Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2007 Supreme(Bom) 1456

IN THE HIGH COURT OF BOMBAY
R.M. S. KHANDEPARKAR & DR. D.Y. CHANDRACHUD, JJ.
The Ambajogai Peoples Cooperative Bank Ltd..Appellant.
versus
M/s. Shrimauli Builders .Respondents.
APPEAL NO.127 OF 2007
IN
JUDGES ORDER NO.494 OF 2006
IN
ARBITRATION PETITION NO.242 OF 2005
AND
ARBITRATION PETITION NO.66 OF 2005
Decided on 9th October, 2007.

Advocates:
Advocate Appeared
Mr. T.N. Subramanian, Senior Advocate with Mr. J.P. Sen and Ms.
Sheetal Shah i/b Mehta Girdharilal for the Appellant.
Mr. S.B. Rao i/b Ms. Gauri Rao for Respondent No.1.
Mr. Virag Tulzapurkar, Senior Advocate with Mr. Dubhash i/b Munir
Merchant for Respondent No.3.
Ms. Shakuntala Joshi for Respondent No.4.

The main legal point established in the judgment is that the mode of recovery of a recovery certificate is specified under the Maharashtra Cooperative Societies Act, 1960 and the rules framed thereunder, and questions of title or priority have to be determined by the Court in whose custody the property is situated.

Headnote:
Recovery Certificate - Cooperative Bank - Maharashtra Cooperative Societies Act, 1960, Section 101, Section 156, Rule 107 - The judgment discusses the enforcement of a recovery certificate issued under Section 101 of the Maharashtra Cooperative Societies Act, 1960. It emphasizes that the Act and the Rules lay down a comprehensive code for enforcement of a recovery certificate and that the mode of recovery is specified under the Act and the rules framed thereunder. It also highlights that when the property to be attached is in the custody of the Court, an attachment can be made by a notice to the Court requesting that the property be held subject to further demands of the Recovery Officer issuing such notice. Questions of title or priority have to be determined by that Court.
Fact of the Case:

The Appellant, a cooperative bank, sought payment of a sum deposited by the Second Respondent in an arbitration petition, in partial satisfaction of a recovery certificate obtained against the First Respondent under Section 101 of the Maharashtra Cooperative Societies Act, 1960. The Learned Single Judge dismissed the Appellant's request, holding that the recovery certificate was fraudulently obtained and that the application was not maintainable by way of a Judges Order.
Finding of the Court:

The Court found that the recovery certificate was not binding on the Third and Fourth Respondents, who were not parties to the recovery proceedings, and that questions of title and priority had to be determined by the Court in whose custody the property was situated. The Court set aside the judgment and order of the Learned Single Judge and remitted the proceedings back to the Learned Single Judge to reexamine the questions of title and priorities after hearing the parties.
Issues: The issues revolved around the validity and enforceability of the recovery certificate, the maintainability of the application by way of a Judges Order, and the rights of the Third and Fourth Respondents as non-parties to the recovery proceedings.
Ratio Decidendi: The Court emphasized that the mode of recovery of a recovery certificate is specified under the Maharashtra Cooperative Societies Act, 1960 and the rules framed thereunder. It also highlighted that when the property to be attached is in the custody of the Court, questions of title or priority have to be determined by that Court.
Final Decision: The judgment and order of the Learned Single Judge were set aside, and the proceedings were remitted back to the Learned Single Judge to reexamine the questions of title and priorities after hearing the parties.

JUDGMENT (Per DR. D.Y. CHANDRACHUD, J.) :

1. The Appeal in these proceedings is directed against an order of a Learned Single Judge dated 15th February, 2007, dismissing Judges Order 494 of 2006 filed by the Appellant for the payment to it of a sum of Rs.2.12 Crores deposited by the Second Respondent in an arbitration petition, along with the interest accrued thereon. The Appellant is a cooperative bank of which the First Respondent is a member. The Appellant had advanced monies to the First Respondent and upon a default committed by 3 the First Respondent the Appellant instituted proceedings under Section 101 of the Maharashtra Cooperative Societies Act, 1960. The proceedings culminated in the issuance of a recovery certificate dated 14th September, 2006 in the total sum of Rs.4,09,79,406/. The Appellant was awarded further interest on the principal sum of Rs.2,70,12,694/at the rate of 14% per annum from 1st July, 2006 till payment or realization.

2. The Third Respondent to the Appeal had instituted two arbitration petitions (Arbitration Petitions 242 and 66 of 2005) against the First Respondent under Section 9 of the Arbitration and Conciliation Act, 1999 for interim relief pending arbitral proceedings. The Appellant was not a party to the arbitral agreement. On 16th July, 2005 an order was passed in Arbitration Petition 242 of 2005 by which the Second Respondent (The Banglore Water Supply and Sewerage Board) was directed to deposit in this Court a sum of Rs.2.12 Crores owed by the Second Respondent to the First Respondent. The Second Respondent deposited the amount in compliance with the order of the Court. 4 By an order dated 7th March, 2006 the arbitration petitions were finally disposed of by a direction pursuant to which the First Respondent was permitted to withdraw the amounts by furnishing a bank guarantee of a nationalized bank within a period of eight weeks, failing which the amount was to be invested in a nationalized bank. The First Respondent did not withdraw the amount which accordingly is stated to have been invested in terms of the order. The arbitral proceedings between the First and Third Respondents are pending.

3. Upon the issuance of a recovery certificate in favour of the Appellant on 14th September, 2006, the Appellant filed a Judges Order (Judges Order 494 of 2006) before the Learned Single Judge for a direction that the amount deposited by the Second Respondent in this Court be paid over to the Appellant in partial satisfaction of the decree. In the meantime, the Fourth Respondent had in arbitral proceedings against the First Respondent secured in its favour an award for a sum of Rs.91,61,727.42. In execution, the Fourth Respondent filed 5 Chamber Summons 530 of 2005 and 124 of 2007 inter alia for an order directing a disclosure of assets by the First Respondent; an order restraining the First and Third Respondents from withdrawing the amounts deposited in Court by the Second Respondent and for an order permitting the Fourth Respondent to withdraw the amounts deposited towards satisfaction of the award in favour of the Fourth Respondent.

4. The Chamber Summons and the Judges Order were disposed of by the impugned judgment and order dated 15th February, 2007 of the Learned Single Judge. The Learned Single Judge held that (i) a prima facie case was made out that the recovery certificate under Section 101 of the Maharashtra Cooperative Societies Act in favour of the Appellant was fraudulently obtained; (ii) Rule 107 of the Maharashtra Cooperative Societies Rules 1961 laid down the procedure for attachment and sale of property which application had not been made by the Appellant; and (iii) An application was not maintainable by way of a Judges Order. The Learned Single Judge granted relief to the Fourth 6 Respondent inter alia permitting the Fourth Respondent to withdraw a sum of Rs.91,61,727.42 from the amounts deposited before this Court.

5. The Appeal has been filed before the Court to challenge the or

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