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2002 DIGILAW 105 (JK)

Punjab National Bank v. Special Tribunal, J&K

2002-04-12

B.L.BHAT, V.K.JHANJI

body2002
Both these L.P.As are directed against the order passed by learned single Judge on 11-9-2001 by virtue of which the case has been remanded to Registrar Co-operative Societies, J. & K. Jammu, for deciding the appeal. 2. In brief the facts of the case are that Punjab National Bank (hereinafter referred to as the Bank) advanced loan to the Farmers Service Co-operative Society Ltd. (hereinafter called as Society). After taking the loan, the Society did not adhere to the terms and conditions which had been agreed to by Society with the Bank and payment was not made as per Schedule. The Bank called upon Society to make payment and liquidate the outstanding. However, no amount was paid. In the meanwhile Registrar Cooperative Societies issued an order of winding up of Society and a liquidator was appointed. The Bank submitted claims before the Liquidator in terms of provisions of Section 67 sub-clause (2) of the J. & K. Co-operative Societies Act, 1960, (hereinafter called the Act) to settle the claim within reasonable time. The claims were not settled by the Liquidator and that led to initiation of arbitration proceedings by the Bank by filing six arbitration proceedings before the Registrar, Co-operative Societies, J. & K. who transferred the same to Joint Registrar, Cooperative Societies, Jammu, for adjudication. The Bank and Society appeared before the Joint Registrar and Society contested the petitions. On the basis of evidence and record made available by the parties, Joint Registrar, while exercising his power under Section 64 of the Act as an Arbitrator, passed award in favour of the Bank for an amount of Rs. 17,97,055.65 with Interest at the rate of 11% per annum. Award dated 4-6-1994 further provided that the awarded amount shall be liquidated by the Society within a period of live years in equal half yearly Instalments. The first instalment was to become due in the month of December (sic) case of default of two consecutive instalments the Bank was to recover the amount in lump sum under the provisions of the Act. Against this award, Society preferred an appeal. Vide order dated 9-3-1998 appeal was accepted by the Registrar, Co-operative Societies Act. The first instalment was to become due in the month of December (sic) case of default of two consecutive instalments the Bank was to recover the amount in lump sum under the provisions of the Act. Against this award, Society preferred an appeal. Vide order dated 9-3-1998 appeal was accepted by the Registrar, Co-operative Societies Act. The operative portion of the order reads as under : After hearing the arguments put forth by the learned counsel for the parties and examining the relevant record produced before me, I find It just and fair to accept the appeal, with the direction that the involved amount at stake would be recovered by the respondent-Bank because it was the financing agency and its officers remained on deputation to manage the affairs of the appellant society from time to time. Further, it is ordered that wherever the respondent-bank requires the assistance of the functionaries of the society, it shall be at liberty to launch massive recovery drive against the defaulters of the appellant society in close co-ordination with the staff and the Management of the society.� 3. Revision against the aforesaid order was filed by the Bank before J. & K. Special Tribunal. The Tribunal vide order dated 18-2-1999 dismissed the revision petition by holding that there is no illegality and impropriety committed by the Registrar Cooperative Societies in the order impugned in revision petition. However, the Tribunal directed that whenever the Bank will require the assistance of the Society, the Society shall assist the Bank in making the recoveries from the loanees/defaulters. Feeling aggrieved of the observation made by the Tribunal, the Bank preferred writ petition (OWP No. 980/99) in this Court. Vide order dated 11-9-2001, the learned single Judge disposed of the writ petition with following observations: - In these circumstances, the matter is remanded to the Co-operative Society, Jammu, who would re-decide the appeal. While doing so, the Co-operative Societies, Jammu, would furnish the names of the members of the Society who are defaulters. The amount payable by them would also be indicated. They would be arrayed as respondents and the said authority would exercise the powers under Section 63-A of the Co-operative Societies Act and pass award accordingly. It is made clear that the liability of the Society is not totally done away with. The amount payable by them would also be indicated. They would be arrayed as respondents and the said authority would exercise the powers under Section 63-A of the Co-operative Societies Act and pass award accordingly. It is made clear that the liability of the Society is not totally done away with. If the members of the Society are unable to pay debts to the financing bank, then a finding has to be recorded that the Society is unable to pay debts only thereafter, further steps have to be taken against Society. Therefore, Registrar Co-operative Societies would re-examine the issue under Section 63-A of the Act. The liability, which would be created would be joint and several. The parties to appear before the Registrar Co-operative Societies, Jammu, on 9-10-2001. Defaulter members would be added as parties. Disposed of accordingly.� 4. The contention of learned counsel appearing for appellant-Bank is that the remand order passed by learned single Judge is contrary to provisions of law. It is stated that Registrar, Co-operative Societies cannot re-hear the (sic) appointed the Arbitrator, who has given award in favour of the Bank. In appeal by the Society to the Registrar, Award was not specifically set aside but Bank was directed to seek assistance from the Society in making massive recovery drive against the defaulters. Learned counsel submitted that writ petition before the learned single Judge was for setting aside the order of the J. & K. Special Tribunal and for making the award final, to which learned single Judge has not adverted to. Learned counsel further submits that the learned single Judge has directed the Registrar Co-operative Societies to re-examine the issue under Section 63-A of the Act and the liability which would be created would be joint and several, but these directions, according to learned counsel, are contrary to provisions of law. Against this learned counsel appearing on behalf of the Society submitted that the Bank can recover the outstanding, amount only under the provisions of Section 63-A of the Act by initiating proceedings of recovery against the defaulters, who, had not (sic) him the direction given by the Registrar Co-operative Societies and upheld by learned single Judge do not call for any interference. 5. 5. LPA (OW) No. 189/2001 preferred by the Society is only limited to the extent of direction of the learned single Judge whereby liability of the Society has been held to be joint and several with its members. In this regard learned counsel for the Society has submitted that the amount cannot be directed to be recovered from the Society. The Bank at best can file fresh arbitration petitions against defaulting members of the Society under Section 63-A of the Act and can seek recovery of the outstanding amount from the defaulters. 6. After hearing learned counsel for the parties and carefully going through the record of the case, we are of the view that the order of Registrar Co-operative Societies, as also of J. & K. Special Tribunal and the learned single Judge are not sustainable in law. 7. It is not in dispute that the loan was advanced by the Bank on a request made by the Society, which in turn was based on a resolution passed by Board of Directors requiring the Bank to sanction the loan in favour of the Society. The loan was advanced on the terms and conditions agreed to between the Bank and the Society. The privity of contract was between the Society and the bank. It is the Society who had to further advance the loan to its members and it is for the Society to recover the same as and when it becomes due from its members. The re-payment of the loan was to the Bank by the Society, as per the schedule agreed to between themselves. On the failure of the society to make payment proceedings for arbitration were initiated and Joint Registrar Co-operative Societies, while acting as an Arbitrator, passed award in favour of the Bank. Registrar Co-operative Societies while allowing the appeal filed by the Society gave no finding as to how the Award passed by Joint Registrar Co-operative Societies, was bad in law. In fact, order of the Registrar Co-operative Societies does not indicate that any grounds to challenge the Award were urged by the Society. The order passed by the Registrar Co-operative Societies is very cryptic and non-speaking. In fact, order of the Registrar Co-operative Societies does not indicate that any grounds to challenge the Award were urged by the Society. The order passed by the Registrar Co-operative Societies is very cryptic and non-speaking. In revision preferred by the Bank, the J. & K. Special Tribunal has not dealt with the contention of the Bank in regard to contractual and statutory obligation of the Society to re-pay the loan to the Bank, which it had advanced to the Society. Learned single Judge though directed that proceedings may be initiated under Section 63-A of the Act but failed to take notice that proceedings had already been taken place and had resulted in passing of an Award. 8. Section 63 of the Act which pertains to settlement of disputes between the parties is reproduced as under: - 63. Disputes which may be referred to arbitration- (1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitution, management or the business of a cooperative society arises- (a) among members, past members and persons claiming through members, past members or deceased members, and sureties of members, past members or deceased members whether such sureties are members or non-members; or (b) between a member, past member or persons claiming through a member, past member or deceased member; or sureties of members, past members or deceased members and the sureties its committee or any officer, agent or employee of the society, or (c) between the society or its committee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society, or (d) between the society and any other cooperative society; such disputes shall be referred to the Registrar for decision and no Court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute. 9. The settlement of dispute between the Society and the Bank is not envisaged under Section 63 of the Act. However, Section 63-A of the Act provides a situation where a society is unable to pay its debts to a financing Bank by reason of its members committing default in the payment of the money due to them. 9. The settlement of dispute between the Society and the Bank is not envisaged under Section 63 of the Act. However, Section 63-A of the Act provides a situation where a society is unable to pay its debts to a financing Bank by reason of its members committing default in the payment of the money due to them. In that event the Bank may direct the committee of such society to proceed against such members under Section 63, and if the committee fails to do so within a period of 60 days from the date of receipt of such directions, the financing Bank itself may proceed against such members under Section 63, in which case the provisions of the Act, the Rules or the bye-laws shall apply as if all references to the society or its committees in the said provisions were references to the financing Bank. Sub-section (2) of Section 63-A of the Act provides that where a financing Bank has obtained a decree or award against a society in respect of moneys due to it from the society, the financing-bank may proceed to recover such moneys firstly from the assets of the society and secondly from the members to the extent of their debts due to the society. 10. In the present case society had already ordered to be wound up and liquidator had also been appointed. Bank submitted its claim to the liquidator, but that was not settled and then on a reference made by the Society, Joint Registrar Co-operative Societies was appointed as an Arbitrator, who after giving opportunity to the parties and hearing the Society passed Award. Award passed by the Arbitrator in this case is envisaged under sub-section (2) of Section 63-A of the Act. Besides this, the said Award has not been set aside on any valid grounds, Bank cannot thus be asked to proceed under Section 63-A of the Act. In this view of I the matter, order passed by the Registrar, as well as by J. & K. Special Tribunal and learned single Judge are set aside and the Award passed by the Joint Registrar Co-operative Societies, as an Arbitrator, in favour1 of the Bank is upheld. 11. In this view of I the matter, order passed by the Registrar, as well as by J. & K. Special Tribunal and learned single Judge are set aside and the Award passed by the Joint Registrar Co-operative Societies, as an Arbitrator, in favour1 of the Bank is upheld. 11. As regards the appeal filed by the Society it is only to be stated that under Subsection (2) of Section 63-A of the Act, the Bank can proceed to recover moneys under the award firstly from the assets if the Society and secondly from the members of the society to the extent of their debts due to the society. The liability being joint and several no fault can be found with the action of the society, whereby it may recover the amount from the assets of the society and remaining Part from its members. 12. At this stage learned counsel for the Bank fairly stated at the bar that money which the Bank has received or may receive from the Insurance Company, would be adjusted against the amount due from the Society. 13. With the aforesaid observations, LPA (OW) No. 206/2001 stands allowed, whereas LPA (OW) No. 189/2001 filed by the Society is dismissed. 14. Registry to place a copy of this order on the record of LPA (OW) No. 189/2001. 15. No costs.