Back
2014 Supreme(Mad) 1793
Madurai Bench of Madras High Court
V. RAMASUBRAMANIAN & V.M. VELUMANI, JJ.
Deposit Insurance and Credit Guarantee Corporation
Versus
The Liquidator, The Madurai Urban Co-operative Bank Ltd., & Another
Writ Petition (MD) No. 12658 of 2012
Decided on: 03-07-2014
Advocate Appeared:
For the Petitioner:T. Poornam, Advocate.
For the Respondents:T. Lajapathi Roy, Advocate.
The judgment establishes that while statutory provisions mandate repayment to the Deposit Insurance and Credit Guarantee Corporation, public interest and unique circumstances may warrant temporary sacrifices for the benefit of depositors.
Headnote:
Deposit Insurance and Credit Guarantee Corporation - Co-operative Bank Liquidation - Deposit Insurance and Credit Guarantee Corporation Act, 1961, Section 21(2), Section 45 - The judgment discusses the obligations of the Liquidator of a co-operative bank in paying the Deposit Insurance and Credit Guarantee Corporation, the rights of depositors, and the public interest involved in disbursement of funds.
Fact of the Case:
The Madurai Urban Co-operative Bank faced financial difficulties and was eventually liquidated. The Deposit Insurance and Credit Guarantee Corporation sanctioned a sum of Rs.31.89 crores but released only Rs.25.04 crores. Several depositors filed cases seeking payment, leading to court intervention. The Liquidator recovered funds from borrowers and the Corporation, but faced challenges in disbursement due to statutory liabilities and public interest.
Finding of the Court:
The court found that the Liquidator should first repay the Corporation as per Section 21(2) of the Act. However, considering the plight of the depositors and the unique circumstances of the case, the court directed the Liquidator to pay a major portion of the amount due to the depositors and postponed the payment of the remaining amount, ensuring that the Corporation will be repaid in full.
Issues: The main issue was whether the Liquidator was obliged to pay the Deposit Insurance and Credit Guarantee Corporation an amount of Rs.22.29 crores in preference to the depositors waiting for a long time.
Ratio Decidendi: The court held that while the Act mandates repayment to the Corporation, public interest and the unique circumstances of the case warranted a temporary sacrifice by the Corporation for the benefit of the depositors. The court directed the Liquidator to pay a major portion of the amount due to the depositors and postponed the payment of the remaining amount, ensuring that the Corporation will be repaid in full.
Final Decision: The court allowed the writ petition and directed the Liquidator to pay Rs.15.16 crores to the Deposit Insurance and Credit Guarantee Corporation immediately, with the balance amount of Rs.9.18 crores to be disbursed to the individual depositors. The outstanding payable by the bank to the Corporation will be paid from future recoveries from the borrowers.
V. Ramasubramanian, J.
1. Madurai Urban Co-operative Bank Limited was established about 100 years ago, as an institution of co-operative micro financing. The institution flourished well until the year 2001. But as has happened in the case of every co-operative institution (except perhaps the milk cooperatives), this institution was also plundered both by the elected office bearers and by the staff. Therefore, after the year 2001, the bank started committing default in making payment to its depositors most of whom were retired pensioners and poor peasants.
2. Consequently, the Reserve Bank of India cancelled the licence of the bank and restrained it from carrying on any banking business by an order dated 28.08.2003. Therefore, the Joint Registrar of Co-operative Societies, Madurai Region by an order dated 07.01.2005, directed the liquidation of the bank in terms of Section 137 (ii) of the Tamil Nadu Co-operative Societies Act, 1983. Ever since then, the Liquidator is in charge of the affairs of the bank.
3. The Madurai Urban Co-operative Bank Limited has been insured under the provisions of the Deposit Insurance and Credit Guarantee Corporation Act, 1961. Therefore, the Liquidator of the bank made an application to the Deposit Insurance and Credit Guarantee Corporation for sanctioning the maximum guaranteed amount of Rs.1 lakh to the depositors. In pursuance of the application so made by the Liquidator of the Co-operative bank, the Corporation sanctioned a sum of Rs.31.89 crores. However, the Corporation ultimately, released only a sum of RS.25.04 Crores.
4. In the meantime, several depositors started filing cases on the file of this Court seeking directions to the Liquidator to make payment on the ground that they were either in the final lap of their journey or waiting to perform the wedding of their wards or awaiting medical treatment. When the Official Liquidator could not manage, a few depositors joined together and came up with a Writ Petition in W.P(MD)No.3751 of 2008 seeking the issue of a writ of Mandamus to direct the Deposit Insurance and Credit Guarantee Corporation to disburse the amounts to the tune of Rs.20,28,77,943/-. When this writ petition came up before a Division Bench on 23.06.2009, the Bench (to which one of us (VRSJ) was a party) directed the Liquidator of the Madurai Urban Co-operative Bank Limited to be present in Court on 26.06.2009. He submitted that huge amounts are not only repayable by the bank to its depositors but also recoverable from the borrowers. The borrowers had taken advantage of the fact that the bank had gone into liquidation and the borrowers were stalling of recovery proceedings by employing all legal methods. Therefore, on 26.06.2009 we passed an order directing the Liquidator to file a statement on 10.07.2009, containing the following details:-
(a) The names and addresses of the debtors of the bank,
(b) The amount due from each of those debtors
(c) The list of properties of debtors that could be brought to sale;
(d) The proceedings initiated by those debtors in any Court, against the recovery proceedings and
(e) The aggregate maturity amount of deposits payable by the bank to the deposit holders.
5. In pursuance of the said order, the Liquidator filed a few volumes of papers. From the extract of the volumes 1 and 2, furnished by the Liquidator, it was found that there were 147 mortgage loans 187 self employment scheme loans, 18 housing loans and 35 hire purchase loans, in respect of which recoveries were to be made by the bank. The principal amount outstanding in respect of the self employment scheme loans alone was found to work out to Rs.11,18,93,892/-. Therefore, to remove all impediments, on the part of the Official Liquidator from making recovery of these amounts, we passed an order on 13.07.2009 directing the Official Liquidator to issue notices to the borrowers, initially to 50 persons, directing them to be present in Court on 27.07.2009.
6. Accordingly, he issued notic
