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2008 Supreme(Guj) 185
2008 (2) GCD 1635 (SC)
Hon’ble Mr. Justice S.B. Sinha &
Hon’ble Mr. Justice Lokeshwar Singh Panta
Indian Bank
Versus
Godhara Nagrik Co-operative Credit Society Ltd. and Another
Civil Appeal No. 3303 of 20051—Decided on 16/05/2008
Important Point :
Whether respondent in the facts of the cases entitled to mandatory relief of release of FDR amount.
Headnote:(a) Banking Regulation Act, 1949—Section 35-A — Banking Companies (Acquisition and Transfer of Under Takings) Act, 1970 — Fixed deposit receipts — Claim for encashment on maturity — Bank refused — Alleged fraud on Banks involving officers — Relief admissible — Single Judge of High Court however holding that writ petitions were not maintainable constituted a Committee to go into the matter in great detail — The Committee submitted its report but it was not unanimous — The opinion of the Committee was a divided one on the crucial issue — It cannot be said, therefore, that the fact finding body made such recommendation which could be accepted by the Court without going into the merit thereof — It is also not a case where nay mandatory relief could be granted in favour of respondents — Court considered the question whether the Co-operative Societies which had absolutely no role to play in the entire episode should be allowed to suffer for the purpose of their day to day functioning requiring the amount which they have inserted in FDR and held that Bank being a State whether the meaning of Article 12 of Constitution with the assistance of officers of CBI should attempt to ascertain as to which of the Co-Operative Societies are in no way involved with the seam, and subject to such five precaution may be found necessary to be taken, release the amount in their favour — Court also issued necessary direction to facilitate the function of respondent of Co-operative Banks.
Held :
The opinion of the Committee was a divided one on the crucial issue. Two members of the Committee were of the opinion that whether the amount deposited by thecooperative banks was received back by them or not, was yet to be ascertained. Court is, therefore, of the opinion that it cannot be said that the fact finding body, assuming that the same could be constituted, made such recommendations which could be accepted by the Court without going into the merit thereof. It is also not a case where any mandatory relief could be granted in favour of the respondents.
[Para 18]
Having said so, Court must pose unto ourselves a further question. Could those Co-operative societies which had absolutely no role to play in the entire episode should suffer in any manner whatsoever? The cooperative societies/cooperative banks for the purpose of their day-to-day functioning, require the amount which they have invested in FDRs on their maturity. Should they wait till the criminal cases are over? Should they be pushed to institute civil suits? They can indisputably be compensated by grant of interest. What, however, happens if in the meanwhile in the absence of the requisite funds being available to them, they find it difficult to run the day-to-day affairs? [Para 19]
Answers thereto may be difficult to find but it is not a wholly impossible task. Court thinks that the appellant Bank being a ‘State’ within the meaning of Article 12 of the Constitution of India with the assistance of officer(s) of the Central Bureau of Investigation should make all attempts to ascertain as to which of the Co-operative societies/cooperative banks are in no way involved with the scam, and subject to such precautions as may be found necessary to be taken, release the amount in their favour. [Para 20]
(b) Constitution of India, 1950 — Articles 12 and 226 — Writ petition — Judicial review — Jurisdiction — Stated.
Held :
A writ petition would lie against a State within the meaning of Article 12 of the Constitution of India. Indisputably, exercise of jurisdiction by the High Court is permissible in a case where action of the State is found to be unfair, unreasonable or arbitrary.
Appeal Allowed
S.B. Sinha, J.—These appeals involve an interesting question as regards the power of judicial review of a Superior Court.
2. Respondents herein are Co-operative societies registered under the Co-operative Societies Act and/or their Members. They deposited certain amounts in cash in fixed deposits of Banks wherefor Fixed Deposit Receipts (FDRs) were to be issued. Such deposits were made through some so-called Commission Agents of the Banks on payment of huge commission which is ordinarily not allowed by the Nationalized Banks.
3. Applications for grant of loans by various persons were filed before the prescribed authorities of the banks on the basis of the said FDRs. Allegedly a large number of officers of the banks were involved in a scam whereby unofficial investments of the said amount were being made.
4. As and when the FDRs matured, the investors requested the Banks for their encashment. The banks refused to accede thereto stating that the amount under the FDRs had already been paid by way of loans and, thus, no further amount was payable. It was contended that a fraud on the banks has been practiced to which the depositors and the officers of the banks were parties.
5. Writ petitions were filed. A learned Single Judge of the High Court opined that serious disputed questions of fact being involved in the said writ petitions, no relief can be granted to the writ petitioners.
6. Despite the same, the learned Single Judge relying on the provisions contained in Section 35A of the Banking Regulations Act, 1949 directed constitution of a Committee under the Chairmanship of the Deputy Governor of Reserve Bank of India or his nominee to go into the matter in great details. Various powers were delegated in favour of the Committee including the one that the decision of the Committee shall be final and binding upon the parties. A Division Bench of the said Court in an intra Court appeal preferred thereagainst, however, stayed only the operation of some of the clauses of the said order. The Committee, however, was allowed to function. A special leave petition filed thereagainst has been dismissed by this Court with certain observations.
7. The Committee submitted its report. It was found that principally the officers of the banks were involved in the matter of commission of the alleged fraud on the Banks. Members of the Committee, however, differed in their opinion as to whether, having regard to the limited scope of the enquiry, any positive direction could be issued.
8. Relying on and/or on the basis of the report of the Committee, the Division Bench of the High Court opined that as the writ petitioners were not parties to the fraud, subject to any other or further orders that may be passed in the criminal case, appellant-banks should be directed to pay the amounts under the FDRs to the depositors.
9. Appellants are, therefore, before us. On 5th April 2004, a limited notice was issued by this Court, which is to the following effect:—
“Issue notice on the special leave petition limited to the question as to whether the High Court should have directed payment having regard to the fact that the Committee itself had not finally resolved the question of liability as far as the disputed amount was concerned. Issue notice on the prayer for interim relief also.”
This Court in its order dated 10th December, 2004 explained the said order stating:—
“The issue which is now required to be resolved is a narrow one viz. whether the Committee had finally decided that the amounts payable by the Bank (a) were the liability of the Bank and (b) if so, what was the quantum if any, payable by the Bank to the deposits. Learned counsel appearing on behalf of the respondent prays for time till after the vacation. Let the matter appear two weeks after reopening on a miscellaneous day. There will be interim order staying the operation of the impugned order.”
However, by an order dated 9th May, 2005, upon hearing the counsel for the parties, ‘Leave’ was granted, a
