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2014 Supreme(Bom) 463
High Court of Judicature at Bombay
A.S. OKA & M.S. SONAK, JJ.
Karad Merchant Sahakari Credit Sanstha Maryadit & Others
Versus
Reserve Bank of India Central Office & Others
Writ Petition Nos. 2082 of 2010 & 6579 of 2011
Decided On: 24-02-2014
For the Petitioners:Tejas D. Deshmukh with Samrat Shinde, C.G. Gavnekar, Advocates.
For the Respondent:R2, Parag Sharma i/b. Udwadia & Udeshi, Mihir Mody, Bhomin Badani i/b. K. Ashar & Co., R4, R5, V.S. Gokhale, AGP, R6, S.R. Ganbavale, H.G. Misal, Advocates.
Headnote:Constitution of India - Article 14 - DICGC Act, 1961 - Section 16(1) Second Proviso - Classification between depositors. - Classification between depositors provided under Second Proviso to Section 16(1) of Act based on intelligible differentia, is not unreasonable.
DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT, 1961 - Sections 16, 17 and 19 - Applicability of Mischief Rule. - Since provisions under Sections 16, 17 and 19 of Act do not admit of any ambiguity hence Mischief Rule not applicable. - Petitioners are credit societies registered under Maharashtra co operative Societies Act, 1960. They had questioned interpretation adopted by Deposit Insurance and Credit Guarantee Corporation (DICGC) in relation to provisions contained in Sections 16(1), 19, 21(2)(a) and (b) of the Act and proviso to sub-section 10-C of Section 43-A of Act 1949.
Provisions of Section 10-C deal with liability of DICGC in respect of insured deposits, manner of payment by corporation in case of winding up of insured banks.
Court opined that provisions in issue do not admit of any ambiguity. The DICGC, in terms of Section 16(1) of the said Act, is no doubt liable to pay ‘every depositor of that bank an amount equal to the amount due to him in respect of his deposit‘ in that bank when order of liquidation or winding up of such bank is made. The second proviso to Section 16(1) of the said Act, however, limits the liability in that the ‘total amount‘ payable by DICGC ‘to any one depositor in respect of his deposit in that bank in the same capacity and in the same right‘ upto Rs. 1,00,000/-. This means that if the deposits held by a depositor in the insured bank as on the date of winding up or liquidation is less than or upto Rs. 1,00,000/-, then such depositor is entitled to avail insurance indemnity upto the entire extent of his deposit.
However, if the deposits held exceed Rs. 1,00,000/- in the same capacity and in the same right, then the insurance indemnity shall extend upto Rs. 1,00,000/- only. Petitioners took plea that correct interpretation would require the DICGC to treat each of the numerous small investors/depositors who have invested/deposited amounts with the petitioner Societies as ‘one unit each‘. Thereby, the DICGC would be bound to indemnify each such small investor! Depositor to extent of Rs. 1,00,000/- each.
However, such interpretation would be inconsistent with objective of the Act. The phraseology employed in the second proviso like ‘any one depositor‘, ‘in respect of his deposit‘ and ‘in the same capacity and in the same right‘ clarifies the position that the DICGC is no way concerned with the investors or depositors who may have invested or deposited with the petitioners. The petitioners, are no doubt depositors with the insured bank, which in the present case is the respondent No. 6. Therefore, in view of the liquidation of respondent No. 6 bank, the DICGC is liable to offer insurance indemnity to the petitioners to the extent of Rs. 1,00,000/-.
There is no further obligation towards depositors/investors who may have made deposits/investments with the petitioners. In the light of the clear provisions, it is futile to suggest any other interpretation either by resort to verbal semantics or by invitation to refer to the legislative intent and on the said basis press the mischief rule of interpretation Mere circumstances that premium is levied upon entire body of deposits, or that some hardship may occasion in individual cases, are not strictly speaking relevant to statutory interpretation.
DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT, 1961 - Sections 16(1) Second Proviso - Constitution of India, Article 14 - Validity of Second Proviso. - Since Second Proviso to Section 16(1) of Act not wipes out liability provided under Section 16(1) on part of DICGC hence it is not arbitrary. - It can be said that the proviso in the present case qualifies or excepts certain provisions from the main enactment. There is nothing arbitrary or ultra vires in the proviso. The proviso, particularly when read in the context of the Statement of Objects and Reasons of the said Act, makes clear the legislative intent that the liability of DICGC was to extend upto the limit to be prescribed in the proviso and not any further. In such circumstances. It is not correct to say that the proviso is either ultra vires, arbitrary, illegal, unconstitutional, null and void.
DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT, 1961 - Sections 19 and 21 - Banking Regulation Act, 1949, Sections 10 and 43 - Constitutional validity of provisions. - Since DICGC is concerned with entire banking system in country hence provision neither arbitrary nor unconstitutional. - There is absolutely no merit in the challenge to the provisions contained in Sections 19 and 21 of the said Act and sub-section (10) of Section 43-A of the B.R. Act. The provisions merely grant a priority to the DICGC in the matter of recovery of the amounts which it may have paid by way of insurance indemnity to the depositors, from out of any recoveries which the Liquidator may make by liquidating the assets of the insured bank. This is not a case of the legislature taking away with one hand what it may have given with the other. In fact it should not be lightly assumed that the Parliament takes away with one hand what it gives with the other. The provisions must be read as parts of an integral whole and as being inter dependent. An attempt should always be made at harmonious construction. In the present case, it needs to be noted that the DICGC is concerned with the entire banking system in the country. In the circumstances, it is not expected that the DICGC offers insurance indemnity to a few insured banks and thereafter is unable to recover the insurance indemnity amount from the said banks in a preferential manner. This would result in virtual collapse in the functioning of the DICGC. This would possibly have a deleterious effect upon the banking system in the country. This cannot have been the intention of the Parliament. In the circumstances there is absolutely nothing arbitrary, illegal, or unconstitutional in the provisions contained in Sections 19 and 21 of the said Act or sub-section (10) of Section 43-A of the B.R. Act.
M.S. Sonak, J.
1. Rule. With the consent of the learned counsel appearing for the parties Rule is made returnable forthwith.
2. As substantially common issues of fact and law arise in these two Petitions, the same are being disposed of by a common judgment and order.
3. The Petitioners in these Petitions question the interpretation adopted by the Deposit Insurance and Credit Guarantee Corporation (DICGC) in relation to the provisions contained in Section 16(1) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (“said Act”) and in the alternate challenge the constitutional validity of the second proviso to Section 16(1), Section 19 and Section 21(2)(a) and (b) of the said Act and the proviso to sub-Section (10) of Section 43A of The Banking Regulation Act, 1949 (B.R. Act).
4. The facts as obtain in Writ Petition No. 2082 of 2010, which are sufficient for appreciating the setting in which the aforesaid challenges arise are that the Petitioners are Credit Societies registered under the provisions of the Maharashtra Co-operative Societies Act, 1960; The Petitioners have invested / deposited a sum of Rs.1805.60 Lakhs and Rs.332.88 Lakhs respectively with Vasantdada Shetkari Sahakari Bank Limited, Sangli (Respondent No. 6); The Reserve Bank of India (Respondent No. 1) vide order dated 06.01.2009 has cancelled the banking licence of the Respondent No. 6 under Section 22 of the B. R. Act; As a consequence, the Registrar of Co-operative Societies, by an order dated 16.02.2009 has ordered the winding up of the Respondent No. 6 and appointed a Liquidator to take charge; As on the date of winding up order, the Petitioner No. 1 claims that it was entitled to receive an amount of Rs.1921.76 Lakhs and the Petitioner No. 2 an amount of Rs.354.07 Lakhs along with interest from the Respondent No. 6; The Deposit Insurance and Credit Guarantee Corporation (“DICGC”), by way of insurance indemnity is however paying / offering an amount of only Rs.1,00,000/- to each of the Petitioners, by treating the Petitioners as 'one unit each' for the purpose of Section 16 of the said Act; Further, the Petitioners apprehend that the DICGC by relying upon Sections 19 and 21 of the said Act read with Section 43A of the B.R. Act would insist upon preferential recovery from the Liquidator of the meagre insurance indemnity amount paid by the DICGC upon realisation of the assets of the Respondent No. 6, which is presently being wound up. In such circumstances, the Petitioners contend that the provisions of the said Act are being improperly interpreted and in the alternate the provisions of the said Act and the B.R. Act, referred to herein above are ultra vires, illegal, unconstitutional, null and void.
5. Mr. Deshmukh and Mr. Gavnekar, learned counsel appearing for the Petitioners in both the Petitions have made the following submissions in support of their Petitions:-
(A) The DICGC, has incorrectly interpreted the provisions of the said Act. The correct interpretation would require the DICGC to treat each of the numerous small investors /depositors who have invested/deposited amounts with the Petitioner Societies as 'one unit each'. Thereby, the DICGC would be bound to indemnify each such small investor / depositor to extent of Rs.1,00,000/- each. Instead, based upon an incorrect interpretation, the DICGC by treating the Petitioner Societies as 'one unit each' offers to indemnify the Petitioners upto Rs.1,00,000/- each when in fact the amounts payable to the petitioners societies are Rs.1,921.76 Lakhs and Rs.354.07 Lakhs respectively. In resorting to such an interpretation, the DICGC ignores the vital circumstance that insurance premia is levied upon the entire body of deposits and not merely to the extent of Rs.1,00,000/- per depositor. Such an interpretation is inconsistent with the objective of the said Act.
(B) The second proviso to Section 16(1) of the said Act completely cuts down and nullifies the main provisions contained in Section 16(1)
