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2009 Supreme(AP) 542

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD
ANIL R. DAVE, CJ AND C.V. NAGARJUNA REDDY, J.
Charminar Co-operative Urban Bank Ltd., Hyderabad
Verses
Rohit and Associates (Building Material Division), Hyderabad and another
WA Nos.1356 of 2000 and Batch and 9 of 2001
Decided On : Twelfth Day of August, 2009

Advocates Appeared:
P.S. Rajasekhar, Counsel for the Appellant in WA Nos.1356, 1454, 1455, 1456 and 1457 of 2000 and for the Respondent No.2 in WA Nos.1670, 1691, 1713 of 2000 and 9 of 2001; Government Pleader for Agriculture and Co-operation (Not Present), Counsel for the Appellants in W A Nos.1670, 1691, 1713 of 2000 and 9 of 2001.

Headnote:

Recovery of Debts due to Banks and Financial Institutions Act, 1993 - Andhra Pradesh Co-operative Societies Act, 1964 - Section 61 - Indian Partnership Act, 1932 - Companies Act, 1956 - Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 - Section 19 , 21 – Constitution of India, 1950 - Article 226 – Recovery of Amount – These appeals is either a company incorporated - firm registered - They are admittedly members of the Bank. Respondent No.1 in each of these appeals borrowed huge amounts as loans from the Bank and failed to repay the same. Therefore, the Bank approached the Arbitrator with claim statements for passing awards - Writ of prohibition to prohibit the Arbitrator from proceeding with the arbitration proceedings. The main plank on which the said writ petitions being either companies or partnership firms, are not eligible to be members of the Bank under the provisions of the Act and, therefore, they are not amenable to the jurisdiction of the Arbitrator under Section 61 of the Act and afortiori the Arbitrator is denuded of the jurisdiction to decide any dispute between respondent No.1 and the Bank. Another question which was raised by respondent No.1 was that since the Charminar Co-operative Urban Bank Limited, Hyderabad, being a Bank, the provisions of the Act have no application and that proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 alone are liable to be initiated for recovery of the loans – Held, The legislative object behind Section 61 of the Act is to provide for an in house mechanism for settlement of disputes touching the constitution, management or the business of a society, other than a dispute regarding disciplinary action taken by the society or its committee against a paid employee of the society Such an object cannot be allowed to be rendered otiose by accepting a technical plea such as the one raised by respondent No.1. – In our view, this is an eminently fit case where the maxim ut res magis valeat quam pereat must be made applicable - Even assuming that respondent No.1 made out a legal case, this Court need not grant relief in their favour, for, having become members, availed loans and committed default, it lies ill in their mouth to turn round and plead that they cannot be treated as members. – The doors of this Court are always shut for such litigants who are dishonest and having malicious intention to defraud the creditors. In this view of the matter, the order under appeals cannot be sustained - The writ appeals are allowed.

C.V. NAGARJUNA REDDY, J : - These writ appeals are filed against common order dated 25.8.2000 passed by the learned Single Judge in Writ Petition Nos.26590, 26591, 26592, 26598 and 26603 of 1999. While Writ Appeal Nos.l670, 1691 and 1713 of 2000 and 9 of 2001 were filed by the Deputy Registrar of Co-operative Societies/OSD/Arbitrator (for short “the Arbitrator”), the other writ appeals were filed by the Charminar Co-operative Urban Bank Limited, Hyderabad (for short “the Bank”).

2. Respondent No.1 in each of these appeals is either a company incorporated under the Companies Act, 1956 or a partnership firm registered under the provisions of the Indian Partnership Act, 1932. They are admittedly members of the Bank. Respondent No.1 in each of these appeals borrowed huge amounts as loans from the Bank and failed to repay the same. Therefore, the Bank approached the Arbitrator with claim statements for passing awards under Section 61 of the Andhra Pradesh Co-operative Societies Act, 1964 (for short “the Act”). When the Arbitrator had entered reference and given notices to respondent No.1, they filed Writ Petition Nos.26590, 26591, 26592, 26598 and 26603 of 1999 in this Court for a writ of prohibition to prohibit the Arbitrator from proceeding with the arbitration proceedings. The main plank on which the said writ petitions were filed was that respondent No.1, being either companies or partnership firms, are not eligible to be members of the Bank under the provisions of the Act and, therefore, they are not amenable to the jurisdiction of the Arbitrator under Section 61 of the Act and afortiori the Arbitrator is denuded of the jurisdiction to decide any dispute between respondent No.1 and the Bank. Another question which was raised by respondent No.1 was that since the Charminar Co-operative Urban Bank Limited, Hyderabad, being a Bank, the provisions of the Act have no application and that proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 alone are liable to be initiated for recovery of the loans.

3. Having gone into the first question referred to above and decided in favour of respondent No.1 and having regard to the decision on the said question, the learned Single Judge felt it unnecessary to deal with the second question. The learned Single Judge allowed the said writ petitions and granted a writ of prohibition, as prayed for by respondent No.1. Feeling aggrieved by the said order, the Bank and the Arbitrator filed these writ appeals.

4. At the hearing, Sri P.S. Raja Sekhar, learned Counsel for the Bank, submitted that the learned Single Judge committed a serious error in issuing the writ of prohibition on the premise that under Section 19 of the Act the firms and companies are not eligible to become members and, therefore, they are not amenable to the jurisdiction of the Arbitrator under Section 61 of the Act. The learned Counsel submitted that the fact that respondent No.1, in all these writ appeals, were admitted as members of the Bank and that they continued as such without being removed by following the provisions of the Act and obtained loans as members of the Bank is not in dispute. He contends that irrespective of whether respondent No.1 were eligible or not, as they continued to be the members of the Bank, the Bank is entitled to raise a dispute against them under Section 61 of the Act.

5. Initially appearance was entered by a learned Counsel on behalf of respondent No.1 in each of these writ appeals. As the Counsel reported no instructions, at the hearing, fresh notices were ordered on 10.6.2009. Personal notices were served by the Bank. The learned Counsel appearing for the Bank submitted a memo along with acknowledgments showing proof of service on respondent No.1 in these writ appeals. Despite service of notices, no one appeared for respondent No.1.

6. We have carefully considered the submissions of the learned Counsel for the appellants and perused the record.

7. Section 19 of the A







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