Mapusa Urban Co-operative Bank Ltd. . vs Dattatraya A. P Mahambre and others

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(Bom) 21

IN THE HIGH COURT OF BOMBAY
(PANAJI BENCH)
R.M.S. Khandeparkar, J.
The Mapusa Urban Co-operative Bank Ltd. Appellant.
Versus
Shri Dattatraya A.P Mahambre others..... Respondents.
Appeal From Order No. 8 of 1995, decided on 15-1-1999.
Advocates appeared :
J.P. Mulgaokar, for the appellant.
S.M. Usgaokar, for the respondent No. 1.
S.R. Rivonkar, for the respondent No. 2.
S.D. Padiyar, for the respondent No. 4 5.

Headnote:Section 34-Member. owing money to society-Recovery-Debtor being insolvent-Member owing money to Nationalized Banks also-Priorities for recovery-Dues payable to Government or Local Authority ranking first in order of priority and then comes dues to society-Nationalized Banks not being Government as held by Apex Court-Held, thus dues to society to be recovered first as against Nationalised Bank.-From the above referred two decisions one in the matter of the C. V Ranum v. Management of Bal1k of Il1dia, AIR 1988 SC 1369 and the other in State of PUl1jab v. Raja Ra/1/, case AIR 1981 SC 1694, it is clear that the Nationalized Banks though are subject to deep and pervasive control by the Central Government and can be considered as the Corporations acting under the Government, the Nationalized Banks by themselves caru10t be considered as the Government within the meaning of the said expression in Section 34 of the said Act. Indeed, Section 34 speaks about the priority of dues payable to the Government and not to the Corporations or Companies over which the Government has full control. The section speaks about the priority only in relation to the money payable to the Government itself and not to its instrumentalities or agencies acting under the Government. Being so, the interpretation sought to be given by the District Court to Section 34 of the said Act cannot be accepted.
In this view of the matter, Section 34 of the said Act has to be construed to mean that in case of Nationalized Banks, the same cannot enjoy the same priority in respect of dues payable to them as is otherwise enjoyed by the Government. In case of dues by a member of a Co-operative Bank, such dues, therefore, will have priority over the dues payable by such person to the Nationalized Banks in terms of Section 34 of the said Act.
Section 34-lnsolvency of member-Nationalised Banks by themselves cannot be considered as Government-Section 34 has no applicability in respect of claims of Nationalised Bank.-The Nationalised Banks though are subject to deep and pervasive control by the Central Government and can be considered as the Corporations acting the Government, the Nationalised Banks by themselves cannot be considered as the Government within the meaning of said expression in Section 34 of the Maharashtra Co-operative Societies Act as applicable to Goa. Section 34 of the Maharashtra Co-operative Societies Act as applicable to Goa speaks about the priority only in relation to the money payable to the Government itself and not to its instrumentalities or agencies acting under the Government. Said section has no applicability in respect of claims of Nationalised Bank. AIR 1984 SC 399, AIR 1989 Ker 86, Relied.

JUDGMENT - R.M.S. KHANDEPARKAR, J.:---This appeal arises from the Judgment and order dated 24th October, 1994, passed in Insolvency Petition No. 1/90, by the District Judge at Panaji. By the impugned order the District Judge had allowed the application filed by the respondent No. 1 herein for his declaration as insolvent and has further ordered that from the amounts realised of the assets of the respondent No. 1 and which are now invested in F.D.R., the outstanding amounts of respondents Nos. 2,4, and 5, shall be paid first and from the balance outstanding amount, the appellant should be cleared and if any balance is left, the outstanding amounts of the remaining respondents shall be cleared on pro-rata basis.

2.The grievance of the appellant is that the impugned order has been passed by misconstruing the provisions contained in section 34 of the Maharashtra Co-operative Societies Act, 1960, as applied to the State of Goa and hereinafter called the "said Act". It is the contention of the appellant that upon proper construction of the said section 34 of the said Act, the dues to the appellant ought to rank higher than that of the respondents.

3.The facts which are not in dispute are that the appellant is a Society registered under the said Act and is engaged in the business of banking. The first respondent has been declared as insolvent and all the other respondents herein alongwith the appellant are creditors of the first respondent. The respondents Nos. 2 to 5 are Nationalized Banks, whereas the other respondents are private creditors. The first respondent is a member of the appellant Society.

4.The nature of the controversy in the matter is pertaining to the scope of the expression. "Government", in section 34 of the said Act. The point for determination which arises in the present appeal is, therefore, whether the Nationalized Banks like respondents Nos. 2 to 5 would be "Government", within the meaning of the said expression in section 34 of the said Act, so as to enjoy priorities by virtue of the said provision over other creditors in case of distribution of assets of a debtor.

5.Section 34 of the said Act reads thus :

"Section 34. Insolvency of members.---Notwithstanding anything contained in the Presidency-Towns Insolvency Act, 1909, the Provincial Insolvency Act, 1920, or any corresponding law for the time being in force, the dues of a Society from a member, in insolvency proceedings against him, shall rank in order of priority next to the dues payable by him to Government or to a local authority."

6.On a plain reading of the said section 34 it is clear in cases where a member owes money to a Society, the dues to the Society shall stand immediately next to the dues payable to the Government or to a local authority, in the matter of priority. In other words, the dues payable to Government or to a local authority will always rank first in the order of priority and the dues to the Society will be next in the queue and thereafter will get the priority over the dues payable to any other creditor by virtue of the provisions contained in section 34 of the said Act. As far as this aspect is concerned, there is no dispute between the parties. The dispute however, relates to the issue as to whether the Nationalized Banks can be termed as the "Government", within the meaning of the said expression in the said section 34 of the said Act, so as to claim priority over the dues payable to the Societies like the appellant Society.

7.The District Court, placing reliance upon two decisions, one of the Punjab and Haryana High Court and one of the Apex Court, has held, by the impugned order, that the Nationalized Banks like the respondents Nos. 2 to 5 are covered by the term "Government", in section 34 of the said Act and, therefore, they will have priority in recovering their dues over the appellant, under section 34 of the said Act. The decisions relied upon by the District Court in that regard are in the matter of (Vijay Kumar Bhambari v. Ra

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1999 Supreme(Bom) 21

Cases Referred (5)