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SUPREME COURT OF INDIA
ARUN MISHRA, S. ABDUL NAZEER, M.R. SHAH, JJ.
GOA STATE COOPERATIVE BANK LTD. – APPELLANT(S)
VERSUS
KRISHNA NATH A. (DEAD) THROUGH LRS. AND OTHERS – RESPONDENT(S)
CIVIL APPEAL NO. 10596 of 2010
Decided on : 20-08-2019
(A) Maharashtra Cooperative Societies Act, 1960 – Section 109 – Recovery of dues from members – Closure of proceedings on expiry of period fixed for liquidation – Society has advanced total loans of Rs.323.81 lakhs to 155 members – Society failed to perform its functions – There was non-recovery of loans from the members resulting in overdues, failure to collect margin money from loanees prior to release of loans – There were irregularities in sanction of loans resulting in Benami transactions – Loans were advanced to non-traditional fishermen – Termination of winding up under section 109 of the Act, cannot be strictly applied so as to defeat very purpose of legislative intent of recovery of amount – There is no such provision in the Act providing once winding up period is over, liability of 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 members is contemplated – Even in case of liquidation accountability remains towards surplus and liabilities do not come to an end – Even if period fixed for liquidation of society is over, that does not terminate proceedings for recovery which have been initiated and appeals are pending – It is open to bank to continue with recovery proceedings and make recoveries from defaulting members. (Paras 14, 15, 20 and 24 and 25)
(B) Doctrine – Concept of Restitution – 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 interim stay, cannot be permitted to reap advantages on the basis of interim orders of court – Court should never permit a litigant to perpetuate illegality by abusing legal process – It is bounden duty of court to ensure that dishonesty and any attempt to abuse legal process must be effectively curbed – No one should be allowed to use judicial process for earning undeserved gains or unjust profits – Object and true meaning of concept of restitution cannot be achieved unless courts adopt a pragmatic approach in dealing with cases – Principle of restitution enjoins duty upon courts to do complete justice to party at the time of final decision and to do away with effect of interim order in fact situation of the case – Concept of restitution is a common law principle and it is a remedy against unjust enrichment or unjust benefit – Court cannot be used as a tool by a litigant to perpetuate illegality. (Paras 21, 22 and 23)
Facts of the Case:
Question involved in present matter is whether under provisions of Section 109 of Maharashtra Cooperative Societies Act, 1960 on expiry of the period fixed for liquidation, proceedings for recovery of dues instituted/pending as against members, shall stand closed. main objective of Society was to promote fisheries and improve socioeconomic condition of fishermen by providing necessary financial assistance, in order to enable them to procure mechanized fishing boats/trawlers.
Findings of Court:
Concept of restitution is a common law principle and it is a remedy against unjust enrichment or unjust benefit. 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 case is pending, cannot take advantage of the fact that the period fixed for Liquidator under the Act is over.
Result : Appeal allowed. Order of High Court set aside.
JUDGMENT
Arun Mishra, J.
The question involved in the present matter is whether under the provisions of Section 109 of the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as 'the Act') on expiry of the period fixed for liquidation, the proceedings for recovery of dues instituted/pending as against the members, shall stand closed.
2. Goa, Daman and Diu Cooperative Fisheries Federation Limited (hereinafter referred to as 'the Society') was registered under the Act as it is applicable to Goa. The main objective of the Society was to promote fisheries and improve socio-economic condition of the fishermen by providing necessary financial assistance, in order to enable them to procure mechanized fishing boats /trawlers. During the period from 1974 to 1980, the Society advanced loans to its members to the extent of Rs. 316 lacs to purchase engines/hull, winches, nets, etc. by raising loan from the Goa State Cooperative Bank Limited.
3. While granting loan to its members, serious irregularities were committed by the Board of Directors of the Society. Due to which, Registrar of Cooperative Societies filed Misfeasance Case No.4/1/80.
4. On the basis of enquiry conducted under Section 83(1) of the Act and in view of the report dated 1.8.1980, the Registrar of Cooperative Societies, Goa passed an interim order on 23.8.1985 under Section 102(1)(a) of the Act for winding up of the Society. The Registrar of the Cooperative Societies confirmed the order, in exercise of power under Section 102(2), on 24.1.1986 and appointed Additional Collector of Goa as Liquidator, who continued till 9.12.1991. As liquidation proceedings were not completed, the Registrar on 10.12.1991 appointed Mr. B.N. Pathan, Assistant Registrar of the Cooperative Societies as Liquidator, who continued till 28.2.1992. Yet another Liquidator was appointed by the Registrar on 21.2.1992, who continued till 15.10.1995. The Registrar vide order dated 16.10.1995 appointed Goa State Cooperative Bank as Liquidator in order to ensure speedy recovery of loans from the members of the Society.
5. The Bank in the capacity of Liquidator filed 156 recovery cases against the defaulting members of the Society, to whom the loans were advanced. The amount of outstanding was reduced to Rs.56 lacs towards principal and Rs. 154 lacs towards interest. Out of 156 cases filed against the defaulting members, 99 appeals were preferred to the Cooperative Tribunal, which were pending adjudication. The recovery could not be completed in view of the pendency of the appeals, interim stay granted by courts etc.
6. In the year 2001, one of the defaulting members of the Society filed Writ Petition No. 358 of 2001 in the High Court of Bombay at Goa, prayer was made to declare that the winding up proceedings with respect to the Society be deemed to have been terminated with retrospective effect from 24.1.1993 and for an order restraining respondents continuing with the winding up/liquidation proceedings in respect of the Society.
7. The High Court allowed the writ petition vide judgment and order dated 29.11.2006, which has resulted in heavy financial losses to the Bank as the cases pending before the Adjudicating Authority will come to standstill. The High Court vide impugned judgment and order dated 29.11.2006 held that as per Section 109 of the Act, the winding up proceedings have to be closed as soon as practicable within six years from the date the Liquidator takes control of all the property, unless the period is extended by the Registrar under Section 109. Under Section 109(1) of the Act, the Registrar cannot extend the period more than 1 year at a time and 4 years in the aggregate and after the expiry of three years from the date on which the Liquidatortook control, it will be deemed that liquidation proceedings have been terminated and therefore, there is no choice left with the Registrar, but to obtain a final report from the Liquidator. The High Court has directed the Registrar to exam
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