The recovery proceedings initiated by the Bank were found to be legal and within the authority of the Bank, as per the U.P. Cooperative Societies Act, 1965.

( 1 ) M/s. Emondson Engineers (P) Ltd. , Lucknow and its Executive Director Shri Pushkar Bajpai have filed this petition for a writ in the nature of certiorari quashing the impugned demand notice dated 24. 9. 2001 (Annexure-6) whereby they were asked to deposit a sum of Rs. 17,88,048/within fifteen days, failing which their properties were to be attached and put on auction-sale. A writ in the nature of mandamus commanding the opposite parties not to recover the aforesaid amount nor to attach their immovable properties or put them on sale has also been sought for.

( 2 ) BRIEFLY stated, the petitioners case is that M/s. Emondson Engineers (P) Ltd. is carrying on its business of sale of welding materials and consumable welding machines as also electrodes. A few years ago, the said company requested the opposite parties 2 to 5 for cash credit facility to the extent of Rs. 12 lakhs. The City Cooperative Bank. Ltd. , and its authorities sanctioned the cash credit facility on the petitioners company having deposited title deeds of its properties as collateral security apart from personal guarantee. Requisite deeds of hypothecation and guarantee were duly executed by the company. In spite of the fact that the petitioners company is still availing the benefits of the aforementioned credit facility, the Bank declared the company as defaulter. Such a declaration is against the Banking policy and the rules and regulations for extending the financial help either by way of loan or advance. The said Cooperative Bank was closed on account of embezzlement of its huge funds amounting to more than Rs. 150 crores by its Directors and the Chief Executive Officer. As per the Cooperative Societies Act, 1965, all its account holders are also the members of the Cooperative Society and in this way, the petitioners company is also invested with the same status. In case of any dispute between a Cooperative society and its members, it is mandatory on the part of the society to refer the dispute to arbitration. However, without complying with the provisions of such reference to an arbitrator, the opposite parties 2 to 5 have proceeded to recover the sum of Rs. 17,88,048/- by way demand notice in question. Owing to the defalcation of the funds of the City Cooperative Bank, the district Magistrate, Lucknow was appointed its administrator by the Reserve Bank of India. The registrar of the Cooperative Society, U. P. had also appointed a Secretary to jointly work with the District Magistrate and look after the daily affairs of the Bank under the guidelines of the reserve Bank of India.

( 3 ) THE petitioner company initially received a notice dated 28. 4. 2001 from the opposite parties 2 and 3 by way of which they required the company to pay Rs. 5,88,048. 16 but subsequently in a period of less than one month, the Bank sent another notice dated 14. 5. 2001 directing the company to pay Rs. 17,88,048/ -. The variation of the two sums prima facie expressed the exorbitant increased demand by virtue of the latter notice. As a matter of fact, the City cooperative Bank cannot initiate recovery proceedings against the petitioner-company unless the dispute subsisting between them is settled by an arbitrator but the authorities of the Bank in hasty and unlawful manner adopted the wrong procedure for recovery of the amount outstanding against the petitioner company. Such an act of the authorities being arbitrary and autocratic deserves to be quashed, otherwise, the petitioner company shall suffer irreparable loss and injury.

( 4 ) ON the petitioners request, Mr. P. N. Singh Yadav, Assistant Registrar had requested the regional Deputy Registrar of the Cooperative Societies to refer the dispute to an arbitrator for being adjudicated upon under the provisions of Chapter IX of the U. P. Cooperative Societies Act but the said recommendation did not find any favour with the higher authorities. Further, in view of the Moratorium issued by the Reserve Bank of Ind