order of the Court.
[20] Chapter 9 of the Act provides for
procedure for deciding disputes referred under
section 96. Section 97(1)(c) provides for limitation of
six years for referring dispute from the date of order
of winding up passed under section 107.
[21] Section 98 and section 99 provides for
settlement of such dispute and procedure for
settlement of disputes with the help of some of the
provisions of the Code of Civil Procedure. According
to said provision for settling the dispute read with
procedure for hearing and decision as provided under
Rule 41 of the Gujarat Cooperative Societies Rules,
1965 (for short 'the Rules') the Board of Nominees is
to decide the dispute by recording evidence of parties
and their witnesses in accordance with justice, equity
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and good conscience. Therefore, when limitation of
six years is provided from the date of order of
winding up for referring dispute, expiry of seven
years from the date of winding up order would neither
take away jurisdiction of the Board of Nominees to
decide the dispute in the Lavad Suit nor would
terminate the proceedings of Lavad Suit. It cannot be
conceived that the legislature having given six years
time from the date of winding up order to file suit
would intend that the proceedings of the lavad suit
would get automatically abated on expiry of further
period of only one year. In fact providing for six years
time period from the date of winding up order would
go to suggest that legislature would never have
intended that either authority of the liquidator would
end or the suit proceedings would abate or
terminated on expiry of period of seven years
provided for closing winding up proceedings in
section 114 of the Act. If the contention of the
petitioners is accepted, it would not only permit the
unscrupulous borrowers to take undue advantage by
prolonging the litigation but would mar the good
object and purpose behind the benevolent legislation.
Such contention therefore, cannot be accepted.
[22] In the case of H.M. Joshi (supra), the
facts were that for three different societies, the
respondent no.4 to 6 therein, which were directed to
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be wound up under section 107(3) of the Act, the
petitioner - Bank therein was appointed as liquidator.
However, on expiry of seven years period, the
liquidator passed an order erminating the liquidation
proceedings under section 114 of the Act on the
ground that liquidation proceedings were deemed to
have been terminated. It was this order which was
challenged before the State Government under
section 155 of the Act. However, pending the revision
application under section 155 of the Act, the Bank as
liquidator requested the Government to invoke
powers under section 161 of the Act to exempt
societies from the provisions of section 114 of the Act.
Examining the action of State Government of
exempting the societies from provision of section 114
of the Act, the Court held that not only Registrar was
justified in treating liquidation proceedings as closed
under deeming fiction of provisions of section 114 of
the Act, but the State Government has also no power
to invoke section 161 of the Act retrospectively. On
the aspect of application of provisions of section
161 retrospectively and deemed termination of
liquidation proceedings, the Court held and observed
in paragraph nos.4 and 8 in the case of H.M.Joshi
(supra) as under :-
"4. It is a well settled rule of
construction that the statute operates pros-
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pectively unless the Legislature by express
words or necessary implication mani-fests an
intention that it should operate retrospectively.
There are no express words in sec.161 to
suggest that it was intended to operate
retrospectively. The power conferred by
sec.161 is not confined to the exemption to be
granted insofar as the operation of sec.114(1)
is concerned but it is an all pervading power to
exempt any society or class of societies from
the operation of any of the provisions of the
Act. In the absence of express words
manifesting an intention that the said power
can be exercised retrospectively. Courts would
be slow to widen the scope of such a provision
by holding that such power can be exercised
retrospectively, also. Even in the absence of
express words suggesting retrospective
operation, the Court may attribute such an
intention to the Legislature if such an intention
can be culled out by necessary implication.
Sec.161 which stands by itself is no doubt
intended to exempt any society or class of
societies from the provisions of the Act but can
it be argued that even after a given provision
has exhausted itself vis-a-vis is the said society
or class or societies the power can be exercised
to exempt it from a back date so as "to nullify
the statutory effect" To be precise, by virtue of
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the application of sub-sec. (1) of sec. 114 of the
Act, certain consequences ensued on expiry of
the aggregate period of seven years, namely,
termination of the liquidation proceedings. Can
this statutory effect or consequence which
ensued on the expiry of the prescribed period
be rendered nugatory by the State Government
by invoking sec.161 of the Act" On the
termination of liquidation proceedings the
Registrar is duty bound to take further action
in the matter and if the power under sec.161
can be exercised retrospectively not only the
termination order but all subsequent actions
taken pursuant thereto would be rendered
nugatory. Such an intention does not appear on
the plain language of sec.161 of the Act. As
stated earlier, sec.161 which is of general
application empowers the State Government to
exempt any society or class of societies from
any of the provisions of the Act. Such a wide
power conferred on the State Government must
be circumscribed and unless there are express
words or other circumstances giving rise to the
necessary implication that the Legislature
intended that the provision may have
retrospective effect, it would not be prudent to
clothe the State Government with power which
would render certain statutory effects or
consequences nugatory. If the provision is
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interpreted as suggested by learned counsel for
the petitioner, the power can be exercised at
any time after the termination of the winding
up proceedings even after the winding up is
complete. Such a far reaching power cannot be
read in sec.161 of the Act. The power has to be
exercised before the statutory consequence set
out in the proviso to sec. 114(1) takes effect.
Once the statutory consequence, namely,
fiction of the liquidation proceedings having
terminated, takes place and the order
terminating the liquidation proceedings is
passed, the provision is exhausted and there
can be no point in exempting any society or
class of societies from that provision thereafter.
To permit its retrospective exemption would
tantamount to permitting undoing of what the
Legislature intended to do by the deeming
fiction. I am, therefore, of the opinion that the
contention that the State Government
committed an error in refusing to exercise
power under sec. 161 of the Act on the plea
that it cannot be exercised retrospectively is
without merit.
xxxxxx
8. Now it must be remembered that when
liquidation proceedings terminate under the
proviso to sec. 114(1) of the Act by efflux of
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time it is by virtue of the fiction of law, since no
final report was received from the liquidator
within the time limit fixed by the legislation. It
was necessary to create a fiction because the
legislature was aware that all formalities for
the submission of the final report by the
liquidator for termination of the winding up
proceedings had not been completed. Since
termination of the liquidation proceedings in
the normal manner as contemplated by the Act
could not be achieved within the stipulated time
which the legislature considered reasonable, it
had to step in, and provide for fictional
termination as if all ormalities were completed.
It is on the strength of the fiction created by the
proviso to sec.114(1) of the Act that the
liquidation proceedings have to be treated as
terminated and an order passed to that effect
as if the final report of the Liquidator is
received by the Registrar. If this is kept in mind
it becomes obvious that the District Registrar
would be required to direct the convening of
the general meeting of the members of the
society for the ultimate cancellation of the
registration of the society. Once the liquidation
proceedings come to an end by virtue of the
fiction there can be no question of the winding
up proceedings being commenced de novo
under sec.107 of the Act. Such an
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interpretation would render the fictional
termination meaningless."
[23] In the case of HM Joshi (supra), it is nowhere
laid down that on account of deemed closure of
liquidation proceedings,the liquidator would loose his
authority or power to discharge other functions, or
that on account of deemed closure of liquidation
proceedings, the society would cease to exist and
consequently, the legal proceedings initiated by the
society shall get abated or terminated. Therefore, the
judgment in the case of H.M.Joshi (supra) will be of
no help to the petitioners on the aspect of authority of
the liquidator to function as liquidator or on the
aspect of termination of legal proceedings initiated by
the society on expiry of maximum seven years period
from the date of winding up order.
[24] As regards the contention that the State
Government cannot apply exemption under section
161 retrospectively and that notification issued under
section 161 is invalid as having been issued in
contravention of Article 166(3) of the Constitution of
India, it is required to note that since this Court finds
that liquidator does not loss his authority to function
on account of deeming fiction of section 114 and that
proceedings of lavad suits shall not stand abated or
terminated on such deeming fiction, issue about
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retrospective application and issue about invalidity of
notification issued under section 161 of the Act are
not relevant to be gone into. In any case, the
petitioners being borrowers and guaranteers are not
entitled to challenge the action taken by the State
Government under section 161 of the Act, as the issue
of exemption of the society from any provision of the
Act is entirely between the State Government and the
society.
[25] As regards the contention that on
deemed closure of the liquidation proceedings, the
registration of the society shall stand cancelled, it is
required to note that section 20 envisages passing of
separate order for cancellation of registration of the
society by the Registrar. Therefore, till the Registrar
passes such order, registration of the society would
continue. There is no deeming fiction in section 20 of
the Act. When the registration of the society is not
deemed to be cancelled on account of deemed closure
of liquidation proceedings, proceedings of lavad suits
would not stand automatic abated or terminated
simply on deemed closure of liquidation proceeding.
Therefore, the contention that on deemed closure of
liquidation proceedings as per section 114,
registration of the society shall stand automatically
cancelled cannot be accepted.
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[26] Learned senior advocate however relied on
judgment in the case of Corporation Bank (supra) to
point out that the law is well settled as observed in
paragraph no.17 of the judgment that the effect of a
legal fiction is well known, it must be given full effect,
be taken to its logical conclusion. However, as
observed above, even if the effect of legal fiction of
deemed closure of liquidation proceedings is given,
same will not carry case of the petitioners any
further, as the authority of the liquidator and
proceedings of the lavad suits are not affected by
deeming fiction of section 114. However, in this very
judgment, observations made in paragraph no.25
need to be referred which read as under :-
25. Furthermore the Notification having been
given a retrospective effect must be construed
on the touchstone of the purpose and object it
sought to achieve. Principle of purposive
construction should be applied in a case of
this nature to find out the object of the Act.
When a statute cannot be considered in such a
manner which would defeat its object, the
legislature is presumed to be aware of the
consequences flowing therefrom. The statute
should be considered in such a manner so as to
hold that it serves to seek a reasonable result.
The statute would not be considered in such a
manner so as to encourage defaulters and
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discourage those who abide by the law."
[27] Similarly in the case of State of
Bombay (supra), the Hon'ble Supreme Court has
held and observed that when a statue enacts that
something will be deemed to have been done, which in
fact truth was not done, the Court is entitled and
bound to ascertain for what purposes and between
what persons the statutory fiction is to be resorted to
and full effect must be given to the statutory fiction
and it should be carried to its logical conclusion.
Such observations would suggest that the statutory
fiction is not to be blindly followed ignoring other
provisions in the same statute and the interest and
purpose behind the statute.
[28] Another judgment in the case of
Commissioner of Income Tax,Delhi (supra) is on the
same ratio, which is not required to be discussed.
[29] However, reference needs to be made at
this stage to decision of this Court cited by Mr. Parikh
in the case of Deceased Manguben Ratilal Thakkar
v/s. State of Gujarat- Department of Agriculture and
Cooperation rendered in Special Civil Application
No.16275 of 2013, where in paragraph no.24 it is
observed that some provisions like section 60 of the
Madras Cooperative Societies Act, 1932 are made for
the State Government to exercise powers where
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numerous provisions are not capable of meeting the
extensive demands of the complex situations which
may arise in the course of the working of the Act.
Paragraph no.24 reads as under :-
"24. In this context, the Supreme Court
pointed out that there was a clear policy of
the Act and there are also clear guidelines.
There are numerous provisions of the Act
dealing with the registration of societies,
rights and liabilities of members, duties of
registered societies, privileges of registered
societies, property and funds of registered
societies, inquiry and inspection,
supersession of committees of societies,
dissolution of societies, surcharge and
attachment, arbitration etc. According to the
Supreme Court, the provisions are generally
designed to further the objective set out in the
preamble. But, numerous as the provisions
are, they are not capable of meeting the
extensive demands of the complex situations
which may arise in the course of the working
of the Act and the formation and the
functioning of the societies. The Supreme
Court further pointed out that too rigorous
application of some of the provisions of the
Act may itself occasionally result in
frustrating the very objects of the Act instead
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of advancing them and it is to provide for
such situations that the Government is
invested by section 60 with a power to relax
the occasional rigour of the provisions of
the Act and to advance the objects of the Act.
Consequently, section 60, according to the
Supreme Court, empowered the State
Government to exempt a registered society
from any of the provisions of the Act or to
direct that such provision shall apply to such
society with specified modifications."
[30] In the case of Naynaben Jashvantsinh
Vihol (supra), learned Single Judge of this Court has
held that by virtue of powers under section 161,
liquidation proceedings cannot be extended beyond
seven years after the date of winding up of the society
and power for extension conferred under section 161
are prospective in nature which cannot be exercised
retrospectively and it would affect real thrust of
section 114. However, in the facts of the case, as
discussed above, this judgment will be of no help to
the petitioners.
[31] For the reasons stated above, all the petitions
are dismissed. Rule discharged in all the petitions.
[32] Learned advocate for the petitioner however,
requested to continue interim relief for a period of six
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weeks. Learned advocate Mr. Parikh appearing for
the Bank strongly objected to grant of such request.
The Court finds that since the interim relief has
remained in operation till today and since there is
ensuing summer vacation, interest of justice will be
served, if interim relief in operation is allowed to
continue for a period of 6(six) weeks. It is ordered
accordingly."
2. The learned counsels at Bar have brought to our notice the
recent Supreme Court judgment in the case of Goa State
Cooperative Bank Ltd. Vs. Krishna Nath A., reported in (2019)
20 Supreme Court Cases 38, wherein while dealing with the pari
materia provisions of the Maharashtra Cooperative Societies
Act, 1960, the Hon'ble Supreme Court held that the recovery rights
of the Lender Bank are not defeated under the provisions of the said
Cooperative Societies Act by virtue of the liquidation / winding-up
provisions prescribed in Sections 109 and 110 of the said Act.
3. The Hon'ble Supreme Court, with detailed reasons and
discussions has held that the said recovery rights can be pursued by
the Registrar of Societies or even by the Lender Bank. The appellant
before the Hon'ble Supreme Court was the Bank itself who was the
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Liquidator appointed in the said case under the provisions of the
Maharashtra Cooperative Societies Act, 1960, who had financed the
Cooperative Society viz. Goa, Daman and Diu Cooperative
Fisheries Federation Ltd., which had gone in liquidation under the
provisions of the Maharashtra Cooperative Societies Act, 1960.
4. The relevant portion of the said judgment of the Hon'ble
Supreme Court delivered on 20.08.2019, which in our humble
opinion, squarely covers all the questions raised before us in the
present Letters Patent Appeals and which, doubtless, binds us, are
quoted below for ready reference.
"16. The Society and the liquidator had filed
recovery cases against all the defaulting members
of the society to whom loans were advanced. The
bank in total advanced Rs.250 lakhs to the society
and on taking charge by the Bank as liquidator of
the said society, the bank had outstanding of Rs.241
lakhs as principal amount and Rs.233 lakhs towards
interest. The arrears due to the efforts of the
liquidator bank were reduced to Rs.37 lakhs towards
principal and Rs.154 lakhs towards interest. It is
pertinent to mention that the bank has further
pointed out that out of the cases filed against the
defaulting members, in 42 cases appeals had been
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filed before the Cooperative Tribunal wherein stay
orders were granted. It is also pointed out that 80
cases were pending with the Zonal Recovery Offices,
i.e., Assistant Registrar, Cooperative Society's Sales
and Recovery Officer under section 156 of the Act.
Therefore, the termination of the winding up under
section 109 of the Act, cannot be strictly applied so
as to defeat the very purpose of the legislative intent
of recovery of amount.
17. It is also submitted that by lapse of time under
section 109(1) of the Act, recovery proceedings
cannot come to an end. It is further pointed out that
the recovery of public money from defaulting
members is absolutely necessary failing which huge
financial loss would be caused to the appellant-bank.
The interim stay granted by the tribunal cannot come
to the prejudice of the bank. Thus, the provisions of
Section 109 have to be construed in such a fashion
so as to enable continuance of the proceedings for
recovery. As the interim order of the court cannot
work to the prejudice of any of the parties, the
provision of section 109 of the Act should be
construed in a manner that it is not used to interdict
recovery from the defaulting members.
18. It is apparent from the facts of the instant
case that the winding up of the Society has been
ordered and liquidator has been appointed as the
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Society has utterly failed to achieve its avowed
objectives in disbursement of loans to proper
persons and in its recovery. No doubt about it that
the liquidation of the Society has come to an end
after a particular period of time as fixed under
section 109. However, on lapse of time as fixed
under subsection (1) of section 109 of the Act,
proceedings have to be terminated by the Registrar
on receipt of final report from the liquidator as
ordered under section 109(2). However, at the same
time, the Registrar has power to extend the period of
6 years fixed under section 109(1), not exceeding
one year at a time and four years in the aggregate,
and maximum for 10 years. In case time is not
extended, the winding up comes to an end on the
expiry of 6 years or at the end of the extended
period. The total period can be 10 years. The second
proviso to section 109 makes it clear that if the
Registrar comes to a conclusion that the work of
liquidation could not be completed by the liquidator
due to the reasons beyond his control, he shall call
upon the liquidator to submit his report. After
getting the report, if the Registrar is satisfied that
the realisation of assets, properties, sale of
properties still remains to be realised, he shall
direct the liquidator to complete the entire work and
carry out the activities only for the purposes of
winding up and submit his report within such period
not exceeding one year reckoned from the date of
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receipt of the report from the liquidator.
19. Section 109(2) of the Act contains a non-
obstante clause which empowers the Registrar to
terminate the liquidation proceedings on receipt of
the final report from the liquidator. The liquidator
shall state in the report that the liquidation
proceedings of the society have been closed, and
how the winding up has been conducted and the
property and the claims of the society have been
disposed of and shall include a statement showing a
summary of the account of the winding up including
the cost of liquidation, the amount, if any, standing
to the credit of the Society in liquidation, after
paying off its 'liabilities' including the share or
interest of members and suggest how the surplus
should be utilised.
20. Section 110 of the Act deals with disposal of
surplus assets. They should either be divided by the
Registrar, with the previous sanction of the State
Government, amongst its members, if they specify
that such a surplus shall be utilised for the
particular purpose or may be utilised for both the
purposes.
21. It is apparent that on the termination of the
liquidation proceedings, liability of the members for
the debts taken by them does not come to an end.
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There is no such provision in the Act providing
once winding up period is over, the liability of the
members for loans obtained by them which is in
their hands, and for which recovery proceedings
are pending shall come to an end. No automatic
termination of recovery proceedings against the
members is contemplated. On the other hand, on
completion of the period fixed to liquidate the
society, final report has to be submitted as to the
amount standing to the credit of the society in
liquidation after paying off its liabilities including
the share or interest of members. Thus, even in the
case of liquidation the accountability remains
towards surplus and liabilities do not come to an
end. Even if the period fixed for liquidation of
society is over, that does not terminate the
proceedings for recovery which have been initiated
and appeals are pending.
22. It is a settled law that when there is stay of
proceedings by court, no person can be made to
suffer for no fault on his part and a person who has
liability but for the interim stay, cannot be permitted
to reap the advantages on the basis of interim
orders of the court. In Amarjeet Singh v. Devi
Ratan, (2010) 1 SCC 417, it was held that no person
can suffer from the act of court and unfair
advantage gained by a party of interim order must
be neutralised. The Court should never permit a
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litigant to perpetuate illegality by abusing the legal
process. It is the bounden duty of the court to ensure
that dishonesty and any attempt to abuse the legal
process must be effectively curbed and the court
must ensure that there is no wrongful, unauthorised
or unjust gain for anyone by the abuse of process of
the court. No one should be allowed to use the
judicial process for earning undeserved gains or
unjust profits. The object and true meaning of the
concept of restitution cannot be achieved unless the
courts adopt a pragmatic approach in dealing with
the cases. The Court observed:
"18. In Ram Krishna Verma v. State of U.P.
(1992) 2 SCC 620, this Court examined the
similar issue while placing reliance upon its
earlier judgment in Grindlays Bank Ltd. v.
ITO, (1980) 2 SCC 191 and held that no
person can suffer from the act of the court
and in case an interim order has been passed
and the petitioner takes advantage thereof and
ultimately the petition is found to be without
any merit and is dismissed, the interest of
justice requires that any undeserved or unfair
advantage gained by a party invoking the
jurisdiction of the court must be neutralised."
(emphasis supplied)
23. The principle of restitution enjoins a duty
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upon the courts to do complete justice to the party
at the time of final decision, and to do away with the
effect of interim order in the fact situation of the
case. In South Eastern Coalfields Ltd. v. State of
M.P., (2003) 8 SCC 648, it was observed that no
party can take advantage of litigation, it has to
disgorge the advantage gained due to delay, in case
lis is lost.
24. The concept of restitution is a common law
principle and it is a remedy against unjust
enrichment or unjust benefit. The court cannot be
used as a tool by a litigant to perpetuate illegality. A
person who is on the right side of the law, should not
have a feeling that in case he is dragged in
litigation, and wins, he would turn out to be a loser
and wrongdoer as a real gainer, after 20 or 30
years. Thus, the members who have obtained stay in
appeal or on recovery proceedings or the case is
pending, cannot take advantage of the fact that the
period fixed for Liquidator under the Act is over.
25. Once a report has been submitted, the
Registrar has to take action in terms of the report
and in such circumstances when the proceedings for
recovery are pending against the members and the
Society has taken loan from the banks for its
member, the actual money has to go to the creditor
i.e., to the bank who is going to be benefitted by
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recovery of public money in the hands of members.
In such cases it would be appropriate for the
Registrar to send notice of the proceedings to a
person who is to be benefitted from the recovery. In
the instant case, the bank itself is a prime lender cum
liquidator. The proceedings cannot come to the end.
Thus, in our considered opinion, it is open to the
bank to continue with the recovery proceedings and
make recoveries from the defaulting members.
Merely on the liquidation of Society, or the factum
that the period fixed for liquidation is over, liability
of the members for the loans cannot be said to have
been wiped off. The disbursement of loan in an
arbitrary manner and failure to recover was the very
fulcrum on the basis of which winding up of the
Society was ordered.
26. The decision of the High Court to the
contrary, deserves to be and is hereby set aside.
Though the Liquidator cannot continue once the
proceedings are over. Notice in such cases should be
issued by the Registrar to the creditors and to
persons for whose benefit recovery is to be made, to
continue the pending proceedings in the
instrumentality of court/tribunals/recovery officers
etc. We hold that appellant Bank can continue the
pending proceedings. The appeal is allowed to the
aforesaid extent."
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5. Therefore, we do not propose to say anything further on the
interpretation of the provisions of Gujarat Cooperative Societies Act,
1961 involved before us and in our opinion the controversy in hand
is squarely covered by the aforesaid Supreme Court decision in the
case of Goa State Cooperative Bank Ltd. Vs. Krishna Nath A.
(supra). As far as the facts of this case are concerned, we had passed
a detailed interim order in the present case on 04.01.2021 which is
also quoted below for ready reference.
"1. The matters have been argued at some length.
The learned counsel for the appellants has relied
upon the judgment of learned single Judge of this
Court in the case of Bhavnagar District Co-
operative Bank Ltd. Vs. H.M. Joshi reported in
1985 (2) G.L.R. 1087, which is said to have been
affirmed by the Division Bench of this Court, in the
case of Bhavnagar District Co-operative Bank Ltd.
Vs. State of Gujarat, reported in the same volume of
Gujarat Law Reporter, namely, 1985 (2) G.L.R.
1380. The learned counsel for the appellants has
contended that the liquidation proceedings under
Section 114 of the Gujarat Co-operative Societies
Act, 1961 shall be deemed to have been terminated
upon the expiry of the outer limit of seven years from
the date of the winding-up order.
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2. However, the above contention is opposed by
the learned counsel Mr. H.M. Parikh appearing for
the respondent-Registrar, Co-operative Societies, by
submitting that since no final report of the Official
Liquidator providing details of the sale proceeds has
been received in the present case, as envisaged
under Section 114(2) of the said Act, the proceedings
cannot be said to have been terminated upon expiry
of seven years from the date of the winding-up order
by virtue of the deeming fiction of law. He submitted
that the said judgment of the Division Bench of this
Court in the case of Bhavnagar District Co-operative
Bank Ltd. (supra) shall not apply to the present case
as no final report has been filed by the Official
Liquidator.
3. The present appeals have been filed by the
writ petitioners, who are borrowers/guarantors of
the respondent-society and similar other co-
operative banks. It was submitted by the learned
counsel for the appellants that even if some dues
were outstanding on the date of expiry of the
aforesaid period of seven years, which, by
amendment of law, has been extended to 10 years
from the date of the winding-up order, the deeming
fiction of law will operate and therefore, the learned
single Judge has erred in dismissing the writ
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petitions by way of the impugned judgment and order
dated 05.05.2015.
4. Prima facie, for a harmonious reading of the
entire provision of Section 114 read with Section 161
of the said Act, the matters would require further
consideration, specially in view of Section 161 of the
Act to consider whether the State Government has
the power to exempt the applicability of the whole or
a part of the provisions of this Act to any society or
not and whether it has been so done in these cases or
not ?
5. The learned counsel for the respondents, Mr.
H.M. Parikh and Mr. Utkarsh Sharma for the State
may place on record the orders passed by the
competent authority of the State under Section 161 of
the Act in the case of the present societies. Both the
sides may also prepare Brief Synopsis, List of Dates
and Events and the compilation of case laws to be
relied upon by them and the relevant statutory
provisions.
6. Besides the aforesaid, during the course of
arguments, it was also submitted by learned counsel
for the appellants that the appellants, who are the
borrowers/guarantors, are even now ready to settle
the loan accounts of the respondent-Banks, which
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have, so far, not been de-registered as society by the
Registrar, on similar lines as has been done in the
cases of some other such borrowers. To this
proposal, the learned counsel for the respondents
submitted that unless a concrete proposal is made by
such borrowers/guarantors, the respondent-societies
cannot consider any such offers or proposals.
However, both the learned counsel prayed that they
may be allowed some time to make efforts in this
direction also.
7. We grant a period of four weeks time. The
appellants may give concrete proposals to the
respondent-banks for settlement of their dues within
a period of One Week from today, which may be
considered by the respondent Cooperative Banks
within a period of Two Weeks from the receipt of
such proposal. Both the sides may try to negotiate
the settlement. This may be done without prejudice
to their rights to raise legal contentions before this
Court in the present Writ Appeals.
8. List the matters on 10.02.2021, as prayed. "
6. We are informed at Bar today by the learned counsel for the
appellant Mr. Maunish T.Pathak and Mr. Chirag B.Patel that a
proposal for Settlement was given to the Respondent Bank,
represented by learned Senior Counsel Mr. H.M. Parikh, but the
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same has been turned down by the Respondent Bank, as the learned
Senior Counsel Mr. Parikh submitted that the Scheme of Settlement
required a minimum payment of interest at the rate of 6% per
annum, as the principal amount of debt which was not offered to be
paid for Settlement by the said Borrowers / Guarantors and
therefore, the said proposal could not be accepted.
7. Therefore, without going into the facts any further, we are of
the opinion that the present Letters Patent Appeals deserve to be
disposed of in the same terms, as held by the Hon'ble Supreme Court
in the case of Goa State Cooperative Bank Ltd. Vs. Krishna Nath A.
(supra).
8. Accordingly, the present Letters Patent Appeals are disposed
of. No order as to costs. Consequently, connected Civil Application
also stand disposed of. Interim order, if any, granted in these
Appeals shall stand vacated.
(DR. VINEET KOTHARI, J.)
(GITA GOPI, J.)
Pankaj
