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1982 Supreme(AP) 263
Andhra Pradesh High Court
Judges : RAMA RAO
B.Suryanarayana - Appellant
Versus
Kollur Parvathi Co-operative Bank Ltd. - Respondent
Decided On : 08-12-82
The provisions of the Andhra Pradesh Co-operative Societies Act, 1964, and the Deposit Insurance and Credit Guarantee Corporation Act, 1961, provide sufficient guidelines and safeguards for the winding-up procedure of eligible co-operative banks, and the issuance of notice to creditors or depositors is not required before passing the winding-up order.
Headnote:
CO-OPERATIVE SOCIETIES - WINDING UP - ELIGIBLE CO-OPERATIVE BANK - PROCEDURE - S. 64, 115-A, 115-B OF THE ANDHRA PRADESH CO-OPERATIVE SOCIETIES ACT, 1964 - S. 13-D OF THE DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT, 1961 - INTERPRETATION - GUIDELINES FOR WINDING UP - NOTICE TO CREDITORS OR DEPOSITORS - CONSTITUTIONALITY - ART. 14 OF THE CONSTITUTION OF INDIA.
Fact of the Case:
The petitioner, a member and depositor of Kollur Parvathi Co-operative Bank Ltd., challenged the winding-up order passed by the Deputy Registrar under S. 64 of the Andhra Pradesh Co-operative Societies Act, 1964, alleging that it was illegal and void. The petitioner contended that the provisions of S. 64 of the Act did not provide for guidelines or rules for the winding-up procedure, violating Art. 14 of the Constitution, and that the winding-up order was passed without following the principles of natural justice by not giving an opportunity to the creditors or depositors.
Finding of the Court:
The court held that the winding-up order was valid and in accordance with the provisions of the Andhra Pradesh Co-operative Societies Act, 1964, and the Deposit Insurance and Credit Guarantee Corporation Act, 1961. The court found that the provisions of S. 64 of the Act, along with Ss. 115-A and 115-B, provided sufficient guidelines and safeguards for the winding-up procedure. The court also held that the provisions of the Act did not require the issuance of notice to creditors or depositors before passing the winding-up order, and that the notice to the society itself was sufficient.
Issues: 1. Whether the winding-up order passed by the Deputy Registrar under S. 64 of the Andhra Pradesh Co-operative Societies Act, 1964, was illegal and void due to the absence of guidelines or rules for the winding-up procedure, violating Art. 14 of the Constitution of India? 2. Whether the winding-up order was passed without following the principles of natural justice by not giving an opportunity to the creditors or depositors?
Ratio Decidendi: 1. The court held that the provisions of S. 64 of the Andhra Pradesh Co-operative Societies Act, 1964, along with Ss. 115-A and 115-B, provided sufficient guidelines and safeguards for the winding-up procedure. The court found that S. 115-B incorporated the provisions of S. 13-D of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, which enumerated several circumstances for the initiation of winding-up proceedings, including the failure of any arrangement to rehabilitate the bank, the continuance of the bank being prejudicial to the interests of the depositors, and the bank's inability to pay its debts. 2. The court held that the provisions of the Act did not require the issuance of notice to creditors or depositors before passing the winding-up order, and that the notice to the society itself was sufficient. The court reasoned that the co-operative societies Act was a self-contained Act that provided a special procedure for the winding-up of societies, and that the analogy of winding up of companies under the Companies Act could not be applied.
Final Decision: The court dismissed the writ petition, holding that the winding-up order was valid and in accordance with the provisions of the Andhra Pradesh Co-operative Societies Act, 1964, and the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
( 1 ) THIS is a petition of issue of writ of mandamus declaring that liquidation proceedings against Kollur parvathi co-operative Bank Limited, is illegal and void by holding that provisions of S. 64 of the A. P. Co-operative that the High Court alone has jurisdiction or in the alternative direct the reserve Bank of India to take steps under sub-cl. (Iii) of S. 115-B of the A. P. Co-operative societies Act, 1964 and by declaring that the Deputy Registrar, Tenali and the registrar of co-operative societies, Hyderabad have no jurisdiction to order liquidation of the Kollur parvathi co-operative Bank ltd.
( 2 ) THE averments in the affidavit filed in support of the writ petition are as follows: The petitioners are members and depositors of Kollur parvathi co-op. Bank Ltd. Kolluru, 1st respondent here in. The petitioners 1 to 8 hold the deposits of Rs. 69,000/- Rs. 49,000/- Rupees 90,000/- Rs. 75,000/-, rs. 37,155/-, Rupees 28,000/-, Rs. 35,000/- and Rs. 20,000/- respectively. The 1st respondent bank is an Urban co-operative Bank established in the year 1915 at Kollur, tenali taluk as on 31-7-1976 there were 1001 members in the society with paid up share capital of Rs. 4,22,537/- The bank accepts current savings fixed recurring daily deposits and Kalpataruvu deposits both from members and non-members. The deposits in the society were to the tune of Rs. 31,70,158/- as on 31-7-1976. The loans outstanding as on 31-7-1976 are Rs. 28,25,000/ -. The state Government holds share capital of two lakhs rupees. The 2nd respondent by proceedings dated 1-8-1976 ordered an enquiry under S. 51 of the co-operative societies Act and after the enquiry report was submitted on 24-7-1977 and 26-9-1977 the 2nd respondent by his proceedings dated 26-6-1978 initiated surcharge proceedings under S. 60 of the Act. As a result of the surcharge proceedings and enquiry reports it was found that there was defalcation of Rs. 6,74,433-85. Subsequent to the receipt of the report the 2nd respondent issued a show cause notice to the 1st respondent bank as to why it should not be wound up. There upon the 1st respondent called for a general body meeting of the members on 25-3-1980. The general body decided against the winding up and communicated the decision to the 2nd respondent however, the 2nd respondent by his order dated 16-4-1980 ordered winding up of 1st respondent and appointed the Taluk co-operative sub-registrar as Liquidator of the 1st respondent. On Liquidator of the 1st respondent. On 14-8-1976 the then president of the 1st respondent Bank addressed a letter to the reserve Bank of India, 4th respondent herein that he suspects misappropriation to the tune of Rs. 3,44,200/- due to wilful acts and omissions of the employees with a request that the 4th respondent may appoint a senior officer to rectify the matter. The 4th respondent did not take any action in this regard. In every audit either by the 3rd respondent or by the 4th respondent the audit report certified that the 1st respondent bank is an A class bank.
( 3 ) THE second respondent filed counter-affidavit as follows:- The general body of the first respondent-bank passed a resolution objecting to the proposed liquidation and the resolution was passed at a meeting attended by only 40 members as against 993 members eligible to participate in the meeting. After giving due consideration to the said resolution this respondent decided that the affairs of the bank should be wound up in the interests of the bulk of the members of the bank. Sri J. Malleswara Rao, co-operative sub-Registrar was appointed as Liquidator by order dated 10-5-1980 and he took charge on 17-4-1980. He handed over charge to his successor on 25-5-1980. The 40 members who attended the General Body meeting the heavily indebted to the Bank. In the proceedings initiated for the recovery of the amounts due from the borrower-members loans are raising untenable contentions and they are deliberately obstructing the progress of the
